Alexander & Alexander Services Inc – ‘10-K’ for 12/31/93 – EX-10.26

As of:  Thursday, 3/31/94   ·   For:  12/31/93   ·   Accession #:  950112-94-842   ·   File #:  1-08282

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Annual Report   —   Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Alexander & Alexander                                 22    136K 
 2: EX-3.3      Articles of Incorporation/Organization or By-Laws     14     27K 
 3: EX-3.4      Articles of Incorporation/Organization or By-Laws     35     86K 
 5: EX-10.20    Material Contract                                      5     18K 
 6: EX-10.23    Material Contract                                      7     33K 
 7: EX-10.24    Material Contract                                     11     50K 
 8: EX-10.25    Material Contract                                    292    562K 
 9: EX-10.26    Material Contract                                    303    841K 
 4: EX-10.3     Material Contract                                      8     27K 
10: EX-13.0     Annual or Quarterly Report to Security Holders        50    241K 
11: EX-21       Subsidiaries of the Registrant                         8     46K 
12: EX-23.0     Consent of Experts or Counsel                          1      8K 

EX-10.26   —   Material Contract
Exhibit Table of Contents

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      SHARE PURCHASE AGREEMENT

     between

      SPHERE DRAKE ACQUISITIONS (U.K.) LIMITED

     and

     ALEXANDER STENHOUSE & PARTNERS LTD.

     _____________________

     As of October 9, 1987

     _____________________

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     TABLE OF CONTENTS
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        1.   Sale and Purchase of Shares  . . . . . . . . . . . . .  1

             1.1    Sale of Shares  . . . . . . . . . . . . . . . .  1
             1.2    Purchase Price  . . . . . . . . . . . . . . . .  1
             1.3    Delivery of Shares  . . . . . . . . . . . . . .  2
             1.4    Closing; Closing Date   . . . . . . . . . . . .  2
             1.5    Purchase Price Adjustments  . . . . . . . . . .  2

        2.   Representations and Warranties of the Seller . . . . .  2

             2.1    Organization  . . . . . . . . . . . . . . . . .  2
             2.2    Authority to Execute and Perform Agreements . .  3
             2.3    Outstanding Share Capital . . . . . . . . . . .  3
             2.4    Title to Shares . . . . . . . . . . . . . . . .  3
             2.5    Options or Other Rights . . . . . . . . . . . .  4
             2.6    Subsidiaries and Other Affiliates . . . . . . .  4
             2.7    Memorandum and Articles of Association  . . . .  5
             2.8    Company Financial Statements  . . . . . . . . .  6
             2.9    SDI Financial Statements  . . . . . . . . . . .  6
             2.10   Consolidating Statement of Net Worth  . . . . .  7
             2.11   No Material Adverse Change  . . . . . . . . . .  7
             2.12   Tax Matters . . . . . . . . . . . . . . . . . .  8
             2.13   Compliance with Laws  . . . . . . . . . . . . . 15
             2.14   Consents and Approvals  . . . . . . . . . . . . 16
             2.15   No Breach . . . . . . . . . . . . . . . . . . . 17
             2.16   Actions and Proceedings . . . . . . . . . . . . 18
             2.17   Contracts and Other Agreements  . . . . . . . . 19
             2.18   Reinsurance . . . . . . . . . . . . . . . . . . 20
             2.19   Real Estate . . . . . . . . . . . . . . . . . . 22
             2.20   Tangible Property . . . . . . . . . . . . . . . 22
             2.21   Intangible Property . . . . . . . . . . . . . . 23
             2.22   Ownership of Securities . . . . . . . . . . . . 23
             2.23   Employees . . . . . . . . . . . . . . . . . . . 23
             2.24   Employee Benefit Plans  . . . . . . . . . . . . 24
             2.25   Operations of the Companies . . . . . . . . . . 27
             2.26   Potential Conflicts of Interest . . . . . . . . 30
             2.27   Deposits and Bonds  . . . . . . . . . . . . . . 31
             2.28   Regulatory Filings  . . . . . . . . . . . . . . 31
             2.29   Managing General Agents . . . . . . . . . . . . 32
             2.30   Banks, Brokers and Powers of Attorney . . . . . 32
             2.31   Full Disclosure . . . . . . . . . . . . . . . . 33
             2.32   Qualification of Representations  . . . . . . . 34
2.33   Representations and Warranties on the
                      Closing Date  . . . . . . . . . . . . . . . . 34

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        3.   Representations and Warranties of the Buyer  . . . . . 34

             3.1    Organization  . . . . . . . . . . . . . . . . . 34
             3.2    Authority to Execute and Perform Agreements . . 35
             3.3    Memorandum and Articles of Association  . . . . 35
             3.4    Reinsurance Affiliates  . . . . . . . . . . . . 35
             3.5    Consents and Approvals  . . . . . . . . . . . . 36
             3.6    No Breach . . . . . . . . . . . . . . . . . . . 36
             3.7    Full Disclosure . . . . . . . . . . . . . . . . 36
3.8    Representations and Warranties on the
                      Closing Date  . . . . . . . . . . . . . . . . 37

        4.   Covenants and Agreements . . . . . . . . . . . . . . . 37

             4.1    Conduct of Business . . . . . . . . . . . . . . 37
     4.2    Continued Effectiveness of Representations
                      and Warranties of the Seller  . . . . . . . . 37
             4.3    Corporate Examinations and Investigations . . . 38
             4.4    Payment of Debts  . . . . . . . . . . . . . . . 39
             4.5    Certain Approvals . . . . . . . . . . . . . . . 39
                    4.5.1   Actions by the Buyer  . . . . . . . . . 39
                    4.5.2   Actions by the Seller . . . . . . . . . 40
             4.6    Use of Certain Names by the Seller  . . . . . . 40
             4.7    Use of Certain Names by the Buyer . . . . . . . 41
             4.8    Expenses  . . . . . . . . . . . . . . . . . . . 41
             4.9    Sale of Sphere Drake (Underwriting) Limited . . 42
             4.10   Sale of Halford, Shead (Holdings) Limited . . . 42
4.11   Sale of Sphere Drake Underwriting    
                      (Australia), Limited  . . . . . . . . . . . . 42
             4.12   Disposition of Certain Subsidiaries . . . . . . 43
             4.13   Administration of Certain Underwriting Pools  . 43
             4.14   Properties  . . . . . . . . . . . . . . . . . . 43
             4.15   Data Processing Services  . . . . . . . . . . . 43
             4.16   Resignations of Directors . . . . . . . . . . . 44
             4.17   Sentry Account  . . . . . . . . . . . . . . . . 44
             4.18   Imperio Account . . . . . . . . . . . . . . . . 44
             4.19   Statements Concerning Relationship  . . . . . . 45
             4.20   FET Refunds . . . . . . . . . . . . . . . . . . 45
             4.21   Tax Indemnity . . . . . . . . . . . . . . . . . 46
             4.22   Guaranty  . . . . . . . . . . . . . . . . . . . 46
             4.23   Indemnification . . . . . . . . . . . . . . . . 47
             4.24   Pension Trustee . . . . . . . . . . . . . . . . 47
             4.25   Further Assurances  . . . . . . . . . . . . . . 47

5.   Conditions Precedent to the Obligation           
               of the Buyer to Close  . . . . . . . . . . . . . . . 47

             5.1    Representations and Covenants . . . . . . . . . 47

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             5.2    Third Party Consents  . . . . . . . . . . . . . 48
             5.3    Buyer's Consents  . . . . . . . . . . . . . . . 48
             5.4    Opinions of Counsel to the Seller . . . . . . . 48
             5.5    Litigation  . . . . . . . . . . . . . . . . . . 49
             5.6    Delivery of Share Certificates  . . . . . . . . 49

6.   Conditions Precedent to the Obligation of        
               the Seller to Close  . . . . . . . . . . . . . . . . 49

             6.1    Representations and Covenants . . . . . . . . . 49
             6.2    Buyer's Consents  . . . . . . . . . . . . . . . 50
             6.3    Opinions of Counsel to the Buyer  . . . . . . . 50
             6.4    Litigation  . . . . . . . . . . . . . . . . . . 50

7.   Purchase Price Adjustments on Account of         
               Reinsurance Recoverables and Loss Reserves . . . . . 50

             7.1    Purchase Price Adjustments  . . . . . . . . . . 50
             7.2    Adjustment Account  . . . . . . . . . . . . . . 51
    7.3    Determination of Reinsurance Recoverables
                      Increase Amount . . . . . . . . . . . . . . . 54
             7.4    Cash Adjustments Following Certain Events . . . 54
             7.5    Limitation on Liability . . . . . . . . . . . . 55
             7.6    Current Status of Recoverables  . . . . . . . . 55
             7.7    Preparation of Adjustment Schedules . . . . . . 56
             7.8    Settlements . . . . . . . . . . . . . . . . . . 58
             7.9    Collection of Reinsurance Recoverables  . . . . 59
             7.10   No Commutation of Recoverables, Etc . . . . . . 61
             7.11   Accounts of SDI, Etc  . . . . . . . . . . . . . 61
             7.12   Other Indemnities . . . . . . . . . . . . . . . 62
             7.13   Right of Inspection . . . . . . . . . . . . . . 62
             7.14   Certain Definitions . . . . . . . . . . . . . . 64

        8.   Net Tax Benefit Adjustment . . . . . . . . . . . . . . 74

             8.1    Certain Memorandum Accounts . . . . . . . . . . 74
             8.2    Notional Tax Computations . . . . . . . . . . . 77
                    8.2.1   Notional Account Adjustments  . . . . . 77
                    8.2.2   Baseline Corporation Tax, Etc . . . . . 80
                    8.2.3   Determination of Benefits . . . . . . . 81
                    8.2.4   Dates for Adjustment  . . . . . . . . . 83
                    8.2.5   Settlement of Tax Benefits  . . . . . . 83
      8.2.6   Principles Applied in Making
                              Computations  . . . . . . . . . . . . 84
             8.3    Claims Handling . . . . . . . . . . . . . . . . 85
             8.4    Preparation of Tax Adjustment Schedules . . . . 86
             8.5    Settlements . . . . . . . . . . . . . . . . . . 87
             8.6    Certain Defined Terms . . . . . . . . . . . . . 88

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9.   Survival of Representations and Warranties       
               of the Parties . . . . . . . . . . . . . . . . . . . 91

        10.  Indemnification and Reimbursement  . . . . . . . . . . 92

    10.1   Obligation of the Seller to Indemnify and
            Reimburse for Undisclosed Liabilities,
                      Misrepresentations, Etc . . . . . . . . . . . 92
   10.2   Obligation of the Buyer to Indemnify and
                      Reimburse for Misrepresentations, Etc . . . . 93
    10.3   Indemnification and Reimbursement Arising
             Out of the Fraud, Deception, Misconduct
               and Irregular Practices of the Management
                      of Alexander Howden Underwriting Ltd., Etc  . 94
    10.4   Indemnification and Reimbursement Arising
         Out of S.I.R. Substituted Stop Loss
                      Reinsurance . . . . . . . . . . . . . . . . . 99
    10.5   Indemnification and Reimbursement Arising
                      Out of the Orion Litigation . . . . . . . . .100
    10.6   Indemnification and Reimbursement Arising
                      out of Certain Matters  . . . . . . . . . . .101
             10.7   Indemnification of Brokerage  . . . . . . . . .102
             10.8   Atlanta Policies  . . . . . . . . . . . . . . .103
10.9   Guaranty of Insurance and Reinsurance
                      Recoveries  . . . . . . . . . . . . . . . . .106
             10.10  Notice and Opportunity to Defend  . . . . . . .107

                    10.10.1  Notice of Asserted Liability . . . . .107
                    10.10.2  Opportunity to Defend  . . . . . . . .108

             10.11  Indemnification to Cover Directors, Etc . . . .109
             10.12  Cooperation . . . . . . . . . . . . . . . . . .111
             10.13  Subrogation . . . . . . . . . . . . . . . . . .111
             10.14  Insurance . . . . . . . . . . . . . . . . . . .111
10.15  No Indemnification or Reimbursement  
                      for Management Time . . . . . . . . . . . . .112
             10.16  Indemnification Payments  . . . . . . . . . . .112
             10.17  Settlement Prior to Closing Date  . . . . . . .112

        11.  Termination of Agreement . . . . . . . . . . . . . . .113
             11.1   Termination . . . . . . . . . . . . . . . . . .113
             11.2   Survival  . . . . . . . . . . . . . . . . . . .114

        12.  Miscellaneous  . . . . . . . . . . . . . . . . . . . .115
             12.1   Certain Definitions . . . . . . . . . . . . . .115
             12.2   Overdue Amounts . . . . . . . . . . . . . . . .119
 12.3   Consent to Jurisdiction and Service of
                      Process . . . . . . . . . . . . . . . . . . .119

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             12.4   Publicity . . . . . . . . . . . . . . . . . . .120
             12.5   Suspensory Clause . . . . . . . . . . . . . . .121
             12.6   Notices . . . . . . . . . . . . . . . . . . . .121
             12.7   Entire Agreement  . . . . . . . . . . . . . . .123
  12.8   Waivers and Amendments; Non-Contractual
                      Remedies; Preservation of Remedies  . . . . .123
             12.9   Governing Law . . . . . . . . . . . . . . . . .124
             12.10  Payments and Currency . . . . . . . . . . . . .124
             12.11  Binding Effect; Assignment  . . . . . . . . . .125
             12.12  Variations in Pronouns  . . . . . . . . . . . .125
             12.13  Counterparts  . . . . . . . . . . . . . . . . .125
             12.14  Exhibits and Schedules  . . . . . . . . . . . .125
             12.15  Headings  . . . . . . . . . . . . . . . . . . .125

SCHEDULES:                                            

2.6    - Subsidiaries and Other Affiliates  
2.9    - SDF Financial Statements           
2.11   - Material Adverse Changes           
2.12   - Tax Matters                        
2.13   - Compliance with Laws               
2.14   - Seller's Consents                  
2.15   - No Breach                          
2.16   - Actions and Proceedings            
2.17   - Contracts and Other Agreements     
2.18   - Reinsurance                        
2.19   - Real Estate                        
2.23   - Employees                          
2.24   - Employee Benefit Plans             
2.25   - Operations of the Companies        
2.26   - Potential Conflicts of Interest    
2.27   - Deposits and Bonds                 
2.28   - Regulatory Filings                 
2.29   - Managing General Agents            
  2.30   - Banks, Brokers and Powers of Attorney
3.4    - Reinsurance Affiliates             
3.5    - Buyer's Consents                   
4.16   - Resignations of Directors          
7.6    - Current Status of Recoverables     
7.10   - Reinsurance Recoverables           
10.3-A - The Howden Affair                  
10.3-B - The Howden Affair (Background)     
10.3-C - The Hart Affair                    
10.3-D - The PCW Affair                     
10.3-E - PCW Contracts List                 
10.3-F - PCW Corporations List              
10.3-G - PCW Syndicates                     
10.3-H - Errors and Omissions Policies      

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EXHIBITS:                                             

A    -  Form of Halford, Shead Agreement (4.10)       

      B-1  -  Form of Agreement with respect to the disposition of
        Alexander Agency Administration Limited (4.12)

      B-2 -   Form of Agreement with respect to the disposition of
    Solar Underwriting Agencies Limited (4.12)

C    -  Form of Administration Agreement (4.13)       

 D-1  -  Form of Agreement with respect to the Ringstead
House Property (4.14)                 

      D-2  -  Form of Agreement with respect to the Park Row Leeds
Property #31 and #32 (4.14)           

E    -  Form of Data Processing Agreement (4.15)      

F    -  Form of Tax Indemnity Deed (4.21)             

G    -  Form of Guaranty Agreement (4.22)             

H    -  Form of Indemnification Agreement (4.23)      

I    -  [Deleted]                                     

J    -  Form of Pension Deed (4.24)                   

K-1  -  Form of Opinion of Debevoise & Plimpton (5.4) 

K-2  -  Form of Opinion of Slaughter and May (5.4)    

 K-3  -  Form of Opinion of Maclay, Murray & Spens (5.4)

L    -  Form of Opinion of Clyde & Co. (6.3)          

M    -  Form of Reinsurance Recoverable Schedule (7.7)

N    -  Form of Reserve Adjustment Schedule (7.7)     

O    -  Form of Tax Adjustment Schedule (8.4)         

P    -  Form of Insurance Guaranty Agreement (10.8)   

Q    -  Form of Investor Letter (11.1)                

R    -  Form of Stock Subscription Agreement (11.1)   

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      SHARE PURCHASE AGREEMENT
      ------------------------

     SHARE PURCHASE AGREEMENT dated as of October 9, 1987 (here-
  in, as amended or supplemented from time to time as per-
mitted hereby, this "Agreement"), between SPHERE DRAKE
      ACQUISITIONS (U.K.) LIMITED, an English company whose regis-
     tered office is situate at 30 Mincing Lane, London EC3R 7BR
 England, registered in England with number 2136565 (the
    "Buyer"), and ALEXANDER STENHOUSE & PARTNERS LTD., a Scot-
    tish company whose registered office is situate at 145 St.
   Vincent Street, Glasgow, Scotland, registered in Scotland
with number SC23477 (the "Seller").                   

   The Seller owns all of the issued share capital of SPHERE
  DRAKE INSURANCE GROUP Public Limited Company, an English
company whose registered office is situate at 52/54   
    Leadenhall Street, London EC3A 2B9J England, registered in
  England with number 1868708 (the "Company").  The Seller
     wishes to sell to the Buyer all of the issued share capital
    of the Company (collectively, the "Shares"), and the Buyer
  wishes to purchase all of the Shares, upon the terms and
subject to the conditions of this Agreement.          

Accordingly, the parties agree as follows:            

1.   Sale and Purchase of Shares                      
---------------------------                 

1.1   Sale of Shares                        
--------------                  

               At the closing provided for in Section 1.4 (the
               "Closing"), subject to the terms and conditions
            of this Agreement, the Seller shall sell the
                 Shares to the Buyer, and the Buyer shall purchase
              the Shares, for the purchase price provided in
Section 1.2.                    

1.2   Purchase Price                        
--------------                  

                 Subject to adjustment as provided in Section 1.5,
                the aggregate purchase price for the Shares (the
                  "Purchase Price") shall be B.P.17,651,934, payable
                at the Closing in same day funds to such account
               at a bank in London, England as the Seller sets
                 forth in a notice to be delivered to the Buyer at
            least one Business Day prior to the Closing.

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1.3   Delivery of Shares                    
------------------              

               At the Closing, the Seller shall deliver to the
                Buyer share certificates representing all of the
               Shares, accompanied by unstamped share transfer
            forms in favour of the Buyer or its nominee.

1.4   Closing; Closing Date                 
---------------------           

           The Closing of the sale and purchase of the
              Shares contemplated hereby shall take place at
               the offices of Slaughter and May, 35 Basinghall
             Street, London EC2V 5DB England at 10:00 a.m.
              local time on the first Business Day following
                receipt of the Seller's Consents and the Buyer's
              Consents referred to in Sections 2.14 and 3.5,
            respectively, or at such other place or such
              other time or date as the Buyer and the Seller
               shall agree in writing.  The time and date upon
             which the Closing occurs is herein called the
"Closing Date."                 

1.5   Purchase Price Adjustments            
--------------------------      

                 The Purchase Price set forth in Section 1.2 shall
              be adjusted by amounts paid or credited to the
          parties pursuant to Sections 7, 8, and 10.

2.   Representations and Warranties of the Seller     
--------------------------------------------

      The Seller represents and warrants to the Buyer as
follows:                                    

2.1   Organization                          
------------                    

                The Company is a company duly incorporated under
                 the laws of England and has the power and author-
               ity to own, lease and operate its assets and to
                carry on its business as now and heretofore con-
               ducted.  Without limiting the generality of the
             foregoing, the Company owns all of the issued
               share capital of SPHERE DRAKE INSURANCE plc, an
                English company whose registered office is situ-
                ate at 52/54 Leadenhall Street, London EC3A 2B9J
                 England, registered in England with number 516540
                 ("SDI").  SDI is authorized to carry on insurance

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                 business in the United Kingdom within the meaning
    of the Insurance Companies Act 1982.

     2.2   Authority to Execute and Perform Agreements
           -------------------------------------------

                The execution and delivery of the Seller's Docu-
             ments by the Seller or its Affiliates, as the
                 case may be, and the performance by the Seller or
              its Affiliates, as the case may be, of its and
           their obligations thereunder have been duly
               authorized by all necessary corporate action on
                 the part of the Seller and its Affiliates, as the
                case may be.  Each of the Seller's Documents has
                 been duly executed and delivered by the Seller or
              its Affiliates, as the case may be, and is the
                 valid and binding obligation of the Seller or its
           Affiliates, as the case may be, enforceable
        against it in accordance with its terms.

2.3   Outstanding Share Capital             
-------------------------       

              The authorized share capital of the Company is
                  B.P.50,000,0O0, represented by 50,000,000 ordinary
                    shares of B.P.1 each, of which shares 21,338,066 are
               issued and fully paid.  No other class of share
                 capital of the Company is authorized.  All of the
              Shares are duly authorized, validly issued and
fully paid.                     

2.4   Title to Shares                       
---------------                 

              The Seller owns the Shares beneficially and of
             record, free and clear of any Lien, and, upon
             delivery of and payment for the Shares at the
          Closing as herein provided, the Buyer will
              acquire good and valid title thereto, free and
clear of any Lien.              

2.5   Options or Other Rights               
-----------------------         

               There is no existing option, warrant, subscrip-
                tion, call, unsatisfied preemptive right (except
             preemptive rights which may exist pursuant to
                 Section 89 of the Companies Act 1985 (the "Compa-
                nies Act")) or other right or agreement obligat-
              ing the Company to issue, transfer or sell any
             share capital of the Company or securities or
                 rights convertible into or exchangeable therefor.

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2.6   Subsidiaries and Other Affiliates     
 ---------------------------------

               Schedule 2.6 sets forth (i) the name and juris-
                diction of incorporation, and the percentage and
                number of issued shares owned by the Company, of
               each Person as to which the Company directly or
               indirectly owns or has the power to vote, or to
                 exercise a controlling influence with respect to,
             5O% or more of the securities of any class of
                such Person the holders of which are entitled to
              vote for the election of directors (or Persons
             performing similar functions) of such Person;
                (ii) the jurisdiction of incorporation, the num-
                 ber of ordinary shares outstanding, and the bene-
             ficial owner of each of such shares of Sphere
                Drake (Underwriting) Limited ("SDUL") and Sphere
                Drake Underwriting (Australia), Limited ("SDUA")
                 (such Persons referred to in clause (i), SDUL and
               SDUA being hereinafter referred to as the "Sub-
                sidiaries," and the Company and the Subsidiaries
                 (other than those Subsidiaries listed in Sections
               4.10 and 4.12) being hereinafter referred to as
            the "Companies"); and (iii) the name of each
                Person, other than the Subsidiaries, as to which
              the Company directly or indirectly owns or has
             the power to vote, or to exercise controlling
               influence with respect to any securities of any
             class of such Person the holders of which are
              entitled to vote for the election of directors
                 (or Persons performing similar functions) of such
              Persons, other than investment securities pur-
                chased and held by the Companies in the ordinary
                 course of business.  Each Subsidiary is a company
                 duly incorporated under the laws of its jurisdic-
           tion of incorporation and has the power and
              authority to own, lease and operate its assets
               and to carry on its business as now and hereto-
             fore conducted.  Except with respect to those
              Subsidiaries listed in Sections 4.10 and 4.12,
                the Company directly or indirectly owns, or will
                own at or prior to closing, all of the shares of
                 each Subsidiary as set forth in Schedule 2.6 free
              and clear of any Lien.  Except as set forth in
             Schedule 2.6, all such shares are duly autho-
               rized, validly issued and fully paid.  There is
                no existing option, warrant, subscription, call,
               unsatisfied preemptive right (except preemptive
                rights which may exist pursuant to Section 89 of

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              the Companies Act) or other right or agreement
               obligating any Subsidiary to issue, transfer or
                 sell any share capital of any Subsidiary or secu-
                 rities or rights convertible into or exchangeable
                 therefor.  Except for the Company's interests set
              forth in Schedule 2.6 and portfolio investment
               securities purchased and held by the Company or
                 any of the Subsidiaries in the ordinary course of
              business, the Company does not own directly or
            indirectly any interest in any other Person.

2.7   Memorandum and Articles of Association
      --------------------------------------

                The Seller has heretofore delivered to the Buyer
              true and complete copies of the Memorandum and
                 Articles of Association of each of the Companies,
              having attached thereto all of the resolutions
            required to be so attached, certified by the
                 Secretary or Assistant Secretary thereof, and has
            delivered all of the returns and information
                supplied to the Registrar of Companies under the
                Companies Act since December 31, 1981, which are
                 all of the returns and information required to be
                 so supplied since such date.  The minute books of
               the Companies contain true and complete records
               of all meetings and written resolutions in lieu
               of meeting of their respective Boards of Direc-
              tors (and any committees thereof) and of their
               shareholders since December 31, 1981, and accu-
              rately reflect all transactions referred to in
               such minutes and written resolutions in lieu of
meeting.                        

2.8   Company Financial Statements          
----------------------------    

                The Seller has delivered to the Buyer true, com-
                 plete and correct copies of the individual finan-
               cial statements of each of the Companies, other
              than SDI, as at December 31, 1985 and December
              31, 1986, which include the balance sheets and
               any related profit and loss accounts and state-
                ments of source and application of funds for the
                years then ended, including the footnotes there-
          to, all accompanied by a report thereon of
               Deloitte Haskins & Sells, independent chartered
                accountants, which financial statements (i) have
         been prepared in accordance with standard
            accounting practice applicable in the United

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              Kingdom, (ii) give a true and fair view of the
                 individual state of the affairs of the Companies,
                 as the case may be, as at such dates and of their
              operations and source and application of funds
           for the years then ended in accordance with
          accounting principles consistently applied
          throughout the periods covered thereby and
                 (iii) comply with the Companies Act.  The forego-
                ing individual financial statements of such Com-
                panies as at December 31, 1986, and for the year
                then ended are sometimes herein called the "Com-
            pany Financials," and the individual balance
             sheets included in the Company Financials are
            sometimes herein called the "Company Balance
Sheets."                        

2.9   SDI Financial Statements              
------------------------        

                The Seller has delivered to the Buyer true, com-
                plete and correct copies of the financial state-
                 ments of SDI as at December 31, 1985 and December
              31, 1986, which include the balance sheets and
             the related revenue accounts, profit and loss
                 accounts and statements of source and application
                of funds for the years then ended, including the
              footnotes thereto, all accompanied by a report
                 thereon of Deloitte, Haskins & Sells, independent
                 chartered accountants, which financial statements
              were prepared on a basis materially consistent
             with that used in the preparation of the pub-
                 lished and audited annual accounts of SDI for the
                accounting periods ending December 31 in each of
              1985, 1984 and 1983 and in accordance with the
                 provisions of the Companies Act (or any statutory
               predecessor thereof) as they apply to insurance
                companies, the statements of standard accounting
                practice issued by the Consultative Committee of
                 Accounting Bodies and generally accepted account-
               ing principles applicable in the United Kingdom
              consistently applied.  The foregoing financial
              statements of SDI as at December 31, 1986, and
            for the year then ended are sometimes herein
            called the "SDI Financials," and the balance
                 sheet included in the SDI Financials is sometimes
      herein called the "SDI Balance Sheet."

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2.10  Consolidating Statement of Net Worth  
    ------------------------------------

                The Seller has delivered to the Buyer true, com-
                 plete and correct copies of a pro forma statement
                of net worth of the Companies as at December 31,
                1986 accompanied by a report thereon by Deloitte
              Haskins & Sells, independent chartered accoun-
             tants, setting out certain assumptions on the
              basis of which such pro forma statement of net
                 worth has been prepared, which statement contains
                information correctly extracted from the Company
                Balance Sheets and the SDI Balance Sheet and has
              been properly prepared as described and on the
               basis of the assumptions set out in such report
of Deloitte Haskins & Sells.    

2.11  No Material Adverse Change            
--------------------------      

           Except as set forth in Schedule 2.11, since
                 December 31, 1986, (i) there has been no material
                adverse change in the Condition of the Companies
                taken as a whole or in the separate Condition of
               SDI; (ii) no action has been taken by or on be-
                 half of any of the Companies that could result in
              any such change; and (iii) the Seller does not
               know of any such change that is threatened, nor
                 has there been any damage, destruction or loss of
             the assets of any of the Companies materially
               adversely affecting the Condition of the Compa-
               nies taken as a whole or the separate Condition
           of SDI whether or not covered by insurance.

2.12  Tax Matters                           
-----------                     

               Except as set forth in Schedule 2.12 or as spe-
         cifically contemplated by this Agreement:

                 (i)      The Companies have paid all Taxation (as
                          defined below) which has become payable,
                         and Schedule 2.12 sets out all Taxation
                         assessments made on the Companies which
                         are not yet payable or on which payment
            of tax has been postponed.

               (ii)     The Companies have claimed on a timely
                     basis all reliefs to which they are
                          entitled and all taxes recoverable shown
                      in the Company Financials or the SDI

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                         Financials (including repayment supple-
                         ment for which credit has been taken in
                        any of the individual financial state-
                        ments of the Companies to December 31,
         1986), are recoverable.

                 (iii)    All amounts paid or payable, received or
                        receivable and shown in the individual
                       financial statements of the Companies
                       for all years up to and including the
                          year ended December 31, 1986, in respect
                          of losses claimed or surrendered, provi-
                         sionally claimed or surrendered or pur-
                        ported to be claimed or surrendered by
                          way of group relief for accounting peri-
                         ods of the Companies ending on December
                         31, 1986, or earlier are not repayable.

            (iv)     The Companies have submitted to the
                        Inland Revenue, and all other Taxation
                       authorities in the United Kingdom and
                          elsewhere, all returns, accounts, compu-
                        tations and information required to be
                         submitted by them to the Inland Revenue
                          and such authorities (including, without
                       limitation, returns and notices which
                          the Companies ought of their own initia-
                          tive to make or give for compliance with
                       TMA, VATA, ICTA and CGTA (each as de-
                          fined below)), and the same are accurate
                       and up-to-date as of the date of this
                          Agreement and none of the Inland Revenue
                       nor any other such Taxation authority
                         has indicated that it disputes any mat-
                       ters for any accounting periods after
    December 31, 1977.

                (v)      Except as disclosed and provided for or
                        reserved in the Company Balance Sheets
                         or the SDI Balance Sheet (a) the Compa-
                  nies have no (and have not since
                          December 31, 1986 had any) liability for
                         Taxation chargeable by reference to any
                         event, business transaction or activity
                         attributable to any period ending on or
                       before December 31, 1986; and (b) the
                        Company Balance Sheets or the SDI Bal-
                     ance Sheet makes full provision for

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                         deferred Taxation on all timing differ-
                       ences arising between the corporation
                          tax computations and the accounts taking
                          no account of any losses carried forward
       at December 31, 1986.

                (vi)     All books and records required for com-
                         pliance with PAYE legislation are fully
                        maintained and written up, and each of
                          the Companies has deducted and accounted
                          to the Inland Revenue for all PAYE which
                      it should deduct and/or for which it
                        should account.  All employee expenses
                       referred to in Chapter II Part III of
                      Finance Act 1976 which have not been
                      specifically disclosed to the Inland
                          Revenue are covered by a valid dispensa-
                       tion which has not been revoked.  All
                       necessary PAYE returns have been made
                        and have been made on a correct basis.

              (vii)    All details of any issues under unap-
                         proved share incentive and share option
                       schemes have been given to the Inland
                          Revenue within the specified time (para-
                          graph 3 Part VII Schedule 12 Finance Act
                       ("FA") 1972 and Section 186(11) Taxes
Act 1970).    

           (viii)   Any share option or profit sharing
                         scheme operated by any of the Companies
                      has been duly approved by the Inland
                      Revenue and no event has occurred or
                  action been taken, to cause such
           approval to be withdrawn.

            (ix)     The Inland Revenue has issued final
                       assessments against the Companies for
                     each accounting period ending on or
                    before December 31, 1977, and such
                      assessments have not been re-opened.

               (x)      Except as specifically provided for in
                        full in the Company Financials and the
                      SDI Financials, there are no circum-
                         stances or events arising since January
                       1, 1978 (including this Agreement and
                      the Closing), which give rise to any

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                       claim for Taxation against any of the
                         Companies (whether on their own account
                      or on account of Taxation chargeable
                       against another in the name of any of
                         the Companies or on account of Taxation
                          chargeable against another for which any
                     of the Companies might otherwise be
                        liable from January 1, 1978) under the
                       following provisions (a) Part VIII of
                          TMA (charges on non-residents); (b) Part
                      IX of TMA (interest on overdue tax);
                             (c) Sec.Sec. 53 or 54 of ICTA (deduction of
                          tax on annual payments, interest, etc.);
                             (d) Sec. 70 of ICTA (collection of Schedule
                         A tax from lessee and agents); (e) Sec.
                          268A ICTA as extended by Sec. 45 FA 1977
                        (postponement -- transfer of assets to
                          non-resident company); (f) Sec. 277 ICTA
                        (tax recoverable from other members of
                            group); (g) Sec.Sec. 278-279 ICTA (company
                       ceasing to be a member of group); (h)
                            Sec.Sec. 460-468 ICTA (cancellation of tax
                      advantage on certain transactions in
                          securities); (i) Sec. 085 ICTA (transac-
                   tions at under value/over value);
                                (j) Sec.Sec. 488-490 ICTA (artificial transac-
                       tions in land); and (k) Sec. 496 ICTA
                        (transactions associated with loans or
credit).      

           (xi)     The liability to tax in respect of
                          chargeable gains which would be incurred
                         on the disposal by any of the Companies
                         of any asset at net book value will not
                        exceed the provisions made in the Com-
                        pany Financials or the SDI Financials,
                        and the records of the Companies accu-
                        rately record all information required
                         for computation of any tax liability or
                          relief which would arise on any disposal
                          or realization of any asset owned by any
                     of the Companies as at December 31,
1986.         

               (xii)    A loss on disposal of any asset by any
                         of the Companies would not give rise to
                          any adjustment resulting from the appli-

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                     cation of Sections 280 and 281 ICTA
              (depreciatory transactions).

               (xiii)   None of the Companies has acquired any
                          assets otherwise than under a bargain at
                  arm's length (Section 29A CGTA).

                (xiv)    No scheme has been effected or arrange-
                        ments made whereby the value of any of
                        the Companies' assets has been materi-
                         ally reduced to obtain a tax-free bene-
                     fit on disposal (Sections 25 and 26
CGTA).        

                (xv)     Since January 1, 1978, none of the Com-
                        panies has made any disposal which has
                         required or may/will require any compu-
                      tation under Section 35 CGTA (part -
disposals).   

                (xvi)    None of the Companies has sought relief
                      under the provisions of Sections 115
                        through 117 CGTA 1979 or Section 46 FA
1977.         

            (xvii)   No charge to Taxation in respect of
                        chargeable gains will arise in respect
                         of any disposal by any of the Companies
                          at a price equal to the cost of acquisi-
                  tion of any asset acquired since
    December 31, 1986.

                (xviii)  None of the Companies has since January
                         1, 1978, made any "distribution" as the
                          same is defined in Sections 233, 234 and
                        235 ICTA except for dividends shown in
                          the Company Financials or the SDI Finan-
cials.        

               (xix)    The Company has not made any elections
                         for any purposes of the ICTA, TMA, VATA
                         or CGTA including (without limiting the
                         foregoing) elections under (a) Sec. 256
                         ICTA (group income, etc.), (b) Schedule
                       6 FA 1983 (pooling qualifying securi-
                         ties), and (c) Schedule 5 CGTA (pooling
                      of securities at market values as at
 April 6, 1965).

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              (xx)     None of the Companies has received or
                        become entitled to receive any capital
                        distribution from a company within the
                     meaning of Section 266(5) ICTA (and
      Section 72(5) CGTA).

               (xxi)    None of the Companies has been a party
                          to any scheme of reconstruction or amal-
                        gamation within the meaning of Section
267(4) ICTA.  

               (xxii)   None of the Companies has carried on a
                          trade outside the United Kingdom through
                       a branch or agency and full provision
                         has been made in the Company Financials
                        or the SDI Financials for all overseas
                       Taxation on overseas branch or agency
activities.   

               (xxiii)  None of the Companies has been a party
                         to any transaction to which Section 482
                        ICTA (migration etc. of companies) may
                          apply and for which Treasury consent has
                        not been obtained or which is not cov-
                          ered by the General Consents (as defined
       in Section 482 ICTA).

              (xxiv)   None of the Companies has claimed any
                        relief under Sections 418 and 419 ICTA
                         (unremittable income and delayed remit-
tances).      

               (xxv)    None of the Companies has paid nor has
                          any obligation to pay any interest which
                      is not eligible for relief by way of
                         deduction in the computation of profits
                  and gains for Taxation purposes.

                (xxvi)   None of the Companies has been involved
                       in or concerned with any transactions
                         falling within the terms of Sections 85
                          and 86 of CGTA or in respect of which it
                       is open to the Companies to apply for
                        clearance pursuant to Section 88 CGTA.

              (xxvii)  The Companies are taxable persons for
                      the Value Added Tax ("VAT") and have
                         been duly registered as such.  The Com-

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                       panies issued correct tax invoices to
                        all appropriate persons requiring them
                       and have kept all necessary documents
                      required to be completed and used to
                          verify their quarterly VAT returns.  The
                      Companies have in all other respects
                    complied with the VAT legislation.

                 (xxviii) All documents in the possession or under
                        the control of any of the Companies or
                      to which any of them is a party have
        been properly stamped.

             (xxix)   None of the Companies has claimed or
                          been concerned with any claim for relief
                       from stamp duty or capital duty under
                         Section 55 FA 1927, Section 78 FA 1985,
                         Section 77 FA 1986, Section 42 FA 1930,
                         Schedule 19 FA 1973 or Parts III and IV
     Chapter IV FA 1986.

               (xxx)    Where any taxes have been recovered or
                         are recoverable full provision has been
                          made for any tax due on that recovery or
                      recoverable, as the case may be, and
                          full provision has been made for amounts
       due to third parties.

              (xxxi)   In this Section 2.12 "Taxation" means
                        any liability to any form of taxation,
                    duty, levy, impost, rate or charge
                          raised, levied or imposed by any govern-
                     mental, fiscal, municipal, local or
                       other authority whatsoever whether in
                         the United Kingdom or elsewhere whether
                      measured on income, receipts, value,
                       gains or otherwise, including without
                          prejudice to the generality of the fore-
                        going any amount chargeable (including
                       interest and penalties and additions)
                     under any provision of the Income &
                          Corporation Taxes Act 1970 ("ICTA"), the
                        Taxes Management Act 1970 ("TMA"), the
                          Capital Gains Tax Act 1979 ("CGTA"), the
                      Value Added Tax Act 1983 ("VATA") or
                          other statute or statutory instrument in
                          the United Kingdom or elsewhere (in each
                        case as amended and in force from time

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                         to time including any statute or statu-
                       tory instrument repealed, replaced or
                       reenacted thereby) relating to income
                        tax, corporation tax, advance corpora-
                      tion tax, capital gains tax, capital
                         transfer tax, inheritance tax, develop-
                       ment land tax, value added tax, with-
                        holding tax, sales tax, use tax, gross
                         receipts tax, franchise tax, employment
                        and payroll related tax, property tax,
                      premium tax, Australian fire brigade
                         charges, import duties, customs duties,
                      excise duties, capital duties, stamp
                          duties, national insurance, social secu-
                          rity and other like contributions and/or
                      costs, interests, penalties or fines
                     relating to any claim for Taxation.

2.13  Compliance with Laws                  
--------------------            

                 Except as set forth in Schedule 2.13, none of the
                Companies is in violation of any applicable law,
               ordinance, regulation, order, judgment, injunc-
         tion, award, decree, undertaking or other
             requirement of any Governmental or Regulatory
              Body applicable to its business the failure to
             comply with which could materially affect the
              Condition of the Companies taken as a whole or
              the separate Condition of SDI, and none of the
              Companies has received written notice that any
               such violation is being alleged.  Except as set
              forth in Schedule 2.13, the Companies have all
              licenses, permits, orders or approvals of each
               Governmental or Regulatory Body that are neces-
               sary for the conduct of any material portion of
                their businesses as now conducted (collectively,
               "Permits").  Without limiting the generality of
        the foregoing, SDI is duly authorized or
                 licensed, or was duly authorized or licensed when
                 necessary, to write all of the lines of insurance
               written by it in each jurisdiction set forth in
               Schedule 2.13, which comprise all jurisdictions
                in which it may have any outstanding liabilities
                 or obligations.  Schedule 2.13 sets forth details
              of all material written undertakings or assur-
               ances issued by Alexander & Alexander Services,
                Inc., a Maryland corporation ("A&A"), the Seller
                or any of their Affiliates, on behalf or for the

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                 benefit of any of the Companies, including, with-
                 out limitation, any such undertaking or assurance
                 issued to the Department of Trade and Industry of
                the United Kingdom (the "DTI") and the Institute
             of London Underwriters (the "ILU") and to any
                other Governmental or Regulatory Body.  All Per-
                 mits, together with their dates of expiration, if
                known, are listed on Schedule 2.13 (such listing
                to be without prejudice to the Seller's position
               that any particular permit is not a Permit) and
                 are in full force and effect.  None of the Compa-
              nies has received any written allegations of a
                violation of any Permit from any Governmental or
               Regulatory Body (including, without limitation,
              any insurance authority), and no proceeding is
          pending or, to the Knowledge of the Seller
                threatened, to revoke or limit any Permit, which
             violation or proceeding could have a material
                adverse affect on the Condition of the Companies
                taken as a whole or on the separate Condition of
                 SDI.  Except as set forth in Schedule 2.13, since
                December 31, 1981, none of the Companies (i) has
            been denied authority by any Governmental or
                Regulatory Body to conduct any type of insurance
              business; (ii) has been notified that a Permit
          has been revoked, suspended, restricted or
                adversely modified (which modifications have not
                 been satisfied); (iii) has received and failed to
            satisfy any request from any Governmental or
               Regulatory Body to modify (by amendment, waiver
                 or otherwise) the terms of any reinsurance agree-
                 ment or treaty to which it is a party or by which
                it is bound; (iv) that is an underwriting agency
                has written insurance policies or settled claims
                outside of the terms of the authority granted to
                 it by its principals; (v) has received an allega-
              tion of a violation of any such authority from
                any principal; (vi) has been a party to any con-
                tract of insurance or reinsurance that is unlaw-
            ful; or (vii) has purported to reinsure with
              Persons not authorized to carry on business as
             insurers in the relevant territories; in each
               case where such event or circumstance described
                 in (i) through (vii) above could result in conse-
              quences materially adverse to the Condition of
               the Companies taken as a whole, or to the sepa-
rate Condition of SDI.          

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2.14  Consents and Approvals                
----------------------          

                Except as set forth in Schedule 2.14, the execu-
              tion and delivery by the Seller or its Affili-
               ates, as the case may be, of the Seller's Docu-
               ments, the binding effect of the Seller's Docu-
              ments on the Seller and its Affiliates and the
                consummation of the transactions to be completed
               on or prior to Closing pursuant to the Seller's
               Documents do not require the Seller, any of the
              Companies or any of their Affiliates to obtain
               any consent, approval or action of, or make any
                 filing with or give any notice to, any Governmen-
                 tal or Regulatory Body or trade or industry orga-
                 nization or any other Person for which the conse-
                quences of failing to obtain any such consent or
                approval, or maintain any such action, filing or
                 notice (i) would prevent the Seller or its Affil-
                iates, as the case may be, from consummating the
                 transactions to be completed on or prior to Clos-
         ing pursuant to the Seller's Documents or
                 (ii) could be materially adverse to the Condition
                 of the Companies taken as a whole or to the sepa-
                rate Condition of SDI (the "Seller's Consents").
                Except as set forth on Schedule 2.14, the Seller
            has no Knowledge of any fact or circumstance
               concerning itself or its Affiliates which could
                result in the Buyer not being able to obtain any
                of the Buyer's Consents (as such term is defined
                in Section 3.5) or the Seller or its Affiliates,
                as the case may be, not being able to obtain any
       of the Seller's Consents in due course.

2.15  No Breach                             
---------                       

                Except as set forth in Schedule 2.15, the execu-
              tion, delivery and performance of the Seller's
              Documents and the consummation of the transac-
            tions to be completed on or prior to Closing
           pursuant to the Seller's Documents will not
              (i) violate any provision of the Memorandum or
               Articles of Association of the Seller or any of
         the Companies or any of their Affiliates;
            (ii) require any consent, approval or notice
               under or result in a violation or breach of, or
             conflict with, or constitute (with or without
              notice or lapse of time or both) a default (or
                give rise to any right of termination, cancella-

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             tion or acceleration) under any of the terms,
                 conditions or provisions of any note, bond, mort-
            gage, indenture, license, Contracts or Other
            Agreements to which the Seller or any of the
               Companies or any of their Affiliates is a party
                 or by which the Seller or any of the Companies or
               any of their Affiliates or any of their proper-
                 ties may be bound, the consequences of failure to
              obtain such consent, approval or notice, or of
                 such violation, breach, conflict or default could
             be materially adverse to the Condition of the
             Companies taken as a whole or to the separate
                 Condition of SDI; (iii) result in the creation or
                 attachment of any Lien on the Shares; (iv) result
                in the creation or attachment of any Lien on any
             property or right of any of the Companies the
              consequences of which Lien could be materially
               adverse to the Condition of the Companies taken
               as a whole or to the separate Condition of SDI;
            (v) violate any order, judgment, injunction,
                 award or decree of any Governmental or Regulatory
                Body applicable to the Seller or any of the Com-
                 panies or any of their Affiliates or any of their
               properties or any statute, law or regulation of
                any jurisdiction, the consequences of which vio-
                lation could be materially adverse to the Condi-
                tion of the Companies taken as a whole or to the
             separate Condition of SDI; or (vi) violate or
                 result in the revocation, restriction, suspension
              or modification of any Permit (assuming in the
                 case of clause (v) that the Seller's Consents and
            the Buyer's Consents have been obtained) the
            consequences of which violation, revocation,
                restriction, suspension or modification could be
                 materially adverse to the Condition of the Compa-
               nies taken as a whole or to the separate Condi-
tion of SDI.                    

2.16  Actions and Proceedings               
-----------------------         

              Except as set forth in Schedule 2.16 and other
              than in the ordinary course of business, there
                 are no outstanding orders, judgments in excess of
                  B.P.5O,O00 alone or in the aggregate, injunctions,
                awards or decrees of any Governmental or Regula-
             tory Body involving any of the Companies as a
             party.  Except as set forth in Schedule 2.16,
               there are no actions, suits or claims or legal,

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                administrative or arbitral proceedings or to the
               Knowledge of the Seller investigations (whether
            or not the defense thereof or liabilities in
                 respect thereof are covered by insurance) pending
              or, to the Knowledge of the Seller threatened,
                involving any of the Companies as a party or any
                of their properties that, individually or in the
               aggregate, could have a material adverse effect
                 upon the transactions contemplated hereby or upon
               the Condition of the Companies taken as a whole
 or the separate Condition of SDI.

2.17  Contracts and Other Agreements        
------------------------------  

               Schedule 2.17 sets forth all material Contracts
                 or Other Agreements to which any of the Companies
                 is a party or by or to which it or its properties
                is bound or subject that are currently in effect
               or may have outstanding obligations or liabili-
             ties and which meet the following conditions:
               (i) Contracts or Other Agreements with any cur-
               rent or former directors; (ii) binding authori-
             ties or contractual arrangements of a similar
               nature (but not including line slips and perma-
               nent open covers), whereby any of the Companies
                has delegated the authority to underwrite on its
             behalf to any managing general agent, broker,
              agent or any other third Person, and any other
                Contracts or Other Agreements with such Persons;
               (iii) Contracts or Other Agreements under which
            any of the Companies agrees to indemnify any
            Person or to guarantee the obligation of any
                 Person other than in the ordinary course of busi-
                ness or to be party to any VAT Grouping with any
              other Person (or any Contracts or Other Agree-
                ments having the same effect as any of the fore-
                 going); (iv) Contracts or Other Agreements (other
                than insurance and reinsurance agreements) which
               cannot be cancelled (a) without liability, pre-
                  mium or penalty less than B.P.100,000 or (b) which
                involve the payment or receipt of B.P.100,000 or
               more per year or are for a term in excess of 18
               months and which cannot be cancelled without 60
            days' or more notice; (v) Contracts or Other
             Agreements containing covenants of any of the
                Companies not to compete in any line of business
              or with any Person in any geographical area or
                 covenants of any other Person not to compete with

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               any of the Companies in any line of business or
                 in any geographical area; (vi) Contracts or Other
                Agreements relating to the acquisition by any of
              the Companies of any operating business or the
                 share capital of any other Person; and (vii) Con-
               tracts or Other Agreements relating to the bor-
                rowing of money by any of the Companies.  Except
              as set forth in Schedule 2.17 or 2.18, none of
                 the Companies is in material default under any of
           the Contracts or Other Agreements listed in
                 Schedule 2.17 nor, to the Knowledge of the Seller
              (i) is any other party to any such Contract or
               Other Agreement in material default thereunder,
                 or (ii) does any condition exist that with notice
                 or lapse of time or both would constitute a mate-
rial default thereunder.        

2.18  Reinsurance                           
-----------                     

              Schedule 2.18 sets forth a list of all outward
               reinsurances (other than facultative contracts)
               including reinsurance treaties or agreements to
                which SDI is a party covering underwriting years
               commencing on January 1, 1978 pursuant to which
                there may be any outstanding Obligations or lia-
                bilities.  Except as set forth in Schedule 2.18,
               (i) all such reinsurances are in full force and
                 effect; (ii) neither SDI nor, to the Knowledge of
               the Seller, any other party thereto is in mate-
                 rial default with respect to any provision there-
                of and to the Knowledge of the Seller, no condi-
                tion exists that with notice or lapse of time or
               both would constitute a material default there-
              under; and (iii) no approval or consent of any
              Person is needed for such reinsurances to con-
            tinue in full force and effect following the
                Closing and the consummation of the transactions
               to be completed on or prior to Closing pursuant
to this Agreement.              

2.19  Real Estate                           
-----------                     

               (i)      Schedule 2.19 sets forth a list of all
                       leases, subleases or other agreements
                     under which any of the companies is
                        lessor, lessee or licensee of any real
                      property (all of such property being

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                         hereinafter referred to as the "Proper-
ties").       

               (ii)     The Properties comprise all the rights
                         vested in the Companies relating to any
                          land at the date hereof and the descrip-
                         tions set out in Schedule 2.19 are cor-
                          rect in all respects and not misleading.

              (iii)    Except as set forth in Schedule 2.19,
                        the Companies have good and marketable
          title to the Properties.

               (iv)     The Properties and deeds and documents
                        of title thereto are free and clear of
                          all Liens other than Permitted Liens and
                         all such deeds and documents are in the
                        possession or under the control of the
                    Companies and, if required, copies
                        thereof shall be supplied to the Buyer
   prior to Closing.

              (v)      Except as set forth in Schedule 2.19,
                         the Companies have exclusive possession
                       of all the Properties and none of the
                     Properties is subject to any lease,
                 tenancy or license to occupy or
                 agreement to grant any of them.

              (vi)     Except as set forth in Schedule 2.19,
                      there are no outgoings affecting the
                       Properties which are of an unusual or
                      onerous nature and there are no rent
                reviews in the course of being
                  determined or exercisable by the
                       landlord thereof from a date prior to
  the date hereof.

              (vii)    To the Knowledge of the Seller, there
                     are no material disputes concerning
                     boundaries, easements, covenants or
                          other matters relating to the Properties
or their use. 

              (viii)   To the Knowledge of the Seller, there
                         are no circumstances which would enable
                         the landlord or any other Person to re-
                        enter or take possession of any of the

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                     Properties or which would otherwise
                     restrict or terminate the continued
                        possession or occupation of any of the
Properties.   

              (ix)     Except as set forth in Schedule 2.19,
                       none of the Companies has acquired or
                     disposed of or agreed to acquire or
                     dispose of or granted any option in
                        respect of any interest in any land or
                     premises other than the Properties.

            (x)      The terms under which the Companies
                        occupy the Properties provide that the
                          relevant landlord shall insure the buil-
                     dings and structures comprising the
                      Properties.  To the Knowledge of the
                        Seller, the Companies have not done or
                         omitted to do anything which would make
                        any such insurance void or voidable or
                      might result in an increased rate of
premium.      

2.20  Tangible Property                     
-----------------               

              All items of tangible property, other than the
               Properties, reflected in the Company Financials
                or the SDI Financials, which are material to the
                 Condition of the Companies taken as a whole or to
               the separate Condition of SDI were owned by the
                Companies on December 31, 1986 free and clear of
                any Lien other than Permitted Liens, and none of
                such tangible property has been sold or disposed
                of other than in the ordinary course of business
               since December 31, 1986.  All of such items are
                in good operating condition and repair, ordinary
                wear and tear excepted, and are fit for the par-
            ticular purpose for which they are currently
being used by the Companies.    

2.21  Intangible Property                   
-------------------             

                The Companies own, have registered or have valid
                right to use any service marks, trademarks, ser-
                vice names, trade names and copyrights, and own,
              or will have the use of as contemplated by the
                Data Processing Agreement (as defined in Section
              4.15), all data, records and computer software

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              that is currently being used in the conduct of
                 their businesses now being conducted, and none of
            the Companies is currently in receipt of any
                 notice of infringement by others of, or conflicts
               by others with, the rights of any of the Compa-
                nies in any such service marks, trademarks, ser-
          vice names, trade names, copyrights, data,
                records and computer software which infringement
                 or conflict would be material to the Condition of
                 the Companies taken as a whole or to the separate
          Condition of SDI.  To the Knowledge of the
                 Seller, none of the Companies has received notice
                that any of the Companies is infringing any ser-
                vice marks, trademark, service names, trade name
             or registration, copyright or any application
                therefor or any right of any other Person in any
 computer software now used by it.

2.22  Ownership of Securities               
-----------------------         

                 SDI beneficially owns and has good and marketable
                 title to all of its portfolio securities, in each
                case free and clear of any Lien other than those
                 Permitted Liens described in Sections 12.1(x)(c),
(g) and (i).                    

2.23  Employees                             
---------                       

              (i)      Schedule 2.23 sets forth the name and
                        total compensation of each director of
                         each of the Companies and of each other
                        employee of any of the Companies whose
                     current annual rate of compensation
                     (including bonuses and commissions)
     exceeds B.P.50,000.

                 (ii)     The Seller has given copies to the Buyer
                        of all current contracts of employment
                          to which any of the Companies is a party
                       involving any rate of compensation in
                             excess of B.P.50,000 and the current Sphere
                                                            ------
                        Drake Staff Handbook (the "Staff Hand-
      --------------------
                       book") presently furnished by each of
                         the Companies to its employees.  Except
                        as set forth in the Staff Handbook, to
                        the Knowledge of the Seller, there are
                    no other contracts or arrangements
                      (a) entitling any employee to future

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                     increases in remuneration, level of
                          employment benefits or pension contribu-
                     tion; (b) entitling any employee to
                     receive sickness payments above and
                          beyond statutory sick pay; (c) entitling
                          any employee to receive notice in excess
                        of the notice period specified in Sec-
                      tion 49 of the Employment Protection
                        (Consolidation) Act 1978 (as amended);
                      or (d) with respect to employees who
                         have been employed by any of the Compa-
                      nies for 10 years or more or receive
                       compensation in excess of B.P.30,000,
                          requiring any of the Companies to recog-
                          nize the part of employment by any other
                         Person or previous employer as continu-
                         ous employment by any of the Companies;
                         which contracts or agreements are mate-
                        rial to the Condition of the Companies
                     taken as a whole or to the separate
   Condition of SDI.

              (iii)    Except as set forth in Schedule 2.23,
                         there are no agreements or arrangements
                          by, or in relation to, any of the Compa-
                          nies whereunder any director or employee
                          is entitled to a commission or remunera-
                       tion of any other sort, calculated by
                       reference to the whole or part of the
                        turnover, profits or sales of any Per-
                       son.  Except as set forth in Schedule
                          2.23, none of the Companies has made any
                         loans other than advances and loans for
                         travel and other out-of-pocket expenses
                         made in the ordinary course of business
                         to any employees or directors of any of
the Companies.

2.24  Employee Benefit Plans                
----------------------          

                 (i)      In this Section 2.24 the following terms
                       shall have the meanings herein speci-
fied:         

                    "Company Pension Scheme" means the
                         Sphere Drake Pension and Life Assurance
Plan (1986).  

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                        "Pension Scheme" means all superannua-
                        tion and all other pension, retirement
                   benefit schemes or life assurance
                          arrangements in operation by or in rela-
               tion to any of the Companies.

                        "Relevant Employee" means any employee
                        or director for the time being of or a
                       former employee or director of any of
                       the Companies or a former employee or
                         director of any other employer to whose
                       business (or any part thereof) any of
              the Companies has succeeded.

               (ii)     Other than the Company Pension Scheme,
                         there is no Pension Scheme to which any
                     of the Companies contributes or has
                     contributed or may become liable to
                        contribute under which benefits of any
                          kind are payable to or in respect of any
                          of the Relevant Employees on retirement,
                     death, disability or sickness or in
              other similar circumstances.

              (iii)    Except as set forth in Schedule 2.24,
                      the Company Pension Scheme (a) is an
                          exempt approved scheme (within the mean-
                   ing of the Finance Act 1970); and
                       (b) has at all times complied with in
                     all material respects and been duly
                          administered in all material respects in
                      accordance with all applicable laws,
                         regulations and requirements (including
                         Inland Revenue and trust requirements).

              (iv)     Except as set forth in Schedule 2.24,
                         each of the Companies (a) has been duly
                          admitted to participation in the Company
                         Pension Scheme; (b) has complied in all
                       material respects with all the provi-
                          sions of the Company Pension Scheme; and
                         (c) holds or is named in an appropriate
                         contracting-out certificate (within the
                         meaning of the Social Security Pensions
Act 1975).    

                (v)      There are not in respect of the Company
                       Pension Scheme or the benefits there-

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                          under any actions, suits or claims pend-
                       ing or threatened (other than routine
                         claims for benefits) which are material
                         to the Condition of the Companies taken
                         as a whole or to the separate Condition
of SDI.       

                 (vi)     There has been delivered to the Buyer in
                       respect of the Company Pension Scheme
                      true, complete and correct copies of
                         (a) all trust deeds and other documents
                          constituting the Company Pension Scheme;
                        (b) all current booklets and announce-
                        ments; (c) the latest actuarial report
                        and valuation; (d) any contracting-out
                    certificates; and (e) lists of all
                          assets, funding arrangements and current
                     membership as of December 31, 1986.

            (vii)    To the Knowledge of the Seller, all
                          steps have been taken to ensure that the
                          Company Pension Scheme conforms with the
                        preservation requirements specified in
                        Sections 62 and 16 of the Social Secu-
                        rity Act 1973 and any regulations made
                          thereunder and the equal access require-
                      ments specified in Section 53 of the
                       Social Security Pensions Act 1975 and
                  any regulations made thereunder.

           (viii)   No claim has been made, nor to the
                     Knowledge of the Seller, threatened
                          against the trustees or administrator of
                      the Company Pension Scheme or any of
                       them or against any other Person whom
                          any of the Companies is or may be liable
                          to indemnify or compensate in respect of
                     any event, act or omission or other
                        matter arising out of or in connection
                  with the Company Pension Scheme.

               (ix)     Notwithstanding any other provision of
                     this Agreement, the Seller makes no
                          representations or warranties as to, and
                      assumes no liability with respect to
                         (whether under Section 7, Section 10 or
                         otherwise), the adequacy of the contri-
                       butions to the Company Pension Scheme

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                         made before the date hereof relative to
                        the liabilities for benefits under the
                         Company Pension Scheme or the financial
                        disclosure with respect thereto in the
                      Company Financials or the SDI Finan-
cials.        

2.25  Operations of the Companies           
---------------------------     

            Except as set forth in Schedule 2.25, in any
                other Schedule hereto or as specifically contem-
                 plated by this Agreement, since December 31, 1986
none of the Companies has:      

              (i)      amended its Memorandum or Articles of
                            Association or merged with or into or con-
                    solidated with any other Person or
                         changed or agreed to change in any man-
                         ner the rights of its outstanding share
                       capital or the character of its busi-
ness;         

               (ii)     issued or sold or purchased, or issued
                        options or rights to subscribe for, or
                       entered into any contracts or commit-
                         ments to issue or sell or purchase, any
       of its share capital;

               (iii)    except in the ordinary course of busi-
                   ness, entered into or amended any
                          employment agreement, or entered into or
                       amended any Contracts or Other Agree-
               ments with any labor union or
                        association representing any employee;

               (iv)     except in the ordinary course of busi-
                     ness, incurred any indebtedness for
                         borrowed money or otherwise represented
                        by notes, bonds, debentures or similar
instruments;  

          (v)      declared or paid any dividends or
                          declared or made any other distributions
                          of any kind to its shareholders, or made
                    any direct or indirect redemption,
                          reduction, purchase or other acquisition
              of any of its share capital;

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               (vi)     except in the ordinary course of busi-
                       ness, to the Knowledge of the Seller,
                         waived any right under any Contracts or
                        Other Agreements of a type required to
                      be set forth in any Schedule hereto,
                    which waiver could have a material
                        adverse effect on the Condition of the
                      Companies taken as a whole or on the
            separate Condition of SDI;

                 (vii)    made any material change in its account-
           ing methods or practices;

                 (viii)   materially changed any of its investment
                          guidelines or business policies or stan-
                     dards with respect to underwriting,
                        principles of loss reserving or claims
                    adjustment policies and practices;

                 (ix)     entered into any obligation or agreement
                     (whether legally binding or not) to
                     provide or procure the provision of
                 benefits of the nature of those
                         described in Section 2.24 in respect of
                         any of the Relevant Employees except in
                       accordance with the provisions of the
         Company Pension Scheme;

               (x)      except in the ordinary course of busi-
                        ness, made any wage or salary increase
                        or bonus, or increase in any other di-
                          rect or indirect compensation, for or to
                   any of its officers or directors;

               (xi)     made any loan or advance to any of its
                    shareholders, officers, directors,
                         employees, consultants, agents or other
                          representatives (other than advances and
                    loans for travel and out-of-pocket
                         expenses made in the ordinary course of
                      business), or made any other loan or
                        advance otherwise than in the ordinary
                          course of business which individually or
                      in the aggregate exceed B.P.100,000;

               (xii)    except in the ordinary course of busi-
                       ness, entered into any material lease
                          (as lessor or lessee) or sold, abandoned

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                          or made any other disposition of a mate-
                       rial portion of its assets or proper-
ties;         

               (xiii)   except in the ordinary course of busi-
                        ness, incurred or assumed any material
                        debt, obligation or liability (whether
                       absolute or contingent and whether or
                 not currently due and payable);

               (xiv)    except in the ordinary course of busi-
                          ness, made any acquisition in a material
                          amount of all or any part of the assets,
                          properties, share capital or business of
   any other Person;

                (xv)     paid, directly or indirectly, any obli-
                         gation in any material amount otherwise
                          than in the ordinary course of business;

               (xvi)    except in the ordinary course of busi-
                     ness, entered into any Contracts or
                         Other Agreements with respect to under-
                          writing authorities or fronting arrange-
ments;        

               (xvii)   except in the ordinary course of busi-
                         ness, created any Liens other than Per-
                        mitted Liens on any of its properties;

               (xviii)  except in the ordinary course of busi-
                        ness, made any expenditure or business
                       commitment in any amount in excess of
B.P.100,000;  

               (xix)    except in the ordinary course of busi-
                         ness, introduced any new class of busi-
                     ness or withdrawn from any class of
                   business in any material respect;

              (xx)     extended its business in any material
                       respect into any geographical area in
                         which it was not previously doing busi-
                        ness or withdrawn any material portion
                       of its business from any geographical
                       area in which it was previously doing
business;     

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               (xxi)    except in the ordinary course of busi-
                     ness, appointed or employed any new
            agent, salesman or broker;

               (xxii)   except in the ordinary course of busi-
                          ness, terminated or cancelled any agent,
     salesman or broker;

               (xxiii)  except in the ordinary course of busi-
                       ness, entered into any reinsurance or
                          coinsurance treaty or agreement, whether
                         assuming premium or ceding liabilities;

                (xxiv)   settled any claims, except in the ordi-
          nary course of business;

               (xxv)    except in the ordinary course of busi-
                      ness, undertaken any litigation with
                   respect to which the liability is
                    expected to exceed B.P.500,000; or

              (xxvi)   done anything that might constitute a
                        default in respect of any provision of
                         any reinsurance treaty, and as a result
                    of such default the Companies as a
                          whole, or SDI individually, could suffer
                material adverse consequences.

2.26  Potential Conflicts of Interest       
------------------------------- 

                 Except as set forth in Schedule 2.26, no director
                 of any of the Companies or the Seller, and to the
              Knowledge of the Seller, no director of A&A or
              any of its Affiliates other than the Companies
               and the Seller, and no entity controlled by any
                such director (to the Knowledge of the Seller in
               the case of directors of A&A and its Affiliates
              other than the Companies and the Seller) owns,
                directly or indirectly, any interest in (except-
               ing not more than 10% shareholdings for invest-
                ment purposes in securities of publicly held and
              traded companies), or is an officer, director,
                 employee or consultant of, any Person that is, or
                is engaged in business as, a competitor, lessor,
                 lessee, customer or supplier of any of the Compa-
               nies which relationship as such lessor, lessee,
               customer or supplier, or the conflict of inter-
                 ests involved in such relationship as competitor,

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             is material to the Condition of the Companies
                taken as a whole or to the separate Condition of
SDI.                            

2.27  Deposits and Bonds                    
------------------              

                SDI has made or furnished or maintains in or for
            the account of each jurisdiction in which it
                 writes or is admitted to write policies of insur-
                 ance or reinsurance all material deposits, bonds,
             funds, letters of credit and other securities
               ("Security Deposits") required to be made, fur-
                 nished or maintained by the law of each jurisdic-
              tion in which it carries on its business.  SDI
                 has complied with all of its material contractual
                 obligations to make, furnish or maintain Security
                 Deposits.  Schedule 2.27 sets forth a list of all
             material Security Deposits furnished or main-
             tained as of December 31, 1986, by any of the
               Companies arising out of any obligations in any
                jurisdiction under any Contracts or Other Agree-
                ments in connection with any contracts of insur-
            ance or reinsurance.  Except as set forth in
                Schedule 2.27, there has been no material change
            in such Security Deposits since December 31,
1986.                           

2.28  Regulatory Filings                    
------------------              

               The Seller has made available for inspection by
              the Buyer the following with respect to any of
             the Companies (i) all material registrations,
                 filings or submissions made with any Governmental
           or Regulatory Body since December 31, 1981;
             (ii) every material financial statement filed
                with or submitted to any Governmental or Regula-
            tory Body since December 31, 1981; (iii) any
                 reports of examination issued by any Governmental
            or Regulatory Body and any trade or industry
         organization since December 31, 1981; and
                 (iv) any such filings or submissions Known to the
               Seller to have been made from December 31, 1978
               through December 31, 1981.  To the Knowledge of
                the Seller, except as indicated in Schedule 2.28
                 since December 31, 1981 (i) each of the Companies
             has filed all reports, statements, documents,
                 registrations, filings or submissions required to
               be filed by it with any Governmental or Regula-

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               tory Body; (ii) all such registrations, filings
              and submissions were in substantial compliance
              with applicable law when filed and as of their
                 respective dates; and (iii) no material deficien-
                cies have been asserted by any such Governmental
                 or Regulatory Body with respect to such registra-
tions, filings or submissions.  

2.29  Managing General Agents               
-----------------------         

               Schedule 2.29 lists all managing general agents
                now engaged, or Known to the Seller to have been
              engaged within the past five years, by SDI and
                 with respect to whom there may be any outstanding
                obligations or liabilities.  Except as set forth
                in Schedule 2.29, neither the Seller nor, to the
            Seller's Knowledge, SDI has received written
                notice that any managing general agent so listed
              and accounting for a material portion of SDI's
              business has cancelled or intends to cancel or
                 otherwise materially modify its relationship with
                SDI or to decrease or limit its services to SDI.

2.30  Banks, Brokers and Powers of Attorney 
     -------------------------------------

             Schedule 2.30 sets forth (i) the name of each
               bank, trust company, securities or other broker
              or financial institution with which any of the
               Companies has an active account, credit line or
                safe deposit box or vault; (ii) the name of each
              Person Known by the Seller to be authorized by
               any of the Companies to draw thereon or to have
            access to any safe deposit box or vault; and
           (iii) the names of all Persons Known by the
                 Seller (other than managing general agents listed
                 in Schedule 2.29 or any Persons authorised pursu-
               ant to any line slips or permanent open covers)
               to be authorized by powers of attorney or other
                 instruments to act on behalf of any of the Compa-
          nies in matters concerning its business or
affairs.                        

2.31  Full Disclosure                       
---------------                 

                 The Seller or its Affiliates, as the case may be,
              has made available to the Buyer for inspection
                 true, complete and authentic copies of all of the

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              Contracts or Other Agreements set forth in any
               Schedule to any of the Seller's Documents.  All
                copies of any Document or Other Papers delivered
                by or on behalf of the Seller or any of the Com-
                panies or any of their Affiliates as required by
                 the Seller's Documents and the transactions to be
                completed on or prior to Closing pursuant to the
                 Seller's Documents are true, complete and authen-
              tic in all material respects.  The representa-
                tions and warranties of the Seller or any of its
               Affiliates contained in the Seller's Documents,
                 and the Documents or Other Papers furnished by or
                on behalf of the Seller or any of its Affiliates
              to the Buyer as required by the Seller's Docu-
               ments or in connection with the transactions to
                be completed on or prior to the Closing pursuant
               to the Seller's Documents, analyzed as a whole,
                 do not contain any untrue statement of a material
               fact or omit to state a material fact necessary
            in order to make the statements made, in the
               light of the circumstances under which they are
                 made, not misleading; provided, however, that the
                             --------  -------
                representations and warranties contained in this
             Section 2.31 shall not apply to (i) Schedules
                10.3A through 10_______ or (ii) the affidavit(s)
              of Reynolds Johnson & Green attached to Sched-
ule 2.12.                       

2.32  Qualification of Representations      
--------------------------------

              The Buyer shall not have any claim or right of
                 action against the Seller based upon, arising out
               of or otherwise in respect of any inaccuracy in
                or any breach of the representations and warran-
              ties set forth in the last sentence of Section
                 2.31 if and to the extent that on or prior to the
                Closing Date the Buyer had Knowledge of the fact
                upon which a claim that such representations and
                warranties were inaccurate or breached is based;
              provided, however, that the limitations on the
--------  -------               
               claims or rights of the Buyer contained in this
           Section 2.32 shall only limit any claims or
             rights that the Buyer might otherwise have or
              assert under the last sentence of Section 2.31
             and shall not limit or otherwise restrict any
           claims or rights that the Buyer may have or
                 assert based upon, arising out of or otherwise in

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              respect of any other provisions of this Agree-
ment.                           

       2.33  Representations and Warranties on the Closing
             ---------------------------------------------
Date                            
----                            

               The representations and warranties contained in
                this Section 2 shall be true and complete in all
               material respects on and as of the Closing Date
             with the same force and effect as though such
               representations and warranties had been made on
and as of the Closing Date.     

3.   Representations and Warranties of the Buyer      
------------------------------------------- 

      The Buyer represents and warrants to the Seller as
follows:                                    

3.1   Organization                          
------------                    

              The Buyer is a company duly incorporated under
                 the laws of England and has the power and author-
               ity to own, lease and operate its assets and to
                carry on its business as now and heretofore con-
ducted.                         

     3.2   Authority to Execute and Perform Agreements
           -------------------------------------------

               The execution and delivery of the Buyer's Docu-
             ments and the performance by the Buyer or its
                 Affiliates of its or their obligations thereunder
                 have been duly authorized by all necessary corpo-
           rate action on the part of the Buyer or its
            Affiliates, as the case may be.  Each of the
            Buyer's Documents has been duly executed and
                delivered by the Buyer or its Affiliates, as the
                 case may be, and is the valid and binding obliga-
               tion of the Buyer or such Affiliate enforceable
                 against such Person in accordance with its terms.

3.3   Memorandum and Articles of Association
      --------------------------------------

                The Buyer has heretofore delivered to the Seller
              true and complete copies of the Memorandum and
                Articles of Association of the Buyer on the date
                hereof, having attached thereto all of the reso-
                lutions required to be so attached, certified by

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           the Secretary or Assistant Secretary of the
Buyer.                          

3.4   Reinsurance Affiliates                
----------------------          

                Schedule 3.4 identifies each Reinsurance Affili-
                ate (as such term is defined in Section 7.14) of
           the Buyer as of the date of this Agreement.

3.5   Consents and Approvals                
----------------------          

               Except as set forth in Schedule 3.5, the execu-
                 tion and delivery by the Buyer or its Affiliates,
                 as the case may be, of the Buyer's Documents, the
              binding effect of the Buyer's Documents on the
                Buyer and its Affiliates and the consummation of
               the transactions to be completed on or prior to
                the Closing pursuant to the Buyer's Documents do
                 not require the Buyer or any of its Affiliates to
             obtain any consent, approval or action of, or
              make any filing with or give any notice to any
              Governmental or Regulatory Body (the consents,
           approvals, actions and filings indicated by
           asterisks in Schedule 3.5 being hereinafter
               referred to as the "Buyer's Consents").  Except
                 or as set forth on Schedule 3.5, the Buyer has no
                Knowledge of any fact or circumstance concerning
              itself or its Affiliates which could result in
              the Seller not being able to obtain any of the
            Seller's Consents or the Buyer or any of its
              Affiliates not being able to obtain any of the
Buyer's Consents in due course. 

3.6   No Breach                             
---------                       

              The execution, delivery and performance of the
             Buyer's Documents and the consummation of the
               transactions to be completed on or prior to the
              Closing pursuant to the Buyer's Documents will
               not (i) violate any provision of the Memorandum
                 or Articles of Association of the Buyer or any of
         its Affiliates; (ii) require any consent,
                 approval or notice under or result in a violation
             or breach of, or conflict with, or constitute
                 (with or without notice or lapse of time or both)
                a default (or give rise to any right of termina-
                tion, cancellation or acceleration) under any of
                the terms, conditions or provisions of any note,

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                bond, mortgage, indenture, license, Contracts or
                 Other Agreements to which the Buyer or any of its
              Affiliates is a party or by which the Buyer or
                any of its Affiliates or any of their properties
             may be bound; (iii) result in the creation or
               attachment of any Lien on any property or right
         of the Buyer or any of its Affiliates; or
             (iv) violate any order, judgment, injunction,
                 award or decree of any Governmental or Regulatory
                 Body applicable to the Buyer or any of its Affil-
iates.                          

3.7   Full Disclosure                       
---------------                 

                 All copies of Documents or Other Papers delivered
                 by or on behalf of the Buyer or any of its Affil-
              iates as required by the Buyer's Documents are
            true, complete and authentic in all material
                respects.  The representations and warranties of
               the Buyer or any of its Affiliates contained in
                 the Buyer's Documents, and the Documents or Other
                Papers furnished by or on behalf of the Buyer or
               any of its Affiliates to the Seller as required
              by the Buyer's Documents or in connection with
               the transactions to be completed on or prior to
              the Closing pursuant to the Buyer's Documents,
              analyzed as a whole, do not contain any untrue
               statement of a material fact or omit to state a
            material fact necessary in order to make the
            statements made, in the light of the circum-
               stances under which they are made, not mislead-
ing.                            

       3.8   Representations and Warranties on the Closing
             ---------------------------------------------
Date                            
----                            

               The representations and warranties contained in
                this Section 3 shall be true and complete in all
               material respects on and as of the Closing Date
             with the same force and effect as though such
               representations and warranties had been made on
and as of the Closing Date.     

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4.   Covenants and Agreements                         
------------------------                    

The parties covenant and agree as follows:  

4.1   Conduct of Business                   
-------------------             

              From the date hereof through the Closing Date,
                the Seller shall use reasonable efforts to cause
              the Companies to conduct their business in the
              ordinary course and, without the prior written
                 consent of the Buyer, not to undertake any of the
            actions specified in Section 2.25, except as
disclosed in Schedule 2.25.     

        4.2   Continued Effectiveness of Representations and
              ----------------------------------------------
Warranties of the Seller        
------------------------        

              From the date hereof through the Closing Date,
                the Seller shall use reasonable efforts to cause
                 the Companies to conduct their businesses in such
                a manner so that the representations and warran-
                ties contained in Section 2 shall continue to be
                true and correct in all material respects on and
              as of the Closing Date as if made on and as of
            the Closing Date.  Each of the Buyer and the
                 Seller shall promptly give notice to the other of
              any event, condition or circumstance occurring
             from the date hereof through the Closing Date
              that would constitute a violation or breach of
      the Buyer's or the Seller's Documents.

   4.3   Corporate Examinations and Investigations
         -----------------------------------------

             Prior to the Closing Date, the Buyer shall be
               entitled, through its employees and representa-
               tives, to make such investigation of the Condi-
              tion of the Companies, and such examination of
                 the books, records and financial Condition of the
                 Companies as the Buyer wishes.  Any such investi-
            gation and examination shall be conducted at
             reasonable times and under reasonable circum-
                stances in such a manner to avoid any disruption
                 of the Companies' businesses, and the Seller, the
                 Companies and any of their Affiliates shall coop-
                 erate fully therein.  Subject to Section 2.32, no
            investigation by the Buyer shall diminish or
               obviate any of the representations, warranties,
               covenants or agreements of the Seller or any of

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                its Affiliates under the Seller's Documents.  In
                 order that the Buyer may have full opportunity to
                make such business, accounting and legal review,
              examination or investigation as it may wish of
                the Condition of the Companies, the Seller shall
            (i) furnish and shall cause the Companies to
               furnish the representatives of the Buyer during
                such period with all such information and copies
               of such documents concerning the affairs of the
                Companies as such representatives may reasonably
                 request with the exception of those documents the
            disclosure of which might serve to waive any
                attorney-client privilege attaching thereto; and
                 (ii) use its best efforts to cause the Companies'
              directors and employees (including auditors in
              whatever capacity employed) to cooperate fully
                 with such representatives in connection with such
                review and examination and to cooperate with the
                Buyer in furnishing all information requested by
               the Buyer as to the Condition of the Companies.
              If this Agreement terminates, the Buyer shall,
            and shall cause its Affiliates and any other
            Person to whom the Buyer has given access to
            information disclosed hereunder to, (i) keep
                 confidential and not use in any manner any infor-
            mation or documents obtained from any of the
               Companies or any of their Affiliates concerning
             the Condition of the Companies unless readily
               ascertainable from public or published informa-
                tion, or already known or subsequently developed
                by the Buyer independent of any investigation of
                 the Companies, or received from a third party not
              under an obligation to the Companies or any of
                their Affiliates to keep such information confi-
              dential and (ii) return any documents obtained
                from the Companies or any of their Affiliates as
             soon as possible without retaining any copies
              thereof; provided, however, that such require-
   --------  -------
                ments shall not apply to any use by the Buyer or
                any of its Affiliates of any such information or
                documents in any action or proceeding brought by
                 it in good faith against the Seller or any of its
                Affiliates for any breach of any of the Seller's
Documents.                      

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4.4   Payment of Debts                      
----------------                

                 Except with respect to amounts owing in the ordi-
                 nary course of business, before the Closing Date,
              the Seller shall, and shall use its reasonable
              efforts to cause each Affiliate of the Seller,
                 other than the Companies, to pay to the Companies
             any amounts owed by any of the Seller or such
                 Affiliate to any of the Companies, and the Compa-
            nies shall pay to the Seller and each of its
                 Affiliates, other than the Companies, any amounts
             owed by the Companies to any of such Persons.

4.5   Certain Approvals                     
-----------------               

4.5.1    Actions by the Buyer   
      --------------------

                       The Buyer shall use its best efforts,
                    without any cost to the Seller, to
                       obtain as promptly as practicable the
                     Buyer's Consents.  The Seller shall
                         cooperate with the Buyer in its efforts
                      to obtain all such Buyer's Consents.
                        The Seller shall provide such informa-
                     tion to Governmental and Regulatory
                        Bodies as such bodies or organizations
                          may require in order to assist the Buyer
                    in obtaining the Buyer's Consents.
                        Without limiting the generality of the
                          foregoing, the Buyer shall in good faith
                    use its best efforts to procure by
                        October 16, 1987 a preliminary indica-
                          tion in writing, reasonably satisfactory
                       to the Seller (the "ILU Indication"),
                         from the ILU or the Buyer to the effect
                        that the ILU has withdrawn or has been
                          satisfied as to each of the requests for
                        further action specified in its letter
                          to SDI dated September 16, 1987.  If the
                    ILU Indication shall not have been
                          obtained prior to October 16, 1987, then
                          the Seller shall have the right, whether
                    or not it elects to terminate this
                        Agreement pursuant to Section 11.1, to
                         furnish material information to, and to
                        hold discussions with, other potential
                         purchasers of SDI or the Company to the
                        end of entering into an agreement with

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                        another purchaser to purchase the Com-
                          pany upon the termination of this Agree-
ment.         

4.5.2    Actions by the Seller  
       ---------------------

                        The Seller shall use its best efforts,
                          without any cost to the Buyer, to obtain
                         as promptly as practicable the Seller's
                      Consents.  The Buyer shall cooperate
                          with the Seller in its efforts to obtain
                        all such Seller's Consents.  The Buyer
                        shall provide such information to Gov-
                         ernmental and Regulatory Bodies as such
                        bodies or organizations may require in
                         order to assist the Seller in obtaining
        the Seller's Consents.

4.6   Use of Certain Names by the Seller    
  ----------------------------------

             Immediately following the Closing, the Seller
                shall, and shall cause all of its Affiliates to,
                (i) cease using the name "Sphere," or "Drake" or
                 any variant thereof, whether alone or in combina-
            tion, and shall promptly cause any Affiliate
               whose corporate name contains any of such words
               to change its name to a name that does not con-
                tain any of such words; and (ii) cease using the
              name "Sterling" in the United Kingdom and Ber-
          muda, if used in conjunction with the word
             "Insurance" or any variant thereof or if used
                with respect to any risk bearing insurance busi-
            ness, and shall promptly cause any Affiliate
            whose corporate name contains such words and
            which does business in the United Kingdom or
              Bermuda to change its name to a name that does
not contain such words.         

4.7   Use of Certain Names by the Buyer     
 ---------------------------------

            Immediately following the Closing, the Buyer
              shall, and shall cause the Companies to, cease
              using the names "Alexander," "Howden," "Reed,"
                "Solar," "Sterling" and "Stenhouse" or any vari-
                 ant thereof, whether alone or in combination, and
               shall promptly cause any Affiliate whose corpo-
              rate name contains any of such words to change
               its name to a name that does not contain any of

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             such words; provided, however, that the Buyer
         --------  -------
                shall continue to have the right to use the name
            "Sterling" without restriction in the United
                 Kingdom and Bermuda, but only if used in conjunc-
             tion with at least one additional descriptive
               word and an intervening descriptive word in the
              case of the use of the word "Insurance" (e.g.,
             Sterling and General Insurance Company); pro-
                                                      ----
                vided, however, that in no event shall the Buyer
-----  -------                  
             use the name Sterling in conjunction with the
                word "Offices." For the purposes of this Section
             4.7, "descriptive word" shall not include the
                words "limited", "company", "public limited com-
                pany" or any variation thereof or any equivalent
words in any jurisdiction.      

4.8   Expenses                              
--------                        

                The parties shall, except as otherwise specific-
           ally provided herein, bear their respective
                 expenses incurred in connection with the prepara-
               tion, execution and performance of the Seller's
           Documents and the Buyer's Documents and the
               transactions to be completed on or prior to the
              Closing pursuant to this Agreement, including,
            without limitation, all fees and expenses of
                 agents, representatives, counsel and accountants;
                 provided, however, that the Seller shall bear the
--------  -------               
            reasonable expenses of such character of the
                 Buyer if this Agreement is terminated pursuant to
             either Section l1.1(iv) or (v), and the Buyer
                shall bear the reasonable expenses of such char-
               acter of the Seller if this Agreement is termi-
             nated pursuant to either Section 11.1(iii) or
                 (vi).  The fees and expenses of any arbitrator or
              expert incurred in connection with the perfor-
                mance of its duties pursuant to any provision of
               the Seller's Documents or the Buyer's Documents
                 shall be borne one-half by the Buyer and one-half
by the Seller.                  

     4.9   Sale of Sphere Drake (Underwriting) Limited
           -------------------------------------------

           Prior to the execution and delivery of this
            Agreement, Howden Management & Data Services
         Limited, an English company ("HMDS"), has
      transferred to the Company for nominal

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               consideration all of the issued and outstanding
share capital of SDUL.          

   4.10  Sale of Halford, Shead (Holdings) Limited
         -----------------------------------------

           Prior to the execution and delivery of this
                Agreement, the Seller and SDI, have entered into
               an agreement in the form of Exhibit A providing
               for the sale to the Seller of all of the issued
               and outstanding share capital of Halford, Shead
           (Holdings) Limited, an English company (the
"Halford Shead Agreement").     

        4.11  Sale of Sphere Drake Underwriting (Australia),
              ----------------------------------------------
Limited                         
-------                         

           Prior to the execution and delivery of this
             Agreement, Alexander Howden Group (Australia)
               Limited, an Australian company, has transferred
               to the Company for nominal consideration all of
                 the issued and outstanding share capital of SDUA.

4.12  Disposition of Certain Subsidiaries   
   -----------------------------------

           Prior to the execution and delivery of this
                Agreement, Dormante Holdings Limited, an English
                company ("Dormante") and the Company, and Sphere
                 Drake Underwriting Management Limited, an English
               company ("SDUM") and Dormante have entered into
               agreements in the form of Exhibits B-1 and B-2,
           respectively, providing for the transfer to
             Dormante of all of the issued and outstanding
                share capital of the following corporations that
             are currently Subsidiaries:  Alexander Agency
              Administration Limited, an English company and
               Solar Underwriting Agencies Limited, an English
             company (collectively, the "Subsidiary Agree-
ments").                        

      4.13  Administration of Certain Underwriting Pools
            --------------------------------------------

           On or prior Closing, Alexander Howden Group
          Agency Management Ltd., an English company
          ("AHGAM"), SDUM and Groves, John & Westrup
             (Underwriting) Ltd., an English company, will
                enter into an agreement in the form of Exhibit C
           pursuant to which AHGAM, shall assume as of
                December 31, 1987, responsibility for the admin-

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            istration of certain underwriting pools (the
"Administration Agreement").    

4.14  Properties                            
----------                      

              On or prior Closing, HMDS and SDI and HMDS and
               SDUM will enter into the agreements in the form
                of Exhibits D-1 and D-2, respectively, providing
               for the assignment of the Ringstead House Prop-
              erty leasehold and the Park Row Leeds Property
            #31 and #32 leaseholds (the "Property Agree-
ments").                        

4.15  Data Processing Services              
------------------------        

                On or prior Closing, Alexander Howden Group Man-
            agement Services Limited, an English company
                 ("AHGM") and SDUM will enter into an agreement in
            the form of Exhibit E pursuant to which AHGM
             shall provide data processing services to the
            Companies (the "Data Processing Agreement").

4.16  Resignations of Directors             
-------------------------       

           On or prior to the Closing Date, all of the
             directors of the Companies who are affiliated
            with the Seller and listed in Schedule 4.16,
              shall have submitted their resignations in the
             form set out in Schedule 4.16, and all of the
            directors of the Seller or Affiliates of the
            Seller who are affiliated with the Buyer and
             listed in Schedule 4.16, shall have submitted
                their resignations in the form set out in Sched-
ule 4.16.                       

4.17  Sentry Account                        
--------------                  

                 Forthwith upon collection by any of the Companies
                 of any of the receivables due to SDUM from Sentry
            Insurance Company (U.K.) Limited (an English
        company) and Sentry Indemnity Company (a
           Wisconsin corporation) ("SIC") amounting to
                 (B.P.537,585), US$2,863,717 and Can.$41,520 and a
                  receivable due to SDUA from SIC of B.P.114,937 the
               Buyer will make a payment to the Seller in cash
                 of an amount equal to any amount so collected and
               the Seller shall have and assume full authority
           and responsibility for claims handling with

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             respect to such receivables.  The Buyer shall
            procure that SDUM and SDUA shall furnish the
                 Seller or an Affiliate of the Seller with a suit-
                 able power of attorney in such form as the Seller
               or such Affiliate shall reasonably request pro-
              viding that the Seller or such Affiliate shall
                have full authority and responsibility to assert
               claims on behalf of SDUM and SDUA in respect of
such receivables.               

4.18  Imperio Account                       
---------------                 

               The Seller will pay to SDUM a sum equivalent to
              balances paid by SDUM at 31st December 1986 on
              the Solar Marine Quota Share Treaty 1976-81 of
                  B.P.923,315, US$1,518,960 and Can.$56,642 less the
                  reserve set up in the books of SDUM of B.P.550,000
                relating to the related E&O Claim No. 84-005-04-
               00.  This payment will be subject to adjustment
                 30 days after the Buyer advises the Seller of the
                actual balances at Closing paid by SDUM less any
                 recoveries received from the quota share reinsur-
                 ers on the said Treaty for the years in question.

4.19  Statements Concerning Relationship    
  ----------------------------------

              The Buyer and the Seller acknowledge that they
             will have a continuing relationship under the
           arrangements provided for in this Agreement
              (including, without limitation, Section 7) and
               that the insurance markets are sensitive to the
                 identity of the owner of the businesses conducted
                 by the Companies.  Accordingly, each of the Buyer
               and the Seller agrees that it will make no mis-
               representation concerning the arrangements pro-
                 vided for in this Agreement, and the Buyer agrees
                that it will not, and from and after the Closing
             Date will not permit any of the Companies to,
                 hold itself out as being controlled by A&A or the
                Seller or represent that, otherwise than as pro-
           vided in the Seller's Documents, A&A or the
                 Seller indemnifies or guarantees any of the obli-
               gations or liabilities of any of the Companies.

4.20  FET Refunds                           
-----------                     

              SDUM has informed the Seller that it estimates
           that as of September 30, 1987 the amount of

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              refund of Federal Excise Tax (plus accumulated
               interest) ("FFT") held by it for the account of
                   SDI is B.P.1,685,000.  SDI, prior to the date here-
            of, has declared and paid a dividend in such
                amount to the Company, and the Company, prior to
                 the date hereof, has declared and paid a dividend
               in such amount to the Seller.  The Buyer agrees
               that if and to the extent that there is a final
               determination that the amount of any FET refund
                held by SDUM for the account of SDI exceeds such
                amount (either by a court of competent jurisdic-
               tion or in the good faith judgment of the Board
                of Directors of SDUM) then the Buyer shall cause
               the prompt payment in cash of such amount equal
                to such excess to the Seller.  The Seller agrees
               that if and to the extent that there is a final
               determination that the amount of any FET refund
              held by it for the account of SDI is less than
           such amount (either by a court of competent
                 jurisdiction or in the good faith judgment of the
            Board of Directors of SDUM) the Seller shall
             cause the prompt payment in cash of an amount
           equal to such deficiency to SDI.  The final
               determination of such amount shall become final
             and binding upon the parties unless within 30
                days of receipt thereof either the Seller or the
              Buyer disagrees with the amount or the matters
                reflected therein and has not resolved such dis-
                 agreement with the other party, in which case the
                 Seller or the Buyer, as the case may be, may give
               the other party written notice of its disagree-
            ment (a "Notice of Disagreement").  Any such
               Notice of Disagreement shall specify in reason-
             able detail the nature of any disagreement so
               asserted and shall be submitted to and reviewed
                 by an arbitrator which shall act as an expert and
            not as an arbitrator which shall be mutually
              selected by the Buyer's and the Seller's audi-
               tors, or if they cannot agree, by the President
            of the Institute of Chartered Accountants of
                England and Wales, whose decision shall be final
and binding upon the parties.   

4.21  Tax Indemnity                         
-------------                   

             At the Closing, the Buyer, the Seller and the
                Company shall enter into a Tax Indemnity Deed in
                 the form of Exhibit F (the "Tax Indemnity Deed").

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4.22  Guaranty                              
--------                        

                 Simultaneously with the execution and delivery of
                 this Agreement, A&A, Alexander & Alexander Europe
               plc, a Scottish corporation ("A&A Europe"), and
                the Buyer are entering into a Guaranty Agreement
              in the form of Exhibit G (the "Guaranty Agree-
ment").                         

4.23  Indemnification                       
---------------                 

              At the Closing, SDI and Alexander Howden North
                 America, Inc., a Georgia corporation, shall enter
                into an Indemnification Agreement in the Form of
            Exhibit H (the "Indemnification Agreement").

4.24  Pension Trustee                       
---------------                 

                 At the Closing, Alexander Howden Holdings plc, an
                 English company, the Company and SDUM shall enter
                 into a Deed in the form of Exhibit J with respect
                to the retirement and appointment of the trustee
           of the Company Pension Scheme (the "Pension
Deed").                         

4.25  Further Assurances                    
------------------              

                Each of the parties shall execute such Documents
                or Other Papers and take such further actions as
                may be reasonably required or desirable to carry
               out the transactions contemplated hereby.  Each
                such party shall use its best efforts to fulfill
              or obtain the fulfillment of the conditions to
                the Closing.  Without limiting the generality of
              the foregoing, the parties will use their best
              efforts to obtain the Seller's Consents or the
     Buyer's Consents, as the case may be.

     5.   Conditions Precedent to the Obligation of the Buyer to
          ------------------------------------------------------
Close                                       
-----                                       

          The obligation of the Buyer to enter into and complete
          the Closing is subject, at its option, to the fulfill-
         ment on or prior to the Closing Date of the following
         conditions, any one or more of which may be waived by
it:                                         

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5.1   Representations and Covenants         
-----------------------------   

                The representations and warranties of the Seller
             or any of its Affiliates, as the case may be,
                 contained in the Seller's Documents shall be true
                 in all material respects on and as of the Closing
             Date with the same force and effect as though
                made on and as of the Closing Date.  Each of the
              Seller and its Affiliates, as the case may be,
                shall have performed and complied with all cove-
             nants and agreements required by the Seller's
                Documents to be performed or complied with by it
                 in all material respects on or prior to the Clos-
                ing Date.  The Seller and any of its Affiliates,
               as the case may be, shall have delivered to the
               Buyer a certificate, dated the Closing Date and
           signed by an officer of the Seller and such
                 Affiliates, respectively, to the foregoing effect
              and stating that all conditions to the obliga-
                tions of the Buyer hereunder have been satisfied
                in all material respects and that the Seller and
                 its Affiliates have not relied upon any represen-
              tation or warranty by the Buyer which is not a
term of the Buyer's Documents.  

5.2   Third Party Consents                  
--------------------            

                 All material consents, permits and approvals from
                 parties to Contracts or Other Agreements with the
              Seller or any or the Companies or any of their
             Affiliates that may be required in connection
                 with the performance by the Seller or its Affili-
            ates of their obligations under the Seller's
                 Documents or the continuance of such Contracts or
             Other Agreements with the Companies after the
 Closing shall have been obtained.

5.3   Buyer's Consents                      
----------------                

                All Buyer's Consents as set forth in Section 3.5
shall have been received.       

5.4   Opinions of Counsel to the Seller     
 ---------------------------------

                The Buyer shall have received the opinions dated
            the Closing Date, addressed to the Buyer, of
               (i) Debevoise & Plimpton, special United States
                counsel to the Seller, in the form of Exhibit K-

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            1, (ii) Slaughter and May, solicitors to the
      Seller, in the form of Exhibit K-2 and
               (iii) Maclay, Murray & Spens, solicitors to the
   Seller, in the form of Exhibit K-3.

5.5   Litigation                            
----------                      

             No action, suit or proceeding shall have been
                instituted before any Governmental or Regulatory
                Body, or instituted or threatened by any Govern-
                 mental or Regulatory Body, to restrain, modify or
            prevent the carrying out of the transactions
            contemplated hereby, or to seek damages or a
                discovery order in connection with such transac-
tions.                          

5.6   Delivery of Share Certificates        
------------------------------  

               At the Closing, the Seller shall deliver to the
                Buyer share certificates representing all of the
               Shares, accompanied by unstamped share transfer
           forms in favor of the Buyer or its nominee.

      6.   Conditions Precedent to the Obligation of the Seller to
           -------------------------------------------------------
Close                                       
-----                                       

           The obligation of the Seller to enter into and complete
          the Closing is subject, at its option, to the fulfill-
         ment on or prior to the Closing Date of the following
         conditions, any one or more of which may be waived by
it:                                         

6.1   Representations and Covenants         
-----------------------------   

               The representations and warranties of the Buyer
             or any of its Affiliates, as the case may be,
                contained in the Buyer's Documents shall be true
                 in all material respects on and as of the Closing
             Date with the same force and effect as though
                made on and as of the Closing Date.  Each of the
             Buyer and its Affiliates, as the case may be,
                shall have performed and complied with all cove-
            nants and agreements required by the Buyer's
                Documents to be performed or complied with by it
                 in all material respects on or prior to the Clos-
               ing Date.  The Buyer and any of its Affiliates,
               as the case may be, shall have delivered to the

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                Seller a certificate, dated the Closing Date and
                 signed by an officer of the Buyer and such Affil-
                iates, respectively, to the foregoing effect and
                 stating that all conditions to the obligations of
               the Seller hereunder have been satisfied in all
            material respects and that the Buyer and its
               Affiliates have not relied upon any representa-
             tion or warranty by the Seller which is not a
term of the Seller's Documents. 

6.2   Buyer's Consents                      
----------------                

                All Buyer's Consents as set forth in Section 3.5
shall have been received.       

6.3   Opinions of Counsel to the Buyer      
--------------------------------

                 The Seller shall have received the opinions dated
             the Closing Date, addressed to the Seller, of
                 Clyde & Co., solicitors to the Buyer, in the form
of Exhibit L.                   

6.4   Litigation                            
----------                      

             No action, suit or proceeding shall have been
                instituted before any Governmental or Regulatory
                Body, or instituted or threatened by any Govern-
                 mental or Regulatory Body, to restrain, modify or
            prevent the carrying out of the transactions
            contemplated hereby, or to seek damages or a
                discovery order in connection with such transac-
tions.                          

   7.   Purchase Price Adjustments on Account of Reinsurance
        ----------------------------------------------------
Recoverables and Loss Reserves              
------------------------------              

        The Purchase Price set forth in Section 1.2 shall be
       adjusted as provided in this Section 7, as follows:

7.1   Purchase Price Adjustments            
--------------------------      

                Certain terms used in this Section 7 are defined
               in Section 7.14.  Subject to the further provi-
                sions of this Section 7, the Seller shall pay to
                the Buyer as an adjustment to the Purchase Price
               the amounts determined from time to time in the
               Adjustment Account provided for in Section 7.2.

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                 All amounts to be credited, paid or applied under
                 this Section 7 shall be credited, paid or applied
               in accordance with the applicable provisions of
              this Section 7.  Except as provided in Section
                7.4 it is understood and agreed that neither the
                 Buyer, SDI, their permitted assigns nor any other
          Person shall have any right of recourse in
                 respect of the Adjustment Account provided for in
           Section 7.2 against the Seller or any other
Person or any of their assets.  

7.2   Adjustment Account                    
------------------              

               The Seller shall maintain pursuant to this Sec-
                 tion 7 an open account (the "Adjustment Account")
                 in favor of the Buyer, and amounts shall be cred-
             ited and charged to the Adjustment Account on
             each Adjustment Date as provided in this Sec-
              tion 7.  The balance in the Adjustment Account
shall be adjusted as follows:   

               (i)      as of any Adjustment Date, the balance
                    of the Adjustment Account shall be
                    increased by the amount of any Net
          Recoverables Adjustment;

            (ii)     as of any Adjustment Date that is a
                         Reserve Adjustment Date or an Accelera-
                          tion Date, the balance of the Adjustment
                        Account shall be increased (decreased)
                          by the positive (negative) amount of any
          Net Reserves Adjustment;

                (iii)    as of any Adjustment Date that is a Tax
                     Adjustment Date, the balance of the
                          Adjustment Account shall be decreased by
                   the amount of any Net Tax Benefit
Adjustment;   

             (iv)     as of any Adjustment Date that is an
                        Annual Adjustment Date or an Accelera-
                       tion Date occurring in either case on
                      December 31, 1988 or thereafter, the
                         balance of the Adjustment Account shall
                       be decreased by the amount of any Net
              Pipeline Profits Adjustment;

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               (v)      as of any Adjustment Date, the balance
                    of the Adjustment Account shall be
                          decreased by the amount of any Net Write
 Off Adjustment;

               (vi)     as of any Adjustment Date, the balance
                    of the Adjustment Account shall be
                         decreased by the amount of any Negative
                    Balance determined as of any prior
                         Adjustment Date not theretofore applied
                       to the Adjustment Account pursuant to
                       this clause (vi) of this Section 7.2;

               (vii)    as of any Adjustment Date, the balance
                    of the Adjustment Account shall be
                      increased in accordance with Section
                     7.12 by the amount specified in any
                        notice given pursuant to Section 7.12;

               (viii)   as of any Adjustment Date, the balance
                    of the Adjustment Account shall be
                     decreased by any amount paid by the
                      Seller to the Buyer pursuant to Sec-
                      tion 7.4 or 7.5 with respect to such
  Adjustment Date;

               (ix)     as of any Adjustment Date, the balance
                    of the Adjustment Account shall be
                        increased by the amount of any Collec-
                          tion Costs incurred by the Buyer and not
                         included in Net Recoverables Adjustment
                        (90% of such amount in respect of Non-
                       Proportional Recoverables and Propor-
       tional Recoverables);

               (x)      as of any Adjustment Date, the balance
                    of the Adjustment Account shall be
                          decreased by the amount of any Remaining
                         Balance paid to SDI pursuant to Section
                      7.9 during the period ending on such
                       Adjustment Date and commencing on the
                    immediately prior Adjustment Date;

               (xi)     as of any Acceleration Date, an amount
                          equal to the full balance of the Adjust-
                          ment Account (but not to exceed the then
                    Accreted Value of the Notes) as at
                         such Acceleration Date shall be paid as

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                        provided below in this Section 7.2 and
                         the Adjustment Account shall be reduced
                         by the amount so applied (but not below
zero);        

            (xii)    as of any such Adjustment Date that
                       occurs subsequent to January 1, 1988,
                       the balance of the Adjustment Account
                       shall be increased by the Reinsurance
                   Recoverables Increase Amount with
                      respect to the period ending on such
                       Adjustment Date and commencing on the
                    immediately prior Adjustment Date;

             (xiii)   as of any Adjustment Date that is an
                        Equity Adjustment Date, the balance of
                 the Adjustment Account shall be
                         decreased by the Equity Put Adjustment;
and           

              (xiv)    as of any Adjustment Date that occurs
                         subsequent to January 1, 1988, the bal-
                         ance of the Adjustment Account shall be
                      increased by an amount determined by
                    applying the Applicable Rate to an
                        amount equal to (a) the balance of the
                          Adjustment Account as of the immediately
                     prior Adjustment Date, less (b) the
                                    ----
                          amount of any Matured Eligible Recovera-
                         bles outstanding as of such immediately
                       prior Adjustment Date and included in
                       such balance at such prior Adjustment
Date.         

               Anything in this Agreement to the contrary not-
               withstanding, if the adjustments to the Adjust-
                ment Account otherwise required pursuant to this
               Section 7 as of any Adjustment Date (including,
              without limitation, the Final Adjustment Date)
                 would result in a negative balance in the Adjust-
                 ment Account (a "Negative Balance"), such balance
           shall, subject to the last sentence of Sec-
               tion 7.4, for all purposes of this Agreement be
               deemed to have been adjusted on such Adjustment
                Date to zero.  As of the earlier to occur of the
               Final Adjustment Date or the Acceleration Date,
              any balance of the Adjustment Account shall be
             paid by the Seller to the Buyer.  Adjustments

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         contemplated by this Section 7.2 shall be
                calculated and determined in accordance with any
              applicable Adjustment Schedule provided for in
               Section 7.7, with any such adjustment to become
              definitive on the date on which the applicable
  Adjustment Schedule becomes final.

   7.3   Determination of Reinsurance Recoverables
         -----------------------------------------
Increase Amount                 
---------------                 

                In connection with the adjustments to be made to
               the Adjustment Account pursuant to Section 7.2,
            there shall be computed with respect to each
            Eligible Recoverable an amount determined by
               applying the Applicable Rate to the Recoverable
                 Base Amount from time to time outstanding of such
                Eligible Recoverable from and including the date
                 upon which each such Eligible Recoverable becomes
                an Eligible Recoverable to but not including the
            date upon which such Eligible Recoverable is
               actually paid to the Buyer or any of the Compa-
                 nies in full.  On each Adjustment Date, an amount
               shall be computed pursuant to the provisions of
           the preceding sentence with respect to each
                Eligible Recoverable that was an Eligible Recov-
              erable at any time during the period ending on
                such Adjustment Date and commencing on the imme-
                 diately prior Adjustment Date, and the sum of the
               amounts so determined with respect to each such
              Eligible Recoverable shall be the "Reinsurance
                Recoverables Increase Amount" as of such Adjust-
ment Date.                      

   7.4   Cash Adjustments Following Certain Events
         -----------------------------------------

               Anything in this Section 7 to the contrary not-
               withstanding (but subject to Section 7.5), fol-
                 lowing any payment pursuant to Section 7.2 of the
           balance of the Adjustment Account as of any
               Acceleration Date, the Adjustment Account shall
              be continued and amounts shall be credited and
                 charged to the Adjustment Account on each Adjust-
                 ment Date as provided in this Section 7; provided
                                                          --------
            that subject to the limitations set forth in
               Section 7.5, any positive amount in the Adjust-
                ment Account as at any such Adjustment Date sub-
                sequent to an Acceleration Date shall be paid by
            the Seller to the Buyer (or to its permitted

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                assigns) in cash at the Adjustment Closing imme-
            diately following such Adjustment Date.  The
             Buyer shall pay the Seller directly (notwith-
                standing any assignment of the Buyer's rights in
            respect of the Adjustment Account) an amount
               equal to the lesser of the Negative Balance and
                 all amounts by which the Adjustment Account shall
                theretofore have been decreased pursuant to Sec-
          tion 7.2(x) as at any such Adjustment Date
                 (reduced by all amounts theretofore paid pursuant
                 to this sentence) in cash at the Adjustment Clos-
               ing next following such Adjustment Date and the
               Negative Balance shall be reduced by the amount
               of any cash payments made pursuant to this sen-
tence.                          

7.5   Limitation on Liability               
-----------------------         

               The total cumulative liability of the Seller to
               the Buyer under this Section 7 shall not exceed
                the sum of B.P.32,651,934 plus the amount of any
                 Warrant Proceeds, provided that such sum shall be
            --------
                reduced if any of the Notes shall have been pre-
             paid in accordance with Section 9 of the Note
            Purchase Agreement by an amount equal to the
                excess, if any, of (i) the Prepaid Percentage of
         -
                    Notes so prepaid times B.P.32,651,934, over (ii) the
                             -----              ----  --
            Accreted Value of the Notes so prepaid.  For
                these purposes the "Prepaid Percentage" shall be
                a fraction, the numerator of which is the aggre-
             gated stated principal amount of the Notes so
           prepaid and the denominator of which is the
              aggregate stated principal amount of the Notes
   outstanding as of the Closing Date.

7.6   Current Status of Recoverables        
------------------------------  

                 Schedule 7.6 annexed hereto sets forth (i) a list
                of all Proportional Recoverables that are Closed
               Recoverables together with the reserves for bad
               debts specifically applied against such Propor-
               tional Recoverables and (ii) a list of all Pro-
                 portional Recoverables that are Open Recoverables
                based solely on the latest best estimates of SDI
                 (as to which the Seller has no independent knowl-
               edge), together with the reserves for bad debts
              specifically applied against such Proportional

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          Recoverables as reflected on the books and
records of SDI.                 

7.7   Preparation of Adjustment Schedules   
   -----------------------------------

           The Buyer shall cause SDI to deliver to the
             Seller as promptly as possible following each
             Adjustment Date but in no event later than 90
           days (180 days if such Adjustment Date is a
               Reserve Adjustment Date) following each Adjust-
                ment Date a schedule (a "Reinsurance Recoverable
                 Schedule") in the form of Exhibit M, accompanied,
                in the case of the Adjustment Date at the end of
               the fourth calendar quarter, by a report of the
               auditors of SDI stating that such auditors have
                reviewed (I) such Reinsurance Recoverable Sched-
                 ule and each other Reinsurance Recoverable Sched-
                ule delivered subsequent to the last such report
                (or the date of the Closing if there was no such
              report), (II) the provisions of this Agreement
               (including Exhibit M) and (III) the appropriate
                 accounting records of SDI, and that such Reinsur-
                ance Recoverable Schedules have been prepared in
            accordance with such provisions and properly
         reflect the information in such books and
                 records; and if such Adjustment Date is a Reserve
              Adjustment Date, a schedule (a "Reserve Sched-
               ule") in the form of Exhibit N accompanied by a
               report of the auditors of SDI stating that such
                 auditors have reviewed (w) such Reserve Schedule,
               (x) the provisions of this Agreement (including
             Exhibit N), (y) the report referred to in the
              last sentence of this Section 7.7, and (z) the
               appropriate accounting books and records of SDI
                and that such Reserve Schedule has been prepared
               in accordance with such provisions and properly
                 reflects the information in such report and books
                and records.  In any event the Buyer shall cause
             SDI to deliver to the Seller no later than 75
             days following each Reserve Adjustment Date a
                draft statement of SDI's Net Reserves Adjustment
                 as at such Reserve Adjustment Date.  In addition,
                within 180 days following each Annual Adjustment
                 Date commencing with December 31, 1988, the Buyer
                 shall cause SDI to deliver to the Seller a sched-
               ule (a "Pipeline Profits Schedule") showing the
               calculation of the Net Pipeline Profits Adjust-
             ment with respect to the preceding accounting

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             year (the Pipeline Profits Schedule, together
                 with the Reinsurance Recoverable Schedule and the
               Reserve Schedule being hereinafter collectively
                 called the "Adjustment Schedules").  In determin-
              ing the amount of all Net Recoverables Adjust-
                 ments, Net Reserve Adjustments and Pipeline Prof-
               its, all adjustments and calculations are to be
                made in their original currency (i.e., Sterling,
           United States or Canadian dollars) and then
                translated into Sterling (i) if at the end of an
                accounting year of SDI, at the exchange rates in
             effect in preparing SDI's annual accounts and
                (ii) if at the last day of the first three quar-
              ters of SDI's accounting year, at the exchange
                 rates published in the Financial Times as at such
                             ---------------
                day (or if such day is not a Business Day, as at
             the immediately preceding Business Day).  The
                 Adjustment Schedules shall become final and bind-
                ing upon the parties (except that any Net Recov-
             erables Adjustment made on an Adjustment Date
               that is not an Annual Adjustment Date, shall be
            subject to year-end audit adjustment) unless
            within 30 days of receipt thereof either the
                Seller or the Buyer disagrees with the amount or
         the matters reflected therein and has not
                resolved such disagreement with the other party,
             in which case the Seller or the Buyer, as the
             case may be, may give the other party written
             notice of its disagreement (a "Notice of Dis-
             agreement").  Any such Notice of Disagreement
                shall specify in reasonable detail the nature of
                 any disagreement so asserted and shall be submit-
               ted to and reviewed by an arbitrator (who shall
                act as an expert and not as an arbitrator) which
                 shall be mutually selected by the Buyer's and the
              Seller's auditors, or if they cannot agree, by
           the President of the Institute of Chartered
                Accountants of England and Wales, whose decision
                 shall be final and binding upon the parties.  Net
                Reserve Adjustments shall be based upon a report
             on the required loss reserves of SDI prepared
                (a) with respect to the first Reserve Adjustment
                Date, by Milliman & Robertson, Inc. and (b) with
               respect to subsequent Reserve Adjustment Dates,
               by any firm of independent consulting actuaries
               of recognized standing selected by SDI and rea-
                 sonably acceptable to the Seller (it being agreed
                 that Tillinghast Nelson & Warren shall be accept-

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               able to the Seller).  Within 180 days after the
             end of each year, the Buyer shall furnish the
             Seller with a report of Milliman & Robertson,
              Inc. (for each year through December 31, 1988)
               and such other independent consulting actuaries
               (for each subsequent year) on the required loss
reserves of SDI.                

7.8   Settlements                           
-----------                     

                 The settlement of any amounts owing by the Seller
               to the Buyer pursuant to this Section 7 and the
               settlement of any amounts owing by the Buyer to
                the Seller pursuant to this Section 7 shall take
               place at a closing (an "Adjustment Closing") to
               be held on the tenth Business Day following the
                 date upon which the Adjustment Schedules relating
                 to such Adjustment Closing become final and bind-
                ing on the parties pursuant to Section 7.7.  Any
               such Adjustment Closing shall take place at the
           offices of Slaughter and May, 35 Basinghall
            Street, London EC2V 5DB, at 10:00 a.m. local
               time, or such other place or such other time or
               date as the Buyer and the Seller agree in writ-
           ing.  Any amounts owing by the Buyer or the
                 Seller at any Adjustment Closing shall be payable
                 in cash in same-day funds, together with interest
          on the amount so due computed from but not
             including the Adjustment Date as to which the
                settlement to be made at such Adjustment Closing
                relates to and including the date of payment, at
          the base lending rate from time to time of
                National Westminster Bank plc based on a year of
              365 days and the actual number of days elapsed
           (each change in such rate of interest to be
              effective as at the opening of business on the
             date the change in such rate is determined by
such bank to be effective).     

7.9   Collection of Reinsurance Recoverables
      --------------------------------------

                 At such time as any amount has been included in a
               Net Recoverables Adjustment with respect to any
                 particular Reinsurance Recoverable, the Seller or
              such Affiliate of the Seller as the Seller may
              designate shall thereupon have and assume full
                authority and responsibility for claims handling
                 with respect to such Reinsurance Recoverable.  In

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            this connection, the Buyer shall furnish the
                 Seller or such Affiliate with a suitable power of
           attorney in such form as the Seller or such
                 Affiliate shall reasonably request providing that
            the Seller or such Affiliate shall have full
                authority and responsibility to assert claims on
                 behalf of the Buyer or the Companies with respect
                 to such Reinsurance Recoverables.  In discharging
               its claims handling responsibility with respect
               to such Reinsurance Recoverables, the Seller or
           such Affiliate shall attempt to collect the
            amount thereof and shall act in the ordinary
                manner applicable in the industry to collections
              of Reinsurance Recoverables, and the Seller or
             such Affiliate will consult from time to time
                with the Buyer at the Buyer's reasonable request
                 with respect to the collection status of any such
             Reinsurance Recoverable but in the absence of
             such request shall not be required to consult
              with the Buyer in advance of taking any action
            with respect to the collection thereof.  The
             Seller or such Affiliate shall deliver to the
            Buyer as promptly as possible following each
              Adjustment Date (but in no event later than 90
               days following each Adjustment Date) a schedule
                 showing the collection status of each outstanding
                 Eligible Recoverable.  The Seller may hold itself
               out as the agent and attorney-in-fact of SDI in
            connection with attempts to collect any such
             Reinsurance Recoverable but all costs and ex-
                penses of collection incurred in connection with
               such attempts following the assumption pursuant
          to this Section 7.9 of its claims handling
              responsibility shall be borne by the Seller or
                 such Affiliate.  The Seller or any of its Affili-
               ates shall indemnify, defend and hold harmless,
             promptly (and within any period specified for
             payment under or pursuant to any court order,
                 arbitration award or other settlement, compromise
               or agreement of any kind) and fully in cash and
            without limitation as to time or amount, the
             Buyer and the Companies from and against, and
               reimburse, make whole and pay the Buyer and the
               Companies for, all losses, claims, liabilities,
                 damages, deficiencies, costs or expenses (includ-
               ing interest and penalties) based upon, arising
                out of or otherwise in respect of, or alleged to
             be based upon, arising out of or otherwise in

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              respect of any attempt by the Seller or any of
           its Affiliates to collect any such Eligible
            Recoverable pursuant to this Section 7.9 and
               shall reimburse the Buyer and the Companies for
                any legal or other expenses (including any value
                added or similar tax payable thereon) reasonably
                incurred, as such expenses are incurred, by them
               in connection therewith.  Any amounts collected
               by the Seller with respect to any such Eligible
        Recoverable shall be applied as follows:
                (i) first, to reimburse the Seller or any of its
              Affiliates, as the case may be, for Collection
               Costs with respect to such Reinsurance Recover-
             able; and (ii) any balance of such collection
              then remaining (the "Remaining Balance") shall
                thereupon be promptly paid to SDI.  Any Reinsur-
                ance Recoverable shall to the extent of any pay-
               ment made pursuant to the immediately preceding
                 sentence thereupon cease to be an Eligible Recov-
                 erable for purposes of this Agreement (including,
                 without limitation, Section 7.3).  At the Adjust-
            ment Date following the reimbursement of the
                Seller or any of its Affiliates, as the case may
           be, Collection Costs and the payment of any
               Remaining Balance to the Buyer pursuant to this
            Section 7.9, the Adjustment Account shall be
              decreased by the amount of such Remaining Bal-
              ance.  The Seller and the Buyer shall, and the
               Buyer shall cause SDI and SDUM to, take reason-
              able measures to cooperate with respect to any
               interests that any third party insured may have
             with respect to policies under which any such
Eligible Recoverable arise.     

7.10  No Commutation of Recoverables, Etc.  
    ------------------------------------

              The Buyer shall not permit SDI to (i) commute,
               reduce, settle or discount Reinsurance Recover-
                able balances for amounts applicable to 1986 and
                prior underwriting years without the prior writ-
           ten consent of the Seller or (ii) pledge or
             otherwise subject to any Lien its Reinsurance
            Recoverables (except for any Liens which may
                 arise in the ordinary operation of its business).
              The Buyer will cause SDI to proceed with dili-
                gence to collect amounts which are or may become
              Reinsurance Recoverables in a manner that will
                 not prejudice the collectibility thereof.  Except

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              with respect to those Reinsurance Recoverables
                set forth on Schedule 7.10, the Seller shall not
               make any direct or indirect solicitation of the
                debtor in respect of any Reinsurance Recoverable
             for collection purposes.  The Buyer shall not
             attempt to cause any debtor in respect of any
            Reinsurance Recoverable to allocate payments
                other than to the oldest outstanding balance due
              from such debtor.  If SDI receives any payment
                 from a debtor on any Reinsurance Recoverable, the
               Buyer shall cause SDI to credit such payment to
            the oldest outstanding balance due from such
              debtor; provided that (x) if and to the extent
--------        
               that such debtor has specifically allocated any
             payment other than to such oldest outstanding
                balance, SDI may credit such payment accordingly
               and the Buyer will cause SDI promptly to notify
             the Seller of such allocation and (y) if such
                 payment is on a commuted Reinsurance Recoverable,
               such payment shall be credited as agreed by the
             Seller in connection with the consent contem-
          plated by the first sentence of, this Sec-
tion 7.10.                      

7.11  Accounts of SDI, Etc.                 
---------------------           

                The principles used in determining the amount of
              any item for purposes of any calculation to be
                 made pursuant to this Section 7 (including, with-
                 out limitation, Reserve Items, Reinsurance Recov-
                erables and Pipeline Profits) shall be in accor-
                 dance with standard accounting practices applica-
              ble in the United Kingdom consistently applied
                with those used in preparing the accounts of SDI
             included in the SDI Balance Sheet but without
                regard to any changes subsequent to December 31,
                 1986, in standard accounting practices applicable
                in the United Kingdom or in legal or other regu-
            latory provisions applicable to SDI, and all
                books and records of SDI applicable to such com-
               putations shall also be kept in accordance with
             such provisions.  It is understood and agreed
                that certain reinsurance recoverables of SDI are
               booked as reinsurance recoverables on the books
                and records of SDUM and on the books and records
                of SDI as a receivable from SDUM, and references
              in this Section 7 to recoverables of SDI shall
               mean and include such items as reflected on the

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                books and records of SDUM.  For purposes of this
              Agreement, Pipeline Profits will be determined
               for the first time as of December 31, 1988, and
annually thereafter.            

7.12  Other Indemnities                     
-----------------               

                In the event of any Act of Insolvency applicable
               to the Seller, the Buyer shall have the option,
               exercisable by written notice to the Seller, to
                apply to the Adjustment Account any amounts pay-
                able to the Buyer by the Seller pursuant to this
                Agreement that would otherwise be payable by the
Seller to the Buyer in cash.    

7.13  Right of Inspection                   
-------------------             

               For so long as the Purchase Price is subject to
                 adjustment pursuant to this Section 7, the Seller
            shall be entitled, through its employees and
                representatives, to inspect, examine and to make
               copies of such of the books, records and finan-
                cial statements of the Companies as may be rele-
          vant to a determination of the adjustments
                required by this Section 7.  Any such inspection
                and examination shall be conducted at reasonable
               times and under reasonable circumstances and in
                 such a manner that the Companies' businesses will
                 not be unreasonably disrupted, and the Buyer, the
                 Companies and any of their Affiliates shall coop-
                 erate fully therein.  The Seller shall, and shall
                 cause its Affiliates and any other Person to whom
              the Buyer has given access to information dis-
             closed pursuant to this Section 7.13 to, keep
                 confidential and not use in any manner any infor-
            mation or documents obtained from any of the
                 Companies or any of their Affiliates unless read-
                 ily ascertainable from public or published infor-
             mation, provided that the foregoing shall not
           prohibit the disclosure of such information
            (a) as may become generally available to the
                public, (b) as may be required or appropriate in
                 any report, statement or testimony to any regula-
                 tory body with appropriate jurisdiction or (c) as
                 may be required or appropriate in response to any
               summons, subpoena or legal proceedings.  For so
                 long as the Seller shall have any claims handling
           responsibility with respect to any Eligible

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              Recoverable pursuant to Section 7.9, the Buyer
            shall be entitled, through its employees and
                representatives, to inspect, examine and to make
               copies of such of the books, records and finan-
                cial statements of the Seller as may be relevant
                to any determination with respect to the collec-
             tion status of any such Eligible Recoverable.
            Any such inspection and examination shall be
               conducted at reasonable times and under reason-
                able circumstances and in such a manner that the
               Seller's business will not be unreasonably dis-
                rupted, and the Seller and any of its Affiliates
              shall operate fully therein.  The Buyer shall,
            and shall cause its Affiliates and any other
             Person to whom the Seller has given access to
              information disclosed pursuant to this Section
             7.13 to, keep confidential and not use in any
                 manner any information or documents obtained from
                the Seller or any of its Affiliates unless read-
                 ily ascertainable from public or published infor-
             mation, provided that the foregoing shall not
           prohibit the disclosure of such information
            (a) as may become generally available to the
                public, (b) as may be required or appropriate in
                 any report, statement or testimony to any regula-
                 tory body with appropriate jurisdiction or (c) as
                 may be required or appropriate in response to any
               summons subpoena or legal proceedings.  Each of
              the Seller and the Buyer shall promptly notify
              the other of any event or circumstance that it
          believes may have a material impact on the
                adjustments contemplated by this Section 7 (such
                as the insolvency of a major reinsurer), but the
               rights of such party shall not be diminished or
               otherwise prejudiced in any way whatsoever as a
               result of any failure to give such notice.  The
                Seller shall at all times have designated a per-
               son in London, England, reasonably satisfactory
                 to the Buyer for the purpose of coordinating with
               the Buyer concerning matters arising under this
Section 7.                      

7.14  Certain Definitions                   
-------------------             

              As used in this Section 7 and in Section 8, as
                applicable, the following terms have the follow-
ing meanings:                   

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                 "Acceleration Date" means any date upon which the
-----------------             
                 Notes are prepaid in full pursuant to Section 9.1
               of the Note Purchase Agreement or the Notes are
                 declared to be due and payable in accordance with
             the provisions of the Note Purchase Agreement
              prior to their maturity following any Event of
            Default (as such term is defined in the Note
Purchase Agreement).            

                 "Accreted Value" has the meaning specified in the
--------------                
Note Purchase Agreement.        

                "Act of Insolvency," with respect to the Seller,
-----------------             
             means that one of the following conditions or
     events shall occur and be continuing:

           (i)      an administration order is made in
                      respect of the Seller or an order is
                     made or a resolution passed for the
              winding up of the Seller; or

              (ii)     the Seller stops or threatens to stop
                         payment or ceases or threatens to cease
                         to carry on all or substantially all of
                       its business (other than for the pur-
                         poses of reorganization or amalgamation
                          while solvent and as previously approved
                        by the Buyer), or is unable to pay its
                         debts within the meaning of Section 123
                        of the Insolvency Act 1986 or an order
                        is made by any competent court, or any
                        resolution is passed by the Seller, to
                         apply for judicial composition proceed-
                          ings with its creditors or any voluntary
                         arrangement is proposed under Section 1
                          of the Insolvency Act 1986, or makes any
                          assignment for the benefit of creditors,
                          or a liquidator, provisional liquidator,
                         administrator or other similar official
                         is validly appointed in relation to the
                        Seller or all or a substantial part of
       any of its assets; or

                (iii)    any encumbrancer takes possession of or
                          a receiver or administrative receiver is
                        appointed of or over any of the assets
   of the Seller; or

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                (iv)     any distress or other process is levied
                       or enforced or served upon or against
                         any asset of the Seller and is not dis-
            charged within 90 days; or

             (v)      if there shall exist final judgments
                          against the Seller aggregating in excess
                             of B.P.100,000 and if any one of such judg-
                       ments shall have been outstanding for
                        any period of 60 days or more from the
                      date of its entry and shall not have
                         been discharged in full or stayed pend-
ing appeal.   

                          "Adjustment Account" has the meaning set
      ------------------
       forth in Section 7.2.

                          "Adjustment Closing" has the meaning set
      ------------------
       forth in Section 7.8.

                         "Adjustment Date" means the last day of
   ---------------
                        each quarter of SDI's accounting year,
                          commencing December 31, 1987, and ending
    December 31, 1994.

                        "Adjustment Schedules" has the meaning
        --------------------
           set forth in Section 7.7.

                      "Allocated Loss Adjustment Expenses"
                      ----------------------------------
                        means all expenses that SDI, under its
                          accounting practices, directly allocates
                          to a particular claim.  Salaries, office
                          and travelling expenses of all employees
                     of the Companies and the Companies'
                       overhead shall be excluded from Allo-
                 cated Loss Adjustment Expenses.

                         "Annual Adjustment Date" means the last
          ----------------------
                      day of each fiscal year of SDI, from
                         December 31, 1987, through December 31,
1994.         

                       "Applicable Rate" means 11% per annum
   ---------------
                        (compounded on June 30 and December 31
in each year).

                     "Billing Date" means in the case of
------------
                     (i) any Reinsurance Recoverables in

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                      respect of accounting periods ending
                        prior to January 1, 1987, the later of
                        the date such recoverable is billed to
                    the broker, and December 31, 1986;
                        (ii) any Reinsurance Recoverables with
                          respect to proportional reinsurance, for
                          accounting periods ending after December
                        31, 1986, the date such recoverable is
                     billed to the broker; and (iii) any
                          other Reinsurance Recoverables, the date
                     on which a collecting note has been
                        submitted to the applicable intermedi-
ary.          

                       "Closed Recoverable" means any amount
      ------------------
                     receivable of SDI from a reinsurer,
                       other than a Reinsurance Affiliate of
                     the Buyer, in respect of accounting
                         periods ended prior to January 1, 1987.

                         "Collection Costs," with respect to any
    ----------------
                         Eligible Recoverable, means all reason-
                         able out-of-pocket expenses incurred in
                          connection with collecting such Eligible
                         Recoverable (including reasonable legal
                       fees and disbursements) but shall not
                          include any costs or expenses of collec-
                       tion agents, management time or over-
                          head; provided that the Collection Costs
      --------
                       of the Buyer or SDI shall not include
                         any expenses incurred by either of them
                          in connection with any litigation insti-
                         tuted without the prior written consent
of the Seller.

                          "Combined Reserves Adjustment" means, as
                ----------------------------
                      at each Reserve Adjustment Date, the
                         algebraic sum of (i) the Motor Reserves
                          Adjustment as at such Reserve Adjustment
                    Date; plus (ii) the Other Reserves
                          Adjustment as at such Reserve Adjustment
                        Date; and less (iii) the algebraic sum
          ----
                      of all Combined Reserves Adjustments
                       theretofore applied to the Adjustment
                  Account pursuant to Section 7.2.

                          "Eligible Recoverable" means, as at each
        --------------------
                        Adjustment Date, any amount receivable

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                       by SDI from a reinsurer, other than a
                        Reinsurance Affiliate of the Buyer, as
                       to which the first anniversary of the
                         Billing Date thereof has occurred on or
                prior to such Adjustment Date.

                          "Equity Adjustment Date" has the meaning
          ----------------------
                     set forth in the Warrant Agreement.

                  "Equity Put Adjustment" means an
         ---------------------
                        "Adjustment" within the meaning of the
                 Warrant Agreement under Section
                      3.2(ii)(b) of the Warrant Agreement.

                        "Final Adjustment Date" means December
         ---------------------
31, 1994.     

                        "Matured Eligible Recoverables" means,
                 -----------------------------
                          as at each Adjustment Date, any Eligible
                          Recoverable as to which the second anni-
                         versary of the Billing Date thereof has
                         occurred on or prior to such Adjustment
Date.         

                        "Motor Reserves" means, as at December
  --------------
                          31, 1986 or any Reserve Adjustment Date,
                         SDI's loss reserves (including, without
                        limitation, IBNR), plus Allocated Loss
                        Adjustment Expenses, minus reinsurance
                          recoverables whether or not collectable,
                          in each case with respect to SDI's motor
                     insurance lines (excluding business
                      accounted for on a three year funded
                         basis), for all accident years 1986 and
                     prior as reflected on the books and
                         accounts of SDI for its accounting year
     ended on such date.

                          "Motor Reserves (Adjusted)" means, as at
             -------------------------
                         each Reserve Adjustment Date, the alge-
                          braic sum of (i) SDI's Motor Reserves as
                        at such Adjustment Date, plus (ii) all
                                        ----
                         cash disbursements on account of losses
                          (including all Allocated Loss Adjustment
                         Expenses) paid after December 31, 1986,
                      through such Reserve Adjustment Date
                     with respect to the motor insurance
                       lines for all accident years 1986 and

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                      prior, minus (iii) cash amounts that
     -----
                     relate to reinsurance recovered and
                         salvage and subrogation recoveries with
                        respect to such motor insurance lines,
                        for all accident years 1986 and prior,
                         during the period commencing January 1,
                        1987 through such Adjustment Date, all
                          as reflected on the books and records of
SDI.          

                          "Motor Reserves Adjustment" means, as at
             -------------------------
                      each Reserve Adjustment Date, (i) if
                       SDI's Motor Reserves (Adjusted) as at
                     such Reserve Adjustment Date exceed
                      SDI's Motor Reserves at December 31,
                 1986, the amount of such excess
                     expressed as a positive number; and
                         (ii) if SDI's Motor Reserves (Adjusted)
                        as at such Reserve Adjustment Date are
                   less than SDI's Motor Reserves at
                       December 31, 1986, the amount of such
                         difference expressed as a negative num-
ber.          

                        "Negative Balance" has the meaning set
    ----------------
       forth in Section 7.2.

                     "Net Closed Recoverables Adjustment
                      ----------------------------------
                      Amount" means, as at each Adjustment
------        
                    Date, the algebraic sum of (i) the
                          aggregate of all Matured Eligible Recov-
                          erables that are Closed Recoverables, to
                     the extent not actually paid to SDI
                         during the period since the immediately
                     prior Adjustment Date (December 31,
                    1986, if there is no such previous
                      Adjustment Date), and not previously
                          included in the Net Recoverables Adjust-
                         ment; less (ii) the aggregate amount of
  ----
                         all reserves specifically applicable to
                    all of such Closed Recoverables as
                       reflected on the books and records of
                         SDI as at December 31, 1986, not previ-
                        ously applied to reduce the Net Closed
                      Recoverables Adjustment Amount; plus
                        (iii) Collection Costs incurred by SDI
                      in attempting to collect such Closed
Recoverables. 

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                    "Net Non-Proportional Recoverables
                     ---------------------------------
                     Adjustment Amount" means as at each
   -----------------
                       Adjustment Date, the algebraic sum of
                         (i) the aggregate of all Matured Eligi-
                       ble Recoverables that are Non-Propor-
                          tional Recoverables incepted on or prior
                         to December 31, 1986, that are recorded
                         on the books and records of SDI as col-
                        lectible after December 31, 1986, that
                         are not actually paid to SDI during the
                    period since the immediately prior
                        Adjustment Date (December 31, 1986, if
                          there is no such prior Adjustment Date),
                        and not previously included in the Net
                        Recoverables Adjustment; less (ii) the
                                        ----
                          aggregate amount of all reserves specif-
                       ically applicable to all of such Non-
                        Proportional Recoverables as reflected
                       on the books and records of SDI as at
                   December 31, 1986, not previously
                       applied to reduce the Net Non-Propor-
                        tional Recoverables Adjustment Amount;
                         plus (iii) Collection Costs incurred by
                        SDI in attempting to collect such Non-
            Proportional Recoverables.

                          "Net Pipeline Profits Adjustment" means,
                   -------------------------------
                        as at each Annual Adjustment Date, the
                        algebraic sum of (i) 50% of the amount
                        by which (a) the aggregate of Pipeline
                         Profits with respect to each accounting
                         year of SDI commencing January 1, 1987,
                          and ending on any such date, exceeds (b)
                            B.P.3,750,000, less (ii) any amount previ-
              ----
                        ously included in Net Pipeline Profits
Adjustment.   

                        "Net Proportional Recoverables Adjust-
                         -------------------------------------
                        ment Amount" means, as at each Adjust-
-----------   
                         ment Date, the algebraic sum of (i) the
                          aggregate of all Matured Eligible Recov-
                         erables that are Proportional Recovera-
                         bles in respect of all accounting peri-
                         ods ended after December 31, 1986, with
                        respect to underwriting years 1986 and
                      prior, as reflected on the books and
                       records of SDI, that are not actually
                         paid to SDI during the period since the

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                   immediately prior Adjustment Date
                          (December 31, 1986, if there was no such
                       prior Adjustment Date) and not previ-
                        ously included in the Net Recoverables
                     Adjustment; less (ii) the aggregate
              ----
                     amount of all reserves specifically
                        applicable to all of such Proportional
                        Recoverables as reflected on the books
                       and records of SDI as at December 31,
                        1986, not previously applied to reduce
                   the Net Proportional Recoverables
                          Adjustment Amount; plus (iii) Collection
                            ----
                        Costs incurred by SDI in attempting to
                         collect such Proportional Recoverables.

                         "Net Recoverables Adjustment" means, as
               ---------------------------
                        at each Adjustment Date, the algebraic
                         sum of 100% of any Net Closed Recovera-
                        bles Adjustment Amount, 90% of any Net
                      Proportional Recoverables Adjustment
                       Amount and 90% of any Net Non-Propor-
                        tional Recoverables Adjustment Amount,
                          determined in each case as of such date.

                       "Net Reserves Adjustment" means as at
           -----------------------
                          each Reserve Adjustment Date, (i) if the
                         Combined Reserves Adjustment as at such
                       Reserve Adjustment Date is a positive
                          number, 80%, of such amount; and (ii) if
                        the Combined Reserves Adjustment as at
                         such Reserve Adjustment Date is a nega-
                  tive number, 50% of such amount.

                      "Net Tax Benefit Adjustment" has the
              --------------------------
                   meaning specified in Section 8.6.

                         "Net Write Off Adjustment" means, as at
            ------------------------
                         each Adjustment Date, the algebraic sum
                   of (i) 50% of the amount by which
                       (a) the aggregate of all amounts col-
                     lected by or on behalf of SDI since
                         January 1, 1987 for its account (net of
                         any Collection Costs incurred by SDI or
                         the Buyer) with respect to any reinsur-
                     ance recoverable written off on the
                   books and records of SDI prior to
                             December 31, 1986, exceeds (b) B.P.200,000,

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                          less (ii) any amount previously included
----          
              in Net Write Off Adjustment.

                          "Non-Proportional Recoverable" means any
                ----------------------------
                       amount receivable of SDI from a rein-
                         surer, other than a Reinsurance Affili-
                        ate of the Buyer, with respect to non-
                          proportional and facultative reinsurance
policies.     

                      "Note Purchase Agreement" means that
           -----------------------
                         certain Note Purchase Agreement of even
                          date herewith between Sphere Drake Hold-
                        ing Public Limited Company, an English
                    company, the Buyer and the Seller.

                          "Notes" has the meaning specified in the
-----       
          Note Purchase Agreement.

                       "Open Recoverables" means reinsurance
     -----------------
                      amounts collectable for underwriting
                         years 1986 and prior billed to reinsur-
                  ers on January 1, 1987 or later.

                        "Other Reserves" means, as at December
  --------------
                          31, 1986 or any Reserve Adjustment Date,
                          the loss reserves of SDI at December 31,
                     1986, with respect to all insurance
                         business other than its motor insurance
                         lines (but Other Reserves shall include
                          loss reserves in respect of motor insur-
                          ance lines accounted for on a three-year
                         funded basis), including, without limi-
                          tation, its marine, non-marine and avia-
tion lines.   

                          "Other Reserves (Adjusted)" means, as at
             -------------------------
                     each Reserve Adjustment Date, SDI's
                         Other Reserves as at December 31, 1986,
                          recomputed as at such Reserve Adjustment
                     Date using the actual ultimate loss
                         ratio determined as at such date of SDI
                         with respect to such business (it being
                        the intent of the parties that in such
                          recomputation no adjustment be made with
                      respect to uncollectible reinsurance
                      recoverables), on a basis consistent
                         with the principles used in determining

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                      SDI's Other Reserves at December 31,
1986).        

                          "Other Reserves Adjustment" means, as at
             -------------------------
                      each Reserve Adjustment Date, (i) if
                       SDI's Other Reserves (Adjusted) as at
                     such Reserve Adjustment Date exceed
                      SDI's Other Reserves at December 31,
                 1986, the amount of such excess
                     expressed as a positive number; and
                         (ii) if SDI's Other Reserves (Adjusted)
                        as at such Reserve Adjustment Date are
                   less than SDI's Other Reserves at
                       December 31, 1986, the amount of such
                         difference expressed as a negative num-
ber.          

                      "Pipeline Profits" means, as at each
    ----------------
                       Annual Adjustment Date, the aggregate
                          (or net amount) for all classes of busi-
                    ness of (i) the amount of premium,
                          received by SDI commencing on January 1,
                       1987, as to each class of business in
                          respect of business incepted on or prior
                        to December 31, 1986, and not recorded
                    on the books and records of SDI at
                  December 31, 1986, multiplied by
                       (ii) the amount by which the ultimate
                          loss ratio for each class of business as
                         at such Annual Adjustment Date is below
                     or in excess of 100% (if the amount
                         determined in accordance with the fore-
                          going provision shall be less than zero,
                         Pipeline Profits at such Annual Adjust-
           ment Date shall be zero).

                      "Proportional Recoverable" means any
            ------------------------
                       amount receivable of SDI from a rein-
                         surer, other than a Reinsurance Affili-
                        ate of the Buyer, with respect to pro-
        portional reinsurance.

                          "Recoverable Base Amount" means (i) with
           -----------------------
                         respect to any Closed Recoverable, 100%
                        of the Net Closed Recoverables Adjust-
                          ment Amount and (ii) with respect to any
                         Non-Proportional Recoverable or Propor-
                         tional Recoverable, 90% of the Net Non-

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                      Proportional Recoverables Adjustment
                          Amount or the Net Proportional Recovera-
                       bles Adjustment Amount, respectively.

                          "Reinsurance Affiliate" means any Affil-
         ---------------------
                        iate of the Buyer and any partner from
                        time to time of SD Partners, a Bermuda
                      partnership; provided, that The Dai-
                    --------
                          Tokyo Fire and Marine Insurance Company,
                        Limited ("Dai-Tokyo") (and its Affili-
                         ates) shall be deemed to be Reinsurance
                        Affiliates for purposes of this Agree-
                     ment for so long as Dai-Tokyo shall
                     beneficially own, directly or indi-
                          rectly, at least a 5% equity interest in
                        the Buyer; provided, further that not-
                --------
                          withstanding the foregoing, if Dai-Tokyo
                          shall no longer beneficially own such 5%
                        equity interest, it and its Affiliates
                          shall be deemed to be Reinsurance Affil-
                       iates with respect to any Reinsurance
                        Recoverable as to which it or any such
                      Affiliate shall claim as a matter of
                       defense, or counterclaim with respect
                          thereto, any matter bearing on it or its
                      or their relationship as a direct or
                 indirect investor in the Buyer.

                         "Reinsurance Recoverables" means Closed
            ------------------------
                          Recoverables, Non-Proportional Recovera-
                     bles and Proportional Recoverables.

                    "Reinsurance Recoverables Increase
                     ---------------------------------
                      Amount" has the meaning specified in
------        
Section 7.3.  

                     "Remaining Balance" has the meaning
     -----------------
           specified in Section 7.9.

                          "Reserve Adjustment Date" means December
           -----------------------
                  31, 1988, December 31, 1990, and
    December 31, 1994.

                      "Reserve Items" means Motor Reserves
 -------------
               (Adjusted) and Other Reserves
(Adjusted).   

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                       "Tax Adjustment Date" has the meaning
       -------------------
           specified in Section 8.6.

                       "Warrant Agreement" means the Warrant
     -----------------
                       Agreement dated the date hereof among
                     Sphere Drake Holding Public Limited
                    Company, the Buyer and the Seller.

                        "Warrant Proceeds" means the aggregate
    ----------------
                         Value of the Underlying Shares (as such
                         terms are defined in the Warrant Agree-
                      ment) actually paid to the Seller as
                        contemplated by Section 3.2(ii) of the
                          Warrant Agreement, and shall not include
                         any Adjustment (as such term is defined
            in the Warrant Agreement).

8.   Net Tax Benefit Adjustment                       
--------------------------                  

         Certain capitalized terms used in this Section 8 have
the meanings specified in Section 8.6.      

8.1   Certain Memorandum Accounts           
---------------------------     

              The Buyer shall cause the following memorandum
            accounts to be established on the accounting
records of the Company:         

             (a)      The "Indemnity Tracing Account", the
                         opening balance of which shall be zero.

                 (b)      As to SDI only an "NOL Tracing Account",
                       the opening balance of which shall be
                     the amount of the aggregate trading
                          losses of SDI carried forward for corpo-
                     ration tax purposes at December 31,
                        1986, as reflected in the tax computa-
                         tions of SDI as heretofore submitted to
                         the Inland Revenue for accounting peri-
                         ods ending prior to and on December 31,
                         1986, provided that the opening balance
      --------
                     of the NOL Tracing Account shall be
      adjusted as follows:

                         (aa)  by decreasing the balance thereof
                                by all amounts of accrued interest
                              and investment income recognised

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                             in the SDI Financials which are
                              chargeable to taxation in Future
                              Accounting Periods (for purposes
                           of identification this amount
                          corresponds to the figure of
                                 B.P.2,068,996 referred to in Sched-
                       ule 2.12 item (v) of this
         Agreement);

                         (bb)  by decreasing the balance thereof
                                by an amount equivalent to any SDI
                               trading losses utilised to extin-
                              guish or mitigate liabilities to
                               taxation which would otherwise be
                                within the indemnity of the Seller
                           under the Tax Indemnity Deed;

                         (cc)  by increasing the balance thereof
                               to reflect any amounts allowed to
                               SDI as a deduction resulting from
                           a Final Determination for any
                         Future Accounting Period in
                                respect of loss reserves appearing
                               in the SDI 1986 Financials to the
                                extent that such loss reserves are
                            not admitted as deductible for
                         corporation tax purposes at
                             December 31, 1986 provided that
                                this paragraph (cc) does not apply
                               to items within Section 8.2.1(b).

                       (dd)  to reflect the actual amount of
                             trading losses giving effect to
                         all Final Determinations in
                            respect of any Open Tax Years;

                     (ee)  by deducting any such trading
                            losses which, as a result of a
                               Final Determination in respect of
                               an accounting period ending after
                               December 31, 1986, are not avail-
                              able to SDI with respect to such
                            accounting period by virtue of
                  section 483 of ICTA;

                       (ff)  to reflect any surrender of the
                             trading losses for group relief
                            purposes of SDI for accounting

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                           periods ending on or prior to
                              December 31, 1986 as a result of
                           group relief claimed by other
                           Affiliates of the Seller; and

                          (gg)  as to any Determination Accounting
                            Period, to the extent that any
                            amount of Discount Increase in
                              respect to such period shall not
                           have resulted in payment of a
                               Discounting Tax Amount as defined
                              in Clause 4(5) of the Tax Indem-
                           nity Deed, the amount of such
                              Discount Increase shall decrease
                            the balance of the NOL Tracing
                                Account, provided that the balance
                              on the NOL Tracing Account shall
                        not be reduced below zero.

              (c)      The "Indemnity Cash Tracing Account",
                       the opening balance of which shall be
zero.         

                (d)      The "Discounting Cash Tracing Account",
                       the opening balance of which shall be
zero.         

        (e)      The "Discounting Unwind Tracing
                        Account", the opening balance of which
shall be zero.

              The Indemnity Tracing Account, the NOL Tracing
                Account, the Indemnity Cash Tracing Account, the
             Discounting Cash Tracing Account and the Dis-
               counting Unwind Tracing Account are referred to
  herein as the "Notional Accounts".

8.2   Notional Tax Computations             
-------------------------       

                Certain principles applicable in making notional
               tax computations under this Section 8.2 are set
forth in Section 8.2.6.         

     8.2.1    Notional Account Adjustments
              ----------------------------

                          On each Tax Adjustment Date with respect
                          to each accounting period (the "Determi-
                      nation Accounting Period") the Buyer

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                       shall cause the Company to adjust the
               Notional Accounts as follows:

                         (a)   Indemnity Tracing Account: Indem-
                               ---------------------------------
                       nity Cash Tracing Account
                       -------------------------

                            The Company shall determine an
                            amount equal to the sum of the
                              following items: (i) the amounts
                             of any Net Recoverables Adjust-
                                ments and any Net Reserves Adjust-
                               ments, less the amount of any Net
                ----
                              Pipeline Profits Adjustments and
                               less any amount in respect of any
  ----
                             Net Pipeline Profits Adjustment
                               for any prior period reflected in
                              any adjustment to the Adjustment
                        Account made under Section
                              7.2(vi), in each case which have
                              been reflected in the Adjustment
                            Account, and (ii) any purchase
                             price adjustment resulting from
                             indemnity payments to the Buyer
                                made in respect of events indemni-
                               fied against under Section 10; in
                               the case of each of the foregoing
                                clauses (i) and (ii) to the extent
                              that such amounts or adjustments
                                were reflected, paid or made on or
                             before such Tax Adjustment Date
                              and not previously included in a
                                Determination Accounting Period of
                             the relevant company hereunder,
                          provided that the amounts or
      --------
                                adjustments referred to in clauses
                             (i) and (ii) shall be reflected
                                only to the extent that individual
                         items of expense or loss in
                              respect of which such amounts or
                           adjustments are made actually
                           reduce (increase) the taxable
                                profits (losses) of the company in
                              question for such accounting pe-
                              riod for purposes of corporation
                              tax.  The sum of the adjustments
                               referred to in the preceding sen-
                         tence is referred to as the
                             "Indemnities Income Adjustment"

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                              for the Determination Accounting
                                Period.  The balance of the Indem-
                           nity Tracing Account shall be
                             increased by the amount of each
                            Indemnities Income Adjustment.
                               The balance of the Indemnity Cash
                                Tracing Account shall be increased
                               if any Indemnities Income Adjust-
                              ment reflects any payment by the
                              Seller by an amount equal to the
                             product of (x) the aggregate of
                        such cash payments or such
                               amounts, times (y) 0.5, and times
                                        -----              -----
                            (z) the Effective Tax Rate for
                     such accounting period.

                          (b)   Discounting Unwind Tracing Account
                                ----------------------------------
                              Discounting Cash Tracing Account
                              --------------------------------

                              The provisions of this paragraph
                               (b) shall apply in respect of any
                                Future Accounting Period of SDI in
                                which a calculation is required to
                             be made under the provisions of
                           Clause 4 of the Tax Indemnity
   Deed.

                            (i)    If the calculation made
                                    under Clause 4(4) of the
                                      Tax Indemnity Deed results
                                      in a Discount Increase for
                                      any Determination Account-
                                      ing Period, the balance of
                                      the Discounting Cash Trac-
                                ing Account shall be
                                  increased by an amount
                                  equal to 0.8 times the
                                           -----
                                    "Discounting Tax Amount"
                                      referred to in Clause 4(5)
                   if any.

                             (ii)   If for any Determination
                                      Accounting Period the cal-
                                   culation under the said
                                    Clause 4(4) results in a
                                     Discount Unwind, the bal-
                                   ance of the Discounting
                                  Unwind Tracing Account

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                                     shall be increased by the
                                   amount of such Discount
                               Unwind, except that
                                  ------

                            (iii)  If in any Determination
                                       Accounting Period for which
                                     the calculation under the
                                       said Clause 4(4) results in
                                     a Discount Unwind and the
                                                   ---
                                  opening balance on the
                                    Discounting Cash Tracing
                                     Account is zero, any Dis-
                                       count Unwind shall be added
                                     to the balance of the NOL
                                       Tracing Account with effect
                                   from that Determination
                             Accounting Period

                               (iv)   For the purposes of subdi-
                                  visions (ii) and (iii)
                                       above Discount Unwind shall
                                    be limited to the amount
                                     which, when added to Dis-
                                     count Unwind for all pre-
                                ceding Determination
                                       Accounting Periods is equal
                                  to the sum of Discount
                                       Increases for all preceding
                                    Determination Accounting
                                       Periods in respect of which
                                    a Discounting Tax Amount
                                   has been paid, plus any
                                              ----
                                   amount by which the NOL
                                    Tracing Account has been
                                    reduced pursuant to Sec-
                                       tion 8.1(b)(gg) above, plus
                                                              ----
                                      in the case of subdivision
                                      (iii) the Opening Discount
                                 for the Determination
                                   Accounting Period ended
                             December 31 1987.

       8.2.2    Baseline Corporation Tax, Etc.
                ------------------------------

                          On each Tax Adjustment Date with respect
                          to each Determination Accounting Period,
                      the Buyer shall cause the Company to
                          determine the aggregate pro forma corpo-

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                         ration tax that would be payable by all
                         of the Group Companies for the Determi-
                        nation Accounting Period at the actual
                  rate or rates applicable to such
                      accounting periods, assuming (v) the
                        surrender of any losses of one or more
                      of the Group Companies that would be
                          available if group relief were available
                         with respect to the Group Companies (on
                         the assumption that there were no trad-
                        ing losses for any of the Group Compa-
                       nies in prior accounting periods) but
                    without giving effect to any group
                         relief that may be available in respect
                       of any company that is not one of the
                         Group Companies, (w) that there were no
                          trading losses or other amounts eligible
                       for carry forward for tax purposes of
                         the Group Companies in prior accounting
                       periods, (x) that the taxable profits
               (losses) of SDI are increased
                       (decreased) by an amount equal to the
                       Indemnities Income Adjustment for the
                      Determination Accounting Period, and
                          (y) that the taxable profits (losses) of
                     SDI are increased (decreased) by an
                     amount equal to the Discount Unwind
            (within the limits of Sec-
                          tion 8.2.1(b)(iv)) for the Determination
                       Accounting Period.  The amount of the
                        aggregate taxable profits, if any, for
                         all Group Companies during the Determi-
                         nation Accounting Period reflecting the
                       assumptions referred to the foregoing
                        clauses (v) through (y) is referred to
                        as the "Baseline Profit" for such com-
                         pany, provided that if the Group Compa-
      --------
                      nies, after taking into account such
                       assumptions have an aggregate trading
                      loss, Baseline Profit shall be zero.
                         The aggregate amount of corporation tax
                       for the Group Companies determined in
                       accordance with the first sentence of
                          this Section 8.2.2 is referred to as the
                         "Baseline Corporate Tax" for the Deter-
             mination Accounting Period.

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  8.2.3    Determination of Benefits
           -------------------------

                      On each Tax Adjustment Date for each
                       Determination Accounting Period as to
                         which Baseline Profits are greater than
                          zero, Baseline Profits for such Applica-
                          ble Accounting Period shall be deemed to
                       be decreased, but not below zero, and
                          the amount of certain tax benefits shall
            be determined, as follows:

                          (a)   First, by the positive balance, if
   -----
                           any, of the Indemnity Tracing
                                Account (such balance to be deter-
                              mined after giving effect to the
                                adjustments required to be made on
                               such Tax Adjustment Date pursuant
                                to Section 8.2.1).  If any adjust-
                           ment is made pursuant to this
                                subdivision (a), the Company shall
                               determine the aggregate amount of
                               the corporation tax that would be
                                payable by all Group Companies for
                          the Determination Accounting
                            Period on Baseline Profits, as
                               adjusted in this subdivision (a).
                               The excess of the Baseline Corpo-
                            ration Tax over such aggregate
                          amount is referred to as the
                             "Indemnity Tax Benefit" for the
                              Determination Accounting Period.

                          (b)   Second, by the positive balance on
    ------
                            the Discounting Unwind Tracing
                               Account (if any) for the Determi-
                               nation Accounting Period.  If any
                            adjustment is made pursuant to
                               this subdivision (b), the Company
                           shall determine the aggregate
                                amount of the corporation tax that
                           would be payable by all Group
                             Companies for the Determination
                               Accounting Period on the Baseline
                               Profits, as adjusted in the fore-
                               going subdivision (a) and in this
                             subdivision (b).  The excess of
                           the aggregate corporation tax
                            payable by all Group Companies

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                               determined in accordance with the
                            foregoing subdivision (a) over
                               such aggregate amount is referred
                               to as the "Discounting Unwind Tax
       Benefit".

                          (c)   Third, by the positive balance, if
   -----
                             any, of the NOL Tracing Account
                            (such balance to be determined
                                after giving effect to the adjust-
                               ments required to be made on such
                             Tax Adjustment Date pursuant to
                                Section 8.2.1).  If any adjustment
                               is made pursuant to this subdivi-
                                sion (c), the Company shall deter-
                              mine the aggregate amount of the
                            corporation tax payable by all
                                Group Companies for the Determina-
                           tion Accounting Period on the
                               basis of the Baseline Profits, as
                                adjusted in the foregoing subdivi-
                           sions (a) and (b) and in this
                             subdivision (c).  The excess of
                              the aggregate corporation tax of
                               all Group Companies determined in
                           accordance with the foregoing
                              subdivision (b) over such aggre-
                               gate amount times 0.5 is referred
                           -----
                             to as the "NOL Tax Benefit" for
                          the Determination Accounting
     Period.

                          Subject to the proviso to Section 8.2.6,
                         if and to the extent that such Baseline
                          Profits are decreased as provided in the
                          foregoing subdivisions (a), (b) and (c),
                      the balance of the Indemnity Tracing
                         Account, the Discounting Unwind Tracing
                        Account or the NOL Tracing Account, as
                        the case may be, shall be decreased by
  an equal amount.

8.2.4    Dates for Adjustment   
      --------------------

                      The adjustments contemplated by this
                       Section 8 shall be made in respect of
                   the following accounting periods:

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                          (a)   the provisions of Section 8.2.1(b)
                            shall apply for all accounting
                              periods up to and including that
                           ending on 31st December 1997;

                    (b)   all other provision or other
                             adjustments referred to in this
                             Section 8 shall be made for the
                               accounting periods commencing 1st
                          January 1987 and ending 31st
            December 1994.

   8.2.5    Settlement of Tax Benefits
            --------------------------

                       On each Tax Adjustment Date the Buyer
                         shall pay the Seller an amount in cash,
                         on the date of the Tax Adjustment Clos-
          ing, equal to the sum of

                       (i)   the lesser of (x) 0.5 times the
                                               -----
                                Indemnity Tax Benefit, and (y) the
                           balance of the Indemnity Cash
              Tracing Account;

                       (ii)  the lesser of (x) 0.8 times the
                                               -----
                            Discount Unwind Tax Benefit or
                                (y) the balance in the Discounting
                       Cash Tracing Account, and

                         (iii) interest on the foregoing amounts
                             at a rate of 11% per year, com-
                         pounded on each June 30 and
                                December 31, from a date 12 months
                                after the last day of the Determi-
                               nation Accounting Period to which
                              such Tax Adjustment Date relates
                         to the Tax Adjustment Date;

                       and the balance of the Indemnity Cash
                     Tracing Account or Discounting Cash
                      Tracing Account, as the case may be,
                       shall be reduced by the amount of any
                          such payment.  If (x) exceeds (y) in (i)
                      above the amount of such excess when
                          added to the NOL Tax Benefit referred to
                        in Section 8.2.3(c) above shall be the
                   "Net Tax Benefit Adjustment" with
                          respect to such Tax Adjustment Date.  If

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                          (x) exceeds (y) in (ii) above the amount
                          of such excess times 0.625 shall also be
                         included in the Net Tax Benefit Adjust-
ment.         

              8.2.6    Principles Applied in Making Computa-
                       -------------------------------------
tions         
-----         

                    As to each accounting period, each
                        adjustment to a Notional Account, each
                          adjustment reflected in a computation of
                          Baseline Profit and Baseline Corporation
                       Tax and each determination under Sec-
                       tions 8.2.2, 8.2.3 and 8.2.5 shall be
                         made without duplication of any amounts
                     of adjustments previously made.  In
                         making each determination called for in
                          Sections 8.2.3 and 8.2.5, (x) if the Tax
                     Adjustment Date for a Determination
                     Accounting Period is an Interim Tax
                        Adjustment Date for such Determination
                       Accounting Period, such determination
                        shall be made in the manner consistent
                       with the accounts and computations of
                      the Group Companies submitted to the
                       Inland Revenue for such Determination
                          Accounting Period; otherwise such deter-
                         mination shall be made in a manner con-
                        sistent with the position reflected in
                       the Final Determination in respect of
                       such Determination Accounting Period;
                          and (y) in determining the deemed reduc-
                        tions in profits of the Companies con-
                          templated by Section 8.2.3 and in deter-
                         mining Baseline Profits and the amounts
                        of the Indemnity Tax Benefit; the Dis-
                         counting Unwind Tax Benefit and the NOL
                     Tax Benefit, the balance on the NOL
                          Tracing Account shall only be applied to
                         SDI and losses of Group Companies shall
                         be deemed to be surrendered in a manner
                      that results in the lowest aggregate
                       corporation tax liability of all such
                       companies, provided that for all such
                --------
                          purposes losses of Group Companies other
                        than SDI shall be deemed to be surren-
                      dered to Group Companies in a manner
                     that results in the lowest possible

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                          surrender of losses to SDI.  Each compu-
                        tation made under this Section 8 on an
                         Interim Tax Adjustment Date relating to
                         a Determination Accounting Period shall
                          be made on an interim basis as set forth
                     in the previous sentence subject to
                        final settlement as of the Tax Adjust-
                          ment Date following the Final Determina-
                         tion with respect to such Determination
                        Account Period, and each such computa-
                       tion shall be adjusted as of such Tax
                        Adjustment Date to give effect to such
                     final settlement.  All calculations
                          under this Section 8 shall be made with-
                     out carrying any losses back from a
                        subsequent taxable year to the taxable
   year in question.

8.3   Claims Handling                       
---------------                 

                Subject to the Tax Indemnity Deed, the Buyer and
                 the Group Companies shall be entitled and obliged
                 to act at their own risk and expense in all deal-
               ings with the Inland Revenue for the purpose of
               finalizing the corporation tax liability of the
             Group Companies for all Future Taxable Years.
              Subject to the provisions of the Tax Indemnity
              Deed, upon the Buyer becoming aware of a Claim
             for corporation tax for any year ending after
                 December 31, 1986 and before January 1, 1998 (the
               "Future Taxable Years") it shall forthwith give
                 written notice of the same to the Seller specify-
            ing the details thereof and shall thereafter
              (i) give such information to the Seller on the
              affairs of the Company, SDI or the other Group
                 Companies as the Seller may reasonably request on
                 the status and course of the discussions with the
               Inland Revenue and on such company's efforts to
        resist, appeal or compromise such Claim;
              (ii) conduct such discussions and efforts only
                 upon consultation with the Seller; and (iii) con-
               duct such efforts and discussions in good faith
            and not with a view to reducing or otherwise
               impairing the Seller's present or future rights
                to receive payments or credits in the Adjustment
              Account in respect of Tax Benefits.  The Buyer
               will cause each Group Company to furnish to the
                Seller true and complete copies of all accounts,

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                 computations and assessments in respect of corpo-
               ration tax payable by such companies in respect
             of the Future Taxable Years promptly upon the
              same being produced or received by such compa-
nies.                           

 8.4   Preparation of Tax Adjustment Schedules
       ---------------------------------------

               The Buyer shall cause the Company to deliver to
                the Seller on or before a date 30 days following
           each Tax Adjustment Date a schedule (a "Tax
               Adjustment Schedule") in the form of Exhibit O,
               together with a report thereon of the Company's
           auditors stating that such accountants have
          reviewed (w) such Tax Adjustment Schedule,
               (x) the provisions of this Agreement (including
          Exhibit O), (y) the appropriate accounting
                 records of the Group Companies (z) the tax compu-
                 tations of the Group Companies and any applicable
                 Final Determination, and that such Tax Adjustment
             Schedule has been prepared in accordance with
                 such provisions and properly reflect the informa-
                tion in such books and records and the positions
             in such tax computations and Final Determina-
                 tions.  Each Tax Adjustment Schedule shall become
                final and binding upon the parties unless within
             30 days of receipt thereof the Seller gives a
                notice (a "Notice of Tax Disagreement") in writ-
                ing to the Buyer prior to the expiration of such
               30-day period that it disagrees with any amount
            or other matter reflected therein.  Any such
                Notice of Tax Disagreement shall specify in rea-
                sonable detail the nature of any disagreement so
             asserted.  If the matters referred to therein
               cannot be resolved by the agreement of the par-
            ties within 30 days of the date on which the
              notice of Tax Disagreement is given, any unre-
                solved issues shall be submitted to and reviewed
                 by an arbitrator which shall be mutually selected
               by the Buyer's and the Seller's auditors, or if
                 they cannot agree, by the President of the Insti-
            tute of Chartered Accountants of England and
                Wales, whose decision shall be final and binding
among the parties.              

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8.5   Settlements                           
-----------                     

                 The Settlement of each amount owing to the Seller
             under Section 8.2.5 or to the Buyer under the
                penultimate sentence of Section 8.2.6 shall take
               place at a closing (a "Tax Adjustment Closing")
              to be held on the tenth Business Day following
                the date upon which the Tax Adjustment Schedules
              relating to such Tax Adjustment Closing become
            final and binding on the parties pursuant to
             Section 8.5.  Any such Tax Adjustment Closing
                shall take place at the offices of Slaughter and
          May, 35 Basinghall Street, London EC2V 5DB
                England, at 10:00 a.m. local time, or such other
                 place or such other time or date as the Buyer and
               the Seller agree in writing.  Any amounts owing
                to the Buyer or the Seller at any Tax Adjustment
            Closing shall be payable in cash in same-day
              funds, together with interest on the amount so
           due computed from but not including the Tax
                Adjustment Date as to which the settlement to be
              made at such Tax Adjustment Closing relates to
            and including the date of payment at 11% per
                 year, compounded on each June 30 and December 31.

8.6   Certain Defined Terms                 
---------------------           

         As used in this Section 8, as the context
                 requires terms defined in the Taxes Act 1970 have
                 the meanings specified therein, and the following
        terms shall have the following meanings:

              "Baseline Corporation Tax" has the meaning set
------------------------      
forth in Section 8.2.2.         

              "Baseline Profit" has the meaning set forth in
---------------               
Section 8.2.2.                  

            "Claim" has the meaning set forth in the Tax
-----                         
Indemnity Deed.                 

                 "Determination Accounting Period" has the meaning
 -------------------------------
set forth in Section 8.2.1.     

                "Discount Increase and Discount Unwind" have the
       -------------------------------------
                 meanings set forth in Clause 4 of the deed of Tax
Indemnity.                      

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                "Discounting Cash Tracing Account" has the mean-
  --------------------------------
ing set forth in Section 8.1.   

                "Discounting Unwind Tax Benefit" has the meaning
------------------------------
set forth in Section 8.2.3.     

            "Discounting Unwind Tracing Account" has the
    ----------------------------------
 meaning set forth in Section 8.1.

               "Effective Tax Rate" means as to any Determina-
------------------            
                 tion Accounting Period the highest rate of corpo-
                 ration tax (expressed as a decimal) applicable to
              companies engaged in the property and casualty
insurance business.             

               "Final Determination" means a binding agreement
-------------------           
            between the relevant taxpayer and the Inland
                Revenue or an applicable administrative or judi-
               cial decision with respect to the taxpayer that
    is not (or is no longer) appealable.

               "Future Accounting Periods" has the meaning set
-------------------------     
forth in the Tax Indemnity Deed.

                "Future Taxable Years" has the meaning set forth
--------------------          
in Section 8.3.                 

               "Group Companies" means if there shall not have
---------------               
              occurred any Triggering Event (as such term is
            defined in the Note Purchase Agreement), the
               Buyer and its UK resident Subsidiaries (as such
                term is defined in the Note Purchase Agreement),
            or if there shall have occurred a Triggering
                Event, the Guarantor and its UK resident Subsid-
           iaries (as so defined) as of the end of the
             accounting period in question provided that a
                                    --------
               company shall be a Group Company only if any of
              its trading losses could be surrendered to the
              Company (assuming that the Company had trading
                profits) under the group relief provisions of TA
             1970, Section 258 and FA 1973, Section 28 and
                 Schedule 12 applicable in the period in question.

               "Indemnities Income Adjustment" has the meaning
----------------------------- 
set forth in Section 8.2.1.     

                "Indemnity Cash Tracing Account" has the meaning
------------------------------
set forth in Section 8.1.       

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               "Indemnity Tracing Account" has the meaning set
-------------------------     
forth in Section 8.             

                 "Indemnity Tax Benefit" has the meaning set forth
---------------------         
in Section 8.2.3.               

                 "Interim Tax Adjustment Date" means any Accelera-
---------------------------   
        tion Date and the Final Adjustment Date.

                "Net Tax Benefit Adjustment" has the meaning set
--------------------------    
forth in Section 8.2.5.         

              "NOL Tax Benefit" has the meaning set forth in
---------------               
Section 8.2.3.                  

               "NOL Tracing Account" has the meaning set forth
-------------------           
in Section 8.1.                 

                "Notice of Tax Disagreement" has the meaning set
--------------------------    
forth in Section 8.4.           

                "Notional Accounts" has the meaning set forth in
-----------------             
Section 8.1.                    

                 "Open Tax Years" has the meaning set forth in the
--------------                
Tax Indemnity Deed.             

               "Opening Discount" has the meaning set forth in
----------------              
the Tax Indemnity Deed.         

            "Tax Adjustment Closing" has the meaning set
----------------------        
forth in Section 8.5.           

           "Tax Adjustment Date" means, (x) as to each
-------------------           
                accounting period of each of the Company and the
             subsidiaries ending after January 1, 1987 and
                before January 1, 1998, the last Business Day of
                the calendar quarter ending on or after the date
              on which there is a Final Determination of the
             corporation tax liability of each company for
              such period and (y) any Interim Tax Adjustment
Date.                           

             "Tax Adjustment Schedule" has the meaning set
-----------------------       
forth in Section 8.4.           

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     9.   Survival of Representations and Warranties of the Par-
          ------------------------------------------------------
ties                                        
----                                        

         Subject to Section 2.32, notwithstanding any right of
          the Buyer fully to investigate the affairs of the Com-
     panies and notwithstanding any knowledge of facts
       determined or determinable by the Buyer pursuant to
           such investigation or right of investigation, the Buyer
         has the right to rely fully upon the representations,
      warranties, covenants and agreements of the Seller
      contained in this Agreement.  All representations,
          warranties, covenants and agreements of the parties to
           this Agreement shall survive the execution and delivery
           hereof and the Closing hereunder, and, except as other-
           wise specifically provided in this Agreement, any claim
           with respect to any such representations and warranties
          of the Seller contained in this Agreement shall there-
          after terminate and expire (i) on the 60th day follow-
          ing the first Reserve Adjustment Date, with respect to
           any General Claim (as herein defined) based upon, aris-
           ing out of or otherwise in respect of any fact, circum-
           stance, action or proceeding of which the party assert-
           ing such claim shall have given no written notice on or
      prior to such date to the party against which such
          General Claim is asserted and (ii) with respect to any
           Tax Claim (as herein defined), within the time provided
          in the Tax Indemnity Deed.  As used in this Agreement,
    the following terms have the following meanings:

           (i)   "General Claim" means any claim (other than a Tax
-------------                 
                 Claim) based upon, arising out of or otherwise in
                 respect of any inaccuracy in or any breach of any
               representation or warranty of the Seller or the
  Buyer contained in this Agreement.

         (ii)  "Tax Claim" means any claim based upon, arising
---------                     
                out of or otherwise in respect of any inaccuracy
              in or any breach of any representation or war-
                 ranty of the Seller contained in Section 2.12 and
in the Tax Indemnity Deed.      

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10.  Indemnification and Reimbursement                
---------------------------------           

         10.1  Obligation of the Seller to Indemnify and Reim-
               -----------------------------------------------
                 burse for Undisclosed Liabilities, Misrepresenta-
                 -------------------------------------------------
tions, Etc.                     
-----------                     

             Without duplication of any other provision of
            this Section 10, the Seller shall indemnify,
                defend and hold harmless the Buyer promptly (and
                within any period specified for payment under or
                 pursuant to any court order, arbitration award or
                other settlement, compromise or agreement of any
              kind) and fully in cash, from and against, and
                reimburse, make whole and pay the Buyer for, all
               losses, claims, liabilities, damages, deficien-
               cies, costs or expenses (including interest and
               penalties) of the Buyer or any of the Companies
               (collectively "Losses") based upon, arising out
               of or otherwise in respect of, or alleged to be
          based upon, arising out of or otherwise in
                respect of, (i) any direct or indirect indebted-
                 ness, liability, claim, loss, damage, deficiency,
              obligation or responsibility known or unknown,
                fixed or unfixed, choate or inchoate, liquidated
               or unliquidated, secured or unsecured, accrued,
                absolute, contingent or otherwise, of any of the
               Companies, whether or not of a kind required by
              generally accepted accounting principles to be
            set forth on a financial statement or in the
             notes thereto ("Liabilities"), incurred on or
                prior to December 31, 1986; (ii) subject to Sec-
                 tion 2.32, any inaccuracy in or any breach of any
             representation or warranty of the Seller con-
                tained in this Agreement; or (iii) any breach by
             the Seller of Section 4.19; provided that the
                                --------
              Seller shall not be liable to make any payment
             pursuant to this Section 10.1: (a) concerning
                 Losses that would be reflected in a Net Recovera-
                bles Adjustment, Net Reserves Adjustment or Col-
                 lection Costs for purposes of Section 7; (b) con-
        cerning Liabilities fully and adequately
            reflected or reserved against on the Company
              Balance Sheets (or, in the case of SDI, on the
               SDI Balance Sheet); (c) concerning any Liabili-
               ties arising as a result of any action taken or
           omitted to be taken at the written request,
            direction or with the written consent of the
              Buyer or in response to any condition or other

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               requirement contained in any written consent of
               the Buyer in respect of the matters referred to
                in Section 2.25; (d) unless and until the aggre-
             gate amount payable by the Seller pursuant to
                    this Section 10.1 exceeds B.P.100,000; or (e) to the
               extent that the aggregate amount payable by the
            Seller pursuant to this Section 10.1 exceeds
                 B.P.32,651,934 as adjusted pursuant to the provi-
              sions of Section 1.5 through the date any such
               payment is due.  The Seller shall reimburse the
             Buyer and the Companies for any legal fees or
            other expenses (including any value added or
                similar tax payable thereon) reasonably incurred
           by them in connection with investigating or
          defending any such Losses as and when such
             expenses are incurred.  Anything in this Sec-
             tion 10.1 to the contrary notwithstanding, no
         indemnification or reimbursement shall be
              provided pursuant to this Section 10.1 for any
              Losses arising from loss of future business or
              future profit to the Buyer or the Companies or
               any of their Affiliates.  The Buyer agrees that
             any claim which it may have with respect to a
               breach of any representation or warranty of the
                Seller contained in this Agreement (other than a
         claim grounded in fraud) shall be brought
          pursuant to this Section 10.1, which shall
         provide its exclusive and complete remedy
therefor.                       

        10.2  Obligation of the Buyer to Indemnify and Reim-
              ----------------------------------------------
  burse for Misrepresentations, Etc.
  ----------------------------------

                The Buyer shall indemnify, defend and hold harm-
                less the Seller, promptly (and within any period
              specified for payment under or pursuant to any
               court order, arbitration award or other settle-
              ment, compromise or agreement of any kind) and
               fully in cash, from and against, and reimburse,
             make whole and pay the Seller for, all Losses
          based upon, arising out of or otherwise in
                respect of, or alleged to be based upon, arising
                 out of or otherwise in respect of, any inaccuracy
              in or any breach of any representation or war-
                 ranty of the Buyer contained in this Agreement or
            any breach by the Buyer of Section 4.19, and
                 shall reimburse the Seller for any legal or other
              expenses (including any value added or similar

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                 tax payable thereon) reasonably incurred by it in
                connection with defending any such Losses as and
                 when such expenses are incurred, provided that no
                                          --------
              indemnification or reimbursement shall be pro-
           vided pursuant to this Section 10.2 for any
              Losses arising from loss of future business or
                 future profit to the Seller or any of its Affili-
                ates.  The Seller agrees that any claim which it
               may have with respect to a breach of any repre-
               sentation or warranty of the Buyer contained in
              this Agreement (other than a claim grounded in
                fraud) shall be brought pursuant to this Section
                10.2, which shall provide its exclusive and com-
plete remedy therefor.          

          10.3  Indemnification and Reimbursement Arising Out of
                ------------------------------------------------
                 the Fraud, Deceit, Misconduct and Irregular Prac-
                 -------------------------------------------------
           tices of the Management of Alexander Howden
           -------------------------------------------
Underwriting Ltd., Etc.         
-----------------------         

                (1)  The Seller shall indemnify, defend and hold
              harmless the Buyer and the Companies, promptly
            (and within any period specified for payment
                 under or pursuant to any court order, arbitration
               award or other settlement, compromise or agree-
               ment of any kind) and fully in cash and without
         limitation as to time or amount, from and
              against, and reimburse, make whole and pay the
            Buyer and the Companies for, all third party
              claims or counterclaims against the Buyer, the
              Companies or their Affiliates, being claims or
           counterclaims by any Person (other than the
                Buyer, the Companies or any of their Affiliates)
              (together with all costs, charges and expenses
              (including interest and penalties) incurred in
                 connection therewith or otherwise relating there-
               to) in connection with, based upon, arising out
                of or otherwise relating to, or alleged to be in
              connection with, based upon, arising out of or
               otherwise relating to, (i) the "Howden Affair",
                 "Hart Affair" or "PCW Affair" (as defined below),
                 provided that such claim or counterclaim involves
--------                        
                 or relates to, or is reasonably proximately asso-
             ciated with any fraud, secret profit, deceit,
                 misappropriation or diversion of funds, breach of
            trust and/or fiduciary duty, wrongful act or
            omission, irregularity and/or misconduct; or
            (ii) any other fraud, secret profit, deceit,

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                 misappropriation or diversion of funds, breach of
            trust and/or fiduciary duty, wrongful act or
               omission, irregularity and/or misconduct by any
                 of K.V. Grob, A.J. Page, J.H. Carpenter, the late
            R.C. Comery, I.R. Posgate, C. Hart, the late
                Leonard Hart, P.S. Dixon, P.E.J. Cameron - Webb,
              J. Wallrock, J.A.W.I. Hardman, D.B. Hill, B.C.
                 Newman, A.G.F. Oldworth, and M. Benbassat (to the
              extent of Benbassat's dealings with any of the
                 preceding named individuals or in relation to his
                 involvement in the Howden Affair, Hart Affair, or
PCW Affair).                    

               Provided however that the indemnity provided in
   this Section 10.3 does not extend:-

                 (a)      to claims or counterclaims payable under
                          valid contracts of insurance or reinsur-
                          ance or in respect of damages for breach
thereof; or   

                (b)      to costs, charges and expenses incurred
                     by SDI in relation to any claim for
                          liability, or any defence thereof, aris-
                       ing in connection with various marine
                     excess of loss reinsurances for the
                        benefit of certain PCW Syndicates, and
                        with various errors and omission poli-
                       cies, details of which are set out in
           Schedule 10.3H hereto; or

              (c)      to SDI's liabilities to Syndicate 126
                   arising under quota share numbers
                      ST8010580, ST8110727, ST8110762(26),
                        ST8210727 and ST8210762 referred to in
           Schedule 10.3A hereto; or

                 (d)      to any Losses to the Buyer or the Compa-
                        nies resulting from the refusal of any
                     third party to engage in any future
                      business transaction with any of the
                         Companies if the Seller can demonstrate
                        that such refusal is based solely upon
                        information concerning the matters set
                        forth in Schedule 10.3A through H that
                       was publicly available on the date of
 this Agreement.

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(2)      Definitions            
-----------   

                      "The Howden Affair" means the facts,
     -----------------
                          matters, and events referred to, recited
                    in, or described in Schedule 10.3A
                          annexed hereto.  Schedule 10.3B does not
                          form part of the Howden Affair or of the
                      Indemnity under Section 10.3 of this
                         Agreement and is provided herein to the
                      Buyer for background and information
                       purposes only.  (It is agreed that no
                         representations or warranties are given
                       by Deloitte Haskins & Sells as to the
                          accuracy of the information contained in
       Schedules 10.3A & B.)

                         "The Hart Affair" means the facts, mat-
   ---------------
                         ters and events referred to, recited in
                        or described in Schedule 10.3C annexed
hereto.       

          "The PCW Affair" means:-
  --------------

                     (a)   The facts, matters and events
                         referred to, recited in, or
                                described in the Report of Lloyd's
                              Disciplinary Committee (case No.
                             8401/5) in January 1985 in pro-
                               ceedings against J.A.W.I. Hardman
                                and others (the "Report") in para-
                             graphs A.5-A.11, B5, B9(b)-B16,
                               C.3-C.23,D5-D27, D31-D33, D36 and
                           F4-F16, F20-F24 as set out in
                              Schedule 10.3D hereto, or any of
                             the contracts of reinsurance or
                                retrocession or purported reinsur-
                             ance or retrocession (including
                              the contracts listed in Schedule
                             10.3E of this section) or other
                               transactions forming part thereof
                             referred to or described in the
                               Report, or any reinsurance of the
                             Schemes described in paragraphs
                             A.6-A10 of the Report, or funds
                               transferred thereunder or in con-
                                nection therewith and any improper
                       benefits paid thereunder;

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                       (b)   any contracts or purported con-
                                tracts of insurance or reinsurance
                              commonly known as "Tonners" made
                            between the PCW Syndicates and
                                Regent Excess Limited or any other
                           company participating in "the
                                Guernsey Scheme", "the Isle of Man
                              Scheme", "the Gibraltar Scheme",
                          "the Geneva Scheme" and "The
                             Europa Scheme" (as described in
                               the Report) or any reinsurance or
                               purported reinsurance thereof and
                                funds transferred thereunder or in
                               connection therewith and improper
                          benefits paid thereunder; or

                         (c)   any act or omission of the corpo-
                              rations or other entities listed
                               in Schedule 10.3F to this section
                           or any improper benefits paid
                      thereto or therefrom; or

                       (d)   the contracts of reinsurance or
                                purported reinsurance made between
                             the PCW Syndicates and Chiltern
                          Reinsurance Company Limited,
                              and/or Regent Excess Limited and
                            retrocessions to Marine Excess
                               (Gibraltar) Limited and/or Marine
                             Excess Limited and funds trans-
                                ferred thereunder or in connection
                             therewith and improper benefits
                 paid thereunder; or

                          (e)   a quota share contract of reinsur-
                                ance placed in 1978 and subsequent
                              years through Seascope Insurance
                               Services Limited under which part
                              of the overriding commission was
                           placed with Unimar SA and any
                                improper benefits paid thereunder.

                       "The PCW Syndicates" means the Syndi-
      ------------------
                      cates specified in Schedule 10.3G to
                       this sectIon for the years of account
    therein mentioned.

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              Nothing in the Schedules to Section 10.3 shall
                constitute or contain any representation or war-
                ranty as to the accuracy of the information con-
               tained therein nor any admission of any fact or
           liability by the Buyer or the Seller or any
             waiver of any applicable legal privilege that
             arises under the laws of England and Wales or
under any other jurisdiction.   

          10.4  Indemnification and Reimbursement Arising Out of
                ------------------------------------------------
        S.I.R. Substituted Stop Loss Reinsurance
        ----------------------------------------

             Without duplication of any other provision of
            this Section 10, the Seller shall indemnify,
                 defend and hold harmless the Buyer, promptly (and
                within any period specified for payment under or
               pursuant to any court order, arbitration award,
               or other settlement, compromise or agreement of
               any kind) and fully in cash and without limita-
                tion as to time or amount, from and against, and
                reimburse, make whole and pay the Buyer for, all
                 Losses of the Buyer or any of the Companies based
                upon, arising out of or otherwise in respect of,
              or alleged to be based upon, arising out of or
                otherwise in respect of, and shall reimburse the
              Buyer and the Companies for any legal or other
              expenses (including any value added or similar
                tax payable thereon) reasonably incurred by them
                 in connection with investigating or defending any
         such Losses as and when such expenses are
             incurred, in connection with the reinsurances
               placed with Lloyds Syndicate 701 concerning the
                 quota share reinsurances written by Sphere, Drake
              and/or SDI for the benefit of Lloyds Syndicate
              126 (the contractual details of which are more
                 particularly described in Alexander Howden Insur-
               ance Brokers Ltd. Cover Notes ST 8010580, ST 80
             10727, ST 81 10727, ST 82 10727) or being the
                 subject matter of proceedings in the English High
                Court of Justice in Action No. 1984 C. No. 6548;
                 provided that no indemnification or reimbursement
--------                        
               shall be provided pursuant to this Section 10.4
            for any Losses to the Buyer or the Companies
                resulting from the refusal of any third party to
              engage in any future business transaction with
             any of the Companies if the Seller can demon-
              strate that such refusal was based solely upon

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             information concerning such matters that were
                 publicly available on the date of this Agreement.

          10.5  Indemnification and Reimbursement Arising out of
                ------------------------------------------------
the Orion Litigation            
--------------------            

             Without duplication of any other provision of
            this Section 10, the Seller shall indemnify,
                 defend and hold harmless the Buyer, promptly (and
                within any period specified for payment under or
                 pursuant to any court order, arbitration award or
                other settlement, compromise or agreement of any
                 kind) and fully in cash and without limitation as
              to time or amount, from and against, and reim-
            burse, make whole and pay the Buyer for, all
                 Losses of the Buyer or any of the Companies based
                upon, arising out of or otherwise in respect of,
              or alleged to be based upon, arising out of or
                otherwise in respect of, and shall reimburse the
              Buyer and the Companies for any legal or other
              expanses (including any value added or similar
                tax payable thereon) reasonably incurred by them
                 in connection with investigating or defending any
         such Losses as and when such expenses are
                 incurred, in connection with (i) Action No. 1986.
                O. No. 1802 in the English High Court of Justice
                 or (ii) the contracts of insurance or reinsurance
            which form the business written by the Orion
              Insurance Company PLC on behalf of SDI and its
            predecessors in title under the various pool
              agreements and other contracts of insurance or
            reinsurance for the period 1953 to 1967, and
              which form the subject matter of the Action in
(i) above.                      

          10.6  Indemnification and Reimbursement Arising out of
                ------------------------------------------------
Certain Matters                 
---------------                 

             Without duplication of any other provision of
            this Section 10, the Seller shall indemnify,
                 defend and hold harmless the Buyer, promptly (and
                within any period specified for payment under or
                 pursuant to any court order, arbitration award or
                other settlement, compromise or agreement of any
                 kind) and fully in cash and without limitation as
              to time or amount, from and against, and reim-
            burse, make whole and pay the Buyer for, all
                 Losses of the Buyer or any of the Companies based

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                upon, arising out of or otherwise in respect of,
              or alleged to be based upon, arising out of or
                otherwise in respect of, and shall reimburse the
              Buyer and the Companies for any legal or other
                expenses (including any value added tax or simi-
               lar tax payable thereon) reasonably incurred by
              them after the Closing Date in connection with
                 investigating or defending any such losses as and
 when such expenses are incurred:-

               (a)      in connection with E & O Claim No. 84-
                         005-04-00 being a notification reported
                        to SDUM's underwriters under its Prior
                    Acts Professional Indemnity Policy
                       expiring 4th January 1984 concerning,
                      inter alia, potential allegations by
                         Iron Trades Mutual Ins. Co. Ltd, a for-
                         mer principal of SDUM and its predeces-
                          sors, and other principals of negligence
                        in arranging reinsurance in 1978-81 in
                          respect of the Marine Quota Share Treaty
                          placed during those years with Companhia
                de Seguros Imperio of Portugal
                      ("Imperio") and other reinsurers and
                          Imperio's attempt to avoid such reinsur-
ance;         

               (b)      in connection with E & O Claim No. 84-
                        005-3-00 being a notification reported
                        to SDUM's underwriters under its Prior
                    Acts Professional Indemnity Policy
                       expiring 4th January 1984 concerning,
                     inter alia, allegations that SDUM's
                         predecessor Swan & Everett Underwriting
                     Ltd may have exceeded its authority
                         under the underwriting agency agreement
                         between it and Eagle Star Ins. Co. Ltd.
                       ("Eagle Star") in the years 1963 - 69
                         and may have been negligent in relation
                      to the said account and Eagle Star's
                        attempt to avoid liability and to seek
                      an indemnity in respect thereof; and

               (c)      in connection with allegations made by
                       Sentry Ins. Co. (U.K.) Ltd and Sentry
                        Indemnity Company (collectively, "Sen-
                       try") concerning, inter alia, allega-
                          tions relating to certain business writ-

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                         ten for Sentry by SDUM or its predeces-
                         sors up to 1982 and Sentry's attempt to
                       avoid liability in respect thereof by
                      way of a contribution from SDUM or a
            counterclaim against SDUM.

10.7  Indemnification of Brokerage          
----------------------------    

              The Buyer and the Seller shall each indemnify,
                 defend and hold harmless the other, promptly (and
                within any period specified for payment under or
                 pursuant to any court order, arbitration award or
                other settlement, compromise or agreement of any
              kind) from and against any claim or demand for
                any commission, fee or other compensation by any
             broker, finder, agent or similar intermediary
                 claiming to have been employed by or on behalf of
                the other, and shall reimburse the other for any
                 legal fees or other expenses (including any value
                added or similar tax payable thereon) reasonably
                incurred by the other in connection with defend-
                ing any such claim or demand, it being specific-
            ally understood and agreed that the fees and
              expenses of Salomon Brothers Inc in connection
                 with the transactions contemplated by this Agree-
            ment shall be the sole responsibility of the
Seller.                         

10.8  Atlanta Policies                      
----------------                

                10.8.1   Without duplication of any provision of
                        the Indemnification Agreement attached
                          hereto as Exhibit H4 or any other provi-
                     sion of this Section 10, the Seller
                        shall indemnify, defend and hold harm-
                          less the Buyer, promptly (and within any
                       period specified for payment under or
                          pursuant to any court order, arbitration
                          award or other settlement, compromise or
                      agreement of any kind), and fully in
                        cash and without limitation as to time
                        or amount, from and against, and reim-
                          burse, make whole and pay the Buyer for,
                       all Losses of the Buyer or any of the
                         Companies based upon, arising out of or
                        otherwise in respect of, or alleged to
                        be based upon, arising out of, in con-
                         nection with or otherwise in respect of

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                         the Atlanta Policies (as defined below)
                       if and only if (i) such Policies were
                        underwritten or issued by Howden Agen-
                         cies Ltd, Howden Swann Ltd, or Country-
                         wide Managers in the name of the Sphere
                         Insurance Company Ltd ("Sphere") or the
                        Drake Insurance Company Ltd ("Drake"),
                       and (ii) neither Sphere nor Drake had
                        any Knowledge of or involvement in the
                         evaluation or underwriting of the risks
                          covered by such Policies, and (iii) such
                         Policies were insured or reinsured with
                       other insurers as an accommodation to
                        one or more of those other insurers or
                          as an accommodation for the Howden Agen-
                          cies Ltd., Howden Swann Ltd, or Country-
                     wide Managers, and (iv) Sphere's or
                          Drake's gross retention on such Policies
                       was less than fifty per cent (50%) of
                       the risk covered by the Policies, and
                          (v) Sphere and Drake received no Premium
                         in respect of their gross retained risk
                     on such Policies.  The Seller shall
                       reimburse the Buyer and the Companies
                      for any legal fees or other expenses
                     (including any value added or other
                         similar tax payable thereon) reasonably
                     incurred by them in connection with
                     investigating or defending any such
                        Losses as and when any such Losses are
                        incurred.  No indemnification or reim-
                        bursement shall be provided under this
                          Section 10.8 for any Losses arising from
                       any failure to pay or other action on
                          the part of one or more of any Affiliate
                       of the Buyer or the Companies or from
                          loss of future business or future profit
                         to the Buyer or the Companies or any of
   their Affiliates.

               10.8.2   The rights of the Buyer and the Compa-
                        nies to be indemnified under this Sec-
                          tion 10.8 as to any event (the "Indemni-
                        fied Event") shall be in excess of the
                         amount of any claim that SDI as succes-
                         sor in interest to Sphere and Drake, as
                     the case may be, may have under any
                          reinsurance or insurance contract issued

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                       by any Person (an "Insurer") covering
                          the Indemnified Event (each amount which
                        SDI may be entitled to claim under any
                          such policy is referred to herein as the
                          "Insurance Recovery Amount" with respect
                        to the Indemnified Event).  As to each
                         and every Indemnified Event, the Seller
                        hereby unconditionally and irrevocably
                        guarantees to the Buyer and the Compa-
                        nies the payment in full of all Insur-
                         ance Recovery Amounts in respect of the
                        Atlanta Policies covered by the Indem-
                      nity in sub-section 10.8.1, notwith-
                      standing any other provision of this
                         sub-section 10.8.2, such guaranty to be
                          further evidenced by the Guaranty Agree-
                        ment attached hereto as Exhibit P (the
                  "Insurance Guaranty Agreement").

               10.8.3   The Seller shall indemnify, defend and
                        hold harmless the Buyer and any of the
                    Companies promptly (and within any
                       period specified for payment under or
                         pursuant to any court order arbitration
                          award or other settlement, compromise or
                          agreement of any kind) and fully in cash
                      and without limitation as to time or
                       amount from and against all Losses of
                          the Buyer or any of the Companies, based
                       upon, arising out of or in connection
                        with the indemnity and guarantee given
    in Section 10.8.2.

            10.8.4   Upon issuance of an Exercise Notice
                         under Section 10.10.2, the Seller shall
                        be authorised to take all steps neces-
                         sary to recover any claims the Buyer or
                       any of the Companies may have against
                    any Insurer in connection with any
                         Insurance Recovery Amount including the
                          use of the appropriate insured's name as
                       and when required, and, if requested,
                          the insured (being one of the Companies)
                          shall provide the Seller with a power of
                      attorney, in such form as the Seller
                         shall reasonably request but no litiga-
                        tion or proceedings shall be commenced
                        in an insured's name without the prior

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                      written consent of the insured, such
                          consent not to be unreasonably withheld.

             10.8.5   (a)   The term "Atlanta Policies" as
                             used herein shall mean any con-
                               tract of insurance or reinsurance
                              written or issued in the name of
                                Sphere or Drake by Howden Agencies
                        Ltd, Howden Swann Ltd, and
                   Countrywide Managers.

                         (b)   The term "Premium" as used herein
                         shall mean amounts actually
                            received by Sphere or Drake as
                                premium under Atlanta Policies but
                               shall exclude any amounts paid to
                              or received in Bermuda on behalf
                               of Sphere or Drake which were not
                                subsequently transmitted to Sphere
        and Drake.

                          (c)   The term "Knowledge" as used here-
                                in shall mean the actual knowledge
                               of any of the executive officers,
                           directors or key employees of
                               Sphere or Drake but shall exclude
                                any knowledge of or involvement by
                               Mr.Jack Carpenter with respect to
                   the Atlanta Policies.

          10.9  Guaranty of Insurance and Reinsurance Recoveries
                ------------------------------------------------

            10.9.1   The Buyer's right to be indemnified
                         under Section 10.4 of this Agreement as
                       to any event (an "Indemnified Event")
                         shall be in excess of the amount of any
                         claim that the Buyer or any of the Com-
                       panies may have under any reinsurance
                          contract covering the Indemnified Event,
                         and the Buyer's right to be indemnified
                       under Sections 10.1, 10.5 and 10.6 of
                         this Agreement as to any event (also an
                         "Indemnified Event") shall be in excess
                        of any amount of any claim that any of
                         the Companies may have under any errors
                    and omission insurance contract in
                     respect of the errors and omissions
                        claims listed in Schedule 2.13 of this

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                        Agreement. (Each Person issuing such a
                    reinsurance or errors and omission
                          insurance contract is hereafter referred
                     to as an "Insurer", and each amount
                         which the Buyer or the Companies may be
                         entitled to claim under such a reinsur-
                       ance or errors and omission insurance
                          contract is hereafter referred to as the
                          "Insurance Recovery Amount" with respect
            to the Indemnified Event.)

                10.9.2   As to each and every Indemnified Event,
                       the Seller hereby unconditionally and
                         irrevocably guarantees to the Buyer the
                         payment in full of all Insurance Recov-
                         ery Amounts in respect of such reinsur-
                        ance or errors and omissions insurance
                     contracts notwithstanding any other
                         provision of Section 10.9.1, such guar-
                     anty to be further evidenced by the
               Insurance Guaranty Agreement.

            10.9.3   Upon issuance of an Exercise Notice
                        under Section 10.10.2 the Seller shall
                        be authorized to take all steps neces-
                         sary to recover any claims the Buyer or
                       any of the Companies may have against
                    any Insurer in connection with any
                         Insurance Recovery Amount including the
                          use of the appropriate insured's name as
                       and when required, and, if requested,
                          the insured (being one of the Companies)
                          shall provide the Seller with a power of
                         attorney, but no litigation or proceed-
                         ings shall be commenced in an insured's
                        name without the prior written consent
                        of the insured, such consent not to be
        unreasonably withheld.

10.10 Notice and Opportunity to Defend      
--------------------------------

     10.10.1  Notice of Asserted Liability
              ----------------------------

                     Promptly after receipt by any party
                      hereto (the "Indemnitee") of written
                        notice of any demand, claim or circum-
                      stance that, with the lapse of time,
                        would give rise to a claim or the com-

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                        mencement (or threatened commencement)
                         of any action, proceeding or investiga-
                         tion (an "Asserted Liability") that may
                        result in a Loss or claim under any of
                    the indemnities in Section 10, the
                      Indemnitee shall give written notice
                      thereof (the "Claims Notice") to any
                       other party which may be obligated to
                          provide indemnification pursuant to this
                     Section 10 (the "Indemnitor").  The
                  Claims Notice shall describe the
                          Asserted Liability in reasonable detail,
                          shall indicate the amount (estimated, if
                          necessary) of the Loss or claim that has
                         been or may be suffered by the Indemni-
                      tee and shall describe any insurance
                        cover in force known to the Indemnitee
                        relating to such demand, claim or cir-
                          cumstance.  For purposes of this Section
                         10.10.1, the parties acknowledge that a
                         Claims Notice is hereby deemed provided
                       pursuant to this Section 10.10.1 with
                        respect to the actions and proceedings
                         set forth in Schedule 2.16, such notice
                         to be effective as of the Closing Date,
                        and such actions and proceedings shall
                      be subject to the provisions of this
Section 10.10.

10.10.2  Opportunity to Defend  
       ---------------------

                        The Indemnitor shall have the right to
                          compromise or defend, at its own expense
                      and by its own counsel, any Asserted
                         Liability, which right may be exercised
                     by it by giving written notice (the
                    "Exercise Notice") of the exercise
                      thereof within 30 days following the
                        Claims Notice (or sooner if the nature
                         of the Asserted Liability so requires).
                       Failure by the Indemnitor to give any
                          Exercise Notice shall be deemed an elec-
                         tion by it not to exercise its right to
                        defend or compromise the Asserted Lia-
                   bility that is the subject of the
                         related Claims Notice.  If the Indemni-
                       tor so elects to compromise or defend
                         such Asserted Liability, the Indemnitee

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                        shall cooperate, at the expense of the
                      Indemnitor, in the compromise of, or
                          defense against, such Asserted Liability
                         and shall provide the Indemnitor with a
                         suitable power of attorney in such form
                    as the Indemnitor shall reasonably
                        request.  If the Indemnitor elects not
                      to compromise or defend the Asserted
                         Liability, fails to notify the Indemni-
                        tee of its election as herein provided
                         or contests its obligation to indemnify
                          under this Agreement, the Indemnitee may
                         compromise or defend such Asserted Lia-
                   bility.  Anything in this Section
                          10.10.2 to the contrary notwithstanding,
                          however, the Indemnitor and the Indemni-
                      tee shall give the other at least 10
                   days' prior written notice of any
                         compromise proposed to be made by it of
                          any claim and neither the Indemnitor nor
                        the Indemnitee may compromise any such
                        claim over the objection of the other;
                provided, however, that if the
   --------  -------
                         Indemnitee withholds its consent to any
                          compromise proposed by the Indemnitor of
                 any claim, the Indemnitee shall
                       thereafter be responsible for its own
                          defense and shall not be entitled to (i)
                    any indemnity or reimbursement for
                         additional defense costs incurred by it
                      subsequent to the withholding of its
                         consent or (ii) any amount by which the
                          ultimate compromise or other disposition
                         of such claim exceeds the compromise to
                     which consent was withheld.  In any
                          event, the Indemnitee and the Indemnitor
                         shall consult, at their own expense, as
                 to the defense of such Asserted
                          Liability.  If the Indemnitor chooses to
                        defend any claim, the Indemnitee shall
                      make available to the Indemnitor any
                   Documents or Other Papers and any
                       employees within its control that are
                   necessary or appropriate for such
                          defense; similarly if the Indemnitee has
                         need to defend or compromise any claim,
                        the Indemnitor shall make available to
                       the Indemnitee any Documents or Other

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                     Papers and any employees within its
                     control (including documents in the
                          control of the Indemnitor's agents) that
                       are necessary or appropriate for such
defense.      

  10.11 Indemnification to Cover Directors, Etc.
        ----------------------------------------

                 Any obligation pursuant to this Section 10 on the
                part of the Seller to indemnify, defend and hold
             harmless the Buyer and the Companies from and
             against any Losses or claims under any of the
                 other provisions of this Section 10, and to reim-
          burse them for any legal or other expenses
                 (including any value added or similar tax payable
               thereon) reasonably incurred in connection with
                defending any such Losses or claims under any of
              the other provisions of this Section 10 as and
                when such expenses are incurred, and any obliga-
               tion pursuant to this Section 10 on the part of
                the Buyer to indemnify, defend and hold harmless
                the Seller from and against any Losses or claims
              under any of the other provisions of this Sec-
             tion 10, and to reimburse it for any legal or
            other expenses (including any value added or
                similar tax payable thereon) reasonably incurred
               in connection with defending any such Losses or
              claims as and when such expenses are incurred,
        shall equally extend to their respective
              directors, officers, employees, Affiliates and
          permitted assigns; provided, that under no
              --------
                 circumstance shall the Seller have any obligation
                pursuant to this Section 10 to indemnify, defend
               and hold harmless, or to make any reimbursement
             of legal or other expenses, to any individual
               named in Schedules 10.3A through 10.3G; further
                                                       -------
              provided, that no Indemnitor shall be required
--------                        
            pursuant to this Section 10 to indemnify any
               director, officer or employee of any Indemnitee
               who is determined to be guilty of Disqualifying
              Conduct with respect to the matter as to which
                indemnification is sought.  For purposes of this
               Section 10.11, "Disqualifying Conduct" with re-
              spect to any matter means willful misfeasance,
                 bad faith, gross negligence or reckless disregard
               with respect to such matter.  A Person shall be
                 deemed to have been found guilty of Disqualifying
                Conduct within the meaning of this Section 10.11

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                (i) if a court of competent jurisdiction makes a
               final determination, which is no longer subject
             to appeal, that such Person is guilty of Dis-
                qualifying Conduct with respect to the matter as
             to which indemnification is claimed in a pro-
                 ceeding in which the burden of proof with respect
                to such issue is on the party claiming that such
                 Person is guilty of Disqualifying Conduct or (ii)
             the Board of Directors of the entity of which
                 such Person is a director, officer or employee is
               unable to make a determination that such Person
            was not guilty of Disqualifying Conduct with
            respect to such matter.  Notwithstanding any
                 other provision of this Section 10, no indemnifi-
             cation shall be made under this Section 10 in
             respect of any Loss or claim under any of the
                other provisions of this Section 10 that relates
                 to a Reinsurance Recoverable or a Reserve Item of
                SDI that is subject to the provisions of Section
              7 or any Loss subject to the provisions of the
                Indemnification Agreement.  Any Indemnitee here-
              under shall refund to its Indemnitor hereunder
               such amount of any claim paid by the Indemnitor
             to the Indemnitee pursuant to this Section 10
                 that the Indemnitee subsequently receives for its
              own account from any third party in respect of
            such claim by way of cash payment, discount,
credit or otherwise.            

10.12 Cooperation                           
-----------                     

                If any loss is incurred by the Buyer or the Com-
              panies, on the one hand, or the Seller, on the
             other hand, that may give rise to a claim for
                indemnification pursuant to this Section 10, the
                Indemnitor hereunder may request in writing that
             the Indemnitee hereunder take certain actions
            that the Indemnitor reasonably believes will
            mitigate, at no cost to the Indemnitee, such
             loss, and the Indemnitee agrees reasonably to
                 consider such request but shall be under no obli-
               gation to comply with such request if it in its
                 sole judgment believes that it is not in its best
interests to do so.             

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10.13 Subrogation                           
-----------                     

               Any Indemnitor hereunder shall be subrogated to
           the rights of any Indemnitee hereunder with
                respect to any claim against any other Person to
                 the extent of any indemnification payment made by
              such Indemnitor to such Indemnitee pursuant to
this Section 10.                

10.14 Insurance                             
---------                       

               Each of the Buyer and the Seller agrees that it
               will, and in the case of the Buyer that it will
                cause the Companies to, claim against any insur-
                ance coverage maintained by it or any of them if
                payment of such claim could result in receipt of
               insurance proceeds that would reduce any amount
                 with respect to which the other party is required
           to provide indemnification pursuant to Sec-
tion 10.1 or 10.2.              

         10.15 No Indemnification or Reimbursement for Manage-
               -----------------------------------------------
ment Time                       
---------                       

         Neither the Buyer nor the Seller shall be
             required to indemnify or reimburse any Person
                 pursuant to any provision of this Section 10 with
                respect to the time devoted by the management or
              employees of such Person to matters related to
              any claim for indemnification or reimbursement
pursuant to this Section 10.    

10.16 Indemnification Payments              
------------------------        

                Any payments to be made pursuant to this Section
                10 to the Buyer or any of the Companies shall be
              made by the Seller (i) to the Buyer or (ii) at
                the election of the Buyer, to the Buyer as agent
                 for any of the Companies which suffered the rele-
                 vant loss in which event the Buyer shall thereaf-
            ter remit such payment to such company which
suffered the relevant Loss.     

10.17 Settlement Prior to Closing Date      
--------------------------------

                The Seller shall not be required to indemnify or
                 reimburse any Person pursuant to any provision of
  this Section 10 to the extent that

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              (i)      any losses, claims, liabilities, dam-
                       ages, deficiencies and expenses shall
                        have been settled or compromised on or
                  before the Closing Date, and are
                         reflected in the accounts of the Buyer,
                        the Companies and their Affiliates for
                       the years up to December 31, 1986, or

              (ii)     any costs, charges and expenses shall
                        have been paid by the Companies during
                        the period from January 1, 1987 to the
                     Closing Date in relation to matters
                         referred to in this Section 10 up to an
                  aggregate amount of B.P.125,000.

11.  Termination of Agreement                         
------------------------                    

11.1  Termination                           
-----------                     

             This Agreement may be terminated prior to the
Closing as follows:             

              (i)      at the election of the Seller, if any
                      one or more of the conditions to the
                          obligation of the Seller to close (other
                      than the conditions set forth in the
                         first two sentences of Section 6.1) has
                      not been fulfilled as of the Closing
Date;         

                 (ii)     at the election of the Buyer, if any one
                          or more of the conditions to the obliga-
                        tion of the Buyer to close (other than
                       the conditions set forth in the first
                       two sentences of Section 5.1) has not
                        been fulfilled as of the Closing Date;

              (iii)    at the election of the Seller, if the
                        Buyer has breached any representation,
                      warranty, covenant or agreement con-
           tained in this Agreement;

             (iv)     at the election of the Buyer, if the
                         Seller has breached any representation,
                      warranty, covenant or agreement con-
           tained in this Agreement;

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              (v)      at the election of the Seller, if any
                          representation or warranty of the Seller
                      contained in this Agreement that was
                          true on the date hereof shall through no
                         act or omission of the Seller, the Com-
                          panies or any of their Affiliates become
                          untrue in any material respect on and as
                        of the Closing Date as a result of any
                        event occurring subsequent to the date
hereof;       

             (vi)     at the election of the Buyer, if any
                         representation or warranty of the Buyer
                      contained in this Agreement that was
                          true on the date hereof shall through no
                        act or omission of the Buyer or any of
                     its Affiliates become untrue in any
                         material respect on and as of the Clos-
                          ing Date as a result of any event occur-
                     ring subsequent to the date hereof;

            (vii)    at the election of the Buyer or the
                         Seller, if the Closing has not occurred
                 on or before December 31, 1987;

            (viii)   at the election of the Buyer or the
                          Seller, if the ILU or the DTI has stated
                        in writing that it will not consent to
                      the consummation of the transactions
                        contemplated by this Agreement and has
                        not withdrawn such statement within 10
                       days following the date that both the
                         Buyer and the Seller have received such
    written statement;

               (ix)     at the election of the Buyer if an ILU
                         Indication shall not have been obtained
             prior to November 16, 1987;

            (x)      at the election of the Seller if it
                        shall not have received a letter and a
                       stock subscription agreement, respec-
                         tively in the form and substantially in
                       the form of Exhibits Q and R prior to
      October 21, 1987; or

              (xi)    at any time on or prior to the Closing
                               Date, by mutual written consent of the parties.

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11.2  Survival                              
--------                        

                If this Agreement is terminated and the transac-
                tions contemplated hereby are not consummated as
                 described above, this Agreement shall become void
              and of no further force and effect, except for
             the provisions of Section 4.3 relating to the
                obligation of the Buyer to keep confidential and
                not to use certain information and data obtained
                by it from the Companies and except for the pro-
                 visions of Sections 4.8, 10.7 and 12.4; provided,
                                                        --------
             however, that except as otherwise provided in
-------                         
                 Section 4.8 none of the parties hereto shall have
                 any liability in respect of a termination of this
              Agreement except to the extent that failure to
                satisfy the conditions of Section 5 or 6 results
                from the intentional or willful violation of the
                representations, warranties, covenants or agree-
         ments of such party under this Agreement.

12.  Miscellaneous                                    
-------------                               

12.1  Certain Definitions                   
-------------------             

              As used in this Agreement, the following terms
              have the following meanings unless the context
otherwise requires:             

                (i)      "Affiliate" with respect to any Person,
---------   
                     means any other Person controlling,
                       controlled by or under common control
                       with such Person, and, in the case of
                       the Buyer includes any partner of any
         Affiliate of the Buyer.

                (ii)     "Business Day" means any day other than
------------
                        a Saturday, a Sunday or a day on which
                        banks are authorized or required to be
                         closed in New York, New York or London,
England.      

              (iii)    "Buyer's Documents" means this Agree-
     -----------------
                         ment, the Tax Indemnity Deed, the Guar-
                        anty Agreement, the Warrant Agreement,
                       the Insurance Guaranty Agreement, the
                       Note Purchase Agreement, the Guaranty
                          Agreement under the Note Purchase Agree-

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                        ment and the Guaranty of SD Investors,
       Inc. pursuant hereto.

            (iv)     "Condition" of any Person means the
---------   
                        assets, liabilities, properties, busi-
                          ness, operations and financial condition
                  of such Person taken as a whole.

              (v)      "Contracts or Other Agreements" means
                 -----------------------------
                        all contracts, agreements, understand-
                        ings, indentures, notes, bonds, loans,
                       instruments, leases, mortgages, fran-
                        chises, licenses, commitments or other
       binding arrangements.

              (vi)     "Documents or Other Papers" means any
             -------------------------
                      Contracts or Other Agreements or any
                        document, instrument, certificate, no-
                         tice, consent, affidavit, letter, tele-
                  gram, telex, statement, schedule
                        (including any Schedule to this Agree-
                          ment), or exhibit (including any Exhibit
     to this Agreement).

                (vii)    "Governmental or Regulatory Body" means
                   -------------------------------
                         any government or political subdivision
                        thereof, whether federal, state, local
                         or foreign, or any agency or instrumen-
                          tality of any such government or politi-
                        cal subdivision and any court or arbi-
     trator and the ILU.

             (viii)   "Knowledge" of or to be "Known" by a
                 ---------               -----
                        Person that is a corporation means the
                          actual knowledge of any of the executive
                         officers, directors or key employees of
                       such Person.  Knowledge of the Seller
                      for purposes of this Agreement shall
                      include the Knowledge of A&A and A&A
Europe.       

                 (ix)     "Lien" means any lien, pledge, mortgage,
----        
                     security interest, right in equity,
                        claim, lease, charge, option, right of
                     first refusal, easement, servitude,
                       transfer restriction under any share-
                       holder or similar agreement or encum-
brance.       

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(x)      "Permitted Lien" means:
  --------------

                       (a)   Liens for taxes, assessments or
                            other governmental charges the
                            payment of which is not at the
                              time required or which are being
                       challenged in good faith;

                        (b)   statutory Liens of landlords and
                              Liens of carriers, warehousemen,
                                mechanics and materialmen incurred
                                in the ordinary course of business
                              for sums not yet due or the pay-
                              ment of which is not at the time
                               required or which are being chal-
                   lenged in good faith;

                         (c)   Security Deposit or deposits made
                                in the ordinary course of business
                              in connection with workers' com-
                               pensation, unemployment insurance
                                and other types of social security
                             or social welfare, or to secure
                                (or to obtain letters of credit or
                           surety, appeal or performance
                             bonds which secure) the perfor-
                               mance of bids, tenders, statutory
                            obligations, leases, purchase,
                                construction, sales or reinsurance
                               contracts and other similar obli-
                                gations, in each case not incurred
                              in connection with the borrowing
                        of money, the obtaining of
                            advances or the payment of the
                              deferred purchase price of prop-
   erty;

                         (d)   any Lien incurred in the ordinary
                              course of business in connection
                               with workers' compensation, unem-
                                ployment insurance and other types
                               of social security or social wel-
                              fare, or to secure (or to obtain
                          letters of credit or surety,
                               appeal or performance bonds which
                              secure) the performance of bids,
                             tenders, statutory obligations,
                               leases, purchase, construction or

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                               sales contracts and other similar
                           obligations, in each case not
                             incurred in connection with the
                               borrowing of money, the obtaining
                               of advances or the payment of the
                              deferred purchase price of prop-
   erty;

                        (e)   any attachment or judgment Lien,
                              unless in the case of the Compa-
                            nies if such judgment is or is
                                required to be set forth in Sched-
                              ule 2.16 the judgment it secures
                             shall not, within 60 days after
                               the entry thereof, have been dis-
                          charged or execution thereof
                             stayed pending appeal, or shall
                                not have been discharged within 60
                              days after the expiration of any
        such stay;

                      (f)   leases or subleases granted to
                               others, easements, rights-of-way,
                            restrictions and other similar
                              charges or encumbrances, in each
                                case incidental to, and not inter-
                               fering with, the ordinary conduct
                           of the business of any of the
        Companies;

                         (g)   in the case of investment securi-
                             ties, Liens of depositories for
                             fees payable, repurchase agree-
                                ments, securities lending arrange-
                               ments, options, futures, Liens of
                           issuing banks with respect to
                                letters of credit, and other simi-
                              lar arrangements entered into in
                              the ordinary course of business;

                       (h)   all other Liens incurred in the
                             ordinary course of business and
                              not material to the Condition of
                               the Companies taken as a whole or
                               to the separate Condition of SDI;
 and

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                          (i)   all Liens reflected on the Company
                               Balance Sheets or the SDI Balance
    Sheet.

                (xi)     "Person" means any individual, corpora-
------      
                         tion, partnership, firm, joint venture,
                          association, joint-stock company, trust,
                      unincorporated organization or other
                        entity and any Governmental or Regula-
tory Body.    

                (xii)    "Property" means real or personal prop-
--------    
                         erty or assets, tangible or intangible.

               (xiii)   "Seller's Documents" means this Agree-
      ------------------
                   ment, the Guaranty Agreement, the
                         Halford Shead Agreement, the Subsidiary
                          Agreements, the Property Agreements, the
                         Administration Agreement, the Data Pro-
                      cessing Agreement, the Tax Indemnity
                          Deed, the Indemnification Agreement, the
                      Pension Deed, the Insurance Guaranty
                         Agreement, the Note Purchase Agreement,
                       the Guaranty Agreement under the Note
                        Purchase Agreement, the Warrant Agree-
ment.         

12.2  Overdue Amounts                       
---------------                 

                 Any amount that becomes due and payable hereunder
            and that is not paid at such time shall bear
               interest from the date it first becomes due and
              payable until the date of payment in full at a
              fluctuating rate of interest equal to (i) with
                 respect to the first 15 days such amount is over-
               due, the base lending rate from time to time of
                National Westminster Bank plc (the "Bank") based
              on a year of 365 days and the actual number of
                days elapsed (the "Base Rate") and (ii) thereaf-
               ter, the Base Rate plus four percentage points.
             Each change in the foregoing rate of interest
                shall be effective as at the opening of business
               on the date a change in the Base Rate is deter-
  mined by the Bank to be effective.

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        12.3  Consent to Jurisdiction and Service of Process
              ----------------------------------------------

                Any legal action, suit or proceeding arising out
                of or relating to this Agreement or the transac-
              tions contemplated hereby may be instituted in
             any federal court located in New York County,
             State of New York or in any English court and
               each party agrees not to assert as a defense in
              any such action, suit or proceeding, any claim
               that it is not subject personally to the juris-
           diction of such court, that its property is
              exempt or immune from attachment or execution,
                 that the action, suit or proceeding is brought in
            an inconvenient forum, that the venue of the
              action, suit or proceeding is improper or that
               this Agreement or the subject matter hereof may
                not be enforced in or by such court.  Each party
               further irrevocably submits to the jurisdiction
             of any such court in any such action, suit or
                proceeding.  The Seller hereby appoints the Gen-
            eral Counsel, Alexander & Alexander Services
                 Inc., at its offices at 1211 Avenue of the Ameri-
          cas, New York, New York, or if the suit is
            brought in England, the Group Legal Adviser,
               Alexander & Alexander Europe plc at its offices
             at 5-10 Bury Street, London, England or their
           respective offices in New York, New York or
                 London, England, as they hereafter furnish to the
            parties to this Agreement, as the authorized
                agent of the Seller to accept and acknowledge on
               such party's behalf service of any and all pro-
                cess that may be served in any such action, suit
               or proceeding.  The Buyer hereby appoints Paul,
          Weiss, Rifkind, Wharton & Garrison, at its
                 offices at 1285 Avenue of the Americas, New York,
            New York 10019, or if the suit is brought in
             England, the Chairman, Sphere Drake Insurance
               plc, at its offices at 52/54 Leadenhall Street,
               London, England, or their respective offices in
              New York, New York, or London, England as they
               hereafter furnish to the parties to this Agree-
               ment, as the Buyer's authorized agent to accept
                 and acknowledge on such party's behalf service of
             any and all process that may be served in any
             such action, suit or proceeding.  Any and all
              service of process and any other notice in any
               such action, suit or proceeding shall be effec-
                tive against any party if given personally or by

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            registered or certified mail, return receipt
             requested, or by any other means of mail that
           requires a signed receipt, postage prepaid.
           Nothing herein contained shall be deemed to
                 affect the right of any party to serve process in
                any manner permitted by law or to commence legal
            proceedings or otherwise proceed against any
              other party in any jurisdiction other than New
York or England.                

12.4  Publicity                             
---------                       

               No publicity release or announcement concerning
               this Agreement or the transactions contemplated
            hereby shall be made without written advance
            approval thereof by the Seller and the Buyer
     until three months after the Closing.

12.5  Suspensory Clause                     
-----------------               

                No provisions of this Agreement or of any agree-
              ment or arrangement of which it forms part, by
                virtue of which the agreement constituted by all
               of the foregoing is subject to registration (if
             such be the case) under the Restrictive Trade
              Practices Act 1976 shall take effect until the
                 day after particulars of such agreement have been
                 furnished to the Director General of Fair Trading
                pursuant to the terms of Section 24 of that Act.

12.6  Notices                               
-------                         

             Any notice or other communication required or
                 permitted hereunder shall be in writing and shall
                be delivered personally, telegraphed, telexed or
                sent by facsimile transmission.  Any such notice
               shall be deemed given when so delivered person-
               ally, telegraphed, telexed or sent by facsimile
         transmission, as the case may be, or when
  received in any manner as follows:

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(i)      if to the Buyer, to:   

                          Sphere Drake Acquisitions (U.K.) Limited
                   c/o Centre Capital Investors L.P.
Suite 1025    
       One Rockefeller Plaza
          New York, New York 10020
          United States of America
            Attention:  Lester Pollack
    Telex:  RCA 222301
         Fax:  (212) 974-2825 or
            (212) 489-9655

and           

                          Sphere Drake Acquisitions (U.K.) Limited
                c/o Sphere Drake Insurance plc
         52/54 Leadenhall Street
 London EC3A 2BJ
England       
         Attention:  Ian H. Dean
         Telex:  935015 Sphere G
   Fax:  01-481-3828

and           

          c/o John Head & Partners
 John C Head III
    545 Madison Avenue
          New York, New York 10022
Telex:  971861
      Fax:  (212) 421-9049

 with copies to:

                          Paul, Weiss, Rifkind, Wharton & Garrison
             1285 Avenue of the Americas
          New York, New York 10019
          United States of America
                  Attention:  Albert P. Hand, Esq.
     Telex:  WUI 666-843
      Fax:  (212) 757-3990

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and           

Clyde & Co.   
51 Eastcheap  
 London EC3M 1JP
England       
                Attention:  Francis Mackie and
                      V.G. Southey
        Telex:  884886 Clyde G
   Fax:  01-623-5427

(ii)     if to the Seller, to:  

                     Alexander & Alexander Services Inc.
             1211 Avenue of the Americas
          New York, New York 10036
             Attention:  General Counsel
Telex:  620303
      Fax:  (212) 302-1921

and           

                     Alexander Stenhouse & Partners Ltd.
 Two South Place
 London EC2P 2DX
England       
                   Attention:  The Company Secretary
 Telex:  8813371
   Fax:  01-588-1680

and           

                  Alexander & Alexander Europe plc
  5-10 Bury Street
 London EC3A 5HL
England       
                 Attention:  Group Legal Adviser
Telex:  882171
   Fax:  01-623-5022

                Any party may by notice given in accordance with
                this Section 12.6 to the other parties designate
                another address or person for receipt of notices
hereunder.                      

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12.7  Entire Agreement                      
----------------                

           This Agreement (including the Schedules and
                Exhibits) and the collateral agreements executed
                 in connection with the consummation of the trans-
              actions contemplated herein contain the entire
               agreement among the parties with respect to the
                purchase of the Shares and related transactions,
              and supersede all prior agreements, written or
oral, with respect thereto.     

           12.8  Waivers and Amendments; Non-Contractual Remedies;
                 -------------------------------------------------
Preservation of Remedies        
------------------------        

               This Agreement may be amended, superseded, can-
                 celled, renewed or extended, and the terms hereof
           may be waived, only by a written instrument
                 signed by the parties affected thereby or, in the
              case of a waiver, by the party waiving compli-
                 ance.  No delay on the part of any party in exer-
              cising any right, power or privilege hereunder
                 shall operate as a waiver thereof.  Nor shall any
           waiver on the part of any party of any such
            right, power or privilege, nor any single or
            partial exercise of any such right, power or
                privilege, preclude any further exercise thereof
                 or the exercise of any other such right, power or
                 privilege with the exception of the waiver of any
                 condition precedent to the obligation to close in
                which case the rights of the parties shall be as
                 set forth herein.  The rights and remedies herein
                provided are cumulative and are not exclusive of
                any rights or remedies that any party may other-
              wise have at law or in equity.  The rights and
                remedies of any party based upon, arising out of
               or otherwise in respect of any inaccuracy in or
                breach of any representation, warranty, covenant
                 or agreement contained in this Agreement shall in
                 no way be limited by the fact that the act, omis-
             sion, occurrence or other state of facts upon
                which any claim of any such inaccuracy or breach
              is based may also be the subject matter of any
           other representation, warranty, covenant or
                agreement contained in this Agreement (or in any
               other agreement between the parties) whether or
          not there is any inaccuracy or breach with
               respect to such other representation, warranty,
covenant or agreement.          

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12.9  Governing Law                         
-------------                   

                 This Agreement shall be governed and construed in
    accordance with the laws of England.

12.10 Payments and Currency                 
---------------------           

                 Any and all amounts payable hereunder, whether at
              the Closing or otherwise, shall be paid to the
                 appropriate party in London, England in sterling,
           and the specification of payment in London,
             England in sterling is of the essence of this
                 Agreement.  No payment obligation hereunder shall
                 be discharged by amounts paid in another currency
                or in another place, whether pursuant to a judg-
                ment or otherwise, to the extent that the amount
            so paid on prompt conversion to sterling and
                transfer to London, England under normal banking
                procedures does not yield the amount of sterling
due hereunder.                  

12.11 Binding Effect: Assignment            
--------------------------      

                 This Agreement shall be binding upon and inure to
               the benefit of the parties and their respective
           successors and legal representatives.  This
             Agreement is not assignable other than by the
written consent of the parties. 

12.12 Variations in Pronouns                
----------------------          

                All pronouns and any variations thereof refer to
              the masculine, feminine or neuter, singular or
   plural, as the context may require.

12.13 Counterparts                          
------------                    

             This Agreement may be executed by the parties
              hereto in separate counterparts, each of which
                 when so executed and delivered shall be an origi-
             nal, but all such counterparts shall together
            constitute one and the same instrument. Each
             counterpart may consist of a number of copies
                 hereof each signed by less than all, but together
    signed by all of the parties hereto.

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12.14 Exhibits and Schedules                
----------------------          

             The Exhibits and Schedules are a part of this
            Agreement as if fully set forth herein.  All
                 references herein to Sections, clauses and Exhib-
               its shall be deemed references to such parts of
            this Agreement, unless the context otherwise
             requires.  All references herein to Schedules
               shall be deemed references to such Schedules as
                delivered to the Buyer by the Seller on the date
hereof.                         

12.15 Headings                              
--------                        

                The headings in this Agreement are for reference
                only, and shall not affect the interpretation of
this Agreement.                 

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

Signed by                                             
------------------------        
for and on behalf of                                  
SPHERE DRAKE ACQUISITIONS (U.K.) LIMITED              
in the presence of:                                   

Signed by                                             
------------------------        
for and on behalf of                                  
ALEXANDER STENHOUSE & PARTNERS, LTD.                  
in the presence of:                                   

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      GUARANTY

               The undersigned (the "Guarantor") (a) is a corpo-
   ration whose capital stock has been subscribed for by the
    proposed partners of SD Partners, a proposed Bermuda part-
 nership that will indirectly be the sole shareholder of
    Sphere Drake Acquisitions (U.K.) Limited; (b) acknowledges
     receipt of copies of the foregoing Share Purchase Agreement
      (the "Agreement") and the Schedules and Exhibits referred to
  therein; (c) agrees that such copies constitute adequate
     notice of all matters contained therein and consent thereto
     in all respects; (d) represents and warrants that the Guar-
antor has full right and power and all authority and  
   approval required to enter into, execute and deliver this
  Guaranty and to consummate the transactions contemplated
   hereby, and that this Guaranty has been duly executed and
 delivered by the Guarantor and is the valid and binding
      obligation of the Guarantor enforceable against it in accor-
     dance with its terms; and (e) unconditionally and irrevoca-
      bly guarantees the due and faithful performance by the Buyer
   of all of the Buyer's obligations as to Closing under the
Agreement.                                            

                This Guaranty shall be binding upon the successors
     and assigns of the Guarantor and shall inure to the benefit
    of and be enforceable by the Seller and its successors and
    assigns.  This Guaranty shall be governed by New York law.
      This Guaranty may be amended, changed, waived, discharged or
   terminated only by an instrument in writing signed by the
Seller.                                               

                                  SPHERE DRAKE ACQUISITIONS HOLDINGS COMPANY
              (U.K.) LIMITED COMPANY
------  

By:   
                           -------------------------
       Name:
                      Title:

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

      GUARANTY AGREEMENT

     Dated as of
     October 9, 1987

      by

     ALEXANDER & ALEXANDER SERVICES INC.

     and

      ALEXANDER & ALEXANDER EUROPE plc

      with

      SPHERE DRAKE ACQUISITIONS (U.K.) LIMITED

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

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     TABLE OF CONTENTS
     -----------------

      Section                                                 Page
      -------                                                 ----

       1.   Share Purchase Agreement  . . . . . . . . . . .      1

       2.   Guaranty  . . . . . . . . . . . . . . . . . . .      2

       3.   Subrogation, etc.   . . . . . . . . . . . . . .      2

       4.   Obligations Unconditional   . . . . . . . . . .      2

       5.   Waiver    . . . . . . . . . . . . . . . . . . .      5

6.   Reservation of Rights of the Seller or any     
            of its Affiliates   . . . . . . . . . . . . . .      6

7.   Representations and Warranties of the          
            Guarantors  . . . . . . . . . . . . . . . . . .      6

            7.1     Organization  . . . . . . . . . . . . .      6
7.2     Authority to Execute and Perform  
                    Agreements  . . . . . . . . . . . . . .      7
    7.3     Certificate of Incorporation, By-Laws,
Memorandum and Articles of
                    Association . . . . . . . . . . . . . .      7
            7.4     Consents and Approvals  . . . . . . . .      7
            7.5     No Breach . . . . . . . . . . . . . . .      7

       8.   Miscellaneous   . . . . . . . . . . . . . . . .      8

            8.1     Survival  . . . . . . . . . . . . . . .      8
    8.2     Consent to Jurisdiction and Service of
                    Process . . . . . . . . . . . . . . . .      8
            8.3     Notices . . . . . . . . . . . . . . . .      9
            8.4     Entire Agreement  . . . . . . . . . . .     12
     8.5     Waivers and Amendments; Non-Contractual
                    Remedies; Preservation of Remedies  . .     12
            8.6     Governing Law . . . . . . . . . . . . .     12
            8.7     Binding Effect; No Assignment . . . . .     13
            8.8     Variations in Pronouns  . . . . . . . .     13
            8.9     Headings  . . . . . . . . . . . . . . .     13
            8.10    Counterparts  . . . . . . . . . . . . .     13

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      GUARANTY AGREEMENT

             GUARANTY AGREEMENT, dated as of October 9, 1987
 (herein as amended or supplemented from time to time as
      permitted hereby, this "Guaranty Agreement"), by Alexander &
     Alexander Services Inc., a Maryland corporation ("A&A") and
  Alexander & Alexander Europe plc, a Scottish corporation
whose registered office is situate at 145 St. Vincents
     Street, Glasgow G2 5NX Scotland registered in Scotland with
   number 32111 ("A&A Europe," A&A and A&A Europe are herein
    collectively referred to as the "Guarantors"), with Sphere
   Drake Acquisitions (U.K.) Limited, an English corporation
whose registered office is situate at 3O Mincing Lane,
    London EC3R 7BR England, registered in England with number
2136565 (the "Buyer").                                

1.   Share Purchase Agreement.                        
------------------------                    

This Guaranty Agreement is made pursuant to the Share 
     Purchase Agreement, dated as of the date hereof (the "Share
Purchase Agreement"), between the Buyer and Alexander 
 Stenhouse & Partners Ltd., a Scottish corporation whose
  registered office is situate at 145 St. Vincents Street,
      Glasgow, Scotland, registered in England with number SC23477
      (the "Seller"), providing for the purchase by the Buyer from
 the Seller of all of the issued share capital of Sphere
  Drake Insurance Group Public Limited Company, an English
 corporation whose registered office is situate at 52/54
   Leadenhall Street, London EC3A 2BJ England, registered in
England with number 1868708 (the "Company").  Certain 
   capitalized terms used herein without definition have the
   meanings specified in the Share Purchase Agreement.  This
     Guaranty Agreement is made for the benefit of the Buyer and
   its Affiliates to guarantee the performance by the Seller
  and its Affiliates of its obligations under the Seller's
Documents.                                            

2.   Guaranty.                                        
--------                                    

     The Guarantors hereby jointly and severally unconditionally
    and irrevocably guarantee to the Buyer and its Affiliates,
      for the benefit of the Buyer and its Affiliates, the due and
      punctual performance by the Seller of the obligations of the
      Seller under the Share Purchase Agreement, the Note Purchase
      Agreement, the Warrant Agreement, and the Tax Indemnity Deed

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   when and as the same shall be performed.  A&A hereby also
     unconditionally and irrevocably guarantees to the Buyer and
its Affiliates, for the benefit of the Buyer and its  
      Affiliates, the due and punctual performance by the Seller's
  Affiliates of the obligations of the Seller's Affiliates
under the Halford Shead Agreement, the Subsidiary     
 Agreements, the Property Agreements, the Administration
Agreement, the Data Processing Agreement, the         
     Indemnification Agreement, and the Pension Deed when and as
     the same shall be performed.  Such guaranties are absolute,
unconditional, present, and continuing guaranties of  
performance.                                          

3.   Subrogation, etc.                                
----------------                            

  In the event (and only in the event) that the Guarantors
 shall have made full and complete performance of any of
  their obligations under Section 2 hereof, the Guarantors
shall be subrogated to the rights of the Buyer or its 
Affiliates, as the case may be to the extent of such  
performance.                                          

4.   Obligations Unconditional.                       
-------------------------                   

      Subject to Section 6, the obligations and liabilities of the
    Guarantors under this Guaranty Agreement (i) are absolute,
     irrevocable and unconditional, (ii) shall not be subject to
     any counterclaim, set-off, deduction or defense (other than
   full and strict compliance with, or satisfaction of, such
    obligations and liabilities) based upon any claim that the
      Guarantors may have against the Buyer, any of its Affiliates
      or any other Person and (iii) shall remain in full force and
effect without regard to, and shall not be released,  
    discharged or in any way affected by, any of the following
circumstances and conditions:                         

          (a)  any amendment or modification of or supplement to
     the Seller's Documents or any Contracts or Other Agreements
 entered into in connection therewith (collectively, the
"Instruments");                                       

         (b)  any invalidity, irregularity or unenforceability
of any term or provision of any Instrument;           

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           (c)  any assignment or transfer of any Instrument or of
     any interest thereunder in compliance with the terms of the
applicable Instrument;                                

         (d)  any furnishing or acceptance of any security, or
any release of any security, for any obligation of the
Seller or any of its Affiliates under any Instrument; 

           (e)  any waiver, consent, extension or indulgence under
or with respect to any Instrument;                    

          (f)  any exercise or nonexercise of any right, remedy,
     power or privilege under or in respect of any Instrument or
 any lack of diligence or failure to mitigate damages or
    failure to proceed against or to take any action or pursue
any remedy with respect to, any Person or any security
afforded by or under any Instrument;                  

  (g)  the voluntary or involuntary liquidation,
dissolution, sale or other disposition of all or      
      substantially all of the assets of, or marshalling of assets
and liabilities, receivership, insolvency, bankruptcy,
  assignment for the benefit of creditors, reorganization,
arrangement, composition or readjustment of, or other 
similar proceeding, affecting the Seller or any of its
   Affiliates or any of their assets, or any action taken by
   any trustee, receiver or court in any such proceeding, or
  the disaffirmance, rejection or postponement in any such
    proceeding of any of the undertakings of the Seller or any
 of its Affiliates set forth in any Instrument (it being
    understood that the obligations guaranteed hereunder shall
 be those of the Seller or any of its Affiliates without
   giving effect to any reduction, disaffirmance, rejection,
  postponement or other change in or by reason of any such
proceeding);                                          

        (h)  any release by operation of law or discharge by
   operation of law of the Seller, any of its Affiliates, or
    any other Person from the performance or observance of any
     obligation, undertaking or condition to be performed by the
    Seller any of its Affiliates, or such other Person, as the
case may be, under or in respect of any Instrument;   

         (i)  any limitation on the liabilities or obligations
  of the Seller, any of its Affiliates or any other Person
 under any Instrument or any termination or cancellation
    (other than any such termination or cancellation expressly
consented to in writing by the Buyer, or any of its   

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      Affiliates which materially impairs or materially diminishes
     the value of the rights of subrogation of the Seller or any
of its Affiliates), or any frustration, invalidity or 
unenforceability, in whole or in part, of any such    
    instrument or agreement or any limitation on the method or
   terms of payment thereunder which may now or hereafter be
caused or imposed in any manner whatsoever;           

         (j)  any failure on the part of the Seller any of its
      Affiliates, or any other Person for any reason to perform or
comply with any term of any Instrument;               

 (k)  any direct or indirect transfer or other
   disposition by either of the Guarantors of their indirect
      interest in the shares of the capital stock of the Seller or
any of its Affiliates;                                

           (l)  any occurrence of a default or an event of default
under any Instrument; or                              

     (m)  any other circumstance or condition, whether
   similar or dissimilar to any of the foregoing, that might
   constitute a legal or equitable discharge or defense of a
 guarantor (whether or not the Guarantors shall have any
knowledge or notice thereof).                         

5.   Waiver.                                          
------                                      

    Subject to Section 6, the Guarantors hereby waive, insofar
as their obligations hereunder are concerned:         

      (a)  notice of acceptance hereof and notice of the
execution and delivery of any Instrument;             

    (b)  notice of any of the matters referred to in
Section 4 hereof;                                     

           (c)  to the fullest extent permitted by applicable law,
      all notices required by statute, rule of law or otherwise to
preserve or enforce any rights against the Guarantors 
  hereunder, including without limitation any presentment,
   demand, proof or notice of nonpayment of any indemnity of
     the Seller or any of its Affiliates, as the case may be and
   notice of any failure on the part of the Seller or any of
      its Affiliates, as the case may be to perform or comply with
   any term of any instrument or agreement applicable to the
Seller or any of its Affiliates;                      

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   (d)  any right to the enforcement, assertion or
    exercise of any right, remedy, power or privilege under or
in respect of any Instrument;                         

           (e)  to the fullest extent permitted by applicable law,
   any requirement that the Seller, any of its Affiliates or
     any other Person be joined as a party to any proceeding for
the enforcement of any term of any Instrument;        

        (f)  any right to require a proceeding first against
     the Seller, or any of its Affiliates or any other Person or
the security provided by or under any Instrument or   
agreement;                                            

        (g)  the filing of claims by the Buyer or any of its
      Affiliates in the event of the receivership or bankruptcy of
    the Seller, any of its Affiliates; provided that the Buyer
                        --------
      or any of its Affiliates, at the Guarantors' expense, comply
      with any reasonable request of the Guarantors to file claims
      on behalf of the Buyer or any of its Affiliates in the event
    of any such receivership or bankruptcy; provided, further,
                                           --------  -------
     however, that compliance with any such request shall not be
    a condition of any obligation of the Guarantors hereunder;
and                                                   

        (h)  any requirement of diligence on the part of the
   Buyer or any of its Affiliates and any requirement on the
    part of the Buyer or any of its Affiliates to mitigate any
    damages resulting from any nonperformance by the Seller or
  any of the Affiliates hereunder or the occurrence of any
default or event of default under any Instrument.     

6.   Reservation of Rights of the Seller or any of its
     -------------------------------------------------
Affiliates.                                 
----------                                  

 Notwithstanding the provisions of Sections 4 and 5, the
Guarantors shall be entitled to assert as a defense   
    hereunder any defense that is or would be available to the
      Seller or any of its Affiliates under the Instruments (other
    than any defense arising as a result of proceedings of the
      character referred to in Section 4(g)) and shall be entitled
to set off any claim that the Seller or any of its    
   Affiliates has against the Buyer or any of its Affiliates
  under the Instruments against its obligations hereunder.
      The Guarantors shall be entitled to receive all notices that
    the Seller or any of its Affiliates is entitled to receive

     5

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 from the Buyer or any of its Affiliates pursuant to the
Seller's Documents.                                   

7.   Representations and Warranties of the Guarantors.
    ------------------------------------------------

    The Guarantors represent and warrant jointly and severally
as follows:                                           

  7.1  Organization.  A&A is a corporation duly organized,
------------                                
     validly existing and in good standing under the laws of the
 State of Maryland, and A&A Europe is a corporation duly
      incorporated under the laws of Scotland.  Each Guarantor has
      the power and authority to own, lease and operate its assets
and to carry on its business as now and heretofore    
conducted.                                            

7.2  Authority to Execute and Perform Agreements.  The
------------------------------------------- 
   execution and delivery of this Guaranty Agreement and the
      performance by the Guarantors of their obligations hereunder
     have been duly authorized by all necessary corporate action
on the part of each of the Guarantors. This Guaranty  
   Agreement has been duly executed and delivered by each of
   the Guarantors and is the valid and binding obligation of
    each of the Guarantors enforceable against each of them in
accordance with its terms.                            

    7.3  Certificate of Incorporation, By-Laws, Memorandum and
         -----------------------------------------------------
   Articles of Association.  A&A has heretofore delivered to
-----------------------                               
  the Buyer true and complete copies of its Certificate of
  Incorporation and By-Laws, certified by the Secretary or
 Assistant Secretary thereof.  A&A Europe has heretofore
delivered to the Buyer true and complete copies of its
 Memorandum and Articles of Association, having attached
    thereto all of the resolutions required to be so attached,
    certified by the Secretary or Assistant Secretary thereof.

     7.4  Consents and Approvals.  The execution and delivery by
----------------------                      
the Guarantors of this Guaranty Agreement and the     
      performance by the Guarantors of their obligations hereunder
do not require either of the Guarantors to obtain any 
    consent, approval or action of, or make any filing with or
    give any notice to, any Governmental or Regulatory Body or
trade or industry organization.                       

     7.5  No Breach.  The execution, delivery and performance of
---------                                   
this Guaranty Agreement and the consummation of the   
   transactions contemplated hereby will not (i) violate any

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     provision of the Certificate of Incorporation or By-Laws of
 A&A or the Memorandum or Articles of Association of A&A
    Europe; (ii) require any consent, approval or notice under
     or result in a violation or breach of, or conflict with, or
      constitute (with or without notice or lapse of time or both)
a default (or give rise to any right of termination,  
cancellation or acceleration) under any of the terms, 
conditions or provisions of any note, bond, mortgage, 
    indenture, license, Contracts or Other Agreements to which
   either of the Guarantors is a party or by which either of
     the Guarantors or any of their respective properties may be
     bound; (iii) violate any order, judgment, injunction, award
     or decree of any Governmental or Regulatory Body applicable
to either of the Guarantors or any of their respective
properties or any statute, law or regulation of any   
jurisdiction applicable to either of the Guarantors.  

8.   Miscellaneous.                                   
-------------                               

8.1  Survival.  If the Share Purchase Agreement is    
--------                                    
      terminated and the transactions contemplated thereby are not
    consummated for reasons other than as set forth in Section
11.1(iv) or (v) of the Share Purchase Agreement, this 
      Guaranty Agreement shall become void and of no further force
     and effect except for any obligation of the Guarantors with
      respect to Sections 4.8, 10.7 and 12.4 of the Share Purchase
Agreement.                                            

   8.2  Consent to Jurisdiction and Service of Process.  Any
  ----------------------------------------------
     legal action, suit or proceeding arising out of or relating
     to this Guaranty Agreement or the transactions contemplated
      hereby may be instituted in any federal court located in New
     York County, State of New York or in any English court, and
  each party agrees not to assert as a defense in any such
      action, suit or proceeding, any claim that it is not subject
personally to the jurisdiction of such court, that its
    property is exempt or immune from attachment or execution,
that the action, suit or proceeding is brought in an  
   inconvenient forum, that the venue of the action, suit or
   proceeding is improper or that this Guaranty Agreement or
     the subject matter hereof may not be enforced in or by such
      court, and hereby waives any offsets or counterclaims in any
such action, suit or proceeding.  Each party further  
      irrevocably submits to the jurisdiction of any such court in
     any such action, suit or proceeding.  The Guarantors hereby
     appoint the General Counsel, Alexander & Alexander Services
  Inc., at its offices at 1211 Avenue of the Americas, New
   York, New York, or if the suit is brought in England, the

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      Group Legal Adviser, Alexander & Alexander Europe plc at its
offices at 5-10 Bury Street, London, England or their 
      respective offices in New York, New York or London, England,
  respectively as they hereafter furnish to the parties to
      this Agreement, as the authorized agent of the Guarantors to
   accept and acknowledge on their behalf service of any and
    all process that may be served in any such action, suit or
      proceeding.  The Buyer hereby appoints Paul, Weiss, Rifkind,
  Wharton & Garrison, at its offices at 1285 Avenue of the
Americas, New York, New York 10019, or if the suit is 
      brought in England the Chairman, Sphere Drake Insurance plc,
     at its offices at 52/54 Leadenhall Street, London, England,
      or their respective offices in New York, New York or London,
   England, as they hereafter furnish to the parties to this
  Agreement, as the Buyer's authorized agent to accept and
   acknowledge on such party's behalf service of any and all
process that may be served in any such action, suit or
   proceeding.  Any and all service of process and any other
notice in any such action, suit or proceeding shall be
effective against any party if given personally or by 
    registered or certified mail, return receipt requested, or
    by any other means of mail that requires a signed receipt,
    postage prepaid.  Nothing herein contained shall be deemed
  to affect the right of any party to serve process in any
     manner permitted by law or to commence legal proceedings or
otherwise proceed against any other party in any      
jurisdiction other than New York or England.          

      8.3  Notices.  Any notice or other communication required or
-------                                     
permitted hereunder shall be in writing and shall be  
delivered personally, telegraphed, telexed or sent by 
  facsimile transmission.  Any such notice shall be deemed
     given when so delivered personally, telegraphed, telexed or
    sent by facsimile transmission, as the case may be or when
received in any manner, as follows:                   

(i)  if to the Buyer, to:                   

      Sphere Drake Acquisitions (U.K.) Limited
c/o Centre Capital Investors L.P. 
Suite 1025                        
One Rockefeller Plaza             
New York, New York 10020          
United States of America          
Attention:     Lester Pollack     
Telex:    RCA 222301              
        Fax:      (212) 974-2825 or (212) 489-9655

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and                               

      Sphere Drake Acquisitions (U.K.) Limited
c/o Sphere Drake Insurance plc    
52/54 Leadenhall Street           
London EC3A 2BJ,                  
England                           
Attention:  Ian H. Dean           
Telex:    935015 Sphere G         
Fax:      01-481-3828             

and                               

John C Head III                   
c/o John Head & Partners          
545 Madison Avenue                
New York, New York 10022          
Telex:    971861                  
Fax:      (212) 421-9049          

with copies to:                   

      Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas       
New York, New York 10019          
United States of America          
Attention:  Albert P. Hand, Esq.  
Telex:    WUI 666-843             
Fax:      (212) 757-3990          

and                               

Clyde & Co.                       
51 Eastcheap                      
London EC3M lJP                   
England                           
Attention:  Francis Mackie and    
  V.G. Southey
Telex:    884886 Clyde G          
Fax:      01-623-5427             

(ii) if to the Guarantors, to:              

 Alexander & Alexander Services Inc.
1211 Avenue of the Americas       
New York, New York 10036          
Attention:  General Counsel       
Telex:    620303                  

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Fax:      (212) 302-1921          

and                               

Alexander & Alexander Europe plc  
5-10 Bury Street                  
London EC3A 5HL                   
England                           
Attention:  Group Legal Adviser   
Telex:    882171                  
Fax:      01-623-5022             

Any party may by notice given in accordance with this 
    Section 8.3 to the other parties designate another address
or person for receipt of notices hereunder.           

    8.4  Entire Agreement.  This Guaranty Agreement, the Share
----------------                            
   Purchase Agreement (including the Schedules and Exhibits)
   and the collateral agreements executed in connection with
  the consummation of the transactions contemplated by the
     Share Purchase Agreement contain the entire agreement among
    the parties with respect to the purchase of the Shares and
   related transactions, and supersede all prior agreements,
written or oral, with respect thereto.                

8.5  Waivers and Amendments; Non-Contractual Remedies;
     -------------------------------------------------
   Preservation of Remedies.  This Guaranty Agreement may be
------------------------                              
      amended, superseded, cancelled, renewed or extended, and the
  terms hereof may be waived, only by a written instrument
  signed by the Guarantors and the Buyer.  No delay on the
part of any party in exercising any right, power or   
     privilege hereunder shall operate as a waiver thereof.  Nor
      shall any waiver on the part of any party of any such right,
   power or privilege, nor any single or partial exercise of
  any such right, power or privilege, preclude any further
   exercise thereof or the exercise of any other such right,
power or privilege.                                   

8.6  Governing Law.  This Guaranty Agreement shall be 
-------------                               
   governed and construed in accordance with the laws of the
State of New York.                                    

      8.7  Binding Effect; No Assignment.  This Guaranty Agreement
-----------------------------               
     shall be binding upon and inure to the benefit of the Buyer
      and its successors and legal representatives.  This Guaranty
Agreement is not assignable.                          

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8.8  Variations in Pronouns.  All pronouns and any    
----------------------                      
variations thereof refer to the masculine, feminine or
 neuter, singular or plural, as the context may require.

     8.9  Headings.  The headings in this Guaranty Agreement are
--------                                    
     for reference only, and shall not affect the interpretation
of this Agreement.                                    

   8.10 Counterparts.  This Agreement may be executed by the
------------                                
     parties hereto in separate counterparts, each of which when
      so executed and delivered shall be an original, but all such
 counterparts shall together constitute one and the same
  instrument.  Each counterpart may consist of a number of
  copies hereof each signed by less than all, but together
signed by all of the parties hereto.                  

               IN WITNESS WHEREOF, the parties have executed or,
     as the case may be, caused their common seals to be affixed
to this Guaranty Agreement as of the date first above 
written.                                              

                               ALEXANDER & ALEXANDER SERVICES INC.

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

              THE COMMON SEAL of
                            ALEXANDER & ALEXANDER EUROPE plc
                              was affixed hereto in the presence
of: 

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The foregoing provisions                              
of this Guaranty Agreement                            
are hereby consented to:                              

Signed by                                             
--------------------              

for and on behalf of                                  
SPHERE DRAKE ACQUISITIONS (U.K.) LIMITED              
in the presence of:                                   

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     AMENDMENT AGREEMENT
     -------------------

               THIS AMENDMENT AGREEMENT is made as of August 30,
     1988 by and among SPHERE DRAKE ACQUISITIONS (U.K.) LIMITED,
whose registered office is at 52-54 Leadenhall Street,
     London, EC3 2BJ (the "Buyer"), SPHERE DRAKE INSURANCE GROUP
     PUBLIC LIMITED COMPANY, whose registered office is at 52-54
 Leadenhall Street, London, EC3 2BJ (the "Company"), and
  ALEXANDER STENHOUSE & PARTNERS LIMITED, whose registered
      office is at 145 St. Vincents Street, Glasgow, Scotland (the
"Seller").                                            

            WHEREAS, the Buyer and the Seller have entered
     into a Share Purchase Agreement dated as of October 9, 1987
  ("the Share Purchase Agreement") under which the parties
    agreed, among other things, that the Seller would sell and
    the Buyer would buy all of the issued share capital of the
Company;                                              

            WHEREAS, the Buyer, the Seller and the Company
   have entered into a Tax Indemnity Deed dated December 30,
1987 (the "Tax Indemnity Deed"); and                  

                WHEREAS the rights of the Buyer under Section 7 of
    the Share Purchase Agreement are held subject to the trust
declared pursuant to a Deed made on 30th December 1987
      between the Buyer and SD Securities Limited as Trustee ("The
Deed of Trust").                                      

               NOW, THEREFORE, in consideration of the terms and
    conditions set forth herein and of other good and valuable
 consideration, the receipt and sufficiency of which are
   hereby acknowledged, the parties hereby agree as follows:

                1.   Share Purchase Agreement.  The Share Purchase
------------------------
   Agreement shall be and is hereby amended in the following
respects:                                             

           (a)  By the insertion in the last sentence of
       Section 7.1 of the words "Section 7.4 and except as
        contemplated by the Deed made on 30th December 1987,
           between Sphere Drake Acquisitions (U.K.) Limited and SD
          Securities Limited, as Trustee (the "Deed of Trust"),"
in place of the words "Section 7.4";        

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           (b)  By the deletion of the final sentence of
    Section 7.4 and the substitution therefor of the
following:                                  

       "On each Adjustment Date subsequent to an
           Acceleration Date and on the Final Adjustment
           Date, the Buyer shall pay the Seller directly
            (notwithstanding any assignment of the Buyer's
              rights in respect of the Adjustment Account), in
                cash at the Adjustment Closing next following such
               Adjustment Date, an amount equal to the lesser of
  the Negative Balance and the sum of:

                     (x)  if such Adjustment Date is not the Final
                 Adjustment Date, all amounts by which the
                  Adjustment Account shall thereto fore have
                    been decreased pursuant to Section 7.2(x) as
        of any such Adjustment Date, and

                    (y)  to the extent that any adjustment shall
                    have been made pursuant to Section 7.2 (iii)
            as of such Adjustment Date, and such
                    adjustment reflects any NOL Tax Benefit, the
       amount of such NOL Tax Benefit,

               (in the case of each of the foregoing clauses (x)
                and (y), such payment to be reduced by all amounts
              theretofore paid pursuant to this sentence), and
          the Negative Balance shall be reduced by the
               amount of any cash payments made pursuant to this
sentence."                        

         (c)  By the deletion of Section 7.5 and the
substitution therefor of the following:     

             "7.5 Certain Limitations.  The total cumulative
--------------------    
             liability of the Seller to the Buyer under this
               Section 7 shall not exceed the greater of (i) the
                                                     -
                  sum of B.P.32,651,934 plus the amount of any Warrant
               Proceeds, or (ii) the Accreted Value of the Notes
--    
               plus the amount of any Warrant Proceeds, provided
                                                        --------
                that such sum shall be reduced if any of the Notes
                shall have been prepaid in accordance with Section
           9 of the Note Purchase Agreement by an amount
             equal to the excess, if any, of (i) the Prepaid
                                 -
                 Percentage of Notes so prepaid times B.P.32,651,934
                                 -----
          over (ii) the Accreted Value of the Notes so
----  --                          
       prepaid.  For these purposes the "Prepaid

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               Percentage" shall be a fraction, the numerator of
                which is the aggregated stated principal amount of
               the Notes so prepaid and the denominator of which
             is the aggregate stated principal amount of the
        Notes outstanding as of the Closing Date."

           (d)  By the deletion of the third sentence of
    Section 7.7 and the substitution therefor of the
following:                                  

           "In addition, within 1180 days following each
             Annual Adjustment Date commencing with December
               31, 1988, the Buyer shall cause SDI to deliver to
        the Seller a schedule (a "Pipeline Profits
           Schedule") showing the calculation of the Net
             Pipeline Profits Adjustment with respect to the
        preceding accounting year.  As promptly as
               possible following each Adjustment Date but in no
        event later than 90 days (180 days if such
           Adjustment Date is a Reserve Adjustment Date)
             following each Adjustment Date, the Buyer shall
               cause SDI to deliver to the Seller a statement of
      the balance of the Adjustment Account (a
         "Statement of the Balance of the Adjustment
           Account") showing each adjustment made in the
              Adjustment Account since the previous Adjustment
            Date and the current balance in the Adjustment
            Account.  (The statement of the Balance of the
              Adjustment Account together with the Reinsurance
              Recoverable Schedules, the Reserve Schedules and
               the Pipeline Profits Schedules, being hereinafter
               collectively called the "Adjustment Schedules".)"

                (e)  By the insertion in section 7.9 following the
last sentence thereof, of the following:    

           "At the Final Adjustment Date the Buyer shall
               cause the Company to assign or otherwise transfer
              to the Seller or such Affiliate of the Seller as
       the Seller may designate, all Reinsurance
              Recoverables which have been included in the Net
               Recoverables Adjustment in the Adjustment Account
             pursuant to Section 7.2 to the extent that such
              Reinsurance Recoverables do not exceed the final
 balance of the Adjustment Account."

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                (f)  By the deletion of the final two sentences of
      Section 8.2.5 and the substitution therefor of the
following:                                  

                     "The 'Net Tax Benefit Adjustment' shall equal
               the NOL Tax Benefit, provided that there shall be
                --------
            included in Net Tax Benefit Adjustment, if (x)
          exceeds (y) in (i) above, the amount of such
               excess, and if (x) exceeds (y) in (ii) above, the
 amount of such excess times 0.625."

           (g)  By the insertion in Note 1 to Annex A to
         Exhibit M of the Share Purchase Agreement of "7.7" in
place of "7.6."                             

         (h)  By insertion in the Note to Annex 2 to
         Exhibit N of the Share Purchase Agreement of "7.7" in
place of "7.6."                             

              2.   Effect of Deed of Trust.  The provisions of
------------------------
   the Deed of Trust for discharge of the liabilities of the
      Seller under the Adjustment Account referred to in Section 7
     of the Share Purchase Agreement shall govern the settlement
    of the Adjustment Account so that (having regard to and in
    furtherance of the limitations on liability in Section 7.5
    of the Share Purchase Agreement) if at any Adjustment Date
  on which the Seller has an obligation to pay cash to the
Buyer pursuant to Section 7.4 of the Share Purchase   
      Agreement the balance in the Adjustment Account is in excess
  of the Accreted Value of the Notes as at such Adjustment
      Date, such obligation of the Seller to pay cash to the Buyer
     (or to the Trustee as assignee of the Buyer's rights) shall
     be equal to the lesser of (i) the amount of such excess and
 -
(ii) an amount determined as follows:                 
--                                                  

              (a)  If at the time of such Adjustment Date none
    of the Notes has been prepaid in accordance with
       Section 9 of the Note Purchase Agreement, an amount
             equal to the sum of (1) the excess of B.P.32,651,934 over
- 
         the Accreted Value of the Notes as at such Adjustment
Date; and (2) any Warrant Proceeds;         
-                     

             (b)  If at the time of such Adjustment Date the
        Notes have been paid in full, an amount equal to the
         sum of (1) any amount actually received by the Seller
-                           
           (or any assignee of the Seller) from the Trustee in the
         discharge or purported discharge of the trusts of the
          Deed of Trust (but excluding, however, any amount paid

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        by the Trustee to the Seller in respect of costs for
       which the Seller is entitled to indemnity under the
    Deed of Trust) and (2) any Warrant Proceeds; and
-   

             (c)  If at the time of such Adjustment Date the
      Notes have been prepaid in part in accordance with
       Section 9 of the Note Purchase Agreement, an amount
      equal to the sum of (1) the sum of (x) all amounts
              -              -
           actually received by the Seller (or any assignee of the
          Seller) from the Trustee in the discharge or purported
     discharge of the trusts of the Deed of Trust (but
           excluding however any amount paid by the Trustee to the
      Seller in respect of costs for which the Seller is
          entitled to indemnity under the Deed of Trust) and (y)
                                                             -
          any excess of (i) B.P.32,651,934 times a fraction, the
-             
        numerator of which is the aggregate stated principal
           amount of the Notes outstanding at such Adjustment Date
        and the denominator of which is the aggregate stated
       principal amount of the Notes outstanding as of the
           Closing Date, over (ii) the Accreted Value of the Notes
--  
      outstanding as at such Adjustment Date and (2) any
                                             -
Warrant Proceeds;                           

      less, in the cases of each of the foregoing clauses (A), (B)
----                                                  
   and (C), the aggregate of all amounts theretofore paid in
cash by the Seller pursuant to Section 7.4.           

              3.   Accounting Periods.  The parties agree that
-------------------     
    the indemnifications due to the Buyer and the tax benefits
      due to the Seller under the Tax Indemnity Deed and the Share
    Purchase Agreement shall be calculated using a 31 December
     tax accounting period currently in use by the Companies (as
  defined in Section 2.6 of the Share Purchase Agreement),
notwithstanding that one or more of the Companies may 
   subsequently change their tax accounting period to a date
other than 31 December.                               

              4.   Tax Indemnity Deed.  The Tax Indemnity Deed
-------------------     
shall be and is hereby amended by the insertion in the
   second sentence of subsection (1) of Section 8 thereof of
the word "not" so that the sentence reads as follows: 

              "Notwithstanding any provision of this Clause 8,
             settlement of such liability for open tax years
               that would materially affect the liability of the
          Company, SDI or any Subsidiary for tax years
             subsequent to that ended on 31st December 1986,
             may not be made with the Inland Revenue without

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       the Company's consent, which shall not be
unreasonably withheld or delayed."

         5.   Consent of Trustee and Guarantors.  By
          ----------------------------------
    signature hereof each of Alexander and Alexander Services,
      Inc. as guarantor of the obligations of the Seller under the
 Share Purchase Agreement, Sphere Drake Holdings, Public
 Limited Company, as guarantor of the obligations of the
     Buyer under the Share Purchase Agreement and the Trustee as
    assignee of the rights of the Buyer under Section 7 of the
      Share Purchase Agreement consent to and ratify the foregoing
amendments.                                           

             6.   Share Purchase Agreement and Tax Indemnity
                  ------------------------------------------
Deed.  Except as amended hereby, the Share Purchase   
-----                                                 
   Agreement and the Tax Indemnity Deed shall remain in full
force and effect.                                     

              7.   Counterparts.  This Amendment Agreement may
-------------           
  be executed in any number of counterparts, each of which
 shall be deemed an original, and the counterparts shall
    constitute but one and the same instrument, which shall be
sufficiently evidenced by any one counterpart.        

               IN WITNESS WHEREOF the parties have executed this
Amendment Agreement as of the date above written:     

Signed by                                             
-------------------------         
for and on behalf of                                  
SPHERE DRAKE INSURANCE GROUP PLC                      
in the presence of:                                   

Signed by                                             
-------------------------         
for and on behalf of                                  
SPHERE DRAKE ACQUISITIONS (U.K.) LIMITED              
in the presence of:                                   

Signed by                                             
-------------------------         
for and on behalf of                                  
ALEXANDER STENHOUSE & PARTNERS LIMITED                
in the presence of:                                   

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              THE UNDERSIGNED hereby consent to and ratify the
foregoing amendments.                                 

                     SPHERE DRAKE HOLDINGS PLC

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

                 ALEXANDER & ALEXANDER
          SERVICES, INC.

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

                             SD SECURITIES LIMITED, AS TRUSTEE

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

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      SPHERE DRAKE ACQUISITIONS (U.K.) LIMITED
       SPHERE DRAKE HOLDING PUBLIC LIMITED COMPANY

     Zero Coupon Senior Notes due 1995
     Zero Coupon Subordinated Notes due 1995
      Credit Facility Notes due 1995

     SPHERE DRAKE HOLDING PUBLIC LIMITED COMPANY

As of October 9, 1987                                 

Alexander Stenhouse & Partners Ltd.                   
145 St. Vincents Street                               
Glasgow                                               
Scotland                                              

Dear Sirs:                                            

               SPHERE DRAKE ACQUISITIONS (U.K.) LIMITED, an Eng-
   lish corporation whose registered office is situate at 30
      Mincing Lane, London EC3R 7BR England, registered in England
     with number 2136565 (the "Company"), and SPHERE DRAKE HOLD-
     ING PUBLIC LIMITED COMPANY, an English company whose regis-
     tered office is situate at 30 Mincing Lane, London EC3R 7BR
 England, registered in England with number 2168083 (the
"Guarantor"), agree with you as follows:              

              1.  Authorization of Notes.  The Company has au-
----------------------    
   thorized the issue and sale of (a) an aggregate principal
 amount determined as set forth below of its Zero Coupon
     Senior Notes due 1995 (the "Senior Notes") and an aggregate
    principal amount determined as set forth below of its Zero
Coupon Subordinated Notes due 1995 (the "Subordinated 
  Notes," and together with the Senior Notes, the "Notes,"
     such terms to include any such Notes issued in substitution
      thereof pursuant to section 15.2) to be substantially in the
    form of the Senior Notes and the Subordinated Notes as re-
   spectively set out in Exhibits A-1 and A-2, and (b) up to
    the amount from time to time of the Credit Facility Cap an
     aggregate principal amount of its Credit Facility Notes due
     1995 (the "Credit Facility Notes", such term to include any
     such notes issued in substitution therefor pursuant to sec-
   tion 15.2), to be substantially in the form of the Credit
  Facility Notes set out in Exhibit A-3; in each case with
    such changes therefrom, if any, as may be approved by you,
     the Company and the Guarantor.  The stated principal amount
        of the Senior Notes shall be B.P.13,000,000 with interest pay-
     able thereon at a rate of 10% per annum, compounded on each

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      June 30 and December 31 from the Closing to the stated final
   maturity date of such Senior Notes.  The stated principal
       amount of the Subordinated Notes shall be B.P.12,700,000 with
   interest payable thereon at a rate of 12% per annum, com-
     pounded on each June 30 and December 31 from the Closing to
    the stated final maturity date of such Subordinated Notes.
   The Notes and the Credit Facility Notes shall be uncondi-
     tionally guaranteed by the Guarantor pursuant to a Guaranty
   Agreement (the "Guaranty Agreement") in the form of Exhi-
      bit B.  Certain capitalized terms used in this Agreement are
    defined in section 14; references to an "Exhibit" are, un-
  less otherwise specified, to an Exhibit attached to this
Agreement.                                            

             2.  Sale and Purchase of Notes.  Subject to the
--------------------------
      terms and conditions of this Agreement, we may call upon you
    by notice given pursuant to section 3 by December 31, 1987
   to purchase from the Company, (a) at the Closing provided
for in section 3, the Notes at the purchase price of  
           B.P.l3,000,000 in the case of the Senior Notes and B.P.12,700,000
    in the case of the Subordinated Notes, and (b) as provided
    in section 10, up to B.P.32,651,934 in principal amount of
      Credit Facility Notes at a purchase price equal to the prin-
cipal amount thereof.                                 

            3.  Closing.  The sale of the Notes to be pur-
-------                   
    chased by you shall take place at the offices of Slaughter
   and May, 35 Basinghall Street, London, EC2V 5DB, at 10:00
    a.m., local time, at a closing (the "Closing") on December
      31, 1987 or on such other Business Day prior to December 31,
     1987 as may be advised by the Company on at least one day's
    advance written notice to you.  If at the Closing the Com-
    pany shall fail to tender the Notes or the Guarantor shall
     fail to tender the Guaranty Agreement to you, or any of the
    conditions specified in section 4 shall not have been ful-
      filled to your satisfaction, you shall, at your election, be
   relieved of all further obligations under this Agreement.

               4.     Conditions to Closing.  Your obligation to
 ---------------------
     purchase and pay for the Notes at the Closing is subject to
  the fulfillment to your satisfaction, prior to or at the
Closing, of the following conditions:                 

           4.1.   Delivery, Etc.  The Company shall have
-------------       
      delivered to you the Senior Notes and the Subordinated Notes
   to be purchased by you, each in the form of a single note
    dated as of the date of the Closing and payable to you (or
     your nominee) or order, against delivery by you to the Com-

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 pany or its order of immediately available funds in the
     amount of the purchase price therefor.  The Guarantor shall
have delivered to you the Guaranty Agreement.         

                4.2.   Representations and Warranties.  The repre-
          ------------------------------
    sentations and warranties of the Guarantor and the Company
 contained in this Agreement and those otherwise made in
    writing by or on behalf of the Guarantor or the Company in
      connection with the transactions contemplated by this Agree-
 ment and the Guaranty Agreement shall be correct in all
     material respects when made and at the time of the Closing,
      except as affected by the consummation of such transactions.

               4.3.   Performance; No Default.  Each of the Gua-
   -----------------------
  rantor and the Company shall have performed and complied
     with all agreements and conditions contained in this Agree-
     ment and the Guaranty Agreement required to be performed or
   complied with by it prior to or at the Closing and at the
    time of the Closing no Event of Default or Potential Event
of Default shall have occurred and be continuing.     

            4.4.   Share Purchase Agreement.  Prior to the
    ------------------------
  subscription hereunder for the Notes, the closing of the
    transactions contemplated by the Share Purchase Agreement,
  dated as of the date hereof, between you and the Company
     (the "Share Purchase Agreement") shall have been completed.

              4.5.   The Warrants.  The Warrants shall be duly
------------        
      issued pursuant to the Warrant Agreement simultaneously with
the Notes.                                            

               4.6.   Compliance Certificate.  The Company shall
  ----------------------
   have delivered to you an Officers' Certificate, dated the
    date of the Closing, certifying that the conditions speci-
fied in sections 4.2 and 4.3 have been fulfilled.     

            4.7.   Opinion of Counsel.  You shall have re-
------------------  
   ceived from Clyde & Co., solicitors for the Guarantor and
      the Company in connection with the transactions contemplated
      by this Agreement, a favourable opinion substantially in the
    form set forth in Exhibit C, dated the date of the Closing
  and otherwise satisfactory in substance and form to you.

              5.     Representations and Warranties, etc. Each
               -----------------------------------
    of the Guarantor and the Company jointly and severally re-
presents and warrants as follows:                     

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             5.1.   Organization.  Each of the Guarantor and
------------        
      the Company is a company duly incorporated under English law
   and has the power and authority to own, lease and operate
    its assets and to carry on its business as now and hereto-
fore conducted.                                       

            5.2.   Authority to Execute and Perform Agree-
                   ---------------------------------------
   ments.  The execution and delivery of this Agreement, the
-----                                                 
      Warrant Agreement and the Guaranty Agreement and the perfor-
    mance by the Guarantor and the Company of their respective
     obligations hereunder and thereunder have been duly author-
   ized by all necessary corporate action on the part of the
     Guarantor and the Company, as the case may be.  This Agree-
     ment, the Warrant Agreement and the Guaranty Agreement have
   been duly executed and delivered by the Guarantor and the
  Company and are the valid and binding obligations of the
    Guarantor and the Company, as the case may be, enforceable
    against the Guarantor and the Company, as the case may be,
in accordance with their respective terms.            

               5.3.  Memorandum and Articles of Association. The
                --------------------------------------
    Guarantor and the Company have heretofore delivered to you
    true and complete copies of their respective Memoranda and
     Articles of Association, having attached thereto all of the
resolutions required to be so attached.               

          5.4.  Capitalization.  The Guarantor and the
--------------        
      Company have delivered to you complete and correct copies of
   (a) a schedule (the "Capitalization Table") setting forth
   accurately as of the date set forth therein the pro forma
capitalization of the Guarantor and the Company giving
      effect, among other things, to the transactions contemplated
 by the Share Purchase Agreement and hereby, and (b) the
agreements, instruments and other documents (the      
 "Constituent Documents") relating to the securities and
    other obligations issued and to be issued by the Guarantor
     and the Company reflected on the Capitalization Table.  The
      Guarantor and the Company were incorporated in September and
  June, 1987, respectively, and, prior to the date hereof,
have had no business or operations other than the     
      negotiations leading up to the execution and delivery of the
      Constituent Documents, the Share Purchase Agreement and this
Agreement.                                            

            5.5.   Compliance with Other Instruments, etc.
                  --------------------------------------
      Neither the Guarantor nor the Company is in violation of any
 term of its Memorandum and Articles of Association, and
      neither the Guarantor nor the Company is in violation of any

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    term of any agreement or instrument to which it is a party
   or by which it is bound (including without limitation the
   Constituent Documents) or any term of any applicable law,
     ordinance, rule or regulation of any governmental authority
    or any term of any applicable order, judgment or decree of
      any court, arbitrator or governmental authority.  The execu-
    tion, delivery and performance of this Agreement, the War-
     rant Agreement, the Guaranty Agreement, the Notes, the War-
   rant and the Credit Facility Notes will not result in any
     violation of or be in conflict with or constitute a default
   under any such term or result in the creation of any Lien
      upon any of the properties or assets of the Guarantor or the
Company.                                              

                5.6.   Governmental Consent.  No consent, approval
--------------------
 or authorization of, or declaration or filing with, any
  governmental authority on the part of the Guarantor, the
      Company or any of their Affiliates is required for the valid
      execution and delivery of this Agreement, the Warrant Agree-
      ment or the Guaranty Agreement, the valid offer, issue, sale
     and delivery of the Notes or the Credit Facility Notes pur-
   suant to this Agreement or the valid issue or (except for
     such as are contemplated by the Warrant Agreement) exercise
    of the Warrant, or the entering into the Constituent Docu-
   ments except for (x) a filing which may be required under
      the Restrictive Trade Practices Legislation, and (y) consent
 under the Control of Borrowing Order 1958 (as amended),
      which (in the case of (y)) shall at the time of the Closing,
have theretofore been duly filed and obtained.        

                5.7.   Offer of Notes.  Neither the Guarantor, the
--------------      
  Company nor anyone acting on behalf of either of them in
  connection with the offering or sale of the Notes or the
     Credit Facility Notes or any similar securities of the Com-
  pany has directly or indirectly offered the Notes or the
  Credit Facility Notes or any part thereof or any similar
   securities (other than in the case of the Credit Facility
    Notes as contemplated by section 10) for sale to, or soli-
   cited any offer to buy any of the same from, or otherwise
  approached or negotiated in respect thereof with, anyone
 other than you.  Neither the Guarantor, the Company nor
     anyone acting on behalf of either of them has taken or will
  take any action which would (a) subject the issuance and
    sale of the Notes or the Credit Facility Notes or the War-
      rants to the registration and prospectus delivery provisions
      of the Securities Act of 1933, as amended, or (b) contravene
    any of the provisions of the Companies Act 1985 or the Fi-
nancial Services Act 1986.                            

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                5.8.   Disclosure.  Neither this Agreement nor any
----------          
    other document, certificate or instrument delivered to you
    by or on behalf of the Guarantor or the Company in connec-
      tion with the transactions contemplated by this Agreement or
 the Warrant Agreement contains (in each case, as of its
   date) any untrue statement of a material fact or omits to
     state a material fact necessary in order to make the state-
   ments contained in this Agreement and in such other docu-
    ments, certificates or instruments not misleading in light
of the circumstances in which they were made.         

            6.     Purchase for Investment.  You represent
   -----------------------
   that you are purchasing the Notes and the Credit Facility
  Notes for your own account for investment and not with a
     view to the distribution thereof or with any present inten-
 tion of distributing or selling any of the Notes or the
      Credit Facility Notes, provided that the disposition of your
--------
property shall at all times be within your control.   

               7.     Accounting; Financial Statements and Other
                      ------------------------------------------
    Information.  The Guarantor and the Company will maintain,
-----------                                           
     and will cause each of the Subsidiaries to maintain, a sys-
      tem of accounting established and administered in accordance
    with standard accounting practice applicable in the United
    Kingdom, and will set aside on their respective books, and
   will cause each Subsidiary to set aside on its books, all
   such proper reserves as shall be required by standard ac-
  counting practice applicable in the United Kingdom.  The
      Guarantor will deliver to you, so long as you, an Affiliated
   Lender or a Credit Enhancement Party, as the case may be,
      shall be required to purchase Notes or be entitled to Credit
     Facility Notes under this Agreement or you, your nominee or
    any permitted transferee shall be the holder of any of the
Notes or of the Credit Facility Notes:                

          (a)  As promptly as possible (typically within 21 days
               after the end of each of the first three calendar
             quarters) and in any event within 30 days after
               the end of each of the first three calendar quar-
              ters, the consolidated balance sheets of (i) the
              Guarantor and its Subsidiaries and (ii) the Com-
             pany and its Subsidiaries, and the separate ba-
               lance sheet of Sphere Drake Insurance plc, a Sub-
               sidiary of the Company and the Guarantor ("SDI"),
            as at the end of such quarters and the related
               profit and loss accounts of the Guarantor and its
                Subsidiaries, of the Company and its Subsidiaries,
               and of SDI, for such quarters and (in the case of

     6

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                the second and third quarters) for the period from
             the beginning of the current fiscal year to the
            end of such quarterly period, setting forth in
            each case in comparative form the consolidated
               figures for the corresponding periods of the pre-
                vious year, all in reasonable detail.  In the case
              of any Subsidiary (including SDI) that is a pro-
               perty and casualty insurance company that is sub-
            ject to the Insurance Companies Act 1985 (such
           subsidiaries are referred to as "UK Insurance
                Subsidiaries"), each such balance sheet and profit
               and loss accounts will be prepared on the follow-
               ing bases: (A) all balance sheet items will be as
              recorded in the books and records of the applic-
              able UK Insurance Subsidiary as at each reported
               date, it being recognized that certain items will
                in accordance with the present practices of SDI be
                one quarter in arrears; (B) changes in the Adjust-
            ment Account shall be reflected one quarter in
                arrears; and (C) all profit and loss account items
               will be reported on an accrual basis, except that
               estimated underwriting transfers (comprising pre-
              miums, net of commissions, less claims incurred,
           all figures net of reinsurance ceded) will be
             included on the basis of the estimated transfer
           for the full year multiplied by the number of
                months elapsed from the beginning of the financial
              year to the end of the reported quarter, the re-
               sultant being divided by 12; and the underwriting
           transfer for the full year will be based on a
              review of premiums and claims data at the end of
               the quarter previous to the one reported.  In the
           case of the Company and, subject to the final
                sentence in this section 7(a), the Guarantor, each
            such consolidated balance sheet and profit and
               loss account will reflect the accounts of each UK
            Insurance Subsidiary prepared on the bases set
              forth in the foregoing sentence and the accounts
                of their other respective Subsidiaries prepared in
              accordance with standard accounting practice ap-
            plicable in the United Kingdom (except for the
               absence of notes) presenting a true and fair view
                of the state of affairs of such Subsidiaries as of
              the applicable date, and of their operations for
             the periods then ending.  Each of the foregoing
              financial statements shall be prepared in accor-
           dance with accounting principles consistently
                applied throughout the period covered thereby, and

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                in compliance with the Companies Act 1985, subject
             to changes resulting from normal year-end audit
              adjustments.  The foregoing financial statements
               shall be certified by the Finance Director of the
                Guarantor, the Company or SDI, as the case may be,
            as having been prepared in accordance with the
                foregoing provisions of this section 7(a).  In the
                case of Subsidiaries of the Guarantor organized in
              jurisdictions other than the United Kingdom, the
             foregoing financial statements of the Guarantor
              may be based on the financial statements of such
                Subsidiaries in accordance with generally accepted
            or standard accounting practices applicable in
such jurisdiction.                

          (b)  (i)    Within 30 days after the end of each year,
                       a preliminary indication of the earnings of
                   the Guarantor and its Subsidiaries, the
                 Company and its Subsidiaries and SDI.

               (ii)   Within 60 days after the end of each year,
                      preliminary forms of the consolidated bal-
                     ance sheets of the Guarantor and its Sub-
                     sidiaries and of the Company and its Sub-
                     sidiaries, and the separate balance sheet
                      of SDI, as at the end of such year and the
                    related consolidated profit and loss ac-
                      counts of the Guarantor and its Subsidiar-
                  ies, and of SDI, for such fiscal year,
                     setting forth in each case (other than in
                      the cases of consolidated financial state-
                     ments required to be delivered before De-
                    cember 31, 1988) in comparative form the
                       consolidated figures for the previous year,
                     all in reasonable detail accompanied by a
                       report as to the issues at the time open in
                       connection with the audit of such financial
                     statements (which report shall indicate a
                       range of amounts affected by each such open
                     issue), certified in the case of such fi-
                      nancial statements by the Finance Director
                     of the Guarantor, the Company and SDI, as
the case may be.    

            (iii)  Within 135 days of the end of such year
                   such financial statements in definitive
                       form and statements of sources and applica-
                  tion of funds of the Guarantor and its

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                   subsidiaries and of SDI for such fiscal
                  year accompanied by reports thereon of
                       independent chartered accountants of recog-
                     nised standing selected by the Guarantor,
                      which reports shall state that such finan-
                     cial statements (x) have been prepared in
                     accordance with standard accounting prac-
                      tice applicable in the United Kingdom, and
                       (y) comply with the Companies Act 1985 and,
                      in the case of SDI, the Companies Act 1985
                     as it applies to insurance companies.  As
                      to any year that ends on a Reserve Adjust-
                   ment Date, the date for delivery of the
                     financial statement and of the report re-
                   ferred to in this clause (iii) shall be
                   deferred until a date 30 days after the
                      delivery of the applicable Reserve Adjust-
ment Schedule.      

        (c)  Together with each delivery of financial state-
                ments pursuant to subdivisions (a) and (b) of this
                section 7, an Officers' Certificate of the Guaran-
                tor (i) stating that the signers have reviewed the
           terms of this Agreement, of the Notes and the
              Credit Facility Note and have made, or caused to
               be made under their supervision, a review in rea-
              sonable detail of the transactions and condition
                of the Guarantor, the Company and their Subsidiar-
               ies during the accounting periods covered by such
               financial statements and that such review has not
             disclosed the existence during or at the end of
             such accounting period, and that the signers do
                not have knowledge of the existence as at the date
               of the Officers' Certificate, of any condition or
            event which constitutes an Event of Default or
                Potential Event of Default, or, if any such condi-
             tion or event existed or exists, specifying the
             nature and period of existence thereof and what
               action the Company has taken or is taking or pro-
               poses to take with respect thereto, (ii) specify-
             ing the amount available at the end of such ac-
                counting period for Restricted Payments in compli-
              ance with section 11.2 and showing in reasonable
             detail all calculations required in arriving at
                such amount, and (iii) demonstrating in reasonable
             detail compliance during and at the end of such
               accounting period with the restrictions contained

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                in sections 11.1(d), 11.2, 11.4 and the proviso to
section 11.9.                     

          (d)  Promptly upon the resignation, dismissal or fail-
              ure to reappoint any chartered accountants which
              had been engaged to report upon financial state-
                ments of the Guarantor or of any of its Subsidiar-
              ies, an Officers' Certificate stating whether in
               connection with the audits of the two most recent
                years and any subsequent interim periods preceding
             such resignation, dismissal or failure to reap-
               point, there were any material disagreements with
               such chartered accountants on matters of account-
             ing principles or practice, financial statement
                disclosure, or on audit procedures; provided, that
                                               ---------
               the foregoing shall not apply to any resignation,
           dismissal or failure to reappoint the firm of
               chartered accountants currently engaged to report
              upon the financial statements of any of the Gua-
              rantor or its Subsidiaries for periods ending on
               or prior to June 30, 1988. Disagreements required
                to be reported in response to this subdivision (d)
             shall include both those resolved to such char-
              tered accountants' satisfaction and those not so
               resolved.  The Guarantor shall request such char-
               tered accountants to furnish the Guarantor with a
                letter addressed to you stating whether such char-
              tered accountants agree with the statements made
              by the Guarantor in response to this subdivision
            (d), and if not, stating the respects in which
               such chartered accountants do not agree. The Gua-
                rantor shall promptly furnish to you a copy of any
such letter obtained by it.       

         (e)  Promptly upon receipt thereof, copies of all re-
             ports submitted to the Company by chartered ac-
               countants in connection with each annual, interim
               or special audit of the books of the Guarantor or
               any of its Subsidiaries made by such accountants,
                including, without limitation, any comment letters
            submitted by such accountants to management in
 connection with their annual audit.

          (f)  Promptly upon their becoming available, copies of
            all financial statements, reports, notices and
               proxy statements sent or made available generally
                by the Guarantor to any public security holders or
                by any of its Subsidiaries to its security holders

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                other than the Guarantor or another Subsidiary, of
            any regular and periodic reports and all final
            registration statements, prospectuses, listing
                particulars, circulars and agreements filed by the
               Guarantor or any such Subsidiary with any securi-
                ties exchange or with the United States Securities
              and Exchange Commission, the Companies Registry,
            The International Stock Exchange of the United
               Kingdom and the Republic of Ireland Limited or of
             any governmental or self-regulatory body having
            jurisdiction over SDI or any of its operations
               (including the Department of Trade and Industry),
            and of all press releases and other statements
              made available generally by the Guarantor or any
              Subsidiary to the public concerning material de-
                velopments in the business of the Guarantor or its
Subsidiaries.                     

        (g)  Immediately upon any director of the Guarantor,
              the Company or SDI, or any other employee of the
              Guarantor, the Company or SDI involved in finan-
            cial administration obtaining knowledge of any
              condition or event which constitutes an Event of
                Default or Potential Event of Default, or that the
              holder of any Note has given any notice or taken
                any other action with respect to a claimed default
              or Event of Default under this Agreement or that
              any Person has given any notice to the Guarantor
           or any of its Subsidiaries or taken any other
               action with respect to a claimed default or event
             or condition of the type referred to in section
            12(f), an Officers' Certificate describing the
               same and the period of existence thereof and what
           action the Guarantor has taken, is taking and
    proposes to take with respect thereto.

         (h)  180 days after the end of each year, a report of
               Milliman & Robertson, Inc. (or as to years ending
           on December 31, 1989 and later, of Milliman &
               Robertson, Inc. or such other firm of independent
             consulting actuaries of recognised standing se-
               lected by the Guarantor and reasonably acceptable
               to you, it being agreed that Tillinghast Nelson &
                Warren shall be acceptable to you) on the required
               loss reserves of SDI and each other Subsidiary of
              the Guarantor which is an insurance carrier, re-
               porting on the matters required to be reported on
             by it pursuant to section 7.7 of the Share Pur-

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           chase Agreement and additionally stating such
               independent consulting actuaries' estimate of the
                total undiscounted reserves necessary to discharge
          liabilities estimated to arise from premiums
             booked by SDI and such other Subsidiaries as of
            the end of such year, prepared on the basis of
              assumptions and methodology appropriate in light
                of all of the circumstances, including the assump-
          tions and methodology reflected in financial
             statements of SDI at and for the periods ending
              December 31, 1986.  The Guarantor shall promptly
            deliver such report received by it, SDI or the
                Company and shall use reasonable efforts to deliv-
              er such report within 75 days of the end of such
           year.  A preliminary report is expected to be
              received within 60 days of the end of such year.

           (i)  With reasonable promptness, such other information
              and data with respect to the Guarantor or any of
               its Subsidiaries as from time to time may be rea-
              sonably requested, including, without limitation
               any of the same as shall be useful to you in car-
          rying out your obligations under section 10.

       (j)  Notwithstanding any contrary provision in this
            Agreement, if any Notice of Disagreement shall
            have been delivered as to any year pursuant to
             section 7.7 of the Share Purchase Agreement the
             date for delivery of financial statements under
               section 7.(b)(iii) shall be extended to a date 10
              days after the final determination of the issues
     involved in the Notice of Disagreement.

            8.     Inspection, etc.; Confidentiality.  The
             ---------------------------------
     Guarantor will permit any authorised representatives desig-
 nated by you, so long as you, an Affiliated Lender or a
    Credit Enhancement Party, as the case may be, shall be re-
    quired to purchase Notes or be entitled to Credit Facility
  Notes under this Agreement, or you, your nominee or your
  permitted transferee shall be the holder of any Notes or
    Credit Facility Notes, without expense to the Guarantor or
  any of its Subsidiaries, to visit and inspect any of the
 properties of the Guarantor or any of its Subsidiaries,
including its and their books of account and statutory
    books, and to make copies and take extracts therefrom, and
      to discuss its and their affairs, finances and accounts with
    its and their officers, chartered accountants and indepen-
      dent consulting actuary (and by this provision the Guarantor

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   authorises such accountants and actuaries to discuss with
    such representatives the affairs, finances and accounts of
     the Guarantor and its Subsidiaries, whether or not the Gua-
    rantor or any such Subsidiary is present).  You agree that
    you will use your best efforts not to disclose without the
    prior consent of the Guarantor (other than to your employ-
   ees, auditors, actuaries or counsel) any information with
      respect to the Guarantor or any of its Subsidiaries which is
     furnished pursuant to section 7 or this section 8, provided
                                                        --------
      that you may disclose any such information (a) as has become
      generally available to the public, (b) as may be required or
     appropriate in any report, statement or testimony submitted
     to any regulatory body having or claiming to have jurisdic-
    tion over you or any of your Affiliates, (c) as may be re-
      quired or appropriate in response to any summons or subpoena
      or in connection with any litigation, (d) to the extent that
   you reasonably believe it appropriate in order to protect
      your investment in the Notes or the Credit Facility Notes or
      in order to comply with any law, order, regulation or ruling
 applicable to you, (e) to the prospective transferee in
 connection with any contemplated transfer of any of the
      Notes by you and (f) to any prospective lender in connection
with section 10.                                      

9.     Prepayment of Notes.       
------------------- 

               9.1.   Optional Prepayments.  The Company may, at
--------------------
    its option, upon notice as provided in section 9.2, prepay
      at any time all, or from time to time any part of, the Notes
    upon the earlier to occur of (i) June 30, 1991 in the case
  of the Senior Notes and June 30, 1990 in the case of the
    Subordinated Notes and (ii) the date on which the Warrants
    first become exercisable as provided in Section 2.1 of the
 Warrant Agreement, in each case at a price equal to the
    Accreted Value of the applicable Note as of the date fixed
      for prepayment pursuant to Section 9.2 provided that prepay-
                                --------
     ments from time to time of less than all of the Notes shall
be applied first to prepay the Subordinated Notes.    

              9.2.   Notice of Prepayments; Officers' Certifi-
                     -----------------------------------------
      cate.  The Company will give to the payee or payees named in
----                                                  
   any Notes written notice of each prepayment under section
      9.1 not less than 30 days and not more than 60 days prior to
     the date fixed for such prepayment, in each case specifying
      such date, the aggregate principal amount of the Notes to be
      prepaid on such date, the principal amount of each Note held
    by such holder to be prepaid on such date, the premium, if

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    any, applicable to such prepayment and the section of this
Agreement under which such prepayment is to be made.  

              9.3.   Surrender, Etc.  Any Note paid or prepaid
--------------      
   in full shall be surrendered to the Company and cancelled
and shall not be reissued.                            

10.    The Credit Facility.       
------------------- 

           10.1.  Loans; Credit Support.  Subject to the
 ---------------------
      terms and conditions of this Agreement and commencing on the
    first Adjustment Date, you agree on each Credit Call Date,
      to procure Third Party Unsupported Loans or furnish Support,
   in each case as contemplated by this section 10, provided
                                                    --------
      that the amount of Support at any time outstanding shall not
      exceed the amount of the Credit Facility Cap as from time to
 time in effect and provided further that all such Third
-------- -------
  Party Unsupported Loans and Support shall be denominated
only in pounds sterling.                              

                10.2.  Credit Facility Cap.  On any date the maxi-
------------------- 
    mum amount of Support available hereunder (the "Credit Fa-
    cility Cap") shall be equal to the sum of A minus B where:

A is the lesser of:                                   

             (i)    the positive balance, if any, of the Ad-
         justment Account on such date, reduced by all amounts
      by which the Adjustment Account has been increased
         pursuant to clauses (xii) and (xiv) of section 7.2 of
        the Share Purchase Agreement (such balance as so re-
          duced is referred to herein as the "Non-Cash Indemnity
        Balance") plus the aggregate amount of interest paid
        and accrued through such date on the Credit Facility
Notes;                                      

                  (ii)   B.P.32,651,934 minus the amount of any Senior
         -----
          Debt actually outstanding on such date as to which you
        and the Company agree that the Senior Notes shall be
subordinate to on any terms; and            

            (iii)  an amount determined from the following
       table with respect to such date and adjusted as set
forth following such table:                 

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If the Date of                  
Determination Falls                 
in the 12-Month Period                  
      Ending on December 31,    Such Amount Shall Be
     ------------------------   --------------------

              1987                  B.P.40 million
              1988                  B.P.43 million
              1989                  B.P.46 million
              1990                  B.P.49 million
              1991                  B.P.52 million
              1992                  B.P.52 million
              1993                  B.P.52 million
              1994                  B.P.52 million
              1995                  B.P.52 million

           minus the net assets of SDI as reflected on the balance
-----                                       
           sheet most recently delivered to you pursuant to clause
          (ii) of section 7(b) (or B.P.38,382,438 if the date of
      determination is before the delivery to you of the
first such balance sheet);                  

        minus any unpaid portion of the capital of SDI as of
-----                                       
       the later of the date of the Closing or the date of
        such balance sheet, but only to the extent that such
        unpaid portion is considered capital of SDI for pur-
          poses of applicable regulations pursuant to the Insur-
ance Companies Act 1982; and                

         if such date falls on January 1, 1988 or later, minus
                                                         -----
          50% of the aggregate amount of any loss reserve redun-
      dancies for underwriting and accident years ending
          before January l, 1987 as reflected in the report most
       recently delivered pursuant to section 7(h), to the
      extent that such loss reserve redundancies are not
reflected in such balance sheet of SDI; and 

      B is the aggregate amount of all Restricted Payments made by
     SDI from the date of the Closing through the date of deter-
mination.                                             

            10.3.  Notices; Cooperation.  Each Third Party
--------------------
 Unsupported Loan shall be made and all Support shall be
   given on at least 120 days' advance written notice by the
Guarantor to you, which notice shall specify:         

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                (a)    a preliminary indication of the date, which
         shall be a Business Day between June 15 and September
         30 of the year in question, on which such Third Party
       Unsupported Loan or Support is proposed to be drawn
upon (the "Credit Call Date");              

             (b)    a preliminary indication of the proposed
       amount of such Third Party Unsupported Loan or such
Support;                                    

            (c)    sufficient information to permit you to
          ascertain on a preliminary basis the amount, as of the
     Credit Call Date, of the Credit Facility Cap; and

             (d)    the identity of any proposed Third Party
          Lender with which the Guarantor or the Company has had
         discussions, and any proposed terms and conditions of
           any thereof, including drafts of the principal proposed
  documents governing any such Third Party Loan.

   From and after the date that such notice is given to you,
    each of the Company and the Guarantor will, and will cause
     their Subsidiaries, any Financial Adviser and their respec-
  tive accountants, attorneys and their agents to, furnish
 such documents and information as shall be necessary or
 appropriate, and otherwise to cooperate with you in all
  respects in procuring and arranging any Third Party Loan
      proposed by you.  At least 30 days prior to each Credit Call
  Date the Guarantor shall give a notice (the "Credit Call
  Notice") specifying the definitive Credit Call Date, the
   actual amount of the Third Party Unsupported Loan or Sup-
     port, and sufficient information to permit you to ascertain
      the amount, as of the Credit Call Date, of the Credit Facil-
ity Cap.                                              

              10.4.  Furnishing Support, etc.  Your obligation
   -----------------------
 to procure a Third Party Unsupported Loan or to furnish
      Support in the amount called for pursuant to section 10.3 on
      any Credit Call Date shall be satisfied if and to the extent
that on the Credit Call Date:                         

             (a)    the Company shall have received the pro-
           ceeds of a loan (a "Third Party Unsupported Loan") from
          a third party lender (a "Third Party Lender") which is
          not an Affiliate of yours, selected by you and reason-
       ably satisfactory to the Company as contemplated by
section 10.5;                               

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             (b)    The Company shall have received the pro-
      ceeds of a loan (a "Loan") from you or one of your
       Affiliates designated by you (you or such Affiliate
           being referred to as an "Affiliated Lender") as contem-
plated by section 10.6; or                  

              (c)    the Company shall have received a loan (a
           "Third Party Supported Loan") from a Third Party Lender
      selected by you and reasonably satisfactory to the
      Company, as to which you or one of your Affiliates
        designated by you provides Credit Support as contem-
plated by section 10.7.                     

   "Support" means a Loan or Third Party Supported Loan. For
   all purposes of this Agreement the amount of Support from
      time to time shall include the principal amount of all Loans
   made as contemplated by the foregoing subdivision (b) and
    the principal amount of all loans from Third Party Lenders
      supported by Credit Support as contemplated by the foregoing
    subdivision (c), but shall not include any amount with re-
spect to any Third Party Unsupported Loan.            

           10.5.  Third Party Unsupported Loans.  If you
         -----------------------------
  propose to satisfy your obligation under Section 10.1 by
 means of a Third Party Unsupported Loan, you shall give
    notice to the Guarantor at least 20 days in advance of the
applicable Credit Call Date stating as follows:       

             (a)    the identity of the proposed Third Party
Lender;                                     

             (b)    the proposed terms and conditions of the
     Third Party Unsupported Loan, including available
        drafts of the principal proposed documents governing
the Third Party Unsupported Loan; and       

            (c)    a statement that such terms are, in the
         good faith judgment of your Board, Relatively Favour-
able.                                       

   Subject to the following provisions of this section 10.5,
  the terms and conditions of such Third Party Unsupported
    Loan shall be as determined by you in your sole discretion
      but such terms must be Relatively Favourable.  Such proposed
    terms shall be "Relatively Favourable" if taken as a whole
    they are at least as favourable as those reflected in sec-
      tions 10.6, 10.9 and ll and the Credit Facility Notes, taken
 as a whole, provided that for these purposes the Credit
--------                      

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   Facility Notes shall be deemed to bear interest at a rate
      from time to time equivalent to four percentage points above
    the base lending rate used in England by National Westmin-
     ster Bank plc, and there shall be deemed to have occurred a
      Triggering Event.  The determination by your Board reflected
  in such notice that such terms are Relatively Favourable
      shall become final and binding upon the parties unless with-
 in seven days of the receipt of such notice the Company
      delivers to you an opinion (a "Financial Adviser's Opinion")
     of an investment banking or merchant banking firm of recog-
   nised standing in the United States or England reasonably
 satisfactory to you (the "Financial Adviser"), and such
      opinion is to the effect that based on such firm's review of
      such proposed terms it is of the opinion that such terms are
     not Relatively Favourable, and stating in reasonable detail
      the respects in which such terms fail to meet the definition
    of Relatively Favourable terms.  If the Company shall have
     caused the delivery of a Financial Adviser's Opinion within
   the period as above said, each of you, the Guarantor, the
 Company and its Subsidiaries shall cooperate in further
  discussions with the applicable Third Party Lender in an
   effort to procure a Third Party Unsupported Loan on terms
    which would meet the objections raised in such opinion; if
  the parties and such firm are not able to agree upon the
    terms of such proposed Third Party Unsupported Loan within
     fifteen Business Days before the proposed Credit Call Date,
  the issue of whether the terms of such proposed loan, as
      proposed as of such date, are Relatively Favourable shall be
     submitted to and reviewed by a third party (which shall act
     as an expert and not an arbitrator) which shall be mutually
    selected by you and the Company or, if such parties cannot
    agree on such third party, by Salomon Brothers, Inc (which
 shall act as an expert and not as an arbitrator), whose
   decision on such matter shall be final and binding on the
     parties, and the Credit Call Date shall be deemed to be the
      fifth Business Day after notice of such decision is received
by you.                                               

                10.6.  Loans.  Subject to the following provisions
-----               
  of this section 10.6, your obligation to furnish Support
     hereunder on any Credit Call Date shall be satisfied if and
      to the extent that any Affiliated Lender makes a Loan to the
  Company as contemplated by this section 10.6.  Each Loan
    under this section 10.6 shall be in an aggregate amount of
        B.P.10,000 or an integral multiple thereof.  Within the limits
  of the Credit Facility Cap, the Company may reborrow and
repay under this section 10.6.                        

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           (a)    Each Loan made by an Affiliated Lender
         shall be evidenced by and repaid with interest in ac-
       cordance with the terms of, a Credit Facility Note,
         dated the date of the initial borrowing from such Af-
         filiated Lender, payable to the order of such Affili-
        ated Lender.  The Affiliated Lender shall endorse on
      the Credit Facility Note held by it an appropriate
          notation indicating the amount of each Loan made by it
hereunder.                                  

               (b)    Not later than 11:00 a.m. (London time) on
          the applicable Credit Call Date, the Affiliated Lender
          shall make available to the Company immediately avail-
able funds in the amount of such Loan.      

           (c)    The Company (i) may, upon two Business
           Days' notice to an Affiliated Lender, prepay all or any
         portion of the principal amount of the Loan as speci-
          fied in such notice; (ii) shall prepay the Loan to the
          extent that the amount of Support shall at any time be
          greater than the Credit Facility Cap, within two Busi-
         ness Days of receipt by the Company of notice from an
          Affiliated Lender of such excess; and (iii) shall pre-
          pay all of the Loans if at any time it pays or prepays
         all or any portion, or is required (whether at matur-
        ity, as a result of acceleration or otherwise) under
         any other provision of this Agreement or the Notes to
         pay all or any portion of the Notes, any such prepay-
         ment to be accompanied by payment of interest accrued
          on the principal amount so prepaid through the date of
          prepayment.  Upon receipt from the Company of payments
         on account of principal, each Affiliated Lender shall
         endorse on the Credit Facility Note held by it an ap-
        propriate notation indicating the amount paid on ac-
count of principal.                         

 Each Loan shall be prepayable at your request, upon two
     days' notice to the Company, out of the proceeds of a Third
    Party Supported Loan or a Third Party Unsupported Loan ar-
     ranged by you pursuant to Section 10.5 or 10.7, as the case
may be.                                               

              10.7.  Credit Support.  Subject to the following
--------------      
    provisions of this section 10.7 your obligation to furnish
      Support hereunder on any Credit Call Date shall be satisfied
   if and to the extent that the Company shall have received
      the proceeds from a loan from a Third Party Lender (a "Third
     Party Supported Loan") as to which you or one of your Affi-

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   liates designated by you provides credit support ("Credit
   Support") pursuant to one of the following (a "Credit En-
hancement Agreement"):                                

                      (a)  a Guaranty with respect to such Third
Party Loan of you or any of your Affiliates;

                      (b)  an irrevocable letter of credit, nam-
        ing the Third Party Lender as the beneficiary, as to
         which you or any of your Affiliates is the applicant;

           (c)  a credit insurance policy;

                       (d)  any agreement pursuant to which you or
       any of your Affiliates agrees to delay or otherwise
           subordinate their right to receive any payment from the
Company; or                                 

                   (e)  such other security, intercreditor
           arrangement or credit support as may be mutually agreed
        upon by you, the Company and the Third Party Lender.

      Each Credit Enhancement Agreement shall be subject to provi-
 sions, satisfactory to you, providing that you, or your
   Affiliate or Affiliates providing Credit Support with re-
    spect to the Credit Enhancement Agreement (the "Credit En-
      hancement Party"), shall be subrogated to the rights of such
      Third Party Lender.  The terms of each Third Party Supported
   Loan shall be furnished in a notice to the Guarantor from
      you and shall be on Relatively Favourable terms, such notice
      to be given and whether such terms are Relatively Favourable
     to be determined in accordance with section 10.5 as if such
   Third Party Supported Loan were a Third Party Unsupported
     Loan thereunder.  The Company shall deliver a Credit Facil-
    ity Note to each Credit Enhancement Party, and any payment
   by any such party in respect of any Credit Enhancement A-
   greement shall be deemed to be a borrowing by the Company
thereunder, with interest payable as provided therein.
    Forthwith upon making any such payment the Credit Enhance-
 ment Party shall endorse on the Credit Facility Note an
     appropriate notation indicating the amount of such payment.
  Each Third Party Supported Loan shall be under terms and
     conditions such that, and the Company agrees that, the Com-
  pany shall (i) promptly prepay the Third Party Supported
     Loans if and to the extent that the amount of Support shall
 at any time be greater than the Credit Facility Cap and
      there shall be no Loan outstanding; and (ii) promptly prepay
    all of the Loans and the Third Party Supported Loans if at

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   any time it pays or prepays all or any portion, or is re-
     quired (whether at maturity, as a result of acceleration or
   otherwise) under any other provision of this Agreement or
     the Notes to prepay all or any portion of the Notes. Forth-
      with upon the Company prepaying all or any part of any Third
  Party Supported Loan each Credit Enhancement Party shall
     endorse on the relevant Credit Facility Note an appropriate
 notation indicating the amount of such prepayment which
      shall be deemed to be a prepayment (in an equivalent amount)
    of the amount outstanding under such Credit Facility Note.
   For all purposes of this section 10, the amount of Credit
      Support outstanding on any date shall include all amounts of
    principal, premium, interest and fees otherwise payable on
    such date in respect of each Third Party Supported Loan to
      the extent that the same are guaranteed, secured, insured or
   otherwise supported as contemplated by this section 10.7.
     To the extent that your liability under any Credit Enhance-
   ment Agreement shall be terminated without creating a de-
  fault in respect of the Third Party Supported Loan, such
     loan shall be deemed for all purposes of this section 10 to
   be a Third Party Unsupported Loan.  You shall not take or
      omit to take any action and you shall not permit any Affili-
      ate to take or omit to take any action if as a result there-
     of there would be any default or event of default under any
      Credit Enhancement Agreement which would result in a default
  in respect of the applicable Third Party Supported Loan.

                10.8.  Conditions Precedent.  (a)  Your obligation
--------------------
     to provide Support on the initial Credit Call Date shall be
     subject to the fulfillment to your reasonable satisfaction,
  prior to or at the time such Support is provided, of the
following conditions:                                 

            (i)    The Affiliated Lender or the Credit En-
       hancement Party, as the case may be, shall have re-
           ceived a Credit Facility Note in substantially the form
of Exhibit A-3.                             

             (ii)    You shall have received from Clyde & Co.,
           solicitors for the Guarantor and the Company in connec-
          tion with the transactions contemplated by this Agree-
        ment, a favourable opinion substantially in the form
set forth in Exhibit C2.                    

           (b)    Your obligation to provide Support and
      procure any Third Party Unsupported Loan on each Credit Call
     Date shall be subject to the fulfillment to your reasonable

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      satisfaction, prior to the time that such Support is provid-
ed, of the following conditions:                      

               (i)    The representations and warranties in sec-
           tion 5 shall be true and correct on and as of the Cred-
       it Call Date as though made on and as of such date.

                (ii)   Each of the Guarantor and the Company shall
       have performed and complied with all agreements and
           conditions contained in this Agreement and the Guaranty
          Agreement required to be performed or complied with by
it prior to or at the Closing.              

                (iii)  No event shall have occurred and be contin-
          uing, or would result from such Support or Third Party
           Unsupported Loan, which constitutes an Event of Default
         or Potential Event of Default or a default in respect
of any Third Party Unsupported Loan.        

            (iv)   Neither the Company, nor if there shall
           have occurred any Triggering Event, the Guarantor shall
         have theretofore made Restricted Payments aggregating
            in excess of B.P.5,000,000, provided that if there shall
              --------
  have occurred a Triggering Event the foregoing
           restriction on Restricted Payments by the Company shall
not apply.                                  

               (v)    The Company shall not have paid or prepaid
             an aggregate amount in excess of B.P.5,000,000 in princi-
          pal amount of the Notes pursuant to the terms and con-
        ditions of the Notes and the terms and conditions of
this Agreement.                             

               (vi)   There shall not have been a Change in Con-
trol of the Guarantor or the Company.       

              (vii)  The Guarantor shall have delivered to you
         an Officers' Certificate, dated the Credit Call Date,
           certifying that the conditions specified in the forego-
         ing clauses of this Section 10.8 have been fulfilled.

               10.9.  Additional Covenants.  So long as any Sup-
--------------------
port is outstanding:                                  

             (a)    Certain Information, etc.  The Guarantor
    ------------------------
 shall immediately notify you of any event of default or
  potential event of default in respect of any Third Party
   Loan.  The Guarantor, the Company and SDI will permit any

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     authorised representative designated by you to attend as an
 observer meetings of the Board of the Guarantor and the
   Company (but such representative shall not be a member of
      either of such Boards and shall not be entitled to take part
     in their deliberations), and to consult with the management
     of the Guarantor and the Company on matters relating to the
  business and affairs of the Company such as: significant
      changes in management personnel and compensation or employee
    benefits, introduction of new lines of business, important
   acquisitions of assets, significant changes in investment
  policies, and the proposed compromise of any significant
      litigation, all at such reasonable times and as often as may
be reasonably requested.                              

             (b)    Senior Debt.  Neither the Company nor if
-----------         
      there shall have occurred any Triggering Event the Guarantor
   will, nor will they permit any Subsidiary to, directly or
    indirectly, create, incur, assume, guarantee, or otherwise
   become directly or indirectly liable with respect to, any
    Senior Debt other than in respect of Loans and Third Party
    Loans unless the proceeds of such Senior Debt shall be ap-
   plied to pay Loans or Third Party Loans except for Senior
      Debt outstanding on the earliest Credit Call Date in respect
of such Support.                                      

              (c)    Restricted Payments.  Neither the Company
------------------- 
   nor if there shall have occurred any Triggering Event the
    Guarantor will directly or indirectly declare, order, pay,
  make or set apart any sum or property for any Restricted
Payment.                                              

            (d)    Liens, etc.  Neither the Company nor if
----------          
      there shall have occurred any Triggering Event the Guarantor
   will, nor will they permit any Subsidiary to, directly or
    indirectly create, incur or assume any Lien on or with re-
   spect to any property or asset (including any document or
 instrument in respect of goods or accounts receivable),
 whether now owned or held or hereafter acquired, or any
      income or profits therefrom, of the character referred to in
clause (h) or (j) of section 11.3.                    

               (e)    Subsidiary Stock and Indebtedness. Neither
             ---------------------------------
     the Company nor if there shall have occurred any Triggering
      Event the Guarantor will engage, or will permit any Subsidi-
     ary to engage, in any transaction of the character referred
      to in clauses (a) through (d) of section 11.6 whether or not
   such transactions are otherwise permitted pursuant to the

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      proviso to such section, other than as permitted pursuant to
the proviso to section 11.9.                          

             (f)    Consolidation, Sale of Assets, etc.  The
              ----------------------------------
           Company and if there shall have occurred any Triggering
         Event the Guarantor will not, and will not permit any
Subsidiary to, directly or indirectly,      

                      (i)  participate in any scheme of arrange-
ment; or                          

                  (ii) sell, transfer, lease, abandon or
              otherwise dispose of all, substantially all or a
                substantial part of its property, assets or under-
taking.                           

               (g)    Business.  The Company and, if there shall
--------            
     have occurred any Triggering Event, the Guarantor will not,
    and will not permit any Subsidiary to, engage in any busi-
     ness other than the businesses conducted by it and its Sub-
   sidiaries (that being the property and casualty insurance
     business in the case of SDI) on the Credit Call Date relat-
     ing to such Support and other businesses or activities sub-
stantially similar or reasonably related thereto.     

              10.10. Additional Events of Default.  So long as
        ----------------------------
     any Support is outstanding, any of the following conditions
      or events shall constitute Events of Default, in addition to
such events specified in section 12:                  

              (a)    if the Guarantor or the Company shall de-
           fault in the performance of or compliance with any term
contained in section 10.9; or               

           (b)    if the Guarantor or the Company or any
          Subsidiary shall default (as principal or guarantor or
       other surety) in the payment of any principal of or
          premium or interest on any Third Party Loan, or if any
         event shall occur or condition shall exist in respect
        of any Third Party Loan or under any evidence of any
           Third Party Loan or of any mortgage, indenture or other
          agreement relating thereto which would permit or shall
       have caused the acceleration of the payment of such
Third Party Loan; or                        

         (c)    if there shall exist final judgments
           against the Guarantor or the Company and its Subsidiar-
            ies aggregating in excess of B.P.50,000, (other than any

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         judgment arising out of or resulting from any fact or
          circumstance in respect of which there shall be a pur-
           chase price adjustment or you are required to indemnify
          the Company under the Share Purchase Agreement) and if
         any one of such judgments shall have been outstanding
           for any period of fifteen days or more from the date of
           its entry and shall not have been discharged in full or
stayed pending appeal.                      

    10.11. Fees and Expenses, Cooperation.
          ------------------------------

            (a)    Credit Support Fee.  On the last day of
------------------  
          each calendar month after the initial Credit Call Date
          on which any Credit Enhancement Party shall have given
         any Credit Support and for so long as any such Credit
           Support shall remain outstanding, the Company shall pay
         such Credit Enhancement Party a fee in an amount (not
           less than zero) equal to (i) the amount that would have
       been payable on such date as interest on the Credit
          Facility Note had the full amount for such Credit Sup-
        port been a Loan thereunder, less (ii) the amount of
                  ----
       interest and discount which accrued or amortised in
        respect of the applicable Third Party Supported Loan
          during the period as to which such interest would have
been payable on the Credit Facility Note.   

                (b)    Expenses.  The Company will pay all reason-
--------            
           able expenses in connection with any Third Party Unsup-
     ported Loan or Support and in connection with any
         amendments or waivers (whether or not the same become
         effective) under or in respect of any agreements with
        respect to any Support, including without limitation
        all costs and expenses (including fees and premiums)
       charged or incurred by the issuer of any Credit En-
          hancement Agreement or any Third Party Lender, and the
          reasonable fees, expenses and disbursements of counsel
         employed by you, any issuer of any Credit Enhancement
           Agreement and any Third Party Lender in connection with
          such transactions and any such amendments nor waivers.

             (c)    Cooperation.  Each of the Guarantor, the
-----------         
           Company, SDI and each other Subsidiary of the Guarantor
        shall cooperate fully and in good faith with you and
         shall otherwise take such commercially reasonable ac-
         tions as you may from time to time request, including
          without limitation attending meetings with Third Party
Lenders and taking corporate actions.       

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           11.    Business and Financial Covenants.  The
            --------------------------------
  Guarantor and the Company covenant that from the date of
      this Agreement through the Closing and thereafter so long as
     any of the Notes or the Credit Facility Notes are outstand-
ing:                                                  

             11.1.  Senior Debt.  Neither the Company nor if
-----------         
      there shall have occurred any Triggering Event the Guarantor
    will, nor will the Company or if there shall have occurred
     any Triggering Event the Guarantor permit any of its Subsi-
    diaries to, directly or indirectly, create, incur, assume,
    guarantee, or otherwise become or remain directly or indi-
      rectly liable with respect to, any Senior Debt, except that:

              (a)    the Company or the Guarantor, as the case
         may be, and their Subsidiaries may remain liable with
          respect to their respective Senior Debt outstanding on
           the date of this Agreement and referred to in the Capi-
         talisation Table, and any extensions, renewals or re-
fundings of any thereof;                    

             (b)    the Company may become and remain liable
           with respect to the Senior Debt evidenced by the Senior
           Notes and the Credit Facility Notes and the Third Party
      Loan and the Guarantor may enter into the Guaranty
Agreement;                                  

               (c)    any Wholly-Owned Subsidiary of the Company
        or the Guarantor, as the case may be, may become and
          remain liable with respect to Senior Debt of such Sub-
         sidiary owing to the Company or the Guarantor, as the
          case may be, or another Wholly-Owned Subsidiary of the
     Company or the Guarantor, as the case may be; and

              (d)    the Company or the Guarantor, as the case
         may be, may become and remain liable (other than to a
           Subsidiary of the Company or the Guarantor, as the case
           may be) with respect to Senior Debt in addition to that
           otherwise permitted by the foregoing provisions of this
           section 11.1, provided that, on the date the Company or
--------        
          the Guarantor, as the case may be, becomes liable with
          respect to any such additional Senior Debt and immedi-
           ately after giving effect thereto and to the concurrent
           repayment of any other Debt the aggregate amount of all
        Senior Debt of the Company and the Guarantor, as the
           case may be, and the Subsidiaries of the Company or the
       Guarantor, as the case may be (excluding the Senior

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        Debt permitted by subdivision (b) and (c)) shall not
exceed B.P.15,000,000.                      

              11.2.  Restricted Payments.  Neither the Company
------------------- 
     nor, if there shall have occurred any Triggering Event, the
     Guarantor shall directly or indirectly declare, order, pay,
      make or set apart any sum for any Restricted Payment unless:

              (a)    there shall at the time be no amount pay-
         able by the Company in respect of any principal of or
interest on any Loan or Third Party Loan;   

              (b)    such proposed action is taken and becomes
effective after September 30, 1989; and     

            (c)    immediately after giving effect to such
proposed action:                            

            (i)    no condition or event shall exist which
         constitutes an Event of Default or Potential Event of
Default;                                    

              (ii)   the aggregate amount of all sums included
         in all Restricted Payments directly or indirectly de-
           clared, ordered, paid, made or set apart by the Company
           or the Guarantor, as the case may be, after the date of
       the Closing and including the date of such proposed
action shall not exceed the sum of:         

                    (A)  50% (but, in the case of a deficit,
              100%) of Consolidated Adjusted Net Income of the
               Company or the Guarantor, as the case may be, for
such period; plus                 
----    

                     (B)  the aggregate amount of the net cash
                proceeds received by the Company or the Guarantor,
             as the case may be, during such period from the
            issue of its shares during such period, and as
               consideration for the issuance during such period
             of Debt of the Company or the Guarantor, as the
              case may be, convertible into shares of the Com-
            pany or the Guarantor, as the case may be, but
            only to the extent that any such Debt has been
                converted into shares during such period, provided
                                                          --------
             that the aggregate amount of such net cash pro-
            ceeds to be taken into account for such period
              (excluding any shares reflected on the Capitali-
             sation Table) shall not exceed the aggregate of

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                the amounts expended by the Company or the Guaran-
             tor, as the case may be, during such period for
               Restricted Payments of the character described in
              clause (b) of the definition of "Restricted Pay-
ment" in section 14; and          

              (iii)  the aggregate amount of all sums included
         in all Restricted Payments directly or indirectly de-
           clared, ordered, paid, made or set apart by the Company
           or the Guarantor, as the case may be, during the period
           beginning one year prior to such proposed action to and
        including the date of such proposed action shall not
         exceed 50% of the Consolidated Adjusted Net Income of
         the Company or the Guarantor, as the case may be, for
         the calendar year covered by the financial statements
     most recently delivered pursuant to section 7(b);

  provided, that the Company and its Subsidiaries may from
---------                                             
    time to time make Restricted Payments which are Triggering
      Events solely to the Guarantor and its Wholly-Owned Subsidi-
      aries.  The Company and the Guarantor will not, and will not
     permit SDI to directly or indirectly declare, order, pay or
      make any Restricted Payment (other than a Restricted Payment
      that is a Triggering Event) except in cash.  Upon the occur-
    rence of a Triggering Event, the amount of Restricted Pay-
   ments made as dividends from the Company to the Guarantor
    shall be deemed to be zero.  The Company and the Guarantor
      will not declare any dividend (other than a dividend payable
     in its own shares) on any shares of any class which is pay-
     able more than 60 days after the date of declaration there-
of.                                                   

              Notwithstanding the foregoing provisions of this
     section 11.2, on or after the first date on which SDI would
 be permitted to discontinue its motor lines of business
   pursuant to section 11.9, SDI may transfer to a direct or
      indirect Subsidiary of the Guarantor (the "New Motor Subsid-
     iary") the personnel and goodwill (including the non-exclu-
    sive right to use the name "Sphere Drake") of SDI relating
   to the motor business of SDI, if immediately after giving
   effect to the proposed transfer (I) no condition or event
    shall exist or have occurred which constitutes an Event of
     Default or Potential Event of Default, (II) no assets other
    than such personnel and goodwill shall have been so trans-
     ferred by SDI and (III) the New Motor Subsidiary shall have
      executed and delivered a guaranty on substantially identical
      terms to the Guaranty Agreement (any transfer of assets made

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      in accordance with this sentence is retermed as a "New Motor
Transfer").                                           

            11.3.  Liens, etc.  Neither the Company nor if
----------          
      there shall have occurred any Triggering Event the Guarantor
    will, nor will the Company or if there shall have occurred
     any Triggering Event the Guarantor permit any of its Subsi-
   diaries, directly or indirectly, create, incur, assume or
     permit to exist any Lien on or with respect to any property
      or asset (including any document or instrument in respect of
     goods or accounts receivable) of the Company or the Guaran-
      tor, as the case may be, and their Subsidiaries, whether now
     owned or held or hereafter acquired, or any income or prof-
its therefrom, except:                                

               (a)    Liens for taxes, assessments or other gov-
        ernmental charges the payment of which is not at the
time required by section 11.10;             

              (b)    statutory Liens of landlords and Liens of
         carriers, warehousemen, mechanics and materialmen in-
          curred in the ordinary course of business for sums not
      yet due or the payment of which is not at the time
required by section 11.9;                   

          (c)    Liens incurred or deposits (deposits,
          bonds, letters of credit and other securities) made in
      the ordinary course of business in connection with
      obtaining licenses and in connection with workers'
           compensation, unemployment insurance and other types of
          social security, or social welfare or to secure (or to
         obtain letters of credit or surety, appeal or perfor-
      mance bonds which secure) the performance of bids,
          tenders, statutory obligations, leases, purchase, con-
       struction, sales or reinsurance contracts and other
           similar obligations or as provided by law in respect of
          bank deposits, in each case not incurred in connection
          with the borrowing of money, the obtaining of advances
         or the payment of the deferred purchase price of pro-
perty;                                      

                (d)    any attachment or judgment Lien, unless the
           judgment it secures shall not, within 60 days after the
           entry thereof, have been discharged or execution there-
         of stayed pending appeal, or shall not have been dis-
           charged within 60 days after the expiration of any such
stay;                                       

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           (e)    leases or subleases granted to others,
          easements, rights-of-way, restrictions and other simi-
        lar charges or encumbrances, in each case incidental
         to, and not interfering with, the ordinary conduct of
        the business of the Company or the Guarantor, as the
case may be, or any Subsidiary;             

               (f)    Liens on property or assets of any Wholly-
           Owned Subsidiary securing Debt of such Subsidiary owing
        to the Company or the Guarantor, as the case may be;

              (g)    Liens securing the Debt of the Company or
           the Guarantor, as the case may be, and their Subsidiar-
ies referred to in the Capitalization Table;

               (h)    any Lien created to secure all or any part
        of the purchase price, or to secure Debt incurred or
         assumed to pay all or any part of the purchase price,
         of property acquired by the Company or the Guarantor,
      as the case may be, or a Subsidiary after the date
         hereof, provided that (i) any such Lien shall be con-
--------                    
        fined solely to the item or items of property so ac-
          quired and, if required by the terms of the instrument
         originally creating such Lien other property which is
       an improvement to or is acquired property, (ii) the
         principal amount of the Debt secured by any such Lien
          shall at no time exceed an amount equal to 100% of the
           lesser of (A) the cost to the Company or the Guarantor,
          as the case may be, or such Subsidiary of the property
          so acquired and (B) the fair market value of such pro-
           perty (as determined in good faith by the Board) at the
           time of such acquisition, and (iii) any such Lien shall
      be created within six months after, in the case of
          property, its acquisition, or, in the case of improve-
ments, their completion;                    

             (i)    with respect to portfolio investments of
           SDI, repurchase agreements, securities lending arrange-
       ments options, futures, liens of issuing banks with
      respect to letters of credit, Liens of brokers and
         custodians securing payments of fees and expenses in-
       curred in the ordinary course of business and other
     similar arrangements entered into in the ordinary
course of business;                         

              (j)    any Lien existing on property of a Person
       immediately prior to its being consolidated with or
         merged into the Company or the Guarantor, as the case

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          may be, or a Subsidiary thereof or its becoming a Sub-
        sidiary of the Company or the Guarantor, as the case
         may be, or any Lien existing on any property acquired
           by the Company or the Guarantor, as the case may be, or
          any Subsidiary thereof at the time such property is so
           acquired (whether or not the Debt secured thereby shall
        have been assumed), provided that no such Lien shall
    --------
         have been created or assumed in contemplation of such
       consolidation or merger or such Person's becoming a
        Subsidiary or such acquisition of property, and pro-
                                                        ----
           vided further that each such Lien shall at all times be
-------------                               
       confined solely to the item or items of property so
         acquired and, if required by the terms of the instru-
      ment originally creating such Lien, other property
          which is an improvement to or is acquired for specific
  use in connection with such acquired property;

              (k)    any Lien renewing, extending or refunding
          any Lien permitted by subdivision (c), (g), (h) or (j)
     of this section 11.3, provided that the principal
        --------
         amount of Debt secured by such Lien immediately prior
        thereto is not increased or the maturity thereof re-
          duced and such Lien is not extended to other property;

               (l)    any Lien securing Senior Debt which, as of
       the date such Debt is created, incurred, assumed or
       guaranteed is permitted so to be created, incurred,
         assumed or guaranteed pursuant to the proviso to sec-
tion ll.1(d); and                           

              (m)    any Lien arising out of or resulting from
      any fact or circumstance in respect of which there
       shall be a purchase price adjustment or you are re-
        quired to indemnify the Company under the Share Pur-
chase Agreement.                            

             11.4.  Leases; Leasebacks.  Neither the Company
------------------  
   nor if there shall have occurred any Triggering Event the
     Guarantor will, nor will the Company or if there shall have
   occurred any Triggering Event the Guarantor permit any of
    its Subsidiaries to, directly or indirectly, become or re-
    main liable as lessee or as guarantor or other surety with
respect to:                                           

             (a)    any lease of any property (whether real,
         personal or mixed) other than a Capital Lease unless,
        immediately after giving effect to the incurrence of
       liability with respect to such lease, the aggregate

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           amount of all minimum or guaranteed net rental payments
           under such lease and all other leases (other than Capi-
          tal Leases) at the time in effect during the then cur-
        rent or any future period of 12 consecutive calendar
         months prior to the stated final maturity date of the
Notes shall not exceed B.P.l,500,000; or    

             (b)    any lease of any property (whether real,
           personal or mixed), other than a Capital Lease, whether
         now owned or hereafter acquired by the Company or the
           Guarantor, as the case may be, or any Subsidiary of the
           Company or the Guarantor, as the case may be, which has
          been or is to be sold or transferred by the Company or
        the Guarantor, as the case may be, or any Subsidiary
         thereof to any other Person other than any such lease
           by the Company or the Guarantor, as the case may be, to
          a Wholly-Owned Subsidiary thereof or by a Wholly-Owned
         Subsidiary thereof to another Wholly-Owned Subsidiary
thereof.                                    

   For the purposes of subdivision (a) of this section 11.4,
 any Person becoming a Subsidiary after the date of this
  Agreement shall be deemed, at the time it becomes such a
      Subsidiary, to have become liable with respect to all of its
then existing obligations under leases.               

               11.5.  Transactions with Affiliates.  The Guaran-
        ----------------------------
      tor will not, and will not permit the Company or any Subsid-
     iary to, directly or indirectly, engage in any transaction,
     including without limitation the purchase, sale or exchange
     of assets or the rendering of any service, with any Affili-
    ate of the Guarantor, except in the ordinary course of and
     pursuant to the reasonable requirements of the Company's or
 such Subsidiary's business and upon fair and reasonable
 terms that are no less favorable to the Company or such
   Subsidiary, as the case may be, than those which might be
  obtained in an arm's length transaction at the time from
    Persons which are not such an Affiliate, provided that the
                                    --------
   foregoing restrictions shall not apply to any transaction
  between the Company and the Guarantor and a Wholly-Owned
      Subsidiary or between one Wholly-Owned Subsidiary and anoth-
      er Wholly-Owned Subsidiary provided further that the Guaran-
                ----------------
     tor and its Subsidiaries may enter into consulting arrange-
      ments with Affiliates of the Guarantor without regard to the
     foregoing restrictions if and so long as the aggregate pay-
 ments during any period of twelve consecutive months in
respect of all of such arrangements shall not exceed  
B.P.150,000.                                          

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               11.6.  Subsidiary Stock and Indebtedness. Neither
             ---------------------------------
      the Company nor, if there shall have occurred any Triggering
Event, the Guarantor shall:                           

             (a)    directly or indirectly sell, charge, as-
           sign, pledge or otherwise dispose of any Debt of or any
           shares of (or warrants, rights or options to acquire or
       subscribe for shares of) any Subsidiary except to a
           Wholly-Owned Subsidiary and except as directors' quali-
fying shares if required by applicable law; 

                (b)    permit any Subsidiary directly or indirect-
           ly to sell, charge, assign, pledge or otherwise dispose
       of any Debt of the Company or the Guarantor, as the
          case may be, or any other Subsidiary, or any shares of
           (or warrants, rights or options to acquire or subscribe
      for shares of) any other Subsidiary, except to the
           Guarantor or a Wholly-Owned Subsidiary or as directors'
    qualifying shares if required by applicable law;

              (c)    permit any Subsidiary to have outstanding
       any Preferred Shares other than shares of Preferred
          Stock which are owned by the Company or a Wholly-Owned
          Subsidiary or which are outstanding on the date of the
          Closing and are reflected in the Capitalisation Table;
or                                          

             (d)    permit any Subsidiary, directly or indi-
        rectly, to issue or sell (including, without limita-
          tion, in connection with a scheme of arrangement, mer-
          ger or consolidation of a Subsidiary otherwise permit-
           ted by section 11.7(a)) any shares (or warrants, rights
      or options to acquire or subscribe for its shares)
           except to the Company or the Guarantor, as the case may
          be, or a Wholly-Owned Subsidiary or as directors' qua-
 lifying shares if required by applicable law;

    provided that all Debt and shares of any Subsidiary, other
--------                                              
      than SDI, owned by the Company or the Guarantor, as the case
  may be, and its other Subsidiaries may be simultaneously
     sold as an entirety for a consideration having a fair value
   at least equal to the fair value thereof (in each case as
    determined in good faith by the Board) at the time of such
  sale if such Subsidiary does not at the time own (i) any
      Debt of the Company or the Guarantor, as the case may be, or
      (ii) any Debt or shares of any other Subsidiary which is not
     also being simultaneously sold as an entirety in compliance
with this proviso or section 11.7(b)(ii).             

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              11.7.  Sale of Assets, etc.  Neither the Company
------------------- 
   nor if there shall have occurred any Triggering Event the
     Guarantor will, nor will the Company or if there shall have
   occurred any Triggering Event the Guarantor permit any of
its Subsidiaries to, directly or indirectly,          

                (a)    enter into a scheme of arrangement with any
   other Person, or consolidate with or merge into any other
  Person or permit any other Person to consolidate with or
merge into it, except that:                           

              (i)    any Subsidiary may enter into a scheme of
         arrangement with the Company or the Guarantor, as the
           case may be, or a Wholly-Owned Subsidiary if immediate-
         ly after giving effect to such transaction, no condi-
           tion or event shall exist which constitutes an Event of
Default or Potential Event of Default;      

               (ii)   any corporation may enter into a scheme of
         arrangement with the Company or the Guarantor, as the
         case may be, or a Wholly-Owned Subsidiary if, immedi-
          ately after giving effect to such transaction, no con-
          dition or event shall exist which constitutes an Event
 of Default or Potential Event of Default; and

              (iii)  the Company or the Guarantor, as the case
           may be, may enter into a scheme of arrangement with any
       other corporation if (A) such corporation expressly
          assumes, by an agreement satisfactory in substance and
       form to the holders of 66 2/3% or more in principal
        amount of each of the Senior Notes, the Subordinated
        Notes and the Credit Facility Notes at the time out-
         standing (which agreement may require the delivery in
       connection with such assumption of such opinions of
        counsel as such holders may reasonably require), the
           obligations of the Guarantor and the Company under this
         Agreement and under the Notes and the Credit Facility
      Notes, (B) immediately after giving effect to such
          transaction, such corporation shall not be liable with
        respect to any Debt which it could not become liable
         with respect under this Agreement on the date of such
           transaction, and (C) immediately after giving effect to
         such transaction (and such assumption), such corpora-
             tion could incur at least B.P.1 of additional Senior Debt
          in compliance with section 11.1(d) and no condition or
           event shall exist which constitutes an Event of Default
or a Potential Event of Default; or         

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                (b)    sell, transfer, lease, abandon or otherwise
    dispose of all, substantially all or a substantial part of
its property, assets and undertaking, except that:    

               (i)    any Subsidiary of the Company or the Guar-
           antor may sell, transfer, lease or otherwise dispose of
         all or substantially all its property, assets and un-
          dertaking to the Company or the Guarantor, as the case
          may be, or a Wholly-Owned Subsidiary of the Company or
the Guarantor, as the case may be;          

               (ii)   any Subsidiary of the Company or the Guar-
          antor other than SDI may sell, transfer, lease or oth-
          erwise dispose of all or substantially all its proper-
        ty, assets and undertaking as an entirety for a cash
          consideration at least equal to the fair value thereof
          (as determined in good faith by the Board) at the time
          of such disposition if such Subsidiary does not at the
           time hold (A) any Debt of the Company or the Guarantor,
        as the case may be, or (B) any Debt or shares of any
        other Subsidiary of the Company or the Guarantor, as
           the case may be, which is not also being simultaneously
           sold as an entirety in compliance with this subdivision
(b) (ii) or the proviso to section ll.6;    

              (iii)  the Company or the Guarantor, as the case
          may be, may sell, transfer, lease or otherwise dispose
        of all or substantially all its property, assets and
         undertaking to any corporation into which the Company
      or the Guarantor, as the case may be, could be the
         subject of a scheme of arrangement in compliance with
        subdivisions (a) (ii) or (iii) of this section ll.7,
         provided that (A) each of the conditions set forth in
--------                                    
       such subdivisions (a) (ii) or (iii) shall have been
        fulfilled, and (B) no such disposition shall relieve
       the Guarantor or the Company from their obligations
           under this Agreement, the Guaranty Agreement, the Notes
or the Credit Facility Notes; and           

       (iv)   SDI may make a New Motor Transfer.

                11.8.  Use of Proceeds.  The proceeds of all Third
---------------     
  Party Unsupported Loans, Loans and Third Party Supported
    Loans shall immediately be applied to subscribe for equity
   share capital (as defined in section 744 of the Companies
Act 1985) of SDI.                                     

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             11.9.  Corporate Existence, etc.; Business. The
               -----------------------------------
     Company and if there shall have occurred a Triggering Event
   the Guarantor will at all times preserve and keep in full
  force and effect its corporate existence, and rights and
  franchises deemed material to its business, and those of
    each of its Subsidiaries, except as otherwise specifically
  permitted by section 11.7, and (subject to the remaining
     provisions of this section 11.9) the Company, the Guarantor
    and their respective Subsidiaries may discontinue any line
    of business and except that the corporate existence of any
  Subsidiary (other than SDI) may be terminated if, in the
      good faith judgment of the Board, such termination is in the
    best interest of the Company or the Guarantor, as the case
  may be, and is not disadvantageous to the holders of the
Notes.  Prior to September 30, 1988:                  

              (a)    the Company or the Guarantor, as the case
        may be, will not, and will not permit any Subsidiary
        to, engage in any business other than the businesses
          conducted by the Company or the Guarantor, as the case
           may be, and its Subsidiaries on the date of this Agree-
         ment and other businesses or activities substantially
          similar or reasonably related thereto (it being under-
         stood that SDI is engaged in the business of property
and casualty insurance underwriting); and   

              (b)    the Company or the Guarantor, as the case
         may be, shall not discontinue any line of business or
          undertake a new line of business, and shall not permit
         any Subsidiary to discontinue any line of business or
undertake any new line of business,         

      provided that if at any time the Motor Net Deficit is great-
--------                                              
        er than B.P.8 million, SDI may (x) discontinue its motor lines
of business, or (y) make a New Motor Transfer.        

              11.10. Payment of Taxes and Claims.  The Company
       ---------------------------
 and if there shall have occurred a Triggering Event the
     Guarantor will, and will cause each of its Subsidiaries to,
   pay all taxes, assessments and other governmental charges
  imposed upon it or any of its properties or assets or in
 respect of any of its franchises, businesses, income or
     profits before any penalty or interest accrues thereon, and
      all claims (including, without limitation, claims for labor,
      services, materials and supplies) for sums which have become
      due and payable and which by law have or might become a Lien
     upon any of its properties or assets, provided that no such
                              --------
 charge or claim need be paid if being contested in good

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 faith by appropriate proceedings promptly initiated and
     diligently conducted and if such reserve or other appropri-
  ate provision, if any, as shall be required by generally
 accepted accounting principles applicable in the United
Kingdom shall have been made therefor.                

                12.    Events of Default; Acceleration.  If any of
           -------------------------------
   the following conditions or events (each an "Event of De-
fault") shall occur and be continuing:                

                (a)    the Company shall default in the payment of
       any principal of or premium, if any, on any Note or
      Credit Facility Note when the same becomes due and
       payable, whether at maturity or at a date fixed for
 prepayment or by declaration or otherwise; or

              (b)    the Company shall default for a period of
         seven days in the payment of any interest on any Note
         or Credit Facility Note when the same becomes due and
          payable or in material respect with any term contained
in section 11.3, ll.5, ll .9 or ll .10; or  

               (c)    the Company or the Guarantor shall default
          in the performance of or compliance with any term con-
           tained in section 11.1, 11.2, 11.4, 11.6, 11.7 or 11.8;
or                                          

               (d)    the Company or the Guarantor shall default
          in the performance of or compliance with any term con-
         tained in this Agreement other than those referred to
       above in this section 12 and such default shall not
       have been remedied within 30 days after the date on
          which the Company or the Guarantor is required to give
notice of such default to you; or           

           (e)    any representation or warranty made in
           writing by or on behalf of the Company or the Guarantor
         in this Agreement or in any instrument other than the
         Share Purchase Agreement furnished in compliance with
          or in reference to this Agreement or otherwise in con-
      nection with the transactions contemplated by this
         Agreement shall prove to have been false or incorrect
         in any material respect on the date as of which made;
or                                          

                (f)    any Debt (other than the Notes or the Cred-
          it Facility Notes) of the Guarantor or any of its Sub-
            sidiaries in excess of B.P.25,000 becomes or is declared

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      repayable prior to the date for payment thereof by
          reason of default or is not repaid on the due date for
          payment thereof as extended by any period of grace; or

               (g)    an administration order is made in respect
           of the Guarantor or any of its Subsidiaries or an order
        is made or a resolution passed for the winding up of
           the Guarantor or any of its Subsidiaries, other than as
permitted under section 11.7; or            

             (h)    the Guarantor or any of its Subsidiaries
           stops or threatens to stop payment or ceases or threat-
        ens to cease to carry on all or substantially all of
       its business (other than in a transaction permitted
         under section ll.7 or for the purposes of reorganiza-
        tion or amalgamation while solvent and as previously
          approved by you), or is unable to pay its debts within
         the meaning of section 123 of the Insolvency Act 1986
      or an order is made by any competent court, or any
        resolution is passed by the Guarantor or any Subsid-
       iary, to apply for judicial composition proceedings
      with its creditors or any voluntary arrangement is
           proposed under Section l of the Insolvency Act 1986, or
           makes any assignment for the benefit of creditors, or a
        liquidator, provisional liquidator, administrator or
           other similar official is validly appointed in relation
         to the Guarantor, any of its Subsidiaries or all or a
substantial part of any of their assets; or 

              (i)    any encumbrancer takes possession of or a
          receiver or administrative receiver is appointed of or
         over any of the assets of the Guarantor or any of its
Subsidiaries; or                            

               (j)    any distress or other process is levied or
       enforced or served upon or against any asset of the
           Guarantor or any Subsidiary and is not discharged with-
in 90 days; or                              

         (k)    if there shall exist final judgments
          against the Guarantor and its Subsidiaries aggregating
             in excess of B.P.100,000 (other than any judgment arising
        out of or resulting from any fact or circumstance in
        respect of which there shall be a purchase price ad-
         justment or you are required to indemnify the Company
         under the Share Purchase Agreement) and if any one of
      such judgments shall have been outstanding for any
        period of 60 days or more from the date of its entry

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        and shall not have been discharged in full or stayed
pending appeal;                             

      then, upon the occurrence of any Event of Default, any hold-
 er or holders of 25% or more in principal amount of the
     Senior Notes, the Subordinated Notes or the Credit Facility
   Notes at the time outstanding may at any time (unless all
  defaults shall theretofore have been remedied) at its or
    their option, by written notice or notices to the Company,
     declare all such Senior Notes, Subordinated Notes or Credit
    Facility Notes, as the case may be, to be due and payable,
      whereupon the same shall forthwith mature and become due and
      payable, in the amount of such Senior Notes' or Subordinated
      Notes' (as the case may be) Accreted Value as of the date of
  such declaration (or principal amount in the case of the
Credit Facility Notes), together with interest accrued
      thereon at a rate of 10% per annum in the case of the Senior
    Notes, 12% per annum in the case of the Subordinated Notes
 and in accordance with the terms of the Credit Facility
   Notes in the case of such notes, all without presentment,
demand, protest or notice, which are hereby waived.   

              At any time after the principal of, and interest
 accrued on, all the Senior Notes, Subordinated Notes or
  Credit Facility Notes or any of them is declared due and
      payable, the holders of not less than 75% in aggregate prin-
 cipal amount of the Senior Notes, Subordinated Notes or
     Credit Facility Notes, as the case may be, then outstanding
   (excluding any Notes or Credit Facility Notes directly or
    indirectly owned by the Company or any of its Subsidiaries
      or Affiliates), by written notice to the Company may rescind
and annul any such declaration and its consequences.  

               13.    Remedies on Default, etc.  In case any one
    ------------------------
  or more Events of Default or Potential Events of Default
  shall occur and be continuing, the holder of any Note or
     Credit Facility Note at the time outstanding may proceed to
    protect and enforce the rights of such holder by an action
 at law, suit in equity or other appropriate proceeding,
    whether for the specific performance of any agreement con-
   tained herein or in such Note or Credit Facility Note, or
   for an injunction against a violation of any of the terms
   hereof or thereof, or in aid of the exercise of any power
      granted hereby or thereby or by law or otherwise. In case of
     a default in the payment of any principal of or premium, if
   any, or interest on any Note or Credit Facility Note, the
    Company will pay to the holder thereof such further amount
  as shall be sufficient to cover the cost and expenses of

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      collection, including, without limitation, reasonable attor-
     neys' fees, expenses and disbursements.  No course of deal-
   ing and no delay on the part of any holder of any Note or
      Credit Facility Note in exercising any right, power or reme-
     dy shall operate as a waiver thereof or otherwise prejudice
    such holder's rights, powers or remedies.  No right, power
 or remedy conferred by this Agreement or by any Note or
      Credit Facility Note upon any holder thereof shall be exclu-
     sive of any other right, power or remedy referred to herein
     or therein or now or hereafter available at law, in equity,
by statute or otherwise.                              

               14.    Definitions.  As used herein the following
-----------         
terms have the following respective meanings:         

           Accreted Value:  the meaning specified in the
--------------                    
Notes.                                                

               Adjustment Account:  the meaning specified in the
------------------                
Share Purchase Agreement.                             

           Affiliate:  any Person directly or indirectly
---------                         
   Controlling or Controlled by or under common Control with
  the Guarantor or any Subsidiary and any partner (whether
general or limited) of any such Person.               

               Affiliated Lender:  the meaning specified in Sec-
-----------------                 
tion 10.4.                                            

              Board:  the Board of Directors of the Guarantor,
-----                             
the Company, SDI or you, as the context requires.     

                Business Day:  any day except a Saturday, a Sunday
------------                      
      or other day on which commercial banks in the City of London
are required or authorized by law to be closed.       

           Capital Lease:  as applied to any Person, any
-------------                     
    lease of any property (whether real, personal or mixed) by
     such Person as lessee which would, in accordance with stan-
     dard accounting practices applicable in the United Kingdom,
     be required to be classified and accounted for as a capital
lease on a balance sheet of such Person.              

            Capital Lease Obligation:  with respect to any
------------------------          
   Capital Lease, the amount of the obligation of the lessee
      thereunder which would, in accordance with standard account-
     ing practices applicable in the United Kingdom, appear on a

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 balance sheet of such lessee in respect of such Capital
Lease.                                                

             Capitalization Table:  the meaning specified in
--------------------              
section 5.4.                                          

              Change in Control:  any of the following events:
-----------------                 

            (i)    The Dai-Tokyo Fire and Marine Insurance
             Company Limited, a Japanese Company, and any of
             its Affiliates shall not own, directly or indi-
                rectly, more than 10% of the equity capital of the
Company, or                       

           (ii)   the partners on the Closing Date of SD
           Partners, a.Bermuda partnership, shall not own, direct-
           ly or indirectly, in the aggregate more than 50% of the
equity capital of the Company.              

             Closing:    the meaning specified in section 3.
-------                           

               Consolidated Adjusted Net Income:  with reference
--------------------------------  
     to any period, the Consolidated Net Income of the Guarantor
    (or the Company, as the case may be) excluding (a) the in-
      come (or deficit) of any Person accrued prior to the date it
     becomes a Subsidiary or is merged into or consolidated with
 the Guarantor (or the Company, as the case may be) or a
      Subsidiary, (b) the income (or deficit) of any Person (other
    than a Subsidiary) in which the Guarantor (or the Company,
    as the case may be) or any Subsidiary has an ownership in-
    terest, except to the extent that any such income has been
    actually received by the Guarantor (or the Company, as the
     case may be) or such Subsidiary in the form of dividends or
      similar distributions, (c) the undistributed earnings of any
    Subsidiary (including in the case of the Guarantor and the
     Company, SDI) to the extent that the declaration or payment
     of dividends or similar distributions by such Subsidiary is
      not at the time permitted by the terms of its Memorandum and
     Articles of Association or any agreement, instrument, judg-
    ment, decree, order, statute, rule or governmental regula-
    tion applicable to such Subsidiary, (d) any restoration to
      income of any contingency reserve, except to the extent that
   provision for such reserve was made out of income accrued
     during such period, (e) any aggregate net gain (but not any
 aggregate net loss) during such period arising from the
     sale, exchange or other disposition of capital assets (such
      term to include all fixed assets, whether tangible or intan-
    gible, all inventory sold in conjunction with the disposi-

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     tion of fixed assets, and all securities), (f) any write-up
    of any assets, (g) any net gain from the collection of the
   proceeds of life insurance policies, (h) any gain arising
    from the acquisition of any securities, or the extinguish-
   ment of any Debt of the Guarantor (or the Company, as the
     case may be) or any Subsidiary, and (i) any deferred credit
    representing the excess of equity in any Subsidiary at the
     date of acquisition over the cost of the investment in such
Subsidiary.                                           

             Consolidated Net Income:  with reference to any
-----------------------           
      period, the net income (or deficit) of the Guarantor (or the
    Company, as the case may be) and its Subsidiaries for such
   period (taken as a cumulative whole), after deducting all
   operating expenses, provisions for all taxes and reserves
   and all other proper deductions, all determined in accor-
    dance with standard accounting practices applicable in the
   United Kingdom on a consolidated basis, after eliminating
    all intercompany transactions and after deducting portions
   of income properly attributable to minority interests, if
any, in the stock and surplus of Subsidiaries.        

              Constituent Documents:  the meaning specified in
---------------------             
section 5.4.                                          

              Control:  (including, with correlative meanings,
-------                           
     the terms "Controlled by" and "under common Control with"),
    as used with respect to any Person, shall mean the posses-
 sion, directly or indirectly, of the power to direct or
    cause the direction of the management and policies of such
    Person, whether through the ownership of voting securities
or by contract or otherwise.                          

               Credit Enhancement Agreement:  the meaning speci-
----------------------------      
fied in section 10.7.                                 

              Credit Enhancement Party:  the meaning specified
------------------------          
in Section 10.7.                                      

               Credit Call Date:  the meaning specified. in sec-
----------------                  
tion 10.3.                                            

           Credit Call Notice:  the meaning specified in
------------------                
section 10.3.                                         

            Credit Facility Cap:  the meaning specified in
-------------------               
section 10.2.                                         

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               Credit Support:  the meaning specified in section
--------------                    
10.7.                                                 

               Debt:  as applied to any Person (without duplica-
----                              
tion):                                                

              (a)    any indebtedness for borrowed money which
       such Person has directly or indirectly created, in-
curred or assumed;                          

              (b)    any indebtedness, whether or not for bor-
           rowed money, secured by any Lien in respect of property
        owned by such Person, whether or not such Person has
        assumed or become liable for the payment of such in-
debtedness;                                 

              (c)    any indebtedness, whether or not for bor-
      rowed money, with respect to which such Person has
         become directly or indirectly liable and which repre-
      sents or has been incurred to finance the purchase
        price (or a portion thereof) of any property or ser-
         vices or business acquired by such Person, whether by
 purchase, consolidation, merger or otherwise;

      (d)    any Capital Lease Obligation; and

              (e)    any indebtedness or Capital Lease Obliga-
         tion of any other Person of the character referred to
          in subdivision (a), (b), (c) or (d) of this definition
        with respect to which the Person whose Debt is being
      determined has become liable by way of a Guaranty.

              Event of Default:  the meaning specified in sec-
----------------                  
tion 12.                                              

               Financial Adviser:  the meaning specified in sec-
-----------------                 
tion 10.5.                                            

              Financial Adviser's Opinion:  the meaning speci-
---------------------------       
fied in Section 10.5.                                 

                Guaranty:  as applied to any Person, any direct or
--------                          
         indirect liability, contingent or otherwise of such Person with
          respect to any indebtedness, lease, dividend or other obligation
        of another, including, without limitation, any such obligation
     directly or indirectly guaranteed, endorsed (otherwise than
   for collection or deposit in the ordinary course of busi-
      ness) or discounted or sold with recourse by such Person, or

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  in respect of which such Person is otherwise directly or
    indirectly liable, including, without limitation, any such
    obligation in effect guaranteed by such Person through any
     agreement (contingent or otherwise) to purchase, repurchase
     or otherwise acquire such obligation or any security there-
  for, or to private funds for the payment or discharge of
  such obligation (whether in the form of loans, advances,
     stock purchases, capital contributions or otherwise), or to
    maintain the solvency of any balance sheet or other finan-
      cial condition of the obligor of such obligation, or to make
    payment for any products, materials or supplies or for any
      transportation or services regardless of the non-delivery or
   nonfurnishing thereof, in any such case if the purpose or
    intent of such agreement is to provide assurance that such
   obligation will be paid or discharged, or that any agree-
   ments relating thereto will be complied with, or that the
      holders of such obligation will be protected against loss in
     respect thereof.  The amount of any Guaranty shall be equal
    to the amount of the obligation guaranteed (or such lesser
  amount as to which the maximum exposure of the guarantor
shall have been specifically limited).                

           Guaranty Agreement:  the meaning specified in
------------------                
section 1.                                            

          Lien:  as to any Person, any mortgage, lien,
----                              
   pledge, adverse claim, charge, security interest or other
    encumbrance in or on, or any interest or title of any ven-
  dor, lessor, lender or other secured party to or of such
    Person under any conditional sale or other title retention
   agreement or lease with respect to, any property or asset
     owned or held by such Person, or the signing or filing of a
financing statement which names such Person.          

           Loan:  the meaning specified in section 10.4.
----                              

              Motor Net Income (or Deficit):  on any date, the
-----------------------------     
      net income (or deficit) of SDI in respect of its motor lines
    of business, determined as if such business were conducted
    by a separate Wholly-Owned Subsidiary of SDI, for the four
      (or if a lesser number, the number of full calendar quarters
     ending after December 31, 1986 through the date of determi-
      nation) most recently-ended calendar quarters, determined on
  the basis of the revenues allocable to such business and
      after deducting the allocable portion of operating expenses,
   reserves (determined in accordance with practices used in
    determining reserves on the financial statements of SDI as
     of and for the periods ending December 31, 1986), and other

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    proper deductions, all determined in accordance with stan-
dard accounting practices in the United Kingdom.      

             New Motor Subsidiary:  the meaning specified in
--------------------              
section 11.2.                                         

           New Motor Transfer:  the meaning specified in
------------------                
section 11.2.                                         

                Non-Cash Indemnity Balance:  the meaning specified
--------------------------        
in section 10.2.                                      

               Officers' Certificate:  a certificate executed on
---------------------             
  behalf of the Guarantor, the Company, SDI or you, as the
     context requires, by its Chairman and its Finance Director,
    and, in respect of financial statements delivered pursuant
     to section 7(b)(iii) and the related certificate under sec-
tion 7(c), approved by its Board.                     

                Person:  a company, a corporation, an association,
------                            
      a partnership, an organization, a business, an individual, a
     government or political subdivision thereof or a governmen-
tal agency.                                           

           Potential Event of Default:  any condition or
--------------------------        
  event which, with notice or lapse of time or both, would
become an Event of Default.                           

             Preferred Shares:  as applied to any company or
----------------                  
  corporation, shares of such company or corporation which
    shall be entitled to preference or priority over any other
    shares of such company or corporation in respect of either
     the payment of dividends or the distribution of assets upon
liquidation.                                          

              Relatively Favourable:  the meaning specified in
---------------------             
section 10.5.                                         

                Reserve Adjustment Date:  the meaning specified in
-----------------------           
the Share Purchase Agreement.                         

              Reserve Adjustment Schedule:  the meaning speci-
---------------------------       
fied in the Share Purchase Agreement.                 

            Restricted Payment:  (a) any dividend or other
------------------                
    distribution, direct or indirect, on account of any shares
   of any class of the Company, the New Motor Subsidiary, or
      the Guarantor, as the case may be now or hereafter outstand-

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     ing, except a dividend payable solely in shares of the Com-
  pany, the New Motor Subsidiary, or the Guarantor, as the
      case may be, which are not Preferred Shares; (b) any redemp-
     tion, purchase or other acquisition, direct or indirect, of
any shares of any class of the Company, the New Motor 
 Subsidiary, or the Guarantor, as the case may be now or
      hereafter outstanding, or of any warrants, rights or options
   to acquire any such shares, except (i) to the extent that
      the consideration therefor consists of an issue of shares of
      the Company or the Guarantor, as the case may be or (ii) out
      of the net cash proceeds received by the Company after Octo-
      ber 9, 1987 from an issue of shares of the Company occurring
      within 60 days of the making of such redemption, purchase or
    other acquisition; and (c) any discharge by the Company or
     the Guarantor, as the case may be, or any Subsidiary there-
     of, of any obligation of any Person Controlling the Company
     or the Guarantor as the case may be, provided that the fol-
                            --------
      lowing shall not be Restricted Payments:  (x) cash dividends
       of the Company not exceeding B.P.430,000 during any period of
      twelve consecutive months, (y) dividends on B.P.3,000,000 of
      the Guarantor's Cumulative Redeemable Preference Shares, and
    other dividends of the Guarantor not exceeding B.P.100,000
      during any period of twelve consecutive months and (z) with-
   out prejudice to (x), dividends aggregating not more than
        B.P.14,750,000 by the Company to the Guarantor or by the Guar-
     antor to its parent to the extent that, simultaneously with
    the receipt of the dividend, the party receiving the divi-
    dend subscribes and pays for preferred shares of the party
     making the dividend in an amount equal to the amount of the
dividend.                                             

           SDI:   the meaning specified in section 7(a).
---                               

              Senior Debt:  Debt other than Subordinated Debt.
-----------                       

              Share Purchase Agreement:  the meaning specified
------------------------          
in section 4.4.                                       

              Shares:  the meaning specified in the Share Pur-
------                            
chase Agreement.                                      

           Subordinated Debt:  any unsecured Debt of the
-----------------                 
 Company or the Guarantor which (a) has a final maturity
      subsequent to June 30, 1995; (b) at the date of its creation
  has a Weighted Average Life to Maturity which is greater
     than the remaining Weighted Average Life to Maturity of the
   Notes; (c) does not permit any holder of such Debt to de-
      clare all or any part of such Debt to be due and payable, or

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      to require (upon the occurrence of any contingency or other-
   wise) all or any part of such Debt to be paid, before its
     expressed maturity by reason of the occurrence of a default
   in respect of the Notes or the Credit Facility Notes; and
   (d) is created under is evidenced by or is subject to any
   instrument containing provisions for the subordination of
      such Debt to the Notes and (if desired by the Company and so
  provided) to other Debt of the Company substantially the
same as those provided in the Trust Deed.             

              Subsidiary:  a corporation, association or other
----------                        
     business entity in which the Guarantor (or, as the case may
     be, the Company) or one or more Subsidiaries of the Guaran-
   tor (or, as the case may be, the Company) owns sufficient
    voting stock to enable it or them (as a group) ordinarily,
     in the absence of contingencies, to elect a majority of the
     directors (or persons performing similar functions) of such
     business entity, provided that for the purposes of sections
--------            
   10.9, ll.l, ll.3, ll.4, ll.6, ll.7 and the definitions of
  "Consolidated Adjusted Net Income" and "Consolidated Net
  Income" any New Motor Subsidiary shall be deemed to be a
      Subsidiary of the Company, but that for all purposes of this
    Agreement, any New Motor Subsidiary shall be deemed not to
be a Wholly-Owned Subsidiary of the Company or SDI.   

              Support:  the meaning specified in section 10.4.
-------                           

           Third Party Lender:  the meaning specified in
------------------                
section 10.4.                                         

                Third Party Loan:  a Third Party Supported Loan or
----------------                  
a Third Party Unsupported Loan.                       

                Third Party Supported Loan:  the meaning specified
--------------------------        
in section 10.4.                                      

               Third Party Unsupported Loan:  the meaning speci-
----------------------------      
fied in section 10.4.                                 

              Triggering Event:  (i) any sale, distribution or
----------------                  
      other transfer of any property, assets or undertaking of the
    Company or any of its Subsidiaries to any of the Guarantor
    or its Subsidiaries (other than the Company and its Subsi-
     diaries), which sale, distribution or transfer would not be
 permitted under sections ll.2 (without reference to the
      proviso thereof) and ll.5 and (ii) any Restricted Payment by
a New Motor Subsidiary.                               

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             Trust Deed:  the Deed of Trust substantially in
----------                        
the form attached hereto as Exhibit D.                

              UK Insurance Subsidiaries: the meaning specified
-------------------------         
in section 7(a).                                      

            Warrants: the meaning specified in the Warrant
--------                          
Agreement.                                            

                Warrant Agreement:  the Warrant Agreement dated as
-----------------                 
of October 9, 1987, between you and the Guarantor.    

               Weighted Average Life to Maturity:  as applied to
--------------------------------- 
      any Debt at any date, the number of years obtained by divid-
    ing (a) the then outstanding principal amount of such Debt
    into (b) the total of the products obtained by multiplying
    (i) the amount of each then remaining installment, sinking
    fund, serial maturity or other required payment, including
    payment at final maturity, in respect thereof, by (ii) the
 number of years (calculated to the nearest one-twelfth)
   which will elapse between such date and the date on which
such payment is to be made.                           

            Wholly-Owned:  as applied to any Subsidiary, a
------------                      
      Subsidiary all the outstanding shares (other than directors'
     qualifying shares, if required by law) of every class which
      are at the time owned by the Company or by one or more Whol-
 ly-Owned Subsidiaries or by the Company and one or more
Wholly-Owned Subsidiaries.                            

        15.    Exchange and Substitution of Notes.
              ----------------------------------

             15.1.  Exchange.  Upon surrender of any Note to
--------            
    the Company at its principal office for exchange for Notes
      of smaller denominations as a result of prepayment or other-
      wise, the Company at its expense will execute and deliver in
      exchange therefor a new Note or Notes in denominations of at
        least B.P.1,000,000 (except one Note may be issued in a lesser
     principal amount if the unpaid principal amount of the sur-
   rendered Note is not evenly divisible by, or is less than
         B.P.l,000,000), as requested by the holder or transferee, which
 aggregate the unpaid remaining principal amount of such
   surrendered Note.  Each such new Note shall be payable to
   the order of such Person as such holder or transferee may
     request and shall be dated so that there will be no loss of
 interest on such surrendered Note and otherwise of like
tenor.                                                

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           15.2.  Replacement.  Upon receipt of evidence
-----------         
    reasonably satisfactory to the Company of the loss, theft,
  destruction or mutilation of any Note or Credit Facility
      Note and, in the case of any such loss, theft or destruction
  of any Note or Credit Facility Note, upon delivery of an
     indemnity bond in such reasonable amount as the Company may
   determine (or, in the case of any Note or Credit Facility
     Note held by you or another institutional holder or your or
 its nominee, of an indemnity agreement from you or such
     other holder), or, in the case of any such mutilation, upon
     the surrender of such Note or Credit Facility Note for can-
    cellation to the Company at its principal office, the Com-
      pany at its expense will execute and deliver, in lieu there-
      of, a new Note or Credit Facility Note in the unpaid princi-
      pal amount of such lost, stolen, destroyed or mutilated Note
      or Credit Facility Note, dated so that there will be no loss
    of interest on such Note and otherwise of like tenor.  Any
    Note or Credit Facility Note in lieu of which any such new
     Note or Credit Facility Note has been so executed and deli-
     vered by the Company shall not be deemed to be an outstand-
   ing Note or Credit Facility Note, as the case may be, for
all purposes of this Agreement.                       

               16.    Payments on Notes.  Payments of principal,
-----------------   
   premium, if any, and interest becoming due and payable on
 the Notes or Credit Facility Notes shall be made at the
principal office of the Company in London.            

                17.    Survival of Representations and Warranties.
                      ------------------------------------------
     All representations and warranties contained in this Agree-
    ment or made in writing by or on behalf of the Company and
   the Guarantor in connection with the transactions contem-
  plated by this Agreement shall survive the execution and
   delivery of this Agreement, any investigation at any time
     made by you or on your behalf, the purchase of the Notes or
 Credit Facility Notes by you, an Affiliated Lender or a
  Credit Enhancement Party, as the case may be, under this
  Agreement and any disposition or payment of the Notes or
 Credit Facility Notes.  All statements contained in any
      certificate or other instrument delivered by or on behalf of
    the Company or the Guarantor pursuant to this Agreement or
  in connection with the transactions contemplated by this
   Agreement other than such as are made in or in connection
     with the Share Purchase Agreement shall be deemed represen-
    tations and warranties of the Company or the Guarantor, as
the case may be, under this Agreement.                

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              18.    Amendments and Waivers.  Any term of this
  ----------------------
 Agreement or of the Senior Notes or of the Subordinated
      Notes or of the Credit Facility Notes may be amended and the
   observance of any term of this Agreement or of the Senior
      Notes or of the Subordinated Notes or of the Credit Facility
  Notes may be waived (either generally or in a particular
  instance and either retroactively or prospectively) only
    with the written consent of the Company, the Guarantor and
     the holders of at least 66 2/3% in principal amount of each
     of the Senior Notes, Subordinated Notes and Credit Facility
   Notes at the time outstanding, provided that, without the
                --------
   prior written consent of the holders of all the Notes and
   Credit Facility Notes at the time outstanding, no such a-
 mendment or waiver shall (a) change the maturity or the
    principal amount of, or reduce the rate or change the time
     of payment of interest on, or change the amount or the time
    of payment of any principal or premium payable on any pre-
      payment of, any Note or Credit Facility Note, (b) reduce the
    aforesaid percentages of the principal amount of the Notes
    or Credit Facility Notes the holders of which are required
      to consent to any such amendment or waiver or (c) change the
     percentage of the principal amount outstanding from time to
 time of the Senior Notes, the Subordinated Notes or the
    Credit Facility Notes the holders of which may declare the
     Senior Notes, the Subordinated Notes or the Credit Facility
     Notes to be due and payable as provided in section 12.  Any
      amendment or waiver effected in accordance with this section
    18 shall be binding upon each holder of any Note or Credit
      Facility Note at the time outstanding, each future holder of
any Note or Credit Facility Note and the Company.     

              19.    Suspensory Clause:  No provisions of this
-----------------   
  Agreement or of any agreement or arrangement of which it
     forms part, by virtue of which the agreement constituted by
     all of the foregoing is subject to registration (if such be
  the case) under the Restrictive Trade Practices Act 1976
   shall take effect until the day after particulars of such
  agreement have been furnished to the Director General of
  Fair Trading pursuant to the terms of Section 24 of that
Act.                                                  

                20.    Notices, etc.  Except as otherwise provided
------------        
   in this Agreement, notices and other communications under
    this Agreement shall be in writing and shall be delivered,
     or mailed by first-class mail, postage pre-paid, addressed,
(a) if to you, at                                     

      50

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 Alexander Stenhouse & Partners Ltd.
Two South Place                   
London EC2P 2DX                   
England                           
Attention:  The Company Secretary 
Telex:      8813371               
Fax:        01-588-1680           

With copies to:                   

  Alexander & Alexander Services, Inc.
1211 Avenue of the Americas       
New York, New York 10036          
Attention:  General Counsel       
Telex:      620303                
Fax:        (212) 302-1921        

Alexander & Alexander Europe plc  
5-10 Bury Street                  
London EC3A 5HL                   
England                           
Attention:  Group Legal Adviser   
Telex:      882171                
Fax:        01-623-5022           

     or at such other address as you shall have furnished to the
  Company in writing, or (b) if to any other holder of any
     Note or Credit Facility Note, at such address as such other
    holder shall have furnished to the Company in writing, or,
    until any such other holder so furnishes to the Company an
        address, then to and at the address of the last holder of such
      Note or Credit Facility Note who has furnished an address to
     the Company, or (c) if to the Company or the Guarantor, to:

      Sphere Drake Acquisitions (U.K.) Limited
c/o Sphere Drake Insurance plc    
52/54 Leadenhall Street           
London EC3A 2BJ                   
England                           
Attention:  Ian H. Dean           
Telex:      935015 Sphere G       
Fax:        01-481-3828           

with copies to                    

      51

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      Sphere Drake Acquisitions (U.K.) Limited
c/o Centre Capital Investors L.P. 
Suite 1025                        
One Rockefeller Plaza             
New York, New York 10020          
United States of America          
Attention:  Lester Pollack        
Telex:      RCA222301             
Fax:        (212) 974-2825 or     
    (212) 489-9655

and                               

John C Head III                   
c/o John Head & Partners          
545 Madison Avenue                
New York,   New York 10022        
Telex: 971861                     
Fax:   (212) 421-9049             

and                               

      Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas       
New York, New York 10019          
United States of America          
Attention:  Albert P. Hand, Esq.  
Telex:      WUI 66-843            
Fax:        (212) 757-3990        

and                               

Clyde & Co.                       
51 Eastcheap                      
London EC3M lJP                   
England                           
         Attention:  Francis Mackie and V.G. Southey
Telex:      884886 Clyde G        
Fax:        01-623-5427           

     or at such other address, or to the attention of such other
      officer, as the Company shall have furnished to you and each
such other holder in writing.                         

            21.    Miscellaneous.  This Agreement shall be
-------------       
     binding upon and inure to the benefit of and be enforceable
 by the respective successors and assigns of the parties
  hereto, whether so expressed or not, and, in particular,

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 shall inure to the benefit of and be enforceable by any
  holder or holders from time to time of the Notes and the
      Credit Facility Notes or any part thereof.  Except as stated
     in section 17, this Agreement embodies the entire agreement
      and understanding between you, the Company and the Guarantor
    and supersedes all prior agreements and understandings re-
  lating to the subject matter hereof. This Agreement, the
    Notes and the Credit Facility Notes shall be construed and
 enforced in accordance with and governed by the laws of
      England.  The headings in this Agreement are for purposes of
    reference only and shall not limit or otherwise affect the
     meaning hereof.  This Agreement may be executed in any num-
      ber of counterparts, each of which shall be an original, but
all of which together shall constitute one instrument.

                If you are in agreement with the foregoing, please
      sign the form of agreement and the accompanying counterparts
   of this letter and return one of the same to the Company,
    whereupon this letter shall become a binding agreement be-
tween you, the Company and the Guarantor.             

SPHERE DRAKE ACQUISITIONS (U.K.) LIMITED              

By: _________________________                         
Director                                      

SPHERE DRAKE HOLDING PUBLIC LIMITED COMPANY           

By: _________________________                         
Director                                      

 The foregoing Agreement is hereby agreed as of the date
hereof.                                               

ALEXANDER STENHOUSE                                   
& PARTNERS LTD.                                       

By: _________________________                         
Director                                      

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                                                       EXHIBIT A-1

     FORM OF
     ZERO COUPON SENIOR NOTE
     -----------------------

      SPHERE DRAKE ACQUISITIONS (U.K.) LIMITED

      ZERO COUPON SENIOR NOTE DUE 1995

   Guaranteed by Sphere Drake Holding Public Limited Company

         B.P.__________                                           London
                                                    December, 1987

               SPHERE DRAKE ACQUISITIONS (U.K.) LIMITED, an Eng-
 lish company having its registered office at 30 Mincing
    Lane, London EC3R 7BR, company registration number 2136565
     (the "Company"), for value received, hereby promises to pay
    to ALEXANDER STENHOUSE & PARTNERS LTD., a Scottish company
  having its registered office at 145 St. Vincents Street,
     Glasgow, Scotland, company registration number SC23477 ("AS
     & P"), or order, on June 30, 1995 (the "Maturity Date"), or
such earlier date as the principal hereof and interest
  thereon may become due in accordance with the provisions
 hereof upon surrender hereof, the principal sum of ____
         Pounds Sterling (B.P. ) (the "Face Amount"), or such lesser sum
  as shall become due upon acceleration of the maturity or
 redemption hereof to a date prior to the Maturity Date.

                This Note shall not otherwise bear interest unless
      the Company shall fail to pay or duly provide for payment of
      any amount due hereunder, whether upon acceleration, redemp-
      tion, at stated maturity or otherwise, provided, that if the
                                --------
   Company shall fail to pay any amount due hereunder on the
     date when due, the overdue amounts shall bear interest from
   and including such due date to but not including the date
 upon which all overdue amounts have been paid at a rate
     equal to the greater of (i) 10% per annum, compounded as of
      June 30 and December 31 in each year, and (ii) a fluctuating
    rate of interest equal to four percentage points above the
     base lending rate from time to time of National Westminster
    Bank plc (each change in such fluctuating rate of interest

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     to be effective as at the opening of business on the date a
   change in such base rate is determined by such Bank to be
effective), so compounded.                            

             Payments of principal and interest on this Note
    shall be made in lawful money of the United Kingdom at the
principal office of the Company in London.            

           This Note is one of the Company's Zero Coupon
   Senior Notes due 1995 (the "Notes"), originally issued in
         the aggregate principal amount of B.P.            pursuant to a
                           -----------
  Note Purchase Agreement (the "Note Purchase Agreement"),
      dated as of October 9, 1987, among the Company, Sphere Drake
     Holding Public Limited Company ("the "Guarantor") and Alex-
     ander Stenhouse & Partners Ltd.  The holder of this Note is
     entitled to the benefits of the Note Purchase Agreement and
     may enforce the agreements of the Company and the Guarantor
  contained therein and exercise the remedies provided for
thereby or otherwise available in respect thereof.    

           Timely payment of all amounts of interest and
     principal payable in respect of this Note are guaranteed by
    the Guarantor pursuant to the Guaranty Agreement dated De-
cember  , 1987.                                       

            The Notes are subject to required and optional
   prepayment, in whole or in part, as specified in the Note
    Purchase Agreement.  All such prepayments shall be at this
    Note's Accreted Value (as hereinafter defined) on the date
     of prepayment.  This Note was originally issued on December
        , 1987 for an aggregate purchase price of B.P.13,000,000.  For
     any period from its date of issue to its final maturity the
     income element in respect of this Note shall be the differ-
      ence between such Accreted Value (as hereinafter defined) as
of the last and the first days of such period.        

            Anything in this Note to the contrary notwith-
    standing, if the Final Adjustment Date (as defined in that
      certain Share Purchase Agreement dated as of October 9, 1987
      between the Company and AS & P) shall occur after the Matur-
      ity Date, the maturity of this Note shall be extended to the
    Final Adjustment Date at which time this Note shall become
    due together with interest as provided in the second para-
graph hereof.                                         

            The term "Accreted Value" with respect to this
 Note means, as of any date (a "Determination Date"), an
  amount equal to the original purchase price of this Note

     2

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      (B.P.13,000,000) plus Accrued Amortization of Original Issue
    Discount to the Determination Date.  "Accrued Amortization
   of Original Issue Discount" shall be (i) the aggregate of
   the amount of original issue discount of this Note at the
   June 30 or December 31 falling on or immediately prior to
    the Determination Date (a "Reference Date"), determined by
      applying the percentage applicable to this Note on such date
  as set forth in the Schedule attached hereto to the Face
     Amount of this Note, plus (ii) if the Determination Date is
     a date other than a Reference Date, Accrued Amortization of
     Original Issue Discount from the immediately preceding Ref-
     erence Date (or [the Closing date] if there is no preceding
     Reference Date) to the Determination Date, computed by mul-
    tiplying (a) the excess of the Accrued Amortization of the
     Original Issue Discount as of the next succeeding Reference
  Date determined by applying the percentage applicable to
    this Note on such Reference Date as set forth in the Sche-
   dule attached hereto to the Face Amount of this Note over
    the Accrued Amortization of the Original Issue Discount as
      of the immediately preceding Reference Date (or [the Closing
  date] if there is no preceding Reference Date), by (b) a
    fraction, (A) the numerator of which is the number of days
      (based on a 360-day year comprised of 12 30-day months) from
     but not including such immediately preceding Reference Date
   (or [the Closing date] if there is no preceding Reference
   Date) to and including the Determination Date and (B) the
denominator of which is 180.                          

            In case an Event of Default, as defined in the
     Note Purchase Agreement, shall occur and be continuing, the
     unpaid balance of the principal of this Note may become due
   and payable in the manner and with the effect provided in
the Note Purchase Agreement.                          

            This Note is made and delivered in London, and
shall be governed by the laws of England.             

                The Company waives diligence, presentment, demand,
      protest and notice of dishonour or other notice of any kind.
   The non-exercise by the holder of this Note of any of its
    rights hereunder in any particular instance shall not con-
      stitute a waiver thereof in that or any subsequent instance.

     3

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               IN WITNESS WHEREOF this Note has been executed on
   behalf of the Company by its duly authorised director the
day and year first above written.                     

SPHERE DRAKE ACQUISITIONS (U.K.) LIMITED              

By:____________________________                       
Director                                        

     4

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     SCHEDULE TO SENIOR NOTE
     -----------------------

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                                                       EXHIBIT A-2

     FORM OF
     ZERO COUPON SUBORDINATED NOTE
     -----------------------------

      SPHERE DRAKE ACQUISITIONS (U.K.) LIMITED

      ZERO COUPON SUBORDINATED NOTE DUE 1995

          Guaranteed by Sphere Drake Holding Public Limited Com-
pany                                                  

         B.P.                                                     London
--------------                                      
                                                    December, 1987

               SPHERE DRAKE ACQUISITIONS (U.K.) LIMITED, an Eng-
 lish company having its registered office at 30 Mincing
    Lane, London EC3R 7BR, company registration number 2136565
     (the "Company"), for value received, hereby promises to pay
    to ALEXANDER STENHOUSE & PARTNERS LTD., a Scottish company
  having its registered office at 145 St. Vincents Street,
      Glasgow, Scotland, company registration number SC23477, ("AS
     & P") or order, on June 30, 1995, (the "Maturity Date"), or
such earlier date as the principal hereof and interest
  thereof may become due in accordance with the provisions
 hereof upon surrender hereof, the principal sum of ____
       Pounds Sterling (B.P.          ) (the "Face Amount"), or such
 lesser sum as shall become due upon acceleration of the
     maturity or redemption hereof to a date prior to the Matur-
ity Date.                                             

                This Note shall not otherwise bear interest unless
      the Company shall fail to pay or duly provide for payment of
      any amount due hereunder, whether upon acceleration, redemp-
      tion, at stated maturity or otherwise, provided, that if the
                                --------
   Company shall fail to pay any amount due hereunder on the
     date when due, the overdue amounts shall bear interest from
   and including such due date to but not including the date
 upon which all overdue amounts have been paid at a rate
     equal to the greater of (i) 12% per annum, compounded as of
      June 30 and December 31 in each year, and (ii) a fluctuating
    rate of interest equal to four percentage points above the
     base lending rate from time to time of National Westminster
    Bank plc (each change in such fluctuating rate of interest
     to be effective as at the opening of business on the date a

.                                                                             

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   change in such base rate is determined by such Bank to be
effective), so compounded.                            

             Payments of principal and interest on this Note
    shall be made in lawful money of the United Kingdom at the
principal office of the Company in London.            

           This Note is one of the Company's Zero Coupon
      Subordinated Notes due 1995 (the "Notes"), originally issued
         in the aggregate principal amount of B.P.         pursuant to a
                              --------
  Note Purchase Agreement (the "Note Purchase Agreement"),
      dated as of October 9, 1987, among the Company, Sphere Drake
    Holding Public Limited Company (the "Guarantor") and Alex-
     ander Stenhouse & Partners Ltd.  The holder of this Note is
     entitled to the benefits of the Note Purchase Agreement and
     may enforce the agreements of the Company and the Guarantor
  contained therein and exercise the remedies provided for
thereby or otherwise available in respect thereof.    

           Timely payment of all amounts of interest and
     principal payable in respect of this Note are guaranteed by
    the Guarantor pursuant to the Guaranty Agreement dated De-
cember  , 1987.                                       

            The Notes are subject to required and optional
  prepayment, in whole or in part as specified in the Note
    Purchase Agreement.  All such prepayments shall be at this
    Note's Accreted Value (as hereinafter defined) on the date
      of prepayment. This Note was originally issued on December ,
      1987 for an aggregate purchase price of B.P.12,700,000.  For
     any period from its date of issue to its final maturity the
     income element in respect of this Note shall be the differ-
      ence between such Accreted Value (as hereinafter defined) as
of the last and the first days of such period.        

            Anything in this Note to the contrary notwith-
    standing, if the Final Adjustment Date (as defined in that
      certain Share Purchase Agreement dated as of October 9, 1987
      between the Company and AS & P) shall occur after the Matur-
      ity Date, the maturity of this Note shall be extended to the
    Final Adjustment Date at which time this Note shall become
    due together with interest as provided in the second para-
graph hereof.                                         

            The term "Accreted Value" with respect to this
 Note means, as of any date (a "Determination Date"), an
  amount equal to the original purchase price of this Note
      (B.P.12,700,000) plus Accrued Amortization of Original Issue

     2

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    Discount to the Determination Date.  "Accrued Amortization
   of Original Issue Discount" shall be (i) the aggregate of
   the amount of original issue discount of this Note at the
   June 30 or December 31 falling on or immediately prior to
    the Determination Date (a "Reference Date"), determined by
      applying the percentage applicable to this Note on such date
  as set forth in the Schedule attached hereto to the Face
     Amount of this Note, plus (ii) if the Determination Date is
     a date other than a Reference Date, Accrued Amortization of
     Original Issue Discount from the immediately preceding Ref-
     erence Date (or [the Closing date] if there is no preceding
     Reference Date) to the Determination Date, computed by mul-
     tiplying (a) the excess of Accrued Amortization of the Ori-
  ginal Issue Discount as of the next succeeding Reference
  Date determined by applying the percentage applicable to
    this Note on such Reference Date as set forth in the Sche-
   dule attached hereto to the Face Amount of this Note over
   Accrued Amortization of the Original Issue Discount as of
   the immediately preceding Reference Date (or [the Closing
  date] if there is no preceding Reference Date), by (b) a
    fraction, (A) the numerator of which is the number of days
      (based on a 360-day year comprised of 12 30-day months) from
     but not including such immediately preceding Reference Date
   (or [the Closing date] if there is no preceding Reference
   Date) to and including the Determination Date and (B) the
denominator of which is 180.                          

            In case an Event of Default, as defined in the
     Note Purchase Agreement, shall occur and be continuing, the
     unpaid balance of the principal of this Note may become due
   and payable in the manner and with the effect provided in
the Note Purchase Agreement.                          

            This Note is made and delivered in London, and
shall be governed by the laws of England.             

     3

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                The Company waives diligence, presentment, demand,
      protest and notice of dishonour or other notice of any kind.
   The non-exercise by the holder of this Note of any of its
    rights hereunder in any particular instance shall not con-
      stitute a waiver thereof in that or any subsequent instance.

               IN WITNESS WHEREOF this Note has been executed on
   behalf of the Company by its duly authorised director the
day and year first above written.                     

SPHERE DRAKE ACQUISITIONS (U.K.) LIMITED              

By:______________________                             
Director                                        

     4

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     SCHEDULE TO SUBORDINATED NOTE
     -----------------------------

.                                                                             

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                                                       EXHIBIT A-3

      FORM OF CREDIT FACILITY NOTE
      ----------------------------

      SPHERE DRAKE ACQUISITIONS (U.K.) LIMITED

     CREDIT FACILITY NOTE DUE 1995

               Guaranteed by Sphere Drake Holding Public Limited
Company                                               

                                                            London
                                                          ,   19__

              SPHERE DRAKE ACQUISITIONS (U.K.) Limited, an En-
  glish company having its registered office at 30 Mincing
     Lane, London EC3R 7BR, England, company registration number
      2136565 (the "Company"), for value received, hereby promises
    to pay to [ALEXANDER STENHOUSE & PARTNERS LTD., a Scottish
  company having its registered office at 145 St. Vincents
Street, Glasgow, Scotland, company registration number
    SC23477] [or name of Affiliated Lender] [or name of Credit
      Enhancement Party] or order, (the "Holder") on June 30, 1995
   as extended, or such earlier date as the principal hereof
   and interest hereon may become due in accordance with the
   provisions hereof, upon surrender hereof, the outstanding
   principal sum of Pounds Sterling shown for the time being
   and from time to time in the fifth column of the schedule
  hereto following notations made from time to time by the
 holder hereof in accordance with section 10 of the Note
   Purchase Agreement hereinafter referred to; together with
    interest on any and all principal amounts remaining unpaid
      hereunder from time to time outstanding from the date hereof
   until payment in full hereof, payable monthly on the last
  day of each calendar month during the term hereof and at
    final maturity at a fluctuating interest rate equal at all
    times to two percentage points above the base lending rate
used in England by National Westminster Bank plc (each
     change in such fluctuating rate of interest to be effective
    as at the opening of business on the date a change in such
base rate is determined by such Bank to be effective).

.                                                                             

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             Payments of principal and interest on this Note
    shall be made in lawful money of the United Kingdom at the
principal office of the Company in London.            

               This Note is one of the Company's Credit Facility
    Notes due 1995 (the "Notes"), originally issued in the ag-
        gregate principal amount of up to B.P.32,651,939 pursuant to a
     Note Purchase Agreement, dated as of October 9, 1987, ("the
   Note Purchase Agreement") among the Company, Sphere Drake
     Holding Public Limited, Company (the "Guarantor") and Alex-
     ander Stenhouse & Partners Ltd.  The holder of this Note is
     entitled to the benefits of the Note Purchase Agreement and
     may enforce the agreements of the Company and the Guarantor
  contained therein and exercise the remedies provided for
thereby or otherwise available in respect thereof.    

           Timely payment of all amounts of interest and
     principal payable in respect of this Note are guaranteed by
    the Guarantor pursuant to the Guaranty Agreement dated De-
cember  , 1987.                                       

            The Notes are subject to required and optional
  prepayment, in whole or in part, all as specified in the
Note Purchase Agreement.                              

                Anything in this Note to the contrary notwithstan-
     ding, if the Final Adjustment Date (as defined in that cer-
   tain Share Purchase Agreement dated as of October 9, 1987
      between the Company and AS & P) shall occur after the Matur-
      ity Date, the maturity of this Note shall be extended to the
    Final Adjustment Date at which time this Note shall become
    due together with interest as provided in the second para-
graph hereof.                                         

            In case an Event of Default, as defined in the
     Note Purchase Agreement, shall occur and be continuing, the
     unpaid balance of the principal of this Note may become due
   and payable in the manner and with the effect provided in
the Note Purchase Agreement.                          

            This Note is made and delivered in London, and
shall be governed by the laws of England.             

                The Company waives diligence, presentment, demand,
      protest and notice of dishonour or other notice of any kind.
   The non-exercise by the holder of this Note of any of its
    rights hereunder in any particular instance shall not con-
      stitute a waiver thereof in that or any subsequent instance.

     2

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               IN WITNESS WHEREOF this Note has been executed on
   behalf of the Company by its duly authorised director the
day and year first above written.                     

SPHERE DRAKE ACQUISITIONS (U.K.) LIMITED              

By:______________________                             
Director                                        

     3

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                              SCHEDULE
                              --------

                              OUTSTANDING PRINCIPAL AMOUNT
                              ----------------------------
                               OF CREDIT FACILITY NOTE
                               -----------------------

                                                        [Enlarge/Download Table]

             Payment Type:  Loan/                                                                
             Third Party                                                                         
             Supported Loan/                                      Outstanding/     Notation      
             Payment under Credit                     Repayment/  Remaining        made on behalf
  Date made  Enhancement Agreement  Principal Amount  Prepayment  Principal Amount of the holder 
  ---------  ---------------------  ----------------  ----------  ---------------- ------------- 
                                                                                                 

.                                                                                                


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                                                                       Exhibit B

      GUARANTY AGREEMENT

     December   , 1987

      by

     SPHERE DRAKE HOLDING PUBLIC LIMITED COMPANY

10931908.                                                             

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     TABLE OF CONTENTS
     -----------------

      Section                                                 Page
      -------                                                 ----

      1.  Definitions . . . . . . . . . . . . . . . . . . .      1

      2.  Guarantee . . . . . . . . . . . . . . . . . . . .      2

      3.  Obligations Unconditional . . . . . . . . . . . .      3

      4.  Waiver  . . . . . . . . . . . . . . . . . . . . .      9

      5.  Corporate Existence . . . . . . . . . . . . . . .     10

      6.  Notices . . . . . . . . . . . . . . . . . . . . .     10

      7.  Governing Law and Jurisdiction  . . . . . . . . .     12

.                                                                             

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                                                         EXHIBIT B

     SPHERE DRAKE HOLDING PUBLIC LIMITED COMPANY
     -------------------------------------------

      GUARANTY AGREEMENT
      ------------------

          THIS GUARANTEE is made the    day of 1987 by
    SPHERE DRAKE HOLDING PUBLIC LIMITED COMPANY, a company in-
 corporated in England (registered number 2168083) whose
   registered office is at 30 Mincing Lane, London EC3R 7BR,
  England ("the Guarantor") for the benefit of each of (1)
    Alexander Stenhouse & Partners Ltd., its permitted succes-
 sors and assigns pursuant to the provisions of the Note
    Purchase Agreement referred to in Recital (A) ("AS&P") and
   (2) the holders from time to time of the Guaranteed Notes
(as hereinafter defined) ("the Noteholders").         

WHEREAS:                                              
--------                                              

 (A)  This Guarantee is made pursuant to a Note Purchase
      Agreement dated as of October 9, 1987 made between
       Sphere Drake Acquisitions (U.K.) Limited (the "Com-
      pany"), the Guarantor and AS&P (the "Note Purchase
Agreement").                                

   (B)  Pursuant to the Note Purchase Agreement, the Company
        may from time to time issue and require AS&P to pur-
         chase the Senior Notes and the Subordinated Notes and
          may from time to time issue and Affiliated Lenders and
           Credit Enhancement Parties may purchase Credit Facility
           Notes (such Senior Notes, Subordinated Notes and Credit
        Facility Notes being hereinafter collectively called
"the Guaranteed Notes").                    

        NOW THIS DEED WITNESSES AND IT IS HEREBY DECLARED as
follows:-                                             

1.   Definitions                                      
-----------                                 

    (A)  Subject as herein provided, all words and expressions
          defined in the Note Purchase Agreement shall where the
         context so requires or permits have the same meanings
in this Guarantee.                          

      (B)  Unless the context indicates otherwise, references to a
           Clause shall be construed as a reference to a Clause of
this Guarantee.                             

     (C)  Headings have been inserted for ease of reference only
           and do not and shall be deemed not to form part of this

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           Guarantee and shall not affect the construction of this
Guarantee.                                  

      (D)  References to the singular shall include the plural and
           vice versa and references to persons include references
to companies.                               

2.   Guarantee                                        
---------                                   

   (A)  The Guarantor hereby unconditionally and irrevocably
         guarantees to AS&P, each of the Noteholders, each Af-
       filiated Lender, and each Third Party Lender if and
         when there is a Triggering Event the due and punctual
        payment by the Company of the following amounts (the
         "Guaranteed Payments") as and when the same shall be-
come due and payable:-                      

        (i)  any and all amounts of principal (including the
             Accreted Value) becoming due and payable on the
           Guaranteed Notes in accordance with the terms
              thereof and of the Note Purchase Agreement, whe-
           ther at the stated maturity of the Guaranteed
              Notes, as installments, as required prepayments,
              by notice of optional prepayment, by declaration
of acceleration or otherwise;     

        (ii)  any and all amounts of interest becoming due and
            payable on the unpaid principal balance of the
           Guaranteed Notes to and including the date of
            payment of such balance in accordance with the
           terms of the Guaranteed Notes and of the Note
           Purchase Agreement, including interest on any
               overdue principal and, to the extent permitted by
      applicable law, on any overdue interest;

         (iii)  any and all amounts payable under any provision of
the Note Purchase Agreement.      

       (iv)  any and all amounts of principal (including the
             Accreted Value) becoming due and payable on the
              Support in accordance with the terms thereof and
            of the Note Purchase Agreement, whether at the
              stated maturity of the Support, as installments,
            as required prepayments, by notice of optional
           prepayment, by declaration of acceleration or
otherwise;                        

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         (v)  any and all amounts of interest becoming due and
            payable on the unpaid principal balance of the
             Support to and including the date of payment of
              such balance in accordance with the terms of the
             Support and of the Note Purchase Agreement, in-
               cluding interest on any overdue principal and, to
            the extent permitted by applicable law, on any
overdue interest; and             

          (vi)  any and all amounts payable under any provision of
any Support agreement.            

 (B)  This Guarantee shall be a continuing guarantee and
           shall remain in force until all the Guaranteed Payments
         shall have been finally paid in full to the satisfac-
          tion of AS&P and each of the Noteholders and shall not
          be satisfied, discharged or affected by any intermedi-
ate payment or settlement of account.       

    (C)  If and whenever the Company shall default in the pay-
      ment of any Guaranteed Payment on the due date for
       payment thereof, the Guarantor shall immediately on
          demand made by AS&P or any Noteholder make the Guaran-
        teed Payment to AS&P or such Noteholder, as the case
          may be, strictly in accordance with the terms and pro-
        visions of the Guaranteed Notes and/or the Note Pur-
          chase Agreement, as the case may be, regardless of any
          law, regulation or decree, now or hereafter in effect,
           which affects or might in any manner affect any of such
           terms and provisions or AS&P's or such Noteholder's, as
   the case may be, rights as against the Company.

3.   Obligations Unconditional                        
-------------------------                   

    (A)  The liability of the Guarantor hereunder shall remain
         in full force and effect without regard to, and shall
           not be released, diminished or discharged or in any way
affected by:                                

          (i)  any amendment or modification of or supplement to
               the Note Purchase Agreement, the Guaranteed Notes
               or any contracts or other agreements entered into
                in connection therewith including, without limita-
            tion, the Share Purchase Agreement dated as of
               October 9, 1987 made between the Company and AS&P
                (all of such agreements, notes and contracts being

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          hereinafter collectively called "the Instru-
ments");                          

          (ii)  any assignment or transfer of any Instrument or of
            any interest thereunder in compliance with the
 terms of the applicable Instrument;

         (iii)  any exercise or non-exercise of any right, remedy,
           power or privilege under or in respect of any
               Instrument or any lack of diligence or failure to
                mitigate damages or failure to proceed against, or
              to take any action or pursue any remedy with re-
              spect to, the Company or any other person or any
           security afforded by or under any Instrument;

       (iv)  any release by operation of law or discharge by
               operation of law of the Company or any other per-
           son from the performance or observance of any
             obligation, undertaking or condition to be per-
                formed by the Company or such other person, as the
             case may be, under or in respect of any Instru-
ment;                             

         (v)  any limitation on the liabilities or obligations
           of the Company, or any other person under any
               Instrument or any termination or cancellation, or
              any frustration, invalidity, irregularity it, or
                unenforceability, in whole or in part, of any such
           Instrument or any limitation on the method or
                terms of payment thereunder which may now or here-
              after be caused or imposed in any manner whatso-
ever;                             

          (vi) any failure on the part of AS&P or any Noteholder
              or any other person for any reason to perform or
              comply with any tern or provision of any Instru-
ment.                             

    (B)  The bankruptcy, liquidation or insolvency of the Com-
           pany shall not affect or determine the liability of the
           Guarantor under this Guarantee. All dividends, composi-
       tions and moneys received by AS&P or any Noteholder
         from the Company or from any other company, person or
        estate capable of being applied by AS&P or any Note-
           holder, as the case may be, in reduction of the Guaran-
       teed Payments shall be regarded for all purposes as
        payments in gross and AS&P or any Noteholder, as the
        case may be, shall be entitled to prove in the bank-

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       ruptcy, liquidation or insolvency of the Company in
         respect of all outstanding Guaranteed Payments due to
           AS&P or any Noteholder, as the case may be, and without
           any right on the part of the Guarantor to be subrogated
         to AS&P or any Noteholder, as the case may be, in re-
           spect of any such proof to the intent that this Guaran-
           tee shall apply to and secure the whole of any ultimate
       balance which shall remain due to AS&P or any Note-
holder.                                     

   (C)  This Guarantee and the rights of AS&P and the Noteh-
          olders hereunder shall be in addition to and shall not
           be in any way prejudiced or affected by any one or more
        other securities or guarantees for the Company which
           AS&P or any Noteholder may now or hereafter hold wheth-
   er from the Guarantor or from any other person.

      (D)  The liability of the Guarantor hereunder shall be unaf-
          fected by any arrangement which AS&P or any Noteholder
      may make with the Company or with any other person
         which (but for this provision) might operate to dimi-
           nish or discharge the liability of or otherwise provide
          a defence to a surety. Without prejudice to the gener-
           ality of the foregoing, AS&P and the Noteholders are to
          be at liberty at any time and without reference to the
         Guarantor to give time for payment or grant any other
           indulgence and to give up, deal with, vary, exchange or
          abstain from perfecting or enforcing any other securi-
          ties or guarantees held by AS&P and the Noteholders at
       any time and to discharge any party thereto, and to
         realise such securities or guarantees or any of them,
         as AS&P and the Noteholders may think fit and to com-
           pound with, accept compositions from and make any other
          arrangements with the Company or any person or persons
         liable on bills, notes or other securities or guaran-
       tees held or to be held by AS&P and the Noteholders
          without affecting the Guarantor's liability hereunder.

     (E)  This Guarantee shall take effect as a guarantee of the
          whole and every part of the Guaranteed payments due or
        owing or payable and accordingly the Guarantor shall
          not be entitled as against AS&P and the Noteholders to
            any right of proof in the bankruptcy, liquidation or in-
        solvency of the Company or any other surety or other
          right of a surety (including any right of contribution
      from any other surety) discharging, in whole or in
         part, its liability in respect of the Guaranteed Pay-
       ments or to share in any security held or money re-

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      ceived by AS&P or any Noteholder on account of the
        obligations of the Company or any other surety or to
        have or exercise any rights as surety (including any
           such right of contribution as aforesaid) in competition
        with AS&P or any Noteholder unless and until all the
        Guaranteed Payments shall have first been completely
         discharged and satisfied.  Furthermore, until all the
      Guaranteed Payments shall have been discharged and
           satisfied in full the Guarantor shall not, if the Guar-
           anteed Payments shall have become payable or shall have
         been paid by the Guarantor under this Guarantee, take
          any step to enforce repayment or to exercise any other
           rights, claims or remedies of any kind which may accrue
       howsoever to the Guarantor in respect either of the
          amount so payable or so paid (including any such right
        of contribution as aforesaid) or of any other moneys
         for the time being due to the Guarantor from the Com-
          pany or any other surety provided that in the event of
         the bankruptcy, liquidation or insolvency of the Com-
       pany or any other surety the Guarantor shall, if so
         directed by AS&P or any Noteholder but not otherwise,
        prove for the whole or any part of the moneys due to
         the Guarantor from the Company or any other surety as
         aforesaid on terms that the benefit of such proof and
        of all moneys to be received by the Guarantor in re-
         spect thereof shall be held in trust for AS&P and the
          Noteholders and applied in discharging the obligations
          of the Guarantor to AS&P and the Noteholders.  For the
           purpose of enabling AS&P and the Noteholders to sue the
           Company or any other surety or prove in the bankruptcy,
         liquidation or insolvency of the Company or any other
       surety for any Guaranteed Payments remaining due or
         owing or payable, or to preserve intact the liability
           of any other party, AS&P and the Noteholders may at any
      time and place keep, for such time as AS&P and the
          Noteholders may think prudent, any moneys received, or
      realised hereunder or under any other guarantee or
       security to the credit, either of the Guarantor, or
         such other person or transaction (if any) as AS&P and
           the Noteholders shall think fit, without any intermedi-
          ate obligation on the part of AS&P and the Noteholders
           to apply the same or any part thereof in or towards the
         discharge of any Guaranteed Payments remaining due or
          owing or payable or any intermediate right on the part
           of the Guarantor to sue the Company or any other surety
         or prove in the bankruptcy, liquidation or insolvency
          of the Company or any other surety in competition with
        or so as to diminish any dividend or other advantage

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           that would or might come to AS&P and the Noteholders or
          treat the liability of the Company or any other surety
           as diminished.  As used in this Clause 3(E) the expres-
        sion "any other surety" includes any party or person
referred to in Clause 3(D).                 

      (F)  For all purposes including any legal proceedings a copy
        of any Guaranteed Note signed by another Director of
          the relevant Noteholder shall be accepted by the Guar-
           antor as conclusive evidence of the outstanding princi-
pal amount of such Guaranteed Note.         

      (G)  It is hereby declared by the Guarantor that no security
          has been received by the Guarantor from the Company or
         any other surety for the giving of this Guarantee and
       it is declared and agreed by the Guarantor that the
         Guarantor will not, so long as this Guarantee remains
         in force, take any security in respect of the Guaran-
         tor's liability hereunder without first obtaining the
written consent of AS&P.                    

  (H)  As a separate and independent stipulation it is de-
          clared and agreed by the Guarantor that any Guaranteed
           Payment which may not be recoverable from the Guarantor
           on the footing of a guarantee, whether by reason of any
           legal limitation, disability or incapacity on or of the
          Company or any other fact or circumstance, and whether
          known to AS&P, any Noteholder or the Guarantor or not,
           shall nevertheless be recoverable from the Guarantor as
         sole or principal debtor in respect thereof and shall
   be paid by the Guarantor immediately on demand.

  (I)  This Guarantee shall continue to bind the Guarantor
          notwithstanding any amalgamation or merger that may be
          effected by AS&P or any Noteholder with any other com-
         pany or companies and notwithstanding any reconstruc-
          tion by AS&P or any Noteholder involving the formation
          of and transfer of the whole or any part of the under-
        taking and assets of AS&P or any Noteholder to a new
           company and notwithstanding the sale or transfer of the
           whole or any part of the undertaking and assets of AS&P
          or any Noteholder to another company, whether the com-
       pany or companies with which AS&P or any Noteholder
         amalgamates or merges or the company to which AS&P or
         any Noteholder transfers the whole or any part of its
        undertaking and assets either on a reconstruction or
           sale or transfer as aforesaid shall or shall not differ
        from AS&P or any Noteholder in their or its objects,

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         character or constitution, it being the intent of the
        Guarantor that this Guarantee shall remain valid and
       effectual in all respects in favour of, against and
           with reference to, and that the benefit of this Guaran-
        tee and all rights conferred upon AS&P and the Note-
          holders hereby may be assigned to and enforced by, any
          such company or companies and proceeded on in the same
         manner to all intents and purposes as if such company
           or companies had been named herein instead of and/or in
addition to AS&P and the Noteholders.       

    (J)  Any settlement or discharge between AS&P or any Note-
           holder and the Guarantor shall be subject to the condi-
         tion that no security or payment to AS&P or any Note-
           holder, as the case may be, by the Company or any other
       person shall be avoided or reduced by virtue of any
           provisions or enactments relating to bankruptcy, liqui-
           dation or insolvency for the time being in force and if
       any such security or payment shall be so avoided or
       reduced AS&P or any Noteholder, as the case may be,
           shall be entitled to recover the value or amount there-
      of from the Guarantor subsequently just as if such
settlement or discharge had not occurred.   

 (K)  Each payment to be made by the Guarantor hereunder
       shall be made to AS&P and the Noteholders in pounds
           sterling, to the credit of the accounts of AS&P and the
           Noteholders with whichever bank or banks located in the
          United Kingdom, as shall be designated by AS&P and the
         Noteholders.  All such payments shall be made in full
         without set-off or counterclaim and free and clear of
         and without deduction of or withholding for or on ac-
           count of any tax of any nature now or hereafter imposed
      by the United Kingdom or any subdivision or taxing
         authority thereof or therein or any federation or or-
         ganisation of which such country is a member.  If any
           such payment shall be subject to any such tax or if the
          Guarantor shall be required to make any such deduction
           or withholding, the Guarantor shall pay such tax, shall
           ensure that such payment, deduction or withholding will
       not exceed the minimum legal liability therefor and
           shall simultaneously pay to AS&P and/or the Noteholders
         such additional amounts as may be necessary to enable
          AS&P and/or the Noteholders to receive, after all such
       payments, deductions and withholdings, a net amount
       equal to the full amount payable hereunder.  If the
      Guarantor shall make any such payment deduction or
         withholding the Guarantor shall within 30 days there-

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       after forward to AS&P and/or the Noteholders an of-
           ficial receipt or other official documentation evidenc-
        ing such payment or the payment of such deduction or
       withholding.  As used in this Clause the term "tax"
        includes all levies, imposts, duties, charges, fees,
       deductions, withholdings, turnover tax, transaction
      tax, stamp tax, and any restrictions or conditions
resulting in a charge.                      

    (L)  No delay or omission on the part of AS&P or any Note-
       holder in exercising any right, power, privilege or
         remedy in respect of this Guarantee shall impair such
          right, power, privilege or remedy or be construed as a
           waiver thereof nor shall any single or partial exercise
          of any such right, power, privilege or remedy preclude
        any further, exercise thereof or the exercise of any
         other right, power, privilege or remedy.  The rights,
      powers, privileges and remedies heron provided are
       cumulative and not exclusive of any rights, powers,
privileges, or remedies provided by law.    

    (M)  The liability of the Guarantor shall not be released,
          diminished or discharged or in any way affected by any
       other circumstance or condition, whether similar or
          dissimilar to any of the foregoing, that might consti-
       tute a legal or equitable discharge or defence of a
          guarantor (whether or not the Guarantor shall have any
knowledge or notice thereof).               

4.   Waiver                                           
------                                      

           The Guarantor hereby waives, insofar as its obligations
hereunder are concerned:                    

          (i)  notice from any person that such person is or has
             become a person entitled to the benefit of this
Guarantee;                        

       (ii)  notice of the execution and delivery of any In-
strument;                         

            (iii)  notice of any of the matters referred to in Clause 3;

          (iv)  to the fullest extent permitted by applicable law,
             all notices required by statute, rule of law or
         otherwise to preserve or enforce any rights
                against the Guarantor hereunder, including without
              limitation any presentment, demand, proof or no-

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              tice of non-payment of any indemnity of the Com-
               pany and notice of any failure on the part of the
               Company to perform or comply with any term of any
                instrument or agreement (including without limita-
             tion any Instrument) applicable to the Company;

         (v)  any right to the enforcement, assertion or exer-
           cise of any right, remedy, power or privilege
    under or in respect of any Instrument;

          (vi)  to the fullest extent permitted by applicable law,
              any requirement that AS&P, any Noteholder or any
               other person be joined as a party to any proceed-
                ing for the enforcement of any term of any Instru-
ment;                             

      (vii)  any right to require a proceeding first against
             the Company or any other person or the security
               provided by or under any Instrument or agreement;

      (viii)  any requirement on the part of AS&P or any Note-
               holder to mitigate any damages resulting from any
           non-performance by the Company or AS&P or any
               Noteholder under any Instrument or the occurrence
              of any default or event or default under any In-
strument.                         

5.   Corporate Existence                              
-------------------                         

        The Guarantor hereby undertakes at all times to pre-
         serve and keep in full force and effect its corporate
existence.                                  

6.   Notices                                          
-------                                     

        Any demand or notice required or permitted hereunder
          shall be in writing and shall be delivered personally,
           telegraphed, telexed or sent by facsimile transmission.
           Any such demand or notice shall be deemed given when so

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         delivered personally, telegraphed, telexed or sent by
           facsimile transmission, as the case may be, as follows:

(i)  if to the Guarantor, to:               

         Sphere Drake Holding Public Limited Company
c/o Sphere Drake Insurance plc    
52/54 Leadenhall Street           
London EC3A 2BJ                   
England                           
Attention:  The Managing Director 
Telex:  935015 Sphere G           
Fax: 01-481-3828                  

with copies to:-                  

         Sphere Drake Holding Public Limited Company
c/o Centre Capital Investors L.P. 
Suite 1025                        
One Rockefeller Plaza             
New York, New York 10020          
United States of America          
Attention:  Lester Pollack        
Telex:  RCA 222331                
Fax:  (212) 971-2825 or           
(212) 489-9655        

and                               

John C Head III                   
c/o John Head & Partners          
545 Madison Avenue                
New York, New York 10022          
Telex: 971861                     
Fax:  (212) 421-9049              

and                               

      Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas       
New York, New York  10019         
United States of America          
Attention:  Albert P. Hand, Esq.  
Telex:  WUI 666-843               
Fax: (212) 757-3990               

and                               

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Clyde & Co.                       
51 Eastcheap                      
London EC3M 1JP                   
England                           
         Attention:  Francis Mackie and V.G. Southey
Telex:  884886 CLYDE G            
Fax:  01-623-5427                 

(ii)  if to AS&P or any Noteholder, to:       

 Alexander Stenhouse & Partners Ltd.
Two South Place                   
London EC2P 2DX                   
Attention:  The Company Secretary 
Telex:  8813371                   
Fax:  01-588-1680                 

with copies to:                   

 Alexander & Alexander Services Inc.
1211 Avenue of the Americas       
New York, New York 10036          
Attention:  General Counsel       
Telex:  620303                    
Fax:  (212) 302-1921              

Alexander & Alexander Europe plc  
5-10 Bury Street                  
London EC3A 5HL                   
England                           
Attention:  Group Legal Adviser   
Telex:  882171                    
Fax:  01-623-5022                 

7.   Governing Law and Jurisdiction                   
------------------------------              

   (A)  This Guarantee shall be governed by and construed in
         accordance with the laws of England and the Guarantor
         hereby irrevocably declares and agrees for the exclu-
     sive benefit of AS&P and the Noteholders that the
        courts of England are to have jurisdiction to settle
        any disputes which may arise out of or in connection
      with this Guarantee and that accordingly any suit,
        action or proceeding arising out of or in connection
      with this Guarantee (in this Clause referred to as
 "Proceedings") may be brought in such courts.

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      (B)  Without prejudice to Clause 7(A), the Guarantor further
        irrevocably declares and agrees that any Proceedings
        may be brought in the courts of the United States of
          America located in New York County in the State of New
         York and submits to the non-exclusive jurisdiction of
such courts.                                

     (C)  Nothing contained in this Clause shall limit the right
         of AS&P or any Noteholder to take Proceedings against
           the Guarantor in any other court of competent jurisdic-
       tion, nor shall the taking of Proceedings in one or
         more jurisdictions preclude the taking of Proceedings
           in any other jurisdiction, whether concurrently or not.

    (D)  The Guarantor hereby irrevocably waives (and irrevoc-
        ably declares and agrees that it will not raise) any
       objection which it may have now or hereafter to the
      laying of the venue of any Proceedings in any such
        court as is referred to in this Clause and any claim
         that any such Proceedings have been brought in an in-
         convenient forum and further irrevocably declares and
        agrees that a judgment in any Proceedings brought in
       any court as is referred to in this Clause shall be
        conclusive and binding upon the Guarantor and may be
     enforced in the courts of any other jurisdiction.

     (E)  The Guarantor declares and agrees that any writ, judg-
         ment or other notice of process shall be sufficiently
       and effectively served on it (a) in connection with
         Proceedings in New York, if addressed to Paul, Weiss,
          Rifkind, Wharton & Garrison and delivered to such firm
      at its offices at 1285 Avenue of the Americas, New
           York, New York 10019 or such other address for the time
         being as the Guarantor may have notified to AS&P, (b)
          if a copy thereof is mailed by registered or certified
        mail (airmail if overseas), postage pre-paid, return
        receipt requested, to the address for the time being
     for the service of notices on the Guarantor under
          Clause 6, or (c) if served in any other manner permit-
ted by law.                                 

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                IN WITNESS WHEREOF this Guarantee has been execut-
      ed by the Guarantor as of the day and year first above writ-
ten.                                                  

THE COMMON SEAL OF SPHERE     )                       
DRAKE HOLDING PUBLIC LIMITED  )                       
COMPANY was hereunto affixed  )                       
in the presence of:-          )                       

Director:                                   

Secretary:                                  

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                                                       EXHIBIT "C"
                                                       -----------

     OPINION OF CLYDE & CO
     ---------------------

Dear Sirs,                                            

            We have acted as Legal Advisors in England and
      Wales to Sphere Drake Acquisitions (U.K.) Limited (the "Com-
     pany") and Sphere Drake Holding Public Limited Company (the
  "Guarantor") with respect to the Note Purchase Agreement
     (the "Note Purchase Agreement") dated as of October 9, 1987
     made between the Company, the Guarantor and yourselves, the
   Guaranty Agreement dated December 30, 1987 (the "Guaranty
    Agreement") and the Warrant Agreement (the "Warrant Agree-
      ment") dated as of October 9, 1987 made between the Company,
    the Guarantor and yourselves and as such have been entered
    into in connection with a transaction in which the Company
  acquired all of the issued share capital of Sphere Drake
      Insurance Group Public Limited Company.  Certain capitalized
   terms used in this Opinion have the meanings specified in
the Note Purchase Agreement.                          

            We have participated in the preparation of and
      have examined the documents listed in Schedule 1 hereof (the
     "Documents") for the purposes of this Opinion.  The opinion
     given is rendered solely in relation to the Laws of England
     and Wales and no opinion is expressed as to the laws of any
other jurisdiction.                                   

              On the basis of the Guaranty Agreement, the Note
      Purchase Agreement, the Notes, the Warrant Agreement and the
    Warrant and the assumptions listed in Schedule 2 hereof we
    are of the opinion that, so far as the laws of England and
Wales are concerned:                                  

      1.   Each of the Company and the Guarantor is duly incorpor-
        ated in England and Wales and no winding up order or
           appointment of a Liquidator, Receiver or Administrative
        Receiver has been filed on the Companies file at the
         Companies Registration Office or the Central Registry
           of Winding-up Petitions with respect to either company.

      2.   Each of the Company and the Guarantor has the corporate
        power to enter into the Guaranty Agreement, the Note

.                                                                             

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        Purchase Agreement, the Notes, the Warrant Agreement
and the Warrant, as the case may be.        

  3.   Each of the Company and the Guarantor has taken the
       necessary corporate action to authorise it to enter
         into the Guaranty Agreement, the Note Purchase Agree-
           ment, the Notes, the Warrant Agreement and the Warrant,
         as the case may be, and to perform its obligations as
therein provided for.                       

      4.   The obligations which each of the Company and the Guar-
          antor will undertake under the Guaranty Agreement, the
          Note Purchase Agreement, the Notes, the Warrant Agree-
        ment and the Warrant, as the case may be, constitute
        valid and legally binding obligations of the Company
         and the Guarantor, as the case may be, under the laws
of England and Wales.                       

      5.   Save for the approvals and consents specified in clause
         5.6 of the Note Purchase Agreement there are no other
          consents or approvals of any United Kingdom governmen-
          tal authority applicable to the Company or the Guaran-
       tor generally which are required in connection with
           their respective entry into the Guaranty Agreement, the
          Note Purchase Agreement, the Notes, the Warrant Agree-
       ment or the Warrants, or the performance by them of
their obligations thereunder.               

     6.   No United Kingdom stamp duty (other than nominal duty)
          is payable in connection with the execution and deliv-
           ery of the Guaranty Agreement, the Note Purchase Agree-
          ment, the Notes, the Warrant Agreement or the Warrant.

     7.   Save as otherwise provided it is not necessary to reg-
          ister the Guaranty Agreement, the Note Purchase Agree-
         ment, the Notes, the Warrant Agreement or the Warrant
in any Public Office in the United Kingdom. 

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             The above Opinion is subject to the assumptions
    referred to in Schedule 2 and the following reservations:-

   A.   Nothing in this opinion is to be taken as indicating
           that an order for specific performance or an injunction
           would be available in respect of any of the obligations
       of the Company or the Guarantor, as the case may be
          under the Guaranty Agreement, the Note Purchase Agree-
           ment, the Notes, the Warrant Agreement or the Warrants.

      B.   The obligations of the Company or the Guarantor, as the
       case may be, under the Guaranty Agreement, the Note
           Purchase Agreement, the Notes, the Warrant Agreement or
          the Warrant are subject to all laws relating to liqui-
           dation or insolvency and all other laws affecting cred-
itors rights generally.                     

      This Opinion is given for the benefit of Alexander
  Stenhouse & Partners Limited as an original party to the
    Note Purchase Agreement pursuant to clause 4.7 thereof and
may not be relied upon by any other person.           

                                         Yours faithfully,

                                   Clyde & Co.
                                   -----------

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      SCHEDULE 1
      ----------

Documents                                   
---------                                   

1)   A conformed copy of the Guaranty Agreement.      

2)   A conformed copy of the Note Purchase Agreement. 

3)   A conformed copy of the Warrant Agreement.       

     4)   The Memorandum and Articles of Association of the Com-
pany.                                       

      5)   The Memorandum and Articles of Association of the Guar-
antor.                                      

     6)   A certificate by the Company Secretary of the Company.

    7)   A certificate by the Company Secretary of the Guaran-
tor.                                        

    8)        (i)  Copy of the Register of Members of the Com-
pany.                   

             (ii)  Minutes of a Meeting of the Board of Direc-
                     tors of the Company held on 9th October 1987.

            (iii)  Minutes of a Meeting of the Shareholders of
the Company.            

              (iv)  Written Resolution of the Board of Directors
              of the Company dated 9th October 1987.

     9)        (i)  Copy of the Register of Members of the Guar-
antor.                  

             (ii)  Minutes of a Meeting of the Board of Direc-
                 tors of the Guarantor held on 9th October
1987.                   

             (iv)  Minutes of a Meeting of the Shareholders of
the Guarantor.          

               (v)  Written Resolution of the Board of Directors
                of the Guarantor dated 9th October 1987.

.                                                                             

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                SCHEDULE 2
                ----------

Assumptions                                 
-----------                                 

      1)   That the opinion we have expressed is not overridden or
   modified by the laws of any other jurisdiction.

 2)   That the Documents we have examined have been duly
           executed and delivered by the parties of record who had
          appropriate capacity power and authority to enter into
        such Documents and which are either original or com-
plete copies thereof.                       

      3)   That the Governmental or public records or certificates
           have searched or examined are complete and accurate and
          do not fail to disclose any material information which
 had been properly presented for registration.

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                                                      EXHIBIT "C2"
                                                      ------------

     OPINION OF CLYDE & CO
     ---------------------

Alexander Stenhouse & Partners Limited,               
145 St. Vincent Street,                               
Glasgow,                                              
      Scotland                            [First Credit Call Date]

Dear Sirs,                                            

            We have acted as Legal Advisers in England and
      Wales to Sphere Drake Acquisitions (U.K.) Limited (the "Com-
     pany") and Sphere Drake Holding Public Limited Company (the
  "Guarantor") with respect to the Note Purchase Agreement
     (the "Note Purchase Agreement") dated as of October 9, 1987
    made between the Company, the Guarantor and yourselves and
     the Guaranty Agreement dated December , 1987 (the "Guaranty
Agreement") made between the Guarantor and yourselves.
 Certain capitalized terms used in this Opinion have the
meanings specified in the Note Purchase Agreement.    

            We have participated in the preparation of and
      have examined the documents listed on Schedule 1 hereof (the
     "Documents") for the purposes of this Opinion.  The opinion
     given is rendered solely in relation to the Laws of England
     and Wales and no opinion is expressed as to the laws of any
other jurisdiction.                                   

              On the basis of the Guaranty Agreement, the Note
 Purchase Agreement and the Credit Facility Note and the
     assumptions listed in Schedule 2 hereof we are of the opin-
    ion that, so far as the laws of England and Wales are con-
cerned:                                               

      1.   Each of the Company and the Guarantor is duly incorpor-
        ated in England and Wales and no winding-up order or
         appointment of a Liquidator, Receiver, Administrative
        Receiver or Administrator has been filed on the Com-
           panies file at the Companies Registration Office or the
         Central Registry of Winding-up Petitions with respect
to either company.                          

.                                                                             

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      2.   Each of the Company and the Guarantor has the corporate
        power to enter into the Guaranty Agreement, the Note
           Purchase Agreement and the Credit Facility Note, as the
case may be.                                

  3.   Each of the Company and the Guarantor has taken the
       necessary corporate action to authorise it to enter
         into the Guaranty Agreement, the Note Purchase Agree-
          ment and the Credit Facility Note, as the case may be,
           and to perform its obligations as provided therein for.

      4.   The obligations which each of the Company and the Guar-
          antor will undertake under the Guaranty Agreement, the
         Note Purchase Agreement and the Credit Facility Note,
          as the case may be, constitute valid and legally bind-
        ing obligations of the Company and the Guarantor, as
         the case may be, under the laws of England and Wales.

5.   Save for the approvals and consents specified in 
          clause 5.6 of the Note Purchase Agreement there are no
          other consents or approvals of any United Kingdom gov-
        ernmental authority applicable to the Company or the
        Guarantor generally which are required in connection
        with their respective entry into the Guaranty Agree-
          ment, the Note Purchase Agreement or the Credit Facil-
         ity Note, or the performance by them of their obliga-
tions thereunder.                           

     6.   No United Kingdom stamp duty (other than nominal duty)
         is payable in connection with the execution and deli-
         very of the Agreement, the Note Purchase Agreement or
the Credit Facility Note.                   

     7.   Save as otherwise provided it is not necessary to reg-
          ister the Guaranty Agreement, the Note Purchase Agree-
         ment or the Credit Facility Note in any Public Office
in the United Kingdom.                      

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             The above Opinion is subject to the assumptions
   referred to in Schedule 2 and the following reservations:

   A.   Nothing in this Opinion is to be taken as indicating
           that an order for specific performance or an injunction
          would be available in respect of any other obligations
        of the Company or the Guarantor, as the case may be,
          under the Guaranty Agreement, the Note Purchase Agree-
ment or the Credit Facility Note.           

      B.   The obligations of the Company or the Guarantor, as the
       case may be, under the Guaranty Agreement, the Note
      Purchase Agreement or the Credit Facility Note are
         subject to all laws relating to liquidation or insol-
       vency and all other laws affecting creditors rights
generally.                                  

                This Opinion is given for the benefit of Alexander
  Stenhouse & Partners Limited as an original party to the
Note Purchase Agreement pursuant to clause 10.8(a)(ii)
 thereof and may not be relied upon by any other person.

                                           Yours faithfully,

                                     Clyde & Co.
                                     -----------

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      SCHEDULE 1
      ----------

Documents                                   
---------                                   

1)   A conformed copy of the Guaranty Agreement.      

2)   A conformed copy of the Note Purchase Agreement. 

     3)   The Memorandum and Articles of Association of the Com-
pany.                                       

      4)   The Memorandum and Articles of Association of the Guar-
antor.                                      

     5)   A certificate by the Company Secretary of the Company.

    6)   A certificate by the Company Secretary of the Guaran-
tor.                                        

    7)        (i)  Copy of the Register of Members of the Com-
pany.                   

              (ii)  Copy of Minutes of a meeting of the Board of
                   Directors of the Company dated 9th October,
1987.                   

             (iii)  Copy of Minutes of a meeting of the Board of
                     Directors of the Company dated 24th December,
1987.                   

            (iv)  Copy of Minutes of a meeting of the Share-
                   holders of the Company dated 29th December,
1987.                   

               (v)  Copy of Minutes of a meeting of the Board of
                     Directors of the Company dated 29th December,
1987.                   

    8)        (i)  Copy of the Register of the Shareholders of
the Guarantor.          

              (ii)  Copy of Minutes of a meeting of the Board of
                     Directors of the Guarantor dated 9th October,
1987.                   

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             (iii)  Copy of Minutes of a meeting of the Board of
                    Directors of the Guarantor dated 21st Decem-
ber, 1987.              

             (iv)  Copy of Minutes of a meeting of the Members
                   of the Guarantor dated 24th December, 1987.

               (v)  Copy of Minutes of a meeting of the Board of
                    Directors of the Guarantor dated 24th Decem-
ber, 1987.              

              (vi)  Copy of Minutes of a meeting of the Board of
                    Directors of the Guarantor dated 29th Decem-
ber, 1987.              

      SCHEDULE 2
      ----------

Assumptions                                 
-----------                                 

      1)   That the opinion we have expressed is not overridden or
   modified by the laws of any other jurisdiction.

 2)   That the Documents we have examined have been duly
           executed and delivered by the parties of record who had
           appropriate capacity, power and authority to enter into
        such Documents and which are either original or com-
plete copies thereof.                       

      3)   That the Governmental or public records or certificates
          we have searched or examined are complete and accurate
        and do not fail to disclose any material information
       which had been properly presented for registration.

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                                                         EXHIBIT D

THIS DEED is made the    1987                         

B E T W E E N :                                       
--------------                                        

    (1)  SPHERE DRAKE ACQUISITIONS (U.K.) LIMITED incorporated
----------------------------------------    
       in England and Wales (No. 2136565) whose registered
          office is at 30 Mincing Lane, London EC3R 7BR ("SDA").

    (2)  S.D SECURITIES LIMITED incorporated in Guernsey whose
----------------------                      
      registered office is at 7, New Street, St. Peter's
Port, Guernsey ("S.D Securities").          

RECITALS                                              
--------                                              

     A.   Words and expressions defined in Clause 1 of this Deed
      ("Definitions") bear the same meaning when used in
those Recitals.                             

    B.   S.D Securities Limited has been promoted by SD Inves-
         tors, Inc., a New York corporation and A&A to acquire
and hold upon certain trusts:-              

          (a)  the Adjustment Rights of SDA under the Share Pur-
chase Agreement;                  

(b)  the Senior Note and the Junior Note.   

      C.   SDA has agreed to grant to S.D. Securities by this Deed
         rights of option in respect of the Adjustment Rights.

    D.   Schedule 1 of this Deed records the trusts upon which
        S.D Securities will hold, inter alia, the Adjustment
Rights upon exercise of the Option.         

.                                                                             

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NOW IT IS AGREED AND DECLARED as follows:-            
-----------------------------                         

1.   DEFINITIONS                                      
-----------                                 

     (1)  In this Deed the following words and expressions shall
         bear the following meanings unless the context other-
wise requires:                              

       "A&A"                         Alexander & Alexander
                                        Services Inc, a Maryland
                           corporation

       "A&A (Europe)"                Alexander & Alexander
                                         (Europe) plc incorporated
                                       in Scotland (No. 32111)

        "the Adjustment Account"      the Adjustment Account
                                        referred to in Section 7
                                     of the Share Purchase
                         Agreement

          "the Adjustment Debt"         at any time, the balance
                                       owing by AS&P under the
                                  Adjustment Account

           "the Adjustment Rights"       all right and interest of
                                       SDA under Section 7 and
                                      the Adjustment Account
                                      including the right to
                                         enforce the provisions of
                                             Section 7 against A&A and A&A
                                      (Europe) as guarantors

           "the Assigned Rights"         following exercise of the
                                         Option, the rights of the
                                        Trustee as holder of the
                                        Notes and as assignee of
                                     the Adjustment Rights

       "AS&P"                        Alexander Stenhouse &
                                       Partners Limited incor-
                                        porated in Scotland (No.
                         SC 23477)

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      "the Beneficiaries"           SDA and AS&P and any
                                    person who is at the
                                        material time a Priority
                                         Creditor (and Beneficiary
                                      shall be construed ac-
                          cordingly)

         "the Countersigned Notice"    the duplicate Notice of
                                         Exercise countersigned in
                                      accordance with clause
                    4(2)

         "this Deed"                   this deed including the
                                         Recitals and Schedules as
                                       from time to time modi-
                                       fied in accordance with
                                     the provisions hereof
                                     including any deed or
                                        document supplemental to
                                       or executed pursuant to
                         this deed

       "Disputed Debt"               the amount treated as
                                such pursuant to
                                         clause 2(5) of Schedule 1

     "Final Adjustment Date"       31st December, 1994

           "Final Adjustment Debt"       the cumulative Adjustment
                                      Debt as finally deter-
                                     mined after the Final
                                        Adjustment Date (without
                                      deduction for payments
                                     made on account other
                                    than payments to SDA
                                       pursuant to sub-section
                                 7.9 of Section 7)

          "Junior Note"                 the Zero Coupon Subordi-
                                       nated Note due 1995 is-
                                         sued by SDA and purchased
                                       by AS&P pursuant to the
                                       Note Purchase Agreement

         "Loan Note Debt"              at any time the balance
                                     outstanding under the
                     Notes

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          "the Greater Debt"            whichever is the greater
                                      of the Adjustment Debt
                                      and the Loan Note Debt

         "the Lower Debt"              whichever is the lesser
                                      of the Adjustment Debt
                                      and the Loan Note Debt

        "the Net Amount"              the difference between
                                        the Greater Debt and the
                          Lower Debt

         "the Notes"                   the Senior Note and the
                           Junior Note

          "the Note Purchase Agreement" an Agreement dated as of
                                        9th October 1987 between
                                    SDA (1) and AS&P (2)
                                        relating to the issue of
                                        the Notes by SDA to AS&P

        "Notice of Disagreement"      shall have the meaning
                                     ascribed in Section 7

           "Notice of Exercise"          a written notice given by
                                        S.D Securities to SDA in
                                      accordance with Clause
                                 4(1) of this Deed

      "the Option"                  the rights of option
                                     granted by SDA to S.D
                                         Securities under Clause 2
                            of this Deed

         "Priority Creditor"           any person nominated by
                                        SDA as a Priority Credi-
                                     tor under clause 6 of
                          Schedule 1

         "Priority Debt"               all monies from time to
                                         time owing (account being
                                     taken, inter alia, of
                                         monies received by way of
                                        dividend in a winding-up
                                     of SDA) by SDA to the
                                         Priority Creditor whether
                                     on account of capital
                                        interest costs or other-

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                                         wise in respect of monies
                                        borrowed or other credit
                                      facilities obtained by
                                     SDA to the extent re-
                                        ferred to in clause 6 of
                          Schedule 1

       "Provisional Adjustment       the amount treated as
           Debt"                         such pursuant to clause 2
                                     (4) of Schedule 1 and
                                         references to the cumula-
                                         tive Provision Adjustment
                                     Debt shall be to such
                                     debt as adjusted from
                                       time to time under Sec-
                                       tion 7 (but without de-
                                    duction for any part
                                        thereof which is paid or
                                        is to be treated as paid
                                         other than payment to SDA
                                       pursuant to sub-section
                                 7.9 of Section 7)

      "SD (Holding)"                Sphere Drake Holding
                                      Public Limited Company

        "Section 7"                   Section 7 of the Share
                                  Purchase Agreement

          "Senior Creditors"            creditors of SDA who are
                                         trade or other unsubordi-
                                      nated creditors of SDA
                                    (other than Priority
                                         Creditors to the extended
                              Priority Debt)

        "Senior Note"                 the Zero Coupon Senior
                                       Note due 1995 issued by
                                         SDA and purchased by AS&P
                                    pursuant to the Note
                                  Purchase Agreement

        "solvent"                     shall have the meaning
                                       ascribed in clause 7 of
                          Schedule 1

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           "the Share Purchase           The Agreement dated as of
          Agreement"                    9th October 1987 between
                                      AS&P as Seller (1) and
                                     SDA as Buyer (2) for,
                                        inter alia, the sale and
                                       purchase of all the is-
                                     sued shares of Sphere
                                     Drake Insurance Group
                                      Public Limited Company

           "the Specified Address"       7 New Street, St. Peter's
                              Port, Guernsey

        "Trustee"                     S.D Securities and any
                                         other trustee or trustees
                                      of the Assigned Rights
                                 from time to time

           "the Trusts"                  the Trusts upon which the
                                      Trustee shall hold the
                                    Assigned Rights as a
                                       Schedule 1 of this Deed
                                     as modified or varied
                                    from time to time in
                                    accordance therewith

  (2)  Words and expressions defined in the Share Purchase
           Agreement where the contract admits bear the same mean-
ing when used in this Deed.                 

(3)  In this Deed where the context admits:-          

            (a)  the sign "B.P." shall be construed as references to
the currency of the United Kingdom

      (b)  references to any action, remedy or method of
                judicial proceedings for the enforcement of rights
             of creditors shall be deemed to include, in re-
           spect of any jurisdiction other than England,
            references to such action, remedy or method of
               judicial or other proceedings for the enforcement
                of rights of creditors available or appropriate in
                such jurisdiction as shall most nearly approximate
                to such action, remedy or proceedings described or
            referred to in this Deed and references to the

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            liquidator of SDA shall include any comparable
officer in any jurisdiction       

         (c)  references to any document in the "agreed terms"
             shall be to a document agreed and initialled by
the Trustee and the Beneficiaries 

          (d)  references to any statute or statutory provisions
              shall include any statute or statutory provision
              which amends, extends, consolidates, or replaces
           the same or which has been amended, extended,
  consolidated or replaced by the same

        (e)  words importing the singular only shall include
               the plural and vice versa, words importing a gen-
                der include every gender and references to persons
       include bodies corporate or unincorporate

           (f)  words and expressions defined in the Companies Act
                1985 shall bear the same meaning when used in this
Deed                              

        (g)  references to any clauses, sub-clauses or para-
              graphs are to the clauses, sub-clauses and para-
            graphs of this Deed, references to sub-clauses
               without other qualification are to sub-clauses of
               the clause in which the reference appears, refer-
             ences to paragraphs without other qualification
                are to paragraphs of the clause (or sub-clause) in
which the reference appears       

           (h)  references to the claims of Senior Creditors shall
               in the case of an insolvent winding-up be to such
                claims as at the date of commencement of the wind-
ing-up                            

           (i)  any headings in this Deed are for convenience only
               and are not to be used as aids in interpretation.

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2.   GRANT OF OPTION                                  
---------------                             

             In consideration of the sum of B.P.1 (receipt of which is
         hereby acknowledged) SDA hereby grants to the Trustee
     an option to acquire by assignment the Adjustment
      Rights upon the terms and conditions of this Deed.

3.  CONDITION PRECEDENT                               
-------------------                           

        Exercise of the Option shall be conditional upon the
           prior or simultaneous acquisition by the Trustee of all
      right, title and interest of AS&P as holder of the
           Senior Note and the Junior Note including the rights of
      AS&P under the Guarantee Agreement dated as of 9th
       October 1987 between SD (Holding) (1) and AS&P (2).

4.  EXERCISE OF OPTION                                
------------------                            

      (1)  The Option shall be exercisable only by Notice of Exer-
          cise under the Common Seal of S.D Securities and deli-
vered to SDA at the Specified Address.      

     (2)  SDA shall at the Specified Address acknowledge service
           of the Notice of Exercise by countersigning a duplicate
          thereof and delivering the Countersigned Notice to S.D
Securities.                                 

    (3)  Delivery of the Notice of Exercise in accordance with
         sub-clause (1) and of the Countersigned Notice in ac-
        cordance with sub-clause (2) shall operate as an as-
        signment so as to transfer to the Trustee absolutely
all the Adjustment Rights.                  

      (4)  A copy certified by any two directors of S.D Securities
       as a true copy of the Countersigned Notice shall be
      conclusive evidence of delivery in accordance with
clause 4 (3).                               

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(5)  Notwithstanding such assignment SDA shall remain 
           obliged to perform (and covenants with the Trustee that
           it will perform) all the obligations of the Buyer under
           the Share Purchase Agreement in relation to the keeping
        of accounts records and the Adjustment Schedules and
          SDA shall deliver copies to the Trustee as the Trustee
may require.                                

   (6)  The Trustee shall retain the Countersigned Notice in
          safe custody at the Specified Address unless and until
       required to be produced for the protection proof or
    enforcement of its claim to the Adjustment Debt.

5.   THE TRUSTS                                       
----------                                  

       Upon exercise of the Option, the Trustee shall hold
           (and the Notice of Exercise shall constitute a declara-
         tion on the part of S.D Securities that it does hold)
         the Adjustment Rights and all rights under the Senior
Note and the Junior Note upon the Trusts.   

6.   STAMP DUTIES                                     
------------                                

  (1)  SDA undertakes to pay United Kingdom stamp duty (if
        any) payable on this Deed, the Notice of Exercise or
the Countersigned Notice.                   

      (2)  The Trustee undertakes with SDA not to bring this Deed,
           the Notice of Exercise or the Countersigned Notice into
           the United Kingdom except if advised by English Counsel
          that the original is required in the United Kingdom to
          prove the terms of the Deed, the Notice of Exercise or
           the Countersigned Notice in proceedings then current in
      the English Courts and that failure to produce the
        original would jeopardize the Trustee's rights here-
under.                                      

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7.  LAW AND JURISDICTION                              
--------------------                          

          This Deed shall be construed in accordance with and be
         governed by English law and the parties hereby submit
    to the non-exclusive jurisdiction of the English
Courts.                                     

           IN WITNESS WHEREOF this document has been executed as a
deed on the above date.                     

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      SCHEDULE 1
      ----------

1.   THE TRUSTS                                       
----------                                  

         The Trustee shall hold the Assigned Rights upon trust
              to enforce the same and to apply all monies derived there-
from in accordance with this Schedule 1.    

   2.   THE ADJUSTMENT SCHEDULES:  FINAL AND PROVISIONAL AD-
        ----------------------------------------------------
JUSTMENT DEBT:  DISPUTED DEBT               
-----------------------------               

    (1)  The Trustee shall require SDA (or failure which AS&P)
         to deliver the Trustee copies of the Adjustment Sche-
         dules prepared in accordance with Section 7 from time
          to time.  The Trustee shall itself be entitled to pre-
         pare and deliver such Schedules or any of them if SDA
           fails to deliver them to AS&P as required by Section 7.

   (2)  The Final Adjustment Debt shall be calculated by the
        Trustee on the basis of the Adjustment Schedules (a-
           mended as appropriate by any arbitrator's determination
under sub-section 7 of Section 7) when:-    

        (a)  all Adjustment Schedules have been delivered to
            the Trustee for all Adjustment Dates up to and
  including the Final Adjustment Date;

         (b)  all disputes concerning items within the Adjust-
              ment Schedules which are the subject of a Notice
               of Disagreement have been finally resolved pursu-
ant to subsection 7 of Section 7. 

      (3)  The Trustee shall notify SDA and AS&P in writing of the
          Trustee's calculation of the Final Adjustment Debt and
           if neither SDA nor AS&P serves counternotice in writing
        upon the Trustee within 30 days following service of
       such notice that it disputes the same the Trustee's
           calculation shall be final and binding provided that if
     a manifest error is discovered in the calculation
     before the Trustee makes any payment on the basis
         thereof, the Trustee shall on application correct the

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          error.  If a counternotice is served and the matter is
         not resolved within the said 30 day period the matter
      shall be submitted to and reviewed by an Chartered
     Accountant (who shall act as an expert and not an
       arbitrator who shall be selected by the auditors of
           SDA and AS&P or, if they cannot agree, by the President
        of the Institute of Chartered Accountants in England
           and Wales, whose decision shall be final and binding on
the parties.                                

  (4)  If after the final determination of each Adjustment
         Schedule pursuant to sub-section 7 of Section 7 it is
          demonstrated there to the Trustee that there is a bal-
         ance in the Adjustment Account in favour of the Buyer
           under Section 7, the Trustee may notify SDA and AS&P in
        writing that such balance is to be treated as Provi-
          sional Adjustment Debt and unless AS&P serves counter-
          notice in writing upon the Trustee within 30 days fol-
           lowing service of such notice that it disputes the same
          the amount so notified shall be treated as Provisional
   Adjustment Debt for the purposes of the Trusts.

  (5)  If it is demonstrated to the Trustee that there are
         items in an Adjustment Schedule which are either dis-
          puted by Notice of Disagreement or are not yet capable
      of final quantification pursuant to Section 7 they
      shall be treated as Disputed Debt and the Trustees
shall notify SDA and AS&P accordingly.      

    (6)  The Final Adjustment Debt and the Provisional Adjust-
        ment Debt shall be determined in accordance with the
           procedure in Section 7 for determining issues raised in
        a Notice of Disagreement and the Trustee as assignee
       shall at the request of any Beneficiary (subject to
          provision of security to the satisfaction of the Trus-
         tee for all costs occasioned thereby) take reasonable
steps to procure such determination.        

    (7)  For the avoidance of doubt it is hereby declared that
        the Adjustment Rights are subject to the limitations
set out in sub-section 5 of Section 7.      

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3.   THE NET AMOUNT (FINAL)                           
----------------------                      

(1)  This clause 3 shall apply only:-                 

         (a)  when the Final Adjustment Debt has been notified
under clause 2(3); and            

          (b)  if the Loan Note Debt has not become due and pay-
        able before the Final Adjustment Date; and

           (c)  if SDA is solvent at the time of such notification

     (2)  The Lower Debt shall be treated for all purposes as if
           it had been paid to the Trustee in full and the Greater
       Debt shall be treated for all purposes as if it had
           been paid to the Trustee to the extent of the amount of
the Lower Debt so that:                     

           (a)  the Trustee shall release and discharge the debtor
of the Lower Debt;                

           (b)  the Trustee shall release and discharge the debtor
            of the Greater Debt to the extent of the Lower
Debt; and                         

           (c)  the debtor of the Greater Debt shall remain liable
for the Net Amount.               

     (3)  The Trustee shall (subject to provision of security to
        the satisfaction of the Trustee for all expenses in-
          curred in connection therewith) take at the request of
            any of the Beneficiaries all reasonable steps to collect
          the Net Amount from the person liable to pay the same.

      (4)  The Trustee shall hold the Net Amount or so much there-
          of as it shall collect (together with recovered costs,
          charges and interest) to apply the same in the follow-
ing order:-                                 

          (a)  to pay thereout any costs and expenses not other-
                wise reserved, including stamp duties, incurred in
                the protection, proof and enforcement of the Trus-

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          tee's claim for any part of the Greater Debt
and/or the Lower Debt,            

          (b)  If the Final Adjustment Debt is the Greater Debt,
      to pay the Net Amount to SDA absolutely,

         (c)  if the Loan Note Debt is the Greater Debt to pay
the Net Amount to AS&P absolutely.

    (5)  If after delivery of the Final Adjustment Schedule it
       appears that the Loan Note Debt will be the Greater
           Debt but that one or more items in the Final Adjustment
         Schedule or any preceding Adjustment Schedule is Dis-
         puted Debt the Trustee may pending resolution of such
dispute:                                    

       (a)  require SDA to pay all or any part of the Loan
              Note Debt which exceeds the undisputed amount of
the Adjustment Debt,              

       (b)  retain funds in respect of Disputed Debts, and

           (c)  make payments on account from time to time to AS&P
             as it may in its absolute discretion think fit.

4.  ACCELERATION OF NOTES                             
---------------------                         

    (1)  If for any reason the Notes shall become due and pay-
           able before the Final Adjustment Date the Trustee shall
        at the written request (but not otherwise) of either
         SDA or AS&P or, if SDA is not solvent, at the written
           request of any of the Beneficiaries (and subject to the
          provision of security to the satisfaction of the Trus-
          tee for all expenses in connection therewith) take all
          reasonable steps to collect the Loan Note Debt includ-
           ing but not limited to proof in the liquidation for the
        full amount of the Loan Note Debt and enforcement of
         any guarantee of SD (Holding) provided that if SDA is
                        --------
        then solvent and an amount of Provisional Adjustment
    Debt has been established pursuant to Section 7:

           (a)  the Trustee shall only collect the amount by which
                the Loan Note Debt exceeds the Provisional Adjust-
                ment Debt at that time and the Trustee shall treat
                the Loan Note Debt as paid by SDA to the extent of
             the Provisional Adjustment Debt and the Trustee
            shall treat the Provisional Adjustment Debt as
paid by AS&P,                     

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       (b)  if the Provisional Adjustment Debt exceeds the
             Loan Note Debt the Trustee shall treat the Loan
           Note Debt as paid in full and the Provisional
               Adjustment Debt paid by AS&P to the extent of the
           Loan Note Debt and the Trustee shall take all
            reasonable steps to collect the balance of the
            Provisional Adjustment Debt from time to time.

    (2)  All monies collected by the Trustee in respect of the
         Loan Note Debt under this clause 4 (together with re-
           covered costs, charges and interest) shall be held upon
the following trusts:                       

         (a)  to pay thereout any costs and expenses including
               stamp duties incurred in the protection proof and
              enforcement of the Trustee's claims for the Loan
Note Debt;                        

        (b)  to apply the balance collected on the Loan Note
       Debt in the following order of priority:-

                (i)  in payment of the amount of the Priority Debt
                   (if any) to the extent then due and payable
                but only against the valid and effective
                    assignment by the Priority Creditor as bene-
                    ficial owner to the Trustee of the rights of
                    the Priority Creditor against SDA in respect
                  of the Priority Debt free from any charge,
                 encumbrance, equity or right of deduction
whatsoever,             

              (ii)  if the amount of Provisional Adjustment Debt
                     then exceeds the aggregate of (aa) any uncol-
                     lected balance of the Loan Note Debt and (bb)
                any amount paid to the Priority Creditor
                     under paragraph (i), in payment to SDA of the
                amount of such excess, in which case the
                   Trustee shall treat the Provisional Adjust-
                  ment Debt as paid by AS&P to the extent of
such payment,           

             (iii)  if SDA was solvent when notice was served on
                   the Trustee under sub-clause (1) and if the
                    Loan Note Debt then exceeded the Provisional
                  Adjustment Debt, the Trustee shall pay the
                  balance of the monies collected under sub-
                   clause (1)(a) and sub-clause (3) in respect
                of the Loan Note Debt to AS&P absolutely

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                     provided that if there shall be or shall have
--------                
                   been an increase in the Provisional Adjust-
                  ment Debt at a time when the Trustee still
                holds any such monies, the Trustee shall
                    first pay the amount of such increase to SDA
                 absolutely and shall only pay to AS&P the
                balance remaining thereafter and in such
                     event the increase in the Provisional Adjust-
                    ment Debt shall be treated by the Trustee as
                    paid by AS&P to the extent of the payment to
SDA.                    

         (c)  Following application of all monies collected on
            account of the Loan Note Debt under sub-clause
             (2), if there shall be a subsequent increase in
             the cumulative Provisional Adjustment Debt (in-
              cluding any amount by which the Final Adjustment
                Debt exceeds the amount last notified by the Trus-
           tee as Provisional Adjustment Debt) then AS&P
                shall remain liable to pay such increase in accor-
               dance with Section 7 and the Trustee shall at the
             request of SDA (and subject to the provision of
             security to the satisfaction of the Trustee for
            all expenses in connection therewith) take all
             reasonable steps to collect the same until such
                time as the whole of the Final Adjustment Debt has
                been collected and/or discharged and/or treated as
           paid and the Trustee shall hold the same upon
          trust to pay such balance to SDA absolutely.

   (3)  The Trustee shall (subject to the provisions of sub-
         clause (1)) take all reasonable steps to collect from
       SDA the amount of the Priority Debt assigned to the
       Trustee in accordance with sub-paragraph (b) (i) of
       sub-clause (2) and the monies so collected shall be
           held upon the trusts set out in paragraphs (b) (ii) and
       (iii) and paragraph (c) of sub-clause (2) as if all
        references to monies collected on the Loan Note Debt
       were to monies collected under this sub-clause (3).

   (4)  If SDA was not solvent at the time of service of the
     written request on the Trustee under clause 4 (1)
clause 5 shall apply.                       

    (5)  All monies collected by the Trustee in respect of the
           Provisional Adjustment Debt shall be held upon trust to

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         pay thereout any costs and expenses not otherwise re-
          covered including stamp duties incurred in the protec-
          tion, proof and enforcement of the Trustee's claim for
       the Provisional Adjustment Debt and thereof for SDA
absolutely.                                 

5.   INSOLVENCY OF SDA:  LIQUIDATION OF AS&P          
---------------------------------------     

  (1)  If SDA shall not be solvent when the Loan Note Debt
      becomes due and payable or if later when a written
          request is served on the Trustee under clause 4(1) the
    provisions of sub-clause (2) to (5) shall apply.

     (2)  The Trustee shall at the request of any of the Benefi-
        ciaries (and subject to the provision of security to
       the satisfaction of the Trustee for all expenses in
      connection therewith) take all reasonable steps to
          collect the full amount of the Loan Note Debt from SDA
         including but not limited to proof in the liquidation
         of SDA for the full amount of such Loan Note Debt and
     the enforcement of any guarantee of SD (Holding).

    (3)  All monies collected by the Trustee on account of the
          Loan Note Debt shall be applied in the following order
   of priority to the extent not previously done:-

           (a)  in the payment of any costs and expenses including
               stamp duties incurred in the protection proof and
              enforcement of the Trustee's claims for the Loan
Note Debt;                        

         (b)  to the Priority Creditor (if any) absolutely the
                amount of the Priority Debt to the extent then due
               and payable against the assignment to the Trustee
                of all rights of the Priority Creditor against SDA
in respect of the Priority Debt;  

        (c)  if (and only if) the Loan Note Debt exceeds the
            cumulative Provisional Adjustment Debt (or the
               Final Adjustment Debt if then established) in the
payment to AS&P of :-             

(i)  the amount of such excess, or

           (ii)  the balance of all monies owing under the
                   Senior Note after deducting the amount paid

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                   in respect of the Priority Debt under para-
graph (b)               

whichever shall be the lesser;    

         (d)  in the payment to the Senior Creditors by way of
              distribution amongst them in proportion to their
              claims against SDA up to the full amount of such
claims;                           

           (e)  if following determination of the Final Adjustment
          Debt (and only if) the Loan Note Debt is the
                Greater Debt, in the payment to AS&P absolutely of
            any amount by which the total payments to AS&P
               under paragraph (c) and sub-clause (4) fall short
of the Net Amount;                

      (f)  finally, in the payment of the balance to SDA
absolutely.                       

      (4)  Out of any monies received by the Trustee in respect of
         claims assigned to the Trustee by a Priority Creditor
          there shall be paid to AS&P (but only if the Loan Note
           Debt is the Greater Debt) an amount equal to the lesser
of:                                         

         (i)  the amount paid by the Trustee in respect of the
relevant Priority Debt;           

      (ii)  the amount by which the payments to AS&P under
          sub-clause (3) fall short of the Net Amount.

         and any balance of such monies shall be paid to those
         persons specified in and in the order of priority set
    out in paragraphs (d) and (f) of sub-clause (3).

    (5)  If the Final Adjustment Debt is established to be the
      Lower Debt then the Final Adjustment Debt shall be
        treated by the Trustee as satisfied in full and AS&P
           shall have no further liability in respect thereof.  If
      the Final Adjustment Debt is established to be the
          Greater Debt then AS&P shall be treated by the Trustee
           as having paid the same to the extent of the Lower Debt
       plus any amount paid by the Trustee under paragraph
          (3)(a) but AS&P shall remain liable for the balance of
          the Net Amount (less monies paid on account), in which
          case the Trustee shall at the request of any Benefici-
           ary (and subject to provision of security to the satis-

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      faction of the Trustee for all expenses occasioned
          thereby) take all reasonable steps to collect the same
         and any monies collected by the Trustee thereon shall
           first be applied, in accordance with paragraphs (a) and
       (b) of sub-clause (3) according to their respective
          priorities and thereafter any balance shall be paid to
SDA absolutely.                             

           (6)  If AS&P shall be wound up the Trustee shall at the
               request of SDA (and subject to provision of secu-
             rity to the satisfaction of the Trustee for all
                expenses occasioned thereby) prove in the liquida-
             tion for the full amount of the Adjustment Debt
            from time to time.  All monies received by the
                Trustee on such proof shall be retained upon trust
           pending establishment of the Final Adjustment
              Debt.  When such Final Adjustment Debt is estab-
                lished under the provisions of clause 2 all monies
              received by the Trustee shall be deemed payments
                 on account of the Final Adjustment Debt and shall:-

                (a)  first be applied in accordance with paragraph
                  (a) and (b) of sub-clause (3) according to
    their respective priorities:

              (b)  thereafter be paid to SDA if and to the ex-
                tent the Final Adjustment Debt (less any
                   amounts paid on account) exceeds the aggre-
                gate of the total Loan Note Debt and the
         amounts paid under paragraph (a);

              (c)  otherwise and as to the balance, be paid to
AS&P absolutely.        

In such case                      

             (i)  the Loan Note Debt shall be treated by the
                  Trustee as discharged to the extent of the
Lower Debt;             

             (ii)  if the Final Adjustment Debt is the Greater
                  Debt it shall be treated by the Trustee as
                  discharged to the extent of the Lower Debt
                     and if it is the Lower Debt it shall be trea-
                   ted by the Trustee as discharged in its en-
tirety.                 

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6.   PRIORITY CREDITORS                               
------------------                          

  (1)  Subject to sub-clause (2) SDA may from time to time
           notify the Trustee and AS&P in writing of the names and
           addresses of banks or other financial institutions from
      which SDA has borrowed money or otherwise obtained
         credit and the persons specified in that notice shall
         be Priority Creditors in the order of priority as be-
          tween themselves as notified by SDA or failing notifi-
        cation of priority ranking pari passu and the monies
         due to them from time to time in respect of such bor-
         rowing or other credit shall be Priority Debt for the
 purposes of this Deed up to but not exceeding
B.P.15,000,000.                             

    (2)  No notice under sub-clause (1) shall be effective un-
           less all persons specified in earlier notices as Prior-
        ity Creditors give their written consent thereto nor
         shall any such notice be given after service upon the
         Trustee of a written request under clause 4(1) or the
           date when the Notes become due and payable or after the
          Final Adjustment Date whichever shall be the earliest.

      (3)  A Priority Creditor shall cease to be such if he serves
notice to that effect upon the Trustee.     

      (4)  By signature of this Deed SDA hereby notifies the Trus-
         tee Manufacturers Hanover Trust Company as a Priority
Creditor for all purposes of this Deed.     

7.   INSOLVENCY                                       
----------                                  

  (1)  SDA shall be deemed solvent for the purpose of this
         Deed if (and only if) (i) it is able to pay its debts
          as they fall due and (ii) its assets exceed its liabi-
       lities (other than its liabilities to persons whose
   claims are subordinated to the Loan Note Debt).

      (2)  SDA may at any time and shall whenever requested by the
          Trustee (upon the written instruction of AS&P) procure
           that two directors of SDA or (if SDA is in liquidation)
          the liquidator of SDA shall give an Officers' Certifi-
          cate (as defined in the Note Purchase Agreement) as to
           whether or not SDA is or would in any specified circum-
         stances be solvent or insolvent within the definition
        in sub-clause (a) above and in the absence of proven
          error any such report shall be treated and accepted by
          the Trustee as correct and sufficient evidence of such

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        fact.  In the absence of any such report to the con-
      trary, it shall be assumed (unless the contrary is
        proven prior to the date of payment) that SDA is and
          will immediately after any payment to AS&P be solvent.
          If a report of two directors of SDA states that SDA is
       not solvent SDA shall procure that the Auditors (as
          defined in the Note Purchase Agreement) shall provide,
          within 30 days of the date of delivery of such report,
        a report of the Auditors as to whether or not SDA is
        solvent for the purposes of sub-clause (a) above and
          such report of the Auditors shall supersede the report
          of the directors of SDA for all purposes of this Deed.

8.   PAYMENTS TO SENIOR CREDITORS                     
----------------------------                

           The trust for distribution amongst the Senior Creditors
          may be performed by the Trustee by repaying to SDA (or
           the liquidator thereof) the amount so to be distributed
       on terms that SDA (or the liquidator thereof) shall
         distribute the same accordingly and in that event the
          Trustee shall not be bound to supervise such distribu-
         tion and (subject as in this Deed otherwise provided)
    shall receive for distribution to AS&P only such
           amounts (if any) as shall be available after the claims
         of all the Senior Creditors shall have been satisfied
or provided for in full.                    

9.  THE GUARANTOR                                     
-------------                                 

 (1)  Whenever any part of the Loan Note Debt is for the
        purposes of the Trusts to be treated as paid by SDA,
      the Trustee shall treat the Loan Note Debt as dis-
         charged to that extent for all purposes in connection
    with the liability of SD (Holding) as guarantor.

  (2)  Whenever any part of the Adjustment Debt is for the
          purposes of the Trusts to be treated by the Trustee as
         paid by AS&P, the Adjustment Debt shall be treated as
         discharged to that extent for all purposes in connec-
      tion with the liability of A&A and A&A (Europe) as
guarantors.                                 

     (3)  If A&A or A&A (Europe) or SD (Holding) shall be called
           upon by the Trustee to make any payment as guarantor of
           the Adjustment Debt or the Loan Note Debt respectively,
         then to the extent of the respective payments so made
         (excluding costs) A&A or A&A (Europe) shall be subro-
       gated to the rights of AS&P under the Trusts and SD

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      (Holding) shall be subrogated to the rights of SDA
         under the Trusts (as the case may be) but neither A&A
          nor A&A (Europe) nor SD (Holding) shall thereby become
 a Beneficiary for the purposes of the Trusts.

10.  PERPETUITY PERIOD                                
-----------------                           

           The period of the Trusts declared by this Deed shall be
      21 years following the death of the last surviving
       child or other descendant now living of Her Majesty
Queen Elizabeth the Second.                 

11.  DEPOSIT OF MONIES AND INCOME RECEIVED BY TRUSTEE 
    ------------------------------------------------

    (1)  Any amounts received by the Trustee in respect of the
           Assigned Rights and not required to be paid out immedi-
          ately under this Deed may be placed on current account
          with any bank.  The Trustee need not invest, or invest
          at interest, such amounts but if any interest or other
           income is earned on such amounts the Trustee shall hold
         that interest or income (after paying any taxation in
       respect of that interest or other income) as monies
         collected on account of the Loan Note Debt or the Ad-
       justment Debt according to the source of the monies
from which such income is derived.          

    (2)  Any bank account maintained by the Trustee in connec-
         tion with these Trusts may be operated by the Trustee
          or by such two or more persons as the Trustee shall in
its discretion determine.                   

   12.  INVESTMENT AND MANAGEMENT OF AMOUNTS RECEIVED BY THE
        ----------------------------------------------------
TRUSTEE                                     
-------                                     

           In addition to all the powers vested in it by this Deed
          or by law or otherwise the Trustee shall have the fol-
lowing powers:-                             

(a)  General                                          
-------                                     

           to exercise all powers of investment, sale, alienation,
      exchange, partition, mortgage, charging, pledging,
         leasing, insurance, protection, improvement, disposi-
          tion and management (and all other powers) of an abso-
       lute beneficial owner of all monies received by the
           Trustee pursuant to this Deed and such powers shall not
      be restricted by any principle of construction but
       shall operate according to the widest generality of

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         which the foregoing words are capable notwithstanding
         that certain powers are hereinafter more particularly
set forth;                                  

(b)  Investment                                       
----------                                  

          to invest or lay out the whole or any part or parts of
          such monies in the purchase of or at interest upon the
      security of such stock, funds, shares, securities,
         foreign currencies, commodities, financial futures or
           other investments or property or interests or particip-
          ations therein of whatever nature and situate anywhere
           in the world and whether involving liability or not and
          whether producing income or not and whether in posses-
           sion or reversion or upon such personal or other credit
        with or without security as the Trustee shall in its
           absolute discretion think fit and the Trustee shall not
      be bound to have regard to any requirement for the
      diversification of investments and it shall not be
       liable for the consequences of investing or keeping
          such monies invested in the shares or obligations of a
single company;                             

(c)  Borrowing                                        
---------                                   

      to borrow money on such terms and conditions as to
         interest, repayment and otherwise as it may think fit
          and whether upon the security of the whole or any part
      or parts of the Assigned Rights or monies deriving
       therefrom or upon personal security only and to use
           such moneys for the purposes of investment or otherwise
         for any purpose for which money deriving from the As-
signed Rights may be used.                  

13.  DELEGATION                                       
----------                                  

         The Trustee shall have power to delegate to any other
           person or persons at any time for any period and in any
           manner upon any terms whatever (including provision for
          reasonable remuneration) all or any of the powers (in-
         cluding power to delegate) and discretions imposed on
     or given to the Trustee by this Deed or by law or
           otherwise without being liable for the acts or defaults
of any such delegate or sub-delegate.       

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14.  PROFESSIONAL ASSISTANCE                          
-----------------------                     

           The Trustee shall have power to employ and pay for such
       professional or other assistance as it may consider
          advisable in the discharge of its duties as trustee of
the Trusts.                                 

15.  PAYMENTS AND RECEIPTS                            
---------------------                       

          The Trustee may from time to time in writing authorise
         such person or persons as the Trustee shall think fit
      to make any payments and to give receipts and dis-
           charges for any money or other property payable, trans-
      ferable or deliverable to the Trustee.  Every such
           receipt or discharge shall be as valid and effective as
           if such receipt or discharge were given by the Trustee.

16.  ENFORCEMENT AND TRUSTEE'S INDEMNITY              
-----------------------------------         

  (1)  The Trustee shall not be bound to take any steps to
           enforce any of the Assigned Rights unless it shall have
    been secured and indemnified to its satisfaction
        against all liabilities, proceedings, claims and de-
     mands to which it may be or become liable and all
           costs, charges and expenses which may be incurred by it
           in connection therewith but this shall not limit in any
         way the right of the Trustee to claim costs, damages,
        expenses and/or interest from any defaulting debtor.

      (2)  Subject to sub-clause (1) above, SDA covenants with the
        Trustee that it will at all times hereafter keep the
        Trustee fully indemnified and saved harmless against
      all claims, losses, demands, actions, proceedings,
        charges, expenses, costs, damages, taxes, duties and
         other liabilities that may be suffered or incurred by
         it in connection with the execution of the trusts and
           powers of this Deed other than liabilities arising as a
           consequence of fraud or wilful default or negligence on
the part of the Trustee.                    

17.  MODIFICATION                                     
------------                                

      (1)  The Trustee may from time to time and at any time with-
        out any consent or sanction of any Beneficiary here-
         under make any modification to this Deed which in the
      opinion of the Trustee it may be expedient to make
         provided that the Trustee is of the opinion that such

      24

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          modification will not be materially prejudicial to the
         interests of any Beneficiary or to correct a manifest
          error or where such modification is of a formal, minor
        or technical nature.  Any such modification shall be
binding on any Beneficiary.                 

    (2)  The Trusts may be varied or terminated by a deed exe-
           cuted by all persons who are then Beneficiaries as they
         shall think fit (including any variation so as to ex-
   clude Senior Creditors from benefit hereunder).

18.  PROTECTION OF THIRD PARTIES                      
---------------------------                 

        The production of a written authority of the Trustee
           given pursuant to clause 15 shall be sufficient protec-
           tion to any person taking any such receipt or discharge
        as is mentioned in clause 13 and (unless that person
        shall have received express notice in writing of the
        revocation of the authority) he shall be entitled to
          assume and to act upon the assumption that the author-
ity remains unrevoked.                      

19.  APPOINTMENT AND REMOVAL OF TRUSTEES              
-----------------------------------         

         The power of appointment of additional Trustees shall
be exercised by the Trustee but:-           

          (a)  if SDA shall be placed in liquidation, AS&P shall
            have the power to appoint and remove Trustees;

          (b)  If AS&P shall be placed in liquidation, SDA shall
            have the power to appoint and remove Trustees.

20.  NOTICES                                          
-------                                     

           Any notice or other communication required or permitted
        hereunder shall be in writing and shall be delivered
         personally, telegraphed, telexed or sent by facsimile
        transmission.  Any such notice shall be deemed given
         when so delivered personally, telegraphed, telexed or
          sent by facsimile transmission, as the case may be, or
when received in any manner as follows:     

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(i)  If to SDA to:                          

      Sphere Drake Acquisitions (U.K.) Limited
c/o Centre Capital Investors L.P. 
Suite 1025                        
One Rockefeller Plaza             
New York, New York  10020         
United States of America          

Attention:  Lester Pollack        
Telex:  RCA 222301                
Fax:  (212) 974-2825 or           
(212) 489-9655        

and                               

      Sphere Drake Acquisitions (U.K.) Limited
c/o Sphere Drake Insurance plc    
52/54 Leadenhall Street           
London EC3A 2BJ                   
England                           
Attention:  Ian N. Dean           
Telex:  935015 Sphere G           
Fax:  01-481-3828                 

and                               

John C Head III                   
c/o John Head & Partners          
545 Madison Avenue                
New York, New York  10022         
United States of America          

Telex:  971861                    
Fax:  (212) 715-8641              

with copies to:                   

      Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas       
New York, New York  10019         
United States of America          
Attention:  Albert P. Hand, Esq.  
Telex:  WUI 666-843               
Fax:  (212) 757-3990              

and                               

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Clyde & Co.                       
51 Eastcheap                      
London EC3M 1JP                   
England                           
Attention:  Francis Mackie and    
  V.C. Southey
Telex:  884886 Clyde G            
Fax:  01-623-5427                 

(ii)  if to AS&P, to:                         

 Alexander & Alexander Services Inc.
1211 Avenue of the Americas       
New York, New York  10036         
United States of America          
Attention:  General Counsel       
Telex:  620303                    
Fax:  (212) 302-1921              

and                               

 Alexander Stenhouse & Partners Ltd.
Two South Place                   
London EC2P 2DX                   
England                           
Attention:  The Company Secretary 
Telex:  8813371                   
Fax:  01-588-1680                 

and                               

Alexander & Alexander Europe plc  
5-10 Bury Street                  
London EC3A 5HL                   
England                           
Attention:  Group Legal Adviser   
Telex:  882171                    
Fax:  01-623-5022                 

              Any party may by notice given in accordance with
   this clause 20 to the other parties designate another ad-
dress or person for receipt of notices hereunder.     

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(iii)  if to the Trustee to:-                   

7 New Street,                     
St. Peter's Port,                 
Guernsey,                         
  (Attention:  Mr Langlois/Mr Beattie)

21.  GOVERNING LAW                                    
-------------                               

           The Trusts shall be governed by and construed in accor-
       dance with English law and the English Courts shall
have non-exclusive jurisdiction.            

THE COMMON SEAL of SPHERE     )                       
DRAKE ACQUISITIONS (U.K.) LTD )                       
is hereunto affixed in the    )                       
presence of:-                 )                       

THE COMMON SEAL of S.D        )                       
SECURITIES LIMITED is hereunto)                       
affixed in the presence of:-  )                       

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      SPHERE DRAKE ACQUISITIONS (U.K.) LIMITED

     Zero Coupon Senior Notes due 1995
     Zero Coupon Subordinated Notes due 1995
      Credit Facility Notes due 1995

     Guaranteed by

     SPHERE DRAKE HOLDING PUBLIC LIMITED COMPANY

     _______________________

     NOTE PURCHASE AGREEMENT
     _______________________

     Dated As of October 9, 1987

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     TABLE OF CONTENTS

      Section                                                 Page
      -------                                                 ----

1.  Authorization of Notes  . . . . . . . . . . . . . 

2.  Sale and Purchase of Notes  . . . . . . . . . . . 

3.  Closing . . . . . . . . . . . . . . . . . . . . . 

4.  Conditions to Closing . . . . . . . . . . . . . . 

   4.1    Delivery etc.  . . . . . . . . . . . . . .
   4.2.   Representations and Warranties . . . . . .
   4.3.   Performance; No Default  . . . . . . . . .
   4.4.   Share Purchase Agreement . . . . . . . . .
   4.5.   The Warrants . . . . . . . . . . . . . . .
   4.6.   Compliance Certificate . . . . . . . . . .
   4.7.   Opinion of Counsel . . . . . . . . . . . .

5.  Representations and Warranties, etc.  . . . . . . 

   5.1.   Organization . . . . . . . . . . . . . . .
5.2.   Authority to Execute and Perform       
            Agreements . . . . . . . . . . . . . . .
   5.3.   Memorandum and Articles of Association . .
   5.4.   Capitalization . . . . . . . . . . . . . .
   5.5.   Compliance with Other Instruments, etc . .
   5.6.   Governmental Consent . . . . . . . . . . .
   5.7.   Offer of Notes . . . . . . . . . . . . . .
   5.8.   Disclosure . . . . . . . . . . . . . . . .

6.  Purchase for Investment . . . . . . . . . . . . . 

7.  Accounting; Financial Statements and Other        
     Information . . . . . . . . . . . . . . . . . .

8.  Inspection, etc.; Confidentiality . . . . . . . . 

9.  Prepayment of Notes . . . . . . . . . . . . . . . 

   9.1.   Optional Prepayments . . . . . . . . . . .
9.2.   Notice of Prepayments; Officers'       
            Certificate  . . . . . . . . . . . . . .
   9.3.   Surrender, etc.  . . . . . . . . . . . . .

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                                                              Page
                                                              ----

10. The Credit Facility . . . . . . . . . . . . . . . 

   10.1.  Loans; Credit Support  . . . . . . . . . .
   10.2.  Credit Facility Cap  . . . . . . . . . . .
   10.3.  Notices; Cooperation . . . . . . . . . . .
   10.4.  Furnishing Support, etc. . . . . . . . . .
   10.5.  Third Party Unsupported Loans  . . . . . .
   10.6.  Loans  . . . . . . . . . . . . . . . . . .
   10.7.  Credit Support . . . . . . . . . . . . . .
   10.8.  Conditions Precedent . . . . . . . . . . .
   10.9.  Additional Covenants . . . . . . . . . . .
   10.10. Additional Events of Default . . . . . . .
   10.11. Fees and Expenses, Cooperation . . . . . .

11. Business and Financial Covenants  . . . . . . . . 

   11.1.  Senior Debt  . . . . . . . . . . . . . . .
   11.2.  Restricted Payments  . . . . . . . . . . .
   11.3.  Liens, etc.  . . . . . . . . . . . . . . .
   11.4.  Leases; Leasebacks . . . . . . . . . . . .
   11.5.  Transactions with Affiliates . . . . . . .
   11.6.  Subsidiary Stock and Indebtedness  . . . .
   11.7.  Sale of Assets, etc. . . . . . . . . . . .
   11.8.  Use of Proceeds  . . . . . . . . . . . . .
   11.9.  Corporate Existence, etc.; Business  . . .
   11.10. Payment of Taxes and Claims  . . . . . . .

12. Events of Default; Acceleration . . . . . . . . . 

13. Remedies on Default, etc. . . . . . . . . . . . . 

14. Definitions . . . . . . . . . . . . . . . . . . . 

15. Exchange and Substitution of Notes  . . . . . . . 

   15.1.  Exchange . . . . . . . . . . . . . . . . .
   15.2.  Replacement  . . . . . . . . . . . . . . .

16. Payments on Notes . . . . . . . . . . . . . . . . 

17. Survival of Representations and Warranties  . . . 

18. Amendments and Waivers  . . . . . . . . . . . . . 

19. Suspensory Clause . . . . . . . . . . . . . . . . 

20. Notices, etc. . . . . . . . . . . . . . . . . . . 

21. Miscellaneous . . . . . . . . . . . . . . . . . . 

      ii

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      EXHIBIT A1     --   Form of Zero Coupon Senior Note due 1995

      EXHIBIT A2     --   Form of  Zero  Coupon Subordinated  Note
due 1995      

EXHIBIT A3     --   Form of Credit Facility Note      

EXHIBIT B      --   Form of Guaranty Agreement        

      EXHIBIT C1     --   Form of  Opinion of  Solicitors for  the
           Company under Section 4.7

      EXHIBIT C2     --   Form of  Opinion of  Solicitors for  the
                 Company under Section 10.8 (ii)

EXHIBIT D      --   Form of Deed of Trust             

     iii

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     AMENDMENT AGREEMENT
     -------------------

               THIS AMENDMENT AGREEMENT is made August 30, 1988,
   by and among SPHERE DRAKE ACQUISITIONS (U.K.) LIMITED, an
   English company, SPHERE DRAKE HOLDING PUBLIC LIMITED COM-
      PANY, an English company, and ALEXANDER STENHOUSE & PARTNERS
LTD., a Scottish company.                             

           WHEREAS, the parties have entered into a Note
   Purchase Agreement dated as of October 9, 1987 (the "Note
Purchase Agreement").                                 

              NOW THEREFORE, in consideration of the terms and
    conditions set forth herein and of other good and valuable
 consideration, the receipt and sufficiency of which are
   hereby acknowledged, the parties hereby agree as follows:

            1.  Amendment to Note Purchase Agreement.  The
          ------------------------------------
   Note Purchase Agreement shall be and hereby is amended in
the following respects:                               

              (a)  By the deletion of Subsection (ii) and Sub-
     section (iii) of Section 7(b) and the substitution therefor
of the following:                                     

               "(ii)  Within 60 days after the end of each year,
           preliminary forms of the consolidated balance sheets of
         the Guarantor and its Subsidiaries and of the Company
           and its Subsidiaries, and the separate balance sheet of
           SDI, as at the end of such year and the related consol-
        idated profit and loss accounts of the Guarantor and
          its Subsidiaries, the Company and its Subsidiaries and
        SDI for such fiscal year, setting forth in each case
      (other than in the cases of consolidated financial
           statements required to be delivered before December 31,
          1988) in comparative form the consolidated figures for
           the previous year, all in reasonable detail accompanied
         by a report as to the issues at the time open in con-
       nection with the audit of such financial statements
       (which report shall indicate a range of amounts af-
          fected by each such open issue), certified in the case
           of such financial statements by the Finance Director of
           the Guarantor, the Company and SDI, as the case may be.

            "(iii)  Within 135 days of the end of the year
        such financial statements referred to in clause (ii)

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          above in definitive form and statements of sources and
         application of funds of the Guarantor and its subsid-
        iaries, the Company and its Subsidiaries and SDI for
      such fiscal year accompanied by reports thereon of
          independent chartered accountants of recognized stand-
      ing selected by the Guarantor, which reports shall
      state that such financial statements (x) have been
                                 -
         prepared in accordance with standard accounting prac-
         tice applicable in the United Kingdom, and (y) comply
                                             -
        with the Companies Act 1985 and, in the case of SDI,
          the Companies Act 1985 as it applies to insurance com-
          panies.  As to any year that ends on a Reserve Adjust-
     ment Date, the date for delivery of the financial
          statement and of the report referred to in this clause
          (iii) shall be deferred until a date 30 days after the
 delivery of the applicable Reserve Adjustment
Schedule."                                  

               (b)  By the deletion of Subsection (i) of Section
10.2 and the substitution therefor of the following:  

              "the positive balance, if any, of the Adjustment
         Account on such date, reduced by all amounts by which
         the Adjustment Account has been increased pursuant to
       clauses (xii) and (xiv) of section 7.2 of the Share
         Purchase Agreement (such balance as so reduced is re-
         ferred to herein as the "Non-Cash Indemnity Balance")
          to the extent and only to the extent that such balance
          does not exceed the limits contained in section 7.5 of
          the Share Purchase Agreement plus the aggregate amount
         of interest paid and accrued through such date on the
Credit Facility Notes;"                     

             2.  Note Purchase Agreement.  Except as amended
-----------------------   
  hereby, the Note Purchase Agreement shall remain in full
force and effect.                                     

                3.  Counterparts.  This Amendment Agreement may be
------------              
     executed in any number of counterparts, each of which shall
      be deemed an original, and the counterparts shall constitute
      but one and the same instrument, which shall be sufficiently
evidenced by any one counterpart.                     

     2

10931655                                              

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

SPHERE DRAKE ACQUISITIONS (U.K.) LIMITED              

By:_____________________________________              

SPHERE DRAKE HOLDING PUBLIC LIMITED COMPANY,          

By:_____________________________________              

ALEXANDER STENHOUSE & PARTNERS, LTD.                  

By:_____________________________________              

     3

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               THIS (NOTE PURCHASE AMENDMENT) AGREEMENT AND DEED
               -------------------------------------------------
OF CONSENT is made the 14th October 1992              
----------                                            

BETWEEN:-                                             
-------                                               

   (1)  ALEXANDER STENHOUSE & PARTNERS LIMITED No. S.C.23477
--------------------------------------      
          whose registered office is at 145 St. Vincents Street,
Glasgow, Scotland ("ASPL")                  

   (2)  SPHERE DRAKE ACQUISITIONS (U.K.) LIMITED No. 2136565
----------------------------------------    
          whose registered office is at 52-54 Leadenhall Street,
London EC3 ("SDA")                          

      (3)  SPHERE DRAKE HOLDING PUBLIC LIMITED COMPANY No. 2168083
------------------------------------------- 
          whose registered office is at 52-54 Leadenhall Street,
London EC3 ("SD Holding")                   

    (4)  SPHERE DRAKE LIMITED No. 2709527 whose registered of-
--------------------                        
  fice is at 52-54 Leadenhall Street, London EC3
("SDLTD")                                   

     (5)  S.D. SECURITIES LIMITED incorporated in Guernsey whose
-----------------------                     
          registered office is at 7 New Street, St Peter's Port,
Guernsey ("S.D. Securities")                

RECITALS                                              
--------                                              

      A.   Words and expressions defined in or by clause 1 ("Defi-
      nitions") bear that meaning when used in these Re-
citals.                                     

     B.   ASPL is the beneficial owner of certain Notes due 1995
         issued by SDA upon and subject to the term and condi-
tions of the Note Purchase Agreement.       

  C.   S.D. Securities is the legal owner of the Notes re-
      ferred to in Recital B and holds the same upon the
trusts constituted by the Trust Deed.       

    D.   The obligations of SDA under the Notes are guaranteed
           by SD Holding under and subject to the terms and condi-
tions of the Guaranty Agreement.            

 E.   SD Holding is the ultimate U.K. holding company of

      (i)  SDI, which is itself the direct subsidiary of

     4

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      (ii)  SDIG, which is itself the direct subsidiary of

       (iii)  SDA, which is itself the direct subsidiary of SD
Holding.                          

      F.   SDLTD wishes, as part of a scheme of reorganisation, to
          acquire all the issued shares of SD Holding and after-
        wards to issue new shares to raise monies which will
          (after deduction of related costs) be lent to SD Hold-
       ing and onwards within the Group for the purpose of
increasing the paid up share capital of SDI.

 G.   This Deed supplements and varies the Note Purchase
          Agreement having regard to the proposed Reorganisation
and New Capitalisation.                     

      H.   SD Securities is a party to this Agreement for the sole
          purpose of providing its consent to the Reorganisation
and New Capitalisation.                     

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NOW THIS DEED WITNESSES as follows:                   
-----------------------                               

1.  DEFINITIONS                                       
-----------                                   

              1.1  Subject to sub-clause 1.2 and to the opera-
   tive terms of this Deed, words and expressions defined in
    the Note Purchase Agreement bear that Meaning when used in
this Deed, including without limitation               

"Affiliate"                       

"Event of Default"                

"Guaranty Agreement"              

"Potential Event of Default"      

"Restricted Payments"             

"Triggering Event"                

  and words used in the Schedule and not otherwise defined
   herein or in the Note Purchase Agreement have the meaning
given to them in the A&A Warrant Amendment Agreement. 

1.2  In this Agreement:-          

     "the A&A Warrant Agreement"     means the Warrant Agreement
                                    made as of October 9, 1987
                                    between SD Holding (1) SDA
                          (2) and ASPL (3)

     "the A&A Warrant Amendment"     means the Agreement made or
                                     to be made at the same time
                                   as this Agreement between
                                     ASPL (1) SD Holding (2) SDA
                                    (3) and SDLTD (4) amending
                                   the A&A Warrant Agreement

"Dai-Tokyo (Bermuda)"           means Dai-Tokyo Inter-
                                     national Company Limited, a
                               Bermudian corporation

     "the draft Articles"            means the draft Articles of
                                     Association of SDLTD deliv-
                                   ered with the A&A Warrant
                                Amendment marked "WA1"

     6

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  "the Group"                     means SD Holding and its
                      subsidiaries

    "Net Subscription Monies"       means the amount raised by
                                 SDLTD the issue of Con-
                                    vertible Preference Shares
                                 upon New Capitalisation
                                     less all costs attendant on
                                   the Reorganisation and on
                    such issue

 "the New B Shares"              means the "B" Shares of
                                 SDLTD as defined in the
                        draft Articles

    "New Capitalisation"            shall have the meaning as-
                              cribed in Schedule 2

    "Notes"                         means the Senior Notes and
                                   the Subordinated Notes as
                                  defined in the Note Pur-
                                    chase Agreement and issued
                by SDA

    "Note Purchase Agreement"       means an Agreement made as
                                    of October 9, 1987 between
                                 ASPL (1) SDA (2) and SD
                                     Holding (3) for the sale of
                                     the Notes by SDA to ASPL as
                                 amended by an Amendment
                                   Agreement made August 30,
                                    1988 between the same par-
              ties

    "the Reorganisation"            shall have the meaning as-
                              cribed in Schedule 1

"SD Associates"                 means S.D. Associates 
                                   Limited, a Bermudian cor-
                  poration

   "SDI"                           means Sphere Drake Insur-
                  ance plc

   "SDIG"                          means Sphere Drake Insur-
                        ance Group plc

"SD Partners"                   means SD Partners, a  

     7

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                                     Bermudian partnership which
                                   proposes to register as a
                                  limited partnership with
                                   the name SD Partners L.P.

2.  INTERPRETATION                                    
--------------                                

             2.1  In this Deed unless the context (which in-
      cludes the context of the Note Purchase Agreement) otherwise
requires:-                                            

            (a)  words and expressions defined in the Com-
   panies Act 1985 as amended bear those meanings;

                (b)  reference to the singular includes the plural
         and vice versa and reference to a gender includes all
other genders;                              

             (c)  reference to a person includes a body cor-
        porate and an unincorporated association of persons;

            (d)  references to the Note Purchase Agreement
include the Notes.                          

            2.2  Headings in this Deed are for convenience
only and do not affect its interpretation.            

3.  CONSENT TO REORGANIZATION                         
-------------------------                     

              3.1  Subject to sub-clause 3.2, ASPL hereby con-
   sents in so far as such consent may be required under the
    Note Purchase Agreement to each step in the Reorganisation
      and in particular agrees that the Reorganisation will not in
      any respect constitute, and in any event shall be deemed not
     to constitute, a Triggering Event or an Event of Default or
      Potential Event of Default or to breach any of the represen-
     tations covenants or obligations of SDA or SD Holding under
   the Note Purchase Agreement or the Guaranty Agreement and
  such consent and agreement shall as from the date hereof
  constitute an amendment to and become a term of the Note
Purchase Agreement.                                   

            3.2  SDLTD, SDA and SD Holding undertakes with
   ASPL that no member of the Group shall give any financial
   assistance in connection with the acquisition by SDLTD of
    shares under the Reorganisation or with the acquisition of
shares in SDLTD under the New Capitalisation.         

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4.  CONSENT TO NEW CAPITALISATION                     
-----------------------------                 

               4.1  Subject to sub-clause 4.2 and clause 5, ASPL
   hereby consents in so far as such consent may be required
   under the Note Purchase Agreement to each step in the New
Capitalisation and in particular agrees that the New  
   Capitalisation will not in any respect constitute, and in
   any event shall be deemed not to constitute, a Triggering
    Event or an Event of Default or Potential Event of Default
or to breach any of the representations covenants or  
  obligations of SDA or SD Holding under the Note Purchase
    agreement and such consent and agreement shall as from the
     date hereof constitute an amendment to and become a term of
the Note Purchase Agreement.                          

                4.2  SDLTD, SD Holding and SDA each undertake with
 ASPL that the loan and security and other documentation
    actually used in the Reorganisation and New Capitalisation
    will not without the prior consent of ASPL differ from the
      drafts referred to in Schedules 1 and 2 in any respect which
  affects the interests of ASPL as beneficial owner of the
Notes acquired under the Note Purchase Agreement.     

               4.3  Nothing in the Note Purchase Agreement shall
     operate to prohibit or limit the exercise or enforcement by
     SDLTD or any member of the Group of its rights under any of
     the agreements referred to in Schedule 2 even if such exer-
    cise or enforcement shall result in an Event of Default or
      Potential Event of Default.  In turn, ASPL shall not by this
    Agreement waive its rights in respect of any such Event of
Default or Potential Event of Default or otherwise.   

5.  A&A WARRANT AMENDMENT                             
---------------------                         

             This Agreement is conditional upon execution of
the A&A Warrant Amendment.                            

6.  AMENDMENT OF THE NOTE PURCHASE AGREEMENT          
----------------------------------------      

              6.1  The definition of Debt in Section 14 of the
   Note Purchase Agreement shall be amended with effect from
      the completion of the New Capitalisation so that there shall
be excluded from the definition of Debt:              

            (i)  indebtedness for the purchase of goods or
           services unless and to the extent that payment therefor
        is not due under the purchase agreement until a date

     9

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           which is more than 90 days after whichever is the later
 of the date of invoice or the date of supply;

                (ii)  indebtedness under office equipment or motor
       vehicle leases having an aggregate capital value of
less than B.P.300,000;                      

             (iii)  interest payable accruing under the loan
agreement referred to in Schedule 2;        

              6.2  The definition of Lien in Section 14 of the
   Note Purchase Agreement shall be amended with effect from
the New Capitalisation so that there shall be excluded
   therefrom any interest which would otherwise constitute a
     Lien if and to the extent it is a security interest for any
    obligation which is by the express terms of sub-clause 6.1
above excluded from the definition of Debt.           

            6.3  For avoidance of doubt it is agreed that:

               (i)  payments or repayments on account of princi-
      pal, interest or any other sums under the loan and
       other agreements referred to in Schedule 2 will not
         constitute Restricted Payments or a Triggering Event;

            (ii) with reference to clause 11.1 of the Note
        Purchase Agreement, that clause is construed so that
         the New Capitalisation is excluded as being permitted
          by sub-clause 11.1 (c) for the purposes of the proviso
      to sub-clause 11.1 (d) whether before or after any
        Triggering Event and accordingly does not operate to
       reduce the sum of B.P.15,O00,000 specified therein.

7.  APPLICATION OF NOTE PURCHASE AGREEMENT            
--------------------------------------        

                Except as amended hereby, the Note Purchase Agree-
ment shall remain in full force and effect.           

8.  GENERAL                                           
-------                                       

             8.1  All applicable provisions of the Note Pur-
      chase Agreement as amended shall apply including in particu-
    lar Sections 10 ("Notices") and 21 ("Miscellaneous").  No-
      tices to SDLTD shall be addressed to SDLTD and served at the
     same address and in the same manner as notices addressed to
SD Holding.                                           

      10

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             8.2  SDLTD undertakes with ASPL to procure that
    the Net Subscription Monies are applied in accordance with
paragraphs (b) (c) and (f) of Schedule 2.             

    IN WITNESS WHEREOF the parties have executed this document
    ----------------------------------------------------------
as a Deed on the above date.                          
---------------------------                           

      11

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      SCHEDULE 1
      ----------

"the Reorganization" means                            

              (a)  the adoption by SDLTD of the draft Articles
          and establishment by SDLTD of the share capital struc-
ture set out therein;                       

            (b)  the exercise by John Head & Partners L.P.
           (or its designate) of rights under an agreement made on
          December 30 1987 between John Head & Partners L.P. and
  SDH and in consequence the issue by SD Holding
         (credited as fully paid through capitalisation of the
        share premium account referred to in (f)) of 612,245
Ordinary Shares;                            

(c)  the acquisition by SDLTD     

               (i)  from SD Partners of all the issued
          shares of SD Associates in exchange for (aa)
                24,134,704 SDLTD 25 pence Ordinary Shares and (bb)
2,713,737 New "B" Shares;         

                    (ii)  from SD Associates of all the issued B
            Preference Shares of SD Holding for the sum of
B.P.14,000,000 payable in cash;   

                  (iii)  from Dai-Tokyo (Bermuda) of all the
             issued A Preference Shares of SD Holding in ex-
              change for 3,000,000 A Preference Shares (as de-
    fined in the draft Articles) of SDLTD;

                   (iv)  from SD Partners and others including
             John Head & Partners L.P. of each of the issued
               Ordinary Shares of SD Holding in exchange for one
SDLTD 25 pence Ordinary Share;    

            (d)  the adoption by SDLTD, subject to Revenue
         approval, of an approved share option scheme (the New
      Share Option Scheme) which will provide on certain
          conditions for the grant of options over SDLTD [10/25]
          pence Ordinary Shares in replacement for (and so as to
         extinguish) the rights of holders of existing options
over Ordinary Shares in SD Holding;         

      12

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               (e)  the grant to executives of SDI of options to
subscribe at par for 555,826 New "B" Shares;

                (f)  the conversion of the 14,000,000 B Preference
           Shares in SD Holding then held by SDLTD into 24,134,704
           Ordinary Shares in SD Holding of 10 pence each credited
        as fully paid and ranking pari passu in all respects
       with the Ordinary Shares of SD Holding currently in
        issue and the consequent creation of a share premium
account of B.P.11,586,529.60;               

            (g)  the adoption by SD Holding of Articles of
        Association in the terms of the draft delivered with
 this agreement and marked as Appendix "WAA2".

      13

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      SCHEDULE 2
      ----------

"New Capitalisation" means        

                (a)  the issue by SDLTD to affiliates or others of
            9,300,000 Convertible Preference Shares of B.P.1 each at
         par and of 5,800,000 Convertible Preference Shares of
        US $1 each at $1 plus the Equalisation Premium, such
        shares having, inter alia, rights of conversion into
      ordinary shares of SDLTD in the terms of the draft
Articles;                                   

              (b)  the loan in Sterling and United States dol-
       lars by SDLTD to SD Holding of the Net Subscription
          Monies upon the terms and conditions of the draft Loan
        Agreement delivered with the Note Purchase Amendment
        and marked as Appendix "NPA1" and the creation by SD
        Holding of security for such loan as contemplated by
         Appendix NPA1 in the form of the draft security docu-
        mentation delivered with the Note Purchase Amendment
and marked as Appendix "NPA2";              

              (c)  the loan in Sterling and United States dol-
          lars by SD Holding to SDIG of all monies borrowed from
          SDLTD as described in paragraph (b) upon the terms and
         conditions of the draft Loan Agreement delivered with
      the Note Purchase Amendment and marked as Appendix
        "NPA4" and the creation by SDIG of security for such
        loan as contemplated by Appendix NPA4 in the form of
       the draft security documentation delivered with the
          Note Purchase Amendment and marked as Appendix "NPA5";

              (d)  the giving by SDA of a guarantee in respect
        of the loan obligations of SDIG to SD Holding in the
          form of the draft Deed of Guarantee delivered with the
          Note Purchase Amendment and marked as Appendix "NPA6";

              (e)  the giving by SDA of a guarantee in respect
         of the loan obligations of SD Holding to SDLTD in the
          form of the draft Deed of Guarantee delivered with the
Note Purchase Amendment;                    

             (f)  the application by SDIG of the monies bor-
       rowed from SD Holding as described in paragraph (c)
         first to meet all attendant costs and charges as con-
          templated by Appendix NPA4 and secondly by way of sub-

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          scription at par for fully paid ordinary shares in SDI
of B.P.1 each;                              

              (g)  the subordination and regulation of priori-
              ties of B.P.32,000,000 Unsecured Loan Notes 1995 issued by
        SDIG to SDA pursuant to a Deed of Priorities between
      SDLTD, SD Holding, SDA and SDIG in the form of the
         draft Deed of Priorities delivered with the Note Pur-
chase Amendment and named as Appendix "NPA7"

   and for the purposes of paragraph (a) above "Equalisation
Premium" means the amount produced by the formula     
(X - US $1) in which X is that amount which will on   
conversion by SDIG into Sterling on the date of New   
Capitalisation realise the sum of B.P.1.              

THE COMMON SEAL OF                                    
ALEXANDER STENHOUSE &                                 
PARTNERS LIMITED                                      
in the presence of:                                   

THE COMMON SEAL OF                                    
SPHERE DRAKE ACQUISITIONS                             
[U.K.] LIMITED in the                                 
presence of:                                          

THE COMMON SEAL OF                                    
SPHERE DRAKE HOLDING                                  
PUBLIC LIMITED COMPANY                                
in the presence of:                                   

THE COMMON SEAL OF                                    
SPHERE DRAKE LIMITED                                  
in the presence of:                                   

THE COMMON SEAL OF                                    
S.D. SECURITIES LIMITED                               
in the presence of:                                   

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THIS (NOTE PURCHASE AMENDMENT) AGREEMENT AND DEED OF CONSENT is                 
made the 14 October 1992                                                        

BETWEEN:-                                                                       

(1)  ALEXANDER STENHOUSE & PARTNERS LIMITED No. S.C.23477 whose                 
registered office is at 145 St Vincents Street, Glasgow,              
Scotland ("ASPL")                                                     

(2)  SPHERE DRAKE ACQUISITIONS (U.K.) LIMITED No. 2136565 whose                 
registered office is at 52-54 Leadenhall Street, London EC3           
("SDA")                                                               

(3)  SPHERE DRAKE HOLDING PUBLIC LIMITED COMPANY No. 2168083                    
whose registered office is at 52-54 Leadenhall Street,                
London EC3 ("SD Holding")                                             

(4)  SPHERE DRAKE LIMITED No. 2709527 whose registered office is                
at 52-54 Leadenhall Street, London EC3 ("SDLTD")                      

(5)  S.D. SECURITIES LIMITED incorporated in Guernsey whose                     
registered office is at 7 New Street, St Peter's Port,                
Guernsey ("S.D. Securities")                                          

RECITALS                                                                        

A.   Words and expressions defined in or by clause 1                            
("Definitions") bear that meaning when used in these                  
Recitals.                                                             

B.   ASPL is the beneficial owner of certain Notes due 1995                     
issued by SDA upon and subject to the terms and conditions            
of the Note Purchase Agreement.                                       

C.   S.D. Securities is the legal owner of the Notes referred to                
in Recital B and holds the same upon the trusts constituted           
by the Trust Deed.                                                    

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D.   The obligations of SDA under the Notes are guaranteed by SD                
Holding under and subject to the terms and conditions of              
the Guaranty Agreement.                                               

E.   SD Holding is the ultimate U.K. holding company of                         

(i) SDI, which is itself the direct subsidiary of                   

(ii) SDIG, which is itself the direct subsidiary of                   

(iii) SDA, which is itself the direct subsidiary of SD                  
Holding.                                                    

F.   SDLTD wishes, as part of a scheme of reorganisation, to                    
acquire all the issued shares of SD Holding and afterwards            
to issue new shares to raise monies which will (after                 
deduction of related costs) be lent to SD Holding and                 
onwards within the Group for the purpose of increasing the            
paid up share capital of SDI.                                         

G.   This Deed supplements and varies the Note Purchase                         
Agreement having regard to the proposed Reorganisation and            
New Capitalisation.                                                   

H.   SD Securities is a party to this Agreement for the sole                    
purpose of providing its consent to the Reorganisation and            
New Capitalisation.                                                   

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NOW THIS DEED WITNESSES as follows:                                             

1.   DEFINITIONS                                                                

1.1  Subject to the sub-clause 1.2 and to the operative terms of                
this Deed, words and expressions defined in the Note                  
Purchase Agreement bear that meaning when used in this                
Deed, including without limitation                                    

"Affiliate"                                                 
"Event of Default"                                          
"Guaranty Agreement"                                        
"Potential Event of Default"                                
"Restricted Payments"                                       
"Triggering Event"                                          

and words used in the Schedule and not otherwise defined              
herein or in the Note Purchase Agreement have the meaning             
given to them in the A&A Warrant Amendment Agreement.                 

1.2  In this Agreement:-                                                        

"the A&A Warrant         means the Warrant Agreement                  
Agreement"               made as of October 9, 1987                   
          between SD Holding (1) SDA (2)
and ASPL (3)        

"the A&A Warrant         means the Agreement made or to               
Amendment"               be made at the same time as this             
         Agreement between ASPL (1) SD
             Holding (2) SDA (3) and SDLTD (4)
    amending the A&A Warrant
Agreement           

"Dai-Tokyo (Bermuda)"    means Dai-Tokyo International                
        Company Limited, a Bermudian
corporation         

"the draft Articles"     means the draft Articles of                  
          Association of SDLTD delivered
          with the A&A Warrant Amendment
marked "WA1"        

"the Group"              means SD Holding and its                     
subsidiaries        

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"Net Subscription        means the amount raised by SDLTD             
Monies"                  the issue of Convertible                     
      Preference Shares upon New
         Capitalisation less all costs
           attendant on the Reorganisation
and on such issue   

"the New B Shares"       means the "B" Shares of SDLTD as             
         defined in the draft Articles

"New Capitalisation"     shall have the meaning ascribed              
in Schedule 3       

"Notes"                  means the Senior Notes and the               
            Subordinated Notes as defined in
           the Note Purchase Agreement and
issued by SDA       

"Note Purchase           means an Agreement made as of                
agreement"               October 9, 1987 between ASPL (1)             
          SDA (2) and SD Holding (3) for
           the sale of the Notes by SDA to
           ASPL as amended by on Amendment
          Agreement made August 30, 1988
    between the same parties

"the Reorganisation"     shall have the meaning ascribed              
in Schedule 1       

"SD Associates"          means S.D. Associates Limited, a             
 Bermudian corporation

"SDI"                    means Sphere Drake Insurance                 
plc                 

"SDIG"                   means Sphere Drake Insurance                 
Group plc           

"SD Partners"            means SD Partners, a Bermudian               
         partnership which proposes to
             register as a limited partnership
          with the name SD Partners L.P.

"SD Securities"          means S.D. Securities Limited, a             
Guernsey corporation

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2.   INTERPRETATION                                                             

2.1  In this Deed unless the context (which includes the context                
of the Note Purchase Agreement) otherwise requires:-                  

(a)  words and expressions defined in the Companies Act               
1985 as amended bear those meanings;                        

(b)  reference to the singular includes the plural and vice           
versa and reference to a gender includes all other          
genders;                                                    

(c)  reference to a person includes a body corporate and an           
unincorporated association of persons;                      

(d)  references to the Note Purchase Agreement include the            
Notes.                                                      

2.2  Headings in this Deed are for convenience only and do not                  
affect its interpretation.                                            

3.   CONSENT TO REORGANISATION                                                  

3.1  Subject to sub-clause 3.2, ASPL hereby consents in so far                  
as such consent may be required under the Note Purchase               
Agreement to each step in the Reorganisation and in                   
particular agrees that the Reorganisation will not in any             
respect constitute, and in any event shall be deemed not to           
constitute, a Triggering Event or an Event of Default or              
Potential Event of Default or to breach any of the                    
representations covenants or obligations of SDA or SD                 
Holding under the Note Purchase Agreement or the Guaranty             
Agreement and such consent and agreement shall as from the            
date hereof constitute an amendment to and become a term of           
the Note Purchase Agreement.                                          

3.2  SDLTD, SDA and SD Holding undertakes with ASPL that no                     

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member of the Group shall give any financial assistance in            
connection with the acquisition of SDLTD of shares under              
the Reorganisation or with the acquisition of shares in               
SDLTD under the New Capitalisation.                                   

4.   CONSENT TO NEW CAPITALISATION                                              

4.1  Subject to sub-clause 4.2 and clause 5, ASPL hereby                        
consents in so far as such consent may be required under              
the Note Purchase Agreement to each step in the New                   
Capitalisation and in particular agrees that the New                  
Capitalisation will not in any respect constitute, and in             
any event shall be deemed not to constitute, a Triggering             
Event or an Event of Default or Potential Event of Default            
or to breach any of the representations covenants or                  
obligations of SDA or SD Holding under the Note Purchase              
Agreement and such consent and agreement shall as from the            
date hereof constitute an amendment to and become a term of           
the Note Purchase Agreement.                                          

4.2  SDLTD, SD Holding and SDA each undertake with ASPL that the                
loan and security and other documentation actually used in            
the Reorganisation and New Capitalisation will not without            
the prior consent of ASPL differ from the drafts referred             
to in Schedules 1 and 2 in any respect which affects the              
interests of ASPL as beneficial owner of the Notes acquired           
under the Note Purchase Agreement.                                    

4.3  Nothing in the Note Purchase Agreement shall operate to                    
prohibit or limit the exercise or endorcement by SDLTD or             
any member of the Group of its rights under any of the                
agreements referred to in Schedule 2 even if such exercise            
or enforcement shall result in an Event of Default or                 
Potential Event of Default.  In turn, ASPL shall not by               
this Agreement waive its rights in respect of any such                
Event of Default or Potential Event of Default or                     
otherwise.                                                            

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5.   A&A WARRANT AMENDMENT                                                      

This Agreement is conditional upon execution of the A&A               
Warrant Amendment.                                                    

6.   AMENDMENT OF THE NOTE PURCHASE AGREEMENT                                   

6.1  The definition of Debt in Section 14 of the Note Purchase                  
Agreement shall be amended with effect from the completion            
of the New Capitalisation so that there shall be excluded             
from the definition of Debt:                                          

(i) indebtedness for the purchase of goods or services              
unless and to the extent that payment therefor is not       
due under the purchase agreement until a date which is      
more than 90 days after whichever is the later of the       
date of invoice or the date of supply;                      

(ii) indebtedness under office equipment or motor vehicle             
leases having an aggregate capital value of less than       
300,000 pounds;                                             

(iii) interest payable accruing under the loan agreement                
referred to in Schedule 2;                                  

6.2  The definition of Lien in Section 14 of the Note Purchase                  
Agreement shall be amended with effect from the New                   
Capitalisation so that there shall be excluded therefrom              
any interest which would otherwise constitute a Lien if and           
to the extent it is a security interest for any obligation            
which is by the express terms of sub-clause 6.1 above                 
excluded from the definition of Debt.                                 

6.3  For avoidance of doubt it is agreed that:                                  

(i) payments or repayments on account of principal,                 
interest or any other sums under the loan and other         

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agreements referred to in Schedule 2 will not               
constitute Restricted Payments or a Triggering Event;       

(ii) with reference to clause 11.1 of the Note Purchase               
Agreement, that clause is construed so that the New         
Capitalisation is excluded as being permitted by sub-       
clause 11.1 (c) for the purposes of the proviso to          
sub-clause 11.1 (d) whether before or after any             
Triggering Event and accordingly does not operate to        
reduce the sum of 15,000,000 pounds specified therein.      

7.   APPLICABILITY OF NOTE PURCHASE AGREEMENT                                   

Except as amended hereby, the Note Purchase Agreement shall           
remain in full force and effect.                                      

8.   GENERAL                                                                    

8.1  All applicable provisions of the Note Purchase Agreement as                
amended shall apply including in particular Sections 10               
("Notices") and 21 ("Miscellaneous").  Notices to SDLTD               
shall be addressed to SDLTD and served at the same address            
and in the same manner as notices addressed to SD Holding.            

8.2  SDLTD undertakes with ASPL to procure that the Net                         
Subscription Monies are applied in accordance with                    
paragraphs (b) (c) and (f) of Schedule 2.                             

IN WITNESS WHEREOF the parties have executed this document as a                 
Deed on the above date.                                                         

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SCHEDULE 1                    

"the Reorganisation" means                                                      

(a)  the adoption by SDLTD of the Draft Articles and                            
establishment by SDLTD of the share capital structure set             
out therein;                                                          

(b)  the exercise by John Head & Partners L.P. (or its                          
designate) of rights under an agreement made on December 30           
1987 between John Head & Partners L.P. and SDH and in                 
consequence the issue by SD Holding (credited as fully paid           
through capitalisation of the share premium account                   
referred to in (f)) of 612,245 Ordinary Shares;                       

(c)  the acquisition by SDLTD                                                   

(i) from SD Partners of all the issued shares of SD                 
Associates in exchange for (aa) 24,134,704 SDLTD 25         
pence Ordinary Shares and (bb) 2,713,737 New "B"            
Shares;                                                     

(ii) from SD Associates of all the issued B Preference                
Shares of SD Holding for the sum of 14,000,000 pounds       
payable in cash;                                            

(iii) from Dai-Tokyo (Bermuda) of all the issued A                      
Preference Shares of SD Holding in exchange for             
3,000,000 A Preference Shares (as defined in the draft      
Articles) of SDLTD;                                         

(iv) from SD Partners and others including John Head &                
Partners L.P. of each of the issued Ordinary Shares of      
SD Holding in exchange for one SDLTD 25 pence Ordinary      
Share;                                                      

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(d)  the adoption by SDLTD, subject to Revenue approval, of an                  
approved share option scheme (the New Share Option Scheme)            
which will provide on certain conditions for the grant of             
options over SDLTD [10/25] pence Ordinary Shares in                   
replacement for (and so as to extinguish) the rights of               
holders of existing options over Ordinary Shares in SD                
Holding;                                                              

(e)  the grant to executives of SDI of options to subscribe at                  
par for 555,826 New "B" Shares;                                       

(f)  the conversion of the 14,000,000 B Preference Shares in SD                 
Holding then held by SDLTD into 24,134,704 Ordinary Shares            
in SD Holding of 10 pence each credited as fully paid and             
ranking pari passu in all respects with the Ordinary Shares           
of SD Holding currently in issue and the consequent                   
creation of a share premium account of 11,586,529.60 pounds;          

(g)  the adoption by SD Holding of Articles of Association in                   
the terms of the draft delivered with this Agreement and              
marked as Appendix "WAA2"                                             

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SCHEDULE 2                    

"New Capitalisation" means                                                      

(a)  the issue by SDLTD to Affiliates or others of 9,300,000                    
Convertible Preference Shares of 1 pound each at par and of           
5,800,000 Convertible Preference Shares of US $1 each at $1           
plus the Equalisation Premium, such shares having, inter              
alia, rights of conversion into ordinary shares of SDLTD in           
the terms of the draft Articles;                                      

(b)  the loan in Sterling and United States dollars by SDLTD to                 
SD Holding of the Net Subscription Monies upon the terms              
and conditions of the draft Loan Agreement delivered with             
the Note Purchase Amendment and marked as Appendix "NPA1"             
and the creation by SD Holding of security for such loan as           
contemplated by Appendix NPA1 in the form of the draft                
security documentation delivered with the Note Purchase               
Amendment and marked as Appendix "NPA2";                              

(c)  the loan in Sterling and United States dollars by SD                       
Holding to SDIG of all monies borrowed from SDLTD as                  
described in paragraph (b) upon the terms and conditions of           
the draft Loan Agreement delivered with the Note Purchase             
Amendment and marked as Appendix "NPA4" and the creation by           
SDIG of security for such loan as comtemplated by Appendix            
NPA4 in the form of the draft security documentation                  
delivered with the Note Purchase Amendment and marked as              
Appendix "NPA5";                                                      

(d)  the giving by SDA of a guarantee in respect of the loan                    
obligations of SDIG to SD Holding in the form of the draft            
Deed of Guarantee delivered with the Note Purchase                    
Amendment and marked as Appendix "NPA6";                              

(e)  the giving by SDA of a guarantee in respect of the loan                    
obligations of SD Holding to SDLTD in the form of the draft           

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Deed of Guarantee delivered with the Note Purchase                    
Amendment;                                                            

(f)  the application by SDIG of the monies borrowed from SD                     
Holding as described in paragraph (c) first to meet all               
attendant costs and charges as contemplated by Appendix               
NPA4 and secondly by way of subscription at par for fully             
paid ordinary shares in SD1 of 1 pound each;                          

(g)  the subordination and regulation of priorities of                          
32,000,000 pounds Unsecured Loan Notes 1995 issued by SDIG to SDA     
pursuant to a Deed of Priorities between SDLTD, SD Holding,           
SDA and SDIG in the form of the draft Deed of Priorities              
delivered with the Note Purchase Amendment and named as               
Appendix "NPA7"                                                       

and for the purposes of paragraph (a) above "Equalisation                       
Premium" means the amount produced by the formula (X - US $1) in                
which X is that amount which will on conversion by SDIG into                    
Sterling on the date of New Capitalisation realise the sum of 1 pound.          

THE COMMON SEAL OF             )                                                
ALEXANDER STENHOUSE &          )      /s/                                       
PARTNERS LIMITED               )                                                
in the presence of:-           )      /s/                                       

THE COMMON SEAL OF             )                                                
SPHERE DRAKE ACQUISITIONS      )      /s/                                       
(U.K.) LIMITED in the          )                                                
presence of:-                  )      /s/                                       

/s/                                               

51 Eastcheap                                      
London EC3  Director                              

THE COMMON SEAL OF             )                                                
SPHERE DRAKE HOLDING           )      /s/                                       
PUBLIC LIMITED COMPANY         )                                                
in the presence of:            )      /s/                                       

/s/                                               

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THE COMMON SEAL OF             )      /s/                                       
SHPERE DRAKE LIMITED           )                                                
in the presence of:-           )      /s/                                       

/s/                                               

THE COMMON SEAL OF             )                                                
S.D. SECURITIES LIMITED        )                                                
in the presence of:-           )                                                

/s/                                               

Director                                          

for C.L. SECRETARIES LIMITED                      

/s/                                               

Authorised Signatory