<PAGE>

                                                                       EXHIBIT 2



                                                                  EXECUTION COPY




                          AGREEMENT AND PLAN OF MERGER

                                      DATED

                                NOVEMBER 13, 2000

                                      AMONG

                      ENHANCE FINANCIAL SERVICES GROUP INC.

                          GOLD ACQUISITION CORPORATION

                                       AND

                                RADIAN GROUP INC.



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                                TABLE OF CONTENTS

                                                                            PAGE


ARTICLE I      MERGER OF ACQUISITION AND THE COMPANY.........................2

      1.1   The Merger.......................................................2
      1.2   Certificate of Incorporation.....................................3
      1.3   By-Laws..........................................................3
      1.4   Directors........................................................3
      1.5   Officers.........................................................3
      1.6   Stock of the Company.............................................4
      1.7   Stock of Sub.....................................................5
      1.8   Distributions with Regard to Company Stock.......................5
      1.9   Options and Warrants.............................................8
      1.10  Adjustment of Exchange Ratio.....................................9

ARTICLE II     EFFECTIVE TIME OF MERGER......................................9

      2.1   Date of the Merger...............................................9
      2.2   Execution of Certificate of Merger..............................10
      2.3   Effective Time of the Merger....................................10

ARTICLE III    REPRESENTATIONS AND WARRANTIES...............................10

      3.1   Representations and Warranties of the Company...................10
      3.2   Representations and Warranties of Parent and Sub................38
      3.3   Termination of Representations and Warranties...................45

ARTICLE IV     ACTIONS PRIOR TO THE MERGeR..................................45

      4.1   Company's Activities Until Effective Time.......................45
      4.2   Parent's Activities Until Effective Time........................51
      4.3   HSR Act Filings.................................................52
      4.4   Licenses and Permits............................................52
      4.5   Registration Statement, Proxy Statements and
            Shareholders Meetings...........................................53
      4.6   No Solicitation of Offers; Notice of Proposals from
            Others..........................................................56
      4.7   Appropriate Action; Consents....................................58
      4.8   Cooperation.....................................................59
      4.9   Company Affiliates; Reorganization..............................60
      4.10  Takeover Statutes...............................................60
      4.11  Certain Contracts...............................................61
      4.12  C-BASS..........................................................62
      4.13  Benefits........................................................63
      4.14  Support Agreements..............................................63

ARTICLE V      conditions precedent to merger...............................63

      5.1   Conditions to the Company's Obligations.........................63
      5.2   Conditions to Parent's and Sub's Obligations....................65

ARTICLE VI     TERMINATION..................................................68
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      6.1   Right to Terminate..............................................68
      6.2   Manner of Terminating Agreement.................................73
      6.3   Effect of Termination...........................................73

ARTICLE VII    ABSENCE of brokers...........................................74

      7.1   Representations and Warranties Regarding Brokers and
            Others..........................................................74

ARTICLE VIII   OTHER AGREEMENTS.............................................75

      8.1   Payment to Parent...............................................75
      8.2   Indemnification for Prior Acts..................................77
      8.3   Beneficiaries...................................................77

ARTICLE IX     general......................................................78

      9.1   Expenses........................................................78
      9.2   Access to Properties, Books and Records.........................78
      9.3   Press Releases..................................................78
      9.4   Entire Agreement................................................79
      9.5   Effect of Disclosures...........................................79
      9.6   Captions; Definitions...........................................79
      9.7   Prohibition Against Assignment; Benefit.........................80
      9.8   Notices and Other Communications................................80
      9.9   Governing Law...................................................81
      9.10  Amendments......................................................81
      9.11  Counterparts....................................................81


EXHIBITS

Exhibit 4.9-A           Affiliate Letter
Exhibit 4.14-A          Shareholders Support Agreement

                                      -ii-
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                          AGREEMENT AND PLAN OF MERGER

      This is an Agreement and Plan of Merger (this "Agreement") dated November
13, 2000, among ENHANCE FINANCIAL SERVICES GROUP INC. (the "Company"), a New
York corporation, RADIAN GROUP INC. ("Parent"), a Delaware corporation, and GOLD
Acquisition Corporation ("Sub"), a New York corporation and wholly owned
subsidiary of Parent.

                                    RECITALS

      WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have approved the merger of Sub with and into the Company (the "Merger"), upon
the terms and subject to the conditions set forth in this Agreement and in
accordance with the New York Business Corporation Law (the "NYBCL"), whereby the
issued and outstanding shares of Company Common Stock (as defined herein), other
than shares to be canceled in accordance with Section 1.6(b), will be converted
into the right to receive the Merger Consideration (as defined herein);

      WHEREAS, as an inducement to Parent to enter into this Agreement, certain
significant shareholders of the Company are entering into an agreement with
Parent (the "Shareholders Support Agreement") pursuant to which each significant
shareholder has, among other things, agreed to vote such significant
shareholder's shares of Company Common Stock in favor of the Merger;

      WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger, and also to prescribe various conditions to the Merger; and

      WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
<PAGE>

      NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereby agree as follows:

                                   ARTICLE I

                      MERGER OF ACQUISITION AND THE COMPANY

      1.1 THE MERGER. (a) Subject to the terms and conditions set forth in this
Agreement, at the Effective Time (as defined herein) pursuant to the Merger, Sub
will be merged into the Company, which will be the surviving corporation of the
Merger (the "Surviving Corporation"). Except as specifically provided in this
Agreement, at the Effective Time, (i) the real and personal property, other
assets, rights, privileges, immunities, powers, purposes and franchises of the
Company will continue unaffected and unimpaired by the Merger, (ii) the separate
existence of Sub will terminate, and Sub's real and personal property, other
assets, rights, privileges, immunities, powers, purposes and franchises will be
merged into the Surviving Corporation, and (iii) the Merger will have the other
effects specified in Section 906 of the NYBCL.

      (b) Notwithstanding Section 1.1(a), Parent may elect to modify the
structure of the transactions contemplated by this Agreement, including, without
limitation, to provide for the merger of the Company directly with and into
Parent, so long as (i) there are no adverse tax or other consequences to the
holders of Company Common Stock as a result of such modification, (ii) the
consideration to be paid to the holders of Company Common Stock under this
Agreement is not thereby changed or reduced in form or amount, and (iii) such
modification will not materially delay or jeopardize receipt of any required
regulatory approvals or otherwise delay or jeopardize the closing of the
transactions contemplated hereby. In the event that Parent determines to do the
foregoing, the parties hereto agree to modify this Agreement and any

                                      -2-
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exhibits, annexes or schedules hereto to reflect such revised terms. In any such
event, Parent shall prepare appropriate amendments to this Agreement and any
such exhibits, annexes or schedules for execution by the parties hereto. The
Company agrees to cooperate fully with Parent to effect such amendments.

      1.2 CERTIFICATE OF INCORPORATION. From the Effective Time until
subsequently amended, the Certificate of Incorporation of Sub immediately before
the Effective Time will be the Certificate of Incorporation of the Surviving
Corporation, except that it will provide that the name of the Surviving
Corporation will be "Enhance Financial Services Group Inc.," and that
Certificate of Incorporation, separate and apart from this Agreement, may be
certified as the Certificate of Incorporation of the Surviving Corporation.

      1.3 BY-LAWS. From the Effective Time until subsequently amended, the
By-Laws of Sub immediately before the Effective Time will be the By-Laws of the
Surviving Corporation.

      1.4 DIRECTORS. The directors of Sub immediately prior to the Effective
Time will be the directors of the Surviving Corporation after the Effective Time
and will hold office in accordance with the By-Laws of the Surviving
Corporation.

      1.5 OFFICERS. The officers of the Company immediately before the Effective
Time will be the officers of the Surviving Corporation after the Effective Time
and will hold office until successors are duly elected or appointed and
qualified in accordance with applicable law.

      1.6 STOCK OF THE COMPANY. (a) Except as provided in Sections 1.6(b) and
(c), at the Effective Time, each share of common stock of the Company, par value
$.10 per share, ("Company Common Stock"), that is outstanding immediately before
the Effective Time will be converted into and become the right to receive 0.22
(as adjusted pursuant to the immediately succeeding sentence) (the "Exchange
Ratio") of a share of common stock, par value $.001 per

                                      -3-
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share, of Parent (such shares, together with the associated rights (the "Parent
Shareholder Rights") pursuant to the Amended and Restated Shareholder Rights
Agreement, dated as of January 19, 1999, by and between CMAC Investment
Corporation (predecessor to Parent) and the Bank of New York, as Rights Agent
thereunder, the "Parent Common Stock"), together with any associated Parent
Shareholder Rights. If the Singer September 30 Net Worth (as defined herein)
shall be less than $36 million, then the Exchange Ratio shall be reduced to
equal 0.22 minus the quotient (rounded to the nearest four decimal places)
obtained by dividing (1) the quotient obtained by dividing (a) the difference
between $36 million and the Singer September 30 Net Worth by (b) 38,500,000, by
(2) the Starting Price (as defined herein).

      (b) Each share of Company Common Stock held in the treasury of the
Company, or by any direct or indirect wholly owned subsidiary of the Company,
immediately before the Effective Time will, at the Effective Time, be cancelled
and cease to exist, and no consideration will be paid with respect to any of
those shares of Company Common Stock.

      (c) No fractional shares of Parent Common Stock will be issued as a result
of the Merger. Any holder of Company Common Stock that, but for this Section
1.6, would be entitled to receive a fraction of a share of Parent Common Stock
as a result of the Merger will, at the Effective Time, have the right to
receive, instead of that fraction of a share and without interest, cash equal to
the Market Value of a share of Parent Common Stock on the Merger Date (as
defined herein) times the fraction. As used herein, the "Market Value" of a
share of Parent Common Stock on a day means the average of the Last Sale Price
of a share of Parent Common Stock on each of the twenty New York Stock Exchange
trading days ending on, and including, that day. As used herein, the "Last Sale
Price" of a share of Parent Common Stock on a day

                                      -4-
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given will be the last sale price of a share of Parent Common Stock reported on
the New York Stock Exchange consolidated tape prior to 4:00 p.m. New York City
time on that day.

      (d) The Parent Common Stock into which a share of Company Common Stock is
converted in the Merger as provided in Section 1.6(a), together with the right
to receive cash instead of fractional shares, is referred to in this Agreement
as the "Merger Consideration."

      1.7 STOCK OF SUB. At the Effective Time, each share of stock of Sub ("Sub
stock") which is outstanding immediately before the Effective Time will be
converted into and become one share of the same class of stock of the Surviving
Corporation. At the Effective Time, a certificate which represented Sub stock
will automatically become and be a certificate representing the number of shares
of the class of Surviving Corporation stock into which the Sub stock represented
by the certificate was converted.

      1.8 DISTRIBUTIONS WITH REGARD TO COMPANY STOCK. (a) Prior to the Effective
Time, Parent or Sub will designate a bank or trust company to act as
distributing agent in connection with the Merger (the "Distributing Agent"). At,
or immediately before, the Effective Time, Parent will provide the Distributing
Agent with the shares of Parent Common Stock and any funds which will have to be
distributed to holders of Company Common Stock under Section 1.6(c) as a result
of the Merger.

      (b) After the Effective Time and until they are distributed to former
Company shareholders pursuant to this Agreement, the shares of Parent Common
Stock held by the Distributing Agent will be deemed to be outstanding, but the
Distributing Agent will not vote those shares or exercise any rights of a
shareholder of Parent with regard to those shares of Parent Common Stock. If any
dividends are paid with regard to shares of Parent Common Stock while they are
held by the Distributing Agent, the Distributing Agent will hold the dividends,

                                      -5-
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uninvested, until such shares of Parent Common Stock are distributed to former
holders of Company Common Stock pursuant to this Agreement, at which time the
dividends which have been paid with regard to the shares of Parent Common Stock
which are being distributed will be paid, without interest, to the persons to
whom the shares of Parent Common Stock are being distributed.

      (c) While the Distributing Agent is holding cash provided by Parent under
Section 1.8(a), the Distributing Agent will invest the funds, as directed by
Parent, in obligations of or guaranteed by the United States of America or
obligations of an agency of the United States of America which are backed by the
full faith and credit of the United States of America, in commercial paper
obligations rated P-1 or A-1 or better by Moody's Investors Services Inc. or
Standard & Poors' Rating Services, a division of The McGraw-Hill Companies
("S&P"), or in deposit accounts, certificates of deposit or banker's acceptances
of, commercial banks with capital, surplus and undivided profits aggregating
more than $200 million (based on the most recent financial statements of the
banks which are then publicly available at the Securities and Exchange
Commission (the "SEC") or otherwise).

      (d) Promptly after the Effective Time, the Surviving Corporation will
cause the Distributing Agent to mail to each person who was a record holder of
Company Common Stock at the Effective Time a form of letter of transmittal for
use in effecting the surrender of stock certificates representing Company Common
Stock ("Certificates") in order to receive the Merger Consideration. When the
Distributing Agent receives a Certificate, together with a properly completed
and executed letter of transmittal and any other required documents, the
Distributing Agent will distribute to the holder of the Certificate, or as
otherwise directed in the letter of transmittal, the Merger Consideration with
regard to the shares represented by the

                                      -6-
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Certificate, and the Certificate will be cancelled. No interest will be paid or
accrued on any cash payable upon the surrender of a Certificate. If the Merger
Consideration is to be issued to a person other than the person in whose name a
surrendered Certificate is registered, the surrendered Certificate must be
properly endorsed or otherwise be in proper form for transfer, and the person
who surrenders the Certificate must provide funds for payment of any transfer or
other Taxes (as defined herein) required by reason of the distribution to a
person other than the registered holder of the surrendered Certificate or
establish to the satisfaction of Parent that the Tax has been paid. After the
Effective Time, a Certificate which has not been surrendered will represent only
the right to receive the Merger Consideration (including any dividends
theretofore paid after the Effective Time with regard to shares of Parent Common
Stock included in the Merger Consideration), without any interest.

      (e) If a Certificate has been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the person claiming such Certificate to be lost,
stolen or destroyed and, if required by Parent, the posting by such Person of a
bond in such amount as Parent may direct as indemnity against any claim that may
be made against it with respect to such Certificate, Parent shall issue in
exchange for such lost, stolen or destroyed Certificate the Merger Consideration
deliverable pursuant to this Agreement in respect of the shares represented by
the Certificate.

      (f) At any time which is more than six months after the Effective Time,
Parent may require the Distributing Agent to deliver to it any Parent Common
Stock and any funds which had been made available to the Distributing Agent and
have not been disbursed to former holders of Company Common Stock (including,
without limitation, interest and other income received by the Distributing Agent
in respect of the funds made available to it), and after the Parent Common Stock
and funds have been delivered to Parent, former shareholders of the

                                      -7-
<PAGE>

Company must look to Parent for the Merger Consideration. None of Parent, the
Surviving Corporation or the Distributing Agent will be liable to any former
shareholder of the Company for any Merger Consideration which is delivered to a
public official pursuant to any abandoned property, escheat or similar law.

      (g) After the Effective Time, the Surviving Corporation will not record
any transfers of shares of Company Common Stock on the stock transfer books of
the Company or the Surviving Corporation, and the stock ledger of the Company
will be closed. If, after the Effective Time, Certificates are presented for
transfer, they will be cancelled and treated as having been surrendered for the
Merger Consideration.

      1.9 OPTIONS AND WARRANTS. At the Effective Time, all Company Stock Options
(as defined herein) which are then outstanding and unexercised shall cease to
represent a right to acquire shares of Company Common Stock and shall be
converted into options to purchase shares of Parent Common Stock on the same
terms and conditions under the applicable Company Stock Plan (as defined herein)
and the stock option agreement by which such Company Stock Option is evidenced.
From and after the Effective Time, (a) the number of shares of Parent Common
Stock purchasable upon exercise of such Company Stock Option shall equal the
product (rounded to the nearest share) of (1) the number of shares of Company
Common Stock that were subject to such Company Stock Option immediately prior to
the Effective Time and (2) the Exchange Ratio, and (b) the per share exercise
price under each such Company Stock Option shall be equal to the result (rounded
to the nearest cent) of dividing the per share exercise price of each such
Company Stock Option by the Exchange Ratio. Notwithstanding the foregoing, each
Company Stock Option that is intended to be an "incentive stock option" (as
defined in Section 422 of the Code) shall be adjusted in accordance with the
requirements of Section 424 of

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<PAGE>

the Code. As used herein, "Company Stock Options" shall mean each option to
purchase shares of Company Common Stock under the stock-based compensation and
incentive plans of the Company set forth in Exhibit 1.9 (the "Company Stock
Plans").

      1.10 ADJUSTMENT OF EXCHANGE RATIO. If, after the date of this Agreement,
but prior to the Effective Time, the shares of Parent Common Stock issued and
outstanding shall, through a reorganization, recapitalization, reclassification,
stock dividend, stock split, reverse stock split or other similar change
(regardless of the method of effectuation of any of the foregoing, including by
way of a merger or otherwise) in the capitalization of Parent, increase or
decrease in number or be changed into or exchanged for a different kind or
number of securities, then an appropriate and proportionate adjustment shall be
made to the Exchange Ratio.

                                   ARTICLE II

                            EFFECTIVE TIME OF MERGER

      2.1 DATE OF THE MERGER. The day on which the Merger is to take place (the
"Merger Date") will be the third business day after the first day on which all
the conditions in Article V (other than conditions which are to be fulfilled on
the Merger Date) have been fulfilled or waived. The Merger Date may be changed
with the consent of the Company and Parent.

      2.2 EXECUTION OF CERTIFICATE OF MERGER. Not later than 3:00 P.M. New York
City time on the day before the Merger Date, (a) Sub and the Company will each
execute a certificate of the merger (the "Certificate of Merger") which complies
with the requirements of Section 904 of the NYBCL, and deliver it to Wachtell,
Lipton, Rosen & Katz for filing with the Department of State of the State of New
York on behalf of the parties. Wachtell, Lipton, Rosen & Katz will be instructed
that, if it is notified on the Merger Date that all the conditions in Article V
have been fulfilled or waived, it is to cause the Certificate of Merger to be
filed on behalf of the parties with

                                      -9-
<PAGE>

the Department of State of the State of New York on the Merger Date or as soon
after that date as is practicable.

      2.3 EFFECTIVE TIME OF THE MERGER. The Merger will become effective at
11:59 P.M. Albany, New York time on the day when the Certificate of Merger is
filed with the Department of State of the State of New York (that being the
"Effective Time").

                                   ARTICLE III

                         REPRESENTATIONS AND WARRANTIES

      3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to Parent and Sub as follows:

      (a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of New York and has all corporate
powers and all Permits (as defined herein) of Governmental Entities (as defined
herein) required to carry on its business as now conducted. The Company is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where such qualification is necessary, other than
jurisdictions in which the failure to qualify, individually or in aggregate,
would not be reasonably expected to have a Material Adverse Effect (as defined
herein) on the Company. The Company has heretofore delivered to Parent true and
complete copies of the Certificate of Incorporation and By-laws of the Company
as currently in effect.

      (b) The Company has all corporate power and authority necessary to enable
it to enter into this Agreement and carry out the transactions contemplated by
this Agreement. All corporate actions necessary to authorize the Company to
enter into this Agreement and carry out the transactions contemplated by it,
other than approval of the Merger and adoption of this Agreement by the
shareholders of the Company, have been taken. This Agreement has been

                                      -10-
<PAGE>

duly executed by the Company and is a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms. The
Company's Board of Directors has determined that the Merger is fair to the
Company's shareholders and has voted to recommend to the Company's shareholders
that they vote in favor of adopting this Agreement and approving the Merger.

      (c) Except as disclosed by the Company on Exhibit 3.1-C, neither the
execution, delivery and performance of this Agreement or of any document to be
delivered in accordance with this Agreement nor the consummation of the
transactions contemplated by this Agreement or by any document to be delivered
in accordance with this Agreement by the Company will (i) contravene, violate,
or result in a breach of, or (ii) require any consent or other action by any
person, give rise to any right of termination, cancellation or acceleration of
any right or obligation of the Company or any of its subsidiaries (as defined in
Section 3.1(e)) or to a loss of any benefit to which the Company or any of its
subsidiaries is entitled or constitute a default (or an event which, with notice
or lapse of time or both, would constitute a default) under, the Certificate of
Incorporation or By-Laws of the Company, any material agreement or material
instrument to which the Company or any subsidiary of the Company is a party or
by which any of them is bound or any Permit or other similar authorization
affecting, or relating in any way to, the assets or business of the Company or
any of its subsidiaries, any law, or any order, rule or regulation of any court,
arbitrator or other judicial body, governmental agency or instrumentality or
other regulatory organization (each, a "Governmental Entity") having
jurisdiction over the Company or any of its subsidiaries or result in the
creation or imposition of any Lien on any asset of the Company or any of its
subsidiaries. As used herein, "Lien" means,

                                      -11-
<PAGE>

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.

      (d) Except as disclosed by the Company on Exhibit 3.1-D, no Permits of
Governmental Entities, or other governmental action, other than the expiration
or termination of waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), if any, are required to
permit the Company to fulfill all its obligations under this Agreement or to
consummate the transactions contemplated hereby.

      (e) Each of the corporations and other entities of which the Company owns,
directly or indirectly, 50% or more of the capital stock, partnership or
membership interests or other equity, or possesses the power, directly or
indirectly, to elect a majority of the members of the board of directors or
other governing body of such corporation or other entity (each such corporation
or other entity with respect to a party hereto being a "subsidiary" of that
party hereto (PROVIDED, that for all purposes of this Agreement unless expressly
provided otherwise herein, each of Credit-Based Asset Servicing and
Securitization LLC ("C-BASS") and Sherman Financial Group LLC ("Sherman") shall
be deemed to be subsidiaries of the Company)) has been duly authorized, and is
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization, and is qualified to do business as a foreign
corporation in each jurisdiction in which it is required to be qualified, except
jurisdictions in which the failure to qualify, individually or in the aggregate,
would not be reasonably expected to have a Material Adverse Effect on the
Company. As used herein, "Material Adverse Effect" with respect to a party
hereto means a material adverse effect (i) on the business, properties, assets,
liabilities (including contingent liabilities), condition (financial or
otherwise), results of operations or prospects of such party and its
subsidiaries, taken as a whole, or (ii) on the ability of such party

                                      -12-
<PAGE>

timely to perform its obligations under, or to consummate the transactions
contemplated by, this Agreement; PROVIDED, HOWEVER, that changes or events set
forth on Exhibit 3.1-E shall not constitute a Material Adverse Effect on the
Company.

      (f) The only authorized stock of the Company is 100,000,000 shares of
Company Common Stock and 5,000,000 shares of preferred stock. As of the close of
business on November 10, 2000, the only outstanding stock of the Company was
38,223,467 shares of Company Common Stock. All the outstanding shares of Company
Common Stock have been duly authorized and issued and are fully paid and
non-assessable. Except as shown on Exhibit 3.1-F, the Company has not issued any
options, warrants or convertible or exchangeable securities, and is not a party
to any other agreements, which require, or upon the passage of time, the payment
of money or the occurrence of any other event may require, the Company to issue
or sell any of its stock. Except as set forth in this Section 3.1(f) and except
for changes since the close of business on November 10, 2000, resulting from the
exercise of Company Stock Options outstanding on such date, there are no
outstanding (i) shares of capital stock or voting securities of the Company,
(ii) securities of the Company or any of its subsidiaries convertible into or
exchangeable for shares of capital stock or voting securities of the Company or
(iii) options or other rights to acquire from the Company or any of its
subsidiaries or other obligations of the Company to issue, any capital stock,
voting securities or securities convertible into or exchangeable for capital
stock or voting securities of the Company. Except as disclosed on Exhibit 3.1-F,
there are no outstanding obligations of the Company or any of its subsidiaries
to repurchase, redeem or otherwise acquire or register for sale or offering any
securities referred to in clause (i), (ii) or (iii) above.

                                      -13-
<PAGE>

      (g) Except as shown on Exhibit 3.1-G, (i) all the shares of stock or other
equity interests owned by the Company or a subsidiary of the Company of each of
the Company's subsidiaries are (to the extent such concept is applicable) duly
authorized, validly issued, fully paid, and non-assessable, are owned by the
Company or a subsidiary of the Company free and clear of any Liens and are not
subject to any preemptive rights, and (ii) neither the Company nor any of its
subsidiaries has issued any options, warrants or convertible or exchangeable
securities, or is a party to any other agreements, which require, or upon the
passage of time, the payment of money or the occurrence of any other event may
require, the Company or any subsidiary to issue or sell any stock or other
equity interests in any of the Company's subsidiaries, and there are no
registration covenants or transfer or voting restrictions with respect to
outstanding securities of any of the Company's subsidiaries. Exhibit 3.1-G sets
forth a complete and correct list of all subsidiaries of the Company. Except as
disclosed by the Company in Exhibit 3.1-G, neither the Company nor any of its
subsidiaries holds any interest in a partnership or joint venture of any kind.

      (h) Since January 1, 1997, the Company has filed with the SEC all forms,
statements, reports and documents it has been required to file under the
Securities Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934 as amended (the "Exchange Act") or the rules and
regulations promulgated thereunder (collectively, the "Company Reports"). The
Company Reports, including the documents incorporated by reference in each of
them, each contained all the information required to be included in it and, when
it was filed and as of the date of such Company Report, did not contain an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements made in it, in light of the circumstances under
which they were made, not misleading and complied as

                                      -14-
<PAGE>

to form in all material respects with the applicable requirements of the
Securities Act and the Exchange Act.

      (i) (1) The Company's Annual Report on Form 10-K for the year ended
December 31, 1999 (as amended by the Form 10-K/A filed on September 20, 2000,
the "Company 10-K") and its Report on Form 10-Q for the period ended March 31,
2000 (as amended by the Form 10-Q/A filed on September 20, 2000, the "Company
March 10-Q") and its Report on Form 10-Q for the period ended June 30, 2000 (as
amended by the Form 10-Q/A filed on September 20, 2000, the "Company June 10-Q")
which the Company filed with the SEC, including the documents incorporated by
reference in each of them, each contained all the information required to be
included in it and, when it was filed, did not contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements made in it, in light of the circumstances under which they were made,
not misleading and complied as to form in all material respects with the
applicable requirements of the Exchange Act. Without limiting Section 3.1(h),
the financial statements included in the Company 10-K and the Company June 10-Q
all were prepared in accordance with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis (except to the extent that
unaudited interim financial information included in the Company Reports does not
contain notes and is subject to normal year end adjustments) and present fairly
the consolidated financial condition and the consolidated results of operations
and cash flows of the Company and its subsidiaries at the dates, and for the
periods, to which they relate. Except as disclosed by the Company on Exhibit
3.1-I(1), at the date of this Agreement, the Company has not filed any reports
with the SEC with regard to any period which ended, or any event which occurred
after June 30, 2000. The estimates of the Company's revenues and net income for
the quarter ended

                                      -15-
<PAGE>

September 30, 2000, which were disclosed by the Company to Parent as of the date
hereof, are substantially similar to the Company's actual revenues and net
income for the quarter ended September 30, 2000.

      (2) The audited balance sheets of the Company's insurance subsidiaries as
of December 31, 1999, 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, 1999 (the "Insurance Subsidiary Annual
Statements") filed with the insurance regulatory authorities in their respective
jurisdictions of domicile (collectively, the "Regulators"), copies of which have
been delivered to Parent, fairly present in all material respects their
respective statutory financial conditions as of such date and the results of
their respective operations and cash flows for the year then ended in conformity
with SAP. As used herein, "SAP" means the accounting procedures and practices
prescribed or permitted from time to time by the National Association of
Insurance Commissioners and adopted, permitted or promulgated by the respective
states of incorporation of the Company's insurance subsidiaries and applied in a
consistent manner throughout the periods involved. The other information
contained in the Insurance Subsidiary Annual Statements fairly presents in all
material respects the information required to be contained therein in conformity
with applicable requirements. The balance sheets of the Company and its
subsidiaries at dates after December 31, 1999, and the related statements of
operations and statements of cash flows, which have been filed with Regulators,
copies of which have been delivered to Parent, fairly present in all material
respects the applicable insurance subsidiaries' respective statutory financial
conditions as of such dates and the results of their respective operations and
cash flows for the periods then ended in conformity with SAP consistently
applied.

                                      -16-
<PAGE>

      (j) Except as disclosed by the Company in the Company June 10-Q or in
Exhibit 3.1-J, since December 31, 1999, (i) the Company and its subsidiaries
(other than insignificant subsidiaries not involved in the insurance business)
have conducted their respective businesses only in the ordinary course and a
manner consistent with past practice and (ii) nothing has occurred and there has
been no development or state of circumstances which, individually or in
aggregate, has had or would be reasonably expected to have a Material Adverse
Effect on the Company.

      (k) The assets and properties owned, leased or licensed by the Company and
its subsidiaries constitute, in the aggregate, all the assets (including
Intellectual Property (as defined herein)) necessary to the conduct of their
businesses and operations as they currently are being conducted. All such assets
and properties (other than as Parent and the Company may mutually agree) will be
owned, leased or licensed by the Company and its subsidiaries at the Effective
Time and will as of the Effective Time permit the Surviving Corporation and its
subsidiaries to conduct such businesses and operations in substantially the same
manner as such businesses and operations have been conducted by the Company and
its subsidiaries prior to the Effective Time.

      (l) The Company and its subsidiaries have at all times complied, and
currently are complying, with all, and none of them is under investigation with
respect to or has been threatened to be charged with or given notice of any
violation of any, applicable Federal, state, local and foreign laws,
regulations, rules, judgments, injunctions or decrees, except failures to comply
which would not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect on the Company.

                                      -17-
<PAGE>

      (m) (1) The Company and its subsidiaries have all licenses, consents,
authorizations, franchises, waivers, approvals, certificates, filings and
permits ("Permits") which are required to enable them to own and conduct their
businesses as they currently are being conducted, and all such Permits are in
full force and effect, except as would not reasonably be expected, individually
or in the aggregate, to have a Material Adverse Effect on the Company. Except as
would not, individually or in the aggregate, be reasonably expected to have a
Material Adverse Effect on the Company, no material violations exist in respect
of any Permit of the Company and its subsidiaries, and no proceeding or
investigation is pending, or to the best of the Company's knowledge threatened,
that would be reasonably likely to result in the suspension, revocation,
limitation or restriction of any Permit and, to the best of the Company's
knowledge, there is no reasonable basis for the assertion of any such material
violation or the institution of any such proceeding.

      (2) All insurance policies issued by any subsidiary of the Company which
are now in force are, to the extent required under applicable law, in a form
acceptable to applicable regulatory authorities, or have been filed with and not
objected to by such authorities within the period provided for such objection.

      (3) The Company and each subsidiary of the Company has filed all material
reports, statements, documents, registrations, filings or submissions required
to be filed by the Company or any subsidiary of the Company, respectively, with
any applicable Federal, state or local regulatory authorities, including to
state insurance regulatory authorities. All such material reports, statements,
documents,

                                      -18-
<PAGE>

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. All premium rates, rating plans and policy forms established or used
by the Company or any subsidiary of the 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, except where the failure to make such filing or obtain such
approval would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on the Company.

      (n) With the possible exception of Tax Returns (as defined herein) of
subsidiaries, which Tax Returns would not be material, the Company and each of
its subsidiaries has filed when due (taking account of extensions) all Tax
Returns which it has been required to file and has paid all Taxes shown on such
Tax Returns to be due. Such Tax Returns are complete and accurate in all
material respects. Such Tax Returns accurately reflect all Taxes required to
have been paid, except to the extent of items which may be disputed by
applicable taxing authorities but for which there is substantial authority to
support the position taken by the Company or its subsidiary and which have been
adequately reserved against in accordance with GAAP on the consolidated balance
sheet at June 30, 2000 included in the Company June 10-Q. Except as shown on
Exhibit 3.1-N, (i) no extension of time given by the Company or any of its
subsidiaries for completion of the audit of any of its Tax Returns or for the
assessment or collection of any Tax has been requested or is in effect, (ii)
there are no tax liens against the Company or any of its subsidiaries or any of
their assets, except with respect to current Taxes not yet due, (iii) no
Federal, state, or local audits or other administrative proceedings or court
proceedings with regard to Taxes are presently pending or threatened in writing
with regard to the Company or any of its subsidiaries, (iv) neither the Company
nor any subsidiary of the

                                      -19-
<PAGE>

Company is a party to or is bound by any agreement or arrangement providing for
the allocation or sharing of Taxes, (v) neither the Company nor any subsidiary
of the Company has participated in or cooperated with any international boycott
as that term is used in Section 999 of the Code, (vi) neither the Company nor
any subsidiary of the Company has filed a consent pursuant to Section 341(f) of
the Code or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as that term is defined in Section
341(f)(4) of the Code) owned by the Company or any subsidiary of the Company,
(vii) no issues have been raised with the Company or any of its subsidiaries by
any taxing authority in connection with any audit or examination of its Tax
Returns, (viii) neither the Company nor any of its subsidiaries has any
liability for the Taxes of any person (other than the Company and subsidiaries
of the Company that are members of the affiliated group of corporations (within
the meaning of Section 1504 of the Code) of which the Company is the common
parent) under Treasury Regulation Section 1.1502-6 (or any similar provision of
state, local or foreign law), as successor or transferee, by contract or
otherwise, (ix) within the past five years, neither the Company nor any of its
subsidiaries has been a "distributing corporation" or a "controlled corporation"
in a distribution intended to qualify under Section 355(a) of the Code and (x)
the Company is not aware of any fact or circumstance that would reasonably be
expected to prevent the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code. For the purposes of this Agreement,
"Taxes" means all taxes (including withholding taxes), assessments, levies and
other like governmental charges, and any related interest or penalties. As used
herein, "Tax Return" means any report, return or other information required to
be supplied to a taxing authority in connection with Taxes.

                                      -20-
<PAGE>

      (o) (i) The Company and its subsidiaries have all material environmental
Permits which are necessary to enable them to conduct their businesses as they
currently are being conducted without violating any Environmental Law (as
defined herein), which Permits are in full force and effect, (ii) except as
shown on Exhibit 3.1-O, neither the Company nor any subsidiary has received any
notice of material noncompliance or material liability under any Environmental
Law, (iii) the Company and its subsidiaries are, and have been, in compliance in
all material respects with all Environmental Laws and (iv) neither the Company
nor any subsidiary is subject to any order of a Governmental Entity requiring
the Company or any subsidiary to take, or refrain from taking, any actions in
order to comply with any Environmental Law and no action or proceeding seeking
such an order or other action, claim, suit, proceeding, investigation or review
related to any Environmental Law is pending or, insofar as any officer of the
Company is aware, threatened against the Company. As used herein, "Environmental
Law" means any Federal, state, local or foreign law, rule, regulation, guideline
or other legally enforceable requirement of a Governmental Entity relating to
protection of the environment, to environmental conditions which affect human
health or safety or to pollutants, contaminants, wastes or chemicals or any
toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous
substances, wastes or materials.

      (p) None of the software, databases, computer firmware, computer hardware
(whether general or special purpose), or other similar or related items of
automated, computerized, and/or software system(s) that are used or relied on by
the Company or by any of its subsidiaries in the conduct of their respective
businesses malfunctioned, ceased to function, generated incorrect data, or
provided incorrect results when processing, providing and/or receiving
date-related data with respect to dates after December 31, 1999 due to the
change from

                                      -21-
<PAGE>

the twentieth to the twenty-first century, and the Company has no reason to
expect any such effects in the future.

      (q) Except as shown on Exhibit 3.1-Q, there are no contracts, agreements
or other arrangements which could result in the payment by the Company or by any
subsidiary of an "Excess Parachute Payment" as that term is used in Section 280G
of the Code as a result of the transactions which are the subject of this
Agreement (either alone or in conjunction with any other event).

      (r) Except as shown on Exhibit 3.1-R, there are no material liabilities of
the Company or any subsidiary of the Company of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise, and there
is no existing condition, situation or set of circumstances which could
reasonably be expected to result in such a liability, other than liabilities
provided for in the consolidated balance sheet of the Company as of June 30,
2000 as set forth in the Company June 10-Q, contingent liabilities under
insurance policies in excess of the reserves required by GAAP, and liabilities
incurred since the date of such balance sheet in the ordinary course of
business, which would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company; and liabilities or
obligations under this Agreement.

      (s) (1) Except as disclosed by the Company on Exhibit 3.1-S(1), neither
the Company nor any of its subsidiaries is a party to or bound by (i) any
agreement any of the benefits or costs of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement; (ii) any agreement which is
a "material contract" (as such term is defined in Item 601(b)(10) of Regulation
S-K under the Securities Act and the Exchange Act) that has not been filed or

                                      -22-
<PAGE>

incorporated by reference in the Company Reports; (iii) any agreement which
would prohibit or materially delay the consummation of the Merger or any of the
transactions contemplated by this Agreement; (iv) any agreement relating to
indebtedness for borrowed money or any guarantee or similar agreement relating
thereto, other than any such agreement with, or relating to, an aggregate
outstanding principal amount or guaranteed obligation not exceeding $500,000
(other than agreements entered into by the Company or its subsidiaries after the
date hereof in accordance with this Agreement in the ordinary course of their
businesses (including insurance, reinsurance and surety obligations incurred by
the Company's insurance subsidiaries)); (v) any material license, franchise or
similar agreement necessary for the operation of the business of the Company and
its subsidiaries, taken as a whole, as it is operated as of the date hereof;
(vi) any agreement that restricts or prohibits the Company or any subsidiary or
affiliate of the 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
geographical area; (vii) any ceded reinsurance agreement applicable to insurance
in force written by any subsidiary of the Company; (viii) any agreement
containing "change in control" or similar provisions relating to a change in
control of the Company or any of its subsidiaries; (ix) any "stop loss"
agreement, other than those entered into in the ordinary course of business
consistent with past practice; (x) any agreement (other than insurance policies
or other similar agreements issued by any subsidiary of the Company in the
ordinary course of business) pursuant to which the Company or any subsidiary of
the Company is obligated to indemnify any other person; (xi) any agreement
(other than any option agreement under a Company Stock Plan) with any affiliate
of the Company (other than a subsidiary of the Company) or any director, officer
or employee of the Company or any of its subsidiaries or affiliates; (xii) any
agreement relating to any joint venture or similar arrangement;

                                      -23-
<PAGE>

(xiii) any other agreement that is, in the Company's judgment, material to the
business or operations of the Company and its subsidiaries, taken as a whole, or
(xiv) any guaranty of any of the foregoing. As used in this Section 3.1(s),
"agreement" means any agreement, contract, arrangement, commitment or
understanding (whether written or oral).

      (2) The Company has heretofore furnished or made available to Parent
complete and correct copies (or, if oral, accurate written summaries) of the
items listed in Exhibit 3.1-S(1), each as amended or modified to the date
hereof, including any waivers with respect thereto (the "Company Significant
Agreements"). Except as specifically disclosed therein: (i) each of the Company
Significant Agreements is valid and binding on the Company or its subsidiaries,
as applicable, and in full force and effect; (ii) the Company and each of its
subsidiaries, as applicable, have in all material respects performed all
material obligations required to be performed by them to date under each Company
Significant Agreement; (iii) neither the Company nor any of its subsidiaries
knows of, or has received notice of, any violation or default (or any condition
which with the passage of time or the giving of notice would cause such a
violation of or a default) by any party under any Company Significant Agreement,
except in the case of clauses (ii) and (iii) above, such matters as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company. Set forth on Exhibit 3.1-S(2) is a description of
any material changes as of the date hereof to the amount and terms of the
indebtedness of the Company and its subsidiaries from that described in the
financial statement footnotes in the Company 10-K (or, as to C-BASS and Sherman,
from that shown on Exhibit 3.1-S(2)).

      (3) All reinsurance and coinsurance treaties or agreements, including
retrocessional agreements, to which the Company or any insurance subsidiary of
the Company is

                                      -24-
<PAGE>

a party or under which the Company or any such insurance subsidiary has any
existing rights, obligations or liabilities are in full force and effect, except
for such treaties or agreements as to which the failure to be in full force and
effect, individually or in the aggregate, would not be reasonably likely to have
a Material Adverse Effect on the Company. Except as disclosed by the Company on
Exhibit 3.1-S(3)(A), neither the Company nor any insurance subsidiary of the
Company, nor, to the best of the Company's knowledge, any other party to a
reinsurance or coinsurance treaty or agreement to which the Company or any
insurance subsidiary of the Company is a party, is in default in any material
respect as to any provision thereof, and no such agreement contains any
provision providing that the other party thereto may (whether with notice, lapse
of time or both) terminate such agreement solely by reason of the transactions
contemplated by this Agreement. The Company has not received any notice to the
effect that the financial condition of any other party to any such agreement is
impaired with the result that a default thereunder may reasonably be
anticipated, whether or not such default may be cured by the operation of any
offset clause in such agreement. Except as disclosed by the Company on Exhibit
3.1-S(3)(A), as of the date hereof, no insurer or reinsurer or group of
affiliated insurers or reinsurers accounted for the ceding to the Company and
the insurance subsidiaries of the Company, or the ceding by the Company and the
insurance subsidiaries of the Company, of insurance or reinsurance business in
an aggregate amount equal to five percent or more of the consolidated gross
premiums written by the Company and the insurance subsidiaries of the Company
for the year ended December 31, 1999. Except for each of MBIA Inc. and its
affiliates ("MBIA"), FGIC (as defined herein) and Connie Lee Insurance Company,
in each case as disclosed in Exhibit 3.1-S(3)(B), no ceding company has any
rights under any circumstances whatsoever (other than as a result of future
downgrades in financial ratings) to terminate on a

                                      -25-
<PAGE>

cut-off basis any reinsurance contract it has entered into with an insurance
subsidiary of the Company or will obtain any such rights as a result of the
transactions contemplated by this Agreement, PROVIDED that nothing in this
sentence shall affect Parent's rights under Section 6.1(i).

      (t) Except as shown on Exhibit 3.1-T or 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 the Company or any subsidiary of the
Company, there is no action, suit, investigation or proceeding pending against,
or to the knowledge of the Company threatened against or affecting, the Company
or any subsidiary of the Company or any of their respective properties before
any Governmental Entity which is reasonably likely to result in damages
individually in excess of $500,000 or damages in the aggregate in excess of
$1,000,000. There is no action, suit, investigation or proceeding pending
against, or to the knowledge of the Company threatened against or affecting, the
Company or any subsidiary of the Company or any of their respective properties
before any Governmental Entity which would reasonably be expected to prevent,
enjoin, alter or materially delay the transactions contemplated hereby. Neither
the Company nor any subsidiary of the Company nor any of their respective
properties is subject to any material order or judgment which would prevent or
delay the consummation of the transactions contemplated hereby.

      (u) (1) Each reserve and other liability amount in respect of the
insurance business, including, without limitation, reserve and other liability
amounts in respect of insurance policies, established or reflected in the
Insurance Subsidiary Annual Statements was reviewed and certified by an
independent actuary in accordance with applicable state insurance laws and
regulations. Each reserve and other liability amount in respect of the insurance

                                      -26-
<PAGE>

business, including, without limitation, reserve and other liability amounts in
respect of insurance policies, established or reflected in any financial
statements filed with Regulators with regard to dates or periods after December
31, 1999 was reviewed by an independent actuary to the extent required by
applicable state insurance laws and regulations. Each insurance subsidiary of
the Company owns assets that qualify as admitted assets under the insurance
laws, rules and regulations of the jurisdiction of domicile of such subsidiary
in an amount equal to the sum of all the reserves and liability amounts and the
minimum statutory capital and surplus as required by the insurance laws, rules
and regulations of the jurisdiction of domicile of such subsidiary. The reserves
set forth in the Insurance Subsidiary Annual Statements for the years indicated
for payment of insurance policy benefits, losses, claims and expenses were
considered by management of the Company to be adequate as of the date of such
statements to cover the total amount of all reasonably anticipated insurance
liabilities of the insurance company subsidiaries of the Company.

      (2) Except as shown in Exhibit 3.1-U(2), each of the insurance
subsidiaries of the Company is entitled to take full credit in its statutory
financial statements pursuant to applicable insurance laws for ceded reinsurance
under all ceded reinsurance agreements in effect on the date hereof to which any
insurance subsidiary is a ceding party and under which there is liability of
either party to the agreement (collectively the "Company Existing Reinsurance
Agreements"), and except as disclosed by the Company in Exhibit 3.1-U(2), there
is no claim under any Company Existing Reinsurance Agreement that is disputed by
any other party to such Company Existing Reinsurance Agreement.

      (v) Other than with respect to Credit2B.com Inc., a Delaware corporation
("Credit2B") as shown on Exhibit 3.1-V or in the ordinary course of its
portfolio investment

                                      -27-
<PAGE>

activities or loss mitigation activities, neither the Company nor any of its
subsidiaries has any contractual commitment to make any loan, advance or capital
contribution to, or investment in, any other person in excess of $500,000 with
respect to any individual person or $1,000,000 in the aggregate.

      (w) (1) Exhibit 3.1-W(1) includes a complete list of each employee benefit
plan, program, policy, practice, or other arrangement providing benefits to any
current or former employee, officer or director of the Company or any of its
subsidiaries or any beneficiary or dependent thereof that is sponsored or
maintained by the Company or any of its subsidiaries or to which the Company or
any of its subsidiaries contributes or is obligated to contribute, whether
formal or informal, written or not written, including, without limitation, any
employee welfare benefit plan within the meaning of Section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), any employee
pension benefit plan within the meaning of Section 3(2) of ERISA (whether or not
such plan is subject to ERISA) and any bonus, incentive, deferred compensation,
vacation, stock purchase, stock option, severance, employment, change in control
or fringe benefit plan, program or agreement under which the Company or any of
its subsidiaries provides or may be required to provide benefits to any current
or former employee, officer or director of the Company or any of its
subsidiaries or any beneficiary or dependent thereof (each, an "Employee Benefit
Plan"). Except as disclosed by the Company on Exhibit 3.1-W(2), neither the
Company nor any subsidiary is a party to any agreement or arrangement providing
for annual future compensation of $500,000 or more with any officer, consultant,
director or employee.

      (2) With respect to each Employee Benefit Plan, the Company has delivered
or made available to Parent a true, correct and complete copy of: (i) each
writing

                                      -28-
<PAGE>

constituting a part of such Employee Benefit Plan, including, without
limitation, all plan documents, employee COMMUNICATIONS, benefit schedules,
trust agreements, and insurance contracts, other funding vehicles and any
amendments thereto (including, without limitation, the Vice President Agreement
Amendments); (ii) the most recent Annual Report (Form 5500 Series) and
accompanying schedule, if any; (iii) the current summary plan description and
any material modifications thereto, if any (in each case, whether or not
required to be furnished under ERISA); (iv) the most recent annual financial
report, if any; (v) the most recent actuarial report, if any; and (vi) the most
recent determination letter from the Internal Revenue Service (the "IRS"), if
any, or the pending determination letter request submitted to the IRS for the
Qualified Plans listed on Exhibit 3.1-W(3). The Company has also delivered or
made available to Parent a true, correct and complete copy of each handbook,
manual or similar document, as currently in effect, which is distributed by the
Company or any subsidiary to its employees which lists or describes the Employee
Benefit Plans in which they are, or are entitled to be, participants, which
documents are consistent with the materials provided or made available to Parent
pursuant to the preceding sentence. Except as specifically provided in the
foregoing documents delivered or made available to Parent, there are no
amendments to any Employee Benefit Plan that have been adopted or approved, nor
has the Company or any of its subsidiaries undertaken to make any such
amendments or to adopt or approve any new Employee Benefit Plan.

      (3) Exhibit 3.1-W(3) identifies each Employee Benefit Plan that is
intended to be a "qualified plan" within the meaning of Section 401(a) of the
Code (each, a "Qualified Plan"). The IRS has issued, or (in the case of
Qualified Plans listed on Exhibit 3.1-W(3)) there is a pending request for, a
favorable determination letter with respect to each Qualified Plan and the
related trust that has not been revoked, and there are no circumstances and

                                      -29-
<PAGE>

no events have occurred that could adversely affect the qualified status of any
Qualified Plan or the related trust. No Employee Benefit Plan is intended to
meet the requirements of Code Section 501(c)(9).

      (4) All contributions required to be made to any Employee Benefit Plan by
applicable law or regulation or by any plan document or other contractual
undertaking, and all premiums due or payable with respect to insurance policies
funding any Employee Benefit Plan, for any period through the date hereof have
been timely made or paid in full or, to the extent not required to be made or
paid on or before the date hereof or to the extent any Employee Benefit Plan is
unfunded, have been fully reflected on the financial statements included in the
Company June 10-Q and/or the financial statements of C-BASS and/or Sherman
previously provided to Parent or have been otherwise disclosed to Parent. Each
Employee Benefit Plan that is an employee welfare benefit plan under Section
3(1) of ERISA is either (i) funded through an insurance company contract and is
not a "welfare benefit fund" within the meaning of Section 419 of the Code or
(ii) unfunded.

      (5) With respect to each Employee Benefit Plan, the Company and its
subsidiaries have complied, and are now in compliance, in all material respects,
with all provisions of ERISA, the Code and all other laws and regulations
applicable to such Employee Benefit Plan and each Employee Benefit Plan has been
administered in all material respects in accordance with its terms. There is not
now, nor do any circumstances exist that could give rise to, any requirement for
the posting of security or the imposition of any Lien on the assets of the
Company or any of its subsidiaries with respect to an Employee Benefit Plan
under ERISA or the Code.

                                      -30-
<PAGE>

      (6) With respect to each Employee Benefit Plan that is subject to Title IV
or Section 302 of ERISA or Section 412 or 4971 of the Code: (i) there does not
exist any accumulated funding deficiency within the meaning of Section 412 of
the Code or Section 302 of ERISA, whether or not waived; (ii) the fair market
value of the assets of such Plan equals or exceeds the actuarial present value
of all accrued benefits under such Plan (whether or not vested); (iii) no
reportable event within the meaning of Section 4043(c) of ERISA for which the
30-day notice requirement has not been waived has occurred, and the consummation
of the transactions contemplated by this agreement will not result in the
occurrence of any such reportable event; (iv) all premiums to the Pension
Benefit Guaranty Corporation (the "PBGC") have been timely paid in full; (v) no
liability (other than for premiums to the PBGC) under Title IV of ERISA has been
or is expected to be incurred by the Company or any of its subsidiaries; and
(vi) the PBGC has not instituted proceedings to terminate such Employee Benefit
Plan and, to the best of the Company's knowledge, no condition exists that
presents a risk that such proceedings will be instituted or which would
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any such Plan.

      (7) (i) Except as set forth in Exhibit 3.1-W(7), no Employee Benefit Plan
is a "multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA (a
"Multiemployer Plan") or a plan that has two or more contributing sponsors at
least two of whom are not under common control, within the meaning of Section
4063 of ERISA (a "Multiple Employer Plan"); (ii) none of the Company and its
subsidiaries nor any of their respective ERISA Affiliates (as defined herein)
has, at any time during the last six years, contributed to or been obligated to
contribute to any Multiemployer Plan or Multiple Employer Plan; and (iii) none
of the Company and its subsidiaries nor any ERISA Affiliates has incurred any
liability

                                      -31-
<PAGE>

to a Multiemployer Plan as a result of a complete or partial withdrawal from
such Multiemployer Plan, as those terms are defined in Part I of Subtitle E of
Title IV of ERISA, that has not been satisfied in full.

      (8) There does not now exist, nor do any circumstances exist that could
result in, any liability (i) under Title IV of ERISA, (ii) under section 302 of
ERISA, (iii) under sections 412 and 4971 of the Code, (iv) as a result of a
failure to comply with the continuation coverage requirements of section 601 et
seq. of ERISA and section 4980B of the Code, or (v) under corresponding or
similar provisions of foreign laws or regulations that would be a liability of
the Company or any of its subsidiaries following the Closing. Without limiting
the generality of the foregoing, neither the Company nor any of its
subsidiaries, nor any of their respective ERISA Affiliates, has engaged in any
transaction described in Section 4069 or Section 4204 or 4212 of ERISA.

      (9) Exhibit 3.1-W(9) sets forth (i) an accurate and complete description
of each provision of any Employee Benefit Plan under which the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby could (either alone or in conjunction with any other event) result in,
cause the accelerated vesting, funding or delivery of, or increase the amount or
value of, any payment or benefit to any employee, officer or director of the
Company or any of its subsidiaries, or could limit the right of the Company or
any of its subsidiaries to amend, merge, terminate or receive a reversion of
assets from any Employee Benefit Plan or related trust, (ii) the name of each
"disqualified individual" within the meaning of Section 280G of the Code, (iii)
the name of each person who has a contractual right to receive an excise tax
gross-up and (iv) the maximum amount of the "excess parachute payments" within
the meaning of Section 280G of the Code that could become

                                      -32-
<PAGE>

payable by the Company and its subsidiaries in connection with the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby (either alone or in conjunction with any other event).

      (10) None of the Company and its subsidiaries nor any other person,
including any fiduciary, has engaged in any "prohibited transaction" (as defined
in Section 4975 of the Code or Section 406 of ERISA), which could subject any of
the Employee Benefit Plans or their related trusts, the Company, any of its
subsidiaries or any person that the Company or any of its subsidiaries has an
obligation to indemnify, to any material Tax or penalty imposed under Section
4975 of the Code or Section 502 of ERISA.

      (11) There are no pending or threatened claims (other than claims for
benefits in the ordinary course), lawsuits or arbitrations which have been
asserted or instituted, and to the best of the Company's knowledge, no set of
circumstances exists which may reasonably give rise to a claim or lawsuit,
against any of the Employee Benefit Plans, or against any fiduciaries thereof
with respect to their duties to the Plans or the assets of any of the trusts
under any of the Employee Benefit Plans, which could reasonably be expected to
result in any material liability of the Company or any of its subsidiaries to
the PBGC, the Department of Treasury, the Department of Labor, any Multiemployer
Plan, any Employee Benefit Plan or a participant therein.

      (12) The Company, its subsidiaries and each member of their respective
business enterprises have complied with the Worker Adjustment and Retraining
Notification Act and all similar state, local and foreign laws (collectively,
"WARN") and the financial statements of the Company and each of its subsidiaries
included in the Company Reports reflect adequate accruals for all current and
expected liabilities (including pay in lieu of notice) under WARN.

                                      -33-
<PAGE>

      (13) All Employee Benefit Plans subject to the laws of any jurisdiction
outside of the United States (i) have been maintained in all material respects
in accordance with all applicable requirements, (ii) if they are intended to
qualify for special tax treatment, meet all requirements for such treatment, and
(iii) if they are intended to be funded and/or book-reserved are fully funded
and/or book-reserved, as appropriate, based upon reasonable actuarial
assumptions.

      (14) As used herein, "ERISA Affiliate" means, with respect to any entity,
trade or business, any other entity, trade or business that is a member of a
group described in Section 414(b), (c), (m) or (o) of the Code or Section
4001(b)(1) of ERISA that includes the first entity, trade or business, or that
is a member of the same "controlled group" as the first entity, trade or
business pursuant to Section 4001(a)(14) of ERISA.

      (x) The Company and its subsidiaries own or otherwise have rights to use
and, as of and from the Effective Time, will 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 as contemplated to be conducted; the use
of any Intellectual Property by the Company and its subsidiaries does not
infringe on or otherwise violate the rights of any person; and, to the best of
the Company's knowledge, no person is challenging, infringing on or otherwise
violating any right of the Company or any subsidiary of the Company with respect
to any Intellectual Property owned by and/or licensed to the Company and its
subsidiaries. From and after the Effective Time, the Company and its
subsidiaries will 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 Intellectual Property used in the conduct of
their respective businesses and

                                      -34-
<PAGE>

operations as currently conducted in the same manner as such Intellectual
Property has been used to conduct such businesses and operations prior to the
date hereof. As used herein, "Intellectual Property" means 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 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, software, computer code 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.

      (y) To the best of the Company's knowledge, there are no circumstances,
and neither the Company nor its subsidiaries nor, to the best of the Company's
knowledge, any of its other affiliates has taken or agreed to take any action,
that would prevent the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code.

      (z) The Board of Directors of the Company has duly approved the Merger and
this Agreement, and such approval is sufficient to render inapplicable to the
Merger, this Agreement and the transactions contemplated by this Agreement the
restrictions on "business combinations" set forth in Section 912 of the NYBCL.
No other "fair price", "moratorium", "control share acquisition" or other
similar antitakeover statute or regulation enacted under state

                                      -35-
<PAGE>

or Federal laws in the United States applicable to the Company or any of its
subsidiaries is applicable to the Merger or the other transactions contemplated
hereby.

      (aa) Since December 31, 1999, except as shown on Exhibit 3.1-AA(1), there
have been no transactions, agreements, arrangements or understandings between
the Company or its subsidiaries, on the one hand, and the Company's affiliates
(other than affiliates that are now and were at such time wholly owned
subsidiaries of the Company) or other persons, on the other hand, that would be
required to be disclosed under Item 404 of Regulation S-K under the Securities
Act and the Exchange Act. Except with respect to Credit2B as set forth in
Exhibit 3.1-AA(2), the Company is not obligated, without its consent, to make
any loan, advance or capital contributions to or investments in any person,
including C-BASS, Sherman or Credit2B.

      (bb) Neither the Company nor any of its subsidiaries is an "investment
company" as defined under the Investment Company Act of 1940, as amended, and
neither the Company nor any of its subsidiaries sponsors any person that is such
an investment company.

      (cc) The Board of Directors of the Company has received the opinion of
Morgan Stanley & Co. Incorporated, financial advisor to the Company, to the
effect that, as of the date of this Agreement, the Exchange Ratio is fair from a
financial point of view to the Company's shareholders.

      (dd) (1) Each contract that is material to Singer's business to which
Singer (as defined herein) is a party (each, a "Singer Material Contract" and
collectively, the "Singer Material Contracts"), including all contracts with
respect to lottery, structured or viatical settlements or securitizations
related thereto, is a valid, binding and enforceable obligation of Singer. There
is no default under any Singer Material Contract by Singer or, to the Company's
knowledge, except as listed on Exhibit 3.1-DD, by any other party thereto, and
no event has

                                      -36-
<PAGE>

occurred that with the lapse of time or the giving of notice or both would
constitute a default thereunder by Singer, or, to the Company's knowledge, any
other party, which default or event, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect on the Company. Except
as listed on Exhibit 3.1-DD, as of the date hereof, no party to any Singer
Material Contract has given notice to the Company or Singer or made a claim
against the Company or Singer with respect to any breach or default thereunder,
which breach or default, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect on the Company. Each Singer Material
Contract, together with any amendments thereto, has been disclosed to Parent,
except as set forth on Exhibit 3.1-DD. The enforceability of any Singer Material
Contract shall not be impaired by the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby, and, as of the date
hereof, no Singer Material Contract requires that a transaction of the kind
contemplated by this Agreement receive the approval of any party to such Singer
Material Contract, except where such impairments or failures to receive
approvals, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect on the Company.

      (2) Each Singer Material Contract is properly reflected on Singer's
servicing system as of the date hereof and the run-off model with respect to
Singer (the "Singer Run-Off Model") heretofore provided by the Company to Parent
properly reflects each Singer Material Contract, except to the extent that the
failure of any or all of the Singer Material Contracts which require servicing
of obligations to be properly reflected on Singer's servicing system as of the
date hereof and the failure of such Singer Run-Off Model to properly reflect any
or all of the Singer Material Contracts to which the Singer Run-Off Model is
relevant would not, individually or in the aggregate, have a Material Adverse
Effect on the Company.

                                      -37-
<PAGE>

      (ee) This Agreement and each certificate or other instrument or document
furnished by or on behalf of the Company to Parent pursuant hereto does not and
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated herein or therein or necessary to make the
statements contained herein or therein, in light of circumstances under which
they were made, not misleading.

      3.2 REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB. Each of Parent and
Sub represents and warrants to the Company as follows:

      (a) Parent is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all corporate powers
and all governmental licenses, authorizations, permits, consents and approvals
required to carry on its business as now conducted. Parent has heretofore
delivered to the Company true and complete copies of the certificate of
incorporation and bylaws of Parent as currently in effect. Sub is a corporation
duly organized, validly existing and in good standing under the laws of the
State of New York. Sub is a wholly owned subsidiary of Parent.

      (b) Each of Parent and Sub has all corporate power and authority necessary
to enable it to enter into this Agreement and carry out the transactions
contemplated by this Agreement. All corporate actions necessary to authorize
each of Parent and Sub to enter into this Agreement and carry out the
transactions contemplated by it, other than approval by the shareholders of
Parent, have been taken. This Agreement has been duly executed by each of Parent
and Sub and is a valid and binding agreement of each of Parent and Sub,
enforceable against each of Parent and Sub in accordance with its terms.
Parent's Board of Directors has determined that the Merger is fair to Parent's
shareholders and has voted to recommend to

                                      -38-
<PAGE>

Parent's shareholders that they vote in favor of adopting this Agreement and
approving the Merger.

      (c) Neither the execution and delivery of this Agreement or of any
document to be delivered in accordance with this Agreement nor the consummation
of the transactions contemplated by this Agreement or by any document to be
delivered in accordance with this Agreement will contravene, violate, result in
a breach of, or constitute a default (or an event which, with notice or lapse of
time or both, would constitute a default) under, the Certificate of
Incorporation or By-Laws of either Parent or Sub, any material agreement or
material instrument to which either Parent or Sub or any other subsidiary of
Parent is a party or by which any of them is bound, any law, or any order, rule
or regulation of any Governmental Entity having jurisdiction over Parent or any
of its subsidiaries, including Sub.

      (d) Except for any need to file any forms with or receive any Permits of
insurance regulatory authorities, no Permits of Governmental Entities, or other
governmental action, other than the expiration or termination of waiting periods
under the HSR Act, if any, and the Permits or actions contemplated by Section
3.1(d), are required to permit each of Parent and Sub to fulfill all its
obligations under this Agreement.

      (e) Sub was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement. Sub has not, and at the Effective Time will not
have, engaged in any activities or incurred any obligations or liabilities,
except the activities relating to the transactions contemplated by this
Agreement and obligations and liabilities incurred in connection with those
activities and with the transactions contemplated by this Agreement.

                                      -39-
<PAGE>

      (f) Parent and each of its subsidiaries is qualified to do business as a
foreign corporation in each state in which it is required to be qualified,
except states in which the failure to qualify, in the aggregate, would not have
a Material Adverse Effect upon Parent.

      (g) The only authorized stock of Parent is 100 million shares of Parent
Common Stock and 20 million shares of preferred stock, par value $.001 per
share. As of the close of business on November 10, 2000, the only outstanding
stock of Parent was 37,839,735 shares of Parent Common Stock and 800,000 shares
of $4.125 preferred stock, par value $.001 per share (the "Parent Preferred
Stock"). All the outstanding shares of Parent Common Stock and Parent Preferred
Stock have been duly authorized and issued and are fully paid and
non-assessable. Except as contemplated by this Agreement and except for the
Parent Shareholder Rights and not more than 6,500,000 options to acquire Parent
Common Stock, as of the close of business on November 10, 2000, Parent has not
issued any options, warrants or convertible or exchangeable securities, and is
not a party to any other agreements, which require, or upon the passage of time,
the payment of money or the occurrence of any other event may require, Parent to
issue or sell any of its stock.

      (h) (i) Each of Parent's subsidiaries has been duly organized, and is
validly existing and in good standing under the laws of its state of
incorporation, (ii) all the shares of stock owned by Parent or a subsidiary of
Parent of each of Parent's subsidiaries are (to the extent such concept is
applicable) duly organized, validly issued, fully paid and non-assessable, are
owned by Parent or a subsidiary of Parent free and clear of any Liens and are
not subject to any preemptive rights, and (iii) as of the date hereof, neither
Parent nor any of its subsidiaries has issued any options, warrants or
convertible or exchangeable securities, or is a party to any other agreements,
which require, or upon the passage of time, the payment of money or the
occurrence

                                      -40-
<PAGE>

of any other event may require, Parent or any subsidiary to issue or sell any
stock or other equity interests in any of Parent's subsidiaries and there are no
registration covenants or transfer or voting restrictions with respect to
outstanding securities of any of Parent's subsidiaries.

      (i) Since January 1, 1997, Parent has filed with the SEC all forms,
statements, reports and documents it has been required to file under the
Securities Act, the Exchange Act or the rules under them (collectively, the
"Parent Reports"). The Parent Reports, including the documents incorporated by
reference in each of them, each contained all the information required to be
included in it and, when it was filed and as of the date of such Parent Report,
did not contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made in it, in light of
the circumstances under which they were made, not misleading and complied as to
form in all material respects with the applicable requirements of the Securities
Act and the Exchange Act.

      (j) (1) Parent's Annual Report on Form 10-K for the year ended December
31, 1999 (the "Parent 10-K") and its Report on Form 10-Q for the period ended
March 31, 2000 (the "Parent March 10-Q") and its Report on Form 10-Q for the
period ended June 30, 2000 (the "Parent June 10-Q") which Parent filed with the
SEC, including the documents incorporated by reference in each of them, each
contained all the information required to be included in it and, when it was
filed, did not contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made in it, in light of
the circumstances under which they were made, not misleading and complied as to
form in all material respects with the applicable requirements of the Securities
Act and the Exchange Act. Without limiting what is said in Section 3.2(i), the
financial statements included in the Parent 10-K and the Parent June 10-Q all
were prepared in accordance with GAAP applied

                                      -41-
<PAGE>

on a consistent basis (except to the extent that unaudited interim financial
information included in the Parent Reports does not contain notes and is subject
to normal year end adjustments) and present fairly the consolidated financial
condition and the consolidated results of operations and cash flows of Parent
and its subsidiaries at the dates, and for the periods, to which they relate. At
the date of this Agreement, Parent has not filed any reports with the SEC with
regard to any period which ended, or any event which occurred after, June 30,
2000.

      (2) The audited balance sheets of Parent's insurance subsidiaries as of
December 31, 1999, 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, 1999 (the "Parent Insurance Subsidiary Annual
Statements") filed with the Regulators, copies of which have been delivered to
the Company, fairly present in all material respects their respective statutory
financial conditions as of such date and the results of their respective
operations and cash flows for the year then ended in conformity with SAP. The
other information contained in the Parent Insurance Subsidiary Annual Statements
fairly presents in all material respects the information required to be
contained therein in conformity with applicable requirements. The balance sheets
of Parent and its subsidiaries at dates after December 31, 1999, and the related
statements of operations and statements of cash flows, which have been filed
with Regulators, copies of which have been delivered to the Company, fairly
present in all material respects the applicable insurance subsidiaries'
respective statutory financial conditions as of such dates and the results of
their respective operations and cash flows for the periods then ended in
conformity with SAP consistently applied.

      (k) Except as disclosed by Parent in the Parent June 10-Q, since December
31, 1999, (i) Parent and its subsidiaries have conducted their respective
businesses only in the

                                      -42-
<PAGE>

ordinary course and in a manner consistent with past practice, and (ii) nothing
has occurred and there has been no development or state of circumstances which,
individually or in aggregate, has had or would reasonably be expected to have a
Material Adverse Effect on Parent.

      (l) Parent and its subsidiaries have at all times complied, and currently
are complying, with all, and none of them is under investigation with respect to
or has been threatened to be charged with or given notice of any violation of
any, applicable Federal, state, local and foreign laws, regulations, rules,
judgments, injunctions or decrees, except failures to comply which would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect on Parent.

      (m) (1) Parent and its subsidiaries have all Permits which are required to
enable them to conduct their businesses as they currently are being conducted,
and all such Permits are in full force and effect, except as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Parent. Except as would not, individually or in the aggregate,
be reasonably expected to have a Material Adverse Effect on Parent, no material
violations exist in respect of any Permit of Parent and its subsidiaries, and no
proceeding or investigation is pending, or to the best of Parent's knowledge
threatened, that would be reasonably likely to result in the suspension,
revocation, limitation or restriction of any Permit and, to the best of Parent's
knowledge, there is no reasonable basis for the assertion of any such material
violation or the institution of any such proceeding.

      (2) Parent and each subsidiary of Parent has filed all material reports,
statements, documents, registrations, filings or submissions required to be
filed by Parent or any subsidiary of Parent, respectively, with any applicable
Federal, state or local regulatory authorities, including to state insurance
regulatory authorities. All such material reports,

                                      -43-
<PAGE>

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. All premium rates, rating plans and policy forms
established or used by Parent or any subsidiary of Parent that are required to
be filed with or approved by insurance regulatory authorities have been so filed
or approved, and 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, except where the failure to make such filing
or obtain such approval would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on Parent.

      (n) Parent and each of its subsidiaries has filed when due (taking account
of extensions) all Tax Returns which it has been required to file and has paid
all Taxes shown on those returns to be due. Such Tax Returns accurately reflect
all Taxes required to have been paid, except to the extent of items which may be
disputed by applicable taxing authorities but for which there is substantial
authority to support the position taken by Parent or its subsidiary and which
have been adequately reserved against in accordance with GAAP on the
consolidated balance sheet at June 30, 2000 included in the Parent June 10-Q.

      (o) To the best of Parent's knowledge, there are no circumstances, and
neither Parent nor its subsidiaries nor, to the best of Parent's knowledge, any
of its other affiliates has taken or agreed to take any action, that would
prevent the Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code.

      3.3 TERMINATION OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties in Sections 3.1, 3.2 and 7.1 will terminate at the Effective Time,
and none of the

                                      -44-
<PAGE>

Company, Parent or Sub will have any rights or claims as a result of any of
those representations or warranties after the Effective Time.

                                   ARTICLE II

                           ACTIONS PRIOR TO THE MERGeR

      4.1 COMPANY'S ACTIVITIES UNTIL EFFECTIVE TIME. From the date of this
Agreement to the Effective Time, or such earlier time as this Agreement is
terminated in accordance with Article VI, the Company will, and, to the extent
it has the power to do so, will cause each of its subsidiaries to, except with
the written consent of Parent:

      (a) Operate its business in the ordinary course and in a manner consistent
with past practice, except that the Company may sell its interest in Credit2B
pursuant to the proviso in Section 4.1(j).

      (b) Use reasonable best efforts to preserve intact its business, maintain
the goodwill of its business and the continued employment of its executives and
other employees and maintain good relationships with the vendors, suppliers,
contractors and others with which it does business.

      (c) At its expense, maintain all its assets in good repair and condition,
except to the extent of reasonable wear and use and damage by fire or other
unavoidable casualty.

      (d) Not incur any indebtedness for borrowed money or issue any debt
securities other than borrowings of up to $1,000,000 in the aggregate in the
ordinary course of business under working capital lines disclosed in the notes
to the consolidated balance sheet at December 31, 1999 included in the Company
10-K; PROVIDED, HOWEVER, that Singer shall use all reasonable efforts to replace
its warehouse financing with permanent financing; PROVIDED FURTHER, HOWEVER,
that in no event shall the consolidated debt on the consolidated balance sheet
of the

                                      -45-
<PAGE>

Company and its subsidiaries (excluding C-BASS and Sherman) at any time prior to
the Effective Time exceed $250,000,000; PROVIDED FURTHER, HOWEVER, that the
Company shall not between the date of this Agreement and the Effective Time make
or become liable for any guarantees other than the $25,000,000 guarantee with
respect to Sherman previously disclosed to Parent (it being understood that this
subparagraph does not preclude subsidiaries from entering into suretyship or
insurance contracts or giving guarantees in the ordinary course of their
businesses consistent with past practice).

      (e) Not enter into any commitments involving loans, capital contributions
or advances (other than loans, capital contributions or advances to or
investments in wholly owned subsidiaries of the Company made in the ordinary
course consistent with past practice or loans, capital contributions or advances
which the Company or a subsidiary is at the date of this Agreement committed to
make as disclosed on Exhibit 4.1-E), except in each case in the ordinary course
of business in an amount not to exceed $50,000 in the aggregate, and not
voluntarily incur any contingent liabilities, except in the ordinary course of
the Company's insurance business.

      (f) Not (i) redeem, acquire or purchase any of its stock and not declare,
set aside, make or pay any dividends, or other distributions with respect to its
capital stock or repayments of debt to its shareholders, other than (x)
quarterly dividends not exceeding $.06 per share, (y) payments by subsidiaries
of the Company to the Company or to wholly owned subsidiaries of the Company or
(z) a dividend of Excess Credit2B Proceeds, where "Excess Credit2B Proceeds"
shall equal 60% of the pre-tax cash proceeds derived from a disposition of
Credit2B prior to the Closing Date after deducting from such proceeds (A) all
transaction costs associated with such disposition, (B) all amounts contributed
to Credit2B or required to be

                                      -46-
<PAGE>

contributed to Credit2B by the Company and (C) an appropriate reserve for any
liabilities, actual or contingent, of Credit2B for which the Company may remain
liable, or (ii) enter into any agreement with respect to the voting of its
capital stock.

      (g) Not make (1) any loans, advances or capital contributions to or
investments in any person (including C-BASS, Sherman or Credit2B) (other than
loans, advances or capital contributions to or investments in wholly owned
subsidiaries of the Company made in the ordinary course consistent with past
practice or loans, advances or capital contributions which the Company or a
subsidiary is at the date of this Agreement committed to make as disclosed on
Exhibit 4.1-G) or (2) any loans or advances (other than advances for travel and
other normal business expenses) to shareholders, directors, officers or
employees.

      (h) Maintain its books of account and records in the usual manner, in
accordance with GAAP applied on a basis consistent with the basis on which they
were applied in prior years, subject to normal year-end adjustments and
accruals.

      (i) Comply in all material respects with all applicable laws and
regulations of Governmental Entities.

      (j) Not acquire, purchase, sell or otherwise dispose of or encumber any
property or assets, create or assume any Lien on any material assets or engage
in any activities or transactions, except in each case in the ordinary course of
business consistent with past practices; PROVIDED, HOWEVER, that (1) the Company
may sell Credit2B (PROVIDED FURTHER, however, that such sale shall not have any
adverse effect, or otherwise impose any obligation or liability, contingent or
otherwise, on the Company or any of its subsidiaries, without Parent's prior
written consent), (2) without limiting the foregoing, the Company shall be
precluded from selling its interest in C-BASS pursuant to the Partnership
Purchase Agreement (as defined herein) in

                                      -47-
<PAGE>

accordance with the terms of such Partnership Purchase Agreement, and (3) the
Company will, and will cause each of its subsidiaries to, not sell, assign,
transfer or otherwise dispose of, or purchase or otherwise acquire, any assets
of Singer Asset Finance Co. ("Singer"), other than assets set forth on Exhibit
4.1-J, which Exhibit shall set forth the terms of any such sale, assignment,
transfer, disposition, purchase or acquisition.

      (k) Not (i) increase the compensation payable or to become payable to its
officers or employees, (ii) pay annual bonuses for 2000 in excess of the
aggregate amount, and subject to the conditions, set forth in Exhibit 4.1-K,
(iii) grant any rights to severance or termination pay to, or enter into any
employment or severance agreement with, any director, officer or other employee,
or establish, adopt, enter into, become an employer with regard to or amend any
collective bargaining, bonus, profit sharing, thrift, compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any director, officer or employee, except as
contemplated by this Agreement or to the extent required by applicable law or
the terms of a collective bargaining agreement, (iv) increase the benefits
payable under any existing severance or termination pay policies or employment
agreements, (v) enter into any employment, deferred compensation or other
similar agreement (or amendment to any such existing agreement) or (vi) take any
action to accelerate the vesting of any stock-based compensation (other than
carrying out the transactions contemplated by this Agreement).

      (l) Not amend its certificate of incorporation or by-laws or equivalent
documents.

      (m) Not (i) issue, sell, pledge, dispose of, grant, transfer, lease,

                                      -48-
<PAGE>

license, guarantee, encumber or authorize the issuance, sale, pledge,
disposition, grant, transfer, lease, license, guarantee or encumbrance of any of
its capital stock (except upon exercise of options which are outstanding on the
date of this Agreement as disclosed by the Company in Exhibit 3.1-F or in
payment of directors fees in accordance with past practice under the terms of
the Director Stock Ownership Plan for those directors who have elected prior to
June 30, 2000 to receive their fees in stock) or any options, warrants, rights
of any kind to acquire such capital stock or convertible or exchangeable
securities (other than automatic annual stock option grants under the Company's
Non-Employee Directors' Option Plan, if the Effective Time is after December 31,
2000, in an aggregate amount not to exceed 70,000 shares of Company Common
Stock) or (ii) split, combine, or reclassify its capital stock or amend any
material term of any outstanding security.

      (n) Not file any income Tax Return other than in the ordinary course of
business and consistent with past practice, make any Tax election, settle or
compromise any Tax liability or change any method of accounting for Tax
purposes.

      (o) Not terminate, cancel or request any material change in, or agree to
any material change in, any Company Significant Agreement, or waive any material
rights (including any rights under confidentiality agreements) other than in the
ordinary course of business, consistent with past practice.

      (p) Not make or authorize any capital expenditure, other than capital
expenditures that are not, in the aggregate, in excess of $50,000 for the
Company and its subsidiaries taken as a whole (it being understood that
purchases of assets in the ordinary course of business by C-BASS or other
subsidiaries do not, for the purposes of this Agreement, constitute capital
expenditures).

                                      -49-
<PAGE>

      (q) Not change any of its investment policies or any of the accounting
principles, practices, methods or policies (including any reserving methods,
practices or policies) used by it, except as may be required as a result of a
change in law, GAAP, SAP or Regulation S-X promulgated under the Securities Act
and Exchange Act.

      (r) Not pay, discharge or satisfy any material 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 prior to the date hereof in
the consolidated financial statements (or the notes thereto) of the Company and
its subsidiaries or incurred thereafter in the ordinary course of business
consistent with past practice.

      (s) Not enter into any amendment to any reinsurance agreement (including
the proposed amendments referred to in Exhibit 3.1-C).

      (t) Not take any action that would or would reasonably be expected to make
any representation and warranty of the Company hereunder untrue in any material
respect at, or as of any time prior to, the Effective Time, or result in any
condition to the obligation of the parties hereto to consummate the Merger set
forth in Article V not being satisfied.

      (u) Not authorize or enter into any agreement, or commit or resolve, to
take any of the actions referred to in Sections 4.1(c) through (t) above.

      4.2 PARENT'S ACTIVITIES UNTIL EFFECTIVE TIME. From the date of this
Agreement to the Effective Time, or such earlier time as this Agreement is
terminated in accordance with Article VI, Parent will, and will cause each of
its subsidiaries to:

      (a) Operate its business in the ordinary course and in a manner consistent
with past practices (PROVIDED, HOWEVER, that Parent may engage in any
acquisition, merger or similar

                                      -50-
<PAGE>

transaction if the Board of Directors of Parent determines that such
acquisition, merger or similar transaction is in the best interest of the
shareholders of Parent).

      (b) Use reasonable best efforts to maintain the goodwill of its business
and the continued employment of its executives and other employees and to
maintain good relationships with the vendors, supplies, contractors and others
with which it does business.

      (c) Comply in all material respects with all applicable laws and
regulations of Governmental Entities.

      (d) Not amend its certificate of incorporation or by-laws.

      (e) Not take any action that would or would reasonably be expected to make
any representation and warranty of the Company hereunder untrue in any material
respect at, or as of any time prior to, the Effective Time, or result in any
condition to the obligation of the parties hereto to consummate the Merger set
forth in Article V not being satisfied.

      (f) Not authorize or enter into any agreement, or commit, to take any of
the actions referred to in Sections 4.2(c) through (e) above.

      4.3 HSR ACT FILINGS. The Company and Parent will each make as promptly as
practicable the filing it is required to make under the HSR Act with regard to
the transactions which are the subject of this Agreement and each of them will
use reasonable best efforts (including providing information to the Federal
Trade Commission and the Department of Justice) to cause the waiting periods
required by the HSR Act to be terminated or to expire as promptly as
practicable. The Company and Parent will each provide information and cooperate
in all other respects to assist and cooperate with the other of them in making
its filing under the HSR Act.

                                      -51-
<PAGE>

      4.4 LICENSES AND PERMITS. The Company and Parent will each, as promptly as
practicable, file all applications and use reasonable best efforts to obtain all
Permits of Governmental Entities (including approvals of transfers of Permits
and of a change in control of the Company and its subsidiaries) which are
necessary to enable the Company to effectuate the Merger and the other
transactions contemplated hereby and to enable the Company and its subsidiaries
to continue to conduct their respective businesses after the Effective Time
substantially as they are being conducted immediately before the Effective Time.

      4.5 REGISTRATION STATEMENT, PROXY STATEMENTS AND SHAREHOLDERS MEETINGS.
(a) Parent will file with the SEC as promptly as reasonably practicable a
registration statement under the Securities Act (the "Registration Statement")
on Form S-4 (or whatever other form may be applicable) with respect to the
issuance of the shares of Parent Common Stock which will be included in the
Merger Consideration, and Parent will use its reasonable best efforts to cause
the Registration Statement to become effective as promptly as reasonably
practicable. The Registration Statement will include a joint proxy
statement/prospectus, which will include the Parent proxy statement described in
Section 4.5(f) and the Company proxy statement described in Section 4.5(g).

      (b) Parent will give lawyers, accountants and other representatives of the
Company reasonable access during normal business hours to the relevant books,
records and personnel of Parent and its subsidiaries which will be useful to
assure them that the disclosures about Parent and its subsidiaries in the
Registration Statement or in documents incorporated by reference into the
Registration Statement are complete and accurate.

      (c) The Company will supply to Parent all information about the Company
and its subsidiaries which Parent is required to include in the Registration
Statement, including

                                      -52-
<PAGE>

consolidated financial statements of the Company and its subsidiaries at
December 31, 1999 and for the three years ended on that date which have been
audited by Deloitte & Touche LLP, and any other required financial statements of
the Company and its subsidiaries, and in all other respects cooperate with
Parent in its efforts to cause the Registration Statement to become effective as
promptly as practicable, including giving lawyers, accountants and other
representatives of Parent reasonable access during normal business hours to the
books, records and personnel of the Company and its subsidiaries which will be
useful to assure them that the disclosures about the Company and its
subsidiaries in the Registration Statement or in documents incorporated by
reference into the Registration Statement are complete and accurate.

      (d) The Company represents and warrants to Parent that the information
about the Company and its subsidiaries which the Company provides for inclusion
in the Registration Statement will be complete and accurate in all material
respects and will not include a misstatement of a material fact or omit to state
any material facts necessary to make the statements about the Company and its
subsidiaries included in the Registration Statement, in light of the
circumstances under which they are made, not misleading.

      (e) Parent represents and warrants to the Company that the information
about Parent and its subsidiaries included in the Registration Statement will be
complete and accurate in all material respects and will not include a
misstatement of a material fact or omit to state any material facts necessary to
make the statements included in the Registration Statement, in light of the
circumstances under which they are made, not misleading.

      (f) Parent will (i) file with the SEC as promptly as practicable a proxy
statement (which may be included in the Registration Statement) relating to a
meeting of its shareholders at which they will be asked to vote upon the
issuance of Parent Common Stock in

                                      -53-
<PAGE>

the Merger, (ii) use its best efforts to cause review of that proxy statement by
the SEC staff to be completed as promptly as practicable, (iii) subject to the
last sentence of this Section 4.5(f), include in that proxy statement the
recommendation of Parent's Board of Directors that its shareholders vote in
favor of the Merger, (iv) as promptly as practicable after the SEC staff
completes the review of the proxy statement and informs Parent that it has no
further comments about the proxy statement cause the proxy statement and a form
of proxy to be mailed to its shareholders (except that if the proxy statement
has already been mailed to Parent's shareholders, only the form of proxy and any
necessary supplements to the proxy statement need be mailed) and cause a meeting
of its shareholders to be held, as promptly as practicable after the
Registration Statement becomes effective, for the purpose of voting upon the
issuance of Parent Common Stock in the Merger (subject to any adjournments which
may be required to comply with law or with any order of a Governmental Entity).
Subject to compliance by the Board of Directors of Parent with its fiduciary
duties under applicable law as determined in good faith by the Board of
Directors of Parent after consultation with outside legal counsel, Parent will
use all reasonable best efforts to obtain the approval of its shareholders
required to consummate the transactions contemplated by this Agreement and the
Board of Directors of Parent shall recommend to the shareholders of Parent that
they approve the issuance of Parent Common Stock in the Merger.

      (g) The Company will (i) file with the SEC as promptly as practicable a
proxy statement (which may be included in the Registration Statement) relating
to a meeting of its shareholders at which they will be asked to vote upon the
Merger, (ii) use its best efforts to cause review of that proxy statement by the
SEC staff to be completed as promptly as practicable, (iii) subject to the last
sentence of this Section 4.5(g), include in that proxy statement the

                                      -54-
<PAGE>

recommendation of the Company's Board of Directors that its shareholders vote in
favor of the Merger, (iv) as promptly as practicable after the SEC staff
completes the review of the proxy statement and informs the Company that it has
no further comments about the proxy statement, cause the proxy statement and a
form of proxy to be mailed to its shareholders (except that if the proxy
statement has already been mailed to the Company's shareholders, only the form
of proxy and any necessary supplements to the proxy statement need be mailed)
and cause a meeting of its shareholders to be held, as promptly as practicable
after the Registration Statement becomes effective, for the purpose of voting
upon the Merger (subject to any adjournments which may be required to comply
with law or with any order of a Governmental Entity). Subject to compliance by
the Board of Directors of the Company with its fiduciary duties under applicable
law as determined in good faith by the Board of Directors of the Company after
consultation with outside legal counsel, the Company will use all reasonable
best efforts to obtain the approval of its shareholders required to consummate
the transactions contemplated by this Agreement and the Board of Directors of
the Company shall recommend to the shareholders of the Company that they adopt
this Agreement and approve the transactions contemplated hereby; provided,
however, that the Board of Directors of the Company may only withdraw, modify or
change its recommendation to the shareholders of the Company in connection with
an Acquisition Proposal (as defined herein) if that Acquisition Proposal is a
Superior Proposal (as defined herein).

      (h) The Company's Board of Directors will not take any action (including
terminating this Agreement except under circumstances permitted under Section
6.1) which prevents the Company's shareholders from voting upon the Merger, and
Parent's Board of Directors will not take any action (including terminating this
Agreement except under

                                      -55-
<PAGE>

circumstances permitted under Section 6.1) which prevents Parent's shareholders
from voting upon the Merger.

      4.6 NO SOLICITATION OF OFFERS; NOTICE OF PROPOSALS FROM OTHERS. (a) The
Company will not, and will not permit any of its subsidiaries, officers,
directors, employees, agents or representatives (including any investment
banker, attorney or accountant retained by it or by any of its subsidiaries)
directly or indirectly to initiate, solicit, encourage or otherwise facilitate
(including by providing information) any discussion, negotiation or inquiry or
the making of any proposal or offer with respect to a merger, reorganization,
share exchange, consolidation or similar transaction involving the Company, or a
purchase of, or tender offer for, all or any significant portion of the
Company's equity securities or assets of the Company or any of its insurance
subsidiaries on a consolidated basis other than the transactions contemplated by
this Agreement (each of these being an "Acquisition Proposal"). The Company
immediately shall cease and cause to be terminated all existing discussions or
negotiations with any persons conducted heretofore with respect to, or that
could reasonably be expected to lead to, any Acquisition Proposal.

      (b) Section 4.6(a) will not prevent the Company from, in response to an
unsolicited written Acquisition Proposal which the Company receives despite
complying with Section 4.6(a) and which the Company's Board of Directors
determines in good faith (x) after consultation with its independent financial
advisor, would result (if consummated in accordance with its terms) in a
transaction (i) for which financing, to the extent required, is then fully
committed or reasonably determined to be available by the Board of Directors of
the Company and (ii) would be more favorable over the long term to the Company's
shareholders than the Merger after taking into account the strategic benefits
anticipated to be derived from the Merger

                                      -56-
<PAGE>

and the prospects of Parent and the Company as a combined company and (y) based
upon the written advice of outside counsel that there would be a reasonable
probability that the failure to do so would be held to be a breach of the
fiduciary duties of the Company's Board of Directors under applicable law (a
"Superior Proposal"), furnishing non-public information (after receipt of an
appropriate confidentiality agreement that is no less favorable to the Company
than the Confidentiality Agreement referred to in Section 9.2 hereof between
Parent and the Company) to the person, entity or group (the "Potential
Acquiror") which makes the Acquisition Proposal and entering into discussions
and negotiations with that Potential Acquiror.

      (c) If the Company or any officer, agent or representative thereof
receives or is contacted with respect to an Acquisition Proposal, or the Company
learns that any person is contemplating soliciting tenders of Common Stock or
otherwise proposes to acquire the Company or a significant portion of its equity
securities or all or a significant portion of its and its subsidiaries' assets
if the Company's shareholders do not approve the Merger, the Company will
promptly (but in any event within 24 hours) notify Parent of that fact and
provide Parent with all information in the Company's possession regarding the
Acquisition Proposal, solicitation of tenders or other proposed transaction, and
the Company will promptly (but in any event within 24 hours), from time to time,
provide Parent with any additional material information the Company obtains
regarding the Acquisition Proposal, solicitation of tenders or other proposed
transaction.

      4.7 APPROPRIATE ACTION; CONSENTS. (a) Subject to the terms and conditions
of this Agreement, the Company and Parent shall use their reasonable best
efforts to (i) take, or cause to be taken, all actions, and do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations, to consummate the Merger and the other transactions

                                      -57-
<PAGE>

contemplated by this Agreement as promptly as practicable, (ii) cause the
conditions set forth in Sections 5.1(e) and (f) and 5.2(f) and (g) to be
satisfied, and (iii) make all necessary filings, and thereafter make any other
required submissions, with respect to this Agreement and the Merger required
under the Securities Act and the Exchange Act or any other applicable law;
PROVIDED that the Company and Parent shall cooperate with each other in
connection with the making of all such filings. The Company and Parent shall
furnish to each other all information required for any application or other
filing to be made pursuant to the rules and regulations of any applicable law in
connection with the transactions contemplated by this Agreement.

      (b) The Company and Parent shall give (or shall cause their respective
subsidiaries to give) any notices to third parties, and use (or shall cause
their respective subsidiaries to use) reasonable best efforts to obtain any
third party consents (i) necessary, proper or advisable to consummate the
transactions contemplated by this Agreement or (ii) required to prevent the
occurrence of a Material Adverse Effect on the Company or Parent as a result of
the transactions contemplated by this Agreement. In the event that either party
shall fail to obtain any third party consent described in this Section 4.7(b),
such party shall use reasonable best efforts, and shall take any such actions
reasonably requested by the other party hereto, to minimize any adverse effect
upon the Company and Parent, their respective subsidiaries and their respective
businesses resulting, or which could reasonably be expected to result after the
Effective Time, from the absence of such consent; PROVIDED, HOWEVER, that such
efforts and actions shall not affect the conditions set forth in Article V.

      4.8 COOPERATION. Parent and the Company shall cooperate with each other
(i) with respect to the timing of the respective shareholder meetings
contemplated by Sections 4.5(f) and 4.5(g) and shall use their reasonable best
efforts to hold such meetings on the same day, (ii) in

                                      -58-
<PAGE>

connection with the preparation of the Registration Statement and the joint
proxy statement to be included therein, (iii) in determining whether any action
by or in respect of, or filing with, any Governmental Entity is required, or any
actions, consents, approvals or waivers are required to be obtained from parties
to any material contracts, in connection with the consummation of the
transactions contemplated by this Agreement, and (iv) in seeking any such
actions, consents, approvals or waivers or making any such filings, furnishing
information required in connection therewith or with the Registration Statement
and the joint proxy statement included therein and seeking timely to obtain any
such actions, consents, approvals or waivers.

      4.9 COMPANY AFFILIATES; REORGANIZATION. (a) Within 30 days of the date of
this Agreement, the Company shall deliver to Parent a letter identifying all
persons whom the Company believes may be deemed to be, at the date of the
Company shareholder meeting contemplated by Section 4.5(g), an affiliate of the
Company for purposes of Rule 145 of the Securities Act (each such person, a
"Rule 145 Affiliate"). The Company shall use its reasonable best efforts to
obtain a written agreement from each person who is identified as a person who
may be deemed to be a Rule 145 Affiliate in the letter referred to above as soon
as practicable and, in any event, prior to the date of the Company shareholder
meeting, substantially in the form of Exhibit 4.9-A.

      (b) Each of the parties hereto shall use its best efforts to cause the
transactions contemplated by this Agreement to qualify, and shall not knowingly
take any action, except for the transactions contemplated by this Agreement,
that could prevent such transactions from qualifying as a reorganization within
the meaning of Section 368(a) of the Code.

      4.10 TAKEOVER STATUTES. If any takeover statute is or may become
applicable to the Merger, each of Parent and the Company shall, to the extent
they have the power to do so, take

                                      -59-
<PAGE>

such actions as are necessary so that the Merger may be consummated as promptly
as practicable on the terms contemplated hereby and otherwise act to eliminate
or minimize any adverse effects of any takeover statute on the Merger.

      4.11 CERTAIN CONTRACTS. (a) The Company will use its reasonable and
commercially practicable best efforts, in consultation and cooperation with
Parent, to obtain from (1) MBIA prior to the Effective Time its written and
irrevocable waiver for at least three years of provisions of the Comprehensive
Automatic Treaty Reinsurance Agreement, effective as of January 1, 2000 (the
"Treaty"), to the extent such provisions would permit MBIA to terminate the
Treaty or any Prior Agreement (as defined in the Treaty) on a cut-off basis as a
result of the Merger and (2) Financial Guaranty Insurance Corporation and its
affiliates ("FGIC") prior to the Effective Time its written and irrevocable
waiver of provisions of the reinsurance agreements between FGIC and subsidiaries
of the Company (the "FGIC Agreements"), to the extent such provisions would
permit FGIC to terminate the FGIC Agreements as a result of the Company's 1999
ratings downgrade. The Company represents and warrants that the waivers referred
to in this Section 4.11(a) may be obtained (1) without the Company or Parent
being required to pay or provide any consideration therefor in excess of the
amounts set forth on Exhibit 4.11-A and (2) on substantially the terms set forth
on Exhibit 4.11-A.

      (b) The Company will use its reasonable and commercially practicable best
efforts to ensure that any person or entity that is party to (or entitled to the
benefit of) a contract or agreement with Singer or any affiliate of Singer
(including any securitization vehicle) pursuant to any provision of which
obligations or liabilities of Singer could be accelerated or breached or would
arise (or providing for rights or benefits in favor of Singer or any affiliate
of Singer that could be terminated or reduced) as a result of this Agreement or
the transactions

                                      -60-
<PAGE>

contemplated hereby, including the Merger, shall have agreed in writing,
pursuant to a form of consent in form and substance reasonably acceptable to
Parent, to waive such provision.

      4.12 C-BASS. If (i) the Company terminates this Agreement under Section
6.1(b), (ii) either Parent or the Company terminates this Agreement under
Section 6.1(d) because the Effective Time did not occur on or before June 30,
2001 as a result of the material breach by Parent of this Agreement, (iii)
either Parent or the Company terminates this Agreement under Section 6.1(e)
because the issuance of Parent Common Stock pursuant to this Agreement shall
have failed to receive the requisite vote for approval at the meeting of
Parent's shareholders held in connection with this Agreement or (iv) if the
Company terminates this Agreement under Section 6.1(h), then the Company will
have the option, exercisable by a notice given to Parent within 5 business days
after the Company or Parent terminates this Agreement, to require Parent to
purchase (directly or through one or more wholly owned subsidiaries) the 45.6%
interest in C-BASS owned by Enhance Residuals, L.P. for a purchase price equal
to 90% of (A) the Purchase Price (as defined in the Partnership Interest
Purchase Agreement (the "Partnership Purchase Agreement") dated September 28,
2000 among the Company, Enhance C-Bass Residual Finance Corporation, C-BASS,
Residential Funding Corporation and RFC Acquisition Corporation) less (B) the
Purchase Price Adjustment Amount (as defined in the Partnership Purchase
Agreement), if any, calculated under the Partnership Purchase Agreement (i.e.,
90% of the sum the Purchasers would have been required to pay under Section 2.2
of the Partnership Purchase Agreement), on customary terms to be mutually
agreed, with the closing to be held on the 30th day after the option is
exercised or as soon thereafter as practicable. Such purchase shall be subject
to any prior rights of third parties and the Company shall cooperate with Parent
to ensure that any such rights are honored.

                                      -61-
<PAGE>

      4.13 Benefits. The Company shall use all commercially reasonable efforts
(1) to amend, and to obtain any required consents to amend, all the employment
agreements between the Company and all of the Senior Vice Presidents, which
Senior Vice Presidents are listed on Exhibit 4.13, to eliminate Section 5 (Tax
Reimbursement Payment) of each such agreement (each such agreement, as amended,
the "Vice President Agreement Amendments"), which Vice President Agreement
Amendments shall provide that no such employee has a right or claim for receipt
of such tax reimbursement payment, and (2) to reflect the prior agreement of
each of Richard J. Dunn and Tony M. Ettinger that the change-in-control
agreement which each is a party to expires on December 31, 2000.

      4.14 Support Agreements. Each of Daniel Gross, Wallace O. Sellers, and
Allan R. Tessler, within five days of the execution of this Agreement, shall
enter into a Shareholders Support Agreement in substantially the form as
attached hereto as Exhibit 4.14-A.

                                    ARTICLE V

                         CONDITIONS PRECEDENT TO MERGER

      5.1 Conditions to the Company's Obligations. The obligations of the
Company to complete the Merger are subject to satisfaction of the following
conditions (any or all of which may be waived by the Company to the extent
permitted by law):

      (a) The representations and warranties of Parent and Sub contained in this
Agreement will be true and correct in all material respects (except that
representations and warranties that are qualified by materiality, Material
Adverse Effect or words of similar import shall be true and correct in all
respects) on the Merger Date with the same effect as though made on that date
(except that representations or warranties which relate expressly to a specified
date or a specified period need only have been true and correct with regard to
the specified date or

                                      -62-
<PAGE>

period), and Parent will have delivered to the Company a certificate dated that
date and signed by the President or a Vice President of Parent to that effect.

      (b) Parent and Sub will have fulfilled in all material respects all their
obligations under this Agreement required to have been fulfilled on or before
the Merger Date, and Parent will have delivered to the Company a certificate
dated that date and signed by the President or a Vice President of Parent to
that effect.

      (c) No order will have been entered by any Governmental Entity and be in
force which invalidates this Agreement or restrains the Company from completing
the transactions which are the subject of this Agreement.

      (d) The Merger will have been approved by the holders of at least
two-thirds of the outstanding shares of Company Common Stock.

      (e) The applicable waiting periods under the HSR Act will have expired or
been terminated.

      (f) All licenses and approvals from all Governmental Entities (including
approvals of transfers of licenses and permits and of a change in control of the
Company and its subsidiaries) which are necessary to complete the Merger will
have been obtained, and all required approvals and consents of Government
Entities necessary to complete the Merger shall have been obtained.

      (g) The Company shall have received an opinion of Clifford Chance Rogers &
Wells LLP, counsel to the Company, dated the Merger Date, to the effect that the
Merger will qualify as a reorganization within the meaning of Section 368(a) of
the Code. In rendering its opinion, counsel may require, and rely upon facts and
representations contained in, certificates of the officers of the Company,
Parent and Sub.

                                      -63-
<PAGE>

      (h) From the date hereof through the Effective Time, no Material Adverse
Effect on Parent shall have occurred, and there shall exist no fact, development
or state of circumstances that, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect on Parent.

      5.2 Conditions to Parent's and Sub's Obligations. The obligations of
Parent and Sub to complete the Merger are subject to the following conditions
(any or all of which may be waived by Parent to the extent permitted by law):

      (a) The representations and warranties of the Company contained in this
Agreement will be true and correct in all material respects (except that
representations and warranties that are qualified by materiality, Material
Adverse Effect or words of similar import shall be true and correct in all
respects) on the Merger Date with the same effect as though made on that date
(except that representations or warranties which relate expressly to a specified
date or a specified period need only have been true and correct with regard to
the specified date or period), and the Company will have delivered to Parent a
certificate dated that date and signed by the President or a Vice President of
the Company to that effect.

      (b) The Company will have fulfilled in all material respects all its
obligations under this Agreement required to have been fulfilled on or before
the Merger Date, and the Company will have delivered to Parent a certificate
dated that date and signed by the President or a Vice President of the Company
to that effect.

      (c) No order will have been entered by any Governmental Entity and be in
force which invalidates this Agreement or restrains Parent or Sub from
completing the transactions which are the subject of this Agreement and no
action will be pending against the Company, Parent or Sub relating to the
transactions which are the subject of this Agreement

                                      -64-
<PAGE>

which presents a reasonable likelihood of resulting in an award of damages
against the Company, Parent or Sub which would have a Material Adverse Effect
after the Merger on Parent and its subsidiaries taken as a whole.

      (d) The issuance of Parent Common Stock in the Merger will have been
approved by the holders of at least a majority in voting power of the
outstanding shares of Parent Common Stock.

      (e) The Merger will have been approved by the holders of at least
two-thirds of the outstanding shares of Company Common Stock.

      (f) The applicable waiting periods under the HSR Act will have expired or
been terminated.

      (g) All licenses and approvals from all Governmental Entities (including
approvals of transfers of licenses and permits and of a change in control of the
Company and its subsidiaries) which are necessary to enable the Company and its
subsidiaries to continue to conduct their respective businesses after the
Effective Time substantially as they are being conducted immediately before the
Effective Time will have been obtained, and all required approvals and consents
of Government Entities and other third parties necessary to complete the Merger
shall have been obtained.

      (h) Parent shall have received an opinion of Wachtell, Lipton, Rosen &
Katz, special counsel to Parent, dated the Merger Date, to the effect that the
Merger will qualify as a reorganization within the meaning of Section 368(a) of
the Code. In rendering its opinion, counsel may require, and rely upon facts and
representations contained in, certificates of the officers of the Company,
Parent and Sub.

                                      -65-
<PAGE>

      (i) The waivers and consents contemplated by Section 4.11(a), Section
4.11(b) and Section 4.13 (in the case of clause (1) of Section 4.13, with
respect to any Senior Vice Presidents who will be subject to tax as a result of
Section 280G of the Code) shall have been obtained.

      (j) (1) Parent shall have received from the Company an audited balance
sheet of Singer as of September 30, 2000, audited by Deloitte & Touche LLP,
setting forth all assumptions and accounting policies related thereto, and such
assumptions and accounting policies shall be consistently applied from prior
periods, fairly presenting in all material respects the financial position of
Singer as of such date, and prepared in accordance with GAAP, which audited
balance sheet as of September 30, 2000 shall reflect a net worth of Singer,
after elimination of the $56 million indebtedness to the Company and its
subsidiaries existing at September 30, 2000 (the "Singer September 30 Net
Worth"), of at least $1.00, (2) Parent shall be reasonably satisfied that there
shall be sufficient and appropriate resources in place for Singer to fulfill its
servicing commitments, (3) the consolidated debt of the Company and its
subsidiaries (excluding C-BASS and Sherman) as of the Effective Time shall not
exceed $250,000,000, (4) the Company shall have secured (for total consideration
not to exceed $1,125,000 per year) and have in effect with respect to Asset
Guaranty Insurance Co. $75,000,000 of soft capital financing, reinsurance or a
similar facility which in any such case is sufficient to cause S&P to reaffirm
to Asset Guaranty Insurance Co.'s AA rating, and (5) the Company shall not have
made or be liable for any guarantees other than the $25,000,000 guarantee with
respect to Sherman previously disclosed to Parent (it being understood that this
subparagraph does not preclude subsidiaries from entering into suretyship or
insurance contracts or giving guarantees in the ordinary course of their
businesses consistent with past practice).

                                      -66-
<PAGE>

      (k) All of the off-balance sheet financing with respect or relating to the
assets of Singer (other than the Loan and Security Agreement, dated as of
December 22, 1997, as amended, by and among Working Capital Management Co.,
L.P., The Industrial Bank of Japan, Singer Asset Loan Receivables L.L.C., and
Singer Asset Finance Company, L.L.C., and related transaction documents (the
"Omnivore facility")) shall remain in place on comparable terms and conditions
after the Effective Time, provided, that the term of any such financing shall be
extended to match the duration or maturity of the applicable assets of Singer or
such assets shall be sold off on terms and conditions reasonably acceptable to
Parent.

      (l) From the date hereof through the Effective Time, no Material Adverse
Effect on the Company shall have occurred, and there shall exist no fact,
development or state of circumstances that, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect on the Company.


                                   ARTICLE VI

                                   TERMINATION

      6.1 Right to Terminate. This Agreement may be terminated at any time prior
to the Effective Time (whether or not the Company's or Parent's shareholders
have approved the Merger):

      (a) By mutual consent of the Company and Parent.

      (b) By the Company upon a breach of or failure to perform in any material
respect (which breach or failure cannot be or has not been cured within 30 days
after the giving of notice to Parent of such breach or failure) any
representation, warranty, covenant or agreement on the part of Parent set forth
in this Agreement, such that the conditions set forth in Sections

                                      -67-
<PAGE>

5.1(a) or (b) would not be satisfied if such breach or failure existed or were
continuing on the Merger Date.

      (c) By Parent upon a breach of or failure to perform in any material
respect (which breach or failure cannot be or has not been cured within 30 days
after the giving of notice to the Company of such breach or failure) any
representation, warranty, covenant or agreement on the part of the Company set
forth in this Agreement, such that the conditions set forth in Sections 5.2(a)
or (b) would not be satisfied if such breach or failure existed or were
continuing on the Merger Date.

      (d) By either Parent or the Company, if the Effective Time shall not have
occurred on or before June 30, 2001; provided, however, that the right to
terminate this Agreement under this Section 6.1(d) shall not be available to the
party whose failure to fulfill any obligation under this Agreement shall have
been the cause of, or resulted in, the failure of the Effective Time to occur on
or before such date.

      (e) By Parent or the Company if this Agreement shall fail to receive the
requisite vote for adoption or approval at the meeting of the Company's
shareholders or the meeting of Parent's shareholders held in connection with
this Agreement, including any adjournment or postponement thereof.

      (f) By Parent, if (i) the Board of Directors of the Company withdraws,
modifies or changes its recommendation of this Agreement in any manner adverse
to Parent or shall have resolved to do so, (ii) after receiving a bona fide
Acquisition Proposal, the Board of Directors of the Company shall have refused
promptly (but in any case within 10 business days) to affirm its recommendation
of this Agreement, (iii) the Board of Directors of the Company shall have
recommended to the shareholders of the Company an Acquisition Proposal or shall

                                      -68-
<PAGE>

have resolved to do so, or (iv) a tender or exchange offer for 15% or more of
the outstanding shares of capital stock of the Company is commenced, and the
Board of Directors of the Company fails to recommend against, or states that it
is taking no position with respect to, acceptance of such tender or exchange
offer by the Company's shareholders.

      (g) By the Company at any time during the two business-day period
commencing two days after the Determination Date (as defined herein), if both of
the following conditions are satisfied:

      (1) the Average Closing Price (as defined herein) shall be less than
$51.35; and

      (2) (i) the number obtained by dividing the Average Closing Price by the
Starting Price (such number, the "Parent Ratio") shall be less than (ii) the
number obtained by dividing the Index Price (as defined herein) on the
Determination Date by the Index Price on the Starting Date (as defined herein)
and subtracting 0.15 from such quotient (such number, the "Index Ratio");

subject to the following three sentences. If the Company elects to exercise its
termination right pursuant to the immediately preceding sentence, it shall give
prompt written notice to Parent; provided that such notice of election to
terminate may be withdrawn at any time within the aforementioned two-day period.
During the two business-day period commencing with its receipt of such notice,
Parent shall have the option of adjusting the Exchange Ratio to equal the lesser
of (i) the number equal to the quotient (rounded to the nearest
one-ten-thousandth), the numerator of which is the product of 0.80, the Starting
Price and the Exchange Ratio (as then in effect) and the denominator of which is
the Average Closing Price, and (ii) the number equal to the quotient (rounded to
the nearest one-ten-thousandth), the numerator of which is the Index

                                      -69-
<PAGE>

Ratio multiplied by the Exchange Ratio (as then in effect) and the denominator
of which is the Parent Ratio. If Parent makes an election contemplated by the
preceding sentence, within such two business-day period, it shall give written
notice to the Company of such election and the revised Exchange Ratio, whereupon
no termination shall have occurred pursuant to this Section 6.1(g) and this
Agreement shall remain in effect in accordance with its terms (except as the
Exchange Ratio shall have been so modified), and any references in this
Agreement to "Exchange Ratio" shall thereafter be deemed to refer to the
Exchange Ratio as adjusted pursuant to this Section 6.1(g). For purposes of this
Section 6.1(g), the following terms shall have the meanings indicated:

      "Average Closing Price" means the average of the last reported sale prices
per share of Parent Common Stock as reported on the New York Stock Exchange
consolidated tape (as reported in The Wall Street Journal or, if not reported
therein, in another mutually agreed upon authoritative source) for the 20
consecutive trading days on the New York Stock Exchange ending at the close of
trading on the Determination Date.

      "Determination Date" means the business day prior to the date of the
special meeting of the Company's shareholders.

      "Index Group" means the group of each of the 20 insurance companies listed
below, the common stock of all of which shall be publicly traded and as to which
there shall not have been, since the Starting Date and before the Determination
Date, an announcement of a proposal for such company to be acquired or for such
company to acquire another company or companies in transactions with a value
exceeding 25% of the acquiror's market capitalization as of the Starting Date.
In the event that the common stock of any such company ceases to be publicly
traded or any such announcement is made with respect to any such company, such
company will be

                                      -70-
<PAGE>

removed from the Index Group, and the weights redistributed proportionately for
purposes of determining the Index Price. The 20 insurance companies and the
weights attributed to them are as follows:

<TABLE>
<CAPTION>

COMPANY                                                               WEIGHTING
-------                                                               ---------
<S>                                                                    <C>
American International Group, Inc.                                       5%
Fannie Mae                                                               5%
Freddie Mac                                                              5%
Allstate Corporation                                                     5%
Hartford Financial Services Group, Inc.                                  5%
Chubb Corporation                                                        5%
St. Paul Companies, Inc.                                                 5%
XL Capital Ltd                                                           5%
Ace Limited                                                              5%
CNA Financial Corporation                                                5%
MBIA Inc.                                                                5%
MGIC Investment Corporation                                              5%
Cincinnati Financial Corporation                                         5%
Ambac Financial Group, Inc.                                              5%
Countrywide Credit Industries, Inc.                                      5%
PMI Group Inc.                                                           5%
Old Republic International Corporation                                   5%
W.R. Berkley Corporation                                                 5%
Ohio Casualty Corporation                                                5%
Triad Guaranty Inc.                                                      5%
                                                                       ------
                                                                       100%
</TABLE>


      "Index Price" on a given date means the weighted average (weighted in
accordance with the factors listed above) of the closing prices of the companies
comprising the Index Group.

      "Starting Date" means November 13, 2000.

      "Starting Price" shall mean $64.19, which was the last reported sale price
per share of Parent Common Stock on the Starting Date, as reported on the New
York Stock Exchange consolidated tape (as reported in The Wall Street Journal
or, if not reported therein, in another mutually agreed upon authoritative
source).

                                      -71-
<PAGE>

      If any company belonging to the Index Group or Parent declares or effects
a stock dividend, reclassification, recapitalization, split-up, combination,
exchange of shares or similar transaction between the Starting Date and the
Determination Date, the prices for the common stock of such company or Parent
shall be appropriately adjusted for the purposes of applying this Section
6.1(g).

      (h) By the Company if the Board of Directors of Parent withdraws, modifies
or changes its recommendation of this Agreement in any manner adverse to the
Company or shall have resolved to do so.

      (i) By Parent, if Asset Guaranty Insurance Co. shall be (1) downgraded,
(2) placed on credit watch or (3) placed on credit review with negative
implications by S&P.

      6.2 Manner of Terminating Agreement. If at any time the Company or Parent
has the right under Section 6.1 to terminate this Agreement, it can terminate
this Agreement by a written notice to the other of them that it is terminating
this Agreement.

      6.3 Effect of Termination. If this Agreement is terminated pursuant to
Section 6.1, after this Agreement is terminated, neither party will have any
further rights or obligations under this Agreement other than the Company's
obligations under Section 8.1 and under the Confidentiality Agreement described
in Section 9.2. Nothing contained in this Section will, however, relieve either
party of liability for any breach of this Agreement which occurs before this
Agreement is terminated.


                                   ARTICLE VII

                               ABSENCE OF BROKERS

      7.1 Representations and Warranties Regarding Brokers and Others. The
Company and Parent each represents and warrants to the other of them that no
person acted as a broker, a

                                      -72-
<PAGE>

finder or in any similar capacity in connection with the transactions which are
the subject of this Agreement, except that Goldman, Sachs & Co. Incorporated
acted as a financial advisor to Parent and Morgan Stanley Dean Witter acted as a
financial advisor to the Company. Parent will pay all the fees and other charges
of Goldman, Sachs & Co. Incorporated and the Company will pay all the fees and
other charges of Morgan Stanley Dean Witter. The Company indemnifies Parent and
Sub against, and agrees to hold each of them harmless from, all losses,
liabilities and expenses (including reasonable fees and expenses of counsel and
costs of investigation) incurred because of any claim by anyone for compensation
as a broker, a finder or in any similar capacity by reason of services allegedly
rendered to the Company in connection with the transactions which are the
subject of this Agreement. Parent indemnifies the Company against, and agrees to
hold it harmless from, all losses, liabilities and expenses (including, but not
limited to, reasonable fees and expenses of counsel and costs of investigation)
incurred because of any claim by anyone for compensation as a broker, a finder
or in any similar capacity by reason of services allegedly rendered to Parent or
Sub in connection with the transactions which are the subject of this Agreement.


                                  ARTICLE VIII

                                OTHER AGREEMENTS

      8.1 Payment to Parent. (a) The Company and Parent agree that if (i) (w)
the Company shall fail to receive the requisite vote for adoption of this
Agreement at the meeting of the Company's shareholders, (x) Parent or the
Company shall terminate this Agreement pursuant to Section 6.1(e), (y) prior to
the time of the meeting of the Company's shareholders meeting a bona fide
Acquisition Proposal shall have become the subject of a public announcement or
any person shall have publicly announced an intention to make a proposal or
offer relating thereto

                                      -73-
<PAGE>

and (z) within 12 months of such termination the Company enters into a
definitive agreement with any third party with respect to or consummates any
transaction contemplated by the definition of "Acquisition Proposal", or (ii)
Parent shall terminate this Agreement pursuant to Section 6.1(f) or Section
6.1(c) (in the case of Section 6.1(c), as a result of a material breach by the
Company of its obligations under Section 4.5(g) or (h) or as a result of a
willful breach by the Company of its obligations under Section 4.6), the Company
shall pay Parent an amount equal to $20,000,000; provided, however, that such
amount shall equal $25,000,000 if (x) in the case of clause (i) above, such
agreement shall be made or such transaction consummated with, or (y) in the case
of clause (ii) above, an Acquisition Proposal shall be made by, one or more of
American International Group, Inc., MGIC Investment Corporation, PMI Group Inc.,
Old Republic International Corporation or General Electric Company or any of
their affiliates. Such payment shall be made (A) in the case of a termination
contemplated by clause (i), prior to or concurrently with (and as a condition
to) entering into such definitive agreement or, if earlier, consummating such
transaction, or (B) in the case of a termination contemplated by clause (ii),
promptly (but in any event within 2 business days) following the receipt by the
Company of written notice of such termination from Parent.

      (b) The Company and Parent agree that the payment provided for in Section
8.1(a) shall be the sole and exclusive remedy of Parent upon a termination of
this Agreement contemplated by Section 8.1(a), provided that nothing herein
shall relieve any party from liability for the willful breach of any of its
representations and warranties or the breach of any of its covenants or
agreements set forth in this Agreement.

                                      -74-
<PAGE>

      (c) Any payment required to be made pursuant to Section 8.1(a), Section
8.1(e), Section 8.1(f) or Section 8.1(g) shall be made by wire transfer of
immediately available funds to an account designated by Parent.

      (d) In the event that the Company shall fail to pay the amount
contemplated by Section 8.1(a), Section 8.1(e), Section 8.1(f) or Section
8.1(g)when due, such amount shall be increased to include the costs and expenses
incurred by Parent (including, without limitation, fees of counsel) in
connection with the collection and enforcement of this Section 8.1.

      (e) In the event that (i) the Company shall fail to obtain the waivers and
consents referred to in Section 5.2(i) and the Agreement is terminated by Parent
pursuant to either Section 6.1(c) or Section 6.1(d), or (ii) the Agreement is
terminated by Parent pursuant to Section 6.1(c), then the Company shall pay
Parent an amount equal to the actual out of pocket fees and expenses incurred by
Parent in connection with this Agreement and the transactions contemplated
hereby up to a maximum of $5,000,000.

      (f) In the event that the Agreement is terminated by the Company pursuant
to Section 6.1(b), then Parent shall pay the Company an amount equal to the
actual out of pocket fees and expenses incurred by the Company in connection
with this Agreement and the transactions contemplated hereby up to a maximum of
$5,000,000.

      (g) In the event that the Agreement is terminated by Parent pursuant to
Section 6.1(i), then the Company shall pay Parent an amount equal to $7,500,000.

      8.2 Indemnification for Prior Acts. The Surviving Corporation will (i)
honor, and will not amend or modify for a period of not less than six years
after the Effective Time, any obligation of the Company to indemnify present and
former directors, officers or employees of the Company or its subsidiaries
(each, an "Indemnified Party") with respect to matters which

                                      -75-
<PAGE>

occurred or occur prior to the Effective Time and (ii) keep in force for at
least six years after the Effective Time directors and officers liability
insurance, insuring the persons who were directors or officers of the Company at
or before the Effective Time, which provides coverage which is at least as broad
as that under the policy which is in force immediately before the Effective
Time, and is in an amount at least as great (and with a deductible retention at
least as small) as that under the policy which is in force immediately before
the Effective Time (or such lesser amount as is the maximum amount which can be
obtained for an annual premium equal to 150% of the annual premium for the
policy which is in force immediately before the Effective Time).

      8.3 Beneficiaries. The provisions in Section 8.2 are intended to be for
the benefit of, and will be enforceable by, the respective directors, officers
and employees of the Company or its subsidiaries to which it relates and their
heirs and representatives and will be binding upon the Surviving Corporation.


                                   ARTICLE IX

                                     GENERAL

      9.1 Expenses. Except as specifically provided in this Agreement, the
Company and Parent will each pay its own expenses (and Parent will pay Sub's
expenses) in connection with the transactions which are the subject of this
Agreement, including legal fees.

      9.2 Access to Properties, Books and Records. From the date of this
Agreement until the Effective Time, the Company will, and will (to the extent it
has the power to do so) cause each of its subsidiaries to, give representatives
of Parent full access during normal business hours to all of their respective
properties, books and records and personnel and shall provide reasonable
cooperation in connection with their review and investigation. The information
Parent or its representatives receive as a result of their access to the
properties, books and records

                                      -76-
<PAGE>

of the Company or its subsidiaries will be subject to the Confidentiality
Agreement dated May 19, 2000 between Parent and the Company, which
Confidentiality Agreement will remain in effect until the Effective Time. No
investigation by Parent or other information received by Parent shall operate as
a waiver or otherwise affect any representation, warranty or agreement given or
made by the Company hereunder.

      9.3 Press Releases. The Company and Parent will consult with each other
before issuing any press release or otherwise making any public statement with
respect to this Agreement or the Merger, except that nothing in this Section 9.3
will prevent either party from making any statement when and as required by law
or by the rules of any securities exchange or securities quotation or trading
system on which securities of that party or an affiliate are listed, quoted or
traded.

      9.4 Entire Agreement. This Agreement, the Confidentiality Agreement
described in Section 9.2 and the documents to be delivered in accordance with
this Agreement contain the entire agreement among the Company, Parent and Sub
relating to the transactions which are the subject of this Agreement and those
other documents, all prior negotiations, understandings and agreements between
the Company and either Parent or Sub are superceded by this Agreement and those
other documents, and there are no representations, warranties, understandings or
agreements concerning the transactions which are the subject of this Agreement
of those other documents other than those expressly set forth in this Agreement
or those other documents.

      9.5 Effect of Disclosures. Any information disclosed by a party in any
representation or warranty contained in this Agreement (including exhibits to
this Agreement) will be treated as having been disclosed in connection with each
representation and warranty made by that party in this Agreement, provided that
it is apparent on its face from such disclosure that it also applies

                                      -77-
<PAGE>

to the other representations and warranties (or exhibits numbered to correspond
to such other representations and warranties) to which such information relates.

      9.6 Captions; Definitions. The captions of the articles and paragraphs of
this Agreement are for reference only, and do not affect the meaning or
interpretation of this Agreement. The definitions herein shall apply equally to
both the singular and the plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include," "includes," and "including"
shall be deemed to be followed by the phrase "without limitation."

      9.7 Prohibition Against Assignment; Benefit. Except in connection with a
change in structure permitted by Section 1.1(b), neither this Agreement nor any
right of any party under it may be assigned. Subject to the preceding sentence,
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns. Notwithstanding
anything contained in this Agreement to the contrary, except as otherwise
expressly set forth herein, nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.

      9.8 Notices and Other Communications. Any notice or other communication
under this Agreement must be in writing and will be deemed given when it is
delivered in person or sent by facsimile (with proof of receipt at the number to
which it was required to be sent), on the business day after the day on which it
is sent by a major nationwide overnight delivery service, or on the third
business day after the day on which it is mailed by first class mail from within
the United States of America, to the following addresses (or such other address
as may be specified after the date of this Agreement by the person to which the
notice or communication is sent):

                                      -78-
<PAGE>

      If to the Company:

            Enhance Financial Services Group Inc.
            335 Madison Avenue
            New York, NY  10017
            Attention:  General Counsel
            Facsimile:  212-682-5377

      with a copy to:

            David W. Bernstein
            Clifford Chance Rogers & Wells LLP
            200 Park Avenue
            New York, New York  10166
            Facsimile:  212-878-8375

      If to Parent or Sub:

            Radian Group Inc.
            1601 Market Street
            Philadelphia, PA 19103
            Attn:  General Counsel
            Facsimile:  215-405-9160

      with a copy to:

            Trevor S. Norwitz
            Wachtell, Lipton, Rosen & Katz
            51 West 52nd Street
            New York, New York  10019
            Facsimile:  212-403-2000

      9.9 GOVERNING LAW. This Agreement will be governed by, and construed
under, the substantive laws of the State of New York, without giving effect to
the conflict of laws principles thereof that would apply the laws of any other
jurisdiction.

      9.10 AMENDMENTS. This Agreement may be amended by, but only by, a document
in writing signed by both the Company and Parent.

      9.11 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, some of which may be signed by fewer than all the parties or may
contain facsimile copies of

                                      -79-
<PAGE>

pages signed by some of the parties. Each of those counterparts will be deemed
to be an original copy of this Agreement, but all of them together will
constitute one and the same agreement.

                                      -80-
<PAGE>

      IN WITNESS WHEREOF, the Company, Parent and Sub have executed this
Agreement, intending to be legally bound by it, on the day shown on the first
page of this Agreement.

                                          ENHANCE FINANCIAL SERVICES GROUP
                                          INC.


                                          By:  /s/ Daniel Gross
                                               ---------------------------------
                                               Name: Daniel Gross
                                               Title: President and CEO


                                          RADIAN GROUP INC.

                                          By:  /s/ Frank Filipps
                                               ---------------------------------
                                               Name:Frank Filipps
                                               Title: CEO


                                          GOLD ACQUISITION CORPORATION


                                          By:  /s/ Frank Filipps
                                               ---------------------------------
                                               Name: Frank Filipps
                                               Title:  President
<PAGE>

                                  EXHIBIT 4.9-A

                        FORM OF ENHANCE AFFILIATE LETTER

                                     , 2000


Radian Group Inc.
1601 Market Street
Philadelphia, PA  19103
Ladies and Gentlemen:

      The undersigned, a holder of shares of common stock, par value $.10 per
share ("ENHANCE COMMON STOCK"), of Enhance Financial Services Group Inc., a New
York corporation ("ENHANCE"), is entitled to receive in connection with the
merger (the "MERGER") of GOLD Acquisition Corporation ("SUB"), a New York
corporation and a wholly owned subsidiary of Radian Group Inc., a Delaware
corporation ("RADIAN"), with and into Enhance, securities of Radian (the "RADIAN
SECURITIES"). The undersigned acknowledges that the undersigned may be deemed an
"AFFILIATE" of Enhance as the term affiliate is defined under Rule 144, and
interpreted for purposes of paragraphs (c) and (d) of Rule 145 ("RULE 145") of
the rules and regulations of the Securities and Exchange Commission (the "SEC")
promulgated under the Securities Act of 1933, as amended (the "SECURITIES ACT").

      If in fact the undersigned were an affiliate under the Securities Act, the
undersigned's ability to sell, assign or transfer the Radian Securities received
by the undersigned in exchange for any shares of Enhance Common Stock in
connection with the Merger may be restricted unless such transaction is
registered under the Securities Act or an exemption from such registration is
available. The undersigned understands that such exemptions are limited and has
discussed with its counsel or counsel for Enhance the nature and condition of
such exemptions to the extent it believed necessary. The undersigned understands
that neither Radian nor Enhance will be required to maintain the effectiveness
of any registration statement under the Securities Act for the purposes of
resale of Radian Securities by the undersigned.

      The undersigned hereby represents to and covenants with Radian that the
undersigned will not, directly or indirectly, sell, assign, transfer, or
otherwise dispose of any of the Radian Securities issued to the undersigned in
exchange for shares of Enhance Common Stock in connection with the Merger except
(i) pursuant to an effective registration statement under the Securities Act,
(ii) in conformity with the volume and other limitations of Rule 145 or (iii) in
a transaction which, in the opinion of the general counsel of Radian or other
counsel reasonably satisfactory to Radian or as described in a "no-action" or
interpretive letter from the Staff of the SEC specifically issued with respect
to a transaction to be engaged in by the undersigned, is not required to be
registered under the Securities Act.

      In the event of a sale or other disposition by the undersigned of Radian
Securities pursuant to Rule 145, the undersigned will supply Radian with
evidence of compliance with such Rule, in the form of a letter in the form of
Annex I hereto. The undersigned understands that Radian may instruct its
transfer agent to withhold the transfer of any Radian Securities owned by
<PAGE>

the undersigned, but that upon receipt of such evidence of compliance or the
availability of an exemption from registration under the Securities Act, the
transfer agent shall effectuate the transfer of Radian Securities sold as
indicated in the letter.

      The undersigned acknowledges and agrees that the legend set forth below
may be placed on certificates representing Radian Securities received by the
undersigned in connection with the Merger or held by a transferee thereof, which
legend may be removed by delivery of substitute certificates upon receipt of an
opinion in form and substance reasonably satisfactory to Radian from independent
counsel reasonably satisfactory to Radian to the effect that such legend is no
longer required for purposes of the Securities Act.

      There may be placed on the certificates for Radian Securities issued to
the undersigned, or any substitutions therefor, a legend stating in substance:


      "The shares represented by this certificate were issued in a transaction
      to which Rule 145 promulgated under the Securities Act of 1933 applies.
      The shares have not been acquired by the holder with a view to, or for
      resale in connection with, any distribution thereof within the meaning of
      the Securities Act of 1933. The shares may not be sold, pledged or
      otherwise transferred except in accordance with an exemption from the
      registration requirements of the Securities Act of 1933."

      The undersigned acknowledges that (i) the undersigned has carefully read
this letter and understands the requirements hereof and the limitations imposed
upon the distribution, sale, transfer or other disposition of Radian Securities
and (ii) the receipt by Radian of this letter is an inducement to Radian's
obligations to consummate the Merger.
<PAGE>

      If you are in agreement with the foregoing, please so indicate by signing
below and returning a copy of this letter to the undersigned, at which time this
letter shall become a binding agreement between us.


                                      Very truly yours,


                                      --------------------------
                                      Name:
                                      Date:

Agreed and accepted this
____ day of _____________, 2000

RADIAN GROUP INC.


By _________________________
   Name:
   Title:
<PAGE>

                                                                         Annex I

                             ______________ __, 200_


Radian Group Inc.
1601 Market Street
Philadelphia, PA  19103
Attention:  Corporate Secretary

      On ______ __, 200_, the undersigned sold the securities ("Securities") of
Radian Group Inc. ("RADIAN") described below in the space provided for that
purpose. The Securities were acquired by the undersigned in connection with the
merger of GOLD Acquisition Corporation, a New York corporation and wholly owned
subsidiary of Radian, with and into Enhance Financial Services Group Inc., a New
York corporation.

      Based upon the most recent report or statement filed by Radian with the
Securities and Exchange Commission, the Securities sold by the undersigned were
within the prescribed limitations set forth in paragraph (e) of Rule 144
promulgated under the Securities Act of 1933, as amended (the "ACT").

      The undersigned hereby represents to Radian that the Securities were sold
in "brokers' transactions" within the meaning of Section 4(4) of the Act or in
transactions directly with a "market maker" as that term is defined in Section
3(a)(38) of the Securities Exchange Act of 1934, as amended. The undersigned
further represents to Radian that the undersigned has not solicited or arranged
for the solicitation of orders to buy the Securities, and that the undersigned
has not made any payment in connection with the offer or sale of the Securities
to any person other than to the broker who executed the order in respect of such
sale.


                                    Very truly yours,




DESCRIPTION OF SECURITIES SOLD: