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                          AGREEMENT AND PLAN OF MERGER

                                      Among

                           HUB INTERNATIONAL LIMITED,

                              416 ACQUISITION INC.

                                       and

                                 KAYE GROUP INC.

                          Dated as of January 19, 2001


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                                TABLE OF CONTENTS

                                                                            Page

                                    ARTICLE I
                                   THE MERGER

SECTION 1.01. The Merger.......................................................1
SECTION 1.02. Closing..........................................................2
SECTION 1.03. Effective Time...................................................2
SECTION 1.04. Effects of the Merger............................................2
SECTION 1.05. Certificate of Incorporation and By-Laws
                of the Surviving Corporation...................................2
SECTION 1.06. Directors and Officers of the Surviving Corporation..............2

                                   ARTICLE II
                 CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES

SECTION 2.01. Conversion of Company Common Stock...............................3
SECTION 2.02. Dissenting Shares................................................3
SECTION 2.03. Exchange of Certificates.........................................4
SECTION 2.04. Election to Increase the Cash Component..........................6
SECTION 2.05. Stock Transfer Books.............................................6
SECTION 2.06. Company Stock Options............................................6
SECTION 2.07. Company Restricted Stock.........................................7
SECTION 2.08. Interest on Merger Consideration.................................9

                                   ARTICLE III
                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

SECTION 3.01. Organization and Qualification; Subsidiaries....................10
SECTION 3.02. Certificate of Incorporation and By-Laws........................10
SECTION 3.03. Capitalization..................................................11
SECTION 3.04. Authority Relative to This Agreement............................11
SECTION 3.05. No Conflict; Required Filings and Consents......................12
SECTION 3.06. Permits; Compliance.............................................13
SECTION 3.07. SEC Filings; Financial Statements...............................13
SECTION 3.08. Undisclosed Liabilities.........................................14
SECTION 3.09. Absence of Certain Changes or Events............................14
SECTION 3.10. Absence of Litigation...........................................15
SECTION 3.11. Employee Benefit Matters........................................15
SECTION 3.12. Material Contracts..............................................17
SECTION 3.13. Environmental Matters...........................................19
SECTION 3.14. Title to Properties; Absence of Liens and Encumbrances..........20
SECTION 3.15. Intellectual Property...........................................20
SECTION 3.16. Taxes...........................................................21
SECTION 3.17. Board Approval; Vote Required...................................22


                                       i
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SECTION 3.18. Employment Agreements and other Affiliate Transactions..........22
SECTION 3.19. Insurance.......................................................22
SECTION 3.20. State Takeover Statutes.........................................22
SECTION 3.21. Labor Matters...................................................23
SECTION 3.22. Brokers.........................................................24
SECTION 3.23. Title to Insurance Business.....................................24
SECTION 3.24. Absence of Restrictions on Conduct of Business..................24
SECTION 3.25. Computer Systems................................................24
SECTION 3.26. Insurance Companies.............................................24
SECTION 3.27. No Downgrading of Rating........................................24
SECTION 3.28. Fairness Opinion................................................25
SECTION 3.29. Insurance Company Organization and Qualification;
                Subsidiaries..................................................25
SECTION 3.30. Insurance Company Certificate of Incorporation and By-Laws......26
SECTION 3.31. Insurance Company Capitalization................................26
SECTION 3.32. Insurance Company Permits; Compliance...........................27
SECTION 3.33. Insurance Company Financial Statements..........................27
SECTION 3.34. Undisclosed Liabilities of the Insurance Companies..............27
SECTION 3.35. Absence of Certain Changes or Events With Respect
                to the Insurance Companies....................................28
SECTION 3.36. Absence of Insurance Company Litigation.........................28
SECTION 3.37. Insurance Company Material Contracts............................28
SECTION 3.38. Insurance Company Taxes.........................................30
SECTION 3.39. Absence of Restrictions on Conduct of Insurance
                Company Business..............................................30
SECTION 3.40. Insurance Company Computer Systems..............................31
SECTION 3.41. No Downgrading of Rating of Insurance Companies.................31

                                   ARTICLE IV
             REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

SECTION 4.01. Organization and Qualification; Subsidiaries....................31
SECTION 4.02. Articles of Incorporation and By-Laws...........................31
SECTION 4.03. Authority Relative to This Agreement............................31
SECTION 4.04. Capitalization..................................................32
SECTION 4.05. No Conflict; Required Filings and Consents......................32
SECTION 4.06. Permits; Compliance.............................................33
SECTION 4.07. Filings; Financial Statements...................................34
SECTION 4.08. Undisclosed Liabilities.........................................34
SECTION 4.09. Taxes...........................................................35
SECTION 4.10. Operations of Merger Sub........................................35
SECTION 4.11. Financing.......................................................35
SECTION 4.12. Brokers.........................................................35
SECTION 4.13. Affiliate Transactions..........................................35
SECTION 4.14. Authorization of Parent Convertible Debentures..................36
SECTION 4.15. Indebtedness of Parent..........................................36


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                                    ARTICLE V
                    CONDUCT OF BUSINESSES PENDING THE MERGER

SECTION 5.01. Conduct of Business by the Company Pending the Merger...........37
SECTION 5.02. Notification of Certain Matters.................................39

                                   ARTICLE VI
                              ADDITIONAL AGREEMENTS

SECTION 6.01. Registration Statement; Company Proxy Statement.................40
SECTION 6.02. Company Stockholders' Meeting...................................41
SECTION 6.03. Access to Information; Confidentiality..........................41
SECTION 6.04. No Solicitation or Negotiation..................................42
SECTION 6.05. Directors' and Officers' Indemnification and Insurance..........43
SECTION 6.06. Further Action; Consents; Filings...............................44
SECTION 6.07. Consent of Holders of Restricted Stock..........................44
SECTION 6.08. Public Announcements............................................45
SECTION 6.09. Parent Shareholders' Meeting....................................45
SECTION 6.10. Affiliates......................................................45
SECTION 6.11. Board Nomination................................................45
SECTION 6.12. Certain Funding of the Company..................................45
SECTION 6.13. Parent Debentures...............................................45
SECTION 6.14. Filing With Insurance Regulatory Authorities....................46

                                   ARTICLE VII
                            CONDITIONS TO THE MERGER

SECTION 7.01. Conditions to the Merger........................................46
SECTION 7.02. Conditions to the Obligations of Parent and Merger Sub..........47
SECTION 7.03. Conditions to the Obligations of the Company....................48

                                  ARTICLE VIII
                        TERMINATION, AMENDMENT AND WAIVER

SECTION 8.01. Termination.....................................................48
SECTION 8.02. Effect of Termination...........................................50
SECTION 8.03. Amendment.......................................................51
SECTION 8.04. Waiver..........................................................51
SECTION 8.05. Fees and Expenses...............................................51

                                   ARTICLE IX
                               GENERAL PROVISIONS

SECTION 9.01. Notices.........................................................52
SECTION 9.02. Non-Survival of Representations, Warranties
                and Agreements................................................53
SECTION 9.03. Parties in Interest.............................................54
SECTION 9.04. Certain Definitions.............................................54


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SECTION 9.05. Severability....................................................56
SECTION 9.06. Specific Performance............................................57
SECTION 9.07. Governing Law; Forum............................................57
SECTION 9.08. Headings........................................................57
SECTION 9.09. Counterparts....................................................57
SECTION 9.10. Entire Agreement................................................57
SECTION 9.11. Waiver of Jury Trial............................................58



                                       iv
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                            Glossary of Defined Terms

                                                                     Location of
Defined Term                                                         Definition

Acquisition Proposal..................................................ss.9.04(a)
Action...................................................................ss.3.10
Affiliate................................................................ss.6.10
Agreement...............................................................Recitals
beneficial owner......................................................ss.9.04(c)
Bermuda Co............................................................ss.3.30(a)
Bermuda Co. Common Stock..............................................ss.3.32(b)
Blue Sky Laws.........................................................ss.3.05(b)
Board...................................................................Recitals
business day..........................................................ss.9.04(a)
Canadian GAAP.........................................................ss.4.07(b)
Cash Component........................................................ss.2.01(a)
Certificate of Merger....................................................ss.1.02
Certificates..........................................................ss.2.03(b)
Closing..................................................................ss.1.02
Closing Date.............................................................ss.1.02
Code..................................................................ss.2.03(e)
Company.................................................................Preamble
Company Balance Sheet.................................................ss.3.07(b)
Company Benefit Plans.................................................ss.3.11(a)
Company Board Approval................................................ss.3.17(a)
Company Common Stock....................................................Recitals
Company Disclosure Schedule...........................................ss.3.01(b)
Company Material Contracts............................................ss.3.12(a)
Company Permits.......................................................ss.3.06(a)
Company Proxy Statement..................................................ss.3.23
Company SEC Reports...................................................ss.3.07(a)
Company Stock Option Plan................................................ss.2.05
Company Stock Options....................................................ss.2.05
Company Stockholders' Approval...........................................ss.3.04
Company Stockholders' Meeting............................................ss.6.02
Company Stockholders' Vote...............................................ss.3.04
Company Subsidiaries..................................................ss.3.01(a)
Computer Systems......................................................ss.9.04(e)
Confidentiality Agreement.............................................ss.6.03(b)
control...............................................................ss.9.04(f)
Debenture Component...................................................ss.2.01(a)
DGCL....................................................................Recitals
Dissenting Shares .......................................................ss.2.02
Effective Time...........................................................ss.1.03

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Employee Termination..................................................ss.2.07(c)
Environmental Laws.......................................................ss.3.13
Environmental Permits....................................................ss.3.13
ERISA.................................................................ss.3.11(a)
Excess Debenture Component............................................ss.2.04(f)
Exchange Act..........................................................ss.3.05(b)
Exchange Agent........................................................ss.2.03(a)
Exchange Fund.........................................................ss.2.03(a)
Expenses..............................................................ss.8.05(b)
Fee...................................................................ss.8.05(a)
Governmental Entity...................................................ss.3.05(b)
Hazardous Substances.....................................................ss.3.13
HSR Act...............................................................ss.3.05(b)
Insignificant Insurance Subsidiaries..................................ss.3.30(d)
Insurance Companies...................................................ss.3.30(a)
Insurance Company Balance Sheets.........................................ss.3.34
Insurance Company Material Contracts..................................ss.3.38(a)
Insurance Company Permits................................................ss.3.33
Insurance Company Subsidiaries........................................ss.3.30(a)
Insurance Financial Statements...........................................ss.3.34
Intellectual Property....................................................ss.3.15
IRS...................................................................ss.3.11(a)
Law...................................................................ss.3.05(a)
Liens.................................................................ss.3.14(b)
Material Adverse Effect...............................................ss.9.04(h)
Merger..................................................................Preamble
Merger Consideration..................................................ss.2.01(a)
Merger Sub..............................................................Preamble
Multiemployer Plan....................................................ss.3.11(b)
Multiple Employer Plan..................................................ss.11(b)
Nasdaq................................................................ss.3.05(b)
Order.................................................................ss.7.01(c)
OSC...................................................................ss.4.05(b)
Parent..................................................................Preamble
Parent Common Shares.....................................................ss.4.04
Parent Debentures.....................................................ss.9.04(i)
Parent Preferred Shares..................................................ss.4.04
Parent Reports...........................................................ss.4.07
Parent Shareholders' Approval............................................ss.4.03
Parent Shareholders' Meeting.............................................ss.6.10
Parent Share Options.....................................................ss.4.04
Parent Share Option Plans................................................ss.4.04
Parent Permits...........................................................ss.4.05
Parent Subsidiaries......................................................ss.4.04
Payment Time..........................................................ss.2.07(d)


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Performance Stock Plan................................................ss.9.04(k)
Person................................................................ss.9.04(j)
Principal Stockholders..................................................Recitals
Related Party Transactions............................................ss.4.04(c)
Restricted Share......................................................ss.2.07(a)
Registration Statement................................................ss.6.01(a)
Representatives.......................................................ss.6.03(b)
Required Consents.....................................................ss.3.05(b)
Rhode Island Co..........................................................ss.3.30
Rhode Island Co. Common Stock.........................................ss.3.32(a)
SEC...................................................................ss.2.04(b)
Securities Act........................................................ss.3.05(b)
Significant Insurer......................................................ss.3.27
subsidiary............................................................ss.9.04(l)
Superior Proposal.....................................................ss.9.04(m)
Surviving Corporation....................................................ss.1.01
Taxes.................................................................ss.9.04(n)
TSE...................................................................ss.4.05(b)
U.S. GAAP...............................................................3.07(b)
Vested Share Consideration............................................ss.2.07(a)
Vested Share Right....................................................ss.2.07(a)
Voting Agreements.......................................................Recitals


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<PAGE>


             AGREEMENT  AND PLAN OF MERGER  dated as of January  19,  2001 (this
"Agreement") among Hub International  Limited, a corporation organized under the
laws of Ontario ("Parent"),  416 Acquisition Inc., a Delaware  corporation and a
wholly  owned  subsidiary  of Parent  ("Merger  Sub"),  and Kaye Group  Inc.,  a
Delaware corporation (the "Company").

                               W I T N E S S E T H
                               - - - - - - - - - -

             WHEREAS,  the respective Boards of Directors of Parent,  Merger Sub
and the Company have each  determined  that it is in the best  interests of each
corporation  and its respective  stockholders  to merge Merger Sub with and into
the Company;

             WHEREAS,  the respective Boards of Directors of Parent,  Merger Sub
and the Company have  approved and declared  advisable  this  Agreement  and the
merger of Merger Sub with and into the Company (the "Merger") in accordance with
the Delaware General  Corporation law (the "DGCL") upon the terms and subject to
the conditions set forth in this Agreement,  whereby each issued and outstanding
share of common  stock,  par value $ .01 per  share,  of the  Company  ("Company
Common  Stock"),  other than shares owned by Parent,  Merger Sub or the Company,
and other than Dissenting Shares (as defined in Section 2.02(a) below),  will be
converted  into the right to  receive a  combination  of Parent  Debentures  (as
defined herein) and cash, without interest thereon, except as otherwise provided
in Section  2.08  hereof,  per share of Company  Common  Stock,  as provided for
herein;

             WHEREAS,  on the date hereof,  and as a condition and inducement to
Parent's  willingness  to enter  into this  Agreement,  Parent,  Merger  Sub and
certain  stockholders  of the  Company who  collectively  hold a majority of the
outstanding  shares of the Company (the "Principal  Stockholders")  have entered
into stock option and voting  agreements (the "Voting  Agreements")  pursuant to
which such stockholders  agreed (i) to vote to approve the Merger and adopt this
Agreement,  (ii) to grant an option to Parent to purchase  their Company  Common
Stock and (iii) to take certain other actions in  furtherance of the Merger upon
the terms and subject to the conditions set forth in the Voting Agreements; and

             WHEREAS,  Parent  intends  to issue and sell to  Fairfax  Financial
Holdings  Limited  certain  securities to obtain  financing for a portion of the
aggregate Merger Consideration (as defined herein);

             NOW,  THEREFORE,  in  consideration of the foregoing and the mutual
covenants and  agreements  herein  contained,  and intending to be legally bound
hereby, Parent, Merger Sub and the Company hereby agree as follows:

                                   ARTICLE I

                                   THE MERGER

             SECTION  1.01.  The  Merger.  Upon the  terms  and  subject  to the
conditions set forth in this  Agreement and in accordance  with the DGCL, at the
Effective  Time (as defined in Section 1.03  herein)  Merger Sub shall be merged
with and into the Company.  As a result of the


<PAGE>

Merger,  the  separate  corporate  existence  of Merger Sub shall  cease and the
Company  shall  continue  as  the  surviving  corporation  of  the  Merger  (the
"Surviving Corporation").

             SECTION 1.02.  Closing.  The closing of the Merger (the  "Closing")
shall  take place at 10:00 a.m.  (New York  time) at the  offices of  Shearman &
Sterling,  599 Lexington  Avenue,  New York, New York 10022-6069 on a date to be
specified by the parties  hereto (the "Closing  Date"),  which shall be no later
than the second business day after  satisfaction or waiver of the conditions set
forth in Article VII (other than those conditions that by their nature are to be
satisfied  at the  Closing,  but subject to the  satisfaction  or waiver of such
conditions),  unless  another  time,  date or place is agreed to by the  parties
hereto.

             SECTION 1.03.  Effective  Time.  On the Closing  Date,  the parties
shall file a  certificate  of merger  (the  "Certificate  of  Merger")  with the
Secretary  of State of the State of Delaware in such form as is required by, and
executed in accordance with, the relevant  provisions of the DGCL and shall make
all other filings or recordings  required by applicable  law in connection  with
the Merger. The Merger shall become effective at such time as the Certificate of
Merger is duly filed with the  Secretary of State of the State of Delaware or at
such later date or time as is agreed upon by the parties  and  specified  in the
Certificate of Merger (the time the Merger becomes  effective being  hereinafter
referred to as the "Effective Time").

             SECTION  1.04.  Effects of the  Merger.  The Merger  shall have the
effects  as  provided  in this  Agreement,  the  Certificate  of Merger  and the
applicable  provisions  of the DGCL.  Without  limiting  the  generality  of the
foregoing, and subject thereto, at the Effective Time all the property,  rights,
privileges,  powers and  franchises  of the Company and Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities, obligations, restrictions
and duties of the  Company and Merger Sub shall  become the debts,  liabilities,
obligations, restrictions and duties of the Surviving Corporation.

             SECTION  1.05.  Certificate  of  Incorporation  and  By-Laws of the
Surviving   Corporation.   (a)  At  the  Effective   Time,  the  Certificate  of
Incorporation of the Company,  as in effect  immediately  prior to the Effective
Time,  shall be the Certificate of  Incorporation  of the Surviving  Corporation
until   thereafter   amended  as  provided  by  law  and  such   Certificate  of
Incorporation.

             (b) Unless  otherwise  determined  by Parent prior to the Effective
Time, and subject to Section 6.05(a),  the By-Laws of the Company,  as in effect
immediately  prior to the Effective Time,  shall be the By-Laws of the Surviving
Corporation  until  thereafter  amended as provided by law, the  Certificate  of
Incorporation of the Surviving Corporation and such By-Laws.

             SECTION 1.06. Directors and Officers of the Surviving  Corporation.
(a) The directors of Merger Sub immediately prior to the Effective Time shall be
the  initial  directors  of the  Surviving  Corporation,  each to hold office in
accordance  with the Certificate of  Incorporation  and By-laws of the Surviving
Corporation.



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<PAGE>

             (b) The officers of the Company  immediately prior to the Effective
Time shall be the initial  officers of the Surviving  Corporation,  in each case
until their respective successors are duly elected or appointed and qualified or
until their earlier death, resignation or approval.

                                   ARTICLE II

                 CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES

             SECTION 2.01.  Conversion of Company Common Stock. At the Effective
Time,  by virtue of the  Merger  and  without  any action on the part of Parent,
Merger Sub or the Company:

                          (a)  Conversion of Company  Common  Stock.  Subject to
             Sections  2.02 and  2.07,  each  issued  and  outstanding  share of
             Company Common Stock (other than shares to be canceled  pursuant to
             Section 2.01(b)) shall be automatically converted into the right to
             receive $14 (the "Merger  Consideration")  payable as follows:  (A)
             net amount of $9.3334 in cash, without interest thereon,  except as
             otherwise  provided in Section 2.08 hereof (the "Cash  Component"),
             and  (B)  $4.6666  principal  amount  of a  Parent  Debenture  (the
             "Debenture Component").  Pursuant to Section 2.04, Parent may elect
             to increase the Cash Component and decrease the Debenture Component
             as provided  therein.  As of the Effective Time, all such shares of
             Company  Common  Stock  shall no  longer be  outstanding  and shall
             automatically be canceled and retired and shall cease to exist, and
             each  holder  of a  certificate  representing  any such  shares  of
             Company  Common  Stock shall cease to have any rights with  respect
             thereto,  except  the right to receive  the  Merger  Consideration,
             without  interest,  except as  otherwise  provided in Section  2.08
             hereof.

                          (b)  Cancellation  of Treasury Stock and  Parent-Owned
             Stock.  Each share of Company  Common  Stock owned by Parent or any
             direct or indirect wholly owned subsidiary of Parent or held in the
             treasury of the Company or any Company Subsidiary shall be canceled
             and extinguished  without any conversion  thereof and no payment or
             distribution shall be made with respect thereto.

                          (c) Conversion of Merger Sub Common Stock.  Each share
             of common  stock,  par value $0.01 per share,  of Merger Sub issued
             and  outstanding  immediately  prior to the Effective Time shall be
             converted into and exchanged for one validly issued, fully paid and
             nonassessable  share of common stock, par value $0.01 per share, of
             the Surviving Corporation.

             SECTION 2.02.  Dissenting Shares. (a) Notwithstanding any provision
of this  Agreement  to the  contrary,  shares of Company  Common  Stock that are
outstanding  immediately  prior  to the  Effective  Time and  which  are held by
stockholders  who  shall  have not  voted in favor of the  Merger  or  consented
thereto in writing and who shall have demanded properly in writing appraisal for
such  shares in  accordance  with  section  262 of the DGCL  (collectively,  the
"Dissenting  Shares")  shall not be converted  into,  or represent  the right to
receive,  the Merger  Consideration.  Such  stockholders  shall be  entitled  to
receive payment of the appraised value of such shares held by them in accordance
with the provisions of such section 262, except that all



                                       3
<PAGE>

Dissenting  Shares held by stockholders  who shall have failed to perfect or who
effectively  shall have  withdrawn  or lost their  rights to  appraisal  of such
shares under such section 262 shall  thereupon be deemed to have been  converted
into and to have become exchangeable for, as of the Effective Time, the right to
receive the Merger Consideration,  without any interest thereon, upon surrender,
in the manner provided in Section 2.03, of the certificate or certificates  that
formerly evidenced such shares.

             (b) The Company  shall give Parent (i) prompt notice of any demands
for appraisal  received by the Company,  withdrawals  of such  demands,  and any
other  instruments  served  pursuant to the DGCL and received by the Company and
(ii) the opportunity to direct all  negotiations and proceedings with respect to
demands for appraisal  under the DGCL.  The Company  shall not,  except with the
prior  written  consent of Parent,  make any payment with respect to any demands
for appraisal or offer to settle or settle any such demands.

             SECTION  2.03.  Exchange  of  Certificates.   (a)  Exchange  Agent.
Immediately after the Effective Time, Parent shall deposit, or shall cause to be
deposited,  with a bank or trust  company  designated  by Parent and  reasonably
acceptable to the Company (the "Exchange Agent"), for the benefit of the holders
of Company Common Stock, for exchange in accordance with this Article II through
the Exchange Agent, (i) certificates  evidencing the Parent Debentures  issuable
pursuant  to Section  2.01(a)  as of the  Effective  Time and (ii)  cash,  in an
aggregate  amount  sufficient  to pay the total cash  payable to the  holders of
shares of  Company  Common  Stock  pursuant  to Section  2.01(a)  (such cash and
certificates of Parent Debentures being hereinafter referred to as the "Exchange
Fund").  The Exchange  Agent shall,  pursuant to irrevocable  instructions  from
Parent, deliver the Parent Debentures and cash contemplated to be issued or paid
pursuant to Section 2.01 out of the Exchange  Fund.  Except as  contemplated  by
Sections  2.03(c) and (g) hereof,  the  Exchange  Fund shall not be used for any
other purpose.

             (b)  Exchange  Procedures.  As  promptly as  practicable  after the
Effective Time,  Parent shall instruct the Exchange Agent to mail to each holder
of  record of a  certificate  or  certificates  which  immediately  prior to the
Effective  Time  represented  outstanding  shares of Company Common Stock (other
than shares of Company Common Stock that have been cancelled pursuant to Section
2.01(b))  (the  "Certificates"),  and whose shares of Company  Common Stock were
converted into the right to receive the Merger Consideration pursuant to Section
2.01,  (i) a letter of  transmittal  (which  shall be in customary  form,  shall
specify  that  delivery  shall be  effected,  and risk of loss and  title to the
Certificates  shall pass, only upon proper  delivery of the  Certificates to the
Exchange  Agent and shall have such other  conditions  as Parent may  reasonably
specify)  and  (ii)  instructions  for use in  effecting  the  surrender  of the
Certificates  pursuant to such letter of  transmittal in exchange for the Merger
Consideration.  Upon  surrender  to the  Exchange  Agent  of a  Certificate  for
cancellation  together  with  such  letter of  transmittal,  duly  executed  and
completed in accordance with the instructions  thereto, and such other documents
as may be required pursuant to such instructions, the holder of such Certificate
shall be entitled to receive in exchange  therefor the Merger  Consideration and
the Certificate so surrendered shall forthwith be cancelled.  Subject to Section
2.03(e),  under no circumstances will any holder of a Certificate be entitled to
receive  any part of the  Merger  Consideration  until  such  holder  shall have
surrendered such Certificate.  In the event of a transfer of ownership of shares




                                       4
<PAGE>

of Company Common Stock which is not  registered in the transfer  records of the
Company, the Merger Consideration may be paid in accordance with this Article II
to the transferee if the  Certificate  evidencing  such shares of Company Common
Stock is presented to the Exchange Agent,  accompanied by all documents required
to evidence and effect such transfer and by evidence that any  applicable  stock
transfer taxes have been paid. Until surrendered as contemplated by this Section
2.02, each  Certificate  shall be deemed at any time after the Effective Time to
represent   only  the  right  to  receive   upon  such   surrender   the  Merger
Consideration.  Except as otherwise provided in Section 2.08 hereof, no interest
shall be paid or will  accrue on any cash  payable to  holders  of  Certificates
pursuant to provisions of this Article II on the Merger Consideration.

             (c) No  Liability.  Neither  Parent nor the  Surviving  Corporation
shall be liable to any  holder of shares of Company  Common  Stock in respect of
any Merger  Consideration that is delivered to a public official pursuant to any
abandoned  property,  escheat or similar Law. If any Certificate  shall not have
been  surrendered  prior to six months after the Effective Time (or  immediately
prior to such earlier  date on which any Merger  Consideration  would  otherwise
escheat to or become the  property  of any  Governmental  Entity (as  defined in
Section 3.05(b))), any such Merger Consideration, except to the extent permitted
by applicable Law, will become the property of the Surviving  Corporation,  free
and clear of all claims or interest of any person previously entitled thereto.

             (d) Withholding. Each of the Surviving Corporation,  Parent and the
Exchange  Agent shall be entitled to deduct and withhold from the  consideration
otherwise  payable pursuant to this Agreement to any holder of shares of Company
Common  Stock such  amounts as it is required to deduct and  withhold  under the
U.S. Internal Revenue Code of 1986, as amended (the "Code"), or any provision of
any state, local or foreign tax law, with respect to the making of such payment.
To the extent that amounts are so withheld by the Surviving Corporation,  Parent
or the  Exchange  Agent,  as the case may be,  such  withheld  amounts  shall be
treated for all purposes of this  Agreement as having been paid to the holder of
shares  of  Company  Common  Stock  in  respect  of  which  such  deduction  and
withholding  were made by the  Surviving  Corporation,  Parent  or the  Exchange
Agent, as the case may be.

             (e) Lost  Certificates.  If any  Certificate  shall have been lost,
stolen or destroyed,  upon the making of an affidavit of that fact by the person
claiming such  Certificate  to be lost,  stolen or destroyed and, if required by
the  Surviving  Corporation,  the  posting  by such  person  of a bond,  in such
reasonable amount as the Surviving  Corporation may direct, as indemnity against
any claim that may be made  against it with  respect  to such  Certificate,  the
Exchange  Agent  will  issue in  exchange  for such  lost,  stolen or  destroyed
Certificate the applicable Merger Consideration, without any interest thereon.

             (f) No Fractional  Debentures.  Parent  Debentures  issued upon the
surrender for exchange of Certificates shall be issued only in principal amounts
of $1,000 and integral multiples thereof.  If the aggregate  principal amount of
Debenture Component due to a holder of a Certificate pursuant to Section 2.01(a)
above is less than $1,000,  then such holder shall  receive cash in lieu of such
Debenture  Component.  If the aggregate  principal amount of Debenture Component
due to a holder of a  Certificate  pursuant  to Section  2.01(a)  above  exceeds
$1,000,


                                       5
<PAGE>

then,  with respect to that amount of Debenture  Component that exceeds
$1,000  or  the  nearest  integral   multiple  thereof  (the  "Excess  Debenture
Component"),  such holder  shall  receive  cash in lieu of the Excess  Debenture
Component.

          (g)  Investment of Exchange Fund. The Exchange Fund may be invested by
the Exchange Agent,  pursuant to  instructions  from Parent and on behalf of the
stockholders  of the Company,  in securities  issued or guaranteed by the United
States  government or certificates of deposit of commercial  banks that have, or
are members of a group of commercial banks that has,  consolidated  total assets
of not less than  $500,000,000.  Any net profit  resulting  from, or interest or
income  produced  by,  such  investments  shall  be  payable  to  the  Surviving
Corporation or Parent, as Parent directs.

          (h) No Further Rights in Company Common Stock.  All Parent  Debentures
issued or cash paid upon  conversion  of the Company  Common Stock in accordance
with the terms  hereof  shall be deemed  to have  been  issued  and paid in full
satisfaction of all rights pertaining to such Company Common Stock.

          SECTION 2.04. Election to Increase the Cash Component. Notwithstanding
anything to the contrary herein, Parent may in its sole discretion,  on any date
prior to the  effectiveness  of the  Registration  Statement (as defined herein)
with the Securities and Exchange  Commission (the "SEC"),  elect to increase the
Cash Component up to $14 and decrease the Debenture  Component  correspondingly.
The Parent shall  evidence any such election by  delivering a written  notice to
the Company stating the Cash Component and Debenture Component.

          SECTION 2.05.  Stock Transfer  Books. At the Effective Time, the stock
transfer books of the Company shall be closed and, thereafter, there shall be no
further  registration of transfers of shares of Company Common Stock theretofore
outstanding  on the records of the Company.  From and after the Effective  Time,
the  holders  of  Certificates  representing  shares  of  Company  Common  Stock
outstanding  immediately  prior to the  Effective  Time shall  cease to have any
rights with respect to such shares of Company Common Stock formerly  represented
thereby, except as otherwise provided in this Agreement or by Law.

          SECTION 2.06. Company Stock Options.  Prior to the Effective Time, all
outstanding  stock  options  (the  "Company  Stock  Options")  issued  under the
Company's  Amended and  Restated  Stock Option Plan (the  "Company  Stock Option
Plan") shall become vested (i.e.,  such Company Stock Options shall become fully
exercisable as to all shares of Company  Common Stock covered  thereby and as to
which such  Company  Stock  Options  have not been  previously  exercised)  and,
immediately  prior to the Effective  Time,  for each Company  Stock Option,  the
holder of each such Company  Stock Option (an  "Optionee")  shall be entitled to
receive, in settlement and cancellation  thereof, an amount of cash equal to the
product of (A) the difference between the Merger  Consideration and the exercise
price per share of Company  Common Stock  provided in each Company Stock Option,
and (B) the number of shares of Company  Common  Stock  covered by such  Company
Stock Option,  which payment shall be made to each Optionee immediately prior to
the Effective Time by the Company. As of the



                                       6
<PAGE>

Effective  Time,  the Company shall cause the Company Stock Option Plan and each
outstanding Company Stock Option to terminate.

          SECTION 2.07.  Company  Restricted Stock. (a) Immediately prior to the
Merger,  each holder (a "Performance  Stock Holder") of shares of Company Common
Stock granted  pursuant to the Stock  Performance Plan (as defined herein) prior
to the date hereof (each a "Performance  Stock Share"),  which Performance Stock
Share is (i) outstanding immediately prior to the Effective Time and (ii) either
(x) has vested pursuant to, and in accordance with, the terms of the Performance
Stock Plan or (y) will as a result of the Merger become vested  pursuant to, and
in accordance  with,  the  Performance  Stock Plan,  shall be cancelled and such
Performance  Stock Holder shall be entitled to a right (a "Vested  Share Right")
to receive in full  payment  therefor and  settlement  thereof an amount of cash
equal to $14 per Performance  Stock Share without  interest thereon (the "Vested
Share Consideration") less applicable  withholding taxes. The Board of Directors
of the Company (the "Board") shall cause the Performance Stock Plan to terminate
as of the Effective  Time and each  Performance  Stock Share  outstanding at the
Effective Time shall be cancelled and retired and shall cease to exist, and each
holder of a certificate  representing  any such  Performance  Stock Shares shall
cease to have any  rights  with  respect  thereto  except  as set  forth in this
Section 2.07.

          (b) The aggregate amount of the Vested Share  Consideration that could
become payable pursuant to Section 2.07(a), which the parties agree is currently
equal to $2,668,070,  subject to adjustment in accordance  with the terms hereof
(the "Escrow Fund"),  shall be paid by the Parent to a mutually agreeable escrow
agent (the  "Escrow  Agent") as soon as  practicable  after the  Effective  Time
pursuant to an escrow agreement  mutually  agreeable to the Parent,  the Company
and the Escrow  Agent (the  "Escrow  Agreement").  The  Escrow  Agreement  shall
provide  that the  entire  Escrow  Fund shall be paid  promptly  after the first
anniversary of the Effective Time,  and,  except as provided  below,  not before
that time, to the One-Year Qualified Holders (as defined below).  Payment of the
Escrow Fund to the  One-Year  Qualified  Holders  shall be made pro rata to each
such holder according to the number of his or her Performance  Stock Shares that
were cancelled pursuant to Section 2.07(a) above.

          (c) A "One-Year  Qualified  Holder" shall mean any  Performance  Stock
Holder (i) who continues to be employed by the Surviving Corporation, the Parent
or any of their direct or indirect  subsidiaries on the first anniversary of the
Effective  Time or (ii) whose  employment  with the Surviving  Corporation,  the
Parent or any of their  direct or indirect  subsidiaries  was  terminated  on or
prior to the first  anniversary  of the Effective  Time only by reason of one of
the following:  (x) by such  Performance  Stock Holder's death or disability (as
defined in the  Company's  applicable  medical or disability  plan),  (y) by the
Surviving   Corporation,   the  Parent  or  any  of  their  direct  or  indirect
subsidiaries  without Cause (as defined below);  or (z) by the Performance Stock
Holder for Good Reason (as defined below).  Upon any Performance  Stock Holder's
death after the Effective Time but on or before the first  anniversary  thereof,
any such holder's  heirs shall be entitled to receive as promptly as practicable
all payments in respect of such Vested  Share Right  without  waiting  until the
first  anniversary of the Effective Time.  Upon any  Performance  Stock Holder's
termination  from  employment  without Cause by the Surviving  Corporation,  the
Parent or any of their direct or indirect subsidiaries, or


                                       7
<PAGE>


termination by the Performance  Stock Holder for Good Reason,  after the Closing
Date but on or before the first  anniversary  thereof,  any such holder shall be
entitled to receive as promptly as  practicable  all payments in respect of such
Vested Share Right without waiting until the first  anniversary of the Effective
Time.

          (d) For purposes of Section 2.07(c):

          (x) "Cause" shall mean (i) a breach by the Performance Stock Holder of
     the provisions of his or her Employment  Agreement,  which breach shall not
     have been cured by the  Performance  Stock Holder  within  thirty (30) days
     following notice thereof by the employer,  the Surviving  Corporation,  the
     Parent or any of their direct or indirect  subsidiaries  to the Performance
     Stock Holder,  (ii) the commission of gross  negligence or bad faith by the
     Performance  Stock Holder in the course of the  Performance  Stock Holder's
     employment,  (iii) the  commission  by the  Performance  Stock  Holder of a
     criminal act of fraud, theft or dishonesty causing damages to the Surviving
     Corporation,  the Parent or any of their direct or indirect subsidiaries or
     (iv)  the  Performance  Stock  Holder's  conviction  of (or  plea  of  nolo
     contendere to) any felony, or misdemeanor involving moral turpitude if such
     misdemeanor  results in financial harm to or adversely affects the goodwill
     of the Surviving Corporation, the Parent or any of their direct or indirect
     subsidiaries; and

          (y) "Good Reason" shall mean:

                    (i) the  assignment to the  Performance  Stock Holder of any
          duties  substantially  inconsistent with the position with the Company
          or its direct or  indirect  subsidiaries  that the  Performance  Stock
          Holder held immediately  prior to the Effective Time, or a significant
          adverse  alteration in the nature or status of the  Performance  Stock
          Holder's  responsibilities  or the conditions of the Performance Stock
          Holder's  employment  from  those in effect  immediately  prior to the
          Effective Time, excluding for this purpose an isolated and inadvertent
          action not taken in bad faith and which is remedied  by the  Surviving
          Corporation,   the  Parent  or  any  of  their   direct  or   indirect
          subsidiaries,  promptly  after receipt of notice  thereof given by the
          Performance Stock Holder;

                    (ii) a material reduction by the Surviving Corporation,  the
          Parent  or  any  of  their  direct  or  indirect  subsidiaries  in the
          Performance Stock Holder's annual base salary as in effect on the date
          hereof or as the same may be increased  from time to time,  except for
          across-the-board   salary  reductions  similarly  affecting  most  key
          personnel  of the  Surviving  Corporation,  the Parent or any of their
          direct or indirect  subsidiaries  and most key personnel of any person
          in control of the Parent;

                    (iii) any failure by the Surviving  Corporation,  the Parent
          or any of their direct or indirect  subsidiaries,  as  applicable,  to
          require  any  successor  (whether  direct or  indirect,  by  purchase,
          merger, consolidation or otherwise) to all or substantially all of the
          business and/or assets of the Surviving  Corporation or the



                                       8
<PAGE>

          Parent,  as applicable,  to assume  expressly and agree to perform the
          provisions of any employment  agreement to which the Performance Stock
          Holder is a party in the same  manner and to the same  extent that the
          Surviving  Corporation,  the Parent or any of their direct or indirect
          subsidiaries  would be required to perform if no such  succession  had
          taken place;

                    (iv) the relocation of the offices at which the  Performance
          Stock  Holder  is  principally   employed  immediately  prior  to  the
          Effective  Time  hereunder to a location  more than 35 miles from such
          location,  or the  imposition  of  any  requirement  by the  Surviving
          Corporation,   the  Parent  or  any  of  their   direct  or   indirect
          subsidiaries that the Performance Stock Holder be based anywhere other
          than the offices at which the Performance  Stock Holder is principally
          employed  immediately prior to the Effective Time, except for business
          related  travel  to  an  extent  substantially   consistent  with  the
          Performance  Stock Holder's  business travel  obligations  immediately
          prior to the Effective Time; or

                    (v) the failure by the Parent or the Surviving  Corporation,
          as the case may be, to  continue  to  provide  the  Performance  Stock
          Holder with  benefits  substantially  similar to those  enjoyed by the
          Performance  Stock  Holder under any of the life  insurance,  medical,
          accident,  disability or other employee benefit or compensation  plans
          of the  Company  or  any of the  Company  Subsidiaries  in  which  the
          Performance  Stock Holder was  participating  at the Effective Time or
          the failure by the Parent or the  Surviving  Corporation,  as the case
          may be, to provide  the  Performance  Stock  Holder with the number of
          paid vacation days to which the  Performance  Stock Holder is entitled
          on the  basis of  years of  service  with  the  Company  or any of its
          subsidiaries,  as the  case may be,  in  accordance  with  the  normal
          vacation  policies of the Company or any such subsidiary,  as the case
          may be, in effect at the Effective Time, unless such failure or taking
          of action  similarly  affects most key personnel of the Parent and its
          subsidiaries.

          SECTION 2.08. Interest on Merger Consideration.  If the Effective Time
shall not have  occurred  on or  before  the  180th  day (the  "Interest  Date")
following the date on which the Company Proxy  Statement (as defined  herein) is
filed with the SEC, then the Merger Consideration shall be adjusted by adjusting
each of the Cash Component and the Debenture Component to reflect the accrual of
interest  at a rate of  8.5%  per  annum  for the  period  beginning  on the day
immediately  following the Interest Date and ending on the date of the Effective
Time.  Notwithstanding  the previous  sentence,  no interest shall accrue and no
adjustment to the Merger  Consideration  shall be made if the Company shall have
failed in any material respect to comply with Section 6.06.


                                  ARTICLE III

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

          As an  inducement  to enter into this  Agreement,  the Company  hereby
represents and warrants to Parent and Merger Sub that:



                                       9
<PAGE>

          SECTION 3.01. Organization and Qualification;  Subsidiaries.  (a) Each
of the Company and each operating subsidiary of the Company with total assets in
excess of $50,000 on its balance sheet at September 30, 2000 (collectively,  the
"Company Subsidiaries") is a corporation duly organized, validly existing and in
good standing under the laws of the  jurisdiction of its  incorporation  and has
all requisite  corporate  power and  authority  and all  necessary  governmental
approvals to own,  lease and operate its properties and to carry on its business
as it is now being  conducted  except  where  the  failure  to be so  organized,
existing or in good standing or to have such power, authority,  and governmental
approvals  would not prevent or materially  delay  consummation of the Merger or
otherwise   prevent  or  materially   delay  the  Company  from  performing  its
obligations  under  this  Agreement  and  would  not,  individually  or  in  the
aggregate,  have a Material  Adverse  Effect (as defined in Section  9.04).  The
Company and each of the Company  Subsidiaries is duly qualified or licensed as a
foreign corporation or organization to do business,  and is in good standing, in
each  jurisdiction  where  the  character  of the  properties  owned,  leased or
operated  by it or the  nature  of its  business  makes  such  qualification  or
licensing necessary, except for such failures to be so qualified or licensed and
in good standing that would not prevent or materially delay  consummation of the
Merger or otherwise  prevent or materially delay the Company from performing its
obligations  under  this  Agreement  and  would  not,  individually  or  in  the
aggregate, have a Material Adverse Effect.

          (b) Section 3.01(b) of the disclosure schedule prepared by the Company
and delivered by the Company to Parent prior to the execution of this  Agreement
and forming a part of this Agreement (the "Company  Disclosure  Schedule")  sets
forth a true and complete  list of all the Company  Subsidiaries,  together with
the jurisdiction of incorporation of each Company  Subsidiary and the percentage
of the outstanding capital stock of each Company Subsidiary owned by the Company
and each Company Subsidiary,  and separately  identifies all subsidiaries of the
Company  that are not Company  Subsidiaries  (collectively,  the  "Insignificant
Subsidiaries"). Except as set forth in Section 3.01(b) of the Company Disclosure
Schedule,  neither the Company nor any Company Subsidiary directly or indirectly
owns,  or has  outstanding  contractual  obligations  to acquire,  any equity or
similar  interest  in,  or any  interest  convertible  into or  exchangeable  or
exercisable for any equity or similar interest in, any corporation, partnership,
joint venture or other business association or entity.

          (c) None of the  Insignificant  Subsidiaries  has any  liabilities  or
obligation of any nature whatsoever  (whether absolute,  accrued,  contingent or
otherwise  and whether due or to become due),  except for such  liabilities  and
obligations as would not prevent or materially delay  consummation of the Merger
or  otherwise  prevent or  materially  delay the  Company  from  performing  its
obligations  under  this  Agreement  and  would  not,  individually  or  in  the
aggregate,  have a  Material  Adverse  Effect  on  the  Company  or any  Company
Subsidiary.

          SECTION 3.02.  Certificate of Incorporation  and By-Laws.  The Company
has  heretofore  made  available  to Parent a complete  and correct  copy of the
Certificate of  Incorporation  and the By-Laws,  each as amended to date, of the
Company and each Company  Subsidiary.  Such  Certificates of  Incorporation  and
By-Laws  are in full force and  effect.  Neither  the  Company  nor any  Company
Subsidiary  is in  violation  of any of the  provisions  of its



                                       10
<PAGE>

Certificate of Incorporation or By-Laws.  True and complete copies of all minute
books of the Company have been made available by the Company to Parent.

          SECTION 3.03. Capitalization.  (a) The authorized capital stock of the
Company  consists  of (a)  20,000,000  shares of  Company  Common  Stock and (b)
1,000,000  shares of preferred  stock, par value $1.00 per share, of the Company
(the "Company Preferred Stock").  As of the date hereof, (a) 8,481,471 shares of
Company  Common Stock and (b) no shares of Company  Preferred  Stock were issued
and  outstanding.  All of the issued and  outstanding  shares of Company  Common
Stock are validly issued, fully paid and nonassessable.  4,481 shares of Company
Common Stock and no shares of Company  Preferred Stock, are held in the treasury
of the  Company or by any Company  Subsidiary  and  1,350,000  shares of Company
Common Stock have been duly reserved for future issuance pursuant to the Company
Stock Option Plan. There are no issued or outstanding bonds, debentures,  notes,
convertible notes or other  indebtedness of the Company having the right to vote
on any matters on which  stockholders  of the  Company may vote.  Except for the
Company  Stock  Options  granted  pursuant to the Company  Stock Option Plans or
pursuant to agreements or arrangements  described in Section 3.03 of the Company
Disclosure Schedule, there are no options, warrants or other rights, agreements,
arrangements or commitments of any character to which the Company or any Company
Subsidiary is a party relating to the issued or unissued stock of the Company or
any Company Subsidiary or conditionally or absolutely  obligating the Company or
any Company  Subsidiary to issue or sell any shares of stock of, or other equity
interests  in, the Company or any  Company  Subsidiary.  Section  3.03(a) of the
Company Disclosure Schedule sets forth all Company Stock Options,  including the
relevant vesting times and exercise periods.  All shares of Company Common Stock
subject to  issuance as  aforesaid,  upon  issuance on the terms and  conditions
specified in the instruments  pursuant to which they are issuable,  will be duly
authorized,  validly  issued,  fully  paid  and  non-assessable.  There  are  no
outstanding  obligations (whether conditional or absolute) of the Company or any
Company  Subsidiary  to  repurchase,  redeem or otherwise  acquire any shares or
other  equity  interests  of Company  Common Stock or any shares or other equity
interests of any Company  Subsidiary.  Each outstanding  share of stock or other
equity interest of each Company  Subsidiary is duly authorized,  validly issued,
fully paid and non-assessable and each such share or other equity interest owned
by the Company or another  Company  Subsidiary is free and clear of all security
interests, liens, claims, pledges, options, rights of first refusal, agreements,
limitations on the Company's or such other Company  Subsidiary's  voting rights,
charges and other encumbrances of any nature whatsoever.

          (b)  Restricted  Stock.  Section  3.03(b)  of the  Company  Disclosure
Schedule  sets  forth a true and  complete  list of each  holder  of  Restricted
Shares,  and identifies how many  Restricted  Shares of each such holder (i) are
vested as of the date  hereof and (ii) may be  vested,  whether by reason of the
Merger  (assuming  only for purposes of this Section  3.03(b) that the Effective
Time is at December 31, 2001) or otherwise at December 31, 2001.

          SECTION 3.04.  Authority  Relative to This Agreement.  The Company has
all  necessary  corporate  power and  authority  to  execute  and  deliver  this
Agreement and perform its obligations hereunder and to consummate the Merger and
the  other  transactions  contemplated  by this  Agreement.  The  execution  and
delivery of this Agreement by the Company and the



                                       11
<PAGE>

consummation   by  the  Company  of  the  Merger  and  the  other   transactions
contemplated  by this  Agreement  have been duly and validly  authorized  by all
necessary corporate action and no other corporate proceedings on the part of the
Company are necessary to authorize  this  Agreement or to consummate  the Merger
and the other  transactions  contemplated  by this  Agreement  (other  than with
respect to the Merger,  the  approval  and  adoption of this  Agreement  and the
Merger by the  affirmative  vote of holders of a majority of the Company  Common
Stock (the "Company Stockholders' Approval") entitled to vote on the matter (the
"Company  Stockholders' Vote"), and the filing of the Certificate of Merger with
the  Secretary of State of the State of Delaware as required by the DGCL).  This
Agreement  has been duly and validly  executed and delivered by the Company and,
assuming the due authorization, execution and delivery by Parent and Merger Sub,
constitutes a legal,  valid and binding  obligation of the Company,  enforceable
against the Company in  accordance  with its terms.  The Board has approved this
Agreement,  the Merger and the other transactions  contemplated  herein and such
approvals are sufficient so that the  restrictions on business  combinations set
forth in Section 203(a) of the DGCL shall not apply to the Merger.

          SECTION 3.05. No Conflict;  Required Filings and Consents.  (a) Except
as set forth in Section 3.05 of the Company Disclosure  Schedule,  the execution
and delivery of this Agreement do not, and  performance of this Agreement by the
Company will not, (i) conflict with or violate the Certificate of  Incorporation
or By-Laws of the  Company or any  equivalent  organizational  documents  of any
Company Subsidiary,  (ii) conflict with or violate any federal, national, state,
provincial, municipal or local law, statute, ordinance, rule, regulation, order,
injunction,  judgment or decree ("Law") applicable to the Company or any Company
Subsidiary  or by which any  property  or asset of the  Company  or any  Company
Subsidiary is bound or affected,  or (iii) result in any breach of or constitute
a default (or an event which with notice or lapse of time or both would become a
default)  under,  or  give  to  others  any  right  of  termination,  amendment,
acceleration  or  cancellation  of, or result in the creation of a lien or other
encumbrance  on any  property or asset of the Company or any Company  Subsidiary
pursuant to, any note, bond, mortgage,  indenture,  contract,  agreement, lease,
license,  permit,  franchise or other  instrument or  obligation,  except,  with
respect to clauses (ii) and (iii), for any such conflicts, violations, breaches,
defaults  or other  occurrences  which  would not  prevent or  materially  delay
consummation of the Merger or otherwise  prevent or materially delay the Company
from performing its obligations under this Agreement and would not, individually
or in the  aggregate,  have a  Material  Adverse  Effect on the  Company  or the
Insurance Companies.

          (b) Except as set forth in Section  3.05(b) of the Company  Disclosure
Schedule,  the execution  and delivery of this  Agreement by the Company do not,
and the  performance  of this  Agreement  by the Company  will not,  require any
consent,  approval,  authorization  or permit of, or filing with or notification
to, any federal, national, state, provincial, municipal or local government, any
instrumentality,  subdivision,  court,  administrative  agency or  commission or
other authority thereof,  or any  quasi-governmental  or private body exercising
any   regulatory,    taxing,    importing   or   any   other   governmental   or
quasi-governmental  authority (a "Governmental Entity"),  except (i) for (A) the
pre-merger   notification   requirements  of  the  Hart-Scott-Rodino   Antitrust
Improvements  Act of 1976, as amended (the "HSR Act"),  and the  requirements of
other  applicable  competition  laws,  (B) the requisite  approvals of insurance

                                       12
<PAGE>

regulatory authorities (including,  without limitation, the insurance regulatory
authorities  of Rhode  Island),  (C)  applicable  requirements,  if any,  of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Securities
Act of  1933,  as  amended,  and  the  rules  and  regulations  thereunder  (the
"Securities Act"), state securities or "blue sky" laws (the "Blue Sky Laws") and
state  takeover  laws,  (D) the DGCL with  respect to the filing of the Delaware
Certificate of Merger and (E) the rules and  regulations of the Nasdaq  National
Market (the "Nasdaq")  (the foregoing  clauses (i)(A) through (E) being referred
to collectively as the "Required Consents") and (ii) where the failure to obtain
any such consent, approval,  authorization or permit, or to make any such filing
or  notification,  would not prevent or  materially  delay  consummation  of the
Merger, or otherwise prevent or materially delay the Company from performing its
obligations  under  this  Agreement  and  would  not,  individually  or  in  the
aggregate,  have a  Material  Adverse  Effect on the  Company  or the  Insurance
Companies.

          SECTION 3.06. Permits;  Compliance. (a) Except as disclosed in Section
3.06(a) of the Company Disclosure Schedule,  each of the Company and the Company
Subsidiaries  is  in  possession  of  all  franchises,  grants,  authorizations,
licenses, permits, easements,  variances,  exceptions,  consents,  certificates,
approvals and orders of any Governmental Entity necessary for the Company or any
Company  Subsidiary to own,  lease and operate its properties or to carry on its
business as it is now being conducted (the "Company  Permits")  except where the
failure to obtain any such Company Permits would not prevent or materially delay
consummation of the Merger, or otherwise prevent or materially delay the Company
from performing its obligations under this Agreement and would not, individually
or in the aggregate,  have a Material Adverse Effect.  As of the date hereof, no
suspension or  cancellation  of any of the Company Permits is pending or, to the
knowledge of the Company, threatened.

          (b) Except as disclosed in Section  3.06(b) of the Company  Disclosure
Schedule, neither the Company nor any Company Subsidiary is in conflict with, or
in default or violation of, any (i) Law applicable to the Company or any Company
Subsidiary  or by which any  property  or asset of the  Company  or any  Company
Subsidiary is bound or affected, (ii) note, bond, mortgage, indenture, contract,
agreement,  lease, license,  permit, franchise or other instrument or obligation
to which  the  Company  or any  Company  Subsidiary  is a party or by which  the
Company or any Company Subsidiary or any property or asset of the Company or any
Company Subsidiary is bound or affected or (iii) Company Permits, except in each
case for any such  conflicts,  defaults or violations  that would not prevent or
materially delay  consummation of the Merger or otherwise  prevent or materially
delay the Company from performing its obligations under this Agreement and would
not, individually or in the aggregate, have a Material Adverse Effect.

          SECTION 3.07. SEC Filings;  Financial Statements.  (a) The Company has
filed all forms,  reports and documents  required to be filed by it with the SEC
since  December  31, 1998 and has  heretofore  delivered  or made  available  to
Parent,  in the form filed with the SEC, (i) its Annual Reports on Form 10-K for
the fiscal years ended December 31, 1998 and 1999, (ii) its Quarterly Reports on
Form 10-Q for the periods ended March 31, 2000,  June 30, 2000 and September 30,
2000,  (iii)  all  proxy  statements  relating  to  the  Company's  meetings  of
stockholders  (whether  annual or  special)  held since May 1, 1998 and (iv) all
other forms,  reports



                                       13
<PAGE>

and other registration statements (other than Quarterly Reports on Form 10-Q not
referred to in clause (ii) above)  filed by the Company with the SEC since April
1, 1998 (the forms,  reports  and other  documents  referred to in clauses  (i),
(ii), (iii) and (iv) above being,  collectively,  the "Company SEC Reports") and
(v)  complete  (i.e.,  unredacted)  copies of each  exhibit to the  Company  SEC
Reports  filed with the SEC.  The  Company  SEC  Reports  (i) were  prepared  in
accordance  with either the  requirements  of the Securities Act or the Exchange
Act, as the case may be, and the rules and regulations  promulgated  thereunder,
and (ii) did not, at the time they were filed, or, if amended, as of the date of
such amendment, contain any untrue statement of a material fact or omit to state
a material fact required to be stated  therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. No Company Subsidiary is required to file any form, report
or other document with the SEC.

          (b) Each of the consolidated financial statements (including,  in each
case,  any notes  thereto)  contained in the Company SEC Reports was prepared in
accordance with United States generally  accepted  accounting  principles ("U.S.
GAAP") applied on a consistent basis throughout the periods indicated (except as
may be indicated in the notes  thereto or, in the case of unaudited  statements,
as permitted  by  Regulation  S-X adopted by the SEC) and each  presented in all
material respects,  the consolidated  financial position,  results of operations
and cash flows of the Company and the  consolidated  subsidiaries of the Company
as at the  respective  dates thereof and for the  respective  periods  indicated
therein,  except as otherwise noted therein  (subject,  in the case of unaudited
statements,  to normal and recurring  year-end  adjustments which would not have
had,  individually or in the aggregate,  a Material Adverse Effect). The balance
sheet of the Company  contained in the Company SEC Reports as of  September  30,
2000 is hereinafter referred to as the "Company Balance Sheet".

          (c) The  Company has  heretofore  furnished  to Parent a complete  and
correct copy of any  amendments or  modifications  that have not been filed with
the SEC to all agreements,  documents or other  instruments  that previously had
been filed by the Company with the SEC and are currently in effect.

          SECTION 3.08.  Undisclosed  Liabilities.  Except for those liabilities
that are  disclosed  in Section 3.08 of the Company  Disclosure  Schedule or are
fully reflected or reserved  against on the Company  Balance Sheet,  neither the
Company nor any Company  Subsidiary has  outstanding any liability or obligation
of any nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether due or to become due),  except for liabilities and obligations that have
been incurred since the date of the Company Balance Sheet in the ordinary course
of business,  that would not prevent or  materially  delay  consummation  of the
Merger or otherwise  prevent or materially delay the Company from performing its
obligations  under this  Agreement  and that would not,  individually  or in the
aggregate,  have a Material  Adverse  Effect.  With  respect to  liabilities  or
obligations  concerning the matters  addressed in Sections 3.07, 3.11, 3.13, and
3.16, the provisions of such Sections and not this Section 3.08 shall apply.

          SECTION 3.09. Absence of Certain Changes or Events. From September 30,
2000 through the date hereof, except as set forth in Section 3.09 of the Company
Disclosure  Schedule,  (a) each of the Company and the Company  Subsidiaries has
conducted  its business



                                       14
<PAGE>

only in the ordinary course and (b) there has not been any circumstance,  event,
occurrence, change or effect that would reasonably be expected,  individually or
in the aggregate, to have a Material Adverse Effect.

          SECTION 3.10. Absence of Litigation.  Except as specifically disclosed
in Section  3.10 of the Company  Disclosure  Schedule,  there is no  litigation,
suit,  claim,  action,  proceeding or investigation (an "Action") pending or, to
the  knowledge  of the  Company,  threatened  against the Company or any Company
Subsidiary,  or against  any  property  or asset of the  Company or any  Company
Subsidiary,  before any court,  arbitrator or Governmental  Entity,  domestic or
foreign which the Company reasonably believes, individually or in the aggregate,
could result in liability of the Company or any Company Subsidiary in amounts in
excess of  $50,000.  Except as  specifically  disclosed  in Section  3.10 of the
Company Disclosure Schedule,  neither the Company nor any Company Subsidiary nor
any property or asset of the Company or any Company Subsidiary is subject to any
continuing  order of, consent  decree,  settlement  agreement or similar written
agreement  with, or, to the knowledge of the Company,  continuing  investigation
by, any Governmental Entity, or any order, writ, judgment,  injunction,  decree,
determination  or  award  of any  Governmental  Entity  that  would  prevent  or
materially delay  consummation of the Merger or otherwise  prevent or materially
delay the Company from performing its obligations under this Agreement or would,
individually or in the aggregate, have a Material Adverse Effect.

          SECTION  3.11.  Employee  Benefit  Matters.  (a)  Plans  and  Material
Documents.  Section 3.11 (a) of the Company  Disclosure  Schedule  lists (i) all
employee  benefit  plans (as defined in Section 3(3) of the Employee  Retirement
Income Security Act of 1974, as amended  ("ERISA")) and all bonus, stock option,
stock purchase,  restricted stock,  incentive,  deferred  compensation,  retiree
medical or life insurance,  supplemental retirement,  severance or other benefit
plans, programs or arrangements,  and all employment,  consulting,  termination,
severance or other contracts or agreements,  whether legally enforceable or not,
to which the Company or any Company Subsidiary is a party, with respect to which
the  Company  or  any  Company  Subsidiary  has  any  obligation  or  which  are
maintained, contributed to or sponsored by the Company or any Company Subsidiary
for the  benefit  of any  current  or former  employee,  consultant,  officer or
director of the Company or any Company  Subsidiary,  (ii) each employee  benefit
plan for which the Company or any Company Subsidiary could incur liability under
section 4069 of ERISA in the event such plan has been or were to be  terminated,
(iii) any plan in respect of which the Company or any Company  Subsidiary  could
incur  liability  under  section  4212(c)  of  ERISA  and  (iv)  any  contracts,
arrangements or understandings between the Company or any Company Subsidiary and
any  employee  of the  Company  or any  Company  Subsidiary  including,  without
limitation, any contracts,  arrangements or understandings relating to a sale of
the  Company or any  Company  Subsidiary  (collectively,  the  "Company  Benefit
Plans").  Except as  disclosed  in  Section  3.11(a) of the  Company  Disclosure
Schedule,  each  Company  Benefit  Plan is in writing  and the  Company has made
available to Parent a true and complete copy of each Company  Benefit Plan and a
true and complete copy of each material document, if any, prepared in connection
with each such Company Benefit Plan,  including,  without limitation,  a copy of
(i) each  trust or other  funding  arrangement  currently  in  effect,  (ii) the
current  summary  plan  description  and  any  subsequent  summary  of  material
modifications,  (iii) the most recently



                                       15
<PAGE>

filed  Internal  Revenue  Service (the "IRS") Form 5500,  (iv) the most recently
received IRS determination letter for each such Company Benefit Plan and (v) the
most recently  prepared  actuarial report and financial  statement in connection
with each such Company  Benefit Plan.  Except as disclosed in Section 3.11(a) of
the Company  Disclosure  Schedule,  there are no other  employee  benefit plans,
programs,  arrangements  or agreements,  whether formal or informal,  whether in
writing or not, to which the Company or any Company  Subsidiary is a party, with
respect to which the Company or any Company  Subsidiary  has any  obligation  or
which are maintained,  contributed to or sponsored by the Company or any Company
Subsidiary  for the  benefit  of any  current  or former  employee,  consultant,
officer or  director  of the  Company or any  Company  Subsidiary.  Neither  the
Company  nor any  Company  Subsidiary  has any  express or  implied  commitment,
whether legally enforceable or not, (i) to create,  incur liability with respect
to or cause to exist any other employee  benefit plan,  program or  arrangement,
(ii) to enter into any contract or agreement to provide compensation or benefits
to any  individual or (iii) to modify,  change or terminate any Company  Benefit
Plan, other than with respect to a modification,  change or termination required
by ERISA or the Code.

          (b) Absence of Certain Types of Plans.  Except as disclosed in Section
3.11(b) of the Company Disclosure Schedule, none of the Company Benefit Plans is
a  multiemployer  plan  (within the meaning of section  3(37) or  4001(a)(3)  of
ERISA) (a  "Multiemployer  Plan") or a single employer  pension plan (within the
meaning of Section  4001(a)(15)  of ERISA) for which the  Company or any Company
Subsidiary  could  incur  liability  under  Section  4063 or 4064  of  ERISA  (a
"Multiple Employer Plan"). Except as disclosed in Section 3.11(b) of the Company
Disclosure  Schedule,  none of the Company  Benefit  Plans (i)  provides for the
payment of separation,  severance,  termination or similar-type  benefits to any
person,  (ii) obligates the Company or any Company Subsidiary to pay separation,
severance,  termination or similar-type benefits solely or partially as a result
of any  transaction  contemplated  by this  Agreement,  or (iii)  obligates  the
Company or any Company  Subsidiary to make any payment or provide any benefit as
a result of a "change in control", within the meaning of such term under Section
280G of the Code.  None of the Company  Benefit  Plans  provides for or promises
retiree medical,  disability or life insurance benefits to any current or former
employee, officer or director of the Company or any Company Subsidiary.  Each of
the Company  Benefit Plans is subject only to the Laws of the United States or a
political subdivision thereof.

          (c) Compliance.  Except as disclosed in Section 3.11(c) of the Company
Disclosure Schedule,  to the knowledge of the Company, each Company Benefit Plan
is now and always has been operated in all respects in accordance with its terms
and  the   requirements  of  all  applicable  laws  and  regulations  and  rules
promulgated  thereunder,  including,  without  limitation,  ERISA  and the Code,
except for such  non-compliance as would not result in a Material Adverse Effect
or has not or would not be reasonably likely to result in a significant  expense
to the Company.  The Company and all Company  Subsidiaries  have  performed  all
material  obligations  required to be  performed  by them under,  are not in any
material  respect  in default  under or in  material  violation  of, and have no
knowledge  of any such  default or violation by any other party with respect to,
any Company  Benefit Plan. No action,  claim or proceeding is pending or, to the
knowledge of the Company,  threatened  with respect to any Company  Benefit Plan
(other than



                                       16
<PAGE>

claims for  benefits  in the  ordinary  course)  and,  to the  knowledge  of the
Company,  no fact or event  exists that could  reasonably  give rise to any such
action, claim or proceeding.

          (d)  Qualification of Certain Plans. Each Company Benefit Plan that is
intended to be qualified  under section  401(a) of the Code or section 401(k) of
the Code has received a favorable determination letter from the IRS covering all
of the provisions  applicable to the Company  Benefit Plan, and no fact or event
has occurred since the date of such determination letter or letters from the IRS
that is likely to  adversely  affect the  qualified  status of any such  Company
Benefit Plan or the exempt status of any such trust.

          (e) Absence of Certain  Liabilities.  To the knowledge of the Company,
there has not been any nonexempt  prohibited  transaction (within the meaning of
Section  406 and 408 of ERISA or Section  4975 of the Code) with  respect to any
Company  Benefit  Plan.  Neither  the Company  nor any  Company  Subsidiary  has
incurred any liability that has not been satisfied  under,  arising out of or by
operation of Title IV of ERISA, including,  without limitation, any liability in
connection with (i) the termination or  reorganization  of any employee  benefit
plan subject to Title IV of ERISA,  (ii) the withdrawal  from any  Multiemployer
Plan  within  the  five-year  period  immediately  preceding  the  date  of this
Agreement or (iii) the withdrawal  from any Multiple  Employer Plan, and no fact
or event exists which could give rise to any such liability.

          (f) Plan  Contributions and Funding.  All  contributions,  premiums or
payments  required to be made with respect to any Company Benefit Plan have been
made on or before  their  due  dates.  All such  contributions  have been  fully
deductible for income tax purposes and no such deduction has been  challenged or
disallowed  by any  Governmental  Entity and no fact or event exists which could
give rise to any such challenge or disallowance.

          (g) Severance Payments.  Except as disclosed in Section 3.11(g) of the
Company Disclosure Schedule,  the consummation of the transactions  contemplated
by this Agreement will not,  either alone or in combination  with another event,
(i) entitle any current or former  employee,  officer or director of the Company
or any Company  Subsidiary to severance pay,  unemployment  compensation  or any
other payment,  except as expressly provided in this Agreement,  (ii) accelerate
the time of payment or vesting,  or increase the amount, of compensation due any
such  employee,  officer or director or (iii)  constitute  a "change of control"
under any Company Benefit Plan.

          (h) There is no  Company  Benefit  Plan that is not  subject to United
States law.

          SECTION 3.12. Material Contracts.  (a) Subsections (i) through (xi) of
Section  3.12(a)  of the  Company  Disclosure  Schedule  contain  a list  of the
following  types of contracts and agreements to which the Company or any Company
Subsidiary  is a party  (such  contracts,  agreements  and  arrangements  as are
required to be set forth in Section 3.12(a) of the Company  Disclosure  Schedule
being the "Company Material Contracts"):

          (i) each contract and agreement  which (A) has or is likely to involve
     consideration of more than $100,000,  in the aggregate,  during one or more
     of the calendar years ending  December 31, 2000 or 2001 or (B) is likely to
     involve



                                       17
<PAGE>

     consideration of more than $100,000,  in the aggregate,  over the remaining
     term of such contract, and which, in either case, cannot be canceled by the
     Company or any Company  Subsidiary  without  penalty or further payment and
     without more than 90 days' notice;

          (ii) all management contracts (excluding contracts for employment) and
     contracts  with  other  consultants  which  have or are  likely to  involve
     consideration of more than $100,000,  including any contracts involving the
     payment of royalties or other amounts calculated based upon the revenues or
     income of the  Company  or any  Company  Subsidiary  or income or  revenues
     related to any product of the Company or any  Company  Subsidiary  to which
     the Company or any Company Subsidiary is a party;

          (iii)  all  contracts  and  agreements  evidencing   indebtedness  for
     borrowed money;

          (iv) all  contracts and  agreements  with any  Governmental  Entity to
     which the Company or any Company Subsidiary is a party;

          (v) all contracts and agreements that limit, or purport to limit,  the
     ability of the Company or any Company  Subsidiary to compete in any line of
     business or with any person or entity or in any  geographic  area or during
     any period of time;

          (vi) other than those entered into in the ordinary course of business,
     all material  contracts or arrangements that result in any person or entity
     holding a power of attorney from the Company or any Company Subsidiary that
     relates  to  the  Company,  any  Company  Subsidiary  or  their  respective
     businesses;

          (vii) all contracts, agreements,  commitments and instruments relating
     to  any  obligation  to  engage  in  a  merger,   consolidation,   business
     combination, share exchange or business acquisition, or for the purchase or
     sale of any assets of the Company or any of the Company  Subsidiaries other
     than in the ordinary course of business;

          (viii)  other  than  those  entered  into in the  ordinary  course  of
     business,  all contracts,  agreements,  commitments  and  instruments  that
     include any  indemnification,  contribution  or support  obligations  in an
     amount which would  reasonably  be expected to exceed  $100,000 or which in
     the aggregate would reasonably be expected to exceed $100,000;

          (ix) all  contracts,  agreements,  commitments  and  instruments  that
     obligate  capital  expenditures  involving  total  payments  of  more  than
     $100,000;

          (x)  all  contracts,  agreements,  commitments  and  instruments  that
     obligate the Company or any Company Subsidiary to issue or sell any capital
     stock; and

          (xi) all other  contracts and  agreements,  whether or not made in the
     ordinary  course of  business,  which are  material  to the  Company or any
     Company  Subsidiary or the conduct of their respective  businesses,  or the
     absence of which would prevent or



                                       18
<PAGE>

     materially  delay  consummation  of the  Merger  or  otherwise  prevent  or
     materially  delay the Company from  performing its  obligations  under this
     Agreement  or would,  individually  or in the  aggregate,  have a  Material
     Adverse Effect.

          (b) Except as would not prevent or materially  delay  consummation  of
the Merger or otherwise  prevent or materially delay the Company from performing
its  obligations  under this  Agreement  and would not,  individually  or in the
aggregate, have a Material Adverse Effect, (i) each Company Material Contract is
a legal,  valid and binding agreement in full force and effect,  and none of the
Company  Material  Contracts is in default by its terms or has been  canceled by
the other party and no event has  occurred  that with notice or lapse of time or
both would constitute a default, (ii) to the Company's knowledge, no other party
is in breach or violation of, or default (where  applicable)  under, any Company
Material  Contract;  (iii) no Company or Company Subsidiary is in receipt of any
claim of default  (where  applicable)  under any such agreement and (iv) neither
the execution of this Agreement nor the  consummation of the Merger or any other
transaction   contemplated  herein  shall  constitute  default,   give  rise  to
cancellation  rights, or otherwise  adversely affect any of the Company's rights
under any Company Material Contract. The Company has furnished or made available
to Parent true and complete copies of all Company Material Contracts,  including
any amendments thereto.

          SECTION 3.13.  Environmental  Matters . Except as described in Section
3.13 of the Company Disclosure Schedule and as would not, individually or in the
aggregate,  have a Material  Adverse  Effect,  (a) the  Company  and the Company
Subsidiaries have not violated and are not in violation of any Environmental Law
(as defined  below);  (b) none of the  properties  currently or formerly  owned,
leased or  operated by the  Company  and the  Company  Subsidiaries  (including,
without   limitation,   soils  and  surface  and  ground  waters)  are  or  were
contaminated  with any Hazardous  Substance (as defined below);  (c) neither the
Company nor the Company  Subsidiaries are liable for any off-site  contamination
by Hazardous  Substances;  (d) the Company and the Company  Subsidiaries are not
liable under any Environmental Law (including,  without  limitation,  pending or
threatened  liens);  (e) the  Company  and the  Company  Subsidiaries  have  all
permits,  licenses and other authorizations required under any Environmental Law
("Environmental  Permits");  (f) the Company and the Company Subsidiaries are in
compliance with their  Environmental  Permits;  and (g) neither the execution of
this Agreement nor the consummation of the transactions contemplated herein will
require any investigation, remediation or other action with respect to Hazardous
Substances,  or any  notice to or  consent  of  Governmental  Entities  or third
parties,  pursuant to any applicable  Environmental Law or Environmental Permit,
including, without limitation, the Connecticut Transfer Act.

          "Environmental  Law" means any  applicable  federal,  state,  local or
foreign  law  relating to (A)  releases of  Hazardous  Substances  or  materials
containing Hazardous Substances; (B) the manufacture,  handling, transport, use,
treatment,  storage or disposal of Hazardous  Substances or materials containing
Hazardous  Substances;  or (C) otherwise  relating to pollution or protection of
the environment, health, safety or natural resources.

          "Hazardous  Substances"  means  (i)  those  substances  defined  in or
regulated under the following federal statutes and their state counterparts,  as
each may be  amended  from time to time,  and all  regulations  thereunder:  the
Hazardous Materials  Transportation Act, the Resource



                                       19
<PAGE>

Conservation  and  Recovery  Act,  the  Comprehensive   Environmental  Response,
Compensation  and Liability  Act, the Clean Water Act, the Safe  Drinking  Water
Act, the Atomic Energy Act, the Federal Insecticide,  Fungicide, and Rodenticide
Act and the Clean Air Act;  (ii)  petroleum and  petroleum  products,  including
crude oil and any fractions  thereof;  (iii) natural gas, synthetic gas, and any
mixtures thereof;  (iv) polychlorinated  biphenyls,  asbestos and radon; (v) any
other  contaminant;  and (vi) any substance,  material or waste regulated by any
federal,   state,  local  or  foreign   Governmental   Entity  pursuant  to  any
Environmental Law.

          SECTION 3.14. Title to Properties;  Absence of Liens and Encumbrances.
(a)  Section  3.14(a)(i)  of the  Company  Disclosure  Schedule  lists  the real
property  interests owned by the Company and the Company  Subsidiaries.  Section
3.14(a)(ii) of the Company Disclosure Schedule lists all real property leases to
which the  Company or any  Company  Subsidiary  is a party,  and each  amendment
thereto.  Other than the owned real property identified in Section 3.14(a)(i) of
the Company  Disclosure  Schedule and leaseholds created under the real property
leases  identified in Section 3.14(a) of the Company  Disclosure  Schedule,  the
Company and the Company  Subsidiaries have no ownership or leasehold interest in
any real property.

          (b)  Except as would not,  individually  or in the  aggregate,  have a
Material  Adverse Effect,  each of the Company and the Company  Subsidiaries has
good and valid title to, or, in the case of leased properties and assets,  valid
leasehold  interests  in,  all of its  tangible  properties  and  assets,  real,
personal and mixed, used or held for use in its business,  free and clear of any
liens, pledges, charges, claims, security interests or other encumbrances of any
sort  ("Liens"),  except for Liens in respect of obligations  not yet due, which
are owed in respect of taxes or which otherwise are owed to landlords, carriers,
warehousepersons  or laborers,  except for such Liens or other  imperfections of
title and encumbrances,  if any, which are not material in character,  amount or
extent,  and which do not  materially  detract  from the  value,  or  materially
interfere with the present or contemplated  use, of the property subject thereto
or affected thereby.

          SECTION 3.15.  Intellectual  Property. (a) The Company and the Company
Subsidiaries own or possess  adequate  licenses or other valid rights to use all
material  Intellectual  Property  (as  defined  below)  used or held  for use in
connection  with the  business of the Company  and the Company  Subsidiaries  as
currently conducted.

          (b) To the  knowledge of the  Company,  no current or prior use of any
Intellectual  Property  by the  Company or any of the  Company  Subsidiaries  or
current or prior product  sold,  imported or offered for sale by the Company and
the Company  Subsidiaries  infringes on or otherwise  violates the rights of any
person  and such  use,  sale,  importation  and offer to sell is and has been in
accordance with all applicable  licenses pursuant to which the Company or any of
the Company  Subsidiaries  acquired the right to use such Intellectual  Property
other  than  as  would  not  reasonably  be  expected,  individually  or in  the
aggregate, to have a Material Adverse Effect.

          (c) To the knowledge of the Company, no Intellectual Property owned or
licensed by the Company or the Company Subsidiaries is being used or enforced in
a matter that would result in the abandonment,  cancellation or unenforceability
of such  Intellectual  Property



                                       20
<PAGE>

other  than  as  would  not  reasonably  be  expected,  individually  or in  the
aggregate, to have a Material Adverse Effect.

          (d)  To the  knowledge  of the  Company,  and  except  as  would  not,
individually or in the aggregate,  have a Material Adverse Effect, (i) there has
been no  misappropriation  of any  material  trade  secrets  or  other  material
confidential  Intellectual  Property of the Company or any Company Subsidiary by
any person, (ii) no employee,  independent contractor or agent of the Company or
any Company Subsidiary has misappropriated any trade secrets of any other person
in the course of such  performance  as an employee,  independent  contractor  or
agent and (iii) no employee,  independent  contractor or agent of Company or any
Company  Subsidiary  is in  default  or  breach  of any  term of any  employment
agreement,  non-disclosure  agreement,  assignment  of  invention  agreement  or
similar agreement or contract relating in any way to the protection,  ownership,
development,  use or transfer  of the  Company's  and the Company  Subsidiaries'
Intellectual Property.

          "Intellectual Property" means all trademarks,  trademark rights, trade
name,  trade name rights,  trade dress and other  indications  of origin,  brand
names,  certification rights, service marks, applications for trademarks and for
service  marks,   know-how  and  other   proprietary   rights  and  information;
inventions,   discoveries  and  ideas,   whether   patentable  or  not,  in  any
jurisdiction; patents, patent rights and trade secrets; proprietary writings and
other works, whether copyrightable or not, in any jurisdiction;  and any similar
intellectual property or proprietary rights.

          SECTION 3.16.  Taxes.  The Company and the Company  Subsidiaries  have
filed all United States federal,  state, local and non-United States Tax returns
and  reports due and  required to be filed by them and have paid and  discharged
all Taxes required to be paid or discharged,  other than (a) such Taxes, returns
or reports as are being  contested in good faith by appropriate  proceedings and
(b) such  Taxes,  returns  or  reports  or other  occurrences  that  would  not,
individually  or in the aggregate,  have a Material  Adverse  Effect.  No United
States (federal, state or local) or non-United States taxing authority or agency
is asserting in writing or threatening to assert in writing  against the Company
or any  Company  Subsidiary  any  deficiency  or claim for any Taxes or interest
thereon or  penalties  in  connection  therewith.  Neither  the  Company nor any
Company  Subsidiary  has granted any waiver of any statute of  limitations  with
respect to, or any  extension  of a period for the  assessment  of any Tax.  The
accruals  and  reserves for Taxes  reflected  in the Company  Balance  Sheet are
adequate to cover all Taxes accruable through such date (including  interest and
penalties,  if any,  thereon) in accordance with U.S. GAAP.  Neither the Company
nor any Company  Subsidiary  has made an election  under  Section  341(f) of the
Code.  There are no Tax liens upon any  property or assets of the Company or any
of the Company  Subsidiaries except liens for current Taxes not yet due. Neither
the Company nor any of the Company  Subsidiaries has been required to include in
income  any  adjustment  pursuant  to  Section  481 of the Code by  reason  of a
voluntary  change in  accounting  method  initiated by the Company or any of the
Company  Subsidiaries,  and the  IRS has not  initiated  or  proposed  any  such
adjustment or change in accounting  method,  in either case which  adjustment or
change would have a Material Adverse Effect.



                                       21
<PAGE>

          SECTION  3.17.  Board  Approval;  Vote  Required.  (a) The  Board,  by
resolutions duly adopted by unanimous vote at a meeting duly called and held and
not subsequently rescinded or modified in any way on or prior to the date hereof
(the "Company  Board  Approval"),  has duly (i) approved this  Agreement and the
Merger,  and  determined  that the execution,  delivery and  performance of this
Agreement is advisable and (ii) recommended that the stockholders of the Company
approve the Merger and this  Agreement and directed that this  Agreement and the
transactions contemplated hereby be submitted for consideration by the Company's
stockholders at the Company Stockholders' Meeting (as hereinafter defined).

          (b) The Company Stockholders' Approval is the only vote of the holders
of any class or series of capital stock of the Company  necessary to approve and
adopt this Agreement, the Merger and the other transactions contemplated by this
Agreement.

          SECTION 3.18. Employment Agreements and other Affiliate  Transactions.
Except as  disclosed  in Section  3.18 of the Company  Disclosure  Schedule  and
except for the ownership of shares of Company  Common Stock and Company  Options
pursuant  to  the  Company  Benefit  Plans,  there  are no  material  contracts,
commitments,  agreements, arrangements or other transactions between the Company
or any of the  Company  Subsidiaries,  on the one hand,  and any (i)  officer or
director  of the  Company  or,  (ii)  officer or  director of any of the Company
Subsidiaries  pursuant  to  which  the  Company  or any  Company  Subsidiary  is
obligated  to make  payments  totaling  more  then  $100,000,  (iii)  record  or
beneficial owner of five percent or more of the voting securities of the Company
or (iv)  person or entity  known to the  Company  that  directly  or  indirectly
controls,  is controlled  by, or is under common  control with any such officer,
director or beneficial owner, on the other hand.

          SECTION  3.19.  Insurance.  Section  3.19  of the  Company  Disclosure
Schedule contains a true, correct and complete list of all policies of insurance
to which each of the Company and the Company  Subsidiaries  are a party or are a
beneficiary  or named  insured.  The Company has  provided or made  available to
Parent true,  correct and complete  copies of all policies of insurance to which
each  of  the  Company  and  the  Company  Subsidiaries  are a  party  or  are a
beneficiary  or named insured that Parent has requested  from the Company or its
representatives.  The Company and the Company  Subsidiaries  maintain  insurance
coverage with reputable  insurers in such amounts and covering such risks as are
in accordance with normal industry  practice for companies engaged in businesses
similar to that of the Company and the Company Subsidiaries (taking into account
the cost and availability of such insurance).

          SECTION 3.20. State Takeover  Statutes.  (a) Except for Section 203 of
the DGCL, no "fair price",  "moratorium",  "control share  acquisition" or other
similar  anti-takeover  statute or  regulation is  applicable,  by reason of the
Company's  being a party to the  Merger or this  Agreement  or the  transactions
contemplated  hereby or  thereby.  Neither  the  Company  nor any of the Company
Subsidiaries  is a  party  to any  "stockholder  rights"  plan  or  any  similar
anti-takeover plan or device.

          (b) Prior to the time this Agreement was executed, the Board has taken
all action necessary, if any, to exempt under or make not subject to Section 203
of the DGCL (i) the execution of this  Agreement,  (ii) the Merger and (iii) the
other transactions contemplated hereby.



                                       22
<PAGE>

          SECTION 3.21.  Labor Matters.  (a) Except as set forth in Section 3.21
of the Company  Disclosure  Schedule,  to the  knowledge  of the Company and the
Company Subsidiaries (i) there are no controversies pending or, to the knowledge
of the Company, threatened between the Company or any Company Subsidiary and any
of their respective  employees,  which controversies would prevent or materially
delay  consummation of the Merger or otherwise  prevent or materially  delay the
Company  from  performing  its  obligations   under  this  Agreement  or  would,
individually or in the aggregate,  have a Material Adverse Effect;  (ii) neither
the Company nor any Company  Subsidiary is a party to any collective  bargaining
agreement or other labor union  contract  applicable to persons  employed by the
Company or any Company  Subsidiary,  nor, to the  knowledge of the Company,  are
there any  activities  or  proceedings  of any labor union to organize  any such
employees;  (iii) neither the Company nor any Company Subsidiary has breached or
otherwise failed to comply with any provision of any such agreement or contract,
and there are no  grievances  outstanding  against  the  Company or any  Company
Subsidiary  under any such  agreement or contract  which have  resulted,  or are
reasonably likely to result,  in,  individually or in the aggregate,  a Material
Adverse  Effect;  (iv) there are no unfair  labor  practice  complaints  pending
against  the  Company  or any  Company  Subsidiary  before  the  National  Labor
Relations  Board  or  any  current  union  representation   questions  involving
employees of the Company or any Company Subsidiary;  and (v) there is no strike,
slowdown,  work stoppage or lockout, or, to the knowledge of the Company, threat
thereof,  by or with  respect to any  employees  of the  Company or any  Company
Subsidiary.

          (b) Except as set forth in Section  3.21(b) of the Company  Disclosure
Schedule,  to the  knowledge  of the Company and the Company  Subsidiaries,  the
Company and the Company  Subsidiaries are in compliance with all applicable laws
relating to the employment of labor,  including  those related to wages,  hours,
collective bargaining and the payment and withholding of taxes and other sums as
required by the appropriate Governmental Entity and has withheld and paid to the
appropriate  Governmental  Entity or are holding for payment not yet due to such
Governmental  Entity all amounts  required to be withheld from  employees of the
Company or any Company  Subsidiary  and are not liable for any arrears of wages,
taxes,  penalties or other sums for failure to comply with any of the  foregoing
except  for any  non-compliance  that  would not  prevent  or  materially  delay
consummation of the Merger or otherwise  prevent or materially delay the Company
from performing its obligations under this Agreement and would not, individually
or in the aggregate, have a Material Adverse Effect. The Company and the Company
Subsidiaries  have paid in full to all  employees or  adequately  accrued for in
accordance with U.S. GAAP consistently applied all wages, salaries, commissions,
bonuses,  benefits and other  compensation due to or on behalf of such employees
and there is no claim against the Company or any Company Subsidiary with respect
to payment of wages,  salary or overtime  pay that has been  asserted or, to the
Company's knowledge, is now pending or threatened before any Governmental Entity
with respect to any persons currently or formerly employed by the Company or any
Company Subsidiary except for any such claims that would not, individually or in
the  aggregate,  have a Material  Adverse  Effect.  Neither  the Company nor any
Company  Subsidiary  is a party to, or  otherwise  bound by, any consent  decree
with,  or  citation  by,  any  Governmental  Entity  relating  to  employees  or
employment  practices.  There is no  charge  or  proceeding  with  respect  to a
violation of any occupational  safety or health standards that has been asserted
or, to the Company's knowledge, is now pending or threatened with



                                       23
<PAGE>

respect to the Company or any Company  Subsidiary.  To the Company's  knowledge,
there is no charge of discrimination in employment or employment practices,  for
any reason, including,  without limitation, age, gender, race, religion or other
legally  protected  category,  which  has been  asserted  or is now  pending  or
threatened before the United States Equal Employment Opportunity Commission,  or
any other  Governmental  Entity in any  jurisdiction in which the Company or any
Company Subsidiary have employed or employ any person.

          SECTION 3.22. Brokers.  No broker,  finder or investment banker (other
than ZS Fund L.P. ("ZS") and Fox-Pitt,  Kelton Inc. ("Fox-Pitt")) is entitled to
any brokerage, finder's or other fee or commission in connection with the Merger
or the other transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company.  The Company has heretofore  made available
upon request to Parent complete and correct copies of all agreements between the
Company,  ZS and Fox-Pitt  pursuant to which such firms would be entitled to any
payment relating to the Merger or any other  transactions,  which payments to ZS
and Fox-Pitt will not exceed $950,000 in the aggregate.

          SECTION  3.23.  Title to  Insurance  Business.  Except as set forth in
Section  3.23  of the  Company  Disclosure  Schedule,  to the  knowledge  of the
Company, no employee or producer of the Company or any of its subsidiaries,  nor
any other person, has any agreement by which they have a claim,  right, title or
interest in or to the book of insurance  business serviced by the Company or any
Company Subsidiary.

          SECTION 3.24.  Absence of Restrictions  on Conduct of Business.  Other
than  ordinary  course  regulatory  restrictions,  no oral or written  contract,
license or permit restricts the ability of the Company or any Company Subsidiary
to own,  possess or use its assets or conduct its business or  operations in any
geographic area or restricts in any way the full participation of any employees,
producers or agents of the Company or any Company Subsidiary in the operation of
such business.

          SECTION  3.25.  Computer  Systems.  Other than in respect of  ordinary
course  maintenance  and repairs,  the Computer  Systems of the Company and each
Company  Subsidiary are operational  except where a failure to be so operational
would not, individually or in the aggregate, have a Material Adverse Effect.

          SECTION  3.26.  Insurance  Companies.  Listed in  Section  3.26 of the
Company  Disclosure  Schedule  are the  names  and  addresses  of the  ten  most
significant  insurance companies (each a "Significant  Insurer") to the business
of the Company and the Company  Subsidiaries  as a whole,  as  determined by the
aggregate amount of premium received by the Company and the Company Subsidiaries
from such insurance company during the fiscal year ended September 1, 2000.

          SECTION 3.27. No  Downgrading  of Rating.  As of the date hereof,  and
except for any  downgrading  which may occur solely as a result of the Merger or
the Related Party Transactions,  there has not occurred any downgrading, nor has
the  Company  become  aware of any  pending or  threatened  downgrading,  of the
Company's or any of the Company Subsidiaries' rating by A.M. Best.



                                       24
<PAGE>

          SECTION  3.28.  Fairness  Opinion.  The Company has received a written
opinion  from  Fox-Pitt  stating  that the Merger  Consideration  is fair to the
stockholders  of the Company from a financial  point of view and has delivered a
copy of such written opinion to Parent.

          SECTION  3.29.   Insurance  Company  Organization  and  Qualification;
Subsidiaries.  (a) Each of Old Lyme  Insurance  Company  of Rhode  Island,  Inc.
("Rhode Island Co.") and Old Lyme  Insurance  Company Ltd.  ("Bermuda  Co.", and
together with Rhode Island Co., the "Insurance  Companies")  and each subsidiary
of the Insurance Companies (collectively,  the "Insurance Company Subsidiaries")
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its  incorporation  and has all requisite  corporate
power and authority and all necessary  governmental  approvals to own, lease and
operate  its  properties  and to  carry  on  its  business  as it is  now  being
conducted.  Each of the Insurance  Companies  and each of the Insurance  Company
Subsidiaries  is  duly  qualified  or  licensed  as  a  foreign  corporation  or
organization to do business, and is in good standing, in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature of
its business makes such  qualification or licensing  necessary,  except for such
failures to be so  qualified or licensed  and in good  standing  that would not,
individually or in the aggregate,  have a Material Adverse Effect (as defined in
Section 9.04).

          (b) Section  3.29(b) of the Company  Disclosure  Schedule sets forth a
true and complete list of all the Insurance Company Subsidiaries,  together with
the jurisdiction of incorporation of each Insurance  Company  Subsidiary and the
percentage of the outstanding capital stock of each Insurance Company Subsidiary
owned by the  Insurance  Company  and each  Insurance  Company  Subsidiary,  and
separately  identifies all subsidiaries of each of the Insurance  Companies that
are  not  Insurance  Company  Subsidiaries  (collectively,   the  "Insignificant
Insurance Subsidiaries") . Except as set forth in Section 3.29(b) of the Company
Disclosure  Schedule,  neither the Insurance  Company nor any Insurance  Company
Subsidiary   directly  or  indirectly  owns,  or  has  outstanding   contractual
obligations  to  acquire,  any equity or similar  interest  in, or any  interest
convertible  into or  exchangeable  or  exercisable  for any  equity or  similar
interest  in, any  corporation,  partnership,  joint  venture or other  business
association or entity.

          (c) Each of the Insurance  Companies and each of the Insurance Company
Subsidiaries is licensed as an authorized  insurer in each jurisdiction in which
it presently  writes  insurance for the type of insurance it presently writes in
such  jurisdictions  and  meets  in all  material  respects  all  statutory  and
regulatory  requirements of all Governmental  Entities (as hereinafter  defined)
which have jurisdiction over it to be an authorized insurer.  Section 3.29(c) of
the  Company  Disclosure  Schedule  sets  forth  each state in which each of the
Insurance  Companies  and  each  of the  Insurance  Company  Subsidiaries  is an
admitted or non-admitted insurer; and for each state in which it is nonadmitted,
whether it has been approved or not disapproved.

          (d)  None  of  the  Insignificant   Insurance  Subsidiaries  have  any
liabilities,  except for such  liabilities  as would not  prevent or  materially
delay  consummation  of  the  Merger  and  would  not,  individually  or in  the
aggregate,  have a Material  Adverse  Effect on the  Insurance  Companies or any
Insurance Company Subsidiaries.


                                       25
<PAGE>

          SECTION 3.30.  Insurance  Company  Certificate  of  Incorporation  and
By-Laws.  The Company has  heretofore  made  available  to Parent a complete and
correct  copy of the  Certificate  of  Incorporation  and the  By-Laws,  each as
amended to date, of each of the Insurance  Companies and each Insurance  Company
Subsidiary. Such Certificates of Incorporation and By-Laws are in full force and
effect.  Neither the Insurance Companies nor any Insurance Company Subsidiary is
in violation of any of the  provisions of its  Certificate of  Incorporation  or
By-Laws.  True and complete  copies of all minute books of each of the Insurance
Companies have been made available by the Company to Parent.

          SECTION 3.31.  Insurance  Company  Capitalization.  (a) The authorized
capital stock of Rhode Island Co.  consists of (a)  10,000,000  shares of common
stock,  par value $14.50 per share  ("Rhode  Island Co.  Common  Stock") and (b)
100,000 shares of preferred  stock, par value $1.00 per share ("Rhode Island Co.
Preferred  Stock").  As of the date hereof,  200,000  shares of Rhode Island Co.
Common Stock were issued and  outstanding and 100,000 shares of Rhode Island Co.
Preferred Stock were issued and  outstanding.  All of the issued and outstanding
shares of Rhode  Island Co.  Common  Stock are  validly  issued,  fully paid and
nonassessable  and are  held by the  Company,  free and  clear  of all  security
interests, liens, claims, pledges, options, rights of first refusal, agreements,
limitations on Rhode Island Co.'s voting rights,  charges and other encumbrances
of any nature whatsoever.

          (b) The  authorized  capital stock of Bermuda Co.  consists of 100,000
shares of common stock,  par value $1.20 per share ("Bermuda Co. Common Stock").
As of the date hereof,  100,000  shares of Bermuda Co.  Common Stock were issued
and outstanding.  All of the issued and outstanding shares of Bermuda Co. Common
Stock are  validly  issued,  fully  paid and  nonassessable  and are held by the
Company,  free and clear of all  security  interests,  liens,  claims,  pledges,
options,  rights of first  refusal,  agreements,  limitations  on the  Bermuda's
voting rights, charges and other encumbrances of any nature whatsoever.

          (c)  There  are no issued or  outstanding  bonds,  debentures,  notes,
convertible  notes or other  indebtedness of either Insurance Company having the
right to vote on any matters on which stockholders of such Insurance Company may
vote. There are no options, warrants or other rights,  agreements,  arrangements
or  commitments  of any  character  relating to the issued or unissued  stock of
either  of the  Insurance  Companies  or any  Insurance  Company  Subsidiary  or
conditionally or absolutely  obligating either of the Insurance Companies or any
Insurance  Company  Subsidiary to issue or sell any shares of stock of, or other
equity  interests  in,  the  Insurance   Companies  or  any  Insurance   Company
Subsidiary.  Neither  of the  Insurance  Companies  nor  any  Insurance  Company
Subsidiary have  outstanding  obligations  (whether  conditional or absolute) to
repurchase,  redeem or otherwise acquire any shares or other equity interests of
Common Stock or any shares or other equity  interests of any  Insurance  Company
Subsidiary.  Each  outstanding  share of stock or other equity  interest of each
Insurance Company Subsidiary is duly authorized,  validly issued, fully paid and
non-assessable  and  each  such  share  or other  equity  interest  owned by the
Insurance Companies or another Insurance Company Subsidiary is free and clear of
all  security  interests,  liens,  claims,  pledges,  options,  rights  of first
refusal,  agreements,  limitations  on such  Insurance  Company's  or such other
Insurance Company Subsidiary's voting rights,  charges and other encumbrances of
any nature whatsoever.



                                       26
<PAGE>

          SECTION 3.32.  Insurance  Company Permits;  Compliance.  (a) Except as
disclosed in Section  3.32(a) of the Company  Disclosure  Schedule,  each of the
Insurance  Companies and the Insurance Company  Subsidiaries is in possession of
all franchises, grants, authorizations, licenses, permits, easements, variances,
exceptions,  consents,  certificates,  approvals and orders of any  Governmental
Entity  necessary for each of the Insurance  Companies or any Insurance  Company
Subsidiary to own,  lease and operate its properties or to carry on its business
as it is now being conducted (the "Insurance  Company Permits") except where the
failure to obtain any such Insurance Company Permits, would not, individually or
in the aggregate,  have a Material  Adverse  Effect.  As of the date hereof,  no
suspension or  cancellation  of any of the Insurance  Company Permits is pending
or, to the knowledge of the Company, threatened.

          (b) Except as disclosed in Section  3.32(b) of the Company  Disclosure
Schedule,  neither the Insurance  Companies nor any Insurance Company Subsidiary
is in conflict  with, or in default or violation  of, (i) any Law  applicable to
the  Insurance  Companies or any  Insurance  Company  Subsidiary or by which any
property or asset of the Insurance Companies or any Insurance Company Subsidiary
is bound or  affected,  (ii) any  note,  bond,  mortgage,  indenture,  contract,
agreement,  lease, license,  permit, franchise or other instrument or obligation
to which the Insurance  Companies or any Insurance Company Subsidiary is a party
or by which the Insurance  Companies or any Insurance Company  Subsidiary or any
property or asset of the Insurance Companies or any Insurance Company Subsidiary
is bound or affected or (iii) any Insurance Company Permits, except in each case
for any such conflicts,  defaults or violations that would not,  individually or
in the aggregate, have a Material Adverse Effect.

          SECTION  3.33.  Insurance  Company  Financial  Statements.   True  and
complete  copies of the audited  statutory  financial  statements of each of the
Insurance  Companies as of December 31, 1999 and for the year ended December 31,
1999,  together  with all  related  notes  and  schedules  thereto  and (ii) the
unaudited  financial  statements of the Insurance  Companies as of September 30,
2000 and for the period then ended (the "Insurance  Financial  Statements")  are
attached  as Section  3.33 of the Company  Disclosure  Schedule.  The  Insurance
Financial  Statements were prepared in conformity with the statutory  accounting
practices  prescribed  or  permitted by the state or nation of domicile for each
the Insurance  Companies  applied on a consistent  basis  throughout the periods
indicated,  and each presents fairly,  in all material  respects,  the financial
position of the Insurance Company to which it relates as at the respective dates
thereof and for the respective  periods indicated  therein,  except as otherwise
noted  therein.  The balance  sheets of each of Rhode Island Co. and Bermuda Co.
contained in the  Insurance  Financial  Statements  as of September 30, 2000 are
hereinafter referred to as the "Insurance Company Balance Sheets".

          SECTION 3.34.  Undisclosed  Liabilities  of the  Insurance  Companies.
Except for those  liabilities  that are disclosed in Section 3.34 of the Company
Disclosure  Schedule or are fully reflected or reserved against on the Insurance
Company  Balance  Sheets,  neither the  Insurance  Companies  nor any  Insurance
Company  Subsidiary  has  outstanding  any liability or obligation of any nature
whatsoever (whether absolute,  accrued,  contingent or otherwise and whether due
or to  become  due),  except  for  liabilities  and  obligations  that have been
incurred



                                       27
<PAGE>

since the date of the Insurance Company Balance Sheets in the ordinary course of
business and that would not,  individually or in the aggregate,  have a Material
Adverse  Effect.  With respect to  liabilities  or  obligations  concerning  the
matters  addressed in Section 3.38,  the provisions of such Section and not this
Section 3.34 shall apply.

          SECTION 3.35. Absence of Certain Changes or Events With Respect to the
Insurance Companies.  From September 30, 2000 through the date hereof, except as
set forth in Section 3.35 of the Company  Disclosure  Schedule,  (a) each of the
Insurance Companies and each of the Insurance Company Subsidiaries has conducted
its business  only in the ordinary  course,  (b) since such date,  there has not
been any circumstance, event, occurrence, change or effect that would reasonably
be expected, individually or in the aggregate, to have a Material Adverse Effect
and (c) neither the Insurance Companies nor any Insurance Company Subsidiary has
taken or permitted  any action that if taken or permitted  after the date hereof
would constitute a breach of any of the covenants set forth in Section 5.01.

          SECTION  3.36.  Absence of  Insurance  Company  Litigation.  Except as
specifically  disclosed in Section 3.36 of the Company  Disclosure  Schedule and
except for claims  under  policies in the  ordinary  course,  there is no Action
pending against the Insurance Companies or any Insurance Company Subsidiary,  or
against  any  property  or asset of the  Insurance  Companies  or any  Insurance
Company  Subsidiary,  before  any  court,  arbitrator  or  Governmental  Entity,
domestic or foreign which the Company  reasonably  believes,  individually or in
the  aggregate,  would be  reasonably  likely  to  result  in  liability  of any
Insurance  Company or any Insurance  Company  Subsidiary in amounts in excess of
$50,000.  Except  as  specifically  disclosed  in  Section  3.36 of the  Company
Disclosure  Schedule,  neither the Insurance Companies nor any Insurance Company
Subsidiary  nor any property or asset of the Insurance  Company or any Insurance
Company  Subsidiary  is  subject to any  continuing  order of,  consent  decree,
settlement  agreement or similar written agreement with, or, to the knowledge of
the Company, continuing investigation by, any Governmental Entity, or any order,
writ, judgment,  injunction,  decree, determination or award of any Governmental
Entity that would,  individually  or in the aggregate,  have a Material  Adverse
Effect.

          SECTION 3.37.  Insurance Company Material  Contracts.  (a) Subsections
(i) through (x) of Section  3.37 of the Company  Disclosure  Schedule  contain a
list of the following  types of contracts and  agreements to which either of the
Insurance  Companies  or any  Insurance  Company  Subsidiary  is a  party  (such
contracts,  agreements  and  arrangements  as are  required  to be set  forth in
Section 3.37 of the Company  Disclosure  Schedule being the  "Insurance  Company
Material Contracts"):

          (i) each contract and agreement  which (A) has or is likely to involve
     consideration of more than $50,000, in the aggregate, during one or more of
     the  calendar  years  ending  December 31, 2000 or 2001 or (B) is likely to
     involve  consideration  of more than $50,000,  in the  aggregate,  over the
     remaining  term of such  contract,  and which,  in either  case,  cannot be
     canceled by either of the  Insurance  Companies  or any  Insurance  Company
     Subsidiary  without  penalty or further  payment and  without  more than 90
     days' notice;


                                       28
<PAGE>

          (ii) all management contracts (excluding contracts for employment) and
     contracts  with  other  consultants  which  has  or is  likely  to  involve
     consideration of more than $50,000,  including any contracts  involving the
     payment of royalties or other amounts calculated based upon the revenues or
     income  of  each  of  the  Insurance  Companies  or any  Insurance  Company
     Subsidiary  or income or  revenues  related to any product of either of the
     Insurance  Companies or any Insurance Company Subsidiary to which either of
     the Insurance Companies or any Insurance Company Subsidiary is a party;

          (iii)  all  contracts  and  agreements  evidencing   indebtedness  for
     borrowed money;

          (iv) all  contracts and  agreements  with any  Governmental  Entity to
     which either of the Insurance Companies or any Insurance Company Subsidiary
     is a party;

          (v) all contracts and agreements that limit, or purport to limit,  the
     ability  of either of the  Insurance  Companies  or any  Insurance  Company
     Subsidiary  to compete in any line of business or with any person or entity
     or in any geographic area or during any period of time;

          (vi)  other  than in those  entered  into in the  ordinary  course  of
     business,  all contracts,  agreements,  commitments  and  instruments  that
     obligate  either  of  the  Insurance  Companies  or any  Insurance  Company
     Subsidiary to make any payments or issue or pay in excess of $50,000 to any
     employee or  consultant  or make any  payments or issue or pay  anything of
     value to any affiliate, director or officer;

          (vii) all contracts,  agreements,  commitments  and  instruments  that
     include any  indemnification,  contribution  or support  obligations  in an
     amount which would reasonably be expected to exceed $50,000 or which in the
     aggregate would reasonably be expected to exceed $50,000;

          (viii)  other than in those  entered  into in the  ordinary  course of
     business,  all contracts,  agreements,  commitments  and  instruments  that
     obligate  capital  expenditures  involving  total  payments  of  more  than
     $50,000;

          (ix) all  contracts,  agreements,  commitments  and  instruments  that
     obligate  either  of  the  Insurance  Companies  or any  Insurance  Company
     Subsidiary to issue or sell any capital stock; and

          (x) all other  contracts  and  agreements,  whether or not made in the
     ordinary course of business,  which are material to either of the Insurance
     Companies  or any  Insurance  Company  Subsidiary  or the  conduct of their
     respective  businesses,  or the absence of which would,  individually or in
     the aggregate, have a Material Adverse Effect.

          (b)  Except as would not,  individually  or in the  aggregate,  have a
Material  Adverse  Effect,  (i) each Insurance  Company  Material  Contract is a
legal, valid and binding



                                       29
<PAGE>

agreement in full force and effect,  and none of the Insurance  Company Material
Contracts is in default by its terms or has been canceled by the other party and
no event has occurred that with notice or lapse of time or both would constitute
a  default,  (ii) to the  Company's  knowledge,  no other  party is in breach or
violation  of, or  default  (where  applicable)  under,  any  Insurance  Company
Material  Contract;  (iii) neither of the Insurance  Companies nor any Insurance
Company  Subsidiary  is in receipt of any claim of  default  (where  applicable)
under any such  agreement;  and (iv) neither the execution of this Agreement nor
the  consummation  of the Merger or any other  transaction  contemplated  herein
shall  constitute  default,  give  rise to  cancellation  rights,  or  otherwise
adversely  affect  any of either of the  Insurance  Company's  rights  under any
Insurance Company Material Contract. The Company has furnished or made available
to Parent true and complete copies of all Insurance Company Material  Contracts,
including any amendments thereto.

          SECTION 3.38. Insurance Company Taxes. The Insurance Companies and the
Insurance  Company  Subsidiaries  have filed all United States  federal,  state,
local and non-United States Tax returns and reports due and required to be filed
by them and have paid and  discharged  all Taxes due and  required to be paid or
discharged, other than (a) such Taxes, returns or reports as are being contested
in good faith by appropriate  proceedings and (b) such Taxes, returns or reports
or other  occurrences that would not,  individually or in the aggregate,  have a
Material  Adverse  Effect.  No  United  States  (federal,  state  or  local)  or
non-United  States  taxing  authority  or  agency is  asserting  in  writing  or
threatening  to  assert  in  writing  against  the  Insurance  Companies  or any
Insurance  Company  Subsidiary any deficiency or claim for any Taxes or interest
thereon or penalties in connection  therewith.  Neither the Insurance  Companies
nor any Insurance  Company  Subsidiary  has granted any waiver of any statute of
limitations  with respect to, or any extension of a period for the assessment of
any Tax. The accruals  and reserves for Taxes  reflected in the Company  Balance
Sheet are adequate to cover all Taxes  accruable  through  such date  (including
interest and penalties,  if any, thereon) in accordance with U.S. GAAP.  Neither
the Insurance Company nor any Insurance Company  Subsidiary has made an election
under  Section  341(f) of the Code.  There are no Tax liens upon any property or
assets of the Insurance  Companies or any of the Insurance Company  Subsidiaries
except liens for current Taxes not yet due. Neither the Insurance  Companies nor
any of the Insurance Company Subsidiaries has been required to include in income
any  adjustment  pursuant  to Section  481 of the Code by reason of a  voluntary
change in accounting  method initiated by the Insurance  Companies or any of the
Insurance  Company  Subsidiaries,  and the IRS has not initiated or proposed any
such adjustment or change in accounting  method, in either case which adjustment
or change would have a Material Adverse Effect.

          SECTION 3.39.  Absence of Restrictions on Conduct of Insurance Company
Business. Other than ordinary course regulatory restrictions, no oral or written
contract,  license or permit restricts the ability of the Insurance Companies or
any Insurance  Company  Subsidiary to own,  possess or use its assets or conduct
its business or  operations in any  geographic  area or restricts in any way the
full  participation  of any  employees,  producers  or agents  of the  Insurance
Companies or any Insurance Company Subsidiary in the operation of such business.



                                       30
<PAGE>

          SECTION  3.40.  Insurance  Company  Computer  Systems.  Other  than in
respect of ordinary course maintenance and repairs, the Computer Systems of each
of  the  Insurance   Companies  and  each  Insurance   Company   Subsidiary  are
operational, except where a failure to be so operational would not, individually
or in the aggregate, have a Material Adverse Effect.

          SECTION 3.41. No Downgrading of Rating of Insurance  Companies.  As of
the date  hereof,  and except for any  downgrading  which may occur  solely as a
result of the Merger or the Related Party  Transactions,  there has not occurred
any  downgrading,  nor has the  Company  become  aware of any pending or overtly
threatened  downgrading,  of either  of the  Insurance  Company's  or any of the
Insurance Company Subsidiaries' rating by A.M. Best.

                                   ARTICLE IV

             REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

          As an inducement to the Company to enter into this  Agreement,  Parent
and Merger Sub  hereby,  jointly  and  severally,  represent  and warrant to the
Company that:

          SECTION 4.01. Organization and Qualification;  Subsidiaries. Parent is
a corporation  duly  organized and validly  existing  under the laws of Ontario.
Merger  Sub is a  corporation  duly  organized  under  the laws of the  State of
Delaware,  and  each of  Parent  and  Merger  Sub has all  requisite  power  and
authority and all necessary governmental approvals to own, lease and operate its
properties  and to carry on its  business as it is now being  conducted,  except
where the failure to be so  organized,  existing or in good  standing or to have
such power, authority and governmental approvals would not prevent or materially
delay the consummation of the transactions contemplated by this Agreement.

          SECTION  4.02.  Articles  of  Incorporation  and  By-Laws.  Parent has
heretofore  made  available  to the Company a complete  and correct  copy of the
Articles of  Incorporation  and By-Laws,  each as amended to date, of Parent and
the  Certificate  of  Incorporation  and By-Laws of Merger Sub. Such  respective
organizational  documents  are in full force and effect and  neither  Parent nor
Merger  Sub  is in  violation  of  any  of  the  provisions  of  its  respective
organizational documents.

          SECTION 4.03. Authority Relative to This Agreement. Each of Parent and
Merger Sub has all  necessary  corporate  power and  authority  to  execute  and
deliver this Agreement,  to perform its obligations  hereunder and to consummate
the  Merger  and the other  transactions  contemplated  by this  Agreement.  The
execution  and  delivery of this  Agreement by each of Parent and Merger Sub and
the  consummation  by each of Parent  and Merger Sub of the Merger and the other
transactions   contemplated  by  this  Agreement  have  been  duly  and  validly
authorized by all necessary corporate action, and no other corporate proceedings
on the part of Parent or Merger Sub are necessary to authorize this Agreement or
to  consummate  the  Merger  and the  other  transactions  contemplated  by this
Agreement  (other than,  if  required,  the approval and adoption of the Related
Party  Transactions (as defined herein) by the requisite vote of approval of the
shareholders of Parent (the "Parent Shareholders' Approval") entitled to vote on
the matter and the filing of the  Certificate  of Merger with the  Secretary  of
State of the State of


                                       31
<PAGE>
Delaware  as  required  by the  DGCL).  The board of  directors  of  Parent,  by
resolutions  duly  adopted  by vote at a meeting  duly  called  and held and not
subsequently  rescinded  or modified in any way on or prior to the date  hereof,
has duly  approved  this  Agreement  and the  Merger,  and  determined  that the
execution,  delivery  and  performance  of this  Agreement  is  advisable.  This
Agreement has been duly and validly executed and delivered by each of Parent and
Merger Sub and,  assuming the due  authorization,  execution and delivery by the
Company,  constitutes the legal,  valid and binding obligation of each of Parent
and Merger Sub,  enforceable against each of Parent and Merger Sub in accordance
with its terms.

          SECTION  4.04.  Capitalization.  (a) The  authorized  capital stock of
Parent  consists  of (a) an  unlimited  number of common  shares of Parent  (the
"Parent  Common  Shares") and (b) an unlimited  number of  preference  shares of
Parent (the "Parent Preferred  Shares").  As of the date hereof,  (a) 18,585,654
Parent  Common  Shares  and (b) no  Parent  Preferred  Shares  were  issued  and
outstanding.  All of the issued and outstanding Parent Common Shares are validly
issued,  fully  paid and  nonassessable.  No  Parent  Common  Shares  or  Parent
Preferred  Shares are held in the  treasury  of Parent or by any  subsidiary  of
Parent (the "Parent  Subsidiaries").  There are no issued or outstanding  bonds,
debentures,  notes, convertible notes or other indebtedness of Parent having the
right to vote on any matters on which  shareholders  of Parent may vote.  Except
for the  agreements  or  arrangements  described  in Section  4.04 of the Parent
Disclosure Schedule, there are no options, warrants or other rights, agreements,
arrangements or commitments of any character  relating to the issued or unissued
stock  of  Parent  or  conditionally  or  absolutely  obligating  Parent  or any
Subsidiary  to issue or sell any shares of stock of, or other  equity  interests
in,  Parent.  Section  4.04 of Parent  Disclosure  Schedule  sets forth  details
regarding  the Parent  Executive  Share  Purchase  Plan,  including the relevant
vesting times.  All Parent Common Shares subject to issuance as aforesaid,  upon
issuance on the terms and conditions  specified in the  instruments  pursuant to
which they are issuable, will be duly authorized, validly issued, fully paid and
non-assessable.  There are no outstanding  obligations  (whether  conditional or
absolute) of Parent to  repurchase,  redeem or  otherwise  acquire any shares or
other equity interests of Parent Common Shares.  Each outstanding share of stock
or other equity interest of each Parent  Subsidiary is duly authorized,  validly
issued,  fully  paid and  non-assessable  and each  such  share or other  equity
interest  owned by Parent is free and clear of all  security  interests,  liens,
claims, pledges,  options, rights of first refusal,  agreements,  limitations on
Parent's voting rights, charges and other encumbrances of any nature whatsoever.

          SECTION 4.05.  No Conflict;  Required  Filings and  Consents.  (a) The
execution  and  delivery of this  Agreement  by each of Parent and Merger Sub do
not, and the  performance  of this  Agreement  will not,  (i)  conflict  with or
violate the Articles of Incorporation or By-Laws of Parent or the Certificate of
Incorporation  or  By-Laws  of Merger  Sub,  (ii)  assuming  that all  consents,
approvals,  authorizations  and permits  described in Section  4.05(b) have been
obtained and all filings and  notifications  described  in Section  4.05(b) have
been made,  conflict with or violate any Law  applicable to Parent or Merger Sub
or by which any  property  or asset of Parent or Merger Sub is bound or affected
or (iii) result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any right of termination,  amendment, acceleration or cancellation of, or result
in the  creation  of a lien or other  encumbrance  on any  property  or asset of
Parent or Merger Sub pursuant to, any



                                       32
<PAGE>

note, bond, mortgage,  indenture,  contract,  agreement, lease, license, permit,
franchise or other  instrument or  obligation,  except,  with respect to clauses
(ii) and (iii) of this  Section  4.05(a),  for any such  conflicts,  violations,
breaches,  defaults or other  occurrences  that would not prevent or  materially
delay the consummation of the transactions contemplated by, or otherwise prevent
Parent and Merger Sub from performing  their material  obligations  under,  this
Agreement.

          (b) The execution and delivery of this Agreement by each of Parent and
Merger Sub do not, and the  performance  of this Agreement by each of Parent and
Merger Sub will not, require any consent, approval,  authorization or permit of,
or filing with or notification to, any Governmental  Entity,  except for (A) the
pre-merger  notification  requirements  of the HSR Act and the  requirements  of
other  applicable  competition  laws,  (B) the requisite  approvals of insurance
regulatory authorities (including,  without limitation, the insurance regulatory
authorities  of Rhode  Island),  (C)  applicable  requirements,  if any,  of the
Exchange Act, the  Securities  Act or Blue Sky Laws and state takeover laws, (D)
the DGCL with respect to the filing of the Delaware  Certificate of Merger,  (E)
all filings, consents,  approvals and authorizations to be made with or received
from  the  Toronto  Stock  Exchange  (the  "TSE")  and  the  Ontario  Securities
Commission  (the "OSC") in connection with the Related Party  Transactions,  (F)
the approval of the TSE in connection with the issuance of the Parent Debentures
and the underlying Parent Common Shares and (G) where the failure to obtain such
consents,  approvals,  authorizations  or  permits,  or to make such  filings or
notifications  would not prevent or  materially  delay the  consummation  of the
transactions  contemplated  by, or otherwise  prevent Parent and Merger Sub from
performing their material obligations under, this Agreement.

          (c) As used in this Agreement,  "Related Party Transactions" means the
issuance  and sale by  Parent  of  certain  convertible  debentures  to  Fairfax
Financial  Holdings  Limited and the Parent  Debentures  and the Company  Common
Stock  underlying  such  securities  and the  sale of the  capital  stock of the
Insurance  Companies by the  Surviving  Corporation  to a subsidiary  of Fairfax
Financial Holdings Limited.

          SECTION 4.06. Permits;  Compliance. (a) Except as disclosed in Section
4.06(a)  of the  Parent  Disclosure  Schedule,  each of  Parent  and the  Parent
Subsidiaries  is  in  possession  of  all  franchises,  grants,  authorizations,
licenses, permits, easements,  variances,  exceptions,  consents,  certificates,
approvals  and orders of any  Governmental  Entity  necessary  for Parent or any
Parent  Subsidiary to own,  lease and operate its  properties or to carry on its
business as it is now being  conducted (the "Parent  Permits")  except where the
failure to obtain any such Parent Permits, would not prevent or materially delay
consummation of the Merger, or otherwise prevent or materially delay Parent from
performing its obligations  under this Agreement and would not,  individually or
in the aggregate,  have a Material  Adverse  Effect.  As of the date hereof,  no
suspension or  cancellation  of any of the Parent  Permits is pending or, to the
knowledge of Parent, threatened.

          (b) Except as  disclosed in Section  4.06(b) of the Parent  Disclosure
Schedule,  neither  Parent nor any Parent  Subsidiary is in conflict with, or in
default  or  violation  of,  (i) any Law  applicable  to  Parent  or any  Parent
Subsidiary or by which any property or asset of Parent or any Parent  Subsidiary
is bound or  affected,  (ii) any  note,  bond,  mortgage,  indenture,  contract,
agreement,  lease, license,  permit, franchise or other instrument or obligation
to which  Parent or any

                                       33
<PAGE>

any Parent  Subsidiary is a party or by which Parent or Parent Subsidiary or any
property  or asset of Parent or any Parent  Subsidiary  is bound or  affected or
(iii) any Parent Permits,  except in each case for any such conflicts,  defaults
or violations  that would not prevent or materially  delay  consummation  of the
Merger or  otherwise  prevent or  materially  delay Parent from  performing  its
obligations  under  this  Agreement  and  would  not,  individually  or  in  the
aggregate, have a Material Adverse Effect.

          SECTION 4.07. Filings;  Financial Statements. (a) Parent has filed all
reports,  schedules,  forms, statements and other documents required to be filed
by it with the TSE and the OSC since December 31, 1998 (collectively,  including
all exhibits thereto and any  registration  statement filed since such date, the
"Parent  Reports").  As of the respective  dates they were filed, (i) the Parent
Reports  complied in all material  respects with the requirements of the TSE and
the OSC, as the case may be and (ii) none of the Parent  Reports  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  made therein,
in the light of the  circumstances  under which they were made, not  misleading.

          (b) Each of the consolidated financial statements (including,  in each
case,  any notes  thereto)  contained  in the Parent  Reports  was  prepared  in
accordance with Canadian generally  accepted  accounting  principles  ("Canadian
GAAP") applied on a consistent basis throughout the periods indicated (except as
may be indicated in the notes  thereto or, in the case of unaudited  statements,
as permitted by Canadian GAAP) and each presented or will present fairly, in all
material respects,  the consolidated  financial position,  results of operations
and cash flows of Parent and its consolidated  subsidiaries as at the respective
dates  thereof  and for the  respective  periods  indicated  therein,  except as
otherwise noted therein (subject, in the case of unaudited statements, to normal
and  recurring  year-end  adjustments  which are not  expected  to be  material,
individually or in the aggregate).

          (c) Parent has  heretofore  furnished  to the  Company a complete  and
correct copy of any amendments or  modifications  (which have not yet been filed
with the TSE or the OSC but which  are  required  to be  filed)  to  agreements,
documents or other  instruments  which  previously had been filed by Parent with
the TSE or the OSC.

          (d) Both  before and after  giving  effect to the direct and  indirect
liabilities and obligations of the Parent arising under this Agreement,  whether
absolute or contingent,  the Parent:  (i) is solvent  (i.e.,  the aggregate fair
value of its  assets  exceeds  the sum of its  liabilities);  (ii) has  adequate
working capital; and (iii) is able to pay its debts as they mature.

          SECTION 4.08.  Undisclosed  Liabilities.  Except for those liabilities
that are  disclosed  in Section  4.08 of the Parent  Disclosure  Schedule or are
fully reflected or reserved  against on the balance sheet of Parent contained in
the Parent  Reports as of  September  30,  2000 (the  "Parent  Balance  Sheet"),
neither  Parent nor any Parent  Subsidiary  has  outstanding  any  liability  or
obligation of any nature whatsoever  (whether absolute,  accrued,  contingent or
otherwise  and  whether  due or to  become  due),  except  for  liabilities  and
obligations  that have been incurred  since the date of the Parent Balance Sheet
in the ordinary course of business,  that would not prevent or materially  delay
consummation of the Merger or otherwise  prevent or



                                       34
<PAGE>

materially delay Parent from performing its obligations under this Agreement and
that would  not,  individually  or in the  aggregate,  have a  Material  Adverse
Effect.  With  respect to  liabilities  or  obligations  concerning  the matters
addressed in Sections  4.07 and 4.09,  the  provisions  of such Sections and not
this Section 4.08 shall apply.

          SECTION 4.09. Taxes. Parent and the Parent Subsidiaries have filed all
United  States  federal,  state,  local and  non-United  States Tax  returns and
reports due and  required to be filed by them and have paid and  discharged  all
Taxes required to be paid or discharged,  other than (a) such Taxes,  returns or
reports as are being contested in good faith by appropriate  proceedings and (b)
such Taxes, returns or reports or other occurrences that would not, individually
or in the aggregate,  have a Material Adverse Effect. No United States (federal,
state or local) or non-United  States taxing authority or agency is asserting in
writing  or  threatening  in  writing  to assert  against  Parent or any  Parent
Subsidiary  any  deficiency  or claim  for any  Taxes  or  interest  thereon  or
penalties in connection therewith.  Neither Parent nor any Parent Subsidiary has
granted  any  waiver of any  statute  of  limitations  with  respect  to, or any
extension of a period for the  assessment  of any Tax. The accruals and reserves
for Taxes  reflected in the Parent Balance Sheet are adequate to cover all Taxes
accruable through such date (including interest and penalties,  if any, thereon)
in  accordance  with  Canadian  GAAP.  Parent and the Parent  Subsidiaries  have
withheld  from all  payments  made by them,  or  otherwise  collected,  and have
remitted all amounts in respect of Taxes  required to be withheld,  collected or
remitted by them to the applicable governmental  authorities within the required
time  periods,  except  where the failure to so  withhold or remit such  amounts
would not result in a Material  Adverse Effect.  There are no Tax liens upon any
property or assets of Parent or any of the Parent  Subsidiaries except liens for
current Taxes not yet due.

          SECTION 4.10.  Operations of Merger Sub.  Merger Sub was formed solely
for the purpose of engaging in the transactions  contemplated by this Agreement,
has engaged in no other  business  activities  and has conducted its  operations
only as contemplated by this Agreement.

          SECTION 4.11. Financing.  Parent has financing  arrangements that will
provide  sufficient  funds to pay,  or cause  Merger Sub to pay,  the  aggregate
Merger Consideration in connection with the Merger and consummate the Merger.

          SECTION  4.12.  Brokers.  Except as  disclosed  in Section 4.12 of the
Parent Disclosure Schedule,  no broker,  finder or investment banker is entitled
to any  brokerage,  finder's or other fee or commission  in connection  with the
Merger or the other  transactions  contemplated  by this  Agreement  based  upon
arrangements made by or on behalf of the Parent or Merger Sub.

          SECTION 4.13. Affiliate  Transactions.  Except as disclosed in Section
4.13 of the Parent  Disclosure  Schedule and except for the  ownership of Parent
Common  Shares and Parent  Share  Options  pursuant to the Parent  Share  Option
Plans, there are no material contracts, commitments, agreements, arrangements or
other  transactions  between  Parent or any of Parent  Subsidiaries,  on the one
hand,  and any (i) officer or director of Parent or any of Parent  Subsidiaries,
(ii) record or beneficial owner of five percent or more of the voting securities
of Parent or (iii) person or entity known to Parent that  directly or indirectly
controls,  is controlled



                                       35
<PAGE>

by, or is under common  control with any such  officer,  director or  beneficial
owner, on the other hand.

          SECTION 4.14.  Authorization  of Parent  Convertible  Debentures.  The
Parent  Convertible  Debentures  have been duly  authorized  by Parent and, when
executed,  authenticated,  issued and delivered in accordance with the indenture
under which the Parent Debentures will be issued,  will constitute legal,  valid
and binding  obligations of Parent enforceable against Parent in accordance with
their terms. The Parent Convertible  Debentures will, when issued, be registered
under the Securities Act and  registered or exempt from  registration  under the
applicable Blue Sky Laws.

          SECTION  4.15.  Indebtedness  of  Parent.  Section  4.15 of the Parent
Disclosure  Schedule  contains a true,  correct and complete  list of all of the
Parent's  indebtedness  for  borrowed  money and Parent is not in default in any
material respect of any of its obligations thereunder.

          SECTION 4.16. Additional Representations and Warranties of Parent. (a)
Parent is a reporting issuer in good standing under the Securities Act (Ontario)
and has been a reporting issuer for the last twelve months.

          (b) The issued and outstanding  Parent Common Shares in the capital of
Parent  are  listed  and  posted  for  trading  on the TSE and  Parent is not in
material default of any of the policies or by-laws of the TSE.

          (c) No securities  commission,  stock  exchange or similar  regulatory
authority  has  issued  or is  threatening  to issue  any  order  preventing  or
suspending trading in any securities of Parent, nor has Parent received a notice
that any such order is pending.

          (d) The Parent  Common Shares  issuable upon  conversion of the Parent
Debentures  have been, or will be prior to the Effective Time, duly reserved and
authorized  for  issuance,  and such  Parent  Common  Shares,  when  issued  and
delivered upon due conversion of the Parent  Debentures,  will be fully paid and
non-assessable  shares in the capital of Parent listed and posted for trading on
the TSE.

          (e) The issuance and delivery of the Parent  Debentures to the holders
of Company  Common Stock and of the Parent Common Shares upon the  conversion of
the  Parent   Debentures  is  exempt  from  the  prospectus   and   registration
requirements  of the  Securities  Act  (Ontario),  and no  prospectus  or  other
document  must be filed with,  proceeding  taken  against or  approval,  permit,
consent or authorization to be obtained,  from the Ontario Securities Commission
under applicable  securities laws, rules,  regulations,  notices and policies in
Ontario.

          (f)  Neither  the  Parent  Debentures  nor the  Parent  Common  Shares
issuable upon the conversion of the Parent Debentures will be subject to a "hold
period"  under  applicable  securities  laws,  rules,  regulations,  notices and
policies in Ontario, provided that:



                                       36
<PAGE>

          (i) at the time of the first trade of such  security,  the Parent is a
     reporting  issuer in Ontario and has been a reporting issuer in Ontario for
     at least 12 months;

          (ii) in the case of a person or company in a special relationship with
     Parent,  the person or company  effecting  the first trade of such security
     has  reasonable  grounds  to  believe  Parent is not in  default  under the
     Securities Act (Ontario) and the regulations made thereunder;

          (iii)  disclosure  to the OSC has  been  made of the  issuance  of the
     Parent Debentures and the Parent Common Shares issuable upon the conversion
     of the Parent Debentures;

          (iv) no unusual  effort is made to  prepare  the market or to create a
     demand for the securities and no extraordinary  commission or consideration
     is paid for the trade; and

          (v) the trade is not a "control block distribution".

                                   ARTICLE V

                    CONDUCT OF BUSINESSES PENDING THE MERGER

          SECTION 5.01.  Conduct of Business by the Company  Pending the Merger.
Except as contemplated by this Agreement,  the Company agrees that,  between the
date of this  Agreement and the Effective  Time,  unless Parent shall  otherwise
consent  in  writing  (which  consent  shall  not be  unreasonably  withheld  or
delayed),  the businesses of the Company and the Company  Subsidiaries  shall be
conducted only in, and the Company and the Company  Subsidiaries  shall not take
any action except in, the ordinary course of business; and the Company shall use
its  reasonable  best  efforts to  preserve  substantially  intact the  business
organization of the Company and the Company Subsidiaries,  maintain their rights
and  keep  available  the  services  of  the  current  officers,  employees  and
consultants  of the  Company and the Company  Subsidiaries  and to preserve  the
current   relationships  of  the  Company  and  the  Company  Subsidiaries  with
customers,  licensors, licensees and other persons with which the Company or any
Company Subsidiary has significant  business relations and where the loss of any
such  relationship  would,  either  individually  or in  the  aggregate,  have a
Material Adverse Effect.

          By way of amplification and not limitation,  except as contemplated by
this Agreement,  neither the Company nor any of its subsidiaries shall,  between
the date of this Agreement and the Effective Time,  directly or indirectly,  do,
or propose to do, any of the  following  without  the prior  written  consent of
Parent:

          (a) amend or otherwise  change its  Certificate  of  Incorporation  or
     By-Laws or equivalent organizational documents;

          (b) transfer,  issue, sell, pledge,  lease, license,  dispose,  grant,
     encumber,  or  authorize  for  transfer,  issuance,  sale,  pledge,  lease,
     license, disposition, grant or



                                       37
<PAGE>

     encumbrance  (i) any  shares of its  stock of any  class,  or any  options,
     warrants, convertible securities or other rights of any kind to acquire any
     shares of such stock, or any other ownership interest  (including,  without
     limitation, any phantom interest), of the Company or any Company Subsidiary
     or (ii) any assets of the Company or any Company  Subsidiary  except in the
     ordinary course of business ;

          (c) authorize, declare, set aside, make or pay any dividend payment or
     other  distribution,  payable in cash, stock,  property or otherwise,  with
     respect to any of its stock,  except for  regular  quarterly  dividends  on
     Company  Common Stock  declared and paid in cash at times  consistent  with
     past  practice in an aggregate  amount not in excess of $0.025 per share of
     Company Common Stock;

          (d)  reclassify,  combine,  split,  subdivide  or redeem,  purchase or
     otherwise acquire, directly or indirectly, any of its capital stock;

          (e) acquire (including,  without limitation, by merger, consolidation,
     or acquisition of stock or assets or any other  business  combination)  any
     interest in any corporation,  partnership,  other business  organization or
     any division thereof or all or substantially  all of the assets of any such
     entity, except for ordinary course organizations affiliated to a purchasing
     group of the Company or any Company Subsidiary;

          (f) incur any material  indebtedness  for borrowed  money or issue any
     debt  securities  or assume,  guarantee or endorse the  obligations  of any
     person, or make any loans,  advances or capital contributions to any person
     or grant any security  interest in any of its assets except in the ordinary
     course of  business  if the same would not be  reasonably  likely to have a
     Material Adverse Effect;

          (g) enter into any lease for the principal  location of the Company in
     New York City;

          (h)  authorize,  or make any  commitment  with respect to, any capital
     expenditures  that are, in the  aggregate,  in excess of  $500,000  for the
     Company and its subsidiaries taken as a whole;

          (i) other than to  facilitate  the  consummation  of the  transactions
     contemplated  hereby,  waive any stock repurchase or acceleration rights in
     any  material  respect,  amend  or  change  the  terms  of any  options  or
     restricted stock in any material respect,  or reprice options granted under
     any Company  Stock Option Plan or authorize  cash  payments in exchange for
     any  options  granted  under  any  such  plans  (except  to  implement  the
     amendments  to the  Performance  Stock Plan  previously  authorized  by the
     Board);

          (j) (i) increase the compensation  payable or to become payable to its
     directors,  officers or  employees  (except for  increases  in the ordinary
     course of business and consistent and with current budgets, as disclosed in
     Section 5.01(j) of the Company Disclosure Schedule, in salaries or wages of
     employees of the Company or any Company Subsidiary or directors or officers
     of the Company or any Company Subsidiary who are



                                       38
<PAGE>

     employed at will by the Company or such Company  Subsidiaries),  (ii) grant
     any rights to severance or termination pay to, or enter into any employment
     or severance agreement with, any director, officer or other employee of the
     Company  or any  Company  Subsidiary  (except  in the  ordinary  course  of
     business to any employee of the Company or any Company  Subsidiary  who are
     not  directors  or officers of the Company or any Company  Subsidiary),  or
     establish,  adopt,  enter into or amend any collective  bargaining,  bonus,
     profit  sharing,  thrift,  compensation,  stock option,  restricted  stock,
     pension,  retirement,  deferred  compensation,   employment,   termination,
     severance or other plan,  agreement,  trust, fund or policy for the benefit
     of any director,  officer or employee, (iii) take any affirmative action to
     accelerate  the vesting of any  stock-based  compensation,  or (iv) hire or
     retain  any  person  other  than as an  employee  at will if such  person's
     aggregate annual or annualized  compensation is expected to be in excess of
     $100,000;

          (k)  take  any  action  with  respect  to  accounting   principles  or
     procedures,  other than reasonable and usual actions in the ordinary course
     of  business  or  required  actions  pursuant  to a  change  in  applicable
     statutory or generally accepted accounting principles;

          (l) pay,  discharge  or satisfy  any claim,  liability  or  obligation
     (absolute,  accrued,  asserted or  unasserted,  contingent or otherwise) of
     more  than  $500,000  individually  or in the  aggregate,  other  than  the
     payment, discharge or satisfaction,  in the ordinary course of business, of
     liabilities  reflected or reserved  against in the Company Balance Sheet or
     subsequently incurred in the ordinary course of business;

          (m) take any  action  that  results  in any of the  conditions  to the
     Merger set forth in Article VII not being  satisfied,  except any action as
     may be required by applicable Law; or

          (n) announce an intention to authorize or enter into any  agreement or
     otherwise make any commitment to do any of the foregoing.

          SECTION  5.02.  Notification  of Certain  Matters.  Parent  shall give
prompt  notice to the  Company,  and the  Company  shall give  prompt  notice to
Parent,  of (i) the occurrence or  nonoccurrence  of any event the occurrence or
nonoccurrence  of which  would be  likely  to cause  (A) any  representation  or
warranty  contained in this Agreement to be untrue or inaccurate in any material
respect or (B) any covenant,  condition or agreement contained in this Agreement
not to be  complied  with or  satisfied  in any  material  respect  and (ii) any
failure of Parent or the Company,  as the case may be, to comply with or satisfy
any  covenant,  condition or  agreement  to be complied  with or satisfied by it
hereunder;  provided,  however, that the delivery of any notice pursuant to this
Section  5.02  shall  not  limit or  otherwise  affect  the  remedies  available
hereunder to the party receiving such notice.



                                       39
<PAGE>

                                   ARTICLE VI

                              ADDITIONAL AGREEMENTS

          SECTION 6.01. Registration Statement;  Company Proxy Statement. (a) As
promptly as practicable  after the execution of this  Agreement,  (i) Parent and
the Company shall  prepare the Company  Proxy  Statement and (ii) Parent and the
Company shall prepare and file with the SEC a registration statement on Form F-4
(together with all amendments  thereto,  the "Registration  Statement") in which
the Company Proxy  Statement  shall be included as a  prospectus,  in connection
with the  registration  under the Securities Act of the Parent  Debentures to be
issued to the stockholders of the Company pursuant to the Merger. Parent and the
Company each shall use their  reasonable best efforts to cause the  Registration
Statement to become  effective  as promptly as  practicable,  and,  prior to the
effective  date of the  Registration  Statement,  Parent  shall  take all or any
action  required  under  any  applicable  federal  or state  securities  Laws in
connection with the issuance of the Parent Debentures.  Each party shall furnish
all  information  concerning  such party and its affiliates that the other party
may reasonably  request in connection  with such actions and the  preparation of
the  Registration  Statement  and the Company  Proxy  Statement.  As promptly as
practicable after the Registration  Statement shall have become  effective,  the
Company shall mail the Company Proxy Statement to its  stockholders.  Subject to
Section  6.04(b),  the Company Proxy  Statement  shall include the Company Board
Approval.

          (b)  Parent and Merger  Sub shall  cooperate  with the  Company in the
preparation  of the Company  Proxy  Statement.  Parent and the Company each will
advise the other,  promptly after they receive notice thereof,  of the time when
the  Registration  Statement has become effective or any supplement or amendment
has been filed,  of the issuance of any stop order, or of any request by the SEC
for amendment of the Company Proxy  Statement or the  Registration  Statement or
comments  thereon and  responses  thereto or requests by the SEC for  additional
information.  Each  party  shall  give  the  other  party  and its  counsel  the
opportunity to review the Company Proxy Statement or Registration  Statement, as
applicable,  including all amendments and  supplements  thereto,  prior to their
being  filed with the SEC and shall  give the other  party and its  counsel  the
opportunity to review all responses to requests for additional  information  and
replies to comments  prior to their being filed with,  or sent to, the SEC. Each
of the Company, Parent and Merger Sub agrees to use its reasonable best efforts,
after  consultation  with the other parties hereto,  to respond  promptly to all
such  comments  of and  requests  by the  SEC and to  cause  the  Company  Proxy
Statement and all required  amendments and  supplements  thereto to be mailed to
the holders of shares of Company  Common  Stock  entitled to vote at the Company
Stockholders' Meeting at the earliest practicable time.

          (c) The  information  supplied  by the Company  for  inclusion  in the
Registration  Statement  and the Company Proxy  Statement  shall not, at (i) the
time the  Company  Proxy  Statement  is  cleared  by the SEC,  (ii) the time the
Company  Proxy  Statement (or any  amendment  thereof or supplement  thereto) is
first mailed to the  stockholders of the Company,  (iii) the time of the Company
Stockholders' Meeting, and (iv) the Effective Time, contain any untrue statement
of a material  fact or fail to state any  material  fact  required  to be stated
therein or necessary in



                                       40
<PAGE>

order to make the statements  therein, in light of the circumstances under which
they were made,  not  misleading  or necessary  to correct any  statement in any
earlier  communication  with  respect to the  solicitation  of  proxies  for the
Company  Stockholders'  Meeting that has become false or misleading.  If, at any
time prior to the  Effective  Time,  any event or  circumstance  relating to the
Company  or any  Company  Subsidiary,  or any of their  respective  officers  or
directors,  that  should be set forth in an  amendment  or a  supplement  to the
Registration  Statement or the Company Proxy  Statement  should be discovered by
the  Company,  the Company  shall  promptly  inform  Parent.  The Company  Proxy
Statement  and all other  documents  for which the  Company  is  responsible  in
connection  with the  Merger  or the  other  transactions  contemplated  by this
Agreement will comply as to form and substance in all material respects with the
applicable requirements of the Securities Act and the Exchange Act.

          (d)  The   information   supplied  by  Parent  for  inclusion  in  the
Registration  Statement  and the Company Proxy  Statement  shall not, at (i) the
time the Registration Statement is declared effective, (ii) the time the Company
Proxy Statement (or any amendment thereof or supplement thereto) is first mailed
to the  stockholders  of Parent and the  Company,  (iii) the time of the Company
Stockholders'  Meeting and (iv) the Effective Time, contain any untrue statement
of a material  fact or fail to state any  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 or necessary to correct
any statement in any earlier  communication  with respect to the solicitation of
proxies  for  the  Company  Stockholders'  Meeting  that  has  become  false  or
misleading.  If,  at any  time  prior  to  the  Effective  Time,  any  event  or
circumstance  relating to Parent or Merger Sub, or their respective  officers or
directors,  should  be  discovered  by  Parent  which  should be set forth in an
amendment or a supplement  to the  Registration  Statement and the Company Proxy
Statement, Parent shall promptly inform the Company.

          SECTION  6.02.  Company  Stockholders'  Meeting.  The Company,  acting
through the Board,  shall,  in accordance  with applicable law and the Company's
Certificate of Incorporation and By-Laws, (i) duly call, give notice of, convene
and hold a meeting  of the  holders  of  Company  Common  Stock as  promptly  as
practicable  after the date on which the Company  Proxy  Statement is cleared by
the SEC for the  purpose  of  voting  upon  the  approval  of the  Merger,  this
Agreement and other transactions contemplated herein (the "Company Stockholders'
Meeting")  and (ii) subject to Section  6.04 hereof,  (A) include in the Company
Proxy Statement the unanimous  recommendation of the Board that the stockholders
of the  Company  approve  and adopt  this  Agreement,  the  Merger and the other
transactions  contemplated  by this  Agreement  and (B) use its best  efforts to
obtain such approval and adoption.

          SECTION 6.03.  Access to  Information;  Confidentiality.  (a) From the
date hereof until the Effective  Time,  the Company  shall,  and shall cause the
Company Subsidiaries and the officers, directors, employees, auditors and agents
of the Company and the Company  Subsidiaries to, afford the officers,  employees
and agents of Parent  and  Merger Sub and  persons  providing  or  proposing  to
provide   Parent  or  Merger  Sub  with  financing  for  the  Merger  and  other
transactions   contemplated   by  this   Agreement  and  other   representatives
(collectively,  the "Parent  Representatives")  of Parent complete access at all
reasonable times to the officers, employees, agents, properties, offices, plants
and  other  facilities,  books  and  records  of the  Company  and


                                       41
<PAGE>

each Company  Subsidiary,  and shall  furnish  Parent and Merger Sub and persons
providing or proposing to provide  Parent or Merger Sub with  financing  for the
Merger  and  other  transactions   contemplated  by  this  Agreement  with  such
financial,  operating  and other data and  information  as Parent or Merger Sub,
through its officers, employees or agents, may reasonably request.

          (b) From the date hereof until the Effective Time,  Parent shall,  and
shall cause the Parent  Subsidiaries  and the  officers,  directors,  employees,
auditors  and  agents of Parent  and the  Parent  Subsidiaries  to,  afford  the
officers,  employees  and  agents  of  the  Company  and  other  representatives
(collectively,  the "Company  Representatives",  and,  together  with the Parent
Representatives,  the  "Representatives")  of the Company complete access at all
reasonable times to the officers, employees, agents, properties, offices, plants
and other  facilities,  books and records of Parent and each Parent  Subsidiary,
and shall furnish the Company with such financial,  operating and other data and
information  as the Company,  through its  officers,  employees  or agents,  may
reasonably request.

          (c) Each party to this  Agreement  shall comply with,  and shall cause
its  Representatives  to  comply  with,  all  of  their  obligations  under  the
Confidentiality  Agreements  listed in Section  6.03(c)  of each of the  Company
Disclosure  Schedule and the Parent  Disclosure  Schedule (the  "Confidentiality
Agreements").  All information obtained by a party or any of its Representatives
pursuant to (a) or (b) above shall be subject to the Confidentiality Agreements.

          SECTION 6.04. No Solicitation or Negotiation.  (a) Neither the Company
nor any Company Subsidiary shall,  directly or indirectly,  through any officer,
director, agent or otherwise, (i) solicit,  initiate or encourage the submission
of, any  Acquisition  Proposal  (as  defined in Section  9.04) or (ii) except as
required by the fiduciary  duties of the Board under applicable law after having
received advice from outside legal counsel and after giving prior written notice
to Parent and Merger Sub and entering into a customary confidentiality agreement
on  terms  no  less  favorable  to  the  Company  than  those  contained  in the
Confidentiality  Agreement,  participate  in  any  discussions  or  negotiations
regarding,  or  furnish to any  person,  any  information  with  respect  to, or
otherwise  cooperate  in any way with respect to, or assist or  participate  in,
facilitate or encourage,  any  unsolicited  proposal  that  constitutes,  or may
reasonably be expected to lead to, an Acquisition Proposal.

          (b) Except as set forth in this Section 6.04(b), neither the Board nor
any  committee  thereof  shall (i)  withdraw,  modify or  change,  or propose to
withdraw,  modify or change,  in a manner  adverse to Parent or Merger Sub,  the
approval or recommendation by the Board or any such committee of this Agreement,
the  Merger  or any other  transaction  contemplated  hereby,  (ii)  approve  or
recommend, or propose to approve or recommend, any Acquisition Proposal or (iii)
enter  into  any   agreement   with   respect  to  any   Acquisition   Proposal.
Notwithstanding the foregoing, in the event that, prior to obtaining the Company
Stockholders'  Approval,  the Board determines in good faith that it is required
to do so by its  fiduciary  duties under  applicable  law after having  received
advice from outside legal counsel, the Board may withdraw or modify its approval
or  recommendation  of the  Merger,  but only to  terminate  this  Agreement  in
accordance with Section 8.01(j) (and, concurrently with such termination,  cause
the Company to enter into an agreement with respect to a Superior Proposal).



                                       42
<PAGE>

          (c) The  Company  shall,  and shall  direct  or cause  its  directors,
officers, employees,  representatives and agents to, immediately cease and cause
to be terminated any  discussions or  negotiations  with any parties that may be
ongoing with respect to any Acquisition Proposal.

          (d) The Company shall promptly  advise Parent orally and in writing of
(i) any Acquisition  Proposal or any request for information with respect to any
Acquisition  Proposal,  the material  terms and  conditions of such  Acquisition
Proposal or request  and the  identity  of the person  making  such  Acquisition
Proposal  or request and (ii) any  changes in any such  Acquisition  Proposal or
request.

          (e) The Company  agrees,  except as required by the Board's  fiduciary
duties under  applicable  law after having  received  advice from outside  legal
counsel,  not to release any third party from,  or waive any  provision  of, any
confidentiality or standstill agreement to which the Company is a party.

          SECTION 6.05. Directors' and Officers'  Indemnification and Insurance.
(a) The  Bylaws  of the  Surviving  Corporation  shall  contain  the  respective
provisions that are set forth, as of the date of this Agreement, in Article Nine
of the Certificate of Incorporation  of the Company,  which provisions shall not
be amended,  repealed or  otherwise  modified for a period of six years from the
Effective Time in any manner that would affect  adversely the rights  thereunder
of individuals who at or at any time prior to the Effective Time were directors,
officers,  employees,  fiduciaries or agents of the Company (or their estates or
personal representatives), unless such modifications shall be required by law.

          (b) For a period of six years after the Effective  Time, the Surviving
Corporation  shall  maintain  in effect the  current  directors'  and  officers'
liability  insurance  policies  maintained  by the  Company  (provided  that the
Surviving  Corporation may substitute therefor policies of substantially similar
coverage  containing  terms and conditions that are not on the whole  materially
less  favorable)  with  respect  to claims  arising  from  facts or events  that
occurred prior to the Effective Time; provided,  however, that in no event shall
the Surviving Corporation be required to expend pursuant to this Section 6.05(b)
more than an amount per year equal to 125% of current  annual  premiums  paid by
the Company for such  insurance  (which  premiums  the  Company  represents  and
warrants to be  approximately  $278,000 per year in the aggregate) (the "Maximum
Premium")  unless the directors agree to reimburse the Surviving  Corporation in
full for the amount by which the annual premium exceeds the Maximum Premium.

          (c) In the event the Surviving Corporation or any of its successors or
assigns (i)  consolidates  with or merges into any other person and shall not be
the  continuing  or surviving  corporation  or entity in such  consolidation  or
merger or (ii) transfers all or  substantially  all of its properties and assets
to any person,  then, and in each case,  proper  provision shall be made so that
the successors and assigns of the Surviving  Corporation or, at Parent's option,
Parent, shall assume the obligations set forth in this Section 6.05.



                                       43
<PAGE>

          SECTION 6.06. Further Action;  Consents;  Filings.  (a) Upon the terms
and subject to the conditions  hereof,  each of the parties hereto shall use its
reasonable  best efforts  expeditiously  to (i) take, or cause to be taken,  all
appropriate action and do, or cause to be done, all things necessary,  proper or
advisable under applicable Law or otherwise to consummate and make effective the
Merger and the other  transactions  contemplated by this Agreement,  (ii) obtain
from Governmental Entities any consents,  licenses, permits, waivers, approvals,
authorizations  or  orders  required  to be  obtained  or made by  Parent or the
Company  or  any  of  their  respective  subsidiaries  in  connection  with  the
authorization,  execution and delivery of this Agreement and the consummation of
the Merger and the other  transactions  contemplated by this Agreement and (iii)
make all necessary filings, and thereafter make any other required  submissions,
with  respect  to  this  Agreement,   the  Merger  and  the  other  transactions
contemplated  by this Agreement that are required under (A) the Exchange Act and
the  Securities  Act and the  rules  and  regulations  thereunder  and any other
applicable  federal  or state  securities  laws,  (B) the HSR Act and any  other
antitrust  regulations,  (C) the rules and regulations of all relevant insurance
regulatory  authorities  and (D) any other  applicable  Law. The parties  hereto
shall  cooperate  with  each  other in  connection  with the  making of all such
filings,  including by providing  copies of all such  documents to the nonfiling
party and its  advisors  prior to filing and, if  requested,  by  accepting  all
reasonable additions, deletions or changes suggested in connection therewith.

          (b) (i) Each party to this  Agreement  shall give any notices to third
parties,  and use its reasonable best efforts to obtain any third party consents
(without making any payments  therefor),  (A) necessary,  proper or advisable to
consummate the transactions  contemplated by this Agreement,  (B) required to be
disclosed in the Company Disclosure  Schedule or the Parent Disclosure  Schedule
(as  applicable)  or (C)  required  to prevent a Material  Adverse  Effect  from
occurring prior to or after the Effective Time.

          (ii) From the date of this Agreement  until the Effective  Time,  each
party to this Agreement  shall promptly notify the other party in writing of any
pending or, to the knowledge of such party, threatened action, suit, arbitration
or other proceeding or  investigation  by any  Governmental  Entity or any other
person (i)  challenging or seeking  damages in connection with the Merger or the
conversion of Company Common Stock into the Merger Consideration pursuant to the
Merger,  (ii) seeking to restrain or prohibit the  consummation of the Merger or
otherwise limiting the right of Parent or its subsidiaries to own or operate all
or any portion of the  businesses or assets of the Company or its  subsidiaries,
or (iii) which could  reasonably be expected to have a Material  Adverse Effect.
Each of the parties  hereto  agrees to  cooperate  and use its  reasonable  best
efforts  to   vigorously   contest  and  resist  any  such   action,   including
administrative or judicial  actions,  and to have vacated,  lifted,  reversed or
overturned any decree,  judgment,  injunction or other order (whether temporary,
preliminary  or  permanent)  that is in effect and that  restricts,  prevents or
prohibits  consummation  of  the  Merger,  including,   without  limitation,  by
vigorously pursuing all available avenues of administrative and judicial appeal.

          SECTION  6.07.  Consent of Holders of Restricted  Stock.  Prior to the
Effective  Time,  and  in  accordance  with  the  terms  and  conditions  of the
Performance  Stock Plan, the Company shall obtain from each holder of Restricted
Shares  written  consent  to the  cancellation


                                       44
<PAGE>

of such Restricted Shares in consideration for the payment provided herein,  and
shall  take all such  other  actions  as may be  necessary  so that the terms of
Section 2.07 may be carried out and so that,  except for the Vested Share Rights
(as described in Section 2.07),  no person will continue to have any rights with
respect to the Restricted  Shares or pursuant to the  Performance  Stock Plan at
any time after the Effective Time.

          SECTION 6.08. Public Announcements.  Parent and the Company agree that
no public release or announcement  concerning the Merger and other  transactions
contemplated in this Agreement shall be issued by either party without the prior
consent of the other party (which consent shall not be  unreasonably  withheld),
except as such  release or  announcement  may be required by Law or the rules or
regulations  of the Nasdaq or the TSE, in which case the party  required to make
the release or announcement  shall use its best efforts to allow the other party
reasonable  time to comment on such release or  announcement  in advance of such
issuance.

          SECTION  6.09.  Parent  Shareholders'  Meeting.  If required,  Parent,
acting through its Board of Directors,  shall, in accordance with applicable law
and the Parent's Certificate of Incorporation and By-Laws, and no later than May
10,  2001,  duly call,  give notice of,  convene and hold a meeting (the "Parent
Shareholders'  Meeting") of holders of the Parent  Common Shares for the purpose
of obtaining the Parent Shareholders' Approval.

          SECTION 6.10.  Affiliates.  Prior to the Effective  Time,  the Company
shall  deliver to Parent a list of names and addresses of those Persons who are,
in the  Company's  reasonable  judgment,  on such date,  affiliates  (within the
meaning  of  Rule  145  of the  rules  and  regulations  promulgated  under  the
Securities  Act (each such Person being an  "Affiliate"))  of the  Company.  The
Company shall provide Parent with such information and documents as Parent shall
reasonably  request for purposes of reviewing  such list.  The Company shall use
its reasonable best efforts to deliver or cause to be delivered to Parent, prior
to the Effective Time, an affiliate  letter  substantially  in the form attached
hereto as  Exhibit  6.10,  executed  by each of the  Affiliates  of the  Company
identified in the foregoing  list and any Person who shall,  to the knowledge of
the Company,  have become an Affiliate of the Company subsequent to the delivery
of such list.

          SECTION  6.11.  Board  Nomination.  As soon as  practicable  after the
Effective Time, Parent shall cause Bruce Guthart to become a member of the Board
of Directors of Parent.  Prior to the Effective  Time,  Parent shall cause Bruce
Guthart to become a member of the board of directors of Merger Sub.

          SECTION 6.12. Certain Funding of the Company. In the event the Company
is  required  to repay its  indebtedness  to  Summit  Bank  and/or  has its loan
availability  reduced or terminated  in order to  consummate  the Merger or as a
result of signing this Agreement,  Parent will provide or cause to be provided a
substantially  equivalent  loan  facility  to the  Company  or  assist  in  such
repayment.

          SECTION 6.13. Parent Debentures. Parent shall make or cause to be made
all required  filings under the  Securities  Act and the Trust  Indenture Act of
1939, as amended, to register the offer and sale of the Parent Debentures.



                                       45
<PAGE>

          SECTION 6.14.  Filing With Insurance  Regulatory  Authorities.  Parent
shall  cause a Form A to be filed  with  the  appropriate  insurance  regulatory
authority with respect to the Merger within 30 business days of the date of this
Agreement.

                                  ARTICLE VII

                            CONDITIONS TO THE MERGER

          SECTION 7.01. Conditions to the Merger. The respective  obligations of
the Company,  Parent and Merger Sub to consummate  the Merger are subject to the
satisfaction at or prior to the Effective Time of the following conditions,  any
or all of which may be waived,  in whole or in part, to the extent  permitted by
applicable Law:

          (a) Approval.  Each of the Company  Stockholders'  Approval and Parent
     Shareholders' Approval shall have been obtained.

          (b) No Order.  No  Governmental  Entity,  nor any  court of  competent
     jurisdiction  or  arbitrator,  shall  have  enacted,  issued,  promulgated,
     enforced  or  entered  any  law,  rule,   regulation,   judgment,   decree,
     injunction,  executive  order or award (whether  temporary,  preliminary or
     permanent)  (collectively,  "Order")  that is then in  effect,  and has the
     effect of making the Merger illegal or otherwise restricting, preventing or
     prohibiting   consummation   of  the  Merger  or  any  other   transactions
     contemplated by this Agreement.

          (c) Consents. All consents,  approvals and authorizations  (including,
     without  limitation,  the Required  Consents  which,  for greater  clarity,
     include the consents and approvals of the Rhode Island insurance regulatory
     authorities)  legally  required to be obtained to consummate the Merger and
     the other  transactions  contemplated  in and by this Agreement  shall have
     been obtained from and made with all Governmental Entities.

          (d) Antitrust Waiting Periods.  Any waiting period (and any extensions
     thereof)  applicable  to the  consummation  of the Merger under the HSR Act
     shall have expired or been terminated.

          (e) Actions.  No Action shall have been brought and remain  pending by
     any  Governmental  Entity or other  person,  entity or group  that seeks to
     prevent or delay the consummation of the transactions  contemplated by this
     Agreement.

          (f) Effective Registration  Statement. If any Parent Debentures are to
     be issued, the Registration Statement shall have been declared effective by
     the  SEC  under  the  Securities  Act  and no  stop  order  suspending  the
     effectiveness of the  Registration  Statement shall have been issued by the
     SEC and no  proceeding  for that purpose  shall have been  initiated by the
     SEC.



                                       46
<PAGE>

          SECTION 7.02.  Conditions to the Obligations of Parent and Merger Sub.
The obligations of Parent and Merger Sub to consummate the Merger are subject to
the  satisfaction  or waiver (where  permissible)  of the  following  additional
conditions:

          (a)  Representations  and Warranties.  Each of the representations and
     warranties  of the Company  contained in this  Agreement  shall be true and
     correct  in all  material  respects  as of the  date  hereof  and as of the
     Effective Time, as though made at and as of the Effective Time, except that
     those  representations  and  warranties  that address  matters only as of a
     particular  date shall remain true and correct as of such date,  and Parent
     shall have received a certificate of the Chief  Executive  Officer or Chief
     Financial Officer of the Company to that effect.

          (b)  Agreements  and  Covenants.  The Company shall have  performed or
     complied  in all  material  respects  with  all  agreements  and  covenants
     required by this  Agreement to be  performed  or complied  with by it on or
     prior to the Effective  Time,  and Parent shall have received a certificate
     of the Chief Executive Officer or Chief Financial Officer of the Company to
     that effect.

          (c)  Consents.  All  consents  from third  parties  under any  Company
     Material Contract required as a result of the transactions  contemplated by
     this Agreement shall have been obtained.

          (d) Regulatory  Consents.  All consents,  approvals and authorizations
     required  to be  made  with or  received  from  the  TSE and the OSC  under
     applicable  laws,  rules  and  regulations   regarding  the  Related  Party
     Transactions have been received.

          (e) Actions.  No Action shall have been brought and remain  pending by
     any  Governmental  Entity  or other  person,  entity  or group  that  would
     reasonably  be  expected,  individually  or in  the  aggregate,  to  have a
     Material Adverse Effect.

          (f) Employment Agreement. Bruce Guthart, the president of the Company,
     has executed an employment  agreement,  together with a related  management
     bonus agreement and restricted stock arrangement, substantially in the form
     of Exhibit A to this Agreement,  and such employment  agreement shall be in
     full force and effect as of the Closing Date.

          (g)  Waiver.  Prior to the Closing  Date,  Schenendorf  Seaman,  Inc.,
     formerly known as Seaman, Ross & Weiner, Inc. ("SRW"), ASCO Risk Management
     Corp.,  formerly  known  as  Amsco  Coverage  Corp.  ("Amsco")  and DS Risk
     Management Corp., formerly known as D.S.I. Associates,  Inc. ("DSI"), shall
     have delivered a written and executed waiver (the "Waiver") of all of their
     respective  rights to receive  securities  of the  Company  under the Asset
     Purchase  Agreement among Kaye Insurance  Associates,  Inc., SRW, Amsco and
     DSI,  Douglas  Schenendorf  and Alex  Seaman  dated as of  January 1, 1999,
     pursuant  to which SRW,  Amsco and DSI shall have  agreed to accept cash in
     lieu of securities  of the Company and the Company shall have  delivered to
     Parent an executed copy of such Waiver.

                                       47
<PAGE>

          SECTION  7.03.  Conditions  to the  Obligations  of the  Company.  The
obligations  of  the  Company  to  consummate  the  Merger  are  subject  to the
satisfaction  or  waiver  (where   permissible)  of  the  following   additional
conditions:

          (a)  Representations  and Warranties.  Each of the representations and
     warranties  of Parent and Merger Sub contained in this  Agreement  shall be
     true and correct in all  material  respects as of the date hereof and as of
     the Effective Time, as though made on and as of the Effective Time,  except
     that those representations and warranties that address matters only as of a
     particular  date shall remain true and correct in all material  respects as
     of such date,  and the Company  shall have  received a  certificate  of the
     Chief  Executive  Officer  or Chief  Financial  Officer  of  Parent to that
     effect.

          (b) Agreements and Covenants. Each of Parent and Merger Sub shall have
     performed  or complied in all material  respects  with all  agreements  and
     covenants required by this Agreement to be performed or complied with by it
     on or prior to the Effective  Time (provided that any agreement or covenant
     that is qualified  by  materiality  or by  reference to a Material  Adverse
     Effect  shall have been  performed  or complied  with in all respects on or
     prior  to the  Effective  Time)  and the  Company  shall  have  received  a
     certificate of the Chief Executive  Officer or Chief  Financial  Officer of
     Parent to that effect.

          (c) Parent Common  Shares.  The Parent Common Shares shall continue to
     be posted for  trading on the TSE and that number of Parent  Common  Shares
     which may be issued upon the conversion of the Parent  Debentures have been
     reserved for issuance by Parent at the Effective Time.

          (d) Change of  Control.  Fairfax  Financial  Holdings  Limited and its
     affiliates  shall not have sold or  otherwise  disposed  of such  number of
     Parent  Common  Shares to cause it or they at the Closing Date to no longer
     beneficially  own at least 30% of the outstanding  Parent Common Shares and
     to no longer  beneficially  own more  Parent  Common  Shares than any other
     shareholder of Parent.

                                  ARTICLE VIII

                        TERMINATION, AMENDMENT AND WAIVER

          SECTION 8.01.  Termination.  This  Agreement may be terminated and the
Merger  and  the  other  transactions  contemplated  by  this  Agreement  may be
abandoned at any time prior to the Effective Time, notwithstanding any requisite
approval and adoption of this  Agreement and the  transactions  contemplated  by
this Agreement, as follows:

          (a) by mutual  written  consent of each of Parent,  Merger Sub and the
     Company  duly  authorized  by the  Boards of  Directors  of each of Parent,
     Merger Sub and the Company;



                                       48
<PAGE>

          (b) by either Parent,  Merger Sub or the Company if the Effective Time
     shall not have occurred on or before December 31, 2001; provided,  however,
     that the right to terminate this Agreement under this Section 8.01(b) shall
     not be available to any party whose failure to fulfill any obligation under
     this  Agreement  has been the cause of, or resulted  in, the failure of the
     Effective Time to occur on or before such date;

          (c) by either Parent or the Company,  if there shall be any Order of a
     Governmental Entity (whether temporary,  preliminary or permanent) which is
     then in effect  and has the  effect of making  consummation  of the  Merger
     illegal or otherwise preventing or prohibiting  consummation of the Merger;
     provided, however, that the provisions of this Section 8.01(c) shall not be
     available to any party whose failure to fulfill its  obligations  hereunder
     shall have been the cause of, or shall have resulted in, such Order;

          (d) by Parent if the TSE or the OSC shall  have  indicated  in writing
     that it has made a final and nonappealable  determination  that it will not
     grant a  consent,  approval  or  authorization  referred  to under  Section
     7.02(d) of this Agreement;

          (e) by Parent  if (i) the  Board  withholds,  withdraws,  modifies  or
     changes the Company Board  Approval in a manner  adverse to Parent or shall
     have  resolved  to do so,  (ii) the Board  shall  have  recommended  to the
     stockholders of the Company an Acquisition  Proposal or shall have resolved
     to do so or shall  have  entered  into any  letter  of  intent  or  similar
     document or any agreement, contract or commitment accepting any Acquisition
     Proposal,  (iii) the Company shall have failed to include the Company Board
     Approval in the Company Proxy Statement,  (iv) if management of the Company
     shall  fail to  certify  that the  Board  has not  withdrawn,  modified  or
     changed,  or  resolved  to do any of the  foregoing  with  respect  to, its
     recommendation  in favor of the  approval of the Merger and this  Agreement
     within five business days after Parent requests in good faith, based on its
     good  faith   belief  that  such   certification   is  desired   under  the
     circumstances,  (v) a tender offer or exchange offer for 30% or more of the
     outstanding  shares of stock of the Company is commenced  and,  within five
     business days after such offer is  commenced,  the Board fails to recommend
     against   acceptance  of  such  tender  offer  or  exchange  offer  by  its
     stockholders   (including  by  taking  no  position  with  respect  to  the
     acceptance of such tender offer or exchange offer by its  stockholders)  or
     (vi) the Company Stockholders' Meeting is not held within 45 days after the
     date on which the Registration Statement shall have become effective;

          (f) by  either  Parent  or the  Company  if  this  Agreement  and  the
     transactions  contemplated  herein shall fail to receive the requisite vote
     for approval at the Company Stockholders' Meeting;

          (g) by  either  Parent  or the  Company  if  this  Agreement  and  the
     transactions  contemplated  herein shall fail to receive the requisite vote
     for approval at the Parent Shareholders' Meeting;


                                       49
<PAGE>

          (h) by Parent upon a breach of any representation,  warranty, covenant
     or agreement on the part of the Company set forth in this Agreement,  or if
     any  representation or warranty of the Company shall have become untrue, in
     either case such that the conditions set forth in either Section 7.02(a) or
     (b) would not be  satisfied (a  "Terminating  Company  Breach");  provided,
     however, that, if such Terminating Company Breach is curable by the Company
     through the exercise of all reasonable efforts and the Company continues to
     exercise all  reasonable  efforts,  Parent may not terminate this Agreement
     under this  Section  8.01(h) for a period of 30 days from the date on which
     Parent  delivers to the Company  written notice setting forth in reasonable
     detail the  circumstances  giving rise to such Terminating  Company Breach;
     provided further that if, within such 30 day period,  the Company does cure
     such Terminating  Company Breach so that the conditions set forth in either
     Section  7.02(a) or (b) would no longer be  breached  thereby,  then Parent
     shall not be entitled to terminate this Agreement  pursuant to this Section
     8.01(h).

          (i) by the  Company  upon a breach  of any  representation,  warranty,
     covenant or agreement on the part of Parent or Merger Sub set forth in this
     Agreement,  or if any  representation  or  warranty of Parent or Merger Sub
     shall have become untrue, in either case such that the conditions set forth
     either in Section  7.03(a) or (b) would not be  satisfied  (a  "Terminating
     Parent Breach"); provided, however, that, if such Terminating Parent Breach
     is curable by Parent  through the  exercise of all  reasonable  efforts and
     Parent  continues  to  exercise  all  reasonable  efforts,  Company may not
     terminate this Agreement under this Section 8.01(i) for a period of 30 days
     from the date on which  the  Company  delivers  to  Parent  written  notice
     setting forth in reasonable  detail the  circumstances  giving rise to such
     Terminating  Parent  Breach;  provided  further that if, within such 30 day
     period,  Parent  does  cure  such  Terminating  Company  Breach so that the
     conditions  set forth in either  Section  7.03(a) or (b) would no longer be
     breached thereby,  then the Company shall not be entitled to terminate this
     Agreement pursuant to this Section 8.01(i)

          (j) by the  Company,  upon  approval  of the  Board,  if  prior to the
     Company Stockholders'  Approval, the Board determines in good faith that it
     is required to do so by its  fiduciary  duties under  applicable  law after
     having received advice from outside legal counsel in order to enter into an
     agreement  with respect to a Superior  Proposal,  upon five business  days'
     prior written  notice to Parent,  setting  forth in  reasonable  detail the
     identity of the person  making,  and the final terms and conditions of, the
     Superior Proposal and after duly considering any proposals that may be made
     by Parent during such five business day period; provided, however, that any
     termination of this Agreement pursuant to this Section 8.01(j) shall not be
     effective  until the Company has made full payment of all amounts  provided
     under Section 8.05; or

          (k) by Parent,  if the Company  shall have  breached  its  obligations
     under Section 6.04.

          SECTION 8.02.  Effect of  Termination.  In the event of termination of
this Agreement  pursuant to Section 8.01, this Agreement shall forthwith  become
void,  there shall be



                                       50
<PAGE>

no  liability  under this  Agreement  on the part of  Parent,  Merger Sub or the
Company or any of their  respective  officers or  directors,  and all rights and
obligations  of each party hereto  shall  cease,  subject to the remedies of the
parties set forth in Section 8.05; provided,  however, that nothing herein shall
relieve  any  party  from  liability  for  the  willful  breach  of  any  of its
representations, warranties, covenants or agreements set forth in this Agreement
and  that  the  Confidentiality  Agreement  shall  survive  termination  of this
Agreement.

          SECTION 8.03. Amendment.  This Agreement may be amended by the parties
hereto by action taken by or on behalf of their  respective  Boards of Directors
at any time prior to the Effective  Time;  provided,  however,  that,  after the
approval of the Merger and this Agreement by the stockholders of the Company, no
amendment  may be made that  would  reduce  the  amount  or  change  the type of
consideration  into which each Share shall be converted upon consummation of the
Merger.  This  Agreement may not be amended,  except by an instrument in writing
signed by the parties hereto.

          SECTION 8.04.  Waiver.  At any time prior to the Effective  Time,  any
party hereto may (a) extend the time for the  performance  of any  obligation or
other  act  of  any  other  party  hereto,  (b)  waive  any  inaccuracy  in  the
representations and warranties  contained herein of any other party hereto or in
any  document  delivered  pursuant  hereto,  and (c) waive  compliance  with any
agreement  of any other party  hereto or condition  contained  herein.  Any such
extension  or waiver  shall be valid if set forth in an  instrument  in  writing
signed by the party or parties to be bound thereby.

          SECTION   8.05.   Fees   and   Expenses.   (a)  In  the   event   that

          (i) this Agreement is terminated pursuant to Section 8.01(e),  8.01(j)
     or 8.01(k); or

          (ii) this  Agreement  is  terminated  pursuant  to Section  8.01(f) or
     8.01(h)  and the  Company  enters  into an  agreement  with  respect  to an
     Acquisition  Proposal,  or an Acquisition Proposal is consummated,  in each
     case within 12 months  after such  termination,  and the Company  shall not
     theretofore have been required to pay the Fee to Parent pursuant to Section
     8.05(a)(i) or 8.05(a)(ii);

     then, in any such event,  the Company shall pay Parent  promptly (but in no
event  later than 10  business  days after the first of such  events  shall have
occurred) a fee equal to $3,855,000  (the "Fee"),  which amount shall be payable
in immediately available funds, plus all Expenses (as hereinafter defined).

          (b) If Parent shall fail to receive the requisite vote for approval at
the Parent Shareholders'  Meeting and as a result Parent is unable to consummate
the transaction, then, in such event, Parent shall pay the Company promptly (but
in no event  later  than 10  business  days after the  failure  to  receive  the
requisite  vote for  approval)  the  Fee,  which  amount  shall  be  payable  in
immediately available funds, plus all Expenses.



                                       51
<PAGE>

          (c) If this  Agreement is terminated  for any reason  whatsoever and a
party hereto is in material  breach of its  material  covenants  and  agreements
contained in this Agreement or is in material breach of its  representations and
warranties  contained in this  Agreement,  such party shall,  whether or not any
payment is made  pursuant to Section  8.05(a),  reimburse the other party hereto
and their  respective  stockholders and affiliates (not later than five business
days after submission of statements therefor) for all out-of-pocket expenses and
fees (including,  without limitation, all fees of counsel, accountants,  experts
and consultants and their respective  stockholders  and affiliates)  incurred or
accrued by either of them or on their  behalf in  connection  with the Merger or
other  transactions  contemplated  by this Agreement and for which such party or
its  stockholders  or affiliates is liable (all the foregoing  being referred to
herein  collectively as the  "Expenses");  provided,  however,  that in no event
shall either  party be obligated to pay Expenses  incurred by the other party in
excess of $1,000,000.

          (d) Except as set forth in this Section  8.05,  all costs and expenses
incurred in connection with this Agreement, the Voting Agreements and the Merger
or other transactions  contemplated by this Agreement shall be paid by the party
incurring  such  expenses,  whether  or not the  Merger  and other  transactions
contemplated  by this  Agreement  are  consummated,  except that the Company and
Parent each shall pay one-half of all  Expenses  relating to printing and filing
of the  Registration  Statement and the Proxy  Statement,  and all SEC and other
regulatory  filing fees incurred in connection with the  Registration  Statement
and the Proxy Statement.

          (e) In the event  that the  Company  shall  fail to pay the Fee or any
Expenses when due, the term "Expenses"  shall be deemed to include the costs and
expenses  actually  incurred  or  accrued  by Parent  and  Merger  Sub and their
respective stockholders and affiliates (including,  without limitation, fees and
expenses of counsel) in connection with the collection  under and enforcement of
this  Section  8.05,  together  with  interest on such unpaid Fee and  Expenses,
commencing on the date that the Fee or such Expenses became due, at a rate equal
to the rate of interest publicly announced by Citibank, N.A., from time to time,
in the City of New York, as such bank's Base Rate plus 2%.

          (f) In the event that Parent shall fail to pay any Expenses  when due,
the term "Expenses"  shall be deemed to include the costs and expenses  actually
incurred  or  accrued  by the  Company  and their  respective  stockholders  and
affiliates  (including,  without  limitation,  fees and  expenses of counsel) in
connection  with the  collection  under and  enforcement  of this Section  8.05,
together with interest on such unpaid Expenses, commencing on the date that such
Expenses became due, at a rate equal to the rate of interest publicly  announced
by Citibank,  N.A.,  from time to time,  in the City of New York, as such bank's
Base Rate plus 2%.

                                   ARTICLE IX

                               GENERAL PROVISIONS

          SECTION 9.01.  Notices.  All notices,  requests,  claims,  demands and
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given  upon  receipt)  by  delivery  in  person,  by
facsimile or by registered or certified  mail (postage  prepaid,  return receipt
requested)  to the  respective  parties at the  following



                                       52
<PAGE>

addresses  (or at such  other  address  for a party as shall be  specified  in a
notice given in accordance with this Section 9.01):

                  if to Parent or Merger Sub:

                           Hub International Limited
                           214 King Street West, Suite 314
                           Toronto, Ontario
                           M5H 3S6
                           Facsimile No.:  (416) 593-8717
                           Attention:  W. Kirk James

                  with a copy to:

                           Shearman & Sterling
                           199 Bay Street, Suite 4405
                           Toronto, Ontario
                           Facsimile No.:  (416) 360-2958
                           Attention:  Brice T. Voran, Esq.

                  if to the Company:

                           Kaye Group Inc.
                           122 East 42nd Street
                           New York, NY  10168
                           Facsimile No.:  (212) 986-2278
                           Attention:  President

                  with a copy to:

                           Jenkens & Gilchrist Parker Chapin LLP
                           The Chrysler Building
                           405 Lexington Avenue
                           New York, NY 10174
                           Facsimile No.:  (212) 704-6288
                           Attention:  James Alterbaum, Esq.

                           and

                           Ivy Fischer, Esq.
                           122 East 42nd Street
                           New York, NY  10168
                           Facsimile No.: (212) 338-2973

          SECTION  9.02.   Non-Survival  of   Representations,   Warranties  and
Agreements. The representations, warranties and agreements in this Agreement and
any certificate  delivered



                                       53
<PAGE>

pursuant  hereto by any person shall terminate at the Effective Time or upon the
termination  of this  Agreement  pursuant to Section  8.01,  as the case may be,
except that the agreements set forth in Section 6.05 shall survive the Effective
Time  indefinitely  and those set forth in Sections  6.03(c),  6.08, 6.11, 8.02,
8.05  and  this  Article  IX  shall  survive   termination   of  this  Agreement
indefinitely unless a different period is set forth in any such Section.

          SECTION 9.03.  Parties in Interest.  This  Agreement  shall be binding
upon and inure solely to the benefit of each party  hereto,  and nothing in this
Agreement,  express or implied,  is  intended to or shall  confer upon any other
person any right,  benefit or remedy of any nature whatsoever under or by reason
of this  Agreement,  other than  Section  6.05  (which is intended to be for the
benefit of the persons covered thereby and may be enforced by such persons).

          SECTION 9.04. Certain Definitions. For purposes of this Agreement, the
term:

          (a)  "Acquisition  Proposal"  means (i) any proposal or offer from any
     person relating to any direct or indirect acquisition of (A) 30% or more of
     the fair market  value of the assets of the  Company  and its  subsidiaries
     taken as a whole or (B) over 30% of any class of equity  securities  of the
     Company or of any  Company  Subsidiary;  (ii) any tender  offer or exchange
     offer, as defined pursuant to the Exchange Act, that, if consummated, would
     result in any person beneficially owning 30% or more of any class of equity
     securities  of the  Company or any  Company  Subsidiary;  (iii) any merger,
     consolidation,   business   combination,   recapitalization,   liquidation,
     dissolution  or similar  transaction  involving  the Company or any Company
     Subsidiary,  other than the  transactions  contemplated  by this Agreement;
     (iv) any  person or entity  shall  have  acquired,  after the date  hereof,
     beneficial  ownership or the right to acquire  beneficial  ownership of, or
     any  "group"  (as such term is defined  under  -----  Section  13(d) of the
     Exchange  Act  and  the  rules  and  regulations   promulgated  thereunder;
     provided,  however,  that any  "group"  formed or deemed  formed by persons
     taking  actions in  furtherance  of this  Agreement  shall not be deemed to
     constitute  a group) shall have been formed that  beneficially  owns or has
     the right to acquire  beneficial  ownership of, 30% or more of any class of
     equity  securities  of  the  Company  or  any  person,  entity  or  "group"
     beneficially  owning,  as of the date  hereof,  30% or more of any class of
     equity  securities  of the  Company  shall  have  acquired,  after the date
     hereof,  beneficial  ownership or the right to acquire beneficial ownership
     of an additional 1% of such class of equity securities of the Company;  (v)
     the declaration or payment by the Company, of an extraordinary  dividend on
     any of its shares of capital stock or the  effectuation by the Company of a
     recapitalization  or other type of transaction  that would involve either a
     change in the  Company's  outstanding  capital stock or a  distribution  of
     assets  of any  kind  to the  holders  of  such  capital  stock;  (vi)  the
     repurchase  by the Company of shares of Company  Common  Stock or (vii) any
     other transaction the consummation of which would reasonably be expected to
     impede,  interfere with,  prevent or materially  delay  consummation of the
     Merger or the transactions contemplated by this Agreement.



                                       54
<PAGE>

          (b)  "affiliate" of a specified  person means a person who directly or
     indirectly through one or more intermediaries  controls,  is controlled by,
     or is under common control with such specified person.

          (c)  "beneficial  owner" with respect to any shares means a person who
     shall be deemed to be the  beneficial  owner of such  shares  (i) that such
     person or any of its  affiliates or associates  (as such term is defined in
     Rule 12b-2 promulgated under the Exchange Act) beneficially owns,  directly
     or indirectly, (ii) that such person or any of its affiliates or associates
     has,  directly or indirectly,  (A) the right to acquire (whether such right
     is  exercisable  immediately  or  subject  only to the  passage  of  time),
     pursuant  to any  agreement,  arrangement  or  understanding  or  upon  the
     exercise of conversion  rights,  exchange rights,  warrants or options,  or
     otherwise, or (B) the right to vote pursuant to any agreement,  arrangement
     or  understanding,  or  (iii)  that are  beneficially  owned,  directly  or
     indirectly,  by any  other  persons  with  whom  such  person or any of its
     affiliates  or  associates  or person  with whom such  person or any of its
     affiliates or associates  has any agreement,  arrangement or  understanding
     for the purpose of acquiring, holding, voting or disposing of any shares.

          (d) "business  day" means any day on which both the principal  offices
     of the SEC in Washington,  D.C. are open to accept filings, or, in the case
     of  determining  a date when any  payment  is due,  any day  (other  than a
     Saturday or a Sunday) on which  banks are not  required  or  authorized  to
     close in The City of New York.

          (e) "Computer  Systems" shall mean all computer,  hardware,  software,
     systems, and equipment (including embedded microcontrollers in non-computer
     equipment)  embedded within or required to operate the current  products of
     the Company and the Company  Subsidiaries,  and/or material to or necessary
     for the Company and the Company  Subsidiaries to carry on their  businesses
     as currently conducted.

          (f) "control"  (including the terms  "controlled by" and "under common
     control with") means the  possession,  directly or indirectly or as trustee
     or  executor,  of the  power  to  direct  or  cause  the  direction  of the
     management  and  policies of a person,  whether  through the  ownership  of
     voting  securities,   as  trustee  or  executor,   by  contract  or  credit
     arrangement or otherwise.

          (g) "Material  Adverse  Effect" means (i) when used in connection with
     the Company or a Company  Subsidiary any circumstance,  event,  occurrence,
     change or effect  that is or will be  materially  adverse to the  business,
     operations,   properties,   condition  (financial  or  otherwise),   assets
     (tangible or intangible), liabilities (including contingent liabilities) or
     results of operations of the Company and the Company  Subsidiaries taken as
     a whole,  (ii) when used in  connection  with the  Insurance  Companies  or
     Insurance Company Subsidiaries any circumstance,  event, occurrence, change
     or  effect  that  is  materially  adverse  to  the  business,   operations,
     properties,   condition  (financial  or  otherwise),  assets  (tangible  or
     intangible),  liabilities (including contingent  liabilities) or results of
     operations of the Insurance  Companies  and their  subsidiaries  taken as a
     whole, and (iii) when used in connection with the Parent or



                                       55
<PAGE>

     Merger Sub means any circumstance, event, occurrence, change or effect that
     is or is likely  to be  materially  adverse  to the  business,  operations,
     properties,   condition  (financial  or  otherwise),  assets  (tangible  or
     intangible),  liabilities (including contingent  liabilities) or results of
     operations of the Parent and its subsidiaries taken as a whole.

          (h)  "Parent  Debentures"  means  the  8.5%  convertible  subordinated
     debentures due 2006 that shall be issued pursuant to an indenture (the form
     of which is  attached  hereto as  Exhibit  B) by Parent to  holders  of the
     Company  Common  Stock in  accordance  with the  provisions  of  Article II
     hereof, as a component of the Merger Consideration.

          (i)  "Performance  Stock  Plan" shall mean the  Company's  Performance
     Stock Plan.

          (j) "person" means an individual,  corporation,  partnership,  limited
     partnership,  syndicate, person (including,  without limitation, a "person"
     as defined in section 13(d)(3) of the Exchange Act), trust,  association or
     entity or government,  or political subdivision,  agency or instrumentality
     of a government.

          (k)  "subsidiary"  or  "subsidiaries"  of the Company,  the  Surviving
     Corporation,  Parent or any other person means an affiliate  controlled  by
     such person, directly or indirectly, through one or more intermediaries.

          (l) "Superior Proposal:  means any Acquisition Proposal on terms which
     the Board determines, in its good faith judgment (after having received the
     advice  of a  financial  advisor  of  recognized  reputation),  to be  more
     favorable  to the  Company's  stockholders  than the  Merger  and for which
     financing, to the extent required, is then committed.

          (m)  "Taxes"  shall  mean any and all  taxes,  fees,  levies,  duties,
     tariffs,  imposts and other charges of any kind  (together with any and all
     interest,  penalties,  additions to tax and additional amounts imposed with
     respect thereto) imposed by any  Governmental  Entity or taxing  authority,
     including, without limitation: taxes or other charges on or with respect to
     income,  franchise,  windfall or other profits,  gross receipts,  property,
     sales, use, capital stock, payroll,  employment,  social security, workers'
     compensation,  unemployment  compensation  or net  worth;  taxes  or  other
     charges in the nature of excise,  withholding, ad valorem, stamp, transfer,
     value-added or gains taxes;  license,  registration and documentation fees;
     and customers' duties, tariffs and similar charges.

          (n) "$" or "dollar" means a United States dollar.

          SECTION  9.05.  Severability.  If any term or other  provision of this
Agreement is invalid,  illegal or incapable of being enforced by any rule of Law
or public policy,  all other  conditions and provisions of this Agreement  shall
nevertheless  remain in full force and effect as long as the  economic  or legal
substance of the transactions  contemplated by this Agreement is not affected in
any manner  materially  adverse to any party. Upon  determination  that any such
term or other provision is invalid,  illegal or incapable of being enforced, the
parties  hereto shall



                                       56
<PAGE>

negotiate  in good faith to modify this  Agreement  so as to effect the original
intent of the parties as closely as possible in a mutually  acceptable manner in
order that the  transactions  contemplated  by this  Agreement be consummated as
originally contemplated to the fullest extent possible.

          SECTION  9.06.  Specific  Performance.  The parties  hereto agree that
irreparable  damage would occur in the event any provision of this Agreement was
not performed in accordance  with the terms hereof and that the parties shall be
entitled to specific  performance of the terms hereof,  in addition to any other
remedy at law or in equity.

          SECTION  9.07.  Governing  Law;  Forum.  Except to the extent that the
Merger is mandatorily governed by the DGCL, this Agreement shall be governed by,
and construed in accordance  with, the laws of the State of New York  applicable
to contracts executed in and to be performed in that state and without regard to
any  applicable  conflicts  of law  principles.  All  Actions  arising out of or
relating to this  Agreement  shall be heard and  determined in the United States
District  Court for the  Southern  District of New York.  Each of the parties to
this Agreement (a) consents to submit itself to the personal jurisdiction of the
United  States  District  Court for the  Southern  District  of New York for the
purpose of any Action  arising out of or relating to this  Agreement  brought by
any party hereto,  and (b) irrevocably  waive, and agree not to assert by way of
motion,  defense,  or  otherwise,  in any such Action,  any claim that it is not
subject  personally to the  jurisdiction  of the  above-named  courts,  that its
property is exempt or immune from  attachment or  execution,  that the Action is
brought in an inconvenient  forum, that the venue of the Action is improper,  or
that this Agreement or the transactions  contemplated herein may not be enforced
in or by any of the above-named courts. Parent agrees that it may be served with
process in the State of New York and irrevocably  appoints  Odyssey  Reinsurance
Corporation,  1 Liberty Plaza,  New York, New York 10006, as the agent of Parent
to accept  service of process  relating to any Action arising out of or relating
to this Agreement.

          SECTION 9.08.  Headings.  The descriptive  headings  contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.

          SECTION  9.09.  Counterparts.  This  Agreement  may  be  executed  and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different  parties  hereto in separate  counterparts,  each of which when
executed and delivered  shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.

          SECTION 9.10. Entire Agreement.  This Agreement (including the Company
Disclosure Schedule and the Parent Disclosure  Schedule),  the Voting Agreements
and the  Confidentiality  Agreements  constitute the entire  agreement among the
parties  with  respect to the  subject  matter  hereof and  supersede  all prior
agreements and undertakings, both written and oral, among the parties, or any of
them,  with respect to the subject  matter hereof.  This Agreement  shall not be
assigned  (whether  pursuant to a merger,  by  operation  of law or  otherwise),
except  that  Parent and  Merger  Sub may assign all or any of their  rights and
obligations  hereunder  to any  affiliate  of  Parent,  provided  that  no  such
assignment  shall relieve the assigning  party of its  obligations  hereunder if
such assignee does not perform such obligations.



                                       57
<PAGE>

          SECTION 9.11.  Waiver of Jury Trial. Each of the parties hereto hereby
waives to the fullest  extent  permitted by applicable law any right it may have
to a trial by jury with respect to any litigation directly or indirectly arising
out  of,  under  or in  connection  with  this  Agreement  or  the  transactions
contemplated by this Agreement. Each of the parties hereto (a) certifies that no
representative,  agent or attorney of any other party has represented, expressly
or otherwise, that such other party would not, in the event of litigation,  seek
to enforce  that  foregoing  waiver and (b)  acknowledges  that it and the other
hereto  have been  induced to enter  into this  Agreement  and the  transactions
contemplated  by this  Agreement,  as  applicable,  by, among other things,  the
mutual waivers and certifications in this Section 9.11.

                                       58
<PAGE>


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

                             HUB INTERNATIONAL LIMITED


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



                             416 ACQUISITION INC.


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



                             KAYE GROUP INC.


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


                                       59
<PAGE>

                                                                    EXHIBIT 6.10

                          FORM OF AFFILIATE LETTER FOR
                            AFFILIATES OF THE COMPANY


                                                  [------------], [----]


Hub International Limited
214 King Street West, Suite 314
Toronto, Ontario
M5H 3S6


Ladies and Gentlemen:

          I have been advised that as of the date of this letter I may be deemed
to be an "affiliate" of Kaye Group Inc., a Delaware corporation (the "Company"),
as the term "affiliate" is (i) defined for purposes of paragraphs (c) and (d) of
Rule 145 of the rules and  regulations  (the  "Rules  and  Regulations")  of the
Securities and Exchange  Commission (the "Commission")  under the Securities Act
of 1933,  as  amended  (the  "Act"),  and/or  (ii) used in and for  purposes  of
Accounting Series Releases 130 and 135, as amended, of the Commission.  Pursuant
to the terms of the Agreement  and Plan of Merger,  dated as of January 19, 2001
(the  "Merger  Agreement"),  among  Hub  International  Limited,  a  corporation
organized under the laws of Ontario ("Parent"), 416 Acquisition Inc., a Delaware
corporation  and a wholly owned  subsidiary of Parent  ("Merger  Sub"),  and the
Company,  Merger Sub will be merged  with and into the Company  (the  "Merger").
Capitalized  terms used in this letter agreement  without  definition shall have
the meanings assigned to them in the Merger Agreement.

          As a  result  of the  Merger,  I may  receive  the  8.5%  Subordinated
Convertible  Debentures due 2006 (the "Parent Debentures")to be issued by Parent
on the Closing Date pursuant to an indenture  among Parent and o, as trustee.  I
would receive such Parent Debentures in exchange for shares (or upon exercise of
options for shares)  owned by me of common stock,  par value $.01 per share,  of
the Company (the "Company Common Stock").

          1. I  represent,  warrant  and  covenant to Parent that in the event I
receive any Parent Debentures as a result of the Merger:

          A. I shall not make any sale,  transfer  or other  disposition  of the
     Parent Debentures in violation of the Act or the Rules and Regulations.

                                       60
<PAGE>

          B. I have  carefully  read this  letter and the Merger  Agreement  and
     discussed  the   requirements  of  such  documents  and  other   applicable
     limitations upon my ability to sell,  transfer or otherwise  dispose of the
     Parent  Debentures,  to the  extent I felt  necessary,  with my  counsel or
     counsel for the Company.

          C. I have been advised that the issuance of the Parent  Debentures  to
     me pursuant to the Merger has been registered with the Commission under the
     Act on a  Registration  Statement  on Form F-4.  However,  I have also been
     advised that, because at the time the Merger is submitted for a vote of the
     stockholders of the Company,  (a) I may be deemed to be an affiliate of the
     Company and (b) the  distribution  by me of the Parent  Debentures  has not
     been  registered  under the Act,  I may not  sell,  transfer  or  otherwise
     dispose of the Parent Debentures issued to me in the Merger unless (i) such
     sale,  transfer or other  disposition is made in conformity with the volume
     and other  limitations of Rule 145 promulgated by the Commission  under the
     Act,  (ii) such sale,  transfer or other  disposition  has been  registered
     under the Act, or (iii) in the opinion of counsel reasonably  acceptable to
     Parent,  such sale,  transfer or other disposition is otherwise exempt from
     registration under the Act.

          D. I  understand  that Parent is under no  obligation  to register the
     sale, transfer or other disposition of the Parent Debentures by me or on my
     behalf  under the Act or,  except as provided in paragraph  2(A) below,  to
     take  any  other  action  necessary  in order  to make  compliance  with an
     exemption from such registration available.

          E. I understand that there will be placed on the  certificates for the
     Parent  Debentures issued to me, or any  substitutions  therefor,  a legend
     stating in substance:

     "THE  SECURITIES   REPRESENTED  BY  THIS   CERTIFICATE  WERE  ISSUED  IN  A
     TRANSACTION TO WHICH RULE 145 PROMULGATED  UNDER THE SECURITIES ACT OF 1933
     APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE TRANSFERRED
     IN ACCORDANCE  WITH THE TERMS OF AN AGREEMENT  DATED [_______ ___,  ______]
     BETWEEN THE REGISTERED HOLDER HEREOF AND HUB INTERNATIONAL  LIMITED, A COPY
     OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF HUB INTERNATIONAL
     LIMITED."

          F. I understand  that unless a sale or transfer is made in  conformity
     with the provisions of Rule 145, or pursuant to a  registration  statement,
     Parent reserves the right to put the following  legend on the  certificates
     issued to my transferee:

     "THE SECURITIES  REPRESENTED BY THIS  CERTIFICATE  HAVE NOT BEEN REGISTERED
     UNDER  THE  SECURITIES  ACT OF 1933 AND  WERE  ACQUIRED  FROM A PERSON  WHO
     RECEIVED SUCH  SECURITIES IN A  TRANSACTION  TO WHICH RULE 145  PROMULGATED
     UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SECURITIES HAVE BEEN



                                       61
<PAGE>

     ACQUIRED  BY THE  HOLDER  NOT WITH A VIEW TO, OR FOR  RESALE IN  CONNECTION
     WITH, ANY DISTRIBUTION  THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF
     1933  AND MAY NOT BE SOLD,  PLEDGED  OR  OTHERWISE  TRANSFERRED  EXCEPT  IN
     ACCORDANCE  WITH AN EXEMPTION  FROM THE  REGISTRATION  REQUIREMENTS  OF THE
     SECURITIES ACT OF 1933."

          G.  Execution of this letter  should not be considered an admission on
     my part that I am an  "affiliate"  of the Company as described in the first
     paragraph  of this  letter,  nor as a  waiver  of any  rights I may have to
     object to any  claim  that I am such an  affiliate  on or after the date of
     this letter.

          2. By Parent's acceptance of this letter, Parent hereby agrees with me
as follows:

          A. For so long as and to the extent necessary to permit me to sell the
     Parent Debentures pursuant to Rule 145 and, to the extent applicable,  Rule
     144 under the Act,  Parent shall (a) use its reasonable best efforts to (i)
     file, on a timely basis, all reports and data required to be filed with the
     Commission by it pursuant to Section 13 of the  Securities  Exchange Act of
     1934,  as amended (the "1934  Act"),  and (ii) furnish to me upon request a
     written  statement as to whether  Parent has complied  with such  reporting
     requirements during the 12 months preceding any proposed sale of the Parent
     Debentures  by me under  Rule 145,  and (b)  otherwise  use its  reasonable
     efforts to permit  such  sales  pursuant  to Rule 145 and Rule 144.  Parent
     hereby  represents to me that it has filed all reports required to be filed
     with the  Commission  under Section 13 of the 1934 Act during the preceding
     12 months.

          B. It is understood and agreed that  certificates with the legends set
     forth in paragraphs  1(E) and 1(F) above will be substituted by delivery of
     certificates  without  such legends if (i) one year shall have elapsed from
     the date the  undersigned  acquired the Parent  Debentures  received in the
     Merger and the  provisions  of Rule  145(d)(2)  are then  available  to the
     undersigned,   (ii)  two  years  shall  have  elapsed  from  the  date  the
     undersigned  acquired the Parent Debentures  received in the Merger and the
     provisions of Rule  145(d)(3) are then  applicable to the  undersigned,  or
     (iii) Parent has received  either an opinion of counsel,  which opinion and
     counsel shall be reasonably satisfactory to Parent, or a "no action" letter
     obtained by the undersigned from the staff of the Commission, to the effect
     that the restrictions  imposed by Rule 145 under the Act no longer apply to
     the undersigned.


                                                  ------------------------------
                                                  Name of Affiliate



                                       62

<PAGE>





             DISCLOSURE SCHEDULE OF KAYE GROUP INC. (THE "COMPANY")
                                     -------
                       TO THE AGREEMENT AND PLAN OF MERGER
                          DATED AS OF JANUARY 19, 2001
                        ("MERGER AGREEMENT") BY AND AMONG
                                ----------------
                           HUB INTERNATIONAL LIMITED,
                              416 ACQUISITION INC.
                                 AND THE COMPANY

          Capitalized  terms used in the  following  Schedules  and not  defined
therein  shall  have the same  meanings  assigned  to such  terms in the  Merger
Agreement. The disclosures contained in any Schedule are to be taken as relating
to all  representations  and  warranties  in  the  Agreement  regardless  of the
Schedule in which said disclosure appears.


<PAGE>


                                SCHEDULE 3.01(b)

                              Company Subsidiaries



<TABLE>
<CAPTION>
Company Subsidiary                             Jurisdiction of                 Percentage of           Percentage of
------------------                             Incorporation             Outstanding Company     Outstanding Company
                                               -------------          Capital Stock Owned by     Capital Stock Owned
                                                                                 the Company         by the Company
                                                                      ----------------------              Subsidiary
                                                                                                 -------------------
<S>                                            <C>                                       <C>             <C>
Kaye Insurance Associates, Inc. ("KIA")        Delaware                                  100%                      0%

Kaye-Western Ins. & Risk Services ("KWIR")     Delaware                                  100%                      0%

Western Group Administrators Inc.*             Delaware                                    0%            100% by KWIR

American Coverage Administrators Inc.*         Delaware                                    0%            100% by KWIR

Old Lyme Insurance Company of Rhode Island,    Rhode Island                              100%                      0%
Inc.

Old Lyme Insurance Company Ltd. ("OLIS")       Bermuda                                   100%                      0%

Park Brokerage Ltd.                            Bermuda                                     0%            100% by OLIS

Kaye Insurance Associates, Inc. New England    Delaware                                  100%                      0%

Program Brokerage Corporation                  Delaware                                  100%                      0%

Kaye Services Corporation                      Delaware                                  100%                      0%

Kaye Administrators Corporation                Delaware                                  100%                      0%

Claims Administration Corporation ("CAC")      Delaware                                  100%                      0%
</TABLE>


*  Such entities are Insignificant Subsidiaries.



                                       2
<PAGE>

          1. CAC owns  warrants  that, if  exercised,  would,  together with its
equity interest, give it approximately 6.0% ownership of Cybsersettle.com.

          2. The Company administers over twenty purchasing groups. See Attached
List.

          3. Pursuant to a Purchase  Agreement among KIA, Laub Group of Florida,
Inc. ("Laub"),  Robert Virtue and Susan Straker dated as of January 1, 2000, KIA
is entitled to up to 25% of the profits of Laub.

          4. Interim Operating  Agreement (and related  agreement)  between Risk
Data Services,  LLC and Kaye Insurance  Associates,  Inc.  (internet  exchange),
dated December 1, 2000.

          5. See Attached List of Investments.


                                       3
<PAGE>


                                  SCHEDULE 3.03

                                 Capitalization

          1. Amended and Restated Stock Option Plan:  1,350,000 shares of common
stock are  reserved  for use under  this  plan.  The  purpose of this plan is to
attract and retain key employees.

          2. Stock Performance Plan. See Schedule 3.03(b) hereof.

          3.  Outside  Directors  of the Company  receive  5,000  stock  options
annually on October 31 pursuant to resolutions of the Board of Directors.

          4. 401(k) Retirement  Savings Plan: Subject to certain  guidelines,  a
participant in this plan who saves at least 5% of his annual salary in this plan
will be eligible for a Company  contribution  of 1% of his annual  salary in the
form of Company common stock.

          5. Purchase  Agreement  among Kaye Insurance  Associates,  Inc.,  Laub
Group of Florida,  Inc.,  Robert Virtue and Susan Straker dated as of January 1,
2000.



                                       4
<PAGE>


                                SCHEDULE 3.03(a)

                              Company Stock Options

                              See attached chart.*

* Each of the options  vests at the rate of 20% a year for five years,  with the
exception of Bruce Guthart's grant of 200,000 options, which vest quarterly. The
options  may be  exercised  at any  time  after  they  vest.  Subject  to a time
restriction, vested options expire one year after the date of such termination.



                                       5
<PAGE>


                                SCHEDULE 3.03(b)

                                Restricted Stock
<TABLE>
<CAPTION>

Restricted Share Holder             Restricted Shares Vested as of        Restricted Shares that may be
-----------------------             -------------------------------       -----------------------------
                                                  January 19, 2001       Vested as of December 31, 2001
                                                  ----------------       ------------------------------

<S>                                                              <C>                             <C>
Jane Baratz-Wolk                                                 0                               15,385

Marc Cohen                                                       0                               38,461

Ivy S. Fischer                                                   0                                7,692

Tamara Igel                                                      0                               15,919

Robert Munao                                                     0                               10,406

Jeffrey Rubin                                                    0                               15,385

Michael P. Sabanos                                               0                               38,461

Peter Scavetta                                                   0                                7,692

Damian Testa                                                     0                               12,895

Guy Warner                                                       0                                7,692

John Warren                                                      0                               15,385

Michael Zeldes                                                   0                                5,203

</TABLE>





                                       6
<PAGE>


                                  SCHEDULE 3.05

                                    Conflicts

          1. Loan  Agreement by and between the Company and Summit  Bank,  dated
June 24, 1998.

          2. Common  Stock  Purchase  Warrants  issued by  Cyber$ettle,  Inc. to
Claims Administration Corporation.

          3. The Employment  Agreements of the individuals  listed below contain
severance provisions:

             (a)      Robert Munao
             (b)      John Schimpf
             (c)      Michael Zeldes
             (d)      Michael Sabanos
             (e)      Bruce Guthart
             (f)      Daniel Keane
             (g)      Douglas Schenendorf
             (h)      Alex Seaman

          4. Office Lease  entered into by and between  Arcadia  Gateway  Centre
Associates, Ltd. and Kaye-Western Insurance & Risk Services, Inc. dated June 30,
2000, amended by Addendum No. 1 to Office Lease dated July 19, 2000.

          5. The payments to Seaman,  Ross & Wiener,  Inc., AMSCO Coverage Corp.
and D.S.I.  Associates,  Inc.,  pursuant  to Section  3.2 of the Asset  Purchase
Agreement among Kaye Insurance  Associates,  Inc., Seaman, Ross & Weiner,  Inc.,
Amsco Coverage Corp. and D.S.I.  Associates,  Inc., Douglas Schenendorf and Alex
Seaman dated as of January 1, 1999.

          6. Interim Operating  Agreement (and related  agreement)  between Risk
Data Services,  LLC and Kaye Insurance  Associates,  Inc.  (internet  exchange),
dated December 1, 2000.










                                       7
<PAGE>


                                SCHEDULE 3.05(b)

                        Consents of Governmental Entities


                                      None





                                       8
<PAGE>



                                SCHEDULE 3.06(a)

                                 Company Permits

          I There are certain insurance brokerage  transactions for which one of
the Company  Subsidiaries  utilizes  the  insurance  brokerage/agent  license of
another Company Subsidiary.





                                       9
<PAGE>


                                SCHEDULE 3.06(b)

                                   Compliance

                                      None.








                                       10
<PAGE>


                                  SCHEDULE 3.08

                             Undisclosed Liabilities

                                      None.



                                       11
<PAGE>


                                  SCHEDULE 3.09

                      Absence of Certain Changes or Events

                                      None.





                                       12
<PAGE>


                                  SCHEDULE 3.10

                                   Litigation


          1.  Ivory  Holding  v.  Program   Brokerage   Corporation  and  Claims
Administration Corporation.

          2. National Casualty v. Claims  Administration  Corporation,  Old Lyme
Insurance Company of Rhode Island, Inc., Classic Realty, et al.

          3. Lefstan Realty v. Claims  Administration  Corporation  and Old Lyme
Insurance Company of Rhode Island, Inc.

          4. National Casualty v. Claims  Administration  Corporation,  Old Lyme
Insurance Company of Rhode Island, Inc., 910 Southern Realty, et al.

          5. National Casualty v. Claims  Administration  Corporation,  Old Lyme
Insurance Company of Rhode Island, Inc., Norwax Associates, et al.

          6. National Casualty v. Claims  Administration  Corporation,  Old Lyme
Insurance Company of Rhode Island, Inc., Fein Property Management Corp.

          7. National Casualty v. Claims  Administration  Corporation,  Old Lyme
Insurance Company of Rhode Island, Inc., RSG Properties.

          8. Perry v. United Harlem v. Kaye Insurance Associates, Inc.

          9. Dezer Properties v. Kaye Insurance Associates, Inc.

          10. Citiwide Cleaning v. Kaye Insurance Associates, Inc.

          11. Forman v. Kaye Insurance Associates,  Inc. and Kaye Corporation of
Connecticut.

          12. City of Glen Cove v. Kaye Insurance Associates, Inc.

          13. Marcial v. BB & BB Mgmt.

          14. WSR v. the Company.

          15. Bastian v. Claims Administration Corporation.

          16. Clarendon v. the Kaye Insurance Associates, Inc.

          17. American Federal Group v. Kaye Insurance Associates, Inc.



                                       13
<PAGE>


          18. Feinberg v. Kaye Insurance Associates, Inc.

          19.  CGS  v.  Program   Brokerage   Corporation   and  Kaye  Insurance
Associates, Inc.

          20. Kaye-Western Insurance & Risk Services, Inc. v. Howell.

          21. Joseph v. Kaye Insurance Associates, Inc.

          22. TPS NY v. Kaye Services Corporation.

          23.  Certain  subsidiaries  were  the  subject  of  an  administrative
investigation commenced in 1992 by the New York Insurance Department relating to
how property  insurance  policies  were issued for the  Residential  Real Estate
Program.  While  the  Company  had  discussions  with  the  New  York  Insurance
Department regarding  settlement of such investigation  several years ago, there
have been no recent discussions or activity relating to this matter.







                                       14
<PAGE>



                                SCHEDULE 3.11(a)

                              Company Benefit Plans



Plan                                                Provider / Administrator

Life                                                      US Life
                                                          Guardian Life

Accidental Death & Dismemberment                          AIG Life

Travel Accident                                           AIG Life

Voluntary Life                                            US Life

Health                                                    Anthem Health Plan
                                                          Blue Chip RI

Dental                                                    Prudential / Antnauhsc

Vision                                                    Davis Vision

Short Term Disability                                     Arista

Long Term Disability                                      Prudential

Long Term Care                                            First Union

401(k) Plan                                               Stanwich Benefits

Flexible Spending Account                                 BAI

Stock Performance Plan

Amended and Restated Stock Option Plan

Severance Benefits Plan

Kaye International, L.P. Pension Plan --
terminated on July 1, 1995



                                       15
<PAGE>


                                SCHEDULE 3.11(b)

                             Certain Types of Plans



          1. Severance Benefits Plan.

          2. Amended and Restated Stock Option Plan.

          3. Stock Performance Plan.

          4. See Schedule 3.11(g).


                                       16
<PAGE>


                                SCHEDULE 3.11(c)

                                   Compliance


          The Kaye  Retirement  Savings  Plan  failed  to  enforce  the terms of
certain loans to participants made under such plan which were not timely repaid.



                                       17
<PAGE>


                                SCHEDULE 3.11(g)

                               Severance Payments

          1. Upon  involuntary  termination of employment,  without cause,  as a
result of a sale or merger,  employees receive one-half of one week's basic rate
of pay for each  completed  full year of service,  up to a maximum of two week's
pay.  Each  effected  employee  who  executes a release and waiver  receives one
week's base rate of pay for each year of service, with no maximum.

          2. The following individuals are each a party to a severance agreement
with the Company in lieu of any  severance  such  individual  may be entitled to
under his or her  employment  agreement:  Michael  Sabanos,  Marc Cohen,  Damian
Testa, Tom Tran, Peter Scavetta, Ivy Fischer and Robert Pachner.

          3. The Employment  Agreements of the individuals  listed below contain
severance provisions:

          (a) Robert Munao
          (b) John Schimpf
          (c) Michael Zeldes
          (d) Michael Sabanos
          (e) Bruce Guthart
          (f) Daniel Keane
          (g) Douglas Schenendorf
          (h) Alex Seaman

          4. The  consummation  of the  Transaction  will  result in payments to
insiders of Restricted Stock pursuant to Section 2.07 of the Agreement.

          5. The  consummation  of the  Agreement  will  constitute a "Change of
Control" under the Severance  Benefits Plan, the Stock  Performance Plan and the
Amended and Restated Stock Option Plan.






                                       18
<PAGE>



                                SCHEDULE 3.12(a)

                               Material Contracts

          1. Loan  Agreement by and between the Company and Summit  Bank,  dated
June 24, 1998.

          2. Letter  Agreement,  dated July 26, 2000,  relating to investment in
Savoy at Staten Island Limited Partnership.

          3.  Subscription  Agreement  between  We  Media,  Inc.  and  Old  Lyme
Insurance Company of Rhode Island, Inc. dated January 2, 2001.

          4. Common  Stock  Purchase  Warrants  issued by  Cyber$ettle,  Inc. to
Claims Administration Corporation.

          5. Stock Purchase Letter between Claims Administration Corporation and
ApartmentSource.com, Inc. dated August 15, 2000.

          6. Subscription Agreement between Catterton Partners IV, L.P. and Kaye
Insurance Associates, Inc. dated August 20, 1999.

          7. Asset Purchase  Agreement  among Kaye Insurance  Associates,  Inc.,
Seaman, Ross & Weiner, Inc., Amsco Coverage Corp. and D.S.I.  Associates,  Inc.,
Douglas Schenendorf and Alex Seaman dated as of January 1, 1999.

          8. Employment agreements, excluding bonuses and commissions, with each
of the following  people (it should be noted that standard  producers not listed
below can potentially earn commissions  which bring them over $100,000 in annual
compensation ):

          (i)     Lawrence Greenfield
          (ii)    Howard Kaye
          (iii)   Ivy Fischer
          (iv)    Michael Sabanos
          (v)     Damian Testa
          (vi)    James Hutchinson
          (vii)   Nancy Lehtinen
          (viii)  Norman Newman
          (ix)    Peter Page
          (x)     Peter Scavetta
          (xi)    Julie Slinger
          (xii)   Guy Warner
          (xiii)  Marc Cohen
          (xiv)   Bruce Guthart
          (xv)    Ronald Apel


                                       19
<PAGE>

          (xvi)   Jane Baratz
          (xvii)  Tamara Igel
          (xviii) Robert Munao
          (xix)   Jeffrey Rubin
          (xx)    Douglas Schenendorf
          (xxi)   Alex Seaman
          (xxii)  Roslyn Spiegel
          (xxiii) John Warren
          (xxiv)  Michael Zeldes
          (xxv)   Christopher Brady
          (xxvi)  Frank Delucia
          (xxvii) Edmund Dunst
          (xxviii)Mary Jeanne Egleston
          (xxix)  Frederica O'Connor
          (xxx)   Tom Tran
          (xxxi)  Daniel Keane
          (xxxii) Michael LoStocco
          (xxxiii)Robert Pachner
          (xxxiv) John Schimpf

          9. Purchase Agreement among Kaye Corporation of Connecticut, Daniel V.
Keane Agency, Inc. and Daniel F. Keane dated as of August 1, 1998.

          10. Purchase  Agreement  among Kaye Insurance  Associates,  Inc., Laub
Group of Florida,  Inc.,  Robert Virtue and Susan Striker dated as of January 1,
2000.

          11. Settlement Agreement among Kaye Insurance  Associates,  Inc., FIA,
Inc.,  Broken & Unwritten,  Inc. and Robert E. Williams  dated as of October 15,
1999.

          12. Agreement  between Claims  Administration  Corporation and Sun TV,
Inc. dated February 14, 1994.

          13. Agreement  between the Company and First Insurance  Funding Corp.,
relating to the Council of Insurance Agents and Brokers.

          14. Co-Branding Agreement between Kaye Insurance Associates,  Inc. and
We Media Inc. dated April 14, 2000.

          15. Agreement  between Kaye Insurance  Associates,  Inc. and Newmark &
Company Real Estate, Inc. dated March 2, 2000.

          16. Agreement  between   AlphaRisk   Management   and  Kaye  Insurance
Associates, Inc. dated August 1995.

          17. Premium   Finance  Disclosure  Statement  and  Security  Agreement
between Program  Brokerage  Corporation and AI Credit Corp.,  dated December 22,
1999.

                                       20
<PAGE>

          18. Guarantee by Program  Brokerage  Corporation of Indebtedness to AI
Credit Corp. dated December 22, 1999.

          19. Commercial   Note  between  AI  Credit  Corp.,   Kaye  Insurance
Associates, Inc., and the Company.

          20. All inter-company loans identified in Section 3.18.

          21. Loan Agreement between Old Lyme Insurance Company of Rhode Island,
Inc. and Program Brokerage Corporation dated June 1, 2000.

          22. Loan Agreement between Old Lyme Insurance Company of Rhode Island,
Inc. and Kaye Insurance Associates, Inc. dated March 17, 1999.

          23. Letter  Agreement  between the Company and ZS Fund LP, dated as of
January 5, 2001.

          24. Agreement  between Kaye Insurance  Associates,  Inc. and Alexander
Fisher, effective January 1, 1999, previous agreement between the parties, dated
May 1, 1997.

          25. Letter Agreement,  dated January 27, 2000, between the Company and
Fox-Pitt, Kelton Inc.

          26. Program License Agreement between Virtual Research Corporation and
Kaye Insurance Associates, Inc. dated February 24, 1997.

          27. Co-Branding   Agreement  between  Kaye  Insurance  Associates  and
b2bStores.com, Inc. dated April 14, 2000.

          28. Program  Agreement   between  PricewaterhouseCoopers  LLP and Kaye
Insurance Associates, Inc. dated as of August 11, 2000.

          29. Netmarketing Services Agreement between Kaye Insurance Associates,
Inc. and Netmarketing, LLC dated December 3, 1999.

          30. Letter     Agreement     between    Kaye    Group    Inc    and
BusinessDevelopment.com, LLC dated November 14, 2000.

          31. Agreement    between    BenefitPoint,   Inc.  and  Kaye  Insurance
Associates, Inc. dated April, 2000.

          32. All Real Property Leases identified in Section 3.14(a).



                                     21
<PAGE>

          33. Agreement  between  Kaye  Insurance  Associates,  Inc. and Tobron
Office  Furniture  Corp.  relating to the  purchase of  furniture  for  Arcadia,
California and Long Island, New York offices dated August 2000.

          34. Unexecuted  Proposal between Kaye Insurance  Associates,  Inc. and
Bergon  Construction  Corp.  relating to construction of offices on Long Island,
New York dated October 2000.

          35. Interim Operating  Agreement  between Risk Data Services,  LLC and
Kaye Insurance Associates, Inc. (internet exchange) dated December 1, 2000.

          36. Agreement  between  Willis North America Inc. and Kaye  Insurance
Associates, Inc. effective February 1, 2001. Note: Not yet signed.

          37. Amended and Restated Stock Option Plan.

          38. Annual Incentive Plans, including MAIP and SAIP.

          39. Stock Performance Plan.

          40. 401(k) Retirement Savings Plan

          41. Purchase Agreement by and between Kaye Insurance Associates,  Inc.
and Setnor Byer Bogdanoff Inc. made and entered into as of March 1, 2000.

          42. Agreement  between Claims  Administration  Corporation and Fischer
Fiden & Norris, LLP, dated February 1, 1995.

          43. Acquisition  Agreement by and among Old Lyme Holding  Corporation,
Kaye  International  L.P.,  and Kaye  Holding  Corp.  dated as of August 3, 1995
(Indemnity Agreement - Section 7.1).

          44. Kaye Insurance  Associates,  Inc. has service fee agreements  with
the following entities (clients) for more than $100,000 per year:

          (a)      UJA/FOJP
          (b)      Combined Coordinating Council
          (c)      Tishman Construction Corp.
          (d)      Niagra La Salle
          (e)      Broadwall Management
          (f)      RCPI Trust
          (g)      Arcade Cleaning
          (h)      Chelsea Property Group




                                     22
<PAGE>

          45. The  Company  has entered  into a letter  agreement  with Bruce D.
Guthart,  a Stockholder and the Company's Chief Executive  Officer,  pursuant to
which the Company will pay Mr.  Guthart a bonus of up to $750,000  (but not less
than $716,000) immediately prior to the Effective Time.

          46. Pledge Agreement between Old Lyme Insurance Company,  Ltd. and The
Bank of Bermuda Limited dated February 17, 1993.








                                       23
<PAGE>


                                  SCHEDULE 3.13

                              Environmental Matters

                                      None







                                       24
<PAGE>


                                SCHEDULE 3.14(a)

                               Title to Properties

A. Liens

          1. Liens in favor of Summit Bank pursuant to the Loan Agreement by and
between the Company and Summit Bank, dated June 24, 1998.

          2.  Inter-company  liens in favor of Old Lyme Holding  Corporation  by
each of:

          (a)      Kaye Insurance Associates L.P.
          (b)      The Kaye Group, Inc.
          (c)      Kaye Corporation of Connecticut
          (d)      Kaye Insurance Services of California, Inc.
          (e)      Kaye Corporation of Connecticut

          3. Liens in favor of The Bank of Bermuda Limited relating to a line of
credit with an outstanding balance of approximately $700,000.

          4. Liens  granted  pursuant to the Pledge  Agreement  between Old Lyme
Holding  Corporation  and Shawmut Bank  Connecticut NA dated as of June 30, 1994
(the underlying line of credit has been paid off).

          5. Liens securing  obligations  under equipment leases in the ordinary
course of business.

          6. Liens arising in the ordinary course of business.


B.  Owned  Real Property

          1.  Condominium  located at 175 Metro Center Blvd.,  Suite 10, Warwick
Rhode Island 02886.

C.  Leased Real Property

          2. Sublease Agreement among Walter Kaye Associates,  Inc. and Phillips
Healthcare Communications,  Inc. and Jay Michael Wolff Advertising, Inc. made as
of April 15, 1996.

          3. Office  Sublease  made by and  between  Crawford & Company and Kaye
Insurance Associates, Inc. dated as of February 23, 1999.

          4.  Agreement  of  Lease  between   Lexington  Avenue  &  42nd  Street
Corporation  and Kaye  Insurance  Associates,  Inc. (as successor to Walter Kaye
Associates,  Inc.) made of as May 1, 1991,  amended by Letter Agreement dated as
of May 1, 1991, Letter Agreement dated


                                       25
<PAGE>

December  1,  1991,  Amendment  of Lease  made as of July 14,  1992,  and Second
Amendment of Lease made as of August 1, 1997.

          5. Lease  Agreement  between  1221 Post Road East  Associates  Limited
Partnership and Kaye Corporation of Connecticut made as of July 9, 1997.

          6.  Agreement  of Lease  between  Oyster Bay  Properties  LLC and Kaye
Insurance Associates, Inc. made as of March 13, 2000.

          7. Agreement  between  Landmark 302 Holdings L.L.C. and Kaye Insurance
Associates Inc.

          8. Office Lease  entered into by and between  Arcadia  Gateway  Centre
Associates, Ltd. and Kaye-Western Insurance & Risk Services, Inc. dated June 30,
2000, amended by Addendum No. 1 to Office Lease dated July 19, 2000.

          9.  Sublease  by and  between  Kaye  Insurance  Associates,  Inc.  and
Cybersettle.com, Inc. made as of April 2000.

          10.  Agreement of Lease by and between Old Lyme  Insurance  Company of
Rhode Island, Inc. and Program Brokerage Corp. dated April 15, 1992.

          11.  Sublease by and between Kaye  Insurance  Associates,  Inc. and 5B
Technologies Corporation made as of August 31, 2000.




                                       26
<PAGE>


                                  SCHEDULE 3.18

                             Affiliate Transactions

          1.  International  Advisory  Services,  Ltd., an insurance  management
company located in Bermuda of which Daniel  Ezekiel,  a Director of the Company,
and an officer of Old Lyme Insurance Co., Ltd., is a director,  provides various
management  services  to Old Lyme  Insurance  Co.,  Ltd.,  a  subsidiary  of the
Company.  During 1997,  1998 and 1999,  Old Lyme  Insurance  Co.,  Ltd.  paid to
International  Advisory Services,  Ltd. management fees of $37,500,  $30,000 and
$20,000,  respectively. Mr. Ezekiel is also a director of an insurance brokerage
company,  H & H Reinsurance  Brokers,  Ltd.  Pursuant to a reinsurance  contract
between Old Lyme Insurance Company of Rhode Island, Inc. and unrelated insurance
carriers (Transatlantic  Reinsurance Company and USF Reinsurance Company), H & H
Reinsurance  Brokers,  Ltd. received commissions from Old Lyme Insurance Company
of  Rhode  Island,  Inc.  of  $38,114,  $0,  and $0,  in 1997,  1998  and  1999,
respectively, in connection with such contract.

          2. Ned L. Sherwood,  a Director of the Company,  is a director of, and
had shared  beneficial  ownership  of more than ten  percent of the  outstanding
common stock of Sun  Television and  Appliances,  Inc.  ("Sun").  Pursuant to an
Agreement   between   Claims   Administration   Corporation   and  Sun,   Claims
Administration  Corporation  agreed to assume  certain of the  extended  service
contracts which Sun sold in conjunction  with Sun's sale of appliances to retail
customers.   Pursuant  to  the  Agreement,   Sun  was  required  to  pay  Claims
Administration  Corporation  30% (later  modified to 35%) of the retail  selling
price of the assumed extended service contracts, payable in increments to Claims
Administration  Corporation  over the  period of the  service  contract.  Claims
Administration Corporation was then required to return to Sun, after the life of
the service contract  expired,  an amount equal to what it had received from Sun
less the  product  of  Expenses  (what  Sun  charged  to  Claims  Administration
Corporation for repairing the appliances - see the next paragraph) times 1.2. In
no event, however, would Claims Administration  Corporation earn less than 2% or
more than 3% of the retail price of the extended service contracts.  Pursuant to
a second  agreement,  the "Master Service  Agreement," Sun agreed to service the
extended service contracts assumed by Claims Administration Corporation pursuant
to the Agreement  described above. Claims  Administration  Corporation agreed to
pay Sun the cost of the repair,  less 20%. In  mid-1998,  Claims  Administration
Corporation terminated the Agreements due to Sun's failure to maintain a certain
minimum  net  worth (a  provision  of the  Agreement)  and by  failing  to remit
payments to Claims Administration  Corporation.  Soon thereafter,  Sun filed for
bankruptcy.  Claims  Administration  Corporation filed a proof of claim on March
11, 1999 for any and all amounts that are due and owing under the Agreement.

          3. Letter  Agreement  between the Company and ZS Fund LP,  dated as of
January 5, 2001.

          4. Binding Authority  Agreement made by and between Old Lyme Insurance
Company of Rhode Island, Inc. and Program Brokerage Corporation.



                                       27
<PAGE>

          5. Claims Services Agreement by and between Old Lyme Insurance Company
of Rhode  Island,  Inc. and Claims  Administration  Corporation  made  effective
January 1, 1994,  amended by Amendment to Claims  Services  Agreement made as of
July 1, 1998.

          6. Agreement to allocate expenses directly incurred by Kaye Group Inc.
for directors and officers  insurance coverage and the Delaware Franchise Tax to
Kaye Insurance  Associates,  Inc.,  Program  Brokerage Corp., Old Lyme Insurance
Company  of Rhode  Island,  Inc.,  Old  Lyme  Insurance  Co.,  Ltd.  and  Claims
Administration Corp.

          7. Agreement to allocate  expenses directly incurred by Kaye Insurance
Associates, Inc. and/or Program Brokerage Corp. to Old Lyme Insurance Company of
Rhode Island, Inc., Claims Administration Corp. and other operating subsidiaries
(except Old Lyme Insurance Co., Ltd.).

          8. Agreement to allocate the accrued  Incentive Plan expenses incurred
quarterly by Kaye Insurance Associates,  Inc. to Program Brokerage  Corporation,
Claims Administration Corp. and Old Lyme Insurance Company of Rhode Island, Inc.

          9. License Agreement between Kaye Insurance  Associates,  Inc. and Old
Lyme Insurance Company of Rhode Island, Inc. and other affiliates.

          10.  Agreement of Lease by and between Old Lyme  Insurance  Company of
Rhode Island, Inc. and Program Brokerage Corp.

          11.  Tax  Allocation  Agreement  between  Kaye  Group  Inc.  and  Kaye
Insurance  Associates,  Inc.,  Kaye-Western Ins. & Risk Services,  Western Group
Administrators  Inc., American Coverage  Administrators Inc., Old Lyme Insurance
Company of Rhode Island,  Inc.,  Kaye  Insurance  Associates,  Inc. New England,
Program Brokerage  Corporation,  Kaye Services Corporation,  Kaye Administrators
Corporation, and Claims Administration Corporation.

          12. Agreement between Old Lyme Insurance Company of Rhode Island, Inc.
and Program Brokerage  Corporation  relating to, among other things, the payment
of a brokerage commission.

          13.  Agreement  for a  $3,000,000  line of  credit  between  Old  Lyme
Insurance Company of Rhode Island, Inc. and Program Brokerage  Corporation dated
June 1, 2000.

          14. Loan Agreement between Old Lyme Insurance Company of Rhode Island,
Inc. and Kaye Insurance Associates, Inc. dated March 17, 1999.

          15. Acquisition  Agreement by and among Old Lyme Holding  Corporation,
Kaye  International  L.P.,  and Kaye  Holding  Corp.  dated as of August 3, 1995
(Indemnity Agreement - Section 7.1).

          16. Contingency  commission  agreement between Old Lyme Insurance Co.,
Ltd. and Program Brokerage Corporation.


                                       28


<PAGE>

          17. The  Company  has entered  into a letter  agreement  with Bruce D.
Guthart,  a Stockholder and the Company's Chief Executive  Officer,  pursuant to
which the Company will pay Mr.  Guthart a bonus of up to $750,000  (but not less
than $716,000) immediately prior to the Effective Time.

          18. See Employment Agreements listed in Schedule 3.12(a).




                                       29
<PAGE>


                                  SCHEDULE 3.19

                                    Insurance

         The following is a list of all policies of insurance to which each of
the Company and the Company Subsidiaries are a party or are a beneficiary or
named insured:
<TABLE>
<CAPTION>

Type of Insurance     Named Insured      Insurance Company   Policy No.         Term                          Premium
-----------------     -------------      -----------------   ----------         ----                          -------

<S>                   <C>                <C>                <C>                 <C>                           <C>
Domestic Package      The Company        Federal Insurance   0694-18-27         June 1, 2000 to               $76,388
Policy                                   Company                                June 1, 2001

Foreign Package       The Company        Federal Insurance   7324-91-22         June 1, 2000 to                $3,195
Policy                                   Company                                June 1, 2001

Workers'              The Company        Federal Insurance   Unassigned         November 1, 2000              $62,650
Compensation                             Company                                to 2001

Workers'              Program            Beacon Mutual       018805             February 25, 2000              $2,781
Compensation          Brokerage          Insurance Co.                          to 2001
                      Corporation

Workers'              Old Lyme           Beacon Mutual       004625             June 5, 2000 to                  $559
Compensation          Insurance          Insurance Co.                          June 5, 2001
                      Company of Rhode
                      Island, Inc.

Umbrella Liability    The Company        U.S. Fire           5530714218         June 1, 2000 to               $14,280
                                         Insurance Co.                          2001

Employee Fidelity     The Company        National Union      857-54-59          December 21, 1998             $16,126
                                         Fire                                   to December 21,               (annual)
                                                                                2001

Fiduciary Liability   The Company        National Union      860-44-14          January 15, 2000               $2,570
Pension Trust                            Fire Ins. Co.                          to 2001

</TABLE>

                                       30
<PAGE>



<TABLE>

<S>                   <C>                <C>                <C>                 <C>                           <C>
Directors &           The Company, [et   National Union      856-68-21          August 17, 1998              $205,000
Officers Liability    al]                Fire                                   to August 17, 2001

Excess Directors &    The Company        Continental         DOX161804337       August 17, 1998               $63,000
Officers Liability                       Casualty Ins. Co.                      to August 17, 2001

Employment            The Company, [et   American            861-42-30          April 1, 2000 to              $23,000
Practices Liability   al]                International                          April 1, 2001
                                         Specialty Lines

Employed Lawyers      The Company        American            278-44-13          February 25, 2000              $7,280
Professional                             International                          to February 25,
Liability                                Specialty Lines                        2001

Errors & Omissions    The Company, [et   American            861-79-65          July 31, 2000 to             $680,000
Liability             al]                International                          2002                         (2 years)
                                         Specialty Lines
</TABLE>




                                       31

<PAGE>


                                  SCHEDULE 3.21

                                  Labor Matters

          1. Feinberg v. Kaye Insurance Associates, Inc.

          2. Kaye-Western Insurance & Risk Services, Inc. v. Howell.



                                       32
<PAGE>


                                SCHEDULE 3.21(a)

                        Collective Bargaining Agreements

                                      None.


                                       33
<PAGE>


                                SCHEDULE 3.21(b)

            Non-Compliance With Applicable Labor and Employment Laws

                                      None.



                                       34
<PAGE>


                                  SCHEDULE 3.24

                           Title to Insurance Business

          1. Program Brokerage  Corporation:  title to insurance  accounts whose
business  is  placed  by  sub-brokerage   companies  through  Program  Brokerage
Corporation remain with such sub-brokerage companies.

          2.  James  Mauren:  title to group  insurance  policies  produced  and
serviced by James Mauren prior to the  commencement  of his employment with Kaye
Insurance Associates, Inc.



                                       35
<PAGE>


                                  SCHEDULE 3.27

                               Insurance Companies

          1. Kemper Insurance Companies

          2. American International Group

          3. RLI Insurance Company

          4. Chubb Group of Insurance Companies

          5. CGU Insurance Company

          6. Old Lyme Insurance Company of Rhode Island, Inc.

          7. Highlands Insurance Company

          8. Crum & Forster Insurance Company

          9. Discover Reinsurance Company

          10. The Hartford



                                       36
<PAGE>


                                SCHEDULE 3.30(b)

                         Insurance Company Subsidiaries


<TABLE>
<CAPTION>

 Insurance Company           Jurisdiction of      Capital Stock              Percentage of Outstanding
    Subsidiary               Incorporation          Ownership                    Insurance Company
------------------           ---------------      -------------              Subsidiary Capital Stock
                                                                                 Owned by the other
                                                                                 Insurance Company
                                                                                    Subsidiary
                                                                             --------------------------
<S>                          <C>                  <C>                                  <C>
Old Lyme Insurance Company   Rhode Island         100% owned by the Company
Company of Rhode Island,
Inc.

Old Lyme Insurance Ltd.      Bermuda              100% owned by the Company             ____

Park Brokerage Ltd.          Bermuda              100% owned by Old Lyme                  0%
                                                  Insurance Ltd.
</TABLE>


                                       37
<PAGE>


                                SCHEDULE 3.30(c)

                         Insurance Company Subsidiaries

<TABLE>
<CAPTION>

Insurance Company               Each State in which such     Each State in which such     If Non-Admitted,
-----------------               Insurance Company is an      Insurance Company is a       Approved or
                                Admitted Insurer             Non-Admitted Insurer         Disapproved
                                -----------------------      ------------------------     ----------------

<S>                             <C>                          <C>                          <C>
Old Lyme Insurance Company of   Rhode Island                 New Jersey                   "Approved"
Rhode Island, Inc.                                           New York                     "Approved"

Old Lyme Insurance Company      None                         None
Ltd.

Park Brokerage Ltd.             None                         None

</TABLE>


                                       38
<PAGE>


                                SCHEDULE 3.33(a)

                            Insurance Company Permits

                                      None.






                                       39
<PAGE>


                                SCHEDULE 3.33(b)

                                   Compliance

                                      None.







                                       40
<PAGE>


                                  SCHEDULE 3.34

                     Insurance Company Financial Statements

                                  See attached.







                                       41
<PAGE>


                                  SCHEDULE 3.35

               Undisclosed Liabilities of the Insurance Companies

                                      None.





                                       42
<PAGE>


                                  SCHEDULE 3.36

       Absence of Certain Changes with Respect to the Insurance Companies

                                      None.





                                       43
<PAGE>


                                  SCHEDULE 3.37

                          Insurance Company Litigation

          1. National Casualty v. Claims  Administration  Corporation,  Old Lyme
Insurance Company of Rhode Island, Inc., Classic Realty, et al.

          2. Lefstan Realty v. Claims  Administration  Corporation  and Old Lyme
Insurance Company of Rhode Island, Inc.

          3. National Casualty v. Claims  Administration  Corporation,  Old Lyme
Insurance Company of Rhode Island, Inc., 910 Southern Realty, et al.

          4. National Casualty v. Claims  Administration  Corporation,  Old Lyme
Insurance Company of Rhode Island, Inc., Norwax Associates, et al.

          5. National Casualty v. Claims  Administration  Corporation,  Old Lyme
Insurance Company of Rhode Island, Inc., Fein Property Management Corp.

          6. National Casualty v. Claims  Administration  Corporation,  Old Lyme
Insurance Company of Rhode Island, Inc., RSG Properties.

          7.  Ivory  Holding  v.  Program   Brokerage   Corporation  and  Claims
Administration Corporation.








                                       44
<PAGE>


                                SCHEDULE 3.38(i)

                      Insurance Company Material Contracts

          1.  Management  Services  Agreement  between  International   Advisory
Services, Ltd. and Old Lyme Insurance Co., Ltd.

          2. Agreement between Old Lyme Insurance Company of Rhode Island,  Inc.
and Program Brokerage  Corporation  relating to, among other things, the payment
of a brokerage commission.

          3. Various Investment Management Agreements between Old Lyme Insurance
Company of Rhode Island, Inc. and Monarch Financial Co.

          4. Various Investment Management Agreements between Old Lyme Insurance
Company of Rhode Island, Inc. and State Street Bank.

          5. Various Investment Management Agreements between Old Lyme Insurance
Company of Rhode Island, Inc. and Summit Bank.

          6. Various Trust Account Agreements between Old Lyme Insurance Company
of Rhode Island, Inc. and State Street Bank.

          7. Various Trust Account Agreements between Old Lyme Insurance Company
of Rhode Island, Inc. and Summit Bank.

          8. Facultative  Reinsurance  Agreement between Old Lyme Insurance Co.,
Ltd. and National Union Fire Insurance Co. of Pittsburgh, PA.

          9. Contingency  commission  agreement  between Old Lyme Insurance Co.,
Ltd. and Program Brokerage Corporation.



                                       45
<PAGE>


          10. Reinsurance agreements between Old Lyme Insurance Company of Rhode
Island, Inc. and:

              (A)   Ceded Business:

                    (i)       National  Reinsurance  Co.  --  6/20/95-12/1/98  -
                              #6234--01A/B

                    (ii)      PXRE Reinsurance Co. -- 12/1/98 until  termination
                              -- #D105

                    (iii)     Transatlantic  Reinsurance Co. and USF Reinsurance
                              Co. -- 4/15/96--12/21/97 -- #2559/96 & 97

                    (iv)      Transatlantic Reinsurance Co. -- 12/1/95--12/10/97
                              -- #2546/95 & 96

                    (v)       Transatlantic Reinsurance Co. -- 12/11/97--98 -- #
                              2546/97

                    (vi)      CNA  Reinsurance  Company Limited -- 6/1/99--00 --
                              #2546/99

                    (vii)     PXRE  Reinsurance Co. -- 9/8/98 until  termination
                              -- #D117

                    (viii)    PXRE Reinsurance Co. -- 9/8/98--9/8/99 -- #D117

                    (ix)      PXRE Reinsurance Co. -- 9/8/99--00 -- #D117C

                    (x)       PXRE Reinsurance Co. -- 10/20/98--99 --# D121

                    (xi)      PXRE Reinsurance Co. -- 10/20/99--00 -- #D121

                    (xii)     The Hartford Steam Boiler Inspection and Insurance
                              Co. -- various -- #1000251

                    (xiv)     PXRE Reinsurance Co. -- 9/1/99--00 -- #D129

                    (xv)      PXRE Reinsurance Co. -- #D130

          (B)       Assumed Business:

                    (i)       RLI Insurance  Co. -- various  (1/1/94 -- present)
                              (various programs; property & general liability)

                    (ii)      Reliance  Insurance  Co. --  various  (12/1/95  --
                              present) (AROMA -- general liability and lead)

                    (iii)     Discover  Reinsurance  Co. -- various  (12/1/95 --
                              present) (AROMA -- general liability and lead)


                    46
<PAGE>

                    (iv)      National  Union Fire  Insurance Co. of Pittsburgh,
                              PA -- 12/10/97--98 (lead)

                    (v)       Lumbermen's  Mutual  Insurance  Co. --  9/1/98--00
                              (business owner policies and commercial auto)

                    (vi)      Connecticut  Indemnity Insurance Co. -- 9/1/98--00
                              (POME)

                    (vii)     National  Union Fire  Insurance Co. of Pittsburgh,
                              PA -- 11/1/98--until terminated (PWC)

                    (viii)    Highlands Insurance Co. -- 8/1/99--00 (BOP)

                    (ix)      Genesis   Insurance  Co.  and  Genesis   Indemnity
                              Insurance Co. -- 9/1/99--00 (Hospitality program)

                    (x)       PXRE Reinsurance Co.-- (AROMA -- general liability
                              and lead)



                                       47
<PAGE>


                                  SCHEDULE 5.01

                     Conduct of Business Pending the Merger

                                      None.






                                       48
<PAGE>


                                  SCHEDULE 6.03

                           Confidentiality Agreements

          1. Mutual Non-Disclosure and Confidentiality  Agreement, dated October
24, 2000, between the Company and Hub International Limited.

          2.  Confidentiality  Agreement,  dated  December  1, 2000  between the
Company and Fairfax Financial Holdings Limited.

          3. Letter  Agreement  between the Company and ZS Fund LP,  dated as of
January 5, 2001.








                                       49

<PAGE>













                           Parent Disclosure Schedule


                        Delivered in connection with the

                          Agreement and Plan of Merger

                                      among


                           HUB INTERNATIONAL LIMITED,

                              416 ACQUISITION INC.

                                       and

                                 KAYE GROUP INC.

                          Dated as of January 19, 2001



<PAGE>



     Pursuant to the  Agreement  and Plan of Merger dated as of January 19, 2001
(the "Agreement") among Hub International  Limited  ("Parent"),  416 Acquisition
Inc. and Kaye Group Inc. (the  "Company"),  Parent hereby provides the following
information  in accordance  with the  referenced  paragraphs  of the  Agreement.
Except as otherwise limited herein, all information and disclosures contained in
this Disclosure Schedule ("Disclosure  Schedule") are made as of the date of the
Agreement,  and their  accuracy is  confirmed  only as of that date and not at a
time  thereafter.  Terms used herein and not  otherwise  defined  shall have the
meaning set forth in the Agreement.

     Every matter,  document and item referred to, set forth or described herein
under any section of this  Disclosure  Schedule shall be deemed to be disclosure
under all relevant  sections of this Disclosure  Schedule and shall be deemed to
qualify each of the  representations  and warranties of Parent in the Agreement,
to the  extent  such  matter,  document  or item may  apply.  The  headings  and
descriptions of representations  and warranties are for convenience of reference
only and are not intended  and do not alter the meaning of any  provision of the
Agreement.

     In accordance  with the Agreement,  Parent hereby  discloses to the Company
the following:



<PAGE>



                                  Section 4.04

                                 Capitalization

Executive Share Purchase Plan: In January, 1999, Parent established an Executive
Share  Purchase Plan (the "ESP Plan")  whereby  certain  employees of Parent and
subsidiaries  of Parent (the  "Participants")  have been  extended  loans ("ESPP
Loans") from Bank of Montreal  (the  "Bank") to acquire  Parent  Common  Shares.
Parent may be called upon to purchase the ESPP Loans from the Bank pursuant to a
Purchase  Agreement  between  Parent  and the Bank .  Parent  and the  employing
subsidiary  of  Parent  pay  interest  on  the  ESPP  Loans  on  behalf  of  the
Participants and the shares vest as to 10% of the number of allocated shares per
year while the  respective  Participant  continues to be employed by Parent or a
subsidiary.  Shares to be allocated to employees may be either  purchased on the
market or issued  from  treasury.  Parent is  currently  obligated  to  allocate
approximately  a further  Cdn$8,824,678  in Parent Common Shares (the  "Required
Shares") to  prospective  Participants  (including  Parent  Common  Shares to be
issued  subsequent to completion of the  transaction  referred to under "Burnham
Stewart  Purchase"  in Section  4.08 of the Parent  Disclosure  Schedule.  It is
presently  anticipated  that  the  Required  Shares  will be  obtained  from the
existing  inventory of  unallocated  shares in the ESPP Plan and from  purchases
from  shareholders  either  directly  or in the  market at then  current  market
prices.

Former  Employee:  Parent has an  obligation  in 2001 to purchase  87,062 Parent
Common Shares from a former employee (price to reflect current trading price).



<PAGE>



                                  Section 4.06

                               Permits; Compliance

Bank of Montreal:  Approval  required from Bank of Montreal in  accordance  with
Credit  Agreement  between Parent (formerly "The Hub Group Limited") and Bank of
Montreal, which consent has been obtained.



<PAGE>



                                  Section 4.08

                             Undisclosed Liabilities

Burnham Stewart Purchase: Parent has entered into a letter of intent to purchase
all of the issued and  outstanding  stock in Burnham  Stewart  Group,  Inc.,  an
insurance agency based in Michigan.  The purchase price of US$28,164,000 will be
paid as to $7,416,000 by certified  check or bank draft and  $20,748,000  by the
issuance  of Parent  Common  Shares at Cdn$17  per  share.  The  transaction  is
anticipated to close at or about March 31, 2001.

ESPP Loan Guarantees: Parent has guaranteed the ESPP Loans (see "Executive Share
Purchase Plan" under Section 4.04 of the Parent Disclosure Schedule).

Former  Employee:  See  "Former  Employee"  under  Section  4.04  of the  Parent
Disclosure Schedule.

Law Suits and  Claims  (including  Errors  and  Omissions  Claims):  Certain  of
Parent's  subsidiaries  are  subject  to claims as  summarized  in the  attached
Addendum 4.08.



<PAGE>



                                  Section 4.09

                                      Taxes

Roll-Overs:  Parent will be filing S. 85 Election  Forms with Revenue  Canada in
respect of certain  inter-company  share "roll-overs"  executed in 1999 and 2000
for corporate organizational purposes.



<PAGE>



                                  Section 4.12

                                     Brokers

Formal Valuation and Fairness Opinion:  Parent has retained an investment banker
to provide a formal valuation in respect of the Related Party Transactions and a
fairness opinion in respect of the Merger.



<PAGE>


                                  Section 4.13

                             Affiliate Transactions

Related  Party  Transactions:  Parent  will  be  completing  the  Related  Party
Transactions,   which  will  include   issuing  a  six-year   8.5%   convertible
subordinated debenture to Fairfax Financial Holdings Limited.

Management  Bonus  Agreements:  Parent is party to a Management  Bonus Agreement
with each of its operating subsidiaries whereby a portion of the profit, if any,
in the respective brokerage is allocated in accordance with a prescribed formula
to management of the respective brokerage for distribution.

Executive Employment Agreements: Certain members of the management of Parent and
its  subsidiaries  have  entered  into  employment  agreements  (the  "Executive
Employment  Agreements") with the respective employer.  The Executive Employment
Agreements  address,  inter alia,  title,  duties  compensation,  severance  and
non-competition obligations.

Leases:  Certain of Parent's subsidiaries lease premises that are owned directly
or  indirectly  by  shareholders  of  Parent.  The  terms  of  such  leases  are
commercially reasonable.



<PAGE>



                                  Section 4.15

                             Indebtedness of Parent

Indebtedness:  Parent  indebtedness  as at December 31, 2000  (exclusive  of the
indebtedness of subsidiaries) was $47,076,276 under the facility described under
Section 4.06 of the Parent Disclosure Schedule.


<PAGE>

                                                                      EXHIBIT A
                                                              [To Agreement and
                                                                 Plan of Merger]


                         EXECUTIVE EMPLOYMENT AGREEMENT

         THIS EMPLOYMENT AGREEMENT dated _________________, 2001.

BETWEEN:

                                BRUCE D. GUTHART

                                (the "Executive")

                                      -and-

                         KAYE GROUP INC., a corporation
                  incorporated pursuant to the laws of Delaware

                                 (the "Agency")

                                      -and-

                    HUB INTERNATIONAL LIMITED, a corporation
                  incorporated pursuant to the laws of Ontario

                                     ("Hub")


     In consideration of the mutual covenants and agreements  contained  herein,
the parties hereto agree as follows.

1.   Interpretation

     (1)  In this Agreement:

          (a)  "Agreement" means this agreement,  all Schedules  attached hereto
               and the amendments made hereto by written  agreement  between the
               Executive and the Agency;

          (b)  "Basic Compensation" means the compensation indicated in Schedule
               "B";

          (c)  "Benefits"  means the benefits to which the Executive is entitled
               in accordance with Schedule "B";

          (d)  "Cause"  means  (i) a  material  breach by the  Executive  of the
               provisions  of this  Agreement,  which breach shall not have been
               cured by the Executive  within thirty (30) days following  notice
               thereof by the Agency to the  Executive,  (ii) the  commission of
               gross  negligence  or bad faith by the Executive in the course of
               the  Executive's  employment,  which  commission  has a  material
               adverse  effect on the Agency or Hub, (iii) the commission by the
               Executive of a criminal act of fraud, theft


<PAGE>


               or  dishonesty  causing  material  damages to the Company or Hub,
               (iv) the Executive's  conviction of (or plead nolo contendere to)
               any felony,  or  misdemeanor  involving  moral  turpitude if such
               misdemeanor  results in material  financial harm to or materially
               adversely  affects the goodwill of the Agency or Hub, or (v) such
               other  act or  omission  that a court of  competent  jurisdiction
               declares  in a written  ruling to be a breach of the  Executive's
               responsibilities  hereunder of such  materiality  as to justify a
               termination of the Executive's employment by the Agency.

          (e)  "Good Reason" means any breach of the terms of this  Agreement by
               the  Agency  or  Hub,  including  but not  limited  to any of the
               following:

                    (i)  the   assignment   to  the   Executive  of  any  duties
               substantially  inconsistent with the Executive's positions as set
               forth on Schedule A, or a significant  adverse  alteration in the
               nature or status of the Executive's responsibilities or duties or
               the  conditions  of the  Executive's  employment  compared to the
               responsibilities,   duties  and  conditions  in  effect  for  the
               Executive's employment with respect to the business of the Agency
               immediately  prior to the date of this  Agreement,  excluding any
               isolated  and  inadvertent  action that is not taken in bad faith
               and that is remedied by the Agency or Hub, as applicable,  within
               thirty  (30) days after  receipt of notice  thereof  given by the
               Executive;

               (ii) a reduction in the Executive's Basic Compensation;

               (iii)any  failure by the Agency or Hub to require  any  successor
                    (whether   direct  or   indirect,   by   purchase,   merger,
                    consolidation or otherwise) to all or  substantially  all of
                    the business and/or assets of the Agency to assume expressly
                    and agree to perform the provisions of this Agreement in the
                    same  manner and to the same  extent that the Agency and Hub
                    would be required to perform if no such succession had taken
                    place;

               (iv) the  relocation  of the  offices at which the  Executive  is
                    principally  employed  immediately  prior to the date of the
                    Closing hereunder to a location more than 20 miles from such
                    location; and

               (v)  the  failure by the Agency or Hub to continue to provide the
                    Executive with the benefits described on Schedule B.

          (f)  "Death"  means a natural  death and,  in  addition,  is deemed to
               include a continuous  period of at least six months  during which
               time the  Executive  has not been in the  offices  of the  Agency
               during normal working hours and the  Executive's  whereabouts are
               unknown to the Agency;

          (g)  "Disability"  means the mental or physical state of the Executive
               is such that the  Executive  would be considered to suffer from a
               "total  disability" or a "disability" or to be "totally disabled"
               or  "disabled"  in accordance  with the Agency's  group  benefits
               insurance policy at the relevant time;

          (h)  "Hub" means Hub International Limited;

          (i)  "Hub Group" means Hub and the Subsidiaries;



                                      -2-


<PAGE>



          (j)  "Investment  Letter" means the investment  letter  referred to in
               item 4 of schedule D and  attached as Exhibit A hereto which will
               be  executed  and  delivered  on  the  date  hereof  between  the
               Executive and Hub.

          (k)  "Management Bonus Agreement" means, subject to item 1 of Schedule
               D hereto,  the Management  Bonus Agreement  attached as Exhibit B
               hereto  which will be executed  and  delivered on the date hereof
               between  the  Agency and Hub,  and a copy of which (as  executed)
               will be provided to the Executive;

          (l)  "Restricted  Period"  means  the  two-year  period  ending on the
               second   anniversary  of  the   termination  of  the  Executive's
               employment hereunder for whatever reason;

          (m)  "Restricted   Stock   Arrangement"   means   the  plan  or  other
               arrangement referred to in item 3 of Schedule D;

          (n)  "Schedule" means a schedule to this Agreement;

          (o)  "Section" means a section or subsection of this Agreement;

          (p)  "Services" means the positions,  duties and the  responsibilities
               set out in  Schedule  "A" to this  Agreement,  as the same may be
               amended or extended  by  agreement  of the  parties  from time to
               time;

          (q)  "Subsidiaries"  means the "subsidiary  companies",  as defined in
               the Securities Act  (Ontario),  of Hub,  including the Agency and
               Hub U.S. Holdings, Inc.;

          (r)  "Vacation" means the vacation to which Executive is entitled,  as
               contemplated in Schedule "B".

     (2)  It is agreed by and  between the  parties  hereto  that the  Schedules
          referred to herein, as itemized below and attached hereto,  shall form
          a part of this  Agreement  and this  Agreement  shall be  construed as
          incorporating such Schedules:

                  Schedule A    -    Services
                  Schedule B    -    Basic Compensation, Benefits and Vacation
                  Schedule C    -    Alternative Dispute Resolution
                  Schedule D    -    Additional Provisions

2.   Employment

     (1)  The  Agency  agrees  to  employ  the  Executive  during  the  term  of
          employment  hereunder  in  the  positions  and  with  the  duties  and
          responsibilities  set out in Schedule A and the Executive accepts such
          employment  and  represents  to the Agency that the  Executive has the
          required skills and expertise to perform the Services.

     (2)  During the term of employment hereunder the Executive agrees to devote
          the  whole  of the  Executive's  business  time and  attention  to the
          Services,  and to  the  other  activities  contemplated  in  item 1 of
          Schedule  D, in a  conscientious  and  competent  manner  and with the
          utmost integrity.

     (3)  The Executive  shall  perform the Services  primarily at the office of
          the Agency located in the City of New York, NY in the United States of
          America  and at  such  other  locations  as  the



                                      -3-


<PAGE>



          Agency's  and Hub's  reasonable  needs may dictate  from time to time,
          provided  that  the  Executive  will  not  be  required  to  move  the
          Executive's residence.

     (4)  During the term of  employment  hereunder,  Hub shall put  forth,  and
          management shall recommend, the Executive for election to the Board of
          Directors of Hub at each annual general meeting of the stockholders of
          Hub.

     (5)  During  the  term of  employment  hereunder  the  Executive  shall  be
          entitled  to the  benefits  of:  (a)  all  indemnification  provisions
          contained in the Agency's and Hub's  Certificate of  Incorporation  or
          Articles of Incorporation or by-laws, as the case may be (and for this
          purpose,  the  Agency and Hub agree  that no  amendment  shall be made
          thereto  which  materially  changes such  indemnification  provisions,
          other  than  to  enhance  the  protection   thereby  afforded  to  the
          Executive); and (b) all of the Company's insurance policies, including
          directors  and officers  liability  policies,  to the extent that such
          policies are generally applicable to other officers and directors.

3.   Remuneration and Benefits

     (1)  During  the term of  employment  hereunder  the  Agency  shall pay the
          Executive  the  Basic  Compensation  in such  payment  periods  as are
          established from time to time by the Agency for its employees, subject
          to deduction and remittance to the appropriate  governmental authority
          of all applicable taxes and other amounts.

     (2)  The  Executive  shall be entitled to and the Agency shall  provide the
          Benefits.

     (3)  The Agency shall  reimburse the Executive  for  reasonable  travel and
          other  business  expenses  incurred by the Executive in performing the
          Services, in accordance with approved budgets.

     (4)  The Executive  shall be entitled to the  Vacation,  to be scheduled at
          the mutual convenience of the parties.

     (5)  The Executive shall be entitled to participate in the Management Bonus
          Agreement  as an Eligible  Manager  (as defined  therein) on the basis
          that  notwithstanding  any  discretion  otherwise  exercisable  by the
          President  of the  Agency  as to the  payment  of  bonuses  under  the
          Management  Bonus  Agreement,  the Executive  shall receive 50% of the
          aggregate  of any  bonus  paid  thereunder  to the  Eligible  Managers
          collectively   to  a  maximum   annual   amount  equal  to  the  Basic
          Compensation  for the  period  of one  year.  The  Executive  shall be
          "President of the Agency" for purposes of the  foregoing  sentence and
          in that capacity  shall have the authority to exercise the  discretion
          as to the payment of bonuses under the Management Bonus Agreement.

4.   Property, Confidentiality and Non-Solicitation

     (1)  Property.  The  Executive  acknowledges  and agrees  that all books of
          business, policies of insurance, documents, computer records, vouchers
          and other books, papers and records connected with the business of the
          Agency or the  other  Subsidiaries  of Hub  Group,  whether  paid for,
          serviced  or produced by the  respective  corporation  of Hub Group or
          not, are the property of the  respective  corporation  and shall be at
          all times  open to the  respective  corporation  for the  purposes  of
          examination,   and  shall  be  turned  over  and  surrendered  to  the
          respective  corporation or its  representatives  upon the order of the
          respective  corporation  or on  the  termination  of  the  Executive's
          employment with the Agency for any reason whatsoever.



                                      -4-


<PAGE>



     (2)  Confidentiality.  The  Executive  acknowledges  that in the  course of
          carrying out the Executive's  duties to the Agency, the Executive will
          have access to and will be  entrusted  with  confidential  information
          concerning the business and corporate affairs of the Agency, the other
          corporations   of  Hub   Group  and   their   clients   ("Confidential
          Information"),  including  information  pertaining  to the  respective
          corporation's  relationships  with  insurance  carriers,  employee and
          producer  compensation  structures,  client  underwriting  and  policy
          renewal  information,  internal  accounting  procedures,  policies and
          information,  unique insurance  product features,  insurance  programs
          developed  by  the  respective   corporation   (with  or  without  the
          assistance  of  the  Executive),  marketing  strategies  and  employee
          training  procedures.  The  Executive  agrees  that  all  Confidential
          Information  acquired by the  Executive or disclosed to the  Executive
          shall be held in the strictest  confidence.  The  Executive  shall not
          disclose any Confidential  Information to any other person without the
          prior written consent of the respective corporation,  except as may be
          required  for the  Executive  to fulfill  the  Executive's  employment
          duties to the Agency or as may be required by law. The Executive shall
          not make use of any  Confidential  Information for the Executive's own
          benefit  or for the  benefit  of any other  person or  persons,  firm,
          partnership,  association  or  corporation  other than Hub  Group,  or
          assist others in so doing; provided that nothing herein shall prohibit
          the Executive from using Confidential Information that:

          (a)  was readily  available to the public at the time such information
               was available to the Executive;

          (b)  became  readily  available  to the  public  after  the time  such
               information  was  made  available  to the  Executive  other  than
               through a breach of this Agreement; or

          (c)  is lawfully and in good faith  obtained by the Executive  from an
               independent third party without a breach of this Agreement.

         The  Executive  acknowledges  and  agrees  that the  disclosure  of any
         Confidential  Information  to  competitors  of the  Agency or the other
         corporations  of Hub Group or to the general public in violation of the
         terms of this  Section 4(2) may be highly  detrimental  to the business
         interests of Hub Group. The Executive  acknowledges and agrees that the
         right of Hub Group to maintain Confidential Information as confidential
         in  accordance  herewith  constitutes  a  proprietary  right  that  the
         respective corporation is entitled to protect.  Unless otherwise agreed
         to by the respective corporation, all Confidential Information shall be
         and shall  remain the sole and  exclusive  property  of the  respective
         corporation  subject to the terms of this Section  4(2).  The Executive
         shall  return  to the  Agency,  forthwith  upon the  effective  date of
         termination of the  Executive's  employment for any reason  whatsoever,
         all  records  of  Confidential  Information  in the  possession  of the
         Executive  which  were  acquired  in  connection  with the  Executive's
         employment by the Agency.  The Executive  hereby agrees with the Agency
         that, in the event of any breach by the Executive of the  provisions of
         this Section 4(2), the respective  corporation(s) of Hub Group shall be
         entitled to  equitable  relief,  including an  injunction  and specific
         performance,  in any  competent  court  having  jurisdiction  over  the
         Executive,   in  addition  to  all  other  remedies  available  to  the
         respective corporation at law or in equity.

     (3)  Non-Competition and Non-Solicitation

          (a)  The Executive  covenants and agrees that the Executive  will not,
               without  the prior  written  consent  of the  Agency,  during the
               Restricted Period, either individually, in partnership,  jointly,
               or in  conjunction  with  any  other  person  or  persons,  firm,
               partnership,  association,  company,  corporation  or  any  other
               entity as  principal,  agent,  employee,  shareholder,  or in any
               other capacity whatsoever carry on or be engaged in any aspect of
               the insurance



                                      -5-
<PAGE>



               agency business in the United States,  or advise,  lend money to,
               guarantee the debts or obligations  of, or permit the Executive's
               name or any part  thereof  to be used or  employed  by any  other
               person  or  persons,  firm,  partnership,  association,  company,
               corporation  or any other  entity  engaged  in any  aspect of the
               insurance  agency business in the United States.  Notwithstanding
               the foregoing, the provisions of this Section 4(3)(a) shall not:

               (i)  apply in the event that this  Agreement is terminated by the
                    Agency  without  Cause or by the  Executive for Good Reason,
                    including in accordance with Section 5(2); or

               (ii) prohibit the Executive from directly or indirectly owning up
                    to 10% of the issued capital stock of any public company the
                    price of whose shares is quoted in a published  newspaper of
                    general circulation.

          (b)  The  Executive  agrees  that  during  the  Restricted  Period the
               Executive  shall not directly or  indirectly  approach or solicit
               any client,  employee  or  producer  of Hub Group  except for the
               benefit  of Hub  Group or  attempt  to  direct  any such  client,
               employee  or  producer  away from Hub Group,  subject to the same
               limitation  set forth in the last  sentence  of  Section  4(3)(a)
               above.

          (c)  If  the  Executive  violates  any of the  provisions  of  Section
               4(3)(b),  the  Executive  shall pay to Hub a sum equal to one and
               one-half  times  the  annual  renewal  commissions  generated  by
               clients  obtained  by  the  Executive  in  violation  of  Section
               4(3)(b).

          (d)  The amount payable by the Executive  under Section  4(3)(c) shall
               be paid in cash and as soon as it is determinable  and may be set
               off by the Agency  against any amount owing or to become owing by
               the Agency or Hub to the  Executive.  The Executive  acknowledges
               that  the  said  amount  is  a  reasonable   calculation  of  the
               respective corporation's liquidated damages given the interest of
               the  corporation  in  maintaining  its client base and the future
               profits  which  would  be  foregone  by  the  corporation  if the
               Executive  violates  the  provisions  of  Section  4(3)(b).   The
               Executive further  acknowledges that the payment by the Executive
               pursuant  to  Section  4(3)(c)  shall in no way  limit  the other
               remedies to which the respective  corporation of Hub Group may be
               entitled as a result of the Executive's breach of Section 4(3)(a)
               or (b).  Without  limiting the generality of the  foregoing,  the
               Executive recognizes that a breach by the Executive of any of the
               covenants  contained in Section  4(3)(a)  would result in ongoing
               damages to the  respective  corporation of Hub Group and that Hub
               Group may not be adequately  compensated  for such damages by the
               payment  of the  amounts  contemplated  in Section  4(3)(c).  The
               Executive  agrees  that in the event of any such  breach,  and in
               addition to any other  remedies  available to Hub Group at law or
               otherwise,  Hub shall, on behalf of the respective corporation of
               Hub Group,  be  entitled as a matter of right to apply to a court
               of  competent  jurisdiction  for  relief  by way  of  injunction,
               restraining  order,  decree or otherwise as may be appropriate to
               ensure  compliance  by  the  Executive  with  the  provisions  of
               Sections 4(3)(a) and (b).

     (4)  The  Executive  agrees  that all  restrictions  in this  Section 4 are
          necessary  and  fundamental  to the  protection of the business of the
          Agency and the other corporations of Hub Group and are reasonable. If,
          at the time of enforcement of this Section 4, a court should hold that
          the   duration,   scope  or  area   restrictions   stated  herein  are
          unreasonable under the circumstances then existing,  the parties agree
          that the maximum duration, scope or area that is reasonable under such
          circumstances  shall be substituted for the stated scope,  duration or
          area, as the



                                      -6-
<PAGE>



          case may be, and the court  shall be  allowed  to revise the  relevant
          restrictions  contained herein to cover the maximum period,  scope and
          area permitted by law.

5.   Term and Termination

     (1)  This  Agreement  and  the  term  of the  employment  of the  Executive
          hereunder shall be for an indefinite  term,  subject to termination in
          accordance with the terms of this Agreement.

     (2)  This  Agreement  and  the  term  of the  employment  of the  Executive
          hereunder may be terminated by the Agency for any reason whatsoever by
          written notice to the  Executive,  or by the Executive for Good Reason
          by written notice to the Agency,  provided that, in the event that the
          Agreement is  terminated in  accordance  with this Section  5(2),  the
          Executive shall be:

          (a)  paid the Basic  Compensation  for the period up to the  effective
               date of termination;

          (b)  paid a  portion  of the  Management  Bonus  payable  for the year
               during which the Executive's  employment is terminated calculated
               by  dividing  the  Management  Bonus for that year by twelve  and
               multiplying  it by the number or months or portions of a month of
               that  year  up  to  and  including  the  effective  date  of  the
               termination of the Executive's employment; and

          (c)  entitled  to  continue  to receive  an amount  equal to the Basic
               Compensation  and the group  insurance and  automobile  allowance
               components of the Benefits for the severance  period  hereinafter
               defined.

          For the purposes of this Section  5(2),  "severance  period" means the
          period  commencing as at the effective  date of such  termination  and
          ending on the first  anniversary of the date thereof.  Notwithstanding
          the  foregoing,  in the event that the  Executive  breaches any of the
          provisions  of Section 4,  effective as at the date of such breach the
          Executive shall cease to be entitled to any further payment,  provided
          that in no event  shall the  Executive  be paid an amount that is less
          than the  prescribed  minimum under  applicable  employment  standards
          legislation.

     (3)  Notwithstanding   Section  5(2),  this  Agreement  may  be  terminated
          immediately by the Agency for Cause, without further obligation to the
          Executive, provided that the Executive shall be entitled to receive an
          amount equal to the Basic Compensation and the Benefits to the date of
          termination.

     (4)  Notwithstanding  Section 5(2), this Agreement may be terminated by the
          Agency  on  notice  to the  Executive  due to  the  Disability  of the
          Executive, upon ninety (90) days' notice to the Executive.

     (5)  Notwithstanding  Section  5(2),  this  Agreement  shall be  terminated
          immediately  upon the  Death of the  Executive  or,  unless  otherwise
          agreed by the parties,  upon the Executive  attaining  sixty-five (65)
          years of age.

     (6)  Upon termination of this Agreement in accordance with Section 5(2) the
          Executive shall have no other claim against the Agency for damages for
          failure  to  give  reasonable  notice  or pay in  lieu  of  notice  or
          severance pay, except as set out in Section 5(2).

     (7)  In the event of termination  of this Agreement in accordance  with the
          terms hereof, the provisions of Section 4 shall continue in full force
          and effect.



                                      -7-
<PAGE>


6.   Alternative Dispute Resolution

     The parties  agree to submit any disputes to mediation in  accordance  with
     the procedures set out in Schedule C.

7.   General Provisions

     (1)  In the event any payment,  distribution  or other benefit  received by
          the  Executive   under  this   Agreement  or  any  other  contract  or
          arrangement  (including,  but not limited to, any  acceleration of the
          exerciseability  of any stock  option or the  vesting  of any stock or
          other property or any payment made to the Executive in connection with
          a change of  control  of the  Agency or Hub or any  severance  payment
          provided  herein)  (a  "Payment")  would be  subject to the excise tax
          imposed by section  4999 of the  Internal  Revenue  Code of 1986 (such
          excise tax, together with any similar tax under any new or replacement
          provision to such Section 4999, are hereinafter  collectively referred
          to as the "Excise Tax"), including any payment,  distribution or other
          benefit that when aggregated  with any other payment,  distribution or
          other  benefit  (whether or not such received or made pursuant to this
          agreement)  results  in the  imposition  of the Excise  Tax,  then the
          Executive  shall be  entitled  to  receive  an  additional  payment (a
          "Gross-Up  Payment")  in an amount  such  that  after  payment  by the
          Executive of all taxes,  including without limitation,  any Excise Tax
          or other tax imposed  upon any  amounts  received  under this  Section
          7(1), the Executive retains an amount of the Gross-Up Payment equal to
          the Excise Tax imposed upon the Payment.  All determinations  required
          to be made under  this  Section  7(1),  including  whether  and when a
          Gross-Up  Payment is required and the amount of such Gross-Up  Payment
          and the assumptions to be utilized in arriving at such  determination,
          shall be made by the Agency's independent  accounting firm which shall
          provide detailed  supporting  calculations  both to the Agency and the
          Executive  within 15  business  days of the receipt of notice from the
          Executive  that there has been or will be a Payment,  or such  earlier
          time as is requested by the Agency.

     (2)  Any and all previous agreements,  written or oral, between the parties
          hereto or on their behalf  relating to the employment of the Executive
          by the Agency,  other than the Management Bonus Agreement,  are hereby
          terminated  and  cancelled  and  each  of the  parties  hereto  hereby
          releases  and  forever  discharges  the  other  hereto of and from all
          manner of actions,  causes of action,  claims and  demands  whatsoever
          under or in respect of any such agreement.

     (3)  The provisions  hereof,  when the context permits,  shall inure to the
          benefit of and be binding  upon the heirs,  executors,  administrators
          and legal personal representatives of the Executive and the successors
          and assigns of the Agency, respectively.

     (4)  This Agreement  shall be construed in accordance  with the laws of the
          Sate of New York and the laws of the United States applicable therein.

     (5)  If any  covenant or provision of this  Agreement is  determined  to be
          void or unenforceable,  in whole or in part, it shall not be deemed to
          affect or impair the validity of any other  covenant or provision  and
          this  Agreement  shall  be  read  and  construed  as if  such  void or
          unenforceable provision were excluded from this Agreement.

     (6)  Any notice, demand, request,  consent,  approval or waiver required or
          permitted to be given  hereunder  shall be in writing and may be given
          to the party for whom it is intended by  personally  delivering  it to
          such party or by mailing the same by prepaid registered mail:

          (a)  In the case of the Agency, to:



                                      -8-
<PAGE>



                  Kaye Group Inc.
                  122 East 42nd St.
                  New York, NY
                  10168

                  Attention: Chief Financial Officer

          (b)  In the case of the Executive:

                  2794 Lindenmere Drive
                  Merrick, New York 11566

          (c)  In the case of Hub:

                  Hub International Limited
                  55 East Jackson Boulevard
                  Chicago, IL
                  60604

              Any such notice or other documents  delivered  personally shall be
              deemed to have been  received by and given to the addressee on the
              day of delivery and any such notice or other documents  mailed, as
              aforesaid,  shall be deemed to have been  received by and given to
              the  addressee  on the third  business day  following  the date of
              mailing. Any party may at any time give notice to the other or any
              change of address.

     (7)  All amounts referred to herein and in the Schedules hereto are in U.S.
          currency unless otherwise indicated.

8.   Additional Provisions

     The  provisions in Schedule D form part of this Agreement.


     IN WITNESS THEREOF the parties hereto have hereunto executed this Agreement
as of the day and year first above written.

HUB INTERNATIONAL LIMITED                    KAYE GROUP INC.
By:                                          By:
_____________________________                __________________________________

Name:                                        Name:
Title:                                       Title:
I have authority to bind the                 I have authority to bind the
corporation.                                 corporation.



                                       -9-
<PAGE>



SIGNED AND DELIVERED in the presence of: )
                                         )
                                         )
(Signature)                              )
                                         )
_________________________________________
(Print Name)                             )
                                         ) ____________________________________
_________________________________________  BRUCE D. GUTHART
(Address)



                                      -10-
<PAGE>



                                   SCHEDULE A
                                    SERVICES

The Executive shall be the President and Chief  Executive  Officer of the Agency
and in that capacity  shall perform such duties and shall have such authority as
are customary and  appropriate to those positions and as are consistent with the
duties and  authority of the Executive in connection  with his  employment  with
respect  to the  business  of the  Agency  prior to the date of this  Agreement,
including,  without  limitation,  the full authority and  responsibility for the
day-to-day management of the Agency (including hiring and firing personnel) in a
manner  consistent  with  prior  practice;  and the  Executive  shall  have such
additional  duties  and  responsibilities   consistent  with  his  positions  as
described above as the Agency,  acting reasonably,  may assign from time to time
(all of the foregoing, collectively, the "Services").



                                      -11-
<PAGE>



                                   SCHEDULE B

                               BASIC COMPENSATION


The Agency will pay the Executive an annual salary of $500,000.


                                    BENEFITS


o    Group insurance (including medical, extended health, dental, short and long
     term  disability  and life  insurance)  and such other benefits as are made
     available to employees of the Agency, provided that the Executive qualifies
     for coverage under such plans.

o    The Agency shall provide the Executive with the same additional benefits he
     received under his employment agreement dated as of January 2, 1997 (a copy
     of which  has been  provided  to the  Agency  and Hub),  including  but not
     limited to the benefits enumerated in section 2(c)(iii) thereof.


                                    VACATION


The Executive shall be entitled to a minimum of four (4) weeks vacation per year
and such  additional  vacation  as may be agreed  upon by the  parties and as is
reasonable  under all of the  circumstances,  including  the amount of  vacation
taken by other executives of similar standing in Hub Group (the "Vacation").



                                      -12-
<PAGE>



                                   SCHEDULE C

                         ALTERNATIVE DISPUTE RESOLUTION

1.   Disputes will be submitted to mediation  before a mediator in New York, New
     York as a condition  precedent to resort to litigation by any party to this
     Agreement; provided, however, any party may seek injunctive relief in court
     to  preserve  the status quo  pending  the  completion  of  mediation.  The
     mediator  shall be chosen by mutual  agreement  of the  parties;  provided,
     however,  if the  parties  are unable to agree  upon a mediator  within ten
     days,  the  mediation  shall be conducted by a mediator to be identified by
     the parties within 30 days of the execution hereof.

2.   At such time as a dispute shall arise that is submitted to mediation,  each
     of the parties shall execute such mediation agreement in such form as shall
     then be used by the chosen mediator or mediation firm for such purposes and
     shall join in a request  that the  mediator  provide an  evaluation  of the
     parties' cases and of the likely  resolution of the dispute if not settled.
     The cost of the  mediator  and  mediation  shall be  borne  equally  by the
     parties.

3    In the event  that one party to this  Agreement  is  willing  to accept the
     mediator's  proposed resolution of the dispute, if any, but the other party
     (the  "Contesting  Party")  elects to pursue claims in a court of competent
     jurisdiction  and the  determination  of the rights of the Contesting Party
     under the final judgment of the court on the Contesting Party's claim(s) is
     less  advantageous to the Contesting  Party than the  determination of such
     rights  contained  in the  mediator's  evaluation  of  such  claim(s),  the
     Contesting  Party  shall be  deemed  to have  agreed  to pay the  costs and
     expenses of litigation of such claim(s),  including  reasonable  attorneys'
     fees of the other party to the litigation.



                                      -13-
<PAGE>



                                   SCHEDULE D

                              ADDITIONAL PROVISIONS

1.   The  Executive,  the Agency  and Hub agree  that,  simultaneously  with the
     execution and delivery of this  Agreement,  the Management  Bonus Agreement
     will be  executed  and  delivered  in  substantially  the form  attached as
     Exhibit  B to  this  Agreement;  provided,  however,  that  prior  to  such
     execution and delivery that agreement will require certain modifications to
     correctly  reflect  the  understanding  of the  parties  that the  Eligible
     Employees  referred  to  therein  will be  entitled  to the  same  bonus of
     $1,333,000  in any future year in which the Agency  produces  "NIBGAIT" (as
     defined therein) of $17,571,000 and to correctly reflect the calculation of
     NIBGAIT  in  accordance  with  the  one-page  schedule  (entitled  "NIBGAIT
     Analysis")  attached  to Exhibit B.  Further,  if NIBGAIT is  affected by a
     change in the corporate  organization structure of the Agency, NIBGAIT will
     be revised.

2.   Hub hereby  appoints the Executive as the President of the U.S.  Operations
     of  Hub  International  Limited  and  the  Executive  hereby  accepts  such
     appointment,  to continue  for the duration of the  Executive's  employment
     under this Agreement,  provided that, save and except for reimbursement for
     expenses  incurred in the  fulfillment of such office,  the Executive shall
     not be  entitled  to any  further  compensation  beyond  that  contemplated
     herein.  The Executive shall perform such duties as Hub, acting reasonably,
     shall assign from time to time in connection  such position,  provided that
     such duties shall not interfere with the Executive's ability to provide the
     Services.

3.   The  Executive,  the Agency and Hub agree that promptly after the execution
     and delivery of this Agreement,  Hub will establish a restricted stock plan
     or arrangement  for the benefit of various  employees of the Hub Group (the
     "Restricted Stock  Arrangement")  pursuant to which Hub will contribute for
     the  benefit  of  certain  key  employees  of the  Company  (including  the
     Executive)  a number of shares  (the "Kaye  Agency  Shares")  of its common
     stock having a value of $3,000,000  (U.S.) with each share valued at $17.00
     (Canadian).  The  exchange  rate for  this  purpose  shall be 1.5  Canadian
     Dollars to each U.S. Dollar. The Restricted Stock Arrangement shall include
     the following provisions:

     *    One-third  of  the  Kaye  Agency  Shares  in  the   Restricted   Stock
          Arrangement shall be allocated to the Executive.

     *    The  Executive  shall have the  authority  to allocate  the  remaining
          two-thirds  of the Kaye Agency  Shares among  certain key employees of
          the Agency.

     *    The awarded stock vests as to 50% after 5 years (unless  waived by the
          executive) and 50% after 10 years.

     *    The  award  will  cease to vest if the  executive  has for any  reason
          ceased  to be an  employee  before  the  award  vests,  except  in the
          following cases:

          -    Normal retirement age (award vests fully);

          -    Dismissal without just cause (award vests fully);

          -    Death (award vests pro rata); and

          -    Long-term disability (award vests pro rata)


                                      -14-

<PAGE>





                                                        SCHEDULE D (continued)

                              ADDITIONAL PROVISIONS


4.   The  Executive  and Hub agree that,  simultaneously  with the execution and
     delivery of this  Agreement,  they shall execute and deliver the Investment
     Letter  in  the  form  attached  as  Exhibit  A and  shall  consummate  the
     transactions contemplated therein as promptly as practicable.


                                      -15-


<PAGE>

                                                                       EXHIBIT A
                                                                   [To Executive
                                                           Employment Agreement]

                            HUB INTERNATIONAL LIMITED
                             55 East Jackson Street
                             Chicago, Illinois 60604



                                                             __________ __, 2001

Mr. Bruce D. Guthart
c/o Kaye Group, Inc.
122 East 42nd Street
New York, New York 10168

              Re: Investment In Shares of Hub International Limited

Gentlemen:

     Reference is hereby made to that certain  agreement and plan of merger (the
"Merger  Agreement")  dated as of January __, 2001  between  Kaye Group Inc.,  a
Delaware  corporation (the "Company"),  Hub  International  Limited,  an Ontario
corporation  ("Hub"),  and 416  Acquisition  Inc., a Delaware  corporation and a
wholly owned  subsidiary  of Hub ("Merger  Sub"),  pursuant to which the Company
will be merged with Merger Sub (the "Merger").

     This letter agreement is being executed and delivered  simultaneously  with
the  effective  time under the Merger  Agreement and sets forth the agreement of
Bruce D. Guthart  ("Guthart"),  a stockholder and the Chief Executive Officer of
the Company,  with respect to the  investment by Guthart in shares of the common
stock, par value $.__ per share (the "Hub Common Stock"), of Hub.

     It is agreed as follows:

     1. Guthart owns  1_______  shares of the common  stock,  par value $.01 per
share (the "Company  Common Stock"),  of the Company.  Based upon that number of
shares of Company Common Stock, as a result of the Merger,  Guthart will receive
aggregate merger consideration of $______ , consisting of $______ (U.S.) in cash
and $______ (U.S.) in principal  amount of Parent  Debentures (as defined in the
Merger  Agreement);  Hub may  elect  under  the  Merger  Agreement  to reduce or
eliminate the amount of the merger consideration to be paid in Parent Debentures
and pay cash in lieu of the Parent Debentures reduced or eliminated (the


-------------------
1 All blanks will be filled in prior to signing this agreement.


<PAGE>


"Cancellation  Amount").  In the  event  that  Hub  purchases  for  cancellation
Guthart's  Parent  Indentures  for cash,  Guthart  shall  purchase Hub Shares as
referred  to below.  For the  purpose of  improving  the  parties'  overall  tax
position,  the parties  agree to consider  any  alternative  structures  for the
payment of the Hub Shares referred to below without disadvantaging either of the
parties.

     2.  Guthart  will be  entitled to a bonus from the  Company  (the  "Bonus")
immediately  prior to the effective time of the Merger,  in an amount of cash of
up to $______ (U.S.),  to be determined  pursuant to a letter agreement  between
the Company and Guthart dated January 19, 2001.

     3. (a)  Guthart  wishes to invest the entire Net Cash Amount (as defined in
paragraph 3(b) below) in shares of Hub Common Stock. Accordingly, Guthart hereby
agrees to purchase from Hub, and Hub hereby agrees to sell to Guthart,  promptly
after  receipt  by Guthart of the  merger  consideration  (and the  Cancellation
Amount,  if applicable)  and the Bonus, a number of shares (the "Shares") of Hub
Common Stock  determined by dividing the Net Cash Amount by a purchase  price of
$13 (Canadian)  (which  translates to  $8.66-2/3rds  (U.S.) at the exchange rate
agreed to by the parties).  The aggregate  purchase  price to be paid by Guthart
for the Shares  shall be the Net Cash  Amount.  Upon  purchase  as  contemplated
hereby,  each of the  Hub  Shares  shall  be duly  authorized,  validly  issued,
fully-paid and non-assessable.

     (b) For purposes of this  agreement,  the "Net Cash Amount" shall equal the
sum of (i) the total merger  consideration  of $_______ (U.S.) to be received by
Guthart  times less 25% thereof  (which  percentage  has been agreed upon by the
parties as the percentage to be used for this purpose to approximate the capital
tax rate  applicable  to  Guthart)  and (ii) the  amount of the  Bonus  less 45%
thereof (which  percentage has been agreed upon by the parties as the percentage
to be used for this purpose to approximate the combined ordinary income tax rate
applicable to Guthart).

     4. As you know, the Shares are not registered under the securities laws and
therefore  cannot  be sold or  transferred  unless  so  registered  or unless an
exemption  is  available.  Accordingly,  you may need to hold the  Shares for an
indefinite  period of time. You are acquiring the Shares for investment for your
own account and have no  understanding or arrangement to sell or transfer any of
the Shares.

     5.  The  Shares  will  be  subject  to an  escrow  agreement  (the  "Escrow
Agreement")  in  substantially  the form of Exhibit A to this letter  agreement.
Simultaneously with the purchase of the Shares,  Guthart and Hub will enter into
the Escrow Agreement with an escrow agent mutually acceptable to them.

     6. This agreement shall be governed by and construed in accordance with the
law of the state of New York  applicable to agreements  made and to be performed
entirely in New York.


                                       -2-
<PAGE>



     If the foregoing correctly sets forth our understanding, please so indicate
by signing in the space provided below.

                                       Very truly yours,

                                       HUB INTERNATIONAL LIMITED


                                       By: _________________________
                                           Name:
                                           Title:

ACCEPTED AND AGREED:


--------------------------------
Bruce D. Guthart



                                       -3-

<PAGE>


                                                                       EXHIBIT B
                                                                   [To Executive
                                                           Employment Agreement]


                           MANAGEMENT BONUS AGREEMENT

                    THIS AGREEMENT dated __________________, 2001.

BETWEEN:

                    HUB INTERNATIONAL LIMITED, a corporation  incorporated under
                    the laws of Ontario ("Hub")

                    - and -

                    KAYE GROUP INC., a corporation  incorporated  under the laws
                    of the State of Delaware (the "Agency")



          RECITALS:

A.        the Agency is a wholly owned subsidiary of Hub; and

B.        the parties wish to set out the terms and conditions pursuant to which
          certain  of the  profits  of the Agency  shall be  distributed  to the
          Eligible Managers (as hereinafter  defined),  in consideration for the
          Eligible Managers providing  management  services to the Agency and to
          Hub;

          NOW THEREFORE in  consideration of the mutual covenants and agreements
          contained in this agreement and other good and valuable  consideration
          (the receipt and  sufficiency of which are hereby  acknowledged),  the
          parties hereto agree as follows:


1.        Definitions

          In this Agreement,

          "Acquired  Agency" means any agency acquired by the Agency pursuant to
          section 5 hereof;

          "Agency"  includes the Subsidiaries of the Agency,  if any, unless the
          context otherwise requires;

          "Basic  Profit" of the Agency for any fiscal  year  means,  subject to
          section  5(a)(iii) hereof, an amount equal to 28.3% (the "Basic Profit
          Percentage")  of the  revenue of the Agency for that  fiscal year from
          all  sources,  net of brokerage  commissions  paid or payable to third
          parties.

          "Business  Day"  means any day,  other  than  Saturday,  Sunday or any
          statutory holiday in the State of New York;


<PAGE>
                                      -2-


          "Eligible  Managers" means such  individuals  identified in writing to
          Hub by Bruce D. Guthart,  the President of the Agency, who participate
          in the  management of the Agency and who Mr.  Guthart  determines  are
          entitled to compensation pursuant to this Agreement from time to time,
          collectively;

          "Net Income" means [to be developed (in  accordance  with the "NIBGAIT
          Analysis"  attached  hereto  as  Exhibit  A)  after  execution  of the
          Agreement and Plan of Merger.];

          "NIBGAIT"  of the Agency,  for any fiscal  year,  means Net Income for
          that  fiscal  year plus the  amount of any  goodwill  amortization  or
          impairment  charge,  interest expense and income taxes in each case to
          the extent such items have been deducted in the  determination  of Net
          Income for that  period;  provided,  however,  that,  anything  to the
          contrary in the foregoing notwithstanding,  in determining NIBGAIT for
          any  period,  (i) there shall be included  any  goodwill  amortization
          expense  attributable  to  deferred  charges  that arise in the normal
          course of  operations  (such as  amortization  of  computer  software,
          software  rights and related  licenses);  (ii) there shall be excluded
          any cost,  expenses or  liabilities  incurred in  connection  with the
          negotiation, execution, delivery and performance of the acquisition of
          the Agency by Hub (the  "Acquisition"),  (iii) there shall be excluded
          any brokerage or finder's commission, fees or similar compensation for
          the  Acquisition;  (iv) there shall be excluded any expenses for legal
          fees and costs  related to the  negotiation  and  consummation  of the
          Acquisition; (v) there shall be excluded any management fees, overhead
          charges or similar corporate expenses  attributable to Hub's ownership
          of the Agency whether or not such charges are actually  levied or paid
          and whether or not such charges are in accordance with Hub's customary
          practices;  (vi) there shall be excluded  any expense  relating to the
          amount of "excess  NIBGAIT over Basic Profit" to be shared between Hub
          and the Eligible  Managers  pursuant to this Agreement and (vii) there
          shall be excluded any amount relating to any cost or expense for which
          Hub  ultimately  obtains  indemnification  under the merger  agreement
          relating to the Acquisition.

          "Shortfall"  means,  from time to time, the cumulative amount by which
          the  Agency's  NIBGAIT for all fiscal  years  ending after the date of
          this  Agreement  is less than the  Basic  Profit  applicable  for such
          fiscal years, subject to reduction pursuant to section 4(a) hereof;

          "Subsidiary"  means a corporation,  partnership,  association or other
          entity that is  wholly-owned  by the Agency or by a Subsidiary  of the
          Agency; and

          "Year-End  Profitability  Bonus" means the bonus to which the Eligible
          Managers are entitled if the Agency's NIBGAIT exceeds Basic Profit, as
          set out in section 2(a) hereof.


<PAGE>
                                      -3-


2.        Year-End Profitability Bonus

          (a)       Subject to the prior payment of any Shortfall, the excess of
                    NIBGAIT  over Basic Profit for any fiscal year of the Agency
                    shall be shared between Hub and the Eligible  Managers as to
                    50% each.  This sharing shall  continue for a minimum of ___
                    fiscal  years  after  the date of this  agreement  and shall
                    commence as provided in section 2(e) below.  A "fiscal year"
                    shall mean a period beginning  January 1 and ending December
                    31 of each year.

          (b)       The Year-End  Profitability Bonus, if any, will be allocated
                    amongst  the  Eligible   Managers  in  accordance  with  the
                    instructions  provided to the Agency by the President of the
                    Agency.

          (c)       Payment of the Year-End Profitability Bonus, if any, will be
                    made on or before the date  which is thirty  (30) days after
                    completion  of the  audited  financial  statements  for  the
                    Agency for the respective fiscal year of the Agency,  but in
                    any  event  not  later  than ___ days  after the end of each
                    respective fiscal year.

          (d)       The portion of Year-End  Profitability  Bonus payable to any
                    individual  in the event that  his/her  employment  with the
                    Agency is terminated by the Agency,  without just cause,  in
                    respect  of the  year  in  which  his/her  employment  is so
                    terminated,  will be a portion  calculated  by dividing  the
                    total amount  allocated to such individual for that year (as
                    determined  under  sections  2(a) and  2(b)) by  twelve  and
                    multiplying  it by the  number of months  or  portions  of a
                    month of that year up to and including the effective date of
                    termination of the  individual's  employment.  An individual
                    shall not be entitled to share in the Year-End Profitability
                    Bonus in  respect  of any year in  which  such  individual's
                    employment  ceases  by way of the  individual's  voluntarily
                    resignation  or by termination at the instance of the Agency
                    for just cause.

          (e)       Except as may be otherwise agreed by the parties, a Year-End
                    Profitability Bonus will not be paid under this Agreement in
                    respect of the fiscal  year in which the Agency is  acquired
                    by Hub if the acquisition is completed after June 30. In the
                    case of  completion on or prior to June 30, the Agency shall
                    prepare  a   reasonable   interim   budget  for  the  period
                    commencing as at the date of closing of the  acquisition  of
                    the  Agency by Hub and ending  December  31 of the same year
                    (to be  reviewed  and  approved  by Hub)  and  the  Year-End
                    Profitability  Bonus shall be  calculated  and payable based
                    upon such interim budget.

4.        Shortfall

          Notwithstanding  the foregoing,  in the event that a Shortfall exists,
          the Shortfall shall be reduced by such amounts as otherwise would have
          been distributed to the Eligible Managers as a Year-End  Profitability
          Bonus.

5.        Acquisitions and Divestitures

          (a)       If after  the date  hereof  the  Agency  wishes  to  acquire
                    another business unit or divest itself of any business unit:

                    (i)       such  transaction  acquisition  shall be completed
                              only with the consent of Hub;
<PAGE>
                                      -4-


                    (ii)      the purchase price of any  acquisition  (including
                              related legal,  accounting and other  professional
                              fees approved by Hub) will be funded by Hub; (iii)
                              the  purchase  price  of any  divestiture  (net of
                              related legal,  accounting and other  professional
                              fees approved by Hub) will be paid over to Hub;

                    (iv)      upon  completion  of the  transaction,  the  Basic
                              Profit  will  be   increased  or   decreased,   as
                              appropriate,  in an amount to be determined in the
                              reasonable  determination  of the  Agency  and Hub
                              based on an  assessment  of all the  circumstances
                              pertaining to the transaction  including,  without
                              limitation,  the number of days of the fiscal year
                              during  which  the  Agency  was  entitled  to  the
                              revenue of the acquired or disposed  business unit
                              (from all sources),  with such determination to be
                              subject to the  concurrence  of Bruce D.  Guthart;
                              and

                    (v)       the Year-End  Profitability Bonus will be based on
                              the   operations  of  the  Agency   including  the
                              acquired  business unit and excluding the divested
                              business unit.

6.        Other Arrangements

          For greater  certainty,  in the event that the Agency  enters into any
          arrangements in respect of: (a) a captive  reinsurance company created
          to reinsure  selected  business  generated by the Agency and any other
          insurance broker owned and/or controlled by Hub, or (b) the sharing of
          net revenues in respect of any business  generated by the Agency,  any
          revenue  of the  Agency  resulting  from  such  arrangements  shall be
          included in calculating  the revenue of the Agency for the purposes of
          calculating NIBGAIT (to determine the Year-End Profitability Bonus, if
          any).

7.        Hub Covenant

          Hub  agrees  to cause  the  Agency  to  fulfill  its  commitments  and
          obligations  under this  Agreement  in  accordance  with the terms and
          conditions provided for herein.

8.        Distribution of Balance

          The net profit of the Agency, other than the Eligible Managers' Share,
          may be  distributed  or  retained  by the  Agency as Hub,  in its sole
          discretion, may determine.

9.        [Financial Benchmarks]

          [(a)      The Agency  will be  required  to prepare  and submit to the
                    Audit  Committee  of  Hub  such  information  as  the  Audit
                    Committee may reasonably  request from time to time in order
                    to allow it to perform the following functions in respect of
                    the  Agency and such other  functions  as are  typical of an
                    audit committee, including, without limitation:]

                    o         [[review executive compensation
                    o         review accounts  receivable  policies and accounts
                              receivable management
                    o         ensure adherence to generally accepted  accounting
                              principles and Hub's accounting policies
                    o         review  management of insurance company payables o
                              review  all  employee   terminations  and  related
                              documentation
                    o         review employee contracts
                    o         review   compensation   structure
                    o         compare all revenue and expense categories against

<PAGE>
                                      -5-


                              Hub's  financial  benchmarks o analyze  contingent
                              profits received
                    o         review  all  lease  contracts  and  commitments
                    o         review capital  expenditures and compare to budget
                              submitted
                    o         prepare   summary   report   with   findings   and
                              recommendations
                    o         review  selling  costs  re  eligibility   and  tax
                              deductibility]]

          [(b)      Upon the  recommendation  of Hub's Audit  Committee,  acting
                    reasonably,   the  Agency  will  adopt  and  implement  such
                    systems,  procedures  and  measures as are required to cause
                    the Agency to achieve  at least  Basic  Profit and a NIBGAIT
                    Percentage   of  [__]%,   including   to   restructure   the
                    compensation scheme of the Eligible Managers.]

10.       Notice

          (a)       Any notice or other  communication  required or permitted to
                    be given hereunder shall be in writing and shall be given by
                    prepaid  first-class  mail,  by  facsimile or other means of
                    electronic   communication   or  by  delivery  as  hereafter
                    provided. Any such notice or other communication,  if mailed
                    by prepaid  first-class mail at any time other than during a
                    general  discontinuance  of postal  service  due to  strike,
                    lockout or otherwise,  shall be deemed to have been received
                    on the fifth (5th) Business Day after the  post-marked  date
                    thereof,   or  if  sent  by  facsimile  or  other  means  of
                    electronic  communication,  shall  be  deemed  to have  been
                    received on the Business Day  following  the sending,  or if
                    delivered  by hand shall be deemed to have been  received at
                    the time it is delivered  to the  applicable  address  noted
                    below  either to the  individual  designated  below or to an
                    individual  at such  address  having  apparent  authority to
                    accept  deliveries  on  behalf of the  addressee.  Notice of
                    change of address shall also be governed by this section. In
                    the event of a general  discontinuance of postal service due
                    to  strike,   lock-out  or   otherwise,   notices  or  other
                    communications  shall  be  delivered  by  hand  or  sent  by
                    facsimile  or other means of  electronic  communication  and
                    shall be deemed to have been  received  in  accordance  with
                    this  section.  Notices  and  other  communication  shall be
                    addressed as follows:

                    (i)       if to Hub:

                              Hub International Limited
                              55 East Jackson Boulevard
                              Chicago, IL  60604

                              Attention:                General Counsel
                              Telecopier number:        (312) 279-4981

                    (ii)      if to the Agency:

                              Kaye Group Inc.
                              122 East 42nd St.
                              New York, NY  10168

                              Attention:                President
                              Telecopier number:        (212) 867-0368


<PAGE>
                                      -6-


11.       Assignment; Third Party Beneficiaries

          This  Agreement  shall not be assigned  by any of the  parties  hereto
          without the express written consent of the other parties hereto. Bruce
          D. Guthart and the other  Eligible  Managers  shall be intended  third
          party  beneficiaries  of this  Agreement  and shall  have the right to
          enforce this agreement against the parties hereto.
<PAGE>

12.       Headings

          The  inclusion  of headings in this  agreement is for  convenience  of
          reference only and shall not affect the construction or interpretation
          hereof.

13.       Invalidity of Provisions

          Each of the  provisions  contained  in this  agreement is distinct and
          severable and a declaration of invalidity or  unenforceability  of any
          such provision by a court of competent  jurisdiction  shall not affect
          the validity or enforceability of any other provision hereof.

14.       Entire Agreement

          This Agreement and the Schedule attached hereto constitutes the entire
          agreement between the parties pertaining to the subject matter of this
          Agreement.  There are no  warranties,  representations  or  agreements
          between the parties in connection  with such subject  matter except as
          specifically  set forth or referred to in this Agreement.  No reliance
          is placed on any representation,  opinion, advice or assertion of fact
          made by any party hereto or its directors, officers and agents, to any
          other party hereto or its  directors,  officers and agents,  except to
          the extent that the same has been reduced to writing and included as a
          term of this  Agreement.  Accordingly,  there  shall be no  liability,
          either  in tort or in  contract,  assessed  in  relation  to any  such
          representation,  opinion,  advice or assertion of fact,  except to the
          extent aforesaid.

15.       Waiver, Amendment

          Except as expressly provided in this Agreement, no amendment or waiver
          of this Agreement  shall be binding unless executed in writing by each
          of the parties  hereto.  No waiver of any provision of this  Agreement
          shall  constitute a waiver of any other provision nor shall any waiver
          of any  provision of this  Agreement  constitute  a continuing  waiver
          unless otherwise expressly provided.

16.       Currency

          Except as expressly  provided in this  Agreement,  all amounts in this
          agreement shall be paid in U.S. currency.

17.       Governing Law

          This agreement  shall be governed by and construed in accordance  with
          the laws of the State of New York.

18.       Counterparts

          This  agreement  may be  signed  in  counterparts  and  each  of  such
          counterparts   shall   constitute   an  original   document  and  such
          counterparts,  taken  together,  shall  constitute  one and  the  same
          instrument.


<PAGE>
                                      -8-


19.       Arbitration

          Any question,  dispute or disagreement (hereinafter referred to as the
          "Dispute") arising under or pertaining to this Agreement including the
          interpretation, application construction of this Agreement or any part
          thereof  shall  be  determined  by  arbitration  accordance  with  the
          following terms and provisions:

          (a)       the Dispute shall be submitted to a single arbitrator as may
                    be agreed upon by the parties to such Dispute, provided that
                    if a  single  arbitrator  has been  requested  by one of the
                    parties  and the  other  party  fails  to  agree on a single
                    arbitrator,  then the  Dispute may be referred to a board of
                    three (3)  arbitrators,  two (2) to be named,  as to one (1)
                    each,  by the parties and the third to be  appointed  by the
                    first two (2) named  arbitrators;

          (b)       if either  party  shall  refuse or  neglect  to  appoint  an
                    arbitrator  within  ten (10)  Business  Days after the other
                    party  shall have  appointed  an  arbitrator  and shall have
                    served a  written  notice  upon the  party  so  refusing  or
                    neglecting  to appoint an  arbitrator,  then the  arbitrator
                    first  appointed  shall  proceed to hear and  determine  the
                    Dispute as if he or she were a single  arbitrator  appointed
                    by both  parties or the purpose;

          (c)       if  two  (2)   arbitrator  are  so  named  within  the  time
                    prescribed and they do not agree within a period of ten (10)
                    Business Days upon the appointment of the third  arbitrator,
                    then  each   arbitrator   shall  prepare  a  list  of  three
                    independent  arbitrators.  Each  arbitrator  will  have  the
                    opportunity to designate as objectionable  and eliminate one
                    arbitrator from the other arbitrator's list within seven (7)
                    Business  Days  after  submission  thereof,  and  the  third
                    arbitrator   shall  then  be   selected   by  lot  from  the
                    arbitrators   remaining  on  the  lists   submitted  by  the
                    arbitrators;

          (d)       the  determination of the Dispute which shall be made by the
                    said  arbitrators  of a  majority  of  them,  or by a single
                    arbitrator,  as the case may be,  shall be final and binding
                    upon the parties hereto and the costs of the arbitration and
                    remuneration of the third  arbitrator shall be borne equally
                    between  all  parties   thereto,   each  party  bearing  the
                    remuneration of the arbitrator  appointed by it; and

          (e)       the  arbitration  shall be  conducted  under the  Commercial
                    Arbitration Rules of the American Arbitration Association as
                    in effect  from  time to time,  except  as  modified  by the
                    agreement  of the  parties  to  this  Agreement.  Except  as
                    otherwise  provided in this Section 19 or in the  Commercial
                    Arbitration Rules of the American Arbitration Association as
                    in effect from time to time, the arbitration  procedures and
                    any final determination  hereunder shall be governed by, and
                    shall be enforced pursuant to, the State of New York.


          IN WITNESS  WHEREOF the parties hereto have executed this agreement on
the date first above written.


HUB INTERNATIONAL LIMITED                  KAYE GROUP INC.



by:__________________________________      by:__________________________________
   Name:                                      Name:
   Title:                                     Title:


<PAGE>


                                                                       EXHIBIT A
                                                          [To Investment Letter]

                                ESCROW AGREEMENT

THIS AGREEMENT dated as of ___________, 2001, among:

          FAIRFAX  FINANCIAL  HOLDINGS  LIMITED,   a  corporation   incorporated
          pursuant to the laws of Canada

          ("Fairfax")

AND:

          HUB INTERNATIONAL LIMITED, a corporation  incorporated pursuant to the
          laws of Ontario

          ("Hub")

AND:

          BRUCE D. GUTHART

          (the "Shareholder")

AND:

          CIBC MELLON TRUST  COMPANY,  a trust  company  pursuant to the laws of
          Canada

          (the "Escrow Agent")

WHEREAS:

A. the  Shareholder  has agreed to deposit with the Escrow  Agent the  aggregate
number  of Hub  common  shares,  as set  forth on  Schedule  A  hereto  (and any
replacement  securities in respect thereof) (the "Escrow Property"),  to be held
by the Escrow Agent pursuant to the terms of this Agreement;

B. Fairfax is a substantial shareholder of Hub;

C. the Escrow Agent has agreed to hold the Escrow Property for Fairfax,  Hub and
the  Shareholder,  on the basis that it will release the Escrow Property subject
to the terms and conditions of this Agreement.

          NOW THEREFORE in  consideration  of the mutual  promises and covenants
contained  in this  Agreement  and other good and  valuable  consideration,  the
receipt and sufficiency of which are hereby  acknowledged,  the parties agree as
follows:


<PAGE>


                                       -2-

1.     Deposit and Escrow

          (a)       The Escrow  Agent,  as escrow agent for the parties  hereto,
                    agrees to accept the Escrow  Property from the  Shareholder.
                    The  Escrow  Agent  shall  not use the  Escrow  Property  or
                    disclose the same to any third party except as  specifically
                    provided  for herein.  The Escrow Agent will hold the Escrow
                    Property in  safekeeping  at a location  where it carries on
                    business in the City of Toronto,  Ontario,  unless and until
                    the Escrow Agent receives  notice pursuant to this Agreement
                    that  the  Escrow  Agent  is to  deliver  some or all of the
                    Escrow  Property to the  Shareholder in accordance with this
                    Agreement.

          (b)       The  parties   acknowledge  that  the  Escrow  Property  was
                    purchased  and  paid  for  by  the  Shareholder  and  is the
                    property  of the  Shareholder  subject  only to the terms of
                    this Agreement. The Shareholder shall be entitled to receive
                    directly all dividends and  distributions  on and in respect
                    of the Escrow Property (subject to the provisions of section
                    12 hereof  in  respect  of  certain  transactions  specified
                    therein)  and to vote or give  consents  with respect to the
                    Escrow  Property.  During  the  period in which  the  Escrow
                    Property  is held in  escrow  pursuant  to the  terms of the
                    Agreement,  the Escrow  Property shall remain  registered in
                    the name of the Shareholder.

          (c)       The  Shareholder  agrees that except as expressly  permitted
                    herein or except with the express written consent of Fairfax
                    and Hub, the Escrow Property and beneficial ownership of any
                    interest  therein  shall  not be sold,  assigned,  redeemed,
                    surrendered  for  consideration,   mortgaged,  hypothecated,
                    charged,  pledged,  encumbered,   alienated,  released  from
                    escrow, transferred within escrow or otherwise dealt with in
                    any  manner,  except  as may be  required  by  reason of the
                    bankruptcy  of the  Shareholder,  in which  case the  Escrow
                    Agent  shall  hold  the  Escrow  Property  subject  to  this
                    Agreement  for the  benefit  of  whatever  person  shall  be
                    legally  entitled to become the registered  owner thereof as
                    evidenced by the order of a court of competent jurisdiction.
                    The  foregoing  notwithstanding,  the  Shareholder  shall be
                    entitled to transfer the beneficial  ownership of the Escrow
                    Property to any family  member or any trust or other  entity
                    for the  benefit  of any  family  member  provided  that the
                    Escrow  Property  shall remain  subject to the terms of this
                    agreement.

2.        Payment to Escrow Agent

          As payment for its services hereunder,  the Escrow Agent shall receive
          an annual fee as agreed  upon with Hub,  and Hub shall pay said fee on
          execution of this Escrow Agreement and again within 30 days of receipt
          of the Escrow Agent's invoice while this Escrow  Agreement  remains in
          force. All reasonable  out-of-pocket  expenses  incurred by the Escrow
          Agent in performing  services under this Escrow Agreement shall be for
          the account of Hub,  and shall be paid upon  delivery of an invoice by
          the Escrow Agent.  If the fees or expenses  remain unpaid for a period
          of 120 days from the date of the  invoice,  the Escrow  Agent shall be
          entitled to release the Escrow Property to the Shareholder.

3.        Terms of Release; Free Tradability

          Subject to the terms of this  Agreement,  the Escrow  Agent shall hold
          the  Escrow  Property  until  the  Escrow  Property  is  released  and
          delivered  to the  Shareholder  on the earlier of the dates and events
          specified in sections 4 and 5. Hub shall cause any securities included
          in  the  Escrow  Property  released  to  the  Shareholder  under  this
          Agreement to be immediately  tradable (assuming such release occurs at
          least 12  months  after  the date of this  Agreement)  under  Canadian
          securities laws (either pursuant to an exemption from  registration or
          pursuant to an effective  registration  statement with respect to such
          shares) if held by a resident  of Canada and  subject in all events to
          the  assumption  that  there  have  been

<PAGE>

                                      -3-

          no material changes in the applicable provisions of Canadian
          securities  laws  from  such  laws as in  effect  of the  date of this
          Agreement.

4.        Automatic Release

          Subject to earlier  release  pursuant  to section 5, the Escrow  Agent
          shall  release and deliver to the  Shareholder:  (i) 10% of the Escrow
          Property  (based upon  number of shares) on each of the third,  fourth
          and fifth  anniversaries  of this Agreement and (ii) the remaining 70%
          of the Escrow Property on the tenth anniversary of this Agreement.

5.        Early Release

          Notwithstanding section 4, the Shareholder (or his estate, executor or
          personal  representative,  as  applicable)  shall be  entitled  to the
          release  of the  Escrow  Property  upon the  occurrence  of any of the
          following events:

          (a)       the death of the Shareholder;

          (b)       the  Shareholder  suffering  a  disability,  as such term is
                    defined in the Shareholder's  employment agreement with Kaye
                    Group Inc.;

          (c)       the  Shareholder  ceasing to be an  employee  of Hub and its
                    subsidiaries   due  to  termination  by  the   Shareholder's
                    employer,  without  "Cause"  (as  defined in the  employment
                    agreement  being  entered into by the  Shareholder,  Hub and
                    Kaye Group  Inc.)  (the  "Employment  Agreement")  or due to
                    termination by the Shareholder for "Good Reason" (As defined
                    in the Employment Agreement); or

          (d)       the  Shareholder  receiving the express  written  consent of
                    Fairfax and Hub.

          In addition to the release  provisions  provided for in section 6, the
          Escrow Agent shall release the Escrow  Property upon Hub providing the
          Escrow  Agent  with  written  notice of the  occurrence  of any of the
          foregoing events.

6.        Release Notice

          The  Shareholder  is entitled  to give  written  notice (the  "Release
          Notice")  to the  Escrow  Agent  seeking  release of any of the Escrow
          Property at any time by reason of the  occurrence of any of the events
          set out in section 5 of this Escrow  Agreement.  The Shareholder shall
          certify to the Escrow Agent that the Shareholder has contemporaneously
          delivered  a copy of the  Release  Notice to both  Fairfax and Hub, by
          telecopier  or personal  delivery at the  addresses for notice set out
          herein.  The Release  Notice  shall,  at the minimum,  (i) be labelled
          "Release Notice",  (ii) identify this Escrow Agreement,  (iii) specify
          the reason for the request for release of any of the Escrow  Property,
          (iv) identify the Escrow  Property which the  Shareholder  claims with
          reasonable  specificity,  and (v) request the  delivery of such Escrow
          Property.

7.        Challenge to Release Notice

          Upon receipt of its copy of a Release Notice, if Fairfax or Hub wishes
          to dispute the  Release  Notice,  it shall,  within ten days after the
          receipt of the copy of the Release Notice, deliver to the Escrow Agent
          and the  Shareholder a sworn statement (the  "Affidavit")  saying that
          the  Shareholder is not entitled to the release of the Escrow Property
          claimed and setting out its reasons for such  dispute,

<PAGE>


                                       -4-

          whereupon the provisions of section 8 of this Agreement will apply. If
          the Escrow Agent receives the Affidavit within ten days of its receipt
          of its copy of the Release Notice,  the Escrow Agent shall continue to
          hold the Escrow Property in accordance with this Escrow Agreement.  If
          the Escrow Agent does not receive the Affidavit within ten days of its
          receipt  of its  copy of the  Release  Notice,  the  Escrow  Agent  is
          authorized  and  directed  to  deliver  the  Escrow  Property  to  the
          Shareholder.

8.        Disputes

          In the event that Fairfax or Hub delivers the  Affidavit to the Escrow
          Agent in the manner and within the time  period set forth in section 7
          of this  Agreement,  the Escrow  Agent  shall not  release  the Escrow
          Property to the Shareholder except in the following circumstances:

          (1)       pursuant to the final  decision of an  arbitration  panel as
                    provided for in section 9;

          (2)       upon receipt of an agreement  with  authorized and notarized
                    signatures of Fairfax, Hub and the Shareholder,  authorizing
                    the release of the Relevant Escrow Property;

          (3)       pursuant to the automatic  release  provisions of section 4;
                    or

          (4)       in the event of  failure  by  Fairfax  and Hub to appoint an
                    arbitrator pursuant to section 9.

9.        Arbitration

          Disputes  arising  under  this  Escrow  Agreement  shall  be  referred
          immediately   to,  and  be  settled  by,  binding   arbitration.   The
          arbitration  panel  shall  consist of three  persons.  Fairfax and Hub
          (acting   together)  and  the  Shareholder   shall  each  appoint  one
          arbitrator  within  15  days  of  receipt  by the  Shareholder  of the
          Affidavit,  and the two arbitrators  thereby  appointed shall select a
          third arbitrator within 15 days of their  appointment.  If Fairfax and
          Hub fail to appoint an arbitrator in  accordance  with the  foregoing,
          the  Shareholder  shall so notify the Escrow Agent,  with copy of such
          notice  to  Fairfax  and  Hub,  and the  Escrow  Agent  shall  proceed
          forthwith  as  though  it  had  not  received  the  Affidavit.  If the
          Shareholder  fails to appoint an  arbitrator  in  accordance  with the
          foregoing, Fairfax and Hub shall so notify the Escrow Agent, with copy
          of such  notice to the  Shareholder,  and the Escrow  Agent  shall not
          release  the  Escrow  Property  to  the  Shareholder  until  otherwise
          permitted  or called for pursuant to this Escrow  Agreement  (it being
          understood  that nothing in this  provision  shall  prevent the Escrow
          Agent from  delivering the Escrow  Property  pursuant to the automatic
          release  provisions of section 4). The arbitration  shall be conducted
          in Toronto,  Ontario at a location  mutually agreed to by the parties,
          or, in the event  that  they  cannot  agree  within  two days,  as the
          arbitration  panel may decide, in accordance with the Arbitration Act,
          1991  (Ontario).  The Escrow  Agent  shall give  prompt  effect to any
          arbitration  award, and shall be protected in acting,  notwithstanding
          the right of either party to seek,  in any court  having  jurisdiction
          thereof,   enforcement  of  a  stay  of  any  award  rendered  by  the
          arbitration panel.

10.       Resignation of the Escrow Agent

          The  Escrow  Agent may  resign  as  escrow  agent  under  this  Escrow
          Agreement without liability whatsoever for such termination, on giving
          no less than thirty (30) days' written notice to each of Fairfax,  Hub
          and  the  Shareholder  of  the  effective  date  of  resignation  (the
          "Effective  Date").  In the event of  resignation by the Escrow Agent,
          Hub may  appoint  a  replacement  escrow  agent,  provided  that  such
          replacement  shall be a chartered  bank or trust  company  entitled to
          carry on business as such in the  Province of Ontario,  who will agree
          to  accept  the  Escrow  Property  and be bound  by the  terms of this
          Agreement  as  Escrow  Agent.  If  within  thirty  (30)  days from the
          Effective Date a replacement


<PAGE>

                                       -5-

          escrow agent has not been  appointed,  the Escrow Agent may apply to a
          court of competent  jurisdiction  at Hub's expense for the appointment
          of a  successor  escrow  agent.  If no  replacement  Escrow  Agent  is
          appointed  within  90 days of the  Escrow  Agent  providing  notice as
          provided in this  section,  the Escrow Agent shall  deliver the Escrow
          Property  to the  Shareholder,  and all of the Escrow  Agent's  duties
          hereunder shall cease immediately.

11.       Dividends, Distributions and Voting

          The escrow of the  Escrow  Property  as  contemplated  in this  Escrow
          Agreement  will not impair any right of the  Shareholder  to receive a
          dividend or other  distribution on the Escrow Property or to elect the
          form or manner in which a dividend or other distribution on the Escrow
          Property  will be paid.  If,  during  the  period  in which any of the
          Escrow  Property  is  retained  in  escrow  pursuant  to  this  Escrow
          Agreement, any distribution (other than a distribution of securities )
          is  received  by the Escrow  Agent in respect of the Escrow  Property,
          such  distribution  shall be held in trust  for and on  behalf  of the
          Shareholder and forthwith paid or transferred to the Shareholder.  Any
          distributions of securities received by the Escrow Agent in respect of
          the Escrow  Property  shall be held in escrow by the  Escrow  Agent in
          accordance  with the provisions of this  Agreement.  The escrow of the
          Escrow  Property as  contemplated  herein will not impair any right of
          the  Shareholder  to exercise  voting  rights  attaching to the Escrow
          Property.

12.       Rights in Respect of Certain Transactions

          (1)       If the  Shareholder  wishes to tender  certain of the Escrow
                    Property (the "Tendered  Securities")  to a bona fide formal
                    take-over bid, plan of arrangement,  amalgamation, merger or
                    similar transaction (a "Transaction"), the Shareholder shall
                    deliver to the Escrow Agent:

                    (a)       a written  direction  signed by the Shareholder (a
                              "Direction")  that  directs  the  Escrow  Agent to
                              deliver  to a  specified  person or  company  (the
                              "Depositary") either:

                              (i)       certificates   evidencing  the  Tendered
                                        Securities; or

                              (ii)      where the  Shareholder  has provided the
                                        Escrow Agent with a notice of guaranteed
                                        delivery   or  similar   notice  of  the
                                        Shareholder's   intent  to  tender   the
                                        Tendered  Securities to the Transaction,
                                        that notice,

                    together with a letter of  transmittal  or similar  document
                    and, where  required,  a transfer and power of attorney duly
                    executed for transfer, and any other documentation specified
                    or provided by the  Shareholder and required to be delivered
                    to the Depositary under the terms of the Transaction; and

                    (b)       such other  information  concerning or evidence of
                              the Transaction as the Escrow Agent may reasonably
                              require.

          (2)       Forthwith   after  its  receipt  of  the   information   and
                    documentation  specified in section 12(1),  the Escrow Agent
                    will  deliver  to the  Depositary,  in  accordance  with the
                    Direction,  the  documentation  specified or provided  under
                    Section  12(1),  together  with a  letter  addressed  to the
                    Depositary that:

                    (a)       identifies the Tendered Securities;

                    (b)       states that the  Tendered  Securities  are held in
                              escrow;

<PAGE>
                                      -6-


                    (c)       states that the Tendered  Securities are delivered
                              only for the purposes of the  Transaction and that
                              the  Tendered  Securities  will be  released  from
                              escrow  only upon  receipt by the Escrow  Agent of
                              the information described in Section 12(3) hereof;

                    (d)       where  certificates  for Tendered  Securities have
                              been  delivered  to the  Depositary,  requires the
                              Depositary to return to the Escrow Agent,  as soon
                              as  practicable,   the   certificates   evidencing
                              Tendered  Securities  that are not releasable from
                              escrow as described in clause (c) above; and

                    (e)       where  applicable,   requires  the  Depositary  to
                              deliver or to cause to be  delivered to the Escrow
                              Agent,  as soon as practicable,  the  certificates
                              representing    securities    acquired    by   the
                              Shareholder   in   exchange,    substitution    or
                              consideration for the Tendered Securities pursuant
                              to the Transaction (the "Replacement Securities").

          (3)       The Tendered  Securities  will be released  from escrow upon
                    receipt by the Escrow Agent of a  declaration  signed by the
                    Depositary or, if the Direction identifies the Depositary as
                    acting on behalf of another  person or company in respect of
                    the Transaction, by that other person or company, that:

                    (a)       the terms and conditions of the  Transaction  have
                              been met; and

                    (b)       the Tendered  Securities have either been taken up
                              and paid for or are  subject  to an  unconditional
                              obligation  to be taken up and paid for  under the
                              Transaction.

          (4)       The  Escrow  Agent  shall  hold any  Replacement  Securities
                    acquired by the Shareholder under a Transaction in escrow on
                    the same terms and conditions,  including  release dates, as
                    applied  to  the  Escrow   Property   for  which  they  were
                    exchanged,   substituted  or  for  which  they   constituted
                    consideration;  provided,  however,  that in any Transaction
                    that  would  result  in the  Shareholder  incurring  any tax
                    liability,   the  Escrow  Agent  shall   distribute  to  the
                    Shareholder such amount of the Replacement Securities having
                    a value equal to such tax liability.

          (5)       Notwithstanding  anything to the contrary  contained herein,
                    if all or any portion of the  consideration for the Tendered
                    Securities  received  pursuant to the  Transaction  includes
                    cash and such cash is paid to the  Escrow  Agent,  such cash
                    shall be released  from the escrow  herein and  delivered to
                    the Shareholders as soon as practicable after receipt by the
                    Escrow Agent.

13.       Limitation on Escrow Agent's Responsibility and Liability

          (1)       Limitation  on  Obligations:  The Escrow  Agent shall not be
                    obliged or required to inspect the Escrow Property and shall
                    not be obligated to ensure that any Escrow  Property held by
                    it pursuant to this  Agreement is genuine or  complete.  The
                    Escrow Agent's  obligation for safekeeping  shall be limited
                    to providing the same degree of care for the Escrow Property
                    as it maintains for its own valuable documents.

          (2)       Protection for Acting in Good Faith:  The Escrow Agent shall
                    be protected in relying and acting upon any written  notice,
                    request, waiver, consent, receipt or other paper or document
                    furnished to it, not only in assuming its due  execution and
                    the validity and effectiveness of its provisions but also as
                    to the truth and  acceptability  of any information  therein
                    contained, which it in good faith believes to be genuine and
                    what it purports to be.

          (3)       Limitation on Liability:  In no event shall the Escrow Agent
                    be liable for any act or failure to act under the provisions
                    of this  Escrow  Agreement,  except  where  its acts are the
                    result of its


<PAGE>
                                      -7-


                    negligenceor willful misconduct. The Escrow Agent shall have
                    no duties except those which are expressly set forth herein,
                    and it shall not be bound by any notice of a claim or demand
                    with   respect   thereto,   or  any  waiver,   modification,
                    amendment,   termination   or   rescission  of  this  Escrow
                    Agreement,  unless it shall  have  given  its prior  written
                    consent thereto.

          (4)       Indemnification:  Fairfax,  Hub and the Shareholders  hereby
                    jointly  and  severally  indemnify  the  Escrow  Agent,  its
                    officers and employees against any loss, liability,  action,
                    claim,  cost,  expense,  or damage (other than any caused by
                    the gross  negligence  or willful  misconduct  of the Escrow
                    Agent), including reasonable costs of litigation and counsel
                    fees, arising from and in connection with the performance of
                    the  Escrow  Agent's  duties  under  this  Agreement.   This
                    provision  shall survive the  resignation  or removal of the
                    Escrow Agent or the termination of this Escrow Agreement.

          (5)       Not a Trust  Agreement:  This Escrow  Agreement shall not be
                    construed  as a trust deed and the Escrow Agent shall not be
                    construed  as a trustee for the parties  with respect to the
                    Escrow Property.

          (6)       Advisors  Provision:  The  Escrow  Agent  may  retain  legal
                    counsel and advisors as may be  reasonably  required for the
                    purpose of discharging  its duties or determining its rights
                    under this Escrow  Agreement,  and may rely and act upon the
                    advice  of  such  counsel  or  advisor.  Hub  shall  pay  or
                    reimburse the Escrow Agent for any reasonable fees, expenses
                    and disbursements of such counsel or advisors.

          (7)       Express  Duties:  The Escrow  Agent  shall have no duties or
                    responsibilities except as expressly provided in this Escrow
                    Agreement  and shall  have no  liability  or  responsibility
                    arising under any other  agreement,  including any agreement
                    referred  to in this Escrow  Agreement,  to which the Escrow
                    Agent is not a party.

14.       Notices

          All  notices,   consents,   approvals,   statements,   authorizations,
          documents, or other communications  (collectively  "notices") required
          or permitted to be given hereunder  shall be in writing,  and shall be
          delivered personally, sent by telecopier,  and/or mailed by registered
          mail, postage prepaid, at the addresses set forth hereunder, namely:

          If to Hub, at:                    Hub International Limited
                                            214 King Street West
                                            Suite 314
                                            Toronto, Ontario
                                            M5H 3S6

                                            Fax:     (416) 593-8717
                                            Attn:    General Counsel

          If to Fairfax:                    Fairfax Financial Holdings Limited
                                            95 Wellington Street West
                                            Suite 800
                                            Toronto, Ontario
                                            M5J 2N7

                                            Fax:     (416) 367-4946
                                            Attn:    Bradley P. Martin
<PAGE>

                                      -8-

          If to the Shareholder:            2794 Lindenmere Drive
                                            Merrick, New York 11566

          If to the Escrow Agent:           CIBC Mellon Trust Company
                                            320 Bay Street
                                            P.O. Box 1
                                            Toronto, Ontario
                                            M5H 4A6
                                            Fax:     (416) 643-5570
                                            Attn:    AVP, Client Services

          or at any such other  address or  addresses  as may be given by any of
          them to the others in writing,  in accordance with this section,  from
          time to time. If sent by first class mail, such notice shall be deemed
          to have been given on the fifth  business day following  such mailing;
          provided  that if such  notice  shall have been  mailed and if regular
          mail  service  shall be  interrupted  by strike or other  irregularity
          before  the  deemed  receipt of such  notice as  aforesaid,  then such
          notice shall not be effective unless  delivered  personally or sent by
          telecopier.  If  delivered  personally  or sent by  telecopier  during
          regular business hours, such notice shall be deemed to have been given
          on the day of delivery or  transmission,  if during  regular  business
          hours on a business day, or if not, on the business day next following
          the day of delivery or transmission.

15.       Termination of Escrow

          This Escrow  Agreement  shall  terminate on the date all of the Escrow
          Property has been delivered to the  Shareholder in accordance with the
          terms of this Agreement.

16.       Assignment; Waiver; Modification; Severability

          This Escrow  Agreement  shall not be  assigned,  waived,  amended,  or
          modified  except by the written  agreement of all the parties  hereto.
          Any  invalidity,  in whole or in part, of any provision of this Escrow
          Agreement   shall  not  affect  the  validity  of  any  other  of  its
          provisions.

17.       Governing Law

          This Agreement  shall be governed by and construed in accordance  with
          the laws of the  Province of Ontario  and the  federal  laws of Canada
          applicable therein.

18.       Successor of Escrow Agent

          Any  corporation  with  which  the  Escrow  Agent  may  be  merged  or
          consolidated  or  amalgamated,  or any  corporation  succeeding to the
          business  of the Escrow  Agent  shall be the  successor  to the Escrow
          Agent  hereunder  without any further act on its part or of any of the
          parties hereto.

19.       Counterparts

          This  Agreement  may be signed  in  counterparts,  each of which  when
          signed and delivered  shall be deemed to be an original,  but all such
          counterparts shall together constitute one and the same instrument.
<PAGE>
                                      -9-


          IN WITNESS  WHEREOF,  the  parties  hereto  have  caused  this  Escrow
Agreement to be duly executed on the date first written above as follows:

HUB INTERNATIONAL LIMITED                       CIBC MELLON TRUST COMPANY


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

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


FAIRFAX FINANCIAL HOLDINGS LIMITED


By:
Name:
Title:

SIGNED AND DELIVERED in the presence of:)
                                        )
                                        )
----------------------------------------)
(Signature)                             )
                                        )
----------------------------------------)
(Print Name)                            )   ------------------------------------
                                        )   BRUCE D. GUTHART
----------------------------------------)
(Address)                               )





<PAGE>
                                      -10-



                                   SCHEDULE A

                                 Escrow Property


_______________ common shares in the capital of Hub International Limited