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                                     EXHIBIT 4.5

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                                                                  Note No.    01

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
QUALIFIED UNDER ANY APPLICABLE STATE SECURITIES LAWS.  IT MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT OR
QUALIFICATION UNDER SUCH SECURITIES LAWS OR AN OPINION OF COUNSEL, SATISFACTORY
TO THE COMPANY, THAT THE SALE OR TRANSFER IS PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION OR QUALIFICATION REQUIREMENTS OF SUCH SECURITIES LAWS.


                          ANCHOR PACIFIC UNDERWRITERS, INC.

                   10% Convertible Subordinated Debenture, Series A
                      (convertible into shares of common stock)

$600,000                                                     Concord, California
                                                               December 28, 1995

    ANCHOR PACIFIC UNDERWRITERS, INC., a Delaware corporation (the "Company"),
for value received, hereby promises to pay to Guarantee Life Insurance Company
or such other person in whose name this Debenture is registered on the Debenture
Register (as that term is defined below) (the "Holder"), the principal amount of
Six Hundred Thousand Dollars ($600,000), with simple interest on the unpaid
balance of such principal amount at the rate of ten percent (10%) per annum from
the date of this Debenture.  Interest on the outstanding principal balance shall
be computed on the basis of a 360 day year of twelve 30-day months and shall be
paid to the Holder on June 27, 1996, December 27, 1996 and June 27, 1996 (each,
an "Interest Payment Date").  Each Debenture delivered upon registration of
transfer or in exchange for or in lieu of this Debenture shall carry the rights
to interest accrued and unpaid, and to accrue, which were carried by this
Debenture.

    The full principal amount of this Debenture, plus interest, will be due and
payable on December 27, 1997 (the "Maturity Date").  Payment of interest and
principal shall be made in lawful money of the United States of America by wire
transfer to an account designated by the Holder appearing on the Debenture
Register.

    This Debenture is a duly authorized Debenture of the Company, Series A,
limited to the aggregate principal amount of $600,000.

    1.   REPRESENTATIONS, WARRANTIES AND COVENANTS.

         1.1  ORGANIZATION, GOOD STANDING AND QUALIFICATION.  The Company is a
corporation duly organized, validly existing and

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in good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to carry on its business as now conducted and as
proposed to be conducted.  The Company is duly qualified to transact business
and is in good standing in each jurisdiction in which the failure to so qualify
would have a material adverse effect on its business or properties.

         1.2  VALID ISSUANCE OF DEBENTURES AND SHARES.  The Debenture, when
issued, sold and delivered in accordance with the terms hereof for the
consideration expressed herein, will be a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, and based
in part upon the representations of the Holder contained in the Subscription
Agreement pursuant to which this Debenture is being issued, will be issued in
compliance with all applicable federal and state securities laws.  The shares of
the Company's Common Stock, $.02 par value per share, issuable upon conversion
of the Debentures (the "Shares") have been duly and validly reserved for
issuance and, upon issuance in accordance with the terms of this Debenture,
shall be duly and validly issued, fully paid and nonassessable.

         1.3  COMPLIANCE WITH OTHER INSTRUMENTS.  The Company is not in
violation of or default under any provisions of its Certificate of Incorporation
or Bylaws as amended and in effect on and as of the date of this Debenture or of
any material provision of any instrument or contract to which it is a party or
by which it is bound or, to its knowledge, of any material provision of any
federal or state judgment, writ, decree, order, statute, rule or governmental
regulation applicable to the Company.  The execution, delivery and issuance of
this Debenture will not result in any such violation or be in conflict with or
constitute, with or without the passage of time and giving of notice, a default
under any such provision, instrument or contract or an event which results in
the creation of any lien, charge or encumbrance upon any assets of the Company.

    2.   SUBORDINATION.

         2.1  SUBORDINATION.  The indebtedness evidenced by this Debenture is
subordinate and junior in right of payment to all Senior Debt (as such term is
defined below) to the extent provided herein, and the Holder, by such Holder's
acceptance hereof, agrees to the subordination herein provided and shall be
bound by the provisions hereof.  Senior Debt shall continue to be Senior Debt
and entitled to the benefits of these subordination provisions irrespective of
any amendment, modification or waiver of any term of the Senior Debt or
extension or renewal of the Senior Debt.

         2.2  SENIOR DEBT DEFINED.  As used herein, the term "Senior Debt"
shall mean the following whether now outstanding or subsequently incurred,
assumed or created:  (a) all indebtedness

                                         -2-

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(whether or not secured) of the Company or its subsidiaries to banks, insurance
companies or other financial institutions regularly engaged in the business of
lending money; (b) such other indebtedness of the Company or its subsidiaries to
the extend that the instrument creating or evidencing such indebtedness provides
that it shall constitute Senior Debt; (c) any indebtedness issued in exchange
for such Senior Debt, or any indebtedness arising from the satisfaction or such
Senior Debt by a guarantor; and (d) any deferrals, renewals, or extensions of
any such Senior Debt.

         2.3  DEFAULT ON SENIOR DEBT.  If the Company shall default in the
payment of any principal of or interest on any Senior Debt when the same shall
become due and payable, whether at maturity or at a date fixed for prepayment or
by declaration of acceleration or otherwise, then, upon written notice of such
default to the Company by the holders of Senior Debt or any trustee therefor,
unless and until such default shall have been cured or waived or shall have
ceased to exist, no direct or indirect payment (in cash, property, securities,
by set-off or otherwise) shall be made or agreed to be made on account of the
principal of or interest on this Debenture, or in respect of any redemption,
repayment, retirement, purchase or other acquisition of this Debenture.

         2.4  PRIOR PAYMENT OF SENIOR DEBT.

              (a)  In the event of:  (i) any insolvency, bankruptcy,
    receivership, liquidation, reorganization, readjustment, composition or
    other similar proceeding relating to the Company; (ii) any proceeding for
    the liquidation, dissolution or other winding up of the Company, voluntary
    or involuntary, whether or not involving insolvency or bankruptcy
    proceedings; (iii) any assignment by the Company for the benefit of
    creditors; or (iv) any other marshalling of the assets of the Company, all
    Senior Debt (including any interest thereon accruing after the commencement
    of any such proceedings) shall first be paid in full before any payment or
    distribution, whether in cash, securities or other property, shall be made
    to any Holder on account of the principal or interest on this Debenture.
    Any payment or distribution, whether in cash, securities or other property
    (other than securities of the Company or any other corporation provided for
    by a plan or reorganization or readjustment the payment of which is
    subordinate, at least to the extent provided in these subordination
    provisions with respect to the indebtedness evidenced by this Debenture, to
    the payment of all Senior Debt at the time outstanding and to any
    securities issued in respect thereof under any such plan or reorganization
    or readjustment), which would otherwise (but for these subordination
    provisions) be payable or deliverable in respect of this Debenture shall be
    paid or delivered directly to the holders of Senior Debt in accordance with

                                         -3-

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    the priorities then existing among such holders until all Senior Debt
    (including any interest thereon accruing after the commencement of any such
    proceeding) shall have been paid in full.  In the event of any such
    proceeding, after payment in full of all sums owing with respect to Senior
    Debt, the Holder of this Debenture, together with the holders of any
    obligations of the Company ranking on a parity with this Debenture, shall
    be entitled to be paid from the remaining assets of the Company the amounts
    at the time due and owing on account of unpaid principal of and interest on
    this Debenture and such other obligations before any payment or other
    distribution, whether in cash, property or otherwise, shall be made on
    account of any capital stock or any obligations of the Company ranking
    junior to this Debenture and such other obligations.

              (b)  In the event that, notwithstanding the foregoing, any
    payment or distribution of any character, whether in cash, securities or
    other property (other than securities of the Company or any other
    corporation provided for by a plan of reorganization or readjustment the
    payment of which is subordinate, at least to the extent provided in these
    subordination provisions with respect to the indebtedness evidenced by this
    Debenture, to the payment of all Senior Debt at the time outstanding and to
    any securities issued in respect thereof under any such plan of
    reorganization or readjustment), shall be received by any Holder in
    contravention of any of the terms hereof, such payment or distribution or
    security shall be received in trust for the benefit of, and shall be paid
    over or delivered and transferred to, the holders of the Senior Debt at the
    time outstanding in accordance with the priorities then existing among such
    holders for application to the payment of all Senior Debt remaining unpaid,
    to the extend necessary to pay all such Senior Debt in full.  In the event
    of the failure of any such Holder to endorse or assign any such payment,
    distribution or security, each holder of Senior Debt is hereby irrevocably
    authorized to endorse or assign the same.

         2.5  NO IMPAIRMENT OF RIGHTS.  Nothing contained herein shall impair,
as between the Company and the Holder, the obligation of the Company to pay such
Holder the principal of and interest on this Debenture or prevent such Holder
from exercising all rights, powers and remedies otherwise permitted by
applicable law or hereunder upon an Event of Default (as defined below)
hereunder, all subject to the rights of the holders of the Senior Debt to
receive cash, securities or other property otherwise payable or deliverable to
the Holder of this Debenture.

         2.6  SUBROGATION.  Upon the payment in full of all Senior Debt, the
Holders of the Debentures, together with all other subordinated debt of the
Company ranking on a parity therewith, shall be subrogated to all rights of any
holders of

                                         -4-


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Senior Debt to receive any further payments or distributions applicable to the
Senior Debt until the indebtedness evidenced by the Debentures shall have been
paid in full, and such payments or distributions received by the Holders
thereof, by reason of such subrogation, of cash, securities or other property
which otherwise would be paid or distributed to the holders of Senior Debt,
shall, as between the Company and its creditors other than the holders of Senior
Debt, on the one hand, and such Holders on the other hand, be deemed to be a
payment by the company on account of Senior Debt and not on the account of the
Debentures.

          2.7  NO IMPAIRMENT OF SECURITY INTEREST.  The provisions of this
Debenture shall not impair any rights, remedies or powers of any secured
creditor of the Company in respect of any security interest.  The securing of
any obligations of the Company otherwise ranking on a parity with the Debentures
or ranking junior to such Debentures shall not be deemed to prevent such
obligations from constituting, respectively, obligations ranking on a parity
with such Debentures or ranking junior to such Debentures.

          2.8  AMENDMENT OF SUBORDINATION PROVISIONS.  No modification or
amendment of the subordination provisions contained in Section 2 hereof in a
manner adverse to the holders of Senior Debt may be made without the consent of
all holders of Senior Debt.

          2.9  UNDERTAKING.  By its acceptance of this debenture, the Holder
agrees to execute and deliver such documents as may be reasonably requested from
time to time by the Company or the lender of any Senior Debt in order to
implement the foregoing provisions of Section 2 hereof.

     3.   NO RESTRICTIONS ON ISSUANCE OF ADDITIONAL DEBT.  Nothing contained in
this Debenture shall restrict the Company from creating, assuming or incurring
any additional indebtedness, whether ranking junior to, on par with, or senior
to, this Debenture, or require the Company to obtain the consent of the Holder
with respect thereto.

     4.   DEFAULT.

          4.1  EVENT OF DEFAULT.  Each of the following events shall be an Event
of Default hereunder:

               (a)  Default in the payment of any interest on this Debenture
     when due, continued for two (2) business days.

               (b)  Default in the payment of the principal on the Maturity 
     Date.

               (c)  Material default in the performance of any of the covenants
     or agreements of the Company contained in this

                                         -5-

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     Debenture continued for thirty (30) days after notice thereof (provided,
     however, that if the default cannot reasonably be corrected within such
     period, there shall be no event of default if corrective action is
     instituted promptly and is pursued diligently until the default is
     corrected).

               (d)  If a petition in involuntary bankruptcy is filed against the
     Company under any bankruptcy, reorganization, arrangement, insolvency,
     readjustment of debt, dissolution or liquidation under the law of any
     jurisdiction, whether now or hereafter in effect, and is not stayed or
     dismissed within thirty (30) days after such filing, or if the Company
     shall make an assignment for the benefit of creditors, or shall file a
     voluntary petition in bankruptcy, or shall be adjudicated a bankrupt or
     insolvent, or shall file any petition or answer seeking for itself any
     reorganization, arrangement, composition, readjustment, liquidation,
     dissolution or similar relief under any present or future statute, law or
     regulation, or shall seek or consent to or acquiesce in the appointment of
     any trustee, receiver or liquidator of the Company or of all or any
     substantial part of the properties of the Company, or commence voluntary or
     involuntary dissolution proceedings.

               (e)  Default under Senior Debt that gives the holder thereof the
     right to accelerate such Senior Debt, and such Senior Debt is in fact
     accelerated by such holder.

          4.2  REMEDIES ON DEFAULT, ETC.

               (a)  If an Event of Default occurs and is continuing after the
     expiration of any applicable grace period, the Holder may declare the
     Debenture immediately due and payable.

               (b)  In case of a default in the payment of any principal or
     interest due on this Debenture, the Company shall pay to the Holder thereof
     the amount owing together with: (i) simple interest on the amount owing at
     the rate per annum equal to the lower of (x) twelve percent (12%) or (y)
     the maximum rate permitted under applicable law on the amounts past due;
     and (ii) such additional amount as shall be sufficient to cover the cost
     and expenses of collection, including, without limitation, reasonable
     attorneys' fees, expenses and disbursements.

               (c)  No right, power or remedy conferred by this Debenture upon
     any Holder shall be exclusive of any other right, power or remedy referred
     to herein or now or hereafter available at law, in equity, by statute or
     otherwise.

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     5.   CONVERSION.

          5.1  CONVERSION RIGHTS.  The Holder may at any time, and from time to
time, prior to the first to occur of the Maturity Date or the date fixed by the
Company for redemption of this Debenture (the "Redemption Date"), convert this
Debenture or any portion of the principal amount hereof which is $100,000 or an
integral multiple of $100,000, into Shares, at a conversion price of $1.50 per
Share (the "Conversion Price"), subject to adjustment in certain events
described below.

          The number of Shares that the Holder shall receive upon any such
conversion shall be determined by dividing the principal amount of this
Debenture to be so converted by the Conversion Price in effect at the time of
such conversion.  In the event that this Debenture is called in for redemption,
the right to convert the Debenture shall terminate at the close of business on
the Redemption Date and will be lost if not exercised prior to that time unless
the Company defaults in making the payment due upon redemption.  In the event
of a partial conversion of this Debenture, the Company shall execute and deliver
to the Holder a new Debenture in the aggregate principal amount equal to and in
exchange for the unconverted portion of the principal amount of the Debenture so
surrendered for conversion.

          5.2  EFFECT OF CONVERSION; ISSUANCE OF SHARES ON CONVERSION.
Conversion of this Debenture shall be deemed to have been made at the close of
business on the date that the Debenture shall have been surrendered for
conversion, accompanied by written notice of election to convert in the form of
Exhibit "A" attached hereto (or such other form reasonably acceptable to the
Company), and thereupon the Holder shall have no further rights hereunder,
except with respect to the receipt of accrued interest due hereunder and the
Shares issuable upon conversion of this Debenture.  As soon as practicable after
full or partial conversion of this Debenture, the Company shall pay to the
Holder all interest accrued hereunder with respect to the portion of the
Debenture so converted to the date of conversion.  In addition, as soon as
practicable after full or partial conversion of this Debenture, the Company
shall, at its expense, cause to be issued in the name of, and delivered to, the
Holder a certificate or certificates for the number of Shares to which the
holder shall be entitled on such conversion, together with any other securities
and property to which the Holder is entitled on such conversion under the terms
of this Debenture.  No fractional shares will be issued on conversion of this
Debenture.  If on any conversion of this Debenture a fraction of a share
results, the Company will pay the cash value of that fractional share,
calculated on the basis of the then effective Conversion Price.

          5.3  ADJUSTMENTS TO CONVERSION PRICE.

               (a)  If the Company shall at anytime while this Debenture is
     outstanding subdivide the outstanding shares of

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     its Common Stock, the Conversion Price then in effect immediately before
     that subdivision shall be proportionately decreased, and if the Company
     shall at any time while this Debenture is outstanding combine the
     outstanding shares of Common Stock, the Conversion Price then in effect
     immediately before that combination shall be proportionately increased.
     Except otherwise provided below, any adjustment under this Section 5.3
     shall become effective at the close of business on the date of the
     subdivision or combination becomes effective.  A dividend on any security
     of the Company payable in Common Stock, or a split of the Company's Common
     Stock, shall be considered a subdivision of Common Stock for purposes of
     this Section 5.3 at the close of business on the record date with respect
     to such dividend or stock split.  A reverse split of the Company's Common
     Stock shall be considered a combination of Common Stock for purposes of 
     this Section 5.3 at the close of business on the record date with respect 
     to such reverse stock split.

               (b)  In the event the Company, at any time or from time to time
     while this Debenture is outstanding, shall make or issue, or fix a record
     date for the determination of holders of Common Stock entitled to receive,
     a dividend or other distribution with respect to the Company's Common Stock
     payable in securities of the Company other than shares of Common Stock,
     then and in each such event, provisions shall be made so that the Holder
     shall receive upon conversion hereof, in addition to the number of shares
     of Common Stock receivable thereupon, the amount of securities of the
     Company which he would have received had this Debenture been converted into
     Common Stock on the date of such event and had the Holder thereafter,
     during the period from the date of such event to and including the
     conversion date, retained such securities receivable by him.

               (c)  If while this Debenture is outstanding, the Shares issuable
     upon conversion of this Debenture shall be changed into the same or a
     different number of shares of any other class or classes of stock of the
     Company, whether by recapitalization, reclassification or other exchange
     (other than a subdivision or combination of shares, or a capital
     reorganization, merger or sale of assets, provided for elsewhere in Section
     5.3 hereof), the Holder shall, upon the conversion of this Debenture, be
     entitled to receive, in lieu of the Shares which the holder would have
     become entitled to receive but for such change, a number of shares of such
     other class or classes of stock that would have been subject to receipt by
     the Holder if he had exercised his right of conversion of this Debenture
     immediately before that change.

               (d)  If while this Debenture is outstanding, there shall be a
     merger or consolidation of the Company with or into another corporation
     (other than a merger which does not

                                      -8-

<PAGE>
    
    result in any reclassification, conversion, exchange or cancellation of
    outstanding shares of Common Stock of the Company), or the sale of all or
    substantially all of the Company's properties and assets to any other
    person, then, as a part of such merger, consolidation or sale, lawful
    provision shall be made so that the Holder shall thereafter be entitled to
    receive upon conversion of this Debenture, during the period specified in
    this Debenture, the number of shares of stock or other securities or
    property of the Company, or of the successor corporation resulting from
    such merger, consolidation or sale, to which a holder of the Shares
    deliverable upon conversion of this Debenture would have been entitled on
    such merger, consolidation or sale if this Debenture had been converted
    immediately before such merger, consolidation or sale.  In any such case,
    appropriate adjustment shall be made in the application of the provisions
    of this Section 5.3 with respect to the rights of the holder after such
    merger, consolidation or sale to the end that the provisions of this
    Section 5.3 (including adjustments of the Conversion Price then in effect
    and number of shares purchasable upon conversion of this Debenture) shall
    continue to be applicable after that event and shall be as nearly
    equivalent to the provisions hereof as may be practicable.

              (e)  The Company shall promptly and in any case not later than
   ten (10) days after the date of any adjustment of the Conversion Price give
   written notice of such adjustment and the number of Shares or other
   securities issuable upon conversion of this Debenture, by first-class mail,
   postage prepaid, to the registered Holder at the Holder's address as shown
   on the Debenture Register.  The certificate shall state such adjustments
   and show in reasonable detail the facts on which such adjustment is based.

              (f)  The form of this Debenture need not be changed because of
   any adjustment in the Conversion Price or in the number of Shares issuable
   upon its conversion.  A Debenture issued after any adjustment on any
   partial conversion or upon replacement may continue to express the same
   Conversion Price and the same number of Shares (appropriately reduced in
   the case of partial conversion) as are stated on this Debenture as
   initially issued, and that Conversion Price and that number of Shares shall
   be considered to have been so changed as of the close of business on the
   date of the adjustment.

    6.   OPTIONAL REDEMPTION.

         6.1  RIGHT OF REDEMPTION.  This Debenture may be redeemed at the
election of the Company, as a whole or from time to time in part, at any time,
at 100% of the principal amount of


                                         -9-

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this Debenture, together with accrued interest to the Redemption Date.

         6.2  REDEMPTION PROCEDURES.

              (a)  Notice of redemption shall be given by first-class mail,
    postage prepaid, mailed not less than 30 nor more than 60 days prior to the
    Redemption date, to the Holder, at the address appearing in the Debenture
    Register. 

              (b)  The notice of redemption shall state: (a) the Redemption
    Date; (b) that on the Redemption Date the redemption price will become due
    and payable on the debenture and that interest thereon will cease to accrue
    on and after said date; and (c) the place where the Debenture is to be
    surrendered for payment for the redemption price.  Any notice that is
    mailed in the matter herein provided shall be conclusively presumed to have
    been given whether or not the Holder receives said notice.


              (c)  Notice of redemption having been given as aforesaid, the
    Debenture shall, on the Redemption Date,  become due and payable at the
    redemption price therein specified, and from and after such date (unless
    the Company shall default in the payment of the redemption price and
    accrued interest) the Debenture shall cease to bear interest.  Upon
    surrender of the debenture for redemption in accordance with said notice,
    the Debenture shall be paid by the Company at the redemption price,
    together with accrued interest to the Redemption Date.

              (d)  If the Debenture shall not be so paid upon surrender thereof
    for redemption, the principal shall, until paid, bear interest from the
    Redemption Date at the rate borne by the Debenture.

    7.   REGISTRATION OF TRANSFER AND EXCHANGE.

         7.1  DEBENTURE REGISTER.  The Company shall cause to be kept at the
principal office of the Company a register (the "Debenture Register") in which,
subject to such reasonable regulations as it may prescribe, the Company shall
provide for the registration and the transfer of the Debenture subject to the
provisions regarding transferability contained in this Debenture.  Upon
surrender for registration of transfer of any Debenture at the principal office
of the Company, the Company shall execute and deliver, in the name of the
designated transferee or transferees, one or more new Debentures in minimum
denominations of $100,000 and integral multiples of $100,000.

         7.2  TRANSFER OF DEBENTURES.  At the time the Debenture is presented
or surrendered for registration of transfer it shall (if so required by the
Company) be duly endorsed, or be accompanied by a written instrument of transfer
in form


                                         -10-

<PAGE>

satisfactory to the Company, duly executed by the Holder thereof or his attorney
duly authorized in writing.  No service charge shall be made for any
registration of transfer, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer of the Debentures.

         7.3  REPLACEMENT DEBENTURES.

              (a)  If the Debenture is mutilated and is surrendered to the
    Company, the Company shall execute and deliver in exchange therefor a new
    Debenture of like tenor and principal amount and bearing a number not
    contemporaneously outstanding.  If there shall be delivered to the Company:
    (i) evidence to its satisfaction of the destruction, loss or theft of the
    Debenture; and (ii) such security or indemnity as may be required by it to
    save the Company and any agent harmless, then, in the absence of notice to
    the Company that the Debenture has been acquired by a bona fide purchaser,
    the Company shall execute and deliver, in lieu of any such destroyed, lost
    or stolen Debenture, a new Debenture of like tenor and principal amount and
    bearing a number not contemporaneously outstanding.  In the event such
    mutilated, destroyed, lost or stolen Debenture has become or is about to
    become due and payable, the Company in its discretion may, instead of
    issuing a new Debenture, retire such Debenture.

              (b)  Upon the issuance of any new Debenture under this section
    7.3, the Company may require the payment of a sum sufficient to cover any
    tax or other governmental charge that may be imposed in relation thereto
    and any other expenses connected therewith.

              (c)  Any new Debenture issued pursuant to this Section 7.3 in
    lieu of any destroyed, lost or stolen Debenture shall constitute an
    original additional contractual obligation of the Company, whether or not
    the destroyed, lost or stolen Debenture shall be at any time enforceable by
    anyone.

              (d)  The provisions of this section 7.3 are exclusive and shall
    preclude (to the extent lawful) all other rights and remedies with respect
    to the replacement or payment of mutilated, destroyed, lost or stolen
    Debentures.

    8.   LIMITATIONS ON DISPOSITION.  The Holder understands that this
Debenture, the Shares issuable upon conversion of this Debenture an any other
securities issued under this Debenture are "restricted securities" under the
federal securities laws inasmuch as they are being acquired from the Company in
a transaction not involving a public offering and that under such laws and
applicable restrictions such securities may be resold without registration under
the Securities Act of 1933, as amended

                                         -11-

<PAGE>

(the "Act") only in certain limited circumstances.  In this connection, the
Holder represents that it is familiar with Rule 144 under the Act and the
limitations imposed thereby and by the Act.

    The Holder further agrees not to make any disposition of all or any portion
of this Debenture, the Shares or any other securities issued hereunder unless
and until:  (a) there is then in effect a Registration Statement under the Act
covering such proposed disposition and such disposition is made in accordance
with such Registration Statement; or (b) (i) the Holder shall have notified the
Company of the proposed disposition and shall have furnished the Company with a
reasonably detailed statement of the circumstances surrounding the proposed
disposition; and (ii) the Holder shall have furnished the Company with an
opinion of counsel, satisfactory to the Company, that such disposition will not
require registration of the securities under the Act.

    The Holder understands that this Debenture, the Shares and any other
securities issued hereunder may bear the following legend, together with any
other legend required by law:

    "The securities represented hereby have not been registered under the
    Securities Act of 1933, or any state securities laws.  These securities may
    not be sold or transferred in the absence of an effective registration
    statement or qualification under such securities laws or an opinion of
    counsel, satisfactory to the Company, that the sale or transfer is pursuant
    to an exemption from the registration or qualification requirements of any
    applicable securities laws."

    9.   LIMITATIONS ON DIVIDENDS AND DISTRIBUTIONS.  So long as this Debenture
is outstanding, the Company shall not declare, the pay, make or set apart any
sum for a dividend or other distribution (whether in cash or other property)
with respect to any class of capital stock of the Company (other than dividends
or distributions payable in its capital stock), or for the redemption,
retirement, purchase or other acquisition for value of any share of any class of
capital stock of the Company or any warrants or rights to purchase any class of
capital stock of the Company.

    10.  REGISTRATION RIGHTS.

         10.1 DEFINITIONS.  For purposes of Section 10 hereof, terms not
otherwise defined herein shall have the following meanings:

              (a)  The terms "register," "registered" and "registration" refer
         to the preparation and filing of a registration statement in
         compliance with the Act and the rules promulgated thereunder, and the
         declaration of the

                                         -12-

<PAGE>

         effectiveness of such registration statement, or the taking of similar
         action under a successor statute or regulation.

              (b)  The term "Registrable Securities" means the Shares issuable
         upon conversion of the Debenture, and any securities issued or
         issuable with respect to such Shares by way of stock dividend or stock
         split or in connection with a combination or shares, recapitalization,
         merger, consolidation or reorganization.

              (c)  The term "Rights Holder" or "Rights Holders" means any
         registered holder or holders or Registrable Securities.

              (d)  The term "Prospectus" means a prospectus that complies with
         applicable provisions of the Act.

         10.2  PIGGYBACK REGISTRATION.

              (a)  If, at any time, through and including the third anniversary
         of the date of this Debenture, the Company proposes to register any of
         its securities under the Act (other than in connection with a merger,
         otherwise pursuant to a Form S-4 Registration Statement or pursuant to
         a Form S-8 Registration Statement), it will give written notice by
         registered mail, at least thirty (30) days prior to the filing of each
         such registration statement, to the Rights Holder of its intention to
         do so.  If the Rights Holder notifies the Company within twenty (20)
         days after receipt of any such notice of its desire to include any
         Registrable Securities in such proposed registration statement, the
         Company shall afford such Rights Holder the opportunity to have any of
         the Registrable Securities registered under such registration
         statement and included in any underwriting involved with respect
         thereto.

              (b)  Notwithstanding the provisions of Section 10 hereof:  (i) 
         the Company shall have the right at any time after it shall have given
         written notice pursuant to said Section 10 (irrespective of whether a
         written request for inclusion of any Registrable Securities shall have
         been made) to elect not to file any such proposed registration
         statement, or to withdraw the same after the filing but prior to the
         effective date thereof; and (ii) in the event a registration under
         Section 10 hereof relates to an underwritten public offering which
         does not include any securities being offered and sold on behalf of
         selling shareholders, the inclusion of any Registrable Securities may,
         at the election of the Company, be conditioned upon the Rights Holder
         agreement that the public offering of such Registrable Securities
         shall not commence until ninety (90) days after the effective date of
         such registration.

                                         -13-

<PAGE>

              (c)  The rights of the Rights Holder pursuant to Section 10
    hereof shall be conditioned upon such Rights Holder's participation in the
    underwriting with respect thereto and the inclusion of such Rights Holder's
    Registrable Securities in such underwriting (unless otherwise mutually
    agreed by the Company, the managing underwriter or, if none, a majority of
    the underwriters, and such Rights Holder) to the extent provided herein.

              (d)  Notwithstanding any other provision of this Debenture, if
    the managing underwriter or, if none, a majority of the underwriters,
    determines that marketing factors require a limitation of the number of
    shares to be underwritten or a complete exclusion of such shares, such
    underwriter or underwriters may limit the number of Registrable Securities
    that may be included in the registration and underwriting or exclude all of
    the Registrable Securities, as appropriate. In the case of an underwritten
    registration in which the number of Registrable Securities that may be
    included is limited, the Company shall advise the Rights Holder of the
    limited number of Registrable Securities that may be included in the
    registration, and the number of Registrable Securities that may be included
    in the registration and underwriting shall be allocated among all Rights
    Holders thereof in proportion, as nearly as practicable, to the respective
    amounts of Registrable Securities entitled to inclusion in such
    registration held by such Rights Holders at the time of filing the
    registration statement.

              (e)  The Company shall (together with all Rights Holders
    proposing to distribute their securities through an underwriting) enter
    into an underwriting agreement in customary form with the underwriter or
    underwriters selected for the underwriting.

              (f)  If, after the third anniversary date of the Debenture, the
    Registrable Securities owned by the Holder continue to be subject to a
    legend or other transfer restriction which treats the Holder as having
    affiliate status as that term is used in Rule 144 of the Act, then the
    Holder shall continue to have a one-time right to include any Registrable
    Securities in a proposed registration statement subject to the procedures
    described in Section 10.2 hereof. This registration right shall expire on
    the earlier of:  (i) the conclusion of the Holder's affiliate status; or
    (ii) the sixth anniversary date of the Debenture.

         10.3 EXPENSES.  All expenses incurred in connection with any
registration pursuant to this Debenture, including without limitation, all
registration, filing and qualification fees, printing expenses, fees and
disbursements of counsel for the Company, and expenses of any special audits
incidental to or

                                         -14-

<PAGE>

required by such registration, shall be borne by the Company; provided however
the Company shall not be required to pay:

              (a)  fees of legal counsel of any Rights Holder, or underwriters'
         fees, discounts, commissions or expenses relating to Registrable
         Securities; and

              (b)  for expenses that the Company is prohibited from paying
         under Blue Sky laws or by Blue Sky administrators.

         10.4 COMPANY RESPONSIBILITIES.  In the case of a registration effected
by the Company pursuant to this Debenture, the Company shall use its best
efforts to keep the Rights Holder advised in writing as to the initiation,
effectiveness and completion of such registration. At its expense the Company
shall:

              (a)  prepare and file a registration statement (and such
         amendments and supplements thereto) with respect to such Registrable
         Securities and use its best efforts to cause such registration
         statement to become and remain effective for a period of one hundred
         eighty (180) days or until the Rights Holder or Rights Holders have
         completed the distribution described in the registration statement
         relating thereto, whichever first occurs;

              (b)  furnish such number of copies of a Prospectus in conformity
         with the requirements of applicable law, and such other documents
         incident thereto as a Rights Holder from time to time may reasonably
         request; and

              (c)  use every reasonable effort to register or qualify the
         Registrable Securities covered by such registration statement under
         the state Blue Sky laws of such jurisdictions as the Company's Board
         of Directors may reasonably determine, and do any and all other acts
         and things which may be necessary under said Blue Sky laws to enable
         the sellers of the Registrable Securities to consummate the public
         sale or other disposition of the Registrable Securities owned by them
         in such jurisdictions, except that the Company shall not for any
         purpose be required to qualify to do business as a foreign corporation
         in any jurisdiction wherein the Registrable Securities are so
         qualified.

         10.5 INDEMNIFICATION.

              (a)  The Company shall indemnify the Rights Holder, each of the
Rights Holder's officers and directors, and each person controlling such Rights
Holder, with respect to such registration effected pursuant to Section 10.2
hereof, and each underwriter, if any, and each person who

                                         -15-

<PAGE>

controls any underwriter of the Registrable Securities, against all claims,
losses, damages and liabilities (or actions in respect thereto) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement or related Prospectus, or based on
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, or
any violation by the Company of any rule or regulation promulgated under any
securities law applicable to the Company and relating to action or inaction
required of the Company in connection with any such registration, and shall
reimburse the Rights Holder, each of the Rights Holder's officers and directors,
and each person controlling such Rights Holder, each such underwriter and each
person who controls any such underwriter, for any legal and any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, provided that the Company shall not be
liable in any such case to the extent that any such claim, loss, damage or
liability arises out of or is based on any untrue statement or omission based
upon written information furnished to the Company in an instrument duly executed
by such Rights Holder or underwriter specifically for use therein.

              (b)  The Rights Holder shall, if Registrable Securities held by
or issuable to the Rights Holder are included in the securities as to which such
registration is being effected, indemnify the Company, each of its directors and
officers who sign such registration statement, each underwriter, if any, of the
Company's securities covered by such a registration statement, each person who
controls the Company within the meaning of the Act, and each other Rights
Holder, each of such Rights Holder's officers and directors and each person
controlling such Rights Holder, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement or related Prospectus, or 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 shall reimburse
the Company, such Rights Holders, such directors, officers, persons, or
underwriters for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability, or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement or related Prospectus in
reliance upon and in conformity with written information furnished to the
Company in an instrument duly executed by such Rights Holder specifically for
use therein.

                                         -16-

<PAGE>

              (c)  Each party entitled to indemnification under this Section
10.5 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not be
unreasonably withheld), and the Indemnified Party may participate in such
defense at such party's expense; and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 10.5. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement, which does not include as an unconditional term thereof,
the giving by the claimant or plaintiff to such Indemnified Party of a release
from all liability in respect to such claim or litigation.

         10.6 RIGHTS HOLDER'S OBLIGATIONS.  The Rights Holder shall furnish to
the Company such written information regarding such Rights Holder and the
distribution proposed by such Rights Holder as the Company may reasonably
request in writing and as shall be required in connection with any registration
referred to in this Debenture.

         10.7 ASSIGNMENT.  The rights granted to the Rights Holder pursuant to
this Debenture may be assigned to a transferee or assignee of the Debenture or
any of the Registrable Securities, provided that the transferee or assignee is
an affiliated entity of the Rights Holder and the Company is given written
notice at the time of or within 10 days after said transfer, stating the name
and address of said transferee or assignee and identifying the Registrable
Securities with respect to which such registration rights are being assigned.

    11.  MISCELLANEOUS.

         11.1 AMENDMENT.  The provisions of this Debenture may be amended or
modified only with the written consent of the company and the Holder.

         11.2 ENTIRE AGREEMENT.  This Debenture constitute the entire agreement
among the parties with regard to the subject matter hereof, and supersedes and
replaces any and all prior to contemporaneous agreements, written or oral. The
terms and conditions of this Debenture shall inure to the benefit of, and be
binding upon, the respective successors and assigns of the parties. Nothing in
this Debenture is intended to confer on any

                                         -17-

<PAGE>

third party any rights, liabilities or obligations, except as specifically
provided.

         11.3 HEADINGS.  The titles and subtitles used in this Debenture are
for convenience only and are not to be used in construing or interpreting this
Debenture.

         11.4 SEC FILINGS.  During the term of this Debenture the Company shall
promptly forward to the Holder annual and periodic reports and proxy statements
required to be filed by the Company with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934.

         11.5 GOVERNING LAW.  This Debenture shall be governed by the internal
laws of the State of California as applicable to transactions performed in
California between California residents.

         11.6 ATTORNEYS' FEES.  The prevailing party in any action or
proceeding between the parties arising out of or related to this Debenture shall
be entitled to recover all reasonable expenses, including without limitation
attorneys' fees and costs, incurred in connection with any such action or
proceeding.

    IN WITNESS WHEREOF, the undersigned have executed this Debenture on the
date first above written.

                                       ANCHOR PACIFIC UNDERWRITERS,
                                       INC.


                                       By: /s/James R. Dunathan
                                           -----------------------
                                           James R. Dunathan
                                           President

                                         -18-

<PAGE>

                                     Exhibit "A"
                              Form of Conversion Notice

To Anchor Pacific Underwriters, Inc.:

The undersigned Holder hereby irrevocably exercises the option to convert his
Debenture, or portion hereof (which is in the amount of not less than $100,000
and in increments of not less than $100,000 thereafter) below designated, into
shares of the Company's Common Stock, $.02 par value per share, in accordance
with the terms of the Debenture, and directs that the shares issuable and
deliverable upon such conversion, together with any check in payment for
fractional shares and any Debentures representing any unconverted principal
amount hereof, be issued and delivered to the undersigned unless a different
name has been indicated below. If shares or Debentures are to be issued in the
name of a person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto. Any amount required to be paid by
the undersigned on account of interest accompanies this Debenture.

Dated:
      ------------------               ------------------------------
                                            Signature


                                       ------------------------------
                                       Taxpayer Identification
                                       Number


Principal Amount to be Converted: $
                                   ------------------

If shares or Debentures are to be registered in the name of a person other than
the Holder, please print such person's name and address below:

Name:
    ------------------------------

Address:
       ---------------------------

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

                                         -19-