STOCK PURCHASE AGREEMENT


                                 by and between


                        FIREMAN'S FUND INSURANCE COMPANY,


                                       and


                            ORION CAPITAL CORPORATION


                       REGARDING THE SALE OF THE SHARES OF
                             WM. H. MCGEE & CO., INC










                              Dated: March 9, 1999




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<PAGE>




                            STOCK PURCHASE AGREEMENT


     AGREEMENT  (the  "Agreement"),  dated March 9, 1999,  by and between  ORION
CAPITAL CORPORATION, a Delaware corporation ("Seller"), as Seller, and FIREMAN'S
FUND INSURANCE COMPANY, a California corporation ("Buyer"), as Buyer,

                              W I T N E S S E T H:

     WHEREAS, Wm. H. McGee & Co., Inc. ("McGee") is a corporation duly organized
and validly existing under the laws of the State of New York, having outstanding
capital stock consisting of 4,400 shares of common stock, without par value (the
"Common Stock"); and

     WHEREAS,  Seller owns 100% of the Common Stock,  all of which is to be sold
to and purchased by Buyer pursuant hereto;

     NOW, THEREFORE, the parties hereto agree as follows, intending that defined
terms used herein shall have the meanings set forth in Article XII: I.

                                 THE TRANSACTION

     Section 1.1. Purchase of Common Stock. Upon the terms and subject to all of
the conditions set forth herein, Seller agrees to sell to Buyer and Buyer agrees
to acquire from Seller on the Closing Date 100% of the Common Stock.
                               

     Section  1.2.  Consideration.  In full  consideration  for the  sale of the
Common  Stock by Seller to Buyer  provided for herein,  together  with the other
undertakings  and commitments  made and delivered by Seller to Buyer herein,  at
the Closing  Buyer shall  deliver to Seller the sum of  Fifty-Nine  Million Four
Hundred Thousand and 00/100  ($59,400,000.00)  Dollars in immediately  available
funds by wire transfer to the account designated by Seller. 

     Section 1.3.  Management  Fee. In full  consideration  for the provision of
management  services by SICH to McGee and its  Subsidiaries  for the period from
January  1, 1999 until  Closing,  at the  Closing  Buyer  shall pay to SICH,  in
immediately  available funds by wire transfer to the account designated by SICH,
an aggregate  amount equal to (a) if the Closing occurs on or prior to April 30,
1999,  Eight Hundred  Thousand and 00/100 Dollars  ($800,000.00),  or (b) if the
Closing occurs after April 30, 1999,  the sum of (i) Eight Hundred  Thousand and
00/100 Dollars ($800,000.00),  plus (ii) Two Hundred Thousand and 00/100 Dollars
($200,000.00)  for each full or partial  calendar  month  during the period from
April 30, 1999 through and including the Closing Date. 

                                      II.

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<PAGE>

                                   THE CLOSING

                  Section 2.1.  Closing.

     (a) The closing of the  transactions  provided  for herein (the  "Closing")
shall occur at the offices of  Cummings & Lockwood  at  CityPlace  I, 185 Asylum
Street,  36th Floor,  Hartford,  Connecticut  or at such other place as shall be
determined by Buyer and Seller, on April 30, 1999;  provided,  however,  that if
any of the  conditions  provided  for in Articles  VII and VIII hereof shall not
have  been met or  waived  by  Seller  or by  Buyer,  as the case may be, by the
scheduled Closing Date, then the party which is unable to meet such condition or
conditions  shall be  entitled  to  postpone  the Closing by notice to the other
party to such effect  until such  condition  or  conditions  shall have been met
(which such party will seek to cause to happen at the earliest practicable date)
or waived (such  postponed  Closing to be held on five business days notice from
the  postponing  party  to  the  other  party),  but  in  no  event  shall  such
postponements extend past June 30, 1999. At the Closing,  Seller and Buyer shall
deliver, or cause to be delivered,  to the other such certificates,  receipts or
other documents or instruments,  in addition to those specifically  provided for
herein,  as may  reasonably  be requested by the other and as are  customary for
transactions of the type contemplated  hereunder.  The date on which the Closing
occurs is hereinafter referred to as the "Closing Date."

     (b) At the Closing,  Seller shall deliver to Buyer: (i) stock  certificates
representing  all of the Common Stock,  (ii) a mutual release between Seller and
its  affiliates  (other than SICH) and McGee in the form of Exhibit A-1; (iii) a
mutual release  between SICH and McGee in the form of Exhibit A-2; (iv) a mutual
release  between  CI and McGee in the form of  Exhibit  A-3  (collectively,  the
"Releases");  and (v) a noncompetition  agreement in the form attached hereto as
Exhibit B (the "Noncompetition Agreement").

                                      III.

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<PAGE>

                    REPRESENTATIONS AND WARRANTIES OF SELLER

                  Seller represents and warrants to Buyer that:

                  Section  3.1.  Organization  and  Good  Standing.  McGee  is a
corporation  duly  organized and existing and in good standing under the laws of
the State of New York, has the corporate power to carry on its business as it is
now  being  conducted  and  is  duly  qualified  to  do  business  as a  foreign
corporation in each jurisdiction in which such qualification is required, except
where the failure so to qualify would not have a material  adverse effect on the
business, properties,  financial condition or results of operations of McGee and
its Subsidiaries  taken as a whole or the ability of any of them to carry on the
business of the Pool as it is carried on by McGee and its Subsidiaries  taken as
a whole (a "Material Adverse Effect"). Each Subsidiary of McGee is a corporation
duly  organized  and  existing  and in  good  standing  under  the  laws  of its
jurisdiction  of  incorporation  and has the  corporate  power  to  carry on its
business as it is now being  conducted and is duly qualified to do business as a
foreign  corporation  in  each  jurisdiction  in  which  such  qualification  is
required,  except  where the  failure  so to  qualify  would not have a Material
Adverse Effect.  Seller has heretofore made available to Buyer true and complete
copies of (a) the Certificate of Incorporation  and By-laws of McGee and each of
its Subsidiaries,  (b) (i) all minutes of the meetings and copies of resolutions
of  stockholders,  the board of  directors  and each  committee  of the board of
directors of McGee since June 30, 1995, and (ii) to the Seller's Knowledge,  all
minutes of the meetings and copies of resolutions of stockholders,  the board of
directors and each  committee of the board of directors of McGee and each of its
Subsidiaries held since the date of its incorporation and organization and prior
to June 30, 1995 and all powers of attorney,  if any,  issued by McGee or any of
its Subsidiaries which are presently outstanding and in effect.

                  Section 3.2.  Capitalization.  McGee has an authorized capital
stock consisting of 11,000 shares of common stock,  without par value, of which,
4,400  shares are issued and  outstanding.  No shares of McGee  Common Stock are
held in treasury.  All of the Common Stock is duly  authorized,  validly issued,
fully paid and  non-assessable  and is owned by Seller as set forth in  Schedule
3.2 hereto,  free and clear  (except as otherwise  shown on Schedule 3.2) of any
and all claims, liens,  restrictions,  pledges, charges, rights of third parties
or other encumbrances. Neither Seller nor McGee (a) is a party to or is bound by
any agreement, or has since June 30, 1995 made any commitment,  to sell or issue
any securities of McGee other than the Common Stock which is the subject of this
Agreement, or (b) has taken any corporate action to approve any of the foregoing
except for the  approval of this  Agreement.  The Common Stock is not subject to
preemptive rights or to any voting trust, proxy or similar  agreement.  Schedule
3.2 correctly  identifies  each of McGee's  Subsidiaries,  its  jurisdiction  of
incorporation  and the  percentage  of its voting  stock owned by McGee and each
other  Subsidiary.  McGee is the legal and beneficial owner of all of the shares
of voting stock of each  Subsidiary of McGee (other than  directors'  qualifying
shares, in the case of Wm. H. McGee & Company of Puerto Rico, Inc.) as set forth
on Schedule 3.2, and such ownership is free and clear (except as otherwise shown
on Schedule 3.2) of any and all claims, liens,  restrictions,  pledges, charges,
rights of third  parties or other  encumbrances.  All such shares have been duly
authorized  and  validly  issued  and are  fully  paid  and  non-assessable.  No
Subsidiary of McGee has any common or preferred stock  authorized or outstanding
other  than as set forth on  Schedule  3.2 and none of McGee nor  Seller nor any
such Subsidiary is a party to or is bound by any agreement or commitment to sell
or issue any  securities  of any  Subsidiary of McGee or has taken any corporate
action to approve, or in contemplation of, any of the foregoing.

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<PAGE>

     Section 3.3. Regulatory Status. To Seller's  Knowledge,  McGee, and each of
its  Subsidiaries,  has all  requisite  power and  authority,  and all necessary
licenses, permits, franchises and other governmental authorizations necessary to
own and operate its  properties  and to carry on its business as now  conducted,
except  where the failure to have the same could not  reasonably  be expected to
have a  Material  Adverse  Effect.  All  material  licenses,  permits  and other
governmental  authorizations held by McGee  are set forth on Schedule 3.3.

     Section  3.4.  Compliance  with Law. To Seller's  Knowledge,  except as set
forth on Schedule 3.4, McGee, and each of its Subsidiaries,  has conducted,  and
is now conducting,  its business and operations in material  compliance with all
existing laws, rules,  regulations,  ordinances,  orders,  judgments and decrees
(including, without limitation, those of state insurance departments) applicable
to  its   business,   properties   or   operations   as   presently   conducted.


     Section 3.5. Authorization.

     (a) This  Agreement has been duly  authorized  by all  necessary  corporate
action of Seller.  This Agreement will,  when duly executed and delivered,  be a
valid and binding agreement of Seller,  enforceable against Seller in accordance
with its terms,  except as limited by  bankruptcy,  insolvency,  reorganization,
moratorium  or other  similar  laws now or  hereafter  in effect  relating to or
affecting  creditors' rights  generally,  and except that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the equitable discretion of the court before which any
proceeding therefor may be brought.

     (b) Each of the  Ancillary  Agreements  to which Seller or a Subsidiary  of
Seller is a party, has been, or prior to the Closing will be, duly authorized by
all necessary  corporate action of Seller or such  Subsidiary,  does not violate
any provision of the Certificate of Incorporation,  or similar charter document,
or  By-Laws  of any of  them  or any  agreement  by  which  any of  them  or the
properties of any of them is bound and will,  when duly executed and  delivered,
be a valid and  binding  agreement  of such  entity  enforceable  against  it in
accordance with the terms thereof, except as limited by bankruptcy,  insolvency,
reorganization,  moratorium  or other  similar  laws now or  hereafter in effect
relating to or affecting creditors' rights generally, and except that the remedy
of specific  performance and injunctive and other forms of equitable  relief may
be subject to equitable  defenses and to the  equitable  discretion of the court
before which any proceeding therefor may be brought.

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<PAGE>

     Section  3.6.  Books  and  Records.   The  consolidated  and  consolidating
unaudited  balance sheets of McGee and its Subsidiaries as of December 31, 1998,
1997  and  1996  and  the  related  consolidated  and  consolidating   unaudited
statements of income and stockholders'  equity for the fiscal year ended on such
date and, in each case, the related schedules,  have been delivered by Seller to
Buyer. The unaudited  consolidated and consolidating  financial  statements have
been  prepared in  accordance  with  generally  accepted  accounting  principles
consistently applied (except that such unaudited financial statements lack or do
not reflect footnote disclosures,  deferred federal income taxes,  goodwill, any
obligations to settle claims of Pool Participants, tax valuation, and allowances
on a stand-alone  basis) and present fairly the financial  position of McGee and
its  Subsidiaries  as of such date and the results of their  operations for such
periods.

     Section 3.7. Litigation and Other Proceedings.

     (a) Except as set forth in Schedule  3.7(a),  there are no actions,  suits,
investigations  or  proceedings   pending  against,  or  to  Seller's  Knowledge
threatened  against,  McGee  or its  Subsidiaries  or any  of  their  respective
officers or employees or their respective  businesses,  properties or assets, by
any  person,  governmental  body or  agency  or by any  securities  exchange  or
national securities association. To Seller's Knowledge, neither Seller nor McGee
nor any  Subsidiary  of McGee is in  default  with  respect  to any order of any
court,  governmental  authority or agency or arbitration board or tribunal or in
violation of any laws or governmental rules or regulations,  nor has any of them
received  written  notice of any  assertion  of a default  where such default or
violation has had or is reasonably  likely to have a Material Adverse Effect. To
Seller's  knowledge,  neither  McGee nor any of its  Subsidiaries  is in default
under any contract or commitment, nor has any of them received written notice of
any assertion of a default which default has had or is reasonably likely to have
a Material Adverse Effect.

     (b) Except as set forth in Schedule  3.7(b),  there are no actions,  suits,
investigations  or  proceedings   pending  against,  or  to  Seller's  knowledge
threatened against,  Pool Participants  arising out of participation in the Pool
relating to extra-contractual, asbestos or environmental claims.


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<PAGE>

     Section 3.8. Title to Properties.

     (a) All real property  owned or leased by McGee or any  Subsidiary of McGee
and, in the case of leased  property,  the lease pursuant to which it is leased,
is listed and  described  on  Schedule  3.8(a).  Except as set forth in Schedule
3.8(a),  McGee has good and  marketable  fee title to all  owned  real  property
reflected  on  Schedule  3.8(a),  free  and  clear  of all  liens,  charges  and
encumbrances, other than rights of way and easements of record, and subject only
to liens of current real and personal  property taxes, and such minor defects of
title of a nature  generally  found in properties of similar  character which do
not in any  material way affect the  marketability  of such real  properties  or
interfere  with the  ownership  and use of such  real  properties.  To  Seller's
Knowledge,  each lease  reflected on Schedule  3.8(a) is valid and subsisting in
accordance  with its terms,  no default by any party  thereto has  occurred,  no
event, act or omission has occurred which  constitutes or with notice or passage
of time or both  would  constitute  a default  and all such  leases are free and
clear of any and all charges,  liens, claims,  rights of third parties and other
encumbrances.  To Seller's Knowledge,  neither McGee nor any of its Subsidiaries
leases any real property to or from any, parent, affiliate,  officer or director
or any  person  related  to or owned or  controlled  by any  parent,  affiliate,
officer or director of McGee or any of its Subsidiaries.

                  (b) Schedule 3.8(b) contains a true and complete  summary,  by
office location and type of property,  of each item of personal  property (other
than  investments  reflected  in Schedule  3.11)  having a value on the books of
McGee in excess of $10,000 which is used by McGee or any  Subsidiary of McGee in
its business and a list of all equipment  leases and capital  leases under which
McGee holds any property with rental payments exceeding $10,000 per year. Except
as set forth in Schedule 3.8(b),  all such personal  property is owned or leased
by McGee  or a  Subsidiary  free and  clear  of any and all  liens,  charges  or
encumbrances,  except for liens for  current  taxes not yet due and  payable and
except for those liens  which do not  materially  detract  from the value of the
property  subject  thereto  or  interfere  with  the  ownership  and use of such
property.  All such personal property is in good operating condition and repair,
ordinary wear and tear  excepted,  and capable of  performing  the functions for
which it is now used.

                  (c) To Seller's Knowledge, Schedule 3.8(c) contains a true and
complete  description of all  copyrights,  patents,  trademarks,  service marks,
trade names, franchises, computer programs (other than computer programs subject
to "shrink-wrap" licenses),  processes and applications,  and other intellectual
property  (in each case,  whether or not  registered)  owned or licensed by, and
applications  for any of the  foregoing  made by, McGee and each  Subsidiary  of
McGee ("Intellectual Property"). To Seller's Knowledge, no Intellectual Property
is subject to any lien,  charge,  encumbrance  or adverse  claim of any kind. To
Seller's  Knowledge,  and except as set forth in Schedule 3.8(c),  all rights in
such Intellectual Property are valid, subsisting and in full force and effect in
accordance with their terms without interference with, or infringement on or by,
the rights of any other  person (in each case which are material to the business
and  operations of McGee and its  Subsidiaries,  taken as a whole).  To Seller's
Knowledge,  neither  McGee  nor  any  Subsidiary  of  McGee  is  engaged  in any
infringement  or  unlawful  use of any  trademark,  service  mark,  trade  name,
copyright,  program,  process or  application or other  intellectual  intangible
property  right  owned or  alleged to be owned by  others,  nor has any  written
notice of any claim been received from any third party alleging  infringement or
unlawful use, nor, except as set forth in Schedule 3.8(c),  has any Intellectual
Property been licensed to any other person.

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<PAGE>

     Section 3.9. No Conflicts.

     (a) Neither the execution nor the delivery by Seller of this  Agreement and
the Ancillary Agreements,  nor the consummation of the transactions contemplated
hereby or  thereby,  nor the  compliance  with or  fulfillment  of the terms and
provisions  hereof or thereof by Seller,  will: (i) conflict with or result in a
breach  or  violation  of any of the  terms,  conditions  or  provisions  of the
Certificate  of  Incorporation  or  By-Laws of Seller or McGee or any of McGee's
Subsidiaries;  or (ii)  conflict  with or result in a breach or violation of, or
default or loss of a material  benefit under, or permit the  acceleration of any
obligation  under any provision of, any agreement,  indenture,  mortgage,  lien,
lease or other  instrument or restriction of any kind to which Seller,  McGee or
any  Subsidiary  of McGee is a party  or by  which  it or any of its  assets  or
properties is otherwise  bound;  or (iii) violate any order,  writ,  injunction,
decree,  statute, rule or regulation applicable to Seller or McGee or any of the
Subsidiaries  of McGee or any of the assets or properties of any of them;  which
conflict, breach, violation,  default, loss or other result, in the case of each
of  clauses  (ii) and (iii),  is  reasonably  likely to have a Material  Adverse
Effect or a material  adverse  effect on the  ability  of Seller to perform  its
obligations  hereunder.  Except  as set  forth in  Schedule  3.9(a)  hereto,  no
consent, approval or authorization of, or filing,  registration or qualification
with,  any  governmental  authority  on the  part  of  Seller  or  McGee  or any
Subsidiary of McGee is required in connection  with the execution,  delivery and
performance of this Agreement and the Ancillary Agreements or the offer, sale or
delivery of the Common Stock as provided herein.

     (b) Neither the execution  nor the delivery by any  Subsidiary of Seller of
any of the  Ancillary  Agreements to which such  Subsidiary is a party,  nor the
consummation  by any such  Subsidiary of the  transactions  contemplated  by any
Ancillary  Agreement  to  which  it is a  party,  nor  the  compliance  with  or
fulfillment by any such  Subsidiary of the terms and provisions of any Ancillary
Agreement to which it is a party,  will: (i) conflict with or result in a breach
or violation of any of the terms, conditions or provisions of the Certificate of
Incorporation or By-Laws of such Subsidiary;  or (ii) conflict with or result in
a breach or violation  of, or default or loss of a material  benefit  under,  or
permit the  acceleration of any obligation under any provision of any agreement,
indenture,  mortgage, lien, lease or other instrument or restriction of any kind
to which  such  Subsidiary  is a party or by  which it or any of its  assets  is
otherwise  bound;  or (iii) result in a violation of or the  acceleration of any
obligation under any agreement,  indenture,  mortgage,  lien, instrument,  writ,
injunction, decree, statute, rule or regulation applicable to such Subsidiary or
any of its assets or properties;  which conflict,  breach,  violation,  default,
loss or  other  result,  in the  case of each of  clauses  (ii)  and  (iii),  is
reasonably likely to have a Material Adverse Effect or a Material Adverse Effect
on the ability of such  Subsidiary to perform its  obligations  under any of the
Ancillary Agreements to which it is a party.



                                       9
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     Section 3.10. Taxes. Except as disclosed in Schedule 3.10:

     (a)  Since  June 30,  1995,  each of McGee and its  Subsidiaries  (and with
respect to federal income Taxes,  every other entity  included in a consolidated
federal  Tax Return  including  McGee and its  Subsidiaries  (collectively,  the
"Consolidated  Group")) has duly and timely filed (either  separately or as part
of a consolidated group) with the appropriate  government agencies, all material
federal,  state, local and foreign returns,  filings and reports with respect to
Taxes and any required material  information returns or reports of any kind (the
"Tax  Returns")  which were required by applicable  law to be filed on or before
the Closing Date, and all Tax Returns are true,  correct and complete.  The term
"Taxes," as used in this  Agreement,  shall mean all federal,  state,  local and
foreign gross  receipts,  franchise,  premium,  income and capital taxes,  value
added taxes, sales, use and consumption taxes, employment, payroll, withholding,
ad valorem and property taxes, and all other taxes,  assessments,  withholdings,
duties,  levies, fees and other governmental  charges or impositions of each and
every kind,  and interest,  penalties and additions to tax with respect  thereto
payable by or in respect of the business or operations of McGee.

     (b) Neither McGee nor any of its Subsidiaries is delinquent in any material
respect in the payment of any Taxes nor has any of them  requested any extension
of time within  which to pay any such Taxes or file any Tax Return with  respect
thereto  except to the  extent  that such Taxes have since been paid or such Tax
Return has since been filed.

     (c) There is no agreement,  waiver or consent providing for an extension of
time with respect to (i) the filing of any Tax Return,  election or  designation
by McGee  or any of its  Subsidiaries,  (ii)  the  payment  or  issuance  of any
assessment  of any Tax by or against McGee or any of its  Subsidiaries  or (iii)
the issuance of any  deficiency  against McGee or any of its  Subsidiaries  with
respect to Taxes.  In addition,  (except as disclosed to Buyer  pursuant to this
Agreement)  there is not  currently  in force any power of  attorney  granted by
McGee or any of its Subsidiaries with respect to any Tax matter.

     (d)  There is no (i)  claim or  deficiency  for any  Taxes  which  has been
asserted  or, to  Seller's  Knowledge,  threatened  against  McGee or any of its
Subsidiaries  or  the  Consolidated  Group,  (ii)  action,   suit,   proceeding,
investigation,  audit or claim now pending or, to Seller's Knowledge, threatened
against,  or  with  respect  to,  McGee  or  any  of  its  Subsidiaries  or  the
Consolidated  Group with  regard to any  Taxes,  or (iii)  claim for  additional
amounts or assessments of such Taxes asserted by any such authority.

                                       11
<PAGE>

                  (e)  The   federal   income  Tax  Returns  of  McGee  and  its
Subsidiaries  (including any consolidated federal income Tax Return filed by the
Consolidated  Group) have been examined by the Internal  Revenue Service for all
periods to and including 1989 and all deficiencies  asserted as a result of such
examinations  have been paid or  finally  settled  and Seller  has  received  no
written notice of any issue having been raised by the Internal  Revenue  Service
in any such examination which, by application of the same or similar principles,
reasonably  could be expected to result in a proposed  deficiency  for any other
period  not so  examined.  Revenue  Canada,  Taxation  has mailed a notice of an
original  assessment in respect of the Canadian  federal income tax liability of
McGee  Canada for all fiscal  years up to and  including  the fiscal  year ended
1997.  Seller has received no written  notice of any issue having been raised by
any Canadian federal or provincial  taxation authority in any examination which,
by application of the same or similar  principles,  reasonably could be expected
to result in a proposed deficiency for any other period not so examined.

                  (f)  Since  June 30,  1995 (i)  neither  McGee  nor any of its
Subsidiaries has filed an election, consent or agreement under Section 341(f) of
the Code; (ii) no indebtedness of McGee or any of its  Subsidiaries  consists of
"corporate  acquisition  indebtedness"  within the meaning of Section 279 of the
Code;  (iii) since January 1, 1996,  there has not been an  "ownership  change,"
"owner  shift  involving a five  percent  shareholder"  or an "equity  structure
shift"  relating  to McGee or any of its  Subsidiaries  within  the  meaning  of
Section  382(g) of the Code and since  January  1,  1996,  there has not been an
acquisition of control of McGee or any of its Subsidiaries within the meaning of
the  Income  Tax  Act  (Canada);  (iv)  no  property  of  McGee  or  any  of its
Subsidiaries is "tax-exempt  use property"  within the meaning of Section 168(h)
of the Code nor property  that Buyer will be required to treat as being owned by
another  person  pursuant to section  168(f)(8) of the Internal  Revenue Code of
1954,  as amended and in effect  immediately  prior to the  enactment of the Tax
Reform Act of 1986; (v) neither McGee nor any of its Subsidiaries nor Seller nor
any of its Subsidiaries, with respect to any person in his or her capacity as an
officer or employee of McGee,  is a party to any agreement  pursuant to which it
has committed,  by reason of the transactions  contemplated in this Agreement or
other  related  agreements  executed on the Closing Date, to make any payment to
such  person  which  (exclusive  of  such  payments  as may be made by or at the
direction  of Buyer)  would  constitute  a  "parachute  payment" for purposes of
Sections  280G  and  4999  of  the  Code;  (vi)  neither  McGee  nor  any of its
Subsidiaries has made any election pursuant to state or foreign Tax laws that is
currently  binding  on  Seller  or  McGee;  (vii)  neither  McGee nor any of its
Subsidiaries is a "gain corporation"  within the meaning of Section 384(c)(4) of
the Code;  (viii)  neither  Seller  nor SICH is a  "foreign  person"  within the
meaning of Section 1445 of the Code; (ix) no deferred intercompany  transactions
within  the  meaning of  Section  1.1502-13  of the  Treasury  Regulations  have
occurred  between  the  members  of the  Consolidated  Group  and  McGee and its
Subsidiaries;  (x) McGee  does not have an excess  loss  account  as  defined in
Section  1.1502-19  of  the  Treasury  Regulations  with  respect  to any of its
Subsidiaries;  (xi) neither McGee nor any of its  Subsidiaries is a party to any
agreement  relating to the sharing of any  liability  for, or payment of,  Taxes
with any other person or entity, except for the Tax Sharing Agreement dated July
1,  1995  between  Seller  and  McGee;  and (xii)  neither  McGee nor any of its
Subsidiaries  has any  liability  for Taxes of any other person as a transferee,
successor or otherwise, by law or contract, except for the Tax Sharing Agreement
dated July 1, 1995 between Seller and McGee.

                                       12
<PAGE>

     (g) Since June 30, 1995:

     (i) Each of Seller and its Subsidiary,  Orion Capital Companies,  Inc., and
each of McGee  and its  Subsidiaries,  in the case of any  person  in his or her
capacity as an officer or employee  of McGee and its  Subsidiaries,  has, in all
material  respects,  withheld  from each  payment  made to any of its  officers,
directors and employees the amount of all Taxes and other deductions  (including
without limitation,  income taxes, unemployment,  disability, and other required
Taxes and  contributions)  required  to be  withheld  and has  timely  paid such
withholding  (together  with its  required  employer's  amount,  if any) and has
timely and properly filed all required Tax Returns with respect thereto.

     (ii) Neither McGee nor McGee Canada has, prior to the date hereof,  made or
filed any elections or designations  for purposes of the Income Tax Act (Canada)
or any relevant provincial taxing statute.

     (iii)  Neither  McGee  nor  McGee  Canada  has,  prior to the date  hereof,
acquired  property  from or disposed of property for proceeds less than the fair
market value thereof to, any person,  firm or corporation  with whom it does not
deal at arm's length as the term is construed under the Income Tax Act (Canada).

     (iv) McGee Canada has no outstanding  loans to or indebtedness  incurred by
directors,  officers  or  shareholders  of  that  company  or to any  person  or
corporation  not  dealing at arm's  length (as the term is  construed  under the
Income Tax Act (Canada)) with any of the foregoing.

     (v) The  taxation  year end of McGee Canada for income tax purposes is, and
since June 30, 1995 has been, December 31.

                                       13
<PAGE>

     (vi)  McGee  does not  carry on  business  in Canada  through  a  permanent
establishment  within  the  meaning  of  that  term  in  the  Canada-Income  Tax
Convention.

     (h) All  representations  and  warranties  of Seller as to Taxes or matters
with respect thereto are provided for in this Section 3.10, and no other section
of this Article III shall be construed or  interpreted  as a  representation  or
warranty of Seller as to Taxes or matters with respect thereto.

     Section  3.11.  Investments.  Schedule  3.11 lists (and shows the custodial
location of) all investments in cash, cash equivalents,  bonds, stocks and other
securities owned by McGee and each of its Subsidiaries,  or held by McGee or any
of its Subsidiaries on behalf of the Pool, as at February 28, 1999, all of which
comply in all material  respects  with laws and  regulations  applicable  to the
ownership of the same by McGee and its respective  Subsidiaries.  McGee and each
of its Subsidiaries  has good and marketable title to all its investments,  free
and clear of any and all liens, charges, claims,  restrictions,  pledges, rights
of third parties and other  encumbrances,  except for investments held on behalf
of the Pool.

     Section 3.12.  Employment Matters.  Except as set forth on Schedule 3.12 or
as disclosed to Buyer in writing,  McGee has no  employment  or labor  contracts
relating  to  any  officers,  directors  or  employees  of  McGee  or any of its
Subsidiaries  and no employee of McGee or any of its Subsidiaries is represented
by a labor  organization of any type. To Seller's  Knowledge,  there is not, and
has not since  January 1, 1996 been,  any effort to  unionize  or  organize  any
employees of McGee or any of its ------------------ Subsidiaries. No claim under
any federal, state, provincial or local employment-related law, order, ordinance
or regulation,  or any unfair labor practice,  discrimination,  wage-and-hour or
employment  equity claim to which McGee or any of its Subsidiaries is subject is
pending  and,  to  Seller's  Knowledge,  no threat of such has been  asserted in
writing against or with respect to McGee or any of its Subsidiaries.

     Section 3.13. Employee Benefit Plans; ERISA.

     (a) Schedule  3.13(a)  sets forth a true and complete  list of all employee
benefit plans,  agreements,  commitments,  practices or arrangements of any type
(including,  but not  limited  to,  plans  described  in Section  3(3) of ERISA)
maintained  by McGee or any of its  Subsidiaries  for the  benefit of current or
former  employees  or  directors,  or with  respect to which McGee or any of its
Subsidiaries has a liability,  whether direct or indirect,  actual or contingent
(including,  but not limited to,  liabilities  arising  from  affiliation  under
Section  414(b),  (c),  (m) or (o) of the Code or  Section  4001 of ERISA)  (the
"Benefit Plans").

                                       14
<PAGE>

     (b) No  Benefit  Plan is a  "multiemployer  plan"  (within  the  meaning of
Section  3(37) or Section  4001(a)(3)  of ERISA) or a "multiple  employer  plan"
(within  the  meaning of Section  4064 of ERISA or Section  413(c) of the Code).
Neither McGee nor any of its Subsidiaries  has a current or potential  liability
or  obligation,  whether direct or indirect,  with respect to any  multiemployer
plan or multiple employer plan.

     (c) Seller has  delivered  or made  available  to Buyer,  true and complete
copies of the  following  documents,  as they may have been  amended to the date
hereof, embodying or relating to the Benefit Plans:

     (i) each of the Benefit  Plans listed in Schedule  3.13(a),  including  all
amendments  thereto,  any related trust  agreements,  group  annuity  contracts,
insurance policies or other funding agreements or arrangements;

     (ii) the most recent  determination  letter,  if any,  as to  qualification
under Section 401(a) or 403(a) of the Code,  received from the Internal  Revenue
Service ("IRS") with respect to each of the Benefit Plans;

     (iii) the actuarial valuation, if any, prepared with respect to each of the
Benefit  Plans for the two most recent plan years and the most recent annual and
periodic accountings of Benefit Plan assets, if applicable;

     (iv) the current summary plan description,  if any, for each of the Benefit
Plans and any material modifications thereto; and

     (v) the two (2)  most  recent  annual  returns/reports  on IRS  Form  5500,
5500-C/R, 5500-C or 5500-R filed for each of the Benefit Plans.

                  (d) Except as set forth in Schedule  3.13(d),  with respect to
each Benefit  Plan which is a welfare  plan  described in Section 3(1) of ERISA:
(i) no such plan provides  medical or death  benefits with respect to current or
former  employees or directors of McGee beyond their  termination of employment,
other than  coverage  mandated by Sections  601-608 of ERISA and 4980B(f) of the
Code,  (ii) each such plan has been  administered  in  compliance  with Sections
601-608 of ERISA and  498OB(f) of the Code;  (iii) no such plan has  undisclosed
reserves,  assets,  surpluses or prepaid premiums; and (iv) there is no material
claim pending or, to Seller's Knowledge, threatened involving the Benefit Plan.

                  (e)  Except as  disclosed  in  Schedule  3.13(e),  none of the
Benefit Plans has  participated in, engaged in or been a party to any prohibited
transaction as defined in ERISA or the Code,  and, except for routine claims for
covered  benefits,  there are no material claims pending or overtly  threatened,
involving  any Benefit Plan listed in Schedule  3.13(a).  Except as disclosed in
the Special Note to Schedule 3.13(a),  there have been no material violations of
any reporting or disclosure requirements with respect to any Benefit Plan.

                                       15
<PAGE>

     (f) To Seller's Knowledge, neither McGee, nor any of its Subsidiaries,  nor
any  fiduciary or  disqualified  person with respect to any Benefit Plan has any
liability for any excise tax imposed by Sections 4971 through 4980B of the Code.

     Section 3.14. Contracts.

     (a)  Schedule  3.14(a)  contains  a list of each  contract,  agreement  and
undertaking,  written or oral,  (other  than  those  listed in  Schedule  3.8 or
Schedule  3.14(b))  to which McGee or any  Subsidiary  of McGee is a party or by
which  it or its  property  is  bound  and  which  involves  indebtedness,  or a
commitment, of $50,000 or more or has a remaining term of more than one year and
which cannot be terminated on not more than ninety (90) days notice.

     (b) Except as disclosed to the Buyer in writing,  Schedule 3.14(b) contains
a list of each contract,  agreement and  undertaking,  written or oral, to which
McGee or any  Subsidiary  of McGee is a party or by which it or its  property is
bound  and  which  relates  to  McGee's  operation  of the Pool  (but  excluding
contracts of insurance  and  reinsurance  (other than  contracts of  reinsurance
among participants of the Pool) by or on behalf of the Pool.

     (c)  To  Seller's   Knowledge,   all  of  the  contracts,   agreements  and
undertakings  listed in  Schedules  3.14(a)  and (b) are free of any  default or
breach or any alleged default or breach by McGee, any Subsidiary of McGee or any
other party thereto and no event,  act or omission has occurred which,  with the
giving of notice or the passage of time or both,  would  constitute  a breach or
default by McGee or any  Subsidiary  of McGee or any other party  thereto of any
such  contract,  lease,  agreement or  undertaking,  other than,  in each of the
foregoing cases, a breach which is not likely to have a Material Adverse Effect.
To Seller's  Knowledge,  and except as listed and described in Schedules 3.14(a)
and (b),  neither McGee nor any Subsidiary of McGee is a party to or is bound by
any contract with, or is indebted to, any parent, affiliate, officer or director
of (or to any person related to or owned or controlled by any parent, affiliate,
officer  or  director  of)  McGee  or any  Subsidiary  of  McGee  in any  amount
whatsoever  other than in  respect  of  salaries  (and  other  compensation  and
benefits  disclosed  in Schedules  3.12 and 3.13) of officers  and  directors of
McGee and the Subsidiaries of McGee. Except as listed and described in Schedules
3.14(a) and (b),  none of such  parents,  affiliates,  officers or  directors is
indebted to McGee or any Subsidiary of McGee.

                                       16
<PAGE>

     Section 3.15.  Capital  Expenditures.  Except as disclosed in Schedule 3.15
and  Schedule  3.14(a),  neither  McGee  nor  any  Subsidiary  of  McGee  has an
outstanding commitment to any person for capital expenditures (including but not
limited to expenditures for data processing  hardware,  software and systems) in
excess  of  $50,000   other  than  for   ordinary   repairs   and   maintenance.

     Section 3.16. Banks. Schedule 3.16 contains a true and complete list of all
banks or other financial institutions in which either McGee or any Subsidiary of
McGee has an account,  line of credit or safe deposit box, showing a description
of each such account and line of credit. -----

     Section  3.17.  Agents and Brokers.  Schedule  3.17  contains a list of the
names and  addresses  of each agent or broker who has  authority  to bind either
SICH or the  Connecticut  Indemnity  Company  in its  capacity  as an  issuer of
policies  of  insurance  or  reinsurance  for  the  Pool,  in each  case  with a
description  of the  type  of  agency  or  binding  authority  granted,  and the
geographical   or   other   limits   of   each   such   authority   or   agency.

     Section 3.18. Insurance. Schedule 3.18 contains a true and complete list of
all  policies of  insurance  issued to McGee or to any  Subsidiary  of McGee and
naming any of them as insureds or covering  any of their  businesses,  assets or
liabilities,  showing policy limits, type of coverage,  annual premium,  premium
payment dates,  expiration dates, cash surrender value, and the amount of loans,
if any, secured.  No policy listed has been canceled and each policy listed will
continue in effect  after the Closing  Date on the terms  indicated  in Schedule
3.18 unless canceled by the insured after the Closing Date.

     Section  3.19.  Absence of  Material  Changes and  Adverse  Factors.  Since
December 31,  1998,  and except for the  transactions  provided for herein or as
otherwise disclosed to Buyer in writing, there has not been, in respect of McGee
or any Subsidiary of McGee: 

     (a) any loss or  destruction  of,  or damage  (whether  or not  covered  by
insurance)  to, any of its assets or  properties  which  affects or impairs  its
ability to conduct its  business as now  conducted  or proposed to be  conducted
such that a Material Adverse Effect is reasonably likely to result therefrom;

     (b) any  other  event or  condition  of any  character  which has had or is
reasonably likely to have a Material Adverse Effect;

     (c) any  declaration,  setting  aside or payment of any  dividend  or other
distribution in respect of the capital stock of McGee or any Subsidiary of McGee
or any direct or indirect redemption,  purchase or other acquisition by McGee or
any Subsidiary of McGee of any such stock;

                                       17
<PAGE>

     (d) any  indebtedness or other liability or obligation  (whether  absolute,
accrued,  contingent  or  otherwise)  incurred or other  transaction  (except as
reflected in this Agreement) incurred by it other than in the ordinary course of
business;

     (e) any  increase in the salary or benefits of any  employee  except in the
ordinary course of business;

     (f) any sale of any  material  asset  or any  acquisition  of any  material
property,  securities,  or other asset  except,  in each case,  in the  ordinary
course of business;

     (g) any material  adverse change in the operations or results of operations
of McGee or in its or its  Subsidiary's  relationships  with and goodwill of its
Pool Participants,  customers, suppliers, agents, general agents, other insurers
and reinsurers and other persons having business dealings with such company;

     (h) any failure to maintain in force all existing  casualty  and  liability
insurance  and  reinsurance  policies  and  fidelity  bonds or policies or bonds
providing substantially the same coverage; or

     (i) any material  adverse change in the operations or operating  results of
the Pool, the  participation  levels of the respective Pool  Participants or, to
the Knowledge of Seller,  the financial  and actuarial  information  provided to
Buyer as reflected in Section 3.21.

     Section 3.20. Environmental Matters. To Seller's Knowledge,  McGee and each
of McGee's Subsidiaries is in compliance with all applicable  environmental laws
governing its business failure to comply with which is reasonably likely to have
a Material  Adverse Effect.  All licenses,  permits,  registrations or approvals
required  for the business of McGee and each of McGee's  Subsidiaries  under any
environmental law have, to Seller's  Knowledge,  been secured and McGee and each
of  its  Subsidiaries  is  in  substantial  compliance  therewith,  except  such
licenses,  permits,  registrations  or  approvals  the failure to secure,  or to
comply with which, is not reasonably  likely to have a Material  Adverse Effect.
There are no  environmental  claims  or  proceedings  to which  McGee is a party
pending or, to Seller's Knowledge,  threatened,  which (a) question the validity
or term of, or  entitlement  of McGee or any of  McGee's  Subsidiaries  to,  any
permit,  license,  order  or  registration  required  for the  operation  of any
facility which McGee or any of McGee's  Subsidiaries  currently operates and (b)
wherein an unfavorable decision, ruling or finding would be reasonably likely to
have a Material  Adverse  Effect.  To  Seller's  Knowledge,  there are no facts,

                                       18
<PAGE>

circumstances, conditions or occurrences on any real property owned or leased by
McGee or any of McGee's  Subsidiaries,  that could reasonably be expected (i) to
form  the  basis  of  an  environmental  claim  against  McGee  or  any  of  its
Subsidiaries  or any  real  property  owned  or  leased  by  McGee or any of its
Subsidiaries  or  (ii)  to  cause  such  real  property  to be  subject  to  any
restrictions on the ownership,  occupancy,  use or  transferability of such real
property  under  any   environmental   law,  except  in  each  such  case,  such
environmental  claims or restrictions  that individually or in the aggregate are
not reasonably likely to have a Material Adverse Effect. To Seller's  Knowledge,
hazardous toxic materials have not at any time been (i) generated, used, treated
or stored on, or transported by McGee or any of McGee's Subsidiaries to or from,
any real property owned or leased by McGee or any of McGee's Subsidiaries except
in compliance  with applicable  environmental  laws or (ii) released by McGee or
any of McGee's  Subsidiaries on any such real property,  in each case where such
occurrence or event is reasonably likely to have a Material Adverse Effect. None
of  McGee or any  Subsidiary  of  McGee  is  party  to any  agreement  regarding
remediation or cleanup relating to any environmental claim or environmental law.

     Section 3.21. Calculation of Liability with respect to Pool Participation.

     (a) The financial  statements of the Pool at December 31, 1996 and 1997 and
the years then ended,  prepared  by  Deloitte & Touche LLP,  and copies of which
have been delivered to Buyer, fairly present the financial condition of the Pool
at such dates and the results of the Pool's  operations for the years then ended
in  accordance  with  New  York  statutory  accounting  principles  consistently
applied.

     (b) The unaudited  December 31, 1998 operating  statement and balance sheet
of the  Pool and the  unaudited  December  31,  1998  balance  sheet of the SICH
participation  in the Pool,  copies of which have been delivered to Buyer,  were
prepared in accordance with generally  accepted  accounting  principles  (except
that such balance sheets lack footnote  disclosures)  and in accordance with the
relevant terms of the respective Pool Agreements.

     (c) Without derogation from the representations and warranties of Seller in
Sections  3.21(a) and 3.21(b) as to  preparation  in accordance  with  statutory
accounting  principles  and  generally  accepted  accounting  principles  of the
financial  statements referred to therein,  Seller notes that such principles do
not   necessarily   result  in  adequacy  of  reserves   and  Seller   makes  no
representation  or  warranty  that the  reserves  of the  Pool set  forth on the
foregoing  balance  sheets  described in Section  3.21(a) and 3.21(b)  above are
adequate or sufficient.

     Section 3.22.  Finders and Brokers.  Neither  Seller nor any Subsidiary nor
any  officer or director  of Seller nor any of its  Subsidiaries  has engaged or
authorized any broker,  finder,  investment  banker or other third party,  other
than Donaldson,  Lufkin & Jenrette  Securities  Corporation  ("DLJ"),  to act on
behalf of Seller, directly or indirectly, as a broker, finder, investment banker
or in  any  other  like  capacity  in  connection  with  this  Agreement  or the
transactions contemplated hereby, or has consented to or acquiesced in anyone so
acting. Seller has no Knowledge of any claim by any person against Seller or any
of its  Subsidiaries or Buyer for compensation for so acting or of any basis for
such a claim and Seller shall hold Buyer totally  harmless  against any costs or
expenses to Buyer arising out of any such claim on Seller's behalf.

                                       19
<PAGE>

     Section 3.23. Disclosure. No representation or warranty of Seller contained
herein or in any  Schedule  hereto  contains or will on the Closing Date contain
any untrue  statement  of a material  fact or omits or will on the Closing  Date
omit to state any  material  fact  necessary  to make the  statements  herein or
therein not false or misleading. 

     Section 3.24. Relationship between Seller and McGee.

     (a) Except as set forth on Schedule 3.24, McGee does not currently make use
of any property or services of Seller in the conduct of its business.

     (b) Except as set forth on Schedule 3.24,  since  December 31, 1998,  there
has not been any transfer of funds or other property between McGee or any of its
Subsidiaries and Seller.

     Section 3.25.  Agreements  regarding Pool. Schedule 3.25 contains a list of
each material  agreement and  undertaking,  written or oral, to which McGee is a
party relating to the Pool. 

     Section 3.26.  Participation of SICH in Pool. As of January 1, 1999, SICH's
net  percentage  participation  in the Pool was 75 percent in the United  States
Pool and 85.5 percent in the Canadian Pool. -----------------------------

     Section 3.27. No Undisclosed Liabilities.  To Seller's Knowledge, there are
no  debts,   liabilities  or  obligations  or  claimed  debts,   liabilities  or
obligations of McGee,  contingent or absolute,  other than liabilities reflected
in the  balance  sheet as of December  31, 1998  delivered  in  accordance  with
Section 3.6, that are reasonably  likely to be asserted and, if asserted,  would
be   reasonably   likely   to  result  in  a   material   liability   of  McGee.
                                       IV.

                                       20
<PAGE>

                         REPRESENTATIONS, WARRANTIES AND
                               AGREEMENTS OF BUYER

     Buyer represents, warrants and agrees as follows:

     Section  4.1.  Organization  and  Standing.  Buyer  is a  corporation  duly
organized,  validly existing and in good standing under the laws of the State of
California.  Buyer has all  requisite  corporate  power and authority to own its
properties   and  to   carry   on  its   business   as  now   being   conducted.

     Section 4.2.  Certificate of Incorporation  and By-Laws.  The copies of the
Certificate of  Incorporation  and By-Laws of Buyer which have  heretofore  been
delivered to Seller are true,  accurate and complete and reflect all  amendments
or      changes      in      effect      as     of     the     date      hereof.


     Section 4.3. Authorization.

     (a) This  Agreement has been duly  authorized  by all  necessary  corporate
action of Buyer.  This Agreement  will,  when duly executed and delivered,  be a
valid and binding  agreement of Buyer,  enforceable  against Buyer in accordance
with its terms,  except as limited by  bankruptcy,  insolvency,  reorganization,
moratorium  or other  similar  laws now or  hereafter  in effect  relating to or
affecting  creditors' rights  generally,  and except that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the equitable discretion of the court before which any
proceeding therefor may be brought.

     (b) Each of the Ancillary Agreements to which Buyer is a party has been or,
prior to the Closing will be, duly authorized by all necessary  corporate action
of Buyer. Each of the Ancillary  Agreements to which Buyer is a party will, when
duly  executed  and  delivered,  be a  valid  and  binding  agreement  of  Buyer
enforceable  against it in accordance with the terms thereof,  except as limited
by bankruptcy, insolvency, reorganization,  moratorium or other similar laws now
or hereafter in effect relating to or affecting creditors' rights generally, and
except that the remedy of specific performance and injunctive and other forms of
equitable  relief may be  subject to  equitable  defenses  and to the  equitable
discretion of the court before which any proceeding therefor may be brought.

     Section 4.4. No Conflicts.

     (a) Neither the  execution  nor the delivery by Buyer of this  Agreement or
any Ancillary Agreement,  nor the consummation of the transactions  contemplated
hereby or  thereby,  nor the  compliance  with or  fulfillment  of the terms and

                                       21
<PAGE>

provisions  hereof or thereof by Buyer,  will:  (i) conflict with or result in a
breach  or  violation  of any of the  terms,  conditions  or  provisions  of the
Certificate of Incorporation or By-Laws of Buyer or any of Buyer's Subsidiaries;
or (ii)  conflict with or result in a breach or violation of, or default or loss
of a material  benefit under, or permit the acceleration of any obligation under
any  provision  of any  agreement,  indenture,  mortgage,  lien,  lease or other
instrument or  restriction of any kind to which Buyer or any Subsidiary of Buyer
is a party or by which it or any of its assets or properties is otherwise bound;
or  (iii)  violate  any  order,  writ,  injunction,  decree,  statute,  rule  or
regulation applicable to Buyer or any of the Subsidiaries of Buyer or any of the
assets or properties of any of them; which conflict, breach, violation, default,
loss or  other  result,  in the  case of each of  clauses  (ii)  and  (iii),  is
reasonably likely to have a Material Adverse Effect or a material adverse effect
on the  ability of Buyer to perform  its  obligations  hereunder.  Except as set
forth in Schedule  4.4  hereto,  no consent,  approval or  authorization  of, or
filing,  registration or qualification  with, any governmental  authority on the
part of Buyer or any  Subsidiary  of Buyer is  required in  connection  with the
execution,  delivery and  performance  of this  Agreement or the offer,  sale or
delivery of the Common Stock as provided herein.

                  (b) Neither the execution  nor the delivery by any  Subsidiary
of Buyer of any of the Ancillary Agreements to which such Subsidiary is a party,
nor the consummation by any such Subsidiary of the transactions  contemplated by
any  Ancillary  Agreement  to which it is a party,  nor the  compliance  with or
fulfillment by any such  Subsidiary of the terms and provisions of any Ancillary
Agreement to which it is a party,  will: (i) conflict with or result in a breach
or violation of any of the terms, conditions or provisions of the Certificate of
Incorporation or By-Laws of such Subsidiary;  or (ii) conflict with or result in
a breach or violation  of, or default or loss of a material  benefit  under,  or
permit the acceleration of any provision of any lease or other or restriction of
any kind to which such Subsidiary is a party or by which it or any of its assets
is otherwise  bound; or (iii) violate any order,  acceleration of any obligation
under any agreement,  indenture,  mortgage, lien, instrument,  writ, injunction,
decree,  statute, rule or regulation applicable to such Subsidiary or any of its
assets or properties; which conflict, breach, violation,  default, loss or other
result,  in the case of each of clauses (ii) and (iii), is reasonably  likely to
have a Material  Adverse  Effect or a material  adverse effect on the ability of
such Subsidiary to perform its obligations under any of the Ancillary Agreements
to which it is a party.

                  Section 4.5.  Finders and Brokers.  All negotiations on behalf
of Buyer relative to this  Agreement and the  transactions  contemplated  hereby
have been carried on directly by Buyer without the  intervention  of any broker,
finder, investment banker or other third party representing Buyer. Neither Buyer
nor  any  Subsidiary  nor  any  officer  or  director  of  Buyer  or  any of its
Subsidiaries, has engaged or authorized any broker, finder, investment banker or
other third party to act on Buyer's behalf, directly or indirectly, as a broker,
finder,  investment banker or in any other like capacity in connection with this
Agreement  or the  transactions  contemplated  hereby,  or has  consented  to or
acquiesced  in anyone so acting.  Buyer knows of no claim by any person  against
Buyer or any of its  Subsidiaries for compensation for so acting or of any basis
for such a claim and Buyer shall hold Seller totally  harmless against any costs
or expenses to Seller arising out of any such claim.

                                       22
<PAGE>

     Section 4.6. Investor Status. Buyer is an "Accredited  Investor" within the
meaning of SEC Rule  501(a).  Buyer is  purchasing  the Common Stock for its own
account and not with a view to distribution  within the meaning of Section 2(11)
of the Securities Act of 1933. 
                                       V.

                          COVENANTS OF BUYER AND SELLER

                  Section 5.1. Access to Properties, Books and Records. Prior to
the Closing Date,  Seller shall afford or cause McGee to afford to the officers,
attorneys, accountants and other authorized representatives of Buyer, reasonable
access to McGee and to each Subsidiary of McGee and to the officers, properties,
books and records  (electronic and other) of all of the foregoing during regular
business  hours and upon  prior  notice  to Seller in order to afford  Buyer the
opportunity  to  make  such  investigations  of the  affairs  of  McGee  and its
Subsidiaries as they may reasonably  deem necessary.  Seller shall also furnish,
or cause  McGee and its  Subsidiaries  to  furnish,  to Buyer  such  information
relating to their respective  businesses and affairs as Buyer shall from time to
time  reasonably  request.  All  information  made  available  to Buyer  and its
representatives  pursuant  to this  Section 5.1 shall be subject to the terms of
the confidentiality  letter agreement dated December 28, 1998 between Seller and
Buyer (which is incorporated herein by reference thereto).

                  Section 5.2.  Conduct of Business.

     (a) Except as  otherwise  permitted  by this  Agreement,  or with the prior
written  consent of Buyer,  after the date hereof and prior to the Closing  Date
Seller  shall not  cause,  suffer or  permit  McGee or any of its  Subsidiaries,
either on its own behalf or on behalf of or for the account of the Pool to:

     (i)  create,  issue or sell any of its own stocks,  bonds,  or other of its
corporate securities, or grant or otherwise issue any options, warrants or other
purchase rights with respect  thereto,  or enter into any contract or commitment
to do any of the foregoing;

                                       24
<PAGE>

     (ii) create,  incur,  assume,  guarantee or  otherwise  become  liable with
respect to any obligation or liability to any person,  fixed or  contingent,  in
excess of $50,000;

     (iii)  declare or make any  payment  or  distribution  with  respect to its
capital  stock to its  stockholders  or  purchase  or redeem  any  shares of the
capital stock of McGee;

     (iv) sell or transfer any properties or assets (including cash held in bank
accounts or otherwise) or cancel,  release or assign any indebtedness owed to it
or any claims held by it, other than in the ordinary course of business;

     (v)  mortgage,  pledge or subject to lien,  or any other  encumbrance,  any
assets,  tangible or  intangible  except for liens (A) with  respect to deposits
with State  insurance  departments  and (B)  letters of credit,  trust funds and
funds withheld  arrangements,  in each case relating to credit for  reinsurance;
provided that such liens shall have been in the ordinary course of business;

     (vi) sell, assign,  transfer or otherwise dispose of any tangible assets or
cancel  any  debt or  claim,  except  in each  case in the  ordinary  course  of
business;

     (vii) sell, assign or transfer any intangible right or asset;

     (viii) amend,  terminate or waive any right of any substantial value, other
than in connection with the settlement of claims,  including reinsurance claims,
or otherwise in the ordinary course of business;

     (ix) make any material  change in the methods of valuation or accounting or
of  determining  reserves for McGee or any  Subsidiary  of McGee or for the Pool
from the methods applied during and for the period ended December 31, 1998;

     (x) make any substantial  change in the standard form of contract currently
in force  between  McGee  or any of its  Subsidiaries  and  brokers  and  agents
representing   McGee  or  any  of  its   Subsidiaries  or  in  the  compensation
arrangements  in connection  therewith or enter into any contract with any agent
or broker other than in substantially the form now used;

     (xi) except as disclosed at the time to the Buyer, and with Buyer's consent
in writing, amend the Pool Agreements;

     (xii) change risk retention  levels net of  reinsurance in connection  with
the Pool business;

                                       25
<PAGE>

     (xiii)  except as  disclosed  at the time to the  Buyer,  and with  Buyer's
consent in writing, revise current percentage participations in the Pool;

     (xiv)  grant any  salary  increase  to any  officer or any  general  salary
increase to its employees other than, in each case,  normal merit increases,  or
enter into any new,  or amend or alter in any  material  respect  any  existing,
employment or consulting agreement or any bonus, incentive compensation,  profit
sharing,  retirement,  pension,  group insurance,  death benefit or other fringe
benefit plan, trust agreement or similar  arrangement adopted by it with respect
to its own employees or its agents, general agents or underwriting managers;

     (xv)  amend  its  Certificate  of  Incorporation  or  By-Laws  or  merge or
consolidate with any other corporation;

     (xvi)  acquire or increase its  beneficial  ownership of stock or assets of
any other person, firm, association, corporation or other business organization,
except for  investments  made in the ordinary  course and consistent  with prior
investment practice;

     (xvii)  except in the  ordinary  course of  business or as required by this
Agreement,  enter into or assume any  contract,  agreement,  obligation,  lease,
license  or  commitment  having a term in  excess  of one year or  involving  an
aggregate monetary commitment or exposure in excess of $50,000;

     (xviii)  arrange for or solicit the issuance or renewal of insurance of any
risk other than those  insurance  risks  which are  undertaken  in the  ordinary
course of business;

     (xix) knowingly do or omit to do any act which could reasonably be expected
to cause a breach of any  contract,  commitment or  obligation,  which breach is
reasonably likely to have a Material Adverse Effect;

     (xx) make any capital expenditure, capital addition or capital improvement,
or any  commitment for any of the  foregoing,  in excess of $50,000,  except for
commitments in effect on the date hereof as reflected on Schedule 3.15;

     (xxi) amend any Tax Return,  settle any tax audit or tax controversy,  make
any tax election or change any tax accounting method; or

     (xxii) make intercompany  advances and settlement thereof other than in the
ordinary  course of business and consistent  with past business  practice except
that reimbursement from McGee to the Seller and/or affiliates of the Seller will
be limited as it relates to:

                                       26
<PAGE>

     a) 1998 bonuses paid in 1999, to the amount accrued in McGee's December 31,
1998 balance sheet;

     b) 1998 pension contribution paid in 1999, to the amount accrued in McGee's
December 31, 1998 balance sheet;

     c) amounts  paid  pursuant to  transaction  related  incentive  programs of
Seller described in writing to Buyer, to zero;

     d) amounts  representing  the  administrative  expense of  participation by
McGee  employees  in the Orion  Capital  Corporation  Stock  Purchase  Plan,  by
excluding  the amount of discounts  from fair market  value of shares  purchased
under the program;

     e) overhead  expenses of Seller,  capital charges and other similar charges
of Seller, to zero.

         Advances and settlements made as described in this subparagraph  (xxii)
shall be reported periodically by Seller to Buyer before and on the Closing Date
and Buyer shall have the right to question  the  ordinary  course  nature of any
transaction   and  its   consistency   with  prior  practice  and  this  Section
5.2(a)(xxii).

     (b)  Except as  otherwise  permitted  by this  Agreement  or with the prior
written  consent of Buyer,  prior to the Closing Date,  Seller shall cause McGee
and each of its Subsidiaries to use commercially reasonable best efforts to:

     (i)  maintain  at all times its status as a  corporation,  duly  organized,
validly  existing,  in good standing and duly  qualified and licensed to conduct
its business as now being  conducted in compliance  with  applicable  law in the
jurisdiction of its incorporation  and each of the other  jurisdictions in which
it is so conducting its business;

     (ii) at all times do or cause to be done,  and cause  each of its  officers
and  employees to do, all things  necessary to maintain,  preserve and renew the
corporate  existence of McGee and the corporate existence of the Subsidiaries of
McGee and all material federal,  provincial, state and local and other licenses,
permits,  franchises and other governmental  authorizations necessary to own and
operate their respective  properties and carry on their  respective  businesses,
and comply in all  material  respects  with all federal,  provincial,  state and
local laws applicable to McGee or any of its Subsidiaries or the Pool;

                                       28
<PAGE>

     (iii) operate its business  substantially as presently operated and only in
the ordinary course and (A) preserve  substantially  intact the present business
organization,  (B) collect all premiums,  balances due from  reinsurers and Pool
Participants and accounts receivable and (C) preserve its relationships with and
the goodwill of its Pool Participants,  customers,  suppliers,  agents,  general
agents, other insurers and reinsurers and other persons having business dealings
with it,  except where the failure to do so is not  reasonably  likely to have a
Material Adverse Effect;

     (iv) with respect to the properties of McGee and each of its  Subsidiaries,
maintain in force all existing casualty and liability  insurance and reinsurance
policies and fidelity  bonds or policies or bonds  providing  substantially  the
same coverage;

     (v)  maintain  proper  business  and  accounting   records  for  itself  in
accordance  with generally  accepted  accounting  principles and for the Pool in
accordance  with  accounting  practices  required  or  permitted  by  applicable
federal, provincial, state and local regulation;

     (vi) advise Buyer in writing of any event,  occurrence or  circumstance  of
which it is aware which is reasonably likely to have a Material Adverse Effect;

     (vii) comply in all material respects with all laws applicable to it and to
the conduct of its business;

     (viii)  maintain all of the  properties  which are material to its business
operations  or  financial  condition  in good  operating  condition  and repair,
ordinary  wear and tear  excepted,  and take all steps  reasonably  necessary to
maintain its intangible assets.

     Section 5.3. Regulatory and Other Filings and Approvals.  Each of Buyer and
Seller shall duly make (and Seller shall cause its Subsidiaries, including McGee
and its  Subsidiaries,  to make) all regulatory  filings  required to be made by
each in respect of this  Agreement or the  transactions  contemplated  hereby as
reflected on Schedule 5.3 to the  Agreement.  Each of Buyer and Seller shall use
its  commercially  reasonable best efforts at all times prior to January 1, 2001
to obtain (and cause ------------------------------------------ its Subsidiaries
to obtain) all  regulatory  approvals  necessary  to carry out the  transactions
contemplated by this Agreement,  including, without limitation, the obtaining by
Buyer  and  Buyer's   Subsidiaries  of  any  necessary  approvals  by  insurance
commissioners  or  superintendents  of  insurance  of  policy  forms  to be used
following the Closing.

                                       29
<PAGE>

     Section  5.4.  Premerger  Notification  and  Clearance.   Pursuant  to  the
Hart-Scott-Rodino  Antitrust  Improvements  Act of 1976 (the  "Hart-Scott-Rodino
Act"),  the Investment  Canada Act and the  Competition  Act of Canada,  each of
Buyer and Seller will file, or cause to be filed, any application,  notification
or report  form which is required  to be filed with the  Premerger  Notification
Office of the U.S.  Federal Trade  Commission or with the Antitrust  Division of
the U.S. Department of Justice or with Industry Canada or the Competition Bureau
(Canada),  if  applicable  (collectively  referred  to herein as the  "Premerger
Notification Agencies") in respect of the transactions contemplated hereby, each
of which  filings  shall  comply  as to form  with all  requirements  applicable
thereto  and all of the data and  information  reported  in which shall be true,
correct and  complete in all  material  respects.  Each of Buyer and Seller will
promptly comply with all requests, if any, of any of the Premerger  Notification
Agencies for additional  information or  documentation  in connection  with each
notification,  report and  application  filed by or on behalf of either Buyer or
Seller with any of the Premerger Notification Agencies, unless in the opinion of
both  McCutchen,  Doyle,  Brown & Enersen,  LLP and  Cummings & Lockwood  (or of
Canadian  Counsel for the Buyer and Seller,  respectively in the case of filings
made under the Investment Canada Act or the Competition Act, if applicable) such
compliance  is not  necessary  in order to obtain  clearance  from the  relevant
Premerger Notification  Agencies.  Such additional information and documentation
will comply with all requirements  applicable  thereto and will be true, correct
and complete in all material respects.

     Section 5.5. Further Assurances.

     (a) Each of Buyer and Seller  agrees to use  commercially  reasonable  best
efforts to take such  reasonable  action as may be necessary or  appropriate  in
order to effectuate the transactions  contemplated  hereby.  In case at any time
after the Closing  Date any further  action by Seller is necessary to vest Buyer
with Seller's full title to the Common Stock, Seller shall take all such action.

     (b) In  furtherance  of and in  addition  to other  obligations  of  Seller
pursuant to this Agreement and the  transactions  entered into pursuant  hereto,
from and after the Closing Date,  Seller shall not (i) use or purport to license
or allow any other  person to license  any mark,  trade  name or trade  dress of
McGee or any Subsidiary of McGee so long as McGee, any of its  Subsidiaries,  or
any successor  thereto has valid rights  therein or (ii) from and after the date
hereof  and until  June 30,  2000,  in any way  damage or  disparage,  and shall
undertake and ensure that no Subsidiary of Seller so damages or disparages,  the
name, business or reputation of McGee or any of McGee's Subsidiaries,  or of the
Pool or any mark,  trade name or trade dress of McGee or any Subsidiary of McGee
or of the Pool.

                                       30
<PAGE>

     (c) Buyer agrees,  following the Closing, to not use, advertise or promote,
or license any use, advertisement or promotion, and shall cause its Subsidiaries
not to  use,  advertise  or  promote,  or  license  any  use,  advertisement  or
promotion,  of the "Seahorse  Service Mark In the Orion Ring" of U.S.  Trademark
Registration  No.  2,180,334  identified  on Schedule  3.8(c)  (hereinafter  the
"Seahorse/Orion  Ring"  mark),  and  agrees  to  cause  McGee to  surrender  for
cancellation, with prejudice, and to abandon all use of, the Seahorse/Orion Ring
mark and any  registrations  thereof in a form  acceptable  to  counsel  for the
Seller within ninety (90) days of the Closing Date. Buyer agrees,  following the
Closing,  that Seller shall  retain  ownership  of its entire  right,  title and
interest in and to the "Orion Ring" component of the  Seahorse/Orion  Ring mark,
and that Buyer shall not use,  advertise or promote the "Orion Ring"  component,
or any mark confusingly or deceptively similar to the "Orion Ring" component for
so long as Seller  continues to use, or does not abandon use of the "Orion Ring"
as a mark or component of a mark.  Seller  agrees,  following the Closing,  that
McGee shall  receive  Seller's  entire  right,  title and interest in and to the
"Seahorse"  and "Wm.  H.  McGee"  components  of the  Seahorse/Orion  Ring  mark
together with all goodwill of McGee's business  symbolized by those  components,
and that Seller shall not use, advertise or promote these components together or
separately,  or any mark confusingly or deceptively similar to these components,
for so long as  Buyer  continues  to use,  or does  not  abandon  use of  either
component  as a mark or  component  of a mark.  Seller  agrees,  for a period of
twenty-four  (24)  months  following  the  Closing,  so  long  as  McGee  or any
Subsidiary  of McGee or any successor to either has valid rights  therein,  that
neither  Seller nor any  Subsidiary of Seller will use any customer list that is
the property of McGee or was received from McGee.

     Section 5.6. Tax Matters. Each of Buyer and Seller covenants that:

     (a) (i) Seller  shall have the right and  obligation  timely to prepare and
file, or cause timely to be prepared and filed,  when due (giving  effect to any
extension of time),  all Tax Returns  with respect to McGee or its  Subsidiaries
for any Tax periods ending on or before the Closing Date.

     (ii) Buyer shall have the right and obligation  timely to prepare and file,
or cause  timely  to be  prepared  and  filed,  when due  (giving  effect to any
extension of time),  all Tax Returns  with respect to McGee or its  Subsidiaries
for any Tax periods ending after the Closing Date and any Tax period that begins
before the Closing Date and ends after the Closing Date (a "Straddle Period")).

     (iii) Any Tax Return which includes McGee or its  Subsidiaries  for any tax
period ending on or before December 31, 1998 (a "Pre-Year End Period"),  and any
Tax Return which includes McGee or its Subsidiaries for any tax period beginning
on or after January 1, 1999 (a  "Post-Year  End Period") to the extent the items
reported on such Tax Return might  increase any Tax  liability of Seller for any
Pre-Year End Period or any Straddle Period, shall be prepared in accordance with
past Tax  accounting  practices used with respect to the Tax Returns in question
as determined by Seller in Seller's discretion,  and to the extent any items are
not covered by past  practices,  in accordance  with  reasonable  Tax accounting
practices  selected by the filing  party with  respect to such Tax Return  under
this  subsection  5.6(a) with the consent  (not to be  unreasonably  withheld or
delayed) of the non-filing party.

                                       31
<PAGE>

     (iv) In the case of any Tax Return for any  Straddle  Period,  Buyer  shall
provide  Seller  with  copies of the  completed  Tax Return for such Tax period,
together  with such  related  work papers and other  documents  as Seller  shall
reasonably request, no later than sixty (60) days before the due date (including
any extensions) for the filing of such Tax Return and materials.  Seller and its
authorized  representatives  shall  have the  right to review  such Tax  Return.
Seller  and Buyer  agree to  consult  each  other and  resolve in good faith any
issues arising under the terms of this subsection  5.6(a)(iv) as a result of the
review of any such Tax Returns and/or materials for any Straddle Period.  If the
parties are unable to resolve any dispute within thirty (30) days after such Tax
Returns  are  provided  to Seller,  the  parties  shall  resort to the method of
dispute  resolution  provided in Section 13.11 hereof. If such disputes have not
been  resolved  prior to the due date for  filing  of such Tax  Return,  the Tax
Return in question, to the extent any issues thereon remain unresolved, shall be
timely  filed  in  accordance  with  the  positions   taken  by  Seller.   If  a
determination is made through the dispute  resolution process after a Tax Return
is filed that Seller's position was inappropriate,  Buyer shall promptly file an
amended Tax Return (to the extent  permitted by applicable  law)  reflecting the
final decision of the  Arbitrator and Seller shall pay to Buyer any  appropriate
additional Tax amounts  resulting  from such amended  return  provided that such
payment  shall be made only to the extent the provision for Taxes as of December
31, 1998 shall have been exceeded.

     (v) In the case of the Tax period of McGee or its Subsidiaries  which began
on January 1, 1999 and shall end on the Closing Date, Seller shall provide Buyer
with copies of the completed Tax Return for such Tax period,  together with such
related work papers and other documents as Buyer shall  reasonably  request,  no
later than sixty (60) days before the due date  (including any  extensions)  for

                                       32
<PAGE>

the  filing  of  such  Tax  Return  and  materials.  Buyer  and  its  authorized
representatives shall have the right to review such Tax Return. Seller and Buyer
agree to consult each other and resolve in good faith any issues  arising  under
the terms of this subsection 5.6(a)(v) as a result of the review of any such Tax
Returns and/or  materials for any such Tax period.  If the parties are unable to
resolve any dispute  within thirty (30) days after such Tax Returns are provided
to Buyer, the parties shall resort to the method of dispute resolution  provided
in Section  13.11 hereof.  If such disputes have not been resolved  prior to the
due date for  filing of such Tax  Return,  the Tax  Return in  question,  to the
extent any issues thereon remain unresolved, shall be timely filed in accordance
with the  positions  taken by Seller.  If a  determination  is made  through the
dispute  resolution  process after a Tax Return is filed that Seller's  position
was  inappropriate,  Seller  shall  promptly  file an amended Tax Return (to the
extent  permitted  by  applicable  law)  reflecting  the final  decision  of the
Arbitrator and Buyer shall pay to Seller,  within thirty (30) days after payment
of such Tax amounts  and filing of such  amended  Tax  Return,  any  appropriate
additional  Tax amounts,  or Seller shall pay to Buyer,  within thirty (30) days
following the receipt of such Tax refund  amounts,  any  appropriate  Tax refund
amounts, resulting from such amended return.

     (b) (i) Seller  shall be liable  for,  and shall  indemnify  and hold Buyer
harmless from and against, any and all Taxes imposed on or with respect to McGee
or its  Subsidiaries  for  Pre-Year End  Periods;  provided  that Buyer shall be
liable for and shall hold  Seller  harmless  from and  against  any and all such
Taxes which result from an amendment,  restatement,  or recalculation of any Tax
Return with respect to such Taxes  occasioned by any action taken by Buyer after
December 31, 1998 or by McGee after the Closing Date.

     (ii)  Buyer  shall be liable  for,  and  shall  indemnify  and hold  Seller
harmless from and against, any and all Taxes imposed on or with respect to McGee
or its Subsidiaries for Post-Year End Periods.

     (iii) In the case of a Straddle Period,  Seller shall be solely responsible
for all Taxes attributable to any Pre-Year End Period, and Buyer shall be solely
responsible for all Taxes attributable to Post-Year End Periods. Tax items shall
be apportioned between Pre-Year End Periods and Post-Year End Periods based on a
closing of the books and records of McGee or its Subsidiaries as of December 31,
1998  (provided  that (A) any Tax item  incurred  by reason of the  transactions
occurring on or before the Closing Date as  contemplated by this Agreement shall
be treated as occurring in a Pre-Year End Period and (B) exemptions, allowances,
deductions  or  credits  that  are  calculated  on  an  annual  basis  shall  be

                                       33
<PAGE>

apportioned on a daily pro rata basis). Notwithstanding anything to the contrary
in the preceding  sentence,  the parties agree that for U.S.  federal income tax
purposes,  Tax  items  for any  Straddle  Period  shall be  apportioned  between
Pre-Year End Periods and Pos Year End Periods in accordance  with U.S.  Treasury
Regulations  Section   1.1502-76(b),   which  regulations  shall  be  reasonably
interpreted  by the  parties  in a manner  intended  to  achieve  the  method of
apportionment  described in the  preceding  sentence.  Seller and Buyer will not
exercise any option or election  (including  any election  ratably to allocate a
Tax year's items under  Treasury  Regulations  Section  1.1502-76(b)(2)(ii))  to
allocate Tax items in a manner inconsistent with this subsection 5.6(b).

     (iv)  Notwithstanding  paragraphs  (i),  (ii) and (iii) of this  subsection
5.6(b) and paragraph  (iv) of  subsection  5.6(a)  hereof,  Seller shall have no
obligation  to pay, or indemnify  Buyer in respect of any unpaid Taxes due to be
paid by Seller  unless,  and then only to the  extent  that,  the amount of such
unpaid Taxes  exceeds the  provision  for Taxes on the  financial  statements of
McGee and its  Subsidiaries  as of December 31, 1998 (with the  exclusion of any
deferred  Taxes).  Seller  shall  determine,  from time to time when  reasonably
necessary,  whether  such  provision  for Taxes has been  exceeded.  Buyer shall
cooperate with Seller with regard to such  determination,  including as provided
in  Section  5.6(h)  below.  Seller and Buyer  agree to  consult  each other and
resolve  in good  faith any issues  arising  under the terms of this  subsection
5.6(b)(iv).  If the parties are unable to resolve any dispute within twenty (20)
days after such  determination by Seller, the parties shall resort to the method
of dispute resolution provided in Section 13.11 hereof.

     (c) (i) If Buyer  receives a Tax refund with respect to Taxes  arising in a
Pre-Year End Period,  Buyer shall pay,  within  thirty (30) days  following  the
receipt of such Tax refund,  the amount of such Tax refund to Seller.  If Seller
receives a Tax refund with respect to Taxes arising in any Post-Year End Period,
within thirty (30) days  following  the receipt of such Tax refund,  Seller will
pay the amount of such Tax  refund to Buyer.  Additionally,  if Seller  pays any
Taxes imposed on or with respect to McGee or its Subsidiaries for the Tax period
which  began on January 1, 1999 and shall end on the Closing  Date,  Buyer shall
pay,  within thirty (30) days following the filing of any Tax Return giving rise
to such Tax and the payment thereof, the amount of such Tax to Seller. If Seller
receives any Tax benefit with respect to McGee or its  Subsidiaries  for the Tax
period which began on January 1, 1999 and shall end on the Closing Date,  Seller
shall pay, within thirty (30) days following the filing of any Tax Return giving
rise to such Tax benefit, the amount of such Tax benefit to Buyer.

                                       34
<PAGE>

     (ii) Buyer agrees that, to the extent permitted by applicable law, it shall
not carry back, and shall not cause or permit McGee or its  Subsidiaries  or any
other  affiliate  of Buyer to carry  back,  any net  operating  loss,  loss from
operations  or other  Tax  attributed  to any Tax year or period of McGee or its
Subsidiaries or any affiliate thereof (including, but not limited to, any member
of any affiliated,  combined or unitary group of which McGee is or was a member)
ending on or before the Closing Date, or to any Tax period  beginning before and
ending after the Closing Date to the extent of the portion of such period ending
on the Closing  Date.  Buyer  agrees that Seller  shall not have any  obligation
under  this  Agreement  to  return or remit  any  refund  or other  Tax  benefit
attributable to a breach by Buyer of the foregoing undertaking.

     (iii) Any amended Tax Return or claim for Tax refund for any period  ending
on or before the Closing Date other than a Straddle  Period  shall be filed,  or
caused to be filed, only by Seller.  Seller shall not, without the prior written
consent of Buyer (which consent shall not be  unreasonably  withheld or delayed)
make or  cause to be made,  any such  filing,  to the  extent  such  filing,  if
accepted, reasonably might change the Tax liability of Buyer for any Tax period.

     (iv) An amended Tax Return or claim for Tax refund for any Straddle  Period
shall be filed by the party  responsible  for  filing  the  original  Tax Return
hereunder if either  Buyer or Seller so requests,  except that such filing shall
not be done  without the consent  (which shall not be  unreasonably  withheld or
delayed)  of Buyer (if the  request  is made by  Seller)  or of  Seller  (if the
request is made by Buyer).

     (v) Any amended Tax Return or claim for Tax refund for any period beginning
after the Closing Date other than a Straddle Period shall be filed, or caused to
be filed,  only by Buyer,  who  shall not be  obligated  to make (or cause to be
made) such filing.  Buyer shall not, without the prior written consent of Seller
(which  consent  may be  withheld  by  Seller  in  Seller's  sole  and  absolute
discretion)  file, or cause to be filed, any amended Tax Return or claim for Tax
refund for any Post-Year End Period to the extent that such filing, if accepted,
might change the Tax liability of Seller for any Tax periods ending on or before
the Closing Date as determined by Seller.

                                       35
<PAGE>

     (d) Buyer shall be liable for and shall pay,  and shall hold Seller and its
Subsidiaries  harmless  against,  any Taxes  attributable  to any election under
Section 338 of the Internal  Revenue Code of 1986,  as amended,  (the "Code") or
any  comparable  or  resulting  election  under  state,  local or foreign law (a
"Section  338  Election"),   with  respect  to  the  transactions   contemplated
hereunder.  Notwithstanding the prior sentence, Buyer shall not make any Section
338 Election  without the prior written  consent of Seller which consent  Seller
may withhold in its sole and absolute discretion.

     (e) Buyer shall be liable for and shall pay,  and shall hold Seller and its
Subsidiaries harmless against any transfer, recordation, stamp, or similar Taxes
of any kind  required in the  applicable  jurisdiction  in  connection  with the
effectuation of the transactions  contemplated hereunder and imposed upon Seller
and its Subsidiaries.

     (f) Seller and Buyer agree that for all federal income tax purposes the Tax
period of McGee or its  Subsidiaries  which  began on  January  1, 1999 shall be
terminated  as of the close of business on the Closing Date in  accordance  with
Treasury Regulations Section 1.1502-76(b)(1) and subsection 256(9) of the Income
Tax Act (Canada).

     (g) Seller and Buyer  shall  provide to each other  notice  within ten (10)
days of receipt of any audit or similar investigation or proceeding in which the
IRS or any other governmental  entity makes or proposes to make a Tax adjustment
to any Tax period which includes any period up to the Closing Date. Seller shall
control any such  proceeding as to Tax periods ending on or prior to the Closing
Date,  and Buyer shall control any such  proceeding as to Tax periods  beginning
after the Closing Date, provided that, with respect to any such audit, the other
party or its representative shall have the right, at its expense, to participate
in any such audit or similar investigation. The parties agree that they will not
settle,  compromise or agree to any Tax adjustment which affects or could affect
the other party's Tax liability  without the prior written  consent of the other
party,  which consent shall not be unreasonably  withheld.  The parties agree to
cooperate   with  each  other  for  the   purposes   of  any  audit  or  similar
investigation,  which  cooperation  shall  include,  but not be  limited  to (i)
providing  all relevant  information  that is available to Buyer,  Seller and/or
McGee,  as the case may be, with  respect to such audit or  investigation,  (ii)
making  personnel  available at  reasonable  times,  and (iii)  preparation  and
responses to requests for information, provided that the foregoing shall be done
in a manner so as to not interfere  unreasonably with the conduct of business by
Buyer, Seller or McGee, as the case may be.

     (h)  Seller on the one  hand,  and Buyer and  McGee,  on the  other,  shall
cooperate  (and cause their  affiliates to  cooperate)  with each other and with
each other's agents, including accounting firms and legal counsel, in connection
with  Tax  matters  relating  to  McGee  or  its  Subsidiaries,   including  (i)
preparation and filing of Tax Returns,  (ii)  determining the liability for, and
amount  of,  any Taxes due or the right to,  and amount of, any refund of Taxes,

                                       36
<PAGE>

(iii)  examinations  of Tax  Returns,  and (iv) any  administrative  or judicial
proceeding  in  respect of Taxes  assessed  or  proposed  to be  assessed.  Such
cooperation shall include each party making all information and documents in its
possession  relating to McGee or its Subsidiaries  available to the other party.
The parties  shall retain all Tax Returns,  schedules  and work papers,  and all
material records and other documents  relating thereto,  until at least one year
after the expiration of the applicable statute of limitations (including, to the
extent notified by any party, any extension  thereof) of the Tax period to which
such Tax Returns and other documents and information relate. Each of the parties
shall also make  available  to the other  party,  as  reasonably  requested  and
available,  personnel  (including  officers,  directors,  employees  and agents)
responsible  for  preparing,   maintaining,  and  interpreting  information  and
documents relevant to Taxes, and personnel  reasonably  required for purposes of
providing  information  or documents in connection  with any  administrative  or
judicial proceedings relating to Taxes.

     (i) The Tax Sharing  Agreement dated July 1, 1995 by and between Seller and
McGee shall be terminated  effective as of the close of business on December 31,
1998. Any resulting unsettled accruals or adjustments in respect of the Taxes of
McGee or its subsidiaries shall be settled as of the Closing Date.

     (j) Seller and Buyer  agree that any  payment  made under this  Section 5.6
shall be treated by the parties for all purposes (to the extent  permitted under
applicable  tax law), as an adjustment to the  consideration  being provided for
the Common Stock hereunder.

                  (k)  Notwithstanding  any other provision in this Agreement to
the contrary  (including  without  limitation  Article 13), the  obligations  of
Seller and Buyer under this  Section 5.6  relating to any Taxes or matters  with
respect  thereto shall survive until the lapse of the statute of limitations for
the assessment of such Tax or sixty (60) days after the final  administrative or
judicial  determination  of such  Tax  and,  for a Tax for  which  McGee  or its
Subsidiaries  are not primarily  liable,  the later to occur of (i) the lapse of
the statute of  limitations  for the  collection  of such Tax or (ii) sixty (60)
days after the final  administrative or judicial  determination that such Tax is
collectable  against Seller or its  Subsidiaries;  provided,  however,  that any
claim in respect of an  obligation  under this  Section 5.6  asserted in writing
prior to the lapse of the  statute of  limitations  or sixty (60) days after the
final administrative or judicial determination shall continue to survive.

     (l) After the Closing, neither party shall have any liability or obligation
with respect to the matters set forth in this Section  5.6,  except  pursuant to
this Section 5.6.

     5.7.  Pool  Financial  Statements.  Within five (5) days of the delivery to
Seller of the audited statutory financial statements of the Pool at December 31,
1998,  accompanied by the report of Deloitte & Touche, LLP, Seller will delivery
a copy of such financial statements to Buyer. 
                                     VI. -

                                       38
<PAGE>

                            AGREEMENTS WITH RESPECT -
                               TO POOL OPERATION -

     Section 6.1. Pool Participations; Reinsurance.

     (a) At or prior to the  Closing,  Seller  shall  cause SICH and CI to enter
into Reinsurance Agreements with Buyer substantially in the form of Exhibit C.

     (b)  At  the  Closing  Buyer  shall  cause  McGee,  subject  to  applicable
regulatory  requirements,  to designate Buyer as the Clearing  Company,  as that
term is defined in the Inter-Office Reinsurance Agreements,  pursuant to McGee's
authority under the Inter-Office  Reinsurance Agreements effective 12:00:01 a.m.
New York Time on January 1, 1999.

     (c)  At  the  Closing  Buyer  shall  cause  McGee,  subject  to  applicable
regulatory  requirements,  to amend the 1999  Schedule of  Participation  of the
Inter-Office Reinsurance Agreements to transfer to Buyer, and Buyer shall assume
(i) SICH's  Pool  Participation  in the United  States Pool and (ii) SICH's Pool
Participation  in the Canadian  Pool,  effective  12:00:01 a.m. New York Time on
January  1,  1999,  thereby  assuming  all of  SICH's  rights,  liabilities  and
obligations as a Pool Participant on and after January 1, 1999.

     Section 6.2. Underwriting Operations of the Pool.

     (a) From the date hereof through the Closing Date:

     (i) Seller will cause McGee to use commercially  reasonable best efforts to
conduct the underwriting  operations of the Pool in the ordinary course and in a
manner  consistent  with prior  practice and otherwise in  accordance  with this
Agreement; and

     (ii) Seller will not, and will not cause or permit  McGee to,  introduce or
commence  on  behalf  of the Pool or for its  account  the  offering  of any new
product  or  service  or the  underwriting  of any  type of risk or any  line of
insurance not currently written by or through the Pool.

     (b) From and after the  Closing  and  through  12:00 a.m.  New York Time on
December 31, 2000, McGee shall, and Buyer shall use commercially reasonable best

                                       39
<PAGE>

efforts to cause McGee to,  manage the affairs of the Pool on behalf of the Pool
Participants  and undertake on behalf of the Pool only such  insurance  risks as
shall  in the  judgment  of McGee  be  appropriate  and  consistent  with  prior
practices of the Pool and otherwise be in accordance with this Agreement and the
Ancillary  Agreements.  From and after the Closing and until  December 31, 2000,
SICH and CI will,  as requested by McGee,  issue,  pursuant to and in accordance
with, the terms of an  underwriting  management  agreement to be entered into by
each of them with McGee,  such  policies of  insurance as are placed by McGee on
behalf of the Pool;  provided  that Buyer  shall not cause or permit  McGee,  on
behalf  of or for the  account  of SICH or CI,  to  introduce  or  commence  the
offering of any new product or service or the  underwriting  of any type of risk
or any line of  insurance  not written by SICH or CI on behalf of or through the
Pool prior to the  Closing  Date and;  provided  further  that  except as may be
necessary to update and maintain  existing policy forms and filings,  neither CI
nor  SICH  shall be  obliged  to file or  qualify  any new  form of  policy.  In
consideration  of the issuance by SICH and CI of such policies,  Buyer shall pay
to SICH and CI, as their interests may appear, on the fifteenth day of the month
following the month in which such policies  shall have been issued,  a fee equal
to one percent (1%) of the gross direct written  premiums in respect of all such
policies issued on or after January 1, 1999 and through  December 31, 1999, and,
in respect of all such  policies  issued on or after January 1, 2000 and through
December  31,  2000,  to a fee equal to two  percent  (2%) of the  gross  direct
written premiums.

     (c) Buyer shall  furnish,  or shall cause  McGee to furnish,  to SICH,  not
later than April 1 of each year,  inter-office  reinsurance financial statements
for the Pool which shall be audited for each year through  December 31, 2001 and
thereafter,  through  December 31, 2008, shall either be audited or certified by
the Chief  Financial  Officer of Buyer. At all times prior to December 31, 2008,
Seller  shall  have the right,  at its own  expense,  to visit the  headquarters
office of McGee at  reasonable  times and on a  reasonable  number of  occasions
during normal  business  hours to discuss the business and affairs of McGee with
officers of McGee  reasonably  designated  by McGee for such purpose and to make
copies of relevant corporate records requested by Seller;  provided that each of
Buyer and  McGee  shall  have  received  at least ten days'  notice of each such
visit.

     (d) From and  after the  Closing  Date,  Buyer  shall  take,  and shall use
commercially   reasonable   best  efforts  to  cause  McGee  and  the  insurance
Subsidiaries  of Buyer to take, all steps  necessary (a) to enable McGee to make
with all necessary  insurance  regulatory  authorities such policy-form and rate
filings  as  shall  be  necessary  so  that  Buyer  or  one  or  more  insurance
Subsidiaries of Buyer is able to issue all forms of policies now being issued on
behalf  of the  Pool  by SICH  and CI and  (b) to  enable  Seller  to make  such
statutory  reports as Seller  shall be required to make in respect of or arising
out of the operations of the Pool and the Reinsurance Agreement.

                                       40
<PAGE>

                  (e) At all  times  prior to  December  31,  2001  McGee  shall
maintain errors and omissions coverage in an amount not less than $6,500,000 per
occurrence and a deductible of not more than  $1,000,000 per occurrence with one
or more  insurers  rated "A" or  better by A.M.  Best  Company;  and  reasonably
satisfactory to Seller; provided that Buyer or any insurance Subsidiary of Buyer
which is so rated shall be  presumed  to be  approved  by Seller  and;  provided
further that if the annual  premiums for such coverage  shall exceed in the year
beginning  January 1, 2000, 103% of such premiums in the year beginning  January
1, 1998 or in the year beginning January 1, 2001 shall be more than 106% of such
1998  premiums then McGee shall  maintain  coverage in such amount and with such
deductibles  as may be obtained by McGee  within the  premium-amount  limits set
forth above.

     (f) None of Seller,  SICH or CI shall have any liability for the payment to
McGee of any  commission,  "overriding"  commission,  "contingent"  or  "profit"
commission  as defined in the Pool  Agreements  in respect of  operations of the
Pool incurred  either prior to the Closing Date or during the period  defined in
Section 6.2(b). VII. -

                      CONDITIONS TO OBLIGATIONS OF BUYER -

     The  obligations of Buyer under this Agreement are, at its option,  subject
to the  fulfillment,  on or before the Closing  Date,  of each of the  following
conditions precedent:

     Section 7.1.  Covenants.  Seller and each  Subsidiary  of Seller shall have
performed and complied with all the terms,  covenants and conditions required by
this  Agreement  to be  performed  or  complied  with by Seller on or before the
Closing  Date,  and Buyer shall have  received  from Seller,  at the Closing,  a
certificate  executed by an officer of Seller to that effect,  dated the Closing
Date. 

     Section  7.2.  Representations  and  Warranties.  The  representations  and
warranties  made by Seller in this Agreement shall be true and correct as of the
Closing Date as though such  representations  and warranties were made at and as
of  such  time,   and  Buyer  shall  have  received  from  Seller  one  or  more
certificates,  dated the Closing  Date,  to that effect  executed by one or more
officers of Seller.

     Section 7.3. Absence of Litigation and Required Regulatory Approvals. Every
consent of or  approval  by any  governmental  authority  which is  required  in
connection with the transactions  contemplated by this Agreement shall have been
obtained  and be in full force and  effect and there  shall not be in effect any
injunction,  writ, preliminary restraining order or any order, ruling or request
of any nature issued by a court or governmental agency of competent jurisdiction

                                       41
<PAGE>

directing  that any  transactions  provided for herein not be  consummated as so
provided and no suit,  action,  proceeding or investigation  shall be pending or
threatened before any court or governmental  agency, which relates to or asserts
(i) the illegality of any of the transactions contemplated by this Agreement, or
which seeks the  restraint  or  prohibition  of the  consummation  of any of the
transactions  contemplated  by this  Agreement or (ii) that material  misleading
statements or omissions have been made in connection  with the  consummation  of
any of the  transactions  contemplated  by this  Agreement  or (iii) a claim for
damages in a material  amount,  or other material relief against McGee or any of
McGee's Subsidiaries, or against Buyer, if such claim shall arise from or relate
to the consummation of this Agreement or the transactions contemplated hereby.

     Section  7.4.  Premerger  Notification.   Any  applicable  period  of  time
necessary before the  transactions  contemplated  hereby can be consummated,  as
provided  by  the  Hart-Scott-Rodino  Act,  the  Investment  Canada  Act  or the
Competition  Act  (Canada),  if  applicable,  shall have  expired,  all required
clearances thereunder shall have been obtained and no action or proceeding shall
have  been  instituted  by any of the  Premerger  Notification  Agencies  or any
similar  agency  claiming to have  jurisdiction  for the purpose of enjoining or
delaying the consummation of the transactions contemplated hereby.

     Section 7.5. No Material  Adverse  Effect.  Seller shall have  furnished to
Buyer a certificate of an officer of Seller to the effect that no act,  omission
or event has  occurred  between the date hereof and the Closing Date which could
reasonably    be    expected    to    have   a    Material    Adverse    Effect.


     Section 7.6. Additional Agreements. Reinsurance Agreements substantially in
the form of  Exhibit C shall have been  entered  into and shall be in full force
and effect,  and the  Releases in the form of Exhibits  A-1, A-2 and A-3 and the
Noncompetition  Agreement  in the form of Exhibit B shall have been entered into
and shall be in full force and effect. 

     Section  7.7.  Opinion of Counsel  for Seller and McGee.  Buyer  shall have
received an opinion from John J. McCann,  Esq.,  Executive  Vice  President  and
Chief Legal Officer of Seller,  with respect to matters relating to Seller,  its
Subsidiaries  and its and their  obligations  under this Agreement,  and (ii) an
opinion of John P. Iacono,  Esq.,  Senior Vice President and General  Counsel of
McGee,  with respect to matters relating to McGee and its Subsidiaries and their
obligations  under this  Agreement,  each dated the Closing Date,  and each such
opinion shall be in form and substance reasonably  satisfactory to Buyer and its
counsel.

                                     VIII. -

                                       42
<PAGE>

                      CONDITIONS TO OBLIGATIONS OF SELLER -

     The obligations of Seller under this Agreement are, at its
option, subject to the fulfillment, on or before the Closing Date of each of the
following conditions precedent:

     Section 8.1. Covenants. Buyer shall have performed or complied with all the
terms,  covenants and  conditions  required by this Agreement to be performed or
complied  with by it on or before  the  Closing  Date,  and  Seller  shall  have
received from Buyer,  at the Closing,  a  certificate  executed by an officer of
Buyer to that effect, dated the Closing Date. 

     Section  8.2.  Representations  and  Warranties.  The  representations  and
warranties  made by Buyer in this Agreement  shall be true and correct as of the
Closing Date as though such  representations  and warranties were made at and as
of such time and Seller shall have received from Buyer a certificate,  dated the
Closing   Date,   to   that   effect   executed   by  an   officer   of   Buyer.


     Section 8.3. Absence of Litigation and Required Regulatory Approvals. Every
consent of or  approval  by any  governmental  authority  which is  required  in
connection with the transactions  contemplated by this Agreement shall have been
obtained  and be in full force and  effect and there  shall not be in effect any
injunction,  writ, preliminary restraining order or any order, ruling or request
of any nature issued by a court or governmental agency of competent jurisdiction
directing  that any  transactions  provided for herein not be  consummated as so
provided and no suit,  action,  proceeding or investigation  shall be pending or
threatened before any court or governmental  agency, which relates to or asserts
(i) the illegality of any of the transactions contemplated by this Agreement, or
which seeks the  restraint  or  prohibition  of the  consummation  of any of the
transactions  contemplated  by this  Agreement or (ii) that material  misleading
statements or omissions have been made in connection  with the  consummation  of
any of the  transactions  contemplated  by this  Agreement  or (iii) a claim for
damages in a material  amount,  or other material relief against McGee or any of
McGee's  Subsidiaries,  or against  Seller or any of its  Subsidiaries,  if such
claim shall arise from or relate to the  consummation  of this  Agreement or the
transactions contemplated hereby.

     Section  8.4.  Premerger  Notification.   Any  applicable  period  of  time
necessary before the  transactions  contemplated  hereby can be consummated,  as
provided  by  the  Hart-Scott-Rodino  Act,  the  Investment  Canada  Act  or the
Competition  Act  (Canada),  if  applicable,  shall have  expired,  all required
clearances thereunder shall have been obtained and no action or proceeding shall
have  been  instituted  by any of the  Premerger  Notification  Agencies  or any
similar  agency  claiming to have  jurisdiction  for the purpose of enjoining or
delaying the consummation of the transactions contemplated hereby.

                                       43
<PAGE>

     Section 8.5. Additional Agreements. Reinsurance Agreements substantially in
the form of  Exhibit C shall have been  entered  into and shall be in full force
and effect and the  Releases  in the form of Exhibits  A-1,  A-2 and A-3 and the
Noncompetition  Agreement  in the form of Exhibit B shall have been entered into
and shall be in full force and effect. 

     Section 8.6.  Opinion of Counsel for Buyer.  Seller shall have  received an
opinion of the general  counsel of Buyer,  dated the Closing  Date,  in form and
substance reasonably satisfactory to Seller and its counsel.
                                
                                      IX. -

                                  TERMINATION -

     Section  9.1.  Termination.  At any time prior to the  Closing  Date,  this
Agreement may be terminated and the transactions  provided for herein abandoned,
whether before or after adoption and approval thereof by Seller and Buyer:
                                -----------

     (a) by mutual written consent of the parties hereto; or


     (b) by Seller or Buyer, if the Closing shall not have occurred on or before
June 30, 1999.

     Section  9.2.  Effect  of  Termination.  In the  event  of any  termination
pursuant  to this  Article  IX, the parties  hereto  shall be released  from all
liabilities and obligations arising under this Agreement with respect to matters
contemplated  by this  Agreement,  other than for damages to the extent  arising
from a prior breach of this Agreement and other than as provided in Sections 5.1
(last sentence only), 13.1 and 13.6. 
                                      X. -

                        EMPLOYMENT AND BENEFIT MATTERS -

     Section 10.1.  Employees.  Buyer will cause McGee and its  Subsidiaries  to
continue to employ all persons who are  currently  employees  of McGee or become
such prior to the Closing (the  "Affected  Employees")  at their current rate of
base compensation and on the same terms and conditions of employment  (including
those  relating to  termination  and  severance  benefits)  that they now enjoy,
subject to the  provisions of Section 10.2,  for a period  following the Closing
Date at least  equal to the notice  period  (without  exceptions  to such notice
period) for the Worker Adjustment and Retraining  Notification Act. For purposes

                                       44
<PAGE>

of this  Article X, all former  employees of McGee who have  retired,  separated
from service with a terminated  vested  interest or are otherwise  terminated or
separated and entitled,  presently or upon the passage of time, to retirement or
other  benefits,  shall be considered to be "Affected  Employees."  In addition,
Buyer has  informed  Seller  that it intends  to cause  McGee to offer to senior
executive  and other key employees of McGee  employment  and Seller will use its
best efforts (which,  except as set forth below, shall not include the making of
payments  or  financial  commitments  by  Seller) to assist  Buyer in  obtaining
acceptance of such offer by such executives and key employees.  Seller agrees to
reimburse  Buyer,  within  thirty  (30) days after  Buyer's  payment or Seller's
receipt of Buyer's  invoice,  whichever  is later,  for  one-half  of  retention
payments  paid by Buyer or McGee  within 13 months  after the  Closing to senior
executives and other key employees of McGee, up to a maximum liability to Seller
under this  sentence  of  $400,000,  and prior to Closing,  Buyer shall  provide
Seller a list of such intended payments and the recipients thereof.

                  Section 10.2. Participation in Benefit Plans. Buyer shall make
provision such that,  effective as of the Closing Date,  the Affected  Employees
will commence participation immediately in welfare benefit plans which will have
been adopted by McGee and which,  taken as a whole,  are comparable to the plans
presently in effect for the Affected  Employees.  The  Affected  Employees  will
either continue participation in McGee's pension plans or commence participation
in Buyer's pension plans,  which,  taken as a whole, are comparable to the plans
presently available to or in effect for the Affected Employees.  Buyer will, and
will cause McGee to,  recognize  each Affected  Employee's  service prior to the
Closing  Date with respect to McGee and its  Subsidiaries  as service with McGee
(or the Buyer or any  Subsidiary  of the Buyer which may become the  employer of
any Affected  Employees,  as the case may be) in connection with (i) any waiting
period,  eligibility  requirements or any  elimination  period under any welfare
benefit  plan  available  to any Affected  Employees,  (ii) any waiting  period,
eligibility requirements and benefit accrual with regard to participation in any
sick, holiday, vacation,  personal time off, or other similar service-based plan
or program  available to any Affected  Employees,  and (iii) any  eligibility or
vesting  requirements under any qualified or non-qualified plan available to any
Affected Employees.  Should the Affected Employees commence participation in the
defined benefit plan of the Buyer, then in no event shall an Affected Employee's
benefit  under the defined  benefit plan of the Buyer be reduced (in any manner)
by any  benefits  accrued  by the  Affected  Employee  under the  pension  plans
maintained by McGee.

                                       45
<PAGE>

     Section 10.3.  Severance Pay. Buyer shall,  or shall cause McGee to, pay to
the Affected  Employees whose employment is terminated within one hundred eighty
(180) days after the Closing Date  severance  benefits not less  favorable  than
those now available to employees of McGee. 

     Section  10.4.  Non-Solicitation.  Seller  agrees that,  from and after the
Closing Date until June 30, 2002,  neither it nor any of its  Subsidiaries  will
solicit,  nor cause any other  person to solicit,  any person  named on Schedule
10.4 so long as such person is an employee of McGee or Buyer or any affiliate of
Buyer;  provided,  however,  that  nothing  in this  Section  shall be deemed to
prohibit  any  solicitation  not  specifically  targeted  at such  employees  or
Affected  Employees,  including  general  advertisement by means of newspaper or
other advertisements. XI. -

                              AMENDMENT; WAIVERS -

     Section  11.1.  Amendments,  Modifications,  Etc.  At any time prior to the
Closing,  this  Agreement  and the  Exhibits  hereto may be  amended,  modified,
superseded or supplemented to the extent  permitted by applicable law only by an
instrument  in writing  executed and  delivered on behalf of each of the parties
hereto, which instrument when so executed and delivered shall thereupon become a
part of this  Agreement and the  provisions  thereof shall be given effect as if
contained  in  this  Agreement as of  the  date hereof.

     Section  11.2.  Waivers.  The  representations,  warranties,  covenants and
conditions of this Agreement may be waived only by a written instrument executed
by the  party  so  waiving.  The  failure  of any  party at any time or times to
require  performance of any provision  hereof shall not affect the right of such
party at a later  time to  enforce  the  same.  No  waiver  by any  party of any
condition,  or  breach  of any  term,  covenant,  agreement,  representation  or
warranty  contained  in this  Agreement,  ------- in any one or more  instances,
shall be deemed to be or construed as a waiver of any other  condition or of the
breach  of any other  term,  covenant,  agreement,  representation  or  warranty
contained in this Agreement. XII. -

                                 DEFINED TERMS -

     When used as defined terms in this  Agreement,  the  following  terms shall
have the meanings set forth herein:

     "Accredited Investor" shall have the meaning set forth in Section 4.6.

                                       46
<PAGE>

     "Affected Employees" shall have the meaning set forth in Section 10.1.

     "Ancillary Agreements" shall mean the Reinsurance  Agreement,  the Releases
and the  Noncompetition  Agreement in the respective  forms attached as Exhibits
hereto.

     "Benefit Plans" shall have the meaning set forth in Section 3.13.

     "Buyer"  shall  mean  Fireman's  Fund  Insurance   Company,   a  California
corporation.

     "Canadian  Pool"  shall have the  meaning  ascribed  in the  definition  of
"Pool."

     "CI"  shall  mean  The  Connecticut   Indemnity   Company,   a  Connecticut
corporation and a wholly-owned Subsidiary of Seller.

     "Common  Stock"  shall  have the  meaning  set forth in the  first  recital
paragraph.

     "Closing" shall each have the meaning set forth in Section 2.1.

     "Closing Date" shall have the meaning set forth in Section 2.1.

     "Code" shall mean the Internal Revenue Code of 1986, as amended.

     "Consolidated Group" shall have the meaning set forth in Section 3.10(a).

     "Damages" shall have the meaning set forth in Section 13.6.

     "DLJ" shall have the meaning set forth in Section 3.22.

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

     "ERISA Affiliate" shall have the meaning set forth in Section 3.13.

     "Hart-Scott-Rodino Act" shall have the meaning set forth in Section 5.4.

     "IRS" shall mean the Internal Revenue Service.

     "Indemnitee(s)" shall have the meaning set forth in Section 13.6.
<PAGE>

     "Indemnitor" shall have the meaning set forth in Section 13.6.

     "Intellectual Property" shall have the meaning set forth in Section 3.8(c).

     "Material Adverse Effect" shall have the meaning set forth in Section 3.1.

     "McGee" shall mean Wm. H. McGee & Co., Inc., a New York corporation.

     "McGee  Bermuda"  shall mean Wm. H. McGee & Co.  (Bermuda)  Ltd., a Bermuda
corporation.

     "McGee  Canada" shall mean Wm. H. McGee & Co. of Canada Ltd., a corporation
formed under the laws of Ontario.

     "New York Time"  shall mean time,  whether  Eastern  Standard  or  Daylight
Saving as may be the case, as determined in the City of New York.

     "Noncompetition  Agreement"  shall  have the  meaning  set forth in Section
2.1(b).

     "PBGC" shall mean the Pension Benefit Guaranty Corporation.

     "Pool" shall mean those insurance underwriting and management  arrangements
which  have been in effect  from time to time  between  and among one or more of
McGee,  McGee Canada.  and McGee Bermuda and the insurers  participating in such
arrangements  as set forth in the Pool  Agreements  and among them,  the present
participants'  gross  participations in the Canadian Pool and United States Pool
being as follows:
<PAGE>

United States Pool                               Canadian Pool
Pool Participants                         %      Pool Participants        %
The Baloise Insurance 
Company of America                        1      Providence Washington    1
                                                 Insurance Company      
Providence Washington 
Insurance Company                         1
SICH                                     75     SICH                      94
LG Insurance Company, 
Ltd. (United States Branch)               8    Mitsui Marine & Fire        5
Mitsui Marine & Fire                     15    Insurance Company of Ltd.  
Insurance Company
America                       
                                               
Each reference to the "Pool" shall,  unless the context otherwise  requires,  be
deemed to include  both the  Canadian  Pool and the United  States Pool and each
annual  renewal  of the Pool so long as there  shall be  outstanding  assets  or
liabilities  of the Pool in respect of that year and shall  further be deemed to
include the participation of the Pool Participants.

                  "Pool  Agreements"  means  (i)  the  Inter-Office  Reinsurance
Agreement  dated as of January 1, 1975,  as amended by the related  Addenda Nos.
1-4 and supplemented by annual Schedules of Participations  thereto, among McGee
and the Pool Participants and the Inter-Office Reinsurance Agreement dated as of
January  1,  1975,  as  amended  by and  supplemented  by  annual  Schedules  of
Participations  thereto  among  McGee  Canada  and the  Pool  Participants  (the
"Inter-Office  Reinsurance  Agreements"),  and (ii) the Underwriting  Management
Agreements, General Agency & Management Agreements and Management Agreements and
related agreements referred to therein, each as amended,  between or among McGee
and the Pool Participants, which are listed in Schedule 3.14(b) as being entered
into in connection with the Pool.

                  "Pool  Participants"  shall mean those insurers and reinsurers
who, from time to time,  have  participated  or may  participate  in the Pool in
respect of any year.

     "Post-Year  End  Periods"  shall  have the  meaning  set  forth in  Section
5.6(a)(iii).

     "Premerger  Notification  Agencies"  shall  have the  meaning  set forth in
Section 5.4.
<PAGE>

     "Pre-Year  End  Periods"  shall  have the  meaning  set  forth  in  Section
5.6(a)(iii).

     "Reinsurance  Agreements" shall mean the quota share reinsurance  agreement
referred to in Section 6(1)(a).

     "Releases" shall have the meaning set forth in Section 2.1(b).

     "Section 338 Election" shall have the meaning set forth in Section 5.6(d).

     "Seller" shall mean Orion Capital Corporation, a Delaware corporation.

     "Seller's  Knowledge" shall mean, when used to qualify a representation  or
warranty of Seller, that such is being made or given only on the basis of and to
the extent of the knowledge of Seller's senior  executive  officers,  reasonable
inquiry  having  been made of the senior  officers  of McGee by them or on their
behalf in respect of the subject matter of the representation or warranty.

     "SICH" shall mean  Security  Insurance  Company of Hartford,  a Connecticut
corporation and a wholly owned Subsidiary of Seller.

     "Straddle Period" shall have the meaning set forth in Section 5.6(a)(ii).

     "Subsidiary"  means any  corporation  of which a corporation or one or more
Subsidiaries of such corporation owns or controls,  directly or indirectly, more
than fifty percent (50%) of the  outstanding  stock having by its terms ordinary
voting power to elect a majority of the Board of Directors of such  corporation,
irrespective  of whether or not at the time stock of any one class or classes of
such  corporation  shall  have or  might  have  voting  power by  reason  of the
happening of any contingency

     "Taxes" shall have the meaning set forth in Section 3.10(a).

     "Tax Return" shall have the meaning set forth in Section 3.10(a).

     "Underwriting Management Agreement" shall mean the General Agency Agreement
dated January 1, 1964 between and among The Security Insurance  Company,  United
States  Casualty  Company,  New  Amsterdam  Casualty  Company,  The  Connecticut
Indemnity Company and Wm. H. McGee & Co., Inc. as amended to the date hereof.

     "United  States Pool" shall have the meaning  ascribed in the definition of
"Pool." XIII. .


<PAGE>

                           MISCELLANEOUS PROVISIONS .

                  Section 13.1. Expenses.  Whether or not the Closing shall have
occurred and  regardless  of whether this  Agreement is  terminated,  each party
hereto shall pay all of the costs and expenses incurred by it in connection with
this  Agreement  and the  other  transactions  contemplated  hereby  (including,
without limitation, disbursements and expenses of its attorneys, accountants and
advisors  (including  financial  advisors),  and  printing  and filing costs and
fees). Seller shall be solely responsible for the fees of DLJ and Buyer shall be
solely responsible for the fees of Stamford Financial Group.

     Section  13.2.  Notices.  All notices or other  communications  required or
permitted  under this Agreement  shall be in writing and sufficient if delivered
personally  or by  recognized  overnight  delivery  service or by  registered or
certified mail, postage prepaid, addressed as follows: -------

                  If to Seller, to                                        
                          Orion Capital Corporation                        
                          9 Farm Springs Road          


                           Farmington, CT  06032                           
                           Attn: Treasurer                                
                  with a copy to                                 
                           Cummings & Lockwood                             
                           CityPlace I                                  
                           185 Asylum Street, 36th Floor                     
                                                                           
                                                                           
                                                                            
<PAGE>

Any  party may  change  the  person  and  addresses  to which  notices  or other
communications  are to be sent to it by giving written notice of any such change
in the  manner  provided  herein  for  giving  notice  and such  change  will be
effective upon receipt.

     Section 13.3. Entire Agreement. This Agreement, together with the schedules
and exhibits hereto and the documents and instruments  referred to herein,  sets
forth the entire agreement and understanding of the parties hereto in respect of
the  transactions  contemplated  hereby,  and supersedes  all prior  agreements,
arrangements and understandings  relating to the subject matter hereof. No party
hereto has relied upon any oral or written statement, representation,  warranty,
covenant,  ----------------  condition,  understanding  or agreement made by any
other party or any representative,  agent or employee thereof,  except for those
expressly set forth in this Agreement or in the schedules or exhibits  hereto or
the documents or instruments referred to herein.

     Section 13.4. No Assignment.  This Agreement shall inure to the benefit of,
and be binding  upon,  the  respective  successors  and  assigns of the  parties
hereto.  No assignment of any rights or delegation of any  obligations  provided
for herein shall be made by any party hereto  without the express  prior written
consent of each other  party  except  that Buyer may assign its rights  (but not
delegate its duties except as permitted  herein)  hereunder to any  wholly-owned
Subsidiary of Buyer. 

     Section 13.5. Survival of Representations and Warranties and Covenants.

     (a) All  representations  and  warranties  of the parties  hereto which are
contained  in this  Agreement  or in  confirming  certificates  delivered at the
Closing (other than those  representations  and  warranties  relating to the due
authorization,  execution  and  delivery  of this  Agreement  and the  Ancillary
Agreement and those  relating to Seller's title to the Common Stock which is the
subject of this  Agreement  which  shall  survive for the  applicable  statutory
period of limitation), shall remain operative and in full force and effect until
June 30, 2000,  regardless of any  investigation  made by or on behalf of any of
the parties hereto, following the Closing.

     (b) All covenants made by Buyer or Seller in Article V of this Agreement to
be performed after the date hereof will survive the Closing,  and will remain in
full force and effect  thereafter:  (i) in the case of all  covenants  that have
specified  terms or periods  until the later of (x)  expiration  of the terms or
periods  respectively  specified therein, or (y) June 30, 2000; or (ii) June 30,
2000 for all other covenants.

     (c) If within the  survival  periods  specified  in  Sections  13.5(a)  and
13.5(b)  above,  a claim for  indemnification  shall be made in  respect  of the
breach of any  representation,  warranty or  covenant,  the  expiration  of such
period  of  survival  shall  not  affect  the  right  of  indemnified  party  to
indemnification if the party claiming indemnification for such breach shall have
delivered  to the other  party  written  notice  setting  forth with  reasonable
specificity  the  basis of such  claim  prior  to the  expiration  of such  time
pursuant to this Section 13.5.
<PAGE>

     Section 13.6.  Indemnification and Payments.  Each of Buyer on the one hand
and Seller on the other hand (each an "Indemnitor") agrees to indemnify and hold
harmless  the  other  and its  respective  related  persons  (collectively,  the
"Indemnitees")  for,  and will pay to the  Indemnitees  the amount of, any loss,
liability,  claim, damage (excluding incidental and consequential  damages), and
expenses (including reasonable costs of investigation and defense and reasonable
attorneys' fees),  whether or not involving a third-party  claim  (collectively,
"Damages"),  arising from any breach of any  representation  or warranty made by
the Indemnitor in this Agreement or any certificate  delivered by the Indemnitor
pursuant to this  Agreement or any covenant or obligation of such  Indemnitor in
this Agreement. All damages and other amounts sought by any Indemnitee hereunder
shall be net of all  insurance  proceeds  received  or  collectible  by any such
Indemnitee  with respect to such claim,  including,  with respect to Buyer,  all
insurance proceeds received or receivable by McGee.

     Section 13.7. Limitations on Amount.

     (a) An Indemnitor will have no liability (for indemnification or otherwise)
with respect to Damages arising from a breach of any  representation or warranty
made by the  Indemnitor in this  Agreement on the date of this  Agreement and on
the Closing Date (other than those  representations  and warranties  relating to
the  due  authorization,  execution  and  delivery  of  this  Agreement  and the
Ancillary  Agreement  and those  relating to Seller's  title to the Common Stock
which is the subject of this Agreement) until the total of all such Damages with
respect  to Buyer and its  related  persons  or with  respect  to Seller and its
related  persons,  as the case may be, exceeds  $500,000,  and then only for the
amount by which such Damages exceed $500,000.

     (b) In no event shall the  aggregate  liability of Buyer on the one hand or
Seller  on the  other  hand with  respect  to  indemnified  Damages  under  this
Agreement   (including  Section  5.6  hereof)  arising  from  a  breach  of  any
representation,  warranty or covenant made by the Indemnitor in this  Agreement,
exceed the Purchase Price.

     Section 13.8. Procedure for Indemnification.

     (a) Promptly  after receipt by an Indemnitee of notice of the  commencement
of  any  proceeding  or  of  any  threatened   proceeding  or  claim,  or  other
notification  thereof  against  it, or after  otherwise  becoming  aware that an
indemnifiable  event has  occurred,  such  Indemnitee  will  give  notice to the
Indemnitor  of such  claim and the  estimated  dollar  amount  thereof,  but the
failure to notify the  Indemnitor  will not relieve the  Indemnitor of liability
that it may have to any Indemnitee,  except to the extent that the Indemnitor is
prejudiced by the Indemnitee's failure to give such notice.
<PAGE>

                  (b) The  Indemnitor  will be entitled to  participate  in such
proceeding  and,  to the extent  that it wishes,  to assume the  defense of such
proceeding  with counsel  reasonably  satisfactory  to the Indemnitee and, after
notice  from the  Indemnitor  to the  Indemnitee  of its  election to assume the
defense of such  proceeding,  the Indemnitor  will not, as long as it diligently
conducts such defense, be liable to the Indemnitee for any fees of other counsel
or  any  other  expenses  with  respect  to  the  defense  of  such   proceeding
subsequently  incurred by the Indemnitee.  If the Indemnitor assumes the defense
of a  proceeding,  the  Indemnitee  will have no  liability  with respect to any
compromise or settlement of such claims effected without its consent

     Section 13.9.  Procedure for  Indemnification  - Other Claims.  The parties
acknowledge  and  agree  that  the  remedies  and  procedures  provided  in this
Agreement  for  breach of any  representations,  warranties,  or  covenants  are
exclusive of all other  remedies which would  otherwise be available,  at law or
equity. 

     Section  13.10.  Governing  Law. This  Agreement  shall be governed by, and
construed in accordance with, the laws of the State of Connecticut applicable to
agreements  made and to be  performed  entirely  within such  State,  except (i)
matters related to the validity of corporate action,  which shall be governed by
the laws of the state or other  jurisdiction  of  incorporation  of the relevant
corporation  and  (ii)  matters  related  to  compliance  of  the   transactions
contemplated by the Agreement with ------------- applicable insurance regulatory
statutes.

     Section 13.11. Dispute Resolution. If a dispute arises out of or relates to
this Agreement,  or the  performance or an asserted breach thereof,  the parties
agree first to try in good faith to settle the  dispute and further  agree that,
to that end: 

     (a) A meeting shall be held promptly  between Buyer and Seller  attended by
individuals with decision-making  authority regarding the dispute, to attempt in
good faith to negotiate a resolution of the dispute.

     (b) If within  fifteen (15) days of the first  meeting of such  individuals
they have not succeeded in  negotiating a resolution of the dispute or agreed to
extend the time within  which to do so, the parties  agree to submit the dispute
to mediation in accordance  with the Commercial  Mediation Rules of the American
Arbitration  Association.  Buyer and Seller shall bear their own costs and share
equally the costs of the mediation.  The mediation  shall take place in Chicago,
Illinois unless otherwise agreed by the parties.
<PAGE>

     (c) Buyer and Seller will jointly appoint a  mutually-acceptable  mediator,
seeking assistance in such regard from the American  Arbitration  Association if
they have been  unable  to agree on such  appointment  within a period of twenty
(20) days from the conclusion of the negotiation period.

     (d) The parties agree to participate  in good faith in the  mediation,  and
negotiations  related thereto or arising therefrom,  for a period of thirty (30)
days after  appointment  of a mediator.  If the parties  are not  successful  in
solving the dispute through mediation within that period of time (or, if sooner,
within sixty (60) days from the conclusion of the negotiation period),  then the
dispute  shall be resolved by  arbitration  in  accordance  with the  Commercial
Arbitration Rules of the American  Arbitration  Association,  with each of Buyer
and  Seller  selecting  one  arbitrator  of a panel of three (3) and the two (2)
arbitrators  so  selected   designating   the  third  member  of  the  panel  of
arbitrators.  In the event  that such two  arbitrators  cannot  agree on a third
arbitrator  within  thirty (30) days,  one shall be  designated  by the American
Arbitration  Association upon application by either of the two arbitrators.  The
arbitrators  shall  render  their  decision  within  ninety  (90) days after the
appointment of the third arbitrator and the decision of the arbitrators shall be
final and binding  upon the parties and judgment  upon the award  entered by the
arbitrators may be entered in any court having jurisdiction  thereof.  Buyer and
Seller shall each bear its own costs and the costs of the  arbitrator  appointed
by each of them and they shall share  equally the costs of the third  arbitrator
and the  administrative  costs of the  arbitration.  The arbitration  shall take
place in San  Francisco,  California  if  initiated  by Seller and in  Hartford,
Connecticut if initiated by Buyer.

     Section 13.12. Press Releases.  Buyer and Seller will each consult with the
other in advance of making any public  announcement or press release,  releasing
any publicity or otherwise  disclosing any information  related to the execution
of this Agreement or any transactions contemplated hereby, and each of Buyer and
Seller  will,  except  in the  case of such  disclosure  as may be  required  by
applicable law or securities  exchange  requirements,  obtain the consent of the
other with respect to the form, content and timing thereof,  which consent shall
not unreasonably be withheld.

     Section 13.13.  Counterparts.  This Agreement may be executed in any number
of separate  counterparts,  each of which shall be deemed to be an original, but
which together shall constitute one and the same instrument. 

     Section 13.14. Headings. The section and article headings contained in this
Agreement are inserted for  convenience  of reference  only and shall not affect
the meaning or interpretation of this Agreement. --------

<PAGE>

     Section  13.15.  Severability.  If any provision of this  Agreement is held
invalid  or  unenforceable  by any court of  competent  jurisdiction,  the other
provisions of this Agreement will remain in full force and effect. Any provision
of this  Agreement  held  invalid or  unenforceable  only in part or degree will
remain in full force and effect to the extent not held invalid or unenforceable.


     Section 13.16.  Further  Assurances.  The parties agree (a) to furnish upon
request to each other such  further  information,  (b) to execute and deliver to
each other such other documents,  and (c) to do such other acts and things,  all
as the other party may  reasonably  request for the purpose of carrying  out the
intent of this Agreement. 










            [The remainder of this page is intentionally left blank]


<PAGE>






                  IN  WITNESS  WHEREOF,   each  party  hereto  has  caused  this
Agreement to be duly executed on the date first above written.


                                  ORION CAPITAL CORPORATION


                                  By:    .......................................
                                         Name:  Craig A. Nyman
                                         Title:     Vice President and Treasurer

Attest:


By:     ..........................................
         Secretary


                                  FIREMAN'S FUND INSURANCE COMPANY


                                  By:    .............................
                                         Name: Bruce F. Friedberg
                                         Title: Senior Vice President

Attest:


By:     ..........................................
         Secretary



                                                   


<PAGE>



                                    SCHEDULES

Disclosure Letter
Schedule 3.2               -        Capitalization
Schedule 3.3               -        Regulatory Status
Schedule 3.4               -        Compliance with Law
Schedule 3.7               -        Litigation and Other Proceedings
Schedule 3.8               -        Title to Properties
Schedule 3.9               -        No Conflicts (Seller)
Schedule 3.10              -        Taxes
Schedule 3.11              -        Investments
Schedule 3.12              -        Employment Matters
Schedule 3.13              -        Employee Benefit Plans; ERISA
Schedule 3.14              -        Contracts
Schedule 3.15              -        Capital Expenditures
Schedule 3.16              -        Banks
Schedule 3.17              -        Agents and Brokers
Schedule 3.18              -        Insurance
Schedule 3.24              -        Relationship between Seller and McGee
Schedule 3.25              -        Agreement Regarding Pool
Schedule 4.4               -        No Conflicts (Buyer)
Schedule 5.3               -        Regulatory and Other Filings and Approvals
Schedule 10.4              -        Executives and Key Employees












                                                   -i-


<PAGE>




                                    EXHIBITS



Exhibit A-1                -        Mutual Release (Seller and McGee)
Exhibit A-2                -        Mutual Release (SICH and McGee)
Exhibit A-3                -        Mutual Release (CI and McGee)
Exhibit B                  -        Noncompetition Agreement
Exhibit C                  -        Reinsurance Agreement



                                                   -ii-


<PAGE>


                                TABLE OF CONTENTS

I.       THE TRANSACTION                                                       
         1.1.     Purchase of Common Stock.....................................1
         1.2.     Consideration................................................1
         1.3.     Management Fee...............................................1
II.      THE CLOSING                                                           2
         2.1.     Closing......................................................2
III.     REPRESENTATIONS AND WARRANTIES OF SELLER                              3
         3.1.     Organization and Good Standing...............................3
         3.2.     Capitalization...............................................3
         3.3.     Regulatory Status............................................4
         3.4.     Compliance with Law..........................................4
         3.5.     Authorization................................................4
         3.6.     Books and Records............................................5
         3.7.     Litigation and Other Proceedings.............................5
         3.8.     Title to Properties..........................................6
         3.9.     No Conflicts.................................................7
         3.10.    Taxes........................................................8
         3.11     Investments.................................................11
         3.12.    Employment Matters..........................................11
         3.13.    Employee Benefit Plans; ERISA...............................11
         3.14.    Contracts...................................................13
         3.15.    Capital Expenditures........................................14
         3.16.    Banks.......................................................14
         3.17.    Agents and Brokers..........................................14
         3.18.    Insurance...................................................14
         3.19.    Absence of Material Changes and Adverse Factors.............14
         3.20.    Environmental Matters.......................................15
         3.21.    Calculation of Liability with respect to Pool Participation 16
         3.22.    Finders and Brokers.........................................16
         3.23.    Disclosure                                                  17
         3.24.    Relationship between Seller and McGee                       17
         3.25.    Agreements regarding Pool                                   17
         3.26.    Participation of SICH in Pool                               17
         3.27     No Undisclosed Liabilities..................................17
<PAGE>

IV.     REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF BUYER                   18
         4.1.     Organization and Standing...................................18
         4.2.     Certificate of Incorporation and By-Laws....................18
         4.3.     Authorization...............................................18
         4.4.     No Conflicts................................................18
         4.5.     Finders and Brokers.........................................19
         4.6.     Investor Status.............................................20
V.       COVENANTS OF BUYER AND SELLER                                        20
         5.1.     Access to Properties, Books and Records.....................20
         5.2.     Conduct of Business.........................................20
         5.3.     Regulatory and Other Filings and Approvals..................24
         5.4.     Premerger Notification and Clearance........................25
         5.5.     Further Assurances..........................................25
         5.6.     Tax Matters.................................................26
         5.7      Pool Financial Statements...................................32
VI.      AGREEMENTS WITH RESPECT TO POOL OPERATION                            33
         6.1.     Pool Participations; Reinsurance............................33
         6.2.     Underwriting Operations of the Pool.........................33
VII.     CONDITIONS TO OBLIGATIONS OF BUYER                                   35
         7.1.     Covenants...................................................35
         7.2.     Representations and Warranties..............................35
         7.3.     Absence of Litigation and Required Regulatory Approvals     35
         7.4.     Premerger Notification......................................36
         7.5.     No Material Adverse Effect..................................36
         7.6.     Additional Agreements.......................................36
         7.7.     Opinion of Counsel for Seller and McGee.....................36
VIII.    CONDITIONS TO OBLIGATIONS OF SELLER                                  37
         8.1.     Covenants...................................................37
         8.2.     Representations and Warranties..............................37
         8.3.     Absence of Litigation and Required Regulatory Approvals     37
         8.4.     Premerger Notification......................................37
         8.5.     Additional Agreements.......................................38
         8.7.     Opinion of Counsel for Buyer................................38
IX.      TERMINATION                                                          38
         9.1.     Termination.................................................38
         9.2.     Effect of Termination.......................................38
<PAGE>

X.       EMPLOYMENT AND BENEFIT MATTERS                                       38
         10.1.    Employees                                                   38
         10.2.    Participation in Benefit Plans                              39
         10.3.    Severance Pay                                               40
         10.4.    Non-Solicitation                                            40
XI.      AMENDMENT; WAIVERS                                                   40
         11.1.    Amendments, Modifications, Etc.                             40
         11.2.    Waivers                                                     40
XII.     DEFINED TERMS                                                        40
XIII.             MISCELLANEOUS PROVISIONS                                    45
         13.1.    Expenses                                                    45
         13.2.    Notices                                                     45
         13.3.    Entire Agreement                                            46
         13.4.    No Assignment                                               46
         13.5.    Survival of Representations and Warranties and Covenants    46
         13.6.    Indemnification and Payments                                47
         13.7.    Limitations on Amount                                       47
         13.8.    Procedure for Indemnification                               47
         13.9.    Procedure for Indemnification - Other Claims                48
         13.10.   Governing Law                                               48
         13.11.   Dispute Resolution                                          49
         13.12.   Press Releases                                              49
         13.13.   Counterparts                                                49
         13.14.   Headings                                                    49
         13.15.   Severability                                                50
         13.16.   Further Assurances                                          50













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