Document:

EXHIBIT 10.5

                            PURCHASE AGREEMENT

                                  between

                       MILLERS AMERICAN GROUP, INC.,
                            a Texas corporation

                                    and

                       ACCEPTANCE INSURANCE COMPANY,
                       a Nebraska insurance company

                                 regarding

                   PHOENIX INDEMNITY INSURANCE COMPANY,
                       an Arizona insurance company

                               May 10, 1999

<PAGE>

                            PURCHASE AGREEMENT

     THIS PURCHASE AGREEMENT (the "Agreement") is made and entered into this
10th day of May, 1999, by and between Millers American Group, Inc., a Texas
corporation (the "Purchaser"), Acceptance Insurance Company, a Nebraska
insurance company (the "Seller") and Phoenix Indemnity Insurance Company, an
Arizona insurance company (the "Company").

                          PRELIMINARY STATEMENTS

     A. Seller is a wholly owned subsidiary of Acceptance Insurance Holdings
Inc., a Nebraska corporation ("AIH") which in turn is a wholly-owned subsidiary
of Acceptance Insurance Companies Inc., a Delaware corporation ("AIC").

     B. The Seller owns all of the issued and outstanding shares of capital
stock of the Company (the "Shares").

     C. The Company, Seller, Acceptance Indemnity Insurance Company, Redland
Insurance Company ("Redland") and Acceptance Casualty Insurance Company
("Acceptance Casualty") (collectively, the "Pooling Participants") are parties
to that certain Reinsurance Pooling Agreement dated January 1, 1993, as amended
by Addendum Number One, Addendum Number Two, Addendum Number Three and Addendum
Number Four thereto (the "Pooling Agreement").

     D. Seller is the lead participant under the Pooling Agreement and reports
its net premiums and losses (after reinsurance is transacted among third parties
and other affiliates) as assumed business from each of the other Pooling
Participants. The pooled business is in turn retroceded from Seller to other
Pooling Participants pursuant to the Pooling Agreement.

     E. The Pooling Participants issue or reinsure insurance policies classified
as Private Passenger Non-Standard Automobile Liability (including No-Fault,
Uninsured and Underinsured Motorists, Medical Payments Coverage, and Guest
Passenger Liability as applicable) and Automobile Physical Damage coverage
(collectively, all such insurance coverage is referred to herein as the
"Nonstandard Business").

     F. Redland writes Nonstandard Business in the State of California which is
reinsured under 80% Quota Share Reinsurance Agreements with unrelated third
party reinsurers (the "California Business").

     G. Acceptance Casualty is a reinsurer under a Quota Share Reinsurance
Agreement of Nonstandard Business produced by Arrowhead General Agency (or its
affiliates) in the State of Texas (the "Texas Business").

     H. The parties desire to enter into this Agreement with each other for the
consideration and pursuant to the terms and conditions hereinafter specified,
under which (i) the Seller will sell the Shares to the Purchaser, and the
Purchaser will purchase the Shares from the Seller, (ii) the Company will write
or reinsure all of the Nonstandard Business other than the California Business,
(iii) The Millers Insurance Company ("Millers") will reinsure 100% of the
California Business (a portion of which may be ceded by Millers to other
reinsurers) and (iv) the Company or Millers will reinsure the Texas Business
pursuant to a retrocession agreement.

                          STATEMENT OF AGREEMENTS

     NOW, THEREFORE, in consideration of the premises and mutual promises and
covenants hereinafter contained, and intending to be legally bound, the parties
hereto agree as follows:

                                ARTICLE 1.
                             PURCHASE AND SALE

     1.1 Sale of Shares. Subject to the terms and conditions contained in this
Agreement, the Seller agrees to sell, transfer and deliver to the Purchaser, and
the Purchaser agrees to purchase from the Seller, at Closing (as such term is
defined in Section 1.4 hereof), all of the Shares outstanding at the Closing for
the consideration specified herein.

     1.2 Transfer of Nonstandard Business. Subject to the terms and conditions
contained in this Agreement, the Seller agrees to transfer to the Company or
Millers, as the case may be, at Closing, and cause the applicable Pooling
Participant to transfer to the Company at Closing, the Nonstandard Business for
the consideration specified herein.

     1.3 Purchase Price. The Preliminary Purchase Price payable pursuant to this
Agreement for the Shares to be transferred to Purchaser after giving effect to
the transfer of the Nonstandard Business (other than the California Business) to
the Company (and the California Business to Millers) shall be the cash amount of
Twenty-five Million Dollars ($25,000,000) subject to any adjustment as provided
in Section 10.3 hereof. At the Closing, Purchaser shall deliver to the Seller,
by wire transfer, pursuant to wiring instructions provided by the Seller at
least five business days prior to the Closing Date, immediately available funds
in an amount equal to the Preliminary Purchase Price. The Final Purchase Price
shall be determined post-closing as provided in Section 10.3 hereof.

     1.4 Closing. The closing for the transactions contemplated by this
Agreement shall take place at the offices of Purchaser, 300 Burnett Street, Fort
Worth, Texas 76102-2799 at 10:00 a.m. local time on the last calendar day of the
month in which the last regulatory consent or approval is received (the
"Closing") or at such other place, date or time as the parties hereto mutually
agree, but in no event shall the date be later than June 30, 1999; provided,
however, the Seller or the Purchaser may extend the Closing Date pursuant to
this Section 1.4 to an effective date of July 31, 1999, provided the extension
is necessary to obtain regulatory consent or approval and the extending party is
not in breach or default under the terms of this Agreement. If the last calendar
day of the month falls on a day that is a legal holiday or a day on which banks
otherwise are closed for business, then the Closing will take place on the next
following business day but will be effective as of the last day of the prior
month. The date of the Closing is referred to as the "Closing Date."

     1.5 Constituent Transactions. Subject to the terms, conditions, provisions
and conditions of this Agreement:

          (a) At the Closing, the Seller shall deliver to the Purchaser, free
     and clear of any lien, pledge, security interest, encumbrance, restriction
     or adverse claim ("Lien"), certificates representing all of the Shares then
     outstanding (which shall constitute all of the issued and outstanding
     shares of capital stock of the Company) duly endorsed in blank for transfer
     or accompanied by stock powers or other instruments of transfer duly
     executed in blank;

          (b) At the Closing, the Purchaser shall deliver to the Seller the
     Preliminary Purchase Price to be paid at Closing to Seller and in cash by
     federal wire transfer of immediately available funds to the Seller's bank
     accounts, pursuant to the terms of Section 1.3 hereof;

          (c) At the Closing, Millers and Redland shall enter into a Portfolio
     Reinsurance Agreement ( the"Millers Agreement") in the form of Exhibit A
     hereto pursuant to which all California Business shall be transferred to
     Millers, and Redland shall agree to continue to write California Business
     for expiring insurance policies and new insurance policies with program and
     rate filing characteristics similar to those of the expiring policies
     within the California Business to be reinsured by Millers in accordance
     with a 100% Quota Share Reinsurance Agreement substantially in the form of
     an Additional State Agreement (as defined below) except that no ceding
     commission or other compensation shall be paid to Redland under such
     agreement.

          (d) At the Closing, the Company and each Pooling Participant (also
     referred to herein as a "Fronting Company") shall enter into an addendum to
     the applicable 100% Quota Share Reinsurance Agreement (as amended by such
     addendum, a "Continuing State Agreement") in the form of Exhibits B-1 and
     B- 2 hereto pursuant to which such Fronting Company shall continue to write
     Private Passenger Nonstandard Automobile Liability (including No-Fault,
     Uninsured and Underinsured Motorists, Medical Payments Coverage, and Guest
     Passenger Liability as applicable) and Automobile Physical Damage coverage
     for expiring insurance policies and new insurance policies with program and
     rate filing characteristics similar to those of the expiring policies (the
     "Continuing Nonstandard Business" ) to be reinsured by the Company in
     accordance with the terms of each Continuing State Agreement;

          (e) At the Closing, the Company and the applicable Fronting Company
     shall enter into an additional 100% Quota Share Reinsurance Agreement (an
     "Additional State Agreement") in the form of Exhibit C hereto pursuant to
     which such Fronting Company shall write Nonstandard Business (the
     "Additional Nonstandard Business") to be reinsured by the Company in
     additional states for up to two years from the Closing Date in an aggregate
     annual amount of up to $20 million in accordance with the terms of the
     Additional State Agreement;

          (f) At the Closing, the Company and Seller shall enter into Addendum
     Number 2 to a 100% Quota Share Agreement of Reinsurance dated October 10,
     1994, as amended by Addendum Number 1 thereto dated August 28, 1997 (as
     amended by Addendum Number 2, the "Assumption Agreement") in the form of
     Exhibit D hereto pursuant to which Seller shall assume all liability of the
     Company under any insurance policies or surety bonds relating to any type
     of insurance business or surety bonds written by the Company other than the
     Nonstandard Business;

          (g) At the Closing, Acceptance Casualty and the Company (or Millers)
     shall enter into a Retrocession Agreement in form and substance
     satisfactory to Purchaser and Seller (the "Retrocession Agreement") with
     respect to all Texas Business.

          (h) At the Closing, AIH, AIC, Seller and each Fronting Company shall
     enter into a Noncompetition Agreement (the "Noncompetition Agreement") in
     the form of Exhibit E hereto pursuant to which each such party agrees to
     certain noncompete, nondisclosure and nonsolicitation covenants as
     described in, and in accordance with the provisions of the Noncompetition
     Agreement;

          (i) At the Closing, AIH, AIC, Seller, each Fronting Company and each
     director of the Company shall execute and deliver to the Company a Release
     (the "Release") in the form of Exhibit F hereto pursuant to which each such
     party agrees to release all claims (other than certain identified claims)
     against the Company in accordance with the terms of such Release and the
     Seller shall use its reasonable efforts to cause each officer of the
     Company listed on Schedule 3.22 to execute and deliver to the Company at
     Closing a Release; and

          (j) At the Closing, each party hereto shall deliver, or cause to be
     delivered, all other required agreements, resignations, officer
     certificates, legal opinions and other documents and instruments required
     to be delivered by such party pursuant to this Agreement.

     1.6 Transaction Documents; Order of Closings. This Agreement, the Millers
Agreement, the Assumption Agreement, each Continuing State Agreement, each
Additional State Agreement, the Retrocession Agreement, the Noncompetition
Agreement, and each Release are collectively referred to herein as the
"Transaction Documents." For the purposes of this Agreement, all transactions
and agreements contemplated hereby between the Company and any Pooling
Participant shall be effective immediately prior to the purchase of the Shares
by Purchaser.

                                ARTICLE 2.
                REPRESENTATIONS AND WARRANTIES OF PURCHASER

     Purchaser represents and warrants the following:

     2.1 Organization and Qualification. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas and has the requisite corporate power to carry on its business as now
conducted.

     2.2 Authority Relative to Agreement. Purchaser has the requisite corporate
power and authority to enter into this Agreement and the other Transaction
documents to which it is a party and to perform its obligations hereunder and
thereunder. The execution and delivery of this Agreement and the other
transaction documents by Purchaser and the consummation by Purchaser of the
transactions contemplated hereby and thereby have been duly authorized by the
Board of Directors of Purchaser as of the date of this Agreement, and no other
corporate proceedings on the part of Purchaser are necessary to authorize this
Agreement and the other Transaction Documents to which it is a party and the
transactions contemplated hereby and thereby. This Agreement has been duly
executed and delivered by Purchaser and constitutes a legal, valid and binding
obligation of Purchaser, enforceable against Purchaser in accordance with its
terms except as enforcement thereof may be limited by liquidation,
conservatorship, bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditor's rights generally from time to time
in effect and except that equitable remedies are subject to judicial discretion.
Each of the other Transaction Documents to which Purchaser is a party that is
required to be executed and delivered at Closing by Purchaser pursuant to this
Agreement will be duly executed and delivered at Closing and, assuming each
Transaction Document will at such time constitute a legal, valid and binding
obligation of the other parties thereto, will constitute a legal, valid and
binding obligation of Purchaser, enforceable against Purchaser in accordance
with its terms except as enforcement thereof may be limited by liquidation,
conservatorship, bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditor's rights generally from time to time
in effect and except that equitable remedies are subject to judicial discretion.
Other than in connection with or in compliance with the provisions of applicable
insurance laws, and the Hart-Scott-Rodino Antitrust Improvements Act of 1976
(the "HSR Act"), no notice to, filing with, or authorization, consent or
approval of, any public body or authority ("Governmental Authority") or other
person or entity ("Person") is necessary for the consummation by Purchaser of
the transactions contemplated by this Agreement except where failures to give
such notices, make such filings, or obtain authorizations, consents or approvals
would, in the aggregate, not have a Materially Adverse Effect (as hereinafter
defined). "Material Adverse Effect" as used in this Agreement means a material
adverse effect on the condition (financial or other), business or operations of
the referenced party or the transactions contemplated by this Agreement.

     2.3 Financing. Purchaser has made adequate provision for the financing of
the Purchase Price.

     2.4 Brokers. Purchaser represents and warrants that no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with this Agreement based upon arrangements made by or
on behalf of Purchaser. If any broker or finder asserts a claim for a fee as a
result of such transactions, based upon a contract, written or oral, with
Purchaser, such claim shall be payable by Purchaser.

     2.5 Effect of Agreement. Neither the execution and delivery of this
Agreement and the other Transaction Documents to which Purchaser is a party nor
the consummation of the transactions contemplated hereby and thereby will
conflict with, violate or result in a breach of any provision of the charter
documents or bylaws of Purchaser or any law, rule, regulation or ordinance
applicable to Purchaser.

                                ARTICLE 3.
                 REPRESENTATIONS AND WARRANTIES OF SELLER

     The Seller represents and warrants to Purchaser as follows in Section 3.1
through Section 3.28, inclusive:

     3.1  Organization, Good Standing, Power, etc.

          (a) Seller is a corporation duly organized, validly existing and in
     good standing under the laws of the State of Nebraska, and has all
     requisite corporate power and authority to own, operate and lease its
     properties and to carry on its business as now being conducted. The Company
     is duly organized, validly existing and in good standing as an Arizona
     property and casualty insurance company and has all requisite corporate
     power and authority to own, operate and lease its properties and to carry
     on its business as now being conducted. The Company is duly qualified as a
     foreign insurance company to do business, and is in good standing, in each
     jurisdiction where the character of its properties owned or leased or the
     nature of its activities make such qualification necessary. Copies of the
     Articles of Incorporation and bylaws of the Company heretofore delivered to
     Purchaser by the Seller are true and complete as of the date hereof. Each
     of such Articles of Incorporation and bylaws is in full-force and effect,
     and the Company is not in violation or breach of any of the provisions of
     its Articles of Incorporation or bylaws.

          (b) Each of Seller and the Company has the requisite corporate and
     other power and authority to enter into this Agreement and the other
     Transaction Documents to which it is a party and to perform its obligations
     hereunder and thereunder. The execution and delivery of this Agreement and
     the other Transaction Documents by Seller and the Company and the
     consummation by Seller and the Company of the transactions contemplated
     hereby and thereby have been duly authorized by the Board of Directors and
     shareholders of Seller and the Company and no other corporate proceedings
     on the part of Seller or the Company are necessary for the execution and
     delivery of this Agreement by Seller and the Company and the consummation
     by Seller and the Company of the transactions contemplated hereby. This
     Agreement has been duly executed and delivered by Seller and the Company
     and constitutes a legal, valid and binding obligation of Seller and the
     Company, as the case may be, enforceable against Seller and the Company in
     accordance with its terms except as enforcement thereof may be limited by
     liquidation, conservatorship, bankruptcy, insolvency, reorganization,
     moratorium or similar laws affecting the enforcement of creditor's rights
     generally from time to time in effect and except that equitable remedies
     are subject to judicial discretion. Each of the other Transaction Documents
     to which Seller and the Company is a party that is required to be executed
     and delivered at Closing by Seller and the Company pursuant to this
     Agreement will be duly executed and delivered at Closing and, assuming each
     Transaction Document will at such time constitute a legal, valid and
     binding obligation of the other parties thereto, will constitute a legal,
     valid and binding obligation of Seller and the Company, as the case may be,
     enforceable against Seller and the Company in accordance with its terms
     except as enforcement thereof may be limited by liquidation,
     conservatorship, bankruptcy, insolvency, reorganization, moratorium or
     similar laws affecting the enforcement of creditor's rights generally from
     time to time in effect and except that equitable remedies are subject to
     judicial discretion.

     3.2 Authorized Capitalization of the Company. The authorized capital stock
of the Company consists solely of 500,000 shares of common stock, $6.00 par
value, of which 500,000 shares are validly issued and outstanding, fully paid
and non-assessable and held solely by Seller. There are no outstanding or
authorized subscriptions, options, warrants, calls, rights (including any
preemptive rights), commitments, or other agreements of any character whatsoever
which obligate or may obligate the Company to issue or sell any additional
shares of its capital stock or any securities convertible into or evidencing the
right to subscribe for any shares of its capital stock or securities convertible
into or exchangeable for such shares. There are no outstanding contractual
obligations of the Company to repurchase, redeem or otherwise acquire any
outstanding shares of capital stock of, or other ownership interests in, the
Company or to provide funds to or make any investment (in the form of a loan,
capital contribution or otherwise) in any other entity.

     3.3 Subsidiaries. The Company does not own any direct or indirect interest
in any corporation or business activity and the Company is not a participant in
any partnership or any joint venture with any third party.

     3.4 Effect of Agreement. The execution, delivery and performance by Seller
and the Company of this Agreement and the other Transaction Documents to which
it is a party and the consummation by Seller and the Company of the transactions
contemplated hereby and thereby will not require any notice to, filing with, or
the consent, approval or authorization of any Person or Governmental Authority,
except as set forth in Schedule 3.4 hereto (which consents or approvals will be
obtained on or before the Closing) and except where failures to give such
notices, make such filings or obtain authorizations, consents or approvals
would, in the aggregate, not have a Material Adverse Effect. Neither the
execution and delivery of this Agreement and the other Transaction Documents nor
the consummation of the transactions contemplated hereby and thereby will (i)
result in the acceleration or termination of, or the creation in any party of
the right to accelerate, terminate, modify or cancel, any indenture, contract,
lease, sublease, loan agreement, note or other obligation or liability to which
the Company or Seller is a party or is bound or to which any of their assets are
subject, (ii) conflict with, violate or result in a breach of any provision of
the charter documents or bylaws of the Company or Seller, (iii) conflict with or
violate any law, rule, regulation, ordinance, order, writ, injunction or decree
applicable to the Company or Seller or by which any of their properties or
assets are bound or affected or (iv) conflict with or result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or result in the creation of any lien, charge or
encumbrance on any of the properties or assets of the Company or Seller pursuant
to any of the terms, conditions or provisions of any indenture, contract, lease,
sublease, loan agreement, note, permit, license, franchise, agreement or other
instrument, obligation or liability to which the Company or Seller is a party or
by which the Company or Seller or any of their assets is bound or affected.

     3.5  Financial Statements and Statutory Reserves.

          (a)  The Seller has heretofore delivered to the Purchaser complete and
     correct copies of the Annual Statement of the Company, as filed with the
     Arizona Department of Insurance, for the year ended December 31, 1998,
     together with all exhibits and schedules thereto (the "Annual Statement").
     The statutory financial statements of the Company contained in the Annual
     Statements met the requirements of the insurance laws of the State  of
     Arizona in all material respects when so filed and have been prepared in
     conformity with statutory accounting practices prescribed or permitted by
     the Department of Insurance of the State of Arizona ("SAP").

          (b) Seller has delivered to Purchaser audited financial statements of
     the Company, prepared in conformity with SAP, as at December 31, 1998, and
     for the year then ended, including, without limitation, a statement of
     consolidated operations and retained earnings, balance sheet, statement of
     changes in financial position, and all notes relating thereto (the "Audited
     Financial Statements") which have been certified by Deloitte and Touche,
     LLP, the independent public accountants of the Company.

          (c) Seller has also delivered to Purchaser unaudited financial
     statements of the Company, prepared in conformity with SAP, as of March 31,
     1999, and for the three-months period then ended, consisting of a balance
     sheet, statement of operations, and statement of cash flow certified by the
     chief financial officer of the Company (the "Interim Financial
     Statements"). The Interim Financial Statements shall include an interim
     review of loss reserves as of the date of the Interim Financial Statements.

          (d) The Audited Financial Statements and the Interim Financial
     Statements (collectively, the "Financial Statements") (i) are in accordance
     with the books and records of the Company, as the case may be, (ii) except
     as set forth therein (including the notes thereto), have been prepared in
     accordance with SAP, (including adequate provisions for reserves for all
     loans), consistently applied throughout the periods involved; and (iii)
     fairly represent both the financial condition of the Company and the
     results of operations as at the dates and for the periods therein
     specified.

          (e) None of the Financial Statements (i) contain or when delivered
     will contain, as the case may be, any item of extraordinary or
     non-recurring income or expense (except as specified therein); (ii) reflect
     or when delivered will reflect, as the case may be, uncollectible accounts
     receivable without a reserve fairly stated for uncollectible amounts; and
     (iii) reflect or when delivered will reflect, as the case may be, any
     write- off or reevaluation of assets (except as specified therein). There
     are no liabilities, indebtedness or obligations of the kind required by
     generally accepted accounting principles to be reflected, noted or reserved
     against on the balance sheets of the Company as of December 31, 1998 and
     March 31, 1999, except those which have been reflected, noted or reserved
     against in the Financial Statements. All loan reserves established by the
     Company are adequate. The Company is not directly or indirectly liable to
     or obligated to provide funds in respect of or to guarantee or assume any
     obligation of any person except to the extent reflected and fully reserved
     against in the Financial Statements. All liabilities of the Company can be
     prepaid without penalty at any time.

          (f) All statutory insurance reserves recorded in the accounting
     records of the Company, for insurance policy benefits, losses, claims and
     expenses, including unpaid loss and loss adjustment expense liabilities,
     and any other reserves are reasonable and adequate and were prepared in
     accordance with the statutory or accounting practices prescribed or
     permitted by all applicable insurance regulatory authorities of all
     jurisdictions in which the Company is licensed to transact insurance
     business and in accordance with prudent customs and practices of the
     insurance industry and make good and sufficient provision for all insurance
     obligations of the Company with respect to all insurance written and
     reinsured by the Company. Information furnished by Seller or the Company to
     Purchaser regarding the historical calculation and methodology for
     calculating the Company's reserves for incurred but not reported ("IBNR")
     claims is true and correct and the methodology for calculating IBNR claims
     has been consistently applied by the Company in calculating IBNR claims
     since December 31, 1993 through the Closing Date.

          (g) The Seller has delivered to the Purchaser complete pro forma
     financial statements of the Company (the "Pro forma Financials") as of the
     dates of the Annual Statements and the Interim Financial Statements (in
     each case, prepared in the same manner as the Financial Statements and as
     adjusted to give effect to the transactions contemplated hereby, including
     the termination and commutation of the Pooling Agreement and the
     termination and commutation of existing reinsurance agreements as provided
     in Section 6.7 hereof.

     3.6  Reinsurance Transactions and Type of Business.

          (a)  Schedule 3.6(a) lists each reinsurance agreement or arrangement
     pursuant  to  which the Company reinsures business (collectively,  the
     "Reinsured Business") written by a Fronting Company.  Schedule 3.6(b) lists
     each reinsurance agreement or arrangement pursuant to which the Company
     cedes business written by the Company to any reinsurer or pursuant to which
     the California Business is ceded to any reinsurer (the "Ceded Business").
     The  Company  is not a party to any reinsurance agreement or  fronting
     arrangement not listed on Schedule 3.6(a) or 3.6(b).  Seller has provided
     to  Purchaser all reinsurance or fronting agreements relating  to  the
     Reinsured   Business  and  the  Ceded  Business  and  all   schedules,
     reconciliations and other records relating to the Reinsured Business and
     the  Ceded  Business  including but not limited  to,  all  information
     documenting  the  type of Reinsured Business and the  Ceded  Business,
     character of premiums, cash flow losses and underwriting results.  Neither
     the Company nor any party to any reinsurance agreement listed on Schedule
     3.6(a) or 3.6 (b) is in default or violation of such reinsurance agreement.
     All Nonstandard Business written by Seller or any Fronting Company will be
     reinsured by the Company or by Millers from and after the Closing.  The
     Company  has  delivered  provisional notices of  cancellation  of  the
     reinsurance  agreements listed on Schedule 3.6(c) and such reinsurance
     agreements will be terminated without cost or penalty to the Company on or
     before the Closing.  Schedule 3.6(d) lists each additional reinsurance
     agreement that will be terminated by the Company without cost or penalty on
     or before the Closing.  Schedule 3.6(e) lists each reinsurance agreement or
     other  agreement that will be commuted without cost or penalty to  the
     Company on or before the Closing.  Schedule 3.6(f) lists each  new  or
     surviving reinsurance agreement to be effective on and after the Closing.

          (b) From and after the Closing, the Company shall have no liability
     with respect to any type of insurance business written or reinsured by the
     Company prior to the Closing other than (i) the Nonstandard Business and
     (ii) the insurance business reinsured by Seller pursuant to the Assumption
     Agreement.

     3.7  Absence of Certain Changes or Events. Since December 31, 1998:

          (a) the Company has not incurred any obligation or liability in excess
     of twenty-five thousand dollars ($25,000) (contingent or otherwise), except
     current liabilities incurred in the ordinary course of business;

          (b) the Company has not discharged or satisfied any lien or
     encumbrance or paid any obligation or liability (contingent or otherwise)
     in excess of twenty-five thousand dollars ($25,000), except current
     liabilities outstanding on the applicable date set forth above, current
     liabilities incurred since such date in the ordinary course of business and
     obligations and liabilities under contracts listed in Schedule 3.11 hereto;

          (c) the Company has not mortgaged, pledged or subjected to lien,
     charge, security interest or other encumbrance any of its assets or
     properties, except in the ordinary course of business;

          (d) the Company has not sold, transferred, leased or otherwise
     disposed of any of its assets or properties, except in the ordinary course
     of business and for a fair consideration nor has the Company entered into
     any reinsurance agreements or treaties;

          (e) the Company has not canceled or compromised any debt owed to it or
     claimed by it, except in the ordinary course of business;

          (f) the Company has not knowingly and expressly waived or released any
     rights of substantial value;

          (g) the Company has not sold, assigned, transferred or granted any
     rights under any licenses, franchises, patents, inventions, trademarks,
     service marks, trade names, or copyrights or rights with respect to any
     know-how or other intangible assets, which sale, assignment, transfer or
     grant would have a Material Adverse Effect on it;

          (h) the Company has not amended or terminated any reinsurance
     agreement or treaty, third party administration agreement, agency agreement
     or any other contract, franchise, agreement or license to which it is a
     party, which amendment or termination would have a Material Adverse Effect
     on it;

          (i) the Company has not knowingly disposed of or permitted to lapse
     any rights for the use of any patent, trademark, service mark, trade name
     or copyright or knowingly disposed of or disclosed to any person not an
     employee, supplier, broker, distributor or customer any trade secret,
     process or know-how not theretofore a matter of public knowledge, which
     dispositions or disclosures would have an Material Adverse Effect on it;

          (j) the Company has not terminated the employment of any department
     head or officer of the Company or entered into (i) any written employment
     agreement or (ii) any oral employment agreement not terminable without
     penalty by any party thereto upon 60 days notice;

          (k) the Company has not increased the rate of compensation or bonus
     payments payable or to become payable to any of its officers or directors
     (including, without limitation, any payment of or promise to pay any bonus
     or special compensation);

          (l) the Company has not declared any dividend or made any payment or
     distribution to its shareholders;

          (m) the Company has not purchased, redeemed, issued, sold or otherwise
     acquired or disposed of any of its shares of capital stock or other equity
     securities, or agreed to do so, or granted any options, warrants or other
     rights to purchase or convert any obligation into any shares of its capital
     stock or any evidence of indebtedness or other securities;

          (n) the Company has not entered into any other transaction, contract
     or commitment other than in the ordinary course of business;

          (o) the Company has not agreed to do any of the things described in
     the preceding clauses (a) through (n);

          (p) no event or circumstance has occurred resulting in a Material
     Adverse Effect on the Company;

          (q) there has not been any damage, destruction or loss, whether or not
     covered by insurance, materially and adversely affecting the property or
     business of the Company; and

          (r) there has not been any material change in the operation of the
     business of the Company or any material transactions entered into, except
     such changes and transactions occurring in the ordinary course of business
     and not otherwise required to be disclosed pursuant to this Section 3.7.

     3.8 Taxes. The Company has timely filed or caused to be timely filed
(including allowable extensions) all federal, state, local, foreign and other
tax returns (including all consolidated, unitary or combined returns of any
group which includes the Company as a member) for income taxes, premium taxes,
sales taxes, withholding taxes, employment taxes, property taxes, franchise
taxes and all other taxes of every kind whatsoever which are required by law to
have been filed. The Company has paid or caused to be paid all taxes,
assessments, fees, penalties and other governmental charges which have become
due and payable and all other taxes, assessments, fees, penalties and other
governmental charges which have become due and payable. The Company has not
filed or entered into any election, consent or extension agreement that extends
the applicable statute of limitations with respect to its liability for taxes.
The provisions for income and other taxes reflected in the balance sheet
included in the 1998 Financial Statements and the Interim Financial Statements
make adequate provision for all accrued and unpaid taxes of the Company, whether
or not disputed, and the Company has made and will continue to make adequate
provision for such taxes on its books and records until the Closing Date,
including any taxes arising from the transactions contemplated by this
Agreement. The Company is not a party to any action or proceeding pending or
threatened by any governmental authority for assessment or collection of taxes;
no unresolved claim for assessment or collection of such taxes has been asserted
against the Company, and no audit or investigation by state or local government
authorities is under way. There is and will be no further liability for any such
taxes, whether by future deficiency assessments or otherwise, and no interest or
penalties accrued or accruing with respect thereto. Seller has delivered to
Purchaser the federal income and state premium tax returns of the Company for
the taxable years ended in 1996, 1997 and 1998 and all state premium tax reports
and returns of the Company for the period between January 1, 1999 and the date
of this Agreement, and the taxes paid and payable, as reflected in all such
returns and reports, state accurately the total tax payable for the periods
designated.

     3.9  Real Property.

          (a)  Schedule 3.9 contains a complete and accurate list of all real
     property owned or leased by the Company (the "Schedule 3.9 property").  the
     Company has good and marketable title to all Schedule 3.9 property owned by
     the Company free and clear of all liens, claims and encumbrances.  All
     improvements on the Schedule 3.9 property are in good condition and repair,
     reasonable wear and tear excepted.

          (b) Except as disclosed in Schedule 3.9, there are no existing leases,
     subleases, tenancies, licenses, contracts or other agreements relating to
     the Schedule 3.9 property to which the Company is a party (the "Leases"),
     and the Company has delivered to Purchaser true and complete copies of all
     of the Leases of the Schedule 3.9 property.

          (c) Except as disclosed in Schedule 3.9, (i) each of the Leases to the
     Company of the Schedule 3.9 property is valid, and neither the Company, nor
     to the best knowledge of Seller and the Company, any other party thereto,
     is in default thereunder, nor is there any event which with notice or lapse
     of time, or both, would constitute a default thereunder by the Company or,
     to the knowledge of Seller or the Company, any other party thereto and (ii)
     the Company has not received notice that any party to any Lease intends to
     cancel, terminate or refuse to renew the same or to exercise or decline to
     exercise any option or other right thereunder.

          (d) None of the Schedule 3.9 property has ever been used by the
     Company or, to the best knowledge of Seller and the Company, by any
     previous owners and/or operators to generate, manufacture, refine, produce,
     store, handle, transfer, process or transport any hazardous wastes or
     substances and the Company has not used in the past any of the Schedule 3.9
     property for the principal or primary purpose of generating, manufacturing,
     refining, producing, storing, handling, transferring, processing or
     transporting of hazardous wastes or substances. The Company is in
     compliance with all rules, laws and regulations relating to the use,
     treatment, storage and disposal of toxic substances and protection of
     health or the environment ("Environmental Laws") which are applicable to
     its business and the Company has not received any written notice from any
     governmental authority or third party of an asserted claim under
     Environmental Laws. The Company will not be required to make future
     material capital expenditures to comply with Environmental Laws and to the
     best knowledge of the Seller and the Company, no property which is owned,
     leased or occupied by the Company has been designated as a Superfund site
     pursuant to the Comprehensive Response, Compensation, and Liability Act of
     1980, as amended (42 U.S.C. 9601, et seq.), or otherwise designated as a
     contaminated site under applicable state or local law.

          (e) The Company has all easements of ingress and egress necessary for
     all operations conducted by it from the real properties referred to in
     Schedule 3.9; and none of such properties has been condemned, requisitioned
     or otherwise taken by any public authority, and no such action is
     threatened or, to the best knowledge of Seller and the Company,
     contemplated.

     3.10 Personal Property.

          (a) Schedule 3.10 contains a complete and accurate list as of January
     1, 1999, of all personal property owned by the Company (other than any
     nonmaterial personal property having a book value less than $1,000.00) and
     all personal property whether owned or not subject to any (i) lease, (ii)
     license, (iii) rental agreement, (iv) contract of sale or (v) other
     agreement to which the Company is a party. The personal property set forth
     on Schedule 3.10, other than personal property disposed of in the ordinary
     course of business since January 1, 1999, all other personal property
     acquired by the Company since January 1, 1999 and all personal property
     subjected, subsequent to January 1, 1999, to any of the agreements
     described in (i) through (v) of the preceding sentence is hereafter
     referred to as the "Schedule 3.10 property."

          (b) Except as otherwise described in Schedule 3.10, the Schedule 3.10
     property is (i) free and clear of all liens, other than liens for taxes not
     yet due and payable, mortgages, pledges, security interests, conditional
     sales agreements, charges, encumbrances and other adverse claims or
     interests of any nature whatsoever, and (ii) is in good operating condition
     and repair, reasonable wear and tear excepted. The Schedule 3.10 property,
     taken as a whole, is reasonably fit and usable for the purposes for which
     it is being used, reasonably sufficient for all current operations and
     business of the Company, and conforms with all applicable ordinances,
     regulations and laws. Each lease, license, rental agreement, contract of
     sale or other agreement to which any Schedule 3.10 property is subject is
     valid and neither the Company nor, to the knowledge of Seller and the
     Company, any other party thereto is in default thereunder, nor is there any
     event which with notice or lapse of time, or both, would constitute a
     default thereunder by the Company or, to the knowledge of Seller and the
     Company, any other party thereto. The Company has not received notice that
     any party to any such lease, license, rental agreement, contract of sale or
     other agreement intends to cancel, terminate or refuse to renew the same or
     to exercise or decline to exercise any option or other right thereunder. No
     Schedule 3.10 property is subject to any lease, license, contract of sale
     or other agreement that is adverse to the business, properties or financial
     condition of the Company.

     3.11 Contracts. Schedule 3.11 contains a complete and accurate list of (i)
all oral contracts the performance of which is required by any party thereto as
a result of the consummation of the transactions contemplated by this Agreement,
(ii) all oral contracts not terminable without penalty by any party thereto upon
60 days notice and (iii) all written contracts involving a present or future
obligation by any party of an amount in excess of $25,000 individually or in the
aggregate with respect to multiple contracts of the same type (except for
Nonstandard Business insurance policies and the insurance policies for the lines
of insurance business written by the Company as set forth in the Company's
Annual Statement written in the ordinary course of business and except as
otherwise specified below), to which the Company is a party, true and complete
copies or summaries of each of which have been delivered to Purchaser by the
Seller, including, without limitation, any:

          (a) mortgage, security agreement, chattel mortgage or conditional
     sales agreement or any similar instrument or agreement, involving a present
     or future obligation of an amount in excess of $25,000;

          (b) agreement, commitment, note, indenture or other instrument
     relating to the borrowing of money, or the guaranty of any such obligation
     for the borrowing of money;

          (c) joint venture or other agreement with any person, firm,
     corporation or unincorporated association doing business either within or
     outside the United States relating to sharing of present or future
     commissions, fees or other income or profits, excluding vending machine
     revenue sharing agreements with the site operator;

          (d) lease of personal property to the Company involving a present or
     future obligation of an amount in excess of $25,000;

          (e) reinsurance agreements;

          (f) non-competition agreements;

          (g) agency contracts and agency appointments;

          (h) third party administration agreements;

          (i) advertising, marketing and promotional agreements (including, but
     not limited to, any agreements providing for discounts and/or rebates),
     involving a present or future obligation of an amount in excess of $25,000;
     or

          (j) agreements with suppliers, involving a present or future
     obligation of an amount in excess of $25,000.

          Except  as  disclosed in Schedule 3.11, all contracts and  leases
     referred  to  in Schedule 3.11 are valid and enforceable, the  Company
     has  performed all obligations imposed upon it thereunder, and neither
     the  Company,  nor, to the knowledge of Seller and  the  Company,  any
     other  party thereto is in default thereunder, nor is there any  event
     which  with  notice  or  lapse of time, or both,  would  constitute  a
     default thereunder by the Company, or, to the knowledge of Seller  and
     the Company, any other party thereto.

     3.12 Legal Proceedings. Except as set forth in Schedule 3.12, there are no
claims, actions, suits, arbitrations, grievances, proceedings or investigations
pending or, to the best knowledge of Seller and the Company, threatened against
the Company, at law, in equity, or before any federal, state, municipal or other
governmental or nongovernmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, and there are no outstanding or
unsatisfied judgments, orders, decrees or stipulations to which the Company is a
party which could have a Material Adverse Effect on the Company. Except as set
forth in Schedule 3.12, the Company is not presently engaged in or contemplating
any legal action to recover moneys due to it or damages sustained by it. The
Company is not in violation of or in default with respect to any applicable
judgment, order, writ, injunction or decree, the effect of which may be adverse
to the Company.

     3.13 Labor Matters. There are no controversies pending or, to the best
knowledge of Seller and the Company, threatened between the Company and any of
its employees. The Company has complied with all laws relating to the employment
of labor, including any provisions thereof relating to wages, hours, collective
bargaining, safety and the payment of withholding and social security and
similar taxes, and the Company has no liability for any arrears of wages or
taxes or penalties for failure to comply with any of the foregoing.

     3.14 Patents, Trademarks, Franchises, etc. A true and complete list of (i)
all patents, patent applications, patent agreements, license arrangements
relating to patents, consulting agreements relating to patents, trademark
registrations and applications therefor, trade names, service marks and
copyright registrations and applications therefor, and franchises and franchise
agreements to which the Company is a party or which are used in its business and
are owned by or licensed to the Company and (ii) any interference actions or
adverse claims made or, to the best knowledge of the Company, threatened in
respect thereof and any claims made or, to the best knowledge of the Company,
threatened for alleged infringement thereof, is set forth in Schedule 3.14. All
patents and trademarks listed on Schedule 3.14 as being owned by the Company and
registered in the U.S. Patent Office have been duly issued or registered
therein, all such registrations have been validly issued and all are in full
force and effect. The Company does not infringe any valid patent, trademark,
trade name, service mark or copyright of any other person or entity. Each
agreement listed in Schedule 3.14 is valid and enforceable, the Company has
performed all obligations imposed upon it thereunder, and neither the Company
nor, to the knowledge of Seller and the Company, any other party thereto is in
default thereunder, nor is there any event which with notice or lapse of time,
or both, would constitute a default thereunder by the Company, or, to the
knowledge of Seller and the Company, any other party thereto. The Company has
not received notice that any party to any such agreement intends to cancel,
terminate or refuse to renew the same or to exercise or decline to exercise any
option or other right thereunder.

     3.15 Loans, Notes, Accounts Receivable and Accounts Payable. The loans,
notes and accounts receivable reflected in the Financial Statements and all such
loans, notes and accounts receivable arising after the applicable dates of such
Financial Statements arose, and have arisen, from bona fide transactions of the
Company, and the bad debt reserves established in connection with such loans,
notes, and accounts receivable are in conformity with generally accepted
accounting principles. Accounts payable of the Company reflected in such
Financial Statements and all accounts payable arising after the applicable dates
of such Financial Statements arose, and have arisen, from bona fide
transactions.

     3.16 Corporate Documents, Books and Records. Seller has furnished or made
available to Purchaser for its examination true, correct and complete copies of
(i) the Articles of Incorporation and bylaws of the Company, including all
amendments thereto; (ii) the minute book of the Company; and (iii) the stock
transfer book of the Company. The originals of all such corporate documents
shall be delivered to Purchaser at the Closing.

     3.17 Absence of Sensitive Payment. The Company has not made or maintained
(i) any contributions, payments or gifts of its funds or property to any
governmental official, employee or agent where either the payment or the purpose
of such contribution, payment or gift was or is illegal under the laws of the
United States or any state thereof, or any other jurisdiction (foreign or
domestic); or (ii) any contribution, or reimbursement of any political gift or
contribution made by any other person, to candidates for public office, whether
federal, state, local or foreign, where such contributions by the Company were
or would be a violation of applicable law.

     3.18 Corporate Insurance. All of the policies of insurance and bonds
presently in force with respect to the Company including, without limitation,
fire, liability and other insurance, are listed in Schedule 3.18, and valid
policies for such insurance as are shown to be in effect on the date of this
Agreement will be outstanding and duly in force at the Closing Date. There are
no claims pending, nor to the best knowledge of the Seller and the Company, are
there any claims threatened or any events or circumstances existing giving rise
to any claim against the Company or any officer, director or employee of the
Company that would be covered by the Company's errors and omission or directors
and officers liability insurance policy if such policy was in effect prior to
January 1, 1999. The Company has delivered or made available to Purchaser true
and complete copies of each insurance policy listed in Schedule 3.18.

     3.19 Employees and Agents.

          (a) Seller has delivered to Purchaser a detailed payroll register for
     the Company for the payroll period ended December 31, 1998, together with a
     listing of department and job codes and an organization chart of the
     Company.

          (b) Except as disclosed in Schedule 3.19(b), the Company is not a
     party to any:

               (i) management, employment or other contract providing for the
          employment or rendition of executive services;

               (ii) contract for the employment of any employee which is not
          terminable by either the Company on 30 days' notice;

               (iii) bonus, incentive, deferred compensation, severance pay,
          pension, profit-sharing, retirement, stock purchase, stock option,
          employee benefit or similar plan, agreement or arrangement (including
          without limitation Christmas bonuses and similar year end bonuses);

               (iv) collective bargaining agreement or other agreement with any
          labor union or other employee organization and no such agreement is
          currently being requested by, or is under discussion by management
          with, any group of employees or others; or

               (v) any other employment contract or other compensation agreement
          or arrangement affecting or relating to current or former employees of
          the Company.

          (c) Schedule 3.19(c) lists all managing general agents, general agents
     and independent agents (collectively, "Agents"), authorized to produce,
     collect premiums, administer, settle claims or otherwise represent the
     Company or any Fronting Company in connection with any Nonstandard
     Business, Reinsured Business, Ceded Business or other business written or
     reinsured by the Company or to be reinsured by Millers pursuant to the
     Millers Agreement. The Company or the applicable Fronting Company, as the
     case may be, is a party to a valid and binding written agency agreement
     with each Agent and maintains a favorable relationship with each Agent and
     no disputes are pending or anticipated by the Company or such Fronting
     Company with any of the Agents. Each Agent is duly licensed to market and
     sell the Policies written by the Company or the applicable Fronting
     Company, as the case may be.

     3.20 Employee Plans.

          (a) Schedule 3.20 sets forth all employee pension benefit plans (as
     such term is defined in Section 3(2) of the Employee Retirement Income
     Security Act of 1974 ("ERISA")) which are maintained by the Company (or
     which cover employees of the Company) and designed to be qualified under
     Section 401(a) of the Internal Revenue Code (the "Code").

          (b) The Company has not maintained an employee pension benefit plan
     which is designed to be qualified under Section 401(a) of the Code other
     than the plans so described in Schedule 3.20. To the best knowledge of
     Seller and the Company, such plans are qualified. The Company is and has at
     all times been in compliance with all applicable provisions of ERISA, all
     regulations promulgated under ERISA or the Code and other federal and state
     statutes and regulations relating to such employee pension benefit plans.
     No event has occurred or, to the knowledge of Seller and the Company, is
     threatened or about to occur that would constitute a reportable event
     within the meaning of Section 4043(b) of ERISA, and no notice of
     termination has been filed by a plan administrator pursuant to Section 4041
     or 4041A of ERISA or issued by the Pension Benefit Guaranty Corporation
     ("PBGC") pursuant to Section 4042 of ERISA with respect to any employee
     pension benefit plan of the Company subject to ERISA. The Internal Revenue
     Service has issued favorable determination letter(s) on the plan(s)
     identified in Schedule 3.20 and Purchaser has been provided copies of such
     letters. To the best knowledge of Seller and the Company, nothing has
     occurred since the date of any such determination letter that has adversely
     affected the validity of the letters.

          (c) Full payment has been made of all amounts that the Company is
     required under the terms of all employee pension benefit plans to have paid
     as contributions to such plans, and no accumulated funding deficiency (as
     defined in Section 302 of ERISA and Section 412 of the Code), whether or
     not waived, exists with respect to any such plan. The Company has paid all
     premiums (and interest charges and penalties for late payment, if
     applicable) due the PBGC with respect to each employee pension benefit plan
     and each plan year thereof for which such premiums are required.

          (d) As of the Closing Date all employee pension benefit plans which
     are designed to meet the requirements of Section 401(a) of the Code will be
     sufficiently funded so that no funding liability would result if such plans
     were terminated as of such date. The funding method used in connection with
     each employee pension benefit plan is acceptable under ERISA, the actuarial
     assumptions used in connection with funding such employee pension benefit
     plan in the aggregate are reasonable (taking into account the experience of
     such employee pension benefit plan and reasonable expectations).

          (e) The Company maintains employee pension benefit plan(s) which are
     not designed to be qualified under Section 401(a) of the Code as listed on
     Schedule 3.20. The participants in such plans, the actuarially determined
     present value at December 31, 1998 of their vested benefits, and the
     actuarial assumptions and calculations used to determine such present value
     are listed on Schedule 3.20 hereto. The Company is not delinquent in any
     payments under any of such plans. The Company is and has at all times been
     in compliance with all applicable provisions of ERISA, the Code, and all
     regulations promulgated under ERISA or the Code and other federal and state
     statutes relating to such employee pension benefit plans.

          (f) The Company maintains employee welfare benefit plans (as such term
     is defined in Section 3(1) of ERISA as listed on Schedule 3.20). The name
     of each plan, participants or class of participants and description of
     benefits are listed on Schedule 3.20 hereto. The Company is and at all
     times has been in substantial compliance with all applicable provisions of
     ERISA, the Code, and all regulations promulgated under ERISA or the Code,
     and other federal and state statutes and regulations relating to such
     employee welfare benefit plans. Full payment has been made of all amounts
     that the Company is required under the terms of such employee welfare
     benefit plans to have paid as contributions to such plans or as benefits
     under such plans except claims for benefits which are currently under
     administrative review pursuant to reasonable and consistent administrative
     procedures established for the operation of such plans.

          (g) Schedule 3.20 lists all other fringe benefits or payment practices
     maintained by the Company and not otherwise identified in this section.

          (h) Copies of all documents constituting the plans or written
     agreement describing any employee benefit plan, letter agreement,
     compensation arrangement or other program maintained by the Company have
     been previously furnished to Purchaser including any filings with any
     government office relating thereto, any contracts relating to assets of any
     such plans, and any actuarial or other calculations relating to the amount
     of benefits payable under such plans.

          (i) No event has occurred and no condition exists relating to any
     employee benefit plan (i) that could result in the imposition of an excise
     tax on the Company, (ii) that would justify the attachment of a lien on the
     assets of the Company, or (iii) that could result in fiduciary liability
     being imposed on the Company under Section 404 of ERISA.

          (j) There are no pending or, to the knowledge of Seller and the
     Company, threatened claims, suits, or other proceedings involving any
     employee benefit plan or compensation arrangement other than ordinary and
     usual claims for participants and beneficiaries.

          (k) The transactions contemplated by this Agreement will not result in
     any employee, former employee, or other person being entitled to any
     severance benefit other than the severance benefits described on Schedule
     3.20 hereto.

     3.21 Transactions with Related Parties. Except for transactions disclosed
in Schedule 3.21, there have been no loans or other transactions between the
Company and Seller or any officer, director, shareholder or affiliate of Seller
or the Company. Except as disclosed in Schedule 3.21, neither Seller, any
officer or director of Seller or the Company nor any spouse or child of any such
person owns or has any interest in, directly or indirectly, any real or personal
property owned by or leased to the Company. Not later than the Closing Date, all
loans between the Company and its affiliates, directors and officers shall have
been paid, and each affiliate, director and officer of the Company shall have
released the Company from any and all claims and such releases shall have been
delivered to Purchaser.

     3.22 Directors and Officers; Banks. Schedule 3.22 contains a true and
complete list showing (i) the names of all the officers and directors of the
Company; (ii) the name of each bank in which either the Company has an account
or a safety deposit box and the names of the persons authorized to draw thereon
or having access thereto; and (iii) the name of each person holding a general or
limited power of attorney from the Company and the extent of such power.

     3.23 Ownership, Quality and Location of Material Assets. The Company does
not utilize in its business any assets not reflected in the Financial Statements
except for assets which have been fully amortized or depreciated and which are
owned or leased by the Company, and franchises, licenses, trademarks and
tradenames. All properties and assets of the Company are in the possession and
control of the Company. As of the date hereof, no physical assets of any value
(other than employee personal effects) are on the premises at the locations
operated by the Company which do not belong to or are not leased by the Company.
The assets of the Company (i) constitute all of the assets, properties,
licenses, systems, software and other arrangements which are presently being
used or are reasonably related to the business of the Company, (ii) are not
subject to any change of control or similar provision that would impair or
restrict the Company's use of such assets following the Closing and (iii) are
sufficient to operate the business of the Company in a manner consistent with
past practices and at the Company's historic levels other than (A) reinsurance
agreements listed on Schedule 3.6 that will be terminated at the Closing and (B)
software and hardware to be retained by Seller or its affiliates as listed on
Schedule 3.14 (the "Retained Systems"). Except for the Retained Systems, no
Systems (as defined in Section 3.28) used by the Company will be retained by the
Seller or its affiliates nor will any Systems become unavailable to the Company
or subject to any fees or expenses for continued availability as a result of the
sale of the Shares to Purchaser. The retention by Seller or its affiliates of
the Retained Systems will have no Material Adverse Effect on the Company.

     3.24 Absence of Undisclosed Liabilities. The Company has no liabilities of
any nature, whether accrued, absolute, contingent or otherwise, not disclosed
elsewhere herein or in the Schedules hereto or adequately reflected or reserved
against in the Financial Statements, other than current liabilities incurred in
the ordinary course of business since March 31, 1999.

     3.25 Brokerage. Neither Seller nor the Company has retained any broker or
finder in connection with the transactions contemplated by this Agreement. If
any broker or finder asserts a claim for a fee as a result of such transactions,
based upon a contract, written or oral, with either Seller and/or the Company,
such claim shall be payable by Seller.

     3.26 Permits and Licenses. Except as set forth on Schedule 3.26, (a) the
Company has all certificates of authority, licenses, clearances, permits,
franchises, grants, authorizations, easements, consents, certificates and orders
necessary to conduct its business and to operate its properties and assets,
including, but not limited to, all licenses to write each line of insurance
written by the Company in each State or jurisdiction as set forth in the Annual
Statement, and such certificates of authority, licenses, clearances, permits,
franchises, grants, authorizations, easements, consents, certificates and orders
are in full force and effect and are set forth in Schedule 3.26; (b) no
violations exist in respect of any license, clearance, permit, franchise, grant,
authorization, easement, consent, certificate or order of the Company; (c) no
proceeding is pending or threatened looking toward the revocation or limitation
of any such certificate of authority, license, clearance, permit, franchise,
grant, authorization, easement, consent, certificate or order and there is no
basis or ground for any such revocation or limitation. Except as set forth in
Schedule 3.26, there are no statutory provisions or conditions in any
certificate of authority that would prohibit, limit or impair the ability of the
Company to continue to write insurance under such certificate of authority as a
result of the purchase of the Shares by Purchaser. The Company has complied with
all laws, rules, regulations, ordinances, codes, licenses, clearances, permits,
franchises, grants, authorizations, easements, consents, certificates and orders
relating to any of its properties or applicable to its business, including, but
not limited to, labor, equal employment opportunity, occupational safety and
health, consumer protection, environmental, securities and antitrust laws and
regulations. The Company is not in violation of any applicable zoning, building
or environmental regulation, ordinance or other law, order, regulation,
restriction or requirement relating to its operations or properties, whether
such properties are owned or leased, and no governmental body or other person
has claimed that any such violation exists, or called attention to the need for
any work, repairs, construction, alterations or installation on or in connection
with the properties of the Company. Neither Seller nor the Company has any
knowledge of any pending or threatened action or proceeding which could result
in a modification or termination of the zoning laws which modification or
termination would adversely affect the Company or any of its property.

     3.27 Policy Data. The Company possesses and will possess at the Closing all
Policy Data relating to all insurance policies (i) issued by the Company, (ii)
reinsured by the Company on the date of this Agreement and at the Closing, (iii)
to be reinsured the Company under all Continuing State Agreements and all
Additional State Agreements to be delivered at the Closing and (iv) to be
reinsured by Millers under the Millers Agreement (collectively, "Policies").
"Policy Data" shall mean all insurance policyholder lists and all other records,
documents, data and information (in whatever form or medium maintained),
including copies thereof, which pertain to the Policies and which may be
reasonably necessary for the administration and servicing of the Policies,
including, but not limited to, all records, files and computer tapes pertaining
to policyholders, claims, losses and expenses, sales, premiums, reserve runs and
reserve factors, financial matters, complaint records, applications, Policies,
lapsed policies for all periods commencing after December 31, 1993 and, if so
requested by Purchaser, for any period during the five years ended December 31,
1993, original authorizations for preauthorized check or electronic fund
transfers for premium payments, reinsurance records, records relating to
regulatory matters, agent files and contracts and all toll-free telephone
numbers currently used in connection with the servicing of the Policies. Seller
has provided to Purchaser copies of all underwriting guidelines and other
information used or provided by the Company or the Agents in connection with the
issuance of the Policies.

     3.28 Year 2000 Complaint. All of the Systems of the Company are Year 2000
Compliant. For the purpose of the Agreement:

          (a)  "Year 2000 Compliant" means, (i) the functions, calculations, and
     other computing processes of the System (collectively, "Processes") perform
     in  a  consistent manner regardless of the date in time on  which  the
     Processes are actually performed and regardless of the Date Data input to
     the System, whether before, on, during or after January 1, 2000 and whether
     or not the Date Data is affected by leap years, (ii) the System accepts,
     calculates, compares, sorts, extracts, sequences, and otherwise processes
     Date  Data, and returns and displays Date Data, in a consistent manner
     regardless of the dates used in such Date Data, whether before, on, during
     or  after  January  1,  2000, (iii) the System will  function  without
     interruptions  caused by the date in time on which the  Processes  are
     actually performed or by the Date Data input to the System, whether before,
     on, during, or after January 1, 2000, (iv) the System accepts and responds
     to two-digit year-date input in a manner that resolves any ambiguities as
     to the century in a defined, pre-determined and appropriate manner, (v) the
     System stores and displays Date Data in ways that are unambiguous as to the
     determinations of the century and (f) no Date Data will cause the System to
     perform an abnormally ending routine or function within the Processes or
     generate  incorrect values or invalid results as a result of the  date
     element included in the Date Data.

          (b) "Systems" means the computer equipment (owned or leased) and
     computer software (owned or licensed) of the Company (or of Seller or its
     affiliates if used by the Company).

          (c) Date Data" means any data, formula, algorithm, process, input or
     output that includes, calculates or represents a date, a reference to a
     date or a representation of a date.

     3.29 Full Disclosure. No information furnished, or to be furnished, by
either Seller or the Company to Purchaser in connection with this Agreement
(including, but not limited to, the Financial Statements and all information in
the Schedules hereto) is, or will be, false or misleading and such information
includes all facts required to be stated therein or necessary to make the
statements therein not misleading.

                                ARTICLE 4.
                  CONDUCT OF BUSINESS PENDING THE CLOSING

     4.1 Conduct of Business by the Company Pending the Closing. Seller
covenants and agrees that, prior to the Closing Date, unless Purchaser shall
otherwise agree in writing or as otherwise expressly contemplated by this
Agreement Seller shall cause the Company to comply with the following:

          (a) The businesses of the Company shall be conducted only in, and the
     Company shall not take any action except in the ordinary course of business
     and consistent with past practices, and the Company shall use its best
     efforts to maintain and preserve its business organization, assets,
     prospects, employees and advantageous business relationships;

          (b) The Company shall not, directly or indirectly, do any of the
     following: (i) authorize for issuance, issue, sell, pledge, deliver, or
     agree or commit to issue, sell, pledge or deliver (whether through the
     issuance or grant of options, warrants, commitments, subscriptions, rights
     to purchase or otherwise) any capital stock of the Company or securities or
     rights convertible into or exchangeable for, shares of capital stock or
     securities convertible into or exchangeable for such shares or (ii) pledge,
     dispose of or encumber, except in the ordinary course of business, any
     assets of the Company (including any indebtedness owed to it or any claims
     held by it); (iii) amend or propose to amend its charter or bylaws or
     similar organizational documents; (iv) split, combine or reclassify any
     shares of its capital stock or declare, set aside or pay any dividend or
     distribution, payable in cash, stock, property or otherwise, with respect
     to any of its capital stock; (v) redeem, purchase or otherwise acquire or
     offer to redeem, purchase or otherwise acquire any capital stock of the
     Company; (vi) transfer any assets or liabilities to any subsidiary;

          (c) The Company shall not, directly or indirectly, (i) acquire (by
     merger, consolidation or acquisition of stock or assets) any corporation,
     partnership or other business organization or division thereof or make any
     investment either by purchase of stock or securities, contributions to
     capital, property transfer or purchase of any amount of property or assets
     of any other individual or entity; (ii) acquire any assets for a value in
     excess of $50,000 other than in the ordinary course of business; (iii)
     dispose of any assets with a value in excess of $50,000 other than in the
     ordinary course of business; (iv) incur any indebtedness for borrowed money
     or issue any debt securities or assume, guarantee, endorse or otherwise as
     an accommodation become responsible for, the obligations of any other
     individual or entity, make any loans or advances or enter into any other
     transaction, except in the ordinary course of business and consistent with
     past practice; (v) authorize, recommend or propose any change in its
     capitalization or any release or relinquishment of any contract right; or
     (vi) authorize or propose any of the foregoing or enter into or modify any
     contract, agreement, commitment or arrangement with respect to any of the
     foregoing;

          (d) The Company shall not enter into or adopt any new, or amend any
     existing, severance or termination benefit arrangements, consulting
     agreements, any employment benefit plans, or arrangement;

          (e) Except for arrangements existing prior to January 1, 1999 or as
     noted in Schedule 3.20, the Company (except for salary increases or other
     employee benefit arrangements in the ordinary course of business) shall not
     adopt or amend any bonus, profit sharing, compensation, stock option,
     pension, retirement, deferred compensation, employment or other employee
     benefit plan, agreement, trust, plan, fund or other arrangement for the
     benefit or welfare of any employee or increase or pay any benefit not
     required by any existing plan and arrangement;

          (f) The Company shall not, pay, discharge or satisfy any claims,
     liabilities or obligations (absolute, accrued, asserted or unasserted,
     contingent or otherwise), other than the payment, discharge or satisfaction
     in the ordinary course of business and consistent with past practice of
     liabilities reflected or reserved against in the Company's Financial
     Statements or incurred in the ordinary course of business and consistent
     with past practice;

          (g) The Company shall not waive, release, grant or transfer any
     franchises, franchise agreements, patents, patent rights, trademarks,
     trademark rights, trade names, trade name rights, copyrights or know-how or
     modify or change in any respect any existing license, lease, contract
     franchise, franchise agreement or other document, other than in the
     ordinary course of business and consistent with past practice;

          (h) The Company shall use its best efforts to preserve its business
     organization intact, to keep available the services of its current officers
     and key employees and to maintain satisfactory relationships with
     reinsurers, policyholders, licensors, licensees, suppliers, contractors,
     distributors, customers and others having significant business
     relationships with the Company;

          (i) The Company shall not enter into, modify, amend, or terminate any
     reinsurance agreements;

          (j) The Company shall not make capital expenditures in the aggregate
     in excess of $50,000; or

          (k) The Company shall not authorize or propose any of the foregoing or
     enter into any contract, agreement, commitment or arrangement to do any of
     the foregoing.

     4.2 Agency and Other Relationships. From and after the date hereof and
until the Closing, Seller will cause the Company to use its reasonable efforts
to maintain its favorable relationships with its Agents, brokers, insurance
companies, reinsurers, coinsurers, suppliers, policyholders and customers
subject to such changes as may be made in the ordinary course of business.
Without the prior written approval of Purchaser, from and after the date hereof
through the Closing, neither Seller nor the Company nor any Fronting Company
shall directly or indirectly (i) disclose Confidential Information (as defined
in the Noncompetition Agreement) regarding the Company's relationship with its
Agents, brokers, insurers, reinsurers, coinsurers, suppliers, policyholders and
customers, (ii) solicit or induce, or in any manner attempt to solicit or induce
any person employed by, or an agent of, the Company to terminate his contract of
employment or agency, as the case may be, with the Company, or (iii) solicit,
divert, or attempt to solicit or divert, as a policyholder, supplier or
customer, any person, concern or entity which, as of the date of this Agreement
or during the one year period prior to the Closing Date was a policyholder of an
insurance policy written or reinsured by the Company, furnishes products or
services (including reinsurance) to, or receives products and services from the
Company, nor will Seller, the Company or any Fronting Company attempt to induce
any policyholder, agent, reinsurer, supplier or customer to cease being (or
prospective policyholder, agent, reinsurer, supplier or customer not to become)
a policyholder, agent, reinsurer, supplier or customer of the Company. The
provisions of Sections 4.2(ii) and (iii) shall not apply to any solicitation or
inducement directed at the public in general and/or found in general
publications.

     4.3 Related Party Transactions. From and after the date hereof and until
the Closing, Seller will provide Purchaser with a schedule of all existing
Related Party Transactions and intercompany reinsurance arrangements of the
Company, including a fee basis schedule, and will not permit the Company, to
engage in any new Related Party Transactions or intercompany reinsurance
arrangements. "Related Party Transactions" shall mean any and all contracts,
agreements, arrangements or transactions, other than reinsurance arrangements,
occurring between the Company and (i) Seller, (ii) Seller's affiliates or (iii)
any directors, officers, employees or agents of the Company, Seller or Seller's
affiliates. Notwithstanding the terms and provisions of any such agreement, all
Related Party Transactions shall, unless otherwise agreed prior to the Closing
or contemplated by the terms of the Agreement, terminate and cease as of the
Closing without penalty to the Company, and with a return to the Company of the
appropriate pro-rata portion of any advances paid by the Company, for services
that would have been performed after the Closing.

     4.4 Resignations of Directors and Officers. Seller will cause the officers
(as may be requested by Purchaser in writing at least 7 days prior to Closing)
and the members of the board of directors of the Company and any of its
subsidiaries to tender, effective at the Closing, their resignations as officers
or directors of the Company and any of its subsidiaries.

     4.5 Additional Interim Financial Statements. Seller shall deliver to
Purchaser, within twenty (20) calendar days after the end of each month during
the period between the date of this Agreement and the Closing, unaudited
financial statements of the Company as of each month end prepared in accordance
with consistently applied. Each such additional interim financial statement
shall also include a pro forma financial statement of the same date giving pro
forma effect to the transactions contemplated by this Agreement.

     4.6  No Shopping.

          (a) The Seller, the Company, their affiliates, and their respective
     officers, directors, employees, representatives, and agents will
     immediately cease any existing discussions or negotiations, if any, with
     any person or group conducted heretofore with respect to any acquisition of
     all or any material portion of the assets of, or any equity interest in,
     the Company or any business combination with the Company (an "Other
     Transaction"). The Company may, directly or indirectly, furnish information
     and access, in each case only in response to unsolicited requests therefor,
     to any person or group made after the date of this Agreement that was not
     encouraged, solicited, or initiated by the Seller or the Company or any of
     their affiliates, or their respective officers, directors, agents, or
     representatives after the date of this Agreement, pursuant to appropriate
     confidentiality agreements, and may participate in discussions and
     negotiate with such person or group concerning an Other Transaction
     involving the Company, if such person or group has submitted a written
     proposal to the Board of Directors of the Company or Seller relating to any
     such Other Transaction and failing to take such action would constitute a
     breach of fiduciary duty under applicable law in the written opinion of
     outside counsel to Seller. The Board of Directors of the Company or Seller,
     as the case may be, will provide a written copy of such proposal to the
     Purchaser immediately after receipt and will keep the Purchaser promptly
     advised of any development with respect to such matters. Except as set
     forth above, neither the Seller, the Company nor any of their affiliates,
     nor any of their respective officers, directors, employees,
     representatives, or agents, will, directly or indirectly, for the account
     of the Company or for their own account, encourage, solicit, participate
     in, or initiate discussions or negotiations with, or provide any
     information to, any person or group (other than the purchaser) concerning
     an Other Transaction involving the Company.

          (b) The Seller or the Company may, by written notice to Purchaser at
     any time prior to the Closing Date, terminate this Agreement if the Seller
     or the Company enters into, executes or agrees to an Other Transaction with
     respect to the Company following a determination by the Board of Directors
     of the Seller on the written advice of outside counsel that the failure to
     take such action would constitute a breach of fiduciary duties under
     applicable law and such action is taken in compliance with the provisions
     of this Section 4.6.

          (c) In order to induce Purchaser to enter into this Agreement and to
     compensate Purchaser for the time and expenses incurred in connection with
     this Agreement and the transactions contemplated hereby and the losses
     suffered by Purchaser from foregone opportunities, the Seller shall pay a
     break-up fee equal to $1,000,000 (the "Break-Up Fee") to Purchaser in
     immediately available funds within three business days of the date the
     Seller or the Company terminates this Agreement pursuant to this Section
     4.6. The parties agree that the agreements contained in this Section 4.6
     are an integral part of the transactions contemplated by this Agreement and
     constitute liquidated damages and not a penalty.

                                ARTICLE 5.
                        FEDERAL INCOME TAX MATTERS

     5.1 Section 338 Election . If requested by Purchaser, Purchaser and Seller
shall join in an election to have the provisions of Section 338(h)(10) of the
Code and similar provisions of state law ("Section 338 Election") apply to the
acquisition of the Company. Purchaser shall be responsible for, and control, the
preparation and filing of such election. Seller and Purchaser shall mutually
agree in good faith to the determination of such purchase price allocations and
shall report, act, file in all respects and for all purposes consistent with
such determination of Purchaser. Seller shall execute and deliver to Purchaser
such documents or forms (including Section 338 Forms, as defined below) as
Purchaser shall request or as are required by applicable law for an effective
Section 338 Election. "Section 338 Forms" shall mean all returns, documents,
statements, and other forms that are required to be submitted to any federal,
state, county or other local taxing authority in connection with a Section 338
Election, including, without limitation, any "statement of Section 338 election"
and IRS Form 8023 (together with any schedules or attachments thereto) that are
required pursuant to Treasury Regulations.

     5.2  Tax Indemnifications.

          (a) For purposes of this Article 5, the term "Taxes" shall mean all
     taxes, however, denominated, including any interest, penalties or other
     additions to tax that may become payable in respect thereof, imposed by any
     federal, territorial, state, local or foreign government or any agency or
     political subdivision of any such government, which taxes shall include,
     without limiting the generality of the foregoing, all income or profits
     taxes (including, but not limited to, federal income taxes and state income
     taxes), real property gains taxes, payroll and employee withholding taxes,
     unemployment insurance taxes, social security taxes, sales and use taxes,
     premium taxes, ad valorem taxes, excise taxes, franchise taxes, gross
     receipts taxes, business license taxes, occupation taxes, real and personal
     property taxes, stamp taxes, environmental taxes, transfer taxes, workers'
     compensation, Pension Benefit Guaranty Corporation premiums and other
     governmental charges, and other obligations of the same or of a similar
     nature to any of the foregoing, which the Company is required to pay,
     withhold or collect.

          (b) Seller shall indemnify and hold Purchaser harmless from, and shall
     be entitled to any credits or refunds of, all Taxes attributable to the
     Company and its subsidiaries, with respect to (i) taxable periods ending on
     or prior to the day of Closing ("Pre-Closing Periods"), including any Taxes
     attributable to the Section 338 (h)(10) Election contemplated in Section
     5.1 hereof; (ii) Seller or any member of an affiliated, consolidated,
     combined or unitary Tax group of which the Company is or was a member prior
     to the Closing Date that is imposed under Treasury Regulation Section
     1.1502-6 (or any similar provision of state, local or foreign law) by
     reason of such Company being included in any affiliated, consolidated,
     combined or unitary Tax group and (iii) any taxes which relate to a tax
     period which begins on or before the Closing Date and which ends after the
     Closing Date (the "Straddle Period") allocated to the Seller pursuant to
     Section 5.5(b) .

          (c) Purchaser shall indemnify and hold the Seller harmless from, and
     shall be entitled to any credits or refunds of (i) any Straddle Period
     Taxes allocated to the Purchaser pursuant to Section 5.5(b) and all Taxes
     attributable to the Company and its subsidiaries with respect to taxable
     periods ending after the Closing Date ("Post Closing Periods") other than
     Straddle Period Taxes allocated to the Purchaser pursuant to Section
     5.5(b).

     5.3 Final Determinations. Any payments by Seller to Purchaser or by
Purchaser to Seller of any tax liability under Section 5.2 which arise from an
audit or examination by a taxing authority of Tax returns shall be made upon a
final determination of such liability. "Final determination" shall mean, with
respect to any issue or item for any taxable period, (i) a final, unappealable
decision by a court of competent jurisdiction; (ii) the expiration of the time
for filing a claim for refund or, if a refund claim has been timely filed, the
expiration of the time for instituting suit in respect of such refund claim, if
no further adjustment to the items of income, gain, deduction, loss or credit
for such period may thereafter be made; (iii) the execution by or on behalf of
the taxpayer and the Service of a closing agreement under Section 7121 of the
Internal Revenue Code of 1986, as amended (the "Code") (iv) the acceptance by
the Internal Revenue Service (the "Service") or its counsel of a tender pursuant
to an offer in compromise pursuant to Section 7122 of the Code; or (v) the
execution of a Form 870AD.

     5.4  Allocations and Tax Returns.

          (a) Allocations. Any allocation of items of income, gain, loss and
     deduction between Pre-Closing Periods and Post-Closing Periods required to
     be made pursuant to this Article 5 shall be made in a manner consistent
     with the rules of the National Association of Insurance Commissioners
     ("NAIC") and in a manner consistent with the Annual Statements filed by the
     Company with the State of Arizona Department of Insurance. Seller shall
     cause the Company to prepare a statement as of the Closing as if it were
     such an Annual Statement and shall include all schedules necessary for the
     preparation of federal income tax returns. Such allocation of all items on
     the statement shall be subject to the review of Purchaser and, in the event
     that Seller and Purchaser disagree as to the appropriate allocation of any
     items between the Pre-Closing Periods and Post-Closing Periods, Seller and
     Purchaser will consult a national accounting firm satisfactory to both
     Purchaser and Seller in an attempt to resolve such disagreement regarding
     the appropriate allocation of such items; provided, however, that the view
     of such national accounting firm, obtained as a result of such
     consultation, shall not be binding on either party.

          (b) Tax Returns.

               (i) Consolidated Returns. Seller shall prepare (or cause to be
          prepared) and timely file all. Required consolidated Returns
          ("Consolidated Returns") with respect to the companies for periods
          including, or ending on or before, the Closing Date. Payment of Taxes
          shown to be due on such Consolidated Returns shall be made in
          accordance with Section 5.4 hereof in a manner consistent with past
          customs and practice of Seller and the Company. Purchaser shall timely
          provide (or cause to be provided) to the Seller all information
          (including pro forma Tax Returns, schedules, statements and supporting
          documentation) reasonably required in connection with the preparation
          and filing of such Consolidated Returns in sufficient time to allow
          Seller to timely file such returns.

               (ii) Separate Company Returns. Seller shall prepare (or cause to
          be prepared) and timely file all Tax Returns with respect to the
          Company that are not Consolidated Returns and that are required to be
          filed on or before the Closing Date. Purchaser shall prepare (or cause
          to be prepared) and timely file all Tax Returns for (a) any Straddle
          Period or (b) any Pre- Closing Period, that are required to be filed
          after the Closing Date (the "Purchaser Returns") and that are not
          Consolidated Returns. Payment of Taxes shown to be due on such Tax
          Returns shall be made in accordance with Section 5.2 and 5.3 hereof.

               (iii) Tax Accounting Practices. Any Tax Return that includes any
          of the Company's assets or activities for any pre-Closing Period shall
          be prepared in accordance with past Tax accounting practices used with
          respect to the Tax Returns in question (unless the party responsible
          for preparing the Tax Return determines that the past practices are no
          longer permissible under the Code or other applicable Tax law), and to
          the extent any items are not covered by past practices (or in the
          event such past practices are no longer permissible under the Code or
          other applicable Tax law), in accordance with reasonable Tax
          accounting practices selected by the party responsible for preparing
          the Tax Return.

               (iv) Right to Review Tax Returns. Purchaser shall make available
          to Seller the Purchaser Returns and related workpapers for Seller's
          review and comment at least 30 business days prior to filing such Tax
          Returns. Such Purchaser Returns shall be subject to Sellers' review
          and approval, such approval not to be unreasonably withheld, before
          the applicable Purchaser Return is filed with any Tax Authority.

     5.5  Allocation of Taxes.

               (i) Pre-Closing Tax Periods. From the date hereof through the
          Closing Date, the Seller shall continue to pay to the appropriate Tax
          Authority, any Taxes attributable to the Company in a manner
          consistent with past custom and practice. From and after the Closing
          Date, Purchaser shall pay (or cause the Company to pay) to the
          appropriate Tax Authorities any Taxes due on or after the Closing Date
          with respect to a Purchaser Return. Not less than ten days prior to
          the due date of any Purchaser Return, Seller shall pay to Purchaser in
          immediately available funds the amount of Seller's portion of the
          Taxes shown as due on such Purchaser Return as determined pursuant to
          Section 5.5(b) hereof. Without duplication, within 30 days of the
          timely filing of the last filed Purchaser Return: (i) Seller shall
          reimburse Purchaser for any Taxes imposed with respect to the Company
          relating to the relevant Pre-Closing Periods that have been paid by
          the Purchaser after the Closing; and (ii) Purchaser shall reimburse
          Seller for any Taxes of the Company relating to Tax Periods beginning
          on or after the Closing Date (including all Taxes allocated to such
          period under Section 5.5(b) hereof) that have been paid by the Seller.

               (ii) Allocation of Straddle Period Taxes. Purchaser and Seller
          shall, to the extent permitted by applicable law and except as
          otherwise provided herein, elect with the relevant Tax Authority to
          close the Tax period of the Company as of and including the Closing
          Date. Subject to the preceding sentence, in the case of Taxes
          attributable to the Company that are payable with respect to any
          Straddle Period, the portion of any such Taxes that are allocable to
          the portion of the Straddle Period ending on the Closing Date shall:
          (i) in the case of Taxes that are either (a) based upon or related to
          income or receipts or (b) imposed in connection with any sale,
          transfer or assignment or any deemed sale, transfer or assignment of
          property (real or personal, tangible or intangible) be deemed equal to
          the amount that would be payable if the Tax year ended on and included
          the Closing Date and (ii) in the case of Taxes (other than those
          described in clause (i)) imposed on a periodic basis with respect to
          the business or assets of the Company or otherwise measured by the
          level of any item, be deemed to be in the amount of such Taxes for the
          entire Straddle Period (or, in the case of such Taxes determined on an
          arrears basis, the amount of such Taxes for the immediately preceding
          Tax period) multiplied by a fraction the numerator of which is the
          number of calendar days in the portion of the Straddle period ending
          on and including the Closing Date and denominator of which is the
          number of calendar days in the entire Straddle Period (the "Part-Year
          Fraction"). For purposes of clause (i) of the preceding sentence, any
          exemption, deduction, credit or other item that is calculated on an
          annual basis shall be allocated to the portion of the Straddle Period
          ending on the Closing Date on a pro rata basis determined by
          multiplying the total mount of such item allocated to the Straddle
          Period multiplied by the Part- Year Fraction. In the case of any Tax
          based upon or measured by capital (including net worth or long-term
          debt) or intangibles, any amount thereof required to be allocated
          under this Section 5.5(b) shall be computed by reference to the level
          of such items on the Closing Date.

     5.6  Tax Sharing Agreement Terminated; Tax Payments.

          Any  tax  sharing arrangements and agreements between the Company
     or  its subsidiaries and the other members of the affiliated group  of
     corporations  (within the meaning of Section 1504(a) of the  Code)  of
     which  the  Company and its subsidiaries are currently members,  shall
     terminate with respect to each of the Company and its subsidiaries  as
     of  the  Closing and will have no further effect for any taxable  year
     (whether the current year, a future year, or a past year).

     5.7  Cooperation and Exchange of Information.

          (a) Purchaser and Seller will provide each other with such cooperation
     and information as either of them reasonably may request of the other in
     connection with the filing of any Tax Return or refund claim, or
     participating in or conducting any audit or other proceeding in respect of
     Taxes. Such cooperation and information shall include providing copies of
     relevant Tax Returns or portion thereof, together with accompanying
     schedules and related work papers (to the extent such documents are not
     subject to attorney-client or similar privileges), but in no event shall
     Purchaser or Seller be required to disclose to the other any information
     relating to their respective operations other than information relating to
     a liability for Taxes attributable to the operations of the Companies prior
     to Closing.

          (b) Purchaser and Seller shall make their respective employees
     available on a mutually convenient basis to provide explanations of any
     documents or information provided hereunder. Purchaser and Seller will
     retain all Tax Returns, schedules and work papers and all material records
     or other documents relating to Tax matters of the operations of the
     Companies for the Tax periods of the Company first ending after the Closing
     Date and for all prior Tax periods until the expiration of the statue of
     limitations of the Tax periods to which such Tax Returns and other
     documents relate (giving effect to any extension, waiver, or mitigation
     thereof). After such time, before Purchaser shall dispose of any of such
     books and records, at least 90 calendar days prior written notice to such
     effect shall be given by Purchaser to Seller and Seller shall be given an
     opportunity, at their cost and expense, to remove and retain all or any
     part of such books and records as Seller may select. Any information
     obtained under this Section 5.7 shall be kept confidential except as may
     otherwise be necessary in connection with the filing of Tax Returns or
     claims for refund or in conducting an audit or other proceeding or as
     otherwise required by law.

     5.8  Contests.

          (a) Notice. After the Closing, Purchaser and Seller each shall notify
     the other in writing within 10 days of the commencement of any Tax audit or
     administrative or judicial proceeding affecting the Taxes of any of the
     companies, which, if determined adversely to the taxpayer, would be grounds
     for indemnification under this Agreement by the other party (or parties, in
     the case of Seller) ("Tax Indemnitor"). Such notice shall contain factual
     information describing any asserted Tax liability in reasonable detail and
     shall include copies of any notice or other document received from any Tax
     Authority in respect of any such asserted Tax liability. If either
     Purchaser or Seller fail to give the other party prompt notice of an
     asserted Tax liability as required under this Agreement, then (i) if the
     Tax Indemnitor is precluded by the failure to give prompt notice from
     contesting the asserted Tax liability in any administration or judicial
     forums, then such party shall not have any obligation to indemnify the
     other party for any loss or damage arising out of such asserted Tax
     liability, and (ii) if the Tax Indemnitor is not so precluded from
     contesting, if such failure to give prompt notice results in a detriment to
     the Tax Indemnitor, then any amount which the Tax Indemnitor is otherwise
     required to pay pursuant to this Agreement with respect to such liability
     shall be reduced by the amount of such detriment.

          (b) Control of Contests Involving Consolidated Returns. In the case of
     an audit or administrative or judicial proceeding involving any asserted
     liability for Taxes ("Tax Controversy") with respect to a Consolidated
     Return for a Pre-Closing Period, Seller shall have the right, at its
     expense, to control the conduct of such Tax Controversy.

          (c) Control of Contests Involving Separate Company Returns. In the
     case of a Tax Controversy with respect to a Tax Return relating to a period
     including, or ending on or before the Closing Date, Seller shall have the
     right, at its expense, to control the conduct of such Tax Controversy. In
     the case of a Tax Controversy involving any asserted liability for Taxes
     with respect to the Company relating to Straddle Period Taxes other than a
     Tax Controversy with respect to a Consolidated Return or a Separate Return,
     Purchaser shall have right, at its expense, to control the conduct of such
     Tax Controversy; provided, however, that if such Tax Controversy could
     result in a material increase in Tax liability for which Seller or any of
     its Affiliates may be liable under this Agreement, Seller may participate
     in the conduct of such Tax Controversy at its own expense and Purchaser
     shall not settle any such audit or proceeding without the such consent of
     Seller, which consent shall not be unreasonably withheld.

          (d) Post-Closing Periods. Purchaser shall control the defense and
     settlement of any Tax Controversy involving any asserted liability for
     Taxes imposed with respect to the Company relating to Tax Periods that
     begin after the Closing Date.

                                ARTICLE 6.
                           ADDITIONAL AGREEMENTS

     6.1 Expenses. All expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
expenses whether or not the sale is consummated, provided that the Seller shall
promptly upon payment thereof by Purchaser reimburse the Purchaser for 50% of
the filing fee under the HSR Act. Seller agrees that no expenses, including
without limitation, legal fees, accounting fees, actuarial fees and brokerage
fees shall be incurred by, or allocated to, the Company in connection with this
Agreement and the transactions contemplated hereby.

     6.2 Additional Agreements. Subject to the terms and conditions herein
provided, each of the parties hereto agrees (i) to use all reasonable efforts to
take, or cause to be taken, all action and (ii) to use all reasonable efforts to
do, or cause to be done, all things necessary, proper or advisable to consummate
and make effective as promptly as practicable the transactions contemplated by
this Agreement and the other Transaction Documents and to cooperate with each
other in connection with the foregoing, (iii) to use all reasonable efforts to
obtain all necessary waivers, consents and approvals from other parties to
material loan agreements, leases and other contracts and to notify each of the
other parties hereto of any request for prepayment with respect thereto;
provided however, all reasonable efforts with respect to obtaining waivers,
consents and approvals under loan agreements does not obligate the parties
hereto to make any prepayment on any such loan, (iv) to use all reasonable
efforts to obtain all necessary consents, approvals and authorizations as are
required to be obtained under any federal, state, local or foreign law or
regulations, including, but not limited to, state insurance laws and the HSR
Act, (v) to defend all lawsuits or other legal proceedings challenging this
Agreement or any other Transaction Document or the consummation of the
transactions contemplated hereby, (vi) to use all reasonable efforts to lift or
rescind any injunction or restraining order or other order adversely affecting
the ability of the parties to consummate the transactions contemplated hereby,
and (vii) to use all reasonable efforts to effect all necessary registrations
and filings and submissions of information required or requested by governmental
authorities.

     6.3 Notification of Certain Matters. Each party will promptly give written
notice to the other parties upon becoming aware of the occurrence or failure to
occur, or impending or threatened occurrence or failure to occur, of any event
that would cause or constitute, or would be likely to cause or constitute, a
breach of any of its representations, warranties or covenants contained in this
Agreement and will use all reasonable efforts to prevent or promptly remedy the
occurrence or failure. No such notification shall limit or affect the
representations, warranties, covenants or conditions or remedies of the parties
hereunder.

     6.4  Access to Information.

          (a) Seller shall, and shall cause the Company and its officers,
     directors, employees and agents to, afford the officers, employees and
     agents of Purchaser complete access at all reasonable times to the
     Company's officers, employees, agents, properties, facilities, books,
     records and contracts and shall furnish Purchaser all financial, operating
     and other data and information as Purchaser through its officers, employees
     or agents, may reasonably request. Purchaser will hold and will cause its
     respective representatives to hold in strict confidence all documents and
     information concerning the Company furnished to Purchaser in connection
     with the transactions contemplated by this Agreement (except to the extent
     that such information can be shown to have been (i) previously known by
     Purchaser (or its respective affiliates) prior to its disclosure to
     Purchaser by Seller or the Company, (ii) in the public domain through no
     fault of Purchaser or (iii) later lawfully acquired by Purchaser (or its
     respective affiliates) from other sources and will not release or disclose
     such information to any other person, except in connection with this
     Agreement to their respective auditors, actuaries, attorneys, financial
     advisors and other consultants or advisors, and to responsible financial
     institutions, partnerships and individuals after Purchaser has made
     reasonable efforts to cause such financial institutions, partnerships and
     individuals to agree to be bound by the provisions of this Section 6.4 as
     if the reference to Purchaser herein were to them (it being understood that
     such persons shall be informed by Purchaser of the confidential nature of
     such information and shall be directed by Purchaser to treat such
     information confidentially) and provided that Purchaser and its respective
     representatives may provide such documents and information in response to
     judicial or administrative process or applicable governmental laws, rules,
     regulations, orders or ordinances, but only that portion of the documents
     or information which, on the advice of counsel, is legally required to be
     furnished, and provided that Purchaser notifies the Company of its
     obligation to provide such information prior to such disclosure and fully
     cooperates with the Company to protect the confidentiality of such
     documents and information under applicable law. If the transactions
     contemplated by this Agreement are not consummated, such confidence shall
     be maintained except to the extent such information can be shown to have
     been (i) previously known by Purchaser, prior to its disclosure to
     Purchaser by the Company, (ii) in the public domain through no fault of
     Purchaser, or (iii) later lawfully acquired by Purchaser or its affiliates,
     from other sources, and, if requested by the Company, Purchaser will
     destroy or return to the Company all copies of written information
     furnished by the Company to Purchaser or its affiliates, agents,
     representatives or advisers.

          (b) No investigation pursuant to this Section 6.4 shall affect any
     representations or warranties of the parties herein or the conditions to
     the obligations of the parties hereto.

          (c) Schedules may be prepared and submitted by the Company after the
     date of this Agreement; provided however, that any schedule which is not
     attached hereto at the time that Purchaser executes this Agreement shall
     not be subsequently attached hereto or incorporated herein unless the form
     and substance of such schedule is acceptable to Purchaser in its sole
     discretion.

          (d) Following the Closing, Purchaser will permit reasonable access to
     the Company's records and personnel at reasonable times and upon reasonable
     notice in order that Seller may have the opportunity to analyze the Final
     Balance Sheet prepared by Purchaser as described in Section 10.3.

     6.5 Information for Other Filings. Seller represents and warrants that the
information provided and to be provided by Seller or the Company for use in any
document to be filed with any other governmental agency or authority in
connection with the transactions contemplated hereby shall, at the respective
times such documents are filed with the governmental agency or authority and on
the Closing Date be true and correct in all material respects and shall not omit
to state any material fact required to be stated therein or necessary in order
to make such information not false or misleading, and the Seller agrees to so
correct any such information provided by it for use in such documents that shall
have become false or misleading.

     6.6  Filings with Governmental Authorities.

          (a) Each of the parties hereto shall as promptly as practicable, but
     in no event later than ten business days following the execution and
     delivery of this Agreement, file with the United States Federal Trade
     Commission (the "FTC") and the United States Department of Justice (the
     "DOJ") the notification and report form, if any, required for the
     transactions contemplated hereby and any supplemental information requested
     in connection therewith pursuant to the HSR Act. Purchaser and Seller shall
     each be responsible for the payment of 50% HSR Filing Fees associated with
     such filings and notices, as provided in Section 6.1 hereof. Any such
     notification and report form and supplemental information shall be in
     substantial compliance with the requirements of the HSR Act. Each of the
     parties hereto shall furnish to the other such necessary information and
     reasonable assistance as the other may request in connection with its
     preparation of any filing or submission which is necessary under the HSR
     Act. The parties hereto shall keep each other apprised of the status of any
     communications with, and any inquiries or requests for additional
     information from, the FTC and the DOJ and, shall comply promptly with any
     such inquiry or request. Each of the parties hereto shall use its best
     efforts to obtain any clearance required under the HSR Act for the
     consummation of the transactions contemplated by this Agreement.

          (b) (i) Purchaser shall file a Form A with the Arizona Department of
     Insurance within ten business days following the execution of this
     Agreement and (ii) each of the parties hereto shall as promptly as
     practicable make any other filings under any applicable state insurance or
     insurance holding company laws if any, required in connection with the
     transactions contemplated hereby.

     6.7 Termination of Existing Reinsurance. Seller agrees to terminate, or
cause to be terminated and commuted (as the case may be) at no cost to the
Company and on terms satisfactory to Purchaser, each of the reinsurance
agreements or arrangements listed on Schedules 3.6(c), 3.6(d) and 3.6(e)
immediately prior to the Closing.

     6.8 California Business Effective at the Closing, Seller shall cause
Redland to enter into the Millers Agreement in the form of Exhibit A with
respect to the California Business. With respect to the California Business, the
parties agree to reasonably cooperate in an effort to extend the term of the 80%
Private Passenger Automobile Quota Share Reinsurance Contracts listed on
Schedule 3.6(c) (the "Noticed Agreements") such that the term of the Noticed
Agreements will extend to provide reinsurance to Redland for the California
Business up to and including the Closing Date. If the parties are not able to
obtain an extension from the reinsurers under the Noticed Agreements, then
Purchaser shall cause Millers to provide reinsurance to Redland for the
California Business from June 15, 1999 to the Closing Date pursuant to an 80%
Quota Share Reinsurance Treaty (the "Interim Agreement") in form and substance
satisfactory to Purchaser and Seller and on terms consistent with the form of
the Additional State Agreement attached hereto as Exhibit C. If this Agreement
is terminated, Seller and Purchaser agree that the Interim Agreement will be
rescinded and all parties to the Interim Agreement shall be returned to their
respective positions as if the Interim Agreement had never been entered into or
performed.

     6.9 Continuing State Agreements. Effective at the Closing, Seller shall,
and shall cause each of the Fronting Companies to enter into a Continuing State
Agreement in the forms of Exhibits B-1 and B-2 hereto pursuant to which the
applicable Fronting Company shall (i) continue to cede to the Company Continuing
Nonstandard Business, (ii) continue to write Continuing Nonstandard Business for
expiring insurance policies and new insurance policies with program and rate
filing characteristics similar to those of such expiring policies on A or A-
rated policies in the applicable state or states listed on Schedule 6.9 as may
be requested by the Company, (iii) file any policy forms or rate filings with
respect to the Nonstandard Business in the name of the Fronting Company as the
Company may request and (iv) appoint any managing general agents, general agents
or independent agents as the Company may request. Seller agrees to cause each
such Fronting Company to reinsure Continuing Nonstandard Business with the
Company without charging a commission or fronting fee to the Company. Each
Continuing State Agreement shall remain in effect for 24 months after the
Closing Date with respect to all Nonstandard Business written by the applicable
Fronting Company during the 24 months following the Closing Date. Purchaser may
elect to designate any affiliate of Purchaser to serve as the reinsurer under
any Continuing State Agreement during all or any portion of the term of such
Continuing State Agreement in lieu of the Company on the same terms as set forth
in the Continuing State Agreement. If the reinsurer designated by Purchaser is
deemed unauthorized by an applicable insurance regulatory authority or if the
balances due the Fronting Company from the reinsurer exceed the amount of the
Fronting Company's policyholders' surplus specified in the Continuing State
Agreement, Purchaser agrees that it shall or shall cause the reinsurer to fund
its share of the Fronting Company's ceded unearned premium and outstanding loss
and loss adjustment expense reserves pursuant to the provisions of the
Continuing State Agreement.

     6.10 Additional State Agreements. From and after the Closing, the Purchaser
may cause the Company to begin writing personal automobile physical damage and
personal automobile liability insurance (including Additional Nonstandard
Business) in states where neither the Company nor affiliates of Purchaser are
authorized to write personal automobile physical damage and personal automobile
liability insurance or in states where neither the Company nor affiliates of
Purchaser can write Additional Nonstandard Business on A or A- rated policies.
Upon the request of the Company from time to time on or after the Closing,
Seller shall cause the applicable Fronting Company designated by the Company to:
(i) write Continuing Nonstandard Business on A or A- rated policies as the
Company may request, (ii) file any policy forms or rate filings with respect to
the Nonstandard Business in the name of the Fronting Company as the Company may
request, (iii) appoint any managing general agents, general agents or
independent agents as the Company may request and (iv) enter into an Additional
State Agreement in the form attached hereto as Exhibit C with the Company with
respect to each state so requested by the Company for a period of 24 months
after the Closing (unless earlier terminated by the Company) in order to permit
the Company through fronting arrangements with such Fronting Company to market,
sell, underwrite, and cause the applicable Fronting Company to issue personal
automobile physical damage and personal automobile liability insurance
(including Nonstandard Business) in such jurisdictions. Seller shall cause the
applicable Fronting Company to enter into each Additional State Agreement
requested by the Company without charging a commission or fronting fee to the
Company in excess of two percent of direct written premiums in such state.
Seller shall cause the applicable Fronting Company to enter into such Additional
State Agreement upon request by the Company. Purchaser may elect to designate
any affiliate of Purchaser to serve as the reinsurer under any Additional State
Agreement during all or any portion of the term of such Additional State
Agreement in lieu of the Company on the same terms as set forth in the
Additional State Agreement.

     6.11 Assumption Agreement. Effective at the Closing, Seller shall enter
into the Assumption Agreement in the form of Exhibit D hereto.

     6.12 Retrocession Agreement. Effective at the Closing, Seller shall cause
Acceptance Casualty to enter into the Retrocession Agreement.

     6.13 Employees.

          (a) Seller and Purchaser agree that Purchaser shall cause the Company
     to continue to employ all employees of the Company on the Closing Date at
     will (the "Offered Employees") provided, however, that the Purchaser may
     determine not to offer such employment to no more than twelve of the
     employees of the Company (collectively, the "Nonoffered Employees"). Prior
     to the Closing, Purchaser shall provide Seller with a list of all
     Nonoffered Employees. Seller shall use its best efforts to encourage the
     Offered Employees to accept the Company's offer to continue their
     employment with the Company or accept the offer of employment by an
     affiliate of Purchaser. Seller agrees to either (i) employ, (ii) cause an
     affiliate of Seller to employ or (iii) discharge under severance
     arrangements having no cost or liability to the Company, all Nonoffered
     Employees. Seller shall cause the Company to provide any notice to
     Nonoffered Employees of the Company that may be required under any federal
     or state employment laws, including the Worker Adjustment and Retraining
     Notification Act or any similar state law. In providing such notices,
     Seller shall not rely on any reduction of any applicable notification
     period prescribed by law.

          (b) Seller shall be solely responsible for, and shall indemnify and
     hold the Company harmless from, any severance claims or any other claims or
     causes of action that relate to or arise out of employment with the Company
     on or prior to the Closing that are asserted by Nonoffered Employees or
     persons who are former employees of the Company as of the Closing Date.

          (c) The Company shall be solely responsible for, and shall indemnify
     and hold Seller harmless from, any severance claims or any other claims or
     causes of action that relate to or arise out of employment with the Company
     that are asserted by employees of the Company with respect to actions taken
     by the Company after the Closing.

          (d) Seller shall remain solely responsible for (i) the satisfaction of
     all liabilities and obligations for all wages of Company employees and all
     claims for medical, dental, life insurance, health, accident, disability or
     other benefits brought by or in respect of Company employees under any
     welfare benefit plans applicable to such employees for all periods prior to
     the Closing, (ii) all unemployment compensation claims arising prior to the
     Closing, (iii) any liability arising from workers' compensation claims of
     Company employees, both medical and disability, or other government-
     mandated programs which are based on injuries, in each case for any periods
     during which such persons were employed by the Company prior to Closing.

          (e) Seller agrees to provide any and all continuation coverage to
     Nonoffered Employees and their qualified beneficiaries (as defined in
     Section 4980B(g)(1) of the Code) that may be required under Section 4980B
     of the Code or Part 6 of Title I of ERISA as a result of any events that
     occur on or prior to the Closing Date, including the consummation of the
     transactions contemplated by this Agreement. Seller agrees to use its best
     efforts to provide expeditiously to Purchaser all information that
     Purchaser deems necessary to determine whether there has been any failure
     to comply with the continuation health care requirements of Section 4980B
     of the Code and Part 6 of Title I of ERISA as such requirements have
     applied to any group health plan maintained by or for the company which
     failure occurred with respect any current or former employee of the Company
     or any spouse, former spouse, dependent child, or former dependent child of
     any such employee, on or prior to the Closing Date. Seller further agrees
     to use its best efforts to provide expeditiously to Purchaser all
     information that Purchaser deems necessary to correct any failures to
     comply with such continuation health care coverage requirements. Such
     information will include the identification of all covered employees (as
     defined in Section 4980(b)(f)(7) of the Code) and their qualified
     beneficiaries (as defined in Section 4980B(g)(1) of the Code), the
     identification of all qualifying events with respect to such covered
     employees or qualified beneficiaries (as defined in Section 4980B(f)(3) of
     the Code) and information otherwise demonstrating compliance with all of
     the continuation health coverage requirements of Section 4980(B) of the
     Code and Part 6 of Title I of ERISA. In the event that (i) Purchaser or the
     Company modifies the health benefits for employees of the Company after the
     Closing, (ii) applicable law requires identical benefits to be provided to
     Nonoffered Employees and their qualified beneficiaries and (iii) Seller
     would incur a greater cost to provide such benefits to Nonoffered Employees
     and their qualified beneficiaries than the cost to provide the health
     benefits in effect prior to the Closing , then the Company shall reimburse
     the Seller for the amount of the additional cost resulting from the
     modification of the health benefits provided to employees of the Company
     after the Closing.

     6.14 Noncompetition Agreement. Seller agrees that each of Seller, AIH, AIC
and each Fronting Company that is, or may be, a party to an Continuing State
Agreement or an Additional State Agreement shall execute and deliver at the
Closing a Noncompetition Agreement in the form of Exhibit E hereto. Neither
Seller nor its affiliates shall interfere with the Company's favorable
relationship with its Agents and neither the Seller nor its affiliates shall
make disparaging or negative remarks to Agents regarding the Company or
Purchaser.

     6.15 Release. Seller agrees (i) to deliver, and cause AIH, AIC, the
Fronting Companies and the directors of the Company to deliver at the Closing
(ii) to use its reasonable efforts to cause the officers of the Company set
forth in Schedule 3.22 to deliver at the Closing, a Release in the form of
Exhibit F hereto.

     6.16 Access to Company Data. Subject to reasonable security procedures,
Seller shall provide the Company and INSpire Insurance Solutions, Inc.
("INSpire") access to and use of any and all data recorded on hardware or
software of Seller or its affiliates (other than the Company) used by the
Company to conduct business prior to Closing (the "Company Data ") (i) for a
period of 6 months after the Closing Date and (ii) for an additional period of
18 months thereafter to the extent that Seller or its affiliates continue to
maintain Company Data during such 18 month period. Seller shall maintain Company
Data for use thereof by the Company for a period of 6 months after the Closing
Date and Seller shall cooperate with the Company and INSpire to effect the
orderly transfer of Company Data to any new systems implemented by the Company
or INSpire to conduct the business of the Company. Seller shall deliver such
Company Data to the Company or INSpire in printed copy (if requested by the
Company or INSpire) and in such computer format as the Company or INSpire may
reasonably request. Seller further agrees for a period of 6 months after the
Closing Date and for an additional period of 18 months thereafter to the extent
that Seller or its affiliates continue to maintain such Company Data during such
18 month period, to input, process and output Company Data on any System of
Seller or its affiliates used by the Company to conduct business prior to
Closing.

     6.17 Independent Covenants. The covenants contained herein, or incorporated
by reference herein, are independent and separate, and in the event that any
provision contained herein, or incorporated by reference herein, is declared
invalid or illegal, the other provisions hereof shall not be affected or
impaired thereby and shall remain valid and enforceable.

                                ARTICLE 7.
                                CONDITIONS

     7.1 Conditions to Obligation of Each Party to Effect the Closing. The
obligations of each party to effect the Closing shall be subject to the
fulfillment at or prior to the Closing Date of the condition that no preliminary
or permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative agency
or commission nor any statute, rule, regulation or executive order promulgated
or enacted by any governmental authority shall be in effect that would make the
acquisition or holding directly or indirectly by Purchaser of the shares of
Common Stock of the Company illegal or otherwise prevent the consummation of the
Closing.

     7.2 Additional Conditions to the Obligation of Seller. The obligation of
Seller to effect the Closing is also subject to the fulfillment at or prior to
the Closing Date of the following conditions (unless waived in writing by
Seller):

          (a) Purchaser shall in all material respects have performed each
     obligation and agreement and complied with each covenant to be performed
     and complied with by it hereunder on or prior to the Closing Date;

          (b) the representations and warranties of Purchaser in this Agreement
     shall be true and correct in all material respects when made and at the
     Closing Date with the same force and effect as though made at such time,
     except as affected by the transactions contemplated hereby;

          (c) Purchaser shall have furnished to Seller a certificate, dated the
     Closing Date, signed by a responsible officer of Purchaser, to the effect
     that all conditions set forth in Section 7.2(a) and (b) have been
     satisfied; and

          (d) Seller shall have received opinions dated the Closing Date of
     Akin, Gump, Strauss, Hauer & Feld L.L.P., counsel to Purchaser, and Angela
     Robinson, general counsel to Purchaser, to the effect as set forth in
     Exhibit G hereto, which opinions shall be in form satisfactory to counsel
     for Seller.

     7.3 Additional Conditions to the Obligations of Purchaser. The obligations
of Purchaser to effect the Closing are also subject to the fulfillment at or
prior to the Closing Date of the following conditions (unless waived in writing
by Purchaser):

          (a) Seller shall in all material respects have performed each
     obligation and agreement and complied with each covenant to be performed
     and complied with by it hereunder on or prior to the Closing Date;

          (b) The representations and warranties of Seller in this Agreement
     shall be true and correct in all material respects when made and at the
     Closing Date with the same force and effect as though made at such time,
     except as affected by the transactions contemplated hereby;

          (c) Seller shall have furnished to Purchaser a certificate, dated the
     Closing Date, signed by a responsible officer of Seller, to the effect that
     all conditions set forth in Section 7.3(a) and (b) have been satisfied;

          (d) If so requested by Purchaser, any members of the Company's Board
     of Directors and officers of the Company shall have irrevocably tendered
     their resignations effective as of the Closing Date and the Company shall
     have accepted such resignations;

          (e) The reinsurance agreements listed on Schedule 3.6(c), (d) and (e)
     shall have been terminated or commuted to the satisfaction of Purchaser
     pursuant to Section 6.7 hereof;

          (f) Redland shall have executed and delivered the Millers Agreement
     pursuant to Section 6.8 hereof;

          (g) The applicable Fronting Company shall have executed and delivered
     a Continuing State Agreement pursuant to Section 6.9 hereof;

          (h) The applicable Fronting Company shall have executed and delivered
     an Additional State Agreement pursuant to Section 6.10 hereof;

          (i) Seller shall have executed and delivered the Assumption Agreement
     pursuant to Section 6.11 hereof;

          (j) Seller shall have caused Acceptance Casualty to have executed and
     delivered the Retrocession Agreement pursuant to Section 6.12 hereof;

          (k) Seller, AIH, AIC and each Fronting Company shall have executed and
     delivered the Noncompetition Agreement pursuant to Section 6.14 hereof;

          (l) Seller, AIH, AIC, the Fronting Companies and each director of the
     Company shall have executed and delivered to the Company a Release of the
     Company pursuant to Section 6.15 hereof and such officers of the Company as
     the Company has caused to execute a Release shall have delivered such
     Release to the Company;

          (m) Purchaser shall have received opinions dated the Closing Date of
     Kutak Rock, counsel to Seller and the Company, and J. Michael Gottschalk,
     general counsel of Seller and the Company to the effect as set forth in
     Exhibit H hereto, which opinions shall be in form satisfactory to counsel
     for Purchaser;

          (n) No event, circumstance, fact or condition shall have occurred
     resulting in a Material Adverse Effect with respect to the Company;

          (o) The Company shall be engaged in no line of insurance business or
     have liability with respect to any line of insurance business other than
     (i) the Nonstandard Business and (ii) the insurance business reinsured by
     Seller pursuant to the Assumption Agreement;

          (p) All insurance regulatory approvals required with respect to the
     sale of the Company and the transactions contemplated hereby shall have
     been obtained;

          (q) Expiration or early termination of the applicable waiting period
     under the HSR Act shall have occurred;

          (r) All outstanding loans owed by any affiliate, officer or director
     of the Company shall have been repaid in full to the Company and the
     releases described in Section 3.21 hereof shall have been delivered to
     Purchaser;

          (s) Purchaser shall have received a copy of the resolutions of the
     Board of Directors of Seller authorizing the execution, delivery and
     performance of the Agreement and the consummation of the transactions
     contemplated hereby and if approval by Seller's shareholders of the
     transactions contemplated by this Agreement is required by law, a copy of
     the resolutions or other consent of the shareholders of Seller approving
     this Agreement, all certified by the Secretary of Seller on the Closing
     Date. Such certificates shall state that the resolutions set forth therein
     have not been amended, modified, revoked or rescinded as of the date of
     such certificates;

          (t) Purchaser shall have received a certificate of the Secretary of
     Seller dated the Closing Date, as to the incumbency and signature of the
     officers of Seller executing this Agreement and any certificate, agreement
     or other documents to be delivered pursuant hereto, together with evidence
     of the incumbency of such Secretary;

          (u) Purchaser shall have received (i) a copy, certified as of a date
     reasonably close to the Closing Date by the Arizona Department of
     Insurance, of the Articles of Incorporation, together with all amendments
     thereto, of the Company, (ii) a copy, certified as of the Closing Date by
     the Secretary or an Assistant Secretary of the Company, of the bylaws of
     the Company in effect on the Closing Date, (iii) a certificate or telex
     confirmation as of the Closing Date from the Arizona Department of
     Insurance as to the existence and good standing of the Company as an
     Arizona property and casualty insurance company (iv) a certificate or telex
     confirmation as of not more than five days prior to the Closing Date of
     existence of Seller as a Nebraska corporation, (v) a certificate or telex
     confirmation as of not more than five days prior to the Closing Date from
     the office of the Department of Insurance or other appropriate public
     official in each state in which the Company is qualified to conduct
     business certifying that the Company is in good standing and licensed as a
     foreign insurance company in each such state, and (vi) a certificate dated
     the Closing Date from the Secretary or Assistant Secretary of the Company
     to the effect that the documents delivered pursuant to (i) are true and
     correct copies of such documents as on file with the Arizona Department of
     Insurance and no action has been taken to amend, modify or repeal such
     documents, the same being in full force and effect in such form on the
     Closing Date;

          (v) Seller shall have delivered to Purchaser all necessary consents,
     waivers, authorizations and approvals so that neither the execution and
     delivery of this Agreement nor the consummation of the transactions
     contemplated hereby (including the change of control of the Company) will
     (i) result in the acceleration or termination of, or the creation in any
     party of the right to accelerate, terminate, modify or cancel, any
     indenture, contract, lease, sublease, loan agreement, note or other
     obligation or liability to which the Company is a party or is bound or to
     which any of its their assets are subject, (ii) conflict with, violate or
     result in a breach of any provision of the charter documents or bylaws of
     the Company, (iii) conflict with or violate any law, rule, regulation,
     ordinance, order, writ, injunction, decree, license or permit applicable to
     the Company or by which any of its properties or assets is bound or
     affected or (iv) conflict with or result in any breach of or constitute a
     default (or an event which with notice or lapse of time or both would
     become a default) under, or result in the creation of any lien, charge or
     encumbrance on any of the properties or assets of the Company pursuant to
     any of the terms, conditions or provisions of any indenture, contract,
     lease, sublease, loan agreement, note, permit, license, franchise,
     agreement or other instrument, obligation or liability to which the Company
     is a party or by which the Company or any of its assets is bound or
     affected;

          (w) All schedules to be prepared and provided by Seller shall have
     been delivered to Purchaser prior to the Closing in form and substance
     acceptable to Purchaser in its sole discretion.

                                ARTICLE 8.
                     TERMINATION, AMENDMENT AND WAIVER

     8.1 Termination. This Agreement may be terminated at any time prior to the
Closing Date:

          (a) by mutual written consent of the Boards of Directors of Purchaser
     and Seller;

          (b) by either of the Boards of Directors of Purchaser or Seller if the
     Closing Date shall not have occurred on or before June 30, 1999 unless
     extended in accordance with Section 1.4 of this Agreement; provided,
     however, that the right to terminate under this Section 8.1(b) shall not be
     available to any party whose failure to fulfill any obligation under this
     Agreement has been the cause of, or resulted in, the failure of the Closing
     Date to occur on or before such date;

          (c) if a court of competent jurisdiction or governmental, regulatory
     or administrative agency or commission shall have issued an order, decree
     or ruling or taken any other action (which order, decree or ruling the
     parties hereto shall use all reasonable efforts to lift), in each case
     permanently restraining, enjoining or otherwise prohibiting the
     transactions contemplated by this Agreement, and such order, decree, ruling
     or other action shall have become final and nonappealable;

          (d) by Seller in the event of a material breach by Purchaser of a
     representation or warranty contained in this Agreement, provided that
     Purchaser has received ten business days' written notice of the breach
     indicated therein and has failed to effect a cure thereof to the reasonable
     satisfaction of Seller prior to the expiration of such period, or of a
     covenant contained in this Agreement;

          (e) by Purchaser in the event of a material breach by Seller of a
     representation or warranty contained in this Agreement, provided that
     Seller has received ten business days' written notice of the breach
     indicated therein and has failed to effect a cure thereof to the reasonable
     satisfaction of Purchaser prior to the expiration of such period, or of a
     covenant contained in this Agreement;

          (f) by Purchaser if, subsequent to the date hereof and prior to the
     Closing Date, there is any material change in the condition (financial or
     otherwise), business, operations, liquidity, property, assets, liabilities,
     obligations or prospects of the Company.

          (g) by the Seller or the Company pursuant to the terms of Section 4.6.

          The date on which this Agreement is terminated pursuant to any of
     the foregoing subsections of this Section 8.1 is herein referred to as
     the "Termination Date."

     8.2 Effect of Termination. Except as set forth in Sections 4.6, 6.4(a),
this Section 8.2 and Article 9, upon the termination of this Agreement pursuant
to Section 8.1, this Agreement shall forthwith become null and void, except that
nothing herein shall relieve any party from liability for any breach of this
Agreement prior to such termination.

     8.3 Amendment. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.

     8.4 Waiver. At any time prior to the Closing Date, any term, provision or
condition of this Agreement may be waived in writing (or the time for
performance of any of the obligations or other acts of the parties hereto may be
extended) by the party that is entitled to the benefits thereof.

                                ARTICLE 9.
                              INDEMNIFICATION

     9.1  Indemnification of the Purchaser and the Company.

          (a) Seller shall indemnify and hold harmless Purchaser and the Company
     and their respective officers, directors, employees, shareholders,
     policyholders, agents and representatives from and against any loss,
     liability, claim, damage or expense, (including reasonable legal fees and
     expenses and costs of investigating and defending against lawsuits, claims,
     actions or other pending or threatened litigation (collectively referred to
     in this Article 9 as the "Costs") incurred by such indemnified party
     arising from (i) any breach of any representation or warranty of the Seller
     and/or the Company contained in this Agreement or in any document or
     certificate delivered pursuant hereto and (ii) any breach of any covenant
     of the Seller and/or Company contained in this Agreement or in any document
     or Agreement delivered pursuant hereto.

          (b) Seller shall also indemnify and hold harmless each party
     indemnified under Section 9.1(a) hereof from and against all Costs incurred
     by such indemnified party. arising from or related to:

               (i) the following civil actions and/or the Company insurance
          policies underlying any of them:

                    (A) Phoenix Indemnity v. North et al, Pima County (Arizona)
               District Court Cause No. C-312982. Insured: Johnny North; Claim
               No.: 2605902; Date of Loss: 10/21/94;

                    (B) Mora v. Vallejo and Phoenix Indemnity, Yuma County
               (Arizona) District Court Cause No. SC97V00047. Insured: Moises
               Vallejo; Claim No.: 2617338, Cross referenced with Claim No.:
               2641792; Date of Loss: 3/7/96;

                    (C) Phoenix Indemnity v. Trujillo, Bernalillo County (New
               Mexico) District Court Cause No. CV98-04992. Insured: Angela
               Lopez; Claim No.: 2626946; Date of Loss: 7/4/97;

               (ii) any other bad faith, extra-contractural claims or claims in
          excess of policy limits known to the Company or any Fronting Company
          prior to the Closing;

               (iii) liability with respect to any line of insurance business
          written or reinsured by the Company prior to the Closing other than
          the Nonstandard Business (including the California Business and the
          Texas Business); and

               (iv) any liability of the Company under the Pooling Agreement.

     9.2 Indemnification by Purchaser. Purchaser shall indemnify and hold
harmless Seller, its officers, directors, employees and controlling persons from
Costs arising from (i) any breach of any representation or warranty of the
Purchaser contained in this Agreement or in any document or certificate
delivered pursuant hereto and (ii) any breach of any covenant of the purchaser
contained in this Agreement or in any document or agreement delivered pursuant
hereto.

     9.3  Procedures for Resolution and Payment of Claims for Indemnification.

          (a) If a party entitled to be indemnified under this Article 9 (the
     "Indemnitee") shall incur any Costs or determine that it is likely to incur
     any Costs, including without limitation claims by third parties, and
     believes that it is entitled to be indemnified against such Costs by
     another party hereunder (the "Indemnitor"), such Indemnitee shall deliver
     to the Indemnitor a certificate (an "Indemnity Certificate") signed by the
     Indemnitee which Indemnity Certificate shall:

               (i) state that the Indemnitee has paid or properly accrued Costs,
          or anticipates that it will incur liability for Costs for which such
          Indemnitee is entitled to indemnification pursuant to this Agreement;
          and

               (ii) specify in reasonable detail each individual item of Cost
          included in the amount so stated, the date such item was paid or
          properly accrued, the basis for any anticipated liability and the
          nature of the misrepresentation, breach of warranty or breach of
          covenant to which each such item is related and the computation of the
          amount to which such Indemnitee claims to be entitled hereunder.

          (b) In case the Indemnitor shall object to the indemnification of an
     Indemnitee in respect of any claim or claims specified in any Indemnity
     Certificate, the Indemnitor shall within 30 days after receipt by the
     Indemnitor of such Indemnity Certificate deliver to the Indemnitee a
     written notice to such effect and the Indemnitor and the Indemnitee shall,
     within the 30-day period beginning on the date of receipt by the Indemnitee
     of such written objection, attempt in good faith to agree upon the rights
     of the respective parties with respect to each of such claims to which the
     Indemnitor shall have so objected. If the Indemnitee and the Indemnitor
     shall succeed in reaching agreement on their respective rights with respect
     to any of such claims, the Indemnitee and the Indemnitor shall promptly
     prepare and sign a memorandum setting forth such agreement. Should
     Indemnitee and the Indemnitor be unable to agree as to any particular item
     or items or amount or amounts, then Indemnitee and the Indemnitor shall
     arbitrate such dispute pursuant to Section 10.5 hereof.

          (c) Claims for Costs specified in any Indemnity Certificate to which
     an Indemnitor shall not object in writing, claims for Costs covered by a
     memorandum of agreement of the nature described in paragraph (b) hereof,
     claims for Costs the validity and amount of which have been the subject of
     arbitration as described in paragraph (b) hereof and claims for Costs the
     validity and amount of which shall have been the subject of a final
     judicial determination are hereinafter referred to, collectively, as
     "Agreed Claims."

          (d) Promptly after the assertion by any third party of any claim
     against any Indemnitee that, in the judgment of such Indemnitee, may result
     in the incurrence by such Indemnitee of Costs for which such Indemnitee
     would be entitled to indemnification pursuant to this Agreement, such
     Indemnitee shall deliver to the Indemnitor a written notice describing in
     reasonable detail such claim and such Indemnitor may, at its option, assume
     the defense of the Indemnitee against such claim (including the employment
     of counsel, who shall be satisfactory to such Indemnitee, and the payment
     of expenses). Any Indemnitee shall have the right to employ separate
     counsel in any such action or claim and to participate in the defense
     thereto, but the fees and expenses of such counsel shall not be at the
     expense of the Indemnitor unless (i) the Indemnitor shall have failed,
     within a reasonable time after having been notified by the Indemnitee of
     the existence of such claim as provided in the preceding sentence, to
     assume the defense of such claim, (ii) the employment of such counsel has
     been specifically authorized by the Indemnitor, or (iii) the named parties
     to any such action (including any impleaded parties) include both such
     Indemnitee and the Indemnitor and such Indemnitee shall have been advised
     in writing by such counsel that there may be one or more legal defenses
     available to it which are different from or additional to those available
     to Indemnitor. No Indemnitor shall be liable to indemnify any Indemnitee
     for any settlement of any such action or claim effected without the consent
     of the Indemnitor but if settled with the written consent of the
     Indemnitor, or if there be a final judgment for the plaintiff in any such
     action, the Indemnitor shall jointly and severally indemnify and hold
     harmless each Indemnitee from and against any loss or liability by reason
     of such settlement of judgment. If an Indemnitor assumes the defense of an
     Indemnitee against a claim asserted hereunder, the Indemnitee shall give
     the Indemnitor access to the Company's books and records as necessary to
     conduct such defense and cooperate in such defense.

          (e) In the event that an Indemnitee subsequently recovers any or all
     of the amount of an Agreed Claim from a party other than the Indemnitor,
     the Indemnitee shall reimburse immediately to the Indemnitor, in cash, an
     amount equal to the amount of such previously paid Agreed Claim which shall
     have been recovered.

     9.4 Minimum Costs. Notwithstanding anything herein to the contrary, an
Indemnitee shall be entitled to indemnification hereunder only if, and to the
extent that, the aggregate amount of Costs incurred by such Indemnitee shall
exceed $500,000; provided however, that such minimum amounts shall not apply to
any Costs arising as a result of (i) the breach of the representations set forth
in Sections 2.2, 3.1, 3.2, 3.3, 3.4, 3.5, 3.6, 3.8, 3.18, 3.23, or 3.26 (with
respect to certificates of authority), (ii) any breach of the obligations of the
Seller pursuant to Section 4.6, Article 5, Sections 6.1, 6.7, 6.8, 6.9, 6.10,
6.11, 6.12, 6.14, 6.15 or 6.16, (iii) indemnification under Section 9.1(b)
hereof, (iv) any payment obligation of a party under Section 10.3(d) or (v) any
breach of this Agreement knowingly made by the Company or an Indemnitor.

                                ARTICLE 10.
                    ADJUSTMENTS AND DISPUTE RESOLUTION

     10.1 Definitions Used to Determine Purchase Price. For purposes of this
Agreement, the following capitalized terms shall have the meanings set forth
below:

          (a) Final Balance Sheet. The SAP balance sheet of the Company which
     shall reflect the termination of the Pooling Agreement, the termination of
     reinsurance agreements pursuant to Section 6.7 and the acquisition by the
     Company of the Nonstandard Business as of the Final Balance Sheet Date and
     which shall be established based on the Preliminary Balance Sheet and
     subject to adjustment pursuant to the process and procedures set forth in
     Section 10.3 below.

          (b) Final Balance Sheet Date. The date shall be (i) the Closing Date
     if the Closing Date occurs on the last day of the calendar month or (ii) if
     the Closing Date does not occur on the last day of a calendar month, the
     last day of the calendar month immediately preceding the calendar month in
     which the Closing Date occurs.

          (c) Final Net Equity Deficit Amount. In the case in which the Final
     Net Equity is less than the Preliminary Net Equity, the amount equal to the
     difference between the Final Net Equity and the Preliminary Net Equity.

          (d) Final Net Equity Surplus Amount. In the case in which the Final
     Net Equity is more than the Preliminary Net Equity, the amount equal to the
     difference between the Final Net Equity and the Preliminary Net Equity.

          (e) Final Net Equity. The Net Equity determined from the Final Balance
     Sheet.

          (f) IBNR and Bulk Claims. Expected payments for losses relating to
     insured events that have occurred but have not been reported to the Company
     as of the Financial Statement date, including losses that have been
     reported to the Company but have not yet been entered to the claims system
     or bulk provisions.

          (g) Net Equity. The value, determined in accordance with SAP, of
     Company assets less the value of the Company liabilities.

          (h) Preliminary Balance Sheet. The SAP pro forma balance sheet of the
     Company at March 31, 1999, and which sets forth a Net Equity equal to or
     greater than the Preliminary Net Equity and which gives pro forma effect to
     the termination of the Pooling Agreement, the termination and commutation
     of reinsurance agreements pursuant to Section 6.7 and the acquisition by
     the Company of the Nonstandard Business as of such date.

          (i) Preliminary Net Equity. A value, determined in accordance with
     SAP, of Net Equity at Closing, equal to $14,700,000.

          (j) Preliminary Purchase Price. The cash amount of Twenty-five Million
     Dollars ($25,000,000) (i) less the amount, if any, that Net Equity shown on
     the Preliminary Balance Sheet is less than the Preliminary Net Equity and
     (ii) reduced by the amount of any dividends paid by the Company to the
     Seller or the proceeds of any Shares redeemed from the Seller by the
     Company from January 1, 1999 until Closing. The Preliminary Purchase Price
     includes the Noncompete Fee payable pursuant to the Noncompetition
     Agreement.

          (k) Post-Closing Adjustment Period. The period commencing on the
     Closing Date and expiring upon the delivery of the Final Balance Sheet from
     Purchaser to Seller.

          (l) Post-Closing Payment Date. The later of (i) the date which is the
     thirtieth day following the expiration of the Post-Closing Adjustment
     Period, or (ii) in the event the Audit Firm is retained pursuant to Section
     10.3(b) or the Actuaries are retained pursuant to Section 10.3(c), the date
     which is the tenth day after the later of the delivery to Purchaser and
     Seller of the report of the Audit Firm, if any, or the Closing IBNR and
     Bulk Claims as determined by the Actuaries, if any.

          (m) Purchase Price. The cash amount equal to the Preliminary Purchase
     Price (i) plus the Final Net Equity Surplus Amount, if any, or (ii) minus
     the Final Net Equity Deficit Amount, if any.

     10.2 General Description of Intent. The Purchase Price payable pursuant to
this Agreement shall be the aggregate purchase price payable for the Shares to
be transferred to Purchaser after giving effect to the termination and
commutation of the Pooling Agreement, the termination of reinsurance agreements
pursuant to Section 6.7 and the acquisition by the Company of the Nonstandard
Business to be transferred to the Company pursuant to this Agreement. It is the
intent of the parties that as of the Closing Date, if the Closing Date is the
last day of a calendar month, or, if it is not, then as of the last day of the
calendar month immediately preceding the calendar month in which the Closing
Date occurs, the balance sheet of the Company for the period ending on such date
shows a Net Equity equal to or greater than the Preliminary Net Equity. On the
Closing Date, Purchaser shall pay the Preliminary Purchase Price. The Final
Balance Sheet shall be determined subsequently, in accordance with the process
and procedures described in Section 10.3, and any adjustment required as a
result of such determination shall be made pursuant to Section 10.3.

     10.3 Final Balance Sheet.

          (a) Establishment of Final Balance Sheet. In accordance with the
     process and procedures described in this Section 10.3, Purchaser and Seller
     shall work with the Company and Audit Firm during the Post-Closing
     Adjustment Period to review, verify and, if necessary, adjust those items
     set forth on the Preliminary Balance Sheet for the purpose of establishing
     the Final Balance Sheet which shall be used finally to determine the
     Purchase Price. The Final Balance Sheet shall be prepared in accordance
     with SAP consistently applied and using the same accounting policies and
     procedures applied in the preparation of the Audited Financial Statements
     (as defined in Section 3.5) and shall give effect to the termination of the
     Pooling Agreement, the termination and commutation of reinsurance
     agreements pursuant to Section 6.7 and the acquisition by the Company of
     the Nonstandard Business.

          (b) Adjustments To Preliminary Balance Sheet Involving Matters Other
     Than IBNR and Bulk Claims. Seller shall deliver the Preliminary Balance
     Sheet prepared in accordance with SAP applied on a basis consistent with
     prior periods and giving pro forma effect to the acquisition of the
     Nonstandard Business as of the date of the Preliminary Balance Sheet.
     Purchaser shall prepare the Final Balance Sheet in accordance with SAP and
     using the same accounting procedures applied in the preparation of the
     Audited Financial Statements and giving effect to the acquisition by the
     Company of the Nonstandard Business within 90 days after the Closing Date
     or as soon thereafter as is reasonably practicable. Seller will be deemed
     to have accepted such Final Balance Sheet and to have waived forever any
     right to contest it unless it notifies Purchaser within 30 days after
     delivery of the Final Balance Sheet to Seller that Seller contests such
     Final Balance Sheet and the reasons therefore. Seller will have access to
     Purchaser records and personnel in order to analyze such final Balance
     Sheet as set forth in Section 6.4. If Seller contests the Final Balance
     Sheet, Purchaser and Seller will enter into good faith negotiations to
     resolve the dispute for a period of 30 days after the Seller's notice to
     Purchaser that it is contesting the Final Balance Sheet. If after such
     period of good faith negotiations Purchaser and Seller are not able to
     resolve the dispute, Purchaser and Seller shall jointly retain Deloitte and
     Touche LLP (the "Audit Firm") to conduct an audit of the Final Balance
     Sheet and prepare a report setting forth any adjustments Audit Firm deems
     necessary in order for the Final Balance Sheet to reflect the standards of
     preparation set forth in this Section 10.3(b). The adjustments to the Final
     Balance Sheet set forth in the report of the Audit Firm as a result of its
     audit shall be final and binding on the parties (other than reserves for
     IBNR and Bulk Claims set forth on the Final Balance Sheet which shall be
     resolved as provided in Section 10.3(c)). The costs for Audit Firm's
     services shall be borne equally by Seller and Purchaser.

          (c) Adjustments to Preliminary Balance Sheet Involving IBNR and Bulk
     Claims. Purchaser and Seller also shall review and evaluate the IBNR and
     Bulk Claims reserves set forth in the Final Balance Sheet. For the purpose
     of establishing the reserves for Closing IBNR and Bulk Claims, (the
     "Reserve Amount") any adjustments must be mutually agreed to by Purchaser
     and Seller within 10 business days after the expiration of the Post-Closing
     Adjustment Period. If Purchaser and Seller do not agree to the Reserve
     Amount for Closing IBNR and Bulk Claims set forth on the Final Balance
     Sheet prepared by Audit Firm, as provided in Section 10.3(b), or if the
     only account balance in the Final Balance Sheet in dispute between
     Purchaser and Seller is the Closing IBNR and Bulk Claims, then the matter
     shall be submitted immediately to two nationally recognized actuarial firms
     (the "Actuaries"), one of which will be PriceWaterhouse Coopers LLP and the
     other will be chosen by mutual agreement of the Purchaser and Seller, for
     their review and determination. The review by the Actuaries shall be
     limited to a determination of the adequacy of the Reserve Amount set aside
     to pay the IBNR and Bulk Claims as of the Final Balance Sheet Date (the
     "Closing IBNR and Bulk Claims"). In their review and determination, the
     Actuaries shall make a final point estimate, using the historical Company
     methodology described in Section 3.5(f) of the appropriate Reserve Amount
     for the then-unpaid Closing IBNR and Bulk Claims, and such estimate shall
     be completed and delivered to Purchaser and Seller within 25 days after the
     expiration of the Post-Closing Adjustment period, or as soon thereafter as
     is practicable. If the Reserve Amount as determined by each Actuary is
     within 10% of the Reserve Amount as determined by the other Actuary, the
     Reserve Amount for the Closing IBNR and Bulk Claims under this Agreement
     will be the average of such Reserve Amounts. If the Reserve Amount as
     determined by one Actuary is not within 10% of the Reserve Amount as
     determined by the other Actuary, the Purchaser and Seller may mutually
     agree to a specific Reserve Amount, or can mutually select another two
     mutually recognized Actuaries, and both of such Actuaries shall determine
     the Reserve Amount as described in the immediately preceding sentences and
     the Post Closing Adjustment Date will then be postponed for a period of 60
     days. If the Reserve Amounts as determined by the second two Actuaries are
     not within 10% of each other, such two Actuaries shall mutually select a
     third nationally recognized actuarial firm (other than any firm previously
     engaged by Purchaser or Seller under this Section 10.3(c)) and such Actuary
     shall determine the Reserve Amount and such determination shall be final,
     binding and conclusive upon Purchaser and Seller. The Reserve Amount
     determined in accordance with this Section 10.3(c) shall be appropriately
     incorporated into the Final Balance Sheet. (d) Post-Closing Payment Date.
     In the event that the Purchase Price exceeds the Preliminary Purchase
     Price, on or before the Post-Closing Payment Date, Purchaser shall pay
     Seller cash in the amount equal to the Purchase Price minus the Preliminary
     Purchase Price. In the event that the Preliminary Purchase Price exceeds
     the Purchase Price, on or before the Post-Closing Payment Date, Seller
     shall return and pay to Purchaser cash in the amount equal to the
     Preliminary Purchase Price minus the Purchase Price.

     10.4 Manner of Payment; Interest. All payments made pursuant to Section
10.3(d) shall be paid via wire transfer or other form of electronic transmission
of immediately available funds, or by cashier's check or in certified funds, and
shall be paid pursuant to payment instructions delivered to the party who owes
the applicable funds from the party to whom such funds are owed. In the event
that any payment is required to be made by a party on the Post-Closing Payment
Date, the amount of such payment shall bear interest at the rate of 8% per annum
from the Closing Date until paid by the applicable party.

     10.5 Alternative Dispute Resolution.

          (a) Any disputes regarding the preparation of the Preliminary Balance
     Sheet, the Final Balance Sheet, the Adjustment to the Preliminary Balance
     Sheet involving matters other than IBNR and Bulk Claims and adjustment to
     the Preliminary Balance Sheet involving IBNR and Bulk Claims shall be
     resolved in the manner described in Section 10.3 hereof.

          (b) The parties agree that they will attempt to settle any claim or
     controversy arising out of this Agreement other than disputes referenced in
     Section 10.5(a) hereof through consultation and negotiation in good faith
     and in a spirit of mutual cooperation. If those attempts fail, then such
     dispute will be mediated by a mutually acceptable mediator to be chosen by
     the parties within 15 business days after written notice by one of the
     parties demanding mediation. Neither party may unreasonably withhold
     consent to the selection of the mediator and the parties agree to share the
     cost of the mediation equally. By mutual agreement, however, the parties
     may postpone mediation until the parties have each completed some specified
     but limited discovery regarding the dispute. The parties may also mutually
     agree to replace mediation with some other form of alternative dispute
     resolution ("ADR") such as neutral fact-finding or mini-trial. If any
     dispute cannot be resolved by the parties through negotiation, mediation or
     another form of ADR other than arbitration within 45 days of the date of
     the initial demand for ADR by one of the parties, then the dispute shall be
     determined by binding arbitration applying the laws of the State of Texas.
     Any arbitration pursuant to this Agreement shall be conducted before the
     American Arbitration Association in accordance with its arbitration rules.
     The arbitration shall be final and binding upon all the parties. The
     arbitrators award shall not be required to include factual findings or
     legal conclusions under the doctrine of laches, waiver, or estoppel to
     adversely affect the rights of either party.

          (c) Any mediation or other form of ADR shall take place in Fort Worth
     or Dallas, Texas. Any dispute which involves, in whole or in part, whether
     by claim, counterclaim or defense, one or more of the following issues is
     excepted from the preceding requirements regarding mediation or other form
     of ADR and, if not otherwise resolved, may be resolved by litigation: (i)
     any claim by Purchaser for declaratory or equitable relief under this
     Agreement or under any of the other Transaction Documents, including but
     not limited to claims for specific performance, rescission, reformation or
     injunctive relief; and (ii) any claim or controversy arising out of, in
     connection with or relating to indemnity under Section 9 herein.

                                ARTICLE 11.
                            GENERAL PROVISIONS

     11.1 Public Statements. So long as this Agreement is in effect, neither
Seller nor Purchaser shall, or shall permit any of its subsidiaries to, issue or
cause the publication of any press release or other announcement with respect to
this Agreement without consulting with and obtaining the consent of the other
parties; provided, however, that a copy of any proposed press release or
announcement shall be provided in advance to the other party but the consent of
such party shall not be required where such release or announcement is required
by applicable law.

     11.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered personally,
mailed by certified mail (return receipt requested) or sent by Fed Ex or other
nationally recognized overnight delivery service or facsimile transmission (if
also sent by personal delivery, certified mail or overnight delivery service) to
the parties at the following addresses or at such other addresses as shall be
specified by the parties by like notice:

          (a)  if to Purchaser:

               Millers American Group, Inc.
               300 Burnett Street
               Fort Worth, Texas  76102
               Attn:  David N. Thompson
               Facsimile No. 817-348-3480

               with a copy to:

               Akin, Gump, Strauss, Hauer & Feld, L.L.P.
               1700 Pacific Avenue, Suite 4100
               Dallas, Texas  75201-4675
               Attn:  Terry M. Schpok, P.C.
               Facsimile No. 214-969-4343

          (b)  if to Seller:

               Acceptance Insurance Company
               222 South 15th Street
               Suite 600 North
               Omaha, Nebraska 68102-1616
               Attn:  Kenneth L. Coon, Chairman
               J. Michael Gottschalk, General Counsel
               Facsimile No. 402-345-9190

               with a copy to:

               Kutak Rock
               The Omaha Building
               1650 Farnam Street
               Omaha, Nebraska  68102-2186
               Attn:  Joe E. Armstrong, Esq.
               Facsimile No. 402-346-1148

Notice so given shall (in the case of notice so given by mail) be deemed to
be given and received in the fourth calendar day after posting, in the case
of  notice  so  given by overnight delivery service on the date  of  actual
delivery and, in the case of notice so given by facsimile transmissions  or
personal  delivery, on the date of actual transmission or, as the case  may
be, personal delivery.

     11.3 Representations and Warranties. The representations and warranties of
the parties hereto shall survive the Closing and remain in full force and effect
on and after the Closing Date for the period set forth below notwithstanding any
investigations which may have been made by any of the parties prior thereto. The
representations and warranties contained in Sections 2.2, 3.1, 3.2, 3.3, 3.4,
3.5 and 3.6 shall survive the Closing forever. The representations and
warranties contained in Sections 3.8 and 3.20 shall survive the Closing for a
period of three months following the expiration of the applicable statute of
limitations. All other representations and warranties contained in this
Agreement shall survive the Closing for a period of 18 months.

     11.4 Miscellaneous. This Agreement (including the documents and instruments
referred to herein) constitutes the entire agreement and supersedes all other
prior agreements and undertakings, both written and oral, among the parties, or
any of them, with respect to the subject matter hereof; is not intended to
confer upon any other person any rights or remedies hereunder, shall not be
assigned; and shall be governed in all respects, including validity,
interpretation and effect, by the internal laws of the State of Texas without
giving effect, to the principles of conflict of laws thereof. This Agreement may
be executed in one or more counterparts which together shall constitute a single
agreement. If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable under any applicable law, then such contravention or
invalidity shall not invalidate the entire Agreement. Such provision shall be
deemed to be modified to the extent necessary to render it legal, valid and
enforceable, and if no such modification shall render it legal, valid and
enforceable, then this Agreement shall be construed as if not containing the
provision held to be invalid, and the rights and obligations of the parties
shall be construed and enforced accordingly.

     11.5 Financial Statements. Unless otherwise specifically required in this
Agreement, all financial statements and information shall be prepared in
accordance with SAP.

                         [Signature Page Follows]

<PAGE>

                     PURCHASE AGREEMENT SIGNATURE PAGE

     IN  WITNESS WHEREOF, the undersigned have caused this Agreement to  be
executed as of the date first written above.

                         MILLERS AMERICAN GROUP, INC.

                         By:    /S/ JOY J. KELLER
                                -------------------------------------
                         Name:  Joy J. Keller
                                -------------------------------------
                         Title: Executive Vice President and CFO
                                -------------------------------------

                         ACCEPTANCE INSURANCE COMPANY

                         By:    /S/ KENNETH L. COON
                                -------------------------------------
                         Name:  Kenneth L. Coon
                                -------------------------------------
                         Title: Chairman
                                -------------------------------------

                         PHOENIX INDEMNITY INSURANCE COMPANY

                         By:    /S/ GEORGIA M. MACE
                                -------------------------------------
                         Name:  Georgia M. Mace
                                -------------------------------------
                         Title: Treasurer
                                -------------------------------------

<PAGE>

                             LIST OF SCHEDULES

Schedule 3.4        Required Consents

Schedule 3.6(a)     Reinsured Business

Schedule 3.6(b)     Ceded Business

Schedule 3.6(c)     Provisional Notices of Cancellation

Schedule 3.6(d)     Other Reinsurance To Be Terminated

Schedule 3.6(e)     Commuted Agreements

Schedule 3.6(f)     New and Surviving Agreements

Schedule 3.9        Real Property

Schedule 3.10       Personal Property

Schedule 3.11       Oral and Written Contracts

Schedule 3.12       Legal Proceedings

Schedule 3.14       Patents, Trademarks, Franchises, etc.

Schedule 3.18       Corporate Insurance

Schedule 3.19       Employees

Schedule 3.20       Employee Benefit Plans

Schedule 3.21       Transactions with Related Parties

Schedule 3.22       Directors, Officers and Bank Accounts

Schedule 3.26       Permits and Licenses

Schedule 6.9        Continuing State Agreements

<PAGE>

                             LIST OF EXHIBITS

Exhibit A      Form of Millers Agreement

Exhibit B-1    Form of Continuing State Agreement
               (Auto Liability and P.D.)

Exhibit B-2    Form of Continuing State Agreement (P.D. only)

Exhibit C      Form of Additional State Agreement

Exhibit D      Form of Assumption Agreement

Exhibit E      Form of Noncompetition Agreement

Exhibit F      Form of Release

Exhibit G      Form of Purchaser's Counsel Legal Opinion

Exhibit H      Form of Seller's Counsel Legal Opinion

<PAGE>

                                    Exhibit A

                                    PORTFOLIO

                              REINSURANCE AGREEMENT

                                 by and between

                            REDLAND INSURANCE COMPANY

                         (hereinafter "Ceding Company")

                                       and

                                   THE MILLERS

                                INSURANCE COMPANY

                            (hereinafter "Reinsurer")

                        Effective Date: ________________

<PAGE>

                         PORTFOLIO REINSURANCE AGREEMENT

THIS PORTFOLIO REINSURANCE AGREEMENT (the "Agreement") is made and entered into
by and among Redland Insurance Company, an insurance company organized under the
laws of the State of Iowa (hereinafter "Ceding Company"), and The Millers
Insurance Company, an insurance company organized under the laws of the State of
Texas (hereinafter "Reinsurer").

                             PRELIMINARY STATEMENTS

A.   Pursuant to that certain Purchase Agreement dated May 10, 1999 (the
     "Purchase Agreement"), Acceptance Insurance Company agreed to (i) sell to
     Millers American Group, Inc. all of the issued and outstanding shares of
     capital stock of Phoenix Indemnity Insurance Company ("Phoenix"), an
     affiliate of Ceding Company herein, and (ii) transfer to Reinsurer all
     private passenger nonstandard automobile insurance (including liability and
     no-fault, uninsured and underinsured motorists, medical payments coverage,
     guest passenger liability, and automobile physical damage coverage, as
     applicable) previously written by Acceptance Insurance Company and its
     affiliated insurance company, Redland Insurance Company, Ceding Company
     herein.

B.   Ceding Company presently writes the private passenger nonstandard
     automobile insurance referred to above in the state of California, and is
     responsible for servicing the policies relating thereto as well as the
     administration and payment of claims arising under such policies.

C.   Ceding Company maintains reserves for losses (including incurred but not
     reported losses), loss adjustment expenses, and unearned premiums relating
     to the policies currently in force.

D.   Ceding Company wishes to sell its California private passenger nonstandard
     automobile insurance program to Reinsurer simultaneously with the sale by
     Acceptance Insurance Company of all of the issued and outstanding shares of
     capital stock of Phoenix to Millers American Group, Inc.

E.   The sale, transfer, and assignment of the California private passenger
     nonstandard automobile insurance program to Reinsurer shall occur
     immediately prior to the sale of the issued and outstanding shares of
     capital stock of Phoenix to Millers American Group, Inc.

                             STATEMENT OF AGREEMENTS

NOW, THEREFORE, in consideration of the premises and mutual promises and
covenants hereinafter contained, and intending to be legally bound, the parties
hereto agree as follows:

                                    Article I
                             Reinsurance of Business

As of the Effective Date, Ceding Company shall cede to Reinsurer, and Reinsurer
agrees to accept from Ceding Company, a quota share reinsurance of Ceding
Company's original liability as respects losses and loss adjustment expenses
under all insurance policies classified by Ceding Company as private passenger
nonstandard automobile insurance with respect to which reserves are carried on
Ceding Company's books as of _____________ and such types of policies written or
renewed by Ceding Company at any time with an effective date prior to the
Effective Date (the "Reinsured Policies"), except as excluded in Article III
hereof, subject to the limitations set forth in this Agreement.

                                   Article II
                                Term and Closing

2.1   Reinsurance under this Agreement becomes effective
      _________________________ (the "Effective Date") and shall remain
      continuously in force until terminated as hereinafter provided.

2.2   Reinsurance under this Agreement shall be in force only if and to the
      extent obligations exist under the Reinsured Policies. Reinsurer's
      liability hereunder will terminate simultaneously with Ceding Company's
      termination of liability under the Reinsured Policies.

2.3   The closing of the transactions contemplated by this Agreement shall take
      place simultaneously with the closing contemplated in Section 1.4 of the
      Purchase Agreement, or at such other place and time as the parties hereto
      shall agree upon in writing, subject to any required state insurance
      regulatory approval.

                                   Article III
                             Liability of Reinsurer

3.1   The liability of Reinsurer shall attach simultaneously with the liability
      of Ceding Company in respect to all the Reinsured Policies. The
      reinsurance provided in this Agreement shall not create any right or legal
      relationship between Reinsurer and the policyholders of Ceding Company or
      any other claimant under a Reinsured Policy.

3.2   The reinsurance provided by this Agreement specifically excludes all
      liability for extra-contractual and bad faith damages arising from actions
      taken or omitted by Ceding Company prior to the Effective Date. For the
      purposes of this Agreement, the term "extra-contractual and bad faith
      damages" means any damages, claims, demands, actions, losses, costs,
      expenses, and liabilities (including, but not limited to, attorneys' fees
      and disbursements and court fees) in excess of the limit of Ceding
      Company's original policy, but otherwise within the terms of the original
      policy, or any punitive, exemplary, or consequential damages, other than
      loss in excess of policy limits, if such excess loss is incurred because
      of Ceding Company's failure to settle within the policy limit or by reason
      of its alleged or actual negligence, bad faith, or unfair practice in
      handling or rejecting a claim, offer, or settlement, or in the preparation
      of the defense or the trial of any action by or against its insured, or in
      the preparation or prosecution of an appeal consequent to such action.

                                   Article IV
                                Amounts Reinsured

Ceding Company shall cede to Reinsurer, and Reinsurer shall accept, a 100% quota
share interest in all the Reinsured Policies. Ceding Company agrees to maintain
its current quota share reinsurance coverage in force until June 15, 1999, and
shall not elect to terminate such coverage on any basis other than a run-off
basis.

                                    Article V
                                  Consideration

Consideration for the reinsurance of the Reinsured Policies and performance of
the services as provided for in this Agreement shall be as follows:

5.1   RESERVES. For and in consideration of Reinsurer reinsuring all liability
      of Ceding Company under the Reinsured Policies, subject to the provisions
      of Article XIV hereof, Ceding Company agrees to release and transfer to
      Reinsurer the following:

     (a)  All statutory reserves for gross losses and loss adjustment expenses
          determined as of _____________ attributable to the Reinsured Policies.
          These reserves shall include, but not be limited to, reserves for
          incurred but not reported claims but shall exclude reserves for
          extra-contractual and bad faith damages which are not reinsured
          hereunder. Such loss reserves as of _____________ will be established
          according to prudent reserving customs and practices as traditionally
          applied by Ceding Company. To the extent that the transfer of such
          funds occurs more than 30 days after the Effective Date, the
          transferred amount shall reflect the reserve amounts as of the
          Effective Date plus 5% interest, prorated by the number of days after
          such 30th day, on such reserves and any and all salvage and
          subrogation recovered, less (i) amounts paid on claims occurring on or
          prior to the Effective Date, and (ii) associated allocated loss
          adjustment expenses.

     (b)  All unearned premium reserves determined as of the Effective Date
          attributable to the Reinsured Policies less (i) the ceding commission
          pursuant to Section 5.2 and (ii) premium taxes.

5.2   CEDING COMMISSION. Reinsurer shall pay to Ceding Company a ceding
      commission equal to the commission paid Arrowhead General Insurance
      Agency, San Diego, California on the unearned premium as of the Effective
      Date for the Reinsured Policies.

5.3   PAYMENT OF FUNDS. Subject to the terms and conditions of this Agreement,
      Ceding Company shall, on the date or dates the reinsurance transactions
      contemplated by this Agreement are closed, cause the payment due to
      Reinsurer to be delivered by a bank wire transfer, in immediately
      available funds, at the time when due, to the bank(s) and account(s)
      designated in writing prior thereto by Reinsurer.

                                   Article VI
                                  Premium Taxes

Reinsurer shall reimburse Ceding Company for all premium taxes paid by Ceding
Company with respect to premiums written on or after the Effective Date as
provided for in the 100% Quota Share Reinsurance Agreement described in Section
7.5.

                                   Article VII
                           Administration by Reinsurer

Commencing on the Effective Date, Reinsurer or its designee shall, subject to
the obligations of Ceding Company as set forth in Articles X and XII of this
Agreement, be responsible for servicing all the Reinsured Policies and
administering the business associated with the Reinsured Policies, including but
not limited to, the following:

7.1  PREMIUM NOTICES AND COLLECTION. Reinsurer shall prepare and mail premium
     notices to the holders of the Reinsured Policies and collect and retain
     premiums.

7.2  CLAIMS. Reinsurer shall receive, adjust, and make payment of all claims
     under the Reinsured Policies, regardless of when such claims were incurred
     or reported, and specifically, without limiting the foregoing, shall assume
     responsibility for administration with respect to all claims pending under
     the Reinsured Policies and unpaid by Ceding Company as of the Effective
     Date.

7.3  RESERVES. Reinsurer shall post, on the closing of the reinsurance
     transactions contemplated hereunder, and maintain during the term of this
     Agreement, such reserves for the Reinsured Policies on its books and
     records to the extent required by the applicable state insurance laws and
     in accordance with prudent customs and practices of the insurance industry.

7.4  PREMIUM TAXES. Reinsurer shall assume liability for all premium taxes as
     provided for in Article VI hereof with respect to premiums due and paid to
     Reinsurer under the Reinsured Policies, whether paid to Reinsurer directly
     or remitted to Reinsurer by Ceding Company.

7.5  MAINTENANCE OF BUSINESS. Ceding Company shall provide a fronting
     arrangement for Reinsurer (i) to allow for the renewal of all Reinsured
     Policies, and (ii) to allow for the production of new business by or on
     behalf of the Reinsurer in the state of California. The fronting
     arrangement for the new and existing business shall be for a period of two
     (2) years commencing on the Effective Date. The terms and conditions of the
     fronting arrangement shall be set forth in a 100% Quota Share Reinsurance
     Agreement, the form of which is attached to the Purchase Agreement as
     EXHIBIT C except that no ceding commission or other compensation shall be
     paid to Ceding Company under such agreement. The production of the new and
     existing business shall be subject to (i) Reinsurer's normal underwriting
     rules, and its manuals of rules and rates, and (ii) such other conditions
     as may be determined by Reinsurer subject, in the case of assigned risk
     policies, to the rules, rates, terms, and conditions required by applicable
     involuntary market and insurance regulatory authorities.

7.6  POLICYHOLDER CORRESPONDENCE. Reinsurer shall process and prepare
     appropriate responses to all policyholder correspondence from prospective
     and existing policyholders.

7.7  REGULATORY ACTION. Reinsurer shall forward to Ceding Company any state
     insurance department correspondence.

The obligation of Reinsurer to perform the above administrative services
pursuant to this Agreement shall commence on ______________, 1999, without
regard to the extent to which reinsurance is effective pursuant to this
Agreement, and shall not be deemed to increase or diminish the extent of its
reinsurance obligations as set forth in this Agreement.

                                  Article VIII
                                     Claims

Reinsurer shall adjudicate claims under the Reinsured Policies in good faith and
with the same degree of care and skill that it applies to its own insurance
policies. Ceding Company agrees to be bound by Reinsurer's disposition of claims
made under any Reinsured Policy. Reinsurer shall have the right to institute,
prosecute, or maintain any legal proceedings on behalf of Ceding Company with
respect to any claim arising under a Reinsured Policy. When requested by the
Ceding Company, the Reinsurer shall permit the Ceding Company, at the expense of
the Ceding Company, to be associated with the Reinsurer in defense or conflict
of any claim, loss, or legal proceeding. In the event that either party hereto
is made party to any legal proceeding arising out of or in connection with the
Reinsured Policies, the parties will cooperate with each other to defend,
settle, or compromise or otherwise resolve the litigation consistent with this
Article and with the intent of this Agreement.

                                   Article IX
                             Bad Faith Actions, etc.

Reinsurer shall indemnify and hold Ceding Company and the officers, directors,
and employees of Ceding Company harmless from any and all "extra-contractual and
bad faith damages," claims, demands, actions, losses, costs, expenses, and
liabilities (including, but not limited to, attorneys' fees and disbursements
and court fees) arising from a bad faith action, unfair claims practice, or
tortious breach of contract committed or alleged to have been committed by
Reinsurer in the course of performing its administration obligations with
respect to the Reinsured Policies hereunder and actions committed or alleged to
have been committed by Ceding Company after the Effective Date but prior to
________________, 1999 to the extent that such actions were taken in accordance
with requirements implemented at Reinsurer's request pursuant to Section 10.2
hereof.

                                    Article X
                         Undertakings of Ceding Company

To facilitate Reinsurer's performance of its obligations under this Agreement,
Ceding Company agrees to undertake the following:

10.1  TRANSFER OF RECORDS, FILES, ETC. Ceding Company agrees that it will
      furnish all assistance to Reinsurer which may be reasonably necessary for
      the orderly reinsurance, administration, and transfer of the Reinsured
      Policies, including the delivery of all records and all right, title, and
      interest in such records relating to the Reinsured Policies, including,
      but not limited to, application forms, marketing materials, premium and
      claims history, reinsurance records, and records relating to the Reinsured
      Policies, and such records and files shall remain the property of Ceding
      Company until one year after all policies constituting the Reinsured
      Business shall have expired, either by cancellation or otherwise, and all
      outstanding losses and loss adjustment expenses have been settled, at
      which time all such files and records shall become the property of
      Reinsurer. In the event such records are needed by Ceding Company, copies
      of such records will be made available to Reinsurer. Reinsurer shall
      reimburse Ceding Company for all reasonable expenses incurred by Ceding
      Company for the transportation of any records relating to the Reinsured
      Policies which are presently located in its offices. It is acknowledged
      that significant time is necessary for Reinsurer to transpose the records
      from Ceding Company forms to Reinsurer forms and to manually transfer the
      records and papers from the home office and computer systems of Ceding
      Company to the offices and computer systems of Reinsurer; therefore,
      Ceding Company agrees to make available to Reinsurer the space and the
      reasonable assistance of its employees at its home office now handling
      this business for as long as may be reasonably necessary to effect the
      transfer and transportation of such records, papers, and forms.

10.2  COOPERATION WITH REINSURER. Ceding Company and Reinsurer shall consult
      after the Effective Date and prior to _______________, 1999 with respect
      to underwriting and claims rules and operations, and Ceding Company will
      act in accordance with any reasonable request of Reinsurer for
      modifications of such rules and operations.

10.3  COLLECTION OF PREMIUMS. Ceding Company agrees that all premiums coming
      into its hands on and after the Effective Date pertaining to the Reinsured
      Policies shall be promptly remitted to Reinsurer.

10.4  REMITTANCE PROCESSING AND OTHER SERVICES. Ceding Company shall perform
      remittance processing and other services reasonably requested by Reinsurer
      for a fee to be mutually agreed upon.

                                   Article XI
                                Banking Services

Reinsurer shall perform for Ceding Company certain banking functions for the
bank accounts of Ceding Company used to administer the Reinsured Policies. These
functions shall include:

     (a)  depositing premium and other receipts;

     (b)  issuing checks or drafts for payment of claims, premium refunds, or
          other payments as required under this Agreement;

     (c)  performing bank reconciliations; and

     (d)  performing daily operational activities and account maintenance and
          contacts with respective banks.

                                   Article XII
                             Costs of Administration

Reinsurer shall not charge Ceding Company a fee for its administrative services
hereunder except as provided for herein. In the event that any state insurance
regulatory authority affirmatively rules that certain policies which were to
have been reinsured hereunder cannot be reinsured hereunder or that the date as
of which the reserves with respect to any Reinsured Policies are determined
shall be later than __________________, Ceding Company shall pay to Reinsurer a
mutually agreed upon fee for the administration of such policies performed
during the period commencing on ___________________ and ending (i) in the case
of Reinsured Policies for which reinsurance hereunder is approved by such
regulatory authority, on the date as of which the reserves with respect to such
Reinsured Policies are determined, and (ii) with respect to policies which
cannot be reinsured hereunder, on the date on which administrative services are
no longer performed hereunder by Reinsurer with respect to such policies.

                                  Article XIII
                                     Reports

13.1  Reinsurer shall, as long as the Agreement remains in effect, provide to
      Ceding Company within thirty (30) days after the end of each calendar
      year, within twenty (20) days after the end of each calendar month other
      than December, and within thirty (30) days after the termination of this
      Agreement, a statement which shall include, in addition to such other
      information as Ceding Company may reasonably request:

     (a)  outstanding losses, including incurred but not reported;

     (b)  paid losses and loss adjustment expenses;

     (c)  unearned premium; and

     (d)  written premium.

13.2  To the extent required by applicable law, Reinsurer shall provide Ceding
      Company with a periodic accounting within sixty (60) days of the end of
      each calendar quarter. To the extent there are any amounts due and owing
      between the parties, the periodic accounting will be followed by an
      appropriate cash settlement within thirty (30) days thereof. The
      requirements in this Section shall not be conditional upon the performance
      of any other agreement or any other person not a party hereto.

                                   Article XIV

                       State Insurance Regulatory Matters

14.1  If required by any applicable law, this Agreement shall be submitted by
      the parties to the respective state insurance regulatory authorities for
      any required approval pursuant to the provisions of the applicable
      insurance statutes. The reinsurance provisions of this Agreement shall not
      become effective as to the Reinsured Policies insuring residents of a
      particular state unless and until the necessary regulatory approvals, if
      any, have been obtained for such state.

14.2  To the extent required by applicable law, Reinsurer, if not licensed to
      transact insurance or reinsurance in an applicable state, agrees to submit
      to a court of jurisdiction within the United States, agrees to comply with
      all requirements necessary to give such court jurisdiction over Reinsurer,
      has designated an agent upon whom service of process may be effected, and
      agrees to abide by the final decision of such court or an appellate court
      to which a trial court decision may be appealed.

                                   Article XV
                                     Audits

Ceding Company shall, until two (2) years after the termination of this
Agreement, have the right to examine, and Reinsurer shall make available to
Ceding Company for examination at Reinsurer's premises or any other place where
Reinsurer's duties hereunder are being performed, at reasonable hours, all
claims, books, records, documents, papers, and other information pertaining to
the Reinsured Policies or the performance of Reinsurer's obligations hereunder.

                                   Article XVI
                                   Termination

16.1 This Agreement shall terminate automatically upon the termination of Ceding
     Company's liabilities and other obligations under each and every Reinsured
     Policy. In the event of such termination, Reinsurer shall continue to
     perform such services provided for in this Agreement, and to provide such
     reports and other information as Ceding Company may reasonably require to
     conclude all remaining administrative requirements hereunder with respect
     to the Reinsured Policies. In such event, the applicable provisions of this
     Agreement shall continue to apply.

16.2 Ceding Company may terminate this Agreement upon the occurrence of any of
     the following events:

     (a)  issuance by a court of competent jurisdiction of an order to liquidate
          or dissolve, or a similar order to wind up the business of, Reinsurer;

     (b)  failure of Reinsurer to maintain the appropriate license or
          certification where required by state law; provided, however, that
          such failure will not be cause for termination if Reinsurer arranges
          through other means, satisfactory to Ceding Company, to remove or
          otherwise satisfy the legal or regulatory impediments to its
          performance.

16.3 This Agreement may be terminated at any time upon mutual agreement of the
     parties.

16.4 Upon termination of this Agreement, Reinsurer shall provide Ceding Company
     with a final accounting and settlement of all matters relating to the
     Reinsured Policies.

                                  Article XVII
                              Errors and Omissions

Ceding Company and Reinsurer shall not be prejudiced, in any way, by any
omission through clerical error, accident or oversight to cede to Reinsurer any
business rightly falling under the terms of this Agreement, or by erroneous
cancellation, either partial or total, of any cession, or by omission to report,
or by erroneously reporting any losses, or by any other error or omission. Any
such error or omission shall be corrected immediately upon discovery.

                                  Article XVIII
                                   Insolvency

18.1  In the event of the insolvency of Ceding Company, reinsurance under this
      Agreement shall be payable by Reinsurer on the basis of the liability of
      the insolvent company under the Reinsured Policies reinsured, without
      diminution because of such insolvency, to the insolvent company or to its
      domiciliary liquidator or receiver.

18.2  It is agreed, however, that the liquidator or receiver or statutory
      successor of the insolvent company will give written notice to Reinsurer
      of the pendency of any claim against the insolvent company on a Reinsured
      Policy within a reasonable time after such claim is filed in the
      insolvency proceeding and that during the pendency of such claim Reinsurer
      may investigate such claim and interpose, at its own expense, in the
      proceeding where such claim is to be adjudicated any defense or defenses
      which it may deem available to the insolvent company or its liquidator or
      receiver or statutory successor. The expense thus incurred by Reinsurer
      will be chargeable, subject to court approval, against the insolvent
      company as part of the expense of liquidation to the extent of a
      proportionate share of the benefit which may accrue to the insolvent
      company solely as a result of the defense undertaken by Reinsurer.

18.3  Should the insolvent company be placed into liquidation or should a
      receiver be appointed, Reinsurer will, to the extent permitted by law, be
      entitled to deduct from any sums which may be or may become due to the
      insolvent company under this Agreement, any sums which are due to
      Reinsurer by the insolvent company under this Agreement and which are
      payable at a fixed or stated date, as well as any other sums due Reinsurer
      which are permitted to be offset under applicable law.

18.4  It is further agreed that, in the event of the insolvency of Ceding
      Company, the reinsurance obligations under this Agreement shall be payable
      directly by Reinsurer to Ceding Company or to its domiciliary, liquidator
      or receiver, except (a) as provided by applicable law, (b) where this
      Agreement specifically provides another payee of such reinsurance in the
      event of the insolvency of Ceding Company, and/or (c) where Reinsurer,
      with the consent of the direct insured, has assumed the policy obligations
      of Ceding Company as direct obligations of Reinsurer to the payee under
      the Reinsured Policies and in substitution for the obligation of Ceding
      Company to such payee.

                                   Article XIX
                                   Arbitration

19.1  Any dispute arising with respect to this Agreement, whether arising before
      or after termination hereof, which is not settled by mutual agreement of
      the parties, shall be submitted to arbitration in accordance with this
      Article.

19.2  Within twenty (20) days from receipt of notice from one party that an
      arbitrator has been appointed, the other party shall also name an
      arbitrator. The two arbitrators shall choose a third arbitrator and shall
      forthwith notify the contracting parties of such choice. If the two
      arbitrators cannot agree upon the third arbitrator, each arbitrator shall
      nominate three persons of whom the other shall reject two. The third
      arbitrator shall then be chosen by drawing lots. If a party fails to
      choose an arbitrator within twenty (20) days after receiving the written
      request of the other party to do so, the latter shall choose both
      arbitrators, who shall choose the third arbitrator. Each arbitrator shall
      be a present or former property and casualty insurance company officer who
      is otherwise not directly or indirectly affiliated with any party to this
      Agreement.

19.3  The party requesting arbitration (the "Petitioner") shall submits brief to
      the arbitrators within thirty (30) days after notice of the selection of
      the third arbitrator. Upon receipt of the Petitioner's brief, the other
      party (the "Respondent") shall have thirty (30) days to file a reply
      brief. On receipt of the Respondent's brief, the Petitioner shall have
      twenty (20) days to file its rebuttal brief. Respondent shall have twenty
      (20) days from the receipt of Petitioner's rebuttal brief to file its
      rebuttal brief. The arbitrators may extend the time for filing of a brief
      at the request of either party.

19.4  The arbitrators shall consider this Agreement as an honorable engagement
      rather than merely as a legal obligation, and shall be relieved of all
      judicial formalities, and shall make their award with a view to effecting
      the intent of the parties. The decision of the arbitrators shall be final
      and binding upon the parties to this Agreement. Judgment may be entered
      upon the final decision of the arbitrators in any court having
      jurisdiction. Each party shall bear the expenses of its own arbitrator and
      shall jointly and equally bear the expenses of the third arbitrator and of
      the arbitration. Any such arbitration shall be conducted pursuant to the
      rules of the American Arbitration Association and shall take place in the
      City of Fort Worth, Texas, unless some other location is mutually agreed
      upon by the parties.

                                   Article XX

                         Representations and Warranties

20.1 REPRESENTATIONS AND WARRANTIES OF CEDING COMPANY. Ceding Company represents
     and warrants to Reinsurer as follows.

     (a)  Organization, Standing, Etc. It is a corporation duly organized,
          validly existing and in good standing under the laws of its state of
          incorporation and is authorized to conduct its business as a property
          and casualty insurance company in those states where, for purposes of
          this Agreement, such authorization is required.

     (b)  Authority for Agreement. It has the corporate power and authority to
          execute and deliver this Agreement and to carry out its obligations
          hereunder. This Agreement and the transactions contemplated herein
          have been duly authorized and approved by its board of directors and,
          where necessary, its shareholder. This Agreement has been duly
          executed and delivered by the duly authorized officers of Ceding
          Company and constitutes the valid and legally binding obligation of
          Ceding Company.

     (c)  Title to Assets. It has title to the assets to be acquired by
          Reinsurer pursuant to Section 5.4 hereof free and clear of any lien or
          encumbrance, and is authorized to convey title to such assets to
          Reinsurer.

     (d)  Compliance with Other Instruments and Laws. The execution, delivery,
          and performance of this Agreement will not result in any violation of
          or be in conflict with or constitute a default under any agreement to
          which it is a party or any judgment, decree, or order which names it
          or by which any of the assets described in Section 5.4 are bound.

     (e)  Consents, Etc. Except as set forth in Schedule 20.1 hereof, no
          consent, approval, order or authorization of, or registration,
          declaration or filing with, any governmental or judicial authority or
          any third party is required in connection with the valid execution,
          delivery and performance of this Agreement by Ceding Company.

20.2 REPRESENTATIONS AND WARRANTIES OF REINSURER. Reinsurer represents and
     warrants to Ceding Company as follows.

     (a)  Organization, Standing, Etc. Reinsurer is a corporation duly
          organized, validly existing and in good standing under the laws of the
          State of Texas and is authorized to conduct its business as a property
          and casualty insurance company in those states where, for purposes of
          this Agreement, such authorization is required.

     (b)  Authority for Agreement. Reinsurer has the corporate power and
          authority to execute and deliver this Agreement and to carry out its
          obligation hereunder. This Agreement and the transactions contemplated
          herein have been duly authorized and approved by Reinsurer's board of
          directors and, where necessary, its shareholder. This Agreement has
          been duly executed and delivered by the duly authorized officers of
          Reinsurer and constitutes the valid and legally binding obligation of
          Reinsurer.

     (c)  Compliance with Other Instruments and Laws. The execution, delivery
          and performance of this Agreement will not result in any violation of
          or be in conflict with or constitute a default under any agreement to
          which Reinsurer is a party or any judgment, decree or order which
          names Reinsurer.

     (d)  Consents, Etc. Except as set forth in Schedule 20.2 hereof, no
          consent, approval, order or authorization of, or registration,
          declaration or filing with, any governmental or judicial authority or
          any third party is required in connection with the valid execution,
          delivery and performance of this Agreement by Reinsurer.

                                   Article XXI
                               General Provisions

21.1  SEVERABILITY. If any term, provision, covenant, or condition of this
      Agreement is held by a court of competent jurisdiction to be invalid,
      void, or unenforceable, the remainder of the provisions shall remain in
      full force and effect and shall in no way be affected, impaired, or
      invalidated.

21.2  AMENDMENTS. This Agreement may not be modified, changed, or amended in any
      respect unless agreed upon in writing and signed by the duly authorized
      representatives of the respective parties hereto.

21.3  ASSIGNMENT. This Agreement shall not be assigned by either party without
      the prior written consent of the other party, except Reinsurer may without
      such consent assign to or contract with any of its affiliates to reinsure
      or administer any of the Reinsured Policies reinsured or administered
      pursuant to this Agreement; provided, however, that any necessary approval
      from regulatory authorities is obtained.

21.4  SOLE BENEFIT. This Agreement is for the sole benefit of the parties hereto
      and in no event shall this Agreement be construed to be for the benefit of
      any third party, except to the limited extent that Reinsurer shall hereby
      acquire liabilities to policyholders of the Reinsured Policies.

21.5  ENTIRE AGREEMENT. This Agreement and the schedules and exhibits attached
      hereto define the full extent of the legally enforceable undertakings of
      the parties hereto, and no related promise or representation, written or
      oral, which is not set forth explicitly herein, or in such schedules or
      exhibits, is intended by either party to be legally binding. With the
      exception of the Purchase Agreement, this Agreement supersedes any and all
      oral and written agreements entered into prior to the Effective Date
      between the parties hereto with respect to the subject matter hereof.

21.6  GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
      ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO
      PRINCIPLES OF CONFLICTS OF LAW THEREOF.

21.7  EXPENSES. Each party hereto shall bear its own costs and expenses
      attributable to the negotiation, execution and delivery of this Agreement
      and the consummation of the transactions contemplated hereby.

21.8  NOTICES. All notices and other communications hereunder shall be in
      writing and shall be deemed to have been given when delivered or mailed by
      first class mail, postage prepaid, addressed as follows:

      (a)   If to Redland, to:

                  Redland Insurance Company
                  Professional Tower, Suite 500
                  105 South 17th Street
                  Omaha, Nebraska  68102
                  Attention:  Kenneth C. Coon

            with a copy to:

                  Kutak Rock
                  The Omaha Building
                  1650 Farnam Street
                  Omaha, Nebraska  68102-2186

                  Attention:  Joe E. Armstrong, Esq.
      (b)   If to The Millers Insurance Company, to:

                  The Millers Insurance Company
                  300 Burnett Street
                  Fort Worth, Texas  76102
                  Attention:  David N. Thompson

            with a copy to:

                  AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
                  1700 Pacific Avenue
                  Dallas, Texas  75201-4675
                  Attention:  Terry M. Schpok, P.C.

21.9  COUNTERPARTS. This Agreement may be executed in several counterparts each
      of which is an original but all of which shall constitute one instrument.

21.10 OFFSETS. Any offsets Reinsurer may take against amounts owed to Ceding
      Company, or any offsets Ceding Company may take against amounts owed to
      Reinsurer, shall be limited to amounts due and owing under this Agreement
      between Ceding Company and Reinsurer.

                            [SIGNATURE PAGE FOLLOWS]

<PAGE>

IN WITNESS WHEREOF, Ceding Company and Reinsurer have by their respective
officers executed this Agreement to be effective the ______ day of
_______________, 1999.

                                          CEDING COMPANY

                                          Redland Insurance Company

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

                                          REINSURER

                                          The Millers Insurance Company

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

<PAGE>

                                 EXHIBIT B-1

                                  QUOTA SHARE
                            AGREEMENT OF REINSURANCE
                            ADDENDUM NUMBER ONE (1)

      This Addendum attaches to and forms a part of a certain Agreement of
Reinsurance between Phoenix Indemnity Insurance Company (hereinafter called the
"Reinsurer") and Acceptance Insurance Company (hereinafter called the "Company")
originally effective January 1, 1994.

      As of the Effective Date, Company and Reinsurer agree as follows:

            ARTICLE I - SCOPE OF AGREEMENT shall be deleted entirety and
      replaced with the following:

            As a condition precedent to the Reinsurer's obligations under this
      Agreement, the Company shall cede to the Reinsurer 100% quota share of the
      Net Written Premium and the liability for the Reinsured Business described
      in this Agreement retained by the Company after all other facultative and
      treaty reinsurance, and the Reinsurer shall accept such business as
      reinsurance from the Company. The Company is to bear no business or
      insurance risk whatsoever (save the risk of Reinsurer's insolvency).

            ARTICLE III - LIABILITY OF THE REINSURER - the first paragraph of
      Article III shall be deleted in its entirety and replaced with the
      following:

            The Reinsurer shall pay to the Company, with respect to each risk
      and policy under Non-Standard Private Passenger Automobile Business, 100%
      of the amount of net loss of the Company ("Reinsured Business").

            ARTICLE IV - DEFINITIONS shall be amended as follows:

            1. Subparagraph (a) is deleted and replaced with the following:

              (a) NON-STANDARD PRIVATE PASSENGER AUTOMOBILE BUSINESS

                  This term shall mean non-standard private passenger automobile
                  business written, in-force, or renewed by the Company on risks
                  located in the states of Arizona, Georgia, Minnesota and
                  Wisconsin and serviced by the Reinsurer.

            2.  Subparagraphs  (b),  (f),  and (g) are  deleted in their
            entirety and without replacement.

            ARTICLE VII - REPORTS AND REMITTANCES will be deleted in its
      entirety and replaced with the following:

                  MONTHLY

                  The Reinsurer shall report to the Company, within 45 days
                  after the close of each month:

                    (1)  The reinsurance premium written for the month by line
                         of insurance, and

                    (2)  The Company's portion of claims, losses, and adjustment
                         expense paid and outstanding during the month by line
                         of insurance and year of claim or loss.

                  QUARTERLY

                  On a quarterly basis, the Company shall calculate and invoice
                  the Reinsurer for premium taxes due. The amount due shall be
                  remitted by the Reinsurer within 30 days of receipt of the
                  invoice.

            ARTICLE VIII - MANAGEMENT OF CLAIMS AND LOSSES shall be deleted in
      its entirety and replaced with the following:

            The Reinsurer shall investigate and settle or defend all claims and
      losses and perform such other functions as it may determine proper for
      servicing the Reinsured Business. When requested by the Company, the
      Reinsurer shall permit the Company, at the expense of the Company, to be
      associated with the Reinsurer in the defense or control of any claim,
      loss, or legal proceeding which involves or is likely to involve the
      Company. All settlements and payments of claims or losses by the
      Reinsurer, whether under strict policy conditions or by way of compromise,
      shall be binding on the Company, subject to the terms of this Agreement.
      Company shall deliver to Reinsurer on the Effective Date of this Addendum
      all files and records, in whatever form, pertaining to the Non-standard
      Private Passenger Automobile Business including, but not limited to,
      accounting, claims, underwriting, and legal. Such files and records shall
      belong to and remain the property of Company until one (1) year after all
      policies constituting the Reinsured Business shall have expired either by
      cancellation or otherwise, and all outstanding losses and Adjustment
      Expenses have been settled, at which time such files and records shall
      become the property of and owned by Reinsurer.

            ARTICLE IX - RECOVERIES - the first paragraph shall be deleted in
      its entirety.

            ARTICLE XI -- SPECIAL ACCEPTANCES shall be deleted in its entirety.

            ARTICLE XII - RESERVES AND TAXES - the following paragraph will be
      added:

            Company shall pay premium taxes on premiums received prior to the
            Effective Date of this Addendum.

            ARTICLE XIII - OFFSET shall be deleted in its entirety.

            ARTICLE XIV - INSPECTION OF RECORDS shall be deleted in its entirety
      and replaced with the following:

            The Reinsurer shall allow the Company to inspect, at reasonable
      times, the records of the Reinsurer relevant to the business reinsured
      under this Agreement, including Reinsurer files concerning claims, losses,
      or legal proceedings which involve or are likely to involve the Company.

            ARTICLE XVII - COMMENCEMENT AND TERMINATION is deleted in it
      entirety and replaced with the following:

            1.    The effective date of this Agreement is at 12:01 a.m. central
                  standard time, on September 1, 1999 (the "Effective Date").
                  This Addendum and Agreement shall remain continuously in force
                  until September 17, 2001, or until such earlier date if
                  terminated according to the provisions set forth herein.

            2.    This  Agreement  may be  terminated  under  any of the
                  following circumstances:

                  (a)   Immediately  by mutual consent of the Parties to
                        this Agreement.

                  (b)   Immediately, upon written notice by Company, if
                        Reinsurer is found to be insolvent by any state
                        insurance department or court of competent jurisdiction,
                        or is placed in supervision, conservation,
                        rehabilitation, or liquidation, or has a receiver or
                        supervisor appointed.

                  (c)   By Reinsurer, upon thirty (30) days written notice, if
                        Company is found to be insolvent by any state insurance
                        department or court of competent jurisdiction, or is
                        placed in supervision, conservation, rehabilitation or
                        liquidation, or has a receiver or supervisor appointed.

                  (d)   By Company, immediately and automatically without prior
                        written notice should the Department of Insurance with
                        jurisdiction over the Reinsured Business require
                        cancellation or disallow credit for this reinsurance.

                  (e)   By either Party, upon thirty (30) days written notice to
                        the other Party if the non-terminating Party:

                        (1)   commits  an   intentionally   wrongful  or
                              fraudulent act material to the Agreement;

                        (2)   materially breaches a provision of the Agreement
                              and fails to cure such breach within sixty (60)
                              days after written notice thereof; or

                        (3)   is in a financially impaired condition under the
                              applicable law of any state having jurisdiction
                              over any of the Reinsured Business.

                  (f)   By Reinsurer, upon 30 days written notice, if Reinsurer
                        or an affiliate becomes licensed to write the Reinsured
                        Business under this Agreement in Arizona, Georgia,
                        Minnesota or Wisconsin.

          3.   When this Agreement terminates for any reason, reinsurance
               hereunder shall continue to apply to the Reinsured Business in
               force at the time and date of termination until expiration or
               cancellation of such business. It is understood that any policies
               constituting the Reinsured Business with effective dates prior to
               the termination date but issued after the termination date are
               covered under this Agreement. Additionally, the reinsurance
               hereunder shall continue to apply as to policies constituting the
               Reinsured Business which must be issued or renewed, as a matter
               of state law.

          4.   Upon termination of this Agreement, Reinsurer shall not be
               relieved of or released from any obligation created by or under
               this Agreement in relation to payment, expenses, reports,
               accounting or handling, which relate to the Reinsured Business.
               The Parties covenant and agree that they will cooperate with each
               other in the handling of all such run-off insurance business
               until all policies constituting the Reinsured Business shall have
               expired either by cancellation or under the terms of such
               policies and all outstanding losses and loss adjustment expenses
               have been settled. Upon termination of this Agreement, the
               Reinsurer shall service the run-off of the Reinsured Business,
               and its duties for such run-off shall include, but not be limited
               to, handling all claims, and handling and servicing all policies
               constituting the Reinsured Business through their natural
               expiration, together with any policy renewals, required to be
               made by provisions of applicable law, whether or not the
               effective date of such renewal is subsequent to the effective
               date of termination of this Agreement. All costs and expenses
               associated with the handling of such run-off business following
               the termination of this Agreement shall be borne solely by
               Reinsurer. Reinsurer may appoint a successor to handle the
               run-off, subject to Company's approval (which shall not be
               unreasonably withheld), at no cost to Company.

          5.   Except as otherwise provided in this Agreement, in the event this
               Agreement is terminated, Reinsurer shall remain liable to and
               shall, immediately upon request, reimburse Company for any
               assessment made upon Company by a state insurance guaranty
               association pursuant to the applicable provisions of a state's
               insurance laws, which applies to the Reinsured Business to the
               effective date of termination. Company shall likewise remain
               liable for, and account to Reinsurer for any recovery of such
               assessment under a state insurance guaranty association, or any
               credit allowed against its premium tax pursuant to applicable
               law.

          6.   The title and ownership of all undelivered policy forms, books,
               and supplies containing Company's name related to the Reinsured
               Business is in Company. Upon termination, these materials shall
               be delivered immediately by Reinsurer to Company, at Company's
               expense, without compelling Company to resort to any legal
               proceedings to secure the property of Company.

          7.   Upon termination of this Agreement, Reinsurer shall provide
               Company with a final accounting and settlement of all matters
               relating to the Reinsured Business.

<PAGE>

            ARTICLE  XIX - EXCESS OF ORIGINAL  POLICY  LIMITS AND EXTRA
      CONTRACTUAL OBLIGATIONS:

          (A)  EXCESS OF ORIGINAL POLICY LIMITS - the following sentence will be
               added at the end of the first paragraph:

               provided, however, that Loss under this provision shall not
               include any loss which otherwise would be subject to this Article
               XIX (a) if (i) prior to the Effective Date the Company knew or
               reasonably should have known that it had breached the covenant of
               good faith and fair dealing, or had taken other action rendering
               it liable for payment in excess of a policy limit, with respect
               to the matter giving rise to the loss, or (ii) such loss is
               specifically referred to in any other agreements between the
               parties or their affiliates and is established therein an
               obligation of Company or its affiliates.

          (B)  EXTRA CONTRACTUAL OBLIGATIONS - the following sentence will be
               added at the end of the first paragraph:

               provided, however, that Loss under this provision shall not
               include any liabilities which otherwise would be subject to this
               Article XIX (b) if (i) prior to the Effective Date the Company
               knew or reasonably should have known that it had breached the
               covenant of good faith and fair dealing, or had taken other
               action rendering it liable for payment in excess of a policy
               limit, with respect to the matter giving rise to the
               extra-contractual obligation, or (ii) such extra-contractual
               obligation is specifically referred to in any other agreements
               between the parties or their affiliates and is established
               therein an obligation of Company or its affiliates.

            ARTICLE XX - AGENTS BROKERS AND MANAGING GENERAL AGENTS shall be
      added:

          A. As of the Effective Date, the Reinsurer shall assume the obligation
     to pay any broker, agent or managing general agent appointed by the Company
     for the solicitation, sale, marketing or production of the Reinsured
     Business, including payment of commissions, service fee and other
     compensation that may be due such brokers, agents or managing general
     agents according to the written agreements between Company and such
     brokers, agents or managing general agents and as approved by Reinsurer.
     Company shall appoint any agent, broker or managing general agent
     reasonably requested by Reinsurer, and Reinsurer shall not accept or
     process any Reinsured Business from any person not appointed by Company.
     Company shall use such standards, rules and instructions for producing the
     Reinsured Business as required by Reinsurer.

          B. As of the Effective Date, the Reinsurer agrees to pay for the
     license or appointment fees imposed on insurance companies to license or
     appoint agents, brokers or managing general agents that are authorized by
     Reinsurer to solicit, sell, market or produce the policies constituting the
     Reinsured Business, provided that Reinsurer shall have the right to require
     Company to terminate the right of an agent, broker or managing general
     agent to produce such policies.

      IN WITNESS WHEREOF, the parties have caused this Addendum to be executed
in duplicate this ____ day of _________, 1999.

                                        ACCEPTANCE INSURANCE COMPANY
Attest:

By                                      By
   ---------------------------------       ---------------------------------
Name                                    Name
     -------------------------------         -------------------------------

                                        PHOENIX INDEMNITY INSURANCE COMPANY
Attest:

By                                      By
   ---------------------------------       ---------------------------------
Name                                    Name
     -------------------------------         -------------------------------

      As of the Effective Date, The Millers Insurance Company shall guaranty the
performance of the financial obligations of Reinsurer under this Quota Share
Reinsurance Agreement, subject to any defenses available to Reinsurer under the
Agreement.

                                        THE MILLERS INSURANCE COMPANY
Attest:

By                                      By
   ---------------------------------       ---------------------------------
Name                                    Name
     -------------------------------         -------------------------------
Date                                    Date
     -------------------------------         -------------------------------

<PAGE>

                                 EXHIBIT B-2

                                   QUOTA SHARE
                            AGREEMENT OF REINSURANCE
                             ADDENDUM NUMBER ONE (1)

      This Addendum attaches to and forms a part of a certain Agreement of
Reinsurance between Phoenix Indemnity Insurance Company (hereinafter called the
"Reinsurer") and Acceptance Insurance Company (hereinafter called the "Company")
originally effective June 1, 1994.

      As of the Effective Date, Company and Reinsurer agree as follows:

            ARTICLE I - SCOPE OF AGREEMENT shall be deleted entirety and
      replaced with the following:

            As a condition precedent to the Reinsurer's obligations under this
      Agreement, the Company shall cede to the Reinsurer 100% quota share of the
      Net Written Premium and the liability for the Reinsured Business described
      in this Agreement retained by the Company after all other facultative and
      treaty reinsurance, and the Reinsurer shall accept such business as
      reinsurance from the Company. The Company is to bear no business or
      insurance risk whatsoever (save the risk of Reinsurer's insolvency).

            ARTICLE III - LIABILITY OF THE REINSURER - the first paragraph of
      Article III shall be deleted in its entirety and replaced with the
      following:

            The Reinsurer shall pay to the Company, with respect to each risk
      and policy under Non-Standard Private Passenger Automobile Business, 100%
      of the amount of net loss of the Company ("Reinsured Business").

            ARTICLE IV - DEFINITIONS shall be amended as follows:

            1.  Subparagraph  (a)  is  deleted  and  replaced  with  the
            following:

              (a) NON-STANDARD PRIVATE PASSENGER AUTOMOBILE BUSINESS

                  This term shall mean non-standard private passenger physical
                  damage business written, in-force, or renewed by the Company
                  on risks located in the states of Alabama, Georgia and
                  Minnesota and serviced by the Reinsurer.

            2.   Subparagraphs   (e),  and  (f)  are  deleted  in  their
            entirety and without replacement.

            ARTICLE VII - REPORTS AND REMITTANCES will be deleted in its
      entirety and replaced with the following:

                  MONTHLY

                  The Reinsurer shall report to the Company, within 45 days
                  after the close of each month:

                  (1)   The  reinsurance  premium  written for the month
                        by line of insurance, and

                  (2)  The Company's portion of claims, losses, and adjustment
                       expense paid and outstanding during the month by line of
                       insurance and year of claim or loss.

                  QUARTERLY

                  On a quarterly basis, the Company shall calculate and invoice
                  the Reinsurer for premium taxes due. The amount due shall be
                  remitted by the Reinsurer within 30 days of receipt of the
                  invoice.

            ARTICLE VIII - MANAGEMENT OF CLAIMS AND LOSSES shall be deleted in
      its entirety and replaced with the following:

            The Reinsurer shall investigate and settle or defend all claims and
      losses and perform such other functions as it may determine proper for
      servicing the Reinsured Business. When requested by the Company, the
      Reinsurer shall permit the Company, at the expense of the Company, to be
      associated with the Reinsurer in the defense or control of any claim,
      loss, or legal proceeding which involves or is likely to involve the
      Company. All settlements and payments of claims or losses by the
      Reinsurer, whether under strict policy conditions or by way of compromise,
      shall be binding on the Company, subject to the terms of this Agreement.
      Company shall deliver to Reinsurer on the Effective Date of this Addendum
      all files and records, in whatever form, pertaining to the Non-standard
      Private Passenger Automobile Business including, but not limited to,
      accounting, claims, underwriting, and legal. Such files and records shall
      belong to and remain the property of Company until one (1) year after all
      policies constituting the Reinsured Business shall have expired either by
      cancellation or otherwise, and all outstanding losses and Adjustment
      Expenses have been settled, at which time such files and records shall
      become the property of and owned by Reinsurer.

            ARTICLE IX - RECOVERIES - the first paragraph shall be deleted in
      its entirety.

            ARTICLE XI -- SPECIAL ACCEPTANCES shall be deleted in its entirety.

            ARTICLE XII - RESERVES AND TAXES - the following paragraph will be
      added:

            Company shall pay premium taxes on premiums received prior to the
            Effective Date of this Addendum.

            ARTICLE XIII - OFFSET shall be deleted in its entirety.

            ARTICLE XIV - INSPECTION OF RECORDS shall be deleted in its entirety
      and replaced with the following:

            The Reinsurer shall allow the Company to inspect, at reasonable
      times, the records of the Reinsurer relevant to the business reinsured
      under this Agreement, including Reinsurer files concerning claims, losses,
      or legal proceedings which involve or are likely to involve the Company.

            ARTICLE XVII - COMMENCEMENT AND TERMINATION is deleted in it
      entirety and replaced with the following:

            1.    The effective date of this Agreement is at 12:01 a.m. central
                  standard time, on ______________, 1999 (the "Effective Date").
                  This Addendum and Agreement shall remain continuously in force
                  until June 30, 2001, or until such earlier date if terminated
                  according to the provisions set forth herein.

            2.    This  Agreement  may be  terminated  under  any of the
                  following circumstances:

                  (a)   Immediately  by mutual consent of the Parties to
                        this Agreement.

                  (b)   Immediately, upon written notice by Company, if
                        Reinsurer is found to be insolvent by any state
                        insurance department or court of competent jurisdiction,
                        or is placed in supervision, conservation,
                        rehabilitation, or liquidation, or has a receiver or
                        supervisor appointed.

                  (c)   By Reinsurer, upon thirty (30) days written notice, if
                        Company is found to be insolvent by any state insurance
                        department or court of competent jurisdiction, or is
                        placed in supervision, conservation, rehabilitation or
                        liquidation, or has a receiver or supervisor appointed.

                  (d)   By Company, immediately and automatically without prior
                        written notice should the Department of Insurance with
                        jurisdiction over the Reinsured Business require
                        cancellation or disallow credit for this reinsurance.

                  (e)   By either Party, upon thirty (30) days written notice to
                        the other Party if the non-terminating Party:

                        (1)   commits  an   intentionally   wrongful  or
                              fraudulent act material to the Agreement;

                        (2)   materially breaches a provision of the Agreement
                              and fails to cure such breach within sixty (60)
                              days after written notice thereof; or

                        (3)   is in a financially impaired condition under the
                              applicable law of any state having jurisdiction
                              over any of the Reinsured Business.

                  (f)   By Reinsurer, upon 30 days written notice, if Reinsurer
                        or an affiliate becomes licensed to write the Reinsured
                        Business under this Agreement in Alabama, Georgia, or
                        Minnesota.

               3.   When this Agreement terminates for any reason, reinsurance
                    hereunder shall continue to apply to the Reinsured Business
                    in force at the time and date of termination until
                    expiration or cancellation of such business. It is
                    understood that any policies constituting the Reinsured
                    Business with effective dates prior to the termination date
                    but issued after the termination date are covered under this
                    Agreement. Additionally, the reinsurance hereunder shall
                    continue to apply as to policies constituting the Reinsured
                    Business which must be issued or renewed, as a matter of
                    state law.

               4.   Upon termination of this Agreement, Reinsurer shall not be
                    relieved of or released from any obligation created by or
                    under this Agreement in relation to payment, expenses,
                    reports, accounting or handling, which relate to the
                    Reinsured Business. The Parties covenant and agree that they
                    will cooperate with each other in the handling of all such
                    run-off insurance business until all policies constituting
                    the Reinsured Business shall have expired either by
                    cancellation or under the terms of such policies and all
                    outstanding losses and loss adjustment expenses have been
                    settled. Upon termination of this Agreement, the Reinsurer
                    shall service the run-off of the Reinsured Business, and its
                    duties for such run-off shall include, but not be limited
                    to, handling all claims, and handling and servicing all
                    policies constituting the Reinsured Business through their
                    natural expiration, together with any policy renewals,
                    required to be made by provisions of applicable law, whether
                    or not the effective date of such renewal is subsequent to
                    the effective date of termination of this Agreement. All
                    costs and expenses associated with the handling of such
                    run-off business following the termination of this Agreement
                    shall be borne solely by Reinsurer. Reinsurer may appoint a
                    successor to handle the run-off, subject to Company's
                    approval (which shall not be unreasonably withheld), at no
                    cost to Company.

               5.   Except as otherwise provided in this Agreement, in the event
                    this Agreement is terminated, Reinsurer shall remain liable
                    to and shall, immediately upon request, reimburse Company
                    for any assessment made upon Company by a state insurance
                    guaranty association pursuant to the applicable provisions
                    of state's insurance laws, which applies to the Reinsured
                    Business to the effective date of termination. Company shall
                    likewise remain liable for, and account to Reinsurer for any
                    recovery of such assessment under a state insurance guaranty
                    association, or any credit allowed against its premium tax
                    pursuant to applicable law.

               6.   The title and ownership of all undelivered policy forms,
                    books, and supplies containing Company's name related to the
                    Reinsured Business is in Company. Upon termination, these
                    materials shall be delivered immediately by Reinsurer to
                    Company, at Company's expense, without compelling Company to
                    resort to any legal proceedings to secure the property of
                    Company.

               7.   Upon termination of this Agreement, Reinsurer shall provide
                    Company with a final accounting and settlement of all
                    matters relating to the Reinsured Business.

            ARTICLE  XIX - EXCESS OF ORIGINAL  POLICY  LIMITS AND EXTRA
      CONTRACTUAL OBLIGATIONS:

               (A)  EXCESS OF ORIGINAL POLICY LIMITS - the following sentence
                    will be added at the end of the first paragraph:

                    provided, however, that loss under this provision shall not
                    include any loss which otherwise would be subject to this
                    Article XIX (a) if (i) prior to the Effective Date the
                    Company knew or reasonably should have known that it had
                    breached the covenant of good faith and fair dealing, or had
                    taken other action rendering it liable for payment in excess
                    of a policy limit, with respect to the matter giving rise to
                    the loss, or (ii) such loss is specifically referred to in
                    any other agreements between the parties or their affiliates
                    and is established therein an obligation of Company or its
                    affiliates.

               (B)  EXTRA CONTRACTUAL OBLIGATIONS - the following sentence will
                    be added at the end of the first paragraph:

                    provided, however, that loss under this provision shall not
                    include any liabilities which otherwise would be subject to
                    this Article XIX (b) if (i) prior to the Effective Date the
                    Company knew or reasonably should have known that it had
                    breached the covenant of good faith and fair dealing, or had
                    taken other action rendering it liable for payment of an
                    extra-contractual obligation, or (ii) such extra-contractual
                    obligation is specifically referred to in any other
                    agreements between the parties or their affiliates and is
                    established therein an obligation of Company or its
                    affiliates.

            ARTICLE XX - AGENTS BROKERS AND MANAGING GENERAL AGENTS shall be
      added:

            A. As of the Effective Date, the Reinsurer shall assume the
      obligation to pay any broker, agent or managing general agent appointed by
      the Company for the solicitation, sale, marketing or production of the
      Reinsured Business, including payment of commissions, service fee and
      other compensation that may be due such brokers, agents or managing
      general agents according to the written agreements between Company and
      such brokers, agents or managing general agents and as approved by
      Reinsurer. Company shall appoint any agent, broker or managing general
      agent reasonably requested by Reinsurer, and Reinsurer shall not accept or
      process any Reinsured Business from any person not appointed by Company.
      Company shall use such standards, rules and instructions for producing the
      Reinsured Business as required by Reinsurer.

          B. As of the Effective Date, the Reinsurer agrees to pay for the
     license or appointment fees imposed on insurance companies to license or
     appoint agents, brokers or managing general agents that are authorized by
     Reinsurer to solicit, sell, market or produce the policies constituting the
     Reinsured Business, provided that Reinsurer shall have the right to require
     Company to terminate the right of an agent, broker or managing general
     agent to produce such policies.

      IN WITNESS WHEREOF, the parties have caused this Addendum to be executed
in duplicate this ____ day of _________, 1999.

                                        ACCEPTANCE INSURANCE COMPANY
Attest:

By                                      By
   ---------------------------------       ---------------------------------
Name                                    Name
     -------------------------------         -------------------------------

                                        PHOENIX INDEMNITY INSURANCE COMPANY
Attest:

By                                      By
   ---------------------------------       ---------------------------------
Name                                    Name
     -------------------------------         -------------------------------

      As of the Effective Date, The Millers Insurance Company shall guaranty the
performance of the financial obligations of Reinsurer under this Quota Share
Reinsurance Agreement, subject to any defenses available to Reinsurer under the
Agreement.

                                        THE MILLERS INSURANCE COMPANY
Attest:

By                                      By
   ---------------------------------       ---------------------------------
Name                                    Name
     -------------------------------         -------------------------------
Date                                    Date
     -------------------------------         -------------------------------

<PAGE>

                                    Exhibit C

                                100% QUOTA SHARE

                              REINSURANCE AGREEMENT

                                     between

                             [ACCEPTANCE AFFILIATE]

                                INSURANCE COMPANY

                             (hereinafter "Company")

                                       and

                               [MILLERS AFFILIATE]

                                INSURANCE COMPANY

                            (hereinafter "Reinsurer")

                        Effective Date: ___________, 1999

<PAGE>

                     100% QUOTA SHARE REINSURANCE AGREEMENT

THIS 100% QUOTA SHARE REINSURANCE AGREEMENT (this "Agreement") is made and
entered into by and among [Acceptance Affiliate] Insurance Company, an insurance
company organized under the laws of the State of __________ (hereinafter
"Company") and [Millers Affiliate] Insurance Company, an insurance company
organized under the laws of the State of ___________ (hereinafter "Reinsurer").

                             PRELIMINARY STATEMENTS

A.   Pursuant to that certain Purchase Agreement dated May 10, 1999 (the
     "Purchase Agreement"), Acceptance Insurance Company agreed to (i) sell to
     Millers American Group, Inc. all of the issued and outstanding shares of
     capital stock of Phoenix Indemnity Insurance Company, Reinsurer herein, and
     (ii) transfer to Reinsurer all private passenger nonstandard automobile
     insurance (including liability and no-fault, uninsured and underinsured
     motorists, medical payments coverage, guest passenger liability, and
     automobile physical damage coverage, as applicable) previously written by
     Acceptance Insurance Company and its affiliated insurance companies.

B.   As an affiliate of Acceptance Insurance Company, Company has previously
     written the private passenger nonstandard automobile insurance referred to
     above in the states of ______________________________________________
     ____________________________as a fronting arrangement for its affiliate,
     Phoenix Indemnity Insurance Company.

C.   Upon consummation of the transaction contemplated in the Purchase
     Agreement, Company has agreed to issue policies of private passenger
     nonstandard automobile insurance in the states of ___________________
     __________________ (the "Production States," whether one or more) pursuant
     to this Agreement and cede to Reinsurer a 100% quota share of all premiums
     and losses arising from all of Company's private passenger nonstandard
     automobile insurance business produced in the Production States pursuant to
     this Agreement (collectively, the "Reinsured Business").

                             STATEMENT OF AGREEMENTS

NOW, THEREFORE, in consideration of the premises and the mutual promises and
covenants hereinafter contained and intending to be legally bound, the parties
hereto agree as follows:

                                    Article I
                          Classes of Reinsured Business

1.1   During the term of this Agreement, Company obligates itself to cede to
      Reinsurer, and Reinsurer obligates itself to accept, 100% of Company's
      gross liability under all policies, certificates, contracts, binders,
      agreements or other proposals or evidences of insurance, new and renewal
      policies, binders, and contracts of insurance (hereinafter called
      "Policies") issued by and on behalf of Company with an effective date on
      or after the Effective Date of this Agreement as private passenger
      nonstandard automobile insurance, including physical damage, liability,
      personal injury protection, uninsured/underinsured motorist, medical
      payments, and miscellaneous coverages.

1.2   This Agreement also shall apply to, and Reinsurer also shall reinsure,
      100% of Company's gross liability for personal injury protection as
      required under the state insurance laws applicable to the Reinsured
      Business.

1.3   The Reinsured Business shall include every original policy, rewrite,
      renewal or extension (whether before or after termination of this
      Agreement) of Reinsured Business which is required by applicable statutes,
      rules or regulations.

1.4   Company may not appoint or contract with other reinsurers, agents and/or
      general agents with respect to private passenger nonstandard automobile
      insurance except as approved by Reinsurer.

1.5   As between Company and Reinsurer, Reinsurer shall own the Reinsured
      Business and all renewals, expirations, customer lists, and other
      intangible property interests associated with the Reinsured Business.

                                   Article II
                                   Exclusions

Neither Reinsurer nor Agents appointed by Company at Reinsurer's request will
solicit or accept proposals or bind Company for insurance coverage on any risk
other than the Reinsured Business. Without limiting the generality of the
foregoing statement, the following risks shall not be reinsured hereunder:

2.1   All business not specifically described as Reinsured Business under
      Section 1.1 of this Agreement.

2.2   Garagekeepers legal liability.

2.3   Vendors single interest.

2.4   Vehicles principally used as ambulances, fire and police units.

2.5   Commercial vehicles rated as such, and all automobile fleets.

2.6   Mobile homes.

2.7   Automobile dealers.

2.8   Loss or damage caused by or resulting from war, invasion, hostilities,
      acts of foreign enemies, civil war, insurrection, military or usurped
      power, martial law or confiscation by order of any governmental or public
      authority, but not excluding loss or damage which would be covered under a
      policy or standard form containing a standard war exclusion clause.

2.9   Nuclear incidents.

2.10  Reinsurance issued for the account of other insurance companies.

2.11  Vehicles used in racing or speed events.

2.12  Taxis, limos, buses, and livery.

2.13  Pools, association, syndicates and insolvency funds.

2.14  Seepage and pollution.

                                   Article III
                          Servicing and Claims Handling

3.1   In consideration of the amounts paid to Reinsurer herein, Reinsurer shall
      take, on Company's behalf, any and all action with regard to the Reinsured
      Business as may be necessary in the proper servicing of such business.

3.2   Reinsurer shall comply with all applicable local, state, and federal laws,
      regulations, rules, and requirements regarding Reinsurer's duties under
      this Agreement and shall not engage in any conduct which is in violation
      of any applicable law.

3.3   Reinsurer's obligations to service the Reinsured Business shall include,
      but not be limited to, the following actions taken on Company's behalf:

     (a)  Reinsurer (or its designee) shall underwrite, quote, rate, code,
          issue, and deliver the Policies relating to the Reinsured Business.
          Company agrees to delegate any and all such underwriting and issuance
          functions to Reinsurer, in its sole discretion, and to allow the
          issuance of its policy forms and other appropriate documentation for
          all business produced by Reinsurer or the Producing Agents.

     (b)  Reinsurer (or its designee) shall issue notices of cancellation,
          non-renewal notices, and endorsements, changes, and modifications on
          the Policies.

     (c)  Reinsurer (or its designee) shall bill and be responsible for
          collections from Producing Agents and policyholders with regard to the
          Reinsured Business. Such premiums shall be promptly remitted or
          credited to Reinsurer.

     (d)  Reinsurer and Company will work together such that all communications
          after the Effective Date from Producing Agents and insureds relating
          to the Reinsured Business are directed to Reinsurer. Reinsurer will
          respond to such communications in a timely manner.

     (e)  Reinsurer shall work together with Company to respond to any
          correspondence from any regulatory authority relating to the Reinsured
          Business. Company shall provide Reinsurer with copies of any
          correspondence to or from any governmental body relating to the
          Reinsured Business.

     (f)  Reinsurer shall prepare and keep accurate and complete books, records,
          and accounts as are necessary to properly reflect the performance of
          Company's and Reinsurer's obligations on the Reinsured Business.
          Reinsurer shall promptly send to Company, as necessary, policy or
          underwriting files relating to the Reinsured Business.

     (g)  Reinsurer shall prepare for the Reinsured Business all statistical
          information required for and necessary to prepare reports, statements,
          or other documents required by law, or as may be reasonably requested
          by Company.

     (h)  To the extent required by applicable law, Reinsurer shall provide
          Company with a periodic accounting within sixty (60) days of the end
          of each calendar quarter. To the extent there are any amounts due and
          owing between the parties, the periodic accounting will be followed by
          an appropriate cash settlement within thirty (30) days thereof. The
          requirements in this subsection shall not be conditional upon the
          performance of any other agreement or any other person not a party
          hereto.

3.4   Each Party shall cooperate with the other Party with respect to any audits
      relating to the Reinsured Business or the Agreement including, but not
      limited to, providing the related books and records and space necessary to
      perform such audits.

3.5   Reinsurer shall not use any advertisement respecting Company or the
      Reinsured Business in any publication or issue any circular or paper
      referring to Company or such business without first obtaining the consent
      of Company. Such consent shall not be unreasonably withheld. Reinsurer
      shall establish and maintain records of any such advertising as required
      by applicable law.

3.6   Company agrees that Reinsurer shall have the absolute right to determine
      the rates and prepare the rate filing for Company to file during the term
      of this Agreement and during the term of the run-off.

3.7   Reinsurer and Company agree that Reinsurer (or its designee) shall settle,
      compromise, investigate, adjust, and pay claims, losses, and related
      expenses covered hereunder, deal with subrogations, salvages, and
      recoveries, and commence, continue, defend, hire counsel, assume all
      litigation expense, compromise, settle, or withdraw from actions, suits,
      or prosecutions, and generally do all such matters and things relating to
      any claim, dispute, or loss arising out of the Reinsured Business.

3.8   Reinsurer shall be responsible for, and have exclusive authority with
      respect to, the determination or interpretation of coverage on Policies
      relating to the Reinsured Business.

3.9   Should Company be ordered or instructed by any regulatory authority to
      take any action or refrain from taking any action with regard to any
      claim, Reinsurer shall be bound by and shall follow the order or
      instructions of such regulatory authority as if Reinsurer were the object
      of such order or instruction.

3.10  Company will promptly notify Reinsurer, or such person or entity as
      Reinsurer may designate, of any claim, suit, or action against Company
      relating to the Reinsured Business when notified of a claim, suit, or
      action against Company, and will promptly furnish to Reinsurer, or such
      person or entity as Reinsurer may designate, all summonses, citations,
      complaints, petitions, counterclaims, or other pleadings and legal
      instruments served upon Company in connection therewith.

3.11  All records pertaining to claims arising under the Reinsured Business
      shall be available to Company or its representatives, or any duly
      appointed examiner for any state within the United States. Reinsurer will
      maintain such files, and Reinsurer agrees that it will not destroy any
      such records in its possession without the prior written approval of
      Company.

                                   Article IV
                          Reinsurance Follows Policies

Reinsurer's liability shall attach simultaneously with that of the Company and
shall be subject in all respects to the same risks, terms, conditions,
interpretations and waivers, and to the same modifications, alterations and
cancellations, as the Policies. Reinsurer and Company intend by this Agreement
that Reinsurer shall, in every case to which this Agreement applies, follow the
fortunes of the Company. Nothing in this Agreement shall in any manner create
any obligations or establish any rights against the Reinsurer in favor of any
third parties or any persons not parties to this Agreement.

                                    Article V

                          Commencement and Termination

5.1   The effective date of this Agreement is at 12:01 a.m. central time, on
      ___________ (the "Effective Date"). This Agreement shall remain
      continuously in force until [June 30, 2001], or until such earlier date if
      terminated according to the provisions set forth herein.

5.2   This Agreement may be terminated under any of the following circumstances:

     (a)  Immediately by mutual consent of the Parties to this Agreement.

     (b)  Immediately, upon written notice by Company, if Reinsurer is found to
          be insolvent by any state insurance department or court of competent
          jurisdiction, or is placed in supervision, conservation,
          rehabilitation, or liquidation, or has a receiver or supervisor
          appointed.

     (c)  By Reinsurer, upon thirty (30) days written notice, if Company is
          found to be insolvent by any state insurance department or court of
          competent jurisdiction, or is placed in supervision, conservation,
          rehabilitation or liquidation, or has a receiver or supervisor
          appointed.

     (d)  By Company, immediately and automatically without prior written notice
          should any Department of Insurance with jurisdiction over any portion
          of the Reinsured Business require cancellation or disallow credit for
          this reinsurance.

     (e)  By either Party, upon thirty (30) days written notice to the
          non-terminating Party if the non-terminating Party:

          (1)  commits an intentionally wrongful or fraudulent act material to
               the Agreement;

          (2)  materially breaches a provision of the Agreement and fails to
               cure such breach within sixty (60) days after written notice
               thereof; or

          (3)  is in a financially impaired condition under the applicable law
               of any state having jurisdiction over any of the Reinsured
               Business.

     (f)  By Reinsurer, upon 30 days written notice, as to Reinsured Business in
          any state if Reinsurer or an affiliate of Reinsurer becomes licensed
          to write the Reinsured Business under this Agreement in that state.

     (g)  By Reinsurer, upon 60 days written notice.

5.3   When this Agreement terminates for any reason, reinsurance hereunder shall
      continue to apply to the Reinsured Business in force at the time and date
      of termination until expiration or cancellation of such business. It is
      understood that any Policies with effective dates prior to the termination
      date but issued after the termination date are covered under this
      Agreement. Additionally, the reinsurance hereunder shall continue to apply
      to Policies which must be issued or renewed as a matter of state law until
      the expiration dates on said Policies.

5.4   Upon termination of this Agreement, Reinsurer shall not be relieved of or
      released from any obligation created by or under this Agreement in
      relation to payment, expenses, reports, accounting or handling for the
      Reinsured Business. The Parties covenant and agree that they will
      cooperate with each other in the handling of all such run-off insurance
      business until all Policies have expired either by cancellation or under
      the terms of such Policies and all outstanding losses and loss adjustment
      expenses have been settled. Upon termination of this Agreement, the
      Reinsurer shall service the run-off of the Reinsured Business. Reinsurer's
      duties for such run-off shall include, but not be limited to, handling all
      claims, and handling and servicing all Policies through their natural
      expiration, together with any policy renewals, required to be made by
      provisions of applicable law, whether or not the effective date of such
      renewal is subsequent to the effective date of termination of this
      Agreement. All costs and expenses associated with the handling of such
      run-off business following the termination of this Agreement shall be
      borne solely by Reinsurer. Reinsurer may appoint a successor to handle the
      run-off, subject to Company's approval (which shall not be unreasonably
      withheld), at no cost to Company.

5.5   Except as otherwise provided in this Agreement, in the event this
      Agreement is terminated, Reinsurer shall remain liable to and shall,
      immediately upon request, reimburse Company for any assessment made upon
      Company by an Insurance Guaranty Association pursuant to the state
      insurance laws applicable to the Reinsured Business. Company shall
      likewise remain liable for, and account to Reinsurer for any recovery of
      such assessment or any credit allowed against its premium tax pursuant to
      applicable law.

5.6   The title and ownership of all undelivered policy forms, books, and
      supplies related to the Reinsured Business is in Company. Upon
      termination, these materials shall be delivered immediately by Reinsurer
      to Company, without compelling Company to resort to any legal proceedings
      to secure the property of Company.

5.7   This Agreement provides for termination on a run-off basis. The relevant
      provisions of the Agreement shall apply to the Reinsured Business being
      run off and shall survive the termination of this Agreement.

5.8   Upon termination of this Agreement, Reinsurer shall provide Company with a
      final accounting and settlement of all matters relating to the Reinsured
      Policies.

                                   Article VI
                             Rights of Third Parties

Nothing herein shall in any manner create any obligations to establish any
rights of, create any direct or indirect agreement with, or create any privity
of contract between, the owners or holders of Policies and Reinsurer.

                                   Article VII
                               Retention and Limit

Company shall cede and Reinsurer shall accept 100% of Company's gross liability
on each Policy reinsured under this Agreement.

                                  Article VIII
                         Commissions, Payments, and Fees

8.1   In consideration of the acceptance by Reinsurer of one hundred percent
      (100%) of Company's liability on Reinsured Business, Reinsurer is entitled
      to one hundred percent (100%) of the Net Written Premiums (as hereinafter
      defined) received by Company, Agent, or Reinsurer on Policies reinsured
      less (i) the ceding fee allowed Company pursuant to Section 8.2 hereof,
      (ii) the commission paid to the Producing Agents (which Reinsurer shall
      pay directly pursuant to Article IX), and (iii) the amount of premium
      taxes on Policies subject to reinsurance hereunder payable pursuant to
      Section 8.3 hereof. "Net Written Premiums" shall mean the gross collected
      premium (including policy fees) charged on all original and renewal
      Policies written on behalf of Company, less return premiums.

8.2   Reinsurer shall pay directly to Company a fee within sixty (60) days
      following the end of each month (as a ceding fee), 2% of Net Written
      Premiums. The ceding fee shall be paid based on Net Written Premium for
      Reinsured Business originally written or renewed by Company under this
      Agreement on or after the Effective Date.

8.3   Reinsurer shall allow and pay within sixty (60) days of the date when due
      from Company an amount equal to the amount of state premium tax on the Net
      Written Premiums for the past month. Should any additional premium tax be
      assessed at any time on Net Written Premium, Reinsurer shall pay Company
      the amount of such additional premium tax within fifteen (15) days of
      being informed by Company of such additional premium tax. Reinsurer shall
      pay to Company within five (5) days prior to the due date of any estimated
      premium tax payment, the amount due. In no event shall any amount required
      to be paid by Reinsurer pursuant to this Section 8.3 exceed the actual
      amount of premium taxes payable by Company on Net Written Premiums from
      the Policies.

8.4   Reinsurer guarantees that Company will receive all amounts payable to
      Company hereunder irrespective of any events, losses or developments for
      the term of this Agreement. Such payment is not dependent upon
      underwriting experience, loss experience, whether premium is collected or
      not, or any other event foreseen or unforeseen by the Parties at the
      inception of this Agreement.

                                   Article IX
                       Commission to the Producing Agents

The commission owed to Agents is an obligation owed directly by Reinsurer. No
funds of any kind shall be due the Agents from Company.

                                    Article X
        Assignments, Assessments, Premium Taxes, Fines, and Penalties

10.1  This Agreement shall apply to risks assigned to Company under any
      governmental or statutory requirement to issue policies under an assigned
      risk plan if such risks were assigned to Company because of the Reinsured
      Business.

10.2  This Agreement shall apply to and Reinsurer shall immediately reimburse
      Company 100% for any assessments made against Company pursuant to those
      laws and regulations creating obligatory funds (including, but not limited
      to, insurance guaranty and insolvency funds), pools, joint underwriting
      associations, FAIR plans and similar plans, or any assessments made
      pursuant to insurance guaranty associations under applicable state
      insurance laws. Amounts owed by Reinsurer under this Article shall be
      payable directly by Reinsurer to Company. Reinsurer shall be entitled to
      receive from Company on or prior to the 31st day of March of each year
      during the term of this Agreement (or such date on which such premium
      taxes are paid) a sum equal to the premium tax credit that is allowed to
      Company with respect to such assessments. The premium tax credit allowed
      Reinsurer hereunder is to be on a pro rata and first-in, first-out basis.
      Company shall promptly return to Reinsurer any amount of assessment
      refunded to or credited to Company pursuant to the applicable provisions
      of the applicable state insurance laws.

10.3  Reinsurer also shall pay promptly and directly to Company any fines,
      penalties or any other charge incurred by Company as respects the
      Reinsured Business hereunder unless such fines, penalties and/or any other
      charge are a direct result of any gross negligence, willful misconduct,
      fraud or violation of criminal law by Company.

                                   Article XI
                              Accounts and Reports

11.1  In lieu of Company furnishing Reinsurer with bordereaux showing the
      particulars of all business ceded hereunder, Reinsurer shall furnish or
      cause to be furnished to Company, within forty-five (45) days after the
      close of each of the respective periods indicated below (on forms
      agreeable to the Parties), monthly, quarterly and annual reports
      accurately stating the following statistical data in respect to the
      Reinsured Business.

     (a)  Monthly, with the data segregated by major classes.

            (i)   Ceded premiums written.
            (ii)  Ceded unearned premiums.
            (iii) Ceded losses paid.
            (iv)  Ceded adjustment expenses paid during this month.
            (v)   Losses outstanding.
            (vi)  Commission due the Producing Agents.
            (vii) Ceding fees due Company.

      (b)   Quarterly and annually, respectively, with the data segregated by
            major classes, such data as is necessary to complete, respectively,
            quarterly and annual statement blanks.

            Such information is to be furnished not later than the 45th day
            after the end of a particular year or calendar quarter.

      (c)   Periodic, with data segregated by major lines.

            Statistical or other data as may be requested from time to time by
            regulatory authorities.

11.2  In order to facilitate the handling of the Reinsured Business, Reinsurer
      agrees to furnish Company with any additional reports necessary to provide
      the information needed by Company to prepare its monthly, quarterly and
      annual statements to regulatory authorities.

                                   Article XII
                       Losses and Loss Adjustment Expenses

12.1  Reinsurer shall assume 100% of the risks covered by this Agreement and
      shall be liable for and pay on behalf of Company 100% of all losses,
      judgments, interest on judgments, settlements whether under strict policy
      conditions or because of compromise, and expenses incurred by Company
      (including, but not limited to, costs, expenses and fees, including
      attorneys' fees and expenses, resulting from a declaratory judgment or
      injunctive action brought by or against an insured or other person).
      Reinsurer shall be credited with 100% of any amount received by Company as
      salvage, subrogation or recovery.

12.2  Company hereby empowers Reinsurer to accept notice of and investigate any
      claim arising under any of the Policies, to pay, adjust, settle, resist,
      or compromise any such claim. Reinsurer will exercise the authority
      granted hereunder in good faith and shall pay all valid claims, if, when,
      and as they become due.

12.3  Company will promptly notify Reinsurer of any claim, suit or action
      brought against Company under any of the Policies when Company actually is
      notified of such a claim, suit or action against Company, and will
      promptly furnish to Reinsurer all summons, citations, complaints,
      petitions, counterclaims and other pleadings and legal instruments served
      upon Company in connection therewith. Company hereby further empowers
      Reinsurer to dispose of any salvage received as the result of any loss
      settlement hereunder, and to enforce any right of Company against any
      person or organization for damages or equitable relief for any loss under
      any of the Policies, employing legal counsel where necessary, and all sums
      received as a result thereof will be treated as current loss recoveries by
      Company and Reinsurer. Company further agrees to furnish Reinsurer any and
      all legal instruments necessary to implement the foregoing authorizations.
      Upon request, Reinsurer shall furnish to Company any or all documents and
      correspondence relating to the subject matter hereof.

12.4  All records pertaining to claims arising under the Policies shall be
      deemed to be jointly owned records of Company and Reinsurer, and shall be
      made available to Company or Reinsurer or their representatives or any
      duly appointed examiner for any State within the United States. Company
      and Reinsurer agree that they will not destroy any such records in their
      possession without the prior written approval of the other Party, except
      that Company shall not be required to retain files longer than required by
      applicable law.

12.5  Reinsurer shall establish a separate claim register or method of
      registering claims arising under the Policies covered by this Agreement so
      that all claims may be segregated and identified separate and apart from
      other records of Reinsurer, with such claims register to identify each
      claim on an individual case basis both as to the identity of the
      insured(s) and the claimant(s) and the reserve for loss and adjusting
      expense. Such claim register shall be kept in a form whereby Company can,
      at any time, determine the status of any claim arising under Policies
      covered by this Agreement. Such records shall reflect the amount of
      reserves established for the individual claim and the date when such
      reserve was established, and if closed, whether such claim was closed with
      or without payment, and if with payment, the amount paid thereon.
      Reinsurer shall also maintain a complaint log for the Reinsured Business
      as may be required by applicable law.

12.6  Reinsurer shall be liable for 100% of the loss adjustment expenses
      incurred by Company in connection with claims and settlements under
      Policies subject hereto, including, but not limited to, all attorney's
      fees, other litigation expenses and interest on judgments and all other
      expenses, (including but not limited to attorney's fees and costs incurred
      in a declaratory judgment or injunctive action with an insured or other)
      but not including office expenses or salaries of Company's regular
      employees, and Reinsurer shall be credited with 100% of any recoveries of
      such loss adjustment expense.

12.7  In the event of a claim under a Policy, Reinsurer shall be liable for 100%
      of the loss adjustment expense incurred by Company in connection
      therewith. Reinsurer shall be credited with any recovery of loss
      adjustment expense previously paid.

                                  Article XIII
                       Loss in Excess of Policy Limits/ECO

13.1  In the event Company pays or is held liable to pay an amount of loss in
      excess of its policy limit, but otherwise within the terms of its Policy
      (hereinafter "loss in excess of policy limits") or any punitive,
      exemplary, compensatory or consequential damages other than loss in excess
      of policy limits (hereinafter "extra-contractual obligations") in relation
      to handling a claim reinsured hereunder or anything else related to the
      Reinsured Business hereunder, 100% of the loss in excess of policy limits
      and/or 100% of the extra contractual obligations shall be added to
      Company's loss, if any, under the Policy involved, and the sum thereof
      shall be reinsured 100% under this Agreement.

13.2  This Article shall not apply to any loss incurred by Company as a result
      of any gross negligence, willful misconduct, fraud, or violation of a
      criminal law by an officer, director or employee of Company.

                                   Article XIV
                              Errors and Omissions

Company and Reinsurer shall not be prejudiced in any way by any omission through
clerical error, accident or oversight to cede to Reinsurer any business rightly
falling under the terms of this Agreement, or by erroneous cancellation, either
partial or total, of any cession, or by omission to report, or by erroneously
reporting any losses, or by any other error or omission if each such error or
omission is corrected immediately upon discovery.

                                   Article XV
                                Access to Records

15.1  All records pertaining to Policies issued on behalf of Company through or
      by Reinsurer or its designated representative subject to this Agreement,
      shall be deemed to be jointly owned records of Company and Reinsurer, and
      shall be made immediately available to Company or Reinsurer or their
      representative or any duly appointed examiner for any State within the
      United States. These records shall be kept in the State of Arizona or as
      otherwise authorized by applicable regulatory authorities. Notwithstanding
      the foregoing, Reinsurer is authorized to maintain duplicate files of all
      such records outside the State of Arizona. Company and Reinsurer agree
      that neither will destroy any such records in their possession with
      respect to Reinsured Business without the prior written approval of the
      other, except that Company shall not be required to retain files longer
      than required by applicable law.

15.2  Neither Party shall take any action limiting, restricting or in any manner
      inhibiting or encumbering the other Party's access to inspect any records
      pertaining to this Agreement or to the Reinsured Business, whether or not
      such records are in the possession or under the control of either Party,
      nor shall either Party fail to take actions to secure the other Party's
      right of inspection of such records.

                                   Article XVI
                           Sale or Transfer of Company

Company agrees to give Reinsurer 30 days advance written notice of any sale or
transfer of Company's business, or Company's consolidation with another firm, in
order that Reinsurer may, in its sole discretion:

16.1  Allow the assignment of this Agreement to the successor, if applicable; or

16.2  Enter into a new reinsurance agreement with the successor;  or

16.3  Terminate this Agreement as provided in Section 5.2 of this Agreement.

                                  Article XVII
                                   Insolvency

17.1  In the event of the insolvency of Company, reinsurance under this
      Agreement shall be payable by Reinsurer on the basis of the liability of
      Company under the Policies reinsured, without diminution because of such
      insolvency, to Company or to its domiciliary liquidator or receiver.

17.2  It is agreed, however, that the liquidator or receiver or statutory
      successor of Company will give written notice to Reinsurer of the pendency
      of any claim against Company on a Policy within a reasonable time after
      such claim is filed in the insolvency proceeding and that during the
      pendency of such claim Reinsurer may investigate such claim and interpose,
      at its own expense, in the proceeding where such claim is to be
      adjudicated any defense or defenses which it may deem available to Company
      or its liquidator or receiver or statutory successor. The expense thus
      incurred by Reinsurer will be chargeable, subject to court approval,
      against Company as part of the expense of liquidation to the extent of a
      proportionate share of the benefit which may accrue to Company solely as a
      result of the defense undertaken by Reinsurer.

17.3  Should Company be placed into liquidation or should a receiver be
      appointed, Reinsurer will, to the extent permitted by law, be entitled to
      deduct from any sums which may be or may become due to Company under this
      Agreement, any sums which are due to Reinsurer by Company under this
      Agreement and which are payable at a fixed or stated date, as well as any
      other sums due Reinsurer which are permitted to be offset under applicable
      law.

17.4  It is further agreed that, in the event of the insolvency of Company, the
      reinsurance obligations under this Agreement shall be payable directly by
      Reinsurer to Company or to its domiciliary, liquidator, or receiver,
      except (a) as provided by applicable law, (b) where this Agreement
      specifically provides another payee of such reinsurance in the event of
      the insolvency of Company, and/or (c) where Reinsurer, with the consent of
      the direct insured, has assumed the policy obligations of Company as
      direct obligations of Reinsurer to the payee under the Policies and in
      substitution for the obligation of Company to such payee.

                                  Article XVIII
                           Appointment of Agents, Etc.

18.1  Company has entered into agency agreements with various managing general
      agents, general agents, and individual agents for the production of
      private passenger nonstandard automobile insurance, a complete listing of
      which is attached hereto as Exhibit A and fully incorporated herein by
      this reference. Company agrees (i) to maintain such appointments and
      agency agreements at the direction of Reinsurer, and (ii) to allow
      Reinsurer to amend or terminate such appointments and agency agreements in
      Reinsurer's sole discretion.

18.2  Company will, at the request of Reinsurer, appoint other Agents to produce
      additional business to be reinsured under this Agreement. The form of
      agreement for appointing these other Agents shall be determined by
      Reinsurer. Reinsurer shall hold Company harmless from and indemnify it
      pursuant to this Agreement with respect to matters caused directly or
      indirectly by any action of, or failure to act, by any Agent.

18.3  Reinsurer shall be responsible for the supervision of the Agents appointed
      by Company at its request, including compliance with state licensing laws
      and the financial condition of such Agents.

18.4  Reinsurer shall guarantee payment to Company of any amounts due Company
      from business produced by or through all Agents appointed or maintained by
      Company at the request of and on behalf of Reinsurer. Reinsurer shall be
      solely responsible for notifying such Agents of this Agreement and of any
      termination hereof, and Reinsurer shall be responsible for the
      consequences of any failure to provide such notification.

18.5  As used herein, "Agent(s)" shall refer to all managing general agents,
      general agents, producing agents, soliciting agents, and individual agents
      currently appointed by Company as of the Effective Date, or subsequently
      appointed or maintained at Reinsurer's direction, to write private
      passenger nonstandard automobile insurance.

                                   Article XIX
                            Hold Harmless Provisions

19.1  Notwithstanding anything else contained herein to the contrary, as
      respects all matters related to this Agreement, in addition to those
      specific provisions insulating Company from specific risks hereunder,
      Reinsurer hereby covenants and agrees to reimburse and hold Company
      harmless from and against every claim, demand, liability, loss, damage,
      cost, charge, attorneys' fees, expense, suit, order, judgment and
      adjudication of every kind or character ("Damages") regarding, arising
      from, or related to this Agreement and/or the Reinsured Business
      (including, but not limited to, underwriting loss, credit loss, and/or
      run-off expense and/or all legal fees and expenses incurred by Company in
      asserting its rights under this Agreement) whether or not such Damages are
      within the terms of Policies written and reinsured hereunder. Reinsurer's
      obligation hereunder includes, but is not limited to: all liability for
      agents' balances, return premiums and commissions; deceptive trade
      practice, consumer protection and bad faith liability; premiums, policy
      fees or other charges (whether collected or not); Damages incurred by
      Company due to a lawsuit between Reinsurer and/or an Agent; all actions or
      inactions by an Agent relating to business produced pursuant to this
      Agreement or any agreement with a premium finance company; all fees and/or
      commissions owing to an Agent under this and the aforementioned related
      agreements; and any and all amounts owed to premium finance companies by
      Company or an Agent.

19.2  Company shall not be liable to Reinsurer for premiums unless Company
      itself has actually received those premiums and not remitted them to
      Reinsurer. Reinsurer may not offset any balances on account of losses,
      loss adjustment expenses or any other amounts due except as to premiums
      actually received by Company itself (as distinct from premiums not
      collected, premiums collected by an Agent, or premiums placed in a premium
      trust account) which have wrongfully not been remitted to Reinsurer.

19.3  If for any reason Reinsurer fails or is unable to administer the Policies
      reinsured hereunder (whether the Agreement is still in effect or the
      business is being run-off), Reinsurer shall appoint a party (reasonably
      acceptable and approved by Company) to administer the business and
      Reinsurer shall be responsible for 100% of the cost of said
      administration. If return premiums or other funds need to be returned to
      premium finance companies, policyholders or sub-agents, Reinsurer shall
      pay these amounts if the successor or administrator does not.

19.4  Reinsurer shall not sue, or seek arbitration, against Company for any acts
      of an Agent or for any monies which an Agent owes unless Company has
      actually received those monies and has wrongfully not remitted them to
      Reinsurer. Reinsurer shall indemnify Company for any Damages incurred by
      reason of an Agent's acts or failure to act. Company is not responsible
      for any commissions or other monies payable to an Agent in connection with
      this Agreement.

19.5  In the event Reinsurer, or any Agent appointed or maintained pursuant to
      this Agreement, binds Company for insurance coverage or insurance risks
      which are not within the terms of business specified in Article I, whether
      intentional or not, Reinsurer will take such actions as may be necessary
      to reduce Company's exposure to such risks and to hold Company harmless
      against any liability or loss which may be incurred by Company in excess
      hereof. At Company's request, Reinsurer in accordance with applicable law
      and policy terms, shall cancel or not renew any risk bound which is not in
      conformance with this Agreement. Any such insurance coverage on insurance
      risks bound which are not within the classes of business specified in
      Article I, whether intentional or not, shall be 100% reinsured and subject
      to this Agreement.

19.6  Reinsurer shall be solely responsible for the acts of the Agents. While
      there are acts of the Agents which may be required by a regulatory agency
      to be performed on behalf of Company, Reinsurer shall remain ultimately
      responsible for such acts and will indemnify and hold Company completely
      harmless for any Damages incurred by Company as respects such acts of the
      Agents.

19.7  Reinsurer must send Company a report, within thirty (30) days of
      determination, that a claim (i) involves a coverage dispute; (ii) involves
      a demand in excess of policy limits; (iii) alleges bad faith; (iv) alleges
      a violation of a state's deceptive trade practices laws; or (v) alleges a
      violation of state insurance laws.

                                   Article XX
                               Reinsurance Credit

In the event a state regulatory authority requires cancellation or disallows
credit for this reinsurance, Reinsurer will have 60 days to secure its
obligations under this Agreement via a security fund agreement to be executed by
Reinsurer and Company, which security fund agreement shall be in form and
content acceptable to Company. Company shall have no obligation to continue this
Agreement with Reinsurer if Company does not receive credit for the business
ceded to Reinsurer hereunder. It shall be Reinsurer's sole responsibility to
provide financial arrangements as may be required by any state regulatory
authority to assure that Company receives credit for the business ceded to
Reinsurer under this Agreement.

                                   Article XXI
                       State Insurance Regulatory Matters

21.1  To avoid having uncollected premiums deemed non-admitted assets, Reinsurer
      assumes full liability and responsibility for all premiums in the course
      of collection. Company's liability to Reinsurer shall be only for any
      premium actually collected by Company and wrongfully not transmitted to
      Reinsurer.

21.2  Reinsurer shall, at no cost to Company, take actions (including, but not
      limited to, modifications in how funds are handled and how accounts are
      cleared and settled) and agree to those arrangements necessary to ensure
      that Company suffers no adverse impact because of this reinsurance program
      and is in compliance with all applicable laws and regulations promulgated
      by any regulatory authority having jurisdiction over any Reinsured
      Business.

21.3  To the extent required by applicable law, Reinsurer, if not licensed to
      transact insurance or reinsurance in a Production State, agrees to submit
      to the jurisdiction of a court within the United States, agrees to comply
      with all requirements necessary to give such court jurisdiction over
      Reinsurer, has designated an agent upon whom service of process may be
      effected, and agrees to abide by the final decision of such court or an
      appellate court to which a trial court decision may be appealed.

                                  Article XXII
                                   Arbitration

22.1  Any dispute arising with respect to this Agreement, whether arising before
      or after termination hereof, which is not settled by mutual agreement of
      the Parties, shall be submitted to arbitration in accordance with this
      Article.

22.2  Within twenty (20) days from receipt of notice from one Party that an
      arbitrator has been appointed, the other Party shall also name an
      arbitrator. The two arbitrators shall choose a third arbitrator and shall
      forthwith notify the Parties of such choice. If the two arbitrators cannot
      agree upon the third arbitrator, each arbitrator shall nominate three
      persons of whom the other shall reject two. The third arbitrator shall
      then be chosen by drawing lots. If a Party fails to choose an arbitrator
      within twenty (20) days after receiving the written request of the other
      Party to do so, the latter shall choose both arbitrators, who shall choose
      the third arbitrator. Each arbitrator shall be a present or former
      property and casualty insurance company officer who is otherwise not
      directly or indirectly affiliated with any Party to this Agreement.

22.3  The Party requesting arbitration (the "Petitioner") shall submit a brief
      to the arbitrators within thirty (30) days after notice of the selection
      of the third arbitrator. Upon receipt of the Petitioner's brief, the other
      Party (the "Respondent") shall have thirty (30) days to file a reply
      brief. On receipt of the Respondent's brief, the Petitioner shall have
      twenty (20) days to file its rebuttal brief. Respondent shall have twenty
      (20) days from the receipt of Petitioner's rebuttal brief to file its
      rebuttal brief. The arbitrators may extend the time for filing of a brief
      at the request of either Party.

22.4  The arbitrators shall consider this Agreement as an honorable engagement
      rather than merely as a legal obligation, and shall be relieved of all
      judicial formalities, and shall make their award with a view to effecting
      the intent of the parties. The decision of the arbitrators shall be final
      and binding upon the parties to this Agreement. Judgment may be entered
      upon the final decision of the arbitrators in any court having
      jurisdiction. Each Party shall bear the expenses of its own arbitrator and
      shall jointly and equally bear the expenses of the third arbitrator and of
      the arbitration. Any such arbitration shall be conducted pursuant to the
      rules of the American Arbitration Association and shall take place in the
      City of Fort Worth, Texas, unless some other location is mutually agreed
      upon by the Parties.

                                  Article XXIII
                                 Savings Clause

If any law or regulation of any federal, state or local government of the United
States of America, or the ruling of officials having supervision over insurance
companies, should prohibit or render illegal this Agreement, or any portion
thereof, as to risks or properties located in the jurisdiction of such
authority, either Company or Reinsurer may upon written notice to the other
suspend or abrogate this Agreement insofar as it relates to risks or properties
located within such jurisdiction to such extent as may be necessary to comply
with such law, regulations or ruling. Such illegality, shall in no way affect
any other portion thereof, provided however, that Reinsurer or Company may
terminate or suspend this Agreement insofar as it relates to the business to
which such law or regulation may apply.

                                  Article XXIV
                                  Miscellaneous

24.1  THIS AGREEMENT HAS BEEN MADE AND ENTERED INTO IN THE STATE OF TEXAS AND
      THE AGREEMENT SHALL BE SUBJECT TO AND CONSTRUED UNDER THE LAWS OF THE
      STATE OF TEXAS WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS
      THEREOF. This Agreement shall be deemed performable at Company's
      administrative office in Fort Worth, Texas and it is agreed that the venue
      of any controversy arising out of this Agreement, or any breach thereof,
      shall be in Fort Worth, Texas.

24.2  All notices and other communications hereunder shall be in writing and
      shall be deemed to have been given when delivered or mailed by first class
      mail, postage prepaid, addressed as follows:

      (a)   If to Company, to:      Acceptance Insurance Company
                                    Suite 600 North
                                    222 South 15th St.
                                    Omaha, Nebraska 68102

                                    Attention:  Kenneth C. Coon

            with a copy to:         Kutak Rock
                                    The Omaha Building
                                    1650 Farnam Street
                                    Omaha, Nebraska  68102-22186
                                    Attention:  Joe E. Armstrong, Esq.

      (b)   If to Reinsurer, to:    [Millers Affiliate] Insurance Company
                                    c/o Millers American Group, Inc.
                                    300 Burnett Street
                                    Fort Worth, Texas  76102
                                    Attention:  David N. Thompson

            with a copy to:         AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
                                    1700 Pacific Avenue
                                    Dallas, Texas  75201-4675
                                    Attention:  Terry M. Schpok, P.C.

24.3  All acts and payments under this Agreement are performable and payable at
      the offices of Reinsurer at the location listed above.

24.4  This Agreement shall be binding upon the Parties hereto, together with
      their respective successors and permitted assigns. Reinsurer may assign
      any of its rights or obligations under this Agreement without the prior
      written consent of Company.

24.5  This Agreement may be executed in one or more counterparts, each of which
      shall be deemed an original, but all of which together shall constitute
      one and the same instrument.

24.6  This Agreement may be amended, modified or supplemented only by a written
      instrument executed by all Parties hereto and referring specifically to
      this Article 24.6.

24.7  With the exception of the Purchase Agreement and any other agreements
      executed pursuant thereto, this Agreement is the entire agreement between
      the Parties and supersedes any and all previous agreements, written or
      oral, and amendments thereto.

24.8  A waiver by Company or Reinsurer of any breach or default by the other
      Party under this Agreement shall not constitute a continuing waiver or a
      waiver by Company or Reinsurer of any subsequent act in breach or of
      default hereunder.

24.9  Headings used in this Agreement are for reference purposes only and shall
      not be deemed a part of this Agreement.

24.10 The Parties hereto intend all provisions of this Agreement to be enforced
      to the fullest extent permitted. Accordingly, should a court of competent
      jurisdiction or arbitration panel determine that the scope of any
      provision is too broad to be enforced as written, the Parties intend that
      the court or arbitration panel should reform the provision to such
      narrower scope as it determines to be enforceable under present or future
      law; such provision shall be fully severable; this Agreement shall be
      construed and enforced as if such illegal, invalid, or unenforceable
      provision were never a part hereof; and the remaining provisions of this
      Agreement shall remain in full force and effect and shall not be affected
      by the illegal, invalid, or unenforceable provision or by its severance.

24.11 Any offsets Reinsurer may take against amounts owed to Company, or any
      offsets Company may take against amounts owed to Reinsurer, shall be
      limited to amounts due and owing under this Agreement between Company and
      Reinsurer.

                              [SIGNATURE PAGE FOLLOWS]

<PAGE>

IN WITNESS WHEREOF, Company and Reinsurer have by their respective officers
executed this Agreement to be effective the ______ day of _______________, 1999.

                                     COMPANY

                                    [Acceptance Affiliate] Insurance Company

                                    By:   ___________________________________
                                    Name: ___________________________________
                                    Title: __________________________________

                                    REINSURER

                                    [Millers Affiliate] Insurance Company

                                    By:   ___________________________________
                                    Name: ___________________________________
                                    Title: __________________________________

                        GUARANTY OF FINANCIAL OBLIGATIONS

As of the Effective Date, The Millers Insurance Company guarantees the
performance of the financial obligations of Reinsurer under this Agreement,
subject to any defenses available to Reinsurer under the Agreement.

In witness whereof, The Millers Insurance Company has executed this Agreement to
be effective the _____ day of __________________, 1999.

                                    THE MILLERS INSURANCE COMPANY

                                    By:   ___________________________________
                                    Name: ___________________________________
                                    Title: __________________________________

<PAGE>

                                    EXHIBIT D

                                   QUOTA SHARE
                            AGREEMENT OF REINSURANCE

                             ADDENDUM NUMBER TWO (2)

      This Addendum attaches to and forms a part of a certain Agreement of
Reinsurance between Phoenix Indemnity Insurance Company (hereinafter called the
"Company") and Acceptance Insurance Company (hereinafter called the "Reinsurer")
originally effective October 1, 1994 and amended by Addendum Number One (1) on
August 28, 1997.

      As of the Effective Date, Company and Reinsurer agree as follows:

            ARTICLE I - SCOPE OF AGREEMENT shall be deleted entirety and
      replaced with the following:

            As a condition precedent to the Reinsurer's obligations under this
      Agreement, the Company shall cede to the Reinsurer 100% quota share of the
      Net Written Premium and the liability for the Reinsured Business described
      in this Agreement retained by the Company after all other facultative and
      treaty reinsurance, and the Reinsurer shall accept such business as
      reinsurance from the Company. The Company is to bear no business or
      insurance risk whatsoever (save the risk of Reinsurer's insolvency).

            ARTICLE III - LIABILITY OF THE REINSURER - the first paragraph of
      Article III shall be deleted in its entirety and replaced with the
      following:

            The Reinsurer shall pay to the Company, with respect to each risk
      and policy under the Business, 100% of the amount of net loss of the
      Company ("Reinsured Business").

            ARTICLE IV - DEFINITIONS as amended by Addendum Number One is
      amended by deleting (a) BUSINESS and replacing it with the following:

             (a)  BUSINESS

                  This term shall mean fire, allied lines, homeowners, inland
                  marine, other liability, commercial automobile no-fault,
                  commercial automobile liability, commercial automobile
                  physical damage, burglary and dwelling fire business written
                  prior to July 1, 1999 by the Company on risks located in the
                  State of Utah; and surety and bond business written prior to
                  July 1, 1999 by the Company on risks wherever located and
                  serviced by the Reinsurer.

            ARTICLE VII - REPORTS AND REMITTANCES will be deleted in its
      entirety and replaced with the following:

                  MONTHLY

                  The Reinsurer shall report to the Company, within 45 days
                  after the close of each month:

                  (1)   The  reinsurance  premium  written for the month
                        by line of insurance, and

                  (2)   The Company's portion of claims, losses, and adjustment
                        expense paid and outstanding during the month by line of
                        insurance and year of claim or loss.

                  QUARTERLY

                  On a quarterly basis, the Company shall calculate and invoice
                  the Reinsurer for premium taxes due. The amount due shall be
                  remitted by the Reinsurer within 30 days of receipt of the
                  invoice.

            ARTICLE VIII - MANAGEMENT OF CLAIMS AND LOSSES shall be deleted in
      its entirety and replaced with the following:

            The Reinsurer shall investigate and settle or defend all claims and
      losses and perform such other functions as it may determine proper for
      servicing the Reinsured Business. When requested by the Company, the
      Reinsurer shall permit the Company, at the expense of the Company, to be
      associated with the Reinsurer in the defense or control of any claim,
      loss, or legal proceeding which involves or is likely to involve the
      Company. All settlements and payments of claims or losses by the
      Reinsurer, whether under strict policy conditions or by way of compromise,
      shall be binding on the Company, subject to the terms of this Agreement.
      After the Effective Date, the Reinsurer shall be responsible for a) paying
      all claims and amounts due under the Reinsured Business; b) paying all
      premium refunds due under the Reinsured Business, and c) all expenses in
      connection with the investigation, adjustment, appraisal or settlement of
      all claims under the reinsured Business. Company shall deliver to
      Reinsurer on the Effective Date of this Addendum all files and records, in
      whatever form, pertaining to the Business including, but not limited to,
      accounting, claims, underwriting, and legal. Such files and records shall
      belong to and remain the property of Company until one (1) year after all
      policies constituting the Reinsured Business shall have expired either by
      cancellation or otherwise, and all outstanding losses and Adjustment
      Expenses have been settled, at which time such files and records shall
      become the property of and owned by Reinsurer.

            ARTICLE XI -- SPECIAL ACCEPTANCES shall be deleted in its entirety.

            ARTICLE XIII - OFFSET shall be deleted in its entirety.

            ARTICLE XIV - INSPECTION OF RECORDS shall be deleted in its entirety
      and replaced with the following:

            The Reinsurer shall allow the Company to inspect, at reasonable
            times, the records of the Reinsurer relevant to the business
            reinsured under this Agreement, including Reinsurer files concerning
            claims, losses, or legal proceedings which involve or are likely to
            involve the Company.

            ARTICLE XVII - COMMENCEMENT AND TERMINATION is deleted in it
      entirety and replaced with the following:

            1.    The effective date of this Addendum is at 12:01 a.m. central
                  standard time, on ____________, 1999 (the "Effective Date").
                  This Addendum and Agreement shall remain continuously in force
                  until terminated according to the provisions set forth herein.

            2.    This  Agreement  may be  terminated  under  any of the
                  following circumstances:

                  (a)   Immediately  by mutual consent of the Parties to
                        this Agreement.

                  (b)   Immediately, upon written notice by Company, if
                        Reinsurer is found to be insolvent by any state
                        insurance department or court of competent jurisdiction,
                        or is placed in supervision, conservation,
                        rehabilitation, or liquidation, or has a receiver or
                        supervisor appointed.

                  (c)   By Reinsurer, upon thirty (30) days written notice, if
                        Company is found to be insolvent by any state insurance
                        department or court of competent jurisdiction, or is
                        placed in supervision, conservation, rehabilitation or
                        liquidation, or has a receiver or supervisor appointed.

                  (d)   By Company, immediately and automatically without prior
                        written notice should the Department of Insurance with
                        jurisdiction over the Reinsured Business require
                        cancellation or disallow credit for this reinsurance.

                  (e)   By either Party, upon thirty (30) days written notice to
                        the other Party if the non-terminating Party:

                        (1)   commits  an   intentionally   wrongful  or
                              fraudulent act material to the Agreement;

                        (2)   materially breaches a provision of the Agreement
                              and fails to cure such breach within sixty (60)
                              days after written notice thereof; or

                        (3)   is in a financially impaired condition under the
                              applicable law of any state having jurisdiction
                              over any of the Reinsured Business.

               3.   When this Agreement terminates for any reason, reinsurance
                    hereunder shall continue to apply to the Reinsured Business
                    in force at the time and date of termination until
                    expiration or cancellation of such business. Additionally,
                    the reinsurance hereunder shall continue to apply as to
                    policies constituting the Reinsured Business which must be
                    issued or renewed, as a matter of state law.

               4.   Upon termination of this Agreement, Reinsurer shall not be
                    relieved of or released from any obligation created by or
                    under this Agreement in relation to payment, expenses,
                    reports, accounting or handling, which relate to the
                    Reinsured Business. The Parties covenant and agree that they
                    will cooperate with each other in the handling of all such
                    run-off insurance business until all the Reinsured Business
                    shall have expired either by cancellation or under the terms
                    of such policies constituting the Reinsured Business and all
                    outstanding losses and loss adjustment expenses have been
                    settled. Upon termination of this Agreement, the Reinsurer
                    shall service the run-off of the Reinsured Business, and its
                    duties for such run-off shall include, but not be limited
                    to, handling all claims, and handling and servicing all
                    policies constituting the Reinsured Business through their
                    natural expiration, together with any policy renewals,
                    required to be made by provisions of applicable law, whether
                    or not the effective date of such renewal is subsequent to
                    the effective date of termination of this Agreement. All
                    costs and expenses associated with the handling of such
                    run-off business following the termination of this Agreement
                    shall be borne solely by Reinsurer. Reinsurer may appoint a
                    successor to handle the run-off, subject to Company's
                    approval (which shall not be unreasonably withheld), at no
                    cost to Company.

               5.   Except as otherwise provided in this Agreement, in the event
                    this Agreement is terminated, Reinsurer shall remain liable
                    to and shall, immediately upon request, reimburse Company
                    for any assessment made upon Company by a state insurance
                    guaranty association pursuant to the applicable provisions
                    of a state's insurance laws, which applies to the Reinsured
                    Business to the effective date of termination. Company shall
                    likewise remain liable for, and account to Reinsurer for any
                    recovery of such assessment under a state insurance guaranty
                    association, or any credit allowed against its premium tax
                    pursuant to applicable law.

               6.   The title and ownership of all undelivered policy forms,
                    books, and supplies containing Company's name related to the
                    Reinsured Business is in Company. Upon termination, these
                    materials shall be delivered immediately by Reinsurer to
                    Company, at Company's expense, without compelling Company to
                    resort to any legal proceedings to secure the property of
                    Company.

               7.   Upon termination of this Agreement, Reinsurer shall provide
                    Company with a final accounting and settlement of all
                    matters relating to the Reinsured Business.

            ARTICLE XX - AGENTS BROKERS AND MANAGING GENERAL AGENTS shall be
      added:

          A. As of the Effective Date, the Reinsurer shall assume the obligation
     to pay any broker, agent or managing general agent appointed by the Company
     for the solicitation, sale, marketing or production of the Reinsured
     Business, including payment of commissions, service fee and other
     compensation that may be due such brokers, agents or managing general
     agents according to the written agreements between Company and such
     brokers, agents or managing general agents.

      IN WITNESS WHEREOF, the parties have caused this Addendum to be executed
in duplicate this ____ day of _________, 1999.

                                        ACCEPTANCE INSURANCE COMPANY
Attest:

By                                      By
   ---------------------------------       ---------------------------------
Name                                    Name
     -------------------------------         -------------------------------

                                        PHOENIX INDEMNITY INSURANCE COMPANY
Attest:

By                                      By
   ---------------------------------       ---------------------------------
Name                                    Name
     -------------------------------         -------------------------------

<PAGE>

                                    EXHIBIT E

                            NONCOMPETITION AGREEMENT

      This NONCOMPETITION AGREEMENT (this "Agreement") is made and entered into
this ____ day of ____________, 1999, by and between Acceptance Insurance
Company, a Nebraska insurance company ("Seller"), Acceptance Insurance Holdings
Inc., a Nebraska corporation ("AIH"), Acceptance Insurance Companies Inc., a
Delaware corporation ("AIC"), each of the Fronting Companies listed on the
signature page hereto, Millers American Group, Inc., a Texas corporation
("Purchaser"), and Phoenix Indemnity Insurance Company, an Arizona insurance
company (the "Company") and The Millers Insurance Company ("Millers").

                             PRELIMINARY STATEMENTS

     A. Pursuant to that certain Purchase Agreement dated May 10, 1999 by and
among Seller, Purchaser and the Company, (the "Purchase Agreement"; capitalized
terms that are not defined in this Agreement shall have the meaning ascribed to
them in the Purchase Agreement) Purchaser has purchased from Seller all of the
capital stock of the Company.

     B. Pursuant to the Purchase Agreement, the Company and Millers have entered
into Continuing State Agreements and Additional State Agreements with certain of
the Fronting Companies, Millers has entered into the Millers Agreement with
Redlands and the Company or Millers have entered into the Retrocession Agreement
with Acceptance Casualty. The Continuing State Agreements, the Additional State
Agreement, the Millers Agreement and the Retrocession Agreement are collectively
referred to herein as the "New Agreements."

     C. Seller, AIH, AIC and the Fronting Companies (collectively, the
"Acceptance Group Members") have through direct or indirect ownership of the
Company, contractual arrangements and other business dealings with the Company
or issuance of Policies included in Nonstandard Business acquired confidential
information with respect to the Company and the insurance business covered by
the New Agreements (the "Business").

     D. The Acceptance Group Members have agreed to execute and deliver this
Agreement as a condition and material inducement to the purchase of the Company
by Purchaser from Seller and the entering into of the New Agreements.

     E. Purchaser desires to protect the value of the Company and the Business
by obtaining from the Acceptance Group Members this Agreement (a) to maintain
the confidentiality of certain information concerning the Company and the
Business and (b) to refrain from competing with the Company and the Millers
Business for a reasonable period of time, pursuant to the provisions of this
Agreement.

      NOW, THEREFORE, in consideration of the premises and of the respective
representations and warranties hereinafter set forth, and of the covenants and
agreements contained herein, the parties hereto agree as follows:

     1. CONFIDENTIAL INFORMATION.

          (a) For purposes of this Agreement, "Confidential Information" shall
mean any proprietary information, and any information which the Company
reasonably considers to be proprietary, pertaining to the Business or the
Company's past, present or prospective business secrets, methods or policies,
earnings, finances, security holders, lenders, key employees, nature of services
performed by the Company's sales administrative personnel, quality control
procedures or standards, procedures and methods of cost or installation of the
Company products or components, Policy Data, information relating to renewals
and expirations of Policies, underwriting guidelines, information relating to
arrangements with suppliers, the identity and requirements of arrangements with
customers or Agents, and the type, volume or profitability of the Business or
insurance written or reinsured by the Company, drawings, records, reports,
documents, manuals, techniques, procedures, formulae, ratings, design
information, data, statistics, trade secrets and all other information of any
kind or character relating to the Company or the Business, whether or not
reduced to writing.

          (b) Each Acceptance Group Member acknowledges that such Acceptance
Group Member has access to Confidential Information and that such Confidential
Information constitutes valuable, special and unique property of the Company and
Millers, as the case may be. At no time shall any Acceptance Group Member (i)
use any Confidential Information in any manner adverse to the business interests
of the Company or Millers or (ii) disclose any such Confidential Information to
any person or entity for any reason or purpose whatsoever; provided that any
Acceptance Group Member may provide such Confidential Information in response to
judicial or administrative process or applicable governmental laws, rules,
regulations orders or ordinances, but only that portion of the documents or
information which, on the advise of counsel, is legally required to be
furnished, and provided that such Acceptance Group Member notifies the Company
and Millers of its obligation to provide such Confidential Information prior to
such disclosure and fully cooperates with the Company and Millers to protect the
confidentiality of such Confidential Information under applicable law. Upon the
request of the Company, each Acceptance Group Member shall deliver to the
Company all letters, notes, computer disks, software, notebooks, reports and
other materials which contain Confidential Information and which are in the
possession or under the control of such Acceptance Group Member, whether or not
prepared by such Acceptance Group Member.

     2. AGREEMENT NOT TO SOLICIT CUSTOMERS, EMPLOYEES OR AGENTS. EAch Acceptance
Group Member agrees that for a period of 24 months following the Closing Date,
such Acceptance Group Member shall not, either alone or on behalf of any
business competing with the Company or the California Business directly or
indirectly (i) solicit or induce, or in any manner attempt to solicit or induce
any person employed by, or an agent of, the Company or Millers to terminate his
contract of employment or agency, as the case may be, with the Company, Millers
or the applicable Fronting Company or (ii) solicit, divert, or attempt to
solicit or divert, as a policyholder, agent, reinsurer, supplier or customer,
any person, concern or entity which, as of the Closing Date or during the one
year period prior thereto was a policyholder of an insurance policy written or
reinsured by the Company or included in the California Business, furnishes
products or services (including reinsurance) to, or receives products and
services from the Company or Millers , nor will any Acceptance Group Member
attempt to induce any policyholder, agent, reinsurer, supplier or customer to
cease being (or any prospective policyholder, agent, reinsurer, supplier or
customer not to become) a policyholder, agent, reinsurer, supplier or customer
of the Company or Millers . Each Acceptance Group Member agrees not to interfere
with the Company's or Millers' favorable relationship with its Agents (including
Agents of the applicable Fronting Company) and not to make disparaging or
negative remarks to Agents regarding the Company, Millers or Purchaser. This
provisions of Section 2(i) and (ii) shall not apply to any solicitation or
inducement directed at the public in general and/or found in general
publications.

     3. NONCOMPETITION.

          (A) RESTRICTED ACTIVITY. For the purposes of this Agreement,
"Restricted Activities" means issuing or reinsuring policies of Private
Passenger Automobile Liability (including No-Fault, Uninsured and Underinsured
Motorists, Medical Payments coverage, and Guest Passenger Liability, as
applicable) and Automobile Physical Damage except pursuant to the New
Agreements.

          (B) COVENANT NOT TO COMPETE. Each Acceptance Group Member agrees that
for a period of 24 months from the date of the Closing Date, it shall not,
directly or indirectly own, manage, operate, control, be employed by,
participate in, or be connected in any manner with the ownership, management,
operations or control of any business or enterprise engaged in the Restricted
Activities within the United States and its territories and possessions.

     4. REASONABLE RESTRICTIONS. It is agreed by the parties that the foregoing
covenants in Sections 2 and 3 impose a reasonable restraint on the Acceptance
Group Members in light of the activities and business of the Company and the
California Business on the date of the execution of this Agreement. Each
Acceptance Group Member further acknowledges and agrees that this Agreement
constitutes a material inducement to Purchaser to purchase the Company and cause
the Company and Millers to enter into the New Agreements and that the sale of
the Company to Purchaser and the transactions contemplated by the Purchase
Agreement result in a material benefit to such Acceptance Group Member. Each
Acceptance Group Member further agrees that $50,000 of the Purchase Price paid
by Purchaser to Seller constitutes a Noncompete Fee to such Acceptance Group
Member of additional consideration for this Agreement and that such payment has
been paid by Purchaser to Seller as the agent for each Acceptance Group Member.
The distribution or allocation of such payment by Seller to each Acceptance
Group Member shall be the sole responsibility of Seller and Purchaser shall have
no obligation to pay or distribute such payment directly to any Acceptance Group
Member other than Seller.

      CHANGE OF CONTROL. Notwithstanding any other provision of this Agreement
to the contrary, the provisions of Sections 2 and 3 of this Agreement shall not
apply to an unrelated third party acquiror of Control (as defined below) of an
Acceptance Group Member (an "Acquiror") engaged prior to or after its
acquisition of control of such Acceptance Group Member in activities that would
constitute Restricted Activities if conducted by an Acceptance Group Member;
provided however, that the provisions of this Agreement shall continue to apply
to such Acceptance Group Member that becomes controlled by such Acquiror and no
Confidential Information shall be provided to or used by such Acquiror. For the
purposes of this Agreement, "Control" means the possession, directly or
indirectly of the power to direct or to cause the direction of the management or
policies of any of the Acceptance Group Members, whether through the ownership
of voting securities, contract or otherwise.

     5. NO VIOLATIONS. Each Acceptance Group Member represents and warrants to
Purchaser and the Company that such Acceptance Group Member has taken no actions
during the period from the date of the Purchase Agreement through the date of
this Agreement that would constitute a violation or breach of any of the terms
of this Agreement if this Agreement were in effect during such period except for
such actions as are permitted pursuant to the Purchase Agreement.

     6. REMEDIES.

          (a) In the event of a breach of any provision of this Agreement by an
Acceptance Group Member, Purchaser, the Company and Millers will be entitled to
recover any damages caused by reason of any such breach, together with any and
all proceeds, funds, payments and proprietary interests, of every kind and
description, arising from, or attributable to, such breach, and to exercise all
other rights existing in its favor. The parties hereto agree and acknowledge
that money damages may not be an adequate remedy for any such breach or
threatened breach of the provisions of this Agreement and that Purchaser, the
Company and Millers may in their sole discretion, in addition to any other
available remedies, apply to any court of law or equity of competent
jurisdiction for and be entitled to specific performance and/or injunctive
relief in order to enforce or prevent any violation of the provisions of this
Agreement. Nothing herein shall be construed as prohibiting the Purchaser, the
Company or Millers from pursuing any other remedies available to the Purchaser,
the Company or Millers for such breach or threatened breach, including the
recovery of damages from the Acceptance Group Members.

          (b) In the event of any breach of any of the covenants contained in
Sections 2 or 3 hereof, the periods provided in Sections 2 or 3, as the case may
be, shall be tolled (i.e., such periods shall not run during a breach of any
such covenant) during the time of such violation.

          (c) In the event a party hereto brings an action under this Agreement,
the prevailing party in such dispute shall be entitled to recover from the
losing party all fees, costs and expenses of enforcing any right of such
prevailing party under or with respect to this Agreement, including without
limitation such reasonable fees and expenses of attorneys and accountants, which
shall include, without limitation, all fees, costs and expenses of appeals.

     7. MATERIALITY OF PROVISIONS. Each Acceptance Group Member agrees that each
of the covenants and agreements contained in this Agreement are a material and
substantial part of the transactions contemplated by the Purchase Agreement.

     8. SURVIVAL. The respective representations, warranties and agreements of
the parties set forth herein shall survive consummation of any transactions
contemplated by the Purchase Agreement.

     9. INVALID PROVISIONS. If any provision hereof is held to be illegal,
invalid or unenforceable under present or future laws effective during the term
hereof, such provision shall be fully severable. This Agreement shall be
construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part hereof, and the remaining provisions hereof shall
remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom. Furthermore, in
lieu of such illegal, invalid or unenforceable provision there shall be added
automatically by Purchaser as a part hereof a provision as similar in terms to
such illegal, invalid or unenforceable provision as may be possible and legal,
valid and enforceable.

     10. WAIVER OF BREACH. The waiver of any party to this Agreement of a breach
of any provision of this Agreement shall not operate or be construed as a waiver
of any subsequent breach by any party.

     11. ENFORCEABILITY. Each party to this Agreement represents and warrants to
the other party that this Agreement has been duly authorized, executed and
delivered by such party and constitutes a valid and binding obligation of such
party, enforceable against such party in accordance with its terms, except as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting the enforcement of creditors' rights generally.

     12. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties hereto with respect to the subject matter hereof. No modification or
amendment of any of the terms, conditions or provisions of this Agreement may be
made otherwise than by written agreement signed by the parties hereto.

     13. CAPTIONS. The captions, headings and arrangements used in this
Agreement are for convenience only and do not in any way limit or amplify the
terms and provisions hereof.

     14. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, successors, and
assigns.

     15. GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. This agreement shall be
construed in all respects under the laws of the state of Texas without regard to
the dictates of conflicts of laws thereof and the parties agree to submit to
exclusive jurisdiction and venue in the united states federal district court for
the northern district of Texas, Dallas division, or the district courts of
Dallas or Tarrant County, Texas. Each party hereto waives its right to trial by
jury in any dispute with the other party arising in connection with this
agreement.

     16. NUMBER AND GENDER. Whenever the singular number is used herein, the
same shall include the plural where appropriate, and words of any gender shall
include each other gender where appropriate.

     17. NOTICES. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be sent by certified mail, return
receipt requested (or by the most nearly comparable method if mailed from or to
a location outside of the United States), or by cable, telex, telegram or
facsimile transmission, or delivered by hand or by overnight or similar delivery
service, fees prepaid, to the party to whom it is to be given at the address of
such party set forth below or to such other address for notice as such party
shall provide in accordance with the terms of this section. Except as otherwise
specifically provided in this Agreement, notice so given shall, in the case of
notice given by certified mail (or by such comparable method) be deemed to be
given and received three business days after the time of certification thereof
(or comparable act), in the case of notice so given by overnight delivery
service, on the date of actual delivery, and, in the case of notice so given by
cable, telegram, facsimile transmission, telex or personal delivery, on the date
of actual transmission or, as the case may be, personal delivery.

If to any Acceptance Group Member:  Acceptance Insurance Companies Inc.
                                    222 South 15th Street
                                    Suite 600 North
                                    Omaha, Nebraska 68102-1616
                                    Attn:  Kenneth L. Coon, Chairman
                                    J. Michael Gottschalk, General Counsel
                                    Facsimile No. 402-345-9190

If to Purchaser, Company or Millers:  Millers American Group, Inc.
                                    300 Burnett Street
                                    Fort Worth, Texas  76102
                                    Attn:  David N. Thompson
                                    Facsimile No. 817-348-3480

     18. COUNTERPARTS. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original for all purposes and all of which
shall be deemed collectively to be one agreement, but in making proof hereof it
shall be necessary to exhibit only one such counterpart.

                            [Signature Page Follows]

<PAGE>

      IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.

                                    SELLER:

                                    ACCEPTANCE INSURANCE COMPANY,
                                    a Nebraska insurance company

                                    By:   ___________________________________
                                    Name: ___________________________________
                                    Title: __________________________________

                                    AIH:

                                    ACCEPTANCE INSURANCE HOLDINGS INC.,
                                    a Nebraska corporation

                                    By:   ___________________________________
                                    Name: ___________________________________
                                    Title: __________________________________

                                    AIC:

                                    ACCEPTANCE INSURANCE COMPANIES INC., a
                                    Delaware corporation

                                    By:   ___________________________________
                                    Name: ___________________________________
                                    Title: __________________________________

                                    FRONTING COMPANIES:

                                    ACCEPTANCE INDEMNITY INSURANCE COMPANY

                                    By:   ___________________________________
                                    Name: ___________________________________
                                    Title: __________________________________

                                    ACCEPTANCE CASUALTY INSURANCE COMPANY

                                    By:   ___________________________________
                                    Name: ___________________________________
                                    Title: __________________________________

                                    REDLAND INSURANCE COMPANY

                                    By:   ___________________________________
                                    Name: ___________________________________
                                    Title: __________________________________

                                    COMPANY:

                                    PHOENIX INDEMNITY INSURANCE COMPANY, an
                                    Arizona insurance company

                                    By:   ___________________________________
                                    Name: ___________________________________
                                    Title: __________________________________

                                   PURCHASER:

                                    MILLERS AMERICAN GROUP, INC.,
                                    a Texas corporation

                                    By:   ___________________________________
                                    Name: ___________________________________
                                    Title: __________________________________

                                    MILLERS:

                                    THE MILLERS INSURANCE COMPANY

                                    By:   ___________________________________
                                    Name: ___________________________________
                                    Title: __________________________________

<PAGE>

                                    EXHIBIT F

                                 FORM OF RELEASE

      The undersigned is [a direct or indirect shareholder or controlling person
of] [an officer or director of] [a Pooling Participant with] Phoenix Indemnity
Insurance Company, an Arizona insurance company (the "Company"), which is a
party to that certain Purchase Agreement (the "Purchase Agreement"), dated as of
May 10, 1999, by and between Millers American Group, Inc. (the "Purchaser"),
Acceptance Insurance Company (the "Seller") and the Company. This Release is
executed and delivered pursuant to Section 6.15 of the Purchase Agreement, in
consideration of the execution, delivery and performance of the Purchase
Agreement by the parties thereto. Capitalized terms not otherwise defined herein
have the meaning ascribed to such terms as set forth in the Purchase Agreement.

      The undersigned, for himself or itself, his heirs, personal
representatives, successors and assigns, does hereby release, acquit, discharge
and covenant not to sue the Company, its officers, directors, agents, attorneys,
employees, successors and assigns, with respect to all past, present and future
claims, expenses, losses, liabilities and obligations of any nature whatsoever,
whether accrued or contingent, known or unknown, whether sounding in contract,
tort or otherwise, based in whole or in any material part upon facts and
circumstances in existence as of the Closing Date other than the following:

      [Identify specific agreements as applicable.]

      This Release may not be amended or terminated and no provision hereof may
be waived, absent a writing executed by the undersigned and the Company.

                                        _______________________________________

<PAGE>

                                    EXHIBIT G

                           PURCHASER'S COUNSEL OPINION

A.    Opinion from Akin, Gump, Strauss, Hauer, & Feld, L.L.P.

     1. The Purchaser is a Texas corporation duly organized and validly existing
and in good standing under the laws of the State of Texas. The Purchaser has all
requisite power and authority to enter into the Agreement, to perform the
obligations thereunder and to consummate the transactions contemplated thereby.
All corporate acts and other proceedings required to be taken by the Purchaser
to authorize the execution, delivery and performance of the Agreement and the
consummation of the transactions contemplated thereby have been duly and
properly taken. The Agreement has been duly executed and delivered by the
Purchaser and (assuming that it has been duly executed and delivered by all
parties thereto other than the Purchaser) constitutes legal, valid and binding
obligation of the Purchaser, enforceable against the Purchaser in accordance
with its terms except as enforcement thereof may be limited by applicable
liquidation, conservatorship, bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or similar laws affecting the enforcement of
creditor's rights generally from time to time in effect and except that
equitable remedies are subject to judicial discretion.

B.    Opinion from Angela Robinson, General Counsel

     1. The execution and delivery of the Agreement by the Purchaser does not,
and the consummation of the transactions contemplated thereby and compliance
with the terms thereof shall not, conflict with, or result in any violation of
or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any material
obligation or to loss of a benefit under, or result in the creation of any lien,
claim, encumbrance, security interest, option, charge or restriction of any kind
upon any of the properties or assets of the Purchaser under, any provision of
(i) the Articles of Incorporation or bylaws of the Purchaser, (ii) to the best
of my knowledge, any note, bond, mortgage, indenture, deed of trust, license,
lease, contract, commitment, agreement or arrangement to which the Purchaser is
a party or by which any of its respective properties or assets are bound or
(iii) to the best of my knowledge, any judgment, order or decree, or statute,
law, ordinance, rule or regulation applicable to the Purchaser or its properties
or assets other than, in the case of clauses (ii) and (iii) above, any such
items that, individually or in the aggregate, would not have a Material Adverse
Effect on the ability of the Purchaser to consummate the transactions
contemplated thereby. No consent, approval, license, permit, order or
authorization of, or registration, declaration or filing with, any Governmental
Authority or any other Person is required to be obtained or made by or with
respect to the Purchaser in connection with the execution, delivery and
performance of the Agreement or the consummation of the transactions
contemplated thereby, other than (i) compliance with and filings under the HSR
Act, if applicable, (ii) compliance with and filings under any applicable state
insurance or insurance holding company laws and (iii) those which if not
obtained would have no Material Adverse Effect on the ability of the Purchaser
to consummate the transactions contemplated thereby.

<PAGE>

                                    EXHIBIT H

                            SELLER'S COUNSEL OPINION

A.    Opinion from Kutak Rock

     1. Seller is an insurance company duly organized, validly existing and in
good standing under the laws of the State of Nebraska. The Company is a property
and casualty insurance company duly organized, validly existing and in good
standing under the laws of the State of Arizona. The Company, Seller and each
affiliate of Seller that is a party to any Transaction Document (an "Affiliate")
have all requisite corporate power and authority to execute and deliver the
Transaction Documents to which it is a party, to perform its obligations
thereunder and to consummate the transactions contemplated thereby. Based solely
on a review of the certificates of authority and having no knowledge to the
contrary, we are of the opinion that the Company is duly qualified as a foreign
insurance Company to do business, and is in good standing with authority to
write the lines of insurance business listed in the Annual Statement in each
jurisdiction listed in the Annual Statement.

     2. The execution, delivery and performance of the Transactions Documents,
and the consummation of the transactions contemplated thereby have been duly and
validly authorized by all necessary corporate action on the part of the Seller,
the Company and the applicable Affiliate. The Transaction Documents have been
duly executed and delivered by a duly authorized officer of the Seller, the
Company and the applicable Affiliate, as the case may be, and constitute legal,
valid and binding obligations of the Seller, the Company and such Affiliate
enforceable against the Seller, the Company and such Affiliate in accordance
with their terms except as enforcement thereof may be limited by applicable
liquidation, conservatorship, bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other laws effecting creditors' rights and except
that equitable remedies are subject to judicial discretion.

     3. The Company has full corporate power and authority necessary to enable
it to own, lease or otherwise hold its properties and assets and to carry on its
business as presently conducted.

     4. On the Closing Date, assuming the Purchaser purchases the Shares in good
faith and without notice of the existence of any lien or adverse claim, the
Purchaser will have acquired the rights of a bona fide purchaser free of any
adverse claim.

     5. The authorized capital stock of the Company consists of 500,000 shares
of Common Stock, par value $6.00 per share, of which 500,000 are duly authorized
and validly issued and outstanding, fully paid and nonassessable and held solely
by Seller. Except for the Shares, there are no shares of capital stock or other
equity securities of the Company outstanding. To the best best of our knowledge,
none of the Shares have been issued in violation of, and none of the Shares are
subject to, any purchase option, call, right of first refusal, preemptive,
subscription or similar rights under any provision of applicable law, the
articles of incorporation or by-laws of the the Company, any contract, agreement
or instrument to which the Company is subject, bound or a party or otherwise or
federal or state securities laws. To the best of our knowledge, there are no
outstanding warrants, options, rights, "phantom" stock rights, agreements,
convertible or exchangeable securities or other commitments pursuant to which
the Company is or may become obligated to issue, sell, purchase, return,
register or redeem any shares of capital stock or other securities of the
Company. There are no equity securities of the Company reserved for issuance for
any purpose. Seller has good and valid title to all the outstanding shares of
capital stock of the Company free and clear of any liens. There are no
outstanding bonds, debentures, notes or other indebtedness having the right to
vote on any matters on which stockholders of the Company may vote. No corporate
proceedings or consent on the part of any direct or indirect stockholder of the
Seller is necessary for the execution and delivery of the Transaction Documents
and the consummation by the Seller, the Company and the applicable Affiliate of
the transactions contemplated thereby.

     6. Except as set forth in Schedule 3.12 to the Agreement, to the best of
our knowledge there are no lawsuits, claims, actions, arbitrations, grievances,
proceedings or investigations pending, or threatened, against the Company or any
of its respective properties, assets, operations or businesses, at law, in
equity, or before any federal, state, municipal or other governmental or
nongovernmental department, commission, board, bureau, agency or
instrumentality, foreign or domestic. There are no outstanding or unsatisfied
judgments, orders, decrees or stipulations to which the Company is a party,
which involve the transactions contemplated herein, or which would have an
adverse effect upon the business, business prospects, assets or financial
condition of the Company. Except as set forth in Schedule 3.12 to the Agreement,
neither the Company nor the Seller is a party or subject to or in default under
any judgment, order, injunction or decree of any Governmental Authority or
arbitration tribunal applicable to it or any of its respective properties,
assets, operations or business. Except as set forth in Schedule 3.12 to the
Agreement, there is no lawsuit or claim by the Company or the Seller pending, or
to the best of our knowledge, contemplated by the Company to initiate against
any other Person. Except as set forth in Schedule 3.12 to the Agreement, to the
best of our knowledge, there is no pending or threatened investigation of the
Company or the Seller by any Governmental Authority.

B.    Opinion from J. Michael Gottschalk, General Counsel

     7. The execution and delivery of the Transaction Documents by the Seller,
the Company and each Affiliate do not, and the consummation of the transactions
contemplated thereby and compliance with the terms thereof will not, conflict
with, or result in any violation of or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a benefit under, or result in the
creation of any lien, claim, encumbrance, security interest, option, charge or
restriction of any kind upon any of the properties or assets of the Seller, the
Company or such Affiliate under any provision of (i) the Articles of
Incorporation or bylaws of the Seller, the Company or such Affiliate, (ii) to
the best of my knowledge, any note, bond, mortgage, indenture, deed of trust,
license, lease, contract, commitment, agreement or arrangement to which the
Seller, the Company or such Affiliate is a party or by which any of its
respective properties or assets are bound or (iii) to the best of my knowledge,
any judgment, order or decree, or statute, law, ordinance, rule or regulation
applicable to the Seller, the Company or such Affiliate or its properties or
assets other than, in the case of clauses (ii) and (iii) above, any such items
that, individually or in the aggregate, would not have a Material Adverse Effect
on the Company or on the ability of the Seller, the Company or such Affiliate to
consummate the transactions contemplated thereby. No consent, approval, license,
permit, order or authorization of, or registration, declaration or filing with,
any Governmental Authority or other Person is required to be obtained or made by
or with respect to the Seller, the Company or any Affiliate in connection with
the execution, delivery and performance of the Transaction Documents or the
consummation of the transactions contemplated thereby other than (i) compliance
with and filings under the HSR Act, if applicable, (ii) compliance with and
filings under any applicable state insurance or insurance holding company laws
and (iii) those which if not obtained would have no Material Adverse Effect on
the Company or on the ability of the Seller, the Company or such Affiliate to
consummate the transactions contemplated thereby.

     8. Schedule 3.26 to the Agreement sets forth a true and complete list of
all licenses, permits and authorizations issued or granted to the Company by
Governmental Authorities that are necessary or desirable for the conduct of the
business of the Company, and such licenses, permits and authorizations are in
full force and effect. Except as set forth in Schedule 3.26 to the Agreement,
all such licenses, permits and authorizations are validly held by the Company
and the Company has complied in all respects with all terms and conditions
thereof and the same will not be subject to suspension, modification, revocation
or nonrenewal as a result of the execution and delivery of the Transaction
Documents or the consummation of the transactions contemplated thereby. To the
best of my knowledge, the Company has complied with all laws, rules,
regulations, ordinances, codes, licenses, clearances, permits, franchises,
grants, authorizations, easements, consents, certificates and orders relating to
its properties or applicable to its business, including but not limited to,
labor, equal employment opportunity, insurance regulatory matters, zoning or
building regulations, consumer protection, environmental, securities and
antitrust laws and regulations, and no Governmental Authority or other Person
has notified the Company or the Seller that any violation of any such laws or
regulations exists. I have no knowledge of any pending or threatened action or
proceeding that could result in a modification or termination of laws or
regulations which modification or termination would adversely affect the
Company.Exhibit 10.6

                             AMENDED AND RESTATED
                       CONSOLIDATED FEDERAL INCOME TAX
                             ALLOCATION AGREEMENT

      This Amended and Restated Consolidated Federal Income Tax Allocation
Agreement (this "Amended and Restated Allocation Agreement") is made and entered
into this 30th day of December, 1999.

      WHEREAS, The Millers Mutual Fire Insurance Company ("Mutual") and all of
its includible subsidiaries, within the meaning of Section 1504 of the Internal
Revenue Code of 1986, as amended (the "Code"), constituted a consolidated group
for federal income tax purposes and filed a Consolidated Income Tax Return; and

      WHEREAS, Mutual and its includible subsidiaries entered into that certain
Consolidated Federal Income Tax Allocation Agreement (the "Allocation
Agreement") effective as of January 1, 1994; and

      WHEREAS, subsequent to the effective date of the Allocation Agreement, two
new companies, Millers Holding Corporation and INSpire Insurance Solutions, Inc.
(f/k/a Millers Integrated Claims Resources, Inc. and MiliRisk, Inc.)
("INSpire"), were formed, and agreed to abide by and be bound by the terms of
the Allocation Agreement, and evidenced such agreement by executing that certain
Addendum to Consolidated Federal Income Tax Allocation Agreement effective as of
the 20th day of September, 1995; and

      WHEREAS, subsequent to the effective date of the Allocation Agreement,
INSpire acquired Strategic Data Systems, Inc., a Wisconsin corporation ("SDS"),
which in turn wholly owned Applied Quoting Systems, Inc., a Wisconsin
corporation ("AQS"), and SDS was merged with and into INSpire; and

      WHEREAS, subsequent to the effective date of the Allocation Agreement,
Millers Holding Corporation acquired two companies, The Millers Direct Insurance
Company (f/k/a Amtex Insurance Company) ("Millers Direct") and The Millers
Specialty Insurance Company (f/k/a Lutheran Benevolent Insurance Exchange)
("Millers Specialty"); and

      WHEREAS, in August 1997, Mutual sold an amount of stock of INSpire in
INSpire's initial public offering ("IPO") which caused INSpire and AQS to be
ineligible to continue to be included in a Consolidated Income Tax Return; and

      WHEREAS,  pursuant to Addendum No. 2 to Consolidated  Federal Income Tax
Allocation  Agreement  ("Addendum  No. 2"),  among other things,  (i) INSpire,
AQS,  Millers  Direct  and  Millers  Specialty  agreed  to  be  bound  by  the
Allocation  Agreement and (ii) the  Allocation  Agreement was terminated as to
INSpire and AQS;

      WHEREAS,  after  Addendum No. 2, Millers  Holding  Corporation  acquired
Millers General Agency, Inc. ("Agency");

      WHEREAS,  after Addendum No. 2, Millers Holding Corporation sold Millers
Specialty;

      WHEREAS, on April 21, 1999, Mutual converted (the "Conversion") from a
mutual insurance company to a stock insurance company (as converted, "Millers
Insurance"), changed its name to "The Millers Insurance Company," and became a
wholly-owned subsidiary of Trilogy Holdings, Inc., a Nevada corporation
("Trilogy"), which in turn is a wholly-owned subsidiary of Millers American
Group, Inc., a Texas corporation ("Millers American");

      WHEREAS,   after  the  Conversion,   Millers  American  formed  two  new
companies,   Financial  &  Actuarial  Resources,  Inc.,  a  Texas  corporation
("FAR"),  and  Effective  Litigation  Management,  Inc.,  a Texas  corporation
("ELM");

      WHEREAS,  in September 1999, Millers American acquired Phoenix Indemnity
Insurance Co., an Arizona insurance company ("Phoenix");

      WHEREAS, Millers American and all of its includible subsidiaries (the
"Subsidiary Companies"), within the meaning of Section 1504 of the Code,
constitute a consolidated group (the "Group") for federal income tax purposes
and intend to file a Consolidated Income Tax Return (the "Consolidated Return").

      NOW, THEREFORE, the parties hereto agree as follows:

       1.   EFFECTIVE PERIOD OF CONSOLIDATION.

            The election to allocate the Consolidated Tax Liability under IRC
            Section 1552 shall be effective as of January 1, 1999 through
            December 31, 1999 and for subsequent years as determined by Millers
            American.

       2.   ALLOCATION OF CONSOLIDATED TAXABLE INCOME OR LOSS.

            A consolidated Federal Income Tax Return will be filed for Millers
            American and all includible subsidiaries. The taxable income or loss
            for each Subsidiary Company will be computed and calculated in
            accordance with the Code, as though that company were filing a
            separate return. The amount of taxable income or loss for each
            company will then be used in computing such company's portion of the
            current tax liability or benefit.

       3.   DETERMINATION OF CURRENT TAX LIABILITY OR BENEFIT.

            (a)   Each Subsidiary  Company will compute its current  estimated
                  tax liability or benefit  based upon the  company's  taxable
                  income or loss.  These tax  calculations  will be determined
                  as if the  company  had filed a separate  tax return and was
                  not  part of a  consolidated  group.  Each  company  will be
                  liable for the tax liability  computed  under this method or
                  will be entitled to receive a benefit for its loss  utilized
                  in the  Consolidated  Return.  Any taxable loss not utilized
                  in the current or prior  years' tax returns  will be carried
                  forward by such  company.  The benefit will be recognized by
                  the  company  when  the   carryforward   is  utilized  in  a
                  subsequent taxable year.

            (b)   Pursuant to IRC Regulation Section 1.1552-1(c), Millers
                  American as the common parent has elected to allocate the tax
                  liability of the group in the manner provided by IRC
                  Regulations Section 1.1552-1(a)(2).

                  Further, pursuant to IRC Regulation Section 1.1502-33(d)(1),
                  Millers American has elected to allocate the Federal income
                  tax liability of the group beginning with the taxable year
                  ending December 31, 1999 in the manner provided by Regulation
                  Section 1.1502-33(d)(3) in conjunction with the method
                  described in Regulation Section 1.1552-1(a)(2). In reference
                  to Regulation Section 1.1502-33(d)(2)(ii), the percentage of
                  the excess provided in Regulation Section 1.1502-33(d)(3)(i)
                  to be allocated to each member is 100%.

       4.   PAYMENT OF CURRENT TAX LIABILITIES OR REFUNDS.

            Final calculations will be made and the Subsidiary Companies will
            remit any adjusted tax liabilities to Millers American within 30
            days after the filing of the Consolidated Tax Return. Millers
            American will remit any refunds and/or benefits simultaneously to
            the appropriate Subsidiary Company.

       5.   REPRESENTATIONS AND AGREEMENTS.

            (a)  Within 90 days after filing the Consolidated Return or any
                 amendment thereto, an additional review and adjustment (where
                 necessary) will be made to insure that;

                 1.   The allocated tax liability for the companies will not be
                      greater than the tax liability they would have incurred if
                      they had been filing separate returns for all years of the
                      consolidated period; and

                 2.   The allocated tax refund for the companies will not be
                      less than the tax refund they would have incurred if they
                      had been filing separate returns for all years of the
                      consolidation period.

           (b)  In the event of any adjustment to the federal income tax
                liability of the Group (by reason of an amended return, claim
                for refund, or an audit by the Internal Revenue Service), the
                liability of Millers American and the Subsidiary Companies under
                Section 5(a) above shall be redetermined to give effect to any
                such adjustment as if it has been made as part of the original
                computation of tax liability, and payments between Millers
                American and the appropriate Subsidiary Company or Subsidiary
                Companies shall be made within 90 days after any payments
                reflecting such adjusted liability are made to the Internal
                Revenue Service (or refunds reflecting such adjusted liability
                are received from the Internal Revenue Service), or, in the case
                of contested proceedings, within 90 days after a final
                determination of the contest.

           (c)  Records of the tax allocations, the subsequent review of such
                allocations, and any adjustments specified by 5(a) above will be
                maintained at the office of Millers American.

           (d)  The Texas domestic insurers which are parties to this Agreement
                shall be indemnified by Millers American Group Inc. in the event
                the Internal Revenue Service levies upon the insurers company's
                assets for unpaid taxes in excess of the amount paid under this
                Agreement.

      6.   ACQUISITION OR FORMATION OF SUBSIDIARIES

           Any subsidiaries acquired, formed, or to be acquired or formed in the
           future shall become parties to this tax sharing agreement when such
           subsidiaries become members of the consolidated group for federal
           income tax purposes.

      7.   MILLERS SPECIALTY

           Subject to Section 11 hereof, this Amended and Restated Allocation
           Agreement shall be terminated as to Millers Specialty (a "Withdrawing
           Member") as of December 11, 1998, but will continue in full force and
           effect with respect to the other parties to this Amended and Restated
           Allocation Agreement.

      8.   FAR

           Effective as of June 9, 1999, FAR agrees to abide by and be bound by
           the terms of the Amended and Restated Allocation Agreement.

      9.   ELM

           Effective as of May 7, 1999, ELM agrees to abide by and be bound by
           the terms of the Amended and Restated Allocation Agreement.

     10.   PHOENIX

           Effective as of September 1, 1999, Phoenix agrees to abide by and be
           bound by the terms of the Amended and Restated Allocation Agreement.

     11.   WITHDRAWING MEMBERS

           Notwithstanding a termination as to the Withdrawing Member as
           provided in Section 7 above, the Amended and Restated Allocation
           Agreement shall continue in effect with respect to all parties to the
           Amended and Restated Allocation Agreement, including such Withdrawing
           Member, with respect to any payments or refunds due or any other
           obligations relating to taxable periods prior to termination. All
           parties, including the Withdrawing Member, agree that Millers
           American shall represent the Group in any income tax proceeding,
           audit, or other matter relating to a taxable period for which a
           Consolidated Return has been filed by the Group and may bind the
           Group with respect to items in that year. Notwithstanding the
           foregoing sentence, Millers American agrees to notify a Withdrawing
           Member of any material adjustment proposed by the Internal Revenue
           Service that either would give rise to any obligation of such
           Withdrawing Member to Millers American and to contest at such
           Withdrawing Member's request, expense and direction, through counsel
           reasonably satisfactory to such Withdrawing Member, any such proposed
           adjustment until final judgment by the highest court having
           jurisdiction thereof. In the event of any adjustment to the
           Consolidated Returns as filed (by reason of an amended return, claim
           for refund, settlement of an Internal Revenue Service or judicial
           action), the respective obligations of the parties hereunder shall be
           redetermined to give effect to any such adjustment in accordance with
           the Amended and Restated Allocation Agreement as if it had been made
           a part of the original computations thereunder, and any additional
           accounting entries, payments or reimbursements between the parties as
           may be required on account thereof shall be made promptly, in the
           case of an uncontested adjustment, after agreement thereon is
           reached, or, in the case of a contested adjustment after a final
           determination of the contest. If any interest or penalty is to be
           paid or received as a result of a tax deficiency or refund, such
           interest or penalty shall be allocated to the parties in the ratio
           each company's change in taxable income bears to the total change in
           taxable income.

     12.   SUCCESSORS

           This Amended and Restated Allocation Agreement shall be binding upon
           and inure to the benefit of any successor, whether by statutory
           merger, acquisition of assets, or otherwise, to any of the parties
           hereto, to the same extent as if the successor had been an original
           party to this Amended and Restated Allocation Agreement.

     13.   TEXAS DEPARTMENT OF INSURANCE APPROVAL

           Notwithstanding any other provision hereof, this Amended and Restated
           Allocation Agreement shall not become effective and binding on the
           parties hereto until this Amended and Restated Allocation Agreement
           is filed with and approved by the Texas Department of Insurance as
           may be required under applicable insurance holding company laws and
           regulations.

                           [SIGNATURE PAGE FOLLOWS]

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Allocation Agreement to be executed by their duly authorized
representatives.

Millers American Group, Inc.                 Millers Holding Corporation

By:  /S/ JILL H. DRIGGERS                    By:  /S/ JILL H. DRIGGERS
     ---------------------------------          -------------------------------

Trilogy Holdings, Inc.                       Millers General Agency, Inc.

By:  /S/ JILL H. DRIGGERS                    By:  /S/ JILL H. DRIGGERS
     ---------------------------------          -------------------------------

The Millers Insurance Company                Financial & Actuarial Resources,
                                                Inc.

By:  /S/ JILL H. DRIGGERS                    By:  /S/ JILL H. DRIGGERS
     ---------------------------------          -------------------------------

Phoenix Indemnity Insurance Co.              Effective Litigation Management,
                                                Inc.

By:  /S/ JILL H. DRIGGERS                    By:  /S/ JILL H. DRIGGERS
     ---------------------------------          -------------------------------

The Millers Casualty Insurance Company       The Millers Direct Insurance
                                                Company

By:  /S/ JILL H. DRIGGERS                    By:  /S/ JILL H. DRIGGERS
     ---------------------------------          -------------------------------

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