Stock Purchase Agreement

Stock Purchase Agreement









                                SECOND AMENDMENT
                                     TO THE
                            STOCK PURCHASE AGREEMENT

         THIS SECOND AMENDMENT to the Stock Purchase Agreement dated March 28,
1997, as amended (the "STOCK PURCHASE AGREEMENT") by and between Mercury Finance
Company, a Delaware corporation ("SELLER") and Frontier Insurance Group, Inc., a
Delaware corporation ("BUYER"), is made and entered into this 3rd day of June,
1997.

         WHEREAS, Buyer and Seller have agreed to amend certain terms of the
Stock Purchase Agreement;

         NOW, THEREFORE, in consideration of the premises herein contained and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Seller and Buyer agree as follows:

         1. AMENDMENT TO SECTION 2.2. Section 2.2(b)(i) is hereby amended to
read in its entirety as follows:

                  (i) (A) $81,629,625, representing 90% of the Aggregate
         Consideration, less $1,170,375, (the "NET AMOUNT") to be paid by Buyer
         to ITT Industries, Inc. under the letter agreement between Buyer and
         Seller dated March 28, 1997 in accordance with Seller's instructions
         thereunder, by wire transfer of immediately available funds to a
         segregated bank account designated by Seller (the "SEGREGATED ACCOUNT")
         and (B) $9,200,000, representing 10% of the Aggregate Consideration, by
         wire transfer of immediately available funds to an account designated
         by Harris Trust and Savings Bank (the "ESCROW AGENT") in writing to be
         held and released pursuant to the terms of an escrow agreement by and
         among Seller, Buyer and the Escrow Agent, in the form attached hereto
         as Exhibit A (the "ESCROW AGREEMENT").

         2. SECTION 5.7. The Stock Purchase Agreement is hereby amended by
adding the following Section 5.7:

                  5.7. Segregated Account. (a) Seller shall hold the funds in
         the Segregated Account and shall not commingle the funds with other
         assets or apply the funds to liabilities or obligations of Seller until
         the earlier to occur of the Opinion Delivery Date (as defined in the
         Escrow Agreement) or the date of the Additional Deposit (as defined in
         the Escrow Agreement).

                  (b) In the event that the Opinion Delivery Date has not
         occurred on or before July 14, 1997, Seller hereby agrees to deposit
         immediately with the Escrow Agent the Additional Deposit (as defined in
         the Escrow Agreement).








                  (c) The Threshold Amount and Ceiling Amount shall not apply to
         any claims for breach of this Section 5.7.

         3. NO OTHER AMENDMENT; CONFIRMATION. Except as expressly amended,
modified and supplemented hereby, the provisions of the Stock Purchase
Agreement, as amended by the First Amendment to the Stock Purchase Agreement
dated May 29, 1997 by and between Seller and Buyer, are and shall remain in full
force and effect.

         4. COUNTERPARTS. This Amendment may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

         5. GOVERNING LAW. This Agreement shall be interpreted in accordance
with the substantive laws of the State of Illinois applicable to contracts made
and to be performed wholly within said state.

         6. DEFINITIONS. All capitalized terms not defined herein shall have the
meanings ascribed to them in the Stock Purchase Agreement.


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

FRONTIER INSURANCE GROUP, INC.             MERCURY FINANCE COMPANY

By:                                        By:
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Its:                                       Its:
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