Exhibit

Description

A

Form of Certificate of Merger

          (a)      The directors of Sub immediately before the Effective Time will be the initial directors of the Surviving Corporation and will hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal.

          (b)      The officers of the Company immediately before the Effective Time will be the initial officers of the Surviving Corporation and will hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal.

          (a)      The Company, acting through its Board of Directors, will, in accordance with the MBCA and its Articles of Incorporation and Bylaws:

          (i)      duly call, give notice of, convene and hold a special meeting of its shareholders (the "Special Meeting") as soon as reasonably practicable following the signing of this Agreement for the purpose of considering and approving the Merger,

         (ii)     subject to the fiduciary obligations of the Board under applicable law as advised by outside legal counsel, include in the Proxy Statement (as defined in Section 5.1) the recommendation of the Board that shareholders of the Company vote to approve the Merger and this Agreement and use its reasonable efforts to solicit and obtain the consent of shareholders sufficient to approve the Merger and this Agreement and to enable the Closing to occur as promptly as practicable.

         (b)      Parent agrees that it will vote, or cause to be voted, all of the shares of Sub owned by it in favor of approval of the Merger and this Agreement.

          (a)      Merger Consideration. Each share of Company common stock, $1.00 par value ("Company Common Stock"), issued and outstanding immediately before the Effective Time (other than any shares of Company Common Stock held by Parent, Sub or any wholly-owned subsidiary of Parent or Sub or by any wholly-owned subsidiary of the Company, which shares of Company Common Stock will be canceled and retired and will cease to exist with no payment being made with respect to those shares) together with the associated rights attached to each share of Company Common Stock (the "Rights") as provided in the Rights Agreement, as amended, between the Company and First Chicago Trust Company of New York dated December 14, 1989 (the "Rights Agreement") will be converted into the right to receive $29.25 in cash, without interest or other payment in respect thereof (the "Per Share Cash Consideration").

          (b)      Conversion and Cancellation of Shares. All shares of Company Common Stock and the associated Rights will no longer be outstanding and automatically will be canceled and retired, and each certificate previously representing any shares of Company Common Stock will thereafter represent the right to receive the Per Share Cash Consideration. Each holder of a certificate representing shares of Company Common Stock will cease to have any rights with respect to the certificate, except the right to receive the Per Share Cash Consideration upon the surrender of the certificate in accordance with Section 2.2.

          (c)      Adjustments. If between the date of this Agreement and the Effective Time the outstanding shares of Company Common Stock changes into a different number of shares, by reason of any stock dividend, reclassification, recapitalization, split, combination or exchange of shares, the amount of the Per Share Cash Consideration to be received by

          (d)      Effect on Sub's Capital Stock. Each share of capital stock of Sub issued and outstanding immediately before the Effective Time will be converted into and become one fully paid and nonassessable share of common stock, $1.00 par value, of the Surviving Corporation.

          (a)      Exchange Agent. Before the Effective Time, Parent will designate the Company's transfer agent or another bank or trust company reasonably acceptable to the Company to act as agent for the holders of shares of Company Common Stock in connection with the Merger (the "Exchange Agent") to receive the funds necessary to make the payments required by Section 2.1(a). At the Effective Time, Parent will deposit, or cause to be deposited, in trust with the Exchange Agent for the benefit of holders of shares of Company Common Stock the aggregate Per Share Cash Consideration to which the holders are entitled at the Effective Time pursuant to Section 2.1(a).

          (b)      Surrender Procedures. Each holder of a certificate or certificates representing any shares of Company Common Stock cancelled in the Merger, which immediately before the Effective Time represented outstanding shares of Company Common Stock (the "Certificates"), and whose shares were converted pursuant to Section 2.1(a), may thereafter surrender the Certificate or Certificates to the Exchange Agent to effect the surrender of the Certificate or Certificates on the holder's behalf for a period ending 180 days after the Effective Time. Parent agrees that promptly after the Effective Time it will cause to be distributed to record holders of shares of Company Common Stock as of the Effective Time appropriate materials to facilitate the surrender, including (i) a letter of transmittal (which will specify that delivery will be effected, and risk of loss and title to the Certificates will pass, only upon delivery of the Certificates to the Exchange Agent and will be in a form and have other provisions as Parent may reasonably specify) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for the Per Share Cash Consideration. Upon the surrender of Certificates, together with a letter of transmittal duly executed and other documents as may be reasonably required by the Exchange Agent, Parent will cause the Exchange Agent to pay to each holder of a Certificate in exchange therefor cash in an amount equal to the Per Share Cash Consideration multiplied by the number of shares represented by the Certificate. Until surrendered, each Certificate (other than Certificates representing shares held by Parent) will represent solely the right to receive the aggregate Per Share Cash Consideration relating to the Certificate.

          (c)      Payment to Persons Other Than Record Holders. If payment of the Per Share Cash Consideration in respect of cancelled Certificates is to be made to a person other than the person in whose name a surrendered Certificate is registered, it will be a condition to payment that the Certificate surrendered be properly endorsed with signatures guaranteed and otherwise be in proper form for transfer and that the person requesting the payment have

          (d)      Stock Transfer Books. At the Effective Time, the stock transfer books of the Company will be closed and there will not be any further registration of transfers of any shares of capital stock on the records of the Company. From and after the Effective Time, the holders of Certificates will cease to have any rights with respect to the shares, except as otherwise provided for in this Agreement or by applicable law. If, after the Effective Time, Certificates are presented to the Surviving Corporation, they will be cancelled and exchanged for cash as provided in this Article II. No interest will accrue or be paid on any cash payable upon the surrender of a Certificate or Certificates which immediately before the Effective Time represented outstanding shares of Company Common Stock.

          (e)      Termination of Exchange Agent's Duties. Promptly following the date which is 180 days after the Effective Time, the Surviving Corporation may require the Exchange Agent to deliver to it any cash (including interest received with respect thereto), Certificates and other documents in its possession relating to the Merger, which had been made available to the Exchange Agent and which have not been disbursed to holders of Certificates, and thereafter the holders will be entitled to look to the Surviving Corporation (subject to abandoned property, escheat or similar laws) only as general creditors thereof with respect to the Per Share Cash Consideration payable upon due surrender of their Certificates, without interest. Notwithstanding the foregoing neither the Surviving Corporation nor the Exchange Agent will be liable to any holder of a Certificate for Per Share Cash Consideration delivered to a public official under any applicable abandoned property, escheat or similar law.

          (f)      Withholding. The Per Share Cash Consideration paid in the Merger will be net to the holder of shares of Company Common Stock in cash, subject to reduction for any applicable federal, state or local tax withholding or, as set forth in Section 2.2(c), stock transfer taxes payable by the holder. If amounts are deducted and withheld by Parent or the Exchange Agent, (i) the amounts will be paid over to the applicable tax authority in a commercially reasonable manner and time and (ii) the amounts will be treated for purposes of this Agreement as having been paid to the holder of the shares in respect of which the deduction and withholding was made.

          (g)      Lost, Stolen or Destroyed Certificates. If any Certificate evidencing shares of Company Common Stock is lost, stolen or destroyed, the Exchange Agent will issue in exchange for that Certificate, upon the making of an affidavit by the holder, the Per Share Cash Consideration; provided, however, that Parent may, in its reasonable discretion and as a condition precedent to the payment of the Per Share Cash Consideration require the owner of the lost, stolen or destroyed Certificate to deliver a bond in a sum that Parent reasonably may direct as indemnity against any claim that may be made against Parent, the Surviving Corporation or the Exchange Agent with respect to the Certificate alleged to have been lost, stolen or destroyed.

          (a)      Each subsidiary of the Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all corporate power and authority and all material governmental licenses, authorizations, consents and approvals required to own, lease and operate its properties and to carry on its business as now conducted. Each subsidiary is duly qualified to do business in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted makes qualification necessary, except in those jurisdictions where the failure to be duly qualified and in good standing would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. The Disclosure Schedule lists all subsidiaries of the Company and their respective jurisdictions of incorporation and identifies the Company's percentage equity ownership interest in each subsidiary. The Company owns, directly or indirectly, the outstanding capital stock of each of the subsidiaries listed on the Disclosure Schedule, free and clear of all liens, charges, pledges, security interests or other encumbrances. All of the capital stock of each subsidiary have been duly authorized, and are validly issued, fully paid and nonassessable, and are not subject to preemptive rights created by statute, the articles of incorporation or bylaws of each subsidiary or any agreement to which any of the subsidiaries are bound, and are free of any liens or encumbrances other than any liens or encumbrances created by or imposed upon the holders thereof.

          (b)      The Company conducts its insurance operations primarily through the subsidiaries listed in Section 3.2(b) of the Disclosure Schedule (collectively, the "Company Insurance Subsidiaries"). Each of the Company Insurance Subsidiaries is, where required, (i) duly licensed or authorized as an insurance company in its jurisdiction of incorporation, (ii) duly licensed or authorized as an insurance company in each other jurisdiction where it is required to be so licensed, authorized or eligible, and (iii) duly authorized or eligible in its jurisdiction of incorporation and each other applicable jurisdiction to write each line of business reported as being written in the Company SAP Statements (as defined in Section 3.6), except where the failure to be so licensed, authorized or eligible, individually or in the aggregate, would not be reasonably likely to have a Company Material Adverse Effect. The Company has made all required filings under applicable insurance holding company statutes except where the failure to file, individually or in the aggregate, would not be reasonably likely to have a Company Material Adverse Effect.

          (a)      Except as disclosed in the Disclosure Schedule, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated by this Agreement will (i) violate any provision of the Company's Articles of Incorporation or Bylaws or the charter or bylaws of its subsidiaries, (ii) result in a violation or breach of, require consents under or constitute (with or without due notice or lapse of time or both) a default, or give rise to any lien, right of termination, cancellation or acceleration of any right under any of the terms, conditions or provisions of any lease, license, franchise, permit, agreement, including any affinity agreement or any other material agreement, note, bond, mortgage, indenture or other instrument of indebtedness to which the Company or any of its subsidiaries is a party, or by which the Company or any of its subsidiaries or any of their respective assets or properties is bound, or (iii) violate any statute, rule, regulation, order or decree of any public body or authority by which the Company or any of its subsidiaries or any

          (b)      No filing or registration with, notification to, or authorization, consent or approval of, any governmental entity is required in connection with the execution and delivery of this Agreement by the Company, or the consummation by the Company of the transactions contemplated by this Agreement, except (i) expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (ii) in connection with the provisions of the Exchange Act, (iii) the filing of the Certificate of Merger with the Bureau, (iv) filings with and approvals of the Commissioners of Insurance of the jurisdictions listed on Schedule 3.5(b) of the Disclosure Schedule, (v)  any filings and consents that may be required under any Environmental Law (as defined in Section 3.14) pertaining to any notification, disclosure or required approval triggered by the Merger or the transactions contemplated by this Agreement, (vi) filing with, and approval of, the SEC and the New York Stock Exchange with respect to the deregistration and delisting of the shares of Company Common Stock and (vii) any other consents, approvals, orders, authorizations, notifications, registrations, declarations and filings not obtained or made before the Effective Time the failure of which to be obtained or made would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, or materially impair the Company's ability to perform its obligations under this Agreement or prevent the consummation of any of the transactions contemplated by this Agreement.

          (a)      As of their respective dates, the audited consolidated financial statements of the Company for the fiscal years ended December 31, 1998, 1997 and 1996, and the unaudited consolidated financial statements for the six-month period ending June 30, 1999, including the notes thereto (collectively, the "Financial Statements"), were prepared in accordance with generally accepted accounting principles applied on a basis consistent with prior periods (except as may be indicated in the notes accompanying the financial statements) and fairly presented the consolidated financial position of the Company and its subsidiaries at the dates indicated and the consolidated results of their operations and statements of cash flows for the periods then ended (subject, in the case of unaudited statements, to the lack of footnotes, normal year-end audit adjustments and any other adjustments described in the Financial Statements).

          (b)      The Company has made available to Parent copies of the annual and quarterly statements of each of the Company Insurance Subsidiaries as filed with the applicable insurance regulatory authorities for the years ended December 31, 1998, 1997 and 1996 and the quarterly periods ended March 31, 1999 and June 30, 1999, including all exhibits, interrogatories, notes, schedules and any actuarial opinions, affirmations or certifications or

          (c)      The Company has filed with the SEC and has made available to Parent copies of each registration statement, report, proxy statement, information statement or schedule, together with all amendments, that were required to be filed with the SEC by the Company since January 1, 1997 (the "SEC Documents"). As of their respective dates, the Company's SEC Documents complied in all material respects with the applicable requirements of the Securities Act of 1933, as amended (the "Securities Act"), and the Exchange Act, as the case may be, and none of the SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

          (a)      Except as disclosed or reflected in the Financial Statements and the SEC Documents or disclosed in the Disclosure Schedule, since December 31, 1998, each of the Company and its subsidiaries has conducted its operations in the ordinary course of business consistent with past practice and there has not been (i) any action, event or occurrence that, individually or in the aggregate, would reasonably be expected to have a Company Material Adverse Effect, (ii) any changes by the Company in accounting methods, principles or practices or underwriting, reserving or actuarial practices or methods, (iii) any declaration, setting aside or payment of any dividend or other distribution in respect of the capital stock of the Company or any direct or indirect redemption, purchase or other acquisition by the Company or any of its subsidiaries of any capital stock or of any interest in or right to acquire any capital stock, (iv) any lien or encumbrance created or assumed on any of the assets or properties of the Company or any of its subsidiaries that, individually or in the aggregate, exceeds $500,000, (v) any borrowings of money by the Company other than in the ordinary course of business, each of which has been fully repaid; (vi) any incurrence by the Company or any of its subsidiaries of any deferred purchase price obligation that, individually or in the aggregate, exceeds the aggregate budget amounts set forth in Schedule 3.7(a) by more than $750,000, (vii) any damage, destruction or loss (not covered by insurance) affecting any of

          (b)      Except as disclosed in the Financial Statements, the SEC Documents or the Disclosure Schedule, and other than policyholder liabilities incurred in the ordinary course of business, since December 31, 1998 neither the Company nor any of its subsidiaries has had any material liabilities or obligations of any nature, whether or not accrued, contingent or otherwise, that were required by generally accepted accounting principles to be reflected on a consolidated balance sheet of the Company and its subsidiaries (including the accompanying notes) or that would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

          (a)      The business and operations of the Company and the Company Insurance Subsidiaries have been conducted in compliance with all applicable statutes and regulations regulating the business of insurance and all applicable orders and directives of insurance regulatory authorities (collectively, "Insurance Laws"), except where the failure to so conduct business and operations would not prevent or materially impair the ability of the Company to consummate the transactions contemplated by this Agreement or cause the loss of eligibility to do business where the loss would, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. Each Company Insurance Subsidiary has marketed, sold and issued insurance products in compliance, in all material respects, with Insurance Laws applicable to the business of that Company Insurance Subsidiary and in the respective jurisdictions in which the products have been sold. There is no pending or, to the

          (b)      In addition to Insurance Laws, the business of each of the Company and its subsidiaries has not been, and are not being, conducted in violation of any federal, state or local law, statute, ordinance, rule, regulation, judgment, order, injunction, decree, arbitration award, agency requirement, license or permit of any governmental entity (collectively with Insurance Laws, "laws"), except for violations or possible violations that, individually or in the aggregate, would not be reasonably likely to have a Company Material Adverse Effect or prevent or materially impair the ability of the Company to consummate the transactions contemplated by this Agreement. No investigation or review by any governmental entity with respect to the Company or its subsidiaries is pending or, to the knowledge of the Company, threatened, except for those the outcome of which are not, individually or in the aggregate, reasonably likely to have a Company Material Adverse Effect or prevent or materially impair the ability of the Company to consummate the transactions contemplated by this Agreement. Each of the Company and its subsidiaries has all permits, licenses, trademarks, patents, trade names, copyrights, service marks, franchises, variances, exemptions, orders and other governmental authorizations, consents and approvals necessary to conduct its business as presently conducted, and all of these permits, licenses, trademarks, patents, trade names, copyrights, service marks, franchises, variances, exemptions, orders and other governmental authorizations, consents and approvals are valid and in full force and effect, except those the absence of which are not, individually or in the aggregate, reasonably likely to have a Company Material Adverse Effect or prevent or materially impair the ability of the Company to consummate the Merger and the other transactions contemplated by this Agreement.

          (a)      Except as otherwise would not, individually or in the aggregate, be reasonably likely to have a Company Material Adverse Effect, to the extent required under applicable law, all policies, binders, slips, certificates and other agreements of insurance in effect as of the date of this Agreement (including all applications, supplements, endorsements, riders and ancillary agreements) that are issued by the Company Insurance Subsidiaries are on forms and at rates approved by applicable insurance regulatory authorities or which have been filed and not objected to by the authorities within the period provided for objection.

          (b)      To the knowledge of the Company, all reinsurance and coinsurance treaties or agreements to which the Company or any Company Insurance Subsidiary is a party or under which the Company or any Company Insurance Subsidiary has any existing rights, obligations or liabilities are in full force and effect. Neither the Company nor any Company Insurance Subsidiary, nor, to the knowledge of the Company, any other party to a reinsurance or coinsurance treaty or agreement to which the Company or any Company Insurance Subsidiary is a party, is in default in any material respect, and no such agreement contains any provision providing that the other party thereto may terminate the agreement by reason of the transactions contemplated by this Agreement. The Company has not received any notice to the effect that the financial condition of any other party to any such agreement is impaired with the result that a material default under the agreement may reasonably be anticipated, whether or not the default may be cured by the operation of any offset clause in the agreement.

          (c)      Before the date of this Agreement, the Company has made available to Parent a copy of any actuarial reports prepared by actuaries, with respect to the Company or any Company Insurance Subsidiary since January 1, 1995, and all attachments, addenda, supplements and modifications thereto (the "Company Actuarial Analyses"). To the knowledge of the Company (i) the information and data furnished by the Company or any Company Insurance Subsidiary to its independent actuaries in connection with the preparation of the Company Actuarial Analyses were accurate in all material respects and (ii) each Company Actuarial Analysis was based upon an accurate inventory of policies in force for the Company and the Company Insurance Subsidiaries, as the case may be, at the relevant time of preparation and was prepared in all material respects using appropriate modeling procedures accurately applied. To the knowledge of the Company, the Company Actuarial Analyses are accurate in all material respects.

          (d)      All insurance contract benefits payable by the Company or any Company Insurance Subsidiary, or to the knowledge of the Company by any other person that is a party to or bound by any reinsurance, coinsurance or other similar contract with the Company or any Company Insurance Subsidiary, have in all material respects been paid in accordance with the terms of the insurance contracts under which they arose, except for such benefits for which the Company believes there is a reasonable basis to contest payment.

          (e)      No outstanding insurance contract issued, reinsured or underwritten by any Company Insurance Subsidiary entitles the holder thereof or any other person to receive dividends, distributions or other benefits based on the revenues or earnings of the Company or any other person.

          (f)      To the knowledge of the Company, (i) each insurance agent, at the time the agent wrote, sold or produced business for the Company, was duly licensed as an insurance agent (for the type of business written, sold or produced by the insurance agent) in the particular jurisdiction in which the agent wrote, sold or produced such business except where the failure to have such license would not reasonably be expected to have a Company Material Adverse Effect, (ii) no insurance agent has violated (or with or without notice or lapse of time or both, would have violated) any term or provision of any law, regulation or any writ, judgment, decree, injunction or similar order applicable to the writing, sale or production of the business of the Company or any of the Company Insurance Subsidiaries, except where the violation would not reasonably be expected to have a Company Material Adverse Effect, (iii) all payments, including, without limitation, commissions, credits, bonuses and other compensation, due to insurance agents with respect to the insurance business of the Company or the Company Insurance Subsidiaries have been paid or accrued in accordance with the insurance agent contracts, a general form of which has been provided to Parent, other than commission schedules, and (iv) all payments, including, without limitation, commissions, credits, bonuses and other compensation due under all affinity agreements and other material agreements have been paid in accordance with such agreements.

          (a)      Except as disclosed in the SEC Documents or the Disclosure Schedule: (i) each "employee benefit plan" (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")), and all other employee benefit, bonus, incentive, stock option (or other equity-based), employment, consulting, severance, termination, retirement, change in control, medical, life insurance and other welfare (including post-retirement medical and life insurance) and fringe benefit plans, programs or funds, written or oral (whether or not subject to ERISA) maintained or sponsored by the Company or its subsidiaries or any trade or business, whether or not incorporated, that would be deemed a "single employer" within the meaning of Section 4001(b) of ERISA (an "ERISA Affiliate"), for the benefit of any employee or former employee of the Company or any of its ERISA Affiliates (the "Employee Plans") has been operated in accordance with its terms and is in compliance (including the making of governmental filings on a timely basis) with all

          (b)      (i) No Employee Plan has incurred an "accumulated fund deficiency" (as defined in Section 302 of ERISA or Section 412 of the Code), whether or not waived and (ii) neither the Company nor any ERISA Affiliate has incurred any liability under Title IV of ERISA except for required premium payments to the PBGC, which payments have been made when due, and no events have occurred that are reasonably likely to give rise to any liability of the Company or an ERISA Affiliate under Title IV of ERISA or that could reasonably be anticipated to result in any claims being made against the Company by the PBGC that present a risk of liability that would, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

          (c)      With respect to each Employee Plan that is subject to Title IV of ERISA: (i) the Company has provided to Parent and Sub true and complete copies of the plan text and any amendments thereto (or if the Employee Plan is not a written plan, a description thereof), any related trust or other funding vehicle, any reports or summaries required under ERISA or the Code, Forms 5500 as filed with the Internal Revenue Service for the last three plan years, the most recent determination letter received from the Internal Revenue Service, the two most recent annual reports and actuarial valuation reports (if required under ERISA) and all handbooks, manuals and similar documents governing material employment policies, practices and procedures; (ii) the assets and liabilities in respect of the accrued benefits as set forth in the most recent actuarial valuation report prepared by the Employee Plan's actuary properly represents the funded status of the Employee Plan in all material respects in accordance with applicable law; and (iii) since the date of such valuation report there has been no adverse change in the funded status of any of the Employee Plans in respect thereto that would, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

          (d)      Neither the Company nor any ERISA Affiliate has failed to make on a timely basis or otherwise any contribution or payment to any Employee Plan that has resulted or

          (e)      Except as disclosed in the Financial Statements, the SEC Documents or the Disclosure Schedule and except to the extent required by the Consolidated Omnibus Budget Reconciliation Act of 1985 and any similar state law, the Company does not maintain any retiree life and/or retiree health insurance plans which provide for continuing benefits or coverage for any employee or any beneficiary of an employee after the employee's termination of employment.

          (f)      Except as set forth in the Disclosure Schedule, no amounts payable under the Employee Plans will fail to be deductible for federal income tax purposes by virtue of Sections 162(a)(1), 162(m) or 280G of the Code.

          (a)      Except as disclosed in the Disclosure Schedule, the Company and its subsidiaries own or have rights to use free of any adverse interest all assets necessary to

          (b)      Except as disclosed in the SEC Documents or the Disclosure Schedule, the Company has, either directly or through its subsidiaries, (i) good and marketable title in fee simple or a valid easement interest to all real property owned by the Company free and clear of any liens, encumbrances, mortgages and security interests other than Permitted Liens (as defined below) or (ii) rights pursuant to those valid and binding leases or other agreements to use all of its other real property as listed in the Disclosure Schedule. The term "Permitted Liens" means (i) liens or encumbrances for water, sewage and similar charges and current taxes and assessments not yet due and payable or being contested in good faith, (ii) liens, encumbrances, mortgages, life estates or security interests listed on the Disclosure Schedule, and (iii) easements, rights of way, restrictions and other similar charges or encumbrances that do not materially interfere with the conduct of the Company's business. All material real property leases under which the Company or any of its subsidiaries is a lessee or lessor are valid, binding and enforceable in all material respects in accordance with their terms, and there are no (i) existing defaults under any of said leases and (ii) no events have occurred that with the giving of notice, the passage of time or both, may cause a default under any of said leases, that would, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

          (c)      The Company previously has provided to Parent copies of the Company Insurance Subsidiaries' Annual Financial Statements since January 1, 1995 and Quarterly Statutory Financial Statements as of June 30, 1999 and holdings of investments as of August 31, 1999 and September 30, 1999, which contain accurate lists as of their respective dates of investment assets held and purchases and sales of the investment assets by the Company. Such debentures, notes, stock, limited partnership interests, other securities, mortgages and other investment assets are owned either by the Company or its Company Insurance Subsidiaries, free and clear of all liens and encumbrances.

          (d)      Except as disclosed in the Disclosure Schedule, (i) the Company or its subsidiaries own or are licensed or otherwise possess the valid right to use all of the Intellectual Property (as defined below) that is used by the Company and its subsidiaries, (ii) the Company and each of its subsidiaries own, free and clear of all liens, or have a valid right to use, all of the Intellectual Property used by the Company and its subsidiaries, (iii) except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, to the knowledge of the Company there is not any opposition, cancellation, invalidity proceeding, interference or re-examination proceeding, claim or litigation presently pending or threatened with respect to any of the Intellectual Property that is owned or used by the Company or its subsidiaries and that: (A) challenges the ownership, use, validity or enforceability of any Intellectual Property owned or used by the Company or any of its subsidiaries or (B) alleges that the Company's or any of its subsidiaries' activities infringe upon, violate or constitute the unauthorized use of the Intellectual Property of a third

          (a)      The Board of Directors has adopted appropriate resolutions authorizing an amendment to its Rights Agreement to provide that Parent will not be deemed an Acquiring Person, the Distribution Date will not be deemed to occur and the Rights (each as defined in the Rights Agreement) issuable pursuant to the Rights Agreement will not separate from the shares of Company Common Stock as a result of entering into this Agreement or consummating the Merger and/or the other transactions contemplated by this Agreement.

          (b)      The Board of Directors of the Company has approved the Merger and has taken other action sufficient to render inapplicable the provisions of Chapter 7A of the MBCA to the Merger (to the extent applicable to the Merger), this Agreement and the transactions contemplated by this Agreement. No other state takeover statute or similar statute or regulation known to the Company applies or purports to apply to the Merger, this Agreement and the transactions contemplated by this Agreement.

          (a)      Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated by this Agreement will (i) violate any provision of Parent's or Sub's respective charter or bylaws or the organizational documents of the Exchanges, (ii) result in a violation or breach of, require consents under or constitute (with or without due notice or lapse of time or both) a default, or give rise to any lien, right of termination, cancellation or acceleration of any right under any of the terms, conditions or provisions of any lease, license, franchise, permit, agreement, note, bond, mortgage, indenture or other instrument of indebtedness to which Parent, Sub or the Exchanges is a party, or by which Parent, Sub or the Exchanges or any of their respective assets or properties is bound, or (iii) violate any statute, rule, regulation, order or decree of any public body or authority by which Parent, Sub or the Exchanges or any of their respective assets or properties is bound, excluding from the foregoing clauses (ii) and (iii) violations, breaches, defaults or rights that either individually or in the aggregate would not reasonably be expected to have a Parent Material Adverse Effect or materially impair Parent's, Sub's or the Exchanges' ability to consummate the transactions contemplated by this Agreement or for which Parent, Sub or the Exchanges has received or, before the Effective Time, will have received appropriate consents or waivers.

          (b)      No filing or registration with, notification to, or authorization, consent or approval of, any governmental entity is required in connection with the execution and delivery of this Agreement by Parent, Sub or the Exchanges, or the consummation by Parent, Sub or the Exchanges of the transactions contemplated by this Agreement, except (i) expiration of the waiting period under the HSR Act, (ii) in connection with the provisions of the Exchange Act, (iii) the filing of the Certificate of Merger with the Bureau, (iv) any filings and consents that may be required under any Environmental Law pertaining to any notification, disclosure or required approval triggered by the Merger or the transactions contemplated by this Agreement, (v) filings with and approvals of the California Commissioner of Insurance, and (vi) any other consents, approvals, orders, authorizations, notifications, registrations, declarations and filings not obtained or made before the Effective Time the failure of which to be obtained or made would not reasonably be expected to, individually or in the aggregate, have a Parent Material Adverse Effect, or materially impair Parent's or Sub's ability to perform its obligations under this Agreement or prevent the consummation of any of the transactions contemplated by this Agreement.

          (a)      amend or propose to amend its Articles of Incorporation or Bylaws or the charter and bylaws of its subsidiaries;

          (b)      authorize for issuance, issue, sell, deliver or agree or commit to issue, sell or deliver (whether through the issuance or granting of options, warrants, commitments, subscriptions, rights to purchase or otherwise) any stock of any class or any other securities or equity equivalents (including any stock options or stock appreciation rights), except for shares of Company Common Stock issued upon exercise of Company Stock Options outstanding as of the date of this Agreement (in accordance with their respective terms) or amend any of the terms of any of those securities or agreements outstanding as of the date of this Agreement;

          (c)      split, combine or reclassify any shares of its capital stock, declare, set aside or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of its capital stock, or redeem or otherwise acquire any of its securities or any securities of its subsidiaries; provided, however, that the Company will be allowed to pay its normal quarterly cash dividends consistent with past practice not in excess of the current rate; and provided, further that the Company Insurance Subsidiaries will be allowed to pay their normal cash dividends consistent with past practice and in accordance with applicable insurance regulations.

          (d)      (i) incur, assume or prepay any long-term or short-term debt or issue any debt securities except for borrowing under existing lines of credit or prepayments in the ordinary course of business not in excess of $500,000; (ii) assume, guarantee, endorse or otherwise become liable or responsible for any material obligations of any other person except for obligations of wholly-owned subsidiaries of the Company; (iii) make any loans, advances or capital contributions to, or investments in, any other person (other than to wholly-owned subsidiaries of the Company or customary loans or advances to employees in the ordinary course of business consistent with past practice and in amounts not material to the maker of the loan or advance) not in excess of $50,000, except as permitted in Section 5.2(n); (iv) pledge or otherwise encumber shares of capital stock of the Company or any of its subsidiaries; or (v) mortgage or pledge any of its real property, material assets, tangible or intangible, or create or suffer to exist any lien upon those assets, excluding Permitted Liens;

          (e)      except as may be required by law or as contemplated by this Agreement, enter into, adopt or amend or terminate any Employee Plan or (except for normal increases in the ordinary course of business consistent with past practice that, in the aggregate, do not result in a material increase in benefits or compensation expense to the Company and its subsidiaries taken as a whole, and as required under existing agreements) increase in any manner the compensation or fringe benefits of any director, officer, consultant or employee or pay any material benefit not required by any plan and arrangement in effect as of the date of this Agreement;

          (f)      acquire, sell, lease or dispose of any assets outside the ordinary course of business or any assets that in the aggregate are material to the Company and its subsidiaries taken as a whole, or enter into any commitments, contracts, agreements or transactions outside the ordinary course of business consistent with past practice or that would, individually or in the aggregate, be material to the Company and its subsidiaries taken as a whole, or modify, amend, terminate or waive any material rights under any contract or agreement material to the Company and its subsidiaries taken as a whole;

          (g)      except as may be required as a result of a change in law or in generally accepted accounting principles, change any of the accounting principles or practices used by it;

          (h)      (i) acquire (by merger, consolidation or acquisition of stock or assets) any corporation, partnership or other business organization or division thereof or any equity interest therein except as set forth in Schedule 5.2(h); (ii) enter into any contract or agreement other than in the ordinary course of business consistent with past practice that would be material to the Company and its subsidiaries taken as a whole; or (iii) enter into or amend any contract, agreement, commitment or arrangement providing for the taking of any action that would be prohibited under this Agreement;

          (i)      revalue in any material respect any of its assets, including writing-off notes or accounts receivable other than in the ordinary course of business consistent with past practice;

          (j)      make any tax election or settle or compromise any material federal, state or local tax liability or assent to the extension of time for collection or assessment of any federal, state or local tax ;

          (k)      pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unassented, contingent or otherwise), other than the payment, discharge or satisfaction in the ordinary course of business consistent with past practice of liabilities reflected or reserved against in, or contemplated by, the Financial Statements (or the accompanying footnotes) or incurred in the ordinary course of business consistent with past practice;

          (l)      authorize any capital expenditures that are in excess of $2,500,000 individually or $5,000,000 in the aggregate other than those set forth in Schedule 5.2(h);

          (m)      take any action that would or would be reasonably likely to prevent or materially impair the ability of the Company to consummate the transactions contemplated by this Agreement, including actions that would be reasonably likely to prevent or materially impair the ability of the Company, Parent or any subsidiary of either company to obtain any consent, registration, approval, permit or authorization required to be obtained from any governmental entity before the Effective Time in connection with the execution and delivery of this Agreement and the consummation of the Merger and the other transactions contemplated by this Agreement;

          (n)      purchase directly or through any investment manager any investment assets, other than cash and cash equivalents, United States treasury obligations and investment grade municipal or fixed income securities with maturities of not greater than eight years traded on a national securities exchange or the Nasdaq National Market System;

          (o)      enter into, amend, renew, modify or terminate any material lease, license or other agreement relating to the use of real property, except for those leases which expire pursuant to their terms; or

          (p)      take, or agree in writing or otherwise to take, any of the actions described in Sections 5.2(a) through 5.2(o) or take, or omit to take, any action that would make any of the representations or warranties of the Company contained in this Agreement untrue or incorrect in any material respect as of the date when made or would result in any of the conditions set forth in Article VI not being satisfied.

          (a)      take any action that would or would be reasonably likely to prevent or materially impair the ability of Parent to consummate the transactions contemplated by this Agreement, including actions that would be reasonably likely to prevent or materially impair the ability of Parent, the Company or any subsidiary of either company to obtain any consent, registration, approval, permit or authorization required to be obtained from any governmental entity before the Effective Time in connection with the execution and delivery of this Agreement and the consummation of the Merger and the other transactions contemplated by this Agreement; or

          (b)      take, or agree in writing or otherwise to take, any of the actions described in Section 5.3(a) or take, or omit to take, any action that would make any of the representations or warranties of Parent contained in this Agreement untrue or incorrect in any material respect as of the date when made or would result in any of the conditions set forth in Article VI not being satisfied.

          (a)      The Company will, and will use its reasonable efforts to cause its affiliates to, immediately cease any existing discussions and negotiations with any parties conducted up to the date of this Agreement with respect to any proposal relating to an Acquisition Transaction (as defined below). The Company agrees that, before the Effective Time, it will not, and will not authorize or knowingly permit any of its subsidiaries or any of its or its subsidiaries' directors, officers or employees to, and will use its reasonable best efforts to cause its agents and representatives not to, solicit, initiate, facilitate or encourage (including by way of furnishing or disclosing non-public information) any inquiries or the making of any proposal with respect to any acquisition of all or a significant portion of the Company by means of a merger, consolidation or other business combination involving the Company or its subsidiaries or acquisition of all or a significant portion of the assets or capital stock of the Company and its subsidiaries taken as a whole (an "Acquisition Transaction") or, subject to Section 5.4(b), negotiate, explore or otherwise engage in substantive communications with any person (other than Parent, Sub or their respective directors, officers, employees, agents and representatives) with respect to any Acquisition Transaction, or enter into any agreement, arrangement or understanding requiring it to abandon, terminate or fail to consummate the Merger or any other transactions contemplated by this Agreement.

          (b)      Notwithstanding anything to the contrary set forth in subsection (a) above or elsewhere in this Agreement, nothing contained in this Agreement will prohibit the Board of Directors of the Company from (i) furnishing information to, or entering into discussions or negotiations with, any person or entity in connection with an unsolicited bona fide proposal for an Acquisition Transaction from a person or entity reasonably believed to have the financial ability to consummate the Acquisition Transaction, if (A) the Board of Directors of the Company, after consultation with and based upon the advice of outside legal counsel, determines in good faith that such action is necessary for the Board of Directors to comply with its fiduciary duties to the Company shareholders under applicable law, (B) the Company enters into with such person or entity a confidentiality agreement in reasonably customary form on terms not more favorable to such person or entity than the terms contained in the Confidentiality Agreement (the "Confidentiality Agreement") between Farmers Group, Inc. and the Company dated August 3, 1999, the terms of which are incorporated by reference in this Agreement, and (C) the Company notifies Parent and Sub of the identity of such person and the principal terms of the proposal for an Acquisition Transaction at least 48 hours before furnishing any information or commencing negotiations; or (ii) failing to make or withdrawing or modifying its recommendation for the Merger or making or disclosing any position or taking any other action if the Board of Directors of the Company, after consultation with and based on the advice of outside legal counsel, determines in good faith that such action is necessary for the Board of Directors to comply with its fiduciary duties to the Company's shareholders under applicable law.

          (c)      The Company promptly will advise Parent in writing of the receipt of any bona fide proposals relating to an Acquisition Transaction and any actions taken pursuant to Section 5.4(b).

          (a)      Parent will cause the Surviving Corporation to take actions that are reasonably necessary so that, for a period of not less than one year after the Effective Time, employees of the Company who continue their employment after the Effective Time (the "Employees") will be provided employee benefits which in the aggregate are no less favorable to the Employees than benefits which are substantially similar to those benefits provided as of the date of this Agreement; provided, however, that Parent will not be obligated to provide a stock option plan to Employees.

          (b)      Following the first anniversary of the Effective Time, Parent will provide or cause the Surviving Corporation to provide, employee benefit plans, programs, arrangements and policies for the benefit of Employees which are comparable in the aggregate to the employee benefit plans, programs, arrangements and policies for the benefit of other employees of Parent who are similarly situated.

          (c)      For purposes of subsection (a) and (b) above, all service credited to each Employee by the Company through the Effective Time (and by the Surviving Corporation thereafter) will be recognized by Parent and the Surviving Corporation for purposes of eligibility and vesting under any employee benefit plan provided by Parent or the Surviving Corporation for the benefit of the employees.

          (d)      Parent will cause the Surviving Corporation to honor (without modification) the employment agreements and individual benefit arrangements listed on Schedule 5.9.

          (a)      From and after the Effective Time, Parent will cause the Surviving Corporation to indemnify, defend and hold harmless, the present and former officers, directors, employees and agents of the Company and its subsidiaries (the "Indemnified Parties") against all losses, claims, damages, expenses or liabilities arising out of actions or omissions or alleged actions or omissions occurring at or before the Effective Time to the same extent and on the same terms and conditions (including with respect to advancement of expenses) provided for in the Company's Articles of Incorporation and Bylaws and agreements in effect as of the date of this Agreement to the extent consistent with applicable law.

          (b)      For a period of six years after the Effective Time, Parent (i) will cause the Surviving Corporation to include in its articles of incorporation and bylaws and maintain indemnification provisions (including provisions relating to expense advancement) for Indemnified Parties to the fullest extent permitted by the laws of the Surviving Corporation's state of incorporation and (ii) will cause to be maintained in effect the current policies of directors' and officers' liability insurance maintained by the Company (provided that Parent may substitute therefor policies of at least the same coverage and amounts containing terms and conditions that are no less advantageous) with respect to claims arising from facts or events that occurred before the Effective Time; provided, however, that Parent will not be obligated to make annual premium payments for this insurance if the premiums exceed 200% of the annual premiums paid as of the date of this Agreement by the Company for the insurance (the "Maximum Amount"). If the amount of the annual premiums necessary to maintain or procure the insurance coverage exceeds the Maximum Amount, Parent and the Surviving Corporation will maintain the most advantageous policies of directors' and officers' insurance obtainable for an annual premium equal to the Maximum Amount.

          (c)      The provisions of this Section 5.11 are intended to be for the benefit of, and will be enforceable by, each Indemnified Party and his or her heirs, legal representatives, successors and assigns.

          (a)      Shareholder Approval. The vote of the shareholders of the Company necessary to consummate the Merger and the other transactions contemplated by this Agreement must have been obtained.

          (b)      No Order. No statute, rule or regulation must have been promulgated, enacted, entered or enforced, and no other legally binding, final and nonappealable action must have been taken, by any domestic or foreign government or governmental, administrative or regulatory authority or agency of competent jurisdiction or by any court or tribunal of competent jurisdiction, domestic or foreign, that in any of the foregoing cases has the effect of making illegal or directly or indirectly prohibiting the consummation of the Merger; provided, however, that the party seeking to invoke this condition must have complied with Section 5.6 above.

          (c)      HSR Act. Any waiting period applicable to the Merger under the HSR Act must have terminated or expired.

          (d)      Proxy Statement. No proceeding in respect of the Proxy Statement shall have been initiated by the SEC and not concluded or withdrawn.

          (e)      Consents. All notices, reports and other filings required to be made before the Effective Time by the Company or Parent or any of their respective affiliates with, and all consents, registrations, approvals, permits and authorizations required to be obtained before the Effective Time by the Company or Parent or any of their respective affiliates from, any Commissioner of Insurance, or any other governmental authority of any jurisdiction, in connection with the execution and delivery of this Agreement and the consummation of the Merger and the other transactions contemplated by this Agreement will have been made or obtained (as the case may be) and will be in full force and effect other than any consents, approvals or permits, the absence of which would not, individually or in the aggregate, be reasonably likely to have a Company Material Adverse Effect or Parent Material Adverse Effect.

          (f)      No Proceeding or Litigation. There will not be pending any action, suit, investigation or other proceeding in, before or by any court, governmental or regulatory authority or other person to restrain, enjoin or otherwise prevent the transactions contemplated by this Agreement or to recover any damages or obtain other relief as a result of this Agreement or any of the transactions contemplated by this Agreement, which action, suit, investigation or other proceeding would reasonably be expected to have a Company Material Adverse Effect or Parent Material Adverse Effect.

          (a)      Representations and Warranties. The representations and warranties of the Company contained in this Agreement that are qualified by a Company Material Adverse Effect must be true and correct in all respects and those representations and warranties not so qualified must be true and correct except to the extent that the failure to be true and correct would not reasonably be expected to have, individually or together with all other such

          (b)      Covenants. The Company must have performed, in all material respects, all obligations and complied in all material respects with all covenants required by this Agreement to be performed or complied with by the Company before the Effective Time.

          (c)      Officer's Certificate. The Company must have delivered to Parent an officer's certificate certifying that as of the Effective Time all of the conditions set forth in Sections 6.1(a) and (b) and Sections 6.2(a) and (b) have been complied with.

          (d)      Material Developments. There must not have occurred after the date of this Agreement and be continuing any development or developments with respect to the Company or its subsidiaries that in the aggregate has had or would reasonably be expected to have a Company Material Adverse Effect.

          (e)      Legal Opinion. Parent and Sub must have received the favorable opinion of the Company's outside legal counsel, Warner Norcross & Judd LLP, dated the Effective Time and in form and substance reasonably satisfactory to Parent's legal counsel, which will include an opinion as to the due authorization of the Company to sign and deliver this Agreement.

          (f)      FIRPTA Affidavit. The Company must have delivered to Parent and Sub an affidavit, in a form reasonably satisfactory to Parent, stating that the Company is not and has never been a United States real property holding corporation (as defined in Section 897(c)(2) of the Code).

          (g)      Consents. All consents, waivers or expirations of termination rights required by third parties to the Required Contracts identified in Schedule 5.15 of the Disclosure Schedule must have been obtained or must have occurred.

          (a)      Representations and Warranties. The representations and warranties of Parent, Sub and the Exchanges contained in this Agreement that are qualified by a Parent Material Adverse Effect must be true and correct in all respects and those representations and warranties not so qualified must be true and correct except to the extent that the failure to be true and correct would not reasonably be expected to have, individually or together with all other such failures, a Parent Material Adverse Effect, in each case when made and at the Effective Time as if made again at that time (except to the extent that any representation or

          (b)      Covenants. Parent and Sub must have performed, in all material respects, all obligations and complied in all material respects with all covenants required by this Agreement to be performed or complied with by Parent and Sub before the Effective Time.

          (c)      Officer's Certificate. Parent and Sub must have delivered to the Company an officer's certificate certifying that as of the Effective Time all of the conditions set forth in Section 6.1(b) and Sections 6.3(a) and (b) have been complied with.

          (d)      Legal Opinion. The Company must have received the favorable opinion of Parent's legal counsel, dated the Effective Time and in form and substance reasonably satisfactory to the Company's legal counsel, which will include an opinion as to the due authorization of Parent, Sub and the Exchanges to sign and deliver this Agreement and the legality, validity and enforceability of the guarantee against each Exchange.

          (a)      By mutual written consent of Parent and the Company;

          (b)      By the Company, if (i) Parent, Sub or an Exchange breaches in any respect any of its representations or warranties in this Agreement qualified by a Parent Material Adverse Effect, (ii) Parent, Sub or an Exchange breaches any of its representations and warranties in this Agreement that are not qualified by a Parent Material Adverse Effect but only if such breach would reasonably be expected to have, individually or together with all other such breaches, a Parent Material Adverse Effect, or (iii) Parent, Sub or an Exchange breaches in any material respect any of its covenants or agreements contained in this Agreement and, with respect to any breach referenced in (i), (ii) or (iii) above that is reasonably capable of being remedied, the breach is not remedied within 40 days after the Company has furnished Parent with written notice of the breach;

          (c)      By Parent, if (i) the Company breaches in any respect any of its representations or warranties in this Agreement qualified by a Company Material Adverse Effect, (ii) the Company breaches any of its representations and warranties in this Agreement that are not qualified by a Company Material Adverse Effect but only if such breach would reasonably be expected to have, individually or together with all other such breaches, a Company Material Adverse Effect, or (iii) the Company breaches in any material respect any of its covenants or agreements contained in this Agreement and, with respect to any breach referenced in (i), (ii) or (iii) above that is reasonably capable of being remedied, the breach

          (d)      By either Parent or the Company if (i) any court of competent jurisdiction or other governmental body has issued an order (other than a temporary restraining order), decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement, including the Merger, and the order, decree, ruling or other action has become final and nonappealable, or (ii) if it becomes impossible for any condition to a party's obligations that is set forth in Article VI to be satisfied on or before the Effective Time and that party does not waive that condition; provided that in the case of (i) or (ii) above the party seeking to terminate this Agreement must have complied with Section 5.6 above;

          (e)      By either Parent or the Company if the Merger and this Agreement do not receive the requisite vote for approval by the Company shareholders at the Special Meeting or at any adjournment or continuation thereof;

          (f)      By either Parent or the Company if the Merger has not been consummated by May 31, 2000; provided, however, that this Agreement may be extended not more than 60 days by Parent or the Company by written notice to the other party if the Merger has not been consummated as a direct result of the Company or Parent having failed by that date to receive all regulatory approvals or consents required to be obtained by the Company or Parent with respect to the Merger; provided further, that the right to terminate this Agreement under this Section 7.1(f) will not be available to (i) Parent, where Parent's willful failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Effective Time to occur on or before such date, or (ii) the Company, where the Company's willful failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Effective Time to occur on or before such date;

          (g)      By the Company, if the Board of Directors of the Company, in connection with a proposal for an Acquisition Transaction that, if consummated, would result in a transaction more favorable to the Company's shareholders from a financial point of view than the transactions contemplated by this Agreement (a "Superior Proposal"), shall have determined in good faith, after consultation with and based upon the advice of outside legal counsel and its financial advisers, that approving and entering into an agreement in connection with, and consummating such proposal for the Superior Transaction is necessary for the Board of Directors to comply with its fiduciary duties under applicable law; provided that this Agreement may not be terminated pursuant to this Section 7.1(g) unless (i) the Company shall have complied with Section 5.4, (ii) concurrent with the termination, the Company pays to Parent the Termination Fee (as defined in Section 7.4) and (iii) the Company shall have provided Parent with at least three days advance notice of such termination; or

          (h)      By Parent, if (i) the Board of Directors of the Company withdraws, amends or modifies its recommendation of this Agreement and the Merger in a manner materially adverse to Parent, (ii) the Company or its Board of Directors approves, recommends or enters

(a)

if to the Company:

Foremost Corporation of America
5600 Beech Tree Lane
Caledonia, Michigan 49316
Attention: Richard L. Antonini, Chairman, Chief
                Executive Officer and President
Telephone No.: (616) 956-3500
Facsimile No.: (616) 956-3990

with a copy to:

Foremost Corporation of America
5600 Beech Tree Lane
Caledonia, Michigan 49316
Attention: Paul D. Yared, Senior Vice President,
                Secretary and General Counsel
Telephone No. (616) 956-3558
Facsimile No. (616) 956-3990

and with a copy to:

Warner Norcross & Judd LLP
900 Old Kent Building
111 Lyon Street N.W.
Grand Rapids, Michigan 49503
Attention: Stephen C. Waterbury
Telephone No.: (616) 752-2000
Facsimile No.: (616) 752-2500

(b)

if to Parent or Sub:

Spartan Parent Corp.
4680 Wilshire Boulevard
Los Angeles, California 90010
Attention: Martin D. Feinstein, President
Telephone No.: (213) 932-3200
Facsimile No.: (213) 857-5989

with a copy to:

Farmers Group, Inc.
4680 Wilshire Boulevard
Los Angeles, California 90010
Attention: Jason L. Katz, Executive Vice President
                and General Counsel
Telephone No.: (213) 932-3200
Facsimile No.: (213) 964-8093

and with a copy to:

Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071
Attention: Joseph J. Giunta
Telephone No.: (213) 687-5000
Facsimile No.: (213) 687-5600

SPARTAN PARENT CORP.

SPARTAN ACQUISITION CO.

By: /s/ Martin D. Feinstein

By: /s/ Martin D. Feinstein

Name: Martin D. Feinstein

Name: Martin D. Feinstein

Title:    President

Title:    President

"Parent"

"Sub"

FOREMOST CORPORATION OF

AMERICA

By: /s/ Richard L. Antonini

Name: Richard L. Antonini

Title:    Chairman, Chief Executive Officer and
            President

"Company"

FARMERS INSURANCE EXCHANGE

FIRE INSURANCE EXCHANGE

By: FARMERS GROUP, INC., d/b/a Farmers

By: FIRE UNDERWRITERS ASSOCIATION,

      Underwriters Association, its attorney-in-

      its attorney-in-fact

      fact

By: /s/ Martin D. Feinstein

By: /s/ Martin D. Feinstein

Name: Martin D. Feinstein

Name: Martin D. Feinstein

Title:   Chairman, President and

Title:   Vice President

           Chief Executive Officer

TRUCK INSURANCE EXCHANGE

By: TRUCK UNDERWRITERS ASSOCI-

          ATION, its attorney-in-fact

By: /s/ Martin D. Feinstein

Name: Martin D. Feinstein

Title:   Vice President