<PAGE> 1




                     STOCK PURCHASE AGREEMENT

                          Dated as of 


                        November 28, 1995

                            between

                THE TRAVELERS INSURANCE GROUP INC.

                              and

                    AETNA LIFE AND CASUALTY COMPANY

                  relating to the purchase and sale
                   of 100% of the Common Stock of

                 THE AETNA CASUALTY AND SURETY COMPANY

                              and

                  THE STANDARD FIRE INSURANCE COMPANY


<PAGE> 2


                        TABLE OF CONTENTS

                                                          Page
                                                          ____

                            ARTICLE 1
                           DEFINITIONS

1.1  Definitions..............................................2

                            ARTICLE 2
                         PURCHASE AND SALE

2.1  Purchase and Sale........................................9
2.2  Closing..................................................9
2.3  September Balance Sheets................................12
2.4  Certain Contributions and Adjustments...................15
2.5  Portfolio Adjustment....................................16
2.6  Post-Closing Payments...................................18

                            ARTICLE 3
              REPRESENTATIONS AND WARRANTIES OF SELLER

3.1  Corporate Existence and Power...........................18
3.2  Corporate Authorization.................................19
3.3  Governmental Authorization..............................20
3.4  Non-Contravention.......................................20
3.5  Capitalization..........................................21
3.6  Ownership of Shares.....................................22
3.7  Subsidiaries............................................22
3.8  Financial Statements; SEC Reports.......................24
3.9  Absence of Certain Changes..............................25
3.10 No Undisclosed Material Liabilities; Investments........29
3.11 Material Contracts......................................31
3.12 Litigation..............................................34
3.13 Compliance with Laws....................................36
3.14 Properties..............................................36
3.15 Licenses and Permits; Policies; Regulatory Matters......37
3.16 ERISA Representations...................................38
3.17 Environmental Matters...................................40
3.18 Intercompany Accounts...................................44
3.19 No Representation with Respect to Reserves..............45
3.20 Intellectual Property; Software.........................45
3.21 Labor Matters...........................................47
3.22 Loans and Advances......................................47
3.23 All Assets Necessary....................................48
3.24 Certain Policies........................................48
3.25 Disclosure..............................................49




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                                                           Page
                                                           ____

                            ARTICLE 4
             REPRESENTATIONS AND WARRANTIES OF BUYER

4.1  Corporate Existence and Power...........................49
4.2  Corporate Authorization.................................49
4.3  Governmental Authorization..............................50
4.4  Non-Contravention.......................................50
4.5  Financing...............................................51
4.6  Purchase for Investment.................................51

                            ARTICLE 5
                       COVENANTS OF SELLER

5.1  Conduct of the Companies................................52
5.2  Access to Information...................................58
5.3  Notices of Certain Events...............................59
5.4  Resignations............................................60
5.5  Covenant Not to Compete.................................60
5.6  No Solicitation.........................................61
5.7  Certain Other Transactions..............................61
5.8  Confidentiality Agreements..............................63
5.9  Other Financial Statements..............................63
5.10 1992 Audit..............................................66
5.11 Use of Computer Software................................66
5.12 Aetna Casualty Company..................................68

                            ARTICLE 6
                        COVENANTS OF BUYER

6.1  Confidentiality.........................................68
6.2  Post-Closing Access.....................................68
6.3  AmRe Agreement..........................................69

                            ARTICLE 7
                    COVENANTS OF BUYER AND SELLER

7.1  Reasonable Efforts......................................70
7.2  Certain Filings.........................................71
7.3  Public Announcements....................................71
7.4  Trademarks; Trade Names.................................72
7.5  Intercompany Accounts...................................73
7.6  Non-Solicitation of Employees...........................75
7.7  Real Estate.............................................76
7.8  Transition Agreements...................................77
7.9  Post-Closing Access.....................................77




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                                                           Page
                                                           ____

7.10 Supplemental Disclosure.................................78
7.11 Investment Portfolio; Real Estate Transactions..........79
7.12 Other Agreements........................................83
7.13 Certain Insurance Policies..............................85

                            ARTICLE 8
                           TAX MATTERS

8.1  Definitions.............................................86
8.2  Tax Representations.....................................88
8.3  Tax Covenants...........................................89
8.4  Termination of Existing Tax Sharing Agreements..........92
8.5  Return Filings and Payment of Tax.......................93
8.6  Cooperation on Tax Matters..............................98
8.7  Tax Benefits...........................................100
8.8  Indemnification by Seller..............................110
8.9  Indemnification by Buyer...............................113
8.10 Survival; Exclusivity..................................116
8.11 Purchase Price Adjustment..............................116
8.12 Late Payments..........................................116
8.13 No Duplicative Payments; Offsets.......................117
8.14 Rule of Construction...................................117
8.15 Notices................................................117
8.16 Allocation of Purchase Price...........................117

                            ARTICLE 9
                 EMPLOYEES AND EMPLOYEE BENEFITS

9.1  Employees..............................................118
9.2  Pension Plan...........................................118
9.3  Individual Account Plan................................122
9.4  Certain Welfare Benefit Plans..........................123
9.5  Other Employee Benefit Plans and Benefit Arrangements..124
9.6  Plans Following the Closing............................125
9.7  Indemnification........................................131

                            ARTICLE 10
                      CONDITIONS TO CLOSING

10.1  Conditions to Obligations of Buyer and Seller.........132
10.2  Conditions to Obligation of Buyer.....................133
10.3  Conditions to Obligation of Seller....................135







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                                                           Page
                                                           ____

                            ARTICLE 11
                    SURVIVAL; INDEMNIFICATION

11.1  Survival..............................................136
11.2  Indemnification.......................................136
11.3  Procedures; Exclusivity...............................137

                            ARTICLE 12
                           TERMINATION

12.1  Grounds for Termination...............................138
12.2  Effect of Termination.................................139

                            ARTICLE 13
                          MISCELLANEOUS

13.1  Notices...............................................139
13.2  Amendments and Waivers................................140
13.3  Expenses..............................................141
13.4  Successors and Assigns................................141
13.5  Governing Law.........................................141
13.6  Jurisdiction..........................................142
13.7  Counterparts; No Third Party Beneficiaries............142
13.8  Entire Agreement......................................142
13.9  Construction..........................................143


                            EXHIBITS

Exhibit 5.11   Software License Agreement
Exhibit 7.4(a) License Agreement
Exhibit 7.4(b) Assignment Agreement
Exhibit 7.7    Real Estate Term Sheet
Exhibit 7.8    Transition Agreement Term Sheet


                         DISCLOSURE SCHEDULES

Schedule 2.3(b)     Reserve Categories and Amounts
Schedule 3.3        Governmental Authorization
Schedule 3.4        Non-Contravention
Schedule 3.7        Subsidiaries
Schedule 3.9        Absence of Certain Changes
Schedule 3.9(xiii)  Seller's Investment Policies
Schedule 3.10(a)    No Undisclosed Material Liabilities




iv

<PAGE> 6


                                                           Page
                                                           ____

Schedule 3.10(b)    Company Investment Assets 
Schedule 3.11       Material Contracts
Schedule 3.12       Litigation
Schedule 3.13       Compliance with Laws
Schedule 3.15       License and Permits; Policies; Regulatory 
                    Matters
Schedule 3.16(a)    Employee Plans
Schedule 3.16(c)    Certain Non-Multiemployer Employee Plans
Schedule 3.16(d)(i) Benefit Arrangement
Schedule 3.17       Environmental Matters
Schedule 3.18       Intercompany Accounts
Schedule 3.20       Software Licenses
Schedule 3.21       Labor Matters
Schedule 3.22       Loans & Advances
Schedule 3.23       All Assets Necessary
Schedule 3.24       Certain Policies
Schedule 4.3        Governmental Authorization
Schedule 4.4        Non-Contravention
Schedule 5.1        Conduct of the Companies
Schedule 5.5        Covenant Not to Compete
Schedule 5.9        Balance Sheet Adjustments
Schedule 7.5(c)     Certain Liabilities
Schedule 7.11(a)    Equity Portfolio
Schedule 7.11(aa)   Securities Not in Equity Portfolio
Schedule 7.11(b)    Real Estate Transactions
Schedule 7.11(c)    Shared Mortgages; Cross Collateralized 
                    Mortgages; Shared Real Estate
Schedule 8.2        Tax Representations
Schedule 8.8(a)     Cushion
Schedule 9.1        P&C Employees
Schedule 9.2(a)     Reimbursement Formula
Schedule 9.3(c)     Supplemental Plan
Schedule 9.4(a)     Certain Welfare Benefit Plans
Schedule 9.5(c)     Other Employee Benefit Plans and 
                    Benefit Arrangements
Schedule 9.5(d)     ACEShares and APEX Unit Awards
Schedule 9.6(c)(i)  Severance Plans
Schedule 9.6(c)(ii) Affected Employees
Schedule 9.6(c)(iii)Certain Employment Agreements
Schedule 9.6(c)(iv) Certain Retention Bonus Payments
Schedule 9.6(d)(i)  1996 Vacation Days Calculation
Schedule 9.6(d)(ii) 1997 Vacations Days Calculation







v



<PAGE> 7


                    STOCK PURCHASE AGREEMENT



              AGREEMENT dated as of November 28, 1995 between 
The Travelers Insurance Group Inc., a Connecticut stock 
insurance corporation ("Buyer"), and Aetna Life and Casualty 
Company, a Connecticut stock insurance corporation ("Seller").

                        W I T N E S S E T H:

          WHEREAS, Seller is the record and beneficial owner of 
all of the issued and outstanding shares of (i) common stock, 
par value $25,000.00 per share (the "ACSC Common Stock"), of The 
Aetna Casualty and Surety Company, a Connecticut insurance 
corporation ("ACSC"), and (ii) common stock, par value $250.00 
per share (the "SFIC Common Stock"), of The Standard Fire 
Insurance Company, a Connecticut insurance corporation ("SFIC" 
and, together with ACSC, the "Companies") ; and

          WHEREAS, Seller desires to sell all of the issued and 
outstanding shares of ACSC Common Stock and SFIC Common Stock 
(collectively, the "Shares") to Buyer, and Buyer desires to 
purchase the Shares from Seller, upon the terms and subject to 
the conditions hereinafter set forth;

          NOW, THEREFORE, the parties hereto agree as follows:





















1

<PAGE> 8


                            ARTICLE 1

                           DEFINITIONS

       1.1  Definitions. (a)  The following terms, as used
            __________
herein, have the following meanings:

          "Affiliate" means, with respect to any Person, any 
other Person directly or indirectly controlling, controlled by, 
or under common control with such Person; provided that neither 
                                          ________              
of the Companies nor any of their respective Subsidiaries shall 
be considered an Affiliate of Seller.

          "Agreement" means this agreement, including the 
Disclosure Schedules and Exhibits hereto.

          "A.M. Best" means A.M. Best Company.

          "Ancillary Agreements" means (i) the Transition 
Agreements, (ii) the License Agreement, (iii) the Assignment 
Agreement, (iv) the Software License Agreement and (v) the 
agreements referred to in Section 7.7.

          "Balance Sheet Date" means September 30, 1995.

          "Benefit Arrangement" means any employment, severance 
or similar contract, arrangement or policy, or any plan or 
arrangement (whether or not written) providing for severance 
benefits, insurance coverage (including any self-insured 
arrangements), workers' compensation, disability benefits, 
supplemental unemployment benefits, vacation benefits, 
retirement benefits, deferred compensation, profit-sharing, 
bonuses, stock options, stock appreciation rights or other forms 
of incentive compensation or post-retirement insurance, 
compensation or benefits that (i) is not an Employee Plan, (ii) 
is entered into or maintained, as the case may be, by Seller











2

<PAGE> 9


or any of its ERISA Affiliates and (iii) covers any employee or 
former employee of any of the Companies or any of their 
Subsidiaries.

          "Closing Date" means the date of the Closing.

          "Employee Plan" means any "employee benefit plan," as 
defined in Section 3(3) of ERISA, that (i) is subject to any 
provision of ERISA, (ii) is maintained, administered or 
contributed to by Seller or any of its ERISA Affiliates and 
(iii) covers any employee or former employee of any of the 
Companies or any of their Subsidiaries.

          "ERISA" means the Employee Retirement Income Security 
Act of 1974, as amended.

          "ERISA Affiliate" of any entity means any other entity 
which, together with such entity, would be treated as a single 
employer under Section 414 of the Code.

          "GAAP" means U.S. generally accepted accounting 
principles.

          "HSR Act" means the Hart-Scott-Rodino Antitrust 
Improvements Act of 1976, as amended.

          "Individual Account Plan" means the Aetna Life and 
Casualty Company Incentive Savings Plan.

          "Lien" means, with respect to any property or asset, 
any mortgage, lien, pledge, charge, security interest, 
encumbrance or other adverse claim of any kind in respect of 
such property or asset.  For the purposes of this Agreement, a 
Person shall be deemed to own subject to a Lien any property or 
asset which it has acquired or holds subject to the interest of 
a vendor or lessor under any conditional











3

<PAGE> 10


sale agreement, capital lease or other title retention agreement 
relating to such property or asset.

          "Material Adverse Effect" means, for purposes of 
Section 3.9 and Article 10 only, with respect to any Person or 
Persons, a material adverse effect on the financial condition, 
results of operations, business, assets or liabilities of such 
Person or Persons and its or their Subsidiaries, taken as whole.

          "Multiemployer Plan" means each Employee Plan that is 
a multiemployer plan, as defined in Section 3(37) of ERISA.

          "Pension Plan" means the Retirement Plan for Employees 
of the Aetna Life and Casualty Company.

          "Person" means an individual, corporation, 
partnership, association, trust, limited liability company or 
other entity or organization, including a government or 
political subdivision or an agency or instrumentality thereof.

          "SAP" means the accounting procedures and practices 
prescribed or permitted from time to time by the National 
Association of Insurance Commissioners and adopted or 
promulgated by the respective states of incorporation of the 
Companies and employed in a consistent manner throughout the 
periods involved.

          "Subsidiary" means, with respect to any Person, any 
entity of which securities or other ownership interests having 
ordinary voting power to elect 50% or more of the board of 
directors or other persons performing similar functions are at 
the time directly or indirectly owned by such Person.

          "Title IV Plan" means an Employee Plan, other than any 
Multiemployer Plan, subject to Title IV of ERISA.












4

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          "Transition Agreements" means the transition 
agreements to be entered into in accordance with Section 7.8.

          (b)  Each of the following terms is defined in the 
Section set forth opposite such term:


     Term                                            Section
     ____                                            _______

     ACC                                               7.12
     Acquisition Proposal                              5.6
     AC&S of Illinois                                  5.7
     Adequate Rating                                   6.3
     Advance Accrual Period                            9.2
     Aetna Casualty Company                            5.12
     Aetna Re U.K. Stop Loss                           5.7
     Affected Employees                                9.6
     AHP                                               7.12
     ALOI                                              5.7
     AL&C Business                                     7.12
     AL&C Buyer                                        7.12
     AmRe Agreement                                     6.3
     Annual Statements                                  3.8
     Assignment Agreement                               7.4
     Attributable Amount                                8.5
     Bond Portfolio                                     7.11
     Buyer Loss                                         8.8
     Buyer Plan                                         9.3
     Claims Provision                                   3.19
     Closing                                            2.2
     Closing Date GAAP Balance Sheet                    5.9
     Code                                               8.1
     Combined State Tax                                 8.1
     Company Facilities                                 3.17
     Company Investment Assets                          3.10
     Company Securities                                 3.5
     Confidentiality Agreement                          6.1
     Continued Employment                               9.6
     Conveyance Taxes                                   8.3
     Cross Collateralized Mortgages                     7.11
     Cushion                                            8.8
     Damages                                           11.2





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     Term                                          Section
     ____                                          _______

     Deemed Closing Date                                5.9
     Direct Rollover                                    9.3
     Disposal Notice                                    8.6
     Environmental Reports                              3.17
     Environmental Laws                                 3.17
     Equity Adjustment                                  2.2
     Equity Portfolio                                   7.11
     ERI                                                7.11
     ERI Stock                                          7.11
     Estimated NOL Value                                2.2
     Estimated Portfolio Adjustment                     2.2
     Event                                              8.7
     Excluded Taxes                                     8.8
     Federal Tax                                        8.1
     Federal Tax Detriment                              8.7
     Final Determination                                8.1
     Final NOL Value                                    2.2
     Final Portfolio Adjustment                         2.5
     Fund Balance                                       6.3
     GAAP Equity Adjustment                             2.2
     Hazardous Substances                               3.17
     Immediate Parent                                   6.3
     Indemnified Party                                 11.3
     Indemnifying Party                                11.3
     Intellectual Property                              3.20
     Independent Accountants                            2.3
     License Agreement                                  7.4
     Maximum Annual Contribution                        9.2
     MBIA                                               7.11
     MBIA Stock                                         7.11
     Mortgaged Properties                               3.17
     New Plan                                           9.2
     NOL Value                                          2.2
     NOLs                                               8.1
     Notifying Party                                    8.6
     Notified Party                                     8.6
     Obligor                                            6.3
     P&C Employees                                      9.1
     Permits                                            3.15
     Permitted Capital Contribution                     2.2
     Points                                             9.2
     Policyholders' Surplus                             2.2
     Portfolio Adjustment                               2.2
     Post-Closing Special Items                         8.7
     Post-Closing Tax Period                            8.1
     Post-September 30 Special Items                    8.7



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     Term                                            Section
     ____                                            _______

     Post-September 30 Tax Period                       8.1
     Pre-September 30 Tax Period                        8.1
     Prior Welfare Plan                                 9.4
     Purchase Price                                     2.2
     Reattributed NOLs                                  8.7
     Regulators                                         3.8
     REO                                                3.17
     Replacement Welfare Plans                          9.4
     Retiree Benefit Program                            9.6
     Returns                                            8.2
     SAP Equity Adjustment                              2.2
     SEC                                                3.8
     SEC Reports                                        3.8
     Seller Group                                       8.1
     Seller Loss                                        8.9
     Separate State Income Tax                          8.1
     Separate State Tax                                 8.1
     September Adjusted Balance Sheets                  5.9
     September Adjusted GAAP Balance Sheet              5.9
     September Adjusted SAP Balance Sheet               5.9
     September Audited Balance Sheets                   5.9
     September Audited GAAP Balance Sheet               5.9
     September Audited SAP Balance Sheet                5.9
     September Unaudited GAAP Balance Sheet             2.3
     September 30 NOL's                                 2.2
     Severance Plans                                    9.6
     Shared Mortgages                                   7.11
     Shared Real Estate                                 7.11
     Significant Agreements                             3.11
     Software                                           3.20
     Software License Agreement                         5.11
     Special Item Federal Tax Detriment                 8.7
     Special Items                                      8.7
     Stockholder's Equity                               2.2
     Stop Loss Business                                 7.12
     Stop Loss Quota                                    7.12
     Straddle Period                                    8.1
     Subsidiary Securities                              3.7
     Supplemental Plan                                  9.3
     Tax                                                8.1
     Tax Benefit                                        8.1
     Tax Claim                                          8.8
     Tax Indemnified Party                              8.3
     Tax Indemnifying Party                             8.3





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     Term                                          Section
     ____                                          _______

     Tax Sharing Agreement                              8.1
     Taxing Authority                                   8.1
     Termination Account                                6.3
     Transferred Employees                              9.1
     Transition Committee                               5.1
     Travelers Plan                                     9.2
     Unaudited September Balance Sheet                  3.8
     Welfare Transfer Date                              9.4









































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<PAGE> 15


                             ARTICLE 2

                         PURCHASE AND SALE



         2.1  Purchase and Sale.  Upon the terms and subject to 
              _________________
the conditions of this Agreement, Seller agrees to sell to Buyer 
and Buyer agrees to purchase from Seller, the Shares at the 
Closing.

         2.2  Closing.  The closing (the "Closing") of the 
              _______                                      
purchase and sale of the Shares hereunder shall take place at 
the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New 
York, New York as soon as possible, but in no event later than 
two business days, after satisfaction of the conditions set 
forth in Article 10, or at such other time or place as Buyer and 
Seller may agree.

      (a)  At the Closing, Buyer shall deliver to Seller, 
in immediately available funds by wire transfer to an 
account of Seller designated in writing by Seller, by 
notice to Buyer not later than two business days prior to 
the Closing Date, the Purchase Price.  The "Purchase 
Price" shall be: (i) $4,000,000,000, (ii) plus an amount 
equal to $602,740 per day for each day from and including 
October 1, 1995 to but not including the Closing Date, 
(iii) plus the aggregate amount of Permitted Capital 
Contributions, if any, made by Seller, increased by an 
amount equal to 0.015068493% of each such Permitted 
Capital Contribution for each day from and including the 
date such Permitted Capital Contribution is made to but 
not including the Closing Date, (iv) minus the Equity 
Adjustment, if any, if the Equity Adjustment has been 
determined prior to the Closing Date, increased by an 
amount equal to 0.015068493% of such Equity Adjustment for 
each day from and including















9

<PAGE> 16


October 1, 1995 to but not including the Closing Date, (v) 
minus an amount equal to the Estimated NOL Value, and (vi) 
if the Estimated Portfolio Adjustment is an aggregate net 
gain, plus an amount equal to such gain, or if the 
Estimated Portfolio Adjustment is an aggregate net loss, 
minus an amount (expressed as a positive number) equal to 
such loss.  If the Equity Adjustment has not been 
determined prior to the Closing Date, the Equity 
Adjustment, if any, shall be paid in accordance with 
Section 2.3(e).

      (b)  At the Closing, Seller shall deliver to Buyer 
certificates for the Shares, duly endorsed or accompanied 
by stock powers duly endorsed in blank with all 
appropriate transfer tax stamps affixed.

      (c)  For the purposes of this Agreement, the 
following terms shall have the following meanings:

        (i)  "Estimated NOL Value" means Seller's good 
faith 
estimate of the NOL Value furnished to Buyer (it being 
understood that Seller shall deliver such estimate not 
less than five business days prior to the Closing Date 
together with a statement setting forth the relevant 
calculations in reasonable detail).

        (ii)  "Estimated Portfolio Adjustment" means the 
Portfolio Adjustment, as estimated in good faith by Seller 
and delivered to Buyer not later than five business days 
prior to the Closing Date. 

        (iii)  "Equity Adjustment" means the greater of  
the 
GAAP Equity Adjustment and the SAP Equity Adjustment.

        (iv)  "Final NOL Value" means the NOL Value 
calculated as promptly as practicable after the filing of 
the Seller Group tax return which includes the Tax period 
beginning after December 31, 1995 and ending on the 
Closing Date.

        (v)  "Final Portfolio Adjustment" means the 
Portfolio Adjustment (i) as shown on Seller's calculation 
delivered pursuant to Section 2.5(a), if no notice of 
disagreement with respect thereto has been delivered 
pursuant to








10

<PAGE> 17


Section 2.5(b) and the full period during which such 
notice may be delivered has elapsed; or (ii) if such a 
notice of disagreement has been delivered, as agreed by 
Buyer and Seller pursuant to Section 2.5(c), or in the 
absence of such agreement, as shown in the Independent 
Accountants' calculation delivered pursuant to Section 
2.5(c).

        (vi)  "GAAP Equity Adjustment" means the amount, 
if any, by which $3,800,000,000 exceeds Stockholder's 
Equity (i) as shown on Seller's calculation delivered 
pursuant to Section 2.3(a), if no notice of disagreement 
with respect thereto has been delivered pursuant to 
Section 2.3(b) and the full period during which such 
notice may be delivered has elapsed; or (ii) if such a 
notice of disagreement has been delivered, as agreed by 
Buyer and Seller pursuant to Section 2.3(c),  or in the 
absence of such agreement, as shown in the Independent 
Accountants' calculation delivered pursuant to Section 
2.3(c).

        (vii)  "NOL Value" means the value of the NOLs as 
of September 30, 1995 as reflected on the September 
Audited GAAP Balance Sheet without regard to the actual 
NOLs (the "September 30 NOLs"), reduced by (i) any amounts 
paid to any of the Companies or any Subsidiaries in 
respect of such NOLs pursuant to Section 8.7(j) hereof, 
and (ii) 35% of any taxable income of the Companies and 
their Subsidiaries for the Post-September 30 Tax Period, 
determined in accordance with Section 8.5 and without 
regard to (A) the September 30 NOLs, (B) Post-September 30 
Special Items or (C) any additions to reserves claimed 
with respect to the Post-September 30 Tax Period which 
satisfy the requirement for reserves relating to a 
Permitted Capital Contribution.

        (viii)  "Permitted Capital Contribution" means a 
cash contribution made by Seller to the capital of any of 
the Companies or their Subsidiaries, (other than as 
expressly contemplated by this Agreement) with the prior 
written consent of Buyer.

        (ix)  "Portfolio Adjustment" means the aggregate net 
after tax gain or aggregate net after tax loss (in either case 
whether or not realized with taxes calculated on a GAAP basis) 
on all securities held in the Equity Portfolio during the 
period from and including October 1, 1995, through the close of 
business on the business day prior to the Closing Date.  Such 
gains or losses shall be calculated based on the difference 
between (i) the market value as of the Balance Sheet Date of 
the securities in the September Audited GAAP Balance Sheet or 
the cost of acquisition for securities acquired after the 
Balance Sheet Date and (ii) the proceeds, net of commissions 
and other direct expenses of disposition, realized in the sale 
or other disposition, or, in the case of securities not sold or 
disposed of, the market value of such securities as of the 
close of business on the business day prior to the Closing Date

11

<PAGE> 18


(reduced in the case of shares of common stock of MBIA 
Inc. by 4.5% of the market value thereof).  The Portfolio 
Adjustment shall be calculated using the same methodology 
and pricing services for purposes of determining the 
market value of securities in the Equity Portfolio at the 
relevant dates.

        (x)  "SAP Equity Adjustment" means the amount, if 
any, by which $2,700,000,000 exceeds Policyholders' 
Surplus (i) as shown on Seller's calculation delivered 
pursuant to Section 2.3(a), if no notice of disagreement 
with respect thereto has been delivered pursuant to 
Section 2.3(b) and the full period during which such 
notice may be delivered has elapsed; or (ii) if such a 
notice of disagreement has been delivered, as agreed by 
Buyer and Seller pursuant to Section 2.3(c),  or in the 
absence of such agreement, as shown in the Independent 
Accountants' calculation delivered pursuant to Section 
2.3(c).

        (xi)  "Stockholder's Equity" means the total 
shareholder's equity of the Companies and their 
Subsidiaries as shown on the September Adjusted GAAP 
Balance Sheet plus an amount equal to $300,000,000.

        (xii)  "Policyholders' Surplus" means the total 
policyholders' surplus of the Companies and their 
Subsidiaries as shown on the September Adjusted SAP 
Balance Sheet plus an amount equal to $300,000,000.

         2.3  September Balance Sheets.  (a)  As promptly as 
              ________________________                       
practicable, but no later than 60 days after the date hereof, 
Seller will cause to be prepared and delivered to Buyer the 
September Adjusted GAAP Balance Sheet and the September Adjusted 
SAP Balance Sheet and the related reports of KPMG Peat Marwick 
LLP thereon, and the certificate of Seller based on such 
September Adjusted Balance Sheets setting forth Seller's 
calculations of the Equity Adjustment, Stockholder's Equity and 
Policyholders' Surplus, all in accordance with Section 5.9.  

          (b)  If Buyer disagrees with any item or amount 
reflected on or omitted from the September Adjusted GAAP Balance 
Sheet or the September Adjusted SAP Balance Sheet or with 
Seller's calculations of the Equity Adjustment, Stockholder's 
Equity or Policyholders' Surplus delivered pursuant to Section 
2.3(a), Buyer may, within 30 days after delivery of the 
documents referred to in Section 2.3(a), deliver




12

<PAGE> 19


a notice to Seller disagreeing with such calculation and setting 
forth Buyer's calculation of such amount.  Any such notice of 
disagreement shall specify those items or amounts as to which 
Buyer disagrees, and Buyer shall be deemed to have agreed with 
all other items and amounts reflected on or omitted from the 
September Adjusted GAAP Balance Sheet, September Adjusted SAP 
Balance Sheet and the calculation of the Equity Adjustment, 
Stockholder's Equity or Policyholders' Surplus delivered 
pursuant to Section 2.3(a) not the subject of such disagreement. 
 Notwithstanding the foregoing, (i) Buyer shall not be entitled 
to deliver a notice of disagreement with respect to (A) the 
amounts of liabilities in respect of any major category of the 
unpaid claims and claim expenses as shown on Schedule 2.3(b) if 
such amounts in respect of such major category reflected on the 
September Adjusted Balance Sheets are at least equal to the 
corresponding amounts reflected on the September Unaudited GAAP 
Balance Sheet or the September Unaudited SAP Balance Sheet, as 
the case may be, or (B) the amounts accrued for vacation 
liabilities reflected on the September Adjusted Balance Sheets 
if such amounts are accurately determined in accordance with 
Schedule 5.9, and (ii) Buyer shall not be entitled to deliver 
any notice of disagreement unless Buyer's calculation of 
Stockholder's Equity or Policyholders' Surplus as shown in such 
notice is lower by at least $5,000,000 than the amount thereof 
shown on the September Adjusted GAAP Balance Sheet or the 
September Adjusted SAP Balance Sheet, respectively.

          (c)  If a notice of disagreement shall be delivered 
pursuant to Section 2.3(b), Seller and Buyer shall, during the 
30 days following such delivery, use their best efforts to reach 
agreement on the disputed items or amounts in order to




















13

<PAGE> 20


determine, as may be required, the Stockholder's Equity or 
Policyholders' Surplus.  If, during such period, Seller and 
Buyer are unable to reach such agreement, they shall promptly 
thereafter cause a recognized firm of independent certified 
accountants of national repute mutually acceptable to Seller and 
Buyer (the "Independent Accountants") promptly to review this 
Agreement and the disputed items or amounts for the purpose of 
calculating the Equity Adjustment, Stockholder's Equity and 
Policyholders' Surplus.  In making such calculation, the 
Independent Accountants shall consider only those items or 
amounts reflected on or omitted from the September Adjusted 
Balance Sheets or Seller's calculation of Stockholder's Equity 
and Policyholders' Surplus as to which Buyer has disagreed.  The 
Independent Accountants shall deliver to Seller and Buyer, as 
promptly as practicable, a report setting forth such 
calculation.  Such report shall be final and binding upon Seller 
and Buyer.  The cost of such review and report shall be borne 
(i) by Seller if the difference between the Equity Adjustment 
and the Equity Adjustment as based upon Seller's calculation 
delivered pursuant to Section 2.3(a) is greater than the 
difference between the Equity Adjustment and the Equity 
Adjustment based on Buyer's calculation delivered pursuant to 
Section 2.3(b), (ii) by Buyer if the first such difference is 
less than the second such difference and (iii) otherwise equally 
by Seller and Buyer.  In no event will the Equity Adjustment, as 
finally determined pursuant to this Section 2.3(c), be less than 
the amount thereof shown in Seller's calculations delivered 
pursuant to Section 2.3(a) or more than the amount thereof shown 
in Buyer's calculations delivered pursuant to Section 2.3(b).






















14

<PAGE> 21


          (d)  Seller agrees that it will, and agrees to cause 
its independent accountants and (prior to the Closing Date) the 
Companies and their Subsidiaries to, cooperate with Buyer and 
its independent accountants and assist them in the conduct of 
their review of the September Adjusted Balance Sheets, including 
without limitation, the making available to the extent necessary 
of books, records, work papers and personnel.

          (e)  If the amount of the Equity Adjustment is 
determined after the Closing Date, then within five business 
days after such determination, Seller shall pay to Buyer the 
amount of the Equity Adjustment, increased by an amount equal to 
0.015068493% thereof for each day from and including October 1, 
1995 to but not including the date of such payment.  Any such 
amount shall be deemed to be an adjustment to the Purchase 
Price.

         2.4   Certain Contributions and Adjustments.  (a) 
               _____________________________________       
Seller agrees that it will, on or prior to December 31, 1995, 
make a cash capital contribution to the Companies of $300 
million, increased by an amount equal to 0.015068493% thereof 
for each day from and including October 1, 1995 to but not 
including the date of such contribution.

         (b)  In the event that the Final NOL Value is greater 
than the Estimated NOL Value, Seller shall pay to Buyer an 
amount equal to such difference.  In the event that the 
Estimated NOL Value is greater than the Final NOL Value, Buyer 
shall pay to Seller an amount equal to such difference.  In 
either event, such payment shall be made within five business 
days from the date of the determination of the Final NOL Value, 
increased by an amount equal to 0.015068493% thereof per



















15

<PAGE> 22


day for each day from and including the Closing Date to but not 
including the date of such payment.  Any such amount shall be 
deemed an adjustment to the Purchase Price.

         2.5   Portfolio Adjustment.  (a)  As promptly as 
               ____________________                       
practicable following the Closing Date, Seller shall calculate 
the Portfolio Adjustment and deliver to Buyer a certificate 
setting forth such calculation in reasonable detail.

          (b)  If Buyer disagrees with the calculation delivered 
pursuant to Section 2.5(a), Buyer may, within 30 days after 
delivery of such calculation, deliver a notice to Seller 
disagreeing with such calculation and setting forth Buyer's 
calculation of such amount.  Any such notice of disagreement 
shall specify those items or amounts as to which Buyer 
disagrees, and Buyer shall be deemed to have agreed with all 
other items and amounts contained in the calculation delivered 
by Seller.

          (c)  If a notice of disagreement shall be delivered 
pursuant to Section 2.5(b), Seller and Buyer shall, during the 
30 days following such delivery, use their best efforts to reach 
agreement on the disputed items or amounts in order to determine 
the Portfolio Adjustment.  If, during such period, Seller and 
Buyer are unable to reach such agreement, they shall promptly 
thereafter cause the Independent Accountants promptly to review 
this Agreement and the disputed items or amounts for the purpose 
of calculating the Portfolio Adjustment.  In making such 
calculation, the Independent Accountants shall consider only 
those items or amounts in Seller's calculation as to which Buyer 
has disagreed.  The Independent Accountants shall deliver to 
Seller and Buyer, as promptly as practicable, a report setting 
forth such


















16

<PAGE> 23


calculation.  Such report shall be final and binding upon Seller 
and Buyer.  In no event shall the Portfolio Adjustment 
determined pursuant to this paragraph (c) be determined to be a 
greater gain or smaller loss, as the case may be, than as shown 
in Seller's calculations delivered pursuant to Section 2.5(a) or 
a smaller gain or greater loss, as the case may be, than as 
shown in Buyer's calculations delivered pursuant to Section 
2.5(b).  The cost of such review and report shall be borne (i) 
by Seller if the difference between the Final Portfolio 
Adjustment and the Portfolio Adjustment as calculated by Seller 
and set forth on the certificate delivered pursuant to Section 
2.5(a) is greater than the difference between the Final 
Portfolio Adjustment and the Portfolio Adjustment as calculated 
by Buyer and set forth on the notice of disagreement delivered 
pursuant to Section 2.5(b), (ii) by Buyer if the first such 
difference is less than the second such difference and (iii) 
otherwise equally by Seller and Buyer.

          (d)  Seller and Buyer agree that they will, and agree 
to cause their respective independent accountants and the 
Companies and their Subsidiaries to, cooperate and assist in the 
calculation of the Portfolio Adjustment and in the conduct of 
the reviews referred to in this Section, including without 
limitation, the making available to the extent necessary of 
books, records, work papers and personnel.

          (e)  If the Final Portfolio Adjustment differs from 
the Estimated Portfolio Adjustment, then Seller shall pay to 
Buyer or Buyer shall pay to Seller an amount equal to such 
difference so that Buyer has paid the Purchase Price it would 
have paid and Seller has received the Purchase Price it would 
have received had the Final Portfolio Adjustment been used to 
determine the Purchase Price.  Such payment


















17

<PAGE> 24


shall be made within five business days from the date of the 
determination of the Final Portfolio Adjustment, together with 
an amount equal to 0.015068493% of such difference per day for 
each day from and including the Closing Date to but not 
including the date of such payment.  Any such amount shall be 
deemed to be an adjustment of the Purchase Price.

         2.6  Post-Closing Payments.  All payments made to Buyer 
              _____________________                              
or Seller after the Closing Date under this Agreement shall be 
paid in immediately available funds by wire transfer to an 
account of the payee designated in writing by the payee, by 
notice to the payor, not later than two business days prior to 
the date the payment is due.

                             ARTICLE 3

                REPRESENTATIONS AND WARRANTIES OF SELLER

        Seller represents and warrants to Buyer as of the date 
hereof and as of the Closing Date (but as of no other dates 
unless expressly so stated) that:

         3.1  Corporate Existence and Power.  Seller has been 
              _____________________________                   
duly incorporated and is validly existing as an insurance 
corporation in good standing under the laws of the State of 
Connecticut and has all corporate powers required to carry on 
its business as now conducted.  Each Company (i) has been duly 
incorporated and is validly existing as an insurance corporation 
in good standing under the laws of the State of Connecticut, 
(ii) has all corporate powers required to carry on its business 
as now conducted, (iii) has all material governmental licenses, 
authorizations, permits, consents and approvals required to 
carry on its business as now conducted 


















18

<PAGE> 25


and (iv) is duly qualified to do business as a foreign 
corporation and is in good standing in each jurisdiction where 
such qualification is necessary, or is duly licensed to do 
business as an insurer and is in good standing in each 
jurisdiction where such licensing is necessary, as the case may 
be, except for those jurisdictions where failure to be so 
qualified or licensed, as the case may be, would not, 
individually or in the aggregate, have a material adverse effect 
on the Companies and their Subsidiaries, taken as a whole.  
Seller has heretofore delivered or made available to Buyer true 
and complete copies of the certificate of incorporation and 
bylaws of Seller, each Company and the Subsidiaries of the 
Companies as in effect on the date hereof.  Neither of the 
Companies nor any of their respective Subsidiaries is in 
violation of any of the provisions of its certificate of 
incorporation or by-laws.

         3.2  Corporate Authorization.  The execution, delivery 
              _______________________                           
and, subject to the receipt of the approvals referred to in 
Section 3.3, performance by Seller of this Agreement and the 
Ancillary Agreements to which Seller is a party are within 
Seller's corporate powers and have been duly authorized by all 
necessary corporate action on the part of Seller.  This 
Agreement constitutes, and when executed and delivered each 
Ancillary Agreement to which Seller is a party will constitute, 
a valid and legally binding agreement of Seller, enforceable 
against Seller in accordance with its terms, subject to (i) 
bankruptcy, insolvency, reorganization, fraudulent transfer, 
moratorium and other similar laws now or hereafter in effect 
relating to or affecting creditors' rights generally and the 
rights of creditors of insurance companies generally and (ii) 
general principles of equity (regardless of whether considered 
in a proceeding at law or in equity).


















19

<PAGE> 26


         3.3  Governmental Authorization.  The execution, 
              __________________________                  
delivery and performance by Seller of this Agreement and each 
Ancillary Agreement to which Seller is a party require no action 
by or in respect of, or filing with, any governmental body, 
agency, or official on the part of Seller or any of its 
Subsidiaries other than (i) compliance with any applicable 
requirements of the HSR Act, (ii) approvals or filings under the 
insurance laws of the jurisdictions set forth on Schedule 3.3,  
(iii) filings and notices not required to be made or given until 
after the Closing Date, (iv) filings, at any time, of tax 
returns, tax reports and tax information statements and (v) any 
such action or filing as to which the failure to make or obtain 
would not, individually or in the aggregate, materially impair 
the ability of the Companies and their Subsidiaries, taken as a 
whole, to conduct their businesses.

         3.4  Non-Contravention.  Except as set forth in 
              _________________                          
Schedule 3.4, the execution, delivery and performance by Seller 
of this Agreement and each Ancillary Agreement to which Seller 
is a party do not and will not (i) violate the certificate of 
incorporation or bylaws of Seller, any Company or any Subsidiary 
of any Company, (ii) assuming compliance with the matters 
referred to in Section 3.3, violate any applicable law, rule, 
regulation, judgment, injunction, order or decree, (iii) require 
any consent or other action by any Person under, constitute a 
default under, or give rise to any right of termination, 
cancellation or acceleration of any right or obligation of any 
Company or any Subsidiary of any Company or to a loss of any 
benefit to which any Company or any Subsidiary of any Company is 
entitled under, any material agreement or other material 
instrument binding upon any Company or any Subsidiary of any 
Company or any material license, franchise, permit or other 
similar 


















20

<PAGE> 27


authorization held by any Company or any Subsidiary of any 
Company, (iv) result in the creation or imposition of any 
material Lien on any asset of any Company or any Subsidiary of 
any Company or (v) cause or constitute a "distribution date," 
"flip in event" or comparable event under any stockholder rights 
plan or comparable plan of any Person the capital stock of which 
is directly or indirectly beneficially owned by any Company or 
any Subsidiary of any Company (provided that no representation 
is made in this clause (v) as to the effect of any beneficial 
ownership of such capital stock by Buyer or any of its 
Affiliates).

         3.5  Capitalization.  (a)  The authorized capital stock 
              ______________                                    
 
of ACSC consists of 1,000 shares of ACSC Common Stock.  As of 
the date hereof, there are outstanding 1,000 shares of ACSC 
Common Stock.  The authorized capital stock of SFIC consists of 
20,000 shares of SFIC Common Stock.  As of the date hereof, 
there are outstanding 20,000 shares of SFIC Common Stock.

          (b)  All outstanding shares of capital stock of each 
Company have been duly authorized and validly issued and are 
fully paid and non-assessable and free of preemptive rights.  
Except as set forth in this Section 3.5, there are no 
outstanding (i) shares of capital stock or voting securities of 
any Company, (ii) securities of any Company convertible into or 
exchangeable for shares of capital stock or voting securities of 
any Company or (iii) options or other rights to acquire from any 
Company, or other obligation of any Company to issue, any 
capital stock, voting securities or securities convertible into 
or exchangeable for capital stock or voting securities of any 
Company (the items in clauses (i), (ii) and (iii) being referred 
to collectively as the "Company Securities").  There are no 
outstanding obligations of 


















21

<PAGE> 28


any Company or any of their respective Subsidiaries to 
repurchase, redeem or otherwise acquire any Company Securities.

         3.6  Ownership of Shares.  Seller is the record and 
              ___________________                            
beneficial owner of the Shares, free and clear of any Lien and 
any other limitation or restriction (including any restriction 
on the right to vote, sell or otherwise dispose of the Shares 
other than pursuant to generally applicable regulatory 
requirements), and will transfer and deliver to Buyer at the 
Closing valid title to the Shares free and clear of any Lien and 
any such limitation or restriction, except Liens, limitations or 
restrictions arising as a result of any action taken by Buyer or 
any of its Affiliates; provided that Seller makes no 
                       ________                      
representation regarding the ability of any Person other than 
Seller to transfer or otherwise dispose of the Shares without 
registration or qualification under, or in compliance with, 
applicable Federal securities or state securities or insurance 
laws.

         3.7  Subsidiaries.  (a)  Each Subsidiary of each 
              ____________                                
Company has been duly incorporated or organized and is validly 
existing as a corporation, partnership or association in good 
standing under the laws of its jurisdiction of incorporation or 
organization and has all powers and all material governmental 
licenses, authoriztions, permits, consents and approvals 
required to carry on its business as now conducted.  Each 
Subsidiary of each Company is duly qualified to do business as a 
foreign corporation or organization and is in good standing in 
each jurisdiction where such qualification is necessary, or is 
duly licensed to do business as an insurer and is in good 
standing in each jurisdiction where such licensing is necessary, 
as the case may be, except for those jurisdictions where failure 
to be so qualified or licensed, as 


















22

<PAGE> 29


the case may be, would not, individually or in the aggregate, 
have a material adverse effect on the Companies and their 
Subsidiaries, taken as a whole.  All Subsidiaries of each 
Company and their respective jurisdictions of incorporation or 
organization are identified on Schedule 3.7.

           (b)  All outstanding shares of capital stock of each 
Subsidiary of each Company have been duly authorized and validly 
issued and are fully paid and non-assessable and free of 
preemptive rights.  As of the Closing Date, except as disclosed 
in Schedule 3.7, all of the outstanding capital stock of, and 
other voting securities or ownership interests in, each 
Subsidiary of each Company will be owned by one of the 
Companies, directly or indirectly, free and clear of any Lien 
and free of any other limitation or restriction (including any 
restriction on the right to vote, sell or otherwise dispose of 
such capital stock or other voting securities or ownership 
interests other than pursuant to generally applicable regulatory 
requirements).  Except as set forth in Schedule 3.7, there are 
no outstanding (i) securities of any of the Companies or any of 
their respective Subsidiaries convertible into or exchangeable 
for shares of capital stock or other voting securities or 
ownership interests in any Subsidiary of any Company or (ii) 
options or other rights to acquire from any of the Companies or 
any of their respective Subsidiaries, or other obligations of 
any of the Companies or any of their respective Subsidiaries to 
issue, any capital stock or other voting securities or ownership 
interests in, or any securities convertible into or exchangeable 
for any capital stock or other voting securities or ownership 
interests in, any Subsidiary of any of the Companies (the items 
in clauses (i) and (ii) being referred to collectively as the 
"Subsidiary Securities").  There are no outstanding 



















23

<PAGE> 30


obligations of any of the Companies or any of their respective 
Subsidiaries to repurchase, redeem or otherwise acquire any 
outstanding Subsidiary Securities.

         3.8  Financial Statements; SEC Reports.  (a)  The 
              _________________________________            
audited combined balance sheet of the Companies and their 
Subsidiaries as of December 31, 1993 and
December 31, 1994 and the related combined statements of income 
and cash flows for each of the years ended December 31, 1993 and 
December 31, 1994 and the unaudited combined balance sheet of 
the Companies and their Subsidiaries as of September 30, 1995 
(the "Unaudited September Balance Sheet") and the related 
combined statement of income for the nine months ended September 
30, 1995, respectively, previously delivered to Buyer, present 
fairly, in all material respects, the combined financial 
position of the Companies and their Subsidiaries as of the dates 
thereof and the combined results of operations of the Companies 
and their Subsidiaries for the periods then ended in conformity 
with GAAP consistently applied (subject to normal year-end 
adjustments in the case of the unaudited interim financial 
statements).

           (b)  The audited balance sheets of the Companies and 
their Subsidiaries as of December 31, 1994, and the related 
statements of operations and statements of cash flows for the 
year then ended, and their respective Annual Statements for the 
fiscal year ended December 31, 1994 (the "Annual Statements") 
filed with the insurance regulatory authorities in their 
respective jurisdictions of domicile (collectively, the 
"Regulators"), copies of which have been delivered to Buyer, 
fairly present in all material respects their respective 
statutory financial conditions as of such date and the results 
of their respective operations for the year then ended in 


















24

<PAGE> 31


conformity with SAP.  The other information contained in the 
Annual Statements fairly presents in all material respects the 
information required to be contained therein in conformity with 
SAP.  The balance sheets of the Companies and their Subsidiaries 
in respect of any period ending after December 31, 1994, and the 
related statements of operations and statements of cash flows, 
which have been filed with Regulators, copies of which have been 
delivered to Buyer, fairly present in all material respects 
their respective statutory financial conditions as of such date 
and the results of their respective operations for the period 
then ended in conformity with SAP consistently applied.

         (c)  As of the date of the latest filing of an SEC 
Report, the SEC Reports taken as a whole, including, without 
limitation, any financial statements or schedules included 
therein, did not contain with regard to Seller's property 
casualty business segments taken as a whole 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 
therein, in light of the circumstances under which they were 
made, not misleading, it being understood that for purposes of 
this subparagraph (c) "material" is to be assessed in the 
context of  Seller and all of its Subsidiaries taken as a whole. 
 As used herein, "SEC Reports" means all forms, reports and 
documents filed by Seller with the Securities and Exchange 
Commission (the "SEC") since January 1, 1992 and prior to the 
date hereof to the extent they contain any information relating 
to Seller's property casualty business segments.

         3.9  Absence of Certain Changes.  Except as disclosed 
              __________________________                       
in Schedule 3.9, during the period from the Balance Sheet Date 
to the date hereof, the business 



















25

<PAGE> 32


of the Companies and their Subsidiaries has been conducted in 
the ordinary course consistent with past practices (including, 
without limitation, with regard to underwriting, pricing, 
actuarial and investment policies generally) and there has not 
been:

          (i)  any event, occurrence, development or state 
of circumstances or facts which has had or would reasonably 
be expected to have a Material Adverse Effect on the 
Companies, other than those resulting from changes in 
general economic conditions;

         (ii)  any declaration, setting aside or payment 
of any dividend or other distribution with respect to any 
shares of capital stock of any Company, or any repurchase, 
redemption or other acquisition by any Company or any 
Subsidiary of any Company of any outstanding shares of 
capital stock or other securities of, or other ownership 
interests in, any Company or any Subsidiary of any 
Company;

         (iii)  any incurrence, assumption or guarantee by 
any Company or any Subsidiary of any Company of any 
indebtedness for borrowed money other than in the ordinary 
course of business and in amounts and on terms consistent 
with past practices;

         (iv)  any transaction or commitment made, or any 
contract or agreement entered into, by any Company or any 
Subsidiary of any Company (including the acquisition or 
disposition of any assets) or any relinquishment by any 
Company or any Subsidiary of any



















26

<PAGE> 33


Company of any contract or other right, other than 
transactions and commitments in the ordinary course of 
business consistent with past practices, or any 
acquisition of assets or incurrence of liabilities by any 
Company or any Subsidiary of any Company which are not 
primarily related to the property and casualty insurance 
business of the Companies and their Subsidiaries;

         (v)  any change in any method of accounting or 
accounting practice or policy (including, without 
limitation, any reserving method, practice or policy) by 
any Company or any Subsidiary of any Company, except for 
any such change as a result of a concurrent change in GAAP 
or SAP; 

         (vi)  to the extent payable directly or 
indirectly by any Company or any Subsidiary of any 
Company, any (A) employment, deferred compensation, 
severance, retirement or other similar agreement entered 
into with any director, officer or employee engaged in 
Seller's property/casualty business (or any amendment to 
any such existing agreement), (B) grant of any severance 
or termination pay to any director, officer or employee 
engaged in Seller's property/casualty business other than 
in the ordinary course of business, (C) change in 
compensation or other benefits payable to any director, 
officer or employee engaged in Seller's property/casualty 
business, other than (x) increases in base compensation in 
the ordinary course of business consistent with past 
practice (but in no event greater than 4 1/2% in the





















27

<PAGE> 34


aggregate on a per annum basis for all such individuals as 
a group), (y) with respect to directors or officers, 
changes in benefits required by plans and arrangements in 
effect as of the Balance Sheet Date and (z) with respect 
to employees who are not directors or officers, changes in 
benefits in accordance with plans or arrangements in 
effect as of the Balance Sheet Date in the ordinary course 
of business consistent with past practice or (D) loans or 
advances to any directors, officers or employees engaged 
in Seller's property/casualty business, except for 
ordinary travel and business expenses in the ordinary 
course of business consistent with past practice;

         (vii)  any damage, theft or casualty loss by any 
Company or any Subsidiary of any Company in an amount 
exceeding $1,000,000;

         (viii)  any transaction by any Company or any 
Subsidiary of any Company involving Company Investment 
Assets other than in the ordinary course of business 
consistent with past practice;

         (ix)  any change in any material way by any 
Company or any Subsidiary of any Company in underwriting 
practices or standards;

         (x)(i)  any entering into of any facultative 
reinsurance contract, other than in the ordinary course of 
business consistent with past practice, or (ii) any 
commutation of any facultative reinsurance


























28

<PAGE> 35


contract, or (iii) any entering into or any commutation of 
any reinsurance treaty, by any Company or any Subsidiary 
of any Company;

         (xi)  any material insurance transaction by any 
Company or any Subsidiary of any Company other than in the 
ordinary course of business consistent with past practice;

         (xii)  any significant change by the Company or 
any Subsidiary of any Company in the compensation 
structure of, or benefits available to, any significant 
agent or with respect to agents generally; 

         (xii)  any investment made in Company Investment 
Assets other than in accordance with Seller's investment 
policies set forth in Schedule 3.9(xiii); or

         (xiv)  any agreement or commitment (contingent or 
otherwise) by any Company or any Subsidiary of any Company 
to do any of the foregoing.

         3.10  No Undisclosed Material Liabilities; Investments. 
               ________________________________________________ 
 
(a)  There are no liabilities of any Company or any Subsidiary 
of any Company of any kind whatsoever, whether accrued, 
contingent, absolute, determined, determinable or otherwise, 
other than:

         (i)  liabilities provided for in the Unaudited 
September Balance Sheet;

         (ii)  liabilities disclosed on Schedule 3.10(a);























29

<PAGE> 36


         (iii)  liabilities incurred since the Balance 
Sheet Date in the ordinary course of business consistent 
with past practice and in amounts and on terms consistent 
with past practice; and

         (iv)  other undisclosed liabilities that are not 
individually or in the aggregate material to the Companies 
and their Subsidiaries, taken as a whole.

              (b)  Schedule 3.10(b) describes in reasonable 
detail all Company Investment Assets as of the Balance Sheet 
Date.  For purposes of this Agreement, "Company Investment 
Assets" means any investment assets (whether or not required by 
GAAP or SAP to be reflected on a balance sheet) beneficially 
owned (within the meaning of Rule 13d-3 under the Securities 
Exchange Act of 1934, as amended) by any Company or any 
Subsidiary of any Company, including, without limitation, bonds, 
notes, debentures, mortgage loans, collateral loans and all other 
instruments of indebtedness, stocks, partnership or joint venture 
interests and all other equity interests, certificates issued by 
or interests in trusts, derivatives and all other assets acquired 
for investment purposes.

               (c)  Neither Company nor any Subsidiary of any 
Company is an "acquiring person" or comparable person under the 
terms of any stockholder rights plan or comparable plan of any 
Person the capital stock of which is directly or indirectly 
beneficially owned by any Company or any Subsidiary of any 
Company, and no "distribution date," "flip in event" or 
comparable event has occurred under any such plan as a 
consequence of such beneficial ownership (provided that no




















30

<PAGE> 37


representation is made in this paragraph (c) as to the effect of 
any beneficial ownership of such capital stock by Buyer or any 
of its Affiliates).

         3.11  Material Contracts.  (a)  Except as disclosed in 
               __________________                               
Schedule 3.11, as of the date hereof, neither of the Companies 
nor any of their Subsidiaries is a party to or bound by:

         (i)  any lease of real property where any of the 
Companies or their Subsidiaries are tenants (A) providing 
for annual base rentals of $1,000,000 or more, (B) 
expiring after December 1, 2000 or (C) where the Seller or 
any of its Affiliates holds an equity interest in such 
real property;

         (ii)  any agreement for the purchase of 
materials, supplies, goods, services, equipment or other 
assets, including any license for Software, that provides 
for either (A) annual payments by any Company or any 
Subsidiary of any Company of $1,000,000 or more or (B) 
aggregate payments by any Company or any Subsidiary of any 
Company of $5,000,000 or more;

         (iii)  any limited partnership, joint venture or 
other unincorporated business organization or similar 
arrangement or agreement in which such Company or 
Subsidiary serves as a general partner or otherwise has 
unlimited liability, or any other material similar 
agreement or arrangement;






















31

<PAGE> 38


         (iv)  any agreement relating to the acquisition 
or disposition of any business (whether by merger, sale of 
stock, sale of assets or otherwise);

         (v)  any agreement relating to indebtedness for 
borrowed money or any guarantee or similar agreement or 
arrangement relating thereto, other than (A) any 
guarantees issued in the ordinary course of the financial 
guarantee business of the Companies and their Subsidiaries 
consistent with past practice and (B) any such agreement 
with, or relating to, an aggregate outstanding principal 
amount or guaranteed obligation not exceeding $10,000,000;

         (vi)  any license, franchise or similar agreement 
material to the Companies and their Subsidiaries, taken as 
a whole;

         (vii)  any agency, dealer, sales representative, 
marketing or other similar agreement material to the 
Companies and their Subsidiaries, taken as a whole;

         (viii)  any agreement that restricts or prohibits 
any Company or any Subsidiary of any Company from 
competing with any Person in any line of business or from 
competing in, engaging in or entering into any line of 
business in any area and which would so restrict or 
prohibit any Company or any Subsidiary of any Company 
after the Closing Date;

         (ix)  any reinsurance treaty or any material 
facultative reinsurance contract (in each case applicable 
to insurance in force);



















32

<PAGE> 39



         (x)  any significant agreement containing "change 
in control" or similar provisions relating to change in 
control of any of the Companies or their Subsidiaries;

         (xi)  any powers of attorney other than those 
entered into in the ordinary course of business in the 
surety bond business;

         (xii)  any "stop loss" agreements, other than 
those entered into in the ordinary course of business 
consistent with past practice;

         (xiii)  any agreements (other than insurance 
policies or other similar agreements issued by any Company 
or any Subsidiary of any Company in the ordinary course of 
its business) material to the Companies and their 
Subsidiaries taken as a whole pursuant to which any 
Company or any Subsidiary of any Company is obligated to 
indemnify any other person; or

         (xiv)  any agreement with Seller or any of its 
Affiliates. 

         (b)  Seller has hereto fore furnished or made 
available to Buyer complete and correct copies of the 
contracts, agreements and instruments listed on Schedule 
3.11, each as amended or modified to the date hereof 
(including any waivers with respect thereto) (the 
"Significant Agreements").  Except as specifically 
disclosed on Schedule 3.11, and except to the extent not 
material to the Companies and their Subsidiaries taken as 
a whole: each of the Significant Agreements is in full 
force and effect and enforceable in accordance with its 
terms, subject to (i) bankruptcy, insolvency, 
reorganization, fraudulent transfer, moratorium and other















33

<PAGE> 40


similar laws now or hereafter in effect relating to or affecting 
creditors' rights generally and the rights of creditors of 
insurance companies generally and (ii) general principles of 
equity (regardless of whether considered in a proceeding at law 
or in equity); neither Seller, nor any of the Companies nor any 
of their Subsidiaries has received any notice (written or oral) 
of cancellation or termination of, or any expression or 
indication of an intention or desire to cancel or terminate, any 
of the Significant Agreements; no Significant Agreement is the 
subject of, or, to the knowledge of Seller, has been threatened 
to be made the subject of, any arbitration, suit or other legal 
proceeding; with respect to any Significant Agreement which by 
its terms will terminate as of a certain date unless renewed or 
unless an option to extend such Significant Agreement is 
exercised, neither Seller, nor any of the Companies nor any of 
their Subsidiaries has received any notice (written or oral), or 
otherwise has any knowledge, that any such Significant Agreement 
will not be so renewed or that any such extension option will 
not be exercised; and there exists no material event of default 
or occurrence, condition or act on the part of any Company or 
any Subsidiary of any Company or, to the knowledge of Seller on 
the part of the other parties to the Significant Agreements, 
which constitutes or would constitute (with notice or lapse of 
time or both) a material breach of or material default under any 
of the Significant Agreements. 

         3.12  Litigation.  Except as set forth on Schedule 3.12 
               __________                                       
 
and, in the case of clause (i) below only, except for any 
action, suit, investigation or proceeding that involves a claim 
under any insurance, reinsurance or indemnity policy, fidelity 
bond, surety bond or similar contract or undertaking issued or 
entered into by any Company 



















34

<PAGE> 41


or any Subsidiary of any Company, there is no action, suit, 
investigation or proceeding pending against, or, to the 
knowledge of Seller, any Company or any Subsidiary of any 
Company, threatened against, or affecting the properties of, any 
Company or any Subsidiary of either Company or any of their 
respective properties before any court or arbitrator or any 
governmental body, agency or official, and, to the best 
knowledge of Seller and the Companies, there is no reasonable 
basis for any such claim (i) in which the actual damages alleged 
or sought exceeds $1,000,000 or (ii) which alleges a course of 
conduct that is based on alleged facts that may give rise to a 
class action lawsuit or (iii) which alleges price-fixing, and in 
the case of (ii) and (iii), in Seller's judgment, there is a 
reasonable basis for the assertion of such claim or (iv) which 
alleges bad faith and, in the case of this clause (iv), in 
Seller's judgment, there is a reasonable possibility of ultimate 
liability in excess of $1,000,000 over any reserves which have 
been established as of the Balance Sheet Date in respect of such 
case.  As of the date hereof and as of no other date, there is 
no action, suit, investigation or proceeding pending against, 
or, to the knowledge of Seller, threatened against, or affecting 
the property of either Company or any Subsidiary of either 
Company or any of their respective properties before any court 
or arbitrator or any governmental body, agency or official which 
challenges or seeks to prevent the transactions contemplated 
hereby.  Except as disclosed in Schedule 3.12, neither Company 
nor any Subsidiary of any Company nor any of their respective 
properties is subject to any material order, writ, judgment, 
injunction, decree, determination or award which would prevent 
or delay the consummation of the transactions contemplated 
hereby.   As used in this Section 3.12, "knowledge" of 




















35

<PAGE> 42


Seller, any Company or any Subsidiary of any Company means the 
knowledge of the executive officers, the chief legal or 
compliance officers of the Seller or the Companies or the senior 
in-house counsel for property and casualty insurance matters of 
the Companies and their Subsidiaries.

         3.13  Compliance with Laws.  Except as set forth in 
               ____________________                          
Schedule 3.13, the Companies and their Subsidiaries are and have 
at all times since January 1, 1993 been in compliance in all 
material respects with all applicable material laws, statutes, 
ordinances and regulations, whether foreign, Federal, state or 
local.

         3.14  Properties.  The Companies and their Subsidiaries 
               __________                                       
 
have good title to, or in the case of leased property have valid 
leasehold interests in, all of their respective property and 
assets (whether real or personal, tangible or intangible) except 
for imperfections in title or invalidities in leasehold 
interests that do not, individually or in the aggregate, 
materially detract from the value reflected on the Unaudited 
September Balance Sheet.  None of such property or assets is 
subject to any Liens, except:

         (i)  Liens reflected on the Unaudited September 
Balance Sheet;

         (ii)  Liens for taxes not yet due or being 
contested in good faith (and for which adequate accruals 
or reserves have been established on the Unaudited 
September Balance Sheet); and

         (iii) Liens which do not, individually or in the 
aggregate, materially detract from the value reflected on 
the Unaudited 

















36

<PAGE> 43


September Balance Sheet or materially interfere with any 
present or intended use of any material property or 
assets.

         3.15  Licenses and Permits; Policies; Regulatory 
               ___________________________________________
Matters.  The Companies and their Subsidiaries and, to the 
_______                                                    
knowledge of Seller and the Companies and their Subsidiaries, 
the significant agents of the Companies and their Subsidiaries, 
hold all material licenses, franchises, permits or other similar 
authorizations (the "Permits") necessary for the ownership and 
conduct of the respective businesses of the Companies, their 
Subsidiaries and such agents in each of the jurisdictions in 
which the Companies, their Subsidiaries and such agents conduct 
or operate their respective businesses in the manner now 
conducted, and such Permits are in full force and effect except 
where any failure to hold any Permit or any failure of any 
Permit to be in full force and effect would not, individually or 
in the aggregate, materially impair the ability of the Companies 
and their Subsidiaries, taken as a whole, to conduct their 
businesses.  No material violations exist in respect of any 
material Permit of the Companies and their Subsidiaries and no 
proceeding or investigation is pending or, to the knowledge of 
Seller, threatened, that would be reasonably likely to result in 
the suspension, revocation or material limitation or restriction 
of any material Permit and, to the knowledge of Seller, the 
Companies and their Subsidiaries, there is no reasonable basis 
for the assertion of any such violation or the institution of 
any such proceeding.  All insurance policies issued by each 
Company and each Subsidiary of each Company, as now in force 
are, to the extent required under applicable law, in a form 
acceptable to applicable regulatory authorities to the knowledge 
of Seller and the Companies and their Subsidiaries, or have been 
filed and 


















37

<PAGE> 44


not objected to by such authorities within the period provided 
for objection.  Each Company and each Subsidiary of each Company 
has filed all material reports, statements, documents, 
registrations, filings or submissions required to be filed by 
any Company or any Subsidiary of any Company, respectively, with 
any applicable Federal, state or local regulatory authorities, 
including, without limitation, state insurance regulatory 
authorities.  All such reports, statements, documents, 
registrations, filings and submissions complied in all material 
respects with applicable law in effect when filed and no 
material deficiencies have been asserted by any such regulatory 
authority with respect to such reports, statements, documents, 
registrations, filings or submissions that have not been 
satisfied.  Except as set forth on Schedule 3.15, all premium 
rates, rating plans and policy forms established or used by any 
Company or any Subsidiary of any Company that are required to be 
filed with or approved by insurance regulatory authorities have 
been so filed or approved, the premiums charged conform in all 
material respects to the premiums so filed or approved and 
comply in all material respects with the insurance laws 
applicable thereto and to the Seller's knowledge, no such 
premiums are subject to any review or investigation by any 
insurance regulatory authority.  As used in this Section 3.15, 
"knowledge" of Seller, or any Company or any Subsidiary of any 
Company means the knowledge of the executive officers, the chief 
legal or compliance officers of the Seller or the Companies or 
the senior in-house counsel for property and casualty insurance 
matters of the Companies and their Subsidiaries.

         3.16  ERISA Representations.  (a)  Schedule 3.16(a) 
               _____________________                         
identifies each Employee Plan.  Seller has furnished or made 
available to Buyer copies of the 



















38

<PAGE> 45


Employee Plans, summary plan descriptions, and, if applicable, 
related trust agreements, and all amendments thereto together 
with (i) the most recent annual report
prepared in connection with any Employee Plan (Form 5500 
including, if applicable, Schedule B thereto) and (ii) the most 
recent actuarial valuation report prepared in connection with 
any Employee Plan.

         (b)  There is no accumulated funding deficiency, 
whether or not waived, within the meaning of Section 302 of 
ERISA or Section 412 of the Code, with respect to any pension 
plan of Seller or any ERISA Affiliate of Seller.  Neither Seller 
nor any ERISA Affiliate of Seller has incurred, or reasonably 
expects to incur prior to the Closing Date (other than a 
liability for premiums under Section 4007 of ERISA), any 
liability under Title IV of ERISA that will not be satisfied in 
full as of the Closing Date.

         (c)  Each Employee Plan that is intended to be 
qualified under Section 401(a) of the Code has received a 
favorable determination letter from the Internal Revenue Service 
and has pending a request for a determination timely filed with 
the Internal Revenue Service in respect of compliance with the 
Tax Reform Act of 1986.  Except as described in Schedule 
3.16(c), each Employee Plan that is not a Multiemployer Plan has 
been maintained in material compliance with its terms and with 
the requirements prescribed by any and all applicable statutes, 
orders, rules and regulations, including but not limited to 
ERISA and the Code.  No Employee Plan is a Multiemployer Plan or 
a multiple employer plan (within the meaning of Section 413(c) 
of the Code).















39

<PAGE> 46


         (d)  Schedule 3.16(d)(i) identifies each Benefit 
Arrangement.  Seller has furnished or made available to Buyer 
copies or descriptions of each Benefit Arrangement.  Each 
Benefit Arrangement has been maintained in substantial 
compliance with its terms and with the requirements prescribed 
by any and all applicable statutes, orders, rules and 
regulations.  

         (e)  Each Employee Plan that is a "group health plan" 
(as defined in Section 4980B of the Code) has been operated in 
material compliance with Section 4980B of the Code at all times.

         (f)  With respect to any Employee Plan that provides 
disability benefits, the amounts accrued on the September 
Adjusted Balance Sheets in accordance with FAS 112 are 
reasonably sufficient to pay all future obligations to the 
Transferred Employees who are disabled as of the Balance Sheet 
Date.

         3.17  Environmental Matters.  (a)  Other than as may be 
               _____________________                            
 
disclosed in the Environmental Reports or in Schedule 3.17, (i) 
there are no Hazardous Substances present on the current or 
former REO, the current or former Mortgaged Properties or the 
current or former Company Facilities requiring material 
remediation under Environmental Laws (provided that to the 
extent the foregoing representation relates to Hazardous 
Substances placed on former REO, former Mortgaged Properties or 
former Company Facilities by any third party subsequent to the 
date on which such properties were sold or otherwise transferred 
by any Company or any Subsidiary of any Company, as the case may 
be, to a Person other than any Company or any of its 
Subsidiaries, such representation is to the knowledge of Seller) 
and (ii) the 


















40

<PAGE> 47


Companies and their Subsidiaries are in compliance in all 
material respects with all applicable Environmental Laws.

         (b)  To the knowledge of Seller, other than as may be 
disclosed in the Environmental Reports or in Schedule 3.17, 
there has been (i) no written notice issued or threatened to be 
issued of a material claim against any Company or any Subsidiary 
of any Company arising under Environmental Laws concerning 
Hazardous Substances present on the current or former REO, the 
current or former Mortgaged Properties or the current or former 
Company Facilities; (ii) no written notice issued or threatened 
to be issued from a governmental authority alleging a material 
violation of Environmental Laws by any Company or any Subsidiary 
of any Company with respect to the ownership or operation of the 
REO or the Company Facilities; (iii) no written notice issued or 
threatened to be issued of a material claim against any Company 
or any Subsidiary of any Company alleging that it is liable 
under the Environmental Laws as a result of the treatment, 
storage, release, transportation, manufacture, installation, 
containment or disposal of Hazardous Substances at properties 
other than the current or former REO's, the current or former 
Mortgaged Properties, or the current or former Company 
Facilities; and (iv) no written notice issued or threatened to 
be issued of a material claim under any Environmental Law 
against any Company or any Subsidiary of any Company as a 
successor to any other Person.

         (c)  Seller has made reasonable efforts to make 
available to Buyer for review and copying, all environmental 
reports in Seller's possession prepared for Seller, any Company 
or any Subsidiary of any Company by third party environmental 




















41

<PAGE> 48


consultants concerning the current REO, the current Mortgaged 
Properties or the current Company Facilities (the "Environmental 
Reports").

         (d)  To the knowledge of Seller, other than as may be 
disclosed in Schedule 3.17, with respect to the current or 
former Mortgaged Properties, there have been no acts or 
omissions of any Company or any Subsidiary of any Company, in 
their capacity as lenders, prior to the Closing Date, on the 
basis of which Buyer, any Company or any Subsidiary of any 
Company has been found or would be found to be materially 
responsible or liable parties under Environmental Laws or 
relating to Hazardous Substances.

         (e)  No representation in this Section 3.17 is intended 
to imply any representation as to any obligation or liability 
that the Companies or any of their Subsidiaries have or may have 
in connection with, as a result of or arising out of any 
insurance or reinsurance or indemnity policy, surety bond or 
similar contract or undertaking issued or entered into by any 
Company or any Subsidiary of any Company in the ordinary course 
of business.

         (f)  To the knowledge of Seller, other than as may be 
disclosed in Schedule 3.17, the execution, delivery and 
performance by Seller of this Agreement require no action by or 
in respect of, or filing with, any governmental body, agency or 
official on the part of Seller or any of its Subsidiaries 
pursuant to any Environmental Law, other than any such action or 
filing as to which the failure to make or obtain would not, 
individually or in the aggregate, have material adverse effect 
on the Companies and their Subsidiaries, taken as a whole.



















42

<PAGE> 49


         (g)  Notwithstanding anything to the contrary in this 
Agreement, any and all representations, warranties, covenants 
and agreements of Seller contained in this Agreement with 
respect to any and all matters relating to Environmental Laws or 
Hazardous Substances are contained solely and exclusively in 
this Section 3.17.

         (h)  As used in this Section 3.17, the term "the 
knowledge of Seller" means: (i) with respect to representations 
concerning the current or former REO, the actual current 
knowledge, without investigation, of any executive officer of 
Seller, any Company or any Subsidiary of any Company or of the 
regional asset manager of Seller or any Company or any 
Subsidiary of any Company directly responsible for the 
management of the REO's in such manager's region, (ii) with 
respect to representations concerning the current or former 
Mortgaged Properties, the actual current knowledge, without 
investigation, of any executive officer of Seller, any Company 
or any Subsidiary of any Company or of the regional investment 
manager of Seller or any Company or any Subsidiary of any 
Company directly responsible for the management of each loan 
secured by a Mortgaged Property in such manager's region, (iii) 
with respect to representations concerning the current or former 
Company Facilities, the actual current knowledge, without 
investigation, of any executive officer of Seller, any Company 
or any Subsidiary of any Company or of the environmental 
compliance officer of Seller or any Company or any Subsidiary of 
any Company responsible for overall environmental compliance 
matters concerning Company Facilities.

         (i)  "Company Facilities" means any offices, buildings 
and other real property that are owned or leased by any 



















43

<PAGE> 50


Company or any Subsidiary of any Company and that are used in 
the operation of the business of any Company or any Subsidiary 
of any Company.  "REO" means the real property (including land 
and any buildings or other improvements thereon) owned by any 
Company or any Subsidiary of any Company but not used in the 
operation of the business of any Company or any Subsidiary of 
any Company.  "Mortgaged Properties" means the real property 
(including land and any buildings or other improvements thereon) 
subject to a mortgage interest or other Lien held by or in favor 
of any Company or any Subsidiary of any Company (other than 
mortgages and liens associated with mortgage-backed securities 
or private placement bond investments made in the ordinary 
course of Seller's securities transactions).

         (j)  "Environmental Laws" means any and all foreign, 
Federal, state or local statutes, laws, regulations, ordinances, 
rules or codes now in effect relating to the environment, to the 
effect of the environment on human health or safety or to the 
use, generation, manufacturing, treatment, disposal, storage, 
discharge or release of Hazardous Substances into the 
environment, including without limitation, ambient air, surface 
water, groundwater or land, or the remediation thereof.

         (k)  "Hazardous Substances" means any toxic, 
radioactive, caustic or otherwise hazardous substance, including 
petroleum and its derivatives and by-products, or any substance 
having any constituent elements displaying any of the foregoing 
characteristics, regulated under Environmental Laws.

         3.18  Intercompany Accounts.  Schedule 3.18 contains a 
               _____________________                            
complete list of (A) all intercompany balances and (B) all 
liabilities of the type referred to in Section 7.5(c), in each 
case as of the Balance Sheet Date between Seller or any of 


















44

<PAGE> 51


its Affiliates, on the one hand, and any Company or any 
Subsidiary of any Company, on the other hand.  Except as 
disclosed on Schedule 3.18, since the Balance Sheet Date, there 
has not been any incurrence or accrual of liability (as a result 
of allocations or otherwise) by any Company or any Subsidiary of 
any Company to Seller or any of its Affiliates or other 
transaction between any Company or any Subsidiary of any Company 
and Seller or any of its Affiliates, except (i) in the ordinary 
course of business in accordance with past practice or (ii) as 
contemplated by this Agreement.

         3.19  No Representation with Respect to Reserves.  
               __________________________________________   
Notwithstanding any other Section or provision of this Article 
3, except as set forth in this Section 3.19, Seller makes no 
representation or warranty that the liabilities for unpaid 
claims and claim expenses whether reported or incurred but not 
reported of the Companies and their Subsidiaries (the "Claims 
Provision") are adequate or sufficient.  As of the date hereof, 
Seller has provided or made available to Coopers & Lybrand 
L.L.P., as consultant to Buyer, all material information in 
possession of Seller and which Seller reasonably believes is 
necessary in order for a reasonable evaluation of the adequacy 
and sufficiency of the Claims Provision relating to asbestos 
liabilities and environmental liabilities.

        3.20  Intellectual Property; Software.  (a)  The 
              _______________________________            
Companies and their Subsidiaries own or otherwise have rights to 
use (in each case, free and clear of any material Liens or other 
material limitations or restrictions) all Intellectual Property 
used in their respective businesses as currently conducted, and 
the consummation of the transactions contemplated hereby will 
not result in the loss of any such rights (or 



















45

<PAGE> 52


require the payment of any additional fees or royalties in order 
to maintain such rights); the use of any Intellectual Property 
by the Companies and their Subsidiaries does not infringe on or 
otherwise violate the rights of any Person; and to Seller's 
knowledge no person is challenging, infringing on or otherwise 
violating any right of any Company or any Subsidiary of any 
Company with respect to any Intellectual Property owned by 
and/or licensed to the Companies and their Subsidiaries.  For 
purposes of this Agreement "Intellectual Property" shall mean 
trademarks, service marks, brand names, certification marks, 
trade dress, assumed names, trade names and other indications of 
origin, the goodwill associated with the foregoing and 
registrations in any jurisdiction of, and applications in any 
jurisdiction to register, the foregoing, including any 
extension, modification or renewal of any such registration or 
application; inventions, discoveries and ideas, whether 
patentable or not in any jurisdiction; patents, applications for 
patents (including, without limitation, divisions, 
continuations, continuations in part and renewal applications), 
and any renewals, extensions or reissues thereof, in any 
jurisdiction; nonpublic information, trade secrets and 
confidential information and rights in any jurisdiction to limit 
the use or disclosure thereof by any Person; writings and other 
works, whether copyrightable or not in any jurisdiction; 
registrations or applications for registration of copyrights in 
any jurisdiction, and any renewals or extensions thereof; and 
any similar intellectual property or proprietary rights, but 
shall not include Software.  For purposes of this Agreement, 
"Software" shall mean all computer and telecommunication 
software including source and object code and documentation and 
any other media (including, without limitation, manuals, 
journals and reference books).





























46

<PAGE> 53


         (b)  Except as set forth in Schedule 3.20, the 
Companies and their Subsidiaries own, or have valid and 
enforceable licenses or other rights to use (in each case, free 
and clear of any material Liens or other material limitations or 
restrictions), all Software used in the conduct of their 
respective  businesses as currently conducted; the use of  the 
Software by the Companies and their Subsidiaries does not 
infringe on or otherwise violate the rights of any person; and 
to Seller's knowledge no person is challenging, infringing on or 
otherwise violating any right of any Company or any Subsidiary 
of any Company with respect to any Software used by the 
Companies and their Subsidiaries.

         3.21  Labor Matters.  Neither Company nor any 
               _____________                           
Subsidiary of any Company is a party to any collective 
bargaining or other labor union contract and no collective 
bargaining agreement is being negotiated by any Company or any 
Subsidiary of any Company.  Except as set forth in Schedule 
3.21, Seller has no knowledge of any material activities or 
proceedings of any labor union to organize any employees of any 
Company or any Subsidiary of any Company.  There is no material 
labor dispute, strike or work stoppage against any Company or 
any Subsidiary of any Company pending or, to Sellers's 
knowledge, threatened which may interfere with the respective 
business activities of the Companies or any of their 
Subsidiaries.

         3.22  Loans and Advances.  Except as set forth in 
               ___________________                         
Schedule 3.22, neither of the Companies nor any of their 
Subsidiaries has any contractual commitment to make any loan, 
advance or capital contribution to, or investment in, any other 
Person in excess of $100,000.



























47

<PAGE> 54


         3.23  All Assets Necessary.  Except as set forth in 
               ____________________                          
Schedule 3.23, the Companies and their Subsidiaries own, lease 
or license all property and assets necessary to carry on their 
businesses and operations as presently conducted, all such 
assets and properties (other than as Buyer and Seller may 
mutually agree) will be conveyed to Buyer (either indirectly by 
means of the transfer of the Shares or through an Ancillary 
Agreement or as contemplated by Sections 5.11, 7.11 and 7.12) at 
the Closing and will as of the Closing (assuming Buyer were to 
elect to obtain the services and facilities made available to 
Buyer pursuant to the Ancillary Agreements and consents 
contemplated by Section 5.11 were obtained) permit Buyer to 
conduct such businesses and operations in the same manner as 
such businesses and operations have been conducted prior to the 
Closing.

         3.24  Certain Policies.  Subject to the qualifications 
               ________________                                 
set forth therein, Schedule 3.24 sets forth a brief description 
of all insurance policies written by or ceded to either of the 
Companies or any of their Subsidiaries with respect to any 
insured currently or formerly involved in the manufacture of 
tobacco products, or to the knowledge of Seller in research, 
development or providing technical advice or information with 
respect to the manufacture of tobacco products, including the 
name of the insured, the policy period and the policy limits.  
No notices have been received by Seller or the Companies or 
their Subsidiaries or claims made by the insured under any of 
such policies.  Except as set forth in Schedule 3.24, each such 
policy for each insured contains a product liability exclusion, 
in the form set forth on Schedule 3.24, for each policy year.  
As used in this Section 3.24, "knowledge" of Seller means the 
knowledge of the executive officers, the chief legal or 
compliance officers of the 


























48

<PAGE> 55


Seller or the Companies or the senior in-house counsel for 
property and casualty insurance matters of the Companies and 
their Subsidiaries.

         3.25  Disclosure.  No representation or warranty of 
               __________                                    
Seller contained in this Agreement (including the Schedules 
referenced herein) contains any untrue statement of a material 
fact or omits to state any material fact required to be stated 
therein or necessary in order to make the statements made 
therein, in light of circumstances under which they were made, 
not misleading.

                            ARTICLE 4

             REPRESENTATIONS AND WARRANTIES OF BUYER

              Buyer represents and warrants to Seller as of the 
date hereof and as of the Closing Date (but as of no other dates 
unless expressly so stated) that:

         4.1  Corporate Existence and Power.  Buyer has been 
              _____________________________                  
duly incorporated and is validly existing as an insurance 
corporation in good standing under the laws of Connecticut and 
has all corporate powers and all material governmental licenses, 
authorizations, permits, consents and approvals required to 
carry on its business as now conducted.  Buyer has heretofore 
delivered to Seller true and complete copies of its certificate 
of incorporation and by-laws as in effect on the date hereof.

         4.2  Corporate Authorization.  The execution, delivery 
              _______________________                           
and, subject to the receipt of the approvals referred to in 
Section 4.3, performance by Buyer of this Agreement and the 
Ancillary Agreements to which Buyer is a party are within the 
corporate powers of Buyer and have been duly authorized by all 
necessary corporate action on the part of Buyer.  This Agreement 
constitutes, and when executed and 






















49

<PAGE> 56


delivered each Ancillary Agreement to which Buyer is a party 
will constitute, a valid and legally binding agreement of Buyer, 
enforceable against Buyer in accordance with its terms, subject 
to (i) bankruptcy, insolvency, reorganization, fraudulent 
conveyance, moratorium and other similar laws now or hereafter 
in effect relating to or affecting creditors' rights generally 
and the rights of creditors of insurance companies generally and 
(ii) general principles of equity (regardless of whether 
considered in a proceeding at law or in equity).

         4.3  Governmental Authorization.  The execution, 
              __________________________                  
delivery and performance by Buyer of this Agreement and each 
Ancillary Agreement to which Buyer is a party require no action 
by or in respect of, or filing with, any governmental body, 
agency or official on the part of Buyer or any of its 
Subsidiaries other than (i) compliance with any applicable 
requirements of the HSR Act, (ii) approvals or filings under the 
insurance laws of the jurisdictions set forth in Schedule 4.3, 
(iii) filings and notices not required to be made or given until 
after the Closing Date, (iv) filings, at any time, of tax 
returns, tax reports and tax information statements and (v) any 
such action or filing as to which the failure to make or obtain 
would not individually or in the aggregate be material.

         4.4  Non-Contravention.  Except as set forth in 
              _________________                          
Schedule 4.4, the execution, delivery and performance by Buyer 
of this Agreement and each Ancillary Agreement to which Buyer is 
a party do not and will not (i) violate the certificate of 
incorporation or by-laws of Buyer, (ii) assuming compliance with 
the matters referred to in Section 4.3, violate any applicable 
law, rule, regulation, judgment, injunction, order or decree, 
(iii) require any consent or other action by any Person under, 



















50


<PAGE> 57


constitute a default under, or give rise to any right of 
termination, cancellation or acceleration of any right or 
obligation of Buyer or any of its Subsidiaries or to a loss of 
any benefit to which Buyer or any of its Subsidiaries is 
entitled under, any material agreement or other instrument 
binding upon Buyer or any of its Subsidiaries or any material 
license, franchise, permit or other similar authorization held 
by Buyer or any of its Subsidiaries or (iv) result in the 
creation or imposition of any material Lien on any asset of 
Buyer or any of its Subsidiaries.

         4.5  Financing.  Buyer has, or will have prior to the 
              _________                                        
Closing, sufficient cash, available lines of credit or other 
sources of immediately available funds to enable it to make 
payment of the Purchase Price and any other amounts to be paid 
by it hereunder.

         4.6  Purchase for Investment.  Buyer is purchasing the 
              _______________________                           
Shares for investment for its own account and not with a view 
to, or for sale in connection with, any distribution thereof, 
provided, however, that at or after the Closing Buyer may issue 
or sell debt or equity securities of the Companies or their 
Subsidiaries in connection with the financing of its acquisition 
of the Shares.  Any such issuance or sale will be effected in 
compliance with all applicable securities laws.  Buyer (either 
alone or together with its advisors) has sufficient knowledge 
and experience in financial and business matters so as to be 
capable of evaluating the merits and risks of its investments in 
the Shares and is capable of bearing the economic risks of such 
investment.





















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<PAGE> 58


                           ARTICLE 5
                      COVENANTS OF SELLER

         Seller agrees that:

         5.1  Conduct of the Companies.  Except as otherwise 
              ________________________                       
expressly provided in this Agreement, during the period from the 
date hereof to the Closing, Seller will cause the Companies and 
their Subsidiaries to conduct their operations according to 
their ordinary course of business consistent with past practice, 
will cause the Companies and their Subsidiaries to use their 
reasonable best efforts to preserve intact their respective 
business organizations, generally to keep available the services 
of their respective officers and employees and generally to 
maintain existing relationships with agents, licensors, 
licensees, suppliers, contractors, distributors, customers and 
others having business relationships with them, and will cause 
the Companies and their Subsidiaries, to the extent permitted by 
applicable law, to confer with Buyer on a regular basis and 
confer with Buyer on significant operational matters and 
material decisions affecting the business of the Companies and 
the Subsidiaries.  Without limiting the generality of the 
foregoing, as promptly as practicable following the date hereof, 
Seller shall establish an interim transition committee (the 
"Transition Committee") which shall meet on a regular basis to 
review the financial and operational affairs of the Companies 
and their Subsidiaries.  Such review shall be conducted in 
accordance with applicable law and shall not cover current or 
future pricing of specific products, marketing or strategic 
plans, specific breakdowns of sales by customers, or plans to 
introduce new competitive products.  A majority of the 
Transition Committee shall consist of senior officers of the 
Companies designated by 

















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<PAGE> 59


Seller (including their respective chief executive and chief 
financial officers) and one or more representatives of Seller.  
The Transition Committee shall also include two individuals 
designated by Buyer.  Without limiting the generality of the 
foregoing, and except as otherwise expressly provided in this 
Agreement or as set forth in Schedule 5.1, Seller will cause 
each of the Companies and each Subsidiary of any Company not to, 
without the prior written consent of Buyer:

         (a)  amend its certificate of incorporation or by-laws;

         (b)  authorize for issuance, issue, sell, deliver or 
agree or commit to issue, sell or deliver (whether through the 
issuance or granting of options, warrants, commitments, 
subscriptions, rights to purchase or otherwise) any stock of any 
class or any other securities or equity equivalents (including, 
without limitation, stock appreciation rights), or amend any of 
the terms of any such securities or agreements outstanding as of 
the date hereof;

         (c)  split, combine or reclassify any shares of its 
capital stock, declare, set aside or pay any dividend or other 
distribution (whether in cash, stock, or property or any 
combination thereof) in respect of its capital stock, or redeem, 
repurchase or otherwise acquire any of its securities;

         (d)(i)  incur any indebtedness for borrowed money 
(except for short term indebtedness incurred in the ordinary 
course of business consistent with past practice pursuant to 
existing lines of credit or extensions or renewals thereof) or 
issue any debt securities or, except in the ordinary course of 
business consistent with past practice, assume, guarantee or 
endorse the obligations of any other Person; (ii) make any 
loans, advances or capital contributions to, or investments in, 
any other Person
















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(other than (A) to wholly owned Subsidiaries of the Companies, 
(B) subject to Section 7.11, investments in the ordinary course 
of business consistent with past practice, (C) loans to agents 
in the ordinary course of business consistent with past practice 
not exceeding $500,000 aggregate principal amount to all agents 
or (D) pursuant to the terms of the agreements listed in 
Schedule 5.1), in excess of $100,000; (iii) pledge or otherwise 
encumber shares of its capital stock; (iv) enter into or invest 
in any derivative financial instruments except in the ordinary 
course of business consistent with current investment and risk 
management policies; or (v) except in the ordinary course of 
business consistent with past practice, mortgage or pledge any 
of its assets, tangible or intangible, or create or suffer to 
exist any Lien thereupon;

         (e)  to the extent payable directly or indirectly by 
any Company or any Subsidiary of any Company:  enter into, adopt 
or (except as may be required by law or the terms of any such 
arrangement) terminate any bonus, profit sharing, compensation, 
severance, termination, stock option, stock appreciation right, 
restricted stock, performance unit, stock equivalent, stock 
purchase agreement, pension, retirement, deferred compensation, 
employment, severance or other employee benefit agreement, 
trust, plan, fund or other arrangement for the benefit or 
welfare of any director, officer or employee engaged in Seller's 
property and casualty insurance business, amend any such 
arrangement as it relates to such directors, officers or 
employees or (except for increases in base compensation in the 
ordinary course of business consistent with past practice, but 
in no event greater than 4 1/2% in the aggregate on a per annum 
basis for all such individuals as a group) increase in any 
manner the compensation 



















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<PAGE> 61


or benefits of any director, officer or employee engaged in 
Seller's property and casualty insurance business or, with 
respect to any director or officer engaged in Seller's property 
and casualty insurance business, pay any benefit not required by 
any plan or arrangement as in effect as of the date hereof or, 
with respect to any employee engaged in Seller's property and 
casualty insurance business who is not an officer or director, 
pay any benefit other than in the ordinary course of business 
consistent with past practice in accordance with plans or 
arrangements in effect as of the date hereof (including, without 
limitation, with respect to any such director, officer or 
employee, the granting of stock options, restricted stock, stock 
appreciation rights or performance units); provided that Buyer 
agrees it will not unreasonably withhold its consent, if 
requested by Seller, to transactions proposed under this 
paragraph (e) (other than increases in base compensation);

         (f)  acquire, sell, lease or dispose of any assets 
outside the ordinary course of business (including, without 
limitation, any assets which are not primarily related to the 
property and casualty insurance business conducted by the 
Companies and their Subsidiaries) or any assets which in the 
aggregate are material to the Companies and their Subsidiaries, 
taken as a whole, or enter into any contract, agreement, 
commitment or transaction with respect thereto outside the 
ordinary course of business consistent with past practice;

         (g)  change any of the accounting principles, 
practices, methods or policies (including, without limitation, 
any reserving methods, practices or policies) used by it, except 
as may be required as a result of a change in law, SEC 
guidelines or GAAP or SAP; 



















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<PAGE> 62


         (h)  change the method of determining the GAAP reserves 
for any guaranty fund assessment, second injury fund assessment, 
special insurance assessment or similar assessment or tax;

         (i) (i)  acquire (by merger, consolidation, or 
acquisition of stock or assets, but excluding foreclosure) any 
corporation, partnership or other business organization or 
division thereof; (ii) authorize any new capital expenditure or 
expenditures which, individually, is in excess of $500,000 or, 
in the aggregate, are in excess of $2,500,000; (iii) settle any 
litigation existing as of the Balance Sheet Date for amounts 
more than $1,500,000 above held reserves existing as of the 
Balance Sheet Date; (iv) settle any litigation commenced after 
the Balance Sheet Date for amounts more than $1,500,000; or (v) 
enter into or amend any contract, agreement, commitment or 
arrangement with respect to any of the foregoing;

         (j)  make any Tax election or settle or compromise any 
Tax liability, other than in the ordinary course of business and 
as limited by Article 8 hereof or enter into any tax sharing 
agreements or arrangements with any party, or amend or modify 
the Tax Sharing Agreement in a manner which adversely affects 
any of the Companies or their Subsidiaries;

         (k)  pay, discharge or satisfy any claims, liabilities 
or obligations (absolute, accrued, asserted or unasserted, 
contingent or otherwise), other than the payment, discharge or 
satisfaction in the ordinary course of business consistent with 
past practice or in accordance with their terms, of liabilities 
reflected or reserved against in the consolidated financial 
statements (or the notes thereto) of the Companies and their 
Subsidiaries or incurred in the ordinary course of business 
consistent with past practice; 

















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<PAGE> 63


         (l)  terminate, or in any manner material thereto 
modify, amend or waive compliance with, any provision of any of 
the Significant Agreements; 

         (m)  change its underwriting standards or practices in 
any material way;

         (n) (i)  enter into any facultative reinsurance 
contract other than  in the ordinary course of business 
consistent with past practice; (ii) commute any reinsurance 
contract (provided that Buyer will not unreasonably withhold its 
consent to any of the transactions specified in the foregoing 
clauses (i) and (ii) and provided further that Seller may cause 
ACSC to enter into an excess of loss reinsurance contract with a 
term of up to one year, provided that Seller agrees to use its 
best efforts to negotiate with the other party to such contract 
to provide for a shorter term, such term to be as close to six 
months as is reasonably practicable); or (iii) without giving 
Buyer at least 10 business days' prior written notice thereof, 
enter into any treaty reinsurance contract;

         (o)  effect any material or unusual insurance 
transaction other than in the ordinary course of business 
consistent with past practice;

         (p)  significantly change the compensation structure 
of, or other benefits available to, any of its significant 
agents or to its agents generally; 

         (q)  make any investment in Company Investment Assets 
other than in accordance with Seller's investment policies set 
forth in Schedule 3.9(xiii);

         (r)  with respect to any leased facility shared by 
Seller or any of its Affiliates, on the one hand, and any 
Company or any Subsidiary of any Company, on the other hand, in 
which the Companies and their Subsidiaries occupy less than 














57

<PAGE> 64


50% of such facility as of the date hereof, enter into or renew 
any lease or other arrangement in the name of any Company or any 
Subsidiary of any Company relating to such facility;

         (s)  effect any transactions with Seller or any of its 
Affiliates, other than pursuant to arrangements existing as of 
the date hereof; 

         (t) except to the extent permitted by paragraphs (a) 
through (r) above, enter into any agreement of the type 
described in Section 3.11(a)(i), (ii), (iii), (vi), (vii), 
(viii), (x), (xi), (xii) or (xiii); or         

         (u)  take, or agree in writing or otherwise to take, 
any of the actions described above in this Section 5.1.

         5.2  Access to Information.  From the date hereof until 
              _____________________                             
 
the Closing Date, subject to the terms of the Confidentiality 
Agreement referred to in Section 6.1, any applicable contractual 
restrictions and applicable legal privileges, and to the extent 
applicable law would not thereby be violated Seller will (i) 
give, and will cause the Companies and their Subsidiaries to 
give, Buyer, its counsel, financial advisors, auditors and other 
authorized representatives full access, upon reasonable prior 
notice and during normal business hours, to the offices, 
properties, books and records of the Companies and each of their 
Subsidiaries and to the books and records of Seller relating to 
the Companies and their Subsidiaries, (ii) furnish, and will 
cause the Companies and their Subsidiaries to furnish, to Buyer, 
its counsel, financial advisors, auditors and other authorized 
representatives such financial and operating data and other 
information relating to the Companies or any of their 
Subsidiaries as such Persons may reasonably request and (iii) 
instruct the employees, counsel and


















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<PAGE> 65


financial advisors of Seller or the Companies or any of their 
Subsidiaries to cooperate with Buyer in its investigation of the 
Companies or any of their Subsidiaries; provided that this 
Section 5.2 shall not obligate Seller to provide or make 
available to Buyer any employee medical records; provided, 
further, that to the extent contractual restrictions limit 
Seller's ability to take any of the actions set forth in this 
Section 5.2, Seller shall use its best efforts to obtain any 
necessary contractual consent or accommodate any reasonable 
request by Buyer with respect to such action by alternative 
means and provided, further, that  to the extent applicable 
legal privileges or applicable laws limit Seller's ability to 
take any of the actions set forth in this Section 5.2, Seller 
shall use its best efforts to accommodate any reasonable request 
by Buyer with respect to such action by alternative means.

5.3  Notices of Certain Events.  Seller shall promptly 
     _________________________                         
notify Buyer of:

    (a)  any notice or other communication received by 
Seller from any Person alleging that the consent of 
such Person is or may be required in connection with 
the transactions contemplated by this Agreement;

    (b)  any notice or other communication received by 
Seller relating to the transactions contemplated by 
this Agreement and any other significant notices or 
other communications from any governmental or 
regulatory agency or authority; and

    (c)  any actions, suits, claims, investigations or 
proceedings commenced or, to Seller's knowledge 
threatened against, relating to or involving or 
otherwise affecting Seller, the Companies or any

















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<PAGE> 66


Subsidiary of any of the Companies that, if pending on 
the date of this Agreement, would have been required to 
have been disclosed pursuant to Section 3.12 or that 
relate to the consummation of the transactions 
contemplated by this Agreement.

         5.4  Resignations.  Seller will deliver to Buyer the 
              ____________                                    
resignations of all officers and directors of the Companies and 
each Subsidiary of any of the Companies who will be officers, 
directors or employees of Seller or any of its Affiliates after 
the Closing Date from their positions with each of the Companies 
and each Subsidiary of any of the Companies at or prior to the 
Closing Date. 

         5.5  Covenant Not to Compete.  For a period of five 
              _______________________                        
years after the Closing, Seller will not, and will cause its 
Affiliates not to, engage, directly or indirectly, in any 
business in the United States, Canada or the United Kingdom that 
competes with any of the businesses of the Companies and their 
Subsidiaries as conducted in such countries as of the Closing; 
provided that Seller and its Affiliates shall not be prohibited 
________                                                        
from engaging in any such businesses to the extent that such 
business is (a) incidental to any business that does not 
otherwise primarily compete with any of the businesses of the 
Companies and their Subsidiaries as conducted in such countries 
as of the Closing, (b) an integral part of any such business of 
Seller and its Affiliates and (c) reasonably necessary to be 
competitive with respect to any such business of Seller and its 
Affiliates; and provided further that Seller and its Affiliates 
                ________ _______                                
shall not be prohibited from conducting any of the activities 
set forth in Schedule 5.5.




















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<PAGE> 67


         5.6  No Solicitation.  Seller will immediately cease 
              _______________                                 
any existing discussions or negotiations with any third parties 
conducted prior to the date hereof with respect to any 
Acquisition Proposal (as defined below).  Seller shall not, 
directly or indirectly, through any officer, director, employee, 
representative or agent or any of its Subsidiaries, (i) solicit, 
initiate, or encourage any inquiries or proposals that 
constitute, or would lead to, a proposal or offer for a merger, 
consolidation, business combination, sale of substantial assets, 
sale of a substantial percentage of shares of capital stock or 
similar transactions involving any of the Companies or their 
Subsidiaries, other than the transactions contemplated by this 
Agreement (any of the foregoing inquiries or proposals being 
referred to in this Agreement as an "Acquisition Proposal"), 
(ii) engage in negotiations or discussions concerning, or 
provide any nonpublic information to any person or entity 
relating to, any Acquisition Proposal or (iii) agree to or 
approve any Acquisition Proposal.  Seller shall notify Buyer 
immediately (and no later than 24 hours) after receipt by Seller 
of any Acquisition Proposal or any request for nonpublic 
information in connection with an Acquisition Proposal or for 
access to the properties, books or records of the Companies or 
any of their Subsidiaries by any person or entity that informs 
Seller that it is considering making, or has made, an 
Acquisition Proposal.  Such notice shall be made orally (and 
confirmed in writing) and shall indicate the identity of the 
offeror and the terms and conditions of such proposal, inquiry 
or contract.

         5.7  Certain Other Transactions.  (a) At or prior to 
              __________________________                      
Closing, Seller will either (i) enter into a novation whereby 
Seller substitutes itself or one of its Affiliates for ACSC as 
assuming reinsurer under the Aggregate Excess Reinsurance 
Agreement


















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<PAGE> 68


between ACSC and Aetna ReInsurance (U.K.) Ltd. dated May 28, 
1993 (the "Aetna Re U.K. Stop Loss") and Aetna ReInsurance 
(U.K.) Ltd. releases ACSC from all liability thereunder; or (ii) 
otherwise indemnify Buyer to the extent that the amount paid by 
ACSC under the Aetna Re U.K. Stop Loss exceeds the amount 
reflected as a reserve (which Seller represents will not exceed 
$35,700,000) on the September Audited GAAP Balance Sheet for 
liabilities or potential liabilities under such agreement.  In 
the event Seller elects to substitute itself or one of its 
Affiliates for ACSC as assuming reinsurer under the Aetna Re 
U.K. Stop Loss, the consideration for such novation will be an 
amount equal to ACSC's held reserve level relating to the Aetna 
Re U.K. Stop Loss at the time of such novation.  Subject to 
receipt of any necessary regulatory approvals, such amount will 
be paid to the assuming company by ACSC as reflected on the 
September Audited Balance Sheet.  In the event that Seller 
elects to indemnify Buyer pursuant to clause (ii) of the first 
sentence of this Section 5.7(a), to the extent that the amount 
paid by ACSC under the Aetna Re U.K. Stop Loss is less than the 
amount reflected as a reserve on the September Audited GAAP 
Balance Sheet for liabilities or potential liabilities under 
such agreement, Buyer shall pay such amount to Seller.

         (b)  At or prior to the Closing, Seller will (i) cause 
Aetna Life Insurance Company of Illinois ("ALOI") to be 
substituted for Aetna Casualty & Surety Company of Illinois 
("AC&S of Illinois") as reinsurer under the original cession 
from ALOI to AC&S of Illinois of Aetna Life Insurance Company's 
long-term disability and credit/mortgage disability business, 
and AC&S of Illinois will be released from all liabilities 
thereunder and (ii) take all other actions necessary to




















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<PAGE> 69


ensure that, following the Closing, neither Company nor any 
Subsidiary of any Company shall have any liability with respect 
to any such agreements.

         5.8  Confidentiality Agreements.  Seller agrees that, 
              __________________________                       
without Buyer's consent, after the date hereof and until the 
expiration of such agreements, it will not terminate, amend, 
waive or modify any provision of any confidentiality agreement 
pursuant to which information was provided to any Person (other 
than Buyer) with respect to the Companies or their Subsidiaries 
or their businesses and operations.  Seller shall, at Buyer's 
expense, take all action reasonably requested by Buyer to 
enforce the terms of each such confidentiality agreement.

         5.9  Other Financial Statements.  (a)  As promptly as 
              __________________________                       
practicable after the date hereof, but in no event later than 60 
days after the date hereof, Seller will prepare or cause to be 
prepared and delivered to Buyer, together with unqualified 
reports of KPMG Peat Marwick LLP thereon, (i) an audited 
combined balance sheet of the Companies and their Subsidiaries 
as of September 30, 1995 (the "September Audited GAAP Balance 
Sheet") and audited combined statements of results of operations 
and cash flows of the Companies and their Subsidiaries for the 
nine 



























63

<PAGE> 70


months ended September 30, 1995, in each case prepared in 
accordance with GAAP applied on a basis consistent with that 
used in the preparation of the audited financial statements 
referred to in Section 3.8(a), and (ii) an audited combined 
balance sheet of the Companies and their Subsidiaries as of 
September 30, 1995 (the "September Audited SAP Balance Sheet" 
and, together with the September Audited GAAP Balance Sheet, the 
"September Audited Balance Sheets") and an audited combined 
statement of results of operations of the Companies and their 
Subsidiaries for the nine months ended September 30, 1995, in 
each case prepared in accordance with SAP applied on a basis 
consistent with that used in the preparation of the audited 
financial statements referred to in Section 3.8(b).

           (b)  The September Audited Balance Sheets shall be 
accompanied by a schedule reflecting the balance sheet 
adjustments described in Schedule 5.9.  The September Audited 
GAAP Balance Sheet, as so adjusted, is referred to herein as the 
"September Adjusted GAAP Balance Sheet," the September Audited 
SAP Balance Sheet, as so adjusted, is referred to herein as the 
"September Adjusted SAP Balance Sheet," and the September 
Adjusted GAAP Balance Sheet and the September Adjusted SAP 
Balance Sheet, collectively, are referred to herein as the 
"September Adjusted Balance Sheets."  The report of KPMG Peat 
Marwick LLP referred to in Section 5.9(a) shall state that such 
firm has reviewed such adjustments.  All audited financial 
statements delivered pursuant to this Section 5.9 will be 
audited in accordance with generally accepted auditing 
standards.

           (c)  As promptly as practicable after December 31, 
1995, but in no event later than March 15, 1996, Seller will 
prepare or cause to be prepared and delivered to Buyer, together 
with unqualified reports of KPMG Peat Marwick LLP thereon, (i) 
an audited combined balance sheet of the Companies and their 
Subsidiaries as of December 31, 1995 and audited combined 
statements of results of operations and cash flows of the 
Companies and their Subsidiaries for the year ended December 31, 
1995, in each case prepared in conformity with GAAP consistently 
applied and (ii) an audited combined balance sheet of the 
Companies and their Subsidiaries as of December 31, 1995 and an 
audited combined statement of results of









64

<PAGE> 71


operations of the Companies and their Subsidiaries for the year 
ended December 31, 1995, in each case prepared in conformity 
with SAP consistently applied.

           (d)  As promptly as practicable after the Closing, 
but in no event later than 60 days after the Closing, Seller 
will prepare or cause to be prepared and delivered to Buyer, 
together with unqualified reports of KPMG Peat Marwick LLP 
thereon, (i) an audited combined balance sheet of the Companies 
and their Subsidiaries as of the Closing Date, if the Closing 
Date is the last day of a calendar month, or if the Closing Date 
is not the last day of a calendar month, as of the last day in 
the calendar month immediately preceding the calendar month in 
which the Closing occurs (such date, the "Deemed Closing Date") 
(the "Closing Date GAAP Balance Sheet") and audited combined 
statements of results of operations and cash flows of the 
Companies and their Subsidiaries for the period beginning on the 
January 1st next preceding the Deemed Closing Date and ending on 
the Deemed Closing Date, in each case prepared in conformity 
with GAAP consistently applied and (ii) an audited combined 
balance sheet of the Companies and their Subsidiaries as of the 
Deemed Closing Date and an audited combined statement of results 
of operations of the Companies and their Subsidiaries for the 
period beginning on the January 1st next preceding the Deemed 
Closing Date and ending on the Deemed Closing Date, in each case 
prepared in conformity with SAP consistently applied.  In 
addition, from and after the date hereof until the Closing Date, 
Seller will prepare or cause to be prepared and, to the extent 
permitted by applicable law, delivered to the members of the 
Transition Committee the same periodic unaudited financial 
information relating to the Companies and their Subsidiaries 
which is provided to the senior management 



















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<PAGE> 72


of Seller and the Companies.  Buyer shall bear 100% of the cost 
of the audit of the financial statements as of and for the 
period ending on the Deemed Closing Date referred to in this 
Section, and Seller shall bear 100% of the cost of the audit of 
all other financial statements and information referred to in 
this Section. 

           (e)  As promptly as practicable after December 31, 
1995, but in no event later than March 15, 1996, Seller will 
deliver to Buyer copies of the Companies' and their 
Subsidiaries' respective annual statements for the fiscal year 
ended December 31, 1995, in the forms filed with the Regulators 
in their respective jurisdictions of domicile.

         5.10  1992 Audit.  Seller shall cause to be prepared 
               __________                                     
and delivered to Buyer, as promptly as practicable, but in no 
event later than December 31, 1995, audited combined statements 
of results of operations and cash flows of the Companies and 
their Subsidiaries for the year ended December 31, 1992, 
prepared in accordance with GAAP consistently applied, together 
with the unqualified reports of KPMG Peat Marwick LLP thereon.  
Buyer shall bear 100% of the cost of the audit of the financial 
statements referred to in this Section.

         5.11  Use of Computer Software.  (a) Prior to the 
               ________________________                    
execution hereof, Seller and the Companies have entered into the 
Software License Agreement annexed hereto as Exhibit 5.11 (the 
"Software License Agreement").

           (b)  With respect to all Software not owned by Seller 
but which is presently used in the operation of the business of 
any of the Companies or their Subsidiaries as that business is 
conducted as of the date hereof, Seller shall use its best 
efforts, prior to Closing, to transfer or procure from the 
necessary third parties 
















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<PAGE> 73


an enforceable license with terms and conditions of like tenor 
to those that are currently enforced against Seller.  Seller and 
Buyer shall share all costs and expenses in excess of ongoing 
royalty obligations incurred in connection with the transfer or 
license to the Companies and their Subsidiaries of all such 
Software, including, but not limited to, payment of any transfer 
or license fees or similar costs, in accordance with the last 
sentence of this paragraph (b).  In the event that Seller is 
unable to effect the transfer or license to the Companies and 
their Subsidiaries of any such Software, Seller shall continue 
following the Closing to use its best efforts to effect such 
transfer or license in accordance with this Section 5.11, and 
shall in the interim make arrangements for the provision of 
replacement Software to the Companies and their Subsidiaries as 
of the Closing, which replacement software shall be reasonably 
acceptable to Buyer, the cost of which arrangements shall be 
shared by Seller and Buyer as provided in the following 
sentence.  Seller shall pay 80%, and Buyer shall pay 20%, of the 
first $10 million of any costs and expenses referred to in this 
paragraph (b), and Seller and Buyer shall share equally in any 
such costs and expenses in excess of $10 million.

           (c)  From the date hereof and prior to the Closing, 
Seller agrees that to the extent it develops, acquires or 
licenses any Software that is used in the operation of the 
business of the Companies and their Subsidiaries, any such 
Software owned exclusively by Seller shall be licensed to the 
Companies and their Subsidiaries prior to the Closing on the 
same terms and conditions as set forth in the Software License 
Agreement, and any such Software not owned exclusively by Seller 
shall be licensed directly by one or more of the Companies and 
the Subsidiaries.



















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<PAGE> 74


           (d)  To the extent that Seller or the Companies or 
the Subsidiaries of the Companies negotiate or renegotiate 
licenses, leases, extensions of leases, purchases or sales of 
Software referred to in paragraphs (b) and (c) above, Seller 
shall notify Buyer of such discussions and Buyer and Seller will 
jointly participate in such negotiations or renegotiations as 
long as Seller has ongoing obligations under this Section 5.11.

           Section 5.12  Aetna Casualty Company.  Seller will 
                         ______________________               
use its best efforts to change, as soon as practicable after the 
Closing Date consistent with any required regulatory approvals, 
the corporate name of "Aetna Casualty Company" to a name which 
may include the word "Aetna" but shall not include the word 
"Casualty" or "Surety."


                              ARTICLE 6

                          COVENANTS OF BUYER

         Buyer agrees that:

         6.1  Confidentiality.  All information provided to 
              _______________                               
Buyer or any of the Persons referred to in Section 5.2 will be 
treated as if provided under the Confidentiality Agreement, 
dated October 2, 1995, between Seller and Buyer (the 
"Confidentiality Agreement").

         6.2  Post-Closing Access.  Buyer will cause the 
              ___________________                        
Companies and each of their Subsidiaries, on and after the 
Closing Date, to afford promptly to Seller and its agents 
reasonable access, upon reasonable prior notice and during 
normal business hours, to their offices, properties, books, 
records, employees and auditors to the

















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extent reasonably necessary to permit Seller to determine any 
matter relating to its ownership of the Companies prior to the 
Closing Date.

         6.3  AmRe Agreement.  If, at any time after the Closing 
              ______________                                    
 
Date and for so long as the AmRe Agreement is in effect, the 
rating of ACSC or such other Person which is the primary obligor 
(the "Obligor") under the Aggregate Excess of Loss Reinsurance 
Agreement between ACSC and American Re-Insurance Company dated 
September 30, 1992 (the "AmRe Agreement") as determined by A.M. 
Best falls below "A-" or its equivalent  (or, if A.M. Best shall 
cease to publish ratings of insurance companies, an equivalent 
claims paying rating by a nationally recognized rating agency) 
(an "Adequate Rating"), Buyer shall promptly inform Seller of 
such fact and, at Buyer's option, shall (i) cause the Obligor to 
establish and fund a trust (satisfying the requirements of 
Regulation 113 of the New York Insurance Department or any 
successor provision thereto) with cash or cash equivalents in an 
amount equal to the Termination Account from time to time as 
provided in Article XIII of the AmRe Agreement (the "Termination 
Account") with the assets of such trust to be held and used 
solely for the purpose of satisfying the obligations of the 
Obligor under the AmRe Agreement, (ii) cause the parent company 
of the Obligor which is the immediate parent company of the 
property and casualty insurance operations of Buyer (the 
"Immediate Parent") to unconditionally guarantee the obligations 
of the Obligor under the AmRe Agreement (provided that if any 
such Immediate Parent ceases to be such, Buyer shall again have 
the obligation to elect one of the alternatives in clause (i), 
(ii) (with respect to the then Immediate Parent), or (iii) of 
this sentence, subject to the last sentence of this Section 6.3) 
or  (iii) obtain 



















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an unconditional letter of credit in favor of Seller in an 
amount not less than the Termination Account issued by a bank 
organized under the laws of the United States with combined 
capital and surplus of at least $3,000,000,000 and having a 
long-term deposit rating of "A+" or "A-1" or better from 
Standard & Poor's Corporation or Moody's Investor Services, 
Inc., respectively, which letter of credit would be drawn on 
solely for the purpose of satisfying the obligations of the 
Obligor under the AmRe Agreement. Buyer's obligation under the 
first sentence of this Section 6.3 shall terminate, and any 
existing trust, guarantee or letter of credit will be terminated 
at the election of the Obligor, at such time as the Obligor 
regains an Adequate Rating; provided that Buyer's obligation 
                            ________                         
under this Section 6.3 shall again be reinstated at any time 
such obligation is required in accordance with the first 
sentence of this Section 6.3.


                              ARTICLE 7

                    COVENANTS OF BUYER AND SELLER

         Buyer and Seller agree that:

         7 .1  Reasonable Efforts.  Subject to the terms and 
               __________________                            
conditions of this Agreement, Buyer and Seller will use their 
reasonable efforts to take, or cause to be taken, all actions 
and to do, or cause to be done, all things reasonably necessary 
or desirable under applicable laws and regulations to consummate 
the transactions contemplated by this Agreement.  Buyer and 
Seller will promptly, and in any event within 30 days of the 
date hereof, prepare and file all applications, notices, 
consents and other documents necessary or advisable to obtain 
the regulatory approvals 

















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specified in Schedule 4.3 and Schedule 3.3, respectively, 
promptly file all supplements or amendments thereto and use 
reasonable efforts to obtain the regulatory approvals specified 
in Schedule 4.3 and Schedule 3.3 as promptly as practicable.  
Buyer and Seller will provide each other and their counsel the 
opportunity to review in advance and comment on all such 
filings.  Buyer and Seller will keep each other informed of the 
status of matters relating to obtaining the regulatory approvals 
specified in Schedule 4.3 and Schedule 3.3.  Seller and Buyer 
agree, and Seller, prior to the Closing, and Buyer, after the 
Closing, agree to cause the Companies and each Subsidiary of any 
of the Companies to execute and deliver such other documents, 
certificates, agreements and other writings and to take such 
other actions as may be necessary or desirable in order to 
consummate or implement expeditiously the transactions 
contemplated by this Agreement.

         7.2  Certain Filings.  Seller and Buyer shall cooperate 
              _______________                                   
 
with one another (i) in determining whether any action by or in 
respect of, or filing with, any governmental body, agency, 
official or authority is required, or any actions, consents, 
approvals or waivers are required to be obtained from parties to 
any contracts, in connection with the consummation of the 
transactions contemplated by this Agreement and (ii) in taking 
such reasonable actions or making any such filings, furnishing 
information required in connection therewith and reasonably 
seeking to obtain in timely fashion any such actions, consents, 
approvals or waivers.

         7.3  Public Announcements.  The parties agree to 
              ____________________                        
consult with each other before issuing any press release or 
making any public statement with respect to this Agreement or 
the transactions contemplated hereby and, except as may be 


















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required by applicable law or any listing agreement with any 
national securities exchange, will not issue any such press 
release or make any such public statement prior to such 
consultation.

         7.4  Trademarks; Trade Names.  (a)  Prior to the 
              _______________________                     
execution hereof, the Companies and Seller have entered into the 
license agreement attached hereto as Exhibit 7.4(a) (the 
"License Agreement").  Prior to the execution hereof, the 
Companies and Seller have also entered into the assignment 
agreement attached hereto as Exhibit 7.4(b) (the "Assignment 
Agreement").

           (b)  After the Closing, Buyer will not, and will not 
permit the Companies or any of their Subsidiaries to, use any of 
Seller's other logos, marks or names not specifically licensed 
or assigned by the License Agreement or the Assignment Agreement 
giving effect to any updates to the schedules thereto as 
provided therein.

           (c)  On or before the expiration of the term of the 
License Agreement, Buyer will cause each of the Companies and 
their Subsidiaries, to the extent necessary, to file with the 
applicable governmental body, agency or official amendments to 
the Companies' or such Subsidiaries' articles or certificate of 
incorporation to delete from its name the word "Aetna" and any 
marks and names derived therefrom and shall do or cause to be 
done all other acts, including the payment of any fees required 
in connection therewith, to cause each such amendment to become 
effective.

           (d)  Seller agrees to cooperate with Buyer in 
connection with all regulatory matters relating to the License 
Agreement and the Assignment Agreement.

















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           (e)  After the Closing, Buyer will cause the 
Companies and their Subsidiaries to use the marks and names 
licensed to them pursuant to the License Agreement only in 
connection with one or more of Buyer's existing names or marks.

           (f)  Notwithstanding any provision in this Agreement 
or the License Agreement to the contrary, following the Closing, 
the Companies and their Subsidiaries may continue to use signs, 
labels, containers, stationery, forms (including policy forms) 
and other printed material or matter which are included as of 
the Closing in the assets or inventory of any Company or any 
Subsidiary of any Company; provided that Buyer shall (i) use its 
                           ________                             
 
reasonable efforts to deplete the supply of such materials 
(excluding signs) containing or bearing the trademarks, trade 
names and service marks listed on Schedule B to the License 
Agreement as soon as practicable in the ordinary course of 
business, but in no event later than six months after the 
Closing Date and (ii) as promptly as practicable following the 
Closing, remove any such signs which contain or bear any of the 
trademarks, trade names and service marks listed on Schedule B 
to the License Agreement.

          7.5  Intercompany Accounts.  (a)  All intercompany 
               _____________________                         
accounts (other than those under or relating to reinsurance 
contracts and arrangements to the extent not then due and 
payable) between Seller or any of its Affiliates, on the one 
hand, and any Company or any Subsidiary of any Company, on the 
other hand, as of the Closing shall be settled (irrespective of 
the terms of payment of such intercompany accounts) in the 
manner provided in this Section 7.5.  At least five business 
days prior to the Closing, Seller shall prepare and deliver to 
Buyer a statement setting out in reasonable detail the 
calculation of all such intercompany account balances


















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based upon the latest available financial information as of such 
date and, to the extent requested by Buyer, provide Buyer with 
supporting documentation to verify the underlying intercompany 
charges and transactions.  All such intercompany account 
balances shall be paid in full in cash prior to the Closing.  
Except as contemplated by Section 5.7 and Section 7.12, all 
intercompany reinsurance agreements  shall remain in effect and 
shall be performed and settled in accordance with their 
respective terms.

           (b)  As promptly as practicable, but no later than 60 
days after the Closing Date, Seller will cause to be prepared 
and delivered to Buyer a statement setting out in reasonable 
detail the calculation of such intercompany account balances as 
of the Closing Date (giving effect to any settlement under 
subsection (a) and any other payments in respect thereof).  
Buyer and Seller shall cooperate in the preparation of any such 
calculation including the provision of supporting documentation 
to verify the underlying intercompany charges, transaction and 
payments.  If Buyer disagrees with Seller's calculation of such 
intercompany balances, Buyer may, within 30 days after delivery 
of such statement, deliver a notice to Seller disagreeing with 
such calculation and setting forth Buyer's calculation of such 
amount.  If Buyer and Seller are unable to resolve such 
disagreement within 30 days thereafter, such disagreement shall 
be resolved by the Independent Accountants.  The net amount of 
any such intercompany balance shall be paid in cash promptly 
thereafter, together with interest thereon from and including 
the Closing Date to but excluding the date of payment at a rate 
per annum equal to the three-month London Interbank Offered Rate 
(as published in The Wall Street Journal on the Closing Date) 
plus 40 basis



















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<PAGE> 81


points.  Such interest shall be payable at the same time as the 
payable to which it relates and shall be calculated on the basis 
of a year of 365 days and the actual number of days elapsed.

           (c)  Liabilities of the Companies and their 
Subsidiaries reflecting allocations of certain expenses of 
Seller and its Affiliates set forth on Schedule 7.5(c) shall be 
settled in the manner contemplated by Section 7.5(a) and (b) 
with respect to intercompany accounts.

         7.6  Non-Solicitation of Employees.  (a)  For a period 
              _____________________________                     
commencing on the date hereof through the second anniversary of 
the Closing Date, (i) neither Seller nor any of its Affiliates 
shall affirmatively seek to hire any officer or key employee of 
the Companies or any Subsidiary whose annual base salary as of 
the date hereof equals or exceeds $75,000 in any capacity 
whatsoever without the express written consent of Buyer, and 
(ii) none of Buyer or any of its Affiliates shall affirmatively 
seek to hire any officer or key employee of Seller whose annual 
base salary as of the date hereof equals or exceeds $75,000 and 
with whom Buyer had significant contact in connection with the 
transactions contemplated hereby in any capacity whatsoever 
without the express written consent of Seller.

           (b)  For a period commencing on the date hereof 
through the second anniversary of the termination of this 
Agreement pursuant to Section 12.1, none of Buyer or any of its 
Affiliates shall (x) affirmatively seek to hire in any capacity 
whatsoever any officer or key employee of the Companies whose 
annual base salary as of the date hereof equals or exceeds 
$75,000 and with whom Buyer had significant contact in 
connection with the transactions contemplated hereby or (y) 
while any such 


















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<PAGE> 82


officer or key employee is employed by Seller or any of its 
Affiliates in a position having greater or substantially the 
same level of compensation and responsibility as the position 
with the Companies held by such officer or key employee on the 
date hereof, hire any such officer or key employee in any 
capacity whatsoever without, in either case (x) or (y), the 
express written consent of Seller.

           (c)  Seller recognizes that the provisions of clause 
(a)(i) of this Section 7.6 are reasonable and necessary for 
Buyer's protection and Buyer recognizes that the provisions of 
clause (a)(ii) and paragraph (b) of this Section 7.6 are 
reasonable and necessary for Seller's protection, and Seller and 
Buyer acknowledge that any breach of Section 7.6(a) or (b) will 
cause irreparable injury to Seller or Buyer, as the case may be, 
which injury will not be reasonably measurable or compensable by 
money damages.  Accordingly, each of the parties hereto agrees 
that it shall be entitled without posting any bond to an 
injunction or injunctions to prevent breaches of the provisions 
of paragraphs (a) and (b) of this Section 7.6 and to enforce 
specifically the terms and provisions hereof in any action 
instituted in any court of the United States or any state 
thereof having subject matter jurisdiction in addition to any 
other remedy to which such party may be entitled at law or 
equity.

           (d)  If any provision of this Section 7.6 is held 
unenforceable because of the scope or duration of its 
applicability, the court making such determinations shall have 
the power to modify such scope or duration and such provisions 
shall then be applicable in such modified form.

         7.7  Real Estate.  Seller and the Companies shall enter 
              ___________                                       
 
into a sublease, effective as of the Closing Date, providing for 
the sublease by one or both of the 
















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<PAGE> 83


Companies of Seller's "CityPlace" facility and the lease by one 
or both of the Companies of Seller's Windsor facility, which 
sublease and lease shall have the principal terms set forth on 
Exhibit 7.7.

         7.8  Transition Agreements.  At the Closing, Seller, 
              _____________________                           
Buyer and, as applicable, the Companies and their Subsidiaries 
will enter into transition agreements having the principal terms 
set forth in Exhibit 7.8.

         7.9  Post-Closing Access.  From and after the Closing 
              ___________________                              
Date, Seller shall retain the originals of all records of the 
Companies and their Subsidiaries concerning Taxes for which 
Seller is responsible hereunder.  To the extent permitted by 
applicable law, Seller shall at Closing provide to Buyer copies 
(or at its election originals) of all of the personnel, payroll, 
accounting and tax records (other than consolidated tax returns, 
consolidated accounting records and consolidated financial 
statements of Seller) of the Companies and their Subsidiaries 
that heretofore have been maintained by Seller.  Seller shall 
cause all other books and records of the Companies and their 
Subsidiaries, whether currently maintained by the Seller, any 
Company or any Subsidiary of any Company, or a third party, to 
be available on the premises of the applicable Company or 
Subsidiary on the Closing Date.  To the extent permitted by 
applicable law, Seller will, on and after the Closing Date, 
afford promptly to Buyer and its agents reasonable access, upon 
reasonable prior notice and during normal business hours, to its 
offices, properties, books, records, employees and auditors to 
the extent reasonably necessary to permit Buyer to determine any 
matter relating to the business of the Companies prior to the 
Closing Date.  Buyer may, at its own expense, make such copies 
of and excerpts from such books and 


















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<PAGE> 84


records as it may deem necessary for the preparation of tax or 
regulatory reports or other purposes permitted hereby.  Seller 
shall  maintain all such books and records for the period 
required by law.  Seller will hold, and will use its best 
efforts to cause its officers, directors, employees, 
accountants, counsel, consultants, advisors and agents to hold, 
in confidence, unless compelled to disclose by judicial or 
administrative process or by other requirements of law, all 
confidential documents and information concerning the Companies 
or any Subsidiary of the Companies provided to it by Buyer 
pursuant to Section 6.2.

         7.10  Supplemental Disclosure.  Each of Seller and 
               _______________________                      
Buyer shall have the continuing obligation promptly to advise 
the other with respect to (i) any material matter hereafter 
arising and (ii) any material matter hereafter discovered which, 
in the case of a matter being disclosed pursuant to clause (i) 
hereof if existing at the date hereof or, in the case of a 
matter being disclosed pursuant to clause (ii) hereof, if known 
at the date hereof would have been required to be set forth or 
described in the respective Schedules provided by them; 
provided, however, that for the purpose of the rights and 
________  _______                                         
obligations of the parties hereunder, any such supplemental or 
amended disclosure by any party shall not be deemed to have been 
disclosed as of the date hereof, to constitute part of, or an 
amendment or supplement to, such Party's Schedules or cure any 
breach or inaccuracy of a representation or warranty unless so 
agreed to in writing by the other party.  If prior to the 
Closing Seller or Buyer becomes aware of a breach or inaccuracy 
of a representation or warranty made by it herein, such party 
shall use its best efforts to cure such breach or inaccuracy as 




















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<PAGE> 85


promptly as practicable; provided, however, that no such cure 
                         ________  _______                    
will relieve such party of any liability for such breach or 
inaccuracy.

         7.11  Investment Portfolio; Real Estate Transactions.  
               ______________________________________________   
(a)  From the date of this Agreement until the Closing Date, 
Buyer and Seller agree that (i) the investment portfolio of the 
Companies and their Subsidiaries consisting of bonds, notes, 
debentures and all other instruments of indebtedness, excluding 
mortgage loans, but including mortgage-backed securities ("Bond 
Portfolio"), shall be invested and managed at the direction of 
Buyer; provided that such investment and management shall be 
consistent with the existing investment guidelines of the 
Companies and their Subsidiaries set forth in Schedule 
3.9(xiii), except that investments in U.S. Treasuries/Agencies 
may be increased to a level up to 40% of invested assets,  
provided that with respect to the additional 20% allowance being 
________                                                        

provided herein, the duration of such additional 20% shall not 
exceed an average of 5.0 years and provided further that no tax 
                                   ________ _______             
exempt securities shall be purchased other than to replace tax 
exempt securities that are sold or redeemed or mature; and (ii) 
the equity investment portfolio of the Companies and their 
Subsidiaries consisting of the securities listed on Schedule 
7.11(a) ("Equity Portfolio") shall be managed at the direction 
of Seller.  Transactions involving real estate investments, 
mortgage loans and other Company Investment Assets not including 
the Bond Portfolio or the Equity Portfolio shall be managed at 
the direction of Seller, in consultation with Buyer.  Subject to 
the foregoing, Seller shall effect the actual execution of 
transactions for all Company Investment Assets.  To the extent 
that investment holdings at September 30, 1995 are at levels 
outside the existing investment guidelines of the Companies and 
their 


















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<PAGE> 86


Subsidiaries, no action is required pursuant to this Agreement 
to change the levels of such holdings.

         (b)  Seller agrees that at the Closing the aggregate 
market value of the securities held in the Equity Portfolio 
shall not exceed $400 million, reduced by (i) the market value 
at the Closing of all shares of common stock, par value $1.00 
per share ("MBIA Stock"), of MBIA, Inc. ("MBIA") held in the 
Equity Portfolio and (ii) 95.5% of the gross proceeds from the 
sale at or prior to the Closing of any shares of MBIA Stock to 
Seller or other Person(s).  Prior to the Closing, Seller shall 
use its reasonable efforts to liquidate for cash, at least 50% 
of the shares of MBIA Stock held in the Equity Portfolio at the 
date hereof; provided that Seller need not seek to liquidate 
shares of MBIA Stock to the extent Seller provides Buyer with 
reasonable evidence of Seller's inability to obtain a price for 
such shares at least equal to the market value thereof at the 
Balance Sheet Date.  Absent such evidence, Seller shall not 
permit to remain in the Equity Portfolio, and shall retain at or 
prior to the Closing, such shares of MBIA Stock, and in 
consideration for any such shares so retained, shall deliver to 
the Companies at the time of such retention, cash in an amount 
equal to 95.5% of the market value of such shares at such time. 
 Notwithstanding any other provision of this Agreement to the 
contrary, Seller shall not permit to remain in the Equity 
Portfolio as of the Closing a number of shares of MBIA Stock or 
shares of common stock, par value $0.10 per share ("ERI Stock"), 
of Executive Risk Inc. ("ERI") that would result in Buyer being 
(x) an "Acquiring Person" under the Rights Agreement, dated as 
of December 31, 1993, between ERI and Mellon Bank, N.A., or the 
Rights Agreement, dated as of December 12, 1991, 




















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<PAGE> 87


between MBIA and Mellon Bank, N.A. or (y) subject, with respect 
to ERI, to the restrictions on "business combinations" with an 
"interested stockholder" under Section 203 of the Delaware 
General Corporation Law.  Notwithstanding any other provision of 
this Agreement to the contrary, this Agreement shall not 
constitute an agreement, arrangement or understanding to acquire 
or dispose of any, and Seller shall therefore retain all, shares 
of MBIA Stock and ERI Stock, other than in either case any 
shares up to an amount that may remain in the Equity Portfolio 
by operation of the immediately preceding sentence.  In 
consideration for any such shares so retained, Seller shall 
deliver to the Companies at the time of such retention cash in 
an amount equal to the market value (or, in the case of MBIA 
Stock, 95.5% thereof) of such shares at such time.  Prior to the 
Closing, Buyer shall notify Seller of any shares of MBIA Stock 
or ERI Stock beneficially owned by Buyer, and Seller shall have 
no liability to Buyer for any losses incurred by Buyer due to 
any inaccuracy in such notification.  Seller agrees that no 
shares of MBIA Stock shall be sold or retained for consideration 
other than cash. 

           (c)  At or prior to the Closing, Seller shall 
purchase or cause another Person to purchase for cash securities 
of American Re-Insurance Company held in the Equity Portfolio so 
that at Closing the aggregate market value of such securities 
held in the Equity Portfolio is not more than $20 million.  
Seller further agrees that the securities listed on Schedule 
7.11(aa) shall not at the Closing be held in the Equity 
Portfolio.

           (d)  At the Closing, if requested by Buyer, Seller 
shall transfer to the Companies readily marketable securities 
(to be reasonably agreed upon by Seller and 


















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<PAGE> 88


Buyer) with a market value at the Closing of up to one-seventh 
(but in no event more than $20 million in the aggregate) of the 
aggregate market value of the Equity Portfolio at such time, and 
in exchange therefor Buyer shall transfer to Seller securities 
held in the Equity Portfolio of equal market value at such time.

           (e)  For purposes of this Section, securities to be 
valued at the Closing shall be valued at the market value at the 
close of business on the business day prior to the Closing Date 
(determined in accordance with Seller's pricing policies 
consistent with past practices), except that the value of any 
shares of MBIA Stock as so determined shall be reduced by 
4 1/2%.

           (f)  From the Balance Sheet Date to the date hereof 
Seller has not acquired any securities for the Equity Portfolio. 
 From the date hereof until the Closing Date Seller shall 
transfer to the Bond Portfolio all cash proceeds received in 
respect of sales of securities in the Equity Portfolio 
immediately following receipt of such proceeds.

           (g)  Schedule 7.11(b) lists (a) all mortgages with 
respect to which both a Company or Subsidiary of a Company and 
Seller or an Affiliate is a party (the "Shared Mortgages"), (b) 
each mortgage held by either Company or any of their 
Subsidiaries which is cross defaulted or cross collateralized 
with a mortgage held by Seller or an Affiliate of Seller (the 
"Cross Collateralized Mortgages") and (c) each real property in 
which or with respect to which both a Company or Subsidiary of a 
Company and Seller or an Affiliate has an ownership interest 
(the "Shared Real Estate").  Prior to the Closing, and subject 
to the receipt of all necessary consents and approvals (which 
Seller shall use its best efforts to obtain in a timely manner), 



















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<PAGE> 89


Seller shall exchange or cause to be exchanged for the 
Companies' and their Subsidiaries' interest in the Shared 
Mortgages and the Shared Real Estate, Seller's and its 
Affiliates' interest in the mortgages and properties set forth 
on Schedule 7.11(c); provided that if Seller does not effect the 
exchange of any such interest of any of the Companies or their 
Subsidiaries in any such Shared Mortgage or Shared Real Estate 
prior to the Closing (by reason of the failure to obtain any 
necessary consent or otherwise), then Seller shall use 
reasonable good faith efforts (including, but not limited to, 
committing to and effectuating the sale of its portion of any 
such shared investment on the same terms and conditions as the 
applicable Company or Subsidiary thereof may agree to sell its 
portion of such investment) to ensure that following the Closing 
the applicable Company or Subsidiary thereof will be permitted 
to sell its interest in such investment without any material 
limitations on such sale.

           (h)  With respect to each Cross Collateralized 
Mortgage, prior to Closing, Seller shall either (i) exchange or 
cause to be exchanged for the interest of the Companies or their 
Subsidiaries in the Cross Collateralized Mortgage, Seller's or 
its Affiliate's interest in mortgages reasonably acceptable to 
Buyer or (ii) cause the cross collateral or cross default 
provisions of the Cross Collateralized Mortgage to be deleted or 
released.

         7.12  Other Agreements.  (a)  Effective at the Closing, 
               ________________                                 
 
Buyer shall cause one of the Companies or one of their 
Subsidiaries (the "AL&C Buyer") to assume on a 100% quota share 
basis all of Seller's previously existing, in-force, new and 
renewal direct written property and casualty insurance business 
carried on directly by Seller in the states of Connecticut and 
Pennsylvania (the "AL&C 

















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<PAGE> 90


Business") in exchange for the payment to Buyer of an amount 
equal to the sum of the reserves for unearned premium, loss 
adjustment expense and incurred loss and other outstanding 
liabilities directly related to the AL&C Business as of the 
Closing Date.  For each such insured, Buyer shall cause the AL&C 
Buyer to make offers of renewal to all persons insured under the 
AL&C Business at the next succeeding renewal date that occurs 
after the Closing.  Seller agrees to provide the AL&C Buyer such 
underwriting information as may be reasonably required to 
effectuate the foregoing transactions.  Buyer agrees to 
indemnify Seller for any losses sustained or expenses incurred 
by Seller as a result of the failure of Buyer or the AL&C Buyer 
to perform their obligations under this Section 7.12(a) or under 
the AL&C Business assumed.

           (b)  ACSC has written and continues to write stop 
loss insurance business ("Stop Loss Business") in connection 
with group health business conducted by Seller's Aetna Health 
Plans Strategic Business Unit ("AHP").  All liabilities related 
to the Stop Loss Business are reinsured to Aetna Casualty 
Company ("ACC") on a 100% quota share basis pursuant to the Stop 
Loss Reinsurance Agreement dated March 25, 1991, by and between 
ACSC and ACC (the "Stop Loss Quota Share").  Buyer agrees that 
Seller shall retain the Stop Loss Business.  Seller shall cause 
ACC, or another Affiliate, to make offers of renewal to all 
Persons insured under the Stop Loss Business at the next 
succeeding renewal date for each such insured that occurs after 
Closing.  Buyer agrees to provide Seller or its designated 
Affiliate such underwriting information as may be reasonably 
necessary to effectuate the foregoing transactions.  
Notwithstanding anything in this Section 7.12(b) to the 
contrary, until 



















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<PAGE> 91


such time as all of the Stop Loss Business is being written in 
ACC or another Affiliate of Seller (but in no event for longer 
than three months following the Closing), Buyer agrees to 
continue to make ACSC available to Seller as an underwriter of 
Stop Loss Business in the State of Missouri, and to reinsure all 
such liabilities to ACC pursuant to the terms of the Stop Loss 
Quota Share.  Seller agrees to indemnify Buyer for any losses 
sustained or expenses incurred by Buyer as a result of the 
failure of Seller or its Affiliates to perform their obligations 
under this Section 7.12(b) or under the Stop Loss Business.  For 
so long as the Stop Loss Quota Share remains in effect, Seller 
agrees to cause one of its Affiliates to administer all of the 
Stop Loss Business.

         7.13  Certain Insurance Policies.  To the extent that, 
               __________________________                       
after the Closing, any Company or any Subsidiary of any Company 
experiences any loss arising out of any event occurring prior to 
the Closing, which loss is covered by any insurance policy 
maintained by Seller or any of its Affiliates for the benefit of 
any Company or any Subsidiary of any Company, Seller will use 
its best efforts to assist the Companies and their Subsidiaries 
in pursuing a claim under such policy and shall remit to the 
Companies or their Subsidiaries any proceeds received by Seller 
or its Affiliates pursuant to such policy (it being understood 
that Seller has no obligation to provide or pay for insurance 
coverage for any of the Companies or their Subsidiaries after 
the Closing).
























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<PAGE> 92


                                 ARTICLE 8

                                TAX MATTERS


         8.1  Definitions.  The following terms, as used herein, 
              ___________
have the following meanings:

         "Code" means the Internal Revenue Code of 1986, as 
amended.

         "Combined State Tax" means, with respect to each state 
or local taxing jurisdiction, any income, franchise or similar 
tax payable to such state or local taxing jurisdiction in which 
a member of the Seller Group files Returns (as hereinafter 
defined) with the Companies and their Subsidiaries (or any 
member thereof), on a consolidated, combined or unitary basis 
for purposes of such income or franchise tax.

         "Federal Tax" means any Tax imposed under the Code.
         "Final Determination" shall mean (i) with respect to 
Federal Taxes, a "determination" as defined in Section 1313(a) 
of the Code or the execution of an Internal Revenue Service Form 
870AD and, (ii) with respect to Taxes other than Federal Taxes, 
any final determination of liability in respect of a Tax that, 
under applicable law, is not subject to further appeal, review 
or modification through proceedings or otherwise (including the 
expiration of a statute of limitations or a period for the 
filing of claims for refunds, amended returns or appeals from 
adverse determinations).

         "NOLs" mean all net operating losses and net capital 
losses of the Companies and their Subsidiaries.

         "Post-Closing Tax Period" means any Tax period 
beginning after the Closing Date and the portion of any Straddle 
Period beginning after the Closing Date pursuant to Section 
8.5(i).














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<PAGE> 93


         "Post-September 30 Tax Period" means (i) the portion of 
calendar year 1995 beginning after September 30, 1995, (ii) any 
Tax period beginning after December 31, 1995 and ending on or 
prior to the Closing Date, and (iii) the portion of any Straddle 
Period ending on and including the Closing Date pursuant to 
Section 8.5(i).

         "Pre-September 30 Tax Period" means any Tax period 
ending on or before September 30, 1995 and the portion of 
calendar year 1995 ending on and including September 30, 1995.

         "Seller Group" means, (i) with respect to Federal 
Taxes, the affiliated group of corporations (as defined in 
Section 1504(a) of the Code with due regard to Section 1504(c) 
of the Code) of which Seller is a member and, (ii) with respect 
to state or local income or franchise Taxes, the consolidated, 
combined, unitary or similar group of which Seller or any of its 
Affiliates is a member.

         "Separate State Tax" means with respect to each state, 
local or foreign taxing jurisdiction, any tax (other than 
Combined State Tax) payable by the Companies and their 
Subsidiaries to such state, local or foreign taxing 
jurisdiction.

         "Separate State Income Tax" means with respect to each 
state, local or foreign taxing jurisdiction, any income, 
franchise or similar tax (other than Combined State Tax) payable 
by the Companies and their Subsidiaries to such state, local or 
foreign taxing jurisdiction.

         "Straddle Period" means any Tax period beginning before 
and ending after the Closing Date.

         "Tax" or "Taxes" means all taxes, charges, fees, levies 
or other assessments, including, without limitation, any net 
income tax or franchise tax based














87

<PAGE> 94


on net income, any alternative or add-on minimum taxes, any 
gross income, gross receipts, premium, sales, use, ad valorem, 
value added, transfer, profits, license, social security, 
medicare, payroll, employment, excise, severance, stamp, 
occupation, property, environmental or windfall profit tax, 
custom duty or other tax, governmental fee or other like 
assessment, together with any interest, penalty, addition to tax 
or additional amount imposed by any governmental authority 
(domestic or foreign) responsible for the  imposition of any 
such tax (a "Taxing Authority").

         "Tax Benefit" means any deduction, credit, 
amortization, exclusion from income, loss or other tax 
attribute.

         "Tax Sharing Agreement" means the Tax Sharing 
Agreement, entered into by Seller and its Subsidiaries, 
applicable to the taxable year ending December 31, 1994 and all 
other periods specified therein, and the procedures and 
practices employed pursuant thereto or reflected therein 
including, without limitation, all procedures and practices with 
respect to alternative minimum taxes.

         8.2  Tax Representations.  Seller represents and 
              ___________________                         
warrants to Buyer as of the date hereof that, except as set 
forth on Schedule 8.2:

           (i) all Tax returns, statements, reports, forms and 
other documentation (collectively, "Returns") required to be 
filed with any Taxing Authority by or with respect to the 
Companies or any of their Subsidiaries on or before the Closing 
Date with respect to any Pre-September 30 Tax Period have been 
filed or will be timely filed on or before the Closing Date in 
accordance with all applicable laws, and all such Returns are 
true, correct and complete in all material respects;

           (ii)  the Companies and their Subsidiaries have 
timely paid all Taxes shown to be due on such Returns;














88

<PAGE> 95


           (iii)  the Companies and their Subsidiaries have made 
adequate provision on the September Adjusted GAAP Balance Sheet 
for all Taxes payable by the Companies and their Subsidiaries 
for any Pre-September 30 Tax Period for which no Return has yet 
been filed or for which Returns have been filed but payment of 
the Tax shown to be due thereon is not yet due;

           (iv)  there is no action, suit, proceeding, 
investigation, assessment, adjustment, audit or claim now 
proposed or pending against or with respect to the Companies or 
their Subsidiaries in respect of any Tax; 

           (v)  there are no outstanding waivers or other 
agreements extending any statutory periods of limitation for the 
assessment of Taxes of the Companies and their Subsidiaries;

           (vi)  on or prior to the date hereof, Seller has 
provided Buyer with copies of all record retention agreements 
currently in effect between the Seller Group and any Taxing 
Authority, and no such record retention agreements have been 
entered into or modified since September 30, 1995; and

           (vii)  the Tax Sharing Agreement is the only 
agreement which governs the liability for Taxes between Seller 
and the Companies and their Subsidiaries.

         8.3  Tax Covenants.  (a)  Except as otherwise required 
              _____________                                     
by law, Buyer covenants that it will not cause or permit the 
Companies, any of their Subsidiaries or any Affiliate of Buyer 
(i) to take any action on the Closing Date, other than in the 
ordinary course of business or except as agreed in writing 
between the parties (including, but not limited to, the 
distribution of any dividend or the effectuation of any 
redemption) that could give rise to any Tax liability or loss of 
the Seller Group under this Agreement, (ii) to make any election 
or deemed election















89

<PAGE> 96


under Section 338 of the Code with respect to the purchase of 
the Shares pursuant to this Agreement or (iii) to amend any 
Return or file a claim for refund that results in any increased 
Tax liability or reduction of any Tax Benefit of the Seller 
Group or any Seller Affiliate.

           (b)  Except as otherwise required by law or set forth 
in section (c) below, Seller covenants and agrees that no member 
of the Seller Group shall amend any Return, file any claim for 
refund, change any method of tax accounting, or make or change 
any Tax election with respect to (i) any Tax period that results 
in any increased Tax liability or reduction of Tax Benefits of 
Buyer, the Companies or any of their Subsidiaries, or any of 
their Affiliates in respect of any Post-September 30 Tax Period 
or any Post-Closing Tax Period and (ii) any Post-September 30 
Tax Period.  Furthermore, Seller covenants and agrees that it 
shall not make any change to its election under Treasury 
Regulation section 1.1502-20(g) as described in Section 8.7 
hereof.

           (c)  Prior to the Closing, Seller will reverse any 
deductions taken pursuant to Section 847 of the Code.  Such 
reversal shall have no effect on the current or deferred tax 
balances on the September Adjusted GAAP Balance Sheet and shall 
not result in any Tax expense (state or Federal) for the 
Companies and their Subsidiaries for any Post-September 30 Tax 
Period or any Post-Closing Tax Period.

           (d)  Each party agrees that, as between the Seller on 
the one hand and the Buyer on the other hand, the other is to 
have no liability for any Tax or reduction of Tax Benefits 
resulting from any action referred to in Sections 8.3(a), (b) 
and (c), and each party shall indemnify and hold harmless 
(hereafter, the "Tax Indemnified Party") the other party and its 
Affiliates (hereafter, the "Tax Indemni- 
















90

<PAGE> 97


fied Party") against any such Tax or reduction in Tax Benefits. 
Each Tax Indemnified Party shall give prompt notice to the Tax 
Indemnifying Party of the assertion of any claim, or the 
commencement of any action or proceeding, in respect of which 
indemnity may be sought under this Section 8.3(d).  Failure to 
give the Tax Indemnifying Party such notice shall not relieve 
such party of its indemnification obligation pursuant to 
Sections 8.3(a), (b) and (c) unless and to the extent that the 
Tax Indemnifying Party and its Affiliates are materially 
prejudiced as a result thereof.  The Tax Indemnifying Party 
shall be entitled to participate in, and to the extent the 
matter reasonably can be handled separately from other items not 
within the scope of this Agreement, shall be entitled to control 
the defense of any such claim, action or proceeding at its own 
expense and neither party shall settle any such claim, action or 
proceeding without the other party's prior written consent, 
which shall not be unreasonably withheld.

           (e)  Buyer shall promptly pay or cause to be paid to 
Seller all refunds of Taxes (including any interest thereon) 
received by Buyer or any of its Affiliates which are 
attributable to Taxes paid by or on behalf of Seller, the 
Companies or any of their Subsidiaries with respect to any Pre-
September 30 Tax Period to the extent that such refund and any 
interest thereon were not reflected on the September Adjusted 
GAAP Balance Sheet.
 
           (f)  Seller shall promptly pay or cause to be paid to 
Buyer all refunds of Taxes (including any interest thereon) 
received by any member of the Seller Group which are 
attributable to Taxes paid by or on behalf of the Companies or 
any of their Subsidiaries to the extent that such refund and any 
interest thereon were reflected on the September Adjusted GAAP 
Balance Sheet.

















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<PAGE> 98


           (g)  All transfer, documentary, sales, use, stamp, 
registration and other such Taxes incurred in connection with 
this Agreement other than Taxes incurred in connection with the 
Transition Agreements (including, without limitation, any New 
York State real property transfer and transfer gains Taxes, New 
York City real property transfer Tax and any similar Taxes 
imposed in other states or subdivisions) (collectively, 
"Conveyance Taxes") shall be paid by Seller.  Seller will, at 
its own expense, file all necessary Returns with respect to all 
such Conveyance Taxes, and, to the extent required by applicable 
law, Buyer will, and will cause its Affiliates to, join in the 
execution of any such Returns.  Buyer shall, within ten days of 
a written request therefor (including a statement calculating in 
reasonable detail Buyer's payment obligation pursuant to this 
Section 8.3(g)), reimburse Seller for 50% of all such Conveyance 
Taxes and Seller's out-of-pocket expenses incurred in connection 
with the filing of such Returns.

           (h)  Buyer and Seller shall jointly determine the 
provision for discounted P&C losses of the Companies and their 
Subsidiaries under Sections 832(b)(5) and 846 of the Code for 
the taxable period ending on the Closing Date.  If the parties 
are unable to agree on the provision for discounted P&C losses, 
such dispute shall be resolved by independent accountants or an 
actuarial consultant acceptable to both parties whose fees and 
expenses shall be borne equally by Buyer and Seller.

         8.4  Termination of Existing Tax Sharing Agreements.  
              ______________________________________________   
On the date hereof or as soon as practicable thereafter, the Tax 
Sharing Agreement between the Companies and their Subsidiaries 
and any member of the Seller Group shall be terminated as of 
September 30, 1995.  After such date, neither the Companies and 
their 


















92

<PAGE> 99


Subsidiaries, Seller nor any of its Affiliates shall have any 
further rights or liabilities thereunder.  This Agreement shall 
be the sole Tax sharing agreement relating to the Companies and 
their Subsidiaries for all Tax periods ending on or prior to the 
Closing Date.

         8.5  Return Filings and Payment of Tax.  (a)  Seller 
              _________________________________               
shall prepare and file or cause the relevant Company or 
Subsidiary to prepare and file on a timely basis and consistent 
with past practices all Returns with respect to the Companies 
and their Subsidiaries for (i) all Pre-September 30 Tax Periods 
(excluding calendar year 1995), (ii) calendar year 1995 and 
(iii) all Post-September 30 Tax Periods (excluding calendar year 
1995 and any Straddle Period).

           (b)  Buyer shall prepare or cause to be prepared and 
file or cause to be filed on a timely basis all other Returns 
with respect to the Companies and their Subsidiaries.  Buyer 
shall pay or cause to be paid to the appropriate Taxing 
Authority the Taxes shown to be due on all Returns required to 
be filed by it pursuant to this Section 8.5(b).

           (c)  In connection with Returns described in 
subsection (i) of Section 8.5(a), (x) Seller shall pay or cause 
the relevant Company or Subsidiary to pay, to the extent such 
Tax liability is reflected as a current liability on the 
September Adjusted GAAP Balance Sheet (as adjusted for any 
payments made by the Companies and their Subsidiaries with 
respect to such Returns after September 30, 1995 and prior to 
the payment date in question), the appropriate Taxing Authority 
the amount of Taxes shown to be due on such Returns, and (y) to 
the extent the amount, if any, reflected as a current liability 
on the September Adjusted GAAP Balance Sheet with respect 
thereto exceeds the actual amount of such liability, the 
Companies and their

















93

<PAGE> 100


Subsidiaries shall pay such excess to Seller simultaneously with 
the payment of Taxes to such Taxing Authority.

           (d)  In connection with Returns for calendar year 
1995, (x) with respect to the Pre-September 30 Tax Period of 
such year, Seller shall pay to the relevant Taxing Authority or 
Seller (or, if such payment is due after the Closing Date, 
Buyer) shall cause the relevant Company or Subsidiary to pay, to 
the extent such Tax liability is reflected as a current 
liability on the September Adjusted GAAP Balance Sheet (as 
adjusted for any payments made by the Companies and their 
Subsidiaries with respect to such Returns after September 30, 
1995 and prior to the payment date in question), Seller or the 
appropriate Taxing Authority such Company's or Subsidiary's 
Attributable Amount (as defined in Section 8.5(i)) with respect 
to such Returns, (y) with respect to the Post-September 30 Tax 
Period of such year, Seller (or, if such payment is due after 
the Closing Date, Buyer) shall cause the relevant Company or 
Subsidiary to pay Seller or the appropriate Taxing Authority 
such Company's or Subsidiary's Attributable Amount with respect 
to such Returns, and (z) to the extent the amount reflected as a 
current liability on the September Adjusted GAAP Balance Sheet 
with respect to the Pre-September 30 Tax Period of such year 
exceeds the Attributable Amount with respect to such period, 
Seller or Buyer, as the case may be, shall cause the Companies 
and their Subsidiaries to pay such excess to Seller 
simultaneously with the payment of Taxes to such Taxing 
Authority.  For purposes of this subsection (d), any payments 
required to be made by the Companies and their Subsidiaries 
shall be made one business day prior to the due date of the 
relevant Return (giving effect to any applicable extensions 
thereto).




















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<PAGE> 101


           (e)  In connection with Returns described in 
subsection (iii) of Section 8.5(a), Seller (or, if the payment 
with respect to such Return is due after the Closing Date, 
Buyer) shall cause the relevant Company or Subsidiary to pay 
Seller or the appropriate Taxing Authority such Company's or 
Subsidiary's Attributable Amount with respect to such Returns 
one business day prior to the due date for such Return (giving 
effect to any applicable extensions thereto).

           (f)  With respect to any Straddle Period, Seller or 
Buyer, as the case may be, shall cause the Companies and their 
Subsidiaries to pay, when due, Seller or the appropriate Taxing 
Authority the Attributable Amount, if any, with respect thereto. 
           (g)  Seller shall (i) provide Buyer with a copy of 
the income and franchise Tax Returns described in Section 8.5(a) 
hereof which have not been filed as of the date hereof at least 
fifteen days prior to filing such Returns, and (ii) make 
available for Buyer's review the premium Tax Returns described 
in Section 8.5(a) hereof which have not been filed as of the 
date hereof as soon as reasonably practicable, but in no event 
more than 60 days after filing such Returns, in both cases, 
accompanied by a statement calculating in reasonable detail the 
Attributable Amount, if any, pursuant to Sections 8.5(c), (d), 
(e) and (f).  To the extent that the total amount of Tax 
payments made by the Companies and their Subsidiaries with 
respect to such Returns pursuant to Sections 8.5(c), (d), (e) 
and (f) (other than payments made by the Companies and their 
Subsidiaries pursuant to Section 8.5(c)(y) or Section 8.5(d)(z)) 
exceeds the aggregate amount of the liability shown on such 
statements or, in the case of Section 8.5(c) and the Pre-
September 30 Tax Period of calendar year 1995, if less, the 
amount reflected on the September Adjusted GAAP



















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<PAGE> 102


Balance Sheet, Seller shall pay the Companies and their 
Subsidiaries within 30 days the amount of such excess.

           (h)  If Buyer disputes a liability of the Companies 
and their Subsidiaries as determined by Seller under Section 
8.5(g), Buyer may, within 30 days after delivery of the 
statement referred to in Section 8.5(g), deliver a notice to 
Seller disagreeing with such calculation and setting forth 
Buyer's calculation of such amount.  Any notice of disagreement 
shall specify those items and amounts as to which Buyer 
disagrees, and, solely for purposes of this Section 8.5, Buyer 
shall be deemed to have agreed with all other items and amounts 
contained in the statement not the subject of such disagreement, 
except for such items and amounts which may be affected by any 
disputed items and amounts.  If a notice of disagreement shall 
be delivered pursuant to this Section 8.5(h), Seller and Buyer 
shall, during the 30 days following such delivery, use their 
best efforts to reach agreement on the disputed items or 
amounts.  If the parties are unable to agree on the allocation 
of Tax payments between Seller, on the one hand, and the 
Companies and their Subsidiaries, on the other hand, under 
Sections 8.5(c), (d), (e) and (f) during such period, such 
dispute shall be resolved by the Independent Accountants whose 
fees and expenses shall be borne by the Companies and their 
Subsidiaries unless the resolution of such dispute as determined 
by such accountants results in an adjustment that reduces the 
obligation of the Companies and their Subsidiaries with respect 
to the disputed item or amount by more than 10% of such amount 
as determined by Seller pursuant to Section 8.5(g), in which 
case Seller shall bear the cost of such fees and expenses, and 
the party owing Taxes shall pay to the other party the amount 
determined by such accountants within three business days of 
such determination.


















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<PAGE> 103


           (i)  For purposes of this Article 8, the Taxes 
attributable to the Companies and their Subsidiaries (the 
"Attributable Amount") shall be (i) with respect to each Federal 
Tax and Combined State Tax Return prepared pursuant to Section 
8.5(a), an amount equal to the Tax liability that the Companies 
and their Subsidiaries would pay on their taxable income if they 
were not filing combined, consolidated or unitary returns with 
any other member of the Seller Group (excluding the Companies 
and their Subsidiaries), and (ii) for each Separate State Tax 
Return, the Tax liability of the Company and its Subsidiaries.  
For purposes of this Section 8.5(i), the Attributable Amount for 
the Pre-September 30 Tax Period and the Post-September 30 Tax 
Period of calendar year 1995 shall be allocated on an "interim 
closing of the books method" as of 11:59 p.m. on September 30 
and the Closing Date, respectively; provided, however, that 
                                    ________  _______       
exemptions, allowances, deductions or other Taxes determined on 
a basis other than income, premium or sales that are calculated 
on an annual basis and annual property taxes shall be prorated 
by allocating the amount of such exemptions, allowances or 
deductions in the case of calendar year 1995, to Seller, by 
multiplying such amount by 273/365; provided, further, that the 
                                    ________  _______           
same amount of taxable income or loss of the Companies and their 
Subsidiaries for the Pre-September 30 Tax Period of calendar 
year 1995 used for determining the value of the NOLs reflected 
on the September Adjusted GAAP Balance Sheet shall be assumed to 
be the actual taxable income or loss of the Companies and their 
Subsidiaries for such period; provided, further, that for 
                              ________  _______           
purposes of determining the taxable income or loss of the 
Companies and their Subsidiaries for any Post-September 30 Tax 
Period, the September 30 NOLs shall be assumed to be the actual 
NOLs as of September 30, 1995.




















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<PAGE> 104


           (j)  For purposes of Section 8.5 and Section 8.8, the 
reserves accrued on the September Adjusted GAAP Balance Sheet 
with respect to any guaranty fund assessment, second injury fund 
assessment, special insurance assessment or similar assessment 
or tax shall be deemed to be the legal liability of the 
Companies and their Subsidiaries on September 30, 1995.  No 
payments under Section 8.5 shall be made between Buyer or the 
Companies and their Subsidiaries and Seller with respect to any 
guaranty fund assessment, second injury fund assessment, special 
insurance assessment or similar assessment or tax.

         8.6  Cooperation on Tax Matters.  (a)  Buyer shall, and 
              __________________________                        
 
shall cause its Affiliates, the Companies and the Subsidiaries 
to, and Seller shall, and shall cause the members of the Seller 
Group to, provide any requesting party with such reasonable 
assistance (including the execution and delivery of such powers 
of attorney as are reasonably necessary to carry out the intent 
of this section) and information (including access to books and 
records) as may reasonably be requested by such party in 
connection with (i) the preparation of any Return, (ii) the 
conduct of any proceeding relating to liability for or refunds 
or adjustments with respect to Taxes, and (iii) any other matter 
that is a subject of this Article 8.  Such cooperation and 
assistance shall be provided to the requesting party promptly 
upon its request.

           (b)  Buyer and its Affiliates, on the one hand, and 
Seller and the Seller Group, on the other hand, shall retain or 
cause to be retained all Returns, schedules, workpapers, and all 
material records or other documents relating thereto, until the 
expiration of the statute of limitations (including any waivers 
or extensions thereof) of the taxable years to which such 
Returns and other documents relate.  Prior to transferring, 
discarding or destroying any material records or documents 
relating 

















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<PAGE> 105


to any Pre-September 30 Tax Period or Post-September 30 Tax 
Period, Buyer and its Affiliates, on the one hand, and Seller 
and the Seller Group, on the other, shall provide the other 
party with reasonable notice and, if such party so requests, the 
opportunity to take possession of such records and documents 
solely at its cost and expense.  Furthermore, each party agrees 
to abide by or cause the abidance with all record retention 
agreements entered into with any Taxing Authority to the extent 
that compliance therewith was possible as of September 30, 1995. 
 Seller and its Affiliates shall not without the prior written 
consent of Buyer enter into or modify any record retention 
agreement with any Taxing Authority which relates to the 
Companies or any of their Subsidiaries.  In order to keep all 
parties informed as to the expiration of the statute of 
limitations for any period, at least thirty days prior to the 
end of each calendar year, each Party (the "Notifying Party") 
shall provide the other (the "Notified Party") with a schedule 
setting forth in reasonable detail which Pre-September 30 Tax 
Periods or Post-September 30 Tax Periods remain open with 
respect to the assessment of income taxes of the Companies and 
their Subsidiaries as of the date of such notice and a good 
faith estimate of when such Tax periods are expected to be 
closed by the expiration of the applicable statutory period of 
limitations or otherwise.  To the extent that the Notified Party 
does not receive the notice described in the preceding sentence 
with respect to any Pre-September 30 Tax Period or Post-
September 30 Tax Period of the Companies or any of its 
Subsidiaries, such Notified Party shall retain such books and 
records relating to such Pre-September 30 Tax Periods and Post-
September 30 Tax Periods until the expiration of the applicable 
statutory period of limitations (without giving effect to any 
extensions or waivers) and, subject to any record retention 
agreements with any Taxing Authority then in force, shall 


















99

<PAGE> 106


notify the Notifying Party by registered mail and facsimile of 
its intention to destroy or dispose of such books and records 
(the "Disposal Notice").  To the extent that the Notified Party 
does not receive a response from the Notifying Party within 
thirty days of sending the Disposal Notice that the applicable 
statutory period of limitations for the years in question remain 
open or that the Notifying Party intends to take possession of 
such books and records within sixty days of receipt of such 
Disposal Notice at its sole cost and expense, the Notified Party 
shall be entitled to destroy or dispose of any such books and 
records after the expiration of such statutory period of 
limitations (without giving effect to any extensions or 
waivers).

           (c)  Seller shall furnish to Buyer, simultaneously 
with the delivery of the September Adjusted GAAP Balance Sheet 
pursuant to Section 2.3(a), a schedule of the deferred and 
current Tax assets (including any NOLs) and deferred and current 
Tax liabilities of the Companies and their Subsidiaries to the 
extent such items are reflected on the September Adjusted GAAP 
Balance Sheet.  Such schedule shall include a listing of 
temporary differences (including NOLs), the amount of deferred 
tax assets (including NOLs) or deferred tax liabilities 
associated with each temporary difference and the estimated 
reversal period (by amount and year) of each temporary 
difference.  The schedule shall also include a detail of current 
tax assets and liabilities by type of tax (premium, property, 
state income, etc.).

         8.7  Tax Benefits.  (a)  Seller shall elect to 
              ____________                              
reattribute to itself, in accordance with Treasury regulation 
1.1502-20(g), an amount of NOLs equal to the September 30 NOLs 
(v) reduced by (i) the portion of such NOLs for which the Seller 
has made payment pursuant to Section 8.7(j) hereof, and (ii) the 
portion of such NOLs used by the Companies and their 
Subsidiaries to reduce their taxable income 
















100

<PAGE> 107


for a Post-September 30 Tax Period and (w) increased by the 
amount, if any, of NOLs attributable to Post-September 30 
Special Items, as described in the last sentence of Section 
8.7(e) hereof.  Seller shall also reattribute any remaining 
amount of NOLs, based on the 1996 Seller Group consolidated 
Federal Tax Return, not otherwise fairly attributable to NOLs 
described in Section 8.7(k)(ii).  For purposes of this Section 
8.7(a), "taxable income" of the Companies and their Subsidiaries 
shall be determined without regard to (x) the September 30 NOLs, 
(y) the Post-September 30 Special Items (as defined in Section 
8.7(e) hereof) and (z) any additions to reserves claimed with 
respect to the Post-September 30 Tax Period which satisfy the 
requirement for reserves relating to a Permitted Capital 
Contribution, calculated as if such entities were not filing a 
consolidated return with any other member of the Seller Group.  
At least five days prior to the Closing Date, Seller shall 
provide Buyer with a schedule setting forth Seller's good faith 
estimate of the amount of NOLs which will not be reattributed to 
Seller and the years in which such NOLs expire. 

           (b)  On or prior to the date on which Seller files 
its consolidated Federal Tax Return for the Tax period which 
includes the Closing Date, Seller shall provide Buyer with a 
schedule of the actual NOLs that were reattributed to Seller on 
such Return pursuant to Treasury regulation section 1.1502-20(g) 
(the "Reattributed NOLs").  Buyer agrees to cause each of the 
Companies and their Subsidiaries with respect to which NOLs are 
reattributed under this Section 8.7 to execute such statements 
or other documents as may be required to comply with the 
provisions of the Code and the regulations.

           (c)  If there is a Final Determination that (i) 
reduces the amount of the Reattributed NOLs or (ii) relates to a 
Return for, or with respect to, a Pre-September 


















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<PAGE> 108


30 Tax Period of any member of the Seller Group which, in either 
case, entitles (x) the Companies or any of their Subsidiaries to 
claim Tax Benefits in their Post-September 30 Tax Period Returns 
solely as a result of such Final Determination or (y) Buyer and 
its Affiliates to claim Tax Benefits in their Post-Closing Tax 
Period Returns solely as a result of such Final Determination, 
to the extent permitted by law, the relevant party shall claim 
such Tax Benefits in its earliest available Post-September 30 
Tax Period Returns or Post-Closing Tax Period Returns, as the 
case may be.  With respect to each such Post-September 30 Tax 
Period or Post-Closing Tax Period in which a Federal Tax Savings 
(as defined below) is realized, the relevant party shall pay to 
Seller the Federal Tax Savings within 90 days of filing the 
applicable Federal Tax Return for such period.  The Federal Tax 
Savings for the Post-September 30 Tax Period or the Post-Closing 
Tax Period in question shall be an amount equal to the excess, 
if any, of (i) the amount of Federal Taxes which would have been 
payable by the Companies and their Subsidiaries or Buyer and its 
Affiliates, as the case may be, for such Tax period had such Tax 
Benefit not been claimed in their Federal Tax Return for such 
period over (ii) the amount of Federal Taxes actually payable by 
the Companies and their Subsidiaries or Buyer and its 
Affiliates, as the case may be, with respect to such period.  
If, subsequent to the payment to Seller of any such amount, 
there shall be a reduction in the amount of the Federal Tax 
Savings as a result of the utilization by Buyer, the Companies 
or any of their Subsidiaries or Affiliates of any other Tax 
Benefits that arise in a Post-September 30 Tax Period or Post-
Closing Tax Period, Seller shall repay to Buyer, within 90 days 
of such event (an "Event"), any amount which would not have been 
payable to Seller pursuant to this Section 8.7(c) had the 
Federal Tax Savings originally been determined in light 



















102

<PAGE> 109


of the Event.  The principles of the foregoing provisions shall 
continue to apply with respect to any utilization of a Federal 
Tax Savings subsequent to an Event, as well as to any Event 
subsequent thereto.

           (d)  If there is a Final Determination that relates 
to a Return for, or with respect to, a Pre-September 30 Tax 
Period of any member of the Seller Group which results in an 
increase in the liability for Federal Taxes of (x) the Companies 
or any of their Subsidiaries for any Post-September 30 Tax 
Period solely as a result of such Final Determination or (y) 
Buyer and its Affiliates for any Post-Closing Tax Period solely 
as a result of such Final Determination, Seller shall pay the 
relevant party the Federal Tax Detriment (as defined below) 
within 90 days of such party's filing of the applicable Federal 
Tax Return for the Post-September 30 Tax Period or Post-Closing 
Tax Period in which such party incurs the Federal Tax Detriment. 
 The Federal Tax Detriment for the Post-September 30 Tax Period 
or the Post-Closing Tax Period in question shall be the excess, 
if any, of (i) the aggregate amount of Federal Taxes payable by 
the Companies and their Subsidiaries or Buyer and its 
Affiliates, as the case may be, with respect to such period 
after giving effect to any adjustments required to be reported 
on their Federal Tax Return for such period by reason of such 
Final Determination over (ii) the aggregate amount of Federal 
Taxes that would have been payable by the Companies and their 
Subsidiaries or Buyer and its Affiliates, as the case may be, 
for such period had such adjustments not been reported in their 
Federal Tax Return for such period.  If the Companies or any of 
their Subsidiaries or Buyer and its Affiliates realize any 
reduction in a Federal Tax Detriment for which they have 
received a payment pursuant to this subsection (d), other than 
by reason of an Event, Buyer shall pay Seller the amount of any 
such reduction. The principles 

















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<PAGE> 110


of this Section 8.7(d) shall continue to apply upon the 
recurrence of a Federal Tax Detriment subject to reversal 
pursuant to the preceding sentence, as well as any subsequent 
reduction of such reversal.

           (e)  To the extent that the Companies and their 
Subsidiaries realize a Federal Tax Savings on their Federal Tax 
Returns for a Post-September 30 Tax Period as a result of the 
use in any such Return of any Tax Benefit attributable to (i) 
deductions arising in respect of Transferred Employee stock 
options which are exercised for Seller common stock after 
September 30, 1995 and on or prior to the Closing Date, (ii) 
alternative minimum tax credits available by reason of 
alternative minimum tax paid by the Seller Group, and (iii) 
other deductions relating to Benefit Arrangements, the costs of 
which are borne by the Seller Group (excluding the Companies and 
their Subsidiaries) (hereafter (i), (ii) and (iii) are referred 
to as "Post-September 30 Special Items"), Seller or Buyer, as 
the case may be, shall cause the Companies and their 
Subsidiaries to pay Seller the amount of such Federal Tax 
Savings within 90 days of filing the applicable Federal Tax 
Return for the Post-September 30 Tax Period in which the 
relevant party realizes such Federal Tax Savings; provided, 
                                                  ________  
however, that such Federal Tax Savings shall be payable to 
_______                                                    
Seller only to the extent that the value of any such Post-
September 30 Special Item is not reflected on the September 
Adjusted GAAP Balance Sheet; provided, further, that the amount 
                             ________  _______                  
of Federal Tax Savings to be paid to Seller shall be reduced by 
any costs or expenses (including Taxes) incurred by the 
Companies and their Subsidiaries solely as a result of claiming 
the Tax Benefits relating to such Post-September 30 Special 
Items.  If, subsequent to the payment to Seller of such Federal 
Tax Savings, there shall be a reduction in the amount of such 
Federal Tax Savings as a result of the 

















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<PAGE> 111


utilization by the Companies and their Subsidiaries of any other 
Tax Benefits that arise in (i) a Post-September 30 Tax Period or 
(ii) a Post-Closing Tax Period due to a Final Determination, 
Seller shall repay to the Companies and their Subsidiaries 
within 90 days of such Event, any amount which would not have 
been payable to Seller pursuant to this Section 8.7(e) had such 
Federal Tax Savings originally been determined in light of the 
Event.  The principles of the last sentence of Section 8.7(c) 
hereof shall apply here mutatis mutandis.  Solely for purposes 
                        _______ ________                       
of determining whether the Companies and their Subsidiaries 
realize such Federal Tax Savings, the taxable income of the 
Companies and their Subsidiaries for such Post-September 30 Tax 
Period (determined in accordance with the principles of Section 
8.5(i) and without regard to any Post-September 30 Special Item) 
and then the taxable income of the members of the Seller Group 
(excluding the Companies and their Subsidiaries) shall be offset 
by the NOLs and any Tax Benefit attributable to a Post-September 
30 Special Item in the following order; first, by the September 
30 NOLs; second, by any NOLs generated by the Companies and 
their Subsidiaries in any Post-September 30 Tax Period; and 
third, by any Tax Benefit relating to a Post-September 30 
Special Item.  To the extent that a Post-September 30 Special 
Item generates a Tax Benefit that is not utilized by the 
Companies and their Subsidiaries in a Post-September 30 Tax 
Period, such amount will be included in the amount of NOLs to be 
reattributed to Seller as described in Section 8.7(a) hereof.

           (f)(A)	  To the extent that Buyer and its Affiliates 
realize a Federal Tax Savings on their Federal Tax Returns for a 
Post-Closing Tax Period, as a result of the use in any such 
Return of any Tax Benefit attributable to (i) deductions arising 
in respect of Transferred Employee stock options which are 
exercised for 


















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Seller common stock after the Closing Date, (ii) alternative 
minimum tax credits available by reason of alternative minimum 
tax paid by the Seller Group, and (iii) other deductions 
relating to retiree life and health and the 1996 payout on the 
Aetna employee incentive program, subject to the receipt of a 
private letter ruling from the Internal Revenue Service which 
concludes that such deductions are allowable to the Companies 
and their Subsidiaries without any inclusion in the income of 
Buyer or any of its Affiliates in a Post-Closing Tax Period 
((hereafter (i), (ii) and (iii) are referred to as "Post-Closing 
Special Items," and together with the Post-September 30 Special 
Items, the "Special Items"), Buyer shall pay Seller such Federal 
Tax Savings within 90 days of filing the applicable Federal Tax 
Return for the Post-Closing Tax Period in which Buyer and its 
Affiliates realize such Federal Tax Savings; provided, however, 
                                             ________  _______  
that such Federal Tax Savings shall be payable to Seller only to 
the extent that the value of such Post-Closing Special Item is 
not reflected on the September Adjusted GAAP Balance Sheet; 
provided, further, that the amount of Federal Tax Savings to be 
________  _______                                               
paid to Seller shall be reduced by any costs or expenses 
(including Taxes) incurred by Buyer and its Affiliates solely as 
a result of claiming the Tax Benefits relating to the Post-
Closing Special Items which resulted in the Federal Tax Savings. 
 If, subsequent to the payment to Seller of such Federal Tax 
Savings, there shall be a reduction in the amount of such 
Federal Tax Savings as a result of the utilization by Buyer and 
its Affiliates of any other Tax Benefits that arise in a Post-
Closing Tax Period, Seller shall repay to Buyer within 90 days 
of such Event, any amount which would not have been payable to 
Seller pursuant to this Section 8.7(f) had such Federal Tax 
Savings originally been determined in light of the Event.  The 
principles of the foregoing 



















106

<PAGE> 113


provisions shall continue to apply with respect to any 
utilization of a Federal Tax Savings subsequent to an Event, as 
well as to any Event subsequent thereto.

           (B)  If the private letter ruling described in 
Section 8.7(f)(A)(iii) above is not obtained, Buyer and its 
Affiliates may, in their sole discretion, claim the deductions 
referred to in such subsection (iii).  In any case, if Buyer and 
its Affiliates claim such deductions, such deductions shall be 
treated as if they were Post-Closing Special Items for purposes 
of Sections 8.7(f)(A), (g), (h) and (i).

           (g)  To the extent that, with respect to a Post-
Closing Tax Period, Buyer and its Affiliates, incur a Special 
Item Federal Tax Detriment (as defined below) as a result of any 
adjustment (including, but not limited to, any adjustment 
resulting from an audit by any Taxing Authority, filing an 
amended Return or the use by the Companies or their Subsidiaries 
or Buyer and its Affiliates of a carryforward or carryback) to 
the taxable income of the relevant party in any Post-Closing Tax 
Period Return caused by the use of any Tax Benefit attributable 
to a Special Item, Seller shall pay the relevant party, and 
indemnify the relevant party against, the Special Item Federal 
Tax Detriment within 15 days of the incurrence of such 
detriment.  The Special Item Federal Tax Detriment for the Post-
Closing Tax Period in question shall be the excess, if any, of 
(i) the aggregate amount of Federal Taxes payable by the 
Companies and their Subsidiaries or Buyer and its Affiliates, as 
the case may be, with respect to such period after giving effect 
to any adjustments required to be made by reason of claiming 
such Tax Benefit over (ii) the aggregate amount of Federal Taxes 
that would have been payable by the Companies and their 
Subsidiaries or Buyer and its Affiliates, as the case may be, 
for such period had such adjustments not been made.

















107

<PAGE> 114


           (h)  With respect to subsections (e), (f) and (g) of 
this Section 8.7, (i) any conflicts arising between such 
subsections and any other provision of this Article 8 shall be 
resolved by applying first the provisions of subsections (e), 
(f) and (g) of Section 8.7 and then, to the extent such other 
provision is not in conflict, such other provision of this 
Article 8, and (ii) in determining whether a Tax Benefit 
relating to a Special Item is utilized by the Companies and 
their Subsidiaries or Buyer and its Affiliates, as the case may 
be, (including, but not limited to, as a result of any audit by 
any Taxing Authority, filing an amended Return or as a result of 
the use by the Companies and their Subsidiaries or Buyer and its 
Affiliates, as the case may be, of any carryforward or 
carryback), any Tax Benefit relating to a Special Item shall be 
presumed to be used by the Companies and their Subsidiaries or 
Buyer and its Affiliates, as the case may be, only after all 
other available Tax Benefits have been utilized by the Companies 
and their Subsidiaries or Buyer and its Affiliates, as the case 
may be, to reduce their taxable income.

         (i)  To the extent permitted by law, as determined by 
Buyer in good faith, Buyer agrees to claim or cause the 
Companies or their Subsidiaries to claim in a proper and timely 
fashion in the earliest Post-Closing Tax Period all or any Tax 
Benefits attributable to the Special Items.  Buyer shall 
promptly notify Seller of any proposed disallowance of any such 
Tax Benefit and shall give Seller such information with respect 
thereto as Seller may reasonably request.  Seller may, at its 
own expense, assist Buyer in the defense of any Tax Claim with 
respect to any Tax Benefit described in Sections 8.7(e) and (f); 
provided, however, that such assistance shall be limited solely 
________  _______                                               
to communications with Buyer and its Affiliates.  Neither



















108

<PAGE> 115


Buyer nor any of its Affiliates shall settle, compromise or 
otherwise dispose of any such Tax Claim without providing prior 
written notice to Seller.

            (j)  Notwithstanding anything contained in this 
Agreement, to the extent that any NOLs or other Tax Benefits 
that are reflected on the September Adjusted GAAP Balance Sheet 
or were generated by the Companies and the Subsidiaries in any 
Post-September 30 Tax Period (determined without regard to the 
Post-September 30 Special Items) are absorbed or otherwise 
utilized by the Seller Group (other than the Companies and their 
Subsidiaries) to offset its taxable income in any Tax period 
ending on or prior to December 31 of the calendar year that 
includes the Closing Date, Seller shall pay to the party or 
parties which generated such NOLs or Tax Benefits, within 15 
days of the end of the quarter in which such reduction or 
elimination occurred, an amount equal to 35% of such NOLs or Tax 
Benefits (other than credits) or the amount of any such credit, 
as the case may be.

           (k)  Notwithstanding anything in this Section 8.7 to 
the contrary, it is the intent of the parties that the Buyer 
receive a value relating to the NOLs equal to the amount of the 
NOL deferred tax asset (i) stated on the September Adjusted GAAP 
Balance Sheet, and (ii) generated by the Companies and their 
Subsidiaries in any Post-September 30 Tax Period (including the 
portion of calendar year 1995 beginning after September 30) or 
Post-Closing Tax Period, in each case computed pursuant to the 
principles established in Section 8.5(i) and excluding any 
Special Items.  The parties agree to take all actions necessary 
(including, without limitation, adjusting the amount of NOLs to 
be reattributed pursuant to Section 8.7(a) hereof and/or 
intercompany settlements) in order to ensure that Buyer and its 
Affiliates 

















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<PAGE> 116


receive only the value (but no less than such value) 
attributable to the NOLs which it is entitled pursuant to the 
preceding sentence.

         8.8  Indemnification by Seller.  (a)  Seller hereby 
              _________________________                      
indemnifies Buyer and its Affiliates against and agrees to hold 
them harmless from any (i) Tax of the Companies and their 
Subsidiaries for any Pre-September 30 Tax Period, (ii) liability 
of the Companies and their Subsidiaries for any Tax of the 
Seller Group under Treasury regulation section 1.1502-6 or any 
similar provision of state or local law as a result of the 
Companies or any of their Subsidiaries being a member of the 
Seller Group, (iii) penalties, interest or other costs and 
expenses with respect to Taxes for a Post-September 30 Tax 
Period attributable to the failure of any member of the Seller 
Group to prepare or timely file any Returns or pay any Taxes 
shown to be due on such Returns of the Companies and their 
Subsidiaries in a manner consistent with past practice, and (iv) 
liabilities, costs, expenses (including, without limitation, 
reasonable expenses of investigation and reasonable attorneys' 
fees and expenses), arising out of or incident to the 
imposition, assessment or assertion of any Tax (including those 
incurred in the contest in good faith in appropriate proceedings 
relating to the imposition, assessment or assertion of any Tax) 
described in clause (i) through (iv) of this paragraph (the sum 
of (i) through (iv) being referred to as a "Buyer Loss"); 
provided, however, that Seller shall not indemnify Buyer and its 
________  _______                                               
 
Affiliates for (i) any Taxes that are measured on a 
retrospective base (e.g., superfund taxes) that includes any 
Pre-September 30 Tax Period and that are imposed with respect to 
any Post-September 30 Tax Period (including, without limitation, 
only that portion of calendar year 1995 beginning after 
September 30) or Post-Closing Tax Period of the Companies and 
their Subsidiaries by reason of any change in law 

















110

<PAGE> 117


enacted after September 30, 1995, (ii) any Taxes reflected on 
the September Adjusted GAAP Balance Sheet, (iii) any Loss 
attributable to or resulting from any action described in 
Section 8.3(a) hereof, or (iv)  any guaranty fund assessment, 
second injury fund assessment, special insurance assessment or 
similar assessment or tax that was not actually assessed on or 
prior to September 30, 1995 or for which there is not a 
specified legal liability in existence on September 30, 1995 
("Excluded Taxes"); provided, further, that such Excluded Taxes 
                    ________  _______                           
shall not include assessments made on or prior to September 30, 
1995 (including any correction in the amount of any assessments 
made after such date to take account of a computational error, 
such as using the wrong base or wrong rate or a mathematical 
error, in light of the facts and law at the time such 
computation was made) or assessments for which there is a legal 
liability in existence on such date; provided, further, that 
                                     ________  _______       
Seller shall have no obligation to make any payment to Buyer 
pursuant to this Section 8.8 until the amount of all claims 
arising pursuant hereto in the aggregate which are treated as 
adjustments to the Purchase Price (minus the actual reduction in 
the liability for Taxes of Buyer and its Affiliates as a result 
of realizing any Tax Benefit attributable thereto) exceeds the 
cushion for Taxes, if any, with respect to the Companies and 
their Subsidiaries reflected on the September Adjusted GAAP 
Balance Sheet (the "Cushion"), as adjusted for any payments made 
by Buyer or the Companies and any of their Subsidiaries to 
Seller pursuant to subsection (z) of Section 8.5(d) or otherwise 
pursuant to this Article 8 after September 30, 1995 and prior to 
Buyer's request for payment pursuant to this Section 8.8(a).  On 
or prior to the date hereof, Seller shall provide Buyer with a 
schedule setting forth a good faith estimate of the Cushion, 




















111

<PAGE> 118


which shall be adjusted (and promptly provided to Buyer) to 
reflect assets and liabilities on the September Adjusted GAAP 
Balance Sheet.

           (b)  Any payment required of Seller pursuant to 
Section 8.8(a) shall be made not later than 30 days after 
receipt by Seller of written notice from Buyer stating that a 
Buyer Loss has been paid by Buyer or any of its Affiliates and 
the amount thereof and of the indemnity payment requested.  
Failure to give Seller such written notice shall not relieve 
Seller of its indemnification obligation pursuant to Section 
8.8(a) unless and to the extent that Seller is materially 
prejudiced as a result thereof.

           (c)  Each party shall notify the other, within ten 
days of receipt thereof, of any claim for Taxes made in writing 
to such party or its Affiliates by a Taxing Authority (a "Tax 
Claim") which, if successful, could affect the other party's 
liability for Taxes.  Seller may discharge, at any time, its 
indemnification obligation under this Section 8.8 by paying to 
Buyer the amount of the applicable Buyer Loss, calculated on the 
date of such payment; provided, however, that if the amount of 
                      ________  _______                        
such Buyer Loss, at the time of a Final Determination with 
respect thereto, exceeds the amount paid by Seller to Buyer 
pursuant to the preceding clause, Seller shall pay such excess 
to Buyer within ten days of such Final Determination.  Seller 
may, at its own expense, participate in and, upon notice to 
Buyer, assume the defense of any Tax Claim for which Seller has 
agreed to indemnify Buyer pursuant to Section 8.8(a).  If Seller 
assumes such defense, Buyer shall have the right (but not the 
duty) to participate in the defense thereof and to employ 
counsel, at its own expense, separate from the counsel employed 
by Seller; provided, however, that to the extent such action 
           ________  _______                                 
reasonably could be expected adversely to affect any Tax 
liability of Buyer and 
















112

<PAGE> 119


its Affiliates for any Post-September 30 Tax Period or Post-
Closing Tax Period Seller shall not settle, compromise, or 
otherwise dispose of any such Tax Claim without Buyer's prior 
written consent, which shall not be unreasonably withheld.  
Buyer shall indemnify Seller from and against any (i) increase 
in the amount of Buyer Loss and (ii) increase in the liability 
for Taxes of the Seller Group incurred by reason of Buyer 
unreasonably withholding its consent to the matters described in 
this Section 8.8(c).

           (d)  Seller shall not be liable under Section 8.8(a) 
for (i) any Tax the payment of which by Buyer was made without 
Seller's prior written consent, which shall not be unreasonably 
withheld, or (ii) any settlements relating to a Tax of the 
Companies or any of their Subsidiaries for a Pre-September 30 
Tax Period effected without the consent of Seller, which shall 
not be unreasonably withheld, or resulting from any Tax Claim in 
which Seller was not permitted an opportunity to participate, 
but only to the extent (in the case of both clause (i) and (ii) 
herein) that Buyer's failure to obtain Seller's consent or 
provide Seller with such an opportunity to participate 
materially prejudiced Seller.  Seller shall indemnify Buyer from 
and against any Buyer Loss incurred by Buyer or any of its 
Affiliates by reason of Seller unreasonably withholding its 
consent to the matters described in clause (i) or (ii) of this 
Section 8.8(d).

         8.9  Indemnification by Buyer.  (a)  After the Closing 
              ________________________                          
Date, Buyer shall indemnify the Seller Group against and agrees 
to hold it harmless from any (i) Tax of the Companies and their 
Subsidiaries for any Post-September 30 Tax Period, (ii) any Tax 
with respect to a Return described in Section 8.5(b) and (iii) 
liabilities, costs, expenses (including, without limitation, 
reasonable expenses of investigation and reasonable attorneys' 
fees and expenses), arising out of or incident to the 
















113

<PAGE> 120


imposition, assessment or assertion of any Tax (including those 
incurred in the contest in good faith in appropriate proceedings 
relating to the imposition, assessment or assertion of any Tax) 
described in clause (i) of this paragraph (the sum of (i), (ii) 
and (iii) being referred to as a "Seller Loss"); provided, 
                                                 ________  
however, that Buyer shall not indemnify the Seller Group against 
_______                                                         
 
any (x) liability described in subsections (ii) or (iii) of 
Section 8.8(a), and (y) liability for Taxes and other costs and 
expenses attributable to claiming the Post-September 30 Special 
Items described in Section 8.7(e).

           (b)  Any payment required of Buyer pursuant to 
Section 8.9(a) shall be made not later than 30 days after 
receipt by Buyer of written notice from Seller stating that a 
Seller Loss has been paid by any member of the Seller Group and 
the amount thereof and of the indemnity payment requested.  
Failure to give Buyer such written notice shall not relieve 
Buyer of its indemnification obligation pursuant to Section 
8.9(a) unless and to the extent that Buyer is materially 
prejudiced as a result thereof.

           (c)  Each party shall notify the other, within ten 
days of receipt thereof, of any Tax Claim which, if successful, 
could affect the other party's liability for Taxes.  Buyer may 
discharge, at any time, its indemnification obligation under 
this Section 8.9 by paying to Seller the amount of the 
applicable Seller Loss, calculated on the date of such payment; 
provided, however, that if the amount of such Seller Loss, at 
________  _______                                             
the time of a Final Determination with respect thereto, exceeds 
the amount paid by Buyer to Seller pursuant to the preceding 
clause, Buyer shall pay such excess to Seller with interest 
within ten days of such Final Determination.  Buyer may, at its 
own expense, participate in and, upon notice to Seller, assume 
the 


















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<PAGE> 121


defense (other than with respect to the Seller Group 
consolidated Federal Tax Returns or Combined State Tax Returns) 
of any Tax Claim for which Buyer has agreed to indemnify Seller 
pursuant to this Section 8.9.  If Buyer assumes such defense 
(including, for this purpose, as provided in the penultimate 
sentence of this Section 8.9(c)), Seller shall have the right 
(but not the duty) to participate in the defense thereof and to 
employ counsel, at its own expense, separate from the counsel 
employed by Buyer; provided, however, that to the extent such 
                   ________  _______                          
action reasonably could be expected to adversely affect any Tax 
liability of the Seller Group for any Post-September 30 Tax 
Period or any Post-Closing Tax Period Buyer shall not settle, 
compromise, or otherwise dispose of any such Tax Claim without 
Seller's prior written consent, which shall not be unreasonably 
withheld.  With respect to a Tax Claim relating to a Seller 
Group consolidated Federal Tax Return or a Combined State Tax 
Return, (i) to the extent possible, Buyer shall have the right 
to litigate (at its own expense) such Tax Claim upon resolution 
of the Tax audit with the Taxing Authority for which such Tax 
Claim relates in a court determined by Seller, and (ii) Seller 
shall use good faith in defending and maintaining Buyer's 
position with respect to such Tax Claim and shall not 
discriminate against such claim due to its indemnified nature.  
Seller shall indemnify Buyer from and against any (i) increase 
in the amount of Seller Loss and (ii) increase in the liability 
for Taxes of Buyer and its Affiliates incurred by reason of 
Seller unreasonably withholding its consent to the matters 
described in this Section 8.9(c).

           (d)  Buyer shall not be liable under Section 8.9(a) 
for (i) any Tax the payment of which by Seller was made without 
Buyer's prior written consent, which shall not be unreasonably 
withheld, or (ii) any settlements relating to a Tax of the 


















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<PAGE> 122


Companies or any of their Subsidiaries for a Post-September 30 
Tax Period or Post-Closing Tax Period effected without the 
consent of Buyer, which shall not be unreasonably withheld, or 
resulting from any Tax Claim in which Buyer was not permitted an 
opportunity to participate, but only to the extent (in the case 
of both clause (i) and (ii) herein) that Seller's failure to 
obtain Buyer's consent or provide Buyer with such an opportunity 
to participate caused Buyer to incur a loss.  Buyer shall 
indemnify Seller from and against any Seller Loss incurred by 
any member of the Seller Group by reason of Buyer unreasonably 
withholding its consent to the matters described in clause (i) 
or (ii) of this Section 8.9(d). 

         8.10  Survival; Exclusivity.  Notwithstanding anything 
               _____________________                            
in this Agreement to the contrary, (i) this Article 8 shall 
govern the procedure for all indemnification claims relating to 
Taxes and (ii) the provisions of this Article 8 shall survive 
for the full period of all statutes of limitations (giving 
effect to any waiver, mitigation or extension thereof) for the 
assessment of Taxes for the Tax period in question, and any 
claim to be brought under this Article 8 must be brought prior 
to the expiration of such period.

         8.11  Purchase Price Adjustment.  Any amount paid to or 
               _________________________                        
 
by Seller under this Article 8 will be treated as an adjustment 
to the Purchase Price unless a Final Determination causes any 
such amount to not constitute an adjustment to the Purchase 
Price for Federal Tax purposes.

         8.12  Late Payments.  Any payment required to be made 
               _____________                                   
by Buyer or Seller pursuant to this Article 8 that is not made 
when due shall bear interest from and including the due date of 
payment to but excluding the date of payment at a rate 


















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<PAGE>  123


per annum equal to the three-month London Interbank Offered Rate 
(as published in the Wall Street Journal on such due date) plus 
40 basis points.

         8.13  No Duplicative Payments; Offsets.  The provisions 
               ________________________________                 
 
of this Article 8 shall be interpreted in a manner such that no 
payment shall be made by any party with respect to the same item 
more than once.  To the extent that any item causes parties to 
make reciprocal payments in any Tax period, such parties shall 
be entitled to offset such payments and the party which is 
obligated to make the greater payment shall pay only the 
difference between the amount of its original obligation and the 
amount it would have received had the reciprocal payments been 
made.

         8.14  Rule of Construction.  For purposes of this 
               ____________________                        
Article 8, the term "Buyer and its Affiliates" shall include the 
Companies and their Subsidiaries for all Post-Closing Tax 
Periods.

         8.15  Notices.  All notices required to be provided to 
               _______                                          
any party under this Article 8 shall be sent by both registered 
mail and facsimile to, in the case of Buyer, the Vice-President 
of Taxes (with a copy to Chief Counsel) or, in the case of 
Seller, the Corporate Controller at the addresses provided in 
Section 13.1 hereof.

         8.16  Allocation of Purchase Price.  Prior to the 
               ____________________________                
Closing Date, Buyer and Seller shall negotiate in good faith to 
agree on an allocation of the Purchase Price to the Shares of 
the Companies.

























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                           ARTICLE 9

                 EMPLOYEES AND EMPLOYEE BENEFITS

         9.1  Employees.  Effective December 31, 1995, Seller 
              _________                                       
shall cause all employees of Seller or any of its Subsidiaries 
who perform substantially all of their services in Seller's 
property and casualty business units ("P&C Employees") to become 
employees of one of the Companies or one of their Subsidiaries 
(as directed by Buyer).  Schedule 9.1 sets forth the complete 
description of the P&C Employees and the employers of such P&C 
Employees as of the date hereof.  With respect to each P&C 
Employee who, as of the Closing Date, is employed by any Company 
or any Subsidiary of any Company (including any P&C Employee 
absent as of such date from active service for any reason, 
including but not limited to disability or leave of absence but 
excluding any terminated P&C Employees receiving severance) 
("Transferred Employees"), Buyer shall cause each Transferred 
Employee's employer to continue to employ such Transferred 
Employee at the same rate of base salary per annum as is in 
effect on the day prior to the Closing Date, provided, however, 
                                             ________  _______  
that nothing herein is intended to, or shall require, such 
employer to employ any such employee on a basis other than as an 
employee at will; and, provided, further, that the individuals 
listed on Schedule 9.6(c)(ii) (Affected Employees) shall not be 
Transferred Employees except as provided in Section 9.6(c)(ii). 
 Seller agrees that, as of the date hereof, employees expected 
to become Transferred Employees consist of 11,350 active 
employees and 275 employees absent from active service (of whom 
250 are on disability and 25 are on a leave of absence).

         9.2  Pension Plan.  (a)  Transferred Employees shall 
              ____________                                    
cease to participate in the Pension Plan as of the Closing Date. 

























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Effective as of the day immediately prior to the Closing Date, 
each Transferred Employee shall be granted service for all 
purposes (including benefit accrual) under the Pension Plan for 
the period commencing on the Closing Date and ending on December 
31, 1997 (the "Advance Accrual Period").  Buyer shall cause the 
Companies to reimburse Seller for the grant of service for the 
Advance Accrual Period within 30 days following the Closing Date 
(but in no event earlier than 15 days after receipt of relevant 
information from Seller).  Such reimbursement shall be made in 
accordance with the formula set forth in Schedule 9.2(a) but in 
no event will such amount exceed the after-tax equivalent of the 
present value (based upon an 8% discount factor) of $15 million 
per year (pre-tax) for two years.  Seller shall provide Buyer 
with all documentation reasonably requested by Buyer to 
substantiate the amount of such charge.

           (b)  After the Closing Date, Seller and its 
Affiliates shall retain all liabilities and obligations in 
respect of benefits accrued by Transferred Employees under the 
Pension Plan.  Accrued benefits of Transferred Employees under 
the Pension Plan shall be fully vested as of the Closing Date.  
Benefit accruals in respect of Transferred Employees under the 
Pension Plan shall cease as of the Closing Date and Transferred 
Employees participating therein shall be considered terminated 
vested participants in such Pension Plan.  No Pension Plan 
assets shall be transferred to Buyer or any of its Affiliates or 
to the Companies or their Subsidiaries or to any plan of Buyer 
or its Affiliates or of the Companies or their Subsidiaries.

           (c)  Effective as of January 1, 1998, the Transferred 
Employees who are then eligible to participate in the Travelers 
Group Pension Plan ("Travelers Plan") shall become participants 
in the Travelers Plan and in a defined contribution profit 
sharing plan to be established by Buyer for the benefit of the 
Transferred Employees 
















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("New Plan").  Under the Travelers Plan, each Transferred 
Employee shall be granted credit for service, to the extent 
recognized by the Pension Plan, for the purpose of eligibility 
and vesting (but not benefit accrual).  The New Plan shall be 
designed to supplement the benefits under the Travelers Plan.  
The amount available to satisfy obligations under the New Plan 
shall be initially $4,000,000 per year, reduced each year after 
1996 to reflect Transferred Employees who have terminated 
employment with the Companies and their Subsidiaries, whether 
voluntarily, involuntarily, by retirement or otherwise (such 
amount in effect from time to time, the "Maximum Annual 
Contribution").  Buyer will in good faith, calculate the Maximum 
Annual Contribution for each year.  Buyer and Seller shall bear 
the Maximum Annual Contribution in the proportions set forth 
below to meet the obligations to employees under the New Plan.  
In respect of its obligations, at the Closing, Seller shall pay 
to Buyer $10,000,000 in cash, which shall be treated as an 
adjustment to the Purchase Price ("Initial Contribution").  The 
Initial Contribution shall be credited interest at the rate of 
6.0% per annum simple interest on the unused balance.  From time 
to time such amount shall be debited by 32.5%, until such time 
as the Initial Contribution (and all interest credited thereto) 
is exhausted, of all amounts paid to Transferred Employees under 
the New Plan as and when such amounts are paid, up to an 
aggregate amount of 32.5%, until such time as the Initial 
Contribution (and all interest credited thereto) is exhausted, 
of the Maximum Annual Contribution.  The remaining obligations 
to Transferred Employees, up to 67.5%, until such time as the 
Initial Contribution (and all interest credited thereto) is 
exhausted, of the Maximum Annual Contribution shall be funded by 
Buyer.  As promptly as practicable after the close of each year 
of the New Plan, Buyer will



















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provide Seller an accounting in reasonable detail of the 
remaining Initial Contribution and the aggregate interest 
credited thereon.  As soon as practicable after December 31, 
2002, Buyer and Seller will negotiate in good faith to settle 
and liquidate Seller's remaining obligations under the New Plan. 
 If they are unable to agree on such a settlement, Buyer shall 
continue to apply any remaining Initial Contribution (and 
interest credited thereto) to Seller's obligations as set forth 
above.  If such funds are exhausted during the term of the New 
Plan, Buyer shall so notify Seller, and Seller shall promptly 
deposit with Buyer an additional amount (the "Subsequent 
Contribution") reasonably estimated to fund any remaining 
liabilities of Seller under the New Plan.  The Subsequent 
Contribution shall be credited with interest and otherwise 
treated as the Initial Contribution described above is treated, 
except that the Subsequent Contribution shall be debited at the 
rate of 50% of amounts contributed in lieu of 32.5%, up to an 
amount equal to 50% of the Maximum Annual Contribution, and 
Buyer shall fund the remaining obligations to Transferred 
Employees up to 50% of the Maximum Annual Contribution.  At the 
time when no additional obligations are due under the New Plan, 
Buyer will repay to Seller an amount equal to any remaining 
unused Initial Contribution or Subsequent Contribution and the 
amount of interest credited thereon.  If at any time the funds 
held by Buyer are not sufficient to satisfy Seller's obligations 
hereunder, Buyer shall assess Seller for its obligations under 
the New Plan, up to an aggregate of 50% of the Maximum Annual 
Contribution, and Seller shall promptly pay to Buyer the amount 
of each such assessment.  As of the Closing, each Transferred 
Employee will be assigned points, based upon the participant's 
age, length of service and compensation level, by such 
reasonable method of allocation as Seller determines and Buyer 
shall


















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<PAGE> 128


not unreasonably withhold its consent thereto.  The number of 
points held by each employee shall be fixed until such time as 
such employee's employment is terminated for any reason, at 
which time they will be forfeited.  For each calendar year of 
the New Plan, an amount equal to the Maximum Annual Contribution 
shall be allocated to Transferred Employees entitled to 
participate in the New Plan in accordance with each such 
participant's Points.

         9.3  Individual Account Plan.  (a)  Seller shall retain 
              _______________________                           
 
all liabilities and obligations in respect to benefits accrued 
by Transferred Employees under the Individual Account Plan.  On 
the Closing Date, Seller shall take such action as may be 
necessary, if any, to permit each Transferred Employee to 
exercise such Transferred Employee's rights under the Individual 
Account Plan to effect an immediate distribution of such 
Transferred Employee's vested account balances under the 
Individual Account Plan or to effect a tax-free rollover of the 
taxable portion of the account balances into an eligible 
retirement plan (within the meaning of Section 401(a)(31) of the 
Code, a "Direct Rollover") maintained by Buyer or an Affiliate 
of Buyer (the "Buyer Plan") or to an individual retirement 
account.  Seller and Buyer shall work together in order to 
facilitate any such distribution or rollover and to effect a 
Direct Rollover for those participants who elect to roll over 
their account balances directly into Buyer Plan; provided, 
                                                 ________  
however, that nothing contained herein shall obligate Buyer Plan 
_______                                                         

to accept a Direct Rollover in a form other than cash.  No 
contributions to the Individual Account Plan in respect of 
Transferred Employees shall be made after the Closing Date and 
Transferred Employees shall be considered terminated as of the 
Closing Date.  To the extent reasonably practicable, Seller and 
Buyer shall work together to develop a process whereby 
Transferred Employees who 


















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<PAGE> 129


have loans outstanding under the Individual Account Plan will be 
permitted to continue to make periodic (at least monthly) 
repayments on such loans through a reduction of salary paid by 
Buyer (it being understood that such loans are to be retained by 
the Individual Account Plan).  Except as required by law, no 
communication shall be sent to the Transferred Employees 
relating to the treatment or status of their loans outstanding 
under the Individual Account Plan without the consent of both 
Buyer and Seller.

           (b)  On the Closing Date, or as soon as practicable 
thereafter, Buyer shall establish or designate Buyer Plan in 
order to accommodate the Direct Rollovers described above and 
shall take all action necessary, if any, to qualify Buyer Plan 
under the applicable provisions of the Code and shall make any 
and all filings and submissions to the appropriate governmental 
authorities required to be made by it in connection with any 
Direct Rollover.  Under Buyer Plan, each Transferred Employee 
will be given credit for service, to the extent recognized by 
the Individual Account Plan, for the purpose of eligibility and 
vesting.

           (c)  From the Closing Date and until December 31, 
1996, under the Buyer Plan and Buyer's supplemental plan, each 
Transferred Employee shall be entitled to (i) make salary 
deferral contributions (which contributions shall be fully 
vested as of the time they are made) and (ii) receive employer 
matching contributions (which contributions shall be fully 
vested as of the time they are made) in accordance with the 
terms of the Individual Account Plan and the Supplemental 
Incentive Savings Plan identified on Schedule 9.3(c) (the 
"Supplemental Plan") relating to salary deferral and employer 
matching contributions.

         9.4  Certain Welfare Benefit Plans.  As of the Closing 
              _____________________________                     
Date, the Transferred Employees shall cease to participate in 

















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<PAGE> 130


the welfare benefit plans listed in Schedule 9.4(a) ("Prior 
Welfare Plans") and shall commence to participate (without any 
break in service for purpose of any eligibility, pre-existing 
condition, deductible or co-payment provisions) in welfare 
benefit plans of Buyer or the Companies ("Replacement Welfare 
Plans"), which Replacement Welfare Plans shall provide for 
identical benefits at identical cost to the employee and on 
substantially identical terms and conditions as those provided 
by Prior Welfare Plans immediately prior to the Closing Date.  
Such Replacement Welfare Plans may not be amended or terminated, 
except as may be required by law or to preserve intended tax 
results, before December 31, 1996.  Notwithstanding the above, 
nothing herein shall prohibit, or be construed to prohibit, 
Buyer or the Companies from terminating or amending the 
Replacement Welfare Plans at any time after December 31, 1996 
("Welfare Transfer Date").  Unless Buyer otherwise elects by no 
later than 60 days prior to the Closing Date, from the Closing 
Date until the Welfare Transfer Date Seller shall administer the 
Replacement Welfare Plans on behalf of Buyer under terms 
substantially similar to those applicable to welfare benefit 
plans then maintained by Seller; provided, however, that the 
                                 ________  _______           
Companies or Buyer may terminate such administration at any 
time.  After the Closing Date, Buyer shall be responsible for 
any claims by Transferred Employees for medical benefits 
relating to claims incurred but not reported prior to the 
Closing Date, but only to the extent the liability relating to 
any such claim is fully reflected on the September Adjusted GAAP 
Balance Sheet.

         9.5  Other Employee Benefit Plans and Benefit 
              _________________________________________
Arrangements.
____________ 


















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<PAGE> 131


           (a)  Except to the extent otherwise provided in this 
Agreement, Seller shall retain all obligations and liabilities 
under the Employee Plans and Benefit Arrangements in respect of 
any employee or former employee or any independent contractor or 
former independent contractor or other participant (in each case 
including any beneficiary or dependent thereof) who is not a 
Transferred Employee.

           (b) Except to the extent otherwise provided in this 
Article 9, with respect to Transferred Employees, Seller shall 
retain all obligations and liabilities relating to or arising 
under the Employee Plans or Benefit Arrangements which (i) are 
attributable to service performed, or benefits accrued or 
payable, on or prior to the Closing Date or (ii) arise out of 
actions, events or omissions that occurred (or, in the case of 
omissions, failed to occur) prior to the Closing Date.

           (c) As of the Closing Date, Buyer shall cause the 
Company to assume all the assets, if any, and liabilities of the 
plans listed on Schedule 9.5(c) that are included on the 
September Adjusted GAAP Balance Sheet estimated as of the 
Closing Date.  Each such plan constitutes a plan under Section 
401(a)(1) of ERISA.

           (d) Unless otherwise notified in writing by Seller on 
or prior to the Closing Date, Buyer shall cause the applicable 
Company to assume all obligations in respect of any Transferred 
Employee for the final performance payment, if any, in 
connection with the first cycle of ACE Shares and APEX Unit 
Awards described in Schedule 9.5(d); provided that if Buyer or 
                                     ________                  
either Company is obligated to make any payments hereunder, 
Seller shall promptly pay Buyer for any such payments in excess 
of the accrual for such obligation included on the September 
Adjusted GAAP Balance Sheet prior to Buyer or a Company making 
such payments.  To the extent the accrual for such obligation as 
of the Closing Date exceeds the aggregate of such payments made 
by Buyer and the Companies, Buyer shall promptly reimburse 
Seller in the amount of such excess accrual.  Communications 
with Transferred Employees and any other administrative 
activities required to be performed in connection with such 
Shares and Awards shall be handled by Seller.

         9.6  Plans Following the Closing.  (a)  With respect to 
              ___________________________                       














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<PAGE> 132


the Transferred Employees who would have been eligible for 
benefits under Seller's Retiree Medical and Life Program 
("Retiree Benefit Program") had they remained employed by Seller 
or an Affiliate of Seller until December 31, 1997, each such 
Transferred Employee shall continue to participate in the 
Retiree Benefit Program at the sole cost of Seller or its 
Affiliates and shall be credited for service with any Company or 
any Subsidiary of any Company on and after the Closing Date 
until December 31, 1997 for all purposes thereunder provided 
such Transferred Employee is a participant in Seller's 
Medical/Dental Plan or Seller's Life Insurance Plan on the day 
prior to the Closing Date.

           (b)  Except to the extent otherwise provided in 
Section 9.2, Buyer will cause the Companies to give Transferred 
Employees full credit for such Transferred Employees' service 
with Seller or any Subsidiary of Seller to the same extent 
recognized by Seller for purposes of eligibility, vesting and 
benefit accrual under any employee benefit plans or arrangements 
maintained by Buyer or any Subsidiary of Buyer in which such 
Transferred Employees are entitled to participate.

           (c)(i)  Buyer shall cause the Companies to pay 
severance and other job elimination benefits to the Transferred 
Employees (other than those who are parties to the Employment 
Agreements and letter


















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<PAGE> 133


agreements entered into upon hiring identified on Schedule 
9.6(c)(iii) for so long as those Agreements and letter 
agreements are in effect and to the extent such Agreements and 
letter agreements enhance severance) whose employment is 
terminated after the Closing Date and prior to December 31, 1997 
to the extent required by Seller's severance plans and programs 
identified on Schedule 9.6(c)(i) ("Severance Plans"); provided, 
                                                      ________  
however, that, consistent with the interpretation of the 
_______                                                  
Severance Plans by the plan administrator, no reduction or 
change in benefits (excluding reductions in base salary) shall 
constitute failure to offer (i) an "equivalent or alternate 
position" or (ii) "job with comparable compensation" under the 
Severance Plans; and, provided, further, that if any period of 
                      ________  _______                        
severance provided under the Severance Plans constitutes service 
for purpose of eligibility, vesting or benefit accrual under any 
pension plan, then any such service shall be reduced by any 
Advance Accrual Period remaining from the date of termination of 
employment.  In no case will Buyer or any Company pay severance 
under the Severance Plans to any Transferred Employee unless 
such Transferred Employee's employment is terminated after the 
Closing Date and prior to December 31, 1997.  Seller covenants 
that in no case will Buyer or any Company pay severance under 
the Severance Plans to any Transferred Employee solely by reason 
of the consummation of the transactions contemplated by this 
Agreement. Severance will be paid to a Transferred Employee who 
is a party to an Employment Agreement or letter agreements 
identified on Schedule 9.6(c)(iii) to the extent provided in 
such employee's Employment Agreement or letter agreements.

           (ii)  Buyer shall cause one or more of the Companies 
and their Subsidiaries to reimburse Seller for 50% of any 
severance payments under the Severance Plans made by Seller to 
individuals identified on Schedule 9.6(c)(ii) ("Affected 
Employees"); provided, however, that if Buyer, any of its 
             ________  _______                            
















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<PAGE> 134


Subsidiaries (including, after the Closing Date, the Companies 
and their Subsidiaries) or any of its Affiliates offers to any 
of the Affected Employees as of the Closing Date (but prior to 
the termination of such Affected Employee's employment by 
Seller; provided, however, that prior to the Closing Date no 
        ________  _______                                    
Affected Employee may be terminated by Seller or the Companies 
without prior consent of Buyer) continued employment with Buyer, 
any of its Subsidiaries (including, after the Closing, the 
Companies and their Subsidiaries) or any of its Affiliates with 
a base salary substantially equal to the base salary such 
Affected Employee received immediately prior to the Closing Date 
(such employment, "Continued Employment"), the amount of 
reimbursement owed hereunder shall be tax-effected and shall 
equal (A) the amount of reimbursement that would have been owed 
in absence of such offers of employment, multiplied by (B) one 
minus a fraction the numerator of which is the number of 
Affected Employees offered Continued Employment and the 
denominator of which is one-half of the total number of Affected 
Employees; provided, further, that in no case may the amount of 
           ________  _______                                    
reimbursement owed hereunder be less than zero.  Any Affected 
Employee who accepts Continued Employment shall be treated as a 
Transferred Employee for all purposes under this Agreement.

           (iii)  Buyer shall cause the Employment Agreements 
and letter agreements identified on Schedule 9.6(c)(iii) to be 
assumed by a Company or a Subsidiary of a Company, which shall 
become a successor with respect thereto.   Seller shall 
indemnify and hold harmless Buyer and its Affiliates (including, 
after the Closing, the Companies and their Subsidiaries) with 
respect to (i) any liabilities or obligations under the 
Employment Agreements to make payments to any Transferred 
Employees with respect to any tax liability under Section 4999 
of the Code on


















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<PAGE> 135


"excess parachute payments" as defined in Section 280G of the 
Code and (ii) for any loss of a tax benefit resulting from the 
treatment of any payment under the Employment Agreement as an 
excess parachute payment.

           (iv)  Seller shall indemnify and hold harmless Buyer 
and its Affiliates (including, after the Closing, the Companies 
and their Subsidiaries) with respect to any liabilities or 
obligations to make retention bonus payments to the Transferred 
Employees listed on Schedule 9.6(c)(iv) except to the extent any 
such liabilities relating to retention bonus payments are 
reflected on the September Adjusted GAAP Balance Sheet.

           (d) To the extent any vacation days earned by any 
Transferred Employee during the period from July 1, 1995 through 
December 31, 1995 are not projected to be used as of the Closing 
Date, Seller will accrue the liability for such vacation days as 
of the September Adjusted GAAP Balance Sheet.  Buyer shall be 
responsible for any vacation days earned after December 31, 
1995, which shall be calculated in accordance with Schedule 
9.6(d)(i) hereto (less any vacation days taken by such 
Transferred Employee in 1996 prior to the Closing Date); 
provided, however, that such vacation entitlement shall be 
________  _______                                          
calculated on the same calendar year basis as under current 
Buyer plan.  Vacation days earned during the period commencing 
on July 1, 1995 and ending on December 31, 1995 that are used by 
the Closing Date shall be credited to Seller's obligation as 
accrued on September Adjusted GAAP Balance Sheet.  Any vacation 
days earned since July 1, 1995 that are used after December 31, 
1995 and before the Closing Date will reduce Buyer's obligation 
after the Closing Date.  Any vacation days or required payments 
related thereto earned prior to July 1, 1995 (i) will not affect 
Buyer's obligation after the 


















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<PAGE> 136


Closing Date, (ii) will be used prior to any days earned after 
July 1, 1995, and (iii) shall in no event become responsibility 
of Buyer.  After December 31, 1996 each Transferred Employee 
shall be entitled to the number of vacation days calculated in 
accordance with Buyer's current plan as modified by Schedule 
9.6(d)(ii).  Seller covenants that, notwithstanding the above, 
no Transferred Employee may take a number of vacation days 
during the 1996 calendar year in excess of the number of 
vacation days earned by such Transferred Employee during the 
1996 calendar year and the July 1 - December 31 period during 
1995, all determined as of the Closing Date.  

           (e)  Nothing in this Article 9 shall be construed to 
impair in any way the application of Buyer's Arbitration Policy 
with respect to Transferred Employees.

           (f)  Prior to the Closing Date, no communications 
shall be made by either party to any Transferred Employee 
relating to any of the provisions of this Article 9 without the 
approval of the other party, which approval shall not be 
unreasonably delayed or withheld.  Seller shall provide Buyer 
with copies of any other communications directed at Transferred 
Employees generally which relate to an employee benefit plan in 
which Transferred Employees participate.  Buyer and Seller agree 
to cooperate in connection with employee benefit plans and 
arrangements covering Transferred Employees.

           (g)  Buyer agrees that it will cooperate fully with 
Seller's investigation of, response to, and defense of, any 
claims made by Seller's employees or former employees, or their 
legal representatives, with respect to employment-related 
matters or decisions, including employee benefit plan 
determinations, made or alleged to have been made by Seller or 
its directors, officers, employees, or agents. Such 

















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<PAGE> 137


cooperation shall include, but not be limited to, making Buyer's 
officers, employees and agents reasonably available (upon 
reasonable notice but at no cost (other than reasonable out of 
pocket expenses) to Seller) to Seller or Seller's 
representatives for interviews and the giving of testimony in 
legal proceedings, making available to Seller any documents in 
Buyer's care, custody or control which are, or may be, relevant 
to such claims, unless prohibited by law and designating an 
attorney employed by Buyer to manage the cooperation 
contemplated by this paragraph and seek to ensure compliance by 
Buyer's employees.

         9.7  Indemnification.  (a)  Seller hereby agrees to 
              _______________                                
indemnify Buyer and its Affiliates (including, after the 
Closing, the Companies and their Subsidiaries) against and 
agrees to hold them harmless from any and all Damages incurred 
or suffered as a result of any failure by Seller to satisfy and 
discharge its obligations under this Article 9.  Buyer hereby 
agrees to indemnify Seller and its Affiliates against and agrees 
to hold Seller and its Affiliates harmless from any and all 
Damages incurred or suffered as a result of any failure by Buyer 
to satisfy and discharge its obligations under this Article 9.

           (b)  Seller hereby agrees to indemnify Buyer and its 
Affiliates (including, after the Closing, the Companies and 
their Subsidiaries) against, and agrees to hold them harmless 
from any and all Damages incurred or suffered as a result of any 
claim by any present or former employee of Seller or any of its 
Subsidiaries who performed or performs services in Seller's 
property and casualty business units, including, without 
limitation, the Transferred Employees which arises under 
federal, state or local statute (including, without limitation, 
Title VII of the Civil Rights Act of 1964, the Civil Rights Act 
of 1991, the Age Discrimination in 


















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Employment Act of 1990, the Equal Pay Act, the Americans with 
Disabilities Act of 1990, the Employee Retirement Income 
Security Act of 1974 and all other statutes regulating the terms 
and conditions of employment), regulation or ordinance, under 
the common law or in equity (including any claims for wrongful 
discharge or otherwise), or under any policy, agreement, 
understanding or promise, written or oral, formal or informal, 
between the Company and the Transferred Employee, which arose 
out of actions, events or omissions that occurred (or, in the 
case of omissions, failed to occur) prior to the Closing Date.

           (c)  The indemnification provided for in this Section 
9.7 shall be subject to the provisions of Section 11.3(a).


                            ARTICLE 10

                       CONDITIONS TO CLOSING


         10.1  Conditions to Obligations of Buyer and Seller.  
               _____________________________________________   
The obligations of Buyer and Seller to consummate the Closing 
are subject to the satisfaction of the following conditions:

           (i)  Any applicable waiting period under the 
HSR Act relating to the transactions contemplated hereby 
shall have expired or been terminated.

           (ii)  All other regulatory consents, approvals 
or clearances necessary for the consummation of the 
Closing shall have been obtained, and no provision of any 
applicable law or regulation shall prohibit the 
consummation of the Closing.




















132

<PAGE> 139


           (iii)  All material consents, approvals or 
waivers of all non-governmental Persons necessary for the 
consummation of the Closing shall have been obtained.

           (iv)  There shall not be in effect any 
temporary restraining order, preliminary injunction or 
permanent injunction or other order issued by any court of 
competent jurisdiction preventing the consummation of the 
transactions contemplated hereby; provided that the party 
invoking this condition shall have used its reasonable 
best efforts to have such order or injunction vacated.

           (v)  The Ancillary Agreements, other than the 
agreement referenced in Section 10.2(ii), shall have been 
executed and delivered by the parties thereto.

         10.2  Conditions to Obligation of Buyer.  The 
               _________________________________       
obligation of Buyer to consummate the Closing is subject to the 
satisfaction of the following further conditions:

           (i)(A)  Seller shall have performed in all 
material respects all of its obligations hereunder 
required to be performed by it on or prior to the Closing 
Date, (B) the representations and warranties of Seller 
contained in this Agreement shall be true at and as of the 
Closing Date, as if made at and as of such date (without 
giving effect to any materiality qualifications or 
materiality exceptions contained therein); provided that 
this condition (B) shall be deemed satisfied if any 
inaccuracies in any such representations and warranties at 
and as of the Closing Date (without giving effect to any 
materiality qualifications or materiality exceptions 
contained therein) would


















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<PAGE> 140


not, individually or in the aggregate, have or reasonably be 
expected to have a Material Adverse Effect on the Companies, and 
(C) Buyer shall have received a certificate signed by the Chief 
Financial Officer of Seller to the effect that the foregoing 
conditions have been satisfied.

           (ii)  Seller shall have executed a reinsurance 
contract, in form and substance satisfactory to Buyer, 
relating to certain matters previously discussed by the 
parties.

           (iii)  Buyer shall have received all documents 
it may reasonably request relating to the existence of 
Seller, the Companies and their Subsidiaries and the 
authority of Seller for this Agreement, all in form and 
substance reasonably satisfactory to Buyer.

           (iv)  Except as disclosed in Schedule 3.9, 
since the Balance Sheet Date, there shall not have been 
any event, occurrence, development or state of 
circumstances or facts which has had or would reasonably 
be expected to have a Material Adverse Effect on the 
Companies, other than those resulting from changes in 
general economic conditions.

           (v)  No governmental or regulatory authority shall 
have commenced any proceeding seeking a temporary restraining 
order, preliminary or permanent injunction or other order 
preventing the consummation of the transactions contemplated 
hereby, other than any such proceeding which, in the reasonable 
judgment of Buyer, would not be reasonably likely, assuming such 
consummation occurs, to have a material adverse effect on the 
Companies and their Subsidiaries, taken as a whole; provided 
that Buyer shall 

















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<PAGE> 141


have used its reasonable best efforts to have such 
proceeding dismissed or terminated.

         10.3  Conditions to Obligation of Seller.  The 
               __________________________________       
obligation of Seller to consummate the Closing is subject
to the satisfaction of the following further conditions:

           (i)(A)  Buyer shall have performed in all 
material respects all of its obligations hereunder 
required to be performed by it at or prior to the Closing 
Date, (B) the representations and warranties of Buyer 
contained in this Agreement shall be true at and as of the 
Closing Date, as if made at and

as of such date (without giving effect to any materiality 
qualifications or materiality exceptions contained 
therein); provided that this condition (B) shall be deemed 
satisfied if any inaccuracies in any such representations 
and warranties at and as of the Closing Date (without 
giving effect to any materiality qualifications or 
materiality exceptions contained therein) would not, 
individually or in the aggregate, have or reasonably be 
expected to have a Material Adverse Effect on Buyer, and 
(C) Seller shall have received a certificate signed by the 
Chief Financial Officer of Buyer to the effect that the 
foregoing conditions have been satisfied.

           (ii) Seller shall have received all documents 
it may reasonably request relating to the existence of 
Buyer and the authority of Buyer for this Agreement, all 
in form and substance reasonably satisfactory to Seller.




















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                              ARTICLE 11

                       SURVIVAL; INDEMNIFICATION

         11.1  The covenants, agreements, representations and 
warranties of the parties hereto contained in this Agreement 
shall not survive the Closing; provided that (i) the covenants 
                               ________                        
and agreements which, by their terms, are to have effect or be 
performed after the Closing shall survive in accordance with 
their terms; (ii) the representations and warranties contained 
in Sections 3.2, 3.4(v), 3.5, 3.6, 3.7, 3.10(c), 4.2 and 4.6 
shall survive for two years after the Closing, (iii) the 
covenants, agreements, representations and warranties contained 
in Article 8 shall survive to the extent provided in Article 8 
and (iv) the covenants and agreements contained in Article 9 
shall survive indefinitely.  No covenant, agreement, 
representation or warranty contained in this Agreement shall 
survive after the time at which it would otherwise terminate 
pursuant to the preceding sentence unless notice of the 
inaccuracy or breach thereof shall have been given to the party 
against whom indemnity for such breach or inaccuracy may be 
sought prior to such time, in which case such covenant, 
agreement, representation or warranty shall survive until such 
claim for indemnity is finally resolved.

         11.2  Indemnification.  (a)  Effective at the Closing, 
               _______________                                  
Seller hereby indemnifies Buyer and, effective at the Closing, 
without duplication, the Companies and their Subsidiaries 
against and agrees to hold them harmless from any and all 
damage, loss, liability and expense (including, without 
limitation, reasonable expenses of investigation and reasonable 
attorneys' fees and expenses in connection with any action, suit 
or proceeding) ("Damages") incurred or suffered by Buyer, any 
Company or any Subsidiary of any Company arising out of the 
breach of any representation or 
















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warranty which survives the Closing for such period as provided 
in Section 11.1 or the breach of any covenant or agreement made 
or to be performed by Seller pursuant to this Agreement which 
covenant or agreement survives the Closing for such period as 
provided in Section 11.1 (other than pursuant to Articles 8 and 
9).

           (b)  Effective at the Closing, Buyer hereby 
indemnifies Seller against and agrees to hold it harmless from 
any and all Damages incurred or suffered by Seller arising out 
of the breach of any representation or warranty which survives 
the Closing for such period as provided in Section 11.1 or the 
breach of any covenant or agreement made or to be performed by 
Buyer pursuant to this Agreement which covenant or agreement 
survives the Closing for such period as provided in Section 11.1 
(other than pursuant to Articles 8 and 9).

           (c)  Any amount of Damages paid by Seller or Buyer 
under this Section 11.2 will be treated as an adjustment to the 
Purchase Price unless and to the extent that a Final 
Determination causes any such amount not to constitute an 
adjustment to the Purchase Price for Federal Tax purposes.

         11.3  Procedures; Exclusivity.  (a) The party seeking 
               _______________________                         
indemnification under Section 11.2 (the "Indemnified Party") 
agrees to give prompt notice to the party against whom indemnity 
is sought (the "Indemnifying Party") of the assertion of any 
claim, or the commencement of any suit, action or proceeding in 
respect of which indemnity may be sought under such Section, 
provided, however, that the failure to give any such notice 
________  _______                                           
shall not prejudice the right of such party to receive 
indemnification hereunder unless the Indemnifying Party is 
actually prejudiced by such failure. The Indemnifying Party may, 
and at the request of the Indemnified Party shall, participate 
in or control the defense of any such suit, action or 
















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proceeding at its own expense.  If the Indemnifying Party 
assumes such defense, the Indemnified Party shall have the right 
(but not the duty) to participate in the defense thereof and to 
employ counsel, at its own expense, separate from counsel 
employed by the Indemnifying Party.  Whether or not Indemnifying 
Party chooses to defend or prosecute any claim, all of the 
parties hereto shall cooperate in the defense or prosecution 
thereof.  The Indemnifying Party shall not be liable under 
Section 11.2 for any settlement effected without its consent of 
any claim, litigation or proceeding in respect of which 
indemnity may be sought hereunder, which consent shall not be 
unreasonably withheld or delayed.

           (b)  After the Closing, Article 8, and Sections 9.7 
and 11.2 will provide the exclusive remedy for any 
misrepresentation, breach of warranty, covenant or other 
agreement (other than those contained in Sections 2.3, 2.4, 2.5, 
5.5, 5.7, 5.8, 5.9(d), 6.2, 6.3, 7.4, 7.5, 7.6, 7.9, 7.12 and 
9.6) or other claim arising out of this Agreement or the 
transactions contemplated hereby.


                            ARTICLE 12
                           TERMINATION


         12.1  Grounds for Termination.  This Agreement may be 
               _______________________                         
terminated at any time prior to the Closing:

           (i)  by mutual written agreement of Seller and Buyer; 
or

           (ii)  by either Seller or Buyer if the Closing shall 
not have been consummated on or before September 30, 1996.

         The party desiring to terminate this Agreement shall 
give notice of such termination to the other party.














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         12.2  Effect of Termination.  If this Agreement is 
               _____________________                        
terminated as permitted by Section 12.1, termination shall be 
without liability of either party (or any stockholder, director, 
officer, employee, agent, consultant or representative of such 
party) to the other party to this Agreement, except as provided 
in Section 13.3 and except that no such termination shall 
relieve Buyer of its obligations under Section 6.1; and provided 
                                                        ________ 
that if such termination shall result from the willful failure 
of either party to fulfill a condition to the performance of the 
obligations of the other party or to perform a covenant of this 
Agreement or from a willful breach by either party to this 
Agreement, such party shall be fully liable for any and all 
Damages incurred or suffered by the other party as a result of 
such failure or breach.  The provisions of Section 7.6, this 
Section 12.2, Section 13.3 and Section 13.5 shall survive any 
termination hereof pursuant to Section 12.1.


                          ARTICLE 13

                         MISCELLANEOUS

13.1  Notices.  All notices, requests and other 
      _______  
communications to any party hereunder shall be in writing 
(including facsimile transmission) and shall be given:

    if to Buyer, to:

            The Travelers Insurance Group Inc.
            One Tower Square
            Hartford, Connecticut  06183
            Attention:  Chief Financial Officer
            Fax:  (203) 954-1161


















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            with copies to:

            Travelers Group Inc.
            388 Greenwich Street
            New York, NY  10013
            Attention:  General Counsel
            Fax:  (212) 816-8969

            Skadden, Arps, Slate, Meagher & Flom
            919 Third Avenue
            New York, New York 10022
            Attention:  Kenneth J. Bialkin, Esq.
            Fax: (212) 735-2000

if to Seller, to:

            Aetna Life and Casualty Company
            151 Farmington Avenue
            Hartford, Connecticut 06156
            Attention:  Chief Financial Officer
            Fax:  (203) 273-2428

            with a copy to:

            Davis Polk & Wardwell
            450 Lexington Avenue
            New York, New York  10017
            Attention:  Richard J. Sandler, Esq.
            Fax:  (212) 450-4800

or at such other address to the attention of such other person 
as Buyer or Seller may designate by written notice to the other 
party hereto.  All such notices, requests and other 
communications shall be deemed received on the date of receipt 
by the recipient thereof if received prior to 5 p.m. in the 
place of receipt and such day is a business day in the place of 
receipt.  Otherwise, any such notice, request or communication 
shall be deemed not to have been received until the next 
succeeding business day in the place of receipt.

         13.2  Amendments and Waivers.  (a) Any provision of 
               ______________________                        
this Agreement may be amended or waived if, but only if, such 
amendment or waiver is in writing








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and is signed, in the case of an amendment, by each party to 
this Agreement, or in the case of a waiver, by the party against 
whom the waiver is to be effective.

           (b)  No failure or delay by any party in exercising 
any right, power or privilege hereunder shall operate as a 
waiver thereof nor shall any single or partial exercise thereof 
preclude any other or further exercise thereof or the exercise 
of any other right, power or privilege.  Other than as provided 
herein, the rights and remedies herein provided shall be 
cumulative and not exclusive of any rights or remedies provided 
by law.

         13.3  Expenses.  Except as otherwise expressly provided 
               ________                                         
 
herein, all costs and expenses incurred in connection with this 
Agreement, including all brokers', finders', investment advisory 
or similar fees, shall be paid by the party incurring or 
responsible for incurring such cost or expense.

         13.4  Successors and Assigns.  The provisions of this 
               ______________________                          
Agreement shall be binding upon and inure to the benefit of the 
parties hereto and their respective successors and assigns; 
provided that no party may assign, delegate or otherwise 
________                                                 
transfer any of its rights or obligations under this Agreement 
without the consent of each other party hereto.  Notwithstanding 
the foregoing, Buyer may assign any of its rights and 
obligations under this Agreement to a wholly owned Subsidiary 
without Seller's consent; provided that no such assignment shall 
relieve Buyer of any of its obligations under this Agreement.

         13.5  Governing Law.  This Agreement shall be governed 
               _____________                                    
by and construed in accordance with the law of the State of New 
York, without regard to the conflict of laws rules of such 
state.

















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         13.6  Jurisdiction.  Except as otherwise expressly 
               ____________                                 
provided in this Agreement, any suit, action or proceeding 
seeking to enforce any provision of, or based on any matter 
arising out of or in connection with, this Agreement or the 
transactions contemplated hereby shall be brought only in the 
United States District Court for the Southern District of New 
York or any New York State court sitting in New York City, and 
each of the parties hereby consents to the jurisdiction of such 
courts (and of the appropriate appellate courts therefrom) in 
any such suit, action or proceeding and irrevocably waives, to 
the fullest extent permitted by law, any objection which it may 
now or hereafter have to the laying of the venue of any such 
suit, action or proceeding in any such court or that any such 
suit, action or proceeding which is brought in any such court 
has been brought in an inconvenient forum.  Process in any such 
suit, action or proceeding may be served on any party anywhere 
in the world, whether within or without the jurisdiction of any 
such court.  Without limiting the foregoing, each party agrees 
that service of process on such party as provided in this 
Section 13.6 shall be deemed effective service of process on 
such party.

         13.7  Counterparts; No Third Party Beneficiaries.  This 
               __________________________________________       
 
Agreement may be signed in any number of counterparts, each of 
which shall be an original, with the same effect as if the 
signatures thereto and hereto were upon the same instrument.  No 
provision of this Agreement is intended to confer upon any 
Person other than the parties hereto any rights or remedies 
hereunder.

           13.8  Entire Agreement.  Except for the 
                 ________________                  
Confidentiality Agreement and the Ancillary Agreements, this 
Agreement constitutes the entire agreement between the parties 
with respect to the subject matter of this Agreement and 
supersedes all
















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prior agreements and understandings, both oral and written, 
between the parties with respect to the subject matter of this 
Agreement.  No representation, inducement, promise, 
understanding, condition or warranty not set forth herein has 
been made or relied upon by either party hereto.

         13.9  Construction.  This Agreement is the result of 
               ____________                                   
arms-length negotiations between the parties hereto and has been 
prepared jointly by the parties.  In applying and interpreting 
the provisions of this Agreement, there shall be no presumption 
that the Agreement was prepared by any one party or that the 
Agreement shall be construed in favor of or against any one 
party.






































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         IN WITNESS WHEREOF, the parties hereto have caused this 
Agreement to be duly executed by their respective authorized 
officers as of the day and year first above written.


                             THE TRAVELERS INSURANCE GROUP INC.



                             By:  /s/ Jay S. Fishman              
                                _______________________________   
                             Name:    Jay S. Fishman
                             Title:   Vice Chairman and Chief 
                                          Financial Officer


                             AETNA LIFE AND CASUALTY COMPANY



                             By:  /s/  Ronald E. Compton
                                ________________________
                             Name:     Ronald E. Compton
                             Title:    Chairman and President























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