American International Group Inc – ‘SC 13D’ on 12/27/94 re: 21st Century Insurance Group – EX-99.B

As of:  Tuesday, 12/27/94   ·   Accession #:  950123-94-2106   ·   File #:  5-40732

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General Statement of Beneficial Ownership   —   Schedule 13D
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: SC 13D      General Statement of Beneficial Ownership             21     89K 
 2: EX-99.A     Agreement of Joint Filing                              2      9K 
 3: EX-99.B     Investment and Strategic Alliance Agreement          203    480K 
 4: EX-99.C     Certificate of Determination                          22     77K 
 5: EX-99.D     Certificate of Amendment                              13     43K 
 6: EX-99.E     By-Laws of 20th Century Industries                    37     64K 
 7: EX-99.F     Proxy Statement of 20th Century Industries           221   1.16M 
 8: EX-99.G     List of Directors and Officers                        28     89K 
 9: EX-99.H     Registration Rights Agreement                         14     61K 

EX-99.B   —   Investment and Strategic Alliance Agreement
Exhibit Table of Contents

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Exhibit 
B 

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                                                                  CONFORMED COPY

INVESTMENT AND STRATEGIC ALLIANCE AGREEMENT 

BETWEEN 

20TH CENTURY INDUSTRIES 

AND 

AMERICAN INTERNATIONAL GROUP, INC.

DATED AS OF OCTOBER 17, 1994

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TABLE OF CONTENTS 

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ARTICLE I 

SALE AND PURCHASE 
OF SERIES A PREFERRED SHARES AND SERIES A WARRANTS

Section 1.1  Sale and Purchase...............................................  2
Section 1.2  The Closing.....................................................  2

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF THE COMPANY 

Section 2.1  Representations and Warranties of the Company...................  3
(a)  Corporate Organization and Qualification................................  3
(b)  Authorized Capital......................................................  4
(c)  Series A Preferred Shares and Warrants..................................  5
(d)  Corporate Authority.....................................................  5
(e)  Insurance, Licenses, Permits and Filings................................  5
(f)  Non-Insurance Licenses and Permits......................................  6
(g)  Company Reports; Financial Statements; Statutory Statements.............  7
(h)  Consents; No Violations.................................................  9
(i)  Insurance Contracts and Rates........................................... 10
(j)  Reinsurance............................................................. 10
(k)  Loss Reserves; Solvency................................................. 11
(l)  Title to Properties..................................................... 11
(m)  Intangible Property and Computer Software............................... 12
(n)  Absence of Undisclosed Liabilities...................................... 12
(o)  Absence of Certain Changes.............................................. 12
(p)  Litigation and Liabilities; Compliance with Laws........................ 13
(q)  Environmental Matters................................................... 13
(r)  Employee Benefits....................................................... 14
(s)  Taxes................................................................... 17
(t)  Insurance............................................................... 17
(u)  Financial Advisors and Brokers.......................................... 18
(v)  No Material Misstatement................................................ 18
(w)  Labor Matters........................................................... 18
(x)  Contracts............................................................... 18
(y)  Investment Company...................................................... 19
(z)  Exemption from Registration, Restrictions on Offer and Sale                
       of Same or Similar Securities......................................... 19

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ARTICLE III 

REPRESENTATIONS AND WARRANTIES OF INVESTOR

Section 3.1  Representations and Warranties of the Investor.................. 19
(a)  Corporate Organization and Qualification................................ 19
(b)  Corporate Authority..................................................... 20
(c)  Consents; No Violations................................................. 20
(d)  Funds................................................................... 21
(e)  Investment.............................................................. 21
(f)  Actions and Proceedings................................................. 21

ARTICLE IV

PROCEEDS; ADVERSE QUAKE CONTRIBUTION

Section 4.1  Use of Proceeds................................................. 21
Section 4.2  Excess Loss Amount.............................................. 22
Section 4.3  Investor Contribution and Additional Shares; Adjustment to         
               Series A Warrants Exercise Price.............................. 22

ARTICLE V 

STRATEGIC ALLIANCE AGREEMENTS 

Section 5.1  Quota Share Agreement........................................... 23
Section 5.2  Joint Venture Agreement......................................... 23

ARTICLE VI

STANDSTILL AND TRANSFER RESTRICTIONS

Section 6.1  Standstill Agreement............................................ 24
Section 6.2  Transfers; Registration Rights.................................. 27

ARTICLE VII 

INDEMNIFICATION 

Section 7.1  Indemnification................................................. 28

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ARTICLE VIII

COVENANTS 

Section 8.1  Interim Operations of the Company and Conduct of Business....... 29
Section 8.2  Acquisition Proposals........................................... 31
Section 8.3  Company Stockholder Action...................................... 32
Section 8.4  Filings; Other Action........................................... 34
Section 8.5  Notification of Certain Matters................................. 35
Section 8.6  Publicity....................................................... 36
Section 8.7  Access.......................................................... 36
Section 8.8  Reservation of Shares........................................... 36
Section 8.9  Satisfactory Financing Plan..................................... 37
Section 8.10 Issuance of Additional Shares of Capital Stock.................. 37

ARTICLE IX

CONDITIONS TO THE OBLIGATIONS OF THE INVESTOR 

Section 9.1  Conditions to the Obligations of the Investor................... 38
(a)  Accuracy of Representations and Warranties.............................. 38
(b)  Performance............................................................. 38
(c)  Absence of Order........................................................ 38
(d)  No Legal Action......................................................... 38
(e)  Stockholders' Approval.................................................. 38
(f)  Department Approval..................................................... 39
(g)  HSR Act................................................................. 39
(h)  Lenders' Consent........................................................ 39
(i)  Compliance Certificate.................................................. 39
(j)  Other Required Consents................................................. 39
(k)  Effectiveness of Consents............................................... 40
(l)  Opinion of Counsel...................................................... 40
(m)  Material Change in the Law.............................................. 40
(n)  Auditor Letter.......................................................... 40
(o)  Opinion of Actuary...................................................... 40
(p)  Other Certificates...................................................... 41
(q)  No Material Adverse Effect.............................................. 41
(r)  Company Stock Ownership................................................. 41

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ARTICLE X 

CONDITIONS TO THE OBLIGATIONS OF THE COMPANY

Section 10.1  Conditions to the Obligations of                                  
                the Company.................................................. 41
(a)  Accuracy of Representations and                                            
       Warranties............................................................ 41
(b)  Performance............................................................. 41
(c)  Absence of Order........................................................ 42
(d)  No Legal Action......................................................... 42
(e)  Stockholders' Approval.................................................. 42
(f)  Department Approval..................................................... 42
(g)  HSR Act................................................................. 42
(h)  Lenders' Consent........................................................ 42
(i)  Other Required Consents................................................. 42
(j)  Effectiveness of Consents............................................... 43
(k)  Opinion of Counsel...................................................... 43
(l)  Compliance Certificate.................................................. 43

ARTICLE XI

MISCELLANEOUS 

Section 11.1  Termination.................................................... 43
(a)  Termination Period...................................................... 43
(b)  Effect of Termination................................................... 44
Section 11.2  Successors and Assigns; No Third                                  
                Party Beneficiaries.......................................... 45
Section 11.3  Survival of Representations and                                   
                Warranties................................................... 45
Section 11.4  Entire Agreement............................................... 45
Section 11.5  Modification or Amendment...................................... 46
Section 11.6  Waiver......................................................... 46
Section 11.7  Governing Law.................................................. 46
Section 11.8  Consent to Jurisdiction; Service of                               
                Process; Waiver of Jury Trial................................ 46
Section 11.9  Severability................................................... 46
Section 11.10 Specific Performance........................................... 47
Section 11.11 Captions....................................................... 47
Section 11.12 Counterparts................................................... 47
Section 11.13 Notices........................................................ 47

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EXHIBIT LIST

                                                        [Enlarge/Download Table]
                                                                                            
Exhibit A            Form of Certificate of Determination for Series A Convertible Preferred
                       Stock                                                                
Exhibit B            Form of Series A Warrant                                               
Exhibit C            Form of Quota Share Agreement                                          
Exhibit D            Form of Registration Rights Agreement                                  
Exhibit E            Form of Voting Agreement                                               
Exhibit F            Form of Term Sheet for Charter Amendment Relating to Transfer          
                       Restrictions, etc.                                                   
Exhibit 9.1(1)(i)    Form of Company General Counsel Opinion                                
Exhibit 9.1(1)(ii)   Form of Company Special Counsel Opinion                                
Exhibit 10.1(k)(i)   Form of Investor General Counsel Opinion                               
Exhibit 10.1(k)(ii)  Form of Investor Special Counsel Opinion                               

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INDEX OF DEFINED TERMS

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Acquisition Proposal..................................................................  31 
Acquisition Transaction...............................................................  31 
Agreement.............................................................................   1 
Annual Statements.....................................................................   8 
Articles of Incorporation.............................................................   4 
Balance Sheet.........................................................................  12 
Charter Amendment.....................................................................   4 
Closing...............................................................................   3 
Closing Date..........................................................................   3 
Code..................................................................................  15 
Common Stock..........................................................................   1 
Company...............................................................................   1 
Company Advisor.......................................................................  18 
Company Group.........................................................................  29 
Company Reports.......................................................................   7 
Company Stockholders' Meeting.........................................................  33 
Compensation and Benefit Plans........................................................   9 
Contracts.............................................................................   9 
Credit Agreement......................................................................  30 
Department............................................................................   6 
Employees.............................................................................  14 
Encumbrances..........................................................................   2 
Environmental Laws....................................................................  14 
ERISA.................................................................................  15 
ERISA Affiliate.......................................................................  15 
ERISA Affiliate Plan..................................................................  15 
Excess Loss Amount....................................................................  22 
Exchange Act..........................................................................  33 
GAAP..................................................................................   8 
Governmental Entity...................................................................   9 
Group.................................................................................  24 

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Hazardous Substance.......................................................... 14
HSR Act...................................................................... 34
Insolvency Event............................................................. 25
Insolvency Statute........................................................... 26
Insurance Licenses...........................................................  6
Investor.....................................................................  1
Investor Contribution........................................................ 22
Investor Group............................................................... 28
Insurance Subsidiary.........................................................  5
Letter of Intent.............................................................  1
Losses....................................................................... 28
Master JV Agreement.......................................................... 23
Material Adverse Effect......................................................  4
Non-Insurance Licenses.......................................................  6
Northridge Earthquake........................................................ 12
Order........................................................................ 38
PBGC......................................................................... 15
Pension Plan................................................................. 15
Plans........................................................................ 14
Preferred Stock..............................................................  4
Properties................................................................... 11
Proposals.................................................................... 33
Proxy Statement.............................................................. 33
Quota Share Agreements....................................................... 23
Recent 10-Qs.................................................................  7
Recent Quarterly Statements..................................................  8
Registration Rights Agreement................................................ 28
Remaining Proceeds........................................................... 21
Representatives.............................................................. 36
Restricted Securities........................................................ 27
Rollback Judgment............................................................ 12
SAP..........................................................................  8

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SEC........................................................................... 7
Securities Act................................................................ 3
Series A Certificate of Determination........................................  1
Series A Preferred Shares....................................................  1
Series A Warrants............................................................  1
SERP......................................................................... 16
Stock Option Agreement.......................................................  1
Subsequent Reports...........................................................  7
Subsidiaries.................................................................  3
Warrant Certificate..........................................................  1

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INVESTMENT AND STRATEGIC ALLIANCE AGREEMENT 

 INVESTMENT AND STRATEGIC ALLIANCE AGREEMENT (this "Agreement") made and
entered into this 17th day of October, 1994, by and between 20th Century        
Industries, a corporation organized and existing under the laws of the State of 
California (the "Company"), and American International Group, Inc., a           
corporation organized and existing under the laws of the State of Delaware (the 
"Investor").                                                                    

RECITALS

    WHEREAS, the Company and the Investor have signed a letter of intent dated
as of September 26, 1994 (the "Letter of Intent") with respect to certain       
transactions to be entered into by the Company and the Investor, including the  
purchase by the Investor of certain securities of the Company pursuant to this  
Agreement;                                                                      

   WHEREAS, in order to induce Investor to enter into this Agreement and the
other transactions contemplated by the Letter of Intent, the Company and the    
Investor have signed a Stock Option Agreement dated as of September 26, 1994    
(the "Stock Option Agreement") providing for the issuance by the Company to the 
Investor of an option to purchase, under certain circumstances, up to 15% of the
outstanding shares of Common Stock, without par value (the "Common Stock"), of  
the Company;                                                                    

  WHEREAS, the Company and the Investor have each determined to enter into
this Agreement pursuant to which the Investor has agreed to acquire, and the    
Company has agreed to issue and sell, (a) 200,000 shares of Series A Convertible
Preferred Stock, stated value $1,000 per share, having the rights, preferences, 
privileges and restrictions set forth in the form of Certificate of             
Determination (the "Series A Certificate of Determination") attached hereto as  
Exhibit A (the "Series A Preferred Shares"), and (b) 16,000,000 Series A        
Warrants, each exercisable for one share of Common Stock, subject to adjustment,
having the terms set forth in the Warrant Certificate (the "Warrant             
Certificate") attached hereto as Exhibit B (the "Series A Warrants"), of the    
Company;                                                                        

 WHEREAS, the Company and the Investor are both, directly or indirectly,
engaged in the business of selling insurance and have determined that it is in  
their mutual best interests to enter into a joint venture agreement, a          

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quota share reinsurance agreement, and other mutually beneficial arrangements;  

WHEREAS, concurrently herewith certain stockholders of the Company are
entering into a voting agreement in the form attached as Exhibit E hereto, dated
as of the date hereof, with the Investor, pursuant to which such stockholders   
are irrevocably agreeing to vote in favor of the transactions contemplated by   
this Agreement and not to support as stockholders any transaction that would    
give the Investor a right not to close the purchase of the Series A Preferred   
Shares and Series A Warrants; and                                               

   WHEREAS, as the Company is currently under severe financial distress, the
Company and the Investor have mutually agreed to proceed to consummate the      
transactions contemplated hereby as soon as practicable, subject to the         
Company's and the Investor's respective rights specified herein to not          
consummate this Agreement and the transactions contemplated hereby regardless of
the effect that nonconsummation would have on the financial condition of the    
Company;                                                                        

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

ARTICLE I 

SALE AND PURCHASE OF
SERIES A PREFERRED SHARES AND SERIES A WARRANTS 

Section 1.1 Sale and Purchase.  On the basis of the representations,  
warranties, covenants and agreements contained herein, but subject to the terms 
and conditions of this Agreement, at the Closing (as defined in Section 1.2     
hereof) the Company agrees to issue and sell to the Investor, and the Investor  
agrees to purchase from the Company, 200,000 Series A Preferred Shares, free and
clear of all liens, charges, encumbrances, security interests, equities,        
options, restrictions (including restrictions on voting rights or rights of     
disposition), claims or third party rights of any nature (collectively,         
"Encumbrances"), at a purchase price of $1,000 per share and 16,000,000 Series A
Warrants, free and clear of all Encumbrances, at a purchase price of $1.00 per  
warrant, for an aggregate purchase price of $216,000,000.                       

Section 1.2 The Closing.  The closing of the sale and purchase of the 
Series A Preferred Shares and the                                               

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Series A Warrants under this Agreement (the "Closing") shall take place at the  
offices of Sullivan & Cromwell, 444 South Flower Street, Los Angeles, California
90071 on the fifth business day (the "Closing Date") following satisfaction or, 
if permissible, waiver, of the conditions set forth in Articles IX and X, or    
such other date, time and place as may be agreed by the parties. At the Closing,
the Company will deliver to the Investor certificates for the number of Series A
Preferred Shares and Series A Warrants being purchased against payment to the   
Company of the purchase price therefor, by wire transfer in immediately         
available funds to an account designated by the Company not less than two       
business days in advance of the Closing, together with the other documents,     
certificates and opinions to be delivered pursuant to Article IX of this        
Agreement. The Series A Preferred Shares and Series A Warrants shall be acquired
by, and the certificates for the Series A Preferred Shares and Series A Warrants
so to be delivered shall be registered in the name of, the Investor or one or   
more direct or indirect wholly-owned subsidiaries of the Investor designated by 
the Investor and in the proportions designated by the Investor at least two     
business days prior to the Closing Date. Such certificates shall bear a legend  
to the effect that: the securities represented by the certificate have not been 
registered under the Securities Act of 1933 (the "Securities Act"), or under the
blue sky or securities laws of any state; neither the securities represented by 
the certificates nor any interest therein may be sold, transferred, pledged or  
otherwise disposed of in the absence of registration under the Securities Act   
and under the securities or blue sky laws of any applicable state, or exemptions
therefrom; and any such sale or disposition must be made in compliance with     
applicable provisions of this Agreement.                                        

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF THE COMPANY 

 Section 2.1 Representations and Warranties of the Company.  The Company
hereby represents and warrants to the Investor that:                            

    (a) Corporate Organization and Qualification.  Each of the Company and its
subsidiaries, all of which are listed on Schedule 2.1(A) hereto (collectively,  
the "Subsidiaries"), is a corporation duly organized, validly existing and in   
good standing under the laws of California and is in good standing as a foreign 
corporation in each jurisdiction where the properties owned, leased or operated,
or the business conducted, by it require such qualification, except for         

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such failure to so qualify or be in such good standing, which, when taken       
together with all other such failures, would not have a material adverse effect 
on the financial condition, regulatory condition, capital, properties, business,
results of operations or prospects of the Company and its Subsidiaries taken as 
a whole, in each case considered on either a SAP (as defined in subsection      
(g)(iii) of this Section 2.1 below) or GAAP (as defined in subsection (g)(ii) of
this Section 2.1 below) basis (a "Material Adverse Effect"). Each of the Company
and its Subsidiaries has the requisite corporate power and authority to carry on
its respective businesses as they are now being conducted. The Company has      
provided to the Investor a complete and correct copy of the Company's Articles  
of Incorporation (the "Articles of Incorporation") and By-Laws, each as amended 
to date. The Company's Articles of Incorporation and By-Laws so delivered are in
full force and effect.                                                          

   (b) Authorized Capital.  After giving effect to the proposed amendment to
the Articles of Incorporation increasing the number of authorized shares of     
Common Stock from 80,000,000 to 110,000,000 shares (as so amended and as amended
as provided in Section 8.3 hereof, the "Charter Amendment"), the authorized     
capital stock of the Company will at the Closing consist of 110,000,000 shares  
of Common Stock of which 51,472,471 are issued and outstanding as of the date   
hereof, and 500,000 shares of preferred stock, par value $1.00 per share        
("Preferred Stock"), of which no shares are issued and outstanding as of the    
date hereof. All of the outstanding shares of Common Stock have been duly       
authorized and are validly issued, fully paid and nonassessable. Other than     
7,720,871 shares of Common Stock reserved for issuance pursuant to the Stock    
Option Agreement, the Company has no shares of Common Stock or Preferred Stock  
reserved for issuance, except for shares of Preferred Stock subject to issuance 
pursuant to this Agreement, shares of Common Stock subject to issuance upon     
conversion of the Series A Preferred Shares and exercise of the Series A        
Warrants and 508,097 shares of Common Stock subject to issuance under existing  
option plans and employee benefit plans as set forth on Schedule 2.1(B)(i). Each
of the outstanding shares of capital stock of each of the Subsidiaries is duly  
authorized, validly issued, fully paid and nonassessable and, except as set     
forth in Schedule 2.1(B)(ii) hereto, owned, either directly or indirectly, by   
the Company, free and clear of all Encumbrances. Except to the extent set forth 
above, there are no shares of capital stock of the Company authorized, issued or
outstanding, no preemptive rights and no outstanding subscriptions, options,    
warrants, rights, convertible securities or other agreements                    

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or commitments of any character relating to the issued or unissued capital stock
or other equity securities of the Company or any of the Subsidiaries.           

     (c) Series A Preferred Shares and Warrants.  The Series A Preferred Shares,
when issued in compliance with the provisions of this Agreement, will be duly   
authorized, validly issued, fully paid and nonassessable and will be convertible
into Common Stock in accordance with the terms, and have the other rights,      
preferences, privileges and restrictions, set forth in the Series A Certificate 
of Determination attached hereto as Exhibit A. The issuance of the Series A     
Preferred Shares is not subject to any preemptive rights or rights of first     
refusal created by the Company. The Series A Warrants, when issued in compliance
with the provisions of this Agreement, will be duly authorized and validly      
issued and enforceable according to the terms set forth in the Warrant          
Certificate attached hereto as Exhibit B. The Common Stock issuable directly or 
indirectly upon conversion of the Series A Preferred Shares and exercise of the 
Series A Warrants has been duly and validly reserved for issuance and is not    
subject to any preemptive rights or rights of first refusal created by the      
Company, and upon conversion of the Series A Preferred Shares and exercise of   
the Series A Warrants in accordance with the Series A Certificate of            
Determination and the Warrant Certificate, respectively, will be duly           
authorized, validly issued, fully paid and nonassessable.                       

 (d) Corporate Authority.  Subject only to the approval of the Company's
stockholders of the Proposals (as defined in Section 8.3), the Company has the  
requisite corporate power and authority and has taken all corporate action      
necessary in order to execute and deliver this Agreement and for it to          
consummate the transactions contemplated hereby and to perform the acts         
contemplated on its part hereunder and under the Series A Certificate of        
Determination and Warrant Certificate. This Agreement has been approved by the  
unanimous vote of the Company's Board of Directors present and, subject only to 
the approval of the Proposals by the Company's stockholders, is a valid and     
binding obligation of the Company, enforceable against the Company in accordance
with its terms.                                                                 

(e) Insurance, Licenses, Permits and Filings.  Each Subsidiary which  
engages in an insurance business (an "Insurance Subsidiary") is duly organized  
and licensed as an insurance company in California and is duly licensed or      
authorized as an insurer or reinsurer in any other jurisdiction where it is     
required to be so licensed or authorized to conduct its business, or is subject 
to no liability or                                                              

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disability that would have a Material Adverse Effect by reason of the failure to
be so licensed or authorized in any such jurisdiction. Since December 31, 1990, 
the Company has made all required filings under applicable insurance holding    
company statutes. Each of the Company and its Insurance Subsidiaries has all    
other necessary authorizations, approvals, orders, consents, certificates,      
permits, registrations or qualifications of and from the California Department  
of Insurance (the "Department") and any other applicable insurance regulatory   
authorities ("Insurance Licenses") to conduct their businesses as currently     
conducted and all such Insurance Licenses are valid and in full force and       
effect, except such Insurance Licenses which the failure to have or to be in    
full force and effect individually or in the aggregate do not have a Material   
Adverse Effect. Schedule 2.1(E) hereto lists each order and written             
understanding or agreement of or with the Department currently in effect and    
applicable to the Company or any of its Insurance Subsidiaries. None of the     
Company or any of its Subsidiaries has received any notification (which         
notification has not been withdrawn or otherwise resolved prior to the date of  
this Agreement) from the Department or any other insurance regulatory authority 
to the effect that any additional Insurance License from such insurance         
regulatory authority is needed to be obtained by any of the Company or any of   
its Subsidiaries in any case where it could be reasonably expected that (x) the 
Company or any of its Subsidiaries would in fact be required either to obtain   
any such additional Insurance License, or cease or otherwise limit writing      
certain business and (y) obtaining such Insurance License or the limiting of    
such business would have a Material Adverse Effect. Each Insurance Subsidiary is
in compliance with the requirements of the insurance laws and regulations of    
California and the insurance laws and regulations of any other jurisdictions    
which are applicable to such Insurance Subsidiary, and has filed all notices,   
reports, documents or other information required to be filed thereunder or in   
any such case is subject to no Material Adverse Effect by reason of the failure 
to so comply or file.                                                           

   (f) Non-Insurance Licenses and Permits.  The Company and its Subsidiaries
have such authorizations, approvals, orders, consents, certificates, permits,   
registrations or qualifications of and from appropriate governmental agencies   
and bodies other than insurance regulatory authorities ("Non-Insurance          
Licenses") as are necessary to own, lease or operate their properties and to    
conduct their businesses as currently conducted and all such Non-Insurance      
Licenses are valid and in full force and effect except such Non-Insurance       
Licenses which the failure to have or to be in                                  

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full force and effect individually or in the aggregate do not have a Material   
Adverse Effect. The Company and its Subsidiaries are in compliance in all       
material respects with their respective obligations under such Non-Insurance    
Licenses, with such exceptions as individually or in the aggregate do not have a
Material Adverse Effect, and no event has occurred that allows, or after notice 
or lapse of time would allow, revocation or termination of such Non-Insurance   
Licenses.                                                                       

(g) Company Reports; Financial Statements; Statutory Statements.      

       (i) The Company has delivered to the Investor (x) each registration
statement, report on Form 8-K, proxy statement, information statement or other  
report or statement filed by it with the Securities and Exchange Commission (the
"SEC") since December 31, 1993 and prior to the date hereof, (y) the Company's  
Annual Report on Form 10-K for the years ended December 31, 1991, 1992 and 1993,
and (z) the Company's Quarterly Reports on Form 10-Q for the periods ended March
31 and June 30, 1994 (the "Recent 10-Qs"), each in the form (including exhibits 
and any amendments thereto) filed with the SEC (collectively, the "Company      
Reports"). As of their respective dates and based on information available at   
such respective dates, the Company Reports did not, and any registration        
statement, report, proxy statement or information statement filed by the Company
with the SEC prior to the Closing Date ("Subsequent Reports") will not, contain 
any untrue statement of a material fact or omit to state a material fact        
required to be stated therein or necessary to make the statements made therein, 
in light of the circumstances under which they were made, not misleading.       

       (ii) Each of the consolidated balance sheets (including the related
notes and schedules) included in or incorporated by reference into the Company  
Reports or any Subsequent Reports fairly presents, or will fairly present, as   
the case may be, the consolidated financial position of the Company and its     
Subsidiaries as of its date and based on information available at such date, and
each of the consolidated statements of income (or statements of results of      
operations), stockholders' equity and cash flows (including any related notes   
and schedules) included in or incorporated by reference into the Company Reports
or any Subsequent Reports fairly presents, or will fairly present, as the case  
may be, the results of operations, retained earnings and cash flows, as the case
may be, of the Company and its Subsidiaries for the periods set forth therein   
(subject, in the case of unaudited statements, to year-end                      

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audit adjustments normal in amount and effect), in each case in accordance with 
generally accepted accounting principles ("GAAP") consistently applied during   
the periods involved, except as may be noted therein. Other than the Company    
Reports, as of the date hereof the Company has not filed or in its reasonable   
opinion been required to file any other reports or statements with the SEC since
December 31, 1993.                                                              

       (iii) On or prior to the date hereof, the Company and its Insurance
Subsidiaries have delivered to the Investor, true, complete and correct copies  
of all Annual Statements filed by them with the Department for the years ended  
December 31, 1993, 1992 and 1991, together with all exhibits and schedules      
thereto (the "Annual Statements"). The Company and its Insurance Subsidiaries   
have furnished to the Investor true, complete and correct copies of all         
Quarterly Statements filed by them with the Department for the quarters ended   
March 30, 1994 and June 30, 1994, together with all exhibits and schedules      
thereto (the "Recent Quarterly Statements"). The Company and its Insurance      
Subsidiaries have furnished to the Investor true, complete and correct copies of
all examination reports of the Department relating to the Company or either     
Insurance Subsidiary and formal written responses thereto of the Company and its
Insurance Subsidiaries. The Annual Statements and the Recent Quarterly          
Statements have been prepared in accordance with statutory accounting principles
and practices prescribed or permitted by the Department with respect to property
and casualty companies domiciled in California ("SAP") throughout the periods   
involved and in accordance with the books and records of the Company and its    
Insurance Subsidiaries, respectively. Each of the statutory financial statements
contained in the Annual Statements and the Recent Quarterly Statements fairly   
and accurately presents and each of the financial statements contained in any   
statements filed by the Company or the Insurance Subsidiaries with the          
Department prior to the Closing Date will fairly and accurately present, as the 
case may be, in all material respects, the assets, liabilities and capital and  
surplus, of the Company and its Insurance Subsidiaries, as the case may be, as  
of the dates thereof and based on information available as of the dates thereof 
in accordance with SAP, subject, in the case of the Recent Quarterly Statements 
and any subsequent Quarterly Statements, to normal year-end adjustments and any 
other adjustments described therein.                                            

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(h) Consents; No Violations.                                          

        (i) Other than the filing of the Series A Certificate of Determination
and the Charter Amendment, the filings referred to in Article VIII and any      
filings with any taxing authorities, no notices, reports or other filings are   
required to be made by the Company or any of its Subsidiaries with, nor are any 
consents, registrations, approvals, permits or authorizations required to be    
obtained by the Company or any of its Subsidiaries from, any governmental or    
regulatory authority (including, but not limited to, any applicable insurance   
regulatory authority), court, agency, commission or other entity, domestic or   
foreign ("Governmental Entity"), in connection with the execution and delivery  
of this Agreement by the Company, the consummation by the Company and its       
Subsidiaries of the transactions contemplated hereby and the performance of the 
acts contemplated on the part of the Company hereunder.                         

   (ii) The execution and delivery of this Agreement by the Company do
not, and the consummation by the Company of the transactions contemplated hereby
and the performance of the acts contemplated on the part of the Company         
hereunder will not, constitute or result in (1) a breach or violation of, or a  
default under, the Articles of Incorporation, as amended by the Charter         
Amendment, or By-Laws of the Company or the comparable governing instruments of 
any of its Subsidiaries, (2) except as listed on Schedule 2.1(H) hereto, a      
breach or violation of, a default under or an event triggering any payment or   
other material obligation pursuant to, any of the Company's or the Subsidiaries'
existing bonus, deferred compensation, pension, retirement, profit-sharing,     
thrift, savings, employee stock ownership, stock bonus, stock purchase,         
restricted stock and stock option plans, all employment or severance contracts, 
and all similar arrangements of the Company and its Subsidiaries (the           
"Compensation and Benefit Plans") or any grant or award made under any of the   
foregoing, (3) except as listed on Schedule 2.1(H) hereto, a breach, violation  
or event triggering a right of termination of, or a default under, or the       
acceleration of or the creation of an Encumbrance on assets (with or without the
giving of notice or the lapse of time or both) pursuant to any provision of any 
agreement, lease of real or personal property, insurance or reinsurance policy  
or agreement, contract, note, mortgage, indenture, arrangement or other         
commitment or obligation, whether written or oral ("Contracts") of the Company  
or any of its Subsidiaries or any law, rule, ordinance or regulation, agreement,
instrument or judgment, decree, order or award to which the Company or any of   
its Subsidiaries is subject or any governmental or non-governmental             
authorization, consent,                                                         

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approval, registration, franchise, license or permit under which the Company or 
any of its Subsidiaries conducts any of its business, or (4) any other change in
the rights or obligations of any party under any of the Company's Contracts,    
except, in the case of clauses (2), (3) or (4), for such breaches, violations,  
defaults, events, accelerations or changes that, alone or in the aggregate,     
would not have a Material Adverse Effect or prevent, materially delay or        
materially burden the transactions and acts contemplated by this Agreement.     

(i) Insurance Contracts and Rates.  All insurance Contracts written or
issued by the Company or any of its Insurance Subsidiaries as now in force are  
in all material respects, to the extent required under applicable law, on forms 
approved by applicable insurance regulatory authorities or which have been filed
and not objected to by such authorities within the period provided for          
objection, and such forms comply in all material respects with the insurance    
statutes, regulations and rules applicable thereto. True, complete and correct  
copies of such forms have been furnished or made available to Investor and there
are no other forms of insurance Contracts used in connection with the Company's 
and its Insurance Subsidiaries' business. Premium rates established by the      
Company or its Insurance Subsidiaries which are required to be filed with or    
approved by insurance regulatory authorities have been so filed or approved, the
premiums charged conform thereto in all material respects, and such premiums    
comply in all material respects with the insurance statutes, regulations and    
rules applicable thereto.                                                       

 (j) Reinsurance.  Schedule 2.1(J) contains a list of all reinsurance or
coinsurance treaties or agreements, including retrocessional agreements, to     
which the Company or any Insurance Subsidiary is a party or under which the     
Company or any Insurance Subsidiary has any existing rights, obligations or     
liabilities. All reinsurance and coinsurance treaties or agreements, including  
retrocessional agreements, to which the Company or any Insurance Subsidiary is a
party or under which the Company or any Insurance Subsidiary has any existing   
rights, obligations or liabilities are in full force and effect. Neither the    
Company nor any Insurance Subsidiary, nor, to the knowledge of the Company, any 
other party to a reinsurance or coinsurance treaty or agreement to which the    
Company or any Insurance Subsidiary is a party, is in default in any material   
respect as to any provision thereof, and no such agreement contains any         
provision providing that the other party thereto may terminate such agreement by
reason of the transactions contemplated by this Agreement. The Company has not  
received any notice to the                                                      

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effect that the financial condition of any other party to any such agreement is 
impaired with the result that a default thereunder may reasonably be            
anticipated, whether or not such default may be cured by the operation of any   
offset clause in such agreement.                                                

   (k) Loss Reserves: Solvency.  Except as set forth in Schedule 2.1(K), the
reserves for loss and loss adjustment expense liabilities set forth in any 1993 
Annual Statement, in any Recent Quarterly Statement and in any subsequent       
Quarterly Statement provided to Investor after the date hereof was or will be   
determined in accordance with generally accepted actuarial standards and        
principles consistently applied, is fairly stated in accordance with sound      
actuarial principles and statutory accounting principles and meets the          
requirements of the insurance statutes, laws and regulations of the State of    
California. Except as disclosed in Schedule 2.1(K), the reserves for loss and   
loss adjustment expense liabilities reflected in any 1993 Annual Statement, in  
any Recent Quarterly Statements and in any subsequent Quarterly Statement       
provided to Investor after the date hereof and established on the books of the  
Company for all future insurance and reinsurance losses, claims and expenses    
make or will make a reasonable provision for all unpaid loss and loss adjustment
expense obligations of the Company and its Insurance Subsidiaries under the     
terms of its policies and agreements. The Company and each of its Insurance     
Subsidiaries owns assets which qualify as admitted assets under California state
insurance laws in an amount at least equal to the sum of all of their respective
required insurance reserves and minimum statutory capital and surplus as        
required by Sections 700.01 through 700.05 of the California Insurance Code. The
value of the assets of the Company and its Subsidiaries at their present fair   
saleable value is greater than their total liabilities, including contingent    
liabilities, and the Company and its Subsidiaries have assets and capital       
sufficient to pay their liabilities, including contingent liabilities, as they  
become due.                                                                     

    (l) Title to Properties.  The Company and its Subsidiaries have sufficient
title to all material properties (real and personal) owned by the Company and   
its Subsidiaries which are necessary for the conduct of the business of the     
Company and its Subsidiaries (the "Properties") as currently conducted, free and
clear of any Encumbrance that may materially interfere with the conduct of the  
business of the Company and its Subsidiaries, taken as a whole, and to the best 
of the Company's knowledge, after due inquiry, all material properties held     
under lease by the Company or its Subsidiaries are held under valid, subsisting 
and enforceable leases.                                                         

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(m) Intangible Property and Computer Software.  The Company and its   
Subsidiaries own or have valid rights to use such trademarks, trade names,      
copyrights and computer software as are necessary for the conduct of the        
business of the Company and its Subsidiaries as now being conducted, which, if  
not owned or possessed would, individually or in the aggregate, have a Material 
Adverse Effect. The Company has not received written notice (which notice has   
not been withdrawn or otherwise resolved prior to the date of this Agreement)   
that the Company or any of its Subsidiaries is infringing any trademark, trade  
name registration, copyright or any application pending therefor.               

  (n) Absence of Undisclosed Liabilities.  Except as disclosed on Schedule
2.1(N), the Company (x) had at June 30, 1994 no liabilities or obligations of   
any nature (whether accrued, absolute, fixed, contingent, liquidated or         
unliquidated or otherwise and whether due or to become due, and whether or not  
required by GAAP to be set forth on the Balance Sheet, but excluding the        
reserves referred to in Section 2.1(k) which are the subject of such section),  
except as and to the extent of the amounts specifically reflected or reserved   
against on the balance sheet included in the Company's Quarterly Report on Form 
10-Q for the quarter ended June 30, 1994 (the "Balance Sheet") or in the notes  
thereto (which reserves (other than the reserves referred to in Section 2.1(K), 
which are the subject of such section) are, in accordance with GAAP, adequate,  
appropriate and reasonable) and (y) has not incurred since the date of the      
Balance Sheet any liabilities or obligations of any nature (whether accrued,    
absolute, fixed, contingent, liquidated or unliquidated or otherwise and whether
due or to become due, and whether or not required by GAAP to be set forth on a  
balance sheet, but excluding the reserves referred to in Section 2.1(k) which   
are the subject of such section) except for current liabilities not in excess of
current liabilities on the Balance Sheet which were incurred since the date of  
the Balance Sheet in the ordinary course of business and consistent with past   
practice; provided, however, this representation and warranty shall not extend  
to any individual liability or obligation of an amount less than $2 million     
provided that the aggregate of such liabilities and obligations does not exceed 
$10 million.                                                                    

   (o) Absence of Certain Changes.  Except with respect to incurred loss and
loss adjustment expense liabilities arising out of the earthquake centered in   
Northridge, California, on January 17, 1994 (the "Northridge Earthquake") and   
the judgment of the Supreme Court of California of August 18, 1994 with respect 
to the Company's rollback liability (the "Rollback Judgment"), neither the      

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Company nor any of its Subsidiaries has sustained since the date of the latest  
audited financial statements provided to the Investor any loss or interference  
with, or other change with respect to, its business that has had or is          
reasonably likely to have a Material Adverse Effect. Except with respect to     
incurred loss and loss adjustment expenses arising out of the Northridge        
Earthquake, since the date of the latest financial statements prior to the date 
hereof, there has not been (w) any catastrophe or any impending catastrophe     
which, in the Company's judgment, may result in gross underwriting losses in    
excess of $25 million pursuant to insurance coverage written by the Company's   
Subsidiaries, (x) any material addition, or any development involving a         
prospective material addition, to the Company's consolidated liabilities for    
unpaid losses and loss adjustment expenses or (y) any change in the authorized  
capital stock of the Company or any of its Subsidiaries or any increase in the  
consolidated long-term debt of the Company.                                     

(p) Litigation and Liabilities; Compliance with Laws.                 

         (i) Except to the extent disclosed in Company Reports or set forth in
Schedule 2.1(P), there are no civil, criminal, administrative, arbitral or other
regulatory actions, suits, claims, hearings, investigations or proceedings      
pending or, to the knowledge of the Company, threatened against the Company or  
any of its Subsidiaries that, alone or in the aggregate, are reasonably likely  
to have a Material Adverse Effect.                                              

(ii) Except with respect to the Rollback Judgement and the  
correspondence of the Department dated June 9, 1994, the Company and its        
Subsidiaries are in compliance with all applicable statutes, rules, regulations,
orders and restrictions of any Governmental Entity having jurisdiction over the 
conduct of their respective businesses or the ownership of their respective     
properties, except where the failure to so comply, alone or in the aggregate,   
would not have a Material Adverse Effect. Neither the Company nor any Subsidiary
has received a notice (which notice has not been withdrawn or otherwise resolved
prior to the date of this Agreement) to the effect that its operations are not  
in compliance with any such statutes, rules, regulations, orders or             
restrictions, except where the failure to so comply is not reasonably likely to 
have a Material Adverse Effect.                                                 

     (q) Environmental Matters.  Except as set forth in the Company Reports, (A)
none of the Company or any of the Subsidiaries have received any communication  
that                                                                            

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alleges that the Company or any Subsidiary is not in compliance, or faces       
liability or costs pursuant to, any Environmental Laws (as defined below)       
including the rules and regulations relating thereto, (B) the Company and the   
Subsidiaries hold, and are in compliance with, all permits, licenses and        
governmental authorizations required for the Company and the Subsidiaries to    
conduct their respective businesses under Environmental Laws, and are in        
compliance with all Environmental Laws, except for any noncompliance which,     
individually or in the aggregate, would not have a Material Adverse Effect and  
(C) there are no circumstances or conditions involving the Company, its         
Subsidiaries, their operations or the Properties that could result in liability 
or costs under any Environmental Law which individually or in aggregate would   
have a Material Adverse Effect and all environmental investigations, studies,   
audits, tests, reviews or other analyses relating to the Company or the         
Properties in the possession of the Company or known by the Company to exist    
have been delivered to the Investor prior to the date hereof. As used in this   
Agreement, the term "Environmental Laws" includes the Comprehensive             
Environmental Response, Compensation and Liability Act, as amended, the Resource
Conservation and Recovery Act, as amended, the Clean Water Act, as amended, the 
Clean Air Act, as amended, and the Toxic Substance Control Act, as amended, and 
all other Federal, state foreign or local laws, rules, regulations, permits,    
authorizations, approvals, consents, orders, judgments, decrees, injunctions and
requirements relating to (x) the protection of the environment, human health or 
safety, or (y) relating to Hazardous Substances. "Hazardous Substance" means any
substance listed, defined, designated or classified as hazardous, toxic,        
radioactive or dangerous, or otherwise regulated, under any Environmental Law.  

(r) Employee Benefits.                                                

(i) The Company Reports and Schedule 2.1(R) accurately describe all   
Compensation and Benefit Plans and any applicable "change of control" or similar
provisions in any such Compensation and Benefit Plans in which any employee or  
former employee or director or former director of the Company or any of its     
Subsidiaries (the "Employees") participates or to which any such Employees are a
party or which are applicable to any of them. The Compensation and Benefit Plans
and all other benefit plans, contracts or arrangements (regardless of whether   
they are funded or unfunded or foreign or domestic) covering Employees          
(collectively, the "Plans"), including, but not limited to, "employee benefit   
plans" within the meaning of Section 3(3) of the Employee Retirement Income     
Security Act of 1974, as amended                                                

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("ERISA"), are listed in Schedule 2.1(R). True and complete copies of all Plans,
including, but not limited to, trust instruments and/or insurance contracts, if 
any, forming a part of any Plans, and all amendments thereto have been made     
available to the Investor. Neither the Company nor any of its Subsidiaries has  
any formal plan or commitment, whether legally binding or not, to create any    
additional Plan or modify or change any existing Plan that would affect any     
Employee.                                                                       

     (ii)  Each Plan has been operated and administered in all material respects
in accordance with its terms and with applicable law, including, but not limited
to, ERISA and the Internal Revenue Code of 1986, as amended (the "Code"). Each  
Plan which is an "employee pension benefit plan" within the meaning of Section  
3(2) of ERISA ("Pension Plan") and which is intended to be qualified under      
Section 401(a) of the Code has received a favorable determination letter from   
the Internal Revenue Service, and the Company is not aware of any circumstances 
likely to result in revocation of any such favorable determination letter. There
is no material pending or, to the best knowledge of the Company, threatened     
legal action, suit or claim relating to the Plans. Neither the Company nor any  
of its Subsidiaries has engaged in a transaction with respect to any Plan that, 
assuming the taxable period of such transaction expired as of the date hereof,  
could subject the Company or any of its Subsidiaries to a tax or penalty imposed
by either Section 4975 of the Code or Section 502(i) of ERISA in an amount which
would be material.                                                              

   (iii) No liability under Subtitle C or D of Title IV of ERISA has been or
is expected to be incurred by the Company or any Subsidiary with respect to any 
ongoing, frozen or terminated "single-employer plan", within the meaning of     
Section 4001(a)(15) of ERISA, currently or formerly maintained by any of them,  
or any single-employer plan of any entity (an "ERISA Affiliate") which is       
considered one employer with the Company under Section 4001 of ERISA or Section 
414 of the Code (an "ERISA Affiliate Plan"). None of the Company, its           
Subsidiaries or any ERISA Affiliate has contributed to or had the obligation to 
contribute to a "multiemployer plan" (within the meaning of Section 3(37) of    
ERISA) since September 26, 1980. No notice of a "reportable event", within the  
meaning of Section 4043 of ERISA for which the 30-day reporting requirement has 
not been waived, has been required to be filed for any Pension Plan or by any   
ERISA Affiliate Plan within the 12-month period ending on the date hereof. The  
Pension Benefit Guaranty Corporation (the "PBGC") has not instituted proceedings
to terminate any Pension Plan or ERISA Affiliate Plan and no                    

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condition exists that presents a material risk that such proceedings will be    
instituted.                                                                     

   (iv) All contributions required to be made under the terms of any Plan or
ERISA Affiliate Plan have been timely made or adequate reserves in respect      
thereof have been established on the books of the Company. Neither any Pension  
Plan nor any ERISA Affiliate Plan has an "accumulated funding deficiency"       
(whether or not waived) within the meaning of Section 412 of the Code or Section
302 of ERISA and all required payments to the PBGC with respect to each Pension 
Plan or ERISA Affiliate Plan have been made on or before their due dates.       
Neither the Company nor its Subsidiaries has provided, or is required to        
provide, security to any Pension Plan or to any ERISA Affiliate Plan pursuant to
Section 401(a)(29) of the Code.                                                 

(v)  The funded status of the Company's Pension Plan and Supplemental 
Executive Retirement Plan (the "SERP"), as of the last day of the most recent   
plan year ended prior to the date hereof, is accurately set forth on the basis  
of reasonable actuarial assumptions in the Company's Annual Report on Form 10-K 
for the year ended December 31, 1993, and with respect to each ERISA Affiliate  
Plan, as of the last day of the most recent plan year ended prior to the date   
hereof, the actuarially determined present value of all "benefit liabilities",  
within the meaning of Section 4001(a)(16) of ERISA (as determined on the basis  
of the actuarial assumptions contained in the plan's most recent actuarial      
valuation), did not exceed the then current value of the assets of any such     
ERISA Affiliate Plan, and, to the knowledge of the Company after reasonable     
inquiry, there has been no material change in the financial condition of such   
Pension Plan, SERP or ERISA Affiliate Plan since the last day of the most recent
Pension Plan, SERP or ERISA Affiliate Plan year. The Company has delivered to   
the Investor true and complete copies of the most recent actuarial report and   
Form 5500 with respect to each Pension Plan covering employees of the Company or
any of its Subsidiaries.                                                        

     (vi) Except as set forth on Schedule 2.1(R), neither the Company nor any of
its Subsidiaries has any obligations for retiree health and life benefits under 
any Plan other than with respect to requirements under Section 4980B of the     
Code. There are no restrictions on the rights of the Company or the Subsidiaries
to amend or terminate any such Plan without incurring any liability thereunder. 

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(vii) Except as set forth on Schedule 2.1(R), the consummation of the 
transactions contemplated by this Agreement will not (i) entitle any Employee to
severance pay, unemployment compensation or any other payment or (ii) accelerate
the time of any payment or vesting of any rights or increase the amount of any  
compensation due any employee.                                                  

    (s) Taxes.  (i) Except to the extent set forth in Schedule 2.1(S), (a) all
material federal, state, local and foreign tax returns and tax reports          
(including declarations of estimated tax) that are required to be filed by the  
Company or any of its Subsidiaries have been duly filed, (b) all taxes shown to 
be due on such tax returns and reports have been paid in full, except for any   
taxes with respect to which a failure to pay would not have a Material Adverse  
Effect, (c) no federal or state income tax returns are being or have been       
examined by the Internal Revenue Service or the California Franchise Tax Board  
or the period of assessment of the tax in respect of which such tax returns were
required to be filed has expired, (d) any deficiencies asserted or assessments  
made as a result of any such examination have been paid in full, (e) no issues  
that have been raised by the relevant taxing authority in connection with the   
examination of any such tax return are currently pending, and (f) no waivers of 
statutes of limitation have been given or requested by or with respect to any   
tax of the Company or any of its Subsidiaries.                                  

     (ii) The purchase of the Series A Preferred Shares and Series A Warrants in
and of themselves will not create an obligation of the Company or any of its    
Subsidiaries to make a payment to an individual that would be a "parachute      
payment" to a "disqualified individual" as those terms are defined in Section   
280G of the Code without regard to whether such payment is reasonable           
compensation for personal services performed or to be performed in the future.  

  (t) Insurance.  All policies of insurance, including liability, property
and casualty, worker's compensation and other similar forms of insurance under  
which the Company or any of its Subsidiaries are named as policyholder or       
beneficiary, are valid, outstanding and enforceable policies, and will not in   
any way be affected by, or terminate or lapse by reason of, the transactions    
contemplated by this Agreement. The insurance policies to which the Company and 
its Subsidiaries are parties are sufficient for compliance with all material    
requirements of law and of all material agreements to which the Company or any  
Subsidiary is a party. To the Company's knowledge, the Company and              

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its Subsidiaries presently have, and will have at the Closing Date, insurance   
with respect to their properties, assets and business covering risks of a       
character usually insured by corporations engaged in the same or similar        
business as the Company and its Subsidiaries against loss or damage of the kinds
customarily insured against by such corporations.                               

(u) Financial Advisors and Brokers.  Other than Smith Barney Inc. (the
"Company Advisor"), no investment banker, broker or finder is entitled to any   
financial advisory, brokerage or finder's fee or other similar payment from the 
Company or any of its Subsidiaries in connection with any transaction           
contemplated hereby based on agreements, arrangements or undertakings made by   
the Company or any of its Subsidiaries or any of their directors, officers or   
employees. The Company has provided the Investor with a true and complete copy  
of the Company's engagement letter with the Company Advisor and such letter has 
not been amended or modified in any respect.                                    

(v) No Material Misstatement.  No exhibit, schedule or certificate    
furnished by or on behalf of the Company to the Investor in connection with this
Agreement (taken as a whole as of the date thereof, or if undated the date      
furnished to the Investor) contains any material misstatement of fact or omits  
to state any material fact necessary to make the statements, in light of the    
circumstances under which they are made by the Company, not misleading. Any     
assumptions, projections, forecasts or other estimates of future results        
included therein were prepared by the Company in good faith on a basis believed 
by it to be reasonable and in a manner consistent with similar projections,     
forecasts or other estimates previously prepared by the Company.                

   (w) Labor Matters.  No material labor disturbance by the employees of the
Company or any of its Subsidiaries exists or, to the best knowledge of the      
Company, after due inquiry, is threatened.                                      

     (x) Contracts.  All of the Company and its Subsidiaries' material Contracts
that are required to be described in the Company Reports or to be filed as      
exhibits thereto are described in the Company Reports or filed as exhibits      
thereto and are in full force and effect. Except for breaches or defaults that  
may exist under the Credit Agreement, neither the Company nor any of its        
Subsidiaries nor, to the best knowledge of the Company, any other party is in   
breach of or default under any such Contracts except                            

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for such breaches and defaults as in the aggregate have not had and would not   
have a Material Adverse Effect.                                                 

    (y) Investment Company.  The Company is not an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.                  

    (z) Exemption from Registration: Restrictions on Offer and Sale of Same or
Similar Securities. Assuming the representations and warranties of the Investor 
set forth in Section 3(e) hereof are true and correct in all material respects, 
the offer and sale of the Series A Preferred Shares and Series A Warrants made  
pursuant to this Agreement will be exempt from the registration requirements of 
the Securities Act. Neither the Company nor any person acting on its behalf has,
in connection with the offering of the Series A Preferred Shares and Series A   
Warrants, engaged in (x) any form of general solicitation or general advertising
(as those terms are used within the meaning of Rule 502(c) under the Securities 
Act), (y) any action involving a public offering within the meaning of Section  
4(2) of the Securities Act, or (z) any action which would require the           
registration of the offering and sale of the Series A Preferred Shares or Series
A Warrants pursuant to this Agreement under the Securities Act or which would   
violate applicable state securities or "blue sky" laws. The Company has not made
and will not make, directly or indirectly, any offer or sale of Series A        
Preferred Shares or Series A Warrants or of securities of the same or a similar 
class as the Series A Preferred Shares and Series A Warrants if as a result the 
offer and sale of Series A Preferred Shares and Series A Preferred Warrants     
contemplated hereby could fail to be entitled to exemption from the registration
requirements of the Securities Act. As used herein, the terms "offer" and "sale"
have the meanings specified in Section 2(3) of the Securities Act.              

ARTICLE III 

REPRESENTATIONS AND WARRANTIES OF INVESTOR

   Section 3.1 Representations and Warranties of the Investor.  The Investor
represents and warrants to the Company that:                                    

(a) Corporate Organization and Qualification.  The Investor is a      
corporation duly organized and validly existing under the laws of Delaware.     

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        (b) Corporate Authority.  The Investor has the requisite
corporate power and authority and has taken all corporate action necessary in   
order to execute and deliver this Agreement and for it to consummate the        
transactions contemplated hereby and to perform the acts contemplated on its    
part hereunder. This Agreement is a valid and binding agreement of the          
Investor enforceable against the Investor in accordance with its terms.         

(c) Consents; No Violations.                    

         (i)   Other than the filings contemplated in Section 8.4, no notices,
    reports or other filings are required to be made by the Investor with, nor
are any consents, registrations, approvals, permits or authorizations 
  required to be obtained by the Investor from, any Governmental Entity in
connection with the execution and delivery of this Agreement by the   
     Investor, the consummation by the Investor of the transactions contemplated
hereby and the performance of the acts contemplated on the part of the
Investor hereunder.                                                   

         (ii)  The execution and delivery of this Agreement by the Investor do
   not, and the consummation of the transactions contemplated hereby and the
    performance of the acts contemplated on the part of the Investor hereunder
will not, constitute or result in (1) a breach or violation of, or a  
    default under, the Articles of Incorporation or By-laws of the Investor or
     (2) a breach, violation or event triggering a right of termination of, or a
 default under, the acceleration of or the creation of an Encumbrance on
    assets (with or without the giving of notice or the lapse of time or both)
pursuant to any provision of any Contracts of the Investor or any law,
   rule, ordinance or regulation or agreement, instrument, judgment, decree,
    order or award to which the Investor or any of its subsidiaries is subject
   or any governmental or non-governmental permit or license, authorization,
   consent, approval, registration, franchise, license or permit under which
  the Investor or any of its subsidiaries conducts any of its business, or
     (3) any other change in the rights or obligations of any party under any of
  the Investor's Contracts, except, in the case of clauses (2) or (3), for
    such breaches, violations, defaults or accelerations that, alone or in the
aggregate, are not reasonably likely to prevent, materially delay or  
     materially burden the transactions and acts contemplated by this Agreement.

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 (d) Funds.  The Investor has or will have on the Closing Date the funds
necessary to consummate the purchase of the Series A Preferred Shares and Series
A Warrants, as contemplated by Section 1.1 hereof.                              

  (e) Investment.  The Investor is acquiring the Series A Preferred Shares
and Series A Warrants, and any Common Shares into which the Series A Preferred  
Shares and Series A Warrants may be converted, for its own account for          
investment and not with a view to, or for sale in connection with, any public   
distribution thereof in violation of the Securities Act.                        

     (f) Actions and Proceedings.  There are no actions, suits, claims or legal,
administrative or arbitration proceedings or investigations pending or, to the  
knowledge of the Investor, threatened against the Investor, which have or could 
have a material adverse effect on the ability of the Investor to consummate the 
transactions contemplated hereby.                                               

ARTICLE IV

PROCEEDS; ADVERSE QUAKE CONTRIBUTION

    Section 4.1 Use of Proceeds.  The Company shall, and hereby agrees that it
will, use the proceeds of the issuance and sale of the Series A Preferred Shares
and Series A Warrants described in Section 1.1 as follows:                      

(i) The amount necessary for each of the Company's Insurance
Subsidiaries to satisfy capital requirements imposed by the Department
shall be contributed as common equity to each Insurance Subsidiary;   

(ii) Second, any amount of net proceeds remaining after the 
     contribution required in (i) above is made (the "Remaining Proceeds") shall
be retained by the Company and shall be invested by the Company in    
     investment securities in accordance with the Company's customary investment
policies; and                                                         

          (iii) At such time as the Board of Directors of the Company shall deem
 proper, and for such uses as the Board deems appropriate, the Remaining
    Proceeds may be withdrawn from the investments described in (ii) above and
used in accordance with the Board's determinations.                   

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   Section 4.2  Excess Loss Amount.  In the event that the Company's and its
Subsidiaries' total incurred loss and allocated loss adjustment expenses        
associated with claims resulting from the Northridge Earthquake exceed          
$850,000,000, the amount by which such losses and allocated expenses exceed     
$850,000,000 shall be considered the "Excess Loss Amount."                      

 Section 4.3  Investor Contribution and Additional Shares; Adjustment to
Series A Warrants Exercise Price.  If at any time (before or after the Closing  
Date) there shall be any Excess Loss Amount as defined above, the Investor      
shall, if requested in writing by the Company after the Closing Date (and       
subject to the Closing hereunder), contribute to the capital of the Company at  
the request of the Company, in whole or in part, an amount up to the lesser of  
(i) $70,000,000 or (ii) the Excess Loss Amount (the "Investor Contribution"). In
consideration of the Investor Contribution, the Company shall issue to the      
Investor that number of fully paid and nonassessable Series A Preferred Shares  
having an aggregate liquidation value equal to (x) the amount of the Investor   
Contribution plus (y) an amount equal to the product of, (1) the Investor       
Contribution, (2) 0.65 and (3) the quotient of (I) the number of shares of      
Common Stock beneficially owned or obtainable by the Investor and its affiliates
by virtue of ownership of the Series A Preferred Shares (including any          
additional shares actually issued by virtue of the provision permitting payment 
of dividends in kind on the Series A Preferred Shares) and the Series A Warrants
and conversion or exercise thereof divided by (II) the sum of (A) the total     
number of shares of Common Stock of the Company outstanding at the date of this 
Agreement plus (B) the number of shares referred to in (I); provided, however,  
that the aggregate liquidation value of any Series A Preferred Shares issued    
pursuant to this sentence (without taking into account any Series A Preferred   
Shares issuable as a dividend in kind on any outstanding Series A Preferred     
Shares) shall not exceed $87.9725 million. The amount represented as "(y)" in   
the above formula is designed to represent Investor's proportional share of the 
Company's after-tax loss resulting from the Excess Loss Amount. Successive      
contributions under this Section 4.3 for partial amounts reflecting development 
over time shall be permitted, with minimum cash contributions prior to the final
contribution being for no less than $10 million.                                

    In the event that the Excess Loss Amount exceeds $95,000,000, the exercise
price of the Series A Warrants shall be reduced as provided in the Series A     
Warrants.                                                                       

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ARTICLE V 

STRATEGIC ALLIANCE AGREEMENTS 

  Section 5.1  Quota Share Agreement.  (a) At the Closing, subsidiaries of
the Investor and each of the Company's Insurance Subsidiaries shall enter into  
quota share reinsurance treaties with respect to all policies of the Company's  
Insurance Subsidiaries incepting on or after the Closing Date (the "Quota Share 
Agreements") substantially in the form attached hereto as Exhibit C. The        
participation thereunder shall be 10% for the first five years as specified     
therein.                                                                        

    (b) Following the Closing Date, the Company and the Investor may from time
to time discuss additional quota share arrangements. In particular, the Company 
and the Investor may discuss an arrangement whereby (i) the Company's Insurance 
Subsidiaries cede such participation in excess of the 10% participation pursuant
to the Quota Share Agreements as results in an agreed upon net                  
premium-to-surplus ratio being achieved and (ii) in the event the Company's net 
premium-to-surplus ratio subsequently improves below such specified ratio, the  
increased participation pursuant to (i) shall thereafter be reduced to achieve  
the specified ratio, with increases and reductions in the additional            
participation made annually. Neither the Company nor the Investor is obligated  
to enter into any such arrangement.                                             

    Section 5.2  Joint Venture Agreement.  After the Closing Date, the Company
and the Investor shall use their respective best efforts to negotiate and       
mutually agree upon a master joint venture agreement (the "Master JV Agreement")
whereby the Company and the Investor will form a new subsidiary or subsidiaries 
to engage in the Company's business in states outside California mutually agreed
from time to time by the parties, thereby enhancing the Company's expansion     
plans envisioned prior to the Northridge Earthquake. The overall venture, and/or
each local venture established pursuant to the Master JV Agreement, will have a 
name to be agreed by the parties which will include reference to a portion of   
the name of each of the parties. The ownership interests and capital            
contributions of the parties in the specific ventures established pursuant to   
the Master JV Agreement will be as mutually agreed, reflecting the knowledge,   
skills, human resources, technology and other capacities of the parties brought 
to the particular venture, and in particular reflecting the Company's special   
distribution capabilities.                                                      

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ARTICLE VI

STANDSTILL AND TRANSFER RESTRICTIONS

   Section 6.1  Standstill Agreement.  (a) The Investor covenants and agrees
with the Company that for a period of three years following the Closing Date (if
the Closing occurs), neither the Investor nor any of its subsidiaries will,     
without the prior approval of the Company's Board of Directors, (i) acquire,    
offer to acquire or agree to acquire (other than (v) in accordance with the     
terms of this Agreement, the Series A Warrant, the Series A Certificate of      
Determination and the Stock Option Agreement, (w) as a result of a stock split, 
stock dividend or other recapitalization by the Company, (x) upon the execution 
of unsolicited buy orders by any affiliate of the Investor that is a registered 
broker-dealer for the account of its customer, (y) as to subsidiaries of the    
Investor engaged in investment activities in the ordinary course, acquisitions  
up to an aggregate of 1% of the outstanding Common Stock (excluding the 900,000 
shares of Common Stock already owned by Investor) or of any other class of      
voting securities in the ordinary course and without an intent to influence the 
management or control of the Company, or (z) in a transaction in which the      
Investor or an affiliate of the Investor acquires a previously unaffiliated     
business entity that owns voting securities of the Company) any outstanding     
Common Stock or any other voting securities of the Company or commence any      
tender or exchange offer seeking to acquire beneficial ownership (as defined in 
Rule 13d-3 without regard to the 60-day provision in paragraph (d)(1)(i)        
thereof) of the Common Stock or any other voting securities of the Company, (ii)
become a member of a 13(d) group, within the meaning of Rule 13d-5 under the    
Exchange Act (a "Group"), with respect to any Common Stock or voting securities 
of the Company, other than a Group composed solely of itself and its affiliates,
or encourage any other Group to acquire any Common Stock or other voting        
securities of the Company (other than in purchases from the Investor), (iii)    
solicit any proxies or stockholder consents or become a participant (other than 
by voting), or encourage any person to become a participant, in a proxy or      
consent solicitation with respect to any of the Company's securities (in each   
case other than solicitations to holders of Series A Preferred Shares with      
respect to matters as to which the Series A Preferred Shares are entitled to    
vote), (iv) call any special meeting of stockholders, (v) make any public       
proposal to stockholders with respect to any extraordinary transaction involving
the Company, including, but not limited to, any business combination,           
restructuring, recapitalization, dissolution, or similar transaction or         

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(vi) request in a manner that would require public disclosure of such request by
the Company or the Investor that the Company amend any restrictions contained in
this Section 6.1(a); provided, however, the foregoing restrictions shall not    
apply with respect to Common Stock or shares of other voting securities held as 
of the date of this Agreement or managed as of the date of this Agreement as    
part of an investment portfolio by subsidiaries of the Investor if, and only to 
the extent, the Investor's subsidiaries have fiduciary obligations to third     
parties to take any of such actions. In the event the Investor becomes aware    
(including, but not limited to, by notice from the Company) that an affiliate   
(as defined under the Securities Exchange Act of 1934) (other than a subsidiary)
of Investor has taken any action that would be prohibited of the Investor by the
foregoing, the Investor shall, to the extent it has the authority, right and    
power to do so, promptly cause such action to cease and, if practicable, to be  
reversed in order to effectuate the intent of the foregoing.                    

     (b) Notwithstanding the foregoing, the Investor shall have the right freely
to acquire additional securities of the Company in any manner whatsoever and    
engage in any of the activities proscribed under Section 6.1(a), in the event   
that (i) an Insolvency Event, as such term is defined below, occurs; (ii) sixty 
days after the Company or any of its Subsidiaries is in default under any       
indebtedness or other borrowing incurred by it unless such default is cured     
during such 60-day period; (iii) the Company or any of its Subsidiaries breaches
this Agreement, the Stock Option Agreement, the Warrant Certificate, the Series 
A Certificate of Determination, the Registration Rights Agreement, the Quota    
Share Agreements or the Voting Agreement in any material respect; (iv) any      
person not affiliated with the Investor acquires, offers to acquire or agrees to
acquire, beneficial ownership (as defined in Rule 13d-3 without regard to the   
60-day provision in paragraph (d)(1)(i) thereof) of twenty percent or more of   
the outstanding shares of the Common Stock or any other class of the Company's  
voting securities, or commences any tender or exchange offer seeking to acquire 
any such ownership; (v) a third party engages in a proxy solicitation for the   
purpose of removing directors of the Company elected by the Common Stockholders 
or influencing the directors' management of the Company; or (vi) a majority of  
the directors of the Company who were elected by the holders of Common Stock    
vote to terminate or release the Investor from compliance with any or all of the
restrictions contained in Section 6.1(a).                                       

(c) An "Insolvency Event" shall be deemed to have occurred (i) if the 
Company or any of its Subsidiaries shall                                        

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commence a voluntary case concerning itself under Title 11 of the United States 
Code entitled "Bankruptcy" as now or hereafter in effect, or under any state    
insurance insolvency, liquidation, rehabilitation or similar statute or any     
successor statutes thereto ("Insolvency Statutes"); (ii) an involuntary case is 
commenced against the Company or any of its Subsidiaries under an Insolvency    
Statute; (iii) a custodian is appointed for, or takes charge of, all or any     
substantial part of this property of the Company or any of its Subsidiaries;    
(iv)(a) the Company or any of its Subsidiaries or (b) any other person,         
including any insurance regulator, commences any other proceeding under any     
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution 
or similar law of any jurisdiction, whether now or hereafter in effect, relating
to the Company or such Subsidiary; (v) any insurance regulator shall take       
material action with respect to the Company or any of its Subsidiaries (other   
than merely requiring the Company to prepare a financial plan) pursuant to the  
terms of any applicable Risk-Based Capital insurance regulatory requirements;   
(vi) the Company or any of its Subsidiaries is adjudicated insolvent or         
bankrupt; (vii) any order of relief or other order approving any such case or   
proceeding is entered; (viii) the Company or any of its Subsidiaries suffers any
appointment of any custodian or the like for it or any substantial part of its  
property to continue undischarged or unstayed for a period of 60 days; (ix) the 
Company or any of its Subsidiaries makes a general assignment for the benefit of
creditors; (x) the Company or any Subsidiary shall fail to pay, or shall state  
that it is unable to pay, or shall be unable to pay, its debts, generally as    
they become due; (xi) the Company or any of its Subsidiaries shall call a       
meeting of its creditors with a view to arranging a composition or adjustment of
its debts; (xii) the Company or any of its Subsidiaries shall by any act or     
failure to act indicate its consent to, approval of or acquiescence in any of   
the foregoing; or (xiii) any corporate action is taken by the Company or any of 
its Subsidiaries for the purpose of effecting any of the foregoing; provided,   
however, in the case of clauses (ii), (iii), (iv)(b), (v) and (vii), an         
"Insolvency Event" shall occur only in the event the Company is unable to cause 
such involuntary case, appointment, proceeding or action to be dismissed or     
withdrawn by the 90th day after the commencement thereof.                       

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Section 6.2 Transfers; Registration Rights.                 

       (a) The Investor agrees that no Series A Preferred Shares, Series A
     Warrants or any Common Stock received upon conversion or exercise of Series
    A Preferred Shares or Series A Warrants (together "Restricted Securities")
shall be sold or otherwise transferred except in compliance with this 
Section 6.2.                                                          

      (b) At any time the Series A Preferred Shares and the Common Stock
   issuable upon conversion thereof may be transferred, in whole or in part,
    in transactions not requiring registration under the Securities Act (i) to
affiliates of the Investor or (ii) commencing one year following the  
Closing Date, in amounts not less than $50 million, to third persons  
     reasonably acceptable to the Company. The Investor (or its transferees) may
   also effect sales of Series A Preferred Shares and Common Stock issued or
 issuable upon conversion thereof (i) in underwritten offerings effected
pursuant to the registration rights granted by the Registration Rights
     Agreement (as defined in Section 6.2(e) hereof) or (ii) commencing one year
   following the Closing Date, to the extent available, pursuant to Rule 144
under the Securities Act.                                             

       (c) At any time the Series A Warrants and the Common Stock issuable
upon exercise thereof may be transferred, in whole or in part, in     
  transactions not requiring registration under the Securities Act, (i) to
affiliates of the Investor and (ii) in amounts not less than 2,000,000
     Series A Warrants (or the equivalent underlying shares of Common Stock), to
     any third person reasonably acceptable to the Company. The Investor (or its
    transferees) may also effect sales of Common Stock issued or issuable upon
     exercise of the Series A Warrants (i) in underwritten offerings effected in
    connection with the registration rights granted by the Registration Rights
     Agreement (as defined in Section 6.2(e) hereof) or (ii) commencing one year
   following the Closing Date, to the extent available, pursuant to Rule 144
under the Securities Act.                                             

        (d) If the Investor or any of its affiliates notifies the Company in
 writing that it wishes to transfer any Restricted Securities to a third
person pursuant to the first sentence of Section 6.2(b) or the first  
sentence of Section 6.2(c) above, that person shall be deemed to be   
 reasonably acceptable to the Company unless the Company, within 10 days
  after its receipt of such written notice, notifies the Investor that the
   proposed transferee is not acceptable to the Company and setting forth in
reasonable detail the reasons therefor.                               

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(e) The Company shall at the Closing enter into a registration rights 
agreement substantially in the form set forth as Exhibit D hereto (the          
"Registration Rights Agreement") relating to the Series A Preferred Shares and  
the Common Stock issued or issuable upon conversion or exercise of the Series A 
Preferred Shares and the Series A Warrants, and shall at all times comply with  
its obligations under the Registration Rights Agreement.                        

 (f) In the event the Investor transfers any Restricted Securities to an
affiliate, the Investor shall notify the affiliate of the transfer restrictions 
set forth herein and shall be responsible for any breach by such affiliate of   
such provisions. In the event the Investor transfers any Restricted Securities  
to a third party pursuant to the first sentence of Section 6.2(b) or the first  
sentence of Section 6.2(c) above, and such transfer is not objected to pursuant 
to Section 6.2(d) above, the third party shall enter into an agreement with the 
Company agreeing to be bound by the transfer restrictions of this Article VI and
succeeding to the registration rights with respect to the Restricted Securities 
transferred provided in the Registration Rights Agreement. As it does with      
respect to the Common Stock, the Company will maintain a ledger of the ownership
of the Series A Preferred Shares and the Series A Warrants upon which transfers 
shall be effected, and, upon transfer, the Company shall issue new certificates 
evidencing the Restricted Securities transferred at no cost to the transferor or
transferee.                                                                     

ARTICLE VII 

INDEMNIFICATION 

   Section 7.1 Indemnification.  (a) The Company hereby agrees to indemnify,
defend and hold harmless the Investor, its subsidiaries and affiliates and their
respective directors, officers, employees and agents and the successors and     
assigns of any of them (collectively, the "Investor Group"), from, against and  
in respect of any damages, claims, losses, charges, actions, suits, proceedings,
deficiencies, taxes, interest, penalties, and costs and expenses (including     
without limitation settlement costs and attorneys' fees and other expenses for  
investigating or defending any actions) ("Losses") imposed on, sustained,       
incurred or suffered by or asserted against any such member of the Investor     
Group, directly or indirectly, relating to or arising out of any breach of any  
representation or warranty of the Company contained in this Agreement for the   
period for which such representation or                                         

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warranty survives or for any breach of any agreement or covenant of the Company 
contained herein, in the Stock Option Agreement, the Series A Certificate of    
Determination, the Warrant Certificate or the other agreements contemplated     
hereby; provided, however, that the Company shall not have any liability under  
this paragraph (a) unless the aggregate of all Losses relating thereto for which
the Company would be liable exceeds on a cumulative basis an amount equal to    
$7.5 million, and then only to the extent of any such excess.                   

   (b) The Investor hereby agrees to indemnify, defend and hold harmless the
Company, its Subsidiaries and affiliates and their respective directors,        
officers, employees and agents and the successors and assigns of any of them    
(collectively, the "Company Group"), from, against and in respect of any Losses 
imposed on, sustained, incurred or suffered by or asserted against any such     
member of the Company Group, directly or indirectly, relating to or arising out 
of any breach of any representation or warranty of the Investor contained in    
this Agreement for the period for which such representation or warranty         
survives; provided, however, that the Investor shall not have any liability     
under this paragraph (b) unless the aggregate of all Losses relating thereto for
which the Investor would be liable exceeds on a cumulative basis an amount equal
to $7.5 million, and then only to the extent of any such excess.                

ARTICLE VIII

COVENANTS 

Section 8.1 Interim Operations of the Company and Conduct of          
Business.  Prior to the Closing, the business and operations of the Company and 
its Subsidiaries, including, without limitation, underwriting, accounting and   
loss reserving practices and procedures, shall be conducted only in the ordinary
and usual course and, to the extent consistent therewith, each of the Company   
and its Subsidiaries shall have used its reasonable efforts to preserve its     
business organization intact and maintain its existing relations with customers,
suppliers, employees and business associations. In addition, without the prior  
written consent of the Investor, neither the Company nor any of its Subsidiaries
shall during the period prior to the Closing:                                   

(a) enter into, modify, renew, terminate or commute any reinsurance   
treaties or retrocession agreements, certificates or arrangements;              

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(b) incur capital expenditures in an amount in excess of $2,000,000;  

     (c) declare or pay any dividends or declare or make any other distributions
of any kind to its stockholders or make any direct or indirect redemption,      
retirement, purchase or other acquisition of any shares of its capital stock;   

(d) purchase or sell investment assets outside the Company's existing 
normal investment policies, or change such investment policies;                 

(e) incur any indebtedness outside the normal course;                 

 (f) pledge assets, except as required pursuant to the Credit Agreement,
dated as of June 30, 1994, by and among the Company, Union Bank, The First      
National Bank of Chicago and other lenders party thereto (the "Credit           
Agreement");                                                                    

   (g) waive material rights under any Contracts to which the Company or any
of its Subsidiaries is subject;                                                 

    (h) increase or modify existing wage, salary, bonus or severance payments,
or increase any other direct or indirect compensation, for or to any of its     
officers, directors, employees, consultants, agents or other representatives, or
enter into any commitment or agreement to make or pay the same, except in the   
normal course of business;                                                      

(i) make any change in its accounting methods or practices, including,
without limitation, any change with respect to the methods for establishment of 
reserve items, or make any change in the depreciation or amortization policies  
or rates adopted by it, except as required by law, GAAP or SAP;                 

 (j) amend, modify or waive any rights under the Credit Agreement or the
arrangements contemplated thereby;                                              

   (k) undertake any new transactions or enter any new Contracts with any of
its affiliates; without limitation of the foregoing, make any loan or advance to
its shareholders or to any of its directors, officers or employees, consultants,
agents or other representatives (other than advances made in the ordinary course
of business);                                                                   

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     (l) except for this Agreement, issue, sell, grant or purchase any shares of
its capital stock, or warrants, options or other securities convertible,        
exchangeable or otherwise entitled to subscribe to any shares of its capital    
stock, or enter into any Contracts or commitments to issue, sell, grant or      
purchase any such securities (except as required in accordance with employee    
options or employee benefit plans outstanding on the date of this Agreement);   

   (m) except for the Charter Amendment, amend its Articles of Incorporation
or By-Laws or merge with or into or consolidate with any other person; subdivide
or in any way reclassify any shares of its capital stock or change or agree to  
change in any manner the rights of its outstanding capital stock or the         
character of its business; or make any acquisition of all or a substantial part 
of the assets, properties, securities or business of any other person; or       

(n) enter into any other Contract or other transaction that materially
increases the liabilities of the Company or that, by reason of its size or      
otherwise, is not in the ordinary course of business; take any action that would
impair the Company's ability to perform this Agreement or any of the            
transactions contemplated hereby; or authorize or enter into a Contract to take 
any of the actions referred to in paragraphs (a) through (n) above.             

Section 8.2 Acquisition Proposals.  Prior to the Closing, the Company 
agrees that neither the Company nor any of its Subsidiaries nor any of the      
respective officers, directors or employees of the Company or any of its        
Subsidiaries shall, and the Company shall direct and use its best efforts to    
cause its and its Subsidiaries, agents and representatives (including, without  
limitation, any investment banker, attorney or accountant retained by the       
Company or any of its Subsidiaries) not to, initiate, solicit or encourage,     
directly or indirectly, any inquiries or the making of any proposal or offer    
(including, without limitation, any proposal or offer to stockholders of the    
Company) with respect to a merger, consolidation, share exchange, business      
combination, purchase of all or a significant portion of the assets of the      
Company or any of its Subsidiaries, purchase of all or any portion of the       
capital stock of the Company or any of its Subsidiaries or securities           
convertible, exchangeable, exercisable or having any other rights to acquire any
of such capital stock, tender offer or exchange offer, or any reinsurance       
agreement outside the ordinary course of business (any such proposal or offer   
being hereinafter referred to as an "Acquisition Proposal" and any such         
transaction being referred to as an "Acquisition Transaction") or engage in any 
discussions or negotia-                                                         

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tions concerning, or provide any confidential information or data to, any person
relating to an Acquisition Proposal, or otherwise facilitate any effort or      
attempt to make or implement an Acquisition Proposal and the Company and its    
Subsidiaries shall not enter into any agreement or letter of intent with respect
to any Acquisition Transaction. Notwithstanding the foregoing, in the event the 
Company receives an unsolicited request for confidential information or data    
from a third party that has made a bona fide proposal (subject to due diligence 
and other usual conditions) to enter into an Acquisition Transaction, the       
Company may provide confidential information or data to such third party if the 
Board of Directors of the Company reasonably determines, after consulting with  
its outside legal counsel, (i) that such third party is capable (financially,   
legally and otherwise) of completing the transaction described in the           
Acquisition Proposal and (ii) that their fiduciary duty to stockholders requires
such. With respect to any activities, discussions or negotiations with any      
parties conducted on or prior to the date hereof with respect to any of the     
foregoing, the Company will immediately cease such and cause such to be         
terminated and will request the return of any confidential information provided 
to such parties. The Company will take the necessary steps to inform the        
individuals or entities referred to in the first sentence hereof of the         
obligations undertaken in this Section. The Company will notify the Investor    
promptly if any such inquiries or proposals are received by, any such           
information is requested from, or any such negotiations or discussions are      
sought to be initiated or continued with, the Company. The Company shall provide
the Investor with copies of any confidential information the Company provides to
third parties in connection with an Acquisition Proposal, and the Company shall 
provide the Investor with any information, including copies of any proposal,    
term sheet or any other document or information provided by a third party to the
Company in connection with an Acquisition Proposal. In the event the Investor   
provides the Company with an additional proposal following the decision of the  
Board of Directors of the Company, in the exercise of its fiduciary duty, to    
provide confidential information to any third party pursuant to the second      
sentence of this Section 8.2, the Company may disclose the Investor's additional
proposal to such third party.                                                   

 Section 8.3 Company Stockholder Action.  (a) As promptly as practicable
after the date hereof, the Company shall convene a meeting of holders of Common 
Stock at which holders of Common Stock will be asked to vote upon the approval  
of such holders for, among other matters, (i) an amendment to the Company's     
Articles of Incorporation to                                                    

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increase the number of authorized shares of Common Stock from 80,000,000 to     
110,000,000, (ii) an amendment to the Company's Articles of Incorporation to    
reflect various restrictions on the transferability of shares consistent with   
the terms set forth on Exhibit F hereto and (iii) this Agreement and            
consummation of the transactions contemplated hereby, including issuance of the 
Series A Preferred Shares and the Series A Warrants to the Investor (together,  
the "Proposals"). The Company shall promptly prepare and file with the SEC      
pursuant to the Securities Exchange Act of 1934 (the "Exchange Act") and the    
rules and regulations promulgated thereunder, and as promptly as practicable    
after receipt of comments from the SEC staff with respect thereto and any       
required or appropriate amendments thereto shall mail to stockholders of the    
Company, a proxy statement (such proxy statement, as amended or supplemented, is
herein referred to as the "Proxy Statement") in connection with the meeting of  
the Company's stockholders referred to above (the "Company Stockholders'        
Meeting"). The Proposals shall provide that none shall be approved unless all   
are approved. The Proxy Statement shall contain the recommendation of the Board 
of Directors of the Company that its stockholders approve the Proposals;        
provided, however, that such recommendation may be excluded, or if included, may
be withdrawn, in the event the Board of Directors determines that its fiduciary 
duty so requires. The Company shall notify the Investor promptly of the receipt 
by it of any comments from the SEC or its staff and of any request by the SEC   
for amendments or supplements to the Proxy Statement or for additional          
information, and will supply the Investor with copies of all correspondence     
between it and its representatives, on the one hand, and the SEC or the members 
of its staff or any other governmental officials, on the other hand, with       
respect to the Proxy Statement.                                                 

(b) The Proxy Statement, as of its date and at the date of the Company
Stockholders' Meeting, will not include an untrue statement of a material fact  
or omit to state a material fact required to be stated therein or necessary to  
make the statements therein, in light of the circumstances under which they will
be made, not misleading; provided, however, that the foregoing shall not apply  
to the extent that any such untrue statement of a material fact or omission to  
state a material fact was made by the Company in reliance upon and in conformity
with written information concerning the Investor furnished to the Company by the
Investor specifically for use in the Proxy Statement. The Proxy Statement shall 
not be filed, and no amendment or supplement to the Proxy Statement will be made
by the Company, without consultation with the Investor and its counsel.         

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(c) The Investor represents, warrants and covenants that (i) it will  
provide to the Company for inclusion in the Proxy Statement all information     
concerning the Investor reasonably necessary for the preparation of such proxy  
statement, and (ii) that such information will not contain any material         
misstatement of fact or omit to state any material fact necessary to make the   
statements, in light of circumstances under which they are made, not misleading.

     Section 8.4 Filings; Other Action.  (a) Subject to the terms and conditions
herein provided, the Company and the Investor shall take all reasonable steps   
necessary or appropriate, and shall use all commercially reasonable efforts, to:
(i) promptly make their respective filings and thereafter make any other        
required submissions under the Hart-Scott-Rodino Antitrust Improvements Act of  
1976 (the "HSR Act") with respect to the transactions contemplated by this      
Agreement; (ii) promptly make all required filings with or submissions to the   
Department necessary to obtain the approval of the Department of the            
transactions and acts contemplated by this Agreement; (iii) promptly make any   
other regulatory filings, notices or applications required in connection with   
the consummation of the transactions and acts contemplated by this Agreement;   
(iv) promptly seek the necessary consents of, or give any required notices to,  
the lenders under the Credit Agreement and other third parties with respect to  
the transactions contemplated by this Agreement; (v) use reasonable efforts     
promptly to cause the satisfaction of all conditions set forth in Articles IX   
and X of this Agreement, subject to the proviso set forth below; (vi) cooperate 
and consult reasonably with the other party in connection with, and keep the    
other party reasonably informed with respect to, the foregoing; and (vii) use   
all reasonable efforts to promptly take, or cause to be taken, all other actions
and do, or cause to be done, all other things necessary, proper or appropriate  
under applicable laws and regulations to consummate and make effective the      
transactions and acts contemplated by this Agreement as soon as practicable;    
provided, however, that the foregoing shall not be deemed to impose any         
requirement on the Investor or the Company to make any concession to the        
Department as a condition to the approval by the Department of all the          
transactions and acts contemplated by this Agreement that, in its sole judgment,
it considers inadvisable.                                                       

 (b) Without limiting the generality of paragraph (a) above, each of the
Company and the Investor will supply the other with all information concerning  
itself and its subsidiaries and their respective financial condition,           
properties, business or results of operations that is neces-                    

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sary or appropriate in seeking any necessary regulatory approval of the         
transactions and acts contemplated by this Agreement. Such information shall not
contain any material misstatement of fact or omit to state any material fact    
necessary to make the statements, in light of the circumstances under which they
were made, not misleading. Each of the Investor and the Company shall advise the
other party prior to the Closing if any of the information supplied to the other
party hereunder that underlies any representation made to any regulatory        
authority with respect to the first party and its Subsidiaries shall have       
changed, or if any such information was inaccurate, to an extent that could     
reasonably be expected to result, upon disclosure of accurate revised           
information to the relevant regulatory authority, in the withdrawal by such     
regulatory authority of its approval of the transactions contemplated by this   
Agreement.                                                                      

  (c) Each of the Company and the Investor shall use best efforts to agree
upon amendments to the Company's By-laws necessary to reflect the transactions  
and acts contemplated by this Agreement as soon as practicable, and the Board of
Directors of the Company shall adopt such amendments effective as of (and       
conditioned upon) the Closing.                                                  

  Section 8.5 Notification of Certain Matters.  Prior to the Closing Date,
the Company shall give prompt notice to the Investor of: (i) any notice of, or  
other communication relating to, a default or event that, with notice or lapse  
of time or both, would become a default, received by the Company or any of its  
Subsidiaries subsequent to the date of this Agreement and prior to the Closing  
Date, under any Contract material to the financial condition, properties,       
businesses, or results of operations of the Company and its Subsidiaries taken  
as a whole (including the Credit Agreement), or to the interest of stockholders 
in the Company, to which the Company or any of its Subsidiaries is a party or is
subject, or any circumstances of which the Company is aware that are reasonably 
likely to result in such a default or event; (ii) the occurrence of any Material
Adverse Effect; (iii) any breach by the Company of any of its representations,  
warranties, covenants or agreements contained in this Agreement or any          
circumstance that is reasonably likely to result in any such representation or  
warranty being materially untrue, or any such covenant or agreement not being   
performed or complied with, or any condition to closing not being fulfilled as  
of the Closing Date; or (iv) the Company's obtaining of knowledge that the      
Department will take any action with respect to the Company or any Subsidiary   
before or after the Closing which would be                                      

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inconsistent with this Agreement and the arrangements contemplated hereby or    
which could have a Material Adverse Effect. Each of the Company and the Investor
shall give prompt notice to the other party of any notice or other communication
from any third party alleging that the consent of such third party is or may be 
required in connection with the transactions or acts contemplated by this       
Agreement.                                                                      

   Section 8.6 Publicity.  Prior to the Closing Date, except (i) as required
or expressly permitted by this Agreement or otherwise agreed between the        
parties, (ii) as may be necessary in order to give the notices to obtain the    
regulatory approvals required hereunder, (iii) as necessary to consult with     
attorneys, accountants, employees, or other advisors retained in connection with
the transactions contemplated hereby, (iv) as required by court order or        
otherwise mandated by law or stock exchange requirements, or by Contract to     
which the Company or the Investor or any of their respective Subsidiaries is a  
party, or (v) in connection with disclosure documents prepared by the Company,  
the Investor or a Subsidiary of either, neither party shall issue any news      
release or other public notice or communication or otherwise make any disclosure
to third parties concerning this Agreement or the transactions contemplated     
hereby without the prior consent of the other party, such consent not to be     
unreasonably withheld. Even in cases where such prior consent is not required   
each party will give prior notice to the other of, and consult with the other   
(to the extent practicable in the circumstances) regarding, the contents of such
releases.                                                                       

   Section 8.7 Access.  Upon reasonable notice, the Company shall (and shall
cause each of its Subsidiaries to) afford the Investor's officers, employees,   
counsel, accountants and other authorized representatives ("Representatives")   
access, during normal business hours both before and after the Closing Date, to 
its properties, books, Contracts and records and personnel and advisers (who    
will be instructed by the Company to cooperate) and, the Company shall (and     
shall cause each of its Subsidiaries to) furnish promptly to the Investor all   
information concerning its business, properties and personnel as the Investor or
its Representatives may reasonably request, provided that no investigation      
pursuant to this Section 8.7 shall affect or be deemed to modify any            
representation or warranty made by the Company. The Investor's right of access  
under this Section 8.7 shall terminate when it owns no Restricted Securities.   

    Section 8.8 Reservation of Shares.  The Company shall at all times reserve
and keep available, out of its authorized and unissued stock, solely for the    
purpose of                                                                      

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effecting the conversion of Series A Preferred Shares and the exercise of Series
A Warrants, such number of shares of its Common Stock free of preemptive rights 
as shall from time to time be sufficient to effect the conversion of all Series 
A Preferred Shares and the exercise of all Series A Warrants from time to time. 

   Section 8.9  Satisfactory Financing Plan.  In the event the Company needs
to obtain additional capital following any additional capital contribution      
pursuant to Section 4.3 hereof or additional quota share arrangements the       
subject of Section 5.1(b) hereof, the Company shall develop a capital financing 
plan which is reasonably acceptable to the Investor.                            

   Section 8.10  Issuance of Additional Shares of Common Stock.  The Company
may not issue additional shares of Common Stock or of another class of          
securities similar thereto, or any securities, options, warrants or similar     
rights convertible, exercisable, exchangeable or having other rights to acquire 
any such shares; provided, however, that the Company may issue a customary and  
appropriate number of shares of Common Stock pursuant to employee stock option  
plans or employee benefit plans approved by the Board of Directors; and         
provided, further, however, following the end of the thirty-eighth (38th) month 
following the Closing Date (i.e., the period referred to in Section 1(a) of the 
Transfer Restrictions attached as Exhibit F hereto designed in light of Section 
382 of the Internal Revenue Code, as amended), the Company may issue and sell   
shares of Common Stock in a fully distributed public offering, so long as (i)   
the Company first provides the Investor prior notice of the Company's intent to 
make such an offering and (ii) the Company provides the Investor a prior        
opportunity, at the Investor's election, either (x) to make an offer to purchase
the outstanding shares of Common Stock of the Company (with the result that the 
public offering not proceed) or (y) to preemptively participate in such Common  
Stock offering up to the Investor's fully converted/exercised interest in the   
Common Stock of the Company at the per share price received by the Company      
(i.e., without underwriters' discount) in such public offering. For purposes of 
the foregoing, the Investor's fully converted/exercised interest in the Common  
Stock shall equal the quotient of (I) the number of shares of Common Stock      
beneficially owned or obtainable by the Investor and its affiliates by virtue of
ownership of the Series A Preferred Shares (including any additional shares     
actually issued by virtue of the provision permitting payment of dividends in   
kind on the Series A Preferred Shares) and the Series A Warrants and conversion 
or exercise thereof divided by (II) the sum of (A) the total number of          

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shares of Common Stock of the Company then outstanding plus (B) the number of   
shares referred to in (I).                                                      

ARTICLE IX

CONDITIONS TO THE OBLIGATIONS OF THE INVESTOR 

     Section 9.1  Conditions to the Obligations of the Investor.  The obligation
of the Investor to purchase the Series A Preferred Shares and Series A Warrants 
at the Closing is subject to the fulfillment of the following conditions        
precedent, or the waiver thereof by the Investor, on or before the Closing Date:

  (a) Accuracy of Representations and Warranties.  The representations and
warranties of the Company contained herein shall be true and correct in all     
material respects as of the Closing Date as though made on and as of the Closing
Date.                                                                           

     (b) Performance.  The Company and its Subsidiaries shall have performed and
complied in all material respects with all agreements and conditions contained  
in this Agreement required to be performed or complied with by the Company or   
its Subsidiaries prior to or at the Closing.                                    

  (c) Absence of Order.  There shall not have been issued and be in effect
(whether temporary, preliminary or permanent) any order, decree, judgment or    
injunction (collectively, an "Order") of any court or tribunal of competent     
jurisdiction which prohibits the consummation of the transactions contemplated  
in this Agreement or imposes any material restriction on Investor or the Company
in connection with the transactions contemplated by this Agreement or with      
respect to the business operations of the Company either prior to or subsequent 
to the Closing Date;                                                            

  (d) No Legal Action.  No action, suit, investigation or other proceeding
relating to the transactions contemplated hereby shall have been instituted or  
threatened before any Governmental Entity which the Investor determines in its  
reasonable discretion presents a substantial risk of the restraint or           
prohibition of the transactions contemplated hereby or the obtaining of material
damages or other material relief in connection therewith.                       

    (e) Stockholders' Approval.  The Proposals shall have been approved by the
requisite vote of the Company's stockholders.                                   

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          (f) Department Approval.  The Department shall have approved in a form
   that is satisfactory to the Investor in good faith in its sole discretion
 all transactions and acts contemplated by this Agreement (including the
exercise of conversion, exercise and other rights under the Series A  
    Preferred Stock and Series A Warrants). In addition, the Investor shall be
    satisfied, in good faith in its sole discretion, as to the status with the
     Department of any issues arising out of or related to the Rollback Judgment
 or the Company's obligations relating to Proposition 103, the Company's
  solvency plan, the rates applicable to the Company's insurance products,
    the arrangements relating to the Credit Agreement or the dividends payable
by the Insurance Subsidiaries;                                        

(g) HSR Act.  Any waiting period (and any extension thereof)
 applicable to the consummation of the transactions contemplated by this
Agreement (other than the transactions contemplated by the Master JV  
Agreement) under the HSR Act shall have expired or been terminated.   

       (h) Lenders' Consent.  The Company and the lenders under the Credit
Agreement shall have entered into a definitive amendment to the Credit
Agreement, effective upon consummation of this Agreement, amending the
     Credit Agreement such that this Agreement and the transactions contemplated
    thereby are permitted under the Credit Agreement as so amended and whereby
no default, or event which could result in a default, exists under the
Credit Agreement as so amended.                                       

        (i) Compliance Certificate.  The Company shall have delivered to the
 Investor a certificate, executed by the Chief Executive Officer and the
President of the Company, dated the Closing Date, certifying as to the
  fulfillment of the conditions specified in subsections 9.1(a), (b), (e),
(h) and (j).                                                          

        (j) Other Required Consents.  The Company shall have received, made,
or obtained all required consents, approvals, authorizations, orders, 
  notices, filings, registrations or qualifications of, to or with (x) any
other Governmental Entity having jurisdiction over the Company, its   
business or its properties, and (y) any party to a Contract or other  
     agreement with the Company or its Subsidiaries, required in connection with
    the transactions and acts contemplated by this Agreement, except where the
failure to do so does not have a Material Adverse Effect or a material
    adverse effect on the financial condition, properties, business or results
 of operations of the Investor and its subsidiaries taken as a whole and
does not materially and                                               

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adversely interfere with the transactions and acts contemplated by this         
Agreement.                                                                      

 (k) Effectiveness of Consents.  All consents, registrations, approvals,
permits or authorizations of any Governmental Entity required in connection with
the transactions and acts contemplated by this Agreement shall be in full force 
and effect, and no circumstances shall have changed or exist that would, if     
known to any Governmental Entity, be reasonably likely to result in the         
withdrawal of its consent, registration, approval, permit or authorization.     

 (l) Opinion of Counsel.  The Investor shall have received (i) a written
opinion from John Bollington, Esq., General Counsel of the Company, dated the   
Closing Date, addressed to the Investor, in a form reasonably acceptable to the 
Investor as to the matters attached hereto as Exhibit 9.1(1)(i), and (ii) a     
written opinion from Gibson, Dunn & Crutcher, special counsel for the Company,  
dated the Closing Date, addressed to the Investor, in a form reasonably         
acceptable to the Investor as to the matters attached hereto as Exhibit         
9.1(1)(ii).                                                                     

(m) Material Change in the Law.  There shall not have been any newly  
adopted or proposed legislation, regulation or rule that would have a Material  
Adverse Effect.                                                                 

  (n) Auditor Letter.  The Company shall provide a letter to Investor from
the Company's auditors stating that, following their review of the Company's    
books and records completed not later than five days prior to the Closing Date, 
they confirm that there have been no material increases or decreases in         
specified balance sheet and income statement items, as mutually agreed, from the
date of the last financial statements provided the Investor.                    

 (o) Opinion of Actuary.  The Company shall have delivered an opinion of
actuary executed by the Chief Actuary of the Company, as of the most recently   
completed monthly period for which actuarial information is available prior to  
the Closing Date, opining that as of such date the reserves for loss and loss   
adjustment expense reflected on the balance sheet of the Company and its        
Subsidiaries have been established in conformity with generally accepted        
actuarial principles and practices consistently applied, that such reserves were
established in conformity with the requirements of the Department and that such 
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expense obligations of the Company under the terms of its policies and          
agreements.                                                                     

    (p) Other Certificates.  The Company shall have furnished to Investor such
executed and conformed copies of such other opinions and certificates, letters  
and documents as Investor may reasonably request and as are customary for       
transactions such as those contemplated by this Agreement.                      

    (q) No Material Adverse Effect.  Since the date of this Agreement, nothing
has occurred which has had, or is reasonably likely to have, a material adverse 
effect on the financial condition, regulatory condition, capital, properties,   
business, results of operations or prospects of the Company or its Subsidiaries 
taken as a whole, in each case considered on either a SAP or GAAP basis (it     
being understood that additional incurred losses and allocated loss adjustment  
expenses arising out of the Northridge Earthquake shall not be taken into       
account in determining the foregoing).                                          

   (r) Company Stock Ownership.  No person or Group shall have (x) acquired,
or commenced a tender offer to acquire, 33 1/3% or more of the Common Stock or  
(y) initiated or announced a proxy solicitation of the holders of Common Stock  
with the intent of removing one or more of the current members of the Company's 
board of directors or senior management or alter management of the Company.     

ARTICLE X 

CONDITIONS TO THE OBLIGATIONS OF THE COMPANY

     Section 10.1  Conditions to the Obligations of the Company.  The obligation
of the Company to issue and sell the Series A Preferred Shares and Series A     
Warrants at the Closing is subject to the fulfillment of the following          
conditions, or the waiver by the Company on or before the Closing Date:         

  (a) Accuracy of Representations and Warranties.  The representations and
warranties of the Investor contained herein shall be true and correct in all    
material respects as of the Closing Date except when made only as of a specified
earlier date.                                                                   

 (b) Performance.  The Investor shall have performed and complied in all
material respects with all agreements and conditions contained in this Agreement
required to                                                                     

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be performed or complied with by the Investor prior to or at the Closing.       

  (c) Absence of Order.  There shall not have been issued and be in effect
(whether temporary, preliminary or permanent) an Order of any court or tribunal 
of competent jurisdiction which prohibits the consummation of the transactions  
contemplated in this Agreement or imposes any material restriction on the       
Company in connection with the transactions contemplated by this Agreement or   
with respect to the business operations of the Company either prior to or       
subsequent to the Closing Date;                                                 

  (d) No Legal Action.  No action, suit, investigation or other proceeding
relating to the transactions contemplated hereby shall have been instituted or  
threatened before any Governmental Entity which the Company determines in its   
reasonable discretion presents a substantial risk of the restraint or           
prohibition of the transactions contemplated hereby or the obtaining of material
damages or other material relief in connection therewith.                       

    (e) Stockholders' Approval.  The Proposals shall have been approved by the
requisite votes of the Company's stockholders.                                  

(f) Department Approval.  The Department shall have approved all      
transactions and acts contemplated by this Agreement.                           

    (g) HSR Act.  Any waiting period (and any extension thereof) applicable to
the consummation of the transactions contemplated by this Agreement (other than 
the transactions contemplated by the Master JV Agreement) under the HSR Act     
shall have expired or been terminated.                                          

(h) Lender's Consent.  The Company and the lenders under the Credit   
Agreement shall have entered into a definitive amendment to the Credit          
Agreement, effective upon consummation of this Agreement, amending the Credit   
Agreement such that this Agreement and the transactions contemplated thereby are
permitted under the Credit Agreement as so amended and whereby no default, or   
event which could result in a default, exists under the Credit Agreement as so  
amended.                                                                        

 (i) Other Required Consents.  The Company shall have received, made, or
obtained all required consents, approvals, authorizations, orders, notices,     
filings, registrations or qualifications of, to or with (x) any other           
Governmental Entity having jurisdiction over the Company,                       

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its business or its properties, and (y) any party to a Contract or other        
agreement with the Company or its Subsidiaries, required in connection with the 
transactions and acts contemplated by this Agreement, except where the failure  
to do so does not have a Material Adverse Effect.                               

 (j) Effectiveness of Consents.  All consents, registrations, approvals,
permits or authorizations of any Governmental Entity required in connection with
the transactions and acts contemplated by this Agreement shall be in full force 
and effect, and no circumstances shall have changed or exist that would, if     
known to any Governmental Entity, be reasonably likely to result in the         
withdrawal of its consent, registration, approval, permit or authorization.     

(k) Opinion of Counsel.  The Company shall have received (i) a written
opinion of Wayland M. Mead, Esq., Acting General Counsel of the Investor, dated 
the Closing Date, addressed to the Company, in a form reasonably acceptable to  
the Investor as to the matters attached hereto as Exhibit 10.1(k)(i), and (ii) a
written opinion from Sullivan & Cromwell, special counsel to the Investor, dated
the Closing Date, addressed to the Company, in a form reasonably acceptable to  
the Investor as to the matters attached hereto as Exhibit 10.1(k)(ii).          

(l) Compliance Certificate.  The Investor shall have delivered to the 
Company a certificate, executed by a senior officer of the Investor, dated the  
Closing Date, certifying as to the fulfillment of the conditions specified in   
subsections 10.1(a) and 10.1(b).                                                

ARTICLE XI

MISCELLANEOUS 

Section 11.1  Termination.                                            

    (a) Termination Period.  This Agreement may be terminated and the purchase
contemplated hereby may be abandoned at any time prior to the Closing:          

          (i)  By the mutual written consent of the Company and the Investor; or

       (ii) By either the Investor or the Company if (x) the Closing shall
not have occurred on or prior to April 1, 1995, or (y) at a meeting duly    
convened therefor or at any adjournment thereof the approvals of the        

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Company's stockholders referred to in Section 8.3 shall not have been 
 obtained, provided that the party seeking to terminate pursuant to this
clause (ii) shall not be in material breach of this Agreement; or     

    (iii) By the Investor, if (w) the Department formally shall have
declined to approve (by order or other official determination, after  
  pursuit by the Investor of all practical remedies before the Department)
   the transactions and acts contemplated by this Agreement in a manner that
   is satisfactory to the Investor in good faith in its sole discretion, (x)
the Company shall have breached in any material respect any of its    
    representations or warranties, or the covenants or agreements contained in
     this Agreement, which breach is not cured within ten days after notice from
the Investor to the Company specifying such breach, (y) the Board of  
Directors of the Company shall have withdrawn or modified in a manner 
    adverse to the Investor its approval or recommendation of the transactions
     contemplated hereby, or the Board of Directors of the Company, upon request
     by the Investor, shall fail to reaffirm such approval or recommendation, or
    shall have resolved to do any of the foregoing or (z) prior to the mailing
     of the Proxy Statement, the Company has not resolved its outstanding issues
     with its Bank Lenders or terms that are satisfactory to the Investor in its
reasonable discretion; or                                             

   (iv)  By the Company, (w) if the Department formally shall have
declined to approve (by order or other official determination, after  
     pursuit by the Company of all practical remedies before the Department) the
    transactions and acts contemplated by the Agreement or (x) if the Investor
   shall have breached in any material respect any of the representations or
    warranties, or covenants or agreements, contained in this Agreement, which
  breach is not cured within ten days after notice from the Company to the
Investor specifying such breach;                                      

     (b)   Effect of Termination.  In the event of termination of this
Agreement as provided in subsection (a), this Agreement shall forthwith become  
null and void and there shall be no liability or further obligation on the part 
of any party hereto or any of its respective directors, officers, employees or  
representatives except that nothing herein shall relieve any party from         
liability for any prior willful breach hereof and unless this Agreement is      
properly terminated by the Company pursuant to Section 11.1(a)(iv) above, the   
Company shall promptly pay the Investor the                                     

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amount of $1.5 million in cash to reimburse the Investor for the fees, expenses 
and other costs associated with this Agreement and the transactions contemplated
hereby.                                                                         

 Section 11.2 Successors and Assigns: No Third Party Beneficiaries.  The
provisions of this Agreement shall be binding upon, and inure to the benefit of,
the respective successors and assigns of the parties hereto, but (except as     
expressly provided in this Agreement) neither this Agreement nor any of the     
rights, interests or obligations hereunder shall be assigned (a) by the Company 
under any circumstances or (b) by the Investor without the prior written consent
of the Company, except to direct or indirect wholly-owned subsidiaries of the   
Investor, provided that the Investor shall remain liable for the performance by 
any such subsidiaries of its obligations pursuant to this Agreement. In         
addition, prior or subsequent to the Closing Date, the Investor shall have the  
right to designate American Home Assurance Company and New Hampshire Insurance  
Company (two wholly-owned subsidiaries), in such proportion as the Investor     
shall determine in its sole discretion, to acquire and hold title to all or part
of the Series A Preferred Shares, Series A Warrants or Common Shares issued     
directly or indirectly upon the conversion thereof and to assume all rights and 
obligations of the Investor under this Agreement; upon such subsidiaries'       
execution and delivery of an instrument reasonably acceptable to the Company    
whereby such subsidiaries assume such rights and obligations, the Investor shall
be released therefrom. Nothing in this Agreement, express or implied, is        
intended to confer upon any person other than the parties hereto and their      
respective permitted successors and assigns any rights, remedies or obligations 
under or by reason of this Agreement.                                           

Section 11.3 Survival of Representations and Warranties.  All         
representations and warranties included in this Agreement shall survive the     
Closing and the issuance and sale of the Series A Preferred Shares and Series A 
Warrants for a period of two years from the Closing Date; provided that         
representations and warranties applicable to federal, state, local and other    
taxes shall survive until the applicable statute of limitations has expired.    

Section 11.4 Entire Agreement.  This Agreement and all exhibits and   
schedules hereto, taken together with the Stock Option Agreement, embodies the  
entire agreement and understanding between the parties hereto with respect to   
the subject matter hereof and thereof and supersede all prior agreements and    
understandings relating to such subject matter. The listing of an item on any   
schedule shall not be                                                           

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taken to indicate that it is reasonably likely to have a Material Adverse       
Effect.                                                                         

   Section 11.5 Modification or Amendment.  At any time prior to the Closing
Date or thereafter, the parties hereto may modify or amend this Agreement, by   
written agreement executed and delivered by duly authorized officers of the     
respective parties.                                                             

     Section 11.6 Waiver.  The conditions to each of the parties' obligations to
consummate the transactions contemplated hereby and to perform the acts         
contemplated on its part hereunder are for the sole benefit of such party and   
may be waived by such party in whole or in part to the extent permitted by      
applicable law. No failure or delay by any party in insisting upon the strict   
performance of any covenant, duty, agreement or condition of this Agreement or  
in exercising any right or remedy consequent upon breach thereof shall          
constitute a waiver of any such breach or of any other covenant, duty, agreement
or condition, any such waiver being made only by a written instrument executed  
and delivered by the waiving party.                                             

    Section 11.7 Governing Law.  This Agreement will be construed and enforced
in accordance with, and governed by, the laws of the State of California.       

  Section 11.8 Consent to Jurisdiction; Service of Process; Waiver of Jury
Trial.  (a) The parties to this Agreement hereby irrevocably submit to the      
exclusive jurisdiction of any Federal court located in Los Angeles, California  
over any suit, action or proceeding arising out of or relating to this          
Agreement. The parties hereby irrevocably waive, to the fullest extent permitted
by applicable law, any objection which they may now or hereafter have to the    
laying of venue of any such suit, action or proceeding brought in such court.   
The parties agree that, to the fullest extent permitted by applicable law, a    
final and non-appealable judgment in any such suit, action, or proceeding       
brought in such court shall be conclusive and binding upon the parties.         

  (b) The parties hereby irrevocably waive any rights they may have in any
court, state or federal, to a trial by jury in any case of any type that relates
to or arises out of this Agreement or the transactions contemplated herein.     

     Section 11.9 Severability.  Should any part of this Agreement, the Series A
Certificate of Determination, the Series A Warrants, the Quota Share Agreements 
or the                                                                          

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Registration Rights Agreement for any reason be declared invalid, such decision 
shall not affect the validity of any remaining portion, which remaining portion 
shall remain in full force and effect as if this Agreement, any such Certificate
of Determination, the Series A Warrants, the Quota Share Agreements or the      
Registration Rights Agreement had been executed with the invalid portion thereof
eliminated, so long as the economic or legal substance of the transactions      
contemplated hereby is not affected in a manner adverse to any party. Upon any  
such determination, the parties shall negotiate in good faith in an effort to   
agree to a suitable and equitable substitute provision to effect the original   
intent of the parties.                                                          

Section 11.10 Specific Performance.  Damages in the event of breach of
certain provisions of this Agreement by a party hereto may be difficult or      
impossible to ascertain, and it is therefore agreed that each such person, in   
addition to and without limiting any other remedy or right it may have, will    
have the right to an injunction or other equitable relief in any court of       
competent jurisdiction (subject to Section 11.8) enjoining any such breach and  
enforcing specifically the terms and provisions hereof, and the parties hereby  
waive any and all defenses they may have on the ground of lack of jurisdiction  
or competence of the court to grant such an injunction or other equitable       
relief.                                                                         

     Section 11.11 Captions.  The Article, Section and paragraph captions herein
and table of contents hereto are for convenience of reference only, do not      
constitute part of this Agreement and shall not be deemed to limit or otherwise 
affect any of the provisions hereof.                                            

 Section 11.12 Counterparts.  For the convenience of the parties hereto,
this Agreement may be executed by facsimile and in any number of counterparts,  
each such counterpart being deemed to be an original instrument, and all such   
counterparts shall together constitute the same agreement.                      

    Section 11.13 Notices.  Any notice, request, instruction or other document
to be given hereunder by any party to the other shall be in writing and shall be
deemed to have been duly given on the date of delivery (i) if delivered         
personally or by facsimile transmission, (ii) if delivered by Federal Express or
other next-day courier service, or (iii) if delivered by registered or certified
mail, return receipt requested, postage prepaid. All notices hereunder shall be 
delivered as set forth below, or to such other person or at such other address  
as may be designated in writing by the party to receive such notice.            

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(a) If to the Investor:                                               

American International Group, Inc.                        
70 Pine Street                                            
New York, New York 10270                                  
Attention: General Counsel                                
Facsimile: (212) 785-1584                                 

with a copy to:                                               

Sullivan & Cromwell                                       
125 Broad Street                                          
New York, New York 10004                                  
Attention: Andrew S. Rowen, Esq.                          
Facsimile: (212) 558-3588                                 

(b) If to the Company:                                                

20th Century Industries                                   
6301 Owensmouth Avenue                                    
Woodland Hills, CA 91367                                  
Attention: Chief Executive Officer                        
General Counsel                     
Facsimile: (818) 715-6223                                 

with a copy to:                                               

Gibson, Dunn & Crutcher                                   
333 South Grand Avenue                                    
46th Floor                                                
Los Angeles CA 90071-3197                                 
Attention: Peter F. Ziegler                               
Jonathan K. Layne                   
Facsimile: (213) 229-7520                                 

     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.                                                
                               20TH CENTURY INDUSTRIES

                              By: /s/ Neil H. Ashley
                                   -------------------
                                    Name: Neil H. Ashley
                          Title: CEO

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                                      AMERICAN INTERNATIONAL GROUP, INC.

                             By: /s/ Robert M. Sandler
                                          ------------------------------
                                   Name: Robert M. Sandler
                      Title: SVP

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SCHEDULE 2.1 (A)

SUBSIDIARIES OF 20TH CENTURY INDUSTRIES 

1. 20th Century Insurance Company, a California Corporation.          

2. 21st Century Casualty Company, a California Corporation.           

3. 21st Century Industries, a California Corporation.                 

4. 21st Century Insurance Company, a California Corporation.          

5. 21st Century Indemnity Company, a California Corporation.          

  All of the above are duly organized corporations, validly existing under
the laws of California. Only 20th Century Industries, 20th Century Insurance    
Company, and 21st Century Casualty Company are registered with the State of     
California Insurance Commissioner pursuant to the Insurance Holding Company     
System Regulatory Act, California Insurance Code, Section 1215.4.               

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SCHEDULE 2.1(B) 

RESTRICTIONS ON AUTHORIZED CAPITAL

2.1 (B)(i)

                                                                [Download Table]

        PLAN                     RESERVED COMMON STOCK
        ----                     ---------------------
                                                      
Restricted Shares Plan                  334,409       

       401(k)                           173,688       
                                        =======       

                                        508,097       


2.1 (B)(ii) 

The stock of 20th Century Insurance Company and 21st Century Casualty Company   
are pledged under the Credit Agreement, dated June 30, 1994, between 20th       
Century Industries and various lenders.                                         

The California Department of Insurance authorized the stock pledges to lenders. 
Any subsequent efforts by the lenders to exercise control over 20th Century     
Insurance Company or 21st Century Casualty Company requires the Department's    
approval. The stock of 21st Century Casualty Company is restricted whereby it   
cannot be transferred without prior written consent of the California Insurance 
Commissioner.                                                                   

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SCHEDULE 2.1 (E)

ORDERS AND AGREEMENTS OF OR WITH  

THE CALIFORNIA DEPARTMENT OF INSURANCE  

    1.         The California Department of Insurance, on May 8, 1992, ordered
        the rate rollback, under Proposition 103, amounting to approximately
$78,300,000 plus 10% simple interest since May 8, 1989.     

2.         The California Department of Insurance, on June 9, 1994,   
    ordered 20th Century Insurance Company and 21st Century Casualty
       Company to cease and desist from writing earthquake coverage and to
     withdraw, as agreed, from the homeowners and condominium lines of
business.                                                   

3.         Effective July 1, 1994, 20th Century Insurance Company and 
21st Century Casualty Company entered into an inter-company 
 reinsurance agreement in which 21st Century ceded 100% of all
 policies to 20th Century Insurance Company. The Department of
       Insurance approved the transaction and reserves the right to review
any material changes.                                       

   4.         The California Department of Insurance, on September 14, 1994,
        approved, under stated conditions, a 6% rate increase for automobile
insurance, effective October 4, 1994.                       

5.         Correspondence from the California Department of Insurance,
   dated June 9, 1994, confirmed a 17% rate increase for homeowner
 insurance, effective August 1, 1994, and the maintenance of a
$250,000,000 surplus.                                       

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SCHEDULE 2.1 (H)

CONSENTS: NO VIOLATIONS 

                                                                [Download Table]


                                                             

SECTION               BREACH, VIOLATION, DEFAULT ACCELERATION
                      OR EVENT TRIGGERING A MATERIAL         
                      OBLIGATION                             

*2.1(h)(ii)(2)       Supplemental Executive Retirement Plan  

                     Restricted Shares Plan                  

 2.1(h)(ii)(3)       Bank Credit Agreement                   

 2.1(h)(ii)(4)       None                                    

* See Schedule 2.1(R) for pertinent sections of Plans.                          

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SCHEDULE 2.1 (J)

REINSURANCE 

LIST IS ATTACHED

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                                                           SCHEDULE 2.1 (J) LIST

20TH CENTURY INSURANCE COMPANY/21ST CENTURY CASUALTY

SUMMARY OF REINSURANCE PROGRAM

AS OF 09/30/94

                                                        [Enlarge/Download Table]

TYPE OF CONTRACT/COVERAGE      REINSURER'S NAME                TERMS                  
-------------------------      ----------------                -----                  
                                                                                      
PROPERTY LINES:                                                                       
---------------                                                                       
1. First layer catastrophe     Various domestic reinsurers     $16,680,000 Net Annual 
   excess of loss               (17.02500%)                     Prem 7/1/84 -- 8/20/95
                               Various foreign reinsurers                             
                                (63.6050%)                                            
                               Various London market                                  
                                reinsurers (8.6050%)                                  
                               Lloyd's of London Underwriters                         
                                (12.6750%)                                            

2. Second layer catastrophe    Various domestic reinsurers     $11,400,000 Net Annual 
   excess of loss               (14.90920%)                     Prem 7/1/94 -- 6/30/96
                               Various foreign reinsurers                             
                                (60.10000%)                                           
                               Various London market                                  
                                reinsurers (2.9684%)                                  
                               Lloyd's of London Underwriters                         
                                (17.0224%)                                            

3. Super Property Catastrophe  National Indemnity Company      $21,750,000 Premium    
   excess of loss                                               8/18/94 -- 2/18/95    

4. Excess of loss              General Reinsurance Corp.       Continuous             
   (20th only)                                                                        

CASUALTY LINES:                                                                       
---------------                                                                       
5. Quota share --              Various admitted Companies                             
   Personal excess              (15.0%)                                               
   liability (20th only)       Scor Reinsurance Company                               
                                (15.0%)                                               
                               Underwriters Reinsurance                               
                                Company (30.0%)                Continuous             

OTHER:                                                                                
------                                                                                
6. 100% Quota share            20th Century Insurance          7/1/94 to              
   21st Casualty to            Company                         Unlimited Duration     
   20th Century                                                                       

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SCHEDULE 2.1 (K)                                                        RESERVES
--------------------------------------------------------------------------------

SCHEDULE 2.1 (K)
RESERVES

Loss and loss expense relating to the Northridge Earthquake                     

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SCHEDULE 2.1 (N)                              ABSENCE OF UNDISCLOSED LIABILITIES

Subsequent to the June 30, 1994 balance sheet date, the Company has   

incurred an additional liability of $88.9 million related to the Proposition 103

refund order upheld by the California Supreme Court on August 18, 1994. This    

brings the total liability related to Proposition 103 to $120.8 million, to be  

fully recognized at the September 30, 1994 balance sheet date.                  

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SCHEDULE 2.1 (P)

LITIGATION AND LIABILITIES

NONE

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SCHEDULE 2.1 (R)

COMPENSATION AND BENEFIT PLANS

List and Description of Plans:                                                  

 1.      Pension Plan -- a non contributory defined benefit plan for all
regular employees.                                    

 2.      Savings and Security Plan -- a 401(k) deferred compensation and
         401(a) profit sharing plan for employees who have completed one
         year of service with the Company and who choose to participate.

   3.      Supplemental Executive Retirement Plan -- a non-qualified defined
     benefit plan for employees nominated by the Chief Executive
Officer and approved by the Board of Directors.       

   4.      Restricted Shares Plan -- An incentive plan for key employees (as
          designated by the Key Employee Incentive Committee) which grants
    restricted shares of the Company's stock to the designated
         employee. The stock vests at 20 per cent per year over a 5-year
period.                                               

5.      Executive Medical Plan -- A plan for key employees for        
          non-reimbursed medical and health-related expenses, to a maximum
reimbursement of $5,000 per year.                     

Change of Control Provisions:                                                   

                                                        [Enlarge/Download Table]
                                                                                      
Exhibit A --  Pension Plan, Article XIV, Merger of Company: Merger of Plan.           

Exhibit B --  Savings and Security Plan 401(k), Article XII, Merger of Company; Merger
              of Plan.                                                                

Exhibit C --  Supplemental Executive Retirement Plan, 2. Definitions, (d) "Change in  
              Control" and 4. Change in Control.                                      

Exhibit D --  SERP Trust Agreement, Section 12, Amendment or Termination, and Section 
              15, Binding Effect.                                                     

Exhibit E --  Restricted Shares Plan Agreement, Paragraph 16.                         

Retiree Health and Life Benefits under any other Plan:                          

The Company has agreed to pay Mr. Louis W. Foster, who retired on     
   January 1, 1994, an annual retirement benefit of $500,000 for the shorter
   of the following two periods: (I) 15 years, or (II) the length of life of
     Mr. Foster, or his wife, if she survives him. If Mr. Foster predeceases his
wife, certain death benefits payable to her from insurance policies   
maintained by the Company will offset some or all of the retirement   
benefits payable to her under the terms of this agreement.            

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Pension Plan

benefits, (2) reduces or eliminates an early retirement benefit or    
     retirement-type subsidy, or (3) eliminates an optional form of benefit with
    respect to benefits attributable to service performed before the amendment
 became effective. However, the restriction on affecting retirement-type
 subsidies applies only with respect to Participants who satisfy (either
    before or after the amendment) the preamendment conditions for entitlement
     to the subsidy. For purposes of this provision, a "retirement-type subsidy"
   shall have the meaning ascribed to such terms by Section 411(d)(6) of the
Code.                                                                 

     (d) No amendment shall adversely change the vesting schedule with
   respect to the future accrual of benefits for any Participant unless each
    Participant with five (5) or more one-year Periods of Service is permitted
to elect to have the vesting schedule which was in effect before the  
amendment used to determine his/her vested benefit.                   

13.2 Retroactive Amendments.  Notwithstanding any provisions of this  
Article XIII to the contrary, to the extent allowable under applicable law the  
Plan may be amended prospectively or retroactively (as provided in Section      
401(b) of the Code as amended by Section 1023 of ERISA) to make the Plan conform
to any provision of ERISA, the Code provisions dealing with employees' trusts,  
or any regulation under either of such statutes.                                

ARTICLE XIV 

MERGER OF COMPANY: MERGER OF PLAN 

 14.1 Effect of Reorganization or Transfer of Assets.  In the event of a
consolidation, merger, sale, liquidation, or other transfer of the operating    
assets of the Company to any other company, the ultimate successor or successors
to the business of the Company shall automatically be deemed to have elected to 
continue this Plan in full force and effect in the same manner as if the Plan   
had been adopted by resolution of its board of directors unless the             
successor(s), by resolution of its board of directors, shall elect not to so    
continue this Plan in effect, in which case the Plan shall automatically be     
deemed terminated as of the applicable effective date set forth in the board    
resolution.                                                                     

14.2 Merger Restriction.  Notwithstanding any other provision in this 
Article, this Plan shall not in whole or in part merge or consolidate with, or  
transfer its assets or liabilities to, any other plan unless each affected      
Participant in this Plan would receive a benefit immediately after the merger,  
consolidation, or transfer (if the Plan then terminated) which is equal to or   
greater than the benefit he/she would have been entitled to receive immediately 
before the merger, consolidation, or transfer (if the Plan had then terminated).

ARTICLE XV

PLAN TERMINATION AND DISCONTINUANCE OF CONTRIBUTIONS

15.1 Plan Termination.                                                

          (a) (i) Subject to the following provisions of this Section 15.1, 20th
  Century Industries may terminate the Plan and the Trust Agreement at any
time by an instrument in writing executed in the name of 20th Century 
 Industries by an officer or officers duly authorized to execute such an
instrument, and delivered to the Trustee.                             

30

2.1(R) EXHIBIT A

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ARTICLE XII 

MERGER OF COMPANY; MERGER OF PLAN 

12.1 Effect of Reorganization or Transfer of Assets.                            

        In the event of a consolidation, merger, sale, liquidation, or other
transfer of the operating assets of the Company to any other company, the       
ultimate successor or successors to the business of the Company shall           
automatically be deemed to have elected to continue this Plan in full force and 
effect, in the same manner as if the Plan had been adopted by resolution of its 
board of directors, unless the successor(s), by resolution of its board of      
directors, shall elect not to so continue this Plan in effect, in which case the
Plan shall automatically be deemed terminated as of the applicable effective    
date set forth in the board resolution.                                         

12.2 Merger Restriction.                                                        

        Notwithstanding any other provision in this Article, this Plan shall
not in whole or in part merge or consolidate with, or transfer its assets or    
liabilities to any other plan unless each affected Participant in this Plan     
would receive a benefit immediately after the merger, consolidation, or transfer
(if the Plan then terminated) which is equal to or greater than the benefit     
he/she would have been entitled to receive immediately before the merger,       
consolidation, or transfer (if the Plan had then terminated).                   

62

2.1(R) EXHIBIT B

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Supplemental Executive Retirement     
Plan  

         (d)   "Change in Control" means, after the effective date of this
Plan:                                                                           

       (i)   There shall be consummated (A) any consolidation or merger of
the Company in which the Company is not the continuing or surviving   
corporation or pursuant to which shares of the Company's common stock 
  would be converted into cash, securities or other property, other than a
  merger of the Company in which the holders of the Company's common stock
  immediately prior to the merger have the same proportionate ownership of
 common stock of the surviving corporation immediately after the merger,
   or (B) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all, or substantially all, of the
assets of the Company; or                                             

       (ii)   The stockholders of the Company approve a plan or proposal for
the liquidation or dissolution of the Company; or                     

   (iii)   Any "person" (as defined in Sections 13(d) and 14(d) of the
 Securities Exchange Act of 1934, as amended (the "Exchange Act")) other
  than a person owned by or directly or indirectly managed by the Company,
 shall become the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of 25 percent or more of the   
Company's outstanding common stock; or                                

       (iv)   During any period of two consecutive years, individuals who at
  the beginning of such period constitute the entire Board of Directors of
 the Company shall cause for any reason to constitute a majority thereof
unless the election, or the nomination for election by the Company's  
stockholders, of each new director was approved by a vote of at least 
    two-thirds of the directors then still in office who were directors at the
beginning of the period.                                              

          (e)   "Code" means the Internal Revenue Code of 1986, as in effect
on  the date of execution of this Plan document and as thereafter amended from  
time to time.                                                                   

   (f)   "Committee" means the 20th Century Industries Company
Nonqualified Supplemental Benefit Committee.                                    

2 

2.1(R) EXHIBIT C

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Participant equal to the Retirement Income Benefit as calculated under Sections 
3(a)(i), (ii) and (iii), but reduced by five percent (5%) for each year         
retirement occurs prior to the Participant attaining age sixty-five (65).       

4. Change in Control                                                  

(a) Termination of Employment Within Three Years After a Change 
in Control                                                                      

         If such Participant's employment terminates for any reason within
three years after a Change in Control but prior to his/her Normal Retirement    
Date, such Participant shall be entitled to a Retirement Income Benefit in the  
form on a monthly benefit commencing on the first day of the month, following   
such termination of employment, payable to the Participant for one hundred      
eighty months (180) which is calculated in accordance with Section 3(a) and     
reduced to reflect early retirement in accordance with Section 3(c).            

 (b) Termination of Employment at any Time After Change in Control

     If such Executive's employment terminates at any time after a
Change in Control, but prior to his/her Normal Retirement Date, such Executive  
shall be entitled to a Retirement Income Benefit payable on the first day of    
the month following such termination of employment, in the form of a lump sum   
distribution actuarially determined to be the present value of the amount       
calculated in accordance with Section 3(a) and reduced to reflect early         
retirement in accordance with Section 3(c); unless such termination of          
employment is by the Company for Cause, as defined in Paragraph (i) below, or   
by the Executive other than for Good Reason, as defined in Paragraph (ii) below.

       (i) Termination by the Company of an Executive's employment for
"Cause" shall mean termination upon (A) the willful and continued failure by the
Executive to substantially perform his/her duties with the Company (other than  
any such failure resulting from his/her incapacity due to physical or mental    
illness or any such actual or anticipated failure after the issuance of a notice
of termination, by the Executive for Good Reason, as defined in Paragraph (ii)  
below), after a written demand for substantial performance is delivered to the  
Executive by the Board of Directors, which demand specifically identifies the   
manner in which the Board                                                       

6 

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SERP Trust

Company as they are incurred. If not paid by the Company, the Trustee may pay   
such amount from the Trust Fund (or may resign and pay its reasonable costs of  
resignation from the Trust Fund). If such amounts are paid from the Trust Fund, 
the Company shall reimburse all such amounts, plus interest at 6% per annum.    

Section 11. Replacement of Trustee.                                   

 The Trustee may be removed at any time by the Company or may resign, in
which case a new trustee shall be appointed by the Company.                     

Section 12. Amendment or Termination.                                 

(a) The Trust hereby created shall be irrevocable. The Company hereby 
expressly waives all rights and powers, whether alone or in conjunction with    
others, (regardless of when or from what source, the Company may heretofore or  
hereafter have acquired such rights or powers) to alter, amend, revoke, or      
terminate the Trust created by this Trust Agreement or any of the terms of this 
Trust, in whole or in part, except as set forth in the following sentence. If   
this Trust is submitted to the Internal Revenue Service for a ruling and (i) if 
the Internal Revenue Service requires an amendment of the Trust for a favorable 
ruling, than the Trust may be amended by the Company and the Trustee in         
accordance with the amendments required by the Internal Revenue Service or (ii) 
if the Internal Revenue Service fails to give such a favorable ruling, then the 
Company may revoke this Trust.                                                  

12

2.1(R) EXHIBIT D

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SERP Trust

Section 15. Binding Effect.                                           

  This Trust Agreement shall be binding upon the successors in interest of
each of the respective parties hereto. The Company agrees that it will not      
merge, consolidate, or otherwise be acquired by any other business entity unless
and until the surviving business entity shall expressly assume and confirm in   
writing the obligations of the company under this Trust Agreement.              

Section 16. Gender and Number.                                        

  Throughout this Trust Agreement, the masculine gender shall be deemed to
include the feminine and the singular may include the plural, unless the context
clearly indicates to contrary.                                                  

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Restricted Shares Plan Agreement

shall require the Company to issue or transfer such shares unless such listing, 
registration, qualification, consent or approval shall have been effected or    
obtained free of any conditions not acceptable to the Committee.                

14. In connection with the shares awarded hereunder, it shall be a    
condition precedent to the Company's obligation to evidence the removal of any  
restrictions or transfer or lapse of any risk of forfeiture that the Employee   
make arrangements satisfactory to the Company to insure that the amount of any  
federal or other withholding tax required to be withheld with respect to such   
sale or transfer on such removal or lapse is made available to the Company for  
timely payment of such tax.                                                     

   15. The Employee represents that he or she is having the shares issued to
him or her for his or her own account and not with a view to or for sale in     
connection with any distribution of the shares.                                 

  16. Notwithstanding any other provision of this Agreement including, but
not limited to, paragraphs 3, 4 and 5 hereof, all shares which have been granted
pursuant to this Agreement which have not been delivered to the Employee because
of the expiration date of the Restrictions shall vest in the Employee           
immediately before a "change of control" of the Company, as defined herein, free
and clear of any restrictions, except the restrictions imposed by paragraphs 12 
through 15 hereof. "Change of control" is hereby defined as follows:            

 (i)   the election to the board of directors of a majority of directors
not nominated by the prior board of directors;                                  

(ii)  the merger of the Company with or into any other corporation not
controlled by the Company immediately before the merger;                        

(iii) the sale of a majority of the assets of the Company to persons, 
firms or corporations not controlled by the Company immediately before the      
sale;                                                                           

2.1(R) EXHIBIT E

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Restricted Shares Plan Agreement

(iv) the acquisition of a majority of the shares of the Company by    
persons not shareholders of the Company as of the date of this Agreement in     
one transaction or series of transactions;                                      

(v)  the liquidation or dissolution of the Company;                   

(vi) any other transaction or reorganization similar to the foregoing 
which in the opinion of the Committee constitutes a "change of control" of      
the nature described in subparagraphs (i) through (v) hereof.                   

However, if in the opinion of the Committee the vesting of the shares 
immediately before a change of control is not in the best interests of the      
Company or its shareholders, shares that have not been delivered to the Employee
because of the expiration date of the Restrictions shall remain subject to the  
Restrictions imposed by paragraphs 3, 4 and 5 hereof. Upon the shares vesting in
the Employee pursuant to this paragraph, share certificate(s) shall be delivered
to the Employee pursuant to the procedures set forth in paragraphs 4 and 5      
hereof.                                                                         

Executed at the place and on the date first above written.            

                           20TH CENTURY INDUSTRIES

                           By  /s/ LOUIS W. FOSTER
                                      ------------------------------
                                   Louis W. Foster, Chairman

                              By  /s/ JOHN R. BOLLINGTON
                                       -----------------------------
                                       John R. Bollington, Secretary

                                    --------------------------------
                    "Employee"

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20TH CENTURY INDUSTRIES & SUBSIDIARIES                                          

SCHEDULE 2.1(S)                                                                 

ITEM s(i)(c)                                                                    

 FEDERAL INCOME TAX RETURNS WHICH HAVE NOT BEEN EXAMINED BY THE INTERNAL
REVENUE SERVICE AND FOR WHICH THE PERIOD OF ASSESSMENT HAS NOT YET EXPIRED:     
RETURNS FOR THE YEARS 1991, 1992, 1993.                                         

 THE LAST IRS EXAMINATION WAS COMPLETED OCTOBER 23, 1991 (DATE OF LETTER
FROM DISTRICT DIRECTOR WITH COPY OF EXAMINATION REPORT, FORM 4549-A) WITH NO    
CHANGES. IT COVERED THE YEARS: 1981 THROUGH 1986, AND 1988.                     

 STATE INCOME TAX RETURNS WHICH HAVE NOT BEEN EXAMINED BY THE CALIFORNIA
FRANCHISE TAX BOARD AND FOR WHICH THE PERIOD OF ASSESSMENT HAS NOT YET EXPIRED: 
RETURNS FOR THE YEARS 1990, 1991, 1992, 1993.                                   

ITEM s(i)(a)                                                                    

CALIFORNIA PREMIUM TAX -- YEARS 1989 AND 1990                                   

A DEFICIENCY ASSESSMENT WAS ISSUED BY THE CALIFORNIA STATE BOARD OF   
EQUALIZATION ON OCTOBER 8, 1993, AS FOLLOWS:                                    

                                                                [Download Table]

YEAR                DUE DATE    GROSS PREMIUMS    RATE       TAX      INTEREST*
----                --------    --------------    -----    -------    ---------
                                                                               
1989                 4/1/90       19,992,089       2.37%   473,813     217,164 
1990                 4/1/91       14,751,589       2.46%   362,889     115,520 
     AMOUNT DUE                                            836,702     332,684 

* INTEREST TO OCTOBER 31, 1993.                                                 

THE DEFICIENCY ARISES BECAUSE THE COMPANY DID NOT PAY PREMIUM TAX ON            
PREMIUMS WHICH WERE TO BE REBATED TO OUR POLICYHOLDERS UNDER PROP 103. THE      
DEPARTMENT OF INSURANCE CONTENDS WE SHOULD HAVE PAID THE PREMIUM TAX ON THOSE   
PREMIUMS BECAUSE WE DID NOT PAY THOSE REBATES BUT ONLY ACCRUED THE LIABILITY. WE
TIMELY FILED A PETITION OF REDETERMINATION WITH THE SBE ON NOVEMBER 5, 1993, AND
HAVE NOT HEARD ANYTHING FURTHER. IF WE LOSE THE APPEAL WE WOULD HAVE TO PAY     
ADDITIONAL INTEREST AS WELL AS A 10% PENALTY OF $83,670.                        

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EXHIBIT 
A 

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                                                                       EXHIBIT A

CERTIFICATE OF DETERMINATION  
OF  
20TH CENTURY INDUSTRIES   

__________________ and ___________________ certify that:                        

       1.      They are the president and the secretary, respectively, of 20TH
CENTURY INDUSTRIES, a California corporation (the "Corporation").               

2.      The authorized number of shares of Series A Convertible 
Preferred Stock, par value $1.00 per share, is 265,000, none of which has been  
issued.                                                                         

      3.      The Board of directors of the Corporation has duly adopted the
following resolution:                                                           

       WHEREAS, the articles of incorporation authorize the Preferred Stock of
the Corporation to be issued in series and authorize the Board of Directors to  
determine the rights, preferences, privileges and restrictions granted to or    
imposed upon any wholly unissued series of Preferred Stock and to fix the       
number of shares and designation of any such series, now therefore it is        

       RESOLVED, that the Board of Directors does hereby establish a series of
Preferred Stock as follows:                                                     

      Section 1.      Designation and Rank.  The series created and provided
for hereby is designated as the Series A Convertible Preferred Stock.  Each     
share of the Series A Convertible Preferred Stock shall be identical in all     
respects with each other share of the Seried A Convertible Preferred Stock.     
Shares of the Series A Convertible Preferred Stock shall have a liquidation     
preference of $1,000 per share (the "Stated Value").  The Series A Convertible  
Preferred Stock shall rank prior to the Corporation's Common Stock and to all   
other classes and series of equity securities of the Corporation now or         
hereafter authorized, issued or outstanding (the Common Stock and such other    
classes and series of equity securities collectively may be referred to herein  
as the "Junior Stock"), other than any classes or series of equity securities   
of the Corporation ranking on a parity with (the "Parity Stock") or senior to   
(the "Senior Stock") the Series A Convertible Preferred Stock as to dividend    
rights and rights upon liquidation, winding up or dissolution of the            
Corporation.  The Series A Convertible Preferred Stock shall be junior to all   
outstanding debt of the Corporation.  The Series A Convertible Preferred Stock  
shall be subject to creation of Senior Stock, Parity Stock and Junior Stock to  

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the extent not prohibited by the Corporation's Articles of Incorporation,       
subject to the approval of the holders of the outstanding shares of Series A    
Convertible Preferred Stock to the extent required pursuant to Section 8 hereof.

Section 2. Number.  The number of authorized shares of the Series A   
Convertible Preferred Stock shall initially consist of 265,000 shares of which  
200,000 are to be issued initially. The Corporation shall not issue any of the  
authorized shares of Series A Convertible Preferred Stock after the initial     
issuance of 200,000 shares other than (i) pursuant to the provisions of Section 
3(b) hereof, (ii) pursuant to Section 4.3 of the Investment and Strategic       
Alliance Agreement, dated as of October 17, 1994, between the Company and       
American International Group, Inc. (the "Investment Agreement"), in the event   
the Company elects to require the contribution of additional capital to the     
Company or (iii) otherwise upon the approval of the holders of the outstanding  
shares of Series A Convertible Preferred Stock pursuant to Section 8(c) hereof. 
Subject to any required approval of the holders of the outstanding shares of    
Series A Convertible Preferred Stock pursuant to Section 8(c) hereof, the number
of authorized shares of the Series A Convertible Preferred Stock may be         
increased by the further resolution duly adopted by the Board of Directors of   
the Corporation or a duly authorized committee thereof and the filing of an     
officers' certificate pursuant to the provisions of the California General      
Corporation Law. The number of authorized shares of the Series A Convertible    
Preferred Stock shall not at any time be decreased below the aggregate number of
such shares then outstanding and contingently issuable pursuant to Section 3(b) 
hereof or Section 4.3 of the Investment Agreement.                              

Section 3. Dividends.                                                 

(a) General.  For the purposes of this Section 3, each ____________   
_______, _______, ________  and _________  on which any Series A Convertible    
Preferred Stock shall be outstanding shall be deemed to be a "Dividend Due      
Date." The holders of Series A Convertible Preferred Stock shall be entitled to 
receive, if, when and as declared by the Board of Directors out of funds legally
available therefor, cumulative dividends at the rate of $90.00 per year on each 
share of Series A Convertible Preferred Stock and no more, calculated on the    
basis of a year of 360 days consisting of twelve 30-day months, payable         
quarterly on each Dividend Due Date, with respect to the quarterly period ending
on the day immediately preceding such Dividend Due Date (except that if any such
date is not a Business Day, then such dividend shall be payable on the next     
Business Day following such Dividend Due Date, provided that, for the           

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purposes of computing such dividend payment, no interest or sum in lieu of      
interest shall accrue from such Dividend Due Date to the next Business Day      
following such Dividend Due Date). For purposes hereof, the term Business Day   
shall mean any day (except a Saturday or Sunday or any day on which banking     
institutions are authorized or required to close in The City of New York, New   
York or Los Angeles, California). Dividends on each share of Series A           
Convertible Preferred Stock shall accrue and be cumulative from and after the   
date of issuance of such share of Series A Convertible Preferred Stock. The     
amount of dividends payable per share for each full dividend period shall be    
computed by dividing by four the $90.00 annual rate. The record date for the    
payment of dividends on the Series A Convertible Preferred Stock shall in no    
event be more than sixty (60) days nor less than fifteen (15) days prior to a   
Dividend Due Date. Such dividends shall be payable in the form determined in    
accordance with subparagraph (b) below. Any such dividend payable in shares of  
Series A Convertible Preferred Stock shall be payable by delivery to such       
holders, at their respective addresses as they appear in the stock register, of 
certificates representing the appropriate number of duly authorized, validly    
issued, fully paid and nonassessable shares of Series A Convertible Preferred   
Stock.                                                                          

(b) Form of Dividends.  Dividends payable on any Dividend Due Date    
occurring prior to ______________, 1997 shall, if declared by the Board of      
Directors of the Corporation or any duly authorized committee thereof and       
regardless of when actually paid, be payable in shares of Series A Convertible  
Preferred Stock or, at the election of the Corporation contained in a resolution
of the Board of Directors or such committee, in substitution in whole or in part
for such shares of Series A Convertible Preferred Stock, in cash. The number of 
shares of Series A Convertible Preferred Stock so payable on any Dividend Due   
Date as a dividend per share of Series A Convertible Preferred Stock shall be   
equal to the product of one share of Series A Convertible Preferred Stock       
multiplied by a fraction of which the numerator is the amount of dividends that 
would have been payable on such share if such dividend were being paid in cash  
on such Dividend Due Date and the denominator is the Stated Value of such share.
Dividends payable on any Dividend Due Date on or after ________________, 1997   
shall, if declared by the Board of Directors of the Corporation or any duly     
authorized committee thereof, be payable in cash. Notwithstanding the foregoing,
no fractional shares of Series A Convertible Preferred Stock, and no certificate
or scrip or other evidence thereof, shall be issued, and any holder of Series A 
Convertible Preferred Stock who would otherwise be entitled to receive a        
fraction                                                                        

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of a share of Series A Convertible Preferred Stock in accordance with this      
paragraph (b) (after taking into account all shares of Series A Convertible     
Preferred Stock then held by such holder) shall be entitled to receive, in lieu 
thereof, cash in an amount equal to such fraction multiplied by the Stated      
Value. In no event shall the election by the Corporation to pay dividends, in   
whole or in part, in cash preclude the Corporation from making a different      
election with respect to all or a portion of the dividends to be paid on the    
Series A Convertible Preferred Stock on any subsequent Dividend Due Date. Any   
additional shares of Series A Convertible Preferred Stock issued pursuant to    
this paragraph (b) shall be governed by this resolution and shall be subject in 
all respects to the same terms as the shares of Series A Convertible Preferred  
Stock originally issued hereunder. All dividends (whether payable in cash or in 
whole or in part in shares of Series A Convertible Preferred Stock) paid        
pursuant to this paragraph (b) shall be paid in equal pro rata proportions of   
such cash and/or shares of Series A Convertible Preferred Stock except as       
otherwise provided for the payment of cash in lieu of fractional shares.        

 (c) Dividend Preference.  On each Dividend Due Date all dividends which
shall have accrued on each share of Series A Convertible Preferred Stock        
outstanding on such Dividend Due Date shall accumulate and be deemed to become  
"due." Any dividend which shall not be paid on the Dividend Due Date on which it
shall become due shall be deemed to be "past due" until such dividend shall be  
paid or until the share of Series A Convertible Preferred Stock with respect to 
which such dividend became due shall no longer be outstanding, whichever is the 
earlier to occur. No interest, sum of money in lieu of interest, or other       
property or securities shall be payable in respect of any dividend payment or   
payments which are past due. Dividends paid on shares of Series A Convertible   
Preferred Stock in an amount less than the total amount of such dividends at the
time accumulated and payable on such shares shall be allocated pro rata on a    
share-by-share basis among all such shares at the time outstanding.             

   If a dividend upon any shares of Series A Convertible Preferred Stock, or
any other outstanding preferred stock of the Corporation ranking on a parity    
with the Series A Convertible Preferred Stock as to dividends, is in arrears,   
all dividends or other distributions declared upon each series of such stock    
(other than dividends paid in Junior Stock) may only be declared pro rata so    
that in all cases the amount of dividends or other distributions declared per   
share of each such series bear to each other the same ratio that the accumulated
and unpaid dividends per                                                        

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share on the shares of each such series bear to each other. Except as set forth 
above, if a dividend upon any shares of Series A Convertible Preferred Stock, or
any other outstanding stock of the Corporation ranking on a parity with the     
Series A Convertible Preferred Stock as to dividends, is in arrears: (i) no     
dividends, in cash, stock or other property, may be paid or declared and set    
aside for payment or any other distribution made upon any stock of the          
Corporation ranking junior to the Series A Convertible Preferred Stock as to    
dividends (other than dividends or distributions in Junior Stock); (ii) no stock
of the Corporation ranking on a parity with the Series A Convertible Preferred  
Stock as to dividends may be (A) redeemed pursuant to a sinking fund or         
otherwise, except (1) by means of a redemption pursuant to which all outstanding
shares of the Series A Convertible Preferred Stock and all stock of the         
Corporation ranking on a parity with the Series A Convertible Preferred Stock as
to dividends are redeemed or pursuant to which a pro rata redemption is made    
from all holders of the Series A Convertible Preferred Stock and all stock of   
the Corporation ranking on a parity with the Series A Convertible Preferred     
Stock as to dividends (in each case, only so long as the Series A Convertible   
Preferred Stock is otherwise redeemable pursuant hereto), the amount allocable  
to each series of such stock being determined on the basis of the aggregate     
liquidation preference of the outstanding shares of each series and the shares  
of each series being redeemed only on a pro rata basis, or (2) by conversion of 
such stock ranking on a parity with the Series A Convertible Preferred Stock as 
to dividends into, or exchange of such stock for, Junior Stock or (B) purchased 
or otherwise acquired for any consideration by the Corporation except (1)       
pursuant to an acquisition made pursuant to the terms of one or more offers to  
purchase all of the outstanding shares of the Series A Convertible Preferred    
Stock and all stock of the Corporation ranking on a parity with the Series A    
Convertible Preferred Stock as to dividends (which offers shall describe such   
proposed acquisition of all such Parity Stock), which offers shall each have    
been accepted by the holders of more than 50% of the shares of each series or   
class of stock receiving such offer outstanding at the commencement of the first
of such purchase offers, or (2) by conversion of such stock ranking on a parity 
with the Series A Convertible Preferred Stock as to dividends into, or exchange 
of such stock for, Junior Stock; and (iii) no stock ranking junior to the Series
A Convertible Preferred Stock as to dividends may be redeemed, purchased, or    
otherwise acquired for consideration (including pursuant to sinking fund        
requirements) except by conversion into or exchange for Junior Stock.           

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The Corporation shall not permit any Subsidiary of the Corporation to 
purchase or otherwise acquire for consideration any shares of stock of the      
Corporation unless the Corporation could, under this Section 3 and Section 7    
below, purchase or otherwise acquire such shares at such time and in such       
manner. As used herein, "Subsidiary" means a corporation more than 50% of the   
outstanding voting stock of which is owned, directly or indirectly, by the      
Corporation or by one or more other Subsidiaries, or by the Corporation and one 
or more other Subsidiaries.                                                     

Section 4. Redemption.                                                

  (a) Optional Redemption.  The Corporation, at its option, may redeem the
shares of the Series A Convertible Preferred Stock, as a whole or from time to  
time in part, on any Business Day set by the Board of Directors (the "Redemption
Date") at a redemption price per share equal to $3,000.00 plus an amount equal  
to accrued and unpaid dividends thereon (whether or not earned or declared) to  
the Redemption Date (subject to the right of the holder of record on the record 
date for the payment of a dividend to receive the dividend due on the           
corresponding Dividend Due Date, or the next Business Day thereafter, as the    
case may be); provided, however, that, on and after the fifth anniversary of the
date on which Series A Preferred Shares were first issued by the Corporation    
(the "Issuance Anniversary Date"), in the event that the closing price (as      
defined in Section 6(e)(viii)) of the Common Stock for 30 consecutive Trading   
Days ending not more than five days prior to the date of the notice of          
redemption is at least 180% of the Conversion Price then in effect, the         
Corporation may so redeem such shares at the following redemption price per     
share if redeemed during the twelve-month period beginning on the Issuance      
Anniversary Date in the year indicated below:                                   

                                                                [Download Table]

                            REDEMPTION
YEAR                          PRICE   
----                        ----------
                                      
1999.....................     $1,050  
2000.....................      1,040  
2001.....................      1,030  


                            REDEMPTION
YEAR                          PRICE   
----                        ----------
                                      
2002.....................     $1,020  
2003.....................      1,010  

and if redeemed at any time on or after the Issuance Anniversary Date in 2004 at
$1,000 per share, plus, in each case, an amount equal to all accrued and unpaid 
dividends thereon (whether or not earned or declared) to the Redemption Date    
(subject to the right of the holder of record on the record date for the payment
of a dividend to                                                                

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receive the dividend due on the corresponding Dividend Due Date, or the next    
Business Day thereafter, as the case may be). The applicable amount payable upon
redemption as provided in the immediately preceding sentence is hereinafter     
referred to as the "Redemption Price."                                          

  (b)   Notice, etc.  (i) Notice of every redemption of shares of Series A
Convertible Preferred Stock pursuant to this Section 4 shall be mailed by first 
class mail, postage prepaid, addressed to the holders of record of the shares to
be redeemed at their respective last addresses as they shall appear on the stock
register of the Corporation. Such mailing shall be at least 30 days and not more
than 60 days prior to the Redemption Date. Each such notice of redemption shall 
specify the Redemption Date, the Redemption Price, the place or places of       
payment, that payment will be made upon the later of the Redemption Date or     
presentation and surrender of the shares of Series A Convertible Preferred      
Stock, that on and after the Redemption Date, dividends will cease to accumulate
on such shares and that the right of holders to convert such shares, as provided
in Section 6 hereof, shall terminate at the close of business on the Business   
Day immediately preceding the Redemption Date.                                  

(ii)  In case of redemption of a part only of the shares of Series A  
Convertible Preferred Stock at the time outstanding, the redemption shall be pro
rata. The Board of Directors shall have full power and authority, subject to the
provisions herein contained, to prescribe the terms and conditions upon which   
shares of the Series A Convertible Preferred Stock shall be redeemed from time  
to time.                                                                        

    (iii) If such notice of redemption shall have been duly given and if on or
before the Redemption Date specified therein the funds necessary for such       
redemption shall have been deposited by the Corporation with the bank or trust  
company hereinafter referred to in trust for the pro rata benefit of the holders
of the shares called for redemption, then, notwithstanding that any certificate 
for shares so called for redemption shall not have been surrendered for         
cancellation, from and after the Redemption Date, all shares so called for      
redemption shall no longer be deemed to be outstanding, dividends shall cease to
accrue thereon and all rights with respect to such shares shall forthwith cease 
and terminate, except only the right of the holders thereof to receive from such
bank or trust company at any time on and after the Redemption Date the funds so 
deposited, without interest. The aforesaid bank or trust company shall be       
organized and in good standing under the laws of the United States of America or
of any State, shall have capital, surplus and undivided profits aggregating at  

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least $500,000,000 according to its last published statement of financial       
condition, and shall be identified in the notice of redemption. Any interest    
accrued on such funds shall be paid to the Corporation from time to time. Any   
funds so set aside or deposited, as the case may be, and unclaimed at the end of
three years from such Redemption Date shall, to the extent permitted by law, be 
released or repaid to the Corporation, after which repayment the holders of the 
shares so called for redemption shall look only to the Corporation for payment  
thereof.                                                                        

(c) Status of Redeemed Shares.  Shares of the Series A Convertible    
Preferred Stock which have been redeemed shall, after such redemption, have the 
status of authorized but unissued shares of Preferred Stock of the Corporation, 
without designation as to series, until such shares are once more designated as 
part of a particular series by or on behalf of the Board of Directors.          

   Section 5. No Sinking Fund.  The shares of Series A Convertible Preferred
Stock, shall not be subject to mandatory redemption or the operation of any     
purchase, retirement, or sinking fund.                                          

Section 6. Conversion Privilege.                                      

(a) Conversion Right.  The holder of any share of Series A Convertible
Preferred Stock shall have the right, at such holder's option (but if such share
is called for redemption, then in respect of such share only to and including,  
but not after, the close of business on the Business Day immediately preceding  
the applicable Redemption Date, provided that no default by the Corporation in  
the payment of the applicable Redemption Price shall have occurred and be       
continuing on the Redemption Date) to convert such share on any Business Day    
into that number of fully paid and non-assessable Common Shares, without par    
value ("Common Stock"), of the Corporation (calculated as to each conversion to 
the nearest 1/100th of a share of Common Stock) obtained by dividing $1,000.00  
by the Conversion Price then in effect. The "Conversion Price" shall initially  
be equal to $11.33 and shall be subject to adjustment from time to time as set  
forth below.                                                                    

  (b) Conversion Procedures.  Any holder of shares of Series A Convertible
Preferred Stock desiring to convert such shares into Common Stock shall         
surrender the certificate or certificates for such shares of Series A           
Convertible Preferred Stock at the office of the Corporation or any transfer    
agent for the Series A Convertible Preferred Stock (the "Transfer Agent"), which
certificate or certificates, if the Corporation shall so require, shall be      

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duly endorsed to the Corporation or in blank, or accompanied by proper          
instruments of transfer to the Corporation or in blank, accompanied by          
irrevocable written notice to the Corporation that the holder elects so to      
convert such shares of Series A Convertible Preferred Stock and specifying the  
name or names in which a certificate or certificates for Common Stock are to be 
issued.                                                                         

   The Corporation covenants that it will, as soon as practicable after such
deposit of certificates for Series A Convertible Preferred Stock accompanied by 
the written notice of conversion and compliance with any other conditions herein
contained, deliver to the person for whose account such shares of Series A      
Convertible Preferred Stock were so surrendered, or to his nominee or nominees, 
certificates for the number of full shares of Common Stock to which he shall be 
entitled as aforesaid, together with a cash adjustment of any fraction of a     
share as hereinafter provided. Subject to the following provisions of this      
paragraph, such conversion shall be deemed to have been made as of the date of  
such surrender of the shares of Series A Convertible Preferred Stock to be      
converted, and the person or persons entitled to receive the Common Stock       
deliverable upon conversion of such Series A Convertible Preferred Stock shall  
be treated for all purposes as the record holder or holders of such Common Stock
on such date; provided, however, that the Corporation shall not be required to  
convert any shares of Series A Convertible Preferred Stock while the stock      
transfer books of the Corporation are closed for any purpose, but the surrender 
of Series A Convertible Preferred Stock for conversion during any period while  
such books are so closed shall become effective for conversion immediately upon 
the reopening of such books as if the surrender had been made on the date of    
such reopening, and the conversion shall be at the Conversion Price in effect on
such date.                                                                      

    (c) Certain Adjustments for Dividends.  In the case of any share of Series
A Convertible Preferred Stock which is surrendered for conversion after any     
record date established by the Board with respect to the payment of a dividend  
on the Series A Convertible Preferred Stock and on or prior to the opening of   
business on the next succeeding Dividend Due Date (or, if such Dividend Due Date
is not a Business Day, before the close of business on the next Business Day    
following such Dividend Due Date), the dividend due on such date shall be       
payable on such date to the holder of record of such share as of such preceding 
record date notwithstanding such conversion. Shares of Series A Convertible     
Preferred Stock surrendered for conversion during the period from the close of  
business on any record date established by the Board with respect to the payment
of                                                                              

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a dividend on the Series A Convertible Preferred Stock immediately preceding any
Dividend Due Date to the opening of business on such Dividend Due Date (or, if  
such Dividend Due Date is not a Business Day, before the opening of business on 
the next Business Day following such Dividend Due Date) shall, except in the    
case of shares of Series A Convertible Preferred Stock which have been called   
for redemption on a Redemption Date within such period, be accompanied by       
payment in New York Clearing House funds or other funds acceptable to the       
Corporation in an amount equal to the dividend payable on such Dividend Due Date
on the shares of Series A Convertible Preferred Stock being surrendered for     
conversion. The dividend with respect to a share of Series A Convertible        
Preferred Stock called for redemption on a Redemption Date during the period    
from the close of business on any record date established by the Board with     
respect to the payment of a dividend on the Series A Convertible Preferred Stock
next preceding any Dividend Due Date to the opening of business on such Dividend
Due Date (or, if such Dividend Due Date is not a Business Day, before the       
opening of business on the next Business Day following such Dividend Due Date)  
shall be payable on such Dividend Due Date (or, if such Dividend Due Date is not
a Business Day, on the next Business Day following such Dividend Due Date) to   
the holder of record of such share on such record date notwithstanding the      
conversion of such share of Series A Convertible Preferred Stock after such     
record date and prior to the opening of business on such Dividend Due Date (or, 
if such Dividend Due Date is not a Business Day, before the opening of business 
on the next Business Day following such Dividend Due Date), and the holder      
converting such share of Series A Convertible Preferred Stock need not include a
payment of such dividend amount upon surrender of such share of Series A        
Convertible Preferred Stock for conversion. Except as provided in this          
paragraph, no payment or adjustment shall be made upon any conversion on account
of any dividends accrued on shares of Series A Convertible Preferred Stock      
surrendered for conversion or on account of any dividends on the Common Stock   
issued upon conversion.                                                         

(d) No Fractional Shares.  No fractional shares or scrip representing 
fractional shares of Common Stock shall be issued upon conversion of Series A   
Convertible Preferred Stock. If more than one certificate representing shares of
Series A Convertible Preferred Stock shall be surrendered for conversion at one 
time by the same holder, the number of full shares issuable upon conversion     
thereof shall be computed on the basis of the aggregate number of shares of     
Series A Convertible Preferred Stock so surrendered. Instead of any fractional  
share of Common Stock which would otherwise be issuable upon conversion of      

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any shares of Series A Convertible Preferred Stock, the Corporation will pay a  
cash adjustment in respect of such fractional interest in an amount equal to the
same fraction of the Current Market Price per share of the Common Stock.        

     (e) Anti-Dilution Adjustments.  The Conversion Price shall be adjusted from
time to time as follows:                                                        

         (i) In case the Corporation shall pay or make a dividend in shares of
Common Stock on any class of capital stock of the Corporation, the    
    Conversion Price in effect immediately prior to the opening of business on
the next Business Day following the date fixed for determination of   
shareholders entitled to receive such dividend shall be reduced by    
multiplying such Conversion Price by a fraction of which the numerator
   shall be the number of shares of Common Stock outstanding at the close of
     business on the date fixed for such determination and the denominator shall
be the sum of such number of shares and the total number of shares    
    constituting such dividend, such reduction to become effective immediately
 prior to the opening of business on the next Business Day following the
     date fixed for such determination. For the purposes of this clause (i), the
number of shares of Common Stock at any time outstanding shall include
shares issuable in respect of scrip certificates issued in lieu of    
fractions of shares of Common Stock.                                  

       (ii) In case the Corporation shall hereafter issue rights, options or
     warrants to all holders of its Common Stock entitling them to subscribe for
  or purchase shares of Common Stock (such rights, options or warrants not
being available on an equivalent basis to holders of the Series A     
     Convertible Preferred Stock upon conversion) at a price per share less than
the Current Market Price of the Common Stock on the date fixed for the
   determination of shareholders entitled to receive such rights, options or
 warrants (other than pursuant to a dividend reinvestment plan), (A) the
    Conversion Price in effect immediately prior to the opening of business on
     the next Business Day following the date fixed for such determination shall
    be reduced by multiplying the Conversion Price in effect immediately prior
     to the close of business on the date fixed for the determination of holders
   of Common Stock entitled to receive such rights, options or warrants by a
 fraction of which the numerator shall be the number of shares of Common
Stock outstanding at the close of business on the date fixed for such 
     determination plus the number of shares of Common Stock which the aggregate
of the offering price of the total number of shares of Common Stock so
    offered for subscription or purchase would purchase at such Current Market
Price and the denominator shall be the number of shares of Common     

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Stock outstanding at the close of business on the date fixed for such 
determination plus the number of shares of Common Stock so offered for
  subscription or purchase, such reduction to become effective immediately
 prior to the opening of business on the next Business Day following the
  date fixed for such determination. For the purposes of this clause (ii),
    the number of shares of Common Stock at any time outstanding shall include
shares issuable in respect of scrip certificates issued in lieu of    
     fractions of shares of Common Stock; and (B) if any such rights, options or
     warrants expire or terminate without having been exercised or are exercised
    for a consideration different from that utilized in the computation of any
   adjustment or adjustments on account of such rights, options or warrants,
the Conversion Price with respect to any Series A Preferred Shares not
  previously converted into Common Stock shall be readjusted such that the
Conversion Price would be the same as would have resulted had such    
adjustment been made without regard to the issuance of such expired or
terminated rights, options or warrants or based upon the actual       
 consideration received upon exercise thereof, as the case may be, which
  readjustment shall become effective upon such expiration, termination or
   exercise, as applicable; provided, however, that all readjustments in the
   Conversion Price based upon any expiration, termination or exercise for a
different consideration of any such right, option or warrant, in the  
  aggregate, shall not cause the Conversion Price to exceed the Conversion
   Price immediately prior to the time such rights, options or warrants were
  initially issued (without regard to any other adjustments of such number
under this Section 6(e) that may have been made since the date of the 
issuance of such rights, options or warrants).                        

 (iii) In case the outstanding shares of Common Stock shall be
    subdivided into a greater number of shares of Common Stock, the Conversion
  Price in effect immediately prior to the opening of business on the next
Business Day following the day upon which such subdivision becomes    
effective shall be proportionately reduced, and, conversely, in case  
  outstanding shares of Common Stock shall each be combined into a smaller
number of shares of Common Stock, the Conversion Price in effect      
immediately prior to the opening of business on the next Business Day 
  following the day upon which such combination becomes effective shall be
proportionately increased.                                            

  (iv)  In case the Corporation shall, by dividend or otherwise,
     distribute to all holders of its Common Stock evidences of its indebtedness
or assets (including securities, but excluding any rights, options or 
   warrants referred to in clause (ii) of this Section 6(e), any dividend or
distribution paid exclusively in cash and any                         

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  dividend referred to in clause (i) of this Section 6(e)), the Conversion
   Price shall be adjusted so that the same shall equal the price determined
by multiplying the Conversion Price in effect immediately prior to the
   close of business on the date fixed for the determination of shareholders
entitled to receive such distribution by a fraction of which (A) the  
     numerator shall be the Current Market Price at the close of business on the
  date fixed for such determination less the then fair market value of the
portion of the assets or evidences of indebtedness so distributed     
    applicable to one share of Common Stock (the amount calculated pursuant to
this clause (A) being hereinafter referred to as the "Adjusted Market 
  Price") and (B) the denominator shall be such Current Market Price, such
     adjustment to become effective immediately prior to the opening of business
    on the next Business Day following the date fixed for the determination of
shareholders entitled to receive such distribution.                   

(v) In case the Corporation shall, by dividend or otherwise,
     distribute to all holders of its Common Stock cash (excluding any cash that
  is distributed and adjusted for as part of a distribution referred to in
 clause (iv) of this Section 6(e)) in an aggregate amount that, combined
  together with (I) the aggregate amount of any other distributions to all
   holders of its Common Stock made exclusively in cash within the 12 months
    preceding the date of payment of such distribution and in respect of which
  no adjustment pursuant to this clause (v) or clause (vi) of this Section
    6(e) has been made and (II) the aggregate of any cash plus the fair market
value as of the last time tender could have been made pursuant to such
tender offer, as it may have been amended (such time, the "Expiration 
Time") of consideration payable in respect of any tender offer by the 
     Corporation or any of its Subsidiaries for all or any portion of the Common
    Stock concluded within the 12 months preceding the date of payment of such
    distribution and in respect of which no adjustment pursuant to this clause
   (v) or clause (vi) of this Section 6(e) has been made, exceeds 10% of the
  product of the Current Market Price per share of the Common Stock on the
     date for the determination of holders of shares of Common Stock entitled to
receive such distribution times the number of shares of Common Stock  
  outstanding on such date, then, and in each such case, immediately after
    the close of business on such date for determination, the Conversion Price
shall be reduced so that the same shall equal the price determined by 
   multiplying the Conversion Price in effect immediately prior to the close
of business on the date fixed for determination of the shareholders   
  entitled to receive such distribution by a fraction (i) the numerator of
  which shall be equal to the Current Market Price per share of the Common
Stock on the                                                          

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date fixed for such determination less an amount equal to the quotient of (x)   
the excess of such combined amount over such 10% and (y) the number of shares   
or Common Stock outstanding on such date for determination and (ii) the         
denominator of which shall be equal to the Current Market Price per share of    
the Common Stock as of such date for determination.                             

(vi)    In case a tender offer (the "Tender Offer") made by the 
Corporation or any Subsidiary for all or any portion of the Common Stock shall  
expire and the Tender Offer (as amended upon the expiration thereof) shall      
require the payment to shareholders based on the acceptance (up to any maximum  
specified in the terms of the tender offer) of Purchased Shares (as defined     
below) of an aggregate of the cash plus other consideration having a fair       
market value (as determined by the Board of Directors) as of the Expiration     
Time of such tender offer that combined together with (I) the aggregate of the  
cash plus the fair market value (as determined by the Board of Directors) of    
consideration payable in respect of any other tender offer (determined as of    
the Expiration Time of such other tender offer) by the Corporation or any       
Subsidiary for all or any portion of the Common Stock expiring within the 12    
months preceding the expiration of the Tender Offer and in respect of which no  
asjustment pursuant to clause (v) of this Section 6(e) or this clause (vi) has  
been made and (II) the aggregate amount of any distributions to all holders of  
the Corporation's Common Stock made exclusively in cash within 12 months        
preceding the expiration of the Tender Offer and in respect of which no         
adjustment pursuant to clause (v) of this Section 6(e) or this clause (vi) has  
been made, exceeds 10% of the product of the Current Market Price per share of  
the Common Stock as of the Expiration Time of the Tender Offer times the number 
of shares of Common Stock outstanding (including any tendered shares) at the    
Expiration Time of the Tender Offer, then, and in each such case, immediately   
prior to the opening of business on the day after the date of the Expiration    
Time of the Tender Offer, the Conversion Price shall be adjusted so that the    
same shall equal the price determined by multiplying the Conversion Price       
immediately prior to close of business on the date of the Expiration Time of    
the Tender Offer by a fraction (i) the numerator of which shall be equal to     
(A) the product of (I) the Current Market Price per share of the Common Stock   
as of the Expiration Time of the Tender Offer and (II) the number of shares of  
Common Stock outstandindg (including any tendered shares) at the Expiration Time
of the Tender Offer less (B) the amount of cash plus the the fair market value  
(determined as aforesaid) of the aggregate consideration payable to             
shareolders based on the acceptance (up to any maximum specified in the terms of
the Tender Offer) of                                                            

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Purchased Shares as defined below, and (ii) the denominator of which shall be   
equal to the product of (A) the Current Market Price per share of the Common    
Stock as of the Expiration Time of the Tender Offer and (B) the number of shares
of Common Stock outstanding (including any tendered shares) as of the Expiration
Time of the Tender Offer less the number of all shares validly tendered and not 
withdrawn as of the Expiration Time of the Tender Offer, and accepted for       
purchase up to any maximum (the shares deemed so accepted up to any such        
maximum, being referred to as the "Purchased Shares").                          

(vii) The reclassification of Common Stock into securities other than 
Common Stock shall be deemed to involve (a) a distribution of such securities   
other than Common Stock to all holders of Common Stock (and the effective date  
of such reclassification shall be deemed to be "the date fixed for the          
determination of shareholders entitled to receive such distribution" and the    
"date fixed for such determination" within the meaning of clause (iv) of this   
Section 6(e)), and (b) a subdivision or combination, as the case may be, of the 
number of shares of Common Stock outstanding immediately prior to such          
reclassification into the number of shares of Common Stock outstanding          
immediately thereafter (and the effective date of such reclassification shall be
deemed to be "the day upon which such subdivision becomes effective" or "the day
upon which such combination becomes effective", as the case may be, and "the day
upon which such subdivision or combination becomes effective" within the meaning
of clause (iii) of this Section 6(e) above).                                    

     (viii) For the purpose of any computation under clause (ii),(iv), (v), (vi)
or (vii) of this Section 6(e), the current market price per share of Common     
Stock (the "Current Market Price") on any day shall be deemed to be the average 
of the daily closing prices per share for the ten consecutive Trading Days      
ending on the earlier of the day in question and the day before the Ex Date (as 
defined below) with respect to the issuance, payment or distribution or the date
of the expiration of the tender offer requiring such computation. For this      
purpose, the term "Ex Date", when used with respect to any issuance or          
distribution, shall mean the first date on which the Common Stock trades regular
way on the applicable securities exchange or in the applicable securities market
without the right to receive such issuance or distribution. "Trading Day" means 
each Monday, Tuesday, Wednesday, Thursday and Friday, other than any day on     
which the Common Stock is not traded on the applicable securities exchange or on
the applicable securities market. The closing price ("closing price") for each  
day shall be the reported last sale price regular way                           

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or, in case no such reported sale takes place on such day, the average of the   
reported closing bid and asked prices regular way, in either case on the New    
York Stock Exchange or, if the Common Stock is not listed or admitted to trading
on such Exchange, on the principal national securities exchange on which the    
Common Stock is listed or admitted to trading or, if not listed or admitted to  
trading on any national securities exchange, on the Nasdaq National Market or,  
if the Common Stock is not listed or admitted to trading on any national        
securities exchange or quoted on the Nasdaq National Market, the average of the 
closing bid and asked prices in the over-the-counter market as furnished by any 
New York Stock Exchange member firm reasonably selected from time to time by the
Board for that purpose.                                                         

 (f) No adjustment in the Conversion Price shall be required unless such
adjustment (plus any adjustments not previously made by reason of this Section  
6(f)) would require an increase or decrease of at least one percent in such     
Conversion Price; provided, however, that any adjustments which by reason of    
this Section 6(f) is not required to be made shall be carried forward and taken 
into account in any subsequent adjustment. All calculations under this Section  
shall be made to the nearest cent or to the nearest 1/100 of a share of Common  
Stock, as the case may be.                                                      

(g) Whenever the Conversion Price is adjusted as herein provided:     

        (i) the Corporation shall compute the adjusted Conversion Price in
accordance with Section 6(e) and shall prepare a certificate signed by the      
treasurer of the Corporation setting forth the adjusted Conversion Price and    
showing in reasonable detail the facts upon which such adjustment is based, and 
such certificate shall forthwith be filed with any Transfer Agent; and          

         (ii) a notice stating that the Conversion Price has been adjusted and
setting forth the adjusted Conversion Price shall forthwith be required, and as 
soon as practicable after it is required, such notice shall be mailed by the    
Corporation to all holders of Series A Convertible Preferred Stock at their last
addresses as they shall appear in the security register.                        

(h) In case:                                                          

        (i) the Corporation shall declare a dividend or other distribution
on its Common Stock (other than a dividend payable exclusively in cash that     
would not cause an                                                              

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   adjustment to the Conversion Price to take place pursuant to Section 6(e)
above); or                                                            

         (ii)  the Corporation or any Subsidiary shall make a tender offer for
the Common Stock (other than a tender offer that would not cause an   
adjustment to the Conversion Price pursuant to clause (v) or (vi) of  
Section 6(e)); or                                                     

       (iii)  the Corporation shall authorize the granting to all holders of
its Common Stock of rights, options or warrants to subscribe for or   
purchase any shares of capital stock of any class; or                 

        (iv)  of any reclassification of the Common Stock of the Corporation
(other than a subdivision or combination of its outstanding shares of 
   Common Stock), or of any consolidation, merger or share exchange to which
  the Corporation is a party and for which approval of any shareholders of
the Corporation is required, or of the sale or transfer of all or     
substantially all of the assets of the Corporation; or                

      (v)  of the voluntary or involuntary dissolution, liquidation or
winding up of the Corporation;                                        

   then the Corporation shall cause to be filed with any Transfer Agent, and
shall cause to be mailed to all holders of the Series A Convertible   
Preferred Stock at their last addresses as they shall appear in the   
  security register, at least 20 days (or 10 days in any case specified in
clause (i) or (ii) above) prior to the effective date hereinafter     
   specified, a notice stating (x) the date on which a record has been taken
    for the purpose of such dividend, distribution or grant of rights, options
   or warrants, or, if a record is not to be taken, the date as of which the
identity of the holders of Common Stock of record entitled to such    
    dividend, distribution, rights, options or warrants was determined, or (y)
the date on which such reclassification, consolidation, merger, share 
exchange, sale, transfer, dissolution, liquidation or winding up is   
    expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their 
   shares of Common Stock for securities, cash or other property deliverable
  upon such reclassification, consolidation, merger, share exchange, sale,
  transfer, dissolution, liquidation or winding up. Neither the failure to
give such notice nor any defect therein shall affect the legality or  
  validity of the proceedings described in clauses (i) through (v) of this
Section 6(h).                                                         

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    (i)     Nonassessability of Common Stock.  The Corporation covenants
that all shares of Common Stock which may be issued upon conversion of Series   
A convertible Preferred Stock will upon issue be fully paid and nonassessable.  

        (j)     Reservation of Shares; Transfer tax; Etc.  The Corporation shall
at all times reserve and keep available, out of its authorized and unissued     
stock, solely for the purpose of effecting the conversion of the Series A       
Convertible Preferred Stock, such number of shares of its Common Stock, free    
from preemptive rights, as shall from time to time be sufficient to effect the  
conversion of all shares of Series A Convertible Preferred Stock from time to   
time outstanding.  The Corporation shall from time to time, in accordance with  
the laws of the State of California, increase the authorized number of shares   
of Common Stock if at any time the number of shares of Common Stock not         
outstanding shall not be sufficient to permit the conversion of all the then    
outstanding shares of Series A Convertible Preferred Stock.                     

     If any shares of Common Stock required to be reserved for purposes of
conversion of the Series A Convertible Preferred Stock hereunder require        
registration with or approval of any governmental authourity under any Federal  
or State law before such shares may be issued upon conversion, the Corporation  
covenants that it will in good faith and as expeditiously as possible endeavor  
to cause such shares to be duly registered or approved, as the case may be.  If 
the Common Stock is listed on the New York Stock Exchange or any other national 
securities exchange, the Corporation covenants that it will, if permitted by    
the rules of such exchange, list and keep listed on such exchange, upon         
official notice of issuance, all shares of Common Stock issuable upon conversion
of the Series A Convertible Preferred Stock.                                    

     The Corporation covenants that it will pay any and all issue or other
taxes that maybe payable in respect of any issue or delivery of shares of       
Connon Stock on conversion of the Series A Convertible Preferred Stock.  The    
Corporation shall not, however, be required to pay any tax which may be         
payable in respect of any transfer involved in the issue or delivery of Commom  
Stock (or other securities or assets) in a name other than that in which the    
shares of Series A Convertible Preferred Stock so converted were registered,    
and no such issue or delivery shall be made unless and until the person         
requesting such issue has paid to the Corporaton the amount of such tax or has  
established, to the satisfaction of the Corporation, that such tax has been     
paid.                                                                           

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Before taking any action which would cause an adjustment reducing the 
Conversion Price below the then par value of the Common Stock, if any, the      
Corporation covenants that it will take any corporate action which may, in the  
opinion of its counsel, be necessary in order that the Corporation may validly  
and legally issue fully paid and non-assessable shares of Common Stock at the   
Conversion Price as so adjusted.                                                

    (k) Other Changes in Conversion Price.  The Corporation may, but shall not
be obligated to, make such decreases in the Conversion Price, in addition of    
those required or allowed by this Section 6, as shall be determined by it, as   
evidenced by a resolution of the Board, to be advisable in order to avoid or    
diminish any income tax to holders of Common Stock resulting from any dividend  
or distribution of any capital stock of the Corporation or issuance of rights,  
options or warrants to purchase or subscribe for any such stock or from any     
event treated as such for income tax purposes.                                  

Section 7. Liquidation Rights.                                        

   (a) Liquidation Preference.  In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation, the   
holders of outstanding shares of the Series A Convertible Preferred Stock shall 
be entitled, before any payment or distribution shall be made on Junior Stock,  
to be paid in full an amount equal to the Stated Value per share, plus an amount
equal to all accrued but unpaid dividends (whether or not earned or declared),  
and no more. After payment of the full amount of such liquidation distribution, 
the holders of the Series A Convertible Preferred Stock shall not be entitled to
any further participation in any distribution of assets of the Corporation.     

(b) Insufficient Assets.  (i) If, upon any voluntary or involuntary   
liquidation, dissolution or winding up of the Corporation, the assets of the    
Corporation, or proceeds thereof, distributable among the holders of the shares 
of the Series A Convertible Preferred Stock and any other stock of the          
Corporation ranking, as to liquidation, dissolution or winding up, on a parity  
with the Series A Convertible Preferred Stock (collectively, "Liquidation Parity
Stock"), shall be insufficient to pay in full the preferential amount set forth 
in subparagraph (a) above and liquidating payments on all Liquidation Parity    
Stock, then assets of the Corporation remaining after the distribution to       
holders of any Senior Stock then outstanding of the full amounts to which they  
may be entitled, or the proceeds thereof, shall be distributed among the holders
of the                                                                          

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Series A Convertible Preferred Stock and all such Liquidation Parity Stock      
ratably in accordance with the respective amount which would be payable on such 
shares of Series A Convertible Preferred Stock and any such Liquidation Parity  
Stock if all amounts payable thereon were paid in full (which, in the case of   
such other stock, may include accumulated dividends).                           

     (ii) In the event of any such liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, unless and until payment in full 
is made to the holders of all outstanding shares of the Series A Convertible    
Preferred Stock of the liquidation distribution to which they are entitled      
pursuant to subparagraph (a) above, no dividend or other distribution shall be  
made to the holders of any Junior Stock and no purchase, redemption or other    
acquisition for any consideration by the Corporation shall be made in respect of
any Junior Stock, other than any such dividend or distribution consisting solely
of, or purchase, redemption or acquisition for consideration consisting solely  
of, shares of Junior Stock.                                                     

(c) Definition.  Neither the consolidation nor the merger of the      
Corporation into or with another corporation or corporations shall be deemed to 
be a liquidation, dissolution or winding up of the Corporation within the       
meaning of this Section 7.                                                      

Section 8. Voting Rights.                                             

 (a) No Vote Except as Provided.  Except as otherwise expressly provided
herein or required by law, no holder of shares of Series A Convertible Preferred
Stock shall have or possess any right to notice of shareholders' meetings or any
vote (whether at such a meeting or in writing without a meeting) with respect to
any shares of Series A Convertible Preferred Stock held by such holder on any   
matter.                                                                         

     (b) Election of Directors.  At any meeting of shareholders for the election
of directors of the Corporation (or, in lieu thereof, by the unanimous written  
consent of the outstanding shares of Series A Convertible Preferred Stock), the 
holders of Series A Convertible Preferred Stock shall have the right, voting or 
consenting separately as a series, to the exclusion of the holders of the       
Corporation's Common Stock or any other series of Preferred Stock or any other  
class or series of capital stock of the Corporation, to elect the Applicable    
Number (as hereinafter defined) of directors of the Corporation (each a "Series 
A Director"). Any Series A Director may be removed by, and (except as provided  
elsewhere in this paragraph (b))                                                

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shall not be removed without cause (or, except to the extent required by law,   
with cause) except by, the vote or consent of the holders of record of a        
majority of the outstanding shares of Series A Convertible Preferred Stock,     
voting or consenting separately as a series, at a meeting of the shareholders or
of the holders of the shares of Series A Convertible Preferred Stock called for 
that purpose or pursuant to a written consent of the Series A Convertible Stock,
as the case may be. Any vacancy in the office of a Series A Director may be     
filled only by the vote or consent of the holders of the outstanding shares of  
Series A Convertible Preferred Stock, voting or consenting separately as a      
series, at a meeting of the shareholders or of the holders of the shares of     
Series A Convertible Preferred Stock called for that purpose or pursuant to a   
written consent of the Series A Convertible Preferred Stock, as the case may be 
or, in the case of a vacancy created by removal of a Series A Director, as      
provided above, at the same meeting at which such removal shall be voted or by  
written consent of a majority of the outstanding shares of Series A Convertible 
Preferred Stock. In no instance shall the Board of Directors of the Corporation 
have the power to fill any vacancy in the office of a Series A Director.        
Whenever holders of the Series A Convertible Preferred Stock shall cease to be  
entitled to elect the then established Applicable Number of directors, then and 
in any such case such Series A Director or Directors as shall be designated by  
majority vote of the holders of the Series A Convertible Preferred Stock shall, 
without any further action, immediately cease to be a director of the           
Corporation. As used herein, the Applicable Number at any time shall mean the   
smallest whole number that is greater than or equal to the product of (i) 2/11  
and (ii) the total number of directors at such time (including the directors    
that the holders of Series A Preferred Stock are entitled to elect at such      
time); provided, however, the Applicable Number shall be reduced by the minimum 
number of directorships in order that the sum of (i) the Applicable Number and  
(ii) the minimum whole number of directors which can be elected (through the    
application of cumulative voting) by shares of Common Stock (x) obtained upon   
conversion of the Series A Convertible Preferred Stock or exercise of the Series
A Warrants and (y) held of record by the holder (or subsidiaries thereof) not   
equal or exceed a majority of the total number of directors of the Company.     

 (c) Certain Actions.  So long as any shares of the Series A Convertible
Preferred Stock shall remain outstanding, the consent of the holders of a       
majority of the shares of the Series A Convertible Preferred Stock at the time  
outstanding, acting as a separate series, given in person or by proxy, either in
writing without a meeting or                                                    

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by vote at any meeting called for the purpose, shall be necessary for 
effecting or validating:                                              

        (i)   The authorization, creation, issuance or sale of any shares of
  any class or series of capital stock of the Corporation which shall rank
  senior to the Common Stock of the Corporation which shall rank senior to
  the Common Stock of the Corporation as to dividend rights or rights upon
 liquidation, winding up or dissolution of the Corporation, whether such
     capital stock shall constitute Senior Stock, Parity Stock (including Series
A Convertible Preferred Stock) or Junior Stock, or otherwise, or any  
     security convertible thereinto or exchangeable therefor or representing the
right to acquire any of the foregoing; provided, however, that no such
    consent is or shall be necessary for the authorization, creation, issuance
     or sale of (A) additional shares of Series A Convertible Stock issuable, at
the election of the Company, pursuant to Section 4.3 of the Investment
    Agreement or (B) additional shares of Series A Convertible Preferred Stock
 payable as a dividend in accordance with Section 3(b) above (including,
without limitation, such shares payable as a dividend upon additional 
shares issued as contemplated by clause (A) of this paragraph (i));   

         (ii)  Any amendment, alteration or repeal of any of the provisions of
the Articles of Incorporation or of the By-laws of the Corporation    
    (including any adoption of a Certificate of Determination of any series of
stock of the Corporation);                                            

         (iii) The merger or consolidation of the Corporation with or into, or
 the sale or conveyance of all or substantially all of the assets of the
    Corporation to, any person or entity (provided, however, that on and after
the third anniversary of the Issuance Anniversary Date, in lieu of the
   right to vote on or consent with respect to the actions specified in this
  paragraph (iii) as a separate series, the Series A Convertible Preferred
Stock shall have the right to vote or consent together with the Common
Stock, as a single class, and in any such vote or consent a holder of 
shares of Series A Convertible Preferred Stock shall be entitled to a 
     number of votes equal to the number of shares of Common Stock (rounded down
to the nearest share) into which such shares of Series A Convertible  
     Preferred Stock are convertible on the date the vote is taken or consent is
given); or                                                            

         (iv)  Any dividend or other distribution to all holders of its Common
     Stock of cash or property or any purchase or acquisition by the Corporation
     or any of its subsidiaries of its Common Stock in an aggregate amount that,
combined together with (A) the aggregate amount of any                

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   other such distributions to all holders of its Common Stock within the 12
     months preceding the date of payment of such distribution and in respect of
which no vote was required pursuant to this paragraph (iv) and (B) the
   aggregate of any cash plus the fair market value of consideration payable
    in respect of any purchase or acquisition by the Corporation or any of its
  subsidiaries for all or any portion of the Common Stock concluded within
 the 12 months preceding the date of payment of such distribution and in
respect of which no vote was required pursuant to this paragraph (iv),
 exceeds 15% of the product of the Current Market Price per share of the
Common Stock of the Corporation on the date for the determination of  
 holders of shares of Common Stock entitled to receive such distribution
times the number of shares of Common Stock outstanding on such date;  

provided, however, that no such consent of the holders of the Series A
   Convertible Preferred Stock shall be required if, at or prior to the time
  when any such action of the type referred to in subparagraphs (i), (ii),
   (iii) and (iv) of this Section 8 is to take effect, provision is made for
     the redemption of all shares of the Series A Convertible Preferred Stock at
    the time outstanding and deposit of the aggregate Redemption Price is made
pursuant to Section 4(b)(iii).                                        

        Section 9. Preemptive Rights.  In the event the Company intends to
    issue and sell shares of Common Stock in a public offering as contemplated
by Section 8.10 of the Investment Agreement, the Company shall first  
    provide the holders of Series A Convertible Preferred Stock 60 day's prior
 written notice of such intent. At the holder's election, each holder of
Series A Convertible Preferred Stock has the preemptive right to      
participate in such Common Stock offering up to the holder's fully    
    converted/exercised interest in the Common Stock of the Company at the per
    share price received by the Company (i.e., without underwriters' discount)
    in such public offering. For purposes of the foregoing, the holder's fully
   converted/exercised interest in the Common Stock shall equal the quotient
of (I) the number of shares of Common Stock beneficially owned or     
   obtainable by the holder and its affiliates by virtue of ownership of the
    Series A Preferred Shares (including any additional shares actually issued
   by virtue of the provision permitting payment of dividends in kind on the
Series A Preferred Shares) and the Series A Warrants and conversion or
    exercise thereof divided by (II) the sum of (A) the total number of shares
of Common Stock of the Company then outstanding plus (B) the number of
    shares referred to in (I). This preemptive right shall terminate when this
    security is not held by American International Group, Inc. or subsidiaries
or affiliates thereof.                                                

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     Section 10. Exclusion of Other Rights.  Except as may otherwise be required
by law, the shares of Series A Convertible Preferred Stock shall not have any   
preferences or relative, participating, optional or other special rights, other 
than those specifically set forth in this resolution (as such resolution may be 
amended from time to time) and in the Articles of Incorporation of the          
Corporation, as amended. Without limitation of the foregoing, the shares of     
Series A Convertible Preferred Stock shall have no preemptive or subscription   
rights.                                                                         

Section 11. Headings of Subdivisions.  The headings of the various    
subdivisions hereof are for convenience of reference only and shall not affect  
the interpretation of any of the provisions hereof.                             

Section 12. Severability of Provisions.  If any right, preference or  
limitation of the Series A Convertible Preferred Stock set forth in this        
resolution (as such resolution may be amended from time to time) is invalid,    
unlawful or incapable of being enforced by reason of any rule of law or public  
policy, all other rights, preferences and limitations set forth in this         
resolution (as so amended) which can be given effect without the invalid,       
unlawful or unenforceable right, preference or limitation shall, nevertheless,  
remain in full force and effect, and no right, preference or limitation herein  
set forth shall be deemed dependent upon any other such right, preference or    
limitation unless so expressed herein.                                          

*      *      *   

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______________ declares under penalty of perjury under the laws of the State of 
California that he [she] has read the foregoing certificate and knows the       
contents thereof and that the same is true of his [her] own knowledge.          

Dated:                                                                          

       /s/
                                      ----------------------------------

______________ declares under penalty of perjury under the laws of the State of 
California that he [she] has read the foregoing certificate and knows the       
contents thereof and that the same is true of his [her] own knowledge.          

Dated:                                                                          

       /s/
                                      ----------------------------------

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EXHIBIT   
B   

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                                                                       EXHIBIT B

[Form of Warrant Certificate] 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER   
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER STATE SECURITIES LAWS. THE     
TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE    
CONDITIONS SPECIFIED IN THE INVESTMENT AND STRATEGIC ALLIANCE AGREEMENT (THE    
"AGREEMENT"), DATED AS OF OCTOBER 17, 1994, BY AND AMONG 20TH CENTURY INDUSTRIES
(THE "COMPANY") AND AMERICAN INTERNATIONAL GROUP, INC. ("INVESTOR"). A COPY OF  
SUCH CONDITIONS WILL BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF UPON      
WRITTEN REQUEST AND WITHOUT CHARGE. THESE SECURITIES MAY NOT BE RESOLD OR       
TRANSFERRED UNLESS SUCH CONDITIONS ARE COMPLIED WITH AND UNLESS REGISTERED OR   
EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND      
APPLICABLE STATE SECURITIES LAWS.                                               

16,000,000  

SERIES A WARRANTS   

to Purchase   

One*  

Share   

of  
Common Stock (no par value)   

of  

20th CENTURY INDUSTRIES   

Price: $13.50* per share  

---------------                                                                 
* Subject to adjustment on the Closing Date to reflect any antidilution         
adjustment that would have occurred pursuant to the terms of the Series A   
Warrant had the Series A Warrant been issued on the date of the Investment  
Agreement.                                                                  

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This certifies that, for value received, American International Group,
Inc., a Delaware corporation (the "Investor"), or its registered assigns (each, 
a "Holder") is entitled to purchase, subject to the provisions of these Series  
A Warrants and the Investment Agreement (as defined below), from 20th Century   
Industries, a corporation duly organized and existing under the laws of the     
State of California (the "Company"), at any time on or after the Effective Date 
(as defined below) and on or before the Expiration Date (as defined below), one*
(the "Warrant Number") fully paid and nonassessable share of Common Stock, no   
par value (the "Common Stock"), of the Company at an exercise price of $13.50*  
per share (the "Exercise Price") pursuant to each of the 16,000,000 Series A    
Warrants evidenced hereby. The Warrant Number and the Exercise Price are subject
to adjustment from time to time as set forth in Section 7 and Section 8. These  
warrants are the Series A Warrants referred to in Section 1.1 of the Investment 
and Strategic Alliance Agreement, dated as of October 17, 1994, by and between  
the Company and the Investor (the "Investment Agreement").                      

 As used herein, the term Effective Date means, with respect to all or a
portion of these Series A Warrants, as the case may be, the first anniversary of
the Closing                                                                     

---------------                                                                 
*  Subject to adjustment as described in note * on cover page.                  

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Date; provided, however, that in the event that the Investor makes a            
contribution to the capital of the Company pursuant to Section 4.3 of the       
Investment Agreement prior to the first anniversary of the Closing Date, the    
Effective Date shall be the second anniversary of the Closing Date; provided,   
however, the Effective Date may be accelerated to be an earlier date in the     
event the Company's Board of Directors approve such; and provided, further,     
however, the Effective Date shall be accelerated to such date that the Investor 
is entitled to acquire additional securities of the Company pursuant to Section 
6.1(B) of the Investment Agreement prior to the third anniversary of the Closing
Date thereunder.                                                                

  As used herein, the term Expiration Date means, with respect to all or a
portion of these Series A Warrants, as the case may be, the thirteenth          
anniversary of the Closing Date.                                                

     Section 1. Definitions. Except as otherwise specified herein, defined terms
herein, which may be identified by the capitalization of the first letter of    
each principal word thereof, have the meanings assigned to them in the          
Investment Agreement.                                                           

     Section 2. Exercise of Series A Warrants. Subject to the provisions hereof,
these Series A Warrants may be exercised, at any time on or after the Effective 
Date and on or before the Expiration Date, by presentation and                  

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surrender hereof to the Company at the office or agency of the Company          
maintained for that purpose pursuant to Section 9 (the "Warrant Office") with   
the purchase Form substantially in the form annexed hereto as Exhibit A (the    
"Purchase Form") and accompanied by payment to the Company, for the account of  
the Company, of the Exercise Price for the number of shares specified in such   
Purchase Form. These Series A Warrants may be exercised in whole or in part and,
if exercised in part, the unexercised Series A Warrants may be exercised on a   
subsequent date or dates on or before the Expiration Date. The Company shall    
keep at the Warrant Office a register for the registration and registration of  
transfer of Series A Warrants. The Exercise Price for the number of shares of   
Common Stock specified in the Purchase Form shall be payable in United States   
dollars by bank check or wire transfer of immediately available funds to an     
account designated by Company for this purpose.                                 

   Upon receipt by the Company of any of this Warrant at the Warrant Office,
in proper form for exercise, the Holder shall be deemed to be the holder of     
record of the shares of Common Stock issuable upon such exercise,               
notwithstanding that the stock transfer books of the Company shall then be      
closed or that certificates representing such shares of Common Stock shall not  
then be actually delivered to the Holder. The Company shall issue certificate(s)
for the shares of Common Stock issuable upon exercise and, if                   

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exercised in part, a new warrant certificate representing the remaining         
unexercised Series A Warrants, and deliver such to the Holder. The Company shall
pay all expenses, and any and all stamp or similar taxes that may be payable in 
connection with the preparation, issuance and delivery of stock certificates and
any new warrant certificate under this Section 2 (collectively, "Taxes");       
provided, however, that the Company shall not be required to pay any Taxes which
may be payable in respect of any transfer involved in the issue and delivery of 
shares of Common Stock in a name other than that of the Holder. No issuance or  
delivery to a party other than a Holder shall be made unless and until that     
party has paid to the Company such Taxes or has established to the satisfaction 
of the Company that Taxes have been paid.                                       

    All shares of Common Stock issued upon exercise of these Series A Warrants
shall be duly authorized and validly issued, fully paid and nonassessable.      

 Section 3. Reservation of Shares; Preservation of Rights of Holder. The
Company hereby agrees that there shall be reserved for issuance and delivery    
upon exercise of these Series A Warrants, free from preemptive rights, the      
number of shares of authorized but unissued shares of Common Stock, or other    
stock or securities deliverable pursuant to paragraph (i) of Section 7, as shall
be required for issuance or delivery upon exercise of these Series A            

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Warrants. The Company further agrees that it will not, by amendment of its      
Articles of Incorporation or through reorganization, consolidation, merger,     
dissolution or sale of assets, or by any other voluntary act, avoid or seek to  
avoid the observance or performance of any of the covenants, stipulations or    
conditions to be observed or performed hereunder by the Company. Without        
limiting the generality of the foregoing, the Company agrees that before taking 
any action which would cause an adjustment reducing the Exercise Price below the
then par value of Common Stock issuable upon exercise hereof, the Company will  
from time to time take all such action which may be necessary in order that the 
Company may validly and legally issue fully paid and nonassessable shares of    
Common Stock at the Exercise Price as so adjusted.                              

  Section 4. Fractional Shares. The Company shall not be required to issue
fractional shares of Common Stock upon exercise of these Series A Warrants but  
shall pay for such fraction of a share in cash or by certified or official bank 
check at the Exercise Price.                                                    

Section 5. Loss of Series A Warrants. Upon receipt by the Company of  
evidence reasonably satisfactory to it of the loss, theft, destruction or       
mutilation of these Series A Warrants, and (in the case of loss, theft or       
destruction) of reasonably satisfactory indemnification, and upon surrender and 
cancellation of these Series A Warrants, if mutilated, the Company will execute 
and deliver new                                                                 

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Series A Warrants of like tenor and date. Any new Series A Warrants executed and
delivered shall constitute an additional contractual obligation on the part of  
the Company, whether or not the Series A Warrants so lost, stolen, destroyed or 
mutilated shall be at any time enforceable by anyone.                           

   Section 6. Rights of the Investor. Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company.                         

Section 7. Antidilution Provisions. The Exercise Price and the Warrant
Number shall be subject to adjustment from time to time as provided in this     
Section 7 and in Section 8.                                                     

    (a) In case the Company shall pay or make a dividend or other distribution
on any class of capital stock of the Company in Common Stock, the Exercise Price
in effect immediately prior to the opening of business on the next Business Day 
following the date fixed for determination of stockholders entitled to receive  
such dividend or other distribution shall be reduced by multiplying such        
Exercise Price by a fraction of which the numerator shall be the number of      
shares of Common Stock outstanding at the close of business on the date fixed   
for such determination and the denominator shall be the sum of such number of   
shares and the total number of shares constituting such dividend or other       
distribution, such reduction to become effective                                

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immediately prior to the opening of business on the next Business Day following 
the date fixed for such determination. For the purposes of this paragraph (a),  
the number of shares of Common Stock at any time outstanding shall include      
shares issuable in respect of scrip certificates issued in lieu of fractions of 
shares of Common Stock.                                                         

   (b) In case the Company shall hereafter issue rights, options or warrants
to all holders of its Common Stock entitling them to subscribe for or purchase  
shares of Common Stock (such rights, options or warrants not being available on 
an equivalent basis to Holders of the Series A Warrants upon exercise) at a     
price per share less than the Current Market Price (as defined in subsection (k)
of this Section 7) of the Common Stock on the date fixed for the determination  
of shareholders entitled to receive such rights, options or warrants (other than
pursuant to a dividend reinvestment plan), (A) the Exercise Price in effect     
immediately prior to the opening of business on the next Business Day following 
the date fixed for such determination shall be reduced by multiplying the       
Exercise Price in effect immediately prior to the close of business on the date 
fixed for the determination of holders of Common Stock entitled to receive such 
rights, options or warrants by a fraction of which the numerator shall be the   
number of shares Common Stock outstanding at the close of business              

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on the date fixed for such determination plus the number of shares of Common    
Stock which the aggregate of the offering price of the total number of shares of
Common Stock so offered for subscription or purchase would purchase at such     
Current Market Price and the denominator shall be the number of shares of Common
Stock outstanding at the close of business on the date fixed for such           
determination plus the number of shares of Common Stock so offered for          
subscription or purchase, such reduction to become effective immediately prior  
to the opening of business on the next Business Day following the date fixed for
such determination. For the purposes of this clause 7(b), the number of shares  
of Common Stock at any time outstanding shall include shares issuable in respect
of scrip certificates issued in lieu of fractions of shares of Common Stock, and
(B) if any such rights, options or warrants expire or terminate without having  
been exercised or are exercised for a consideration different from that utilized
in the computation of any adjustment or adjustments on account of such rights,  
options or warrants, the Exercise Price with respect to any Series A Warrants   
not theretofore exercised shall be readjusted such that the Exercise Price would
be the same as would have resulted had such adjustment been made without regard 
to the issuance of such expired or terminated rights, options or warrants or    
based upon the actual consideration received upon exercise thereof, as the case 
may be, which readjustment shall become                                         

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effective upon such expiration, termination or exercise, as applicable;         
provided, however, that all readjustments in the Exercise Price based upon any  
expiration, termination or exercise for a different consideration of any such   
right, option or warrant, in the aggregate, shall not cause the Exercise Price  
to exceed the Exercise Price immediately prior to the time such rights, options 
or warrants were initially issued (without regard to any other adjustments of   
such number under this clause 7(b) that may have been made since the date of the
issuance of such rights, options or warrants).                                  

     (c) In case the outstanding shares of Common Stock shall be subdivided into
a greater number of shares of Common Stock, the Exercise Price in effect        
immediately prior to the opening of business on the next Business Day following 
the day upon which such subdivision becomes effective shall be proportionately  
reduced, and, conversely, in case outstanding shares of Common Stock shall each 
be combined into a smaller number of shares of Common Stock, the Exercise Price 
in effect immediately prior to the opening of business on the next Business Day 
following the day upon which such combination becomes effective shall be        
proportionately increased.                                                      

    (d) In case the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock evidences of its indebtedness or assets (including  

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securities, but excluding any rights, options or warrants referred to in clause 
(b) of this Section 7, any dividend or distribution paid exclusively in cash and
any dividend referred to in clause (a) of this Section 7), the Exercise Price   
shall be adjusted so that the same shall equal the price determined by          
multiplying the Exercise Price in effect immediately prior to the close of      
business on the date fixed for the determination of shareholders entitled to    
receive such distribution by a fraction of which (A) the numerator shall be the 
Current Market Price at the close of business on the date fixed for such        
determination less the then fair market value of the portion of the assets or   
evidences of indebtedness so distributed applicable to one share of Common Stock
(the amount calculated pursuant to this clause (A) being hereinafter referred to
as the "Adjusted Market Price") and (B) the denominator shall be such Current   
Market Price, such adjustment to become effective immediately prior to the      
opening of business on the next Business Day following the date fixed for the   
determination of shareholders entitled to receive such distribution.            

    (e) In case the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock cash (excluding any cash that is distributed and    
adjusted for as part of a distribution referred to in clause (d) of this Section
7) in an aggregate amount that, combined together with (A) the aggregate amount 
of any other                                                                    

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distributions to all holders of its Common Stock made exclusively in cash within
the 12 months preceding the date of payment of such distribution and in respect 
of which no adjustment pursuant to this clause (e) or clause (d) of this Section
7 has been made and (B) the aggregate of any cash plus the fair market value as 
of the last time tender could have been made pursuant to such tender offer, as  
it may have been amended (such time, the "Expiration Time") of consideration    
payable in respect of any tender offer by the Company or any of its subsidiaries
for all or any portion of the Common Stock concluded within the 12 months       
preceding the date of payment of such distribution and in respect of which no   
adjustment pursuant to this clause (e) or clause (f) of this Section 7 has been 
made, exceeds 10% of the product of the Current Market Price per share of the   
Common Stock on the date for the determination of holders of shares of Common   
Stock entitled to receive such distribution times the number of shares of Common
Stock outstanding on such date, then, and in each such case, immediately after  
the close of business on such date for determination, the Exercise Price shall  
be reduced so that the same shall equal the price determined by multiplying the 
Exercise Price in effect immediately prior to the close of business on the date 
fixed for determination of the shareholders entitled to receive such            
distribution by a fraction (A) the numerator of which shall be equal to the     
Current Market Price per share                                                  

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of the Common Stock on the date fixed for such determination less an amount     
equal to the quotient of (x) the excess of such combined amount over such 10%   
and (y) the number of shares of Common Stock outstanding on such date for       
determination and (B) the denominator of which shall be equal to the Current    
Market Price per share of the Common Stock as of such date for determination.   

    (f)  In case a tender offer (a "Tender Offer") made by the Company or any of
its subsidiaries for all or any portion of the Common Stock shall expire (the   
"Expiration Time") and the Tender Offer (as amended upon the expiration thereof)
shall require the payment to shareholders based on the acceptance (up to any    
maximum specified in the terms of the Tender Offer) of Purchased Shares (as     
defined below) of an aggregate of the cash plus other consideration having a    
fair market value (as determined by the Board of Directors) as of the Expiration
Time of such Tender Offer that combined together with (A) the aggregate of the  
cash plus the fair market value (as determined by the Board of Directors) of    
consideration payable in respect of any other tender offer (determined as of the
Expiration Time of such other tender offer) by the Company or any of its        
subsidiaries for all or any portion of the Common Stock expiring within the 12  
months preceding the expiration of the Tender Offer and in respect of which no  
adjustment pursuant to clause (e) of this Section 7 or this                     

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clause (f) has been made and (B) the aggregate amount of any distributions to   
all holders of the Common Stock made exclusively in cash within 12 months       
preceding the expiration of the Tender Offer and in respect of which no         
adjustment pursuant to clause (e) of this Section 7 or this clause (f) has been 
made, exceeds 10% of the product of the Current Market Price per share of the   
Common Stock as of the Expiration Time of the Tender Offer multiplied by the    
number of shares of Common Stock outstanding (including any tendered shares) at 
the Expiration Time of the Tender Offer, then, and in each such case,           
immediately prior to the opening of business on the next Business Day after the 
date of the Expiration Time of the Tender Offer, the Exercise Price shall be    
adjusted so that the same shall equal the price determined by multiplying the   
Exercise Price immediately prior to close of business on the date of the        
Expiration Time of the Tender Offer by a fraction (A) the numerator of which    
shall be equal to (x) the product of (i) the Current Market Price per share of  
the Common Stock as of the Expiration Time of the Tender Offer and (ii) the     
number of shares of Common Stock outstanding (including any tendered shares) at 
the Expiration Time of the Tender Offer less (y) the amount of cash plus the    
fair market value (determined as aforesaid) of the aggregate consideration      
payable to shareholders based on the acceptance (up to any maximum specified in 
the terms of the Tender Offer) of                                               

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Purchased Shares as defined below, and (B) the denominator of which shall be    
equal to the product of (x) the Current Market Price per share of the Common    
Stock as of the Expiration Time of the Tender Offer and (y) the number of shares
of Common Stock outstanding (including any tendered shares) as of the Expiration
Time of the Tender Offer less the number of all shares validly tendered and not 
withdrawn as of the Expiration Time of the Tender Offer, and accepted for       
purchase up to any maximum. For purposes of this Section 7, the term "Purchased 
Shares" shall mean such shares as are deemed so accepted up to any such maximum.

(g) The reclassification (including any reclassification upon a       
consolidation or merger in which the Company is the continuing corporation, but 
not including any transactions for which an adjustment is provided in paragraph 
(i) below) of Common Stock into securities other than Common Stock shall be     
deemed to involve (A) a distribution of such securities other than Common Stock 
to all holders of Common Stock (and the effective date of such reclassification 
shall be deemed to be "the date fixed for the determination of shareholders     
entitled to receive such distribution" and the "date fixed for such             
determination" within the meaning of clause (d) of this Section 7, and (B) a    
subdivision or combination, as the case may be, of the number of shares of      
Common Stock outstanding immediately prior to such reclassification into the    
number of shares of                                                             

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Common Stock outstanding immediately thereafter (and the effective date of such 
reclassification shall be deemed to be "the day upon which such subdivision     
becomes effective" or "the day upon which such combination becomes effective",  
as the case may be, and "the day upon which such subdivision or combination     
becomes effective" within the meaning of clause (c) of this Section 7 above).   

     (h) The Company may make such reductions in the Exercise Price, in addition
to those required by paragraphs (a), (b), (c), (d), (e), (f) and (g) of this    
Section 7, as it considers to be advisable in order that any event treated for  
Federal income tax purposes as a dividend of stock or stock rights shall not be 
taxable to the recipients.                                                      

(i) In case of any consolidation of the Company with, or merger of the
Company into, any other person, any merger of another person into the Company   
(other than a merger which does not result in any reclassification, conversion, 
exchange or cancellation of outstanding shares of the Common Stock) or any sale 
or transfer of all or substantially all of the assets of the Company, at the    
election of the Holder of Series A Warrants represented hereby, the person      
formed by such consolidation or resulting from such merger or which acquires    
such assets, as the case may be, shall execute and deliver to the Holder a new  
warrant certificate, satisfactory in form and substance to the Holder, providing
that the Holder shall have the right                                            

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thereafter, during the period such Series A Warrants shall be outstanding to    
exercise such Series A Warrants into the kind and amount (if any) of securities,
cash and other properly receivable upon such consolidation, merger, sale or     
transfer by a holder of the number of shares of Common Stock of the Company into
which such Series A Warrants might have been converted immediately prior to such
consolidation, merger, sale or transfer. If the holders of the Common Stock may 
elect from choices the kind or amount of securities, cash and other property    
receivable upon such consolidation, merger, sale or transfer, then for the      
purpose of this Section 7 the kind and amount of securities, cash and other     
property receivable upon such consolidation, merger, sale or transfer shall be  
deemed to be the choice specified by the Holder, which specification shall be   
made by the Holder by the later of (A) 20 Business Days after Holder is provided
with a final version of all information required by law or regulation to be     
furnished to holders of Common Stock concerning such choice, or if no such      
information is required, 20 Business Days after the Company notified the Holder 
of all material facts concerning such specifications and (B) the last time at   
which holders of Common Stock are permitted to make their specification known to
the Company. If the Holder fails to make any specification, the Holder's choice 
shall be deemed to be whatever choice is made by a plurality of holders of      
Common                                                                          

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Stock not affiliated with the Company or the other person to the merger or      
consolidation. Such new Series A Warrants shall provide for adjustments which,  
for events subsequent to the effective date of such new Series A Warrants, shall
be as nearly equivalent as may be practicable to the adjustments provided for in
this Section 7 and Section 8. The above provisions of this paragraph (i) shall  
similarly apply to successive consolidations, mergers, sales or transfers.      

 (j) Whenever there shall be any change in the Exercise Price hereunder,
then there shall be an adjustment (to the nearest thousandth of a share) in the 
Warrant Number, which adjustment shall become effective at the time such change 
in the Exercise Price becomes effective and shall be made by multiplying the    
Warrant Number in effect immediately before such change in the Exercise Price by
a fraction of the numerator of which is the Exercise Price immediately before   
such change and the denominator of which is the Exercise Price immediately after
such change.                                                                    

   (k) For the purpose of any computation under clause (b), (d), (e), (f) or
(g) of this Section 7, the current market price per share of Common Stock (the  
"Current Market Price") on any day shall be deemed to be the average of the     
daily closing prices per share for the ten consecutive Trading Days (as defined 
below) ending on the earlier of the day in question and the day before the      

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Ex Date (as defined below) with respect to the issuance, payment or distribution
or the date of the expiration of the tender offer requiring such computation.   
For this purpose, the term "Ex Date", when used with respect to any issuance or 
distribution, shall mean the first date on which the Common Stock trades regular
way on the applicable securities exchange or in the applicable securities market
without the right to receive such issuance or distribution. "Trading Day" means 
each Monday, Tuesday, Wednesday, Thursday and Friday, other than any day on     
which the Common Stock is not traded on the applicable securities exchange or on
the applicable securities market. The closing price for each day shall be the   
reported last sale price regular way or, in case no such reported sale takes    
place on such day, the average of the reported closing bid and asked prices     
regular way, in either case on the New York Stock Exchange or, if the Common    
Stock is not listed or admitted to trading on such Exchange, on the principal   
national securities exchange on which the Common Stock is listed or admitted to 
trading or, if not listed or admitted to trading on any national securities     
exchange, on the NASDAQ National Market or, if the Common Stock is not listed or
admitted to trading on any national securities exchange or quoted on the NASDAQ 
National Market, the average of the closing bid and asked prices in the         
over-the-counter market as furnished by any New York Stock Exchange member firm 
reasonably selected from                                                        

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time to time by the Board for that purpose. For purposes of Section 7, the term 
"Business Day" shall mean any day except a Saturday, Sunday or any day on which 
banking institutions are authorized or required to close in the city of New     
York, New York or Los Angeles, California.                                      

(1) No adjustment in the Exercise Price shall be required unless such 
adjustment (plus any adjustments not previously made by reasons of this Section 
7(1)) would require an increase or decrease of at least 1% in such Exercise     
Price; provided, however, that any adjustments which by reason of this Section  
7(1) are not required to be made shall be carried forward and taken into account
in any subsequent adjustment. All calculations under this Section 7(1) shall be 
made to the nearest cent or to the nearest 1/100 of a share of Common Stock, as 
the case may be. Notwithstanding the foregoing, any adjustment required by this 
Section 7(1) shall be made no later than the earlier of three years from the    
date of the transaction which mandates such adjustment or the expiration of the 
right to exercise the Series A Warrants or a portion thereof.                   

(m) Whenever the Exercise Price is adjusted as herein provided:       

(A) the Company shall compute the adjusted Exercise Price in  
 accordance with Section 7 and shall prepare a certificate signed by the
treasurer of the Company setting forth the                            

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 adjusted Exercise Price and showing in reasonable detail the facts upon
 which such adjustment is based, and such certificate shall forthwith be
filed with any transfer agent; and                                    

      (B) a notice stating that the Exercise Price has been adjusted and
    setting forth the adjusted Exercise Price shall forthwith be required, and
     as soon as practicable after it is required, such notice shall be mailed by
    the Company to all Holders of Series A Warrants at their last addresses as
     they shall appear in the register required to be kept pursuant to Section 2
hereof.                                                               

(n) In case:                                                          

         (A) the Company shall declare a dividend or other distribution on its
    Common Stock (other than a dividend payable exclusively in cash that would
 not cause an adjustment to the Exercise Price to take place pursuant to
Section 7 above);                                                     

        (B) the Company or any of its subsidiaries shall make a tender offer
 for the Common Stock (other than a tender offer that would not cause an
   adjustment to the Exercise Price pursuant to clause (e) or (f) of Section
7);                                                                   

      (C) the Company shall authorize the granting to all Holders of its
Common Stock of rights,                                               

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options or warrants to subscribe for or purchase any shares of capital
stock of any class;                                                   

 (D) of any reclassification of the Common Stock (other than a
   subdivision or combination of its outstanding shares of Common Stock), or
  of any consolidation, merger or share exchange to which the Company is a
party and for which approval of any shareholders of the Company is    
 required, or of the sale or transfer of all or substantially all of the
assets of the Company; or                                             

   (E) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;                                            

then the Company shall cause to be filed with any warrant agent, and shall cause
to be mailed to all Holders of the Series A Warrants at their last addresses as 
they shall appear in the register required to be kept for that purpose by       
Section 2 hereof, at least 20 days (or 10 days in any case specified in clause  
(A) or (B) above) prior to the effective date hereinafter specified, a notice   
stating (x) the date on which a record has been taken for the purpose of such   
dividend, distribution or grant of rights, options or warrants, or, if a record 
is not to be taken, the date as of which the identity of the holders of Common  
Stock of record entitled to such dividend, distribution,                        

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   rights, options or warrants was determined, or (y) the date on which such
  reclassification, consolidation, merger, share exchange, sale, transfer,
 dissolution, liquidation or winding up is expected to become effective,
 and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for 
    securities, cash or other property deliverable upon such reclassification,
consolidation, merger, share exchange, sale, transfer, dissolution,   
    liquidation or winding up. Neither the failure to give such notice nor any
 defect therein shall affect the legality or validity of the proceedings
described in clauses (A) through (E) of this Section 7(n).            

     Section 8.  Excess Loss Amount Adjustment.  In the event that the
Excess Loss Amount (as defined in Section 4.2 of the Investment Agreement)      
exceeds $95,000,000, the Exercise Price per share shall be reduced by an amount 
equal to $.08 for each $1,000,000 of Excess Loss Amount in excess of            
$95,000,000; provided, however, that the Exercise Price shall not hereby be     
reduced to less than $1.00; provided, further, however, that no reduction in    
the Exercise Price shall be made as a result of any increase in the aggregate   
Excess Loss Amount reported in any financial statements following the 1995      
year-end financial statements of the Company. The aggregate Excess Loss Amount  
shall be                                                                        

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calculated on the earlier of (i) any exercise of the Series A Warrants or (ii)  
otherwise, a quarterly basis and the appropriate reduction in the Exercise Price
shall then be made.                                                             

 Section 9.  Maintenance of Warrant Office. The Company will maintain an
office or agency in Los Angeles, California, where these Series A Warrants may  
be presented or surrendered for split-up, combination, registration of transfer,
or exchange and where notices and demands to or upon the Company in repect of   
these Series A Warrants may be served.                                          

  Section 10. Assignments of Transfers. Transfers and assignments of these
Series A Warrants are subject to the prohibitions on transfer set forth in the  
Investment Agreement and applicable state and federal securities laws.          

   Section 11. Notices. Notices under these Series A Warrants to the Company
and the Investor shall be provided in the manner, and to the addresses of the   
Company and the Investor, set forth in the Investment Agreement.                

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  Section 12. Governing Law. These Series A Warrants shall be governed by,
and interpreted in accordance with, the laws of the State of California, without
regard to principles of conflicts of law.                                       

                           20TH CENTURY INDUSTRIES
[Seal]                                                                
      By
                             ---------------------
ATTEST:                                                                         

----------------------------------                                              
Secretary                                             

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PURCHASE FORM 

   The undersigned hereby irrevocably elects to exercise ____________ Series
A Warrants to purchase ______________ shares of Common Stock, no par value, of  
20th Century Industries, and hereby makes payment of the Exercise Price of      
$______________.                                                                

Dated:  ___________________________________, 19____.                            

Instructions for Registration of Stock                                          

    Name _____________________________________________________________________
          (please typewrite or print in block letters)
    Address __________________________________________________________________

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EXHIBIT   
C   

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                                                                       EXHIBIT C

QUOTA SHARE REINSURANCE AGREEMENT 

BETWEEN 

20TH CENTURY INSURANCE COMPANY
(HEREINAFTER REFERRED TO AS THE "COMPANY")

and 

(HEREINAFTER REFERRED TO AS THE "REINSURER")

PREAMBLE                                                                        

The Reinsurer hereby agrees to reinsure the Company in respect of the Company's 
net liability under all policies, contracts and binders of insurance            
(hereinafter referred to as "policies") issued during the term of this Agreement
subject to the following terms and conditions:                                  

ARTICLE I 

TERM                                                                            

This Agreement shall be effective from 12:01 A.M., pacific standard time,       
January 1, 1995 and shall remain continuously in force through December 31,     
1999. The Reinsurer has the option to renew this agreement annually for four    
additional years by notifying the company prior to December 31, 1999 or prior to
the expiration date of any reinsurer.                                           

ARTICLE II

PARTICIPATION                                                                   

The Company shall cede and the Reinsurer shall accept 10% of the Company's net  
liability for losses on policies effective during the term of this Agreement. As
consideration, the Reinsurer shall receive a 10% share of the net written       
premiums, less ceding commission as described in Article III, generated by such 
policies. In the event the Reinsurer elects to renew this Agreement for annual  
periods following December 31, 1998 the participation shall be 8% on the first  
renewal, 5% on the second renewal, 4% on the third renewal and 2% on the fourth 
renewal.                                                                        

ARTICLE III 

COMMISSION                                                                      

The Reinsurer shall allow the Company's commission of 10.8% of the ceded written
premium for policies with effective dates from January 1, 1995 and through      
December 31, 1995. For policies with effective dates in each subsequent         
underwriting year, the                                                          

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                                     QUOTA SHARE REINSURANCE AGREEMENT
                               20TH CENTURY/NATIONAL UNION
                                         EFFECTIVE OCTOBER 1, 1994      PAGE 2

commission shall be equal to the rate of the Company's incurred underwriting    
expenses (as recorded in the Company's statutory statement) to net written      
premium for the prior calendar year.                                            

ARTICLE IV

REPORTS AND ACCOUNTS                                                            

1. The Company shall furnish within forty-five days after the close of each     
calendar quarter an account reflecting the following separately for each  
underwriting year:                                                        

A. Net written premium ceded during the quarter (credited).               

B. Commission on the ceded premium (debited).                             

C. Net paid losses (debited).                                             

D. Net paid adjustment expenses (debited).                                

E. Net outstanding Losses.                                                

F. Net unearned premium.                                                  

  If the balance of A through D is a credit such amount shall be remitted with
the account. If the balance of A through D is a debit, the Reinsurer shall
  remit such amount within 15 days of receipt of the account. Accounts by line
of business shall also be provided by the Company including the           
aforementioned information.                                               

ARTICLE V 

DEFINITION                                                                      

Underwriting year shall mean all policies with effective dates from 12:01 AM,   
pacific standard time, January 1st through December 31st of each calendar year. 

Net written premium or net losses shall mean the gross amount less deductions   
for all other reinsurance.                                                      

CURRENCY                                                                        

All premium and loss payments hereunder shall be in United States currency.     

ARTICLE VI

ACCESS TO RECORDS                                                               

The Reinsurer or its duly appointed representatives shall have free access at   
all reasonable times to such books and records of those Divisions, Departments  
and Branch Offices of the Company which are directly involved with the subject  
matter business of this Agreement as shall reflect premium and loss transactions
of the Company for the purpose of obtaining any and all information concerning  
this                                                                            

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                                         QUOTA SHARE REINSURANCE AGREEMENT
                                   20TH CENTURY/NATIONAL UNION
                                           EFFECTIVE OCTOBER 1, 1994    PAGE 3

Agreement or the subject matter hereof. All non-public information provided in  
the course of the inspection shall be kept confidential by the Reinsurer as     
against third parties.                                                          

ARTICLE VII 

INSOLVENCY                                                                      

In the event of the insolvency of the Company, this reinsurance shall be payable
directly to the Company, or to its liquidator, receiver, conservator or         
statutory successor. Immediately upon demand, on the basis of the liability of  
the Company without diminution because of the insolvency of the Company or      
because the liquidator, receiver, conservator or statutory successor of the     
Company has failed to pay all or a portion of any claim. It is agreed, however, 
that the liquidator, receiver, conservator or statutory successor of the Company
shall give written notice to the Reinsurer of the pendancy of a claim against   
the Company which would involve a possible liability on the part of the         
Reinsurer, indicating the policy or bond reinsured, within a reasonable time    
after such claim is filed in the conservation or liquidation proceeding or in   
the receivership. It is further agreed that during the pendancy of such claim   
the Reinsurer may investigate such claim and interpose, at its own expense, in  
the proceeding where such claim is to be adjudicated, any defense or defenses   
that it may deem available to the Company or its liquidator, receiver,          
conservator, or statutory successor. The expense thus incurred by the Reinsurer 
shall be chargeable, subject to the approval of the Court, against the Company  
as part of the expense of conservation or liquidation to the extent of a pro    
rata share of the benefit which may accrue to the Company solely as a result of 
the defense undertaken by the Reinsurer.                                        

ARTICLE VIII

ARBITRATION                                                                     

A. All disputes or differences arising out of the interpretation of this        
Agreement shall be submitted to the decision of two arbitrators, one to be
 chosen by each party, and in the event of the arbitrators failing to agree,
   to the decision of an umpire to be chosen by the arbitrators. The arbitrators
and umpire shall be disinterested active or retired executive officials of
fire or casualty insurance or reinsurance companies or Underwriters at    
Lloyd's, London. If either of the parties fails to appoint an arbitrator  
   within one month after being required by the other party in writing to do so,
   or if the arbitrators fail to appoint an umpire within one month of a request
   in writing by either of them to do so, such arbitrator or umpire, as the case
   may be, shall at the request of either party be appointed by a Justice of the
Supreme Court of the State of New York.                                   

B. The arbitration proceeding shall take place in the city in which the         
  Company's Head Office is located. The applicant shall submit its case within
one month after the appointment of the court of arbitration, and the      
 respondent shall submit its reply within one month after the receipt of the
claim. The arbitrators and umpire are relieved from all judicial formality
   and may abstain from following the strict rules of law. They shall settle any
  dispute under the Agreement according to an equitable rather than a strictly
legal interpretation of the terms.                                        

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                                           QUOTA SHARE REINSURANCE AGREEMENT
                                     20TH CENTURY/NATIONAL UNION
                                             EFFECTIVE OCTOBER 1, 1994    PAGE 4

C.  Their written decision shall be provided to both parties within ninety days 
 of the close of arbitration and shall be final and not subject to appeal.

D.  Each party shall bear the expenses of his arbitrator and shall jointly and  
equally share with the other the exercises of the umpire and of the     
arbitration.                                                            

E.  This Article shall survive the termination of this Agreement.               

ARTICLE IX

ERRORS AND OMISSIONS                                                            

Any inadvertent delay, omission or error shall not relieve either party hereto  
from any liability which would attach to it hereunder if such delay, omission or
error had not been made, provided such delay, omission or error is rectified    
immediately upon discovery.                                                     

ARTICLE X 

LOSS & LOSS ADJUSTMENT EXPENSE                                                  

A.  The Company alone and at its full discretion shall adjust, settle or        
compromise all claims and losses. All such adjustments, settlements, and
compromises, shall be binding on the Reinsurer in proportion to its     
  participation. The Company shall likewise at its sole discretion commence,
continue, defend, compromise, settle or withdraw from actions, suits or 
proceedings and generally do all such matters and things relating to any
claim or loss as in its judgment may be beneficial or expedient, and all
   payments made and costs and expenses incurred in connection therewith or in
taking legal advice therefor shall be shared by the Reinsurer           
proportionately. The Reinsurer shall, on the other hand, benefit        
proportionately from all reductions of losses by salvage, compromise or 
otherwise.                                                              

ARTICLE XI

EXTRA CONTRACTUAL OBLIGATIONS                                                   

This Agreement shall protect the Company where the ultimate net loss includes   
any extra contractual obligations. The term "extra contractual obligations" is  
defined as those liabilities not covered under any other provision of the       
Contract and which arise from the handling of any claim on business covered     
hereunder, such liabilities arising because of, but not limited to, the         
following: failure by the Company to settle within the policy limit, or by      
reason of alleged or actual negligence, fraud or bad faith in rejecting an offer
of settlement or in the preparation of the defense or in the trail of any action
against it's insured or reinsured or in the preparation of prosecution of an    
appeal consequent upon such action. The Reinsurer's liability for extra         
contractual obligations shall not exceed their participation of the maximum     
limit of liability on the policy from which the extra contractual obligation    
arises.                                                                         

The date on which any extra contractual obligation is incurred by the Company   
shall be deemed, in all circumstances, to be the date of the original disaster  
and/or casualty.                                                                

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                                           QUOTA SHARE REINSURANCE AGREEMENT
                                     20TH CENTURY/NATIONAL UNION
                                             EFFECTIVE OCTOBER 1, 1994    PAGE 5

However, this Article shall not apply where the loss has been incurred due to   
fraud or a member of the Board of Directors or a corporate officer of the       
Company acting individually or collectively or in collusion with any individual 
or corporation or any other organization or party involved in the presentation, 
defense or settlement of any claim covered hereunder.                           

ARTICLE XII   

OFFSET                                                                          

Each party hereto shall have, and may exercise at any time and from time to     
time, the right to offset any undisputed balance or balances, whether on account
of premiums, or on account of losses or otherwise, due from such party to the   
other party hereto under this Agreement.                                        

ARTICLE XIII

TERMINATION                                                                     

Either party may terminate this Agreement with thirty days notice in the event  
that:                                                                           

1.  One party should at any time become insolvent, or suffer any impairment of  
capital, or file a petition in bankruptcy, or go into liquidation or    
  rehabilitation, or have a receiver appointed, or be acquired or controlled
by any other insurance company or organization or,                      

2.  Any law or regulation of any Federal or any State or any Local Government of
any jurisdiction in which the Company is doing business should render   
illegal the arrangements made herein, or                                

3.  With the agreement of the other party.                                      

In the event of termination, the Reinsurer shall refund to the Company the      
applicable unearned premium minus the ceding commission and shall continue to   
remain liable for all losses occurring prior to the date of termination.        
However, if this Contract shall terminate while a loss occurrence covered       
hereunder is in progress, it is agreed that, subject to the other conditions of 
this Contract, the Reinsurer is responsible for its proportion of the entire    
loss.                                                                           

ARTICLE XIV   

TAX                                                                             

In consideration of the terms under which this Agreement is issued, the Company 
undertakes not to claim any deduction of the premium hereon when making tax     
returns, other than Income or Profits Tax returns, to any State or Territory of 
the United States or to the District of Columbia.                               

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                                           QUOTA SHARE REINSURANCE AGREEMENT
                                     20TH CENTURY/NATIONAL UNION
                                             EFFECTIVE OCTOBER 1, 1994    PAGE 6

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives.                                       

In ________________________________ this ______________ day of ___________ 199 .

20TH CENTURY INSURANCE COMPANY

By: _________________________________ Title:____________________________________

and in ____________________________ this ______________ day of ___________ 199 .

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QUOTA SHARE REINSURANCE AGREEMENT 

between 

21ST CENTURY CASUALTY COMPANY 
(hereinafter referred to as the "Company")

and 

(hereinafter referred to as the "Reinsurer")

PREAMBLE                                                                        

The Reinsurer hereby agrees to reinsure the Company in respect of the Company's 
net liability under all policies, contracts and binders of insurance (hereafter 
referred to as "policies") issued during the term of this Agreement subject to  
the following terms and conditions:                                             

ARTICLE I 

TERM                                                                            

This Agreement shall be effective from 12:01 AM, pacific standard time, January 
1, 1995 and shall remain continuously in force through December 31, 1999. The   
Reinsurer has the option to renew this agreement annually for four additional   
years by notifying the company prior to December 31, 1999 or prior to the       
expiration date of any renewal.                                                 

ARTICLE II

PARTICIPATION                                                                   

The Company shall cede and the Reinsurer shall accept 10% of the Company's net  
liability for losses on policies effective during the term of this Agreement. As
consideration, the Reinsurer shall receive a 10% share of the net written       
premiums, less ceding commission as described in Article III, generated by such 
policies. In the event the Reinsurer elects to renew this Agreement for annual  
periods following December 31, 1999 the participation shall be 8% on the first  
renewal, 6% on the second renewal, 4% on the third renewal and 2% on the fourth 
renewal.                                                                        

ARTICLE III 

COMMISSION                                                                      

The Reinsurer shall allow the Company a commission of 10.8% of the ceded written
premium for policies with effective dates from January 1, 1995 and through      
December 31, 1995. For policies with effective dates in each subsequent         
underwriting year, the                                                          

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                                         QUOTA SHARE REINSURANCE AGREEMENT
                                   21ST CENTURY/NATIONAL UNION
                                           EFFECTIVE OCTOBER 1, 1994    PAGE 2

commission shall be equal to the rate of the Company's incurred underwriting    
expenses (as recorded in the Company's statutory statement) to net written      
premium for the prior calendar year.                                            

ARTICLE IV

REPORTS AND ACCOUNTS                                                            

1. The Company shall furnish within forty-five days after the close of each     
calendar quarter an account reflecting the following separately for each  
underwriting year.                                                        

A. Net written premium ceded during the quarter (credited).               

B. Commission on the ceded premium (debited).                             

C. Net paid losses (debited).                                             

D. Net paid adjustment expenses (debited).                                

E. Net outstanding Losses.                                                

F. Net unearned premium.                                                  

  If the balance of A through D is a credit such amount shall be remitted with
the account. If the balance of A through D is a debit, the Reinsurer shall
  remit such amount within 15 days of receipt of the account. Accounts by line
of business shall also be provided by the Company including the           
aforementioned information.                                               

ARTICLE V 

DEFINITION                                                                      

Underwriting year shall mean all policies with effective dates from 12:01 AM,   
pacific standard time, January 1st through December 31st of each calendar year. 

Net written premium or net losses shall mean the gross amount less deductions   
for all other reinsurance.                                                      

CURRENCY                                                                        

All premium and loss payments hereunder shall be in United States currency.     

ARTICLE VI

ACCESS TO RECORDS                                                               

The Reinsurer or its duly appointed representatives shall have free access at   
all reasonable times to such books and records of those Divisions, Departments  
and Branch Offices of the Company which are directly involved with the subject  
matter business of this Agreement as shall reflect premium and loss transactions
of the Company for the purpose of obtaining any and all information concerning  
this                                                                            

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                                         QUOTA SHARE REINSURANCE AGREEMENT
                                   21ST CENTURY/NATIONAL UNION
                                           EFFECTIVE OCTOBER 1, 1994    PAGE 3

Agreement or the subject matter hereof. All non-public information provided in  
the course of the inspection shall be kept confidential by the Reinsurer as     
against third parties.                                                          

ARTICLE VII 

INSOLVENCY                                                                      

In the event of the insolvency of the Company, this reinsurance shall be payable
directly to the Company, or to its liquidator, receiver, conservator or         
statutory successor, immediately upon demand, on the basis of the liability of  
the Company without diminution because of the insolvency of the Company or      
because the liquidator, receiver, conservator or statutory successor of the     
Company has failed to pay all or a portion of any claim. It is agreed, however, 
that the liquidator, receiver, conservator or statutory successor of the Company
shall give written notice to the Reinsurer of the pendency of a claim against   
the Company which would involve a possible liability on the part of the         
Reinsurer, indicating the policy or bond reinsured, within a reasonable time    
after such claim is filed in the conservation or liquidation proceeding or in   
the receivership. It is further agreed that during the pendency of such claim   
the Reinsurer may investigate such claim and interpose, at its own expense, in  
the proceeding where such claim is to be adjudicated, any defense or defenses   
that it may deem available to the Company or its liquidator, receiver,          
conservator, or statutory successor. The expense thus incurred by the Reinsurer 
shall be chargeable, subject to the approval of the Court, against the Company  
as part of the expense of conservation or liquidation to the extent of a pro    
rata share of the benefit which may accrue to the Company solely as a result of 
the defense undertaken by the Reinsurer.                                        

ARTICLE VIII

ARBITRATION                                                                     

A. All disputes or differences arising out of the interpretation of this        
Agreement shall be submitted to the decision of two arbitrators, one to be
 chosen by each party, and in the event of the arbitrators failing to agree,
   to the decision of an umpire to be chosen by the arbitrators. The arbitrators
and umpire shall be disinterested active or retired executive officials of
fire or casualty insurance or reinsurance companies or Underwriters at    
Lloyd's, London. If either of the parties fails to appoint an arbitrator  
   within one month after being required by the other party in writing to do so,
   or if the arbitrators fail to appoint an umpire within one month of a request
   in writing by either of them to do so, such arbitrator or umpire, as the case
   may be, shall at the request of either party be appointed by a Justice of the
Supreme Court of the State of New York.                                   

B. The arbitration proceeding shall take place in the city in which the         
  Company's Head Office is located. The applicant shall submit its case within
one month after the appointment of the court of arbitration, and the      
 respondent shall submit its reply within one month after the receipt of the
claim. The arbitrators and umpire are relieved from all judicial formality
   and may abstain from following the strict rules of law. They shall settle any
  dispute under the Agreement according to an equitable rather than a strictly
legal interpretation of its terms.                                        

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                                         QUOTA SHARE REINSURANCE AGREEMENT
                                   21ST CENTURY/NATIONAL UNION
                                           EFFECTIVE OCTOBER 1, 1994    PAGE 4

C.  Their written decision shall be provided to both parties within ninety days 
 of the close of arbitration and shall be final and not subject to appeal.

D.  Each party shall bear the expenses of his arbitrator and shall jointly and  
equally share with the other the expenses of the umpire and of the      
arbitration.                                                            

E.  This Article shall survive the termination of this Agreement.               

ARTICLE IX

ERRORS AND OMISSIONS                                                            

Any inadvertent delay, omission or error shall not relieve either party hereto  
from any liability which would attach to it hereunder if such delay, omission or
error had not been made, provided such delay, omission or error is rectified    
immediately upon discovery.                                                     

ARTICLE X 

LOSS & LOSS ADJUSTMENT EXPENSE                                                  

A.  The Company alone and at its full discretion shall adjust settle or         
compromise all claims and losses. All such adjustments, settlements, and
compromises, shall be binding on the Reinsurer in proportion to its     
  participation. The Company shall likewise at its sole discretion commence,
continue, defend, compromise, settle or withdraw from actions, suits or 
proceedings and generally do all such matters and things relating to any
claim or loss as in its judgment may be beneficial or expedient, and all
   payments made and costs and expenses incurred in connection therewith or in
taking legal advice therefor shall be shared by the Reinsurer           
proportionately. The Reinsurer shall, on the other hand, benefit        
proportionately from all reductions of losses by salvage, compromise or 
otherwise.                                                              

ARTICLE XI

EXTRA CONTRACTUAL OBLIGATIONS                                                   

This Agreement shall protect the Company where the ultimate net loss includes   
any extra contractual obligations. The term "extra contractual obligations" is  
defined as those liabilities not covered under any other provision of the       
Contract and which arise from the handling of any claim on business covered     
hereunder, such liabilities arising because of, but not limited to, the         
following: failure by the Company to settle within the policy limit, or by      
reason of alleged or actual negligence, fraud or bad faith in rejecting an      
offer of settlement or in the preparation of the defense or in the trail of     
any action against it's insured or reinsured or in the preparation of           
prosecution of an appeal consequent upon such action. The Reinsurer's liability 
for extra contractual obligations shall not exceed their participation of the   
maximum limit of liability on the policy from which the extra contractual       
obligation arises.                                                              

The date on which any extra contractual obligation is incurred by the Company   
shall be deemed, in all circumstances, to be the date of the original disaster  
and/or casualty.                                                                

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                                         QUOTA SHARE REINSURANCE AGREEMENT
                                   21ST CENTURY/NATIONAL UNION
                                           EFFECTIVE OCTOBER 1, 1994    PAGE 5

However, this Article shall not apply where the loss has been incurred due to   
fraud or a member of the Board of Directors or a corporate officer of the       
Company acting individually or collectively or in collusion with any individual 
or corporation or any other organization or party involved in the presentation, 
defense or settlement of any claim covered hereunder.                           

ARTICLE XII 

OFFSET                                                                          

Each party hereto shall have, and may exercise at any time and from time to     
time, the right to offset any undisputed balance or balances, whether on        
account of premiums or on account of losses or otherwise, due from such party   
to the other party hereto under this Agreement.                                 

ARTICLE XIII

TERMINATION                                                                     

Either party may terminate this Agreement with thirty days notice in the event  
that:                                                                           

1. One party should at any time become insolvent, or suffer any impairment of   
capital, or file a petition in bankruptcy, or go into liquidation or      
   rehabilitation, or have a receiver appointed, or be acquired or controlled by
any other insurance company or organization or,                           

2. Any law or regulation of any Federal or any State or any Local Government of 
   any jurisdiction in which the Company is doing business should render illegal
the arrangements made herein, or                                          

3. With the agreement of the other party.                                       

In the event of termination, the Reinsurer shall refund to the Company the      
applicable unearned premium minus the ceding commission and shall continue to   
remain liable for all losses occurring prior to the date of termination.        
However, if this Contract shall terminate while a loss occurrence covered       
hereunder is in progress, it is agreed that, subject to the other conditions of 
this Contract, the Reinsurer is responsible for its proportion of the entire    
loss.                                                                           

ARTICLE XIV 

TAX                                                                             

In consideration of the terms under which this Agreement is issued, the Company 
undertakes not to claim any deduction of the premium hereon when making tax     
returns, other than Income or Profits Tax returns, to any State or Territory of 
the United States or to the District of Columbia.                               

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                                         QUOTA SHARE REINSURANCE AGREEMENT
                                   21ST CENTURY/NATIONAL UNION
                                           EFFECTIVE OCTOBER 1, 1994    PAGE 6

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives.                                       

in _________________________ this _______________ day of ________________ 199 . 

21ST CENTURY CASUALTY COMPANY 

By: __________________________________ Title: _________________________________ 

and in _____________________ this _______________ day of ________________ 199 . 

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EXHIBIT   
D   

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                                                                       EXHIBIT D

REGISTRATION RIGHTS AGREEMENT 

BETWEEN 

20TH CENTURY INDUSTRIES 

AND 

AMERICAN INTERNATIONAL GROUP, INC.

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

Dated: As of November   , 1994
--------------------------------------------------- 

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                                                        [Enlarge/Download Table]

                             TABLE OF CONTENTS                                           

                                                                                     PAGE
                                                                                     ----

                                 ARTICLE I                                               

                            CERTAIN DEFINITIONS                                          
                                                                                         

1.1   Business Day..................................................................   1 
1.2   Closing Date..................................................................   1 
1.3   Common Stock..................................................................   1 
1.4   Eligible Securities...........................................................   2 
1.5   Holder........................................................................   2 
1.6   Person........................................................................   2 
1.7   Registration Expenses.........................................................   2 
1.8   SEC...........................................................................   3 
1.9   Securities Act................................................................   3 
1.10  Series A Preferred Shares.....................................................   3 
1.11  Series A Warrants.............................................................   4 

                                ARTICLE II                                               

                               EFFECTIVENESS                                             

2.1   Effectiveness of Registration Rights..........................................   4 

                                ARTICLE III                                              

                            DEMAND REGISTRATION                                          

3.1   Notice........................................................................   4 
3.2   Registration Expenses.........................................................   6 

                                ARTICLE IV                                               

                          PIGGYBACK REGISTRATION                                         

4.1   Notice and Registration.......................................................   6 
4.2   Registration Expenses.........................................................   9 

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                                                                                     ----
                                                                                         
                                ARTICLE V                                                

                         REGISTRATION PROCEDURES                                         

 5.1  Registration and Qualification................................................   9 
 5.2  Underwriting..................................................................  13 
 5.3  Blackout Periods..............................................................  14 
 5.4  Withdrawals...................................................................  15 

                                ARTICLE VI                                               

                  PREPARATION; REASONABLE INVESTIGATION                                  

 6.1  Preparation; Reasonable Investigation.........................................  16 

                               ARTICLE VII                                               

                     INDEMNIFICATION AND CONTRIBUTION                                    

 7.1  Indemnification and Contribution..............................................  17 

                               ARTICLE VIII                                              

                     TRANSFER OF REGISTRATION RIGHTS                                     

 8.1  Transfer of Registration Rights...............................................  18 

                                ARTICLE IX                                               

                          UNDERWRITTEN OFFERINGS                                         

 9.1  Selection of Underwriters.....................................................  18 

                                ARTICLE X                                                

                                 RULE 144                                                

10.1  Rule 144......................................................................  19 

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                                                                                      ----
                                                                                          
                                 ARTICLE XI                                               

                               MISCELLANEOUS                                              

11.1   Captions......................................................................  19 
11.2   Severability..................................................................  19 
11.3   Governing Law.................................................................  20 
11.4   Consent to Jurisdiction; Service of Process; Waiver of Jury Trial.............  20 
11.5   Specific Performance..........................................................  20 
11.6   Modification and Amendment....................................................  21 
11.7   Counterparts..................................................................  21 
11.8   Entire Agreement..............................................................  21 
11.9   Notices.......................................................................  21 
11.10  Successors to Company, Etc. ..................................................  21 

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REGISTRATION RIGHTS AGREEMENT 

  This REGISTRATION RIGHTS AGREEMENT is made as of the __ day of November,
1994 (this "Agreement"), among 20th Century Industries, a California corporation
(the "Company"), and American International Group, Inc., a Delaware corporation 
(the "Investor").                                                               

W I T N E S S E T H:

 WHEREAS, the Company has agreed to issue and sell, and the Investor has
agreed to purchase, pursuant to the Investment and Strategic Alliance Agreement,
dated October 17, 1994 (the "Investment Agreement"), between the Company and    
Investor, certain unregistered Series A Preferred Shares and Series A Warrants  
of the Company.                                                                 

WHEREAS, in order to induce Investor to enter into the Investment     
Agreement, the Company desires to grant to Investor, as provided herein, certain
registration rights with respect to the Series A Preferred Shares the shares of 
Common Stock issuable to the Investor upon conversion of the Series A Preferred 
Shares and the shares of Common Stock issuable to the Investor upon exercise of 
the Series A Warrants.                                                          

   NOW, THEREFORE, in consideration of the mutual covenants and undertakings
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and subject to and on the terms   
and conditions herein set forth, the parties hereto agree as follows:           

ARTICLE I 

CERTAIN DEFINITIONS.

   1.1. "Business Day" means any Day on which the New York Stock Exchange is
open for trading.                                                               

1.2. "Closing Date" means the date of this Agreement.                 

   1.3. "Common Stock" means the Common Stock, no par value, of the Company,
and any securities of the Company or any successor which may be issued on or    
after the date hereof in respect of, or in exchange for, shares of Common Stock 
pursuant to merger, consolidation, stock split, stock dividend, recapitalization
of the Company or otherwise.                                                    

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   1.4. "Eligible Securities" means Series A Preferred Shares, any shares of
Common Stock issuable upon any conversion of Series A Preferred Shares and any  
shares of Common Stock issuable upon exercise of the Series A Warrants, in each 
case whether held by either the Investor or any direct or indirect transferee of
the Investor.                                                                   

  As to any proposed offer or sale of Eligible Securities, such securities
shall cease to be Eligible Securities with respect to such proposed offer or    
sale when (i) a registration statement with respect to the sale of such         
securities shall have become effective under the Securities Act and such        
securities shall have been disposed of in accordance with such registration     
statement or (ii) all of such securities are permitted to be distributed        
concurrently pursuant to Rule 144 (or any successor provision to such Rule)     
under the Securities Act or are otherwise freely transferable to the public     
without registration pursuant to Section 4(1) of the Securities Act. In the     
event the Company prepares a registration statement pursuant to Article 3 or 4  
hereof which becomes effective and the Holder fails to dispose of Eligible      
Securities pursuant to said registration statement, the securities shall remain 
Eligible Securities but the Holder shall be responsible for assuming that       
portion of the Registration Expenses in connection with such registration as    
equals the portion of Eligible Securities originally to be sold pursuant to such
registration which were to be sold by such Holder.                              

1.5. "Holder" means the Investor and each of the Investor's respective
successive successors and assigns who acquire Eligible Securities, directly or  
indirectly, from the Investor or from any successive successor or assign of the 
Investor.                                                                       

1.6. "Person" means an individual, a partnership (general or limited),
corporation, joint venture, business trust, cooperative, association or other   
form of business organization, whether or not regarded as a legal entity under  
applicable law, a trust (inter vivos or testamentary), an estate of a deceased, 
insane or incompetent person, a quasi-governmental entity, a government or any  
agency, authority, political subdivision or other instrumentality thereof, or   
any other entity.                                                               

   1.7. "Registration Expenses" means all expenses incident to the Company's
performance of or compliance with the registration requirements set forth in    
this Agreement including, without limitation, the following: (a) the fees,      
disbursements and expenses of the Company's counsel(s) and                      

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accountants in connection with the registration of Eligible Securities to be    
disposed of under the Securities Act; (b) all expenses in connection with the   
preparation, printing and filing of the registration statement, any preliminary 
prospectus or final prospectus, any other offering document and amendments and  
supplements thereto and the mailing and delivering of copies thereof to the     
underwriters and dealers; (c) the cost of printing or producing any agreement(s)
among underwriters, underwriting agreement(s) and blue sky or legal investment  
memoranda, any selling agreements and any other documents in connection with the
offering, sale or delivery of Eligible Securities to be disposed of; (d) all    
expenses in connection with the qualification of Eligible Securities to be      
disposed of for offering and sale under state securities laws, including the    
fees and disbursements of counsel for the underwriters in connection with such  
qualifications and in connection with any blue sky and legal investment surveys;
(e) the filing fees incident to securing any required review by the National    
Association of Securities Dealers, Inc. of the terms of the sale of Eligible    
Securities to be disposed of; and (f) fees and expenses incurred in connection  
with the listing of Eligible Securities on each securities exchange on which    
securities of the same class are then listed; provided, however, that           
Registration Expenses with respect to any registration pursuant to this         
Agreement shall not include (x) underwriting discounts or commissions           
attributable to Eligible Securities, (y) transfer taxes applicable to Eligible  
Securities or (z) SEC filing fees with respect to shares of Common Stock to be  
sold by the Holder thereof.                                                     

1.8. "SEC" means the Securities and Exchange Commission.              

  1.9. "Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations of the SEC thereunder, all as the same shall be in
effect at the relevant time.                                                    

    1.10. "Series A Preferred Shares" means all shares of Series A Convertible
Preferred Stock, stated value $1,000 per share, issued pursuant to the          
Investment Agreement (including shares issued with respect to payments of       
dividends in kind) and having the rights, preferences, privileges and           
restrictions set forth in the form of Certificate of Determination attached to  
the Investment Agreement as Exhibit B, and any securities of the Company or any 
successor which may be issued on or after the date hereof in respect of, or in  
exchange for, the Series A Preferred Shares pursuant to a merger, consolidation,
stock                                                                           

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split, stock dividend, recapitalization of the Company or otherwise.            

  1.11. "Series A Warrants" means the 16,000,000 Series A Warrants, having
the terms set forth in the Warrant Certificate attached to the Investment       
Agreement as Exhibit C, and any securities of the Company or any successor which
may be issued on or after the date hereof in respect of, or in exchange for, the
Series A Warrants pursuant to a merger, consolidation, stock split, stock       
dividend, recapitalization of the Company or otherwise.                         

ARTICLE II

EFFECTIVENESS.

2.1. Effectiveness of Registration Rights.  The registration rights   
pursuant to Articles 3 and 4 hereof shall become effective on the Closing Date  
and terminate when there cease to be Eligible Securities.                       

ARTICLE III 

DEMAND REGISTRATION.

3.1. Notice.  At any time or from time to time following the first    
anniversary of the Closing Date, upon written notice from any Holder or Holders 
requesting that the Company effect the registration under the Securities Act of 
all or part of the Eligible Securities held by them pursuant to Section 3.1(d)  
below, which notice shall specify the number and class of Eligible Securities   
intended to be registered and the intended method or methods of disposition of  
such Eligible Securities, the Company will use reasonable efforts to effect (at 
the earliest possible date) the registration, under the Securities Act, of such 
Eligible Securities for disposition in accordance with the intended method or   
methods of disposition stated in such request, provided that:                   

          (a) the Company shall be obligated to register the Eligible Securities
   upon receipt of a registration request only if the Eligible Securities to
    be registered have a fair market value, at both the time of receipt of the
   request and the filing of the Registration Statement, of at least (i) $50
     million, in any case where the Eligible Securities to be registered consist
of Series A Preferred Shares or shares of Common Stock obtained or    
obtainable upon conversion of                                         

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 the Series A Preferred Shares or (ii) $25 million in any case where the
Eligible Securities to be registered consist of shares of Common Stock
obtained or obtainable upon exercise of the Series A Warrants;        

        (b) if, following receipt of a registration request pursuant to this
Article 3 but prior to the filing of a registration statement or the  
effective date of a registration statement filed in respect of such   
request, (i) the Board of Directors of the Company, in its reasonable 
    judgment and in good faith, resolves that (a) the filing of a registration
statement or a sale of Eligible Securities pursuant thereto would     
materially interfere with any significant acquisition, corporate      
   reorganization or other similar transactions involving the Company or (b)
 the filing of a registration statement or a sale of Eligible Securities
    pursuant thereto would require disclosure of material information that the
Company has a bona fide material business purpose for preserving as   
    confidential or (c) the Company is unable to comply with SEC requirements,
 and (ii) the Company gives the Holders having made such request written
 notice of such determination (which notice shall include a copy of such
resolution), the Company shall, notwithstanding the provisions of this
Article 3, be entitled to postpone for up to 90 days the filing or    
effectiveness of any registration statement otherwise required to be  
 prepared and filed by it pursuant to this Article 3; provided, however,
that the Company shall not be entitled to postpone such filing or     
 effectiveness if, within the preceding twelve months, it had effected a
    postponement pursuant to this clause (b) and, following such postponement,
   the Eligible Securities to be sold pursuant to the postponed registration
were not sold (for any reason);                                       

         (c) if the Company shall have previously effected a registration with
  respect to Eligible Securities pursuant to Article 4 hereof, the Company
   shall not be required to effect a registration pursuant to this Article 3
     until a period of one hundred and eighty (180) days shall have elapsed from
the effective date of the most recent such previous registration; and 

         (d) the intended method or methods of disposition shall not include a
   "shelf registration" whereby shares of Common Stock are sold from time to
time in multiple transactions.                                        

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  3.2. Registration Expenses.  With respect to the registrations requested
pursuant to this Article 3, the Company shall pay all Registration Expenses.    

ARTICLE IV

PIGGYBACK REGISTRATION. 

     4.1. Notice and Registration.  If the Company proposes to register Eligible
Securities or any other securities issued by it ("Other Securities") (whether   
proposed to be offered for sale by the Company or any other Person) on a form   
and in a manner which would permit registration of Eligible Securities for sale 
to the public under the Securities Act, it will give prompt written notice to   
all Holders of its intention to do so, including the identities of any Holders  
exercising registration rights pursuant to Article 3 hereof. Such notice shall  
specify, at a minimum, the number and class of Eligible Securities or Other     
Securities so proposed to be registered, the proposed date of filing of such    
registration statement, any proposed means of distribution of such Eligible     
Securities or Other Securities, any proposed managing underwriter or            
underwriters of such Eligible Securities or Other Securities and a good faith   
estimate by the Company of the proposed maximum offering price thereof, as such 
price is proposed to appear on the facing page of such registration statement.  
Upon the written request of any Holder delivered to the Company within 5        
Business Days after the giving of any such notice (which request shall specify  
the number of Eligible Securities intended to be disposed of by such Holder and 
the intended method of disposition thereof) the Company will use reasonable     
efforts to effect, in connection with the registration of the Other Securities, 
the registration under the Securities Act of all Eligible Securities which the  
Company has been so requested to register by such Holder (the "Selling          
Stockholder"), to the extent required to permit the disposition (in accordance  
with the intended method or methods thereof as aforesaid) of Eligible Securities
so to be registered, provided that:                                             

         (a) if, at any time after giving such written notice of its intention
 to register any Other Securities and prior to the effective date of the
registration statement filed in connection with such registration, the
Company shall be unable to or shall determine for any reason not to   
register the Other Securities the Company may, at its election, give  
written notice of such determination to such Holder and thereupon the 
Company shall be relieved of its                                      

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obligation to register such Eligible Securities in connection with the
   registration of such Other Securities (but not from its obligation to pay
 Registration Expenses to the extent incurred in connection therewith as
 provided in Section 4.2), without prejudice, however, to the rights (if
any) of such Holder immediately to request that such registration be  
effected as a registration under Article 3;                           

   (b) In the event that the Company proposes to register Eligible
    Securities or Other Securities for purposes of a primary offering, and any
    managing underwriter shall advise the Company and the Selling Stockholders
in writing that, in its opinion, the inclusion in the registration    
     statement of some or all of the Eligible Securities sought to be registered
    by such Selling Stockholders creates a substantial risk that the price per
    unit the Company will derive from such registration will be materially and
adversely affected or that the primary offering would otherwise be    
  materially and adversely affected, then the Company will include in such
registration statement such number of Eligible Securities or Other    
    Securities as the Company and such Selling Stockholders are so advised can
be sold in such offering without such an effect (the "Primary Maximum 
 Number"), as follows and in the following order of priority: (i) first,
such number of Eligible Securities or Other Securities in the primary 
offering as the Company, in its reasonable judgment and acting in good
faith and in accordance with sound financial practice, shall have     
determined and (ii) second, if and to the extent that the number of   
   Eligible Securities or Other Securities to be registered under clause (i)
is less than the Primary Maximum Number, Eligible Securities of each  
Selling Stockholder, pro rata in proportion to the number sought to be
    registered by such Selling Stockholder relative to the number sought to be
registered by all the Selling Stockholders;                           

   (c) In the event that the Company proposes to register Eligible
   Securities or Other Securities for purposes of a secondary offering, upon
  the request or for the account of any holder thereof (each a "Requesting
 Stockholder"), and any managing underwriter shall advise the Requesting
   Stockholder or Stockholders and the Selling Stockholders in writing that,
    in its opinion, the inclusion in the registration statement of some or all
   of the Eligible Securities or Other Securities sought to be registered by
the Requesting                                                        

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    Stockholders and of the Eligible Securities sought to be registered by the
 Selling Stockholders creates a substantial risk that the price per unit
that such Requesting Stockholder or Stockholders and such Selling     
Stockholders will derive from such registration will be materially and
adversely affected or that the secondary offering would otherwise be  
materially and adversely affected, the Company will include in such   
registration statement such number of Eligible Securities or Other    
    Securities as the Requesting Stockholders and the Selling Stockholders are
    so advised can reasonably be sold in such offering, or can be sold without
such an effect (the "Secondary Maximum Number"), as follows and in the
   following order of priority: (i) first, the number of Eligible Securities
     sought to be registered by the Selling Stockholders and (ii) second, if and
     to the extent that the number of Eligible Securities to be registered under
clause (i) is less than the Secondary Maximum Number, such number of  
 Eligible Securities or Other Securities sought to be registered by such
Requesting Stockholder or Stockholders;                               

   (d) In the event that the Company proposes to register Eligible
     Securities or Other Securities for purposes of a combined offering, and any
   managing underwriter shall advise the Company, the Requesting Stockholder
or Stockholders and the Selling Stockholders in writing that, in its  
    opinion, the inclusion in the registration statement of some or all of the
 Eligible Securities sought to be registered by the Selling Stockholders
    creates a substantial risk that the price per unit the Company will derive
  from such registration will be materially and adversely affected or that
     the combined offering would otherwise be materially and adversely affected,
     then the Company will include in such registration statement such number of
Eligible Securities or Other Securities as the Company, the Requesting
 Stockholders and the Selling Stockholders are so advised can be sold in
  such offering without such an effect (the "Combined Maximum Number"), as
   follows and in the following order of priority: (i) first, such number of
Eligible Securities or Other Securities in the primary offering as the
Company, in its reasonable judgment and acting in good faith and in   
  accordance with sound financial practice, shall have determined and (ii)
second, if and to the extent that the number of Eligible Securities or
Other Securities sought to be registered under clause (i) is less than
    Combined Maximum Number, Eligible Securities or Other Securities sought to
be registered by each Selling Stockholder, pro rata, if necessary, in 

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proportion to the number sought to be registered by such Selling      
   Stockholder relative to the number sought to be registered by all Selling
Stockholders and (iii) third, if and to the extent that the number of 
Eligible Securities or Other Securities sought to be registered under 
 clauses (i) and (ii) is less than the Combined Maximum Number, Eligible
   Securities or Other Securities sought to be registered by each other such
  Person pro rata in proportion to the value of the Eligible Securities or
Other Securities sought to be registered by all such parties;         

       (e) The Company shall not be required to effect any registration of
    Eligible Securities under this Article 4 incidental to the registration of
  any of its securities in connection with mergers, acquisitions, exchange
   offers, subscription offers, dividend reinvestment plans or stock options
or other employee benefit plans; and                                  

  (f) The Company shall not be required to register any Eligible
Securities or Other Securities if the intended method or methods of   
   distribution for the Eligible Securities is from time to time in multiple
transactions.                                                         

No registration of Eligible Securities effected under this Article 4 shall      
relieve the Company of its obligation (if any) to effect registrations of       
Eligible Securities pursuant to Article 3.                                      

        4.2. Registration Expenses.  The Company (as between the Company and
any Holder) shall be responsible for the payment of all Registration Expenses   
in connection with any registration pursuant to this Article 4.                 

ARTICLE V 

REGISTRATION PROCEDURES.

        5.1. Registration and Qualification.  If and whenever the Company is
required to use reasonable efforts to effect the registration of any Eligible   
Securities under the Securities Act as provided in Articles 3 and 4, the Company
will as promptly as is practicable:                                             

   (a) prepare, file and use reasonable efforts to cause to become
   effective a registration statement under the Securities Act regarding the
Eligible Securities to be offered, provided that such reasonable      

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efforts obligation shall not require the Company to yield to an SEC   
    accounting or other comment which it is discussing, resisting or otherwise
  addressing in good faith and which the Board of Directors of the Company
   determines that such discussing, resisting or addressing is materially in
the best interests of the Company;                                    

        (b) prepare and file with the SEC such amendments and supplements to
     such registration statement and the prospectus used in connection therewith
  as may be necessary to keep such registration statement effective and to
comply with the provisions of the Securities Act with respect to the  
  disposition of all Eligible Securities until the earlier of such time as
  all of such Eligible Securities have been disposed of in accordance with
the intended methods of disposition by the Holders set forth in such  
registration statement or the expiration of six (6) months after such 
Registration Statement becomes effective;                             

     (c) furnish to all Holders and to any underwriter (which term for
purposes of this Agreement shall include a person deemed to be an     
   underwriter within the meaning of Section 2(11) of the Securities Act and
any placement agent or sales agent) of such Eligible Securities one   
     executed copy each and such number of conformed copies of such registration
   statement and of each such amendment and supplement thereto (in each case
   including all exhibits), such number of copies of the prospectus included
   in such registration statement (including each preliminary prospectus and
any summary prospectus), in conformity with the requirements of the   
Securities Act, such documents incorporated by reference in such      
registration statement or prospectus, and such other documents as any 
Holder or such underwriter may reasonably request;                    

  (d) use reasonable efforts to register or qualify all Eligible
Securities covered by such registration statement under such other    
securities or blue sky laws of such jurisdictions as any Holder or any
  underwriter of such Eligible Securities shall reasonably request, and do
  any and all other acts and things which may be necessary or advisable to
    enable any Holder or any underwriter to consummate the disposition in such
jurisdictions of the Eligible Securities covered by such registration 
statement, except the Company shall not for any such purpose be       

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  required to qualify generally to do business as a foreign corporation in
  any jurisdiction wherein it is not so qualified, or to subject itself to
taxation in any such jurisdiction, or to consent to general service of
process in any such jurisdiction;                                     

          (e) promptly notify the selling Holders of Eligible Securities and the
managing underwriter or underwriters, if any, thereof and confirm such
   advice in writing, (i) when such registration statement or the prospectus
included therein or any prospectus amendment or supplement or         
post-effective amendment has been filed, and, with respect to such    
   registration statement or any post-effective amendment, when the same has
  become effective, (ii) of any comments by the SEC and by the Blue Sky or
   securities commissioner or regulator of any state with respect thereto or
   any request by the SEC for amendments or supplements to such registration
statement or prospectus or for additional information, (iii) of the   
    issuance by the SEC of any stop order suspending the effectiveness of such
    registration statement or the initiation or threatening of any proceedings
     for that purpose, (iv) if at any time the representations and warranties of
   the Company contemplated by Section 5.1(h) or Section 5.2(b) hereof cease
    to be true and correct in all material respects, (v) of the receipt by the
Company of any notification with respect to the suspension of the     
  qualification of the Eligible Securities for sale in any jurisdiction or
   the initiation or threatening of any proceeding for such purpose, or (vi)
at any time when a prospectus is required to be delivered under the   
  Securities Act, that such registration statement, prospectus, prospectus
amendment or supplement or post-effective amendment, or any document  
incorporated by reference in any of the foregoing, contains an untrue 
   statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not  
misleading in light of the circumstances then existing;               

        (f) use its reasonable efforts to obtain the withdrawal of any order
suspending the effectiveness of such registration statement or any    
     post-effective amendment thereto at the earliest practicable date, provided
  that such reasonable efforts obligation shall not require the Company to
     yield to a material SEC accounting or other comment which it is discussing,
resisting or otherwise addressing in good faith and which the Board of
Directors of the Company determines                                   

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 that such discussing, resisting or addressing is materially in the best
interests of the Company;                                             

       (g) use its reasonable efforts to obtain the consent or approval of
 each governmental agency or authority, whether federal, state or local,
   which may be required to effect such registration or the offering or sale
     in connection therewith or to enable the Holders to offer, or to consummate
    the disposition of, the Eligible Securities, provided that such reasonable
 efforts obligation shall not require the Company to yield to a material
     accounting or other comment issued by such governmental agency or authority
     which it is discussing, resisting or otherwise addressing in good faith and
which the Board of Directors of the Company determines that such      
    discussing, resisting or addressing is materially in the best interests of
the Company;                                                          

          (h) whether or not an agreement of the type referred to in Section 5.2
hereof is entered into and whether or not any portion of the offering 
    contemplated by such registration statement is an underwritten offering or
  is made through a placement or sales agent or any other entity, (i) make
     such representations and warranties to the Holders and the underwriters, if
any, thereof in form, substance and scope as are customarily made in  
connection with an offering of common stock or other equity securities
  pursuant to any appropriate agreement and/or to a registration statement
    filed on the form applicable to such registration; (ii) obtain opinions of
  inside and outside counsel to the Company in customary form and covering
such matters, of the type customarily covered by such opinions, as the
   managing underwriters, if any, and as the Holders may reasonably request;
(iii) obtain a "cold comfort" letter or letters from the independent  
  certified public accountants of the Company addressed to the Holders and
 the underwriters, if any, thereof, dated (I) the effective date of such
registration statement and (II) the date of the closing under the     
  underwriting agreement relating thereto, such letter or letters to be in
   customary form and covering such matters of the type customarily covered,
     from time to time, by letters of such type and such other financial matters
 as the managing underwriters, if any, and as the Holders may reasonably
    request; (iv) deliver such documents and certificates, including officers'
certificates, as may be reasonably requested by the Holders and the   
   placement or sales agent, if any, therefor and the managing underwriters,
if any, thereof to evidence the                                       

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    accuracy of the representations and warranties made pursuant to clause (i)
above and the compliance with or satisfaction of any agreements or    
conditions contained in the underwriting agreement or other agreement 
     entered into by the Company; and (v) undertake such obligations relating to
    expense reimbursement, indemnification and contribution as are provided in
Article 7 hereof;                                                     

        (i) comply with all applicable rules and regulations of the SEC, and
     make generally available to its securityholders, as soon as practicable but
 in any event not later than eighteen months after the effective date of
  such registration statement, an earning statement of the Company and its
     subsidiaries complying with Section 11(a) of the Securities Act (including,
at the option of the Company, Rule 158 thereunder); and               

        (j) use its best efforts to list prior to the effective date of such
registration statement, subject to notice of issuance, the Eligible   
Securities covered by such registration statement on any securities   
    exchange on which securities of the same class are then listed or, if such
   class is not then so listed, to have the Eligible Securities accepted for
     quotation for trading on the NASDAQ National Market System (or a comparable
interdealer quotation system then in effect).                         

The Company may require any Holder to furnish the Company such information      
regarding such Holder and the distribution of such securities as the Company may
from time to time reasonably request in writing and as shall be required by law 
or by the SEC in connection with any registration.                              

5.2 Underwriting.  (a) If requested by the underwriters for any       
underwritten offering of Eligible Securities pursuant to a registration         
requested hereunder, the Company will enter into an underwriting agreement with 
such underwriters for such offering, such agreement to contain such             
representations and warranties by the Company and such other terms and          
provisions as are then customarily contained in underwriting agreements with    
respect to secondary distributions, including, without limitation, indemnities  
and contribution and the provision of opinions of counsel and accountants'      
letters to the effect and to the extent provided in Section 5.1(h). The Holders 
on whose behalf Eligible Securities are to be distributed by such underwriters  
shall be parties to any such underwriting agreement. Such agreement shall       
contain such representations                                                    

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and warranties by the Holders and such other terms and provisions as are then   
customarily contained in underwriting agreements with respect to secondary      
distributions, including, without limitation, indemnities and contribution to   
the effect and to the extent provided in Article 7. The representations and     
warranties by, and the other agreements on the part of, the Company to and for  
the benefit of such underwriters shall also be made to and for the benefit of   
such Holders of Eligible Securities.                                            

       (b) In the event that any registration pursuant to Article 4 hereof
shall involve, in whole or in part, an underwritten offering, the Company may   
require Eligible Securities requested to be registered pursuant to Article 4 to 
be included in such underwriting on the same terms and conditions as shall be   
applicable to the Other Securities being sold through underwriters under such   
registration. In such case, the Holders of Eligible Securities on whose behalf  
Eligible Securities are to be distributed by such underwriters shall be parties 
to any such underwriting agreement. Such agreement shall contain such           
representations and warranties by the Holders and such other terms and          
provisions as are then customarily contained in underwriting agreements with    
respect to secondary distributions, including, without limitation, indemnities  
and contribution to the effect and to the extent provided in Article 7. The     
representations and warranties in such underwriting agreement by, and the other 
agreements on the part of, the Company to and for the benefit of such           
underwriters shall also be made to and for the benefit of such holders of       
Eligible Securities.                                                            

        5.3 Blackout Periods.  (a) At any time when a registration statement
effected pursuant to Article 3 hereunder relating to Eligible Securities is     
effective, upon written notice from the Company to all Holders that either:     

         (i) the Board of Directors of the Company, in its reasonable judgment
     and in good faith, resolves that such Holder's or Holders' sale of Eligible
Securities pursuant to the registration statement would materially    
 interfere with any significant acquisition, corporate reorganization or
     other similar transaction involving the Company (a "Transaction Blackout");
or                                                                    

        (ii) (A) the Company determines in good faith, based upon the advice
   of outside counsel to the Company, that such Holder's or Holders' sale of
  Eligible Securities pursuant to the registration statement would require
     disclosure of material information and the Company's Board of Directors, in

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    its reasonable judgment and in good faith, resolves that the Company has a
    bona fide business purpose for preserving such information confidential or
     (B) the Company determines, after taking into account the advice of outside
counsel and/or independent accountants, that the Company is unable to 
comply with SEC requirements (an "Information Blackout"),             

Such Holder or Holders shall suspend sales of Eligible Securities pursuant to   
such registration statement until the earlier of:                               

          (X) (i) in the case of a Transaction Blackout, the earliest of (A) one
     month after the completion of such acquisition, corporate reorganization or
other similar transaction, (B) promptly after abandonment of such     
    acquisition, corporate reorganization or other similar transaction and (C)
three months after the date of the Company's written notice of such   
Transaction Blackout, or                                              

       (ii) in the case of an Information Blackout, the earlier of (A) the
 date upon which such material information is disclosed to the public or
 ceases to be material and (B) 90 days after the Company makes such good
faith determination, and                                              

     (Y) such time as the Company notifies such Holder or Holders that
     sales pursuant to such registration statement may be resumed (the number of
    days from such suspension of sales by such Holder or Holders until the day
 when such sales may be resumed hereunder is hereinafter called a "Sales
Blackout Period");                                                    

provided, that the Company may not impose a Transaction Blackout within 30 days 
after the initial effectiveness of any registration statement of equity         
securities prepared pursuant to a request hereunder.                            

         5.4. Withdrawals.  Any Holder having notified or directed the Company
to include any or all of his or its Eligible Securities in a registration       
statement pursuant to Article 3 or 4 hereof shall have the right to withdraw    
such notice or direction with respect to any or all of the Eligible Securities  
designated for registration thereby by giving written notice to such effect to  
the Company at least two business days prior to the anticipated effective date  
of such registration statement. In the event of any such withdrawal, the        
Company shall amend such registration statement and take such other actions as  
may be necessary so                                                             

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that such Eligible Securities are not included in the applicable registration   
and not sold pursuant thereto, and such Eligible Securities shall continue to be
Eligible Securities in accordance herewith; the Withdrawing Holder shall be     
responsible for assuming that portion of the Company's expenses in connection   
with such registration as equals the portion of Eligible Securities originally  
to be sold pursuant to such registration which were to be sold by Withdrawing   
Holder. No such withdrawal shall affect the obligations of the Company with     
respect to Eligible Securities not so withdrawn, provided, however, that in the 
case of a registration pursuant to Article 3 hereof, if such withdrawal shall   
reduce the total number of the Eligible Securities to be registered so that the 
requirements set forth in Section 3.1(a) are not satisfied, then the Company    
shall, prior to the filing of such registration statement or, if such           
registration statement (including any amendment thereto) has theretofore been   
filed, prior to the filing of any further amendment thereto, give each Holder of
Eligible Securities so to be registered notice, referring to this Agreement, of 
such fact and, within ten business days following the giving of such notice,    
either the Company or the Holders of a majority of such Eligible Securities may,
by written notice to each Holder of such Eligible Securities or the Company, as 
the case may be, elect that such registration statement not be filed or, if it  
has theretofore been filed, that it be withdrawn.                               

ARTICLE VI

PREPARATION; REASONABLE INVESTIGATION.

6.1. Preparation; Reasonable Investigation.  In connection with the   
preparation and filing of each registration statement registering Eligible      
Securities under the Securities Act, the Company will give all Holders and the  
underwriters, if any, and their respective counsel and accountants, such        
reasonable and customary access to its books and records and such opportunities 
to discuss the business of the Company with its directors, officers, employees, 
counsel and the independent public accountants who have certified its financial 
statements as shall be necessary, in the opinion of any Holder and such         
underwriters or their respective counsel, to conduct a reasonable investigation 
within the meaning of the Securities Act.                                       

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ARTICLE VII 

INDEMNIFICATION AND CONTRIBUTION. 

     7.1 Indemnification and Contribution.  (a) In the event of any registration
of any Eligible Securities hereunder, the Company will enter into customary     
indemnification arrangements to indemnify and hold harmless all selling Holders,
their directors and officers (if any), each Person who participates as an       
underwriter in the offering or sale of such securities, each officer and        
director of each underwriter, and each Person, if any, who controls such seller 
or any such underwriter within the meaning of the Securities Act against any    
losses, claims, damages, liabilities and expenses, joint or several, to which   
such Person may be subject under the Securities Act or otherwise insofar as such
losses, claims, damages, liabilities or expenses (or actions or proceedings in  
respect thereof) arise out of or are based upon (i) any untrue statement or     
alleged untrue statement of any material fact contained in any registration     
statement under which such securities were registered under the Securities Act, 
any preliminary prospectus or final prospectus included therein, or any         
amendment or supplement thereto, or any document incorporated by reference      
therein, or (ii) any omission or alleged omission to state therein a material   
fact required to be stated therein or necessary to make the statements therein  
not misleading, and the Company will periodically reimburse each such Person for
any legal or any other expenses reasonably incurred by such Person in connection
with investigating or defending any such loss, claim, liability, action or      
proceeding; provided that the Company shall not be liable in any such case to   
the extent that any such loss, claim, damage, liability (or action or proceeding
in respect thereof) or expense arises out of or is based upon an untrue         
statement or omission or alleged omission made in such registration statement,  
any such preliminary prospectus or final prospectus, amendment or supplement in 
reliance upon and in conformity with written information furnished to the       
Company by any selling holder or such underwriter for use in the preparation    
thereof. Such indemnity shall remain in full force and effect regardless of any 
investigation made by or on behalf of any Holder or any such person and shall   
survive the transfer of such securities by such selling Holder. The Company also
shall agree to provide provision for contribution as shall be reasonably        
requested by such selling Holder or any underwriters in circumstances where such
indemnity is held unenforceable.                                                

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     (b)  All selling Holders, by virtue of exercising their registration rights
hereunder, agree and undertake to enter into customary indemnification          
arrangements to indemnify and hold harmless (in the same manner and to the same 
extent as set forth in clause (a) of this Article 7) the Company, each director 
of the Company, each officer of the Company who shall sign such registration    
statement, each Person who participates as an underwriter in the offering or    
sale of such securities, each officer and director of each underwriter, each    
Person, if any, who controls the Company or any such underwriter within the     
meaning of the Securities Act, with respect to any statement in or omission from
such registration statement, any preliminary prospectus or final prospectus     
included therein, or any amendment or supplement thereto, if such statement or  
omission was made in reliance upon and in conformity with written information   
concerning such Holder furnished by it to the Company. Such indemnity shall     
remain in full force and effect regardless of any investigation made by or on   
behalf of the Company or any such director, officer or controlling Person and   
shall survive the transfer of the registered securities by any Holder. Holders  
also shall agree to provide provision for contribution as shall be reasonably   
requested by the Company or any underwriters in circumstance where such         
indemnity is held unenforceable. The indemnification and contribution           
obligations of any Holder shall in every case be limited to the aggregate       
proceeds received (net of any underwriting fees and expenses and other          
transaction costs) by such Holder in such registration.                         

ARTICLE VIII

TRANSFER OF REGISTRATION RIGHTS.

8.1. Transfer of Registration Rights. Any Holder may transfer the     
registration rights granted hereunder to any other Person only in connection    
with a Transfer permitted pursuant to Article VI of the Investment Agreement to 
such Person of Eligible Securities held by such Holder.                         

ARTICLE IX

UNDERWRITTEN OFFERINGS. 

   9.1. Selection of Underwriters. If any of the Eligible Securities covered
by any registration statement filed pursuant to Article 3 hereof, or pursuant to
Article 4 hereof in connection with a secondary offering, are to be sold        
pursuant to an underwritten offering, the managing                              

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underwriter or underwriters thereof shall, in the case of any registration      
statement filed pursuant to Article 3 hereof, be designated after consultation  
with the Company by the Holder or Holders demanding registration, provided that 
such designated managing underwriter or underwriters is or are reasonably       
acceptable to the Company and, in the case of any registration statement        
pursuant to Article 4 hereof, by the Person originating the registration.       

ARTICLE X 

RULE 144. 

   10.1. Rule 144. The Company covenants to and with each Holder of Eligible
Securities that to the extent it shall be required to do so under the Exchange  
Act, the Company shall use its best efforts to timely file the reports required 
to be filed by it under the Exchange Act or the Securities Act (including, but  
not limited to, the reports under Section 13 and 15(d) of the Exchange Act      
referred to in subparagraph (c)(1) of Rule 144 adopted by the SEC under the     
Securities Act) and the rules and regulations adopted by the SEC thereunder, and
shall use its best efforts to take such further action as any Holder may        
reasonably request, all to the extent required from time to time to enable the  
Holders to sell Eligible Securities without registration under the Securities   
act within the limitations of the exemption provided by Rule 144 under the      
Securities Act, as such Rule may be amended from time to time, or any similar   
rule or regulation hereafter adopted by the SEC. Upon the request of any Holder 
of Eligible Securities, the Company shall deliver to such Holder a written      
statement as to whether it has complied with such requirements.                 

ARTICLE XI

MISCELLANEOUS.

11.1. Captions. The captions or headings in this Agreement are for    
convenience and reference only, and in no way define, describe, extend or limit 
the scope or intent of this Agreement.                                          

   11.2. Severability. If any clause, provision or section of this Agreement
shall be invalid, illegal or unenforceable, the invalidity, illegality or       
unenforceability of such clause, provision or section shall not affect the      
enforceability or validity any of the                                           

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remaining clauses, provisions or sections hereof to the extent permitted by     
applicable law.                                                                 

     11.3. Governing Law.  This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of California without giving  
effect to conflicts of law principles.                                          

11.4. Consent to Jurisdiction; Service of Process; Waiver of Jury     
Trial.  (a) The parties to this Agreement hereby irrevocably submit to the      
exclusive jurisdiction of any Federal court located in Los Angeles, California  
over any suit, action or proceeding arising out of or relating to this          
Agreement. The parties hereby irrevocably waive, to the fullest extent permitted
by applicable law, any objection which they may now or hereafter have to the    
laying of venue of any such suit, action or proceeding brought in such court.   
The parties agree that, to the fullest extent permitted by applicable law, a    
final and nonappealable judgment in any such, action, or proceeding brought in  
such court shall be conclusive and binding upon the parties.                    

    (b)   The parties hereby irrevocably waive any rights they may have in any
court, state or federal, to a trial by jury in any case of any type that relates
to or arises out of this Agreement or the transactions contemplated herein.     

11.5. Specific Performance.  The Company acknowledges that it would be
impossible to determine the amount of damages that would result from any breach 
by it of any of the provisions of this Agreement and that the remedy at law for 
any breach, or threatened breach, of any of such provisions would likely be     
inadequate and, accordingly, agrees that each Holder shall, in addition to any  
other rights or remedies which it may have, be entitled to seek such equitable  
and injunctive relief as may be available from any court of competent           
jurisdiction to compel specific performance of, or restrain the Company from    
violating any of, such provisions. In connection with any action or proceeding  
for injunctive relief, the Company hereby waives the claim or defense that a    
remedy at law alone is adequate and agrees, to the maximum extent permitted by  
law, to have each provision of this Agreement specifically enforced against it, 
without the necessity of posting bond or other security against it, and consents
to the entry of injunctive relief against it enjoining or restraining any breach
or threatened breach of this Agreement.                                         

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11.6.  Modification and Amendment.  This Agreement may not be changed,
modified, discharged or amended, except by an instrument signed by all of the   
parties hereto.                                                                 

    11.7.  Counterparts.  This Agreement may be executed in counterparts, each
of which shall be an original, but all of which together shall constitute one   
and the same instrument.                                                        

   11.8.  Entire Agreement.  This Agreement constitutes the entire agreement
and understanding among the parties and supersedes any prior understandings     
and/or written or oral agreements among them respecting the subject matter      
herein.                                                                         

11.9.  Notices.  All notices, requests, demands, consents and other   
communications required or permitted to be given pursuant to this Agreement     
shall be in writing and delivered by hand, by overnight courier delivery service
or by certified mail, return receipt requested, postage prepaid. Notices shall  
be deemed given when actually received, which shall be deemed to be not later   
than the next Business Day if sent by overnight courier or after five Business  
Days if sent by mail.                                                           

   11.10. Successors to Company, Etc.  This Agreement shall be binding upon,
and inure to the benefit of, the Company's successors and assigns.              

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement or caused   
this Agreement to be executed as of the day and year first above written.       

                           20TH CENTURY INDUSTRIES

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

                                      AMERICAN INTERNATIONAL GROUP, INC.

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

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EXHIBIT       
E       

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                                                                  EXECUTION COPY

                                                             EXHIBIT E

VOTING AGREEMENT

     VOTING AGREEMENT (the "Agreement"), dated as of October 17, 1994, among the
undersigned stockholders (the "Stockholders") of 20th Century Industries, a     
California corporation (the "Company"), and American International Group, Inc., 
a Delaware corporation (the "Investor").                                        

     WHEREAS, concurrently with the execution of this Agreement, the Company and
the Investor have entered into an Investment and Strategic Alliance Agreement   
(as the same may be amended from time to time, the "Investment Agreement"),     
providing for the issuance and sale by the Company, and the purchase by the     
Investor, of (i) 200,000 shares of Series A Convertible Preferred Stock, par    
value $1,000 per share, and (ii) 16,000,000 Series A Warrants, each exercisable 
for one share of Common Stock, no par value (the "Common Stock"), of the        
Company;                                                                        

WHEREAS, in order to induce the Investor to enter into the Investment 
Agreement, the Stockholders wish to agree (i) to vote the Shares (as defined    
below) and any other such shares of capital stock of the Company owned by them  
so as to facilitate consummation of the transactions contemplated by the        
Investment Agreement, (ii) not to transfer or otherwise dispose of any of the   
Shares, or any other shares of capital stock of the Company acquired hereafter  
and prior to the Expiration Date (as defined below) and (iii) to deliver an     
irrevocable proxy to vote the Shares to the Investor.                           

NOW, THEREFORE, for good and valuable consideration, the receipt,     
sufficiency and adequacy of which is hereby acknowledged, the parties hereto    
agree as follows:                                                               

  1. Representations of Stockholders.  Each of the Stockholders represents
and warrants (each as to himself or itself) to the Investor that (a) such       
Stockholder lawfully owns the shares of Common Stock set forth opposite such    
Stockholder's name on Exhibit A (such Stockholder's "Shares") free and clear of 
all liens, claims, charges, security interests or other encumbrances and, except
for this Agreement, there are no options, warrants or other rights, agreements, 
arrangements or commitments of any character to which such Stockholder is a     
party relating to the pledge, disposition or voting of any shares of capital    

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stock of the Company and there are no voting trusts or voting agreements with   
respect to such Shares, (b) such Stockholder does not own any shares of Common  
Stock other than such Shares and does not have any options (other than employee 
stock options), warrants or other rights to acquire any additional shares of    
capital stock of the Company or any security exercisable for or convertible into
shares of capital stock of the Company, and (c) such Stockholder has full power 
and authority to enter into, execute and deliver this Agreement and to perform  
fully such Stockholder's obligations hereunder. This Agreement has been duly    
executed and delivered and constitutes the legal, valid and binding obligation  
of such Stockholder in accordance with its terms.                               

  2. Agreement to Vote Shares.  Each of the Stockholders agrees during the
term of this Agreement to vote such Stockholder's Shares and any New Shares (as 
defined in Section 6 hereof), and to cause any holder of record of such Shares  
or New Shares to vote, (i) in favor of adoption and approval of the Proposals   
(as defined in the Investment Agreement) at any meeting of the stockholders of  
the Company at which such matters are considered and at every adjournment       
thereof, (ii) against any action or agreement that would compete with, impede,  
interfere with or attempt to discourage the Proposals or inhibit the timely     
consummation of the Proposals, and (iii) against any merger, consolidation,     
business combination, reorganization, recapitalization, liquidation or sale or  
transfer of any material assets of the Company or its subsidiaries. Each        
Stockholder agrees to deliver to the Investor upon request a proxy substantially
in the form attached hereto as Exhibit B, which proxy shall be irrevocable      
during the term of this Agreement to the extent permitted under California law. 

3. No Voting Trusts.  During the term of this Agreement, each of the  
Stockholders agrees that such Stockholder will not, nor will such Stockholder   
permit any entity under such Stockholder's control to, deposit any of such      
Stockholder's Shares in a voting trust or subject any of their Shares to any    
arrangement with respect to the voting of such Shares other than agreements     
entered into with the Investor.                                                 

    4. No Proxy Solicitations.  During the term of this Agreement, each of the
Stockholders agrees that such Stockholder will not, nor will such Stockholder   
permit any entity under such Stockholder's control to, (a) solicit proxies or   
become a "participant" in a "solicitation" (as such terms are defined in        
Regulation 14A under the 1934 Act)                                              

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in opposition to or competition with the Proposals or otherwise encourage or    
assist any party in taking or planning any action which would compete with,     
impede, interfere with or attempt to discourage the Proposals or inhibit the    
timely consummation of the Proposals, (b) directly or indirectly encourage,     
initiate or cooperate in a stockholders' vote or action by consent of the       
Company's stockholders in opposition to or in competition with the Proposals, or
(c) become a member of a "group" (as such term is used in Section 13(d) of the  
1934 Act) with respect to any voting securities of the Company for the purpose  
of opposing, competing with or impeding the consummation of the Proposals;      
provided, that the foregoing shall not restrict any director of the Company from
taking any action as a director that such director reasonably believes after    
consultation with outside counsel is necessary to satisfy such director's       
fiduciary duty to stockholders of the Company.                                  

   5.  Transfer and Encumbrance.  On or after the date hereof and during the
term of this Agreement, each of the Stockholders agrees not to transfer, sell,  
offer, exchange, pledge or otherwise dispose of or encumber any of such         
Stockholder's Shares or New Shares (other than the disposition in market        
transactions of New Shares acquired upon exercise of any employee stock         
options); provided, however, each Stockholder may sell, transfer, exchange,     
pledge or otherwise dispose of or encumber up to 2% of such Stockholder's Shares
(it being understood that any such sales must comply with the requirements of   
the federal securities laws, as to which the Stockholders have been advised, and
for which the Stockholders have full responsibility and liability, without any  
liability on behalf of the Company or the Investor).                            

6.  Additional Purchases.  Each of the Stockholders agrees that such  
Stockholder will not purchase or otherwise acquire beneficial ownership of any  
shares of Company Common Stock after the execution of this Agreement ("New      
Shares"), nor will any Stockholder voluntarily acquire the right to vote or     
share in the voting of any shares of Company Common Stock other than the Shares,
unless such Stockholder agrees to deliver to the Investor immediately after such
purchase or acquisition an irrevocable proxy substantially in the form attached 
hereto as Exhibit B with respect to such New Shares. Each of the Stockholders   
also severally agrees that any New Shares acquired or purchased by him or her   
shall be subject to the terms of this Agreement to the same extent as if they   
constituted Shares.                                                             

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  7. Specific Performance.  Each party hereto acknowledges that it will be
impossible to measure in money the damage to the other party if a party hereto  
fails to comply with any of the obligations imposed by this Agreement, that     
every such obligation is material and that, in the event of any such failure,   
the other party will not have an adequate remedy at law or damages. Accordingly,
each party hereto agrees that injunctive relief or other equitable remedy, in   
addition to remedies at law or damages, is the appropriate remedy for any such  
failure and will not oppose the granting of such relief on the basis that the   
other party has an adequate remedy at law. Each party hereto agrees that it will
not seek, and agrees to waive any requirement for, the securing or posting of a 
bond in connection with any other party's seeking or obtaining such equitable   
relief.                                                                         

8. Entire Agreement.  This Agreement supersedes all prior agreements, 
written or oral, among the parties hereto with respect to the subject matter    
hereof and contains the entire agreement among the parties with respect to the  
subject matter hereof. This Agreement may not be amended, supplemented or       
modified, and no provisions hereof may be modified or waived, except by an      
instrument in writing signed by all the parties hereto. No waiver of any        
provisions hereof by any party shall be deemed a waiver of any other provisions 
hereof by any such party, nor shall any such waiver be deemed a continuing      
waiver of any provision hereof by such party.                                   

     9. Notices.  All notices, requests, claims, demands or other communications
hereunder shall be in writing and shall be deemed given when delivered          
personally, upon receipt of a transmission confirmation if sent by telecopy or  
like transmission and on the next business day when sent by Federal Express,    
Express Mail or other reputable overnight courier service to the parties at the 
following addresses (or at such other address for a party as shall be specified 
by like notice):                                                                

If to the Investor:                                                   

American International Group, Inc.                          
70 Pine Street                                              
New York, New York 10270                                    
Attention: General Counsel                                  
Telecopy:  (212) 785-1584                                   

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With a copy to:                                                       

Sullivan & Cromwell                                         
125 Broad Street                                            
New York, New York 10004                                    
Attention: Andrew S. Rowen                                  
Telecopy:  (212) 558-3588                                   

   If to a Stockholder, to the address or telecopy number set forth for such
Stockholder on the signature page hereof:                                       

With a copy to:                                                       

Gibson, Dunn & Crutcher                                     
333 South Grand Avenue                                      
46th Floor                                                  
Los Angeles, CA 90071-3197                                  
Attention: Peter F. Ziegler                                 
Jonathan K. Layne                     
Telecopy:  (213) 229-7520                                   

10. Miscellaneous.                                                    

(a) This Agreement shall be deemed a contract made under, and for all 
purposes shall be construed in accordance with, the laws of the State of        
California, without reference to its conflicts of law principles.               

     (b) If any provision of this Agreement or the application of such provision
to any person or circumstances shall be held invalid or unenforceable by a court
of competent jurisdiction, such provision or application shall be unenforceable 
only to the extent of such invalidity or unenforceability and the remainder of  
the provision held invalid or unenforceable and the application of such         
provision to persons or circumstances, other than the party as to which it is   
held invalid, and the remainder of this Agreement, shall not be affected.       

(c) This Agreement may be executed by facsimile in one or more        
counterparts, each of which shall be deemed to be an original but all of which  
together shall constitute one and the same instrument.                          

  (d) This Agreement shall terminate upon the earliest to occur of (i) the
conclusion of the Company's                                                     

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meeting of stockholders held for the purpose of voting on the Proposals (or, if 
adjourned, the conclusion of any subsequent reconvened meeting held for such    
purpose), and (ii) the date on which the Investment Agreement is terminated in  
accordance with its terms.                                                      

   (e) Each party hereto shall execute and deliver such additional documents
as may be necessary or desirable to effect the transactions contemplated by this
Agreement.                                                                      

   (f) All Section headings herein are for convenience of reference only and
are not part of this Agreement, and no construction or reference shall be       
derived therefrom.                                                              

   (g) The obligations of the Stockholders set forth in this Agreement shall
not be effective or binding upon any Stockholder until after such time as the   
Investment Agreement is executed and delivered by the Company and the Investor, 
and the parties agree that there is not and has not been any other agreement,   
arrangement or understanding between the parties hereto with respect to the     
matters set forth herein. The obligations of each Stockholder who executes and  
delivers this Agreement shall be effective and binding regardless of the failure
of other Stockholders to execute and deliver this Agreement.                    

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

                          AMERICAN INTERNATIONAL
                   GROUP, INC.

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

                     THE STOCKHOLDERS:

                          ----------------------
                   Louis W. Foster

                          ----------------------
                   John B. DeNault

                          ----------------------
                  Neil H. Ashley

                          ----------------------
                   James O. Curley

                          ----------------------
                Rex J. Bates

                          ----------------------
                    Stanley M. Burke

                          ----------------------
                        John B. DeNault, III

                          ----------------------
                         R. Scott Foster, M.D.

                          ----------------------
                   Rachford Harris

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                          ----------------------
                    Wayne F. Horning

                          ----------------------
                  Arthur H. Voss

                          ----------------------
                      Paul S. Castellani

                          ----------------------
                      William L. Mellick

                          ----------------------
                      John R. Bollington

                          ----------------------
                    Richard A. Andre

                          ----------------------
                  Margaret Chang

                          ----------------------
                   Teresa K. Colpo

                          ----------------------
                    William G. Crain

                          ----------------------
                          William M. Dailey, Jr.

                          ----------------------
                    Richard A. Dinon

                          ----------------------
                  Paul F. Farber

                          ----------------------
                   Richard L. Hill

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                     -----------------
                    Charles I. Petit

                     -----------------
                 Dean E. Stark

                     -----------------
                     Rickard F. Schutt

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                                                                     (EXHIBIT A)

20TH CENTURY INDUSTRIES 
LIST OF STOCKHOLDERS, DIRECTORS AND OFFICERS

                                                                [Download Table]

NAME                                                                 # SHARES 
----                                                                 -------- 
                                                                              
LOUIS W. FOSTER                                                      4,725,696

JOHN B. DENAULT                                                      4,362,000

NEIL H. ASHLEY                                                          78,747

JAMES O. CURLEY                                                         34,540

REX J. BATES                                                           360,000

STANLEY M. BURKE                                                        16,000

JOHN B. DENAULT, III                                                 1,570,700

R. SCOTT FOSTER, M.D.                                                  318,996

RACHFORD HARRIS                                                        972,313

WAYNE F. HORNING                                                       555,418

ARTHUR H. VOSS                                                         441,000

PAUL S. CASTELLANI                                                      32,202

WILLIAM L. MELLICK                                                      39,800

JOHN R. BOLLINGTON                                                      48,685

RICHARD A. ANDRE                                                        11,493

MARGARET CHANG                                                          57,635

TERESA K. COLPO                                                          3,725

WILLIAM G. CRAIN                                                        29,767

WILLIAM M. DAILEY, JR.                                                  13,960

RICHARD A. DINON                                                        14,280

PAUL F. FARBER                                                           6,560

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                                                                [Download Table]

NAME                                                                  # SHARES
----                                                                  --------
                                                                              
RICHARD L. HILL                                                          4,792

CHARLES I. PETIT                                                         5,575

DEAN E. STARK                                                            3,938

RICKARD F. SCHUTT                                                        4,167
                                                                    ----------
TOTAL (as of Oct. 1, 1994)                                          13,711,939

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                                                                     (EXHIBIT B)

FORM OF PROXY 

The undersigned, for consideration received, hereby appoints Robert   
Sandler, Howard Smith and Richard D'Alessandri, and each of them, my proxies,   
with power of substitution and resubstitution, to vote all shares of Common     
Stock, no par value (the "Common Stock"), of 20th Century Industries, a         
California corporation (the "Company"), owned by the undersigned at the Annual  
or special meeting of stockholders of the Company, and at any adjournment       
thereof, to be held for the purpose of considering and voting upon proposals to 
approve and adopt the Proposals (as defined in the Investment and Strategic     
Alliance Agreement, dated as of October 17, 1994, between the Company and       
American International Group, Inc., a Delaware corporation ("Investor")), and   
consummation by the Company of all of the transactions contemplated thereby,    
including the issuance and sale by the Company of certain securities (the       
"Proposals"), FOR such Proposals and AGAINST any action or agreement that would 
compete with, impede, interfere with or attempt to discourage the Proposals or  
inhibit the timely consummation of the Proposals and any merger, consolidation, 
business combination, reorganization, recapitalization, liquidation or sale or  
transfer of any material assets of the Company or its subsidiaries. This proxy  
is coupled with an interest, revokes all prior proxies granted by the           
undersigned, is irrevocable and shall terminate at such time as the Voting      
Agreement, dated as of October 17, 1994, among the Investor and certain         
stockholders of the Company, including the undersigned, a copy of such Agreement
being attached hereto and incorporated herein by reference, terminates in       
accordance with its terms.                                                      

                                          Dated__________________________ , 1994

                                          --------------------------------------
                                          (Signature of Stockholder)

                                          --------------------------------------
                                          (Signature of Stockholder)

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                                                                       EXHIBIT F

TRANSFER RESTRICTIONS 

(DEFINITIONS IN PARAGRAPH 13) 

1.  Until the earliest to occur of (a) the end of the thirty-eighth (38th) month
  following the closing of the Investor's purchase of the Series A Preferred
Stock, (b) the first day of the first taxable year following the taxable
year (or years) in which the Income Tax Net Operating Loss Carryover has
    been reduced to zero, or (c) the effective date of the repeal of Section 382
    without a successor provision that places restrictions on the Income Tax Net
Operating Loss Carryover based on changes of ownership of the Company's 
Stock, any Transfer of Stock or an Option shall be deemed a "Prohibited 
 Transfer" if (x) such Transfer would increase the Percentage of the Stock
   Owned by any Person or Public Group that (or whose Stock is or by virtue of
such Transfer would be attributed to any Person or Public Group that),  
 either after giving effect to the attribution rules (including the option
attribution rules) of Section 382 or without regard to such attribution 
   rules, Owns, by virtue of such Transfer would Own, or has at any time since
    the date three years prior to the Closing Date Owned, more than 4.75% of the
outstanding Stock (the "Limit"), or would otherwise be treated as a 5%  
    Shareholder or (y) the Transfer would cause an "ownership change" within the
    meaning of Section 382. With respect to the Series A Preferred Stock and the
   Common Stock, the Limit shall be equal to 4.75% of each class. The Stock or
  Option sought to be transferred in the Prohibited Transfer shall be deemed
"Excess Stock." In the event the Purported Transferee Owns Stock both   
actually or constructively, the transfer restrictions will provide an   
ordering mechanism for determining which shares are deemed Excess Stock,
   which generally will select Stock actually Owned first, subject to Board of
Director discretion to select another method for determining the Excess 
Stock in that situation.                                                

2.  A Prohibited Transfer shall be void ab initio as to the Purported Transferee
in the Prohibited Transfer and such Purported Transferee shall not be   
    recognized as the owner of the Excess Stock for any purpose and shall not be
entitled to any rights as a stockholder of the Company arising from the 
   ownership of Excess Stock, including, but not limited to, the right to vote
such Excess Stock or to receive dividends or other                      

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distributions in respect thereof or, in the case of Options, to receive 
   Stock in respect of their exercise. Any Excess Stock shall automatically be
transferred to Trustee in trust for the benefit of the Charitable       
Beneficiary, effective as of the close of business on the business day  
 prior to the date of the Prohibited Transfer, and shall be subject to the
provisions of paragraphs 3 and 4 hereof; provided, however, that if the 
transfer to the Trust is deemed ineffective for any reason, such Excess 
Stock shall nevertheless be surrendered to the Trustee, and the Trustee 
shall have rights consistent with those of the Trustee as described in  
paragraphs 3 and 4. This paragraph 2 shall not apply to a Prohibited    
Transfer described in paragraph 8.                                      

3.  A holder of Excess Stock shall immediately surrender the Certificates       
   therefor to the Trustee of the trust. In addition, the Purported Transferee
shall surrender to the Trustee any dividends and other distributions    
   received with respect to the Excess Stock ("Prohibited Distributions"). The
Trustee shall have all the rights of the owner of the Excess Stock,     
 including the right to vote, receive dividends, and receive proceeds from
liquidation. The Purported Transferee and the Company will have the     
obligation to notify the Trustee of a Prohibited Transfer.              

4.  Upon receipt of the Excess Stock, the Trustee shall take such actions as it 
deems necessary to dispose of the Excess Stock in an arm's-length       
transaction that would not constitute a Prohibited Transfer. Upon the   
  disposition of such Excess Stock, the Trustee shall remit to the Purported
Transferee an amount of the proceeds of such sale not to exceed the     
 Purported Transferee's cost incurred to acquire such Excess Stock, or, if
such Excess Stock was acquired for less than fair market value, the fair
   market value of the Excess Stock on the date of the Prohibited Transfer, in
each case less all costs incurred by the Company, the Trustee and the   
Transfer Agent in enforcing the provisions. In the event the Purported  
Transferee has disposed of the Excess Stock otherwise than in accordance
with this paragraph, such Purported Transferee shall be deemed to have  
disposed of such Excess Stock as an agent for the Trustee, and shall be 
    required to return to the Trustee the proceeds from such sale, together with
any Prohibited Distributions theretofore received by the Purported      
Transferee with respect to such Excess Stock, subject to retention of an
 amount of such sale proceeds not to exceed the amount that such Purported
Transferee would have                                                   

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   received from the Trustee if the Trustee had obtained and resold the Excess
Stock at any time during the period beginning on the date the Purported 
 Transferee acquired such Excess Stock and the date of such disposition by
  the Purported Transferee, assuming for this purpose that the Trustee would
   have sold the Excess Stock for an amount equal to the lowest-quoted trading
 price of such Excess Stock during such period. The Trustee shall transfer
 any proceeds (after deducting an amount equal to the expenses incurred by
the Company or the Trustee in enforcing these restrictions) to the      
    Charitable Beneficiary. Neither the Trustee, the Company nor any other party
 shall claim an income tax deduction with respect to such contribution and
neither the Trustee nor the Company shall benefit in any way from the   
enforcement of these transfer restrictions, except insofar as these     
   restrictions protect the Company's Income Tax Net Operating Loss Carryover.
Neither the Transfer Agent nor the Company shall have any liability to a
 Purported Transferee or Purported Transferor for any loss arising from or
related to a Prohibited Transfer.                                       

5.  The transfer restrictions will not apply to: (a) the sale to the Investor of
  the Series A Preferred Stock, (b) the sale to the Investor of the Series A
 Warrants, (c) the conversion by the Investor of Series A Preferred Stock,
    (d) the sale by the Investor of shares of Series A Preferred Stock or shares
   of Common Stock obtained upon conversion thereof if the sale would not be a
Prohibited Transfer but for the Investor's ownership of Stock, in either
   case in compliance with the Investment Agreement, (e) any Transfer effected
    by the Investor permitted by Section 6.1(b) of the Investment Agreement, (f)
   any sale effected by the Investor of any securities of the Company acquired
   after the Closing Date under the Investment Agreement, and (g) any Transfer
with respect to which the Person who would otherwise be the Purported   
  Transferee obtains prior written approval of the Board of Directors of the
    Company, which approval shall be granted in its sole and absolute discretion
   after considering all facts and circumstances, including but not limited to
  future events the occurrence of which are deemed by the Board of Directors
of the Company to be reasonably possible.                               

6.  The Transfer Agent shall not register any Transfer of Stock on the Company's
stock transfer records if it has knowledge that such Transfer is a      
    Prohibited Transfer. The Transfer Agent shall have the right, prior and as a
condition to registering any Transfer of Stock on the Company's stock   
transfer records, to request any                                        

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  transferee of the Stock to submit an affidavit, on a form agreed to by the
  Transfer Agent and the Company, stating the number of shares of each class
of Stock Owned by the transferee (and by Persons who would Own the      
  transferee's Stock) before the proposed Transfer and that would, if effect
  were given to the Transfer, be Owned by the transferee (and by Persons who
  would Own the prospective transferee's Stock) after the proposed Transfer.
If either (a) the Transfer Agent does not receive such affidavit, or (b)
 such affidavit evidences that the Transfer was a Prohibited Transfer, the
  Transfer Agent shall notify the Company and shall not enter the Prohibited
   Transfer into the Company's stock transfer records, and the Transfer Agent,
the Trustee and the Company shall take such steps as provide in these   
 restrictions in order to dispose of the Excess Stock purportedly Owned by
  such Purported Transferee. In addition, the Company, shall take such other
  steps as the Board of Directors of the Company determines to be helpful in
  ensuring compliance with the transfer restrictions. If the Transfer Agent,
for whatever reason, enters a Prohibited Transfer in the Company's stock
transfer records, such Transfer shall be nonetheless void and, in       
accordance with the foregoing restrictions, such Transfer shall have no 
  force and effect and the Company's stock transfer records shall be revised
to so provide.                                                          

7.  If a Purported Transferee fails to surrender Excess Stock or Prohibited     
   Distributions, or proceeds from the sale of Excess Stock, to the Trustee as
   required, then, as soon as practicable after demand therefor is made by the
   Company, the Trustee or the Transfer Agent, the Company will initiate legal
  proceedings to compel such actions and for compensatory damages on account
of any failure to take such actions.                                    

8.  Except as otherwise provided in Section 5 hereof, special provisions will   
apply to a Transfer if the effect is to reduce the Ownership by a 5%    
   Shareholder and increase the ownership of a Public Group in order to ensure
that the Excess Stock will not be treated as having been sold and will  
continue to be owned by the Purported Transferor.                       

9.  Any person who knowingly violates the restrictions shall be liable to the   
   Company for, and shall indemnify and hold the Company harmless against, any
 and all damages suffered as a result of such violation, including but not
limited to damages resulting from a reduction in or elimination of the  
 Company's ability to utilize its Income Tax Net Operating Loss Carryover,
and attorneys'                                                          

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and accountants' fees incurred in connection with such violation.       

10. All certificates or other instruments evidencing Ownership of Stock shall   
bear a conspicuous legend describing the restrictions.                  

11. The Company will take such further actions that it deems necessary or       
appropriate in order to ensure that the transfer restrictions will be   
enforced.                                                               

12. If any part of the restrictions is judicially determined to be invalid or   
otherwise unenforceable, such invalidity or unenforceability shall not  
affect the remainder of the restrictions, which shall be thereafter     
interpreted as if the invalid or unenforceable part were not contained  
herein, and, to the maximum extent possible, in a manner consistent with
preserving the ability of the Company to utilize to the greatest extent 
possible the Income Tax Net Operating Loss Carryover.                   

13. Definitions:                                                                

"Charitable Beneficiary" shall mean an organization described in Section
170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code.                      

 "Code" shall mean the Internal Revenue Code of 1986, as amended and as it
may be amended from time to time hereafter.                             

  "5% Shareholder" shall mean any Person who is a "5-percent shareholder" of
the Company within the meaning of Section 382.                          

    "Income Tax Net Operating Loss Carryover" shall mean the net operating loss,
capital loss, net unrealized built-in loss, general business credit,    
 alternative minimum tax credit and foreign tax credit carryovers to which
  the Company is entitled under the Code and Regulations, at any time during
which the restrictions are in force.                                    

 "Option" shall mean any interest that could give rise to the ownership of
    Stock and that is an option, contract, warrant, convertible instrument, put,
    call, stock subject to a risk of forfeiture, pledge of stock or any interest
    that is similar to any of such interests or any other interest that would be
  treated, under Paragraph (d)(9) of Treasury Regulation Section 1.382-4, in
the same manner as an option, whether or not any of such interests is   
subject to contingencies.                                               

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"Own," and all derivations of the word "Own" shall mean any direct or   
indirect, actual or beneficial interest, including, except as otherwise 
provided, a constructive ownership interest under the attribution rules 
(including the option attribution rules) of Section 382. In determining 
whether a Person Owns an amount of Stock in excess of the Limit, Options
   Owned by such Person (or other Persons whose Ownership of Stock is or would
be attributable under Section 382 to such Person) shall be treated as   
exercised (and the Stock that would be acquired by such exercise as     
outstanding) and Options Owned by other Persons shall be treated as not 
exercised (and the Stock that would be acquired if such options Owned by
  other Persons were exercised shall be treated as not outstanding), in case
    without regard to whether such treatment would result in an ownership change
within the meaning of Section 382.                                      

"Percentage" or "%" shall mean percentage by value.                     

   "Person" shall mean any individual (other than a Public Group treated as an
individual under Section 382) or any "entity" as that term is defined in
Regulations Section 1.382-3(a).                                         

"Public Group" shall have the meaning assigned to such term in the      
    applicable Regulations under Section 382. Any Transfer or attempted Transfer
  of Stock to an individual or entity whose Stock is included in determining
   the Percentage of Stock Owned by a Public Group for purposes of Section 382
  shall be treated as a Transfer or attempted Transfer to such Public Group.

 "Purported Transferee" shall mean a person who acquires Excess Stock in a
Prohibited Transfer or any subsequent transferee of such Excess Stock.  

  "Purported Transferor" shall mean a person who Transfers Excess Stock in a
Prohibited Transfer.                                                    

"Regulations" shall mean Treasury Regulations, including proposed or    
temporary regulations, promulgated under the Code, as the same may be   
amended from time to time. References herein to specific provisions of  
   proposed or temporary Regulations shall include the analogous provisions of
final Regulations or other successor Regulations.                       

"Section 382" shall mean Section 382 of the Code and the Regulations    
promulgated thereunder.                                                 

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  "Stock" shall mean the Common Stock, the Series A Preferred Stock, and any
 interest in the Company that would be treated as stock under Section 382,
without regard to clauses (ii)(B) and (iii)(B) of paragraph (f)(18) of  
   Temporary Treasury Regulation Section 1.382-2T (but only if, in determining
    the Ownership by any Person of Stock, the uniform treatment of such interest
  as Stock or as not Stock, as the case may be, would increase such Person's
Percentage Ownership of Stock), and shall also include any Stock the    
ownership of which may be acquired by the exercise of an Option.        

  "Transfer" shall mean any direct or indirect disposition, whether by sale,
exchange, merger, consolidation, transfer, assignment, conveyance,      
distribution, pledge, inheritance, gift, mortgage, the creation of any  
   security interest in, or lien or encumbrance upon, or any other disposition
   of any kind and in any manner, whether voluntary or involuntary, knowing or
unknowing, by operation of law or otherwise. Notwithstanding any        
understandings or agreements to which an Owner of Stock is a party, any 
arrangement, the effect of which is to transfer any or all of the rights
   arising from Ownership of Stock, shall be treated as a Transfer. A Transfer
 shall also include the creation, grant, exercise, conversion, Transfer or
other disposition of or with respect to an Option.                      

   "Transfer Agent" means the Person responsible for maintaining the books and
   records in which are recorded the ownership and transfer of shares of Stock
or any Person engaged by the Company for the purpose of fulfilling the  
duties required to be fulfilled by the Transfer Agent hereunder.        

   "Trustee" means the trustee of the Trust appointed by the Company, provided
that the Trustee shall be a Person unaffiliated with the Company, any 5%
    Shareholder, and any Person purchasing or disposing of Stock in a Prohibited
Transfer.                                                               

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                                                               EXHIBIT 9.1(l)(i)

OPINION OF GENERAL COUNSEL TO THE COMPANY 

[LETTERHEAD OF 20TH CENTURY]

1. Each of the Subsidiaries is a corporation duly organized, validly  
existing and in good standing under the laws of the State of California, and has
the requisite corporate power and authority to own its respective properties and
to carry on its respective businesses as presently conducted. All of the        
outstanding shares of capital stock of each Subsidiary are validly issued, fully
paid and non-assessable and are owned by the Company free and clear of any lien,
charge or encumbrance except as provided by the Credit Agreement or as described
in the Investment Agreement.                                                    

     2. Each of the Subsidiaries is duly licensed as an insurance company in the
State of California and has filed all notices, reports, documents or other      
information, has obtained all authorizations, approval, orders, consents,       
licenses, certificates, permits, registrations or qualifications, and has       
performed all such other actions, required to conduct an insurance business in  
the State of California, except for failures as would not adversely affect the  
business, operations or financial condition of such Subsidiaries or affect the  
validity or enforceability of the Investment Agreement, the Certificate of      
Determination, the Series A Warrant Certificate, the Registration Rights        
Agreement or the Quota Share Agreement ("the Related Agreements") or the        
transactions contemplated thereby.                                              

3. Except as set forth on Schedule 2.1(P) to the Investment Agreement,
there are no legal or governmental proceedings pending or, to the best of such  
counsel's knowledge, threatened to which the Company or any of the Subsidiaries 
is a party which, individually or in the aggregate, would have a Material       
Adverse Effect.                                                                 

     4. Each of the Subsidiaries has all requisite corporate power and authority
to execute, deliver and perform the obligations set forth in the Quota Share    
Agreements to which it is a party. The Quota Share Agreements have been duly    
authorized by all necessary corporate action and have been duly and validly     
executed and delivered by the Subsidiaries on the date                          

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hereof. The execution, delivery and performance of the Investment Agreement and 
Related Agreements (as applicable) and the consummation of the transactions     
contemplated thereby by the Company or its Subsidiaries will not (i) result in a
breach or violation of any statute, rule or regulation binding on the           
Subsidiaries, including, but not limited to, regulations and statutes applying  
to insurance companies or (ii) result in a breach or violation of the terms,    
conditions or provisions of any writ or injunction of any court or Governmental 
Entity applicable to the Subsidiaries. Each of the Quota Share Agreements       
constitutes the valid and legally binding obligation of the Subsidiaries,       
enforceable in accordance with its terms, except as limited by applicable       
bankruptcy, insolvency, reorganization, moratorium or other similar laws of     
general application now or hereafter in effect relating to or affecting         
creditors' rights, including, without limitation, the effect of statutory or    
other laws regarding fraudulent conveyances or preferential transfers and by    
general principles of equity, whether considered in a proceeding in law or      
equity (including the possible unavailability of specific performance or        
injunctive relief and the general discretion of the court or tribunal           
considering the matter).                                                        

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                                                              EXHIBIT 9.1(l)(ii)

OPINIONS OF SPECIAL COUNSEL TO THE COMPANY

 1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of California, and has the requisite  
corporate power and authority to own its properties and to carry on its         
businesses as presently conducted. The holders of the outstanding shares of     
Common Stock, no par value per share (the "Common Stock"), of the Company have  
duly authorized (i) an amendment to the Company's Articles of Incorporation     
increasing its authorized shares of Common Stock and adopting certain transfer  
restrictions and (ii) the Company's and its Subsidiaries' (as applicable)       
entering into the Investment Agreement, the Series A Warrant Certificate and the
Registration Rights Agreement (the "Related Agreements") and the Certificate of 
Determination, and said amendment has been filed with the Secretary of State of 
the State of California.                                                        

2. The outstanding shares of Common Stock are duly authorized, validly
issued, fully paid and non-assessable. All Series A Preferred Shares issuable   
pursuant to the Investment Agreement (initially, upon payment of dividends in   
kind and upon further adverse development with respect to the Northridge        
Earthquake) are duly authorized, and when issued pursuant to the Investment     
Agreement and Certificate of Determination, will be validly issued, fully paid  
and non-assessable. The Series A Warrants are duly authorized and, when issued, 
will be validly issued and constitute valid and legally binding obligations of  
the Company enforceable in accordance with their terms except as limited by     
applicable bankruptcy, insolvency, reorganization, moratorium or other similar  
laws of general application now or hereafter in effect relating to or affecting 
creditors' rights, including, without limitation, the effect of statutory or    
other laws regarding fraudulent conveyances or preferential transfers and by    
general principles of equity, whether considered in a proceeding in law or      
equity (including the possible unavailability of specific performance or        
injunctive relief and the general discretion of the court or tribunal           
considering the matter). The Company has duly authorized and reserved sufficient
shares of Common Stock for issuance upon conversion of all Series A Preferred   
Shares, upon full exercise of the Stock Option Agreement and upon full exercise 
of the Series A Warrants and, if and when delivered, such shares of             

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Common Stock will be validly issued, fully paid and non-assessable.             

  3. Holders of the outstanding shares of Common Stock are not entitled to
any preemptive or other rights to subscribe for any Series A Preferred Shares or
Series A Warrants or for the shares of Common Stock obtainable thereunder by    
operation of law or pursuant to the Company's Articles of Incorporation or      
By-Laws.                                                                        

    4. The Company has all requisite corporate power and authority to execute,
deliver and perform the obligations set forth in the Investment Agreement and   
the Related Agreements (other than the Series A Warrants) to which it is a      
party. The Investment Agreement and Related Agreements have been duly authorized
by all necessary corporate action and have been duly and validly executed and   
delivered by the Company on the date hereof. The execution, delivery and        
performance of the Investment Agreement and Related Agreements and the          
consummation of the transactions contemplated thereby by the Company will not   
(i) conflict with, or result in a breach of, the Company's or its Subsidiaries' 
Articles of Incorporation or By-laws, (ii) result in a breach or violation of   
any statute, rule or regulation binding on the Company or (iii) result in a     
breach or violation of the terms, conditions or provisions of any writ or       
injunction of any court or Governmental Entity applicable to the Company. Each  
of the Investment Agreement and Related Agreements to which the Company is a    
party (other than the Series A Warrants) constitutes the valid and legally      
binding obligation of the Company, enforceable in accordance with its terms,    
except (a) as limited by applicable bankruptcy, insolvency, reorganization,     
moratorium or other similar laws of general application now or hereafter in     
effect relating to or affecting creditors' rights, including, without           
limitation, the effect of statutory or other laws regarding fraudulent          
conveyances or preferential transfers and by general principles of equity,      
whether considered in a proceeding in law or equity (including the possible     
unavailability of specific performance or injunctive relief and the general     
discretion of the court or tribunal considering the matter), and (b) such       
counsel expresses no opinion as to the legality, binding effect or              
enforceability of any provisions of the Investment                              

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Agreement or the Registration Rights Agreement regarding rights of              
indemnification or contribution that may be limited by federal or state         
securities laws or considerations of public policy.                             

     5. Each of the Company and the Subsidiaries has filed all notices, reports,
documents or other information ("Notices") required to be filed with any        
Governmental Entity in connection with, and has obtained all authorizations,    
approvals, orders, consents, licenses, certificates, permits, registrations or  
qualifications ("Approvals") necessary to be obtained from any Governmental     
Entity in connection with, the execution, delivery and performance of the       
Investment Agreement and the Related Agreements and the consummation of the     
transactions contemplated thereby, including, without limitation, such Notices  
and Approvals required to be filed with, or obtained from, the California       
Insurance Department.                                                           

 6. The Proxy Statement complies in form in all material respects to the
requirements of the Exchange Act and the rules and regulations thereunder       
(except as to the financial statements and other financial data, or as to       
material relating to, or supplied by, AIG or any of its Subsidiaries, included  
therein, as to which we express no opinion).                                    

    7. To the best of such counsel's knowledge, no action, suit, investigation
or other proceeding ("Action") to which the Company or either of the            
Subsidiaries is or is threatened to be made a party relating to the Investment  
Agreement, the Related Agreements or the transactions contemplated thereby has  
been instituted or threatened before any Governmental Entity which Action       
presents a substantial risk of restraining or prohibiting the consummation of   
such transactions or obtaining material damages or other material relief in     
connection therewith.                                                           

    8. Assuming the correctness of the representations of the Investor and the
Company contained in Sections 2.1(z) and 3.1(e) of the Investment Agreement, the
sale of the Series A Preferred Shares and the Series A Warrants to AIG on the   
Closing Date are exempt from registration under the Securities Act.             

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     9. In addition, such counsel shall state that such counsel has participated
in conferences with representatives of the Company, the Company's investment    
bankers and your counsel at which the contents of the Proxy Statement and       
related matters were discussed. Such counsel has not independently verified the 
accuracy, completeness or fairness of the statements contained in the Proxy     
Statement, and such counsel is not passing upon and does not assume any         
responsibility for the accuracy, completeness or fairness of such statements;   
however, based upon such counsel's participation in the aforesaid conferences,  
such counsel has no reason to believe that the Proxy Statement (except as to the
financial statements and other financial data, or as to material relating to,   
and supplied by, AIG or any of its subsidiaries, included therein, as to which  
such counsel expresses no opinion), as of its date, contained any untrue        
statement of a material fact or omitted to state any material fact required to  
be stated therein or necessary in order to make the statements therein not      
misleading, or that the Proxy Statement, as of the time of the approval of      
stockholders of the Company required in connection with the Transactions,       
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements 
therein, in light of the circumstances under which they were made, not          
misleading.                                                                     

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                                                                EXHIBIT 10(k)(i)

OPINIONS OF ACTING GENERAL COUNSEL TO THE INVESTOR

     1. American Home Assurance Company and New Hampshire Insurance Company (the
"Subsidiaries") are corporations duly organized, validly existing and in good   
standing under the laws of the states of _________________________.             

     2. Each of the Subsidiaries has all requisite corporate power and authority
to execute, deliver and perform the obligations set forth in the Quota Share    
Agreements to which it is a party. The Quota Share Agreements have been duly    
authorized by all necessary corporate action and have been duly and validly     
executed and delivered by the Subsidiaries. The execution, delivery and         
performance of the Investment Agreement and Related Agreements and the          
consummation of the transactions contemplated thereby by AIG or its Subsidiaries
will not (i) result in a breach or violation of any statute, rule or regulation 
binding on AIG or the Subsidiaries, including, but not limited to, regulations  
and statutes applying to insurance companies, or (ii) result in a breach or     
violation of the terms, conditions or provisions of any contract to which AIG or
any of the Subsidiaries is a party or any writ or injunction of any court of    
Governmental Agency applicable to AIG or the Subsidiaries. Each of the Quota    
Share Agreements constitutes the valid and legally binding obligation of the    
Subsidiaries, enforceable in accordance with its terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar  
laws of general application now or hereafter in effect relating to or affecting 
creditors' rights, including, without limitation, the effect of statutory or    
other laws regarding fraudulent conveyances or preferential transfers and by    
general principles of equity, whether considered in a proceeding in law or      
equity (including the possible unavailability of specific performance or        
injunctive relief and the general discretion of the court or tribunal           
considering the matter), and (b) such counsel expresses no opinion as to the    
legality, binding effect or enforceability of any provisions of the Investment  
Agreement or the Registration Rights Agreement regarding rights of              
indemnification or contribution that may be limited by federal or state         
securities laws or considerations of public policy.                             

3. Each of AIG and the Subsidiaries has filed all notices, reports,   
documents or other information ("Notices") required to be filed with any        
Governmental Entity in connection with, and has obtained all authorizations,    
approvals, orders, consents, licenses,                                          

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certificates, permits, registrations or qualifications ("Approvals") necessary  
to be obtained from any Governmental Entity in connection with the execution,   
delivery and performance of the Investment Agreement and the Related Agreements 
and the consummation of the transactions contemplated thereby.                  

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                                                               EXHIBIT 10(k)(ii)

OPINIONS OF SPECIAL COUNSEL TO THE INVESTOR 

1. AIG is a corporation duly organized, validly existing and in good  
standing under the laws of the State of Delaware.                               

    2. AIG has all requisite corporate power and authority to execute, deliver
and perform the obligations set forth in the Investment Agreement and the       
Related Agreements to which it is a party. The Investment Agreement and Related 
Agreements have been duly authorized by all necessary corporate action and have 
been duly and validly executed and delivered by AIG. The execution, delivery and
performance of the Investment Agreement and Related Agreements and the          
consummation of the transactions contemplated thereby by AIG will not conflict  
with, or result in a breach of, AIG's or American Home Assurance Company's or   
New Hampshire Insurance Company's (the "Subsidiaries") Certificates of          
Incorporation or By-Laws. Each of the Investment Agreement and the Related      
Agreements to which AIG is a party constitutes the valid and legally binding    
obligation of AIG enforceable in accordance with its terms, except (a) as       
limited by applicable bankruptcy, insolvency, reorganization, moratorium or     
other similar laws of general application now or hereafter in effect relating to
or affecting creditors' rights, including, without limitation, the effect of    
statutory or other laws regarding fraudulent conveyances or preferential        
transfers and by general principles of equity, whether considered in a          
proceeding in law or equity (including the possible unavailability of specific  
performance or injunctive relief and the general discretion of the court or     
tribunal considering the matter), and (b) such counsel expresses no opinion as  
to the legality, binding effect or enforceability of any provisions of the      
Investment Agreement or the Registration Rights Agreement regarding rights of   
indemnification or contribution that may be limited by federal or state         
securities laws or considerations of public policy.                             

    3. To the best of such counsel's knowledge, no action, suit, investigation
or other proceeding ("Action") to which AIG or either of the Subsidiaries is or 
is threatened to be made a party relating to the Investment Agreement, the      
Related Agreements or the transactions contemplated thereby has been instituted 
or threatened                                                                   

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before any Governmental Entity which Action presents a substantial risk of      
restraining or prohibiting AIG's or such Subsidiaries' consummation of such     
transactions.                                                                   

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before any Governmental Entity which Action presents a        
substantial risk of restraining or prohibiting AIG's or such  
Subsidiaries' consummation of such transactions.              

F-18  

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘SC 13D’ Filing		Date		First		Last			Other Filings
		12/31/99		133		139			10-K,  11-K,  13F-HR
		12/31/98		133					10-K,  11-K
		12/31/95		133		139			10-K,  10-K/A
		4/1/95		53
		1/1/95		133		139
Filed on:		12/27/94
		10/17/94		2		184
		10/4/94		62
		10/1/94		134		183
		9/30/94		67					10-Q
		9/26/94		11
		9/14/94		62
		8/18/94		22		67
		8/1/94		62
		7/1/94		62
		6/30/94		17		67			10-Q,  S-3/A
		6/9/94		23		62
		3/30/94		18					10-K
		1/17/94		22
		1/1/94		69
		12/31/93		17		26			10-K
		11/5/93		78
		10/31/93		78
		10/8/93		78
		12/31/92		18
		5/8/92		62
									List all Filings