Alexander & Alexander Services Inc – ‘10-K’ for 12/31/93 – EX-10.25

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-10.25   —   Material Contract
Exhibit Table of Contents

EX-10.25
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      STOCK PURCHASE AGREEMENT

      BY AND BETWEEN

     F-M ACQUISITION CORPORATION

     AND

      ALEXANDER & ALEXANDER INC.

     Shares of Capital Stock

      of

      Shand, Morahan & Company, Inc.

     Dated as of October 7, 1987

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      STOCK PURCHASE AGREEMENT
      BY AND BETWEEN
     F-M ACQUISITION CORPORATION
     AND
      ALEXANDER & ALEXANDER INC.

     TABLE OF CONTENTS

     ARTICLE I
     SALE AND PURCHASE OF SHARES

     1.1.    Sale and Purchase of Shares . . . . . . . . . .   2
     1.2.    Purchase Price  . . . . . . . . . . . . . . . .   2
     1.3.    Payment of Purchase Price . . . . . . . . . . .   2
     1.4.    Deferred Purchase Price . . . . . . . . . . . .   3

      ARTICLE II
      REPRESENTATIONS AND WARRANTIES OF SELLER

     2.1.    Organization and Existence of Seller  . . . . .  11
2.2.    Existence, Corporate Power and                
                Qualifications of SMCO . . . . . . . . . . .  12
2.3.    Existence, Corporate Power and                
                Qualifications of ESI  . . . . . . . . . . .  12
     2.4.    Subsidiaries  . . . . . . . . . . . . . . . . .  13
2.5.    Existence, Corporate Power and                
                Qualifications of EIC and ICE  . . . . . . .  14
     2.6.    Capitalization  . . . . . . . . . . . . . . . .  15
     2.7.    Ownership of Capital Stock  . . . . . . . . . .  15
     2.8.    Authorization and Validity  . . . . . . . . . .  16
     2.9.    Affiliates and Ventures . . . . . . . . . . . .  16
     2.10.   Non-Contravention of Instruments  . . . . . . .  17
     2.11.   Consents, Filings and Approvals . . . . . . . .  18
     2.12.   Financial Statements  . . . . . . . . . . . . .  19
     2.13.   Absence of Certain Changes or Events  . . . . .  22
     2.14.   Accounts Receivable . . . . . . . . . . . . . .  24
     2.15.   Undisclosed Liabilities . . . . . . . . . . . .  24
     2.16.   Convention Statements . . . . . . . . . . . . .  25
     2.17.   Disputes and Litigation . . . . . . . . . . . .  26
     2.18.   Title to Properties . . . . . . . . . . . . . .  27
     2.19.   Investments . . . . . . . . . . . . . . . . . .  27
2.20.   Governmental Licenses and Permits;            
                Compliance with Laws . . . . . . . . . . . .  28
     2.21.   Leases  . . . . . . . . . . . . . . . . . . . .  28
     2.22.   Condition of Tangible Assets  . . . . . . . . .  29

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     2.23.   Taxes . . . . . . . . . . . . . . . . . . . . .  29
     2.24.   Labor Relations . . . . . . . . . . . . . . . .  32
     2.25.   Insurance Coverage  . . . . . . . . . . . . . .  33
     2.26.   Certain Contracts . . . . . . . . . . . . . . .  33
     2.27.   Employee Benefit Plans  . . . . . . . . . . . .  35
             (a)  ERISA  . . . . . . . . . . . . . . . . . .  35
(b)  Qualification of Pension Plans;  
                    Compliance with Law  . . . . . . . . . .  36
             (c)  Multiemployer Plans  . . . . . . . . . . .  37
     2.28.   Environmental Protection  . . . . . . . . . . .  37
     2.29.   Insurance Business  . . . . . . . . . . . . . .  37
     2.30.   Regulatory Filings  . . . . . . . . . . . . . .  38
2.31.   Reinsurance, Coinsurance and                  
                Underwriting Management  . . . . . . . . . .  39
     2.32.   Agents  . . . . . . . . . . . . . . . . . . . .  40
2.33.   Intangible Property and Computer              
                Software . . . . . . . . . . . . . . . . . .  40
     2.34.   No Brokers  . . . . . . . . . . . . . . . . . .  41
     2.35.   Tax Allocation Agreement  . . . . . . . . . . .  41
     2.36.   A&A as Guarantor  . . . . . . . . . . . . . . .  41
     2.37.   Safe Harbor Leases  . . . . . . . . . . . . . .  42
     2.38.   Full Disclosure . . . . . . . . . . . . . . . .  42

     ARTICLE III
     REPRESENTATIONS AND WARRANTIES OF BUYER

     3.1.    Organization and Existence of Buyer . . . . . .  43
     3.2.    Authorization and Validity  . . . . . . . . . .  43
     3.3.    Non-Contravention of Instruments  . . . . . . .  43
     3.4.    Consents, Filings and Approvals . . . . . . . .  44
     3.5.    No Brokers  . . . . . . . . . . . . . . . . . .  45
     3.6.    Purchase for Investment . . . . . . . . . . . .  45
     3.7.    Qualification . . . . . . . . . . . . . . . . .  45
     3.8.    Subsidiaries  . . . . . . . . . . . . . . . . .  46
     3.9.    Capitalization  . . . . . . . . . . . . . . . .  46
     3.10.   Indebtedness, etc.  . . . . . . . . . . . . . .  46
     3.11.   Disputes and Litigation . . . . . . . . . . . .  47
3.12.   Governmental Licenses and Permits;            
                Compliance with Laws . . . . . . . . . . . .  47
     3.13.   Taxes . . . . . . . . . . . . . . . . . . . . .  48
     3.14.   Buyer Guarantors  . . . . . . . . . . . . . . .  48
     3.15.   Full Disclosure . . . . . . . . . . . . . . . .  49

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      ARTICLE IV
     ADDITIONAL AGREEMENTS

     4.1.    Conduct of Business . . . . . . . . . . . . . .  49
     4.2.    Forbearance . . . . . . . . . . . . . . . . . .  51
4.3.    Investigation of Business and                 
                Properties . . . . . . . . . . . . . . . . .  53
     4.4.    Investigation of Financial Statements . . . . .  54
     4.5.    Agreement to Consummate . . . . . . . . . . . .  55
     4.6.    Regulatory Matters  . . . . . . . . . . . . . .  55
     4.7.    Use of Names  . . . . . . . . . . . . . . . . .  56
     4.8.    Covenant Not to Compete . . . . . . . . . . . .  56
     4.9.    Cooperation of Parties  . . . . . . . . . . . .  57
     4.10.   EPIC Program  . . . . . . . . . . . . . . . . .  58
     4.11.   Safe-Harbor Leases  . . . . . . . . . . . . . .  59
     4.12.   Tax Allocation Agreement  . . . . . . . . . . .  60
     4.13.   Timing Differences  . . . . . . . . . . . . . .  60
     4.14.   Buyer Guarantees  . . . . . . . . . . . . . . .  61
     4.15.   Shand Morahan Plaza . . . . . . . . . . . . . .  61
     4.16.   Pledge Agreement  . . . . . . . . . . . . . . .  62

     ARTICLE V
     CONDITIONS TO BUYER'S OBLIGATIONS

     5.1.    Representations and Warranties  . . . . . . . .  62
     5.2.    Performance of this Agreement . . . . . . . . .  62
     5.3.    Shand Morahan Plaza . . . . . . . . . . . . . .  63
     5.4.    Proceedings . . . . . . . . . . . . . . . . . .  63
     5.5.    Consents, Filings and Approvals . . . . . . . .  63
     5.6.    Litigation  . . . . . . . . . . . . . . . . . .  64
     5.7.    Opinion of Counsel for Seller . . . . . . . . .  64
     5.8.    Share Certificates  . . . . . . . . . . . . . .  65
     5.9.    Transfer Taxes  . . . . . . . . . . . . . . . .  65
     5.10.   Repayment of Indebtedness . . . . . . . . . . .  65
     5.11.   Agreements with Lenders . . . . . . . . . . . .  65
     5.12.   Tax Allocation Agreement  . . . . . . . . . . .  66
     5.13.   Guarantee . . . . . . . . . . . . . . . . . . .  66

      ARTICLE VI
      CONDITIONS TO SELLER'S OBLIGATIONS

     6.1.    Representations and Warranties  . . . . . . . .  66
     6.2.    Performance of this Agreement . . . . . . . . .  67
     6.3.    Proceedings . . . . . . . . . . . . . . . . . .  67
     6.4.    Consents, Filings and Approvals . . . . . . . .  67
     6.5.    Litigation  . . . . . . . . . . . . . . . . . .  68

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     6.6.    Opinions of Counsel . . . . . . . . . . . . . .  68
     6.7.    Shand Morahan Plaza . . . . . . . . . . . . . .  69
     6.8.    Transfer Taxes  . . . . . . . . . . . . . . . .  69
     6.9.    Pledge Agreement  . . . . . . . . . . . . . . .  69
     6.10.   Guarantee . . . . . . . . . . . . . . . . . . .  69
     6.11.   Certificates and Undertakings . . . . . . . . .  69
     6.12.   Payments by SMCO  . . . . . . . . . . . . . . .  70
     6.13.   Tax Allocation Agreement  . . . . . . . . . . .  70

     ARTICLE VII
     CLOSING

     7.1.    Time and Place of Closing . . . . . . . . . . .  70
     7.2.    Deliveries by Seller  . . . . . . . . . . . . .  71
     7.3.    Deliveries by Buyer . . . . . . . . . . . . . .  71

      ARTICLE VIII
     INDEMNIFICATION

     8.1.    By Seller . . . . . . . . . . . . . . . . . . .  72
     8.2.    By Buyer  . . . . . . . . . . . . . . . . . . .  75
     8.3.    Third Party Claims  . . . . . . . . . . . . . .  75
     8.4.    Payments  . . . . . . . . . . . . . . . . . . .  80
     8.5.    No Contribution . . . . . . . . . . . . . . . .  83

      ARTICLE IX
     TERMINATION, AMENDMENT AND WAIVER

     9.1.    Termination . . . . . . . . . . . . . . . . . .  83
     9.2.    Effect of Termination . . . . . . . . . . . . .  84
     9.3.    Amendment . . . . . . . . . . . . . . . . . . .  85
     9.4.    Extension; Waiver . . . . . . . . . . . . . . .  85

     ARTICLE X
      BUSINESS AND FINANCIAL COVENANTS

     10.1.   Debt  . . . . . . . . . . . . . . . . . . . . .  87
     10.2.   Restricted Payments . . . . . . . . . . . . . .  88
     10.3.   Liens, etc. . . . . . . . . . . . . . . . . . .  89
     10.4.   Leases; Leasebacks  . . . . . . . . . . . . . .  92
     10.5.   Transactions with Affiliates  . . . . . . . . .  92
     10.6.   Subsidiary Stock and Indebtedness . . . . . . .  93
10.7.   Consolidation, Merger, Sale of                
                Assets, etc. . . . . . . . . . . . . . . . .  95

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     10.8.   Corporate Existence, etc.; Business . . . . . .  96
     10.9.   Payment of Taxes and Claims . . . . . . . . . .  97
     10.10.  Investments . . . . . . . . . . . . . . . . . .  98
     10.11.  Net Worth . . . . . . . . . . . . . . . . . . .  99
     10.12.  Compliance with ERISA . . . . . . . . . . . . .  99
     10.13.  Insurance . . . . . . . . . . . . . . . . . . . 101
10.14.  Accounting, Financial Statements and          
               Other Information . . . . . . . . . . . . . . 101
     10.15.  Inspection  . . . . . . . . . . . . . . . . . . 108
     10.16.  Definitions . . . . . . . . . . . . . . . . . . 108

      ARTICLE XI
      PURCHASE PRICE ADJUSTMENTS

     11.1.   Certain Definitions . . . . . . . . . . . . . . 117
     11.2.   Adjustment Amount . . . . . . . . . . . . . . . 119
11.3.   Estimates and Finality of the Adjustment      
                Amount; Disputes . . . . . . . . . . . . . . 122
     11.4.   Assignment of Uncollectible Reinsurance . . . . 125
     11.5.   Indemnification Amount, etc.  . . . . . . . . . 126
11.6.   No Commutation of Uncollectible               
               Reinsurance, etc. . . . . . . . . . . . . . . 128
     11.7.   Right of Inspection . . . . . . . . . . . . . . 129

     ARTICLE XII
     EVENTS OF DEFAULT

     12.1.   Events of Default; Acceleration . . . . . . . . 130
     12.2.   Remedies on Default, etc. . . . . . . . . . . . 135
     12.3.   Cure of Defaults  . . . . . . . . . . . . . . . 136

      ARTICLE XIII
      GENERAL PROVISIONS

     13.1.   Notices . . . . . . . . . . . . . . . . . . . . 137
     13.2.   Fees and Expenses . . . . . . . . . . . . . . . 138
     13.3.   Public Announcements  . . . . . . . . . . . . . 139
     13.4.   Interpretation  . . . . . . . . . . . . . . . . 139
     13.5.   Counterparts  . . . . . . . . . . . . . . . . . 139
     13.6.   Miscellaneous . . . . . . . . . . . . . . . . . 139
     13.7.   Survival  . . . . . . . . . . . . . . . . . . . 140
     13.8.   Knowledge . . . . . . . . . . . . . . . . . . . 141
     13.9.   Arbitration . . . . . . . . . . . . . . . . . . 141
     13.10.  Deemed Obligations of Buyer . . . . . . . . . . 142

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EXHIBITS                                              

A - Form of Tax Allocation Agreement                  
B - Terms of Shand Morahan Plaza Agreement            
C - Form of Legal Opinion of Debevoise & Plimpton     
D - Form of Legal Opinion of Lord, Bissell & Brook    
E - Form of A&A Guarantee                             
      F - Form of Legal Opinion of McGuire, Woods, Battle & Boothe
G - Form of Legal Opinion of Burke, Griffin,          
Chomicz & Wienke, P.C.                    
H - Form of Pledge Agreement                          
I - Form of Non-Contingent Buyer Guarantee            
J - Form of Overall Buyer Guarantee                   
K - Form of Certificate and Undertaking               
L - Form of Legal Opinion of Tory, Tory,              
DesLauriers & Binnington                  
M - Form of Kansa Buyer Guarantee                     

SCHEDULES                                             

2.2   -  Jurisdictions in which SMCO is licensed or   
qualified to do business.           
      2.3   -  Jurisdictions in which ESI is licensed or qualified
to do business.                     
      2.5   -  Classes of insurance which EIC or ICE are qualified
to issue.                           
  2.9   -  Affiliations and ventures of SMCO, ESI, EIC and
ICE.                                
2.10  -  Agreements, judgments, court orders having   
       termination or other provisions that may be
              triggered by the transactions contemplated by this
agreement.                          
2.11  -  Filings and approvals required of Seller.    
2.12  -  Financial Statements Not Delivered.          
      2.13  -  Changes in business or assets of SMCO, ESI, EIC and
ICE since June 30, 1987.            
  2.15  -  Liabilities of SMCO, ESI, EIC or ICE (otherwise
undisclosed).                       
      2.17  -  Disputes and litigation affecting SMCO, ESI, EIC or
ICE.                                
   2.18  -  Real property owned by SMCO, ESI, EIC or ICE and
encumbrances on material assets.    
     2.20  -  Procedings involving licenses of SMCO, ESI, EIC or
ICE.                                
     2.21  -  Leases of personal property having annual payments
in excess of $25,000.               

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      2.23  -  Tax matters with respect to SMCO, ESI, EIC and ICE.
2.24  -  Labor disputes with SMCO, ESI, EIC or ICE.   
  2.25  -  Insurance coverage of and unpaid claims against
SMCO, ESI, EIC and ICE.             
2.26  -  Certain contracts.                           
2.27  -  SMCO employee benefit plans subject to ERISA.
  2.30  -  Regulatory filings of SMCO, ESI, EIC or ICE not
             provided to Buyer or having alleged deficiencies.
2.31  -  Reinsurers of EIC and ICE and underwriting   
            management agreements to which SMCO, ESI, EIC or
ICE are a party.                    
2.32  -  Agents and brokers of EIC and ICE.           
2.33  -  Intangible property of SMCO, ESI, EIC or ICE.
2.37  -  Tax Benefit Leases.                          
3.4   -  Filings and approvals required of Buyer.     
3.9   -  Capitalization of Buyer.                     
4.8   -  Lines of insurance with respect to Seller's  
covenant not to compete.            
      5.10  -  Indebtedness to be repaid by Seller or an Affiliate
to SMCO.                            
6.12  -  Indebtedness to be repaid by SMCO to Seller. 

     List of Defined Terms
     ---------------------

Item                            Section               
-----                           -------               

A&A                             2.11                  
A&A Guarantee                   2.36                  
Adjustment Amount               11.2                  
Adjustment Date                 1.4(a)                
Affiliate                       10.16                 
Best                            1.4(c)(i)(C)(II)(1)   
Buyer                           Heading               
Buyer Affiliates                8.1                   
Buyer Guarantors                3.14                  
Buyer's Actuaries               11.3                  
Buyer's Auditors                11.3                  
Closing                         7.1                   
Closing Date                    7.1                   
Code                            10.16                 
Coleman                         Recital A             
Consolidated Net Income         10.16                 
Consolidated Net Worth          10.16                 
Contingent Amount               1.4 (a)(i)            
Control                         10.16                 
Debt                            10.16                 

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Deferred Purchase Price         1.4 (a)               
Determination Date              11.1                  
EIC                             2.4                   
Employee Benefit Plans          2.27                  
EPIC                            4.10                  
ERISA                           10.16                 
ESI                             Recital A             
ESI Common Stock                2.6                   
ESI Share Purchase Agreements   Recital C             
ESI Shares                      Recital A             
Events of Default               12.1                  
Fairfax                         1.4(c)(i)(C)(II)(2)(z)
Financial Guarantee             1.4(c)(i)(A)          
General Accident                8.1(c)                
Guarantee                       10.16                 
Guarantee Effectiveness Event   Art. X (Introductory  
                    paragraph)
Hamblin Watsa                   10.16                 
ICE                             2.4                   
Indemnification Amount          11.1                  
Intellectual Property           2.33                  
Interest and Penalties          2.23(ii)              
Kansa                           Recital A             
Kansa Buyer Guarantee           3.14                  
Legal Action                    8.3(b)                
Legislation                     2.23(i)               
Lien                            10.16                 
Litigation                      2.23(i)               
Loss Events                     2.37                  
Markel                          1.4(c)(i)(C)(II)(2)(z)
Multiemployer Plan              10.16                 
Mutual Fire                     8.1(b)                
Non-Contingent Amount           1.4(a)(ii)            
Non-Contingent Buyer Guarantee  3.14                  
Officer's Certificate           10.16                 
   Overall Buyer Guarantee         1.4(c)(i)(C)(II)(2)(z)(1)
Payment Date                    1.4(a)                
Pension Plans                   2.27(a)               
Person                          10.16                 
Plan                            10.16                 
Potential Event of Default      10.16                 
Purchase Price                  1.2                   
Reassessments                   2.23(ii)              
Reserves for Losses and                               
Loss Adjustment Expenses      11.1                
Reserves for Uncollectible                            
Reinsurance                   11.1                
Restricted Payment              10.16                 

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Returns                         2.23(i)               
Seller                          Heading               
Seller's Actuaries              11.3                  
Seller's Auditors               11.3                  
SMCO                            Recital A             
SMCO Common Stock               2.6                   
SMCO Shares                     Recital A             
Subsidiary                      10.16                 
Tax Allocation Agreement        2.35                  
Tax Reserves                    2.23(ii)              
Taxes                           2.23(i)               
Total Adjustment                1.4(b)                
Uncollectible Reinsurance       11.1                  
Voting Stock                    10.16                 
Welfare Plans                   2.27(a)               
Wholly-Owned                    10.16                 

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    STOCK PURCHASE AGREEMENT

               This STOCK PURCHASE AGREEMENT is made as of Octo-

    ber 7, 1987 by and between F-M Acquisition Corporation, an

   Illinois corporation ("Buyer"), and Alexander & Alexander

Inc., a Maryland corporation ("Seller").              

     RECITALS OF THE PARTIES

               A.  Seller owns all of the issued and outstanding

shares of capital stock (the "SMCO Shares") of Shand, 

    Morahan & Company, Inc., an Illinois corporation ("SMCO").

     SMCO, Kansa General Insurance Company, Ltd., a Finland cor-

      poration ("Kansa"), and C.J. Coleman Holdings Ltd., a United

    Kingdom corporation ("Coleman"), own all of the issued and

   outstanding shares of capital stock (the "ESI Shares") of

     Evanston Services, Inc., an Illinois insurance holding cor-

poration ("ESI").                                     

                B.  Buyer desires to purchase the SMCO Shares from

     Seller and Seller desires to sell the SMCO Shares to Buyer.

                C.  Buyer proposes to enter into one or more stock

    purchase agreements with Kansa and Coleman for the purpose

    of purchasing all of the ESI Shares not owned by SMCO (the

"ESI Share Purchase Agreements").                     

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              NOW THEREFORE, in consideration of the foregoing

    and the representations, warranties, agreements and condi-

      tions contained herein, the parties hereto agree as follows:

     ARTICLE I
     SALE AND PURCHASE OF SHARES

                1.1.  Sale and Purchase of Shares.  Subject to the
     ---------------------------

     terms and conditions set forth in this Agreement, including

    the approval of the Commissioner of Insurance of the State

 of Illinois, Seller hereby agrees to sell to Buyer, and

Buyer hereby agrees to purchase from Seller, the SMCO 

     Shares, free and clear of all claims, liens, pledges, secu-

   rity interests, restrictions or encumbrances and together

with all rights attaching thereto.                    

           1.2.  Purchase Price.  The aggregate purchase
--------------        

    price for the SMCO Shares shall be equal to $62.8 million,

      subject to the adjustments referred to in Section 1.4 hereof

     (the "Purchase Price"), payable as provided in Sections 1.3

and 1.4.                                              

            1.3.  Payment of Purchase Price.  The Purchase
   -------------------------

      Price (except for the Deferred Purchase Price) shall be paid

      to Seller at the Closing (as defined in Section 7.1) by wire

    transfer of immediately available funds to such account as

     Seller may designate in the amount of (a) $30.5 million, or
                         -

     (b) $21 million, if at the Closing Buyer shall have assumed
-                                                   

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  $9.5 million of the liability owing to SMCO by Seller in

respect of the safe harbor leases referred to in Sec- 

  tion 4.11 and if at the Closing SMCO shall have released

      Seller, in a manner satisfactory to Seller, from all liabil-

ity in respect of such liability of $9.5 million.     

               1.4.  Deferred Purchase Price.  (a)  On the fifth
 -----------------------

      anniversary of the Closing Date, or such earlier date as may

    be provided pursuant to Sections 1.4(d) or 12.1 (the "Pay-

     ment Date"), Buyer shall pay to Seller, by wire transfer of

   immediately available funds to such account as Seller may

    designate, an amount (the "Deferred Purchase Price") equal

to                                                    

           (i)  $29.3 million (the "Contingent Amount"),

plus                                                  
----                                                  

           (ii)  $3 million (the "Non-Contingent Amount"),

plus                                                  
----                                                  

             (iii)  an amount equivalent to interest (calculated

           using the applicable assumed interest rate set forth in

         Section 1.4(c)) accrued on the Contingent Amount from

           the Closing Date until the date on which the Contingent

Amount is paid in full,                     

plus                                                  
----                                                  

              (iv)  an amount equivalent to interest (calculated

           using the applicable assumed interest rate set forth in

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        Section 1.4(c)) accrued on the Non-Contingent Amount

         from the Closing Date until the Non-Contingent Amount

is paid in full,                            

minus                                                 
-----                                                 

          (v)  the Adjustment Amount (as defined in Sec-

          tion 11.2) calculated as of the Determination Date (as

defined in Section 11.1) and,               

minus                                                 
-----                                                 

           (vi)  an amount (if any) equivalent to interest

          (calculated using the applicable assumed interest rate

          set forth in Section 1.4(c)) accrued on the Adjustment

      Amount from the Adjustment Date (as defined below)

until the Payment Date.                     

      "Adjustment Date" shall mean the expiration date of the time

      period (beginning on the Closing Date) specified in Column 4

 of the table set forth in Section 1.4(c)(ii) which cor-

    responds to the interest rate, as set forth in Column 2 of

   such table, that is used in determining the Deferred Pur-

chase Price.                                          

         (b)  Notwithstanding the provisions of Sec-

      tion 1.4(a), the sum (the "Total Adjustment") of the amounts

   specified in clauses (v) and (if applicable) (vi) thereof

     (in respect of the Adjustment Amount and the amount equiva-

   lent to interest accrued thereon) shall be subject to the

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   limitations hereinafter provided in clauses (i), (ii) and

(iii) of this paragraph (b):                          

               (i)  In any event, the Total Adjustment shall not

           exceed the Contingent Amount plus the amount equivalent

           to interest accrued thereon pursuant to clause (iii) of

Section 1.4(a).                             

             (ii)  In the event that (A) the Deferred Purchase
               -

          Price is prepaid pursuant to Section 1.4(d) or (B) (1)
                                                         -   -

          the payment of the Deferred Purchase Price is acceler-

           ated pursuant to Section 12.1 to become due and payable

          prior to the Adjustment Date and (2) the amount speci-
                         -

        fied in clause (v) of Section 1.4(a) does not exceed

        $12.6 million, the Total Adjustment shall not exceed

         the amount equivalent to interest accrued on the Con-

   tingent Amount pursuant to clause (iii) of Sec-

tion 1.4(a).                                

              (iii)  In the event that the payment of the Deferred

          Purchase Price is accelerated pursuant to Section 12.1

          to become due and payable prior to the Adjustment Date

  and the amount specified in clause (v) of Sec-

           tion 1.4(a) exceeds $12.6 million, the Total Adjustment

       shall equal the amount specified in clause (iii) of

       Section 1.4(a), plus the amount by which the amount
----        

  specified in clause (v) exceeds $12.6 million.

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                (c)  The amount equivalent to interest referred to

    in clauses (iii), (iv) and (vi) of Section 1.4(a) shall be

   calculated on the basis of a 365- or 366-day year, as the

      case may be, and the actual number of days elapsed and shall

     be accrued on, and for the entire periods specified in Sec-

      tion 1.4(a) with respect to, the Contingent Amount, the Non-

      Contingent Amount and the Adjustment Amount, as the case may

be, at the rates set forth below:                     

               (i)  The assumed interest rate per annum shall be

          17.67% in the case of the Contingent Amount and 16.17%

          in the case of the Non-Contingent Amount unless one of

         the following different rates shall apply to the Con-

           tingent Amount (in which case the assumed interest rate

         on the Non-Contingent Amount will be 150 basis points

    less than the respective rates set forth below):

                  (A)  An assumed interest rate per annum of

              13.36% shall apply if Buyer shall have delivered

             to Seller on or before the first anniversary of

               the Closing Date an unconditional and irrevocable

           guarantee or letter of credit (the "Financial

           Guarantee"), in form and substance reasonably

            satisfactory to Seller, that is in the maximum

              amount of the Deferred Purchase Price (including

                the amount equivalent to interest that has accrued

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               prior to the date on which such guarantee or let-

            ter of credit becomes effective and the amount

              equivalent to interest which would accrue there-

              after until the fifth anniversary of the Closing

            Date, in both cases at the rates determined as

              provided in this Section 1.4(c)(i), and assuming

          that no amount would be deducted pursuant to

               clauses (v) and (vi) of Section 1.4(a)), and that

                will remain in effect for a term ending not earli-

                er than the sixth anniversary of the Closing Date,

              from a bank, other financial institution or Hees

                International Corporation, if such bank, financial

              institution or corporation is rated AA or better

             by Standard & Poor's Corporation (or receives a

          comparable rating from a comparable agency).

                  (B)  An assumed interest rate per annum of

              14.39% shall apply if Buyer shall have delivered

               to Seller the Financial Guarantee after the first

              anniversary of the Closing Date and on or before

         the second anniversary of the Closing Date.

                  (C)  An assumed interest rate per annum of

               15.45% shall apply if either (I) Buyer shall have
                           -

               delivered to Seller the Financial Guarantee after

               the second anniversary of the Closing Date and on

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            or before the third anniversary of the Closing

                Date or (II) on or before such third anniversary a
--              

             condition set forth in the following subclauses

               shall have occurred and such condition shall con-

           tinue to be true to and including the Payment

Date:                             

                      (1)  EIC shall have received written

                    notice that it has received, and shall main-

                     tain, a rating of B+ or better from A.M. Best

& Company ("Best"); or  

                         (2)  if, and only if, EIC is rated NA-5

                (Significant Change) by Best and (x) EIC
                                             -

                  shall have received written notice that it

                     has received, and shall maintain, a rating of

                     A or better by Standard & Poor's Corporation,

                    or (y) Buyer shall have, and shall maintain,
-               

                    a Consolidated Net Worth (as defined in Sec-

                    tion 10.16) in excess of $50 million, or (z)
                                                             -

                  Fairfax Financial Holdings Limited ("Fair-

                   fax") and Markel Corporation ("Markel") (1)
                                                           -

                     shall have executed and delivered to Seller a

                    guarantee substantially in the form attached

                     hereto as Exhibit J (the "Overall Buyer Guar-

                   antee"), and (2) either individually or to-
     -

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                gether shall have, and shall maintain, a

                    Consolidated Net Worth in excess of $70 mil-

lion;                   

      provided, that, if a condition set forth in clause
--------                                    

       (II)(1) or (2) above ceases to be true, the assumed

         rate of interest brought about by fulfillment of such

         condition shall continue to apply if Buyer, within 60

         days following such cessation, delivers to Seller the

           Financial Guarantee or fulfills one of the other condi-

           tions set forth in clause (II)(1) or (2).  For purposes

     of this proviso, the term "cessation" shall mean:

                  (m) in the case of clause (II)(1) and (2),

              the date notice is received from a rating agency

of a lowering of the rating; and  

                    (n)  in the case of clause (II)(2), the date

          of issuance of the first quarterly balance sheet show-

          ing the deficiency of Consolidated Net Worth below $50

million or $70 million, as the case may be. 

                     (D)  An assumed rate of 16.54% shall apply if

             either (1) Buyer shall have delivered to Seller
-                 

              the Financial Guarantee after the third anniver-

           sary of the Closing Date and on or before the

              fourth anniversary of the Closing Date or (2) on
                                                     -

               or before such fourth anniversary a condition set

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             forth in clauses (C)(II)(1) or (2) of this Sec-

               tion 1.4(c)(i) shall have occurred and shall con-

           tinue to be true to and including the Payment

               Date, subject to the same proviso as is set forth

               immediately following such clauses (C)(II)(1) and

(2).                              

             (ii)  In the case of the Adjustment Amount, the

         assumed interest rate per annum shall be as set forth

        in Column 3 of the table below, corresponding to the

      assumed interest rate applicable to the Contingent

  Amount as set forth in Column 2 of such table:
     Column 1       Column 2       Column 3       Column 4
     --------       --------       --------       --------
     Applicable        Rate           Rate        Adjustment
    Clause      Applicable to  Applicable to      Date
     of Paragraph    Contingent     Adjustment     Years After
     ------------    ----------     ----------     -----------
      (c)(i)         Amount         Amount        Closing*
     ------         ------         ------        -------

  Introduction 17.67%         12.45%          2.43 years

 (A)     13.36%          9.55           3.22
 (B)     14.39           9.95           2.99

 (C)     15.45          10.82           2.78
 (D)     16.54          11.67           2.60

            The application of such assumed interest rates

     hereunder shall be on the basis of simple interest, without

   compounding.  All payments of the Deferred Purchase Price

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

    *    The figures in Column 4 represent the time periods at
      the end of which the amount equivalent to interest
     accrued on the Contingent Amount pursuant to Sec-
tion 1.4(a)(iii) equals $12.6 million.      

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shall be applied first to amounts due pursuant to Sec-

tion 1.4(a)(iii), then to amounts due pursuant to Sec-

tion 1.4(a)(i), then to amounts due pursuant to Sec-  

     tion 1.4(a)(iv) and finally to amounts due pursuant to Sec-

  tion 1.4(a)(ii).  An amount equivalent to interest shall

     accrue on any portion of the Contingent Amount and the Non-

     Contingent Amount not paid when due at the assumed interest

  rate per annum then applicable thereto plus 4%, provided
                                         ----     --------

      that such rate of interest shall not apply to any portion of

     the Deferred Purchase Price that is subject to and withheld

  during a good-faith dispute as to the Adjustment Amount,

 which portion is ultimately determined to be payable to

Seller (and is so paid).                              

                (d)  Buyer, at its option, exercised by giving not

     less than 45 days' irrevocable notice to Seller designating

 the date of prepayment, at any time may prepay, by wire

    transfer of immediately available funds to such account as

  Seller may designate, all, but not part, of the Deferred

  Purchase Price, calculated as of the date of prepayment.

      ARTICLE II
      REPRESENTATIONS AND WARRANTIES OF SELLER

              Seller represents and warrants to Buyer the fol-

lowing:                                               

      11

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                2.1.  Organization and Existence of Seller.  Sell-
              ------------------------------------

     er is a corporation duly organized, validly existing and in

good standing under the laws of the State of Maryland.

             2.2.  Existence, Corporate Power and Qualifica-
                   -----------------------------------------

    tions of SMCO.  SMCO is a corporation duly and validly ex-
-------------                                         

    isting and in good standing under the laws of the State of

    Illinois, and has the corporate power and authority to own

    all of its properties and assets and to carry on its busi-

      ness as it is presently being conducted.  SMCO is duly qual-

     ified or licensed to do business and is in good standing in

     each jurisdiction where the character of the properties and

     assets it owns, operates or holds under lease or the nature

  of the business transacted by it in such jurisdiction so

     requires, except where, in the good-faith belief of manage-

  ment, the failure so to qualify or be licensed would not

    have a material adverse effect on its business.  Each such

     jurisdiction on which SMCO is duly qualified or licensed is

     listed in Schedule 2.2.  SMCO is duly licensed as an insur-

     ance brokerage company in each such jurisdiction where such

   licensing is required, except where the failure to be li-

      censed would not have a material adverse effect on its busi-

    ness.  The copies of the Articles of Incorporation and the

    Bylaws of SMCO which have been delivered to Buyer are true

      12

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     and complete copies of such instruments as in effect on the

date hereof.                                          

             2.3.  Existence, Corporate Power and Qualifica-
                   -----------------------------------------

     tions of ESI.  ESI is a corporation duly and validly exist-
------------                                          

 ing and in good standing under the laws of the State of

    Illinois, and has the corporate power and authority to own

    all of its properties and assets and to carry on its busi-

 ness as an insurance holding company as it is presently

    being conducted.  ESI is duly qualified to do business and

      is in good standing in each jurisdiction where the character

 of the properties and assets it owns, operates or holds

    under lease or the nature of the business transacted by it

    in such jurisdiction so requires, except where the failure

   so to qualify would not have a material adverse effect on

      its business.  Each such jurisdiction where ESI is qualified

      to do business is listed on Schedule 2.3.  The copies of the

    Articles of Incorporation and the Bylaws of ESI which have

      been delivered to Buyer are true and complete copies of such

instruments as in effect on the date hereof.          

             2.4.  Subsidiaries.  ESI owns all of the issued
------------          

    and outstanding shares of capital stock in Evanston Insur-

     ance Company, an Illinois corporation ("EIC"), and EIC owns

      all of the issued and outstanding shares of capital stock of

Insurance Company of Evanston, an Illinois corporation

      13

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     ("ICE"), in each case free and clear of all liens, charges,

   pledges, security interests or other encumbrances, except

   for the pledge by ESI of shares of common stock of EIC to

      Harris Trust and Savings Bank, and all such capital stock is

     duly authorized, validly issued and outstanding, fully paid

      and nonassessable.  There are no Subsidiaries (as defined in

Section 10.16) of SMCO other than ESI, EIC and ICE.   

             2.5.  Existence, Corporate Power and Qualifica-
                   -----------------------------------------

      tions of EIC and ICE.  EIC and ICE are corporations duly and
--------------------                                  

     validly existing and in good standing under the laws of the

      State of Illinois, and have the corporate power and authori-

     ty to own all of their respective properties and assets and

      to carry on their businesses as property and casualty insur-

 ance companies, operating on a non-admitted or admitted

basis, as appropriate, as they are presently being    

conducted.  Each of EIC and ICE is duly qualified or  

 licensed to do business and is in good standing in each

jurisdiction where the character of the properties and

     assets it owns, operates or holds under lease or the nature

  of the business transacted by it in such jurisdiction so

    requires, except where the failure so to qualify would not

     have a material adverse effect on its business.  Each class

     of property or casualty insurance qualified to be issued by

  EIC or ICE is listed on Schedule 2.5.  The copies of the

      14

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 Articles of Incorporation and the Bylaws of EIC and ICE

  which have been delivered to Buyer are true and complete

     copies of such instruments as in effect on the date hereof.

           2.6.  Capitalization.  The authorized capital
--------------        

  stock of SMCO consists of 10,000 shares of common stock,

   $1.00 par value (the "SMCO Common Stock"), of which 1,000

  shares of SMCO Common Stock are duly authorized, validly

   issued and oustanding, fully paid and nonassessable.  The

      authorized capital stock of ESI consists of 2,000,000 shares

    of Common Stock, $5.00 par value (the "ESI Common Stock"),

     of which 751,229 shares of ESI Common Stock are duly autho-

     rized, validly issued, fully paid and nonassessable.  There

    are not outstanding any options, warrants or other commit-

      ments to issue any shares of capital stock of SMCO, ESI, EIC

      or ICE, or any securities or obligations convertible into or

     exchangeable for, or giving any person any right to acquire

     from any of them, any shares of capital stock of SMCO, ESI,

      EIC or ICE, except as set forth in Section 6.2 of the Bylaws

    of ESI.  No shares of ESI Common Stock have any preemptive

     rights.  No person other than Seller presently has any pre-

   emptive rights under the provisions of SMCO's Articles of

      Incorporation, and Seller's preemptive rights shall cease to

     exist upon the transfer of the SMCO Shares pursuant to this

Agreement.                                            

      15

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              2.7.  Ownership of Capital Stock.  Seller is the
    --------------------------

    owner beneficially and of record of the SMCO Shares.  SMCO

is the owner beneficially and of record of 391,925 ESI

   Shares.  Seller has good and marketable title to the SMCO

   Shares, and SMCO has good and marketable title to the ESI

  Shares owned by it, in each case with no contractual re-

     strictions on voting rights and with the other incidents of

     record and beneficial ownership incident thereto, except as

set forth in Section 6.2 of the Bylaws of ESI.        

               2.8.  Authorization and Validity.  Seller has the
    --------------------------

   corporate power and authority to execute and deliver this

     Agreement and the other agreements contemplated on its part

   hereby and to consummate the transactions contemplated on

its part hereby; the execution and delivery hereof and

  thereof by Seller and the consummation by Seller of such

    transactions have been duly authorized by its Board of Di-

    rectors, no other corporate authorization being necessary;

      and this Agreement has been, and on the Closing Date each of

    such other agreements will be, duly executed and delivered

  by and this Agreement constitutes and each of such other

     agreements will constitute a valid and binding agreement of

Seller.                                               

           2.9.  Affiliates and Ventures.  Except as de-
 -----------------------

      scribed in Section 2.4 or as set forth on Schedule 2.9, none

      16

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      of SMCO, ESI, EIC or ICE is a general or limited partner of,

   or any party to any joint venture with, any other entity,

      nor does any of them, directly or indirectly, own any inter-

     est in any other corporation, partnership, joint venture or

      other business association or entity other than in the ordi-

 nary course of business.  Except as set forth on Sched-

   ule 2.9, Seller has no direct or indirect interest in any

   material property (other than any interests in any agree-

   ments listed on any Schedule attached hereto or otherwise

      disclosed herein) used by, or relating to, SMCO, ESI, EIC or

ICE, except through the ownership of the SMCO Shares. 

           2.10.  Non-Contravention of Instruments.  The
            --------------------------------

execution and delivery of this Agreement and the other

     agreements contemplated on its part hereby by Seller do not

    and the consummation by Seller of the transactions contem-

      plated hereby and thereby, will not violate any provision of

  the Articles of Incorporation or Bylaws of Seller, SMCO,

  ESI, EIC or ICE, except for Section 6.2 of the Bylaws of

ESI, and, except for transactions disclosed on Sched- 

     ule 2.10, will not (a) violate, or result, with the passage
-             

     of time or the giving of notice or both, in a violation of,

     any provision of, or result in the acceleration of or enti-

     tle any party to accelerate any obligation under, or result

   in the creation or imposition of any claim, lien, pledge,

      17

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      security interest, restriction or other encumbrance upon any

  of the property of SMCO, ESI, EIC, ICE or, to the extent

      that such creation or imposition would prevent the consumma-

   tion of the transactions contemplated hereby, Seller pur-

 suant to any provision of, any material mortgage, lien,

     lease, agreement (except as set forth in Section 6.2 of the

   Bylaws of ESI), license or instrument to which SMCO, ESI,

  EIC, ICE or Seller is a party or to which any of them is

    subject, (b) constitute an event permitting termination of
-                                 

     any mortgage, lien, lease, agreement, license or instrument

    to which SMCO, ESI, EIC or ICE is a party, and (c) violate
                                           -

      any judgment, order, writ, injunction, decree, regulation or

   rule of any court or governmental authority applicable to

   SMCO, ESI, EIC, ICE or, to the extent that such violation

would prevent the consummation of the transactions    

   contemplated hereby, Seller or the assets of any of SMCO,

   ESI, EIC, ICE or, to the extent that such violation would

   prevent the consummation of the transactions contemplated

hereby, Seller.                                       

             2.11.  Consents, Filings and Approvals.  Except
           -------------------------------

      for filings and approvals listed on Schedule 2.11 and as set

    forth in Section 6.2 of the Bylaws of ESI, no consent, ap-

      proval, notification, authorization or order of, or declara-

    tion, filing or registration with, any governmental agency

      18

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   or third party of the character referred to in the second

      sentence of this Section 2.11, is required to be obtained or

      made by Alexander & Alexander Services Inc. ("A&A"), Seller,

  SMCO, ESI, EIC or ICE prior to the Closing in connection

     with the execution, delivery and performance of this Agree-

    ment or any other agreement contemplated hereby.  The pre-

    ceding sentence shall apply only where the consequences of

     failing to obtain or make any such consent, approval, noti-

     fication, authorization, order, declaration, filing or reg-

     istration would prevent consummation of any of the transac-

      tions contemplated by this Agreement or materially adversely

affect SMCO, ESI, EIC or ICE.                         

           2.12.  Financial Statements.  Each of (v) the
             --------------------            -

 audited financial statements for SMCO for the two years

      ended December 31, 1986, (w) the audited consolidated finan-
- 

    cial statements for ESI and its Subsidiaries for the three

     years ended December 31, 1986, (x) the audited consolidated
           -

 financial statements for EIC and its Subsidiary for the

 three years ended December 31, 1986 and (y) the audited
                             -

    financial statements for ICE for the three years ended De-

      cember 31, 1986, all of which, except as set forth in Sched-

      ule 2.12, have been delivered to Buyer, (i) were prepared in
                             -

  accordance with generally accepted accounting principles

     applied on a consistent basis (except as noted therein) and

      19

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   (ii) fairly present the assets, liabilities and financial
--                                                  

    position of the entities or consolidated entities included

     therein as at the respective dates thereof, and the results

     of their operations and changes in their financial position

    for the periods then ended, provided that this representa-
          --------

  tion shall not be deemed to be breached by reason of the

    development (or the state of facts giving rise to such de-

   velopment) of Reserves for Losses and Loss Adjustment Ex-

     penses (as defined in Section 11.1) and Reserves for Uncol-

     lectible Reinsurance (as defined in Section 11.1) after the

   respective dates of such financial statements for periods

   included therein.  The unaudited financial statements for

  SMCO for the six-month period ended June 30, 1987, which

    have been delivered to Buyer, were prepared from the books

     and records of SMCO and its Subsidiary accounted for on the

      equity method in conformity with generally accepted account-

      ing principles (except for any adjustments described therein

  and for the absence of footnotes therefrom) applied on a

      basis consistent with those applied in the audited financial

   statements of SMCO for the fiscal year ended December 31,

      1986 and fairly present the assets, liabilities and consoli-

     dated financial position of SMCO and its Subsidiary at such

      date and the results of operations for such period in accor-

   dance with such principles, subject to the aforementioned

      20

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      adjustments and to normal year-end audit adjustments made in

      accordance with generally accepted accounting principles and

   consistent with prior years' practice, provided that this
                                --------

     representation shall not be deemed to be breached by reason

  of the development (or the state of facts giving rise to

      such development) of Reserves for Losses and Loss Adjustment

   Expenses and Reserves for Uncollectible Reinsurance after

    June 30, 1987 for the periods included therein.  The unau-

      dited consolidated financial statements of ESI and the unau-

  dited unconsolidated financial statements of EIC and the

  unaudited financial statements of ICE, as of and for the

    six-month periods ended June 30, 1986 and 1987, which have

   been delivered to Buyer, were prepared in accordance with

     the books and records of ESI, EIC and ICE, respectively, in

  conformity with generally accepted accounting principles

   (except for any adjustments described therein and for the

    absence of footnotes therefrom) applied on a basis consis-

     tent with those applied in the audited financial statements

      for the year ended December 31, 1986, and fairly present the

    consolidated assets, liabilities and financial position of

   ESI and the assets, liabilities and financial position of

   EIC and ICE at such dates and the results of their opera-

    tions for such periods in accordance with such principles,

 subject to the aforementioned adjustments and to normal

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      year-end audit adjustments made in accordance with generally

  accepted accounting principles and consistent with prior

      years' practice, provided that this representation shall not
--------            

   be deemed to be breached by reason of the development (or

the state of facts giving rise to such development) of

Reserves for Losses and Loss Adjustment Expenses and  

    Reserves for Uncollectible Reinsurance after their respec-

tive dates for periods included therein.              

          2.13.  Absence of Certain Changes or Events.
                ------------------------------------

   Except as contemplated by Section 4.1, there has not been

since June 30, 1987:                                  

            (i)  except as set forth on Schedule 2.13, any

        material adverse change in the business or assets of

SMCO, ESI, EIC and ICE, taken as a whole;   

           (ii)  any damage, destruction or other casualty

          loss to the property of SMCO, ESI, EIC or ICE (whether

         or not covered by insurance) materially adversely af-

        fecting the business or assets of SMCO, ESI, EIC and

ICE, taken as a whole;                      

              (iii)  any change in the accounting methods followed

     by SMCO, ESI, EIC or ICE, except as stated in the

     financial statements referred to in Section 2.12;

             (iv)  any direct or indirect redemption, purchase

        or other acquisition by SMCO, ESI, EIC or ICE of any

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       shares of their capital stock or any acquisition or

         proposed acquisition of real property by any of them;

          (v)  any split, combination or other similar

        change in the outstanding shares of capital stock of

SMCO, ESI, EIC or ICE;                      

           (vi)  except as set forth on Schedule 2.13, any

         declaration, setting aside or payment of any dividend

         or other distribution (whether in cash, capital stock

or property) by SMCO, ESI, EIC or ICE;      

            (vii)  any increase in any manner in the compensa-

         tion of any of the employees of SMCO, ESI, EIC or ICE

          except normal increases in accordance with established

       prior practice; any payment or agreement to pay any

       pension or retirement allowance not required by any

          existing plan or agreement to any officer or employee;

       or any amendment (except as required by law) to any

           employee agreement or any incentive compensation, prof-

          it sharing, stock purchase, stock option, stock appre-

           ciation rights, savings, consulting, deferred compensa-

       tion, retirement, pension or other "fringe benefit"

      plan or arrangement with or for the benefit of any

officer, employee or other person;          

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          (viii)  any sale or other transfer of the fixed or

         capital assets of SMCO, ESI, EIC or ICE other than in

the ordinary course of business;            

           (ix)  except as set forth in Schedule 2.13, any

          capital expenditures or commitments for capital expen-

      ditures by SMCO, ESI, EIC or ICE other than in the

ordinary course of business;                

            (x)  except as set forth in Schedule 2.13, any

           termination of any material agreement by, any waiver of

         any rights or claims under material agreements by, or

           any material gifts or material contracts or commitments

           to make any gifts of the property of, SMCO, ESI, EIC or

         ICE other than in the ordinary course of business; or

              (xi)  any payment of liabilities by SMCO, ESI, EIC

        or ICE other than current liabilities or liabilities

          reflected in the audited consolidated financial state-

        ments of SMCO and ESI as of December 31, 1986 or the

           unaudited consolidated financial statements of SMCO and

ESI as of June 30, 1987.                    

               2.14.  Accounts Receivable.  The accounts receiv-
------------------- 

     able shown on the balance sheets of SMCO, ESI, EIC, and ICE

at June 30, 1987, delivered to Buyer pursuant to Sec- 

      tion 2.12 hereof, or acquired by them subsequent to June 30,

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    1987, and prior to the date hereof, represent transactions

made in the ordinary course of business.              

            2.15.  Undisclosed Liabilities.  Except as set
   -----------------------

    forth on Schedule 2.15 or otherwise disclosed herein or in

  any other schedule hereto, none of SMCO, ESI, EIC or ICE

 (i) had, as of June 30, 1987, any debts, liabilities or
-                                                   

      obligations, whether accrued, absolute, contingent or other-

 wise, and whether due or to become due, material in the

    aggregate to the financial condition of SMCO, ESI, EIC and

   ICE, taken as a whole, except as reflected in or provided

  for in their respective financial statements at June 30,

     1987 referred to in Section 2.12 hereof, provided that this
                                    --------

     representation shall not be deemed to be breached by reason

  of the development (or the state of facts giving rise to

      such development) of Reserves for Losses and Loss Adjustment

   Expenses and Reserves for Uncollectible Reinsurance after

    such date for the periods prior thereto; (ii) has incurred
                                --

any material debts, liabilities or obligations since  

     June 30, 1987, other than in the normal course of business;

      or (iii) has, since June 30, 1987, conducted business other-
---                                           

wise than in the normal course.                       

            2.16.  Convention Statements.  Seller has fur-
 ---------------------

      nished to Buyer Annual Convention Statements for each of the

      five years ended December 31, 1986 and the Quarterly Conven-

      25

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   tion Statements for the quarters ended March 31, 1987 and

  June 30, 1987 for EIC and ICE as filed with the Illinois

    Insurance Department.  The Annual and Quarterly Convention

     Statements present fairly the statutory financial condition

      of EIC and ICE as of their respective dates and the statuto-

   ry results of their operations for the periods then ended

   and were prepared in conformity with statutory accounting

      principles prescribed or permitted by the Illinois Insurance

    Department, provided that this representation shall not be
--------                      

    deemed to be breached by reason of the development (or the

     state of facts giving rise to such development) of Reserves

  for Losses and Loss Adjustment Expenses and Reserves for

      Uncollectible Reinsurance after the respective dates of such

statements.                                           

            2.17.  Disputes and Litigation.  Except as de-
   -----------------------

      scribed on Schedule 2.17, (i) there is no pending or, to the
 -

      knowledge of Seller, threatened, action, suit, proceeding or

     claim before any court, arbitrator or governmental authori-

   ty, or, to the knowledge of Seller, pending or threatened

     investigation or review by any governmental agency, against

    or affecting SMCO, ESI, EIC or ICE or any of their proper-

    ties or business, or any of their employee welfare benefit

     plans or employee pension benefit plans, which would have a

      material adverse effect on SMCO, ESI, EIC and ICE taken as a

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    whole; (ii) there is no action, suit, proceeding or claim,
--                                    

     investigation or review by any governmental agency, pending

   or, to the knowledge of Seller, threatened against Seller

      which would have a material adverse effect on Seller's abil-

      ity to perform its obligations hereunder; and (iii) there is
                                           ---

    no outstanding order, judgment, writ, injunction or decree

     of any court, government or governmental authority or arbi-

 trator against SMCO, ESI, EIC or ICE or their assets or

   business.  This representation shall not be deemed to in-

     clude (x) any actions, suits, proceedings, claims, investi-
-                                       

      gations or reviews or orders, judgments or writs against any

  person insured by EIC or ICE which may involve insurance

   provided by EIC or ICE, or (y) threatened actions, suits,
   -

    proceedings or claims against EIC or ICE in respect of in-

   surance policies issued by them in the ordinary course of

business.                                             

              2.18.  Title to Properties.  Except as set forth
------------------- 

      on Schedule 2.18, SMCO, ESI, EIC and ICE do not own any real

    property.  SMCO, ESI, EIC and ICE have good and marketable

    title to all material assets reflected on their respective

     balance sheets as at June 30, 1987, delivered to Buyer pur-

  suant to Section 2.12 hereof, or acquired after June 30,

     1987, other than any assets that have been sold or disposed

    of in the normal course of business, free and clear of all

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     claims, liens, pledges, security interests, restrictions or

     encumbrances, except for those arising by operation of law.

               2.19.  Investments.  Each of ESI, EIC and ICE has
-----------         

 good and marketable title, free and clear of all liens,

    claims, charges, options or encumbrances, except for those

      arising by operation of law, to all of its investment assets

 reflected in its Quarterly Convention Statement for the

      quarter ended June 30, 1987 or acquired after June 30, 1987,

      other than investment assets that have been sold or disposed

     of in the normal course of business, except as set forth in

Schedules 2.18 and 2.10.                              

               2.20.  Governmental Licenses and Permits; Compli-
                      ------------------------------------------

    ance with Laws.  SMCO, ESI, EIC and ICE have all necessary
--------------                                        

  governmental licenses, permits and approvals legally re-

      quired and material to the conduct of their respective busi-

      nesses in each of the jurisdictions listed on Schedules 2.2,

   2.3 and 2.5.  Other than as listed on Schedule 2.20, such

      licenses, permits and approvals are in full force and effect

      and no proceeding is pending or, to the knowledge of Seller,

  threatened to suspend, revoke or limit any such license,

      permit or approval; and SMCO, ESI, EIC and ICE have complied

     in all material respects with all applicable material laws,

      regulations and restrictions relating to each of their busi-

      28

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    nesses, including the terms and conditions of such govern-

mental licenses and permits.                          

            2.21.  Leases.  None of SMCO, ESI, EIC and ICE
------              

   leases any real property, except for Shand Morahan Plaza.

 Each lease pursuant to which SMCO, ESI, EIC or ICE is a

     lessee of personal property having lease payments in excess

of $25,000 per year is listed on Schedule 2.21.       

                2.22.  Condition of Tangible Assets.  All tangible
        ----------------------------

      personal property owned by SMCO, ESI, EIC or ICE and materi-

     al to their businesses is in good repair and operating con-

      dition, normal wear and tear excepted, and reasonably suffi-

   cient for the operation of their respective businesses as

presently conducted.                                  

   2.23.  Taxes.  Except as set forth on
-----               

Schedule 2.23:                                        

             (i)  SMCO, ESI, EIC and ICE have filed with all

         appropriate governmental agencies all returns, forms,

           notices, information returns and reports, and elections

       (hereinafter collectively referred to as "Returns")

        that are required to be filed by them on or prior to

         the date hereof pursuant to any legislation, domestic

       or foreign, federal, provincial, state or municipal

      (hereinafter collectively referred to as "Legisla-

          tion"), which levies a tax (including, without limita-

      29

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          tion, all income, franchise, property, gross receipts,

          sales, use, employment, stamp, and other taxes), with-

        holding tax, duty, levy or other charge (hereinafter

collectively referred to as "Taxes");       

              (ii)  Taking into account any carrybacks or carry-

        forwards existing as of June 30, 1987, none of SMCO,

          ESI, EIC or ICE will have any liability beyond current

        and deferred Taxes reflected in the financial state-

         ments as of June 30, 1987 referred to in Section 2.12

       (hereinafter referred to as "Tax Reserves") for any

         material Taxes (including withholding Taxes) with re-

        spect to its income, assets or business prior to Ju-

          ly 1, 1987 or any material assessments, reassessments,

           orders or judgments in respect of any such Taxes (here-

           inafter referred to as "Reassessments") or any material

      interest or charges, penalties or fines imposed in

         respect of any such Taxes (hereinafter referred to as

"Interest and Penalties");                  

            (iii)  Upon the payment by SMCO of $1,681,955 owed

          with respect to SMCO's share of the Federal income tax

        liability of the consolidated group of A&A for 1986,

       the payment by SMCO of $44,527 owed with respect to

     SMCO's share of state tax liabilities of combined

          groups of Seller and A&A for 1986, the payment by SMCO

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           of $174,518 in respect of IRS adjustments for the years

          1980 through 1982, the payment by SMCO of $13,123 with

        respect to state income taxes resulting from IRS ad-

          justments for the years 1979 through 1982, the payment

          by SMCO of $24,952 with respect to IRS adjustments for

         the years 1977 through 1979 (the Tax Reserves, before

           reduction for the benefit of an operating loss expected

         for the first six months of 1987, being more than the

        aggregate of the preceding amounts), and SMCO's ful-

       fillment of its obligations with respect to Federal

      income tax and Illinois income and replacement tax

        under Section 4.12, SMCO will not have any liability

         with respect to the Taxes of any consolidated or com-

          bined group of Seller or A&A of which SMCO is or was a

member;                                     

           (iv)  There are no actions, suits, proceedings,

         investigations, claims or audits pending or, to Sell-

           er's knowledge, threatened against, nor any discussions

        by SMCO, ESI, EIC or ICE with the tax authorities of

           any jurisdiction involving, SMCO, ESI, EIC or ICE which

           may result in the imposition of additional Taxes, Reas-

       sessments or Interest and Penalties, or the loss or

          diminution of any benefit or advantage which may cause

          additional Taxes, Reassessments or Interest and Penal-

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        ties to become payable, which are not covered by the

Tax Reserves; and                           

                (v)  The Federal income tax returns of the consol-

        idated group of which SMCO is a member, ESI, EIC and

       ICE for all tax periods listed on Schedule 2.23 are

           closed by reason of final audit by the Internal Revenue

           Service or expiration of the applicable period of limi-

tations.                                    

             2.24.  Labor Relations.  Except as set forth on
---------------     

     Schedule 2.24, (i) SMCO, ESI, EIC and ICE are in compliance
-                     

   with all Federal and state laws respecting employment and

   employment practices, terms and conditions of employment,

   wages and hours and non-discrimination in employment, and

   are not engaged in any unfair employment practice, in any

   case in which the violation thereof would have a material

    adverse effect on the business or assets of SMCO, ESI, EIC

    and ICE, taken as a whole; (ii) there is no charge pending
    --

   or, to Seller's knowledge, threatened before any court or

     agency alleging unlawful discrimination in employment prac-

     tices or any unfair labor practice by SMCO, ESI, EIC or ICE

    which would have a material adverse effect on the business

or assets of SMCO, ESI, EIC and ICE, taken as a whole;

     (iii) there are no collective bargaining agreements binding
---                                                 

on SMCO, ESI, EIC or ICE, and no collective bargaining

      32

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     agreement is currently being negotiated by any of them with

     any employee representative or labor organization; and (iv)
                                                            --

    none of SMCO, ESI, EIC or ICE has experienced any material

     work stoppage or any other material labor difficulty during

the three years immediately preceding the date hereof.

                2.25.  Insurance Coverage.  None of SMCO, ESI, EIC
------------------  

     or ICE is in default with respect to any material provision

     of any material insurance policy issued for its benefit nor

      has SMCO, ESI, EIC or ICE failed to give any notice or pres-

    ent any material claim thereunder in due or timely fashion

      or as required by any of such insurance policies which would

  result in failure to recover any material amount in full

     under such policies.  Attached hereto as Schedule 2.25 is a

     true and complete list, showing company and type and amount

 of coverage, of, and all actual or potential claims for

      which notice has been given to the insurer under, all insur-

    ance policies for the benefit of SMCO, ESI, EIC and ICE or

    their respective employees which are carried by them or on

     their behalf by the Seller or any Affiliate of Seller.  The

   provisions of this Section 2.25 are not intended to cover

treaties and agreements referred to in Section 2.31.  

            2.26.  Certain Contracts.  Except as listed on
-----------------   

      Schedule 2.26 or on other Schedules attached hereto (includ-

  ing the benefit plans listed therein), (i) none of SMCO,
                           -

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      ESI, EIC or ICE has any written or oral employment agreement

     providing either (x) a stated term of employment or (y) any
                  -                                  -

     material compensation in addition to salary which is in the

 nature of incentive compensation, profit sharing, stock

     option, stock appreciation rights, stock purchase, savings,

      deferred compensation, retirement, pension or other plans or

 other benefit arrangements or practices with or for the

      benefit of any officer, employee or any other person, or any

   consulting agreement or arrangement with any officer, em-

      ployee, former officer, former employee or holder of options

      to purchase capital stock of any of them, provided that this
                                      --------

  representation shall not be deemed to cover any implicit

 undertaking or obligations with respect to persons that

SMCO, ESI, EIC or ICE deems to be terminable at will; 

      (ii) no officer or director of SMCO, ESI, EIC or ICE has any
--                                                  

   other material agreement with any of them or any material

      interest in any real, personal or intellectual property used

   in or pertaining to their businesses; (iii) none of SMCO,
                           ---

 ESI, EIC or ICE is a party to any enforceable agreement

     (whether or not in writing) providing for severance or ter-

     mination payments or payments in connection with any change

    in control of any of them; and (iv) none of SMCO, ESI, EIC
            --

  or ICE is subject to any agreement (other than insurance

producer agreements written pursuant to the Management

      34

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Agreement, dated April 1, 1985, between EIC and Corrie

     Bauckham Batts Strickland Ltd., insurance policies or rein-

    surance treaties, in each case issued in the normal course

 of business) which provides for or creates a contingent

   obligation to make aggregate future payments in excess of

  $500,000.  All material mortgages, liens, leases, agree-

   ments, licenses or instruments to which SMCO, ESI, EIC or

   ICE is a party or by which any of its assets are bound or

     affected are in full force and effect and are binding obli-

    gations of SMCO, ESI, EIC and ICE, as the case may be, and

   no event or condition exists, or is alleged by any of the

    other parties thereto to exist, which constitutes, or with

     the lapse of time or giving of notice or both would consti-

    tute, on the part of SMCO, ESI, EIC or ICE, a default or a

   basis for acceleration of any obligation thereunder or in

respect thereof.  Schedule 2.26 contains a list of all

 agreements presently in existence between A&A or any of

    A&A's Subsidiaries, on the one hand, and any of SMCO, ESI,

    EIC or ICE, on the other, not listed on any other Schedule

hereto.                                               

2.27.  Employee Benefit Plans.    
  ----------------------

               (a)  ERISA.  SMCO, ESI, EIC and ICE have complied
-----                   

     with the provisions of ERISA (as defined in Section 10.16),

    and each applicable regulation thereunder in administering

      35

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      the employee welfare benefit plans (the "Welfare Plans") and

  employee pension benefit plans (the "Pension Plans"), as

    defined in Sections 3(1) and 3(2) of ERISA, covering their

      employees from time to time (together, the "Employee Benefit

      Plans").  The Employee Benefit Plans listed on Schedule 2.27

      are the only Employee Benefit Plans maintained by SMCO, ESI,

   EIC or ICE or to which any of them is now contributing or

    has contributed that are subject, or have been subject, to

any provision of ERISA or any such regulation.        

             (b)  Qualification of Pension Plans; Compliance
                  ------------------------------------------

     with Law.  The Pension Plans intended to qualify under Sec-
--------                                              

      tion 401 of the Code (as defined in Section 10.16) have been

      determined to be qualified under such Section, and no action

 or proceeding has been initiated or is threatened which

      would affect the qualification of any such Pension Plan.  No

    prohibited transactions, as defined in Section 4975 of the

  Code, have occurred in connection with any Pension Plan.

      None of the Pension Plans which is a defined benefit pension

 plan has incurred an accumulated funding deficiency, as

    defined in Section 412 of the Code, whether or not waived,

    since the effective date of Section 412.  Since the effec-

     tive date of ERISA, no Pension Plan, subject to Title IV of

  ERISA, nor any pension plan subject to Title IV of ERISA

     sponsored by any member of the controlled group of corpora-

      36

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  tions of which any of SMCO, ESI, EIC and ICE is a member

    (within the meaning of Section 414(b) or (c) of the Code),

    has been completely or partially terminated, nor has there

 been any reportable event as to which the 30-day notice

requirement has not been waived, as defined in Sec-   

    tion 4043(b) of ERISA and the regulations thereunder, with

respect to any Pension Plan.                          

               (c)  Multiemployer Plans.  None of SMCO, ESI, EIC
-------------------     

   and ICE is a party to any employee Multiemployer Plan (as

defined in Section 10.16).                            

              2.28.  Environmental Protection.  SMCO, ESI, EIC
    ------------------------

  and ICE have obtained all material permits, licenses and

      other authorizations which are required under federal, state

     and local laws relating to public health and safety, worker

    health and safety and pollution or protection of the envi-

     ronment, are in compliance with all material terms and con-

   ditions of such required permits, licenses and authoriza-

   tions, and are also in compliance with all other material

    limitations, restrictions, conditions, standards, prohibi-

    tions, requirements, obligations, schedules and timetables

     contained in any federal, state or local law or any regula-

 tion, code, plan, order, decree or judgment relating to

     public health and safety, worker health and safety and pol-

lution or protection of the environment.              

      37

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               2.29.  Insurance Business.  All material policies
------------------  

    of insurance issued by EIC or ICE and in force on the date

  hereof are, to the extent required by applicable law, on

    forms approved by applicable insurance regulatory authori-

   ties or which have been filed with and not objected to by

     such authorities within the period provided for such objec-

tion.  Any premium rates required to be filed with or 

   approved by insurance regulatory authorities have been so

     filed or approved and the premiums charged conform thereto.

                2.30.  Regulatory Filings.  Except as set forth in
------------------  

     Schedule 2.30, Seller has made available to Buyer all mate-

      rial registrations, filings or submissions (other than poli-

    cy filings or rate filings) made by or on behalf of EIC or

   ICE with or to any insurance regulatory authority and all

   reports of examination issued by any insurance regulatory

     authority.  EIC and ICE have filed all reports, statements,

      documents, registrations, filings or submissions required to

   be filed with any governmental or regulatory body, except

  those, if any, with respect to which the failure to file

  individually or in the aggregate does not materially ad-

  versely affect their respective licenses or authority as

  property and casualty insurance companies operating on a

    non-admitted or admitted basis, as appropriate, in any ju-

  risdiction or does not otherwise have a material adverse

      38

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      effect on either of them.  Except as shown on Schedule 2.30,

 all such registrations, filings and submissions were in

    material compliance with applicable law when filed, and no

      material deficiencies have been asserted with respect there-

to.                                                   

              2.31.  Reinsurance, Coinsurance and Underwriting
                     -----------------------------------------

      Management.  (a)  Schedule 2.31 contains a list of all mate-
----------                                            

     rial treaty reinsurers of EIC or ICE entering into treaties

     during calendar year 1987 that are effective for such year.

      All treaties with such reinsurers for calendar year 1987 are

      in full force and effect (subject to any termination notices

    that may have been given that would become effective as of

     December 31, 1987).  Except as shown on Schedule 2.31, nei-

      ther EIC or ICE nor, to the knowledge of Seller, EIC or ICE,

   any other party thereto, is in default as to any material

provision of any material reinsurance treaty.         

                (b)  Schedule 2.31 contains a list of all material

   agreements to which SMCO, ESI, EIC or ICE is a party pur-

 suant to which SMCO, ESI, EIC or ICE serves as managing

   general agent or underwriting manager and continues to be

     authorized or obligated to provide any services.  Except as

     set forth on Schedule 2.31, all such agreements are in full

      force and effect and Seller has not received notice from any

      other party to any such agreement that such party intends to

      39

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     terminate or does not intend to renew such agreement.  Nei-

    ther SMCO nor, to the knowledge of Seller, any other party

      thereto, is in default as to any material provision thereof,

      and, except as set forth in Schedule 2.31, no such agreement

   contains any provision to the effect that the other party

     thereto may terminate the agreement by reason of the trans-

actions contemplated by this Agreement.               

            2.32.  Agents.  Each of the material contracts
------              

    between EIC or ICE and their respective agents and brokers

 authorizing such agents or brokers to execute insurance

      policies on behalf of EIC or ICE is listed on Schedule 2.32.

      The termination provisions of such agreements are summarized

in Schedule 2.32.                                     

               2.33.  Intangible Property and Computer Software.
                     -----------------------------------------

   SMCO, ESI, EIC and ICE have and own, or have the right to

   use, all trademarks, service marks, trade names, business

 names, copyrights, formulas, inventions, trade secrets,

      know-how and computer software material to and used in their

    businesses including, but not limited to, the items listed

    on Schedule 2.33 (the "Intellectual Property").  There are

     no claims or proceedings pending or, to Seller's knowledge,

     threatened against SMCO, ESI, EIC or ICE asserting that its

      use of any Intellectual Property infringes the rights of any

  other person.  None of Seller, SMCO, ESI, EIC or ICE has

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  licensed or otherwise assigned any material Intellectual

Property to any third party.                          

               2.34.  No Brokers.  Neither Seller nor any of its
----------          

      Affiliates has employed any broker or finder or incurred any

   liability for any brokerage fees, commissions or finders'

     fees in connection with the transactions contemplated here-

    by, except for Smith, Barney, Harris Upham & Co. Inc., and

   Seller agrees to hold Buyer and SMCO and its Subsidiaries

     harmless from any claim relating to any such fee or compen-

sation.                                               

                2.35.  Tax Allocation Agreement.  Set forth in Ex-
    ------------------------

      hibit A hereto is the form of agreement (the "Tax Allocation

    Agreement") which will define the manner in which tax lia-

    bilities and related tax items of any consolidated or com-

    bined group of Seller or A&A will be treated and allocated

   for any period beginning after December 31, 1986 in which

SMCO is a member of any such group.                   

            2.36.  A&A as Guarantor.  A&A is a corporation
----------------    

     duly organized, validly existing and in good standing under

 the laws of the State of Maryland and has the corporate

     power and authority to execute and deliver the guarantee in

      the form attached hereto as Exhibit E (the "A&A Guarantee").

    At the Closing Date, the execution and delivery of the A&A

   Guarantee shall have been duly authorized by the Board of

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  Directors of A&A, no other corporate authorization being

      necessary on its part, and the A&A Guarantee shall have been

   duly executed and delivered by and constitute a valid and

      binding agreement of A&A.  The execution and delivery of the

    A&A Guarantee by A&A does not violate any provision of the

Articles of Incorporation or Bylaws of A&A.           

             2.37.  Safe Harbor Leases.  Except for possible
------------------  

      minor discrepancies that in the aggregate would result in no

     more than $150,000 of net additional taxable income, Sched-

   ule 2.37 reflects the Federal taxable income that will be

  generated each year beginning after June 30, 1987 by the

    safe harbor leases under which SMCO is the tax lessor, ex-

  cept for any dispositions of assets or other termination

    events under such leases (hereinafter referred to as "Loss

Events").                                             

                2.38.  Full Disclosure.  No statement contained in
---------------     

    this Article II, together with the documents, certificates

      and other writings furnished or to be furnished by Seller to

      Buyer pursuant to the provisions of this Agreement, contains

     or shall contain any untrue statement of a material fact or

      omits or shall omit to state any material fact necessary, in

    the light of the circumstances under which it was made, to

make such statement not misleading.                   

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     ARTICLE III
     REPRESENTATIONS AND WARRANTIES OF BUYER

         Buyer represents and warrants to Seller the

following:                                            

               3.1.  Organization and Existence of Buyer.  Buyer
             -----------------------------------

  is a corporation duly organized, validly existing and in

good standing under the laws of the State of Illinois.

              3.2.  Authorization and Validity.  Buyer has the
    --------------------------

   corporate power and authority to execute and deliver this

     Agreement and the other agreements contemplated on its part

   hereby and to consummate the transactions contemplated on

 its part hereby and thereby; the execution and delivery

      hereof and thereof by Buyer and the consummation by Buyer of

     such transactions have been duly authorized by its Board of

      Directors, no other corporate authorization being necessary;

      and this Agreement has been, and on the Closing Date each of

    such other agreements will be, duly executed and delivered

  by and this Agreement constitutes and each of such other

     agreements will constitute a valid and binding agreement of

Buyer.                                                

               3.3.  Non-Contravention of Instruments.  The exe-
          --------------------------------

    cution and delivery of this Agreement and the other agree-

     ments contemplated on its part hereby by Buyer and the con-

    summation by Buyer of the transactions contemplated hereby

    and thereby will not violate any provision of the Articles

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      of Incorporation or Bylaws of Buyer, and will not violate or

     result, with the passage of time or the giving of notice or

     both, in a violation of, any provision of, or result in the

      acceleration of or entitle any party to accelerate any obli-

      gation under, or result in the creation or imposition of any

 lien, charge, pledge, security interest, restriction or

      other encumbrance (except as contemplated hereby or thereby)

     upon any of the property of Buyer pursuant to any provision

      of any material mortgage, lien, lease, agreement, license or

     instrument to which Buyer is a party or to which it is sub-

    ject, and will not constitute an event permitting termina-

  tion of any mortgage, lien, lease, agreement, license or

   instrument to which Buyer is a party and will not violate

      any judgment, order, writ, injunction, decree, regulation or

   rule of any court or governmental authority applicable to

Buyer or its assets.                                  

                3.4.  Consents, Filings and Approvals.  Except for
         -------------------------------

  filings and approvals listed on Schedule 2.11 or 3.4, no

     consent, approval, notification, authorization or order of,

     or declaration, filing or registration with, any governmen-

   tal agency or third party of the character referred to in

   the second sentence of this Section 3.4 is required to be

     obtained or made by Buyer or any Affiliate of Buyer in con-

      nection with the execution, delivery and performance of this

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    Agreement or any other agreement contemplated hereby.  The

    preceding sentence shall apply only where the consequences

  of failing to obtain or make any such consent, approval,

    notification, authorization, order, declaration, filing or

      registration would prevent consummation of any of the trans-

  actions contemplated by this Agreement or materially ad-

versely affect Buyer.                                 

             3.5.  No Brokers.  Neither Buyer nor any of its
----------            

    Affiliates has employed any brokers or finders or incurred

     any liability for any brokerage fees, commissions, finders'

      fees or financial advisory fees in connection with the tran-

      sactions contemplated hereby and Buyer agrees to hold Seller

     harmless from any claim relating to any such fee or compen-

sation.                                               

               3.6.  Purchase for Investment.  Buyer is purchas-
 -----------------------

    ing the SMCO Shares hereunder, and the shares of stock ac-

     quired under the ESI Share Purchase Agreements, for its own

     account for investment and not with a view to the distribu-

    tion thereof or with any present intention of distributing

or selling any thereof.                               

              3.7.  Qualification.  Buyer is duly qualified to
-------------         

  do business and is in good standing in each jurisdiction

   where the character of the properties and assets it owns,

     operates or holds under lease or the nature of the business

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   transacted by it in such jurisdiction so requires, except

   where the failure so to qualify would not have a material

adverse effect on its business.                       

             3.8.  Subsidiaries.  Buyer has no Subsidiaries.
------------          

             3.9.  Capitalization.  All shares of authorized
--------------        

    capital stock of Buyer now outstanding are, and all shares

 of authorized capital stock of Buyer outstanding at the

   Closing will be, duly authorized, validly issued and out-

      standing, fully paid and nonassessable.  The legal and bene-

      ficial owners of the common stock of Buyer and the number of

      shares of common stock that each such owner owns on the date

   hereof are set forth on Schedule 3.9, and, at the Closing

  Date, Buyer will deliver an updated Schedule 3.9 showing

such owners as of such date.                          

              3.10.  Indebtedness, etc.  Buyer has no liabili-
-----------------   

    ties or indebtedness and has not entered into any transac-

     tions other than transactions in connection with its forma-

     tion and capitalization and other than transactions contem-

      plated by or incidental to the performance of this Agreement

      and the other instruments provided for herein to which it is

    or is to be party.  There has been no change in the finan-

      cial condition of Buyer since the date of its incorporation,

     other than changes in the ordinary course of business which

    have not been, in any case or in the aggregate, materially

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      adverse, and since such date neither the condition, business

   or prospects of Buyer nor any of its properties or assets

    have been materially adversely affected as a result of any

    occurrence whatever, whether or not insured against except

for the transactions contemplated by this Agreement.  

                3.11.  Disputes and Litigation.  There is no pend-
   -----------------------

     ing or, to Buyer's knowledge, threatened action, suit, pro-

     ceeding or claim before any court, arbitrator or governmen-

     tal authority, or, to Buyer's knowledge, pending or threat-

  ened investigation or review by any governmental agency,

    against or affecting Buyer or properties or business which

      would have a material adverse effect on it or on its ability

 to perform its obligations hereunder or under the other

     agreements to be entered into pursuant hereto, and there is

    no outstanding order, judgment, writ, injunction or decree

     of any court, government of governmental authority or arbi-

trator against it or its assets or business.          

               3.12.  Governmental Licenses and Permits; Compli-
                      ------------------------------------------

   ance with Laws.  Buyer has all necessary governmental li-
--------------                                        

     censes, permits and approvals legally required and material

     to the conduct of its business.  Such licenses, permits and

     approvals are in full force and effect and no proceeding is

   pending or, to the knowledge of Buyer, threatened to sus-

     pend, revoke or limit any such license, permit or approval;

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  and Buyer has complied in all material respects with all

    applicable material laws, regulations and restrictions re-

    lating to its business, including the terms and conditions

of such governmental licenses and permits.            

           3.13.  Taxes.  All tax returns and reports of
-----               

     Buyer required by law to be filed have been duly filed, and

all material taxes, assessments and other governmental

  charges required to be paid in connection therewith have

    been duly paid in full.  No Federal, state or other income

    tax has been assessed against Buyer up to the date hereof.

           3.14.  Buyer Guarantors.  Each of Fairfax and
----------------    

    Markel (together, the "Buyer Guarantors") is a corporation

     duly organized, validly existing and in good standing under

   the laws of its jurisdiction of incorporation and has the

  corporate power and authority to execute and deliver the

 guarantee in the form attached hereto as Exhibit I (the

    "Non-Contingent Buyer Guarantee"), the Overall Buyer Guar-

    antee and the guarantee in the form attached hereto as Ex-

      hibit M (the "Kansa Buyer Guarantee").  At the Closing Date,

      the execution and delivery of the Non-Contingent Buyer Guar-

      antee and the Kansa Buyer Guarantee, if required pursuant to

    Section 4.14, shall have been duly authorized by the Board

     of Directors of each of the Buyer Guarantors, no other cor-

     porate authorization being necessary on the part of either,

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    and such guarantee or guarantees shall have been duly exe-

   cuted and delivered by and constitute a valid and binding

  agreement or valid and binding agreements of each of the

   Buyer Guarantors.  The execution and delivery of the Non-

   Contingent Buyer Guarantee, the Kansa Buyer Guarantee and

    the Overall Buyer Guarantee by the Buyer Guarantors do not

   violate any provision of the Articles of Incorporation or

Bylaws of either Buyer Guarantor.                     

                3.15.  Full Disclosure.  No statement contained in
---------------     

     this Article III, together with the documents, certificates

     and other writings furnished or to be furnished by Buyer to

   Seller pursuant to the provisions of this Agreement, con-

   tains or shall contain any untrue statement of a material

     fact or omits or shall omit to state any material fact nec-

      essary, in the light of the circumstances under which it was

made, to make such statement not misleading.          

      ARTICLE IV
     ADDITIONAL AGREEMENTS

              4.1.  Conduct of Business.  From the date hereof
-------------------   

     through the Closing Date, Seller shall cause SMCO, ESI, EIC

     and ICE to conduct their operations according to the normal

      course of business and shall use its best efforts (but with-

     out material expense to Seller) to cause SMCO, ESI, EIC and

   ICE to preserve intact in all material respects their re-

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     spective business organizations and their licenses to carry

    on their respective businesses in the jurisdictions listed

    on Schedules 2.2, 2.3 and 2.5, keep available the services

      of their respective officers and employees material to their

   respective businesses and maintain satisfactory relation-

      ships with brokers, insurance companies, reinsurers, custom-

    ers and others having business relationships with them and

      that are material to their business taken as a whole.  Sell-

      er and Buyer shall confer on a regular and frequent basis to

 discuss operational matters of a material nature and to

   discuss the general status of ongoing operations.  Seller

    shall promptly notify Buyer of any unexpected emergency or

     other material adverse change in the normal course of busi-

   ness or in the operations of the businesses of SMCO, ESI,

      EIC or ICE, of any investigation or review of SMCO, ESI, EIC

   or ICE, pending or threatened, of which it learns, by any

    governmental entity that would have a material adverse ef-

   fect on their business or assets taken as a whole, and of

 any material budget revisions submitted to the Board of

  Directors of Seller, SMCO, ESI, EIC or ICE involving any

      business, asset or property of SMCO, ESI, ECI or ICE.  Sell-

 er shall keep Buyer fully informed of developments with

   respect to such events and permit Buyer's representatives

   access to all materials prepared in connection therewith.

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                4.2.  Forbearance.  Except as contemplated by this
-----------           

    Agreement, Seller will not permit any of SMCO, ESI, EIC or

     ICE, after the date hereof prior to the Closing Date, with-

out the prior written consent of Buyer to:            

  (i)  issue additional capital stock;

              (ii)  declare or pay any dividend or distribution,

          except for dividends declared by EIC and ICE in accor-

dance with customary practice;              

              (iii)  issue stock options or any stock appreciation

rights;                                     

            (iv)  sell any material assets other than in the

normal course of business;                  

         (v)  issue or incur additional funded debt;

             (vi)  assume, guarantee, endorse or otherwise be-

           come responsible for the obligations of any other indi-

         vidual, firm or corporation, or make any loans or ad-

         vances to any individual, firm or corporation, except

in the normal course of business;           

              (vii)  mortgage, pledge or otherwise encumber any of

           its properties or assets, except in the ordinary course

of business;                                

       (viii)  make any investment in third parties or

          assets of a capital nature either by purchasing stock,

         securities or assets, contributing to capital, trans-

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       ferring property or otherwise making an investment,

except in the normal course of business;    

             (ix)  except with respect to matters set forth in

          Schedule 2.13, make any commitments for capital expen-

        ditures other than in the normal course of business;

             (x)  increase in any manner the compensation of

         any of its officers or employees; pay or agree to pay

           any pension or retirement allowance not required by any

          existing plan or agreement to any officer or employee;

          or enter into or amend any employment agreement or any

           incentive compensation, profit sharing, stock purchase,

          stock option, stock appreciation rights, savings, con-

          sulting, deferred compensation, retirement, pension or

         other "fringe benefit" plan or arrangment with or for

         the benefit of any officer, employee or other person;

         excepting, however, with respect to all of this para-

           graph (x), increases in compensation, benefits or other

           commitments, transactions or agreements in the ordinary

      course of business consistent with past practices;

              (xi)  agree that any insurance policy naming it as

          a beneficiary or a loss payee may be cancelled or ter-

      minated or allow any of the coverage thereunder to

      lapse unless simultaneously with such termination,

      cancellation or lapse notice is given to Buyer and

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         replacement policies providing substantially the same

        coverage are obtained (it being understood, however,

          that all insurance policies of which Seller or A&A and

           any of SMCO, ESI, EIC or ICE are jointly named as bene-

       ficiaries or loss payees shall be terminated on the

Closing Date);                              

           (xii)  amend its Articles of Incorporation or By-

laws;                                       

          (xiii)  enter into any agreements other than those

made in the ordinary course of business; or 

          (xiv)  enter into any agreement to do any of the

         things described in clauses (i) through (xiii) above.

             4.3.  Investigation of Business and Properties.
                  ----------------------------------------

      Buyer may make or cause to be made such investigation of the

 business and properties of SMCO, ESI EIC and ICE and of

     their financial and legal condition as may be reasonable to

    familiarize Buyer therewith, provided that such investiga-
            --------

 tion shall not unreasonably interfere with their normal

      operations.  Seller agrees to cause SMCO, ESI EIC and ICE to

    permit Buyer and its accountants, counsel and other repre-

 sentatives to have reasonable access to their premises,

 books and records during normal business hours.  Seller

 shall make arrangements with SMCO, ESI, EIC and ICE and

 their officers to furnish Buyer with such financial and

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    operating data and other information with respect to their

  business and properties as Buyer shall from time to time

     reasonably request in accordance with this Section.  If for

    any reason the transactions contemplated by this Agreement

  fail to close, Buyer shall maintain, and shall cause its

   agents and representatives to maintain, in confidence all

      non-public information received or learned by it (other than

      any such information or documents properly obtained by Buyer

   from a source other than SMCO, ESI, EIC or ICE or that is

     readily ascertainable from public or published information)

   and shall return to them all written materials in its and

   its agents' and representatives' possession received from

them, and all copies thereof.                         

          4.4.  Investigation of Financial Statements.
               -------------------------------------

    Seller shall make arrangements with SMCO, ESI, EIC and ICE

  to give, and shall instruct Deloitte Haskins & Sells and

 Arthur Andersen & Co., its independent certified public

      accountants, to give such reasonable assistance and coopera-

      tion to Peat, Marwick, Main & Co., the independent certified

      public accountants of Buyer, and to employees or representa-

     tives of Buyer as they may reasonably request in connection

     with their review of the financial statements of SMCO, ESI,

      EIC and ICE.  Such review shall include the right to examine

any notes and work papers related thereto.            

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            4.5.  Agreement to Consummate.  Subject to the
 -----------------------

   terms and conditions herein provided, each of the parties

    agrees to use its reasonable efforts to do all things rea-

      sonably necessary, proper or advisable under applicable laws

      and regulations to consummate and make effective, as soon as

  reasonably practicable, the transactions contemplated by

      this Agreement, including, but not limited to, the obtaining

      of all consents, authorizations, orders and approvals of any

 governmental commission, board or other regulatory body

      required in connection therewith.  Notwithstanding the fore-

   going, it is understood that neither Seller or Buyer, nor

  any of their respective affiliates, shall be required to

     incur any costs or to assume any obligations or liabilities

     in connection with carrying out this Section 4.5 other than

     immaterial costs, obligations and liabilities.  At any time

     after the Closing Date, if any further action is necessary,

      proper or advisable to carry out the purposes of this Agree-

      ment, then, as soon as is reasonably practicable, each party

  to this Agreement shall take, or cause to be taken, such

action.                                               

              4.6.  Regulatory Matters.  Seller and Buyer will
------------------    

   cooperate in the preparation of documentation and filings

      and the obtaining of permits, consents, approvals and autho-

     rizations of third parties and governmental bodies (includ-

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  ing, without limitation, applicable insurance regulatory

    authorities) necessary to consummate the transactions con-

     templated by this Agreement.  Each party shall be primarily

      responsible for accomplishing all such matters applicable to

     it but shall take all such further action in regard to mat-

     ters applicable to the other party as the other party shall

reasonably request.                                   

              4.7.  Use of Names.  After the Closing Date, A&A
------------          

     and its Subsidiaries will have no right to use the names or

    trade names of SMCO, ESI, EIC and ICE, and the trade names

     ALTIS and SLIM, in any form in the conduct of any business.

              4.8.  Covenant Not to Compete.  Except as other-
 -----------------------

  wise provided in this Section 4.8, for a period of three

     years from the date hereof, neither Seller nor any corpora-

 tion or other entity affiliated with Seller, except for

     Sphere Drake Insurance Group Public Limited Company and its

      Subsidiaries operating substantially as they do today, shall

    directly or indirectly, either individually or in partner-

 ship or in conjunction with any other person or entity,

      engage in business within the United States as an underwrit-

 er accepting third party risks for its own account with

   respect to the lines of insurance listed on Schedule 4.8.

In no event shall any of the prohibitions in this Sec-

    tion 4.8 apply to rent-a-captive or limited risk insurance

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    and reinsurance arrangements.  Seller further acknowledges

     and agrees that Buyer's remedy at law for any breach of the

    covenants contained in this Section will be inadequate and

      that Buyer, its successors and assigns, shall be entitled to

   injunctive relief for any breach or any violation hereof.

     The period, geographical area and scope of the restrictions

     on Seller's activities under this Section 4.8 are divisible

  so that if any of the provisions hereof is invalid, that

 provision shall be automatically modified to the extent

      necessary to make it valid.  It is understood that the fore-

    going covenants shall not prohibit Seller from carrying on

     its business as and to the extent currently conducted by it

      and its Subsidiaries (other than SMCO, ESI, EIC or ICE) with

     respect to the brokering and underwriting of architects and

 engineers professional liability and products liability

insurance.                                            

           4.9.  Cooperation of Parties.  Subject to the
----------------------

      provisions of the Tax Allocation Agreement, Seller and Buyer

 agree that in connection with any claims or proceedings

     (including tax proceedings) arising out of events occurring

      prior to the Closing Date which involve or affect both Sell-

    er or any of its affiliates and any of SMCO or its Subsid-

   iaries (regardless of whether such claim or proceeding is

    covered by insurance or by the indemnity provided in Arti-

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cle VIII) each party will, to the extent reasonably   

practicable, cooperate and work with the other in the 

    handling or resolution of such claims or proceedings so as

    to avoid, to the extent reasonably feasible, any damage to

     the relationship of such companies or their affiliates with

any brokers, customers or regulatory agencies or tax  

    authorities, provided that neither party shall be required
--------                    

to incur other than immaterial costs or expenses in   

connection with such cooperation and work.            

                4.10.  EPIC Program.  Seller and SMCO are present-
------------        

 ly involved in attempting to establish a risk retention

      group known as the Environmental Protection Insurance Compa-

   ny ("EPIC").  In the event EPIC is formed but only one of

    A&A or any of A&A's Subsidiaries, on the one hand, or SMCO

    or any of SMCO's Subsidiaries, on the other hand, shall be

     retained as manager and underwriting manager, respectively,

      the party that is retained shall reimburse the party that is

    not retained for all documented and otherwise unreimbursed

   out-of-pocket expenses incurred in the formation of EPIC.

Such reimbursement shall be limited to the lesser of  

    $300,000 or one-third of the revenues earned from EPIC ex-

      clusive of expense reimbursement and shall be paid, promptly

      upon receipt thereof, from revenues received by the retained

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   party from EPIC exclusive of expense reimbursement at the

rate of $1.00 out of each $3.00 so received.          

           4.11.  Safe-Harbor Leases.  If any payment is
------------------  

    received by SMCO from any tax lessee under any safe-harbor

   lease referred to in Section 2.37 under which SMCO is the

      tax lessor, SMCO will pay to Seller any portion thereof that

 is paid with respect to any Loss Event (under such safe

 harbor lease) which occurred before July 1, 1987.  SMCO

 shall be responsible for all Taxes attributable to Loss

      Events occurring after June 30, 1987, and for loss of depre-

    ciation deductions by Seller during the first half of 1987

     as a result of any Loss Event occurring after June 30, 1987

     and prior to the Closing Date.  Seller shall be responsible

    for all Taxes attributable to Loss Events occurring before

    July 1, 1987.  In the event SMCO as the result of any Loss

    Event occurring prior to July 1, 1987 shall have less tax-

      able income from such safe harbor leases after June 30, 1987

      than was reflected in Schedule 2.37, SMCO shall pay to Sell-

     er an amount equal to any resulting tax savings realized by

    SMCO promptly after the realization thereof.  In the event

    any Loss Event occurs after June 30, 1987, Seller, subject

      to the provisions of Section 8.4(c)(ii) hereof, shall indem-

    nify and hold harmless SMCO against any failure of the tax

  lessee under the applicable safe harbor lease to pay any

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  amount due as a consequence of such Loss Event, provided

    SMCO shall promptly (after SMCO has knowledge of such Loss

    Event) notify Seller of any such failure and, if requested

     by Seller, shall (subject to Seller's payment of reasonable

      fees of counsel and reasonable out-of-pocket expenses) first

      pursue such tax lessee and exhaust its remedies against such

tax lessee.                                           

              4.12.  Tax Allocation Agreement.  The parties to
    ------------------------

    the Tax Allocation Agreement will promptly pay all amounts

   determined to be due in accordance with the provisions of

  the Tax Allocation Agreement, and after the Closing Date

   Buyer will cause SMCO to comply with the terms of the Tax

Allocation Agreement.                                 

              4.13.  Timing Differences.  In the event SMCO or
------------------  

    A&A's affiliated group, as the case may be, in any taxable

    year after SMCO ceases to be a member of Seller's or A&A's

   affiliated group for the purpose of filing federal income

     tax or Illinois combined income and replacement tax returns

    shall realize any tax savings as a result of any audit ad-

     justment relating to SMCO increasing or reducing deductions

     or increasing or reducing income reported on a consolidated

    or combined basis for the taxable years 1983 through 1986,

      SMCO shall pay to A&A, or A&A shall pay to SMCO, as the case

    may be, an amount equal to such tax savings promptly after

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    the realization thereof.  A&A shall notify SMCO of any tax

 savings payable by A&A to SMCO pursuant to this Section

promptly after A&A's realization of such savings.  All

      payments shall be made promptly after notification by A&A to

     SMCO.  No payment shall be required under this Section 4.13

     unless and until the aggregate net amount of such increased

      or decreased deductions and/or increased or decreased income

exceeds $250,000.                                     

               4.14.  Buyer Guarantees.  Subject to the fulfill-
----------------    

    ment of the conditions set forth in Article V, Buyer shall

      cause the Buyer Guarantors to execute and deliver to Seller,

     on the Closing Date, the Non-Contingent Buyer Guarantee and

   the Kansa Buyer Guarantee, unless Kansa, on or before the

      Closing Date, shall have sold and delivered to Buyer the ESI

 Shares owned by it, in which case Buyer shall cause the

      Buyer Guarantors to execute and deliver only the Non-Contin-

gent Buyer Guarantee to Seller on the Closing Date.   

                4.15.  Shand Morahan Plaza.  Subject to the condi-
------------------- 

      tions set forth in Article VI, Seller shall, and shall cause

      its affiliates which are parties thereto to, and, subject to

 the conditions set forth in Article V, Buyer shall, and

  shall cause its Affiliates which are parties thereto to,

execute and deliver the agreement referred to in Sec- 

tions 5.3 and 6.7 hereof.                             

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               4.16.  Pledge Agreement.  Subject to the fulfill-
----------------    

   ment of the conditions set forth in Article V, Buyer will

 execute and deliver at the Closing the Pledge Agreement

     referred to in Section 6.9 and will perform its obligations

thereunder required to be performed at the Closing.   

     ARTICLE V
     CONDITIONS TO BUYER'S OBLIGATIONS

            Buyer's obligation to purchase and pay for the

    SMCO Shares shall be subject, to the extent not waived, to

     the satisfaction of each of the following conditions at the

Closing.                                              

               5.1.  Representations and Warranties.  The repre-
        ------------------------------

      sentations and warranties of Seller contained in this Agree-

    ment shall be true and correct in all material respects as

 of the date when made and, except for changes expressly

  contemplated by this Agreement, on and as of the Closing

     Date as though such representations and warranties had been

   made on and as of the Closing Date, and Seller shall have

      delivered to Buyer a certificate, signed by the President or

   a Vice-President of Seller and dated the Closing Date, to

the foregoing effect.                                 

           5.2.  Performance of this Agreement.  Seller,
       -----------------------------

     SMCO, ESI, EIC and ICE shall have performed and complied in

  all material respects with all covenants, conditions and

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  agreements required by this Agreement to be performed or

  complied with by any and all of them (including, without

     limitation, the delivery of all SMCO Shares) prior to or on

     the Closing Date and Seller shall have delivered to Buyer a

     certificate, signed by the President or a Vice-President of

     Seller and dated the Closing Date, to the foregoing effect.

               5.3.  Shand Morahan Plaza.  Seller and any of its
-------------------   

      affiliates which are parties thereto shall have executed and

     delivered to Buyer an agreement, in form and substance rea-

    sonably satisfactory to Buyer, with respect to the matters

contained in Exhibit B.                               

              5.4.  Proceedings.  All corporate and other pro-
-----------           

      ceedings to be taken by Seller in connection with the trans-

   actions contemplated hereby shall have been completed and

 all such proceedings and all documents incident thereto

   shall be reasonably satisfactory in substance and form to

   Buyer, and Buyer shall have received all such counterpart

     originals or certified or other copies of such documents as

Buyer may reasonably request.                         

              5.5.  Consents, Filings and Approvals.  All con-
         -------------------------------

   sents and authorizations by third parties and all govern-

    mental consents, filings, approvals, licenses and permits,

     the granting of which are necessary for the consummation of

    the transactions contemplated hereby or for preventing the

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  termination of any material right, privilege, license or

      agreement of each of SMCO, ESI, EIC and ICE which is materi-

      al to it (each of the licenses or approvals listed on Sched-

     ules 2.2, 2.3 and 2.5 being deemed to be material) upon the

     consummation of the transactions contemplated hereby, shall

   have been obtained or made and shall be in full force and

      effect, including any consents required of applicable insur-

     ance regulatory authorities, and all waiting periods speci-

 fied by law the passing of which are necessary for such

consummation shall have passed.                       

                5.6.  Litigation.  No order of any court or admin-
----------            

     istrative agency shall be in effect which restrains or pro-

    hibits the transactions contemplated hereby or which would

    limit or affect Buyer's ownership or control of SMCO, ESI,

   EIC or ICE, and there shall not have been threatened, nor

    shall there be pending, any action or proceeding by or be-

      fore any court or governmental agency or other regulatory or

    administrative agency or commission challenging any of the

     transactions contemplated by this Agreement or Buyer's par-

ticipation therein.                                   

               5.7.  Opinion of Counsel for Seller.  Buyer shall
       -----------------------------

      have received an opinion from Debevoise & Plimpton dated the

      Closing Date, substantially in the form of Exhibit C hereto,

     and an opinion from Lord, Bissell & Brook dated the Closing

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      Date, substantially in the form of Exhibit D hereto, and, in

    each case, concerning such other matters as Buyer may rea-

sonably request.                                      

           5.8.  Share Certificates.  The certificate(s)
------------------    

     representing all the SMCO Shares, duly endorsed in blank or

  with stock powers attached thereto duly signed in blank,

shall have been tendered to Buyer.                    

               5.9.  Transfer Taxes.  Seller shall have paid, or
--------------        

   caused to be paid, all stock transfer and other taxes re-

 quired to be paid by it in connection with the sale and

delivery to Buyer of the SMCO Shares.                 

              5.10.  Repayment of Indebtedness.  Seller or A&A
     -------------------------

     shall have paid all dollar amounts owed by them to SMCO due

      through the Closing Date under the Tax Allocation Agreement,

     all items of indebtedness on Schedule 5.10 and indebtedness

    of $19.5 million owed by Seller or an affiliate thereof to

SMCO in respect of certain safe harbor leases (or of  

      $10 million if payment of the immediately payable portion of

    the Purchase Price at the Closing is made pursuant to Sec-

tion 1.3(b) hereof).                                  

               5.11.  Agreements with Lenders.  Buyer shall have
   -----------------------

      obtained agreements in form and substance satisfactory to it

      with all banks or other commercial lenders with whom ESI has

    outstanding indebtedness, to the effect that they will not

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   exercise their right to declare any of ESI's indebtedness

     immediately payable or otherwise accelerate the agreed pay-

   ment terms, by reason of the consummation of the transac-

tions contemplated by this Agreement.                 

              5.12.  Tax Allocation Agreement.  Seller and A&A
    ------------------------

 shall have executed, and Seller shall have delivered to

Buyer, the Tax Allocation Agreement.                  

            5.13.  Guarantee.  A&A shall have executed and
---------           

delivered to Buyer the A&A Guarantee.                 

      ARTICLE VI
      CONDITIONS TO SELLER'S OBLIGATIONS

          Seller's obligations to sell and deliver the

   Shares shall be subject, to the extent not waived, to the

 satisfaction of each of the following conditions at the

Closing.                                              

               6.1.  Representations and Warranties.  The repre-
        ------------------------------

     sentations and warranties of Buyer contained in this Agree-

    ment shall be true and correct in all material respects as

 of the date when made and, except for changes expressly

  contemplated by this Agreement, on and as of the Closing

     Date as though such representations and warranties had been

  made on and as of the Closing Date, and Buyer shall have

      delivered to Seller its certificate, signed by the President

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     or a Vice-President of Buyer and dated the Closing Date, to

the foregoing effect.                                 

               6.2.  Performance of this Agreement.  Buyer shall
       -----------------------------

   have performed and complied in all material respects with

   all covenants, conditions and agreements required by this

      Agreement to be performed or complied with by it prior to or

      on the Closing Date, and Buyer shall have delivered to Sell-

    er a certificate, signed by the President or a Vice-Presi-

    dent of Buyer and dated the Closing Date, to the foregoing

effect.                                               

              6.3.  Proceedings.  All corporate and other pro-
-----------           

     ceedings to be taken by Buyer in connection with the trans-

   actions contemplated hereby shall have been completed and

 all such proceedings and all documents incident thereto

   shall be reasonably satisfactory in substance and form to

    Seller and Seller shall have received all such counterpart

     originals or certified or other copies of such documents as

Seller may reasonably request.                        

              6.4.  Consents, Filings and Approvals.  All con-
         -------------------------------

      sents and authorizations by third parties and all governmen-

     tal consents, filings, approvals, licenses and permits, the

     granting of which are necessary for the consummation of the

    transactions contemplated hereby, shall have been obtained

      or made and shall be in full force and effect, including any

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      consents required of applicable insurance regulatory author-

     ities, and all waiting periods specified by law the passing

 of which are necessary for such consummation shall have

passed.                                               

                6.5.  Litigation.  No order of any court or admin-
----------            

     istrative agency shall be in effect which restrains or pro-

    hibits the transactions contemplated hereby or which would

    limit or affect Buyer's ownership or control of SMCO, ESI,

   EIC or ICE, and there shall not have been threatened, nor

    shall there be pending, any action or proceeding by or be-

      fore any court or governmental agency or other regulatory or

     administrative agency or commission challenging or limiting

    the effect of any of the transactions contemplated by this

Agreement or Seller's participation therein.          

           6.6.  Opinions of Counsel.  Seller shall have
-------------------   

   received an opinion from McGuire, Woods, Battle & Boothe,

dated the Closing Date, substantially in the form of  

 Exhibit F, from Burke, Griffin, Chomicz & Wienke, P.C.,

      dated the Closing Date, substantially in the form of Exhibit

G from Tory, Tory, DesLauriers & Binnington, dated the

      Closing Date, substantially in the form of Exhibit L, and in

each case, concerning such other matters as Seller may

reasonably request.                                   

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              6.7.  Shand Morahan Plaza.  Buyer and any of its
-------------------   

      Affiliates which are parties thereto shall have executed and

 delivered to Seller an agreement, in form and substance

     reasonably satisfactory to Seller, with respect to the mat-

ters contained in Exhibit B.                          

              6.8.  Transfer Taxes.  Buyer shall have paid, or
--------------        

   caused to be paid, all stock transfer and other taxes re-

 quired to be paid by it in connection with the sale and

delivery to Buyer of the SMCO Shares.                 

               6.9.  Pledge Agreement.  Buyer shall have entered
----------------      

  into the Pledge Agreement in the form attached hereto as

      Exhibit H and shall have performed and complied in all mate-

     rial respects with all covenants, conditions and agreements

    required to be performed or complied with by it thereunder

      (including the delivery to Seller of the SMCO Shares pledged

thereby) prior to or on the Closing Date.             

            6.10.  Guarantee.  The guarantee or guarantees
---------           

    required pursuant to Section 4.14 shall have been executed

and delivered by the Buyer Guarantors to Seller.      

            6.11.  Certificates and Undertakings.  Each of
         -----------------------------

     Joseph Prochaska, Robert Libby, E.L. Calhoun, William Wall,

      Richard Adler, Robert Liston and Robert Linn, as of the date

   hereof and on the Closing Date, shall have entered into a

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    Certificate and Undertaking in the form attached hereto as

Exhibit K.                                            

               6.12.  Payments by SMCO.  SMCO shall have paid to
----------------    

  Seller or Seller's parent (a) the dollar amounts owed by
 -

SMCO that are set forth in Section 2.23(iii), (b) all 
                                         -

    amounts due through the Closing Date under the Tax Alloca-

      tion Agreement and (c) all amounts of indebtedness set forth
-             

in Schedule 6.12.                                     

               6.13.  Tax Allocation Agreement.  SMCO shall have
    ------------------------

    executed and delivered to Seller the Tax Allocation Agree-

ment.                                                 

     ARTICLE VII
     CLOSING

              7.1.  Time and Place of Closing.  The closing of
   -------------------------

    the transactions provided for in this Agreement shall take

     place at 10:00 a.m. local time within 15 days following the

      satisfaction of the conditions specified in Sections 5.5 and

      6.4 (provided that all other conditions of Articles V and VI

   shall have been satisfied), at the offices of Debevoise &

    Plimpton, 875 Third Avenue, New York, New York, or at such

    other time, date and place as the parties shall agree (the

     "Closing").  The date on which the Closing occurs is called

the "Closing Date."                                   

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               7.2.  Deliveries by Seller.  At the Closing, con-
--------------------  

    currently with the discharge of the other parties' respec-

 tive closing obligations, Seller shall deliver, or with

   respect to the items described in clause (v), arrange for

delivery, to Buyer the following:                     

         (i)  the certificates representing the SMCO

       Shares, duly endorsed in blank or with stock powers

attached thereto, duly signed in blank;     

            (ii)  the opinions of counsel, agreements, docu-

        ments and certificates required by Article V of this

Agreement;                                  

         (iii)  certificates of SMCO's, ESI's, EIC's and

       ICE's good standing and authority to transact their

           respective businesses as described in Sections 2.2, 2.3

         and 2.5 in the jurisdictions listed on Schedules 2.2,

      2.3 and 2.5 as of the most recent date obtainable;

              (iv)  evidence satisfactory to Buyer of compliance

with Section 5.10; and                      

               (v)  all minute books, seals and stock records of

SMCO, ESI, EIC and ICE.                     

              7.3.  Deliveries by Buyer.  At the Closing, con-
-------------------   

    currently with the discharge of the other parties' respec-

     tive closing obligations, Buyer shall deliver to Seller the

following:                                            

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             (i)  the Purchase Price (except for the portion

    thereof comprising the Deferred Purchase Price);

            (ii)  the opinions of counsel, agreements, docu-

         ments and certificates required by Article VI of this

Agreement; and                              

          (iii)  certificates of Buyer's good standing and

         authority to transact its business in those jurisdic-

           tions where Buyer is qualified to do business as of the

most recent date obtainable.                

      ARTICLE VIII
     INDEMNIFICATION

               8.1.  By Seller.  Seller shall indemnify and hold
---------             

harmless Buyer, its Affiliates (including Fairfax and 

 Markel) and their officers and directors and, after the

  Closing Date, SMCO and its Subsidiaries and (except with

      respect to any matter set forth in Section 8.1(a)) the offi-

      cers and directors (including former officers and directors)

   of SMCO and its Subsidiaries (collectively with Buyer and

     its Affiliates and their officers and directors, the "Buyer

Affiliates") against:                                 

                (a)  any damages, losses, liabilities, fees, costs

          or expenses (including reasonable fees and expenses of

           outside counsel, but excluding the time of employees of

          Buyer and its Affiliates) sustained or suffered by any

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        of the Buyer Affiliates and arising from a breach of

         (i) this Agreement occurring on or before the Closing
-                                         

         Date, (ii) Section 4.7, 4.8, 4.10, 4.11, 4.12 or 4.13
--                            

         of this Agreement or (iii) any representation or war-
   ---

        ranty of Seller contained in Section 2.1 through 2.8

           inclusive, 2.36 or 2.37 of this Agreement or the Sched-

ules pertaining to such Sections;           

          (b)  any damages, losses, liabilities, fees,

         costs, or expenses (including reasonable fees and ex-

           penses of outside counsel and payments to the rehabili-

      tator or liquidator of The Mutual Fire, Marine and

           Inland Insurance Company ("Mutual Fire"), but excluding

      the time of employees of Buyer and its Affiliates)

        sustained or suffered by any of the Buyer Affiliates

         (to the extent not reserved for on the balance sheets

         of SMCO, ESI, EIC or ICE as of June 30, 1987 referred

        to in Section 2.12) arising out of or related to any

           transactions or arrangements, including without limita-

        tion any insurance policies in which Mutual Fire was

        the insurer or reinsurer and any matters relating to

       Mutual Fire listed on any Schedule attached hereto,

           occurring or existing prior to the Closing Date between

          any of SMCO, ESI, EIC or ICE and Mutual Fire, provided
                                                        --------

         that such transactions and arrangements shall not in-

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         clude (i) claims made in the ordinary course of busi-
-                             

          ness under insurance policies in which Mutual Fire was

           the insured and EIC or ICE was the insurer and (ii) the
                                                      --

      amount of Uncollectible Reinsurance (as defined in

           Section 11.1) that is included in the Adjustment Amount

pursuant to Section 11.2(b);                

                (c)  any damages, losses, liabilities, fees, costs

          or expenses (including reasonable fees and expenses of

           outside counsel, but excluding the time of employees of

          Buyer and its Affiliates) sustained or suffered by any

           of the Buyer Affiliates (to the extent not reserved for

        on the balance sheets of SMCO, ESI, EIC or ICE as of

          June 30, 1987 referred to in Section 2.12) arising out

          of or relating to (i) the actual or alleged occurrence
-     

           or existence prior to the Closing Date of any breach by

           SMCO, ESI, EIC or ICE of any agreements entered into on

        or before the Closing Date between SMCO, ESI, EIC or

         ICE and General Accident Insurance Company or affili-

           ates thereof (collectively, "General Accident") (except

       for insurance policies entered into in the ordinary

       course of business in which General Accident is the

         insured and EIC or ICE is the insurer) or any willful

         or negligent act or omission or any misrepresentation

          on the part of SMCO, ESI, EIC or ICE in respect of any

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        of such agreements prior to the Closing Date or (ii)
                                                        --

         the actual or alleged occurrence prior to the Closing

        Date of any error or omission in connection with the

       professional services provided by SMCO, ESI, EIC or

ICE.                                        

             8.2.  By Buyer.  Buyer shall indemnify and hold
--------              

  harmless A&A and its Subsidiaries (including Seller) and

   their officers and directors against any damages, losses,

     liabilities, fees, costs and expenses (including reasonable

      fees and expenses of outside counsel, but excluding the time

     of employees of A&A and its Subsidiaries) sustained or suf-

    fered by A&A or any of such Subsidiaries or their officers

   and directors and arising from a breach of this Agreement

      (prior to, on or after the Closing Date) or any other agree-

      ment or any representation or warranty of Buyer contained in

     or made pursuant to this Agreement or any Exhibit or Sched-

ule attached hereto.                                  

            8.3.  Third Party Claims.  The obligations and
------------------    

 liabilities of the parties under this Article VIII with

     respect to claims resulting from the assertion of liability

   by third parties (including governmental penalties, fines

     and assessments) and with respect to any requests, demands,

    proposals or actions by any rehabilitator or liquidator of

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 Mutual Fire shall be subject to the following terms and

conditions:                                           

           (a)  The indemnified person shall give prompt

          written notice to the indemnifying person of any claim

         or assertion of liability by a third party or any re-

           quest, demand, proposal, or action by any rehabilitator

           or liquidator of Mutual Fire which might give rise to a

          claim by the indemnified person against the indemnify-

          ing person based on the indemnity agreements contained

         in Section 8.1 or 8.2.  Such notice shall comply with

the provisions of Section 13.1.             

            (b)  (i)  Except as provided in clause (ii) of

     this paragraph (b) and paragraph (c) of this Sec-

          tion 8.3, in the event any action, suit, proceeding or

          claim (a "Legal Action") is brought or made against an

           indemnified person with respect to which the indemnify-

           ing person may have liability under an indemnity agree-

          ment contained in Section 8.1 or 8.2, the indemnifying

           person shall have the right (but not the obligation) to

         defend, and to negotiate concerning the resolution or

       settlement of, the Legal Action (in the name of the

        indemnified person if necessary or appropriate).  If

         the indemnifying person does elect to defend or nego-

         tiate such Legal Action, the indemnified person shall

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           have the right to be represented by counsel and accoun-

      tants, at its own expense, and shall be kept fully

          informed as to such Legal Action at all stages thereof

        whether or not it is represented by its own counsel.

          Subject to clause (ii) of this paragraph (b) and para-

         graph (c) of this Section 8.3, until the indemnifying

      person shall have elected to defend or negotiate a

         Legal Action, or if the indemnified person shall have

        reasonably concluded that there are likely to be de-

       fenses available to the indemnified person that are

           different from or in addition to those available to the

        indemnifying person (in which case, to the extent of

          such differing defenses, the indemnifying person shall

       not be entitled to assume the defense of such Legal

        Action but shall have the right to be represented by

          counsel and accountants, at its own expense, and shall

         be kept fully informed as to such Legal Action at all

           stages thereof, whether or not it is represented by its

           own counsel), the indemnified person shall expeditious-

        ly, on behalf of Buyer and Seller, undertake the de-

         fense and negotiation of such Legal Action and, until

       such time or in such event, all reasonable fees and

       expenses of outside counsel and other expenses (but

          excluding the time of the employees of the indemnified

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         person and its affiliates) reasonably incurred by the

         indemnified person shall be borne by the indemnifying

       person.  The parties hereto agree to render to each

           other such assistance as they may reasonably require of

         each other in order to facilitate the proper and ade-

          quate defense or negotiation of the resolution or set-

tlement of any such Legal Action.           

               (ii)  In the event that any rehabilitator or liqui-

          dator of Mutual Fire makes any request, demand or pro-

          posal or takes any action the effect of which might be

      to give rise to an indemnity obligation of Seller,

      Seller shall have the right to negotiate with such

         rehabilitator or liquidator with respect thereto, and

         Buyer shall not, without the prior consent of Seller,

           conduct any negotiations with any such rehabilitator or

       liquidator with respect thereto, to the extent that

        such requests, demands, proposals or actions do give

       rise to such an indemnity obligation, provided that
                                        --------

           Seller shall keep Buyer fully informed of the course of

          such negotiations and that Buyer shall have the right,

    at its own expense, to attend such negotiations.

              (c)  Neither the indemnifying person nor the in-

          demnified person shall make any settlement or commuta-

           tion of any claim or agree to any request or demand of,

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        or enter into any agreement or arrangement with, any

       Person (as defined in Section 10.16), including any

      rehabilitator or liquidator of Mutual Fire, if the

          result thereof might give rise to an amount subject to

          indemnification hereunder, without the written consent

          of the other person, which consent shall not be unrea-

      sonably withheld or delayed.  Without limiting the

       generality of the foregoing, it shall not be deemed

        unreasonable to withhold consent to a settlement in-

        volving injunctive or other equitable relief against

      the indemnified person or its assets, employees or

business.                                   

            (d)  (i)  Buyer will, and will cause the other

        Buyer Affiliates to, use reasonable diligence in at-

           tempting to obtain payment of any claim under any poli-

          cy of insurance referred to in Section 8.4(d)(iv) and,

        upon payment by Seller of any amount with respect to

          any claim actually or allegedly covered by such insur-

ance, will assign such claim to Seller.     

             (ii)  Seller will use reasonable diligence in at-

           tempting to obtain payment of any claim under any poli-

       cy of insurance referred to in Section 8.4(d)(iii).

             (e)  Buyer will cause SMCO, ESI, EIC and ICE to

      use reasonable diligence in performing contractual

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           obligations with respect to collecting receivables owed

       to General Accident or Mutual Fire and in otherwise

          performing all of their obligations (if any) set forth

          in the agreements referred to in Section 8.1(c)(i) and

all obligations with respect to Mutual Fire.

              8.4.  Payments.  (a)  Any losses, liabilities or
--------              

  expenses for which the indemnifying party is responsible

     under Section 8.1, 8.2 or 8.3 shall be paid directly by the

 indemnifying party.  If any such losses, liabilities or

     expenses are sustained, suffered or paid by the indemnified

    party, the indemnifying party shall reimburse the indemni-

    fied party for the amount thereof within 20 days after no-

    tice of such loss, liability or claim for reimbursement is

 delivered to the indemnifying party.  Any reimbursement

payments not paid within such 20-day period shall bear

  interest at a rate equal to the assumed interest rate in

   effect at the time with respect to the Contingent Amount.

             (b)  Seller shall incur no liability under Sec-

      tion 8.1(a) with respect to the breach of any representation

   or warranty contained in Sections 2.1 through 2.8, inclu-

   sive, and Section 2.36 of this Agreement, and Buyer shall

  incur no liability under Section 8.2 with respect to the

breach of any representation or warranty contained in 

Article III of this Agreement, unless and until the   

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     aggregate amount of the damages, losses, liabilities, fees,

costs and expenses sustained or suffered by the Buyer 

   Affiliates or by A&A, its Subsidiaries and their officers

and directors, as the case may be, with respect to all

  breaches of such representations and warranties, exceeds

     $500,000, whereupon such liability, including liability for

the portion not exceeding $500,000, shall accrue.     

              (c)  (i)  Notwithstanding any other provision of

     this Agreement, the aggregate amount for which Seller shall

   be liable pursuant to Section 8.1(a) shall not exceed the

      Purchase Price, and such amount shall be payable (A) in cash
                                               -

      to Buyer as provided in Section 8.4(a) only to the extent of

    the portion of the Purchase Price paid by Buyer in cash at

      the Closing and (B) with respect to any remaining portion of
-                   

      such amount, at the Payment Date, but only as a reduction in

   the Deferred Purchase Price then payable.  Any amount set

    off pursuant to clause (B) shall be increased by an amount

    equivalent to interest, at the rate applicable to the Con-

     tingent Amount from (and including) the date on which Buyer

    incurred the damage, loss, liability, fee, cost or expense

    with respect to which such amount arose to (but excluding)

the Payment Date.                                     

        (ii)  Notwithstanding the provisions of Sec-

   tions 4.11 and 8.1(a) hereof, the obligation of Seller to

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    indemnify Buyer pursuant to Section 4.11, or in connection

 with any breach of the representation set forth in Sec-

      tion 2.37, of this Agreement shall not exceed, in the aggre-

gate, $8.5 million.                                   

              (d)  Notwithstanding any other provision of this

  Agreement, Seller shall not be liable under this Article

    VIII (or, except for clause (i) below, under Article XI of

     this Agreement) for an amount (i) to the extent such amount
         -

    is reflected in the Adjustment Amount on the Determination

    Date, (ii) to the extent, if any, that any damage, loss or
--                                      

     liability giving rise to such amount results from a failure

      on the part of any Buyer Affiliate to exercise good faith in

  not jeopardizing or prejudicing the interests of Seller,

     (iii) subject to Seller's compliance with the provisions of
---                                                 

     Section 8.3(d)(ii), to the extent that Seller is rightfully

   denied coverage with respect to any matter giving rise to

 such amount under any policy of insurance maintained by

      Seller or an affiliate thereof, if such denial is the result

   of Buyer's failure to notify Seller of the claim with re-

      spect to such matter promptly after receiving notice thereof

    or Buyer's taking any other action which has the effect of

   causing the rightful denial of such coverage, (iv) to the
                                          --

 extent a Buyer Affiliate receives any proceeds from any

   policy of insurance maintained by it covering the damage,

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    loss or liability with respect to such amount and (v) with
                                                 -

      respect to which (and to the extent that) Seller is obligat-

 ed to indemnify an officer or director (this clause (v)

   applying only to the obligation, if any, to an officer or

   director) of any Buyer Affiliate, to the extent that such

  amount results from any action or failure to act by such

     officer or director unless such action or failure to act is

     in good faith and with a reasonable belief that his conduct

    was in, or not opposed to, the interests of the company of

which such person is an officer or director.          

                8.5.  No Contribution.  After the Closing Date, if
---------------       

      Seller shall have any liability to any Buyer Affiliate under

     any provision of this Agreement, Seller shall have no right

      of contribution from, or any other right of recovery from or

  remedy against, SMCO, ESI, EIC or ICE or (except, in the

      case of individuals delivering certificates and undertakings

 pursuant to Section 6.11 hereof with respect to matters

    covered by such certificates and undertakings) their offi-

cers or directors, whether at law or in equity.       

      ARTICLE IX
     TERMINATION, AMENDMENT AND WAIVER

              9.1.  Termination.  This Agreement may be termi-
-----------           

nated at any time prior to the Closing Date:          

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               (i)  by mutual consent of the Boards of Directors

of Buyer and Seller;                        

             (ii)  by Buyer, if any representation or warranty

          of Seller, or by Seller, if any representation or war-

           ranty of Buyer, contained herein shall have been incor-

          rect or breached in any material respect and shall not

           have been cured or otherwise resolved to the reasonable

      satisfaction of the other on or before the Closing

      Date, or by either Buyer or Seller if any material

          condition to the consummation of the transactions con-

          templated hereby which must be fulfilled to its satis-

     faction has become impossible to be fulfilled; or

          (iii)  by Buyer or Seller if the Closing has not

      occurred by 11:59 p.m. E.S.T. on January 30, 1988.

               9.2.  Effect of Termination.  In the event of the
--------------------- 

  termination of this Agreement as provided in Section 9.1

  above, this Agreement shall become wholly void and shall

 have no further force and effect; and there shall be no

 liability on the part of Buyer or Seller except if such

     termination is caused by a willful breach or failure on the

      part of Buyer or Seller.  In the event of the termination of

      this Agreement, each party shall return all papers and docu-

     ments, including all copies, obtained from the other party,

   and will maintain in confidence all nonpublic information

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     received by it from the other party (other than information

      or documents that are properly obtained or obtainable from a

      source other than such other party or are readily ascertain-

able from public or published sources).               

               9.3.  Amendment.  This Agreement and the exhibits
---------             

      and schedules hereto may be amended by the parties hereto at

     any time; provided that any amendment must be by an instru-
--------                          

    ment or instruments in writing signed and delivered on be-

half of each of the parties hereto.                   

                9.4.  Extension; Waiver.  At any time prior to the
-----------------     

 Closing Date, any party hereto which is entitled to the

     benefits hereof may (i) extend the time for the performance
-           

     of any of the obligations or other acts of any of the other

     parties hereto, (ii) in whole or in part, waive any inaccu-
--                  

  racy in the representations and warranties of any of the

  other parties hereto contained herein or in any schedule

  hereto or in any document delivered pursuant hereto, and

     (iii) in whole or in part, waive compliance with any of the
---                                                 

     agreements of any of the other parties hereto or conditions

   contained herein.  Any agreement on the part of any party

      hereto to any such extension or waiver shall be valid if set

   forth in an instrument in writing signed and delivered on

behalf of such party.                                 

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     ARTICLE X
      BUSINESS AND FINANCIAL COVENANTS

            Buyer covenants that, from the Closing Date of

  this Agreement, and so long as Seller is owed any amount

    under Section 1.4 of this Agreement (and as to the inspec-

     tion of tax records as provided in Section 10.15, until all

  federal and state statutes of limitations, including any

     extension thereof, have expired with respect to tax periods

     prior to or including the Closing Date) it will observe the

    covenants set forth in this Article X, provided that Buyer
                                --------

   shall not be deemed to have failed to comply with, and no

      Event of Default shall exist as to, any such covenant to the

    extent, if any, that SMCO, ESI, EIC or ICE shall not be in

     compliance therewith on the Closing Date.  Seller will con-

      sider in good faith in a timely fashion any request by Buyer

   to waive any covenant or breach thereof contained in this

     Article X and will provide such waiver if and to the extent

 Seller determines in good faith that the effect of such

      waiver of compliance would not materially diminish the like-

 lihood of Buyer (or, if either (i) the Buyer Guarantors
           -

    shall have provided the Kansa Buyer Guarantee and the Con-

  solidated Net Worth of Buyer shall have fallen below $10

   million or (ii) the Buyer Guarantors shall have delivered
--                            

  the Overall Buyer Guarantee (the events specified in the

      foregoing clauses (i) and (ii) being hereinafter referred to

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      as a "Guarantee Effectiveness Event"), the Buyer Guarantors)

     being able to perform its (or their) obligations under this

    Agreement below such likelihood at the date of this Agree-

    ment.  Seller will maintain, and will cause its agents and

   representatives to maintain, in confidence all non-public

      information received by it pursuant to this Article X (other

    than any information or document that is properly obtained

      or obtainable by Seller from a source other than Buyer or is

      readily ascertainable from public or published information).

               10.1.  Debt.  Buyer will not, and will not permit
----                

     any of its Subsidiaries to, directly or indirectly, create,

 incur, assume, guarantee, or otherwise become or remain

  directly or indirectly liable with respect to, any Debt,

except that:                                          

               (a)  Buyer and its Subsidiaries may remain liable

        with respect to their respective Debt outstanding on

         the Closing Date, and any extensions, renewals or re-

fundings of any thereof;                    

              (b)  Buyer may become and remain liable with re-

     spect to the Debt owed to Seller pursuant to this

          Agreement and to Kansa and Coleman pursuant to the ESI

Share Purchase Agreements;                  

           (c)  any Wholly-Owned Subsidiary of Buyer may

         become and remain liable with respect to Debt of such

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          Subsidiary owing to Buyer or another Wholly-Owned Sub-

sidiary;                                    

            (d)  Buyer and its Subsidiaries may become and

          remain liable with respect to Debt in addition to that

           otherwise permitted by the foregoing provisions of this

           Section 10.1, provided that, immediately after Buyer or
--------        

     any such Subsidiary becomes liable for such Debt,

          (i) to the best knowledge and belief of Buyer, as cer-
-                                         

           tified by an Officers' Certificate delivered to Seller,

          no condition or event shall exist which constitutes an

      Event of Default (as defined in Section 12.1) or a

        Potential Event of Default and (ii) Consolidated Net
                      --

           Worth shall at least equal 25% of the aggregate Debt of

Buyer and its Subsidiaries; and             

                (e)  Buyer's Subsidiaries engaged in the insurance

      business may make arrangements for the issuance of

         letters of credit in the normal course of their busi-

ness.                                       

              10.2.  Restricted Payments.  Buyer will not, and
------------------- 

 will not permit any of its Subsidiaries to, directly or

 indirectly declare, pay or make any Restricted Payment,

except for a Restricted Payment payable to Buyer or a 

     Wholly-Owned Subsidiary of Buyer, unless, immediately after

giving effect to such proposed action:                

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                (a)  to the best knowledge and belief of Buyer, as

      certified by an Officers' Certificate delivered to

           Seller, no condition or event shall exist which consti-

         tutes an Event of Default or a Potential Event of De-

fault; and                                  

               (b)  the aggregate amount of all sums included in

      all Restricted Payments directly or indirectly de-

         clared, paid or made by Buyer during the period after

         June 30, 1987, to and including the date of such pro-

          posed action, shall not exceed 50% of the Consolidated

    Net Income of Buyer for such period in excess of

$5 million.                                 

    Buyer will not, and will not permit any Subsidiary to, di-

  rectly or indirectly declare, pay or make any Restricted

Payment except in cash.                               

              10.3.  Liens, etc.  Buyer will not, and will not
----------          

    permit any of its Subsidiaries to, directly or indirectly,

    create, incur, assume or permit to exist any material Lien

   on or with respect to any material property or asset (in-

   cluding any document or instrument in respect of goods or

   accounts receivable) of Buyer or any of its Subsidiaries,

 whether now owned or held or hereafter acquired, or any

material income or profits therefrom, except:         

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                (a)  Liens for taxes, assessments or other govern-

          mental charges the payment of which is not at the time

required by Section 10.9;                   

            (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 10.9;                   

               (c)  Liens incurred or deposits made in the ordi-

           nary course of business in connection with obtaining or

          maintaining licenses, and workers' compensation, unem-

          ployment insurance and other types of social security,

           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 or sales contracts and other

        similar obligations and payment of the deferred pur-

     chase price of property purchased in the ordinary

course of business;                         

              (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

         thereof stayed pending appeal, or shall not have been

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         discharged within 60 days after the expiration of any

such stay;                                  

               (e)  leases or subleases granted to others, ease-

        ments, rights-of-way, restrictions and other similar

        charges or encumbrances, in each case incidental to,

          and not materially interfering with, the ordinary con-

          duct of the business of Buyer or any of its Subsidiar-

ies;                                        

             (f)  Liens on property or assets of any Wholly-

           Owned Subsidiary securing Debt of such Subsidiary owing

   to Buyer or a Wholly-Owned Subsidiary of Buyer;

               (g)  Liens existing as of the Closing Date, Liens

          in favor of Harris Trust & Savings Bank to secure Debt

          existing at the Closing Date and successor Liens asso-

          ciated with extensions, renewals or refundings of Debt

as permitted under Section 10.1(a);         

                (h)  any Lien securing the obligations of Buyer to

        Seller under this Agreement or (to the extent of any

           pledge of ESI Shares sold by Kansa or Coleman) to Kansa

        and Coleman under the ESI Share Purchase Agreements;

and                                         

           (i)  Liens securing Debt permitted under Sec-

    tion 10.1(d), subject to the following sentence.

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  If Buyer or any of its Subsidiaries shall create, incur,

   assume or suffer to exist any Lien on any of its or their

 properties, whether now owned or hereafter acquired, in

     violation of the provisions of this Section 10.3 or that is

      permitted under Section 10.3(i), it will make or cause to be

   made effective provision whereby the obligations of Buyer

    hereunder will be secured equally and ratably with any and

all other Debt or obligations thereby secured.        

             10.4.  Leases; Leasebacks.  Buyer will not, and
------------------  

 will not permit any of its Subsidiaries to, directly or

     indirectly, become or remain liable as lessee or as guaran-

     tor or other surety with respect to any leases except those

    existing on the Closing Date and those entered into there-

after in the ordinary course of business.             

              10.5.  Transactions with Affiliates.  Buyer will
        ----------------------------

      not, and will not permit any of its Subsidiaries to, direct-

      ly or indirectly, engage in any transaction, including with-

    out limitation the purchase, sale or exchange of assets or

    the rendering of any service, with any Affiliate of Buyer,

      except in the ordinary course of and pursuant to the reason-

    able requirements of Buyer's or such Subsidiary's business

    and upon fair and reasonable terms that are no less favor-

    able to Buyer or such Subsidiary, as the case may be, than

 those which are generally obtainable in an arm's-length

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    transaction at the time from Persons which are not such an

   Affiliate, provided that the foregoing restrictions shall
--------                        

      not apply to (a) any transaction between Buyer and a Wholly-
-                         

    Owned Subsidiary of Buyer or between one Wholly-Owned Sub-

 sidiary of Buyer and another Wholly-Owned Subsidiary of

  Buyer, (b) any transaction that, together with all other
-                                     

  transactions entered into pursuant to this clause (b) of

    this proviso is not material to Buyer and its Subsidiaries

     taken as a whole or (c) any investment consulting agreement
-           

    between Buyer or any of its Subsidiaries and Hamblin Watsa

     or any brokerage, underwriting management or claims manage-

     ment agreement between Buyer or any of its Subsidiaries and

Markel or any of its Subsidiaries, so long as any such

      agreement is on terms (including compensation) substantially

  at least as favorable as those generally entered into by

     Hamblin Watsa or by Markel or its Subsidiaries, as the case

     may be, with unaffiliated third parties for comparable ser-

vices.                                                

              10.6.  Subsidiary Stock and Indebtedness.  Buyer
             ---------------------------------

will not:                                             

              (a)  directly or indirectly sell, assign, pledge

        or otherwise dispose of any Debt of or any shares of

       stock of (or warrants, rights or options to acquire

         stock of) any of its Subsidiaries, except as security

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           for Buyer's obligations under this Agreement or the ESI

      Purchase Agreements with Kansa and Coleman or to a

         Wholly-Owned Subsidiary of Buyer and except as direc-

          tors' qualifying shares if required by applicable law;

             (b)  permit any of its Subsidiaries directly or

           indirectly to sell, assign, pledge or otherwise dispose

          of any Debt of Buyer or any other Subsidiary of Buyer,

         or any shares of stock of (or warrants, rights or op-

      tions to acquire stock of) any other Subsidiary of

          Buyer, except to Buyer or a Wholly-Owned Subsidiary of

           Buyer or as directors' qualifying shares if required by

         applicable law and except for the pledge of shares of

           common stock of ESI or its Subsidiaries permitted under

Section 10.3(g); or                         

              (c)  permit any of its Subsidiaries, directly or

        indirectly, to issue or sell any shares of its stock

         (or warrants, rights or options to acquire its stock)

         except to Buyer or a Wholly-Owned Subsidiary of Buyer

         or as directors' qualifying shares if required by ap-

plicable law;                               

 provided that Buyer or any of its Subsidiaries may sell
--------                                              

    shares of stock of (or, warrants, rights or options to ac-

     quire stock of) any Subsidiary of Buyer, and any Subsidiary

      of Buyer may issue or sell shares of its stock (or warrants,

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     rights or options to acquire its stock), not otherwise per-

    mitted under this Section 10.6, so long as, at the time of

such issuance or sale:                                

               (i)  the price of each of the shares so issued or

           sold (or the exercise price for any shares to be issued

        or sold upon exercise of any warrants, rights or op-

           tions to acquire such shares) is not less than the book

           value per share of stock of such Subsidiary at the time

of such issue or sale;                      

           (ii)  after such issue or sale, such Subsidiary

          would continue at all times to be a Subsidiary of Buy-

          er, regardless of any exercise of any warrants, rights

or options so issued or sold; and           

             (iii)  immediately prior to such issue or sale, the

    Buyer would have been permitted pursuant to Sec-

 tion 10.1(d) to issue at least $1.00 of Debt.

                10.7.  Consolidation, Merger, Sale of Assets, etc.
                      ------------------------------------------

    Buyer will not, and will not permit any Subsidiary to, di-

rectly or indirectly,                                 

           (a)  consolidate with or merge into any other

         Person or permit any other Person to consolidate with

or merge into it;                           

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              (b)  sell, transfer, lease, abandon or otherwise

     dispose of all or substantially all its property,

assets and undertakings; or                 

              (c)  sell, transfer, lease, abandon or otherwise

       dispose of any of its material property, assets and

           undertakings (except in the ordinary course of business

         or in connection with any action permitted under Sec-

tion 10.8);                                 

    provided that any Subsidiary of Buyer may consolidate with
--------                                              

      or merge into Buyer or a Wholly-Owned Subsidiary of Buyer if

    Buyer or such Wholly-Owned Subsidiary, as the case may be,

      shall be the surviving corporation and if, immediately after

      giving effect to such transaction, to the best knowledge and

   belief of Buyer, as certified by an Officers' Certificate

      delivered to Seller, no condition or event shall exist which

 constitutes an Event of Default or a Potential Event of

Default.                                              

              10.8.  Corporate Existence, etc.; Business.  Ex-
               -----------------------------------

    cept as permitted by the provisions of Section 10.7, Buyer

      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 Subsidi-

     aries.  Buyer will not, and will not permit any of its Sub-

      sidiaries to, engage in any material business other than the

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   businesses conducted by Buyer and its Subsidiaries on the

    Closing Date of this Agreement and other businesses or ac-

     tivities substantially similar or reasonably related there-

 to; and Buyer will not discontinue any material line of

    business or undertake a material new line of business, and

     shall not permit any Subsidiary to discontinue any material

      line of business or undertake any material new line of busi-

      ness, except that Buyer or a Subsidiary of Buyer may discon-

    tinue a line of insurance business or undertake a new line

 of insurance business if, in the good-faith judgment of

     management of Buyer or such Subsidiary, such discontinuance

     or undertaking is in the best of interests of Buyer or such

Subsidiary, as the case may be.                       

              10.9.  Payment of Taxes and Claims.  Buyer will,
       ---------------------------

      and will cause each of its Subsidiaries to, pay all material

   taxes, assessments and other governmental charges imposed

   upon it or any of its material properties or assets or in

     respect of any of its material franchises, business, income

    or profits before any penalty or interest accrues thereon,

 and all material 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 material properties or

    assets, provided that no such charge or claim need be paid
--------                              

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      if being contested in good faith by appropriate proceedings,

      diligently conducted, and if such reserve or other appropri-

  ate provision, if any, as shall be required by generally

    accepted accounting principles shall have been made there-

for.                                                  

                10.10.  Investments.  Buyer will not, and will not
-----------       

      permit any of its Subsidiaries to, make any material Invest-

   ment in any Person or property, whether directly or indi-

      rectly made, and whether by purchase or other acquisition of

    shares or other securities, by loan, advance, extension of

   credit or capital contribution, or otherwise, other than:

              (a)  accounts receivable arising in the ordinary

course of business;                         

             (b) any such investment in property (other than

         shares or other securities of any person) used in the

ordinary course of business;                

             (c)  any such investment by Buyer in any of its

Subsidiaries existing on the Closing Date;  

                (d)  any investment made in the ordinary course of

          business by any Subsidiary of Buyer which, at the time

           of making such investment, Buyer reasonably and in good

         faith believed would not violate any applicable legal

investment laws; and                        

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            (e)  any investment by Buyer or a wholly-owned

       Subsidiary of Buyer in a wholly-owned Subsidiary of

Buyer.                                      

            10.11.  Net Worth.  Buyer will not at any time
---------         

    permit its Consolidated Net Worth to be less than $10 mil-

lion.                                                 

             10.12.  Compliance with ERISA.  Buyer will not,
   ---------------------

and will not permit any of its Subsidiaries to,       

               (a)  engage in any transaction in connection with

           which Buyer or any of its Subsidiaries could be subject

       to either a civil penalty assessed pursuant to Sec-

         tion 502(i) of ERISA or a tax imposed by Section 4975

          of the Code, terminate any Plan (other than a Multiem-

           ployer Plan) in a manner, or take any other action with

       respect to any such Plan, which could result in any

        liability of Buyer or any of its Subsidiaries to the

           Pension Benefit Guaranty Corporation, fail to make full

    payment when due of all amounts which, under the

provisions of any Plan, Buyer or any of its 

    Subsidiaries is required to pay as contributions

       thereto, or permit to exist any accumulated funding

          deficiency, whether or not waived, with respect to any

           Plan (other than a Multiemployer Plan), if, in any such

       case, such penalty or tax or such liability, or the

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          failure to make such payment, or the existence of such

         deficiency, as the case may be, could have a material

     adverse effect on Buyer and its Subsidiaries as a

whole;                                      

             (b)  permit the present value of all vested ac-

          crued benefits under all Plans maintained at such time

           by Buyer and any of its Subsidiaries (other than Multi-

         employer Plans) guaranteed under Title IV of ERISA to

        exceed the current value of the assets of such Plans

          allocable to such vested accrued benefits by more than

    $1 million plus the amount, if any, by which the
----                  

           present value of all accrued benefits under all Pension

     Plans listed on Schedule 2.27 on the Closing Date

         exceeds the current value of the assets of such Plans

at the Closing Date; or                     

               (c)  withdraw from any Multiemployer Plan if such

           withdrawal would result in a withdrawal liability under

Title IV of ERISA in excess of $1 million.  

   Buyer agrees (i) once in each calendar year, beginning in
-                         

    the year following its initial participation in a Multiem-

   ployer Plan, to request a current statement of withdrawal

  liability from each Multiemployer Plan and (ii) promptly
                                    --

upon receipt, to transmit to Seller a copy of any such

     statement obtained from a Multiemployer Plan within 25 days

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after Buyer receives the same.  As used in this Sec-  

   tion 10.12, the term "accumulated funding deficiency" has

   the meaning specified in Section 302 of ERISA and Section

   412 of the Code, the terms "accrued benefit" and "current

   value" have the meanings specified in Section 3 of ERISA.

               10.13.  Insurance.  Buyer will use all reasonable
---------         

      efforts to maintain or cause to be maintained, with insurers

  believed in good faith by it to be financially sound and

      reputable, insurance with respect to its material properties

      and business and the material properties and business of its

      Subsidiaries, including without limitation, errors and omis-

 sions and directors' and officers' liability insurance,

 against loss or damage of the kinds customarily insured

      against by corporations of established reputation engaged in

    the same or similar business and similarly situated and in

   such amounts as Buyer determines in good faith to be ade-

     quate in light of the circumstances and experience of Buyer

and its Subsidiaries.                                 

                10.14.  Accounting, Financial Statements and Other
                        ------------------------------------------

 Information.  Buyer will maintain and cause each of its
-----------                                           

      Subsidiaries to maintain, a system of accounting established

    and administered in accordance with generally accepted ac-

     counting principles and, to the extent required, accounting

   practices prescribed by all regulatory authorities in all

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     jurisdictions where violation thereof would have a material

 adverse effect on Buyer and its Subsidiaries taken as a

     whole, and will set aside on its books, and will cause each

 of its Subsidiaries to set aside on its books, all such

     proper reserves as shall be required by such principles and

  practices.  Buyer will deliver (in duplicate) to Seller:

              (a)  within 40 days after the end of each of the

       first three quarterly fiscal periods in each fiscal

           year of Buyer, consolidated balance sheets of Buyer and

         its Subsidiaries as at the end of such period and the

           related consolidated statements of income, of Buyer and

        its Subsidiaries for such period and (in the case of

          the second and third quarterly periods) 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 previous fiscal year,

          all in reasonable detail and certified as complete and

      correct by a principal financial officer of Buyer,

         provided that the comparative statements shall not be
--------                                    

      required in the initial year following the Closing

unless reasonably available;                

              (b)  within 60 days after the end of each fiscal

         year of Buyer, consolidated and consolidating balance

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         sheets of Buyer and its Subsidiaries as at the end of

     such year and the related consolidated and, as to

          statements of income only, consolidating statements of

         income, stockholders' equity and changes in financial

          position of Buyer and its Subsidiaries for such fiscal

        year, setting forth in each case in comparative form

      the consolidated and consolidating figures for the

        previous fiscal year, all in reasonable detail, pro-
                                                        ----

      vided that the comparative statements shall not be
-----                                       

      required in the initial year following the Closing

       unless reasonably available; and (i) in the case of
                         -

          such consolidated financial statements, accompanied by

          a report thereof of Peat, Marwick, Main & Co. or other

          independent certified public accountants of recognized

           national standing selected by Buyer, which report shall

           state that such consolidated financial statements pres-

      ent fairly the financial position of Buyer and its

          Subsidiaries as at the dates indicated and the results

      of their operations and changes in their financial

         position for the periods indicated in conformity with

         generally accepted accounting principles applied on a

          basis consistent with prior years (except as otherwise

        specified in such report) and that the audit by such

           accountants in connection with such consolidated finan-

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           cial statements has been made in accordance with gener-

         ally accepted auditing standards and (ii) in the case
                                  --

         of such consolidating financial statements, certified

by a principal financial officer of Buyer;  

           (c)  together with each delivery of financial

        statements of Buyer and its Subsidiaries pursuant to

      subdivisions (a) and (b) of this Section 10.14, an

       Officers' Certificate stating that the signers have

          reviewed the terms of this Agreement and have made, or

          caused to be made under their supervision, a review in

          reasonable detail of the transactions and condition of

           Buyer and its Subsidiaries during the accounting period

      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 condition or event

          existed or exists, specifying the nature and period of

           existence thereof and what action Buyer has taken or is

    taking or proposes to take with respect thereto;

              (d)  together with each delivery of consolidated

      financial statements of Buyer and its Subsidiaries

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        pursuant to subdivision (b) of this Section 10.14, a

           written statement by the independent public accountants

          giving the report thereon stating (i) that their audit
                           -

          examination has included a review of the terms of this

          Agreement as it relates to the financial covenants and

         accounting matters and (ii) whether, in the course of
      --

         their audit examination, they obtained knowledge (and

           whether, as of the date of such written statement, they

        have knowledge) of the existence of any condition or

         event which constitutes an Event of Default or Poten-

         tial Event of Default, and, if so, specifying the na-

ture and period of existence thereof;       

               (e)  promptly upon receipt thereof, copies of all

        reports submitted to Buyer by independent public ac-

        countants in connection with each annual, interim or

         special audit of the books of Buyer or any Subsidiary

        made by such accountants, including, without limita-

       tion, the comment letter, if any, submitted by such

      accountants to management in connection with their

annual audit;                               

               (f)  promptly upon their becoming available, cop-

           ies of all financial statements, reports and notices as

          to material matters and proxy statements filed or sub-

           mitted by Buyer or any of its Subsidiaries to any regu-

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          latory authority having jurisdiction over Buyer or any

        such Subsidiary, of all regular and periodic reports

          and all registration statements and prospectuses filed

           by Buyer or any Subsidiary with any securities exchange

         or with the Securities and Exchange Commission or any

         governmental authority succeeding to any of its func-

          tions, or to any such regulatory authority, and of all

      press releases and other statements made available

      generally by Buyer or any Subsidiary to the public

       concerning material developments in the business of

Buyer or its Subsidiaries;                  

            (g)  immediately upon any principal officer of

          Buyer or any other officer of Buyer or any of its Sub-

      sidiaries involved in its financial administration

          obtaining knowledge of any condition or event which he

         understands constitutes an Event of Default or Poten-

         tial Event of Default, or that the holder of any Debt

       has given any notice or taken any other action with

         respect to a claimed default with respect thereto, an

           Officers' Certificate describing the same and the peri-

     od of existence thereof and what action Buyer has

      taken, is taking and proposes to take with respect

          thereto or that might reasonably be expected to have a

          material adverse effect on the business, affairs, con-

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         dition (financial or otherwise), properties or assets

    of Buyer and its Subsidiaries, taken as a whole;

               (h)  75 days after the end of each year, a report

           of a firm of independent consulting actuaries of recog-

         nized national standing selected by Buyer and reason-

           ably acceptable to Seller on the required loss reserves

         of each Subsidiary which is an insurance carrier, re-

        porting on the matters required to be estimated pur-

           suant to Section 11.3 of this Agreement and additional-

           ly stating such independent consulting actuaries' esti-

           mate of the total reserves arising from business booked

         by such Subsidiaries as of the end of such year, pre-

         pared on the basis of assumptions methodology consis-

        tent with those reflected in financial statements of

           ESI at and for the periods ending December 31, 1986, or

           on the basis of such different assumptions or methodol-

           ogy as the actuaries determine to be appropriate, which

shall be specified in their report;         

                (i)  promptly after any principal officer of Buyer

         learns thereof, any condition or event materially ad-

         versely affecting the amount of the Deferred Purchase

Price; and                                  

                (j)  with reasonable promptness, such other infor-

       mation and data with respect to Buyer or any of its

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       Subsidiaries as from time to time may be reasonably

requested.                                  

               10.15.  Inspection.  Buyer will permit any autho-
----------        

 rized representatives designated by Seller to visit and

      inspect any of the properties of Buyer or any of its Subsid-

  iaries, including its and their books of account and tax

      records, and to make copies and take extracts therefrom, and

      to discuss its and their affairs, finances and accounts with

    its and their officers and independent public accountants,

     all at such reasonable times and as often as may be reason-

  ably requested.  Seller shall, and shall cause any other

    person to whom Seller has given access to information dis-

     closed pursuant to this Section 10.15, to keep confidential

     any information or documents obtained pursuant to this Sec-

      tion 10.15, unless such information or documents are readily

ascertainable from public or published information.   

                10.16.  Definitions.  As used herein the following
-----------       

terms have the following respective meanings:         

           Affiliate:  any Person directly or indirectly
---------                         

   Controlling or Controlled by or under common Control with

Buyer.                                                

          Code:  the Internal Revenue Code of 1986, as
----                              

amended from time to time.                            

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             Consolidated Net Income:  with reference to any
-----------------------           

      period, the net income (or deficit) of Buyer and its Subsid-

   iaries for such period (taken as a cumulative whole), in-

     cluding any aggregate net realized gain (net of any unreal-

     ized net loss arising after June 30, 1987, determined as of

     the end of the fiscal quarter terminating on or immediately

      preceding the date on which Consolidated Net Income is to be

   determined) during such period arising from the sale, ex-

     change or other disposition of capital assets (such term to

   include all fixed assets, whether tangible or intangible,

   all inventory sold in conjunction with the disposition of

fixed assets, and all securities), after deducting all

   operating expenses, provisions for all taxes and reserves

      (including reserves for deferred income taxes) and all other

  proper deductions, and after application of tax loss and

investment tax credit carryforwards all determined in 

     accordance with generally accepted accounting principles on

  a consolidated basis applied on a consistent 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 its

     Subsidiaries, provided that there shall be excluded (a) the
              --------                               -

     income (or deficit) of any Person accrued prior to the date

    it becomes a Subsidiary of Buyer (or, in the case of SMCO,

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    ESI, EIC and ICE, prior to July 1, 1987) or is merged into

      or consolidated with Buyer or a Subsidiary of Buyer, (b) the
                                                       -

    income (or deficit) of any Person (other than a Subsidiary

    of Buyer) in which Buyer or any Subsidiary of Buyer has an

ownership interest, except to the extent that any such

income has been actually received by Buyer or such    

Subsidiary in the form of dividends or similar        

distributions, (c) the undistributed earnings of any  
-                     

   Subsidiary of Buyer to the extent that the declaration or

    payment of dividends or similar distributions by such Sub-

  sidiary is not at the time permitted by the terms of its

 charter or any agreement, instrument, judgment, decree,

    order, statute, rule or governmental regulation 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 after June 30,

      1987, (e) any write-up of any asset (except to the extent it
-                                       

      was written down after June 30, 1987), (f) any net gain from
                           -

    the collection of the proceeds of life insurance policies,

     (g) any gain arising from the acquisition of any securities
-                                                   

      or Debt of Buyer or any of its Subsidiaries, and (h) any net
                                               -

  income or gain (but not any net loss) during such period

   from any change in accounting, from the discontinuance of

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    any operations or the disposition thereof, from any extra-

ordinary events or from any prior period adjustments. 

               Consolidated Net Worth:  with respect to any Per-
----------------------            

   son, the sum of the capital stock (but excluding treasury

   stock and capital stock subscribed and unissued), paid-in

   capital, and surplus (including retained earnings, earned

 surplus, capital surplus and the balance of the current

      profit and loss account not transferred to surplus) accounts

     of such Person and its Subsidiaries appearing on a consoli-

 dated balance sheet of such Person and its Subsidiaries

   prepared in accordance with generally accepted accounting

     principles as of the date of determination, after eliminat-

    ing all intercompany transactions and all amounts properly

      attributable to minority interests, if any, in the stock and

      surplus of Subsidiaries, all as reflected in the most recent

  available quarterly financial statements of such Person;

      provided that, in the case of any determination of the joint
--------                                              

      Consolidated Net Worth of Fairfax and Markel, there shall be

     deducted from such joint Consolidated Net Worth any portion

     thereof attributable to acquisitions after the date of this

   Agreement by Fairfax of equity interests in Markel, or by

Markel of equity interests in Fairfax.                

              Control:  (including, with correlative meanings,
-------                           

     the terms "controlled by" and "under common control with"),

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    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.                          

               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; and                      

              (b)  any indebtedness for borrowed money secured

         by any Lien in respect of property owned by such Per-

         son, whether or not such Person has assumed or become

    liable for the payment of such indebtedness; and

           (c)  any indebtedness for borrowed money with

       respect to which such Person has become directly or

      indirectly liable and which represents or has been

        incurred to finance the purchase price (or a portion

    thereof) of any property or services or business

 acquired by such Person, whether by purchase,

consolidation, merger or otherwise; and     

              (d)  any indebtedness of any other Person of the

         character referred to in subdivision (a), (b), or (c)

       of this definition with respect to which the Person

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           whose Debt is being determined has become liable by way

of a Guarantee.                             

             ERISA:  the Employee Retirement Income Security
-----                             

Act of 1974, as amended from time to time.            

              Guarantee:  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, en-

 dorsed (otherwise than for collection or deposit in the

 ordinary course of business) or discounted or sold with

     recourse by such Person, or in respect of which such Person

      is otherwise directly or indirectly liable, including, with-

     out 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 therefor, or to provide funds for the pay-

      ment or discharge of such obligation (whether in the form of

    loans, advances, stock purchases, capital contributions or

      otherwise), or to maintain the solvency or any balance sheet

     or other financial condition of the obligor of such obliga-

 tion, 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

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  if the purpose or intent of such agreement is to provide

    assurance that such obligation will be paid or discharged,

  or that any agreements relating thereto will be complied

   with, or that the holders of such obligation will be pro-

    tected against loss in respect thereof.  The amount of any

  Guarantee 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 lim-

ited).                                                

              Hamblin Watsa:  Hamblin Watsa Investment Counsel
-------------                     

Ltd.                                                  

          Lien:  as to any Person, any mortgage, lien,
----                              

     pledge, security interest or other encumbrance in or on, or

      any interest or title of any vendor, lessor, lender or other

 secured party to or of such Person with respect to, any

      property or asset owned or held by such Person, or the sign-

 ing or filing of a financing statement which names such

    Person as debtor, or the signing of any security agreement

     authorizing any other party as the secured party thereunder

to file any financing statement.                      

                Multiemployer Plan:  any Plan which is a "multiem-
------------------                

     ployer plan" (as such term is defined in section 4001(a)(3)

of ERISA).                                            

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               Officers' Certificate:  a certificate executed on
---------------------             

    behalf of Buyer by its President or one of its Vice Presi-

dents and its Chief Financial Officer.                

                Person:  a corporation, an association, a partner-
------                            

     ship, an organization, a business, an individual, a govern-

 ment or political subdivision thereof or a governmental

agency.                                               

           Plan:  an "employee pension benefit plan" (as
----                              

    defined in section 3 of ERISA) which is or has been estab-

    lished or maintained or to which contributions are or have

      been made, by Buyer or any trade or business, whether or not

   incorporated, which, together with Buyer, is under common

   control, as defined in section 414(b) or (c) of the Code.

           Potential Event of Default:  any condition or
--------------------------        

  event which, with notice or lapse of time or both, would

become an Event of Default.                           

            Restricted Payment:  (a) any dividend or other
------------------    -           

    distribution, direct or indirect, on account of any shares

     of any class of stock of Buyer or a Subsidiary of Buyer now

    or hereafter outstanding, except a dividend payable solely

      in shares of stock of Buyer; and (b) any redemption, retire-
               -

     ment, purchase or other acquisition, direct or indirect, of

      any shares of any class of stock of Buyer or a Subsidiary of

 Buyer now or hereafter outstanding, or of any warrants,

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     rights or options to acquire any such shares, except to the

      extent that the consideration therefor consists of shares of

stock of Buyer.                                       

               Subsidiary:  with respect to any Person, a corpo-
----------                        

    ration, association or other business entity in which such

      Person or one or more Subsidiaries or such Person and one or

     more Subsidiaries owns sufficient Voting Stock to enable it

    or them (as a group) ordinarily, in the absence of contin-

   gencies, to elect a majority of the directors (or persons

performing similar functions) of such business entity.

              Voting Stock:  stock of any class or classes (or
------------                      

    equivalent interests), if the holders of the stock of such

    class or classes (or equivalent interests) are ordinarily,

   in the absence of contingencies, entitled to vote for the

  election of the directors (or persons performing similar

      functions) of such business entity, even though the right so

    to vote has been suspended by the happening of such a con-

tingency.                                             

            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 of

    stock of which are at the time owned by Buyer or by one or

    more Wholly-Owned Subsidiaries or by Buyer and one or more

Wholly-Owned Subsidiaries.                            

     116

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      ARTICLE XI
      PURCHASE PRICE ADJUSTMENTS

          11.1.  Certain Definitions.  As used in this
------------------- 

     Agreement, the following terms have the following meanings:

             Adjustment Amount:  as defined in Section 11.2.
-----------------                 

               Buyer's Accountants:  as defined in Section 11.3.
-------------------               

             Buyer's Actuaries:  as defined in Section 11.3.
-----------------                 

             Determination Date:  the earliest of (a) Decem-
     ------------------                    -

     ber 31, 1991, (b) the last day of the fiscal quarter of ESI
-                       

     most recently ended prior to the date on which the Deferred

    Purchase Price becomes due and payable following accelera-

    tion pursuant to Section 12.1, and (c) the last day of the
                   -

     fiscal quarter of ESI most recently ended prior to the date

     on which Buyer delivers notice of prepayment to Seller pur-

suant to Section 1.4(d).                              

            Indemnification Amount:  the aggregate amount,
----------------------            

   calculated in accordance with Section 11.5 and subject to

   the limitation specified in Section 11.5, of all damages,

  losses, liabilities, fees, costs and expenses (including

    reasonable fees and expenses of counsel) sustained or suf-

    fered by any of the Buyer Affiliates (except for the indi-

      viduals delivering certificates and undertakings pursuant to

   Section 6.11) and arising from a breach after the Closing

     Date of any agreement of Seller (except for a breach of the

     provisions of Section 4.7, 4.8, 4.10, 4.11, 4.12 or 4.13 or

     117

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      Article VIII of this Agreement) or a breach of any represen-

      tation or warranty of Seller (except for the representations

     and warranties set forth in Sections 2.1 through 2.8 inclu-

    sive, 2.36 and 2.37 and the Schedules attached hereto with

    respect to such Sections) contained in or made pursuant to

    this Agreement or any Exhibit or Schedule attached hereto.

               Reserves for Losses and Loss Adjustment Expenses:
              ------------------------------------------------

    an amount equal to the provision, determined in accordance

     with generally accepted accounting principles (applied on a

   basis consistent with that used at December 31, 1986), in

   respect of the consolidated financial position of ESI and

      its Subsidiaries, for (a) case reserve estimates for report-
-       

  ed losses, plus (b) incurred but not reported claims and
----  -                         

     loss adjustment expenses, less (c) cash amounts that relate
     ----  -

   to salvage and subrogation recoveries, and in the case of

 clauses (a), (b) and (c), net of applicable reinsurance

recoverables.                                         

                Reserves for Uncollectible Reinsurance:  an amount
    --------------------------------------

      equal to the provision, determined in accordance with gener-

 ally accepted accounting principles (applied on a basis

     consistent with that used at December 31, 1986), in respect

    of the consolidated financial position of ESI and its Sub-

sidiaries for Uncollectible Reinsurance.              

                Seller's Accountants:  as defined in Section 11.3.
--------------------              

     118

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              Seller's Actuaries:  as defined in Section 11.3.
------------------                

              Uncollectible Reinsurance:  reinsurance recover-
-------------------------         

    ables owed to ESI and its Subsidiaries by reinsurers, that

 have been determined to be uncollectible (including any

      amount charged as an expense in connection with commutation,

     in accordance with generally accepted accounting principles

 (applied on a basis consistent with that used at Decem-

ber 31, 1986)).                                       

               11.2.  Adjustment Amount.  As used in this Agree-
-----------------   

      ment, the "Adjustment Amount" shall mean an amount equal to:

               (a)  52%, if the Kansa Buyer Guarantee shall have

        been delivered at the Closing, and 70%, if the Kansa

        Buyer Guarantee shall not have been delivered at the

       Closing, of an amount equal to 90% of the first $10

        million and 100% of the remainder, of any difference

          (positive or negative) which results when $160,823,000

is subtracted from the sum of:              

                    (i)  Reserves for Losses and Loss Adjustment

     Expenses at the Determination Date, and

                  (ii)  the aggregate amount of all losses and

               loss adjustment expenses paid by ESI and its Sub-

               sidiaries from January 1, 1987, to the Determina-

          tion Date in each case, with respect only to

              losses occurring on or before December 31, 1986,

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         under contracts of insurance or reinsurance

       entered into by ESI and its Subsidiaries;

plus                                                  
----                                                  

               (b)  52%, if the Kansa Buyer Guarantee shall have

        been delivered at the Closing, and 70%, if the Kansa

        Buyer Guarantee shall not have been delivered at the

       Closing, of an amount equal to 90% of the first $10

         million, and 100% of the remainder, of any difference

           (positive or negative) which results when $8 million is

subtracted from the following amount:       

                   (i)  Reserves for Uncollectible Reinsurance

at the Determination Date;        

plus                                        
----                                        

                 (ii)  the aggregate amount of Uncollectible

                Reinsurance on paid claims written off, net of any

              recoveries with respect thereto, from January 1,

1987 to the Determination Date;   

minus                                       
-----                                       

                  (iii)  the amount by which (x) the sum of such
                             -

                Uncollectible Reinsurance owed by Mutual Fire that

                is written off and such Reserves for Uncollectible

             Reinsurance with respect to Mutual Fire exceeds

(y) $4.5 million;                 
-                               

minus                                       
-----                                       

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                  (iv)  recoveries from January 1, 1987 to the

            Determination Date with respect to reinsurance

              recoverables written off by ESI and its Subsidi-

aries prior to January 1, 1987,   

      in each case, in respect of reinsurance agreements in effect

    before January 1, 1987, with respect to insurance policies

 (including optional extension periods) in effect before

   January 1, 1987, under which a claim arises out of events

occurring prior to January 1, 1987;                   

plus                                                  
----                                                  

               (c)  the Indemnification Amount at the Determina-

tion Date;                                  

minus                                                 
-----                                                 

              (d)  one-third of the amount of the net Federal,

           state or local tax savings that are realized in respect

           of tax periods prior to and including the Determination

           Date by Buyer, SMCO, ESI, EIC or ICE, determined as set

    out below, as a result of any items reflected in

          amounts determined pursuant to paragraphs (a), (b) and

          (c) of this Section 11.2.  If the Adjustment Amount is

        a negative number, it shall be deemed to be equal to

        zero.  No amount shall be included in the Adjustment

           Amount to the extent that Seller is obligated to indem-

      nify Buyer with respect to such amount pursuant to

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         Section 8.1 prior to the Determination Date.  The de-

           termination of the tax savings realized shall be deter-

          mined each year by consolidating or combining the cur-

        rent year taxable income (loss) of Buyer, SMCO, ESI,

          EIC and ICE (taking into account carryforwards and, to

        the extent arising no later than the tax period that

        includes the Determination Date, carrybacks) and ex-

   cluding the income (loss) of any other company.

             11.3.  Estimates and Finality of the Adjustment
                    ----------------------------------------

      Amount; Disputes.  (a)  Buyer, at its expense, shall deliver
----------------                                      

 to Seller within 30 days following each quarter of each

      fiscal year a non-binding estimate of the Adjustment Amount,

  which shall assume that the last day of the quarter with

    respect to which such report is being delivered is the De-

    termination Date.  Each such estimate shall be accompanied

  by a reasonably detailed statement by Buyer of the basis

therefor.                                             

             (b)  As soon after the Determination Date as is

     practicable, Buyer, at its expense, shall deliver to Seller

      its determination of the Adjustment Amount, accompanied by a

     reasonably detailed statement of the basis therefor (to the

     extent of actuarial matters involved therein) by nationally

      recognized actuaries regularly used by Buyer in making actu-

arial determinations with respect to its own financial

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    statements (the "Buyer's Actuaries") and (to the extent of

   accounting matters involved therein) by nationally recog-

    nized independent accountants regularly used by Buyer with

     respect to its own financial statements (the "Buyer's Audi-

   tors") stating that such determination has been made pur-

     suant to this Agreement.  Such determination shall be final

   and binding upon the parties unless, within 20 days after

  receipt thereof, Seller notifies Buyer that it disagrees

    with the amount or the matters reflected therein, in which

     case it shall, at its own expense, cause its own nationally

 recognized actuaries (the "Seller's Actuaries"), if the

   disagreement concerns an actuarial matter, or its own na-

    tionally recognized independent accountants (the "Seller's

     Auditors"), if the disagreement concerns an accounting mat-

     ter, to perform an additional determination and shall deli-

  ver such determination to Buyer within 45 days after the

  delivery of its notice concerning such disagreement.  If

 Seller's disagreement concerns any matter other than an

   actuarial or accounting matter, Seller shall notify Buyer

   within 20 days after receipt of Buyer's determination and

   shall submit such disagreement to arbitration pursuant to

    Section 13.9.  With respect to any disagreement concerning

      an actuarial or accounting matter, if the Seller's Actuaries

and/or the Seller's Auditors and the Buyer's Actuaries

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     and/or the Buyer's Auditors cannot agree on a single deter-

    mination of the Adjustment Amount within 20 days after de-

    livery to Buyer of the determination of the Seller's Actu-

     aries and/or the Seller's Auditors, then the Seller's Actu-

      aries and/or the Seller's Auditors and the Buyer's Actuaries

  and/or the Buyer's Auditors shall, within 10 days there-

    after, mutually select an independent third actuary and/or

      auditor, whose determination of the Adjustment Amount, which

 shall not be more than the determination of the Buyer's

     Actuaries and the Buyer's Auditors nor less than the deter-

      mination of the Seller's Actuaries and the Seller's Auditors

   and which shall be made within 60 days after its or their

     selection and shall be delivered to Buyer and Seller, shall

be final and binding.                                 

             (c)  The determination of the Adjustment Amount

   shall be deemed to be final upon the earliest to occur of

      (i) Buyer's receipt of Seller's written concurrence with the
-                                                   

      determination made by Buyer, (ii) Seller's failure to notify
        --

Buyer of its objection to Buyer's determination within

    20 days after Seller's receipt thereof, (iii) with respect
                               ---

      to disagreements concerning actuarial or accounting matters,

 (A) Seller's failure to deliver the Seller's Actuaries'
-                                                   

     and/or the Seller's Auditors' determination to Buyer within

      45 days after delivery to Buyer of the notice referred to in

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   clause (ii) above, (B) the receipt by Buyer and Seller of
-             

   the written agreement by the Buyer's Actuaries and/or the

      Buyer's Auditors and the Seller's Actuaries and/or the Sell-

     er's Auditors on a single determination, or (C) the receipt
                                     -

    by Buyer and Seller of the determination made by the inde-

 pendent third actuaries and/or auditors selected by the

     Buyer's Actuaries and/or the Buyer's Auditors and the Sell-

   er's Actuaries and/or the Seller's Auditors and (iv) with
                                              --

    respect to disagreements concerning other matters, the re-

     ceipt by Buyer and Seller of the determination of the arbi-

      trators selected pursuant to Section 13.9.  If any objection

      or dispute exists at any time with respect only to a portion

 of the Adjustment Amount, the portion of the Adjustment

  Amount not objected to or disputed shall be deemed to be

      final on receipt of notice by Buyer from Seller, or by Sell-

   er from Buyer, that such portion is not objected to or in

dispute.                                              

             11.4.  Assignment of Uncollectible Reinsurance.
                   ---------------------------------------

     On the date on which any reinsurance recoverable that would

     be reflected in the Adjustment Amount is written off by ESI

      or any of its Subsidiaries, Buyer shall assign, or cause ESI

   or its Subsidiaries to assign, to Seller such reinsurance

     recoverable.  Buyer shall cause ESI and its Subsidiaries to

    write off such reinsurance recoverables in accordance with

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      generally accepted accounting principles (applied on a basis

 consistent with that used at December 31, 1986).  On or

     prior to the Closing Date, Seller may cause ESI or its Sub-

    sidiaries to assign to Seller all reinsurance recoverables

    relating to reinsurance in effect prior to January 1, 1987

    that were written off the books and records of such compa-

    nies prior to January 1, 1987, and Seller will make avail-

    able to Buyer records or lists identifying the reinsurance

      recoverables so assigned.  Seller may thereafter collect the

     amount of any such recoverables in its own name and for its

    own account, provided that, to the extent that it can rea-
--------                    

    sonably do so, Seller will avoid unnecessary damage to the

      relationship between ESI and its Subsidiaries and the person

owing such recoverable.                               

            11.5.  Indemnification Amount, etc.  (a)  With
       ---------------------------

  respect to any warranty or representation of Seller con-

     tained in or made pursuant to this Agreement or any Exhibit

   or Schedule attached hereto which contains a reference to

  materiality (other than the representations set forth in

      Sections 2.1 through 2.8), the breach of which may give rise

  to an amount included in the Indemnification Amount, any

    damages, losses, liabilities, fees, costs or expenses sus-

    tained or suffered by any of the Buyer Affiliates shall be

      deemed material and (subject to the next following sentence)

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   included in the Indemnification Amount only if the amount

     thereof sustained or incurred with respect to such warranty

   or representation exceeds $50,000, but if such amount ex-

      ceeds $50,000, such entire amount (including the portion not

     exceeding $50,000) shall be included in the Indemnification

    Amount.  No such damages, losses, liabilities, fees, costs

      and expenses shall be included in the Indemnification Amount

      unless the aggregate amount thereof with respect to all such

  representations and warranties (less any amount excluded

 pursuant to the final sentence of this Section 11.5(a))

   exceeds $100,000, whereupon such entire amount (including

      the portion thereof not exceeding $100,000) shall be includ-

ed in the Indemnification Amount.  The Indemnification

      Amount shall not include any amount included in the calcula-

    tion of the Adjustment Amount pursuant to paragraph (a) or

(b) of Section 11.2.                                  

              (b)  The obligations and liabilities of the par-

     ties under this Article XI with respect to claims resulting

     from the assertion of liability by third parties that might

  give rise to an amount included in the Adjustment Amount

    shall be subject to the provisions of Sections 8.3, 8.4(d)

    (except for clause (i) thereof) and 8.5 hereof, as if such

 claims would give rise to an indemnification obligation

pursuant to any provision of Article VIII hereof.     

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               (c)  Buyer shall have no right, recourse or claim

whatsoever against Seller with respect to             

              (i)  any representation or warranty contained in

          this Agreement (except for those set forth in Sections

           2.1 through 2.8 inclusive, 2.36 and 2.37 of this Agree-

       ment and the Schedules attached hereto with respect

thereto),                                   

             (ii)  any obligation created by this Agreement or

        arising out of the transactions contemplated hereby,

        the breach of which would give rise to an amount in-

cluded in the Indemnification Amount,       

            (iii)  inadequacies of any Reserves for Losses and

          Loss Adjustment Expenses or Reserves for Uncollectible

Reinsurance, or                             

             (iv)  the inability of any Buyer Affiliate to ob-

         tain payment of any Uncollectible Reinsurance, except

      as set forth in this Article XI and in Section 1.4

         hereof, provided that nothing in this Section 11.5(c)
--------                    

          shall in any way adversely affect Buyer's rights under

Article VIII.                               

             11.6.  No Commutation of Uncollectible Reinsur-
                    ----------------------------------------

    ance, etc.  Buyer shall not permit ESI or its Subsidiaries
---------                                             

    to commute, reduce, settle or discount any reinsurance re-

   coverable that is or might be reflected in the Adjustment

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   Amount without the prior written consent of Seller, which

      consent will not be unreasonably withheld or delayed.  Buyer

   will, and will cause ESI and its Subsidiaries to, proceed

    with reasonable diligence to attempt to collect such rein-

      surance recoverables.  All payments by any debtor in respect

     of any reinsurance recoverable shall, in the absence of any

   requirement to the contrary, be allocated for purposes of

      this Article XI to the oldest outstanding recoverable of the

 payor that would be reflected in the Adjustment Amount.

                11.7.  Right of Inspection.  Seller shall be enti-
------------------- 

     tled, through its employees and representatives, to inspect

 and examine such of the books, records, tax records and

   financial statements of Buyer, SMCO, ESI, EIC and ICE and

      working files of the Buyer's Actuaries and the Buyer's Audi-

   tors as may be relevant to a determination of the adjust-

     ments required by this Article XI.  Any such inspection and

      examination shall be conducted at reasonable times and under

     reasonable circumstances in such a manner as will avoid any

    unreasonable disruption of the businesses of such corpora-

   tions, and Buyer shall and shall cause SMCO, ESI, EIC and

      ICE to cooperate fully with such inspection and examination.

      Seller shall, and shall cause any other person to whom Sell-

  er has given access to information disclosed pursuant to

    this Section 11.7, to keep confidential any information or

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  documents obtained pursuant to this Section 11.7, unless

      such information or documents are readily ascertainable from

public or published information.                      

     ARTICLE XII
     EVENTS OF DEFAULT

                12.1.  Events of Default; Acceleration.  If any of
           -------------------------------

  the following conditions or events ("Events of Default")

shall occur and be continuing:                        

               (a)  if Buyer shall default in the payment of any

        amount owed under Section 1.4 of this Agreement when

         the same becomes due and payable, whether on the date

        when normally due, as set forth herein, or at a date

fixed for prepayment; or                    

           (b)  if Buyer shall materially default in the

           performance of or compliance with any material covenant

           contained in Article X of this Agreement or, if a Guar-

          antee Effectiveness Event shall have occurred, a Buyer

         Guarantor shall materially default in the performance

           of or compliance with Section 10(a) or (b) of the Kansa

        Buyer Guarantee or Overall Buyer Guarantee, and such

       default shall not have been remedied within 45 days

         after written notice thereof shall have been received

by Buyer from Seller; or                    

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             (c)  if any material representation or warranty

           made in writing by or on behalf of Buyer in this Agree-

         ment or the Pledge Agreement, together with the docu-

          ments, certificates and other writings furnished or to

           be furnished by Buyer to Seller pursuant to this Agree-

       ment or by or on behalf of a Buyer Guarantor in the

      Non-Contingent Buyer Guarantee, or, if a Guarantee

          Effectiveness Event shall have occurred, any represen-

           tation or warranty contained in the Kansa Buyer Guaran-

       tee or Overall Buyer Guarantee, shall prove to have

          been false or incorrect in any material respect on the

date as of which made; or                   

               (d)  if Buyer or any of its Subsidiaries or, if a

        Guarantee Effectiveness Event shall have occurred, a

           Buyer Guarantor, shall default (as principal or guaran-

        tor or other surety) in the payment (at maturity, at

           any time designated for prepayment or otherwise) of any

         principal of or premium or interest on any Debt which

     is outstanding in an aggregate amount of at least

         $1 million ($2 million in the case of a Buyer Guaran-

        tor) in the aggregate (other than the obligations of

           Buyer under this Agreement) and such amount is not paid

           or the payment of such amount is not waived, within any

         grace period applicable thereto or, if longer, within

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        ten days after the occurrence of such default, or if

         any event shall occur or condition shall exist in re-

          spect of any such Debt which is outstanding in a prin-

          cipal amount of at least $1 million ($2 million in the

        case of a Buyer Guarantor) in the aggregate or under

         any evidence of any such Debt or of any mortgage, in-

          denture or other agreement relating thereto the effect

         of which is to accelerate the payment of such Debt so

           as to cause it to become due before its stated maturity

           or before its regularly scheduled dates of payment, and

       such acceleration shall not have been waived or re-

           scinded by the holder of such Debt prior to delivery of

         a notice by Seller to Buyer pursuant to clause (y) of

this Section 12.1; or                       

               (e)  if Buyer or any of its Subsidiaries or, if a

        Guarantee Effectiveness Event shall have occurred, a

          Buyer Guarantor, shall (i) be generally not paying its
     -

      debts as they become due, (ii) file, or consent by
            --

      answer or otherwise to the filing against it of, a

           petition for relief or reorganization or arrangement or

           any other petition in bankruptcy, for liquidation or to

         take advantage of any bankruptcy or insolvency law of

      any jurisdiction, (iii) make an assignment for the
---   

          benefit of its creditors, (iv) consent to the appoint-
            --

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           ment of a custodian, receiver, trustee or other officer

          with similar powers with respect to it or with respect

           to any substantial part of its property, (v) be adjudi-
                                         -

         cated insolvent or (vi) take corporate action for the
--  

purpose of any of the foregoing; or         

               (f)  if a court or governmental authority of com-

        petent jurisdiction shall enter an order appointing,

           without consent by Buyer or any of its Subsidiaries or,

           if a Guarantee Effectiveness Event shall have occurred,

      without consent by a Buyer Guarantor, a custodian,

          receiver, trustee or other officer with similar powers

         with respect to it or with respect to any substantial

      part of the property of Buyer and its Subsidiaries

         taken as a whole or of such Buyer Guarantor, or if an

         order for relief shall be entered in any case or pro-

          ceeding for liquidation or reorganization or otherwise

         to take advantage of any bankruptcy or insolvency law

           of any jurisdiction, or ordering the dissolution, wind-

         ing-up or liquidation of Buyer or any of its Subsidi-

           aries or, if a Guarantee Effectiveness Event shall have

        occurred, a Buyer Guarantor, if any petition for any

         such relief shall be filed against Buyer or a Subsid-

        iary of Buyer or, if a Guarantee Effectiveness Event

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          shall have occurred, a Buyer Guarantor, and such peti-

  tion shall not be dismissed within 90 days; or

            (g)  if a final judgment or judgments shall be

         rendered against Buyer or any of its Subsidiaries or,

           if a Guarantee Effectiveness Event shall have occurred,

         a Buyer Guarantor, for the payment of money in excess

    of $1 million ($2 million in the case of a Buyer

   Guarantor) in the aggregate and any one of such

          judgments shall not be discharged or execution thereon

     stayed pending appeal, within 60 days after entry

           thereof, or, in the event of such a stay, such judgment

          shall not be discharged within 60 days after such stay

expires; or                                 

                (h)  if a Guarantee Effectiveness Event shall have

           occurred, at any time after delivery of the Kansa Buyer

         Guarantee when the Consolidated Net Worth of Buyer is

      less than $10 million or after the delivery of the

         Overall Buyer Guarantee, neither Buyer Guarantor has,

          or both together do not have, a Consolidated Net Worth

          in excess of $50 million then, (x) upon the occurrence
                     -

           of any Event of Default described in subdivision (e) or

          (f) of this Section 12.1 the entire unpaid amount owed

           to Seller pursuant to Section 1.4 hereof shall automat-

        ically become due and payable or (y) upon the occur-
                         -

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          rence of any other Event of Default, Seller may at any

         time (unless all defaults shall theretofore have been

         remedied) at its option, by written notice or notices

      to Buyer, declare the entire unpaid amount owed to

       Seller pursuant to Section 1.4 hereof to be due and

          payable, whereupon the same shall forthwith mature and

become due and payable.                     

               12.2.  Remedies on Default, etc.  In case any one
    ------------------------

  or more Events of Default or Potential Events of Default

 shall occur and be continuing, unless (in the case of a

     Potential Event of Default) Buyer is diligently and in good

     faith attempting to remedy such Potential Event of Default,

    Seller may proceed to protect and enforce its rights by an

     action at law, suit in equity or other appropriate proceed-

    ing, whether for the specific performance of any agreement

    contained herein, 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 any case to which the preceding sentence is

     applicable, Buyer will pay to Seller such further amount as

      shall be sufficient to cover its costs and expenses, includ-

      ing without limitation, reasonable attorneys' fees, expenses

 and disbursements and costs and expenses of collection,

     incurred in connection therewith.  No course of dealing and

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 no delay on the part of Seller in exercising any right,

     power or remedy shall operate as a waiver thereof or other-

      wise prejudice such holder's rights, powers or remedies.  No

 right, power or remedy conferred by this Agreement upon

      Seller shall be exclusive of any other right, power or reme-

     dy referred to herein or now or hereafter available at law,

in equity, by statute or otherwise.                   

               12.3.  Cure of Defaults.  (a)  If the Buyer Guar-
----------------    

      antors shall have delivered to Seller an Overall Buyer Guar-

antee, any breach of the covenants contained in Sec-  

  tions 10.4, 10.9, 10.10, 10.11, 10.12 and, to the extent

    that the covenants in Section 10.14 require action by per-

    sons other than Buyer and its Subsidiaries, 10.14, and any

     breach of any covenant which does not result from action or

  intentional inaction by Buyer or any Subsidiary, that is

     then in existence or thereafter may occur shall, unless the

  obligations of Buyer under Section 1.4 hereof shall have

   been accelerated pursuant to Section 12.1 hereof prior to

     delivery to Seller of an Overall Buyer Guarantee, be deemed

   to have been cured.  To the extent that a Buyer Guarantor

    has a Consolidated Net Worth in excess of $50 million, any

     event with respect to the other Buyer Guarantor that other-

wise would constitute an Event of Default under Sec-  

 tion 12.1(d) or (g) shall be deemed to have been cured.

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              (b)  If Buyer shall have delivered the Financial

    Guarantee to Seller prior to the acceleration, pursuant to

     Section 12.1, of the obligations of Buyer under Section 1.4

    hereof, any Event of Default or Potential Event of Default

   that is in existence at the time of such delivery or that

      thereafter may occur (other than failure to pay the Deferred

      Purchase Price on the fifth anniversary of the Closing Date)

shall be deemed for all purposes to have been cured.  

      ARTICLE XIII
      GENERAL PROVISIONS

               13.1.  Notices.  All notices and other communica-
-------             

 tions hereunder shall be in writing and shall be deemed

      given if delivered personally or transmitted by telex, tele-

   copy (if receipt is confirmed) or mailed by registered or

     certified mail (return receipt requested) to the persons at

 the following addresses (or at such other address for a

party as shall be specified by like notice):          

(a)  If to Buyer:                 

          Fairfax Financial Holdings Limited
Suite 800               
 95 Wellington Street West
        Toronto, Ontario, Canada M5J 2N7
Attention:  Prem Watsa  

Markel Corporation      
5310 Markel Road        
Richmond, Virginia 23230
    Attention:  Steven A. Markel

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with copies to:                   

             Tory, Tory, DesLauriers &  Binnington
Suite 3200              
IBM Tower               
Toronto Dominion Center 
Toronto, Ontario M5K 1N2
    Attention:  Eric P. Salsberg

      McGuire, Woods, Battl & Boothe
One James Center        
Richmond, Virginia 23219
     Attention:  Leslie A. Grandis

(b)  If to Seller:                

  Alexander & Alexander Inc.
300 East Joppa Road     
 Baltimore, Maryland 21204
Attention:  Controller  

with a copy to:                   

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

     A notice shall be deemed to be delivered (a) in the case of
                               -

     personal delivery, on the date of delivery, (b) in the case
                                     -

      of telex or telecopy, on the date of confirmation of receipt

     and (c) in the case of registered or certified mail, on the
-                                           

date shown on the receipt.                            

            13.2.  Fees and Expenses.  Each of the parties
-----------------   

  hereto shall pay its own expenses incurred in connection

    with the preparation, negotiation, execution, delivery and

consummation of this Agreement.                       

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            13.3.  Public Announcements.  Buyer and Seller
--------------------

    shall consult with each other before issuing any press re-

  lease with respect to this Agreement or the transactions

contemplated hereby.                                  

               13.4.  Interpretation.  The headings contained in
--------------      

      this Agreement are for reference purposes only and shall not

 affect the meaning or interpretation of this Agreement.

     Terms such as "herein", "hereof" and "hereinafter" refer to

      this Agreement as a whole and not to the particular sentence

      or paragraph where they appear, unless the context otherwise

   requires.  Terms used in the plural include the singular,

and vice versa, unless the context otherwise requires.

         13.5.  Counterparts.  This Agreement may be
------------        

      executed in two or more counterparts, each of which shall be

deemed an original, but all of which together shall   

constitute one and the same instrument.               

               13.6.  Miscellaneous.  This Agreement (i) consti-
             -------------                   -

   tutes the entire agreement and supersedes all other prior

     agreements and understandings, both written and oral, among

  the parties, or any of them, with respect to the subject

   matter hereof; (ii) except as expressly stated herein, is
--                    

    not intended to and shall not confer upon any other person

    any rights or remedies hereunder or otherwise with respect

      to the subject matter hereof; (iii) shall not be assigned by
           ---

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      operation of law or otherwise; and (iv) shall be governed in
                    --

     all respects, including validity, interpretation and effect

by the laws of the State of New York.                 

               13.7.  Survival.  No investigation by the parties
--------            

   made heretofore or hereafter shall affect the representa-

    tions and warranties of the parties contained herein.  The

     representations and warranties of Seller shall survive such

     investigation and the Closing (a) in the case of the repre-
         -

     sentations and warranties contained in Sections 2.1 through

    2.8 inclusive and 2.36, until the Payment Date, (b) in the
                                             -

      case of representations and warranties with respect to Taxes

      paid or payable by SMCO, ESI, EIC and ICE and liabilities in

    respect thereof, for the period during which an assessment

    or reassessment may be made in respect thereof, (c) in the
                                             -

   case of the representation and warranty contained in Sec-

     tion 2.37, until April 30, 2000, and (d) in the case of all
                       -

   other representations and warranties, for a period of two

     years following the Closing and, in each case, if notice of

  a breach thereof shall have been received by Seller from

 Buyer during the applicable survival period, until such

      alleged breach has been resolved or settled.  Each represen-

    tation and warranty of Buyer shall survive such investiga-

      tion and the Closing until the Deferred Purchase Price shall

 have been paid in full, and, if notice of a breach of a

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      representation or warranty shall have been received by Buyer

   from Seller prior to payment in full of the Deferred Pur-

     chase Price, such representation and warranty shall survive

 until such alleged breach has been resolved or settled.

            13.8.  Knowledge.  Any provision in Article II
---------           

      referring to the knowledge of Seller also shall be deemed to

      refer to the knowledge of A&A.  Any provision in Article III

     referring to the knowledge of Buyer also shall be deemed to

 refer to the knowledge of each of the Buyer Guarantors.

              13.9.  Arbitration.  (a)  Any dispute arising in
-----------         

     respect of the terms hereof or in any manner related hereto

  (except as provided in Section 11.3) shall be settled by

  arbitration in accordance with the rules of the American

      Arbitration Association and judgment upon the award rendered

    by the arbitrators may be rendered in any court having ju-

risdiction thereof.                                   

             (b)  Arbitration hereunder shall be by a single

    arbitrator appointed by agreement between the parties.  If

      the parties fail to agree to such appointment within 15 days

     following the delivery by one party to the other of a writ-

      ten notice requesting concurrence in a proposed appointment,

 then either party may notify the other party that it is

      requesting a panel of three arbitrators.  In such event each

     party shall select one arbitrator within 21 days of receipt

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    of such notice requesting a panel.  In default of such se-

    lection by either party, the arbitrator (if any) appointed

    by the other party shall be the sole arbitrator hereunder.

     If both parties have made a selection, those arbitrators so

     selected shall agree on the third arbitrator within 30 days

      following the date on which the last of the two was selected

   as an arbitrator.  Should the two arbitrators fail within

     this time limit to reach an agreement on the third arbitra-

    tor, the third arbitrator shall be appointed by the Presi-

    dent of the American Arbitration Association in accordance

    with its rules.  Such third arbitrator shall act as Chair-

man.                                                  

              (c)  Any arbitration proceeding shall take place

   in New York City and any arbitration award shall be final

and binding on the parties.                           

               (d)  The arbitrators shall designate the party or

parties to bear the expense of the arbitration and the

amount to be borne by each.                           

                (e)  None of the parties shall cease or suspend or

    otherwise hinder the continuing performance of its respec-

      tive obligations hereunder pending any reference to arbitra-

tion but shall continue to perform the same fully.    

              13.10.  Deemed Obligations of Buyer.  To the ex-
         ---------------------------

   tent that this Agreement imposes any obligations on SMCO,

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  ESI, EIC or ICE after the Closing Date, such obligations

shall be deemed to be obligations of Buyer.           

                IN WITNESS WHEREOF, the parties hereto have caused

      this Agreement to be executed by their duly authorized offi-

cers.                                                 

                           F-M ACQUISITION CORPORATION

                    By  /s/ S. A. Markel
                                ----------------------------
                         Title:  President

                          ALEXANDER & ALEXANDER INC.

                          By  /s/ J. B. Lockhart III
                                ----------------------------
                                  Title:  Vice President and
                                     Treasurer

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                                                         EXHIBIT A

      TAX ALLOCATION AGREEMENT
      ------------------------

              AGREEMENT between ALEXANDER & ALEXANDER SERVICES

    INC., a Maryland corporation having its principal place of

    business located at 1211 Avenue of the Americas, New York,

     New York, and ALEXANDER & ALEXANDER INC., a Maryland corpo-

      ration having its principal place of business located at 300

    East Joppa Road, Baltimore, Maryland (hereinafter together

   and individually referred to as the "Parent"), and SHAND,

     MORAHAN & COMPANY, INC., an Illinois corporation having its

     principal place of business located at Shand Morahan Plaza,

     Evanston, Illinois (hereinafter referred to as the "Subsid-

iary").                                               

              WHEREAS, Subsidiary was a member of the Parent's

     affiliated group as defined in section 1504 of the Internal

     Revenue Code of 1986, as amended (the "Code") on January 1,

   1987 and will consolidate with the Parent for purposes of

      filing Federal consolidated income tax returns ("Consolidat-

    ed Return") and is expected to be combined with the Parent

      for purposes of filing Illinois combined income and replace-

     ment tax returns ("Combined Return") for tax periods begin-

 ning after December 31, 1986 and ending when Subsidiary

     ceases to be a member of the Parent's affiliated group; and

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              WHEREAS, Parent and Subsidiary desire to execute

   this Agreement, effective for all tax returns for taxable

years beginning after December 31, 1986.              

                NOW, THEREFORE, in order to calculate Subsidiary's

     allocable share of Parent's Federal consolidated income tax

    liability and Illinois combined income and replacement tax

      liability for tax periods beginning after December 31, 1986,

the parties hereto agree as follows:                  

     SECTION 1.  Definitions and Payment of Federal Consolidated
                 -----------------------------------------------
            Income Tax Liability and Illinois Combined
            ------------------------------------------
       Income and Replacement Tax Liability.
      ------------------------------------

       (a)  General Rule.  On the filing of a Consolidated
------------                      

      Return or a Combined Return by the Parent for any tax period

      beginning after December 31, 1986, the tax liabilities shall

    be allocated and borne by the parties hereto in accordance

     with this Agreement.  This Agreement shall not apply to the

    extent Subsidiary is not included in a Consolidated Return

or a Combined Return of the Parent.                   

        (b)  Disbursing Agent.  Upon receipt of the payments
----------------                  

      provided for in Section 2 and subsection (c) of this Section

     1, Parent, acting as disbursing agent for Subsidiary, shall

     pay the amount due the Internal Revenue Service or Illinois

      Department of Revenue on account of any Federal consolidated

    income tax or Illinois combined income and replacement tax

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    for such tax period and shall pay or credit any refunds to

Subsidiary as required by Section 4.                  

        (c)  Determination of Payment and Disbursement.  The
       -----------------------------------------

   amount of payments and disbursements provided for in this

     Agreement shall be made quarterly on the basis of estimates

    of taxable income and Tax Credits and shall be adjusted as

      provided in Section 4(b).  Such quarterly installments shall

  be on a basis consistent with that adopted by Parent for

     payment of estimated Federal consolidated income tax to the

  Internal Revenue Service and estimated Illinois combined

  income and replacement tax to the Illinois Department of

    Revenue, and all amounts due Parent shall be paid no later

      than one day prior to the due date of Parent's estimated tax

  payment.  Parent shall be responsible for any failure to

remit the Subsidiary's payments on a timely basis.    

(d)  Definitions.                           
-----------                       

           1.   The term "Separate Return Tax Liability"

      means the Subsidiary's aggregate Federal income tax liabili-

  ty (including alternative minimum tax and any tax on the

   deferred intercompany gain recognized with respect to the

      sale of Shand Morahan Plaza in 1985) and Illinois income and

      replacement tax liability (each after available Tax Credits)

    computed in the manner that Subsidiary would use in filing

      an Illinois income and replacement tax return reflecting the

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 application of Subsidiary's Apportionment Factor to the

     unitary group's Illinois taxable income and a separate Fed-

      eral income tax return except that:  (i) all Federal taxable
                       -

    income with the exception of net capital gains (as defined

      in section 1222(11) of the Code) of Subsidiary will be taxed

     at the highest marginal corporate tax rate, as specified in

   section 11 of the Code (taking into account section 15 of

     the Code), and (ii) Illinois taxes shall be computed at the
--                    

    Illinois flat income and replacement tax rates (provided a

      Combined Return is filed including Subsidiary) and (iii) any
                                                     ---

    taxable income, gain, loss or deduction that prior to July

      1, 1987 is generated by or related to the safe harbor leases

    under which Subsidiary is the tax lessor (the "Safe Harbor

Leases") shall be omitted.                            

               2.   The term "Subsidiary's Apportionment Factor"

      means the average of the ratios, as provided by Illinois tax

    law, of the Subsidiary's gross receipts within Illinois to

     the aggregate gross receipts of the unitary group, the Sub-

      sidiary's property within Illinois to the aggregate property

  of the unitary group and the Subsidiary's payroll within

      Illinois to the aggregate payroll of the unitary group.  Any

 receipts and property related to the Safe Harbor Leases

      shall be excluded in determining the Subsidiary's Apportion-

ment Factor for any period prior to July 1, 1987.     

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          3.   The term "Tax Credits" means any credit

   against tax liability permitted under the Code or the tax

statutes of Illinois.                                 

SECTION 2.  Determination of Liabilities.             
----------------------------  

        (a)  General Rule.  The Parent shall compute Subsid-
------------                      

     iary's Separate Return Tax Liability.  The amount of tax so

      computed shall be paid by Subsidiary to the Parent, less the

amount of any adjustment under Section 4.             

      (b)  In computing Subsidiary's Separate Return Tax

     Liability under subsection (a), any net operating loss car-

     ryover, capital loss carryover, excess charitable contribu-

     tion deduction carryover, or any similar carryover existing

    at January 1, 1987 (other than a carryover generated by or

      related to the Safe Harbor Leases and other than Tax Credits

     and charitable contribution deductions generated by Subsid-

    iary in tax years ending before January 1, 1987) shall, to

     the extent utilized in Parent's Consolidated Return or Com-

bined Return, be given effect.                        

        (c)  Parent shall determine the Federal consolidated

      and combined Illinois income and replacement tax liabilities

  and submit all appropriate returns and tax payments in a

manner determined by the Parent.                      

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SECTION 3.  Use of Tax Credits.                       
------------------            

                Subsidiary shall be entitled to the benefit of Tax

    Credits generated by it after December 31, 1986 and during

    the period Subsidiary is included in a Consolidated Return

or a Combined Return with Parent.                     

SECTION 4.  Refund or Adjustment of Tax.              
---------------------------   

(a)  Tax Previously Paid.                   
-------------------               

               1.  Cash Refund.  Except as provided in paragraph
-----------               

    (2), Subsidiary shall be entitled to a refund, computed as

  provided in paragraph (3), of tax previously paid to the

Parent (pursuant to the terms of this Agreement or any

     formal or informal tax sharing arrangement existing between

 Parent and Subsidiary for taxable years ending prior to

      January 1, 1987) if in any tax period subject to this Agree-

     ment it sustains a net operating loss, has unused Tax Cred-

     its, or has unused deductions, which may be carried back on

      a Separate Return Tax Liability basis to a tax period ending

     prior to January 1, 1987 under applicable provisions of the

Code or the Illinois tax statutes.                    

               2.  Deduction Against Current Tax.  If Subsidiary
   -----------------------------

    has a current Separate Return Tax Liability payable to the

     Parent, the amount of refund determined under paragraph (1)

    shall be deducted from such tax liability and only the ex-

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      cess of such tax liability over the amount of such deduction

shall be paid to the Parent.                          

             3.  Basis of Computation of Amount of Refund or
                 -------------------------------------------

     Adjustment.  Subsidiary's Separate Return Tax Liability for
----------                                            

      the year to which a net operating loss, Tax Credit or unused

     deduction is carried back shall be recomputed both with and

without such carryback and excluding in computing     

     Subsidiary's Separate Return Tax Liability any items gener-

      ated by or related to the Safe Harbor Leases.  The excess of

    such Separate Return Tax Liability recomputed without such

     carryback over such Separate Return Liability computed with

such carryback will be refunded to Subsidiary.        

          (b)  Adjustment of Separate Return Tax Liability.  The
         -------------------------------------------

      amounts payable to the Parent or Subsidiary under the provi-

sions of this Agreement shall be adjusted:            

            (1)  quarterly to reflect the then estimate of

    Subsidiary's Separate Return Tax Liability subject to this

 Agreement for the taxable period involved and all prior

payments by Subsidiary with respect to such period,   

           (2)  upon the filing of Parent's Consolidated

    Return or Combined Return for the taxable period involved,

              (3)  upon receipt of a statutory notice of defi-

  ciency or other notice of or consent to audit adjustment

  (favorable or unfavorable) if the Parent determines that

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     such deficiency or adjustment shall be paid or accepted for

taxable periods ending after December 31, 1986,       

               (4)  upon final determination of the Federal con-

    solidated and Illinois combined income and replacement tax

liabilities of the Parent for such period, and        

               (5)  to include any interest, penalties, or other

additions to tax related to such amounts.             

   Any adjustments required to be made shall be treated on a

 basis consistent with the provisions of this Agreement.

SECTION 5.  Effective Date.                           
--------------                

           The parties agree that the provisions of this

  Agreement shall be effective for taxable years beginning

    after December 31, 1986 (and for earlier years as provided

for example in Section 4(a)) and for each taxable year

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      thereafter in which Subsidiary is included in a Consolidated

Return or a Combined Return of Parent.                

                IN WITNESS WHEREOF, the parties hereto have caused

   this Agreement to be duly executed and attested all as of

the      day of December, 1987.                       
----                                          

                           ALEXANDER & ALEXANDER
                           ---------------------
                       SERVICES INC.
                      ------------

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

                                ALEXANDER & ALEXANDER INC.
                                --------------------------

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

                                    SHAND, MORAHAN & COMPANY, INC.
                                   -----------------------------

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

     A-9

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                                                         EXHIBIT B

      TERMS OF SHAND MORAHAN PLAZA AGREEMENT

            Until December 31, 2010, on each date on which
      rental payments are payable by SMCO under its lease of Shand
Morahan Plaza, if the difference between (a) the rent 
                               -
 payable under such lease and (b) the rent that would be
       -
   payable if such rent were computed at a rate per annum of
   $13.00 per square foot (with an escalator of 4% per annum
  and with such escalator taking effect beginning with the
     computation with respect to the first rental payment due in
     1989) is positive, Seller will pay or cause to be paid such
      difference to the bank account of SMCO's lessor, and if such
    difference is negative, Buyer will pay or cause to be paid
      the absolute value of such difference to Seller.  Buyer will
      have the option, on each March 1 and September 1, to require
the Building's owner to sell, and Seller will have the
     option, on each March 1 and September 1 beginning September
   1, 1995, to require Buyer to buy, the owner's interest in
    the Building, free and clear of all liens and encumbrances
     except for the existing mortgage, liens and encumbrances in
 respect of obligations or actions of SMCO or Buyer, and
other liens and encumbrances not materially adversely 
affecting title to the property and the intended use  
    thereof, at an amount equal to the greater of (i) the then
                                         -
     outstanding amount of the existing mortgage on the Building
  and (ii) the depreciated book value of such interest for
--                                          
      accounting purposes, determined in accordance with generally
     accepted accounting principles, on the books of such owner,
      provided that in connection with the sale or purchase of the
--------                                              
owner's interest in the Building, (x) if the sale is  
                 -
      required by Buyer, either (1) A&A and its affiliates must be
 -
     released from any guarantees in respect of the lease or the
   existing financing of the Building, or (2) if the sale is
                           -
   required by Buyer on or after January 1, 1996 Fairfax and
 Market will provide A&A and affiliates with a financial
   guaranty in form and scope reasonably satisfactory to A&A
    from a bank or financial institution rated AA or better by
  Standard & Poor's Corporation (or receiving a comparable
rating from a comparable rating agency) and (y) if the
                                     -
purchase is required by Seller, either A&A and its    
 affiliates will be released from any such guarantees or
Fairfax and Markel will provide A&A with a financial  
      guaranty, reasonably satisfactory to A&A as to the guarantor
      and the scope and form of the guarantee, with respect to the
lease and the existing financing, provided that such  
                      --------
     guarantee, if it is to be provided by a third party, can be
     obtained at reasonable cost.  All subleases of space in the
      Building by SMCO will be for SMCO's own account.  SMCO shall
continue to enjoy all existing rights under the lease.

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                                             EXHIBIT E
                                                   [A&A Guarantee]

     ALEXANDER & ALEXANDER SERVICES INC.

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

     GUARANTEE AGREEMENT

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

     Dated as of October 1, 1987

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                                                         EXHIBIT E

     GUARANTEE AGREEMENT

                GUARANTEE AGREEMENT (the "Agreement"), dated as of
      December   , 1987, from ALEXANDER & ALEXANDER SERVICES INC.,
--                                  
      a Maryland corporation ("Guarantor"), to and in favor of F-M
      ACQUISITION CORPORATION, an Illinois corporation ("F-M") and
 the other BUYER AFFILIATES (as such term is hereinafter
defined).                                             

      R E C I T A L S:
     - - - - - - - -

               A.  Pursuant to a Stock Purchase Agreement, dated
as of October 7, 1987 (the "Stock Purchase Agreement")
between F-M and Alexander & Alexander Inc., a Maryland
    corporation ("A&A"), F-M has agreed to buy from A&A all of
     the outstanding shares of capital stock (the "SMCO Shares")
      of Shand, Morahan & Company, Inc., and A&A has agreed, among
other things, to indemnify F-M and the other Buyer    
   Affiliates (as such term is defined in Section 8.1 of the
    Stock Purchase Agreement) with respect to certain matters.
      Capitalized terms used and not otherwise defined herein have
 the meanings specified in the Stock Purchase Agreement.

              B.  Guarantor will derive direct and substantial
   benefit from the sale of the SMCO Shares by A&A under the
Stock Purchase Agreement.                             

                C.  F-M is not willing to purchase the SMCO Shares
unless Guarantor enters into this Agreement.          

                NOW, THEREFORE, to induce F-M to purchase the SMCO
Shares from A&A, Guarantor agrees as follows:         

              1.  Guarantee.  Guarantor irrevocably guarantees
---------                 
     the timely payment and performance in full of the following
      obligations (the "Obligations"):  all amounts owed by A&A to
      F-M or to any other Buyer Affiliate under the Stock Purchase
 Agreement and any other agreements executed pursuant or
      incidental to the Stock Purchase Agreement (collectively the
   "Stock Purchase Documents") and the performance by A&A of
   all of its obligations under the Stock Purchase Agreement
and the other Stock Purchase Documents.               

              2.  Obligations Hereunder.  This Guarantee shall
---------------------     
    be irrevocable and shall continue in full force and effect

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   as the separate and independent undertaking of Guarantor.
  If, for any reason, the Obligations of A&A to be paid or
   performed under the Stock Purchase Agreement or any other
Stock Purchase Document shall not be paid or performed
promptly at the time set forth in the Stock Purchase  
Agreement or any other Stock Purchase Document for the
  payment or performance thereof (including any applicable
      grace or cure periods), Guarantor will immediately make such
     payment or perform such obligation as provided in the Stock
  Purchase Agreement or any other Stock Purchase Document,
     subject to any defenses or rights of setoff or counterclaim
    which A&A may have or assert but regardless of whether any
   Buyer Affiliate shall have taken any steps to enforce any
     rights against A&A or any other person to collect such sums
or any part thereof or with respect to any collateral.
    Payments to any Buyer Affiliate under this Guarantee shall
   be made in immediately available funds in lawful money of
    the United States of America and shall be paid immediately
 on the date on which such payments become due under the
Stock Purchase Agreement or any other Stock Purchase  
  Document (including any applicable grace period), at c/o
  Markel Corporation, 5310 Markel Road, Richmond, Virginia
   23230, or such other place in the United States as may be
designated by notice to Guarantor.  The Obligations of
   Guarantor under this Guarantee shall remain in full force
  and effect without regard to, and shall not be released,
    discharged or terminated by, any circumstance or condition
  (whether or not Guarantor shall have notice or knowledge
thereof), including, without limitation:              

               (a)  any amendment or modification of or addition
        or supplement to the Stock Purchase Agreement or any
other Stock Purchase Document;              

            (b)  any waiver, compromise, release, consent,
        extension, indulgence or other action or inaction in
      respect of the documents referred to in clause (a)
above;                                      

                (c)  any failure, omission or delay on the part of
    any Buyer Affiliate or any successor in interest
           thereto to enforce, assert or exercise any right, power
    or remedy conferred on or available to any Buyer
   Affiliate or any successor in interest thereto;

            (d)  any default by A&A or Guarantor under the
documents referred to in clause (a) above;  

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             (e)  any exercise or non-exercise of any right,
          remedy, power or privilege under or in respect of this
         Guarantee and the documents referred to in clause (a)
above;                                      

             (f)  any furnishing or acceptance of additional
         security, or any release, substitution or exchange of
any security for the Obligations;           

             (g)  any failure to give notice to Guarantor of
          the occurrence of a breach or default by A&A under the
        Stock Purchase Agreement or any other Stock Purchase
Document;                                   

              (h)  any assignment or transfer of any assets of
           A&A to any other person or corporation or other entity,
or any disposition by Guarantor or any other
        stockholder of A&A of any stock or other interest in
Buyer;                                      

              (i)  any bankruptcy, insolvency, reorganization,
      arrangement, adjustment, composition, liquidation,
  dissolution or similar proceeding involving or
  affecting A&A or any discharge of A&A therein;

               (j)  any partial prepayment, or any assignment or
   transfer, of any portion of the Obligations; or

       (k)  any other circumstance or occurrence
    whatsoever, whether similar or dissimilar to the
          foregoing, which might otherwise constitute a legal or
        equitable defense or discharge of the liabilities of
      Guarantor hereunder or which might otherwise limit
recourse against Guarantor.                 

             3.  Waivers.  Guarantor unconditionally waives:
-------                   

              (a)  notice of any of the matters referred to in
section 2;                                  

                (b)  all notices which may be required by statute,
          rule or law or otherwise to preserve any rights of any
           Buyer Affiliate or any successor to any Buyer Affiliate
against A&A or Guarantor, including, without
         limitation, notice of default, presentment and demand
        for payment and protest for non-payment or dishonor;

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             (c)  any right to the enforcement, assertion or
        exercise of any right, remedy, power or privilege by
        any Buyer Affiliate under or in respect of the Stock
  Purchase Agreement or any other Stock Purchase
Document;                                   

              (d)  any right to require any Buyer Affiliate or
         any successor to a Buyer Affiliate to proceed against
     A&A or any other person, or to proceed against or
           exhaust any security granted to secure the Obligations,
or to pursue any other remedy;              

    (e)  any requirement of diligence; and

       (f)  any notice of the acceptance of this
Guarantee.                                  

               4.  Right to Proceed Against Guarantor.  Upon any
        ----------------------------------
     default in the payment or performance of the Obligations by
A&A (after any applicable grace or cure period), the  
      obligation of Guarantor to make such payment or perform such
     obligation hereunder shall be effective immediately without
     notice.  Any Buyer Affiliate, in its sole discretion, shall
have the right to proceed first and directly against  
      Guarantor under this Guarantee without proceeding against or
     exhausting any other remedies which it may have and without
      resorting to any other security held by any Buyer Affiliate.

        5.  Reinstatement.  The obligations of the
-------------             
Guarantor under this Guarantee shall continue to be   
   effective or be automatically reinstated, as the case may
      be, if any payment made with respect to the Obligations when
    due according to the terms of the Stock Purchase Agreement
    or any other Stock Purchase Documents or this Guarantee is
    rescinded or must otherwise be restored or returned by the
 recipient upon the insolvency, bankruptcy, dissolution,
    liquidation or reorganization of A&A or Guarantor, or upon
     or as a result of the appointment of a custodian, receiver,
      trustee or other officer with similar powers with respect to
     A&A or Guarantor or any substantial part of the property of
  either, or otherwise, all as though such payment had not
been made.                                            

             6.  Subordination.  Guarantor hereby absolutely
-------------             
subordinates, both in right of payment and in time of 
    payment, any present and any future indebtedness of A&A to
      Guarantor to the indebtedness of A&A to the Buyer Affiliates
 and any successors in interest to the Buyer Affiliates.

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  Notwithstanding any payment made by Guarantor hereunder,
 Guarantor shall not be entitled to be subrogated to any
      rights of the Buyer Affiliates or any successor to the Buyer
   Affiliates until the payment in full of the principal and
   interest of the Obligations and the performance of all of
    A&A's other obligations under the Stock Purchase Agreement
and the other Stock Purchase Documents.               

             7.  Enforcement.  (a)  The Buyer Affiliates and
-----------               
 the successors to the Buyer Affiliates may enforce this
     Guarantee in their own names or otherwise, either by action
      at law, suit in equity or other proceeding, and it shall not
      be necessary to make A&A a party to any such action, suit or
    proceeding.  Guarantor stipulates that the remedies at law
      in respect of any default or threatened default by Guarantor
      in the performance of or compliance with any of the terms of
   this Guarantee are not and will not be adequate, and that
    any of such terms may be specifically enforced by a decree
for specific performance or by an injunction against  
violation of any of such terms or otherwise.          

           (b)  A separate action may be brought against
      Guarantor whether or not an action is commenced against A&A.

          (c)  Guarantor will pay all fees (including,
    without limitation, reasonable attorneys' fees), costs and
 expenses of any nature whatsoever incurred by any Buyer
Affiliate or any successor to the Buyer Affiliates in 
connection with enforcing this Guarantee.             

               8.  Termination.  Except as provided in section 5
-----------               
   hereof, the obligations of Guarantor under this Guarantee
     shall terminate upon the payment and performance in full by
A&A of all of the Obligations.                        

             9.  Representations.  Guarantor represents that
---------------           
      (a) it is a corporation duly organized, validly existing and
-                                                   
in good standing under the laws of its jurisdiction of
    incorporation and has the corporate power and authority to
   execute and deliver this Agreement, (b) the execution and
                     -
    delivery of this Agreement has been duly authorized by its
    Board of Directors, no other corporate authorization being
 necessary on its part, (c) this Agreement has been duly
-     
    executed and delivered by it and constitutes its valid and
      binding agreement and (d) the execution and delivery of this
-       
      Agreement will not violate any provisions of its Articles of
Incorporation or By-laws.                             

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            10.  Covenants.  Guarantor agrees that it will
---------               
comply with the following covenants:                  

             (a)  Guarantor will not directly or indirectly,

                     (i)  consolidate with or merge into any other
              Person or permit any other Person to consolidate
with or merge into it; or         

             (ii)  sell, transfer, lease, abandon or
               otherwise dispose of all or substantially all its
property, assets and undertakings;

         provided that Guarantor may consolidate with or merge
--------                                    
         into another corporation, and another corporation may
    be merged into it, if the surviving corporation,
        immediately after giving effect to such transaction,
         shall have a Consolidated Net Worth at least equal to
           Guarantor's Consolidated Net Worth immediately prior to
  giving effect to such transaction, and if such
          surviving corporation shall assume, in a manner and in
      form and substance reasonably satisfactory to F-M,
Guarantor's obligations hereunder.          

                (b)  Guarantor will deliver (in duplicate) to you:

                    (i)  within 45 days after the end of each of
              the first three quarterly fiscal periods in each
              of its fiscal years, consolidated balance sheets
                of Guarantor and its Subsidiaries as at the end of
      such period and the related consolidated
            statements of income, stockholders' equity and
                changes in financial position of Guarantor and its
              Subsidiaries for such period and (in the case of
             the second and third quarterly periods) 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 previous fiscal year, all in reasonable
               detail and certified as complete and correct by a
       principal financial officer of Guarantor;

                   (ii)  within 90 days after the end of each of
              its fiscal years, consolidated balance sheets of
             Guarantor and its Subsidiaries as at the end of
               such year and the related consolidated statements
            of income, stockholders' equity and changes in

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     financial position of Guarantor and its
              Subsidiaries for such fiscal year, setting forth
               in each case in comparative form the consolidated
          figures for the previous fiscal year, all in
                reasonable detail, accompanied by a report thereon
            of independent certified public accountants of
                recognized national standing selected by it, which
       report shall state that such consolidated
               financial statements present fairly the financial
              position of Guarantor and its Subsidiaries as at
          the dates indicated and the results of their
                operations and changes in their financial position
          for the periods indicated in conformity with
              generally accepted accounting principles applied
               on a basis consistent with prior years (except as
              otherwise specified in such report) and that the
               audit by such accountants in connection with such
                consolidated financial statements has been made in
         accordance with generally accepted auditing
standards.                        

           11.  Notices.  All notices hereunder shall be
-------                 
personally delivered or sent by prepaid certified or  
registered mail, return receipt requested, (i) if to  
                                   -
 Guarantor, to Alexander & Alexander Services Inc., 1211
  Avenue of the Americas, New York, New York 10036, to the
attention of general counsel, and (ii) if to any Buyer
                  --
      Affiliate, to Fairfax Financial Holdings Limited, Suite 800,
  900 Wellington Street West, Toronto, Ontario, Canada M5J
2N7, to the attention of V. Prem Watsa, and to Markel 
      Corporation, 4551 Cox Road, Richmond, Virginia 23260, to the
    attention of Steven A. Markel, or at such other address as
 may be specified by written notice to each other party.

           12.  Jurisdiction.  Guarantor irrevocably and
------------            
 unconditionally (a) submits itself to the non-exclusive
-                   
 jurisdiction of courts of the State of New York and the
  federal courts of the Southern District of New York with
     respect to any action, suit or proceeding arising out of or
relating to this Agreement or for the recognition or  
    enforcement of any judgment in respect thereof, (b) waives
                                             -
any objection to the venue of any such action, suit or
      proceeding in such court and (c) agrees that service upon it
       -
in the manner provided for notice in Section 11 shall 
    constitute valid and effective service with respect to any
such action, suit or proceeding.                      

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                13.  Miscellaneous.  If any term of this Guarantee
-------------           
 or any application thereof shall be invalid, illegal or
      unenforceable, the remainder of this Guarantee and any other
     application of such term shall not be affected thereby.  No
   delay or omission in exercising any right hereunder shall
     operate as a waiver of such right or any other right.  This
      Guarantee shall be binding upon, inure to the benefit of and
be enforceable by Guarantor, F-M and the other Buyer  
  Affiliates, and their respective successors and assigns.
      This Guarantee shall be governed and construed in accordance
with the laws of the State of New York.               

           IN WITNESS WHEREOF, Guarantor has caused this
    Guarantee to be duly executed as of the day and year first
above written.                                        

                     ALEXANDER & ALEXANDER SERVICES INC.

By:           
                      --------------------------
                       James B. Lockhart III
                              Vice President and Treasurer

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                                           EXHIBIT I
                                                 [Non-Contingent
                                                  Buyer Guarantee]

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

      FAIRFAX FINANCIAL HOLDINGS LIMITED

      MARKEL CORPORATION

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

     GUARANTEE AGREEMENT

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

     Dated as of __________________ __, 1987

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

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                                                         EXHIBIT I

     GUARANTEE AGREEMENT

                GUARANTEE AGREEMENT (the "Agreement"), dated as of
     December   , 1987, from FAIRFAX FINANCIAL HOLDINGS LIMITED,
--                                  
  a Canada corporation, and MARKEL CORPORATION, a Virginia
      corporation (together, the "Guarantors"), to and in favor of
      ALEXANDER & ALEXANDER, INC., a Maryland corporation ("A&A").

      R E C I T A L S:
     - - - - - - - -

               A.  Pursuant to a Stock Purchase Agreement, dated
as of October 7, 1987 (the "Stock Purchase Agreement")
  between A&A and F-M Acquisition Corporation, an Illinois
    corporation ("Buyer"), A&A has agreed to sell to Buyer all
of the outstanding shares of capital stock (the "SMCO 
 Shares") of Shand, Morahan & Company, Inc.  Capitalized
terms used and not otherwise defined herein have the  
meanings specified in the Stock Purchase Agreement.   

               B.  Guarantors will derive direct and substantial
benefit from the purchase of the SMCO Shares by Buyer.

        C.  The purchase price for the SMCO Shares
consists of an immediately payable component and two  
deferred components, the Deferred Purchase Price.     

               D.  A&A is not willing to sell the SMCO Shares to
Buyer unless the Guarantors enter into this Agreement.

            NOW, THEREFORE, to induce A&A to sell the SMCO
Shares to Buyer, Guarantors agree as follows:         

                1.  Guarantee.  Guarantors, jointly and severally,
---------                 
 irrevocably guarantee the timely payment in full of the
     following obligations (the "Obligations"):  all amounts due
      and payable by Buyer and Seller pursuant to clauses (ii) and
 (iv) of Section 1.4(a) of the Stock Purchase Agreement.

              2.  Obligations Hereunder.  This Guarantee shall
---------------------     
    be irrevocable and shall continue in full force and effect
as the separate and independent undertaking of each   
     Guarantor.  If, for any reason, the Obligations of Buyer to
      be paid under the Stock Purchase Agreement shall not be paid
promptly at the time set forth in the Stock Purchase  
     Agreement for the payment thereof (including any applicable

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  grace or cure periods), Guarantors will immediately make
such payment to A&A as provided in the Stock Purchase 
   Agreement, subject to any defenses or rights of setoff or
    counterclaim which Buyer may have or assert but regardless
  of whether A&A shall have taken any steps to enforce any
  rights against Buyer or any other Guarantor or any other
 person to collect such sums or any part thereof or with
respect to any collateral.  Payments to A&A under this
   Guarantee shall be made in immediately available funds in
   lawful money of the United States of America and shall be
    paid immediately on the date on which such payments become
due under the Stock Purchase Agreement (including any 
applicable grace period), whether at maturity, by     
     declaration or by acceleration, following the occurrence of
     a default or otherwise, at 1211 Avenue of the Americas, New
   York, New York.  The obligations of Guarantors under this
 Guarantee shall remain in full force and effect without
regard to, and shall not be released, discharged or   
      terminated by, any circumstance or condition (whether or not
Guarantors shall have notice or knowledge thereof),   
including, without limitation:                        

               (a)  any amendment or modification of or addition
        or supplement to the Stock Purchase Agreement or any
           other agreements executed pursuant or incidental to the
      Stock Purchase Agreement (collectively, the "Stock
Purchase Documents");                       

            (b)  any waiver, compromise, release, consent,
        extension, indulgence or other action or inaction in
      respect of the documents referred to in clause (a)
above;                                      

                (c)  any failure, omission or delay on the part of
       A&A or any successor in interest to A&A to enforce,
           assert or exercise any right, power or remedy conferred
          on or available to A&A or any successor in interest to
A&A;                                        

               (d)  any default by Buyer or Guarantors under the
documents referred to in clause (a) above;  

             (e)  any exercise or non-exercise of any right,
          remedy, power or privilege under or in respect of this
         Guarantee and the documents referred to in clause (a)
above;                                      

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             (f)  any furnishing or acceptance of additional
         security, or any release, substitution or exchange of
any security for the Obligations;           

               (g)  any failure to give notice to Guarantors (in
        their capacity as Guarantors) of the occurrence of a
        Potential Event of Default or Event of Default under
   the Stock Purchase Agreement or any other Stock
Purchase Document;                          

              (h)  any assignment or transfer of any assets of
     Buyer to any other person or corporation or other
         entity, or any disposition by any Guarantor or any of
         the other stockholders of Buyer of any stock or other
interest in Buyer;                          

              (i)  any bankruptcy, insolvency, reorganization,
      arrangement, adjustment, composition, liquidation,
  dissolution or similar proceeding involving or
      affecting Buyer or any discharge of Buyer therein;

               (j)  any partial prepayment, or any assignment or
   transfer, of any portion of the Obligations; or

       (k)  any other circumstance or occurrence
    whatsoever, whether similar or dissimilar to the
          foregoing, which might otherwise constitute a legal or
        equitable defense or discharge of the liabilities of
       Guarantors hereunder or which might otherwise limit
recourse against Guarantors.                

             3.  Waivers.  Guarantors unconditionally waive:
-------                   

              (a)  notice of any of the matters referred to in
section 2;                                  

                (b)  all notices which may be required by statute,
          rule or law or otherwise to preserve any rights of A&A
        or any successor to A&A against Buyer or Guarantors,
     including, without limitation, notice of default,
           presentment and demand for payment and protest for non-
payment or dishonor;                        

             (c)  any right to the enforcement, assertion or
        exercise of any right, remedy, power or privilege by
           A&A under or in respect of the Stock Purchase Agreement
or any other Stock Purchase Document;       

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               (d)  any right to require A&A or any successor to
           A&A to proceed against Buyer or any other person, or to
      proceed against or exhaust any security granted to
          secure the Obligations, or to pursue any other remedy;

    (e)  any requirement of diligence; and

       (f)  any notice of the acceptance of this
Guarantee.                                  

                4.  Right to Proceed Against Guarantors.  Upon any
         -----------------------------------
   default in the payment of the Obligations by Buyer (after
 any applicable grace or cure period), the obligation of
     Guarantor to make such payment hereunder shall be effective
   immediately without notice.  A&A, in its sole discretion,
    shall have the right to proceed first and directly against
    Guarantors under this Guarantee without proceeding against
or exhausting any other remedies which it may have and
without resorting to any other security held by A&A.  

         5.  Reinstatement.  The obligations of each
-------------             
Guarantor under this Guarantee shall continue to be   
   effective or be automatically reinstated, as the case may
      be, if any payment made with respect to the Obligations when
   due or pursuant to acceleration according to the terms of
     the Stock Purchase Agreement is rescinded or must otherwise
be restored or returned by the recipient upon the     
insolvency, bankruptcy, dissolution, liquidation or   
    reorganization of Buyer or any other Guarantor, or upon or
  as a result of the appointment of a custodian, receiver,
      trustee or other officer with similar powers with respect to
     Buyer or any other Guarantor or any substantial part of the
      property of either, or otherwise, all as though such payment
     had not been made.  If an event permitting the acceleration
   of the Obligations shall at any time have occurred and be
 continuing, and such acceleration shall at such time be
     prevented by reason of the pendency against Buyer of a case
  or proceeding under a bankruptcy or insolvency law, each
   Guarantor agrees that, for purposes of this Guarantee and
    its obligations hereunder, the Obligations shall be deemed
to have been accelerated with the same effect as if   
accelerated in accordance with the terms of the Stock 
Purchase Agreement.                                   

              6.  Subordination.  Guarantors hereby absolutely
-------------             
subordinate, both in right of payment and in time of  
      payment, any present and any future indebtedness of Buyer to
Guarantors to the indebtedness of Buyer to A&A and any

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     successors in interest to A&A.  Notwithstanding any payment
made by Guarantors hereunder, Guarantors shall not be 
entitled to be subrogated to any rights of A&A or any 
     successor to A&A until the payment in full of the principal
and interest of the Obligations.                      

              7.  Enforcement.  (a)  A&A and the successors to
-----------               
A&A may enforce this Guarantee in their own names or  
     otherwise, either by action at law, suit in equity or other
   proceeding, and it shall not be necessary to make Buyer a
   party to any such action, suit or proceeding.  Guarantors
      stipulate that the remedies at law in respect of any default
      or threatened default by Guarantors in the performance of or
    compliance with any of the terms of this Guarantee are not
     and will not be adequate, and that any of such terms may be
    specifically enforced by a decree for specific performance
    or by an injunction against violation of any of such terms
or otherwise.                                         

           (b)  A separate action may be brought against
  Guarantors whether or not an action is commenced against
Buyer.                                                

           (c)  Guarantors will pay all fees (including,
    without limitation, reasonable attorneys' fees), costs and
  expenses of any nature whatsoever incurred by A&A or any
successor to A&A in connection with enforcing this    
Guarantee.                                            

               8.  Termination.  Except as provided in section 5
-----------               
    hereof, the obligations of Guarantors under this Guarantee
   shall terminate upon the payment in full to A&A of all of
the Obligations.                                      

      9.  Representations.  Each of Guarantors
---------------           
 represents that (a) it is a corporation duly organized,
-                   
     validly existing and in good standing under the laws of its
   jurisdiction of incorporation and has the corporate power
      and authority to execute and deliver this Agreement, (b) the
                                                       -
execution and delivery of this Agreement has been duly
  authorized by its Board of Directors, no other corporate
authorization being necessary on its part, (c) this   
                                   -
  Agreement has been duly executed and delivered by it and
 constitutes its valid and binding agreement and (d) the
                                             -
   execution and delivery of this Agreement will not violate
     any provisions of its Articles of Incorporation or By-laws.

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            10.  Covenants.  Each Guarantor agrees that it
---------               
will deliver (in duplicate) to you:                   

              (i)  within 45 days after the end of each of the
       first three quarterly fiscal periods in each of its
     fiscal years, consolidated balance sheets of such
        Guarantor and its Subsidiaries as at the end of such
     period and the related consolidated statements of
         income, stockholders' equity and changes in financial
       position of such Guarantor and its Subsidiaries for
        such period and (in the case of the second and third
           quarterly periods) 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 previous fiscal year, all in reasonable detail
        and certified as complete and correct by a principal
financial officer of such Guarantor;        

             (ii)  within 90 days after the end of each of its
     fiscal years, consolidated balance sheets of such
        Guarantor and its Subsidiaries as at the end of such
           year and the related consolidated statements of income,
          stockholders' equity and changes in financial position
          of such Guarantor and its Subsidiaries for such fiscal
        year, setting forth in each case in comparative form
          the consolidated figures for the previous fiscal year,
     all in reasonable detail, accompanied by a report
        thereon of independent certified public or chartered
           accountants of recognized national standing selected by
       it, which report shall state that such consolidated
     financial statements present fairly the financial
         position of such Guarantor and its Subsidiaries as at
           the dates indicated and the results of their operations
           and changes in their financial position for the periods
   indicated in conformity with generally accepted
       accounting principles applied on a basis consistent
           with prior years (except as otherwise specified in such
     report) and that the audit by such accountants in
          connection with such consolidated financial statements
       has been made in accordance with generally accepted
auditing standards.                         

            11.  Notices.  All  notices hereunder shall be
-------                 
personally delivered or sent by prepaid certified or  
registered mail, return receipt requested, (i) if the 
                                   -
  Guarantors, to Fairfax Financial Holdings Limited, Suite
   800, 900 Wellington Street West, Toronto, Ontario, Canada

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   M5J 2N3, to the attention of V. Prem Watsa, and to Markel
     Corporation, 5310 Markel Road, Richmond, Virginia 23230, to
   the attention of Steven A. Markel, and (ii) if to A&A, at
                            --
      its address set forth in paragraph 2 above, to the attention
    of its general counsel, or at such other address as may be
specified by written notice to each other party.      

                12.  Jurisdiction.  Each Guarantor irrevocably and
------------            
 unconditionally (a) submits itself to the non-exclusive
-                   
 jurisdiction of courts of the State of New York and the
  federal courts of the Southern District of New York with
     respect to any action, suit or proceeding arising out of or
relating to this Agreement or for the recognition or  
    enforcement of any judgment in respect thereof, (b) waives
                                             -
any objection to the venue of any such action, suit or
      proceeding in such court and (c) agrees that service upon it
       -
in the manner provided for notice in Section 11 shall 
    constitute valid and effective service with respect to any
such action, suit or proceeding.                      

                13.  Miscellaneous.  If any term of this Guarantee
-------------           
 or any application thereof shall be invalid, illegal or
      unenforceable, the remainder of this Guarantee and any other
     application of such term shall not be affected thereby.  No
   delay or omission in exercising any right hereunder shall
     operate as a waiver of such right or any other right.  This
      Guarantee shall be binding upon, inure to the benefit of and
 be enforceable by Guarantors, A&A, and their respective
   successors and assigns.  This Guarantee shall be governed
   and construed in accordance with the laws of the State of
New York.                                             

             IN WITNESS WHEREOF, Guarantors have caused this
    Guarantee to be duly executed as of the day and year first
above written.                                        

                              FAIRFAX FINANCIAL HOLDINGS LIMITED

                              By:_______________________________
                              Title:____________________________

              MARKEL CORPORATION

                              By:_______________________________
                              Title:____________________________

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                                                         EXHIBIT J
                                         [Overall Buyer Guarantee]

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

      FAIRFAX FINANCIAL HOLDINGS LIMITED

      MARKEL CORPORATION

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

     GUARANTEE AGREEMENT

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

     Dated as of __________________ __, 1987

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

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                                                         EXHIBIT J

     GUARANTEE AGREEMENT

                GUARANTEE AGREEMENT (the "Agreement"), dated as of
     ________ __, 1987, from FAIRFAX FINANCIAL HOLDINGS LIMITED,
  a Canada corporation, and MARKEL CORPORATION, a Virginia
  corporation (together, "Guarantors"), to and in favor of
      ALEXANDER & ALEXANDER, INC., a Maryland corporation ("A&A"),
     Alexander & Alexander Services Inc., a Maryland corporation
     ("Services"), any direct or indirect Subsidiary (as defined
in the Stock Purchase Agreement referred to below) of 
      Services and their officers and directors (collectively, the
"A&A Affiliates").                                    

      R E C I T A L S:
     ---------------

               A.  Pursuant to a Stock Purchase Agreement, dated
as of October 7, l987 (the "Stock Purchase Agreement" 
  between A&A and F-M Acquisition Corporation, an Illinois
 corporation ("Buyer"), A&A has sold to Buyer all of the
    outstanding shares of capital stock (the "SMCO Shares") of
    Shand, Morahan & Company, Inc.  Capitalized terms used and
     not otherwise defined herein have the meanings specified in
the Stock Purchase Agreement.                         

               B.   Under the Stock Purchase Agreement, Buyer is
required to pay Seller the Deferred Purchase Price.   

                C.   Guarantors will derive direct and substantial
      benefit from guaranteeing the obligations of Buyer under the
Stock Purchase Agreement.                             

            NOW, THEREFORE, to induce A&A to sell the SMCO
Shares to Buyer, Guarantors agree as follows:         

                1.  Guarantee.  Guarantors, jointly and severally,
---------                 
     irrevocably guarantee the timely payment and performance in
     full of the following obligations (the "Obligations"):  all
   amounts comprising the Deferred Purchase Price, all other
 amounts owed by Buyer or its Subsidiaries to A&A or any
    other A&A Affiliate under the Stock Purchase Agreement and
     any other agreements executed pursuant or incidental to the
    Stock Purchase Agreement (collectively the "Stock Purchase
Documents") and the performance by Buyer of all of its
      obligations under the Stock Purchase Agreement and the other
Stock Purchase Documents.                             

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              2.  Obligations Hereunder.  This Guarantee shall
---------------------     
    be irrevocable and shall continue in full force and effect
as the separate and independent undertaking of each   
    Guarantor.  If, for any reason, the Obligations to be paid
   or- performed under the Stock Purchase Agreement or other
 Stock Purchase Documents shall not be paid or performed
promptly at the time set forth in the Stock Purchase  
 Agreement or the other Stock Purchase Documents for the
  payment or performance thereof (including any applicable
  grace or cure periods), Guarantors will immediately make
such payment to or perform such obligation for A&A as 
  provided in the Stock Purchase Agreement and other Stock
  Purchase Documents, subject to any defenses or rights of
    setoff or counterclaim which Buyer or its Subsidiaries may
   have or assert but regardless of whether A&A or any other
 A&A Affiliate shall have taken any steps to enforce any
  rights against Buyer or any other Guarantor or any other
 person to collect such sums or any part thereof or with
      respect to any collateral.  Payments to A&A or any other A&A
     Affiliate under this Guarantee shall be made in immediately
 available funds in lawful money of the United States of
    America and shall be paid immediately on the date on which
     such payments become due under the Stock Purchase Agreement
or the other Stock Purchase Documents (including any  
applicable grace period), whether at maturity, by     
     declaration or by acceleration, following the occurrence of
     a default or otherwise, at 1211 Avenue of the Americas, New
   York, New York.  The obligations of Guarantors under this
 Guarantee shall remain in full force and effect without
regard to, and shall not be released, discharged or   
      terminated by, any circumstance or condition (whether or not
Guarantors shall have notice or knowledge thereof),   
including, without limitation:                        

               (a)  any amendment or modification of or addition
        or supplement to the Stock Purchase Agreement or any
other Stock Purchase Document;              

            (b)  any waiver, compromise, release, consent,
        extension, indulgence or other action or inaction in
      respect of the documents referred to in clause (a)
above;                                      

                (c)  any failure, omission or delay on the part of
      A&A or any other A&A Affiliate or any successor in
       interest thereto to enforce, assert or exercise any
           right, power or remedy conferred on or available to A&A

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           or any other A&A Affiliate or any successor in interest
thereto;                                    

                (d)  any default by Buyer, any Subsidiary of Buyer
           or Guarantors under the documents referred to in clause
(a) above;                                  

             (e)  any exercise or non-exercise of any right,
          remedy, power or privilege under or in respect of this
         Guarantee and the documents referred to in clause (a)
above;                                      

             (f)  any furnishing or acceptance of additional
         Security, or any release, substitution or exchange of
any security for the Obligations;           

               (g)  any failure to give notice to Guarantors (in
        their capacity as Guarantors) of the occurrence of a
        Potential Event of Default or Event of Default under
         the Stock Purchase Agreement or any breach or default
       by Buyer or any Subsidiary of Buyer under any other
Stock Purchase Document;                    

              (h)  any assignment or transfer of any assets of
           Buyer or any Subsidiary of Buyer to any other Person or
          corporation or other entity, or any disposition by any
          Guarantor or any of the other stockholders of Buyer of
any stock or other interest in Buyer;       

              (i)  any bankruptcy, insolvency, reorganization,
      arrangement, adjustment, composition, liquidation,
  dissolution or similar proceeding involving or
     affecting Buyer or any Subsidiary or Buyer or any
          discharge of Buyer or any Subsidiary of Buyer therein;

               (j)  any partial prepayment, or any assignment or
   transfer, of any portion of the Obligations; or

       (k)  any other circumstance or occurrence
    whatsoever, whether similar or dissimilar to the
          foregoing, which might otherwise constitute a legal or
        equitable defense or discharge of the liabilities of
       Guarantors hereunder or which might otherwise limit
recourse against Guarantors.                

             3.  Waivers.  Guarantors unconditionally waive:
-------                   

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           (a)  notice of any of the matters referred to
section 2;                                  

                (b)  all notices which may be required by statute,
          rule or law or otherwise to preserve any rights of A&A
       or any other A&A Affiliate or any successor thereto
           against Buyer or any Subsidiary of Buyer or Guarantors,
     including, without limitation, notice of default,
           presentment and demand for payment and protest for non-
payment or dishonor;                        

             (c)  any right to the enforcement, assertion or
        exercise of any right, remedy, power or privilege by
         A&A or any other A&A Affiliate under or in respect of
   the Stock Purchase Agreement or any other Stock
Purchase Document;                          

            (d)  any right to require A&A or any other A&A
         Affiliate or any successor thereto to proceed against
         Buyer or any Subsidiary of Buyer or any other person,
         or to proceed against or exhaust any security granted
     to secure the Obligations, or to pursue any other
remedy;                                     

    (e)  any requirement of diligence; and

       (f)  any notice of the acceptance of this
Guarantee.                                  

                4.  Right to Proceed Against Guarantors.  Upon any
         -----------------------------------
     default in the payment or performance of the Obligations by
Buyer (after any applicable grace or cure period), the
      obligation of Guarantor to make such payment or perform such
     obligation hereunder shall be effective immediately without
notice.  A&A or any other A&A Affiliate, in its sole  
discretion, shall have the right to proceed first and 
  directly against Guarantors under this Guarantee without
      proceeding against or exhausting any other remedies which it
      may have and without resorting to any other security held by
A&A or any other A&A Affiliate.                       

         5.  Reinstatement.  The obligations of each
-------------             
Guarantor under this Guarantee shall continue to be   
   effective or be automatically reinstated, as the case may
      be, if any payment made with respect to the Obligations when
   due or pursuant to acceleration according to the terms of
  the Stock Purchase Agreement or the other Stock Purchase
    Documents or this Guarantee is rescinded or must otherwise

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be restored or returned by the recipient upon the     
insolvency, bankruptcy, dissolution, liquidation or   
 reorganization of Buyer, any Subsidiary of Buyer or any
    other Guarantor, or upon or as a result of the appointment
 of a custodian, receiver, trustee or other officer with
 similar powers with respect to Buyer, any Subsidiary of
     Buyer or any other Guarantor or any substantial part of the
      property of either, or otherwise, all as though such payment
     had not been made.  If an event permitting the acceleration
   of the Obligations shall at any time have occurred and be
 continuing, and such acceleration shall at such time be
     prevented by reason of the pendency against Buyer of a case
  or proceeding under a bankruptcy or insolvency law, each
   Guarantor agrees that, for purposes of this Guarantee and
    its obligations hereunder, the Obligations shall be deemed
to have been accelerated with the same effect as if   
accelerated in accordance with the terms of the Stock 
Purchase Agreement.                                   

              6.  Subordination.  Guarantors hereby absolutely
-------------             
subordinate, both in right of payment and in time of  
      payment, any present and any future indebtedness of Buyer or
      any Subsidiary of Buyer to Guarantors to the indebtedness of
Buyer and any such Subsidiary to A&A or any other A&A 
Affiliate and any successors in interest thereto.     
   Notwithstanding any payment made by Guarantors hereunder,
  Guarantors shall not be entitled to be subrogated to any
   rights of A&A or any other A&A Affiliate or any successor
thereto until the payment in full of the principal and
   interest of the Obligations and the performance of all of
   Buyer's and Buyer's Subsidiaries' other obligations under
   the Stock Purchase Agreement and the other Stock Purchase
Documents.                                            

          7.  Enforcement.  (a)  A&A and the other A&A
-----------               
Affiliates and the successors thereto may enforce this
     Guarantee in their own names or otherwise, either by action
      at law, suit in equity or other proceeding, and it shall not
 be necessary to make Buyer or any of its Subsidiaries a
   party to any such action, suit or proceeding.  Guarantors
      stipulate that the remedies at law in respect of any default
      or threatened default by Guarantors in the performance of or
    compliance with any of the terms of this Guarantee are not
     and will not be adequate, and that any of such terms may be
    specifically enforced by a decree for specific performance
    or by an injunction against violation of any of such terms
or otherwise.                                         

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           (b)  A separate action may be brought against
  Guarantors whether or not an action is commenced against
Buyer or any of its Subsidiaries.                     

           (c)  Guarantors will pay all fees (including,
    without limitation, reasonable attorneys' fees), costs and
  expenses of any nature whatsoever incurred by A&A or any
    other A&A Affiliate or any successor thereto in connection
with enforcing this Guarantee.                        

               8.  Termination.  Except as provided in section 5
-----------               
    hereof, the obligations of Guarantors under this Guarantee
     shall terminate upon the payment and performance in full to
     A&A and the other A&A Affiliates of all of the Obligations.

      9.  Representations.  Each of Guarantors
---------------           
 represents that (a) it is a corporation duly organized,
-                   
     validly existing and in good standing under the laws of its
   jurisdiction of incorporation and has the corporate power
      and authority to execute and deliver this Agreement, (b) the
                                                       -
execution and delivery of this Agreement has been duly
  authorized by its Board of Directors, no other corporate
authorization being necessary on its part, (c) this   
                                   -
  Agreement has been duly executed and delivered by it and
 constitutes its valid and binding agreement and (d) the
                                             -
   execution and delivery of this Agreement will not violate
     any provisions of its Articles of Incorporation or By-laws.

            10.  Covenants.  Each Guarantor agrees that it
---------               
will comply with the following covenants:             

             (a)  Such Guarantor will not, directly or indi-
        rectly, sell, assign, pledge or otherwise dispose of
          any shares of stock, now or hereafter acquired, of (or
           warrants, rights or options to acquire stock of) Buyer,
         except to one of its Wholly-Owned Subsidiaries or the
        other Guarantor and except for directors' qualifying
shares if required by applicable law.       

      (b)  Such Guarantor will not directly or
indirectly,                                 

                     (i)  consolidate with or merge into any other
              Person or permit any other Person to consolidate
with or merge into it; or         

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             (ii)  sell, transfer, lease, abandon or
               otherwise dispose of all or substantially all its
property, assets and undertakings;

    provided that such Guarantor may consolidate with or merge
--------                                              
  into another corporation, and another corporation may be
   merged into it, if the surviving corporation, immediately
after giving effect to such transaction, shall have a 
   Consolidated Net Worth at least equal to such Guarantor's
      Consolidated Net Worth immediately prior to giving effect to
   such transaction, and if such surviving corporation shall
assume, in a manner in form and substance reasonably  
satisfactory to Seller, such Guarantor's obligations  
hereunder.                                            

                (c)  Such Guarantor will deliver (in duplicate) to
you:                                        

                    (i)  within 45 days after the end of each of
              the first three quarterly fiscal periods in each
              of its fiscal years, consolidated balance sheets
              of such Guarantor and its Subsidiaries as at the
             end of such period and the related consolidated
            statements of income, stockholders' equity and
             changes in financial position of such Guarantor
              and its Subsidiaries for such period and (in the
             case of the second and third quarterly periods)
              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 previous fiscal year, all in reasonable
               detail and certified as complete and correct by a
            principal financial officer of such Guarantor;

                   (ii)  within 90 days after the end of each of
              its fiscal years, consolidated balance sheets of
               such Guarantor and its Subsidiaries as at the end
       of such year and the related consolidated
            statements of income, stockholders' equity and
             changes in financial position of such Guarantor
                and its Subsidiaries for such fiscal year, setting
        forth in each case in comparative form the
                consolidated figures for the previous fiscal year,
               all in reasonable detail, accompanied by a report
        thereon of independent certified public or
          chartered accountants of recognized national
               standing selected by it, which report shall state

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         that such consolidated financial statements
           present fairly the financial position of such
            Guarantor and its Subsidiaries as at the dates
               indicated and the results of their operations and
         changes in their financial position for the
            periods indicated in conformity with generally
               accepted accounting principles applied on a basis
              consistent with prior years (except as otherwise
             specified in such report) and that the audit by
      such accountants in connection with such
                consolidated financial statements has been made in
         accordance with generally accepted auditing
standards.                        

           11.  Notices.  All notices hereunder shall be
-------                 
personally delivered or sent by prepaid certified or  
registered mail, return receipt requested, (i) if to  
                                   -
  Guarantors, to Fairfax Financial Holdings Limited, Suite
   800, 900 Wellington Street West, Toronto, Ontario, Canada
   M5J 2N7, to the attention of V. Prem Watsa, and to Markel
     Corporation, 5310 Markel Road, Richmond, Virginia 23230, to
      the attention of Steven A. Markel, and (ii) if to A&A or any
                            --
      other A&A Affiliate, at its address set forth in paragraph 2
    above, to the attention of its general counsel, or at such
     other address as may be specified by written notice to each
other party.                                          

                12.  Jurisdiction.  Each Guarantor irrevocably and
------------            
unconditionally (a) submits itself to the nonexclusive
-                   
 jurisdiction of courts of the State of New York and the
  federal courts of the Southern District of New York with
     respect to any action, suit or proceeding arising out of or
relating to this Agreement or for the recognition or  
    enforcement of any judgment in respect thereof, (b) waives
                                             -
any objection to the venue of any such action, suit or
      proceeding in such court and (c) agrees that service upon it
       -
in the manner provided for notice in Section II shall 
    constitute valid and effective service with respect to any
such action, suit or proceeding.                      

                13.  Miscellaneous.  If any term of this Guarantee
-------------           
 or any application thereof shall be invalid, illegal or
      unenforceable, the remainder of this Guarantee and any other
     application of such term shall not be affected thereby.  No
   delay or omission in exercising any right hereunder shall
     operate as a waiver of such right or any other right.  This
      Guarantee shall be binding upon, inure to the benefit of and
     be enforceable by Guarantors, A&A, the other A&A Affiliates

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      and their respective successors and assigns.  This Guarantee
     shall be governed and construed in accordance with the laws
of the State of New York.                             

             IN WITNESS WHEREOF, Guarantors have caused this
    Guarantee to be duly executed as of the day and year first
above written.                                        

                                FAIRFAX FINANCIAL HOLDINGS
                 LIMITED

                                   By: _________________________

                                   Title:_______________________

                        MARKEL CORPORATION

                                   By:__________________________

                                   Title:_______________________

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                                                         EXHIBIT K

                                                   October 7, 1987

Alexander & Alexander Inc.                            
1211 Avenue of the Americas                           
New York, New York 10036                              

Dear Sirs:                                            

 I understand that you are agreeing,
    contemporaneously herewith, to sell all of the outstanding
stock of Shand, Morahan & Company, Inc. ("SMCO") to   
                                                           ---------
  pursuant to that certain Stock Purchase Agreement (the
"Agreement"), dated as of October 7, 1987, between    
                                                          ----------
and you, a copy of which is attached hereto.  I have  
  carefully reviewed the Agreement in connection with this
   letter.  Capitalized terms used and not otherwise defined
herein have the meanings specified in the Agreement.  

              I recognize that you are relying on my statement
      in paragraph 1 below, in addition to information provided to
   you by others, including, without limitation, independent
     certified public accountants, attorneys, your employees who
have had supervisory responsibility for SMCO and its  
      subsidiaries (including those employees who have served from
     time to time as members of the Boards of Directors of SMCO,
EIC, ESI or ICE) and other agents.                    

         1.  To my actual knowledge, information and
    belief, the representations and warranties with respect to
SMCO, EIC, ESI and ICE contained in Article 2 of the  
 Agreement and in the Exhibits attached thereto, and the
      information contained in the Schedules attached thereto with
      respect to SMCO, EIC, ESI and ICE, did not as of the date of
   such Agreement contain any untrue statement of a material
      fact or omit to state a material fact necessary, in light of
   the circumstances under which they were made, to make the
      statements and information contained therein not misleading;
provided that I express no opinion with respect to the
--------                                              
  representations, warranties and information described in
  Annex A to this Agreement.  With respect to the reserves
     shown on the unaudited financial statements of SMCO and its
 subsidiaries as at June 30, 1987 in respect of business
    booked prior to December 31, 1986, to my actual knowledge,
      information and belief there were no events or circumstances
      known to me at the time such reserves were established which
      would have then required any material increase in the amount
   of such reserves; provided that this representation shall
--------          

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      Alexander & Alexander Inc.     -2-        September 30, 1987

   not be deemed to be breached in the event that additional
    reserves are developed after the date hereof for any prior
     period or year-end audit adjustments are made in accordance
      with generally accepted accounting principles and consistent
with prior years' practice.                           

           2.  I will, within the purview of my assigned
responsibilities and the directions of the Board of   
     Directors of SMCO, ESI, EIC or ICE, as the case may be, use
my best efforts to ensure that SMCO, ESI, EIC and ICE 
      conduct their operations in compliance with Sections 4.1 and
4.2 of the Agreement, and will cooperate with you in  
      carrying out your obligations under, and in consummating the
transactions contemplated by, the Agreement.          

           3.  I will, within the purview of my assigned
responsibilities and the directions of the Board of   
     Directors of SMCO, ESI, EIC or ICE, as the case may be, use
my best efforts to ensure that SMCO, ESI, EIC and ICE 
conduct their businesses in such a manner so that the 
   representations and warranties contained in Article II of
    the Agreement shall continue to be true and correct in all
material respects on and as of the Closing Date.      

          4.  I will promptly inform you of any event,
   condition or circumstance occurring following the date of
   this letter until the Closing Date of which I have actual
 knowledge that will constitute a violation or breach by
     Seller of the Agreement, that does not comply with Sections
4.1 and 4.2 of the Agreement, or that would cause the 
   representations and warranties contained in Article II of
    the Agreement not to be true and correct as of the Closing
Date.                                                 

                       Very truly yours,

            [Name]

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       Annex A

I  express  no  opinion  with  respect  to the representations, warranties      
and  information  contained  in  the  following  paragraphs  of Article II      
of the Stock Purchase Agreement By and Between F-M Acuuisition Corporation      
and Alexander & Alexander Inc. dated as of October 7, 1987:                     

1.  2.23 with respect to Federal and State income tax returns of SMCO only.     

2.  2.25                                                                        

3.  2.35                                                                        

4.  2.37                                                                        

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                                                         EXHIBIT M
                                            [Alii Buyer Guarantee]

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

      FAIRFAX FINANCIAL HOLDINGS LIMITED

      MARKEL CORPORATION

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

     GUARANTEE AGREEMENT

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

     Dated as of __________________ __, 1987

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

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     GUARANTEE AGREEMENT

                GUARANTEE AGREEMENT (the "Agreement"), dated as of
     December   , 1987, from FAIRFAX FINANCIAL HOLDINGS LIMITED,
--                                  
  a Canada corporation, and MARKEL CORPORATION, a Virginia
  corporation (together, "Guarantors"), to and in favor of
      ALEXANDER & ALEXANDER, INC., a Maryland corporation ("A&A"),
     Alexander & Alexander Services Inc., a Maryland corporation
  ("Services"), any direct or indirect Subsidiary (as such
     term is defined in the Stock Purchase Agreement referred to
below) of Services and their officers and directors   
(collectively, the "A&A Affiliates").                 

      R E C I T A L S:
     - - - - - - - -

               A.  Pursuant to a Stock Purchase Agreement, dated
as of October 7, 1987 (the "Stock Purchase Agreement")
  between A&A and F-M Acquisition Corporation, an Illinois
 corporation ("Buyer"), A&A has sold to Buyer all of the
    outstanding shares of capital stock (the "SMCO Shares") of
    Shand, Morahan & Company, Inc.  Capitalized terms used and
     not otherwise defined herein have the meanings specified in
the Stock Purchase Agreement.                         

              B.  Under the Stock Purchase Agreement, Buyer is
required to pay Seller the Deferred Purchase Price.   

               C.  Guarantors will derive direct and substantial
      benefit from guaranteeing the obligations of Buyer under the
Stock Purchase Agreement.                             

            NOW, THEREFORE, to induce A&A to sell the SMCO
Shares to Buyer, Guarantors agree as follows:         

                1.  Guarantee.  Guarantors, jointly and severally,
---------                 
     irrevocably guarantee the timely payment and performance in
     full of the following obligations (the "Obligations"):  all
   amounts comprising the Deferred Purchase Price, all other
 amounts owed by Buyer or its Subsidiaries to A&A or any
    other A&A Affiliate under the Stock Purchase Agreement and
     any other agreements executed pursuant or incidental to the
    Stock Purchase Agreement (collectively the "Stock Purchase
Documents") and the performance by Buyer of all of its
      obligations under the Stock Purchase Agreement and the other

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Stock Purchase Documents, provided that Guarantors'   
      --------
     obligations hereunder with respect to the Obligations shall
    exist only if, at the time when enforcement of Guarantors'
   obligations is sought (or at any time thereafter prior to
     the date on which the Obligations are paid and performed in
     full), the Consolidated Net Worth of Buyer is less than $10
million.                                              

              2.  Obligations Hereunder.  This Guarantee shall
---------------------     
    be irrevocable and shall continue in full force and effect
as the separate and independent undertaking of each   
     Guarantor.  If, for any reason, the Obligations of Buyer to
    be paid or performed under the Stock Purchase Agreement or
 the other Stock Purchase Documents shall not be paid or
performed promptly at the time set forth in the Stock 
      Purchase Agreement or the other Stock Purchase Documents for
      the payment or performance thereof (including any applicable
  grace or cure periods), Guarantors will immediately make
such payment to or perform such obligation for A&A or 
 another A&A Affiliate as provided in the Stock Purchase
      Agreement and the other Stock Purchase Documents, subject to
      any defenses or rights of setoff or counterclaim which Buyer
  or its Subsidiaries may have or assert but regardless of
     whether A&A or any other A&A Affiliate shall have taken any
steps to enforce any rights against Buyer or any other
   Guarantor or any other person to collect such sums or any
      part thereof or with respect to any collateral.  Payments to
      A&A or any other A&A Affiliate under this Guarantee shall be
    made in immediately available funds in lawful money of the
   United States of America and shall be paid immediately on
    the date on which such payments become due under the Stock
  Purchase Agreement or the other Stock Purchase Documents
(including any applicable grace period), whether at   
    maturity, by declaration or by acceleration, following the
     occurrence of a default or otherwise, at 1211 Avenue of the
      Americas, New York, New York.  The obligations of Guarantors
    under this Guarantee shall remain in full force and effect
     without regard to, and shall not be released, discharged or
      terminated by, any circumstance or condition (whether or not
Guarantors shall have notice or knowledge thereof),   
including, without limitation:                        

               (a)  any amendment or modification of or addition
        or supplement to the Stock Purchase Agreement or any
other Stock Purchase Document;              

            (b)  any waiver, compromise, release, consent,
        extension, indulgence or other action or inaction in

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      respect of the documents referred to in clause (a)
above;                                      

                (c)  any failure, omission or delay on the part of
      A&A or any other A&A Affiliate or any successor in
       interest thereto to enforce, assert or exercise any
           right, power or remedy conferred on or available to A&A
           or any other A&A Affiliate or any successor in interest
thereto;                                    

                (d)  any default by Buyer, any Subsidiary of Buyer
           or Guarantors under the documents referred to in clause
(a) above;                                  

             (e)  any exercise or non-exercise of any right,
          remedy, power or privilege under or in respect of this
         Guarantee and the documents referred to in clause (a)
above;                                      

             (f)  any furnishing or acceptance of additional
         security, or any release, substitution or exchange of
any security for the Obligations;           

               (g)  any failure to give notice to Guarantors (in
        their capacity as Guarantors) of the occurrence of a
        Potential Event of Default or Event of Default under
         the Stock Purchase Agreement or any breach or default
       by Buyer or any Subsidiary of Buyer under any other
Stock Purchase Document;                    

              (h)  any assignment or transfer of any assets of
           Buyer or any Subsidiary of Buyer to any other person or
          corporation or other entity, or any disposition by any
          Guarantor or any of the other stockholders of Buyer of
any stock or other interest in Buyer;       

              (i)  any bankruptcy, insolvency, reorganization,
      arrangement, adjustment, composition, liquidation,
  dissolution or similar proceeding involving or
     affecting Buyer or any Subsidiary of Buyer or any
          discharge of Buyer or any Subsidiary of Buyer therein;

               (j)  any partial prepayment, or any assignment or
   transfer, of any portion of the Obligations; or

       (k)  any other circumstance or occurrence
    whatsoever, whether similar or dissimilar to the
          foregoing, which might otherwise constitute a legal or

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        equitable defense or discharge of the liabilities of
       Guarantors hereunder or which might otherwise limit
recourse against Guarantors.                

             3.  Waivers.  Guarantors unconditionally waive:
-------                   

              (a)  notice of any of the matters referred to in
section 2;                                  

                (b)  all notices which may be required by statute,
          rule or law or otherwise to preserve any rights of A&A
       or any other A&A Affiliate or any successor thereto
           against Buyer or any Subsidiary of Buyer or Guarantors,
     including, without limitation, notice of default,
           presentment and demand for payment and protest for non-
payment or dishonor;                        

             (c)  any right to the enforcement, assertion or
        exercise of any right, remedy, power or privilege by
         A&A or any other A&A Affiliate under or in respect of
   the Stock Purchase Agreement or any other Stock
Purchase Document;                          

            (d)  any right to require A&A or any other A&A
         Affiliate or any successor thereto to proceed against
         Buyer or any Subsidiary of Buyer or any other person,
         or to proceed against or exhaust any security granted
     to secure the Obligations, or to pursue any other
remedy;                                     

    (e)  any requirement of diligence; and

       (f)  any notice of the acceptance of this
Guarantee.                                  

                4.  Right to Proceed Against Guarantors.  Upon any
         -----------------------------------
     default in the payment or performance of the Obligations by
Buyer (after any applicable grace or cure period), the
      obligation of Guarantor to make such payment or perform such
     obligation hereunder shall be effective immediately without
notice.  A&A or any other A&A Affiliate, in its sole  
discretion, shall have the right to proceed first and 
  directly against Guarantors under this Guarantee without
      proceeding against or exhausting any other remedies which it
      may have and without resorting to any other security held by
A&A or any other A&A Affiliate.                       

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         5.  Reinstatement.  The obligations of each
-------------             
Guarantor under this Guarantee shall continue to be   
   effective or be automatically reinstated, as the case may
      be, if any payment made with respect to the Obligations when
   due or pursuant to acceleration according to the terms of
the Stock Purchase Agreement or other Stock Purchase  
 Documents is rescinded or must otherwise be restored or
    returned by the recipient upon the insolvency, bankruptcy,
    dissolution, liquidation or reorganization of Buyer or any
     Subsidiary of Buyer or any other Guarantor, or upon or as a
     result of the appointment of a custodian, receiver, trustee
    or other officer with similar powers with respect to Buyer
  or any Subsidiary of Buyer or any other Guarantor or any
   substantial part of the property of either, or otherwise,
    all as though such payment had not been made.  If an event
     permitting the acceleration of the Obligations shall at any
     time have occurred and be continuing, and such acceleration
   shall at such time be prevented by reason of the pendency
     against Buyer of a case or proceeding under a bankruptcy or
     insolvency law, each Guarantor agrees that, for purposes of
this Guarantee and its obligations hereunder, the     
   Obligations shall be deemed to have been accelerated with
  the same effect as if accelerated in accordance with the
terms of the Stock Purchase Agreement.                

              6.  Subordination.  Guarantors hereby absolutely
-------------             
subordinate, both in right of payment and in time of  
      payment, any present and any future indebtedness of Buyer or
      any Subsidiary of Buyer to Guarantors to the indebtedness of
Buyer or any such Subsidiary to A&A or any other A&A  
Affiliate and any successors in interest thereto.     
   Notwithstanding any payment made by Guarantors hereunder,
  Guarantors shall not be entitled to be subrogated to any
 rights of A&A, any other A&A Affiliate or any successor
thereto until the payment in full of the principal and
   interest of the Obligations and the performance of all of
   Buyer's and Buyer's Subsidiaries' other obligations under
   the Stock Purchase Agreement and the other Stock Purchase
Documents.                                            

          7.  Enforcement.  (a)  A&A and the other A&A
-----------               
Affiliates and the successors thereto may enforce this
     Guarantee in their own names or otherwise, either by action
      at law, suit in equity or other proceeding, and it shall not
 be necessary to make Buyer or any of its Subsidiaries a
   party to any such action, suit or proceeding.  Guarantors
      stipulate that the remedies at law in respect of any default
      or threatened default by Guarantors in the performance of or

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    compliance with any of the terms of this Guarantee are not
     and will not be adequate, and that any of such terms may be
    specifically enforced by a decree for specific performance
    or by an injunction against violation of any of such terms
or otherwise.                                         

           (b)  A separate action may be brought against
  Guarantors whether or not an action is commenced against
Buyer or any of its Subsidiaries.                     

           (c)  Guarantors will pay all fees (including,
    without limitation, reasonable attorneys' fees), costs and
  expenses of any nature whatsoever incurred by A&A or any
    other A&A Affiliate or any successor thereto in connection
with enforcing this Guarantee.                        

               8.  Termination.  Except as provided in section 5
-----------               
    hereof, the obligations of Guarantors under this Guarantee
     shall terminate upon the payment and performance in full to
     A&A and the other A&A Affiliates of all of the Obligations.

      9.  Representations.  Each of Guarantors
---------------           
 represents that (a) it is a corporation duly organized,
-                   
     validly existing and in good standing under the laws of its
   jurisdiction of incorporation and has the corporate power
      and authority to execute and deliver this Agreement, (b) the
                                                       -
execution and delivery of this Agreement has been duly
  authorized by its Board of Directors, no other corporate
authorization being necessary on its part, (c) this   
                                   -
  Agreement has been duly executed and delivered by it and
 constitutes its valid and binding agreement and (d) the
                                             -
   execution and delivery of this Agreement will not violate
     any provisions of its Articles of Incorporation or By-laws.

            10.  Covenants.  Each Guarantor agrees that it
---------               
will comply with the following covenants:             

       (a)  Such Guarantor will not, directly or
      indirectly, sell, assign, pledge or otherwise dispose of any
      shares of stock, now or hereafter acquired, of (or warrants,
     rights or options to acquire stock of) Buyer, except to one
     of its Wholly-Owned Subsidiaries or the other Guarantor and
except for directors' qualifying shares if required by
applicable law.                                       

      (b)  Such Guarantor will not directly or
indirectly,                                           

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                     (i)  consolidate with or merge into any other
              Person or permit any other Person to consolidate
with or merge into it; or         

             (ii)  sell, transfer, lease, abandon or
               otherwise dispose of all or substantially all its
property, assets and undertakings;

        provided that such Guarantor may consolidate with or
--------                                    
           merge into another corporation, and another corporation
        may be merged into it, if the surviving corporation,
        immediately after giving effect to such transaction,
         shall have a Consolidated Net Worth at least equal to
       such Guarantor's Consolidated Net Worth immediately
           prior to giving effect to such transaction, and if such
           surviving corporation shall assume, in a manner in form
         and substance reasonably satisfactory to Seller, such
Guarantor's obligations hereunder.          

                (c)  Such Guarantor will deliver (in duplicate) to
you:                                        

                    (i)  within 45 days after the end of each of
              the first three quarterly fiscal periods in each
              of its fiscal years, consolidated balance sheets
              of such Guarantor and its Subsidiaries as at the
             end of such period and the related consolidated
            statements of income, stockholders' equity and
             changes in financial position of such Guarantor
              and its Subsidiaries for such period and (in the
             case of the second and third quarterly periods)
              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 previous fiscal year, all in reasonable
               detail and certified as complete and correct by a
            principal financial officer of such Guarantor;

                   (ii)  within 90 days after the end of each of
              its fiscal years, consolidated balance sheets of
               such Guarantor and its Subsidiaries as at the end
       of such year and the related consolidated
            statements of income, stockholders' equity and
             changes in financial position of such Guarantor
                and its Subsidiaries for such fiscal year, setting
        forth in each case in comparative form the
                consolidated figures for the previous fiscal year,

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               all in reasonable detail, accompanied by a report
        thereon of independent certified public or
          chartered accountants of recognized national
               standing selected by it, which report shall state
         that such consolidated financial statements
           present fairly the financial position of such
            Guarantor and its Subsidiaries as at the dates
               indicated and the results of their operations and
         changes in their financial position for the
            periods indicated in conformity with generally
               accepted accounting principles applied on a basis
              consistent with prior years (except as otherwise
             specified in such report) and that the audit by
      such accountants in connection with such
                consolidated financial statements has been made in
         accordance with generally accepted auditing
standards.                        

           11.  Notices.  All notices hereunder shall be
-------                 
personally delivered or sent by prepaid certified or  
registered mail, return receipt requested, (i) if to  
                                   -
  Guarantors, to Fairfax Financial Holdings Limited, Suite
   800, 900 Wellington Street West, Toronto, Ontario, Canada
   M5J 2N7, to the attention of V. Prem Watsa, and to Markel
      Corporation, 4551 Cox Road, Richmond, Virginia 23260, to the
  attention of Steven A. Markel, and (ii) if to A&A or any
                    --
      other A&A Affiliate, at its address set forth in paragraph 2
    above, to the attention of its general counsel, or at such
     other address as may be specified by written notice to each
other party.                                          

                12.  Jurisdiction.  Each Guarantor irrevocably and
------------            
 unconditionally (a) submits itself to the non-exclusive
-                   
 jurisdiction of courts of the State of New York and the
  federal courts of the Southern District of New York with
     respect to any action, suit or proceeding arising out of or
relating to this Agreement or for the recognition or  
    enforcement of any judgment in respect thereof, (b) waives
                                             -
any objection to the venue of any such action, suit or
      proceeding in such court and (c) agrees that service upon it
       -
in the manner provided for notice in Section 11 shall 
    constitute valid and effective service with respect to any
such action, suit or proceeding.                      

                13.  Miscellaneous.  If any term of this Guarantee
-------------           
 or any application thereof shall be invalid, illegal or
      unenforceable, the remainder of this Guarantee and any other
     application of such term shall not be affected thereby.  No

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   delay or omission in exercising any right hereunder shall
     operate as a waiver of such right or any other right.  This
      Guarantee shall be binding upon, inure to the benefit of and
     be enforceable by Guarantors, A&A, the other A&A Affiliates
      and their respective successors and assigns.  This Guarantee
     shall be governed and construed in accordance with the laws
of the State of New York.                             

             IN WITNESS WHEREOF, Guarantors have caused this
    Guarantee to be duly executed as of the day and year first
above written.                                        

                              FAIRFAX FINANCIAL HOLDINGS LIMITED

By: 

                   V. Prem Watsa
              Chairman

              MARKEL CORPORATION

By: 

                      Steven A. Markel
                              Executive Vice-President

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SCHEDULE 2.2                                          

A.   Jurisdictions in which SMCO is qualified to do   
business:                                   

Arizona                           
Montana                           

B.   Jurisdictions in which SMCO is licensed:         

Arizona                           
California                        
Montana                           
New Jersey                        
New York                          
Pennsylvania                      

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SCHEDULE 2.3                                          

None                                                  

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SCHEDULE 2.5                                          

   A.  Evanston Insurance Company is licensed as an admitted
        carrier in the State of Illinois.  It is authorized to
write the following classes of insurance:     

   Accident and Health; Vehicle; Liability; Workers'
         Compensation; Burglary and Forgery; Glass; Fidelity and
         Surety; Miscellaneous; Other Casualty Risks; Contingent
       Losses; Livestock and Domestic Animals; Legal Expense
     Insurance; Fire; Elements; War, Riot and Explosion;
      Marine and Transportation; Vehicle; Property Damage,
          Sprinkler Leakage and Crop; Other Fire and Marine Risks;
Contingent Losses; Legal Expense; Reinsurance.

         Evanston Insurance Company is an eligible surplus lines
carrier in the following jurisdictions:       

Alabama                 
Alaska                  
Arizona                 
Arkansas                
California              
Colorado                
Connecticut             
District of Columbia    
Delaware                
Florida                 
Georgia                 
Hawaii                  
Idaho                   
Indiana                 
Iowa                    
Kansas                  
Kentucky                
Louisiana               
Maine                   
Maryland                
Massachusetts           
Michigan                
Minnesota               
Mississippi             
Missouri                
Montana                 
Nebraska                
Nevada                  

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New Hampshire*          
New Jersey              
New Mexico              
New York                
North Carolina          
North Dakota            
Ohio                    
Oklahoma                
Oregon                  
Pennsylvania            
Puerto Rico             
Rhode Island            
South Carolina          
South Dakota            
Tennessee               
Texas                   
Utah                    
Vermont                 
Virginia                
Washington              
West Virginia           
Wisconsin               
Wyoming                 

      B.  Insurance Company of Evanston is licensed as an admitted
        carrier in forty-one jurisdictions.  It is licensed to
write the following classes of business:      

       Alabama - Property; Miscellaneous Casualty (including
-------                                       
Official Surety Bonds).                       

         Alaska - Property; Casualty; Surety; Marine, Wet Marine
------                                        
and Transportation.                           

   Arizona - Disability; Property; Casualty; Surety;
-------                                       
        Vehicle; Marine and Transportation (excluding Workers'
Compensation).                                

Arkansas - Property; Casualty; Surety; Marine;
--------                                      
Disability.                                   

         Colorado - Accident and Health; Livestock; Plate Glass;
--------                                      
          Steam Boiler and Machinery; Burglary and Theft; Fidelity

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

*   See Schedule 2.20                                 

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      and Surety; Motor Vehicle - Full Coverage; Workmen's
          Compensation; Liability; Professional Malpractice; Legal
         Expense; Fire and Lightning; Extended Coverage; Hail on
 Growing Crops; Earthquake; Motor Vehicle - Full
  Coverage; Aircraft; Inland Marine; Ocean Marine;
Commercial Multiple Peril.                    

       District of Columbia - Fire; Allied Lines; Farmowners
--------------------                          
       Multiple Peril; Homeowners Multiple Peril; Commercial
      Multiple Peril; Ocean Marine; Inland Marine; Medical
        Malpractice; Earthquake; Workmen's Compensation; Other
         Liability; Private Passenger Auto Liability; Commercial
         Auto Liability; Private Passenger Auto Physical Damage;
          Aircraft (all perils); Fidelity; Surety; Glass; Burglary
   and Theft; Boiler and Machinery; Credit; Umbrella
Liability.                                    

         Georgia - Property; Marine and Transportation; Casualty
-------                                       
(including Workers' Compensation); Surety.    

Hawaii - Casualty.                            
------                                        

         Idaho - Property; Marine and Transportation; Casualty -
-----                                         
Excluding Workmen's Compensation; Surety.     

     Illinois - Accident and Health; Vehicle; Liability;
--------                                      
     Workers' Compensation; Burglary and Forgery; Glass;
    Fidelity and Surety; Miscellaneous; Other Casualty
  Risks; Contingent Losses; Livestock and Domestic
        Animals; Legal Expense Insurance; Fire; Elements; War,
         Riot and Explosion; Marine and Transportation; Vehicle;
          Property Damage; Sprinkler, Leakage and Crop; Other Fire
     and Marine Risks; Contingent Losses; Legal Expense;
Reinsurance.                                  

      Indiana - Accident; Burglary and Theft; Glass; Steam
-------                                       
   Boilers, Elevators and Machinery; Motor Vehicles;
 Sprinklers; Employers' Liability; Surety; Other
         Casualty; Property; Crop; Water Damage; Transportation.

     Iowa - Fire; Extended Coverage; Other Allied Lines;
----                                          
   Homeowners Multi-peril (including bodily injury);
          Commercial Multi-peril; Earthquake; Growing Crops; Ocean
    Marine; Inland Marine; Accident Only (Individual);
        Accident and Health (Individual); Hospital and Medical
       Expense (Individual); Group Accident and Health; Non-
        cancellable Accident; Workers' Compensation; Liability
       other than auto (bodily injury); Liability other than

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         auto (property damage); Auto Liability (bodily injury);
         Auto Liability (property damage); Auto Physical Damage;
    Aircraft Physical Damage; Fidelity; Surety; Glass;
Burglary and Theft; Boiler and Machinery.     

       Kansas - Fire; Windstorm and Hail; Extended Coverage;
------                                        
     Additional Perils on Growing Crops; Hail on Growing
     Crops; Optional Perils; Sprinkler Leakage; Business
         Interruption; Earthquakes, Water Damage; Aircraft Hull;
        Ocean Marine; Inland Marine; Rain; Automobile Physical
          Damage; Flood; Homeowners Policies; Accident and Health;
   Automobile Liability; General Liability; Workers'
         Compensation; Fidelity, Surety and Forgery Bond; Glass;
    Burglary, Theft and Robbery; Boiler and Machinery;
    Credit Malpractice Liability; Livestock Mortality;
Aircraft Liability; Cargo Liability.          

Kentucky - Multiple Line Insurance.           
--------                                      

         Louisiana - Vehicle; Liability; Workmen's Compensation;
---------                                     
       Burglar and Forgery; Glass; Fidelity and Surety; Fire
   and Extended Coverage; Steam Boiler and Sprinkler
        Leakage; Crop and Livestock; Marine and Transportation
(Inland Marine); Miscellaneous.               

 Maryland - Workers' Compensation; Casualty (not
--------                                      
        including Vehicle Liability, Workers' Compensation and
    Mortgage Guaranty); Health; Marine, Wet Marine and
      Transportation; Surety; Property and Marine; Vehicle
Liability.                                    

        Massachusetts - Liability other than Auto; Reinsurance
-------------                                 
Except Life.                                  

 Michigan - Disability; Property; Marine; Inland
--------                                      
          Navigation and Transportation; Automobile (except bodily
injury); Steam Boiler and Flywheel; Liability;
     Automobile and Workmen's Compensation; Plate Glass;
   Sprinkler; Credit; Burglary and Theft; Livestock;
Malpractice; Surety and Fidelity.             

    Minnesota - Property, Legal Expenses; Surety; Auto
---------                                     
Casualty.                                     

       Mississippi - Fire and Allied Lines; Industrial Fire;
-----------                                   
     Miscellaneous Casualty; Fidelity; Surety; Guaranty;
        General Liability; Auto Fire and Physical Damage; Auto
          Liability; Workmen's Compensation; Boiler and Machinery;

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    Livestock; Burglary and Theft; Plate Glass; Inland
         Marine; Ocean Marine; Aircraft; Homeowners; Farmowners;
Accident and Health.                          

        Missouri - Aircraft; Automobile Full Coverage; Boiler,
--------                                      
         Burglary and Theft; Employers Liability; Fidelity; Fire
        and Allied Lines; Collision other than Auto; Liability
      other than Auto, Bodily Injury; Liability other than
          Auto; Property Damage; Livestock Full Coverage; Machine;
         Marine, Inland Marine and Transportation; Non-recording
Insurance; Plate Glass; Rain; Surety; Workers'
       Compensation; Miscellaneous Contractual Liability and
Indemnity.                                    

Montana - Property; Casualty; Surety; Marine. 
-------                                       

    Nebraska - Fire and Marine; Sickness and Accident;
--------                                      
      Fidelity Insurance; Liability Insurance; Plate Glass
     Insurance; Boiler and Machinery Insurance; Burglary
  Insurance; Credit Insurance; Automobile; Engine,
Elevator Insurance; Miscellaneous Insurance.  

 Nevada - Property; Casualty; Surety; Marine and
------                                        
Transportation.                               

         New Mexico - General Casualty; Surety; Property; Marine
----------                                    
and Transportation; Vehicle.                  

     New York - Accident and Health; Fire; Miscellaneous
--------                                      
    Property; Water Damage; Burglary and Theft; Glass;
    Boiler and Machinery; Elevator; Animal; Collision;
       Personal Injury Liability; Property Damage Liability;
          Workers' Compensation and Employers' Liability; Fidelity
         and Surety; Credit; Motor Vehicle and Aircraft Physical
         Damage; Marine and Inland Marine; Marine Protection and
Indemnity Insurance.                          

     New York - Free Trade Zone License (Regulation 63),
--------                                      
          License No. 88-300-36, Expiration Date 8/31/88 - Special
Risk.                                         

      North Carolina - Fire; Miscellaneous Property; Water
--------------                                
          Damage; Burglary and Theft; Glass; Boiler and Machinery;
        Elevator; Animal; Collision; Personal Injury; Property
          Damage; Workmen's Compensation and Employers' Liability;
          Fidelity and Surety; Credit; Motor Vehicle and Aircraft;
Marine.                                       

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          North Dakota - Fire; Ocean Marine; Liability (non-Auto);
------------                                  
          Aircraft; Burglary and Theft; Crop; Allied Lines; Inland
          Marine; Auto Liability (BI and PD); Fidelity and Surety;
          Boiler and Machinery; Mortgage Guaranty; Multiple Peril;
  Earthquake; Auto Physical Damage; Glass; Credit.

          Ohio - Property; Liability; Disability; Auto; Machinery;
----                                          
Casualty; Miscellaneous; Fidelity and Surety. 

     Oklahoma - Accident and Health; Property; Casualty;
--------                                      
Marine; Vehicle.                              

 Oregon - Property; Casualty (including Workers'
------                                        
   Compensation); Marine and Transportation; Surety.

  Pennsylvania - Property; Transportation; Marine;
------------                                  
        Fidelity; Accident and Health; Glass; Liability; Steam
       Boilers; Burglary and Theft; Credit; Water; Elevator;
 Livestock; Motor Vehicle; Machinery; Employers'
Liability.                                    

      South Carolina - Property; Casualty; Surety; Marine.
--------------                                

        South Dakota - Fire and Allied Lines; Inland and Ocean
------------                                  
        Marine; Workers' Compensation; Bodily Injury; Property
    Damage, Physical Damage; Fidelity and Surety Bond;
  Glass; Burglary and Theft; Boiler and Machinery;
  Aircraft; Credit (Mortgage Guaranty); Crop Hail;
Livestock.                                    

  Tennessee - Property; Vehicle; Casualty; Surety.
---------                                     

     Texas - Fire; Allied Coverages; Hail, growing crops
-----                                         
     only; Rain; Inland Marine; Ocean Marine; Aircraft -
       Liability and Physical Damages; Workers' Compensation
 and Employers' Liability; Employers' Liability;
       Automobile - Liability and Physical Damage; Liability
    other than Automobile; Fidelity and Surety; Glass;
    Burglary and Theft; Forgery; Boiler and Machinery;
Credit; Livestock and Reinsurance.            

     Utah - Disability; Property; Professional Liability
----                                          
   (including Medical Malpractice); Surety (includes
  Fidelity); Liability (includes Vehicle, excludes
Disability); Marine and Transport; Workers'   
Compensation; Vehicle Liability.              

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         Virginia - Fire; Farmers Multi-peril; Commercial Multi-
--------                                      
       peril; Inland Marine; Liability other than Auto; Auto
    Physical Damage; Aircraft Physical Damage; Surety;
         Burglary and Theft; Credit; Water Damage; Miscellaneous
  Property; Homeowners' Multi-peril; Ocean Marine;
    Workers' Compensation - Employers' Liability; Auto
        Liability; Aircraft Liability; Fidelity; Glass; Boiler
and Machinery; Animal; Legal Services.        

   Washington - Property; Marine and Transportation;
----------                                    
General Casualty; Surety.                     

     Wisconsin - Fire, Inland Marine and Other Property;
---------                                     
    Ocean Marine; Disability; Liability and Incidental
   Medical Expense (other than Auto); Automobile and
Aircraft; Fidelity; Surety; Credit; Workers'  
   Compensation; Legal Expense; Credit Unemployment;
Miscellaneous.                                

Wyoming - Multiple Lines.                     
-------                                       

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SCHEDULE 2.9                                          

     A.  Additional affiliates, partnerships, and joint ventures
       in which SMCO, ESI, EIC, or ICE may own any interests
other than in the ordinary course of business:

      1.  SMCO is assisting in the formation of Barristers
Insurance Company and EPIC.           

    B.  Interests of Seller in property used by SMCO, ESI, ECI
or ICE:                                       

         Shand Morahan Plaza is owned by TIFCO Properties, Inc.,
          an affiliate of Seller as beneficiary of a land trust at
American National Bank, Chicago.              

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SCHEDULE 2.10                                         

     A.  Agreements containing default provisions which could be
    triggered by the transactions contemplated by this
agreement:                                    

        1.  Term Credit Agreement between ESI and Harris Trust
          and Savings Bank dated March 27, 1985 as amended
December 18, 1985.                    

          2.  Amended and Restricted Pledge and Security Agreement
         from ESI to Harris Trust and Savings Bank dated
December 18, 1985.                    

     3.  Guaranty Agreements by SMCO to Harris Trust and
            Savings Bank dated March 27, 1985 and December 18,
1985.                                 

   4.  Term Credit Agreement dated December 31, 1985
between ESI and SMCO.                 

  B.  Contracts containing termination provisions or other
         limitations that could be triggered by the transactions
contemplated by this agreement:               

   1.  Management Agreement among SMCO, ESI, and EIC
effective January 1, 1982.            

       2.  Management Agreement among SMCO and EIC effective
January 1, 1982.                      

   3.  Management Agreement among SMCO, ESI, and ICE
effective January 1, 1982.            

          4.  Lloyds Errors and Omissions Contract #8791 effective
          January 1, 1987 between SMCO and Underwriters at
Lloyds.                               

      5.  Maintenance Agreement between Management Science
      America, Inc. and SMCO dated August 7, 1981.

     6.  Treaty with American Reinsurance Co., effective
January 1, 1987.                      

          7.  Denver Insurance Company Line Slip effective between
SMCO and other line slip participants.

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C.  Court or other governmental orders that would be  
   violated by the transactions contemplated by this
agreement:                                    

None                                          

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SCHEDULE 2.11                                         

      Filings, Consents, Approvals, etc. required by Seller, SMCO,
ESI, EIC, or ICE in connection with the transactions  
contemplated by this Agreement:                       

      1.  Hart-Scott-Rodino filings may be required on the
part of Buyer and/or Seller.          

        2.  Lord, Bissell & Brook is conducting research as to
     state "takeover" statutes, as well as state
             insurance statutes.  Such research may indicate the
              need or desirability of further consents, approvals,
or notices.                           

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SCHEDULE 2.12                                         

None                                          

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SCHEDULE 2.13                                         

A.  The following events or continuing conditions have
          existed which may have an adverse effect on the business
or assets of SMCO, ESI, EIC, or ICE:          

   1.  Utica Mutual Insurance Company advised of its
            intention to terminate its underwriting management
          agreement with SMCO effective as of December 31,
1987.                                 

        2.  The Mutual Fire, Marine & Inland Insurance Company
continues in rehabilitation.          

          3.  General Accident Insurance Company indicated that it
may have claims against SMCO.         

4.  See also Schedules 2.17 and 2.20 which are
incorporated herein by reference.     

     B.  Quarterly dividends have been paid, from ICE to EIC and
   from EIC to ESI, according to customary practice.

C.  Capital expenditures or commitments for capital   
expenditures:                                 

    1.  SMCO is replacing a significant portion of its
             office equipment, including typewriters and copying
         machines, involving an expenditure of less than
$100,000 to complete transaction.     

         2.  SMCO is planning to purchase phone switch currently
        leased from AT&T in November for approximately
$95,000.                              

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SCHEDULE 2.15                                         

Undisclosed liabilities of SMCO, ESI, EIC, or ICE:    

      1.  Approximately $12 million has been recognized as
            commission income by SMCO but has been deferred as
              expense by EIC and amortized over the policy period.

        2.  SMCO is obligated to render future claims handling
            services valued at approximately $12-15 million to
             its underwriting management clients and reinsurers.

       3.  Under an agreement dated October 4, 1985, SMCO is
         obligated to hold Sphere Drake Insurance p.l.c.
            harmless for any loss arising out of SMCO's acting
             as a reinsurance broker on layers $8,000,000 excess
          of $2,000,000 retrocession to Munich Reinsurance
Company.                              

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SCHEDULE 2.17                                         

      A.  Threatened claims (no suit filed) against Shand, Morahan
& Company, Inc.:                              

      1.  International Association of Financial Planners.
         -----------------------------------------------
                    Evanston Insurance Company has been named in
                three actions (Burge, Oeberst and Hatch,
             noted below) involving non-renewal of
             individual policies with respect to a
                    financial planners insurance program.  Other
                     participants in this program may have similar
claims.                 

    2.  General Accident Insurance Company of America.
       ---------------------------------------------
                  General Accident has advised it intends to
                 make a claim against SMCO for substantial
                  damages allegedly suffered with respect to
                   certain agreements with SMCO (see also item
A.10 below).            

3.  Lord, Bissell & Brook.                    
---------------------                 
            Threatened claim by insured law firm
                   regarding final expiration date of optional
             extension period of insurance policy.

4.  Brobeck & Phlegler.                       
------------------                    
                 Threatened claim involving allegations of
         insufficient limits of liability.

5.  P.T. Umum.                                
---------                             
         A reinsurer alleges SMCO may have
                    intentionally charged inadequate premiums to
receive commissions.    

6.  Rothstein & Associates (EIC).             
----------------------------          
                  Evanston Insurance Company has a potential
              claim against SMCO for failure to deny
coverage.               

7.  Hassneh Insurance Company.                
-------------------------             
                 Threatened claim by a reinsurer concerned
                    about escalating defense costs on an insured
law firm case.          

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8.  Mutual Fire.                              
-----------                           
               Threatened claim involving dispute over
     proper notice of non-renewal.

                     The following parties have notified SMCO that
                  they may assert claims with respect to the
Mutual Fire situation:  
a.   Sun Coast Hospital 
                b.   Krueger Engineering & Manufacturing
Company       
              c.   Advanced Environmental Technology
      d.   Cook International Agency
      e.   Schidler, McBroom & Gates
f.   Abramson           
         g.   North Miami General Hospital
h.   Egleseder & Levitt.

9.  Murphy, Jahn.                             
------------                          
                     Potential claim by an excess carrier alleging
                 unspecified breach of fiduciary duties by
SMCO.                   

10.  The Travelers v. General Accident.       
---------------------------------   
                Potential claim arising from declaratory
                    relief action filed by The Travelers against
                 General Accident.  General Accident might
                    cross-claim SMCO if matter proceeds to trial
  (see also item A.2 above).

11.  Linkow.                                  
------                              
                Potential claim by an oral surgeon whose
                  claim reserves were inadvertently revealed
                     during a presentation to American Association
           of Oral and Maxillofacial Surgeons.

  B.  Claims (in suit) made against SMCO issuing companies
       other than EIC, ICE, or Mutual Fire.  These represent
     potential claims against SMCO in its capacity as an
underwriting manager.                         
                Name               Court/County     Docket #
                ----               ------------     --------

1.  Costello v. Northbrook       CA, Shasta       80939 
Excess and Surplus Company                      

     2.  Bonaldi v. Utica Mutual      NJ, Bergen       L-092354-85
   3.  Schaffer v. Northbrook       CA, Los Angeles  C-576-773
Excess and Surplus Company                      

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                Name               Court/County     Docket #
                ----               ------------     --------

   4.  Lakritz v. General Accident  MI, Oakland      86-323829
  Insurance Company of                            CK
America                                         

 5.  Meyer, Rohrs v. General      OH, Lucas        85-0583
Accident Insurance Company                      
of America                                      
6.  Davis & Davis v. General     CA, San Diego    589377
Accident Insurance Company                      
of America                                      

  7.  Hamond & Company v. Utica    NY, Nassau       14186-87
Mutual                                          
8.  Sabella v. American Bankers  CA, San          831949
                       Francisco

   9.  Joseph P. Hennessey v.       MT, Yellowstone  DV87-1186
General Accident Insurance                      
Company                                         

     C.  The following is a list of lawsuits naming SMCO or SMCO
and EIC as a defendant or defendants.         

       1.  Johnson v. Underwriters at Lloyds, Orion, SMCO et
           ---------------------------------------------- --
           al. - Superior Court, Ventura County, California;
--                                    
Case #83040                           
    2.  General Practice Associates v. SMCO - District
-----------------------------------   
     Court, Clark County, Nevada; Case #A-228821
      3.  Lee v. The Travelers, SMCO - Superior Court, Los
--------------------------            
     Angeles County, California; Case #C-608-174
     4.         David Potter Duff v. EIC, SMCO - Circuit
      ------------------------------
                    Court, Cook County, Illinois; Case #86L23758
         5.  Farm Bureau Town & Country v. SMCO - Circuit Court,
----------------------------------    
  Cole County, Missouri; Case #CVl86-845CC
          6.  Auerbach v. GAIC, SMCO - Circuit Court, Dade County,
----------------------                
Florida; Case #86-52834               
        7.  Duke Transportation v. SMCO - U.S. District Court,
---------------------------           
             Middle District of Louisiana; Case #86-186, Section
"B"                                   
      8.  City of Harlingen v. EIC, SMCO - District Court,
------------------------------        
Dallas County, Texas; Case #86-11483  
  9.  Swanke, Hayden, Connell v. GAIC, SMCO - U.S.
------------------------------------- 
           District Court, Southern District, New York; Case
#87CIV3332                            

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        10. Phanlobh Vichaikul v. SMCO - Circuit Court, Marion
--------------------------            
County, West Virginia; Case #87C303   
       11. LaVine v. EIC, SMCO - Superior Court, Los Angeles
-------------------                   
County; Case #C-652-302               
          12. American Motorists Insurance Company v. GAIC, SMCO -
            --------------------------------------------- ----
      Court of Common Please, Philadelphia County,
Pennsylvania; Case #4796              
        13. Fidelity Bank & Trust Co. v. SMCO, Mutual Fire, et
            ----------------------------------------------- --
      al. - 22nd District Court, St. Tammy Parish,
--                                    
Louisiana; Case #86-11418             
     14. Encino Savings & Loan v. Mutual Fire, SMCO U.S.
    ------------------------------------------
              District Court, Central District of California; Case
#CV86-6l55DT                          
        15. Evander v. SMCO, et al. - Circuit Court, Baltimore
----------------------                
City, Maryland; Case #87051030/CL61785
      16. Harrington v. Commonwealth Insurance Company, v.
          ------------------------------------------------
           SMCO, Mutual Fire - Superior Court, Essex County,
-----------------                     
Massachusetts; Case #83-546           
     17. American Savings & Loan v. SMCO - U.S. District
-------------------------------       
            Court, Central District of California; Case #CV86-
8024PAR                               
          18. Houston Engineering v. NESCo, SMCO - District Court,
----------------------------------    
 Case County, North Dakota; Case #79-835
    19. Ensearch v. SMCO, EIC - District Court, Dallas
---------------------                 
County, Texas; Case 85-9011           
        20. Pioneer Bank & Trust v. SMCO, EIC - Circuit Court,
---------------------------------     
         Cook County, Illinois; Case #85CH09964 and Case
#85CHl0506                            
         21. Transamerica v. SMCO, GAIC - Court of Common Pleas,
--------------------------            
         Allegheny County, Pennsylvania; Case #GD86-5254
          22. Strout Realty v. SMCO, Mutual Fire - District Court,
----------------------------------    
Mesa County, Colorado; Case #87-CV-358
        23. American Medical International Incorporated, et al
            --------------------------------------------------
              v. EIC, SMCO, and A&A - Superior Ct., Orange County,
---------------------                 
CA; Case #53-11-72                    
       24. Diamond Claims and Investigation Services v. SMCO
           -------------------------------------------------
             and EIC, Circuit Ct., Mulnomar County, Oregon; Case
--------                              
#A8708-04938                          
         25. Federal Insurance Co. v. SMCO and EIC, Circuit Ct.,
------------------------------------- 
Cook County, Ill. Case #7CH08984      

      D.  The following is a list of lawsuits naming the EIC (does
not include items listed in "C" above).       

        1.   Diplarakos, First Home Realtors v. EIC, GAIC U.S.
        --------------------------------------------
           District Court, Central District of California;
Case #856450 WDK                    

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    2.   Esco Elevators v. EIC, Weir et al. - District
---------------------------------   
            Court, Tarrant County, Texas; Case #141-99515-86
         3.   Sigco Research v. EIC - U.S. District Court, North
---------------------               
          Dakota, Southeastern Division; Case #A3-86-114
     4.   Warren Oil v. EIC - Superior Court, Providence
-----------------                   
County, Rhode Island; Case #87-290  
        5.   Nevada National Bank v. EIC et al. - lst District
---------------------------------   
       Court, Carson City, Nevada; Case #87-00l07A
          6.   Wilshire Group v. EIC - Superior Court, Los Angeles
---------------------               
 County, California; Case #WEC-109-549
      7.   Bob Speer v. EIC - U.S. District Court, Western
----------------                    
   District of Oklahoma; Case #CIV-87-6l2B
     *   8.  Christopher Hatch et al. v. EIC - Superior Court,
-------------------------------     
      Suffolk County, Massachusetts, Case #81289
     *   9.  Burge v. EIC - Superior Court, Sacramento County,
------------                        
California; Case #336090            
       *  10.  Oeberst v. EIC - Superior Court, Sacramento County,
--------------                      
California; Case #336090            
         11.  Chemical Sales Co. v. EIC - District Court, Denver
-------------------------           
County, Colorado; Case #PD02173     
     12.  Harold F. LeClair Co. v. EIC et al. - Superior
----------------------------------  
             Court, Middlesex County, Massachusetts; Case #87-
2421                                
         13.  Erma Johnson v. EIC - Circuit Court, Floyd County,
-------------------                 
Kentucky; Case #85-CI-587           
          14.  Wayne County National Bank v. EIC - Court of Common
---------------------------------   
     Pleas, Wayne County, Ohio; Case #87-CI107
        15.  Martin et al. v. EIC - Circuit Court, Ray County,
--------------------                
Missouri; Case #CV387-l46CC         
**  16.  Vance Abstract Company v. EIC - U.S. District
-----------------------------       
               Court, Eastern District of Arkansas; Case #LR-C-84-
42                                  
   17.  PPG Industries v. EIC - U.S. District Court,
---------------------               
           Western District of Pennsylvania; Case #85-1387
       18.  Furguson v. EIC - Circuit court, Broward County,
---------------                     
Florida; Case #85-03584             
19.  (Intentionally Deleted)                  

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

    * Involves International Association of Financial Planners
as noted in Section A.                            

** Item, 16 Vance Abstract Company v. EIC was recently
----------------------------- 
      settled although the settlement documents have not yet
been signed.                                    

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        20.  Integrity v. EIC - Superior Court, Bergen County,
----------------                    
New Jersey; Case #L-10931-86E       
       21.  Opatut v. EIC - Superior Court, Atkinson County,
-------------                       
Georgia; Case #85-C-7               
          22.  McGraw Edison v. EIC - U.S. District Court, Western
--------------------                
District of Michigan; Case #K86-48  
          23.  Travelers Corporation v. Denver Johnson v. EIC 27th
          ----------------------------------------------
              District Court, St. Landry Parish; Louisiana; Case
#87-0021-C                          
          24.  Argonaut Insurance Company v. EIC - Superior Court,
---------------------------------   
Pima County, Arizona; Case #244520  
          25.  IT Corporation v. EIC - Superior Court, Los Angeles
---------------------               
County, California; Case #C578125   
    26.  Aerojet General Corporation v. EIC - Superior
----------------------------------  
             Court, San Mateo County, California; Case #262425
          27.  St. Joseph's Regional Medical Center, Inc. v. EIC -
             -------------------------------------------------
          4th Judicial District, Ada County, Idaho; Case
#89415                              
     28.  Emmett & Chandler v. EIC - Superior Court, Los
------------------------            
     Angeles County, California; Case #C610601
      29.  Devan Pardue & Riverside v. EIC - 2lst Judicial
-------------------------------     
        District, Livingston Parish, Louisiana; Case
#50200, Div. E                      
    30.  Haas et al. v. V.W. Childress, EIC - Superior
----------------------------------  
              Court, King County, Washington; Case #86-2-21823-8
         31.  Karen Ballard v. EIC - 2lst Judicial District, St.
--------------------                
         Helena Parish, Louisiana; Case #11739, Div. A
          32.  Terry Turner v. EIC - District Court, Osage County,
-------------------                 
Oklahoma, Case #C-86-553            
         33.  Allstate Insurance Co. v. EIC, Aetna - 4th Circuit
------------------------------------
            Court; Duvall County, Florida; Case #86-16712-CA
        34.  Johnson Grant & Co. et al. v. EIC - U.S. District
---------------------------------   
        Court, District of Nebraska; Case #CV87-L-87
      35.  Mount Holly Retirement v. EIC - Superior Court,
-----------------------------       
            Burlington County, New Jersey; Case #W-003078-86
       36.  Arkwright-Boston v. EIC - Court of Common Pleas,
-----------------------             
Cuyahoga County, Ohio; Case #71819  
        37.  Carl Johns v. EIC - District Court, Gregg County,
-----------------                   
Texas; Case #83-3150-B              
          38.  Cravens, Dargan & Co. v. EIC - U.S. District Court,
----------------------------        
      Middle District of Louisiana; Case #85-539
          39.  Central Illinois Public Service Company v. EIC, 7th
          ----------------------------------------------
           Judicial Circuit, Morgan County, Illinois; Case
#87639                              
       40.  Northrup Corporation v. EIC, Superior Court, Los
---------------------------         
     Angeles County, California; Case #C566129

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      E.  The following is a list of lawsuits naming the Insurance
Company of Evanston.                          

         1.   Transamerica Insurance Co. v. ICE - Circuit Court,
---------------------------------   
  Cook County, Illinois; Case #86CHl2193
          2.   Clark Compton v. W. Knecht & R. Gheen (garnishment)
 -------------------------------------
              - Circuit Court, Lane County, Oregon; Case #16-86-
03420                               

F.  Government Agency Review                          

   1.   The Illinois Insurance Department received a
   complaint from an insured, Consolidated
             Construction Safety Fund of Illinois.  The policy
           provided aggregate Excess Workers' Compensation
          Reinsurance through General Accident Insurance
       Company of America.  The Illinois Insurance
          Department has requested that SMCO contact the
             Insured to work out an amicable resolution of the
matter.                             

          2.   The Illinois Insurance Department is in the process
              of completing its regular triennial examination of
               Evanston Insurance Company and Insurance Company of
Evanston for 1983-1985.             

         3.   Illinois is conducting a tax audit of EIC, ESI and
ICE through 1985.                   

    4.   See also Schedule 2.20 incorporated herein by
reference.                          

G.  See Schedule 2.23 which is incorporated herein by 
reference.                                    

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SCHEDULE 2.18                                         

A.  Real Property owned by SMCO:                      

      1.  A triangular lot adjacent to Shand Morahan Plaza
described as follows:                 

           That part of Lots 1, 2, 3, 4, 5 and 6 (taken as a
              single tract) in Block 3 of E.A. Pratt's Addition to
           Evanston, being a Subdivision of that part of the
       Southwest quarter of the Northwest quarter of
              Section 18, Township 41 North, Range 14, East of the
            Third Principal Meridian, lying East of Ridge Road
            and West of the Chicago and Northwestern Railroad,
         in the City of Evanston, Cook County, Illinois,
            described as follows:  Beginning at a point on the
          West line of said Lot 6 and the East line of Oak
             Avenue, 171.50 ft. North of the Southwest corner of
            Lot 7 in said Block 3; thence East parallel to the
              North line of Church Street, 148.0 ft.; thence North
            parallel to the East line of Oak Avenue, 13.0 ft.;
        then East parallel to the North line of Church
           Street, 57.51 ft. to the East line of said Lot 6,
             being also the Westerly line of the right of way of
              the Chicago and Northwestern Railway Company; thence
            Northwesterly along the Easterly line of said Lots
          1, 2, 3, 4, 5 and 6, 362.62 ft. to the Northwest
           corner of said Lot 1; thence West 8.26 ft. to the
             Northwest corner of said Lot 1; thence South on the
             East line of Oak Avenue, 317.22 ft. to the place of
beginning.                            

   2.  A parking lot adjacent to Shand Morahan Plaza
described as follows:                 

           Lots 1 and 2 (except the Westerly 11 feet), Lot 3
          (except the Westerly 11 feet of the Northerly 12
              feet), 4, 5 and the North 2 feet of Lot 6 and all of
             Lots 16, 17, 18, 19 and 20 and 21 (except that part
           of Lot 21 which lies North and East of a straight
             line drawn from the Southeast corner of said Lot 21
             to a point on the North line of and 50 feet West of
           the Northeast corner of said Lot 21), the vacated
              North and South Public Alley lying between said Lots
            1 to 6 inclusive and Lots 16 to 21 inclusive; that
          part of the vacated South 8 feet of Clark Street
              which lies East of the West line of said Lots 1 to 6
             inclusive extended in a Northeasterly direction and

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        West of the said line drawn from the Southeast
            corner of said Lot 21 to a point on the North line
             of and 50 feet West of the Northeast corner of said
            Lot 21 extended in a Northwesterly direction; also
            Lots A, B, C and D (except the West 25 feet of Lot
            D) in Grover and Currey's Subdivision of Lots 6, 7
           and 8 (except the North 2 feet of Lot 6 thereof);
              all of the aforesaid property being located in Block
   2 in E.A. Pratt's Addition to Evanston, a
         subdivision of part of the Southwest 1/4 of the
         Northwest 1/4 of Section 18, Township 41 North,
              Range 14 East of the Third Principal Meridian, lying
              East of Ridge Road and West of Milwaukee Division of
       the Chicago and Northwestern Railway, in Cook
County, Illinois.                     

         Properties 1 and 2 above are both owned beneficially by
          SMCO.  Title is held by American National Bank and Trust
        Company under trust agreement #56801 dated February 1,
1983.                                         

B.  Real Property owned by ESI, EIC, or ICE:          

None                                          

C.  Encumbrances on any Real Property owned by SMCO:  

    1.  Grant of Easement dated September 19, 1956 and
            recorded October 11, 1956 as Document No. 16723918
       granted to the City of Evanston for sidewalk.

          2.  License granted August 1, 1985 allowing encroachment
           by Shand Morahan Plaza patio onto triangular lot.

         3.  Easement Agreement, dated March 1, 1983 and amended
        August 1, 1985, granting a parking easement to
         property described in Sections A1 and A2 above.

     D.  Assets Deposited as security by EIC and ICE pursuant to
state regulations as of December 31, 1986:    

           STATE              EIC              ICE
           -----              ---              ---
   1.    Arkansas             $  150,000        $  100,000
   2.    Delaware                --                 35,000
   3.    Illinois              8,575,000         5,400,000
 4.    Kentucky                175,000              --
   5.    Louisiana               150,000            70,000
   6.    Massachusetts           500,000           100,000

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 7.    Michigan                100,000              --
 8.    New Hampshire         1,500,000              --
 9.    New Jersey              150,000              --
  10.    New Mexico              150,000           100,000
  11.    North Carolina             --             100,000
12.    Oklahoma                100,000              --
  13.    Oregon                     --             230,000
  14.    Virginia                   --             100,000

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SCHEDULE 2.20                                         

      The New Hampshire Insurance Department has notified Evanston
Insurance Company that it has been removed from the   
    authorized surplus lines company list effective October 1,
   1987.  The Department advised on October 1, 1987 that EIC
    will be removed from this list until the Department has an
   opportunity to review the financial statements of the new
investors in SMCO.                                    

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SCHEDULE 2.21                                         

A.  Leases of personal property by SMCO, having annual
payments in excess of $25,000:                

        1.  Master lease for computer equipment from NBI, Inc.
dated March 29, 1985;                 

        2   Master lease for computer equipment from Comdisco,
Inc. dated August 6, 1981.            

          3.  Master lease for computer equipment from ITT Courier
     Terminal Systems, Inc. dated March 1, 1983.

4.  Lease of phone switch from AT&T.          

      5.  Lease of software from E.D.S. Corp. and software
            maintenance agreement dated as of January 23, 1985
and extended to January 31, 1988.     

    B.  Leases of personal property by ESI, EIC, or ICE having
annual payments in excess of $25,000:         

None.                                         

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SCHEDULE 2.23                                         

A.  Exceptions to clause (i) of Section 2.23:         

          SMCO's 1986 Illinois state income tax return has not yet
       been filed.  The return is extended until October 15,
         1987.  The Illinois Combined Income and Replacement tax
   return for ESI, EIC and ICE, was not filed by the
          extended due date of September 15, 1987 but was filed on
         September 30, 1987.  No penalties or interest should be
 assessed since the return shows a current loss.

B.  Exceptions to clause (iii) of Section 2.23:       

          SMCO owes to A&A $174,518 in respect to the IRS audit of
       1980 through 1982 Federal Income Tax returns and SMCO
         owes to A&A $24,952 in respect to the IRS audit of 1977
        through 1979 Federal income tax returns.  SMCO owes to
          A&A $13,123 with respect to state income taxes, net of a
      Federal tax benefit, resulting from the IRS audit of
    1979 through 1982 Federal Income Tax returns.  The
       amounts due to A&A with respect to State income taxes
     are based on IRS audit adjustments from preliminary
     audit reports.  These adjustments have not yet been
reported to the State tax authorities.        

        SMCO owes to A&A a balance of $1,681,955 in respect to
    the 1986 Federal Income Tax return filed by A&A on
          September 15, 1987.  SMCO owes to A&A $44,527 in respect
     to the Illinois Combined Income and Replacement tax
       return that will be filed by A&A on or before October
      15, 1987 (this amount is net of a Federal income tax
benefit).                                     

C.  Exceptions to clause (iv) of Section 2.23:        

         The 1979 through 1984 Federal Income Tax returns of the
          consolidated group of which SMCO is included, are either
   currently under audit or, the parent has received
       notification that they will be audited.  No state tax
          returns of SMCO are currently under audit.  The Illinois
         state tax authorities have reviewed the Combined Income
          and Replacement tax return for ESI, EIC and ICE, for the
          years ended December 31, 1984 and 1985 and have verbally
stated that no adjustment is needed.          

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D.  Exceptions to clause (v) of Section 2.23:         

      SMCO's federal income tax returns are closed for tax
        years ending on or prior to December 31, 1978.  SMCO's
      Illinois income tax returns are closed for tax years
      ending on or before December 31, 1983 and the SMCO's
          Minnesota income tax returns are closed for years ending
        on or before December 31, 1981.  ESI's Federal returns
       are closed for tax years ending on or before December
         31, 1984.  The Illinois Combined Income and Replacement
          tax returns for ESI, EIC and ICE for tax years ending on
or before December 31, 1983 are closed.       

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SCHEDULE 2.24                                         

EEOC charges have been filed by:                      

         1.  Melvin Smith (alleging race and age discrimination)

2.  Maudette Watley                           
Antigone Cooper                       
Juanita Welch                         
Claudine Jordan                       
Lilieth McLachlin                     
(alleging race discrimination)        

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SCHEDULE 2.25                                                             

   A.  A&A Insurance Policies Covering SMCO, ESI, EIC, and ICE up until the time
of SMCO's sale:                                                   

Company                        Type                 Amount of Coverage  
-------                        ----                 ------------------  

1.   Hartford                 Workers              Statutory WC       
                              Compensation &       100,000 EL accident
                               Employers            500,000 OD aggregate
Liability 

     2.   Hartford                 Comprehensive        1,000,000 CSL occurrence
                            General and          & aggregate where
                     Automobile           applicable
Liability 
   3.   Seaboard Surety          Advertisers'                      1,000,000
                                                                             per
                                 Liability                     advertisement
                                                               50,000forpunitive

     4.   Federal                  Aircraft Non-         20,000,000CSLoccurrence
Ownership 
Liability 
5.                                                                    
    (a)   Hartford                 Umbrella Liability       5,000,000xsprimaries
                                                                       (above)

    (b)   Pacific Empl             Umbrella Liability       5,000,000xs5,000,000

    (c)   St. Paul Surplus         Umbrella Liability         5MMp/o 10MMxs 10MM
    (d)   North River              Umbrella Liability         5MMp/o 10MMxs 10MM

    (e)   Aetna C&S                Umbrella Liability        10MMp/o 40MMxs 20MM
    (f)   Fireman's Fund           Umbrella Liability        10MMp/o 40MMxs 20MM

    (g)   AIU                      Umbrella Liability         5MMp/o 40MMxs 20MM

    (h)   INA                      Umbrella Liability         5MMp/o 40MMxs 20MM
    (i)   Home                     Umbrella Liability         5MMp/o 40MMxs 20MM

    (j)   New England              Umbrella Liability         5MMp/o 40MMxs 20MM
    (k)   Federal                  Umbrella Liability        10MMp/o 25MMxs 60MM

    (l)   Transamerica             Umbrella Liability        10MMp/o 25MMxs 60MM

    (m)   Lexington                Umbrella Liability         5MMp/o 25MMxs 60MM
    (n)   Fireman's Fund           Umbrella Liability     15,000,000xs85,000,000

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6.                                                                      
    (a)   Lloyd's & Cos.           Fiduciary               5,000,000xs 10,000ded
Liability 

    (b)   Federal                  Fiduciary               25,000,000xs5,000,000
Liability 

    7.    National Union           Lawyers                 5,000,000xs 5,000ded.
  Professional
Liability 
   (moonlighting
only)     
8.                                                                      
    (a)   Trust Property and       Professional E&O     SMCO to be reimbursedfor
       Casualty                                      covered indemnity and
                                                     expenses which exceed
                                                       40,000 each claim until
                                                        SMCO has paid out100,000
                                                        from 12-1-86 to 12-1-87.
                                                      SMCO is reimbursed for
                                                  100% of such costs
                                                  thereafter.  (This
                                                        applies to SMCO, ESI,EIC
                                         and ICE).

    (b)   Lloyds & Cos.            Professional E&O      25%of 10,000,000xs TP&C
    (c)   Trust P&C                Professional E&O     75% of 10,000,000 xsTP&C
                                                      (TP&C = 5,000,000 each
                                                      claim of which 40MM xs
                                                      1MM is limited to 40MM
                                          aggregate)

    (d)   Lloyds & Cos.            Professional E&O       11.25MMp/o 15MMxs 10MM

    (e)   Amer. Cas./Reading       Professional E&O         .50MMp/o 15MMxs 10MM
    (f)   Amer. Motorists          Professional E&O         .50MMp/o 15MMxs 10MM

    (g)   Continental Ins.         Professional E&O         .50MMp/o 15MMxs 10MM
    (h)   Hartford                 Professional E&O         .50MMp/o 15MMxs 10MM

    (i)   National Union           Professional E&O         .50MMp/o 15MMxs 10MM

    (j)   National Cas             Professional E&O         .35MMp/o 15MMxs 10MM
    (k)   Centennial               Professional E&O         .25MMp/o 15MMxs 10MM

    (l)   Fireman's Fund           Professional E&O         .25MMp/o 15MMxs 10MM
    (m)   Hartford                 Professional E&O         .50MMp/o 15MMxs 10MM

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    (n)   The Home                 Professional E&O         .15MMp/o 15MMxs 10MM

    (o)   Lloyd's Cos.             Professional E&O       12.40MMp/o 15MMxs 25MM

    (p)   Amer. Motorists          Professional E&O         .50MMp/o 15MMxs 25MM
    (q)   National Union           Professional E&O         .50MMp/o 15MMxs 25MM

    (r)   Travelers                Professional E&O         .50MMp/o 15MMxs 25MM
    (s)   The Home                 Professional E&O         .35MMp/o 15MMxs 25MM

    (t)   Hartford                 Professional E&O         .25MMp/o 15MMxs 25MM

    (u)   INA                      Professional E&O         .25MMp/o 15MMxs 25MM
    (v)   North River              Professional E&O         .25MMp/o 15MMxs 25MM

    (w)   Aetna C&S                Professional E&O         1.25MMp/o 5MMxs 40MM
    (x)   Fireman's Fund           Professional E&O          .75MMp/o 5MMxs 40MM

    (y)   INA                      Professional E&O          .75MMp/o 5MMxs 40MM

    (z)   Federal                  Professional E&O          .60MMp/o 5MMxs 40MM
    (aa)  Travelers                Professional E&O          .50MMp/o 5MMxs 40MM

    (bb)  Amer. Zurich             Professional E&O          .50MMp/o 5MMxs 40MM
    (cc)  Hartford                 Professional E&O          .25MMp/o 5MMxs 40MM

    (dd)  Utica Mnt.               Professional E&O          .25MMp/o 5MMxs 40MM

    (ee)  The Home                 Professional E&O          .15MMp/o 5MMxs 40MM
9.                                                                      
   (a)   National Union           Directors &                      15,000,000*
                                                                              xs
                                  Officers                         deductible:

                                                         CORPORATE REIMBURSEMENT
                                                         -----------------------
                                                                  2,500,000/Loss
                                                                               -
                                                                    regulatory

                                                              750,000/Loss-other

                                                         INDIVIDUAL COVERAGE
                                                         -------------------
                                                               10,000/director
                                                                              or
                                                                     officer

                                                             100,000aggregateper
                                                                      loss
    (b)   Harbor                   Directors &             5,000,000xs15,000,000
Officers  

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    (c)   North River              Directors &             1,000,000xs20,000,000
Officers  

    (d)   Federal                  Directors &             4,000,000xs21,000,000
Officers  

    (e)   Great Amer.              Directors &            10,000,000xs25,000,000
Officers  
    (f)   INAPRO                   Directors &             2,000,000xs40,000,000
Officers  

    (g)   Home                     Directors &             2,000,000xs42,000,000
Officers  
    (h)   National Union           Directors &             5,000,000xs35,000,000
Officers  

*5% coinsurance applies to the first 1,000,000 of loss.     

10.   CNA                      Commercial           (subject to a 1,000 
----------
                      Property:            deductible)
--------  
     real & personal

                                   in transit            35,000,000eachoccurence
                                   extra expense         1,000,000eachoccurrence

                                   extra expense         2,000,000eachoccurrence

    11.   Travelers                Boiler & Machinery   25,000,000 each accident
                                                   (subject to a 1,000
                                           deductible)
12.                                                                     
(a)   Federal                  Comprehensive        10,000,000 per loss 
   -------------
                                   Crime:               (subject to a 2.5MMded.)
-----     
      Blanket Coverage
  for employee
 dishonesty,
 property on
     premises and in
       transit, forgery,
etc.      

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    (b)   National Union           Comprehensive          10,000,000xs10,000,000
   -------------
Crime:    
-----     
      Blanket Coverage
  for employee
 dishonesty,
 property on
     premises and in
       transit, forgery,
etc.      

    (c)   INA                      Comprehensive           5,000,000xs20,000,000
   -------------
Crime:    
-----     
      Blanket Coverage
  for employee
 dishonesty,
 property on
     premises and in
       transit, forgery,
etc.      

    (d)   National Union           Comprehensive           5,000,000xs25,000,000
   -------------
Crime:    
-----     
      Blanket Coverage
  for employee
 dishonesty,
 property on
     premises and in
       transit, forgery,
etc.      
    (e)   Reliance                 Comprehensive           7,500,000xs30,000,000
   -------------
Crime:    
-----     
      Blanket Coverage
  for employee
 dishonesty,
 property on
     premises and in
       transit, forgery,
etc.      

13.                                                                     
    (a)   Federal                  Special                    15,000,000perevent
 Contingency
    (b)   American Ins. Group      Special                20,000,000xs15,000,000
 Contingency

    (c)   Lloyd's                  Special                15,000,000xs35,000,000
 Contingency

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    14.   Federal                  First Class Mail               250eachpackage
                                                             1,100,000peraddress
                                                       per day

 15.   Federal                  Registered Mail      2,500,000each package

                                                         2,500,000per addressper
                                                           day

    16.   CNA                      Travel Accident      Class I Employee 350,000
                                    max.
                                                        ClassII Employee 100,000
                                    max.
SPECIAL SELF-INSURED FUNDING ARRANGEMENTS OF A&A                        
------------------------------------------------                        

17.   Automobile Physical      ACV Comprehensive less 250 deductible    
Damage Plan:             ACV Collision less 250 deductible  
   18.   Crime Deductible Fund    : Formula for disbursements has not yet been
finalized 

   19.   EEO Liability Fund       : Formula for disbursements has not yet been
finalized 

B.  Independent SMCO Insurance Policies:                                
1.    Lawyers Title Insurance  Title Insurance      23,288,276 Leasehold
Co.                                           Owners'       
                                                    45,878,929 Mortgagee

  2.    First State              Insurance Cos. E&O   1,000,000 xs 1,000,000
                                                    decl. (underlying to
                                                  Lloyd's Prof. E&O)
  3.    General Insurance Co.    Directors &          1,000,000 xs Nat Union
of America               Officers             (below)       
                                                 or xs deductible:
                                                       CORPORATE REIMBURSEMENT
                                                       -----------------------
                                               50,000 for loss
                                                   INDIVIDUAL COVERAGE
                                                   -------------------
                                                   5,000 per director/
                                       officer
                                                        20,000aggregate per loss

      The following claim summary lists open case files for actual
  and potential E&O claims against SMCO, ESI, EIC, or ICE.

     All of these claims and potential claims have been reported
to A&A for protection under its professional indemnity
program.                                              

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    Additionally, all EIC cases with a DCM - date claim made -
of 12-4-86 or later have been reported to First State 
Insurance Company.                                    

At the present time, none of these claims exceed the  
      deductible amounts under any available E&O insurance policy.

In addition, approximately two or three unpaid workers
      compensation claims are outstanding.  These claims are fully
insured by the Hartford.                              

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                                                    Claim or
                                                    --------
         DCM                                         Potential
         ---                                         ---------

                                                   EIC    SM
                                                   ---    --

12/1/83 to 12-1-84        
------------------        
        3-22-84  Johnson                            --     C

12-1-84 to 12-1-85        
------------------        
        8-05-85  G.P.A.                             --     C

        9-25-85  Int'l Finc Planners                P      P

       11-13-85  Costello                           --     C
12-1-85 to 12-1-86        
------------------        

        1-13-86  Burge Financial                    C      P
        1-22-86  Diplarakos                         P      P

        3-21-86  Lord Bissell & Brook               P      P

        4-10-86  Mutual Fire (MF)                   --     P
        5-09-86  Harrington                         --     C

        7-23-86  Savitri Jain, M.D.                 C      P
        8-04-86  Sun Coast Hospital (MF)            --     P

        8-06-86  Lee v. The Travelers               --     C

        8-14-86  Advanced Environ (MF)              --     P
        8-14-86  N. Miami Gen Hosp (MF)             --     P

        8-19-86  Evander                            --     P
        8-20-86  Krueger Engin (MF)                 --     C

        9-04-86  Fidelity Bank (MF)                 --     C

        9-30-86  Encino S&L (MF)                    --     C
       10-01-86  Bonaldi Agency                     --     C

       10-09-86  Esco Elevator                      C      P
       10-28-86  David Potter Duff                  C      C

       11-06-86  Schaffer                           --     P

       11-10-86  American S&L (MF)                  --     C
       11-14-86  Cook Int'l (Campb) (MF)            --     P

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       11-14-86  Shidler, McBroom (MF)              --     P

       11-14-86  Abrahamson (MF)                    --     P

       11-14-86  Strout Realty (MF)                 --     P
       11-24-86  Brobeck & Phlegler                 P      P

       11-26-86  Mutual Fire                        P      P
12-1-86 to 12-1-87        
------------------        

       12-02-86  Farm Bureau T&C                    P      C

       12-02-86  Murphy-Jahn                        P      P
        1-05-87  Duke Transportation                P      C

        1-07-87  P.T. Umum                          --     P
        1-14-87  Sigco Research                     C      P

        1-16-87  Auerbach                           --     C

        1-20-87  Lakritz                            --     P
        1-26-87  City of Harlingen                  C      C

        2-02-87  Wiltshire Group                    C      P
        2-05-87  Meyer, Rohrs                       --     P

        2-10-87  Warren Oil Co.                     C      P

        3-02-87  Bob Speer                          C      P
        3-14-87  Christopher Hatch                  C      P

        3-16-87  Nevada National Bank               C      C
        3-25-87  Rothstein (EIC)                    --     P

        4-14-87  Chemical Sales Co.                 C      P

        4-21-87  Hassneh Ins. Co.                   P      P
        4-22-87  Eglseder & Levitt (MF)             --     P

        6-01-87  Phanlobh Vichaikul                 P      C
        6-05-87  Harold F. Leclair Co.              C      P

        6-08-87  Swanke, Hayden                     --     C

        6-09-87  Erma Johnson                       C      P
        6-24-87  Wayne Co. Nat. Bank                C      P

        7-20-87  Martin et al.                      C      P

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        7-29-87  LaVine                             C      C

        8-03-87  Hammond & Company                  --     P

        8-06-87  American Motorists                 --     C
        8-24-87  Davis & Davis                      --     P

        8-27-87  Diamond Claims                     C      C
         9-9-87  The Travellers (GA)                --     P

        7-24-87  Linkow                             --     P

        9-14-87  American Medical International     C      C
         9-9-87  Federal Ins. Co.                   C      C

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SCHEDULE 2.26                                         

   A. SMCO Employment Agreements that might provide a stated
or implied term of employment:                  

    1.  Consulting Agreement with Joseph E. Morahan, Jr.
2.  Employee Handbook.                          
3.  Personnel Manual.                           

    B. SMCO Employment Agreements providing compensation other
        than salary (other than welfare, health or pension plans
listed on Schedule 2.27):                       

1.  Officer Reimbursement Policy.               

      2.  Short Term Bonus Plan and Covenant not to Compete.

3.  Long Term Bonus Plan.                       

4.  Excess Benefit Bonus Plan.                  

5.  Severance Pay Policy.                       

    6.  Executive Committee Golf Club Membership Policy.

  7.  Deferred Compensation Agreement with Joseph J.
Prochaska, Jr.                          

      8.  Deferred Compensation Agreement with E.L. Calhoun.

9.  Special Disability Income Protection Plan.  

10. Retiree Life and Health Program.            

11. Employee Handbook.                          

12. Personnel Manual.                           

    13. Bonus plans for Donald Brayer and Robert Liston.

14. Company policy on Automobiles for Executive 
Committee Members.                      

   15. Deferred Compensation Agreement with M.W. Beam.

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     C. ESI, EIC or ICE Employment Agreements providing a stated
     term of employment or compensation other than salary.

None.                                           

 D. Agreements between Seller or Seller's affiliates and
     subsidiaries and SMCO, ESI, EIC, or ICE not disclosed
elsewhere:                                      

1.  Agreement between A&A and SMCO providing for
        reimbursement by A&A to SMCO of deferred amounts
payable to J.E. Morahan, Jr. in 1988.   

2.  Incentive Stock Option Plan                 

        3.  Two insurance policies issued by EIC in favor of A&A
           and all owned entities providing brokers and agents
         errors and omissions coverage for the period from
12:01 AM to 11:59 PM December 31, 1980. 

        4.  Hemisphere Marine & General Assurance (Bermuda) Ltd.
         aggregate excess of loss reinsurance covering EIC
effective December 31, 1982.            

  5.  Two facultative reinsurance agreements between
            Hemisphere Marine & General Assurance (Bermuda) Ltd.
          as reinsurer and EIC as reinsured from 12:01 AM to
11:59 PM December 31, 1980.             

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SCHEDULE 2.27                                         

A.  Employee Benefit Programs subject to ERISA:       

Profit Sharing Plan                             
Money Purchase Pension Plan                     
Defined Benefit Pension Plan                    
Health and Dental Plan                          
 Flexible Benefit Plan (including component plans)

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SCHEDULE 2.30                                         

A. Insurance regulatory registrations, filings, or    
submissions not made available to Buyer:        

None                                            

     B. Registrations, filings, or submissions not in compliance
with applicable law:                            

    See Schedule 2.20, incorporated herein by reference.

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SCHEDULE   2.31                                       

A.  1987 Treaty Reinsurers of EIC or ICE:             

    A.M.P. Fire & General Insurance Company, Limited
American Hardware Mutual Insurance Co.      
Austin Mutual Insurance Co.                 
Auto-Owners Insurance Co.                   
        Baltica-Skandinavia Reinsurance Co. of America, Inc.
Celfor Insurance Company                    
    Chiyoda Fire & Marine Insurance Company, Limited
     Colonial Mutual General Insurance Company Limited
Columbia Mutual Insurance Company           
The Copenhagen Reinsurance Co. of America   
     Dai Tokyo Fire & Marine Insurance Company Limited
Dai Tokyo U.K.                              
Dorinco Reinsurance Co.                     
Dowa Fire & Marine Insurance Company Limited
Druggists Mutual Insurance Co.              
Eisen & Stahl Ruckversicherungs A.G.        
Evanston Insurance Company                  
Excess Insurance Company                    
Farm Bureau Mutual Insurance Co. of Michigan
Farmers Home Mutual Insurance Co.           
Folksam International Insurance Co., Ltd.   
Fuji Fire & Marine Insurance Company Limited
John Hancock Reinsurance Management/Hanseco 
Insurance Co.                             
Hannover Ruckversicherungs A.G.             
Homestead Insurance Company                 
Insurance Company of Evanston               
Insurance Corporation of Hannover           
Israel Reinsurance Company Limited          
Alii Reinsurance Company Limited            
Kyoei Mutual Fire & Marine Insurance Company
Paul J. McGee Associates/RLS Insurance Co.  
Michigan Mutual Insurance Co.               
Midwest Family Mutual Insurance Co.         
   Nichido Fire & Marine Insurance Company Limited
North Star Mutual Insurance Co.             
Royale Belge                                
Russell Reinsurance Service/Employers Mutual
Casualty Accounts A&B                     
Signet Reinsurance Company                  
Sphere Drake Insurance Co.                  
Stockholm Reinsurance Company, Ltd.         
Travelers Indemnity Co.                     
Underwriters at Lloyds                      

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United Fire & Casualty Company              
United States Fidelity and Guaranty Company 
Utah Home Fire Insurance Company            
West Bend Mutual Insurance Company          
Western National Mutual Insurance Company   

   B.  Management and Underwriting Agreements to which SMCO,
ESI, EIC or ICE is a party:                     

1.  American Bankers Ins. Co. of Florida - SMCO.    
         Management Agreement, effective April 1, 1977 through
December 31, 1982.                          

 2.  General Accident Insurance Co. of America - SMCO.
    ------------------------------------------------
         Underwriting Management Agreement, effective November
1, 1980 through June 30, 1986.              

 3.  General Accident Insurance Co. of America - SMCO.
    ------------------------------------------------
       Reinsurance Management Agreement, effective October
20, 1980 through December 31, 1986.         

     4.  General Accident Insurance Co. of Puerto Rico Limited
         -----------------------------------------------------
         - SMCO.  Underwriting Management Agreement, effective
------                                      
January 1, 1983 through December 31, 1985.  

     5.  EIC - ESI - SMCO.  Tripartite Underwriting Management
----------------                            
Agreement, effective January 1, 1982.       

     6.  ESI - SMCO.  Underwriting Management Agreement, dated
----------                                  
September 27, 1982.                         

     7.  ICE - ESI - SMCO.  Tripartite Underwriting Management
----------------                            
    Agreement, effective January 1, 1982 as amended.

8.  Underwriters at Lloyd's, London - SMCO.  Lawyers
--------------------------------------      
          Errors and Omissions Contract # 8791 effective January
1, 1987.                                    

 9.  Northbrook Excess & Surplus Insurance Co. - SMCO.
    ------------------------------------------------
        Underwriting Management Agreement, effective through
December 31, 1981.                          

   10. Utica Mutual Insurance Co. - Professional Insurance
       ---------------------------------------------------
       Agents Association - SMCO.  Underwriting Management
-------------------------                   
        Agreement, effective March 15, 1971 through December
    31, 1987.  Utica has given notice of termination
effective as of December 31, 1987.          

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  11. Mutual Fire, Marine & Inland Insurance Co. - SMCO.
     -------------------------------------------------
        Underwriting Management Agreement effective June 30,
1977 through December 31, 1984.             

 12. Barristers Insurance Co. - Risk Retention Group -
     -------------------------------------------------
       SMCO.  Underwriting Consultation and Claims Service
----                                        
Agreement, not yet finalized.               

     13. Managing Partners Council - SMCO.  Service Agreement,
--------------------------------            
presently in effect.                        

14. EIC - Corrie Bauckham Batts Strickland Ltd.     
------------------------------------------  
  Management Agreement, effective April 1, 1985.

15. Environmental Protection Insurance Co. - Risk   
 ---------------------------------------------
          Retention Group - SMCO.  Management Agreement, not yet
----------------------                      
finalized.                                  

     16. Denver Insurance Company - SMCO.  Line slip effective
-------------------------------             
between SMCO and other participants.        

 17. General Accident Insurance Co. of America - SMCO.
    ------------------------------------------------
      Service Agreement for insurance policies effective
July 1, 1986.                               

 18. Northbrook Excess & Surplus Insurance Co. - SMCO.
    ------------------------------------------------
    Service Agreement for lawyers insurance policies
effective January 1, 1982.                  

 19. Northbrook Excess & Surplus Insurance Co. - SMCO.
    ------------------------------------------------
  Service Agreement for architects and engineers
insuance policies effective January 1, 1982.

   20. First State Insurance Company - SMCO.  Underwriting
------------------------------------        
       Management Agreement for hospital umbrella policies
          including malpractice from January 1, 1977 to December
31, 1982.                                   

E. Management and Underwriting Agreements having      
      termination provisions affected by the transactions of
this agreement:                                 

  1.  See Schedule 2.10, which is incorporated herein by
reference.                                  

2.  Denver Insurance Co. Line Slip.                 

F.  Reinsurers exhibiting account deficiencies:       

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     1.  Approximately 100 reinsurers had account deficiencies
        (excess of loss reserves over funds held in trust or
    L.O.C.s) with SMCO and EIC as of August 31, 1987
     ranging from $0 to approximately $2,800,000.  The
      following reinsurers had deficiencies greater than
$500,000:                                   

A.A. Mutual              Mutual Fire        
Abeille Paix             P.T. Umum          
Gerling Global           River Plate        
Malayan                  Terra Nova         

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SCHEDULE 2.32                                         

A.  Material contracts between EIC and ICE and brokers
         authorizing such brokers to issue insurance policies on
their behalf:                                 

          1.  Management Agreement between EIC and Corrie Bauckham
             Batts Strickland Ltd. ("CBBS") dated April 1, 1985.
           (Terminable by either party on 6-months' notice).

            The following agents have been signed as producers
    for EIC by CBBS under the above management
agreement:                            

         ADCO General Corporation       Denver, Colorado
         All Risks, Ltd.                Towson, Maryland
             Arkansas General Agency        Fort Smith, Arkansas
             Bolton & Company               Louisville, Kentucky
            Casualty Underwriters, Inc.    St. Paul, Minnesota
             Cochrane Griffin               Bellevue, Washington
& Co., Inc.                       
           EBCO Commercial Lines          Memphis, Tennessee
Underwriters                          
          Erickson-Larsen, Inc.          Brooklyn Park, MN
       Franklin Excess &              Columbus, Ohio
Surplus Agency, Inc.                  
             Burns & Wilcox, Ltd.           Southfield, Michigan
              I-West Insurance Managers      San Diego, California
            K.W. Underwriters              Metairie, Louisiana
            Med James, Inc.                Shawnee Mission, KS
              Montgomery General             Ardmore, Pennsylvania
Agency, Inc.                          
          Preferred General Agency       Anchorage, Alaska
of Alaska, Inc.                   
    R.J. Saex Insurance            Holyoke, MA
Agency, Inc.                          
         Westward Insurance             Phoenix, Arizona
Specialties Co., Inc.                 

      (The Producer agreements signed by the above
           producers are terminable by either party upon 30-
days' notice.)                        
 2.  Agreement between SMCO and I-West Insurance
  Managers, Inc., effective July 23, 1987.
(Terminable upon 60-days' notice.)    
      3.  Agreement between SMCO and Skanco International,
             Ltd. effective July 14, 1987.  (Terminable upon 60-
days' notice.)                        

   4.  Theodore Liftman one year exclusive contract.

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SCHEDULE 2.33                                         

   A.  Registered trademarks or service marks owned by SMCO,
ESI, EIC, or ICE:                             

1.  ALTIS - registered in Illinois.           
2.  SLIM                                      

      B.  Third party software material to SMCO, ESI, EIC, or ICE:

1.  "PCMF" Software by E.D.S. Corporation.    
          (Maintenance Agreement expires January 31, 1987)

      2.  Office management software by Management Science
America, Inc.                         

3.  NBI software by N.B.I., Inc.              

    C.  In-House material software systems developed and owned
by SMCO:                                      

1.  PRAIS                                     
2.  Invoicing                                 
3.  Broker                                    
4.  Reinsurance Assumed                       
5.  LEAP                                      
6.  RGS                                       
7.  On-Line Risk Experience                   
8.  Types of Business                         

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SCHEDULE 2.37                                         

   Total federal taxable income under SMCO Safe Harbor Lease
agreements with ITT and U.S. Air:                     

                                       Federal
Year                                    Taxable Income
  ----                                   -----------------

1987*                                      $  222,902 
1988                                       $  474,505 
1989                                       $  782,218 
1990                                       $1,116,813 
1991                                       $2,109,242 
1992                                       $2,557,689 
1993                                       $3,102,543 
1994                                       $3,764,776 
1995                                       $4,456,156 
1996                                       $5,139,851 
1997                                       $4,054,377 
1998                                       $4,943,512 
1999                                       $5,956,273 
2000                                       $2,223,897 
2001                                       $1,259,601 
2002                                       $  726,335 
2003                                       $  300,958 
2004                                       $  360,618 
2005                                       $  432,105 
2006                                       $  517,763 
2007                                       $  620,402 
2008                                       $  743,387 
2009                                       $  890,751 
2010                                       $1,067,329 
2011                                       $1,161,554 
                                          ----------

                            Total          $48,985,557
___________________                                   

    *    Federal taxable income for the period July 1, 1987 to
December 31, 1987.                          

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SCHEDULE 3.4                                          

     Filings, Consents, Approvals, etc. required by Buyer or any
Affiliate of Buyer to consummate transaction:         

         1.   A "Form A" must be filed by Buyer with the insurance
      regulatory agencies of the following states:

Illinois                            

       2.   Lord, Bissell & Brook is conducting research as to
     state "takeover" statutes, as well as state
             insurance statutes.  Such research may indicate the
              need or desirability of further consents, approvals,
or notices.                           

         3.   The New Hamphsire Insurance Department has indicated
        that it will not reinstate EIC's surplus lines
           authorization before it has had an opportunity to
      review the financial statements of Buyer and
Affiliates.                           

     4.   Hart-Scott-Rodino filings may be required on the
part of Buyer and/or Seller.          

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SCHEDULE 3.9                                          

   Legal and beneficial owners of the common stock of Buyer:

Owner            Number of Shares     
-----            ----------------     

Fairfax             100               

Markel              100               

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SCHEDULE 4.8                                          

     Lines of insurance with respect to Seller's covenant not to
compete:                                              

Architects and Engineers Professional Liability 

Hospital Professional Liability                 

 Insurance Agents and Brokers Errors and Omissions
Liability                                       

      Insurance Companies Errors and Omissions and Directors
and Officers Liability                          

Lawyers Professional Liability                  

Medical Malpractice Professional Liability      

        Mutual Fund and Investment Advisors Errors and Omissions
and Directors and Officers Liability            

Products Liability                              

Environmental Impact and Liability              

        Errors and Omissions Coverages for any of the following:

Advertisers                           
Associations                          
Claims Adjusters                      
Communication Consultants             
Electronic Data Processors            
Executive Search Firms                
Franchisors                           
Management Consultants                
      Manufacturers' Product Engineering or Design
 Marketing Agencies/Consultants Printers
Property Managers                     
Tax Preparers                         
Testing Labs                          
Translators                           
Travel Agents                         
Trustees                              
Unauthorized Computer Access          

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SCHEDULE 5.10                                         

     Amounts payable by A&A to SMCO, other than payments for the
Safe Harbor Leases listed on Schedule 2.37, which is  
included herein by reference:                         

J. Morahan special payroll                            
         adjustments                                $419,455.69(1)

Reimbursable travel expenses-                         
J. Morahan            $883.53                   
P. West                 39.40                   
       B. Libby               640.13                  1,563.06

    E&O reimbursements                              562,577.32
                                                    ----------

       Total                                       $983,596.07
                                                   -----------

(1) This amount represents reimbursements of deferred 
        compensation payments payable by SMCO to J. Morahan in
      1988.  Payment for reimbursement is not due from A&A
       until actual payments are made by SMCO.  In addition,
     certain amounts that comprise these payments accrue
        interest at a rate that cannot be determined until the
actual date of payment by SMCO to J. Morahan. 

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SCHEDULE 6.12                                         

Amounts payable by SMCO to A&A:                       

   1986 Management fees                         $ 770,000.00

      1987 General insurance                       1,661,000.00(1)

   1987 Excess building charge                    205,002.00

   E&O reimbursement                              133,379.14
                                                  ----------

      Total                                    $2,769,381.14
                                               -------------

   (1) Represents ultimate amount due if coverage remains in
     force through year end.  $833,833 has been expensed
       through 6/30/87.  Per A&A's instructions, this amount
      has been set up as a prepaid amount on SMCO's books,
      thus bringing the net payable at 6/30/87 to $827,167
        ($1,661,000 - $833,833).  If the effective date of the
Closing is prior or subsequent to 12/31/87, an
         appropriate pro-rata adjustment will have to be made to
the $1,661,000.                               

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      ALEXANDER & ALEXANDER INC.
     1211 Avenue of the Americas
     New York, New York  10036

                                           As of February 15, 1989

F-M Acquisition Corporation                           
c/o Fairfax Financial Holdings Limited                
Suite 800                                             
95 Wellington Street West                             
Toronto, Ontario                                      
Canada  M5J2N7                                        

Attention:  Mr. Prem Watsa                            

      AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT,
      dated as of October 7, 1987, between
     F-M Acquisition Corporation and
        Alexander & Alexander Inc.
      --------------------------------------------

Dear Sirs:                                            

           We refer to the Stock Purchase Agreement (the

   "Stock Purchase Agreement"), dated as of October 7, 1987,

   between you and us providing for the sale by us to you of

all of the outstanding common stock of Shand Morahan &

    Company, Inc.  Terms used and not otherwise defined herein

      have the meanings specified in the Stock Purchase Agreement.

              As you are aware, you and we have differed as to

  how certain issues relating to optional extension period

 policies are addressed in the Stock Purchase Agreement.

  This Agreement, and the amendments to the Stock Purchase

   Agreement contained herein, are intended to resolve those

 differences and to provide for other adjustments to the

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     amounts payable, and credits against amounts payable, under

  the Stock Purchase Agreement that you and we agreed were

appropriate in connection with such resolution.       

 You and we hereby agree as follows:

                1.   Amendments to Article I of the Stock Purchase
                     ---------------------------------------------

Agreement.                                            
---------                                             

              1.1. Deferred Purchase Price.  Section 1.4(a) of
----------------------- 

  the Stock Purchase Agreement is amended by inserting the

    following heading immediately after "(a)" at the beginning

of such section:                                      

    "Elements of Deferred Purchase Price."
   -----------------------------------

      and by amending the final sentence of Section 1.4(a) to read

in its entirety as follows:                           

            "'Adjustment Date' shall mean March 19, 1991."

            1.2. Limitations on Total Adjustment.  Section
       -------------------------------

1.4(b) of the Stock Purchase Agreement is amended by  

     inserting the following heading immediately following "(b)"

at the beginning thereof:                             

"Limitations on Total Adjustment."
------------------------------- 

           1.3. Amounts Equivalent to Interest.  Section
      ------------------------------

  1.4(c) of the Stock Purchase Agreement is amended in its

entirety to read as follows:                          

            "(c) Assumed Interest Rates and Payments.  The
           -----------------------------------

        amount equivalent to interest referred to in clauses

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   (iii), (iv) and (vi) of Section 1.4(a) shall be

         calculated on the basis of a 365- or 366-day year, as

          the case may be, and the actual number of days elapsed

       and shall be accrued on, and for the entire periods

    specified in Section 1.4(a) with respect to, the

         Contingent Amount, the Adjustment Amount and the Non-

           Contingent Amount, as the case may be, at the rates set

     forth in clauses (i) and (ii) below, and shall be

     subject to the further provisions of this Section

1.4(c).                                     

                  (i)   Assumed Interest Rate for Contingent
                        ------------------------------------

        Amount and Adjustment Amount.  The assumed
----------------------------      

            interest rate per annum shall be 13.36% in the

            case of the Contingent Amount and 9.55% in the

case of the Adjustment Amount.    

                   (ii)  Assumed Interest Rate for Non-Contin-
                         -------------------------------------

               gent Amount.  The assumed interest rate per annum
-----------                       

              on the Non-Contingent Amount shall be 16.17% or,

                under the circumstances hereinafter specified, one

  of the following respective amounts:

                         (A)  An assumed interest rate per annum

                 of 11.86% shall apply if Buyer shall have

                     delivered to Seller on or before February 28,

             1989 an unconditional and irrevocable

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                     guarantee or letter of credit (the "Financial

                     Guarantee"), in form and substance reasonably

                     satisfactory to Seller, that is in the amount

                   of the Non-Contingent Amount and the amount

               equivalent to interest that has accrued

               thereon prior to the date on which such

             guarantee or letter of credit becomes

              effective and the amount equivalent to

                  interest which would accrue thereon there-

                after until the fifth anniversary of the

                Closing Date, in both cases at the rates

                     determined as provided in this Section 1.4(c)

                 and that will remain in effect for a term

                     ending not earlier than the sixth anniversary

               of the Closing Date, from a bank, other

                   financial institution or Hees International

             Bancorp Inc., if such bank, financial

                 institution or corporation is rated AA or

                   better by Standard & Poor's Corporation (or

           received a comparable rating from a

comparable agency).     

                         (B)  An assumed interest rate per annum

                 of 12.89% shall apply if Buyer shall have

                   delivered to Seller the Financial Guarantee

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                    after February 28, 1989 and on or before the

               second anniversary of the Closing Date.

                         (C)  An assumed interest rate per annum

                 of 13.95% shall apply if either (I) Buyer
                                           -

                    shall have delivered to Seller the Financial

                     Guarantee after the second anniversary of the

               Closing Date and on or before the third

                     anniversary of the Closing Date or (II) on or
                                                  --

                     before such third anniversary a condition set

                    forth in the following subclauses shall have

                     occurred and such condition shall continue to

                  be true to and including the Payment Date:

                        (1)  EIC shall have received

                          written notice that it has received, and

                          shall maintain, a rating of B+ or better

                       from A.M. Best & Company ("Best"); or

                              (2)  if, and only if, EIC is rated

                       NA-5 (Significant Change) by Best and

                     (x) EIC shall have received written
-           

                        notice that it has received, and shall

                      maintain, a rating of A or better by

                       Standard & Poor's Corporation, or (y)
                                                         -

                         Buyer shall have, and shall maintain, a

                       Consolidated Net Worth (as defined in

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                          Section 10.16) in excess of $50 million,

                   or (z) Fairfax Financial Holdings
-     

                Limited ("Fairfax") and Markel

                       Corporation ("Markel") (1) shall have
                                   -

                    executed and delivered to Seller a

                     guarantee substantially in the form

                   attached hereto as Exhibit J (the

                     "Overall Buyer Guarantee"), and (2)
                                                     -

                       either individually or together shall

                          have, and shall maintain, a Consolidated

                     Net Worth in excess of $70 million;

                   provided, that, if a condition set forth in
--------                

                clause (II)(1) or (2) above ceases to be

                  true, the assumed rate of interest brought

                    about by fulfillment of such condition shall

                  continue to apply if Buyer, within 60 days

                    following such cessation, delivers to Seller

                  the Financial Guarantee or fulfills one of

                the other conditions set forth in clause

             (II)(1) or (2).  For purposes of this

                 proviso, the term "cessation" shall mean:

                             (m) in the case of clause (II)(1)

                      and (2), the date notice is received

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                       from a rating agency of a lowering of

 the rating; and

                              (n) in the case of clause (II)(2),

                   the date of issuance of the first

                     quarterly balance sheet showing the

                      deficiency of Consolidated Net Worth

    below $50 million.

                      (D)  An assumed rate of 15.04% shall

            apply if either (1) Buyer shall have
           -

                   delivered to Seller the Financial Guarantee

                  after the third anniversary of the Closing

                    Date and on or before the fourth anniversary

                    of the Closing Date or (2) on or before such
                         -

                   fourth anniversary a condition set forth in

                 clauses (C)(II)(1) or (2) of this Section

                1.4(c)(ii) shall have occurred and shall

                continue to be true to and including the

                    Payment Date, subject to the same proviso as

               is set forth immediately following such

   clauses (C)(II)(1) and (2).

                  (iii)  No Compounding.  The application of
    --------------

                the assumed interest rates specified in paragraphs

             (i) and (ii) of this Section 1.4(c) shall be on

                the basis of simple interest, without compounding.

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                    (iv)  Order of Payment.  All payments of the
    ----------------

               Deferred Purchase Price shall be applied first to

               amounts due pursuant to Section 1.4(a)(iii), then

                to amounts due pursuant to Section 1.4(a)(i), then

               to amounts due pursuant to Section 1.4(a)(iv) and

        finally to amounts due pursuant to Section

              1.4(a)(ii), except that a prepayment pursuant to

          Section 1.4(d)(ii) shall be applied first to

            amounts due pursuant to Section 1.4(a)(iv) and

     then to amounts due pursuant to Section

1.4(a)(ii).                       

                    (v)   Overdue Amounts.  An amount equivalent
   ---------------

            to interest shall accrue on any portion of the

             Contingent Amount and the Non-Contingent Amount

                not paid when due at the assumed interest rate per

             annum then applicable thereto plus 4%, provided
                                           ----     --------

               that such rate of interest shall not apply to any

            portion of the Deferred Purchase Price that is

         subject to and withheld during a good-faith

                dispute as to the Adjustment Amount, which portion

              is ultimately determined to be payable to Seller

(and is so paid).                 

                (vi)  Guarantee by Fairfax and Markel of
                      ----------------------------------

              Contingent Amount.  In consideration of Seller's
-----------------                 

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        agreement to the assumed rates of interest

                specified in paragraph (i) of this Section 1.4(c),

               Fairfax and Markel have executed and delivered to

              Seller a Guarantee, which shall become effective

         as a guarantee only under the circumstances

specified in section 1 thereof."  

           1.4. Prepayment.  Section 1.4(d) of the Stock
----------              

  Purchase Agreement is amended in its entirety to read as

follows:                                              

                "(d)  Prepayment.  Buyer, at its option, exercised
----------            

          by giving not less than 45 days' (or one day's, in the

      case of a prepayment of the Non-Contingent Amount)

        irrevocable notice to Seller designating the date of

           prepayment, at any time may prepay, by wire transfer of

         immediately available funds to such account as Seller

         may designate, all, but not part, of (i) the Deferred
                                 -

         Purchase Price, or (ii) the Non-Contingent Amount and
--  

         the amount equivalent to interest accrued thereon, in

       each case calculated as of the date of prepayment."

               2.   Amendment to Article X of the Stock Purchase
                    --------------------------------------------

    Agreement.  The introductory paragraph of Article X of the
---------                                             

    Stock Purchase Agreement is amended by deleting the second

      sentence thereof and substituting therefor the following two

sentences:                                            

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   "Seller will consider in good faith in a timely

         fashion any request by Buyer to waive any covenant or

       breach thereof contained in this Article X and will

   provide such waiver if and to the extent Seller

           determines in good faith that the effect of such waiver

   of compliance would not materially diminish the

        likelihood of Buyer or (if a Guarantee Effectiveness

     Event, as defined in the succeeding sentence, has

        occurred) the Buyer Guarantors being able to perform

       its or their obligations under this Agreement below

       such likelihood at the date of this Agreement.  The

       term "Guarantee Effectiveness Event" shall mean the

         execution and delivery by the Buyer Guarantors of the

Overall Buyer Guarantee."                   

        3.   Amendments to Article XI of the Stock
             -------------------------------------

Purchase Agreement.                                   
------------------                                    

               3.1. Additional Definitions.  Section 11.1 of the
----------------------  

     Stock Purchase Agreement is hereby amended by inserting the

   following definitions into such Section in the respective

    appropriate places so that the definitions in such Section

are in alphabetical order:                            

         "Auditable Premium and Auditable Refund: an
      --------------------------------------

   additional premium (herein called an "Auditable

       Premium") above an initial, base or deposit premium

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     which may be payable, or a partial refund (herein

        called an "Auditable Refund") of an initial, base or

           deposit premium which may be made, in accordance with a

           calculation formula provided for in an insurance policy

         (often called an auditable or adjustable, or a retro,

    policy), which formula is based on the amount of

        certain revenues received by the insured or on other

           objective measures of the insured's exposure, or on the

     amount of certain losses of the insured, during a

period related to the term of such policy." 

               "Commutation Amount:  any amount of cash actually
------------------              

     received by ESI or any of its Subsidiaries from a

     reinsurer in a commutation or other settlement in

        respect of any reinsurance recoverable that would or

          could be a factor in the calculation of the Adjustment

       Amount, provided that such Commutation Amount is so
--------                    

     received after December 31, 1987 and prior to the

      delivery to Seller of Buyer's determination of the

       Adjustment Amount pursuant to the first sentence of

Section 11.3(b)."                           

              "Commutation Amount Earnings:  the interest that
----------------------------    

       would be earned on all or any part of a Commutation

Amount, when calculated as follows:         

      11

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                (a)  Interest rate per annum:  equal to 90% of the
----------------------- 

          yield of 90-day U.S. Treasury securities most recently

          issued by the United States prior to the date on which

       such Commutation Amount is received, as reported in

        Federal Reserve Statistical Release H.15(519) (or if

           such Statistical Release is no longer available, in any

      publicly available source of similar market data).

               (b)  Interest period:  the number of days elapsed
---------------         

         commencing with the day following the date of receipt

           of the Commutation Amount and ending on (but including)

           the earlier of (i) December 31, 1993, and (ii) the date
                 -                          --

         on which such Commutation Amount (or part thereof) is

           applied against losses that would have been paid to the

        reinsured under the reinsurance policy in respect of

         which such Commutation Amount was received; provided,
                                                    --------

        however, that as to any part of a Commutation Amount
-------                                     

         not so applied on or prior to the Determination Date,

     this clause (ii) shall cease to be applicable and
--                

       interest shall be calculated for a period ending on

(but including) December 31, 1993.          

               (c)  Apportionment:  for any interest period that
-------------           

includes a period of less than one year, the

         calculation for such partial year shall be based on a

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         fraction of which the numerator is the number of days

           within the interest period and the denominator is 365."

"Included Losses:                 
---------------                 

           (a)  all losses under Included Policies which

expired prior to January 1, 1987;           

              (b)  all losses, resulting from events occurring

       prior to January 1, 1987, under Included Policies A

      which are occurrence policies (or are contracts of

    reinsurance providing reinsurance for occurrence

policies);                                  

             (c)  all losses, for which the date of loss (as

           provided in the relevant insurance policy) was prior to

        January 1, 1987, under Included Policies A which are

         claims-made policies (or are contracts of reinsurance

        providing reinsurance for claims-made policies); and

         (d)  all losses under Included Policies B."

"Included Policies:               
-----------------               

               (a)  insurance policies (except in respect of any

   portion of the term thereof that is an Optional

        Extension Period and except for project policies) or

      contracts of reinsurance (except in respect of any

       portion of the term thereof that provides for rein-

          surance in respect of an Optional Extension Period and

          except for those contracts that provide reinsurance in

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        respect of project policies) entered into by ESI and

          its Subsidiaries (as insurer or reinsurer, as the case

           may be) that were in effect (and as in effect) prior to

January 1, 1987; and                        

              (b)  insurance policies or contracts of reinsur-

          ance (except for those policies or contracts that pro-

       vide insurance or reinsurance in respect of project

          policies) entered into by ESI and its Subsidiaries (as

          insurer or reinsurer, as the case may be) that were in

          effect (and as in effect) prior to January 1, 1987 and

        under the terms of which there could be, or could be

           reinsurance provided for, an Optional Extension Period,

          but only in respect of any portion of the term thereof

          that is, or that provides reinsurance for, an Optional

   Extension Period; and "Included Policies A" and

          "Included Policies B" mean Included Policies described

in clauses (a) and (b) above, respectively."

                    "Included Premiums:  the amount which is 75%
-----------------     

       of the sum (without duplication of any amounts) of:

         (a)  the full amount (without deduction for

         deferred acquisition costs) of premiums earned by ESI

           and its Subsidiaries after June 30, 1987 (determined in

 accordance with generally accepted accounting

       principles, applied on a basis consistent with that

      14

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     used at December 31, 1986) in respect of Included

Policies B; and                             

              (b)  the amount (which may be a negative number)

       resulting when the following percentage of the full

          amount (without credit for deferred acquisition costs)

  of each Auditable Refund for which ESI and its

     Subsidiaries become liable after June 30, 1987 is

        subtracted from the following percentage of the full

      amount (without deduction for deferred acquisition

          costs) of each Auditable Premium earned by ESI and its

       Subsidiaries after June 30, 1987 (all determined in

       accordance with generally accepted accounting prin-

           ciples, applied on a basis consistent with that used at

December 31, 1986):                         

               -    if the Auditable Refund or Auditable Premium

                    is in respect of an Included Policy B, 100%;

          -    otherwise, that percentage which is the

                     percentage of the entire term of the Included

                Policy constituted by the portion of the

                   policy term which commenced at the policy's

                  effective date and which terminated on the

                    earlier of the policy's termination date and

December 31, 1986; and  

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             (c)  with respect to premiums earned by ESI and

          its Subsidiaries under any insurance policy written by

         ESI or one of its Subsidiaries and in effect prior to

         January 1, 1987, the aggregate net amount, if any, by

          which such premiums, as recognized on the books of ESI

     and its Subsidiaries as earned in respect of such

      policies as at June 30, 1987 (and reflected in the

           financial statements as at that date delivered to Buyer

           pursuant to Section 2.12), are less than (in which case

          such amount will be a positive number) or greater than

         (in which case such amount will be a negative number)

          the amount of premiums that would have been recognized

        as earned at December 31, 1986 if such premiums were

           treated as earned pro rata over the risk period covered

       by such policy (or, if Buyer and Seller shall agree

   that, in respect of any policy, it would not be

         equitable to have the premiums under such policies be

          treated as earned pro rata (Buyer and Seller hereby so

        agreeing in respect of project policies generally)1,

       as earned on such policy in a manner that Buyer and

Seller shall agree is equitable)."          

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

  1.   This clause does not derogate from the exclusion of
       losses under project policies from Included Losses.

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                    "Optional Extension Period:  that portion of
   -------------------------

     the term of a claims-made insurance policy listed

           (subject (a) to changes as a result of an audit of such
-                       

        policies by Seller, (b) to correction of typographic
- 

        errors and minor errors of identification and (c) to
                                                   -

          the deletion of any project policies included therein)

         in the Schedule identified by Buyer and Seller as the

           "Schedule of Optional Extension Periods" at the time of

    their entering into Amendment No. 1, dated as of

    February 15, 1989, to this Agreement which is an

       extension of the original term of the policy within

          which claims must be first made against the insured to

      be covered under the policy, if such extension has

       occurred by the exercise of a right of the insured,

    contained in the original policy, to obtain such

       extension, with or without payment of an additional

premium."                                   

               3.2. Determination of Adjustment Amount.  Section
          ----------------------------------

11.2 of the Stock Purchase Agreement is amended in its

entirety to read as follows:                          

                  "11.2  Adjustment Amount.  As used in this
       -----------------

           Agreement, the "Adjustment Amount" shall mean an amount

equal to:                                   

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            (a)  the amount (whether positive or

negative) which is equal to:      

                        (i)  70% of an amount equal to the sum

                of (x) 90% of the first $10 million, and
-               

                    (y) 100% of the remainder, of any difference
-                     

                    (whether positive or negative) which results

                 when the sum of $160,823,000 and Included

               Premiums is subtracted from the sum of:

                   (1)  Reserves for Losses and Loss

                          Adjustment Expenses at the Determination

Date, and     

                         (2)  the aggregate amount of all losses

                          and loss adjustment expenses paid by ESI

                      and its Subsidiaries from January 1,

                        1987 to the Determination Date, in the

                      case of each of clauses (1) and (2),

                       with respect only to Included Losses,

minus                   
-----                   

               (ii)  $4.3 million,

plus                    
----                    

               (iii)  $0.49 million;

PLUS                                        
----                                        

                 (b)  70% of an amount equal to the sum of

               (x) 90% of the first $10 million, and (y) 100% of
       -                                     -

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                the remainder, of any difference (whether positive

           or negative) which results when $8 million is

   subtracted from the following amount:

                 (i)  Reserves for Uncollectible

              Reinsurance at the Determination Date,

plus                              
----                              

                      (ii)  the aggregate amount of Uncol-

                   lectible Reinsurance on paid claims written

               off, net of any recoveries with respect

            thereto, from January 1, 1987 to the

Determination Date,     

minus                             
-----                             

                        (iii)  the amount by which (x) the sum
                                           -

                 of such Uncollectible Reinsurance owed by

                Mutual Fire that is written off and such

                   Reserves for Uncollectible Reinsurance with

               respect to Mutual Fire exceeds (y) $4.5
                                         -

million,                

minus                             
-----                             

                          (iv)  recoveries from January 1, 1987 to

              the Determination Date with respect to

                   reinsurance recoverables written off by ESI

                and its Subsidiaries prior to January 1,

1987,                   

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             in the case of each of clauses (i), (ii), (iii)

             and (iv), with respect only to Included Losses;

PLUS                                        
----                                        

              (c)  the Indemnification Amount at the

Determination Date;               

MINUS                                       
-----                                       

               (d)  one-third of the amount of the net

              Federal, state or local tax savings in excess of

              $6 million of such savings2 that are realized in

              respect of tax periods through and including the

              period in which the Determination Date occurs by

              Buyer, SMCO, ESI, EIC, or ICE, determined as set

             out in the penultimate sentence of this Section

         11.2, as a result of any items reflected in

                amounts determined pursuant to paragraphs (a), (b)

and (c) of this Section 11.2;     

MINUS                                       
-----                                       

             (e)  all Commutation Amount Earnings;

PLUS                                        
----                                        

                 (f) one third of the amount of additional

         taxes (Federal, state or local), if any, in

               respect of Commutation Amount Earnings that would

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

      2.   I.e., one-third of such savings to the extent that such
- -                                         
one-third exceeds $2 million.               

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             be payable in tax periods through and including

               the period in which the Determination Date occurs

             if (i) Commutation Amount Earnings allocable to
-                         

              tax periods through and including the tax period

         in which the Determination Date occurs were

            actually earned by ESI and its Subsidiaries in

          such tax periods and (ii) Commutation Amount
            --

             Earnings allocable to tax periods after the tax

                period in which the Determination Date occurs were

                actually earned by ESI and its Subsidiaries in the

                tax period in which the Determination Date occurs,

          all determined as set out in the penultimate

          sentence of this Section 11.2, provided that
                                    --------

            notwithstanding the foregoing the amount to be

                added pursuant to this subdivision (f) shall be as

            follows:  (x) if the amount of net tax savings
-           

            referred to in subdivision (d) of this Section

            11.2 (that is, the actual amount, not only the

               amount in excess of $6 million) (the "Subdivision

           (d) Savings") does not exceed $6 million, the

          amount to be added shall be one third of the

               amount, if any, by which the amount of additional

            taxes referred to in this subdivision (f) (the

              "Subdivision (f) Taxes") exceeds the Subdivision

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         (d) Savings; and (y) if the Subdivision (d)
   -

               Savings exceed $6 million, the amount to be added

              shall be one third of the sum of (I) the amount,
                                   -

               if any, by which the Subdivision (f) Taxes exceed

              the Subdivision (d) Savings, and (II) the lesser
                                    --

           of (1) the Subdivision (f) Taxes, and (2) the
          -                                  -

                amount by which the Subdivision (d) Savings exceed

$6 million.                       

           If the Adjustment Amount is a negative number, it shall

      be deemed to be equal to zero.  No amount shall be

        included in the Adjustment Amount to the extent that

          Seller is obligated to indemnify Buyer with respect to

    such amount pursuant to Section 8.1 prior to the

       Determination Date.  The determinations pursuant to

          paragraph (d) of the tax savings realized and pursuant

          to paragraph (f) of the additional taxes that would be

          payable shall be determined each year by consolidating

          or combining the current year taxable income (loss) of

      Buyer, SMCO, ESI, EIC and ICE (taking into account

          carryforwards and, to the extent arising no later than

        the tax period that includes the Determination Date,

      carrybacks) and excluding the income (loss) of any

   other company.  For purposes of determining the

       Adjustment Amount, all Commutation Amounts received

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        after the Determination Date shall be deemed to have

        been received immediately prior to the Determination

Date.                                       

            3.3. Commutation of Uncollectible Reinsurance.
                ----------------------------------------

Section 11.6 of the Stock Purchase Agreement is hereby

 amended by inserting the following sentence immediately

after the first sentence thereof:                     

      "Seller's determination that the provisions of the

     definition of Commutation Amount Earnings, to the

      extent that they limit the interest calculation to

           periods ending December 31, 1993, do not provide a fair

           basis for estimating Buyer's earnings in respect of any

    amount received as a result of such commutation,

       reduction, settlement or discount shall be deemed a

   reasonable basis for withholding such consent."

            3.4  Right of Inspection.  Section 11.7 of the
-------------------     

     Stock Purchase Agreement is hereby amended by inserting the

    following phrase immediately after "Article XI" and before

the period at the end of the first sentence thereof:  

          "or to an audit of the policies listed in the Schedule

       referred to in the definition of Optional Extension

Period in Section 11.1".                    

        4.  Amendment to Section 13.9 of the Stock
            --------------------------------------

 Purchase Agreement.  Section 13.9 of the Stock Purchase
------------------                                    

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   Agreement is hereby amended by substituting the following

    for the language in parentheses in the third line thereof:

           "(except as provided in Section 11.3, but including any

  dispute as to modifications to the Schedule of

       insurance policies referred to in the definition of

         Optional Extension Period in Section 11.1 as a result

of an audit of such policies by Seller)".   

     * * * * *

            Except as otherwise herein provided, the Stock

    Purchase Agreement is hereby ratified and confirmed in all

respects.                                             

                This Agreement may be signed in counterparts, each

 of which shall be an original but all of which together

shall constitute one instrument.                      

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                If you are in agreement with the foregoing, please

     sign the form of agreement on the accompanying counterparts

    of this Amendment No. 1 and return one of the counterparts

      to us, whereupon this Amendment No. 1 shall become a binding

agreement between you and us.                         

                       Very truly yours,

                                ALEXANDER & ALEXANDER INC.

         By:
                                   -----------------------
                  Title:
The foregoing Agreement                               
is hereby agreed to as                                
of the date thereof.                                  

F-M ACQUISITION CORPORATION                           

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

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      WAIVER AND CONSENT
      ------------------

F-M Acquisition Corporation                           
c/o Markel Corporation                                
5310 Markel Road                                      
Richmond, Virginia  23230                             

Gentlemen:                                            

                We refer to the Stock Purchase Agreement, dated as
of October 7, 1987 (as amended, the "Stock Purchase   
Agreement"), between F-M Acquisition Corporation ("F-M
Acquisition") and Alexander & Alexander Inc. ("A&A"). 

          You have advised us that F-M Acquisition has
   entered into a Merger Agreement, dated as of December 10,
   1990 (the "Merger Agreement"), with Shand/Evanston Group,
   Inc. ("S/E Group") pursuant to which F-M Acquisition will
      merge with and into S/E Group (the "Merger").  You have also
advised us that in connection with the Merger, F-M    
    Acquisition intends to enter into (or cause certain of its
subsidiaries to enter into) various other transactions
      which, together with the Merger, are described in the Form A
Statement of Evanston Insurance Company ("EIC") and   
  Insurance Company of Evanston ("ICE"), dated October 18,
   1990, and the supplement thereto, dated November 1, 1990,
      consisting of a letter from Messrs. Lord, Bissell & Brook to
the Director of Insurance of Illinois (such Form A    
    Statement, as so supplemented, being herein referred to as
the "Form A").  Capitalized terms used herein without 
     definition shall have the meaning assigned to such terms in
the Form A.                                           

              Merger.  With respect to the Merger as described
------                            
     in the Form A and to the extent such Merger would otherwise
     breach the covenants contained in Sections 10.2, 10.5, 10.7
     and 10.8 of the Stock Purchase Agreement, A&A hereby waives
compliance with such covenants.                       

           Purchases of M&H Shares.  With respect to the
-----------------------           
purchases of the M&H Shares by EIC and ICE from Markel
      Corporation ("Markel") as described in the Form A and to the
    extent such purchases would otherwise breach the covenants
 contained in Sections 10.2, 10.5 and 10.10 of the Stock
    Purchase Agreement, A&A hereby waives compliance with such
covenants.                                            

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                Purchases of Markel Preferred Stock.  With respect
 -----------------------------------
 to the purchases by EIC and ICE of the Markel Preferred
 Stock from Markel as described in the Form A and to the
    extent such purchases would otherwise breach the covenants
 contained in Sections 10.2, 10.5 and 10.10 of the Stock
    Purchase Agreement, A&A hereby waives compliance with such
covenants.                                            

                Purchases of F-M Preferred Stock.  With respect to
--------------------------------  
      the purchases by EIC and ICE of the F-M Preferred Stock from
  Markel as described in the Form A and to the extent such
     purchases would otherwise breach the covenants contained in
   Sections 10.2, 10.5, 10.6 and 10.10 of the Stock Purchase
Agreements, A&A hereby waives compliance with such    
covenants.                                            

            Year-End Dividend on F-M Preferred Stock.  F-M
      ----------------------------------------
     (or, after the effectiveness of the Merger, S/EG,) proposes
  to pay a regular annual dividend (in respect of the year
     1990) of $10.00 per share or an aggregate of $972,000 on or
     about December 31, 1990.  To the extent the payment of such
    dividend would otherwise breach the covenants contained in
     Sections 10.2 and 10.5 of the Stock Purchase Agreement, A&A
hereby waives compliance with such covenants.         

            Delivery by Markel of Overall Buyer Guarantee.
           ---------------------------------------------
    The delivery of the Guarantee Agreement by Markel referred
     to in the following paragraph shall be deemed to constitute
delivery by Markel (but not Fairfax Financial Holdings
   Limited) of a commitment equivalent to the "Overall Buyer
     Guarantee", as it relates to Markel, for purposes of clause
      (ii) of the introductory paragraph of Article X of the Stock
   Purchase Agreement, provided, that nothing in this Waiver
--------      
   and Consent shall preclude F-M Acquisition from asserting
that a "Guarantee Effectiveness Event" (as defined in 
      Article X of the Stock Purchase Agreement) has occurred, and
  provided further that nothing in this Waiver and Consent
----------------                                      
shall preclude A&A from asserting that a "Guarantee   
Effectiveness Event" has not occurred.  In evaluating 
   requests for waivers pursuant to Article X, A&A will give
     consideration, in its good faith judgment, to the financial
position of Markel in addition to that of Buyer.      

                Scope of this Waiver and Consent.  This Waiver and
--------------------------------  
  Consent is strictly limited to the specific transactions
described herein and carries no implication as to the 
granting of waivers and consents with respect to      
 transactions of a similar nature in the future. Without

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    limiting the generality of the foregoing, the Purchases of
F-M Preferred Stock and the Year-End Dividend on F-M  
  Preferred Stock, as described in the paragraphs above so
designated, shall be included in the calculation of   
 Restricted Payments, as defined in Section 10.16 of the
     Stock Purchase Agreement, in any calculation made hereafter
under Section 10.2 of the Stock Purchase Agreement.   

                Effectiveness.  This Waiver shall become effective
-------------                     
simultaneously with the delivery to A&A of both (i) a 
                                             -
     certain Confirmation and Assumption Agreement, of even date
herewith (but to take effect simultaneously with the  
      Merger), executed by S/E Group; and (ii) a certain Guarantee
                      --
Agreement, of even date herewith, executed by Markel  
Corporation, a Virginia corporation, which shall be   
effective on delivery.                                

                                ALEXANDER & ALEXANDER INC.

                                 By_________________________
                Title:

Dated:  December 18, 1990                             

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     CONFIRMATION AND ASSUMPTION AGREEMENT
     -------------------------------------

                CONFIRMATION AND ASSUMPTION AGREEMENT, dated as of
     December 18, 1990 by SHAND/EVANSTON GROUP, INC., a Virginia
---                                 
   corporation ("S/E Group"), for the benefit of ALEXANDER &
ALEXANDER INC., a Maryland corporation ("A&A).        

              WHEREAS, A&A and F-M Acquisition Corporation, an
  Illinois corporation ("F-M Acquisition"), entered into a
   Stock Purchase Agreement, dated as of October 7, 1987 (as
     amended from time to time, the "Stock Purchase Agreement"),
  pursuant to which A&A sold to F-M Acquisition all of the
 outstanding shares of capital stock of Shand, Morahan &
Company, Inc.                                         

         WHEREAS, F-M Acquisition and S/E Group have
   entered into a Merger Agreement, dated as of December 10,
1990 (the "Merger Agreement"), pursuant to which F-M  
     Acquisition will merge with and into S/E Group (the "Merger
Agreement").                                          

          WHEREAS, pursuant to Section 10 of the Stock
Purchase Agreement, the Merger may not be consummated 
without the prior written consent of A&A.             

           WHEREAS, A&A is not willing to consent to the
Merger unless S/E Group enters into this Agreement.   

             NOW, THEREFORE, to induce A&A to consent to the
   Merger and for other good and valuable consideration, the
sufficiency of which is hereby acknowledged, S/E Group
agrees as follows:                                    

          1.   Confirmation and Assumption.  S/E Group
   ---------------------------
hereby confirms its liability for, as the surviving   
 corporation under the Merger Agreement, and in addition
  hereby expressly assumes, all of the debts, liabilities,
   duties, and obligations of F-M Acquisition, including but
not limited to the debts, liabilities, duties and     
 obligations of F-M Acquisition under the Stock Purchase
     Agreement and the Pledge Agreement (as defined in the Stock
   Purchase Agreement), and any other agreements executed by
      F-M Acquisition pursuant or incidental to the Stock Purchase
Agreement as if in each case they had been originally 
executed by S/E Group.                                

              2.   Further Assurances.  From time to time, S/E
------------------      
    Group will execute and deliver such further instruments or
agreements and will take such other action as A&A may 
reasonably request in order more fully to evidence the

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      confirmation and assumption undertaken by S/E Group pursuant
to paragraph 1 of this Agreement.                     

           3.   Binding Effect.  This Agreement shall be
--------------          
      binding upon S/E Group, its successors and assigns and inure
    to the benefit of A&A and any A&A Affiliate (as defined in
the Stock Purchase Agreement), and their respective   
successors and assigns.                               

             4.   Effective Date.  This Agreement shall take
--------------          
     effect simultaneously with the effectiveness of the Merger,
     without any further action on the part of S/E Group, A&A or
any other person.                                     

              5.   Governing Law.  This Agreement shall in all
-------------           
    respects be governed by, and construed in accordance with,
the laws of the State of New York.                    

                6.   Counterparts.  This Agreement may be executed
------------            
  in any number of counterparts, each of which shall be an
  original, but all of which together shall constitute one
instrument.                                           

           IN WITNESS WHEREOF, S/E Group has caused this
    Agreement to be executed by its duly authorized officer as
of the date first above written.                      

                                SHAND/EVANSTON GROUP, INC.

                                By________________________
                Title:

ACKNOWLEDGEMENT                                       

ALEXANDER & ALEXANDER INC. hereby                     
accepts and agrees to the foregoing                   
Confirmation and Assumption Agreement,                
and agrees that, upon the effectiveness               
of the Merger, S/E Group will be the                  
entity defined as "Buyer" under the                   
Stock Purchase Agreement                              

ALEXANDER & ALEXANDER INC.                            

By________________________                            
Title:                                            

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      ALEXANDER & ALEXANDER INC.

                                                 December 18, 1990

F-M Acquisition Corporation                           
Shand/Evanston Group Inc.                             
c/o Markel Corporation                                
5310 Markel Road                                      
Richmond, Virginia  23230                             

Gentlemen:                                            

            Reference is hereby made to the Stock Purchase
Agreement dated as of October 7, 1987, between F-M    
   Acquisition Corporation, an Illinois corporation ("F-M"),
and Alexander & Alexander Inc., a Maryland corporation
     ("A&A"), as amended by Amendment No. 1 dated as of February
15, 1989 (the "Stock Purchase Agreement").            

             For purposes of determining compliance with the
      covenants and agreements under the Stock Purchase Agreement,
   we have agreed that Consolidated Net Worth (as defined in
 Section 10.16 of the Stock Purchase Agreement) shall be
      calculated so as to eliminate the impact of the  application
     by F-M of purchase accounting methods (commonly referred to
 as "push-down" accounting) to the acquisition by Markel
Corporation, a Virginia corporation ("Markel"), of any
      shares of capital stock of F-M.  Accordingly, we have agreed
     that Consolidated Net Worth shall be adjusted in the manner
set forth below:                                      

             (a)  If the Consolidated Net Worth of Buyer (as
    defined in the Stock Purchase Agreement), calculated as at
  December 31, 1990 and calculated taking into account the
fair value adjustments (the "Fair Value Adjustments") 
  resulting from application by F-M of purchase accounting
methods to the acquisition by Markel of any shares of 
     capital stock of F-M (the "Adjusted Net Worth"), is greater
    than the Consolidated Net Worth of Buyer, calculated as at
      December 31, 1990 without taking into account the Fair Value
      Adjustments (the "Unadjusted Net Worth"), then the amount by
     which the Adjusted Net Worth is greater than the Unadjusted
    Net Worth as at December 31, 1990 shall be subtracted from
     the Adjusted Net Worth of Buyer in determining Consolidated
Net Worth for purposes of Section 10.16 of the Stock  
      Purchase Agreement.  A subtraction in the same dollar amount
     as was subtracted at December 31, 1990 shall be made in all

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    future calculations of Consolidated Net Worth for purposes
of such Section 10.16.                                

             (b)  If the Unadjusted Net Worth as at December
31, 1990 is greater than the Adjusted Net Worth as at 
    December 31, 1990, then the amount by which the Unadjusted
    Net Worth exceeds the Adjusted Net Worth shall be added to
     the Adjusted Net Worth of Buyer in determining Consolidated
Net Worth for purposes of Section 10.16 of the Stock  
    Purchase Agreement.  An addition in the same dollar amount
as was added at December 31, 1990 shall be made in all
    future calculations of Consolidated Net Worth for purposes
of such Section 10.16.                                

                If you are in agreement with the foregoing, please
indicate by signing in the space indicated below.     

                       Very truly yours,

                                ALEXANDER & ALEXANDER INC.

                                 By_________________________
                Title:

ACCEPTED AND AGREED TO:                               

F-M ACQUISITION CORPORATION                           

By______________________________                      
Title:                                            

SHAND/EVANSTON GROUP INC.                             

By______________________________                      
Title:                                            

MARKEL CORPORATION, as Guarantor                      
under the Guarantee Agreement,                        
dated even date herewith, between                     
Markel Corporation and                                
Alexander & Alexander Inc.                            

By______________________________                      
Title:                                            

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