THE ALLSTATE CORPORATION
                     CHANGE OF CONTROL EMPLOYMENT AGREEMENT
 
 
     THIS AGREEMENT dated as of March __, 1999 (the "AGREEMENT DATE") is made by
and among The Allstate  Corporation,  a Delaware corporation  ("ALLSTATE"),  the
Allstate  Insurance  Company,  an Illinois insurance  corporation  ("AIC"),  and
Edward M. Liddy ("EXECUTIVE").
 
 
                                    PURPOSES
 
     Allstate has  determined  that it is in the best  interests of Allstate and
its  stockholders to assure that the Company will have the continued  service of
Executive.  Allstate also believes it is imperative to reduce the distraction of
Executive that would result from the personal  uncertainties caused by a pending
or  threatened  change of control of  Allstate,  to encourage  Executive's  full
attention  and  dedication  to  the  Company,  and  to  provide  Executive  with
compensation  and  benefits  arrangements  upon a change  of  control  that will
satisfy the expectations of Executive and be competitive with those of similarly
situated   corporations.   This  Agreement  is  intended  to  accomplish   these
objectives.
 
                                   ARTICLE I.
                               CERTAIN DEFINITIONS
 
     As used in this  Agreement,  the  terms  specified  below  shall  have  the
following meanings:
 
     1.1 "ACCRUED  ANNUAL BONUS" means the amount of any Annual Bonus earned but
not yet paid to Executive as of the  Executive's  Termination  Date,  other than
amounts that Executive has elected to defer.
 
     1.2 "ACCRUED BASE SALARY" means the amount of Executive's  Base Salary that
is accrued but unpaid as of the Executive's Termination Date, other than amounts
that Executive has elected to defer.
 
     1.3 "ACCRUED  LTIP BONUS" means the amount of any LTIP Bonus earned but not
yet paid to Executive as of the Executive's Termination Date, other than amounts
that Executive has elected to defer.
 
     1.4 "ACCRUED  OBLIGATIONS"  means,  as of any date,  the sum of Executive's
Accrued Base Salary,  Accrued Annual Bonus,  Accrued LTIP Bonus, any accrued but
unpaid  vacation pay, and any other amounts and benefits that are then due to be
paid or provided to  Executive by the Company  (other than  pursuant to Sections
2.4 or  4.1(b)  or any  defined  benefit  or  defined  contribution  plan of the
Company,  whether or not qualified  under Section 401(a) of the Code),  but have
not yet been paid or provided (as  applicable).  
 
     1.5 "AGREEMENT DATE" -- see the  introductory  paragraph of this Agreement.
 
   
 
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     1.6 "AGREEMENT TERM" means the period  commencing on the Agreement Date and
ending on the third  anniversary of the Agreement Date or, if later,  such later
date to which the Agreement Term is extended pursuant to the following sentence.
Commencing on the second  anniversary of the Agreement  Date, the Agreement Term
shall  automatically  be extended  each day by one day to create a new  one-year
term until, at any time after the second  anniversary of the Agreement Date, the
Company delivers  written notice (an "EXPIRATION  NOTICE") to Executive that the
Agreement  shall  expire  on a date  specified  in the  Expiration  Notice  (the
"EXPIRATION DATE") that is not less than 12 months after the date the Expiration
Notice is delivered to Executive;  provided,  however, that if an Effective Date
or an Imminent  Control Change Date occurs before the Expiration  Date specified
in the Expiration  Notice,  then such Expiration  Notice shall be void and of no
further  effect.  "IMMINENT  CONTROL  CHANGE DATE" means (i) any date on which a
proposal  or  offer  for  a  Change  of  Control  is  presented  to   Allstate's
stockholders  generally or to any of Allstate's  directors or executive officers
or is  publicly  announced  (whether  by  advertisement,  press  release,  press
interview,  public  statement,  SEC filing or otherwise) or (ii) any  subsequent
date as of  which  such  proposal  or  offer  for a Change  of  Control  remains
effective and has not expired or been revoked.
 
     1.7 "AIC" -- see the introductory paragraph of this Agreement. 
 
     1.8 "ALIC" means the Allstate Life Insurance Company.
 
     1.9  "ALLSTATE" -- see  the  introductory  paragraph  of  this  Agreement.
 
     1.10 "ALLSTATE  INCUMBENT  DIRECTORS"  means,  determined as of any date by
reference to any baseline date:
 
          (a) the  members  of the Board on the date of such  determination  who
     have been members of the Board since such baseline date, and
 
          (b) the  members  of the Board on the date of such  determination  who
     were appointed or elected after such baseline date and whose  election,  or
     nomination  for  election by  stockholders  of  Allstate  or the  Surviving
     Corporation,  as applicable,  was approved by a vote or written  consent of
     two-thirds (100% for purposes of paragraph (a) of the definition of "Merger
     of Equals") of the directors comprising the Allstate Incumbent Directors on
     the date of such vote or written  consent,  but  excluding  any such member
     whose initial  assumption of office was in connection with (i) an actual or
     threatened election contest, including a consent solicitation,  relating to
     the election or removal of one or more members of the Board, (ii) a "tender
     offer" (as such term is used in Section 14(d) of the Exchange Act), (iii) a
     proposed  Reorganization  Transaction,  or (iv) a  request,  nomination  or
     suggestion of any Beneficial Owner of Voting Securities representing 15% or
     more of the aggregate voting power of the Voting  Securities of Allstate or
     the Surviving Corporation, as applicable.
 
     1.11 "ANNUAL BONUS" s-- ee Section 2.2(b).
 
     1.12 "ANNUAL PERFORMANCE PERIOD" -- see Section 2.2(b).
 
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     1.13 "ANNUALIZED LTIP BONUS" means, in respect of any Termination  Date, an
amount equal to the quotient of the following:
 
          (a)  the  sum  of  the  amounts   potentially  payable  under  all  of
     Executive's LTIP Target Awards outstanding as of such Termination Date,
 
divided by:
 
          (b) the  number  of whole  and  fractional  years  during  the  period
     beginning on the earliest commencement date of the LTIP Performance Periods
     then in  effect  and  ending  on the  latest  termination  date of the LTIP
     Performance Periods then in effect.
 
     1.14  "APPROVED  PASSIVE  HOLDER"  means,  as of any date,  any Person that
satisfies all of the following conditions:
 
          (a) as of such date, such Person is a 20% Owner, but is the Beneficial
     Owner of less than 30% of the  then-outstanding  Common Stock and of Voting
     Securities  representing  less than 30% of the combined voting power of all
     then-outstanding Voting Securities of Allstate;
 
          (b) prior to becoming a 20% Owner,  such  Person has filed,  and as of
     such date has not withdrawn,  or made any subsequent regulatory or judicial
     filing or public  statement or announcement  that is  inconsistent  with, a
     statement  with the SEC pursuant to Section  13(g) of the Exchange Act that
     includes a certification  by such Person to the effect that such beneficial
     ownership  does not have the purpose or effect of  changing or  influencing
     the control of Allstate;
 
          (c) prior to such Person's  becoming a 20% Owner, at least  two-thirds
     of the Allstate Incumbent  Directors (such Allstate Incumbent  Directors to
     be  determined  as of such date using the  Agreement  Date as the  baseline
     date) shall have voted in favor of a resolution adopted by the Board to the
     effect that:
 
               (i) the terms and  conditions of such Person's  investment in the
          Company  will not have the  effect  of  changing  or  influencing  the
          control of Allstate, and
 
               (ii)  notwithstanding  clause (a) of the definition of "Change of
          Control,"  such  Person's  becoming  a 20% Owner  shall be  treated as
          though it were a Merger of Equals for purposes of this  Agreement  and
          all other similar agreements between the Company and its executives.
 
     1.15 "ARTICLE" means an article of this Agreement.
 
     1.16 "BASE SALARY"-- see Section 2.2(a).
 
     1.17 "BENEFICIAL OWNER" means such term as defined in Rule 13d-3 of the SEC
under the Exchange Act. 
 
 
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<PAGE>
 
     1.18 "BENEFICIARY" -- see Section 10.3.
 
     1.19  "BOARD"  means the Board of  Directors of Allstate or, from and after
the  Effective  Date of a Change  of  Control  that  gives  rise to a  Surviving
Corporation, the Board of Directors of such Surviving Corporation.
 
     1.20 "BONUS PLAN" -- see Section 2.2(b).
 
     1.21 "CAUSE"-- see Section 3.3(b).
 
     1.22 "CEO" means Chief Executive Officer.
 
     1.23 "CHANGE OF CONTROL" means,  except as otherwise provided at the end of
this Section, the occurrence of any one or more of the following:
 
          (a) any  person  (as such term is used in Rule  13d-5 of the SEC under
     the Exchange Act) or group (as such term is defined in Sections 3(a)(9) and
     13(d)(3) of the  Exchange  Act),  other than a  Subsidiary  or any employee
     benefit plan (or any related trust) of Allstate or any of its Subsidiaries,
     becomes the Beneficial Owner of 20% or more of the common stock of Allstate
     or of Voting  Securities  representing  20% or more of the combined  voting
     power of all Voting  Securities of Allstate (such a person or group that is
     not a Similarly  Owned Company (as defined below),  a "20% OWNER"),  except
     that no Change of Control shall be deemed to have occurred solely by reason
     of such beneficial ownership by a corporation (a "SIMILARLY OWNED COMPANY")
     with  respect  to which  both  more  than 70% of the  common  stock of such
     corporation  and  Voting  Securities  representing  more  than  70%  of the
     combined voting power of the Voting Securities of such corporation are then
     owned,  directly  or  indirectly,  by the  persons  who were the  direct or
     indirect  owners of the common  stock and  Voting  Securities  of  Allstate
     immediately  before such acquisition in substantially  the same proportions
     as their  ownership,  immediately  before such  acquisition,  of the common
     stock and Voting Securities of Allstate, as the case may be; or
 
          (b) the Allstate Incumbent  Directors  (determined using the Agreement
     Date as the  baseline  date)  cease for any reason to  constitute  at least
     two-thirds of the directors of Allstate  then serving  (provided  that this
     clause (b) shall be inapplicable during a Post-Merger of Equals Period); or
 
          (c)   approval   by  the   stockholders   of  Allstate  of  a  merger,
     reorganization,  consolidation,  or  similar  transaction,  or  a  plan  or
     agreement for the sale or other  disposition of all or substantially all of
     the  consolidated  assets of Allstate or a plan of  liquidation of Allstate
     (any of the  foregoing,  a  "REORGANIZATION  TRANSACTION")  that,  based on
     information  included in the proxy and other written materials  distributed
     to Allstate's  stockholders in connection with the solicitation by Allstate
     of such  stockholder  approval,  is not  expected  to  qualify as an Exempt
     Reorganization  Transaction;  provided,  however, that if (i) the merger or
     other agreement between the parties to a Reorganization Transaction expires
     or is terminated after the date of such  stockholder  approval but prior 
                          
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<PAGE>
 
     to the consummation of such  Reorganization  Transaction (a "REORGANIZATION
     TRANSACTION TERMINATION") or (ii) immediately after the consummation of the
     Reorganization Transaction, such Reorganization Transaction does qualify as
     an Exempt Reorganization  Transaction  notwithstanding the fact that it was
     not  expected  to so qualify as of the date of such  stockholder  approval,
     then such stockholder  approval shall not be deemed a Change of Control for
     purposes of any Termination of Employment as to which the Termination  Date
     occurs on or after the date of the Reorganization  Transaction  Termination
     or the date of the consummation of the Exempt  Reorganization  Transaction,
     as applicable; or
 
          (d) the consummation by Allstate of a Reorganization  Transaction that
     for any reason fails to qualify as an Exempt Reorganization  Transaction as
     of the  date of such  consummation,  notwithstanding  the  fact  that  such
     Reorganization  Transaction  was  expected  to so qualify as of the date of
     such stockholder approval; or
 
          (e) a 20% Owner who had qualified as an Approved Passive Holder ceases
     to  qualify as such for any  reason  other  than  ceasing to be a 20% Owner
     (such cessation of Approved  Passive Holder status to be considered for all
     purposes of this Agreement (including the definition of "Effective Date") a
     Change of Control  distinct  from and in  addition to the Change of Control
     specified in clause (a) above).
 
Notwithstanding  the  occurrence  of any of the  foregoing  events,  a Change of
Control  shall not occur with respect to Executive if, in advance of such event,
Executive  agrees in writing  that such event shall not  constitute  a Change of
Control.
 
     1.24 "CODE"  means the  Internal  Revenue  Code of 1986,  as  amended.  Any
reference  to  any  section  of the  Code  shall  also  refer  to any  successor
provision.
 
     1.25  "COMPANY"   means  Allstate,   AIC  and  each  of  Allstate's   other
Subsidiaries.
 
     1.26 "COMPANY CERTIFICATE" -- see Section 5.1(b).
 
     1.27 "COMPANY COUNSEL OPINION" -- see Section 5.5.
 
     1.28  "COMPETITIVE  BUSINESS"  means as of any date  (including  during the
one-year  period  commencing on the  Termination  Date) any corporation or other
Person  (and any  branch,  office or  operation  thereof)  that  engages  in, or
proposes to engage in:
 
          (a) the underwriting,  reinsurance,  marketing or sale of (i) any form
     of insurance of any kind that the Company as of such date does, or proposes
     to, underwrite,  reinsure,  market or sell (any such form of insurance,  an
     "ALLSTATE  INSURANCE  PRODUCT") or (ii) any other form of insurance that is
     marketed or sold in competition with any Allstate Insurance Product, or
 
          (b) any other  business  that as of such date is a direct and material
     competitor of the Company;
 
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<PAGE>
 
and that is located (i) anywhere in the United States,  or (ii) anywhere outside
of the United States where the Company is then engaged in, or proposes to engage
in, any of such activities.
 
     1.29  "CONSUMMATION   DATE"  means  the  date  on  which  a  Reorganization
Transaction is consummated.
 
     1.30 "DISABILITY" -- see Section 3.1(b).
 
     1.31 "DISABILITY EFFECTIVE DATE" see Section 3.1.
 
     1.32  "EFFECTIVE  DATE"  means the date on which a Change of Control  first
occurs during the Agreement Term.
 
     1.33 "EXCHANGE ACT" means the Securities Exchange Act of 1934.
 
     1.34 "EXCISE TAXES" -- see Section 5.1.
 
     1.35 "EXECUTIVE COUNSEL OPINION" -- see Section 5.5.
 
     1.36  "EXECUTIVE'S  GROSS-UP  DETERMINATION"  -- see Section  5.2(a).  
 
     1.37 "EXEMPT REORGANIZATION TRANSACTION" means a Reorganization Transaction
that  results  in the  Persons  who were the  direct or  indirect  owners of the
outstanding  common stock and Voting Securities of Allstate  immediately  before
such Reorganization Transaction becoming,  immediately after the consummation of
such Reorganization Transaction, the direct or indirect owners of both more than
70% of the then-outstanding common stock of the Surviving Corporation and Voting
Securities  representing  more  than  70% of the  combined  voting  power of the
then-outstanding   Voting   Securities   of  the   Surviving   Corporation,   in
substantially the same respective  proportions as such Persons' ownership of the
common  stock  and  Voting  Securities  of  Allstate   immediately  before  such
Reorganization Transaction.
 
     1.38 "GOOD REASON" -- see Section 3.4(b).
 
     1.39 "GROSS-UP MULTIPLE" -- see Section 5.4.
 
     1.40 "GROSS-UP PAYMENT" -- see Section 5.1.
 
     1.41 "INCLUDING" means including without limitation.
 
     1.42 "IRS" means the Internal Revenue Service.
 
     1.43 "IRS CLAIM" -- see Section 5.6.
 
     1.44 "LEGAL AND OTHER EXPENSES" -- see Section 6.1(a).
 
     1.45 "LTIP" means the Allstate Long-Term Executive  Incentive  Compensation
Plan (or any successor plan).
 
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<PAGE>
 
     1.46 "LTIP AWARD" means an incentive compensation opportunity granted under
the LTIP.
 
     1.47 "LTIP  BONUS"  means the  amount  paid or earned in respect of an LTIP
Award.
 
     1.48 "LTIP PERFORMANCE  PERIOD" means any performance  period designated in
accordance with any LTIP approved by the Board or any committee of the Board.
 
     1.49 "LTIP TARGET AWARD" means, in respect of any LTIP Award, the
amount  that  Executive  would  have  been  entitled  to  receive  for the  LTIP
Performance  Period  corresponding  to such LTIP Award if the performance  goals
established  pursuant  to such LTIP Award were  achieved at the 100% level as of
the end of the LTIP Performance Period.
 
     1.50 "LUMP SUM VALUE" of an annuity  payable  pursuant to a defined benefit
plan  means,  as of a specified  date,  the present  value of such  annuity,  as
determined, as of such date, under generally accepted actuarial principles using
(i) the  applicable  interest  rate,  mortality  tables  and other  methods  and
assumptions that the Pension Benefit Guaranty  Corporation ("PBGC") would use in
determining the value of an immediate annuity on the Termination Date or (ii) if
such  interest  rate and mortality  assumptions  are no longer  published by the
PBGC, interest rate and mortality assumptions  determined in a manner as similar
as  practicable  to the manner by which the PBGC's  interest  rate and mortality
assumptions  were  determined  immediately  prior  to the  PBGC's  cessation  of
publication of such assumptions; provided, however, that if such defined benefit
plan provides for a lump sum distribution and such lump-sum  distribution either
(x) is the only payment method  available  under such plan or (y) provides for a
greater amount than the Lump Sum Value of the Maximum  Annuity  available  under
such plan, then "Lump Sum Value" shall mean such lump sum amount.
 
     1.51 "MAXIMUM ANNUITY" means, in respect of a defined benefit plan (whether
or not  qualified  under  Section  401(a) of the Code),  an annuity  computed in
whatever  manner  permitted  under  such plan  (including  frequency  of annuity
payments,  attained  age  (whether  determined  as of a current  date or as of a
future date upon the commencement of annuity payments),  and nature of surviving
spouse benefits, if any) that yields the greatest Lump Sum Value.
 
     1.52  "MERGER  OF  EQUALS"  means,  as of any  date,  a  transaction  that,
notwithstanding  the fact that such  transaction may also qualify as a Change of
Control,  satisfies all of the  conditions  set forth in  paragraphs  (a) or (b)
below:
 
          (a)  If  such  date  is  on  or  after  the   Consummation   Date,   a
     Reorganization  Transaction  in  respect  of  which  all of  the  following
     conditions  are satisfied as of such date, or, if such date is prior to the
     Consummation  Date,  a proposed  Reorganization  Transaction  in respect of
     which the merger  agreement or other documents  (including the exhibits and
     annexes   thereto)   setting  forth  the  terms  and   conditions  of  such
     Reorganization  Transaction,  as in effect on such date after giving effect
     to all amendments thereof or waivers thereunder, require that the following
     conditions be satisfied on and, where  applicable,  after the  Consummation
     Date:
 
 
 
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<PAGE>
 
               (i) at least 50%,  but not more than 70%, of the common  stock of
          the   Surviving   Corporation   outstanding   immediately   after  the
          consummation of the Reorganization  Transaction,  together with Voting
          Securities  representing  at least 50%,  but not more than 70%, of the
          combined  voting  power  of all  Voting  Securities  of the  Surviving
          Corporation  outstanding  immediately after such consummation shall be
          owned,  directly  or  indirectly,  by the persons who were the owners,
          directly or indirectly,  of the common stock and Voting  Securities of
          Allstate  immediately  before such  consummation in substantially  the
          same  proportions as their  respective  direct or indirect  ownership,
          immediately before such  consummation,  of the common stock and Voting
          Securities of Allstate, respectively; and
 
               (ii) Allstate  Incumbent  Directors  (determined  as of such date
          using  the  date  immediately  preceding  the  Effective  Date  as the
          baseline date) shall, throughout the period beginning on the Effective
          Date and  ending  on the  third  anniversary  of the  Effective  Date,
          continue to constitute  not less than 50% of the members of the Board;
          and
 
               (iii) the person who was the CEO of Allstate immediately prior to
          the Effective  Date shall serve as (x) the CEO of Allstate  throughout
          the  period  beginning  on  the  Effective  Date  and  ending  on  the
          Consummation Date and (y) the CEO of the Surviving  Corporation at all
          times during the period commencing on the Consummation Date and ending
          on the first anniversary of the Consummation Date;
 
     provided,  however,  that a Reorganization  Transaction that qualifies as a
     Merger of Equals shall cease to qualify as a Merger of Equals (a "MERGER OF
     EQUALS CESSATION") and shall instead qualify as a Change of Control that is
     not a Merger of Equals from and after the first date during the Post-Change
     Period (such date, the "MERGER OF EQUALS  CESSATION  DATE") as of which any
     one or more of the following shall occur for any reason:
 
                    (1) if any  condition of clause (i) of paragraph (a) of this
               Section  shall for any reason not be satisfied as of  immediately
               after the consummation of the Reorganization Transaction; or
 
                    (2) if as of the close of  business  on any date on or after
               the  Effective  Date,  any  condition of clauses (ii) or (iii) of
               paragraph (a) of this Section shall not be satisfied; or
 
                    (3) if on any date  prior to the  first  anniversary  of the
               Consummation  Date, the Company shall make a filing with the SEC,
               issue  a press  release,  or make a  public  announcement  to the
               effect that  Allstate is seeking or intends to seek a replacement
               for the CEO,  whether  such  replacement  is to become  effective
               before or after such first anniversary.
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<PAGE>
 
          (b) As of such date, each Person, if any, who is a 20% Owner qualifies
     as an Approved Passive Holder.
 
The  Company  shall  give  Executive  written  notice  of any  Merger  of Equals
Cessation  and  the  applicable  Merger  of  Equals  Cessation  Date  as soon as
practicable after the Merger of Equals Cessation Date.
 
     1.53 "MERGER OF EQUALS  CESSATION DATE" -- see the definition of "MERGER OF
EQUALS." 
 
     1.54 "MERGER OF EQUALS CESSATION NOTICE" -- means a written notice given in
accordance with Section 10.8 by the Company to notify Executive of the facts and
circumstances  of a Merger of Equals  Cessation,  including the Merger of Equals
Cessation Date.
 
     1.55 "NOTICE OF CONSIDERATION" -- see Section 3.3(c).
 
     1.56 "NON-QUALIFIED PLAN" -- see Section 2.4.
 
     1.57 "NOTICE OF  TERMINATION"  means a written  notice given in  accordance
with Section 10.8 that sets forth (i) the specific termination provision in this
Agreement relied on by the party giving such notice,  (ii) in reasonable  detail
the  specific  facts  and  circumstances  claimed  to  provide  a basis for such
Termination of Employment,  and (iii) if the Termination  Date is other than the
date of receipt of such Notice of Termination, the Termination Date.
 
     1.58 "PERSON" means any individual, sole proprietorship, partnership, joint
venture,   limited  liability  company,  trust,   unincorporated   organization,
association,  corporation,  institution,  public benefit corporation,  entity or
government instrumentality, division, agency, body or department.
 
     1.59 "PLANS" means plans, programs, or Policies of the Company.
 
     1.60 "POLICIES" means policies, practices or procedures of the Company.
 
     1.61 "POST-CHANGE PERIOD" means the period commencing on the Effective Date
and ending on the third anniversary of the Effective Date.
 
     1.62 "POST-MERGER OF EQUALS PERIOD" means the period commencing on an
Effective  Date of a Change of Control that  qualifies as a Merger of Equals and
ending on the third anniversary of such Effective Date or, if sooner, the Merger
of Equals Cessation Date.
 
     1.63 "POTENTIAL PARACHUTE PAYMENTS" -- see Section 5.1.
 
     1.64 "PRO-RATA ANNUAL BONUS" means, in respect of the Company's fiscal year
during  which the  Termination  Date  occurs,  an amount equal to the product of
Executive's  Target  Annual  Bonus  (determined  as  of  the  Termination  Date)
multiplied by a fraction,  the numerator of which equals the number of days from
and  including  the first day of such fiscal  year  through  and  including  the
Termination Date, and the denominator of which equals 365.
 
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     1.65  "PRO-RATA LTIP BONUS" means an amount equal to the sum of each of the
following  amounts:  for each LTIP Performance  Period that is in effect as of a
Termination Date, Executive's LTIP Target Award for such LTIP Performance Period
multiplied by a fraction,  the numerator of which equals the number of days from
and  including  the  beginning  of such  LTIP  Performance  Period  through  and
including  the  Termination  Date,  and the  denominator  of  which  equals  the
aggregate number of days in such LTIP Performance Period.
 
     1.66 "REFUND CLAIM" -- see Section 5.6.
 
     1.67  "REORGANIZATION  TRANSACTION" -- see clause (c) of the definition of
"CHANGE OF CONTROL."
 
     1.68 "RESTRICTED SHARES" means shares of restricted stock, restricted stock
units or similar awards.
 
     1.69 "SEC" means the Securities and Exchange Commission.
 
     1.70 "SECTION" means, unless the context otherwise  requires,  a section of
this Agreement.
 
     1.71 "SERP" means a supplemental executive retirement Plan that is a
Non-Qualified Plan.
 
     1.72 "SEVERANCE PERIOD" -- see Section 4.1(g).
 
     1.73  "STOCK  OPTIONS"  means  stock  options,  stock  appreciation  rights
(including limited stock appreciation rights), or similar awards.
 
     1.74 "SUBSIDIARY" means any corporation,  business trust, limited liability
company  or  partnership  with  respect  to which  Allstate  owns,  directly  or
indirectly, Voting Securities representing more than 50% of the aggregate voting
power of the then-outstanding Voting Securities.
 
     1.75  "SURVIVING  CORPORATION"  means  the  corporation  resulting  from  a
Reorganization  Transaction  or, if securities  representing at least 50% of the
aggregate Voting Power of such resulting  corporation are directly or indirectly
owned by another corporation, such other corporation.
 
     1.76  "TARGET  ANNUAL  BONUS" as of any date means the amount  equal to the
product of Base Salary  determined as of such date  multiplied by the percentage
of such Base  Salary to which  Executive  would have been  entitled  immediately
prior to such date under any Bonus Plan for the  Annual  Performance  Period for
which the Annual Bonus is awarded if the performance goals established  pursuant
to such Bonus Plan were  achieved  at the 100% level as of the end of the Annual
Performance Period.
 
     1.77 "TAXES" means federal, state, local and other income, employment
and other taxes.
 
                                      E-13
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     1.78  "TERMINATION  DATE"  means the date of the  receipt  of the Notice of
Termination  by  Executive  (if such  Notice is given by the  Company) or by the
Company (if such Notice is given by Executive), or any later date, not more than
15 days after the giving of such Notice,  specified  in such  Notice;  provided,
however, that:
 
          (a) if  Executive's  employment  is  terminated  by reason of death or
     Disability,  the Termination Date shall be the date of Executive's death or
     the  Disability   Effective  Date  (as  defined  in  Section  3.1(a)),   as
     applicable; and
 
          (b) if no Notice of Termination is given,  the Termination  Date shall
     be the last date on which Executive is employed by the Company.
 
     1.79  "TERMINATION  OF  EMPLOYMENT"  means any  termination  of Executive's
employment with the Company, whether such occurs by reason of (a) the initiative
of any Company or Executive or (b) the death of Executive.
 
     1.80 "20%  OWNER" -- see  paragraph  (a) of the  definition  of  "Change of
Control." 
 
     1.81  "VOTING  SECURITIES"  of  a  corporation  means  securities  of  such
corporation  that are entitled to vote generally in the election of directors of
such corporation.
 
 
                                   ARTICLE II.
                               POST-CHANGE PERIOD
 
     2.1 POSITION AND DUTIES.
 
          (a) During the Post-Change Period, (i) Executive's position (including
     offices,  titles,  reporting requirements and responsibilities),  authority
     and duties shall be at least commensurate in all material respects with the
     most  significant of those held,  exercised and assigned at any time during
     the 90-day
 
                                      E-14
<PAGE>
 
     period immediately before the Effective Date and (ii) Executive's  services
     shall be performed at the location where Executive was employed immediately
     before the Effective  Date or any other location no more than 30 miles from
     such former location.
 
          (b) During  the  Post-Change  Period  (except  during  any  periods of
     vacation to which Executive is entitled and any authorized sick, disability
     or  other  leave of  absence),  Executive  shall  devote  Executive's  full
     attention  and time to the  business and affairs of the Company and, to the
     extent   necessary  to  discharge  the  duties  assigned  to  Executive  in
     accordance with this Agreement,  to use Executive's best efforts to perform
     such duties.  During the  Post-Change  Period,  Executive  may (i) serve on
     corporate, civic or charitable boards or committees, (ii) deliver lectures,
     fulfill speaking engagements or teach at educational institutions and (iii)
     manage personal investments, so long as such activities are consistent with
     the Policies of the Company at the Effective Date and do not  significantly
     interfere with the performance of Executive's  duties under this Agreement.
     To the extent that any such  activities  have been  conducted  by Executive
     immediately  prior  to the  Effective  Date and  were  consistent  with the
     Policies of the Company at the Effective  Date,  the  continued  conduct of
     such  activities  (or  activities  similar in nature  and scope)  after the
     Effective  Date shall not be deemed to interfere  with the  performance  of
     Executive's duties under this Agreement.
 
     2.2 COMPENSATION.
 
          (a) BASE SALARY.  During the Post-Change Period, the Company shall pay
     or cause to be paid to Executive an annual base salary in cash, which shall
     be paid in a manner  consistent  with the  Company's  payroll  practices in
     effect  immediately  before the Effective  Date, at an annual rate not less
     than 12 times the highest  monthly base salary paid or payable to Executive
     by the Company in respect of the  12-month  period  immediately  before the
     Effective  Date (such annual rate salary,  the "BASE  SALARY").  During the
     Post-Change Period, the Base Salary shall be reviewed at least annually and
     shall  be  increased  at any  time  and  from  time  to time  as  shall  be
     substantially  consistent  
                                      E-15
 
<PAGE>
 
     with  increases  in base  salary  awarded to other peer  executives  of the
     Company;  provided,  however,  that no  provision of this  Agreement  shall
     require  the  Company  to  increase   Executive's   Base  Salary  during  a
     Post-Merger of Equals  Period.  Any increase in Base Salary shall not limit
     or reduce  any other  obligation  of the  Company to  Executive  under this
     Agreement.  After any such  increase,  the Base Salary shall not be reduced
     and "Base Salary" shall thereafter refer to the increased amount.
 
          (b) ANNUAL  BONUS.  The Company  shall also pay or cause to be paid to
     Executive a bonus (the "ANNUAL BONUS") for each Annual  Performance  Period
     that ends during the Post-Change Period.  "ANNUAL PERFORMANCE PERIOD" means
     each period  designated in accordance with any annual bonus  arrangement or
     Plan (a "BONUS  PLAN")  that is based on  performance  and  approved by the
     Board or any committee of the Board, or in the absence of any Bonus Plan or
     any such  designated  period of time,  each calendar year. The Annual Bonus
     shall be not  less  than  the  Target  Annual  Bonus  determined  as of the
     Effective  Date;  provided,  however,  that no provision in this  Agreement
     shall  require the Company to pay any Target  Annual Bonus or other minimum
     Annual Bonus during a Post-Merger of Equals Period.
 
          (c) LTIP BONUS. The Company shall also:
 
               (i) pay or cause to be paid to  Executive  an LTIP Bonus equal to
          the  LTIP  Target  Award  for  each  LTIP  Award  for  which  an  LTIP
          Performance Period is in effect as of the Effective Date; and
 
               (ii)  throughout  the  Post-Change  Period,  grant LTIP Awards to
          Executive as follows:
 
                    (1) LTIP Awards shall be granted no less  frequently than is
               contemplated by the terms of the LTIP and the Company's practices
               thereunder, as such terms and practices are in effect immediately
               prior to the Effective Date;
 
                    (2) each such LTIP Award shall  provide for the payment of a
               percentage of Executive's  Base Salary in effect at the beginning
               of the Performance  Period  applicable to such LTIP Award that is
               no less than the  average  of the  Target  LTIP  Percentages  (as
               defined  below) for all of  Executive's  LTIP Awards  outstanding
               immediately prior to the Effective Date; and
 
                    (3) the target  performance  goals established for each such
               LTIP  Award  shall  be  substantially  comparable  to the  target
               performance  goals under  Executive's LTIP Awards  outstanding on
               the Effective Date;
 
     provided, however, that during a Post-Merger of Equals Period, no provision
     of this  Agreement  shall  require the Company to (x) pay any minimum  LTIP
     Bonus amount pursuant to clause (i) above, except to the extent required by
     the terms of such LTIP
                                      E-16
 
<PAGE>
 
     Award or (y) grant any LTIP Award  pursuant to clause  (ii) above.  "TARGET
     LTIP  PERCENTAGE"  means,  in respect of any LTIP Award,  the percentage of
     Executive's  Base Salary  (determined as of the beginning of the applicable
     LTIP Performance  Period) that Executive would be entitled to receive after
     the completion of the applicable LTIP Performance Period if the performance
     goals applicable to such LTIP Award as of the date immediately prior to the
     Effective Date were achieved at the 100% level.
 
          (d) INCENTIVE,  SAVINGS AND RETIREMENT PLANS.  Executive shall also be
     entitled to  participate  during the  Post-Change  Period in all  incentive
     (including long-term  incentives),  savings and retirement Plans applicable
     to other peer  executives of the Company,  but in no event (except during a
     Post-Merger  of Equals  Period)  shall such Plans  provide  Executive  with
     incentive (including long-term incentives), savings and retirement benefits
     during  the  Post-Change  Period  that are,  in any case,  materially  less
     favorable,  in the aggregate,  than the most favorable of those provided by
     the Company for Executive  under such Plans as in effect at any time during
     the 90-day period immediately before the Effective Date.
 
          (e) WELFARE BENEFIT PLANS.  During the Post-Change  Period,  Executive
     and Executive's family shall be eligible to participate in, and receive all
     benefits under,  welfare  benefit Plans provided by the Company  (including
     medical, prescription,  dental, disability, salary continuance,  individual
     life,  group life,  dependent  life,  accidental  death and travel accident
     insurance Plans) and applicable to other peer executives of the Company and
     their  families,  but in no event (except  during a  Post-Merger  of Equals
     Period) shall such Plans provide  benefits  during the  Post-Change  Period
     that  are  materially  less  favorable,  in the  aggregate,  than  the most
     favorable of those  provided to Executive  under such Plans as in effect at
     any time during the 90-day period immediately before the Effective Date.
 
          (f) FRINGE BENEFITS. During the Post-Change Period, Executive shall be
     entitled to fringe  benefits in accordance  with the most  favorable  Plans
     applicable  to peer  executives  of the  Company,  but in no event  (except
     during a Post-Merger  of Equals  Period)  shall such Plans  provide  fringe
     benefits that are in any case materially less favorable,  in the aggregate,
     than the most favorable of those provided by the Company to Executive under
     such  Plans in effect at any time  during  the  90-day  period  immediately
     before the Effective Date.
 
          (g)  EXPENSES.  During  the  Post-Change  Period,  Executive  shall be
     entitled  to  prompt  reimbursement  of all  reasonable  employment-related
     expenses incurred by Executive upon the Company's receipt of accountings in
     accordance with the most favorable  Policies  applicable to peer executives
     of the Company,  but in no event  (except  during a  Post-Merger  of Equals
     Period) shall such Policies be materially less favorable, in the aggregate,
     than the most  favorable  of those  provided by the  Company for  Executive
     under  such  Policies  in  effect  at any time  during  the  90-day  period
     immediately before the Effective Date.
 
                                      E-17
<PAGE>
 
          (h) OFFICE AND SUPPORT STAFF. During the Post-Change Period, Executive
     shall be  entitled  to an office or offices of a size and with  furnishings
     and  other  appointments,  and  to  secretarial  and  other  assistance  in
     accordance with the most favorable  Policies  applicable to peer executives
     of the Company,  but in no event  (except  during a  Post-Merger  of Equals
     Period) shall such Policies be materially less favorable, in the aggregate,
     than the most  favorable  of those  provided by the  Company for  Executive
     under  such  Policies  in  effect  at any time  during  the  90-day  period
     immediately before the Effective Date.
 
          (i)  VACATION.  During  the  Post-Change  Period,  Executive  shall be
     entitled to paid vacation in accordance  with the most  favorable  Policies
     applicable  to peer  executives  of the  Company,  but in no event  (except
     during a  Post-Merger  of Equals  Period) shall such Policies be materially
     less favorable, in the aggregate, than the most favorable of those provided
     by the  Company  for  Executive  under such  Policies in effect at any time
     during the 90-day period immediately before the Effective Date.
 
     2.3 STOCK  INCENTIVE  AWARDS.  On the Effective Date of a Change of Control
that is not a  Merger  of  Equals  or,  if  applicable,  on a Merger  of  Equals
Cessation Date, (i) all of Executive's  unvested Stock Options then  outstanding
(whether  granted before or after the Agreement Date) shall  immediately  become
fully vested and exercisable, and (ii) all of Executive's Restricted Shares then
outstanding  shall  immediately  become  fully vested and  nonforfeitable.  This
Section  amends all award  agreements  dated as of any date before the Agreement
Date.
 
     2.4 UNFUNDED  DEFERRED  COMPENSATION.  On the Effective Date of a Change of
Control that is not a Merger of Equals or, if applicable,  on a Merger of Equals
Cessation Date,  Executive shall become fully vested in all benefits  previously
accrued  under any  deferred  compensation  Plan  (including a SERP) that is not
qualified under Section 401(a) of the Code (a "NON-QUALIFIED PLAN"). Within five
business days after (i) any such  Effective  Date of a Change of Control that is
not a Merger  of  Equals  or (ii) such  Merger  of  Equals  Cessation  Date,  as
applicable, the Company shall pay to Executive a lump-sum cash amount equal to:
 
          (a) the sum of the Lump-Sum  Values of all Maximum  Annuities that are
     payable pursuant to all defined benefit Non-Qualified Plans, plus
 
          (b)  the  sum  of  Executive's  account  balances  under  all  defined
     contribution Non-Qualified Plans.
 
To the extent that, if, for any reason,  any portion of such  Non-Qualified Plan
benefit  is not so paid,  the  Company  shall pay  Executive  in lieu  thereof a
lump-sum cash payment equal to such unpaid portion within the  five-business day
period specified in the preceding sentence.
 
 
                                  ARTICLE III.
                            TERMINATION OF EMPLOYMENT
 
     3.1 DISABILITY.
 
                                      E-18
<PAGE>
 
          (a)  During  the  Post-Change   Period,   the  Company  may  terminate
     Executive's   employment  because  of  Executive's   Disability  by  giving
     Executive or his legal representative, as applicable, (i) written notice in
     accordance  with  Section  10.8 of the  Company's  intention  to  terminate
     Executive's employment pursuant to this Section and (ii) a certification of
     Executive's  Disability  by a  physician  selected  by the  Company  or its
     insurers,  subject  to  the  consent  of  Executive  or  Executive's  legal
     representative,  which  consent  shall  not  be  unreasonably  withheld  or
     delayed.  Executive's  employment shall terminate effective on the 30th day
     (the "DISABILITY  EFFECTIVE DATE") after Executive's receipt of such notice
     unless,  before the Disability Effective Date, Executive shall have resumed
     the full-time performance of Executive's duties.
 
          (b) "DISABILITY" means any medically  determinable  physical or mental
     impairment of an Executive that:
 
               (i) has lasted for a  continuous  period of not less than (x) six
          months  or (y)  such  longer  period,  if any,  that is  available  to
          Executive under the Company's Policies relating to the continuation of
          employee status after the onset of disability, as such Policies are in
          effect when Disability is determined, but in no event (except during a
          Post-Merger of Equals  Period) shall such Policies be materially  less
          favorable to the Executive than the most favorable of such Policies in
          effect  for peer  executives  at any time  during  the  90-day  period
          immediately before the Effective Date,
 
               (ii) can be expected to be permanent or of  indefinite  duration,
          and
 
               (iii)  renders  Executive  unable to perform the duties  required
          under this Agreement.
 
     3.2  DEATH.  Executive's  employment  shall  terminate  automatically  upon
Executive's death during the Post-Change Period.
 
     3.3 CAUSE.
 
          (a)  During  the  Post-Change   Period,   the  Company  may  terminate
     Executive's  employment  for  Cause  solely in  accordance  with all of the
     substantive and procedural provisions of this Section.
 
          (b) "CAUSE" means any one or more of the following:
 
               (i)  Executive's  conviction of a felony or other crime involving
          fraud, dishonesty or moral turpitude;
 
               (ii) Executive's  willful or reckless material  misconduct in the
          performance of Executive's duties;
 
               (iii) Executive's habitual neglect of duties; or
 
                                      E-19
<PAGE>
 
               (iv) Executive's willful or intentional breach of this Agreement;
 
     provided,  however,  that for purposes of clauses  (ii),  (iii),  and (iv),
     Cause shall not include any one or more of the following:
 
                    (1) bad judgment or negligence;
 
                    (2) any act or omission  believed by Executive in good faith
               to have been in or not  opposed to the  interest  of the  Company
               (without intent of Executive to gain,  directly or indirectly,  a
               profit to which Executive was not legally entitled);
 
                    (3)  any  act  or   omission   with   respect   to  which  a
               determination  could  properly  have been made by the Board  that
               Executive had satisfied  the  applicable  standard of conduct for
               indemnification or reimbursement  under Allstate's  by-laws,  any
               applicable  indemnification agreement, or applicable law, in each
               case as in effect at the time of such act or omission; or
 
                    (4) any act or  omission  with  respect  to which  Executive
               receives a Notice of  Consideration  (as defined below) more than
               six  months  after the  earliest  date on which any member of the
               Board,  not a party to the act or  omission,  knew or should have
               known of such act or omission; and
 
     further  provided,  that if a breach of this  Agreement  involved an act or
     omission  based on  Executive's  good  faith  and  reasonable  belief  that
     Executive's act or omission was in the best interests of the Company or was
     required by applicable law or administrative regulation,  such breach shall
     not constitute  Cause unless the Company gives Executive  written notice of
     such breach that  specifically  refers to this Section and,  within 30 days
     after  such  notice is given,  Executive  fails to cure such  breach to the
     fullest extent that it is curable.
 
          (c)  The  Company  shall  strictly   observe  each  of  the  following
     procedures in connection with any Termination of Employment for Cause:
 
               (i) A meeting of the Board shall be called for the stated purpose
          of  determining  whether  Executive's  acts or  omissions  satisfy the
          requirements  of Section  3.3(b)  and,  if so,  whether  to  terminate
          Executive's employment for Cause.
 
               (ii) Not less than 30 days prior to the date of such meeting, the
          Company shall  provide  Executive and each member of the Board written
          notice (a "NOTICE OF CONSIDERATION") of (x) a detailed  description of
          the acts or omissions  alleged to constitute Cause, (y) the date, time
          and location of such meeting of the Board, and (z) Executive's  rights
          under clause (iii) below.
 
                                      E-20
<PAGE>
 
               (iii) If the Notice of Consideration is given to Executive at any
          time  during a  Post-Change  Period,  then  Executive  shall  have the
          opportunity  to appear before the Board in person and, at  Executive's
          option,  with legal counsel,  and/or to present to the Board a written
          response to the Notice of Consideration.
 
               (iv)  Executive's  employment may be terminated for Cause only if
          (x) the acts or omissions specified in the Notice of Consideration did
          in fact occur and do constitute Cause as defined in this Section,  (y)
          the Board  makes a specific  determination  to such  effect and to the
          effect that Executive's  employment should be terminated for Cause and
          (z)  the  Company  thereafter  provides  Executive  with a  Notice  of
          Termination  that  specifies  in  specific  detail  the  basis of such
          Termination  of  Employment  for  Cause  and  which  Notice  shall  be
          consistent with the reasons set forth in the Notice of  Consideration.
          The Board's  determination  specified  in clause (y) of the  preceding
          sentence  shall  require the  affirmative  vote of at least 75% of the
          members of the Board.
 
               (v) In the event  that the  existence  of Cause  shall  become an
          issue in any action or proceeding  between the Company and  Executive,
          the Company shall,  notwithstanding  the  determination  referenced in
          clause (iv) of this Section  3.3(c),  have the burden of  establishing
          that the actions or omissions specified in the Notice of Consideration
          did in fact occur and do  constitute  Cause and that the  Company  has
          satisfied the  procedural  requirements  of this Section  3.3(c).  The
          satisfaction   of  the  Company's   burden  shall  require  clear  and
          convincing evidence.
 
          3.4 GOOD REASON.
 
               (a) During the  Post-Change  Period,  Executive may terminate his
          employment  for Good Reason in  accordance  with the  substantive  and
          procedural provisions of this Section.
 
               (b) "GOOD REASON" means any one or more of the following  actions
          or  omissions  that,  unless  otherwise  specified,  occurs  during  a
          Post-Change Period:
 
                                      E-21
<PAGE>
                    (i) any failure to pay Executive's  Base Salary in violation
               of Section  2.2(a) or any  failure to increase  Executive's  Base
               Salary to the extent, if any, required by such Section;
 
                    (ii) any  failure  to pay  Executive's  Annual  Bonus or any
               reduction in Executive's  Target Annual Bonus,  in either case in
               violation of Section 2.2(b);
 
                    (iii)  any  failure  to grant  or pay an LTIP  Award or LTIP
               Bonus in violation of Section 2.2(c);
 
                    (iv) any material  adverse  change in  Executive's  position
               (including   offices,    titles,    reporting   requirements   or
               responsibilities),  authority  or duties in  violation of Section
               2.1(a);
 
                    (v)  at  any  time  during  a  Post-Change  Period,  causing
               Executive to cease to be the CEO of Allstate  or, if  applicable,
               the  Successor  Company or causing  Executive to report to anyone
               other than the Board;
 
                    (vi)  requiring  Executive  to be  based  at any  office  or
               location in violation of Section 2.1(a);
 
                    (vii) any  other  material  adverse  change to the terms and
               conditions of Executive's employment;
 
                    (viii) any other  material  breach of this  Agreement by the
               Company;
 
                    (ix) any  Termination  of  Employment  by the  Company  that
               purports to be for Cause,  but is not in full compliance with all
               of the substantive and procedural  requirements of this Agreement
               (any such purported termination shall be treated as a Termination
               of Employment without Cause for all purposes of this Agreement);
 
                    (x) the  giving of a Notice  of  Consideration  pursuant  to
               Section 3.3(c) and the subsequent failure to terminate  Executive
               for Cause  within a period of 90 days  thereafter  in  compliance
               with  all of  the  substantive  and  procedural  requirements  of
               Section 3.3(c);
 
                    (xi) the failure at any time of a  successor  to the Company
               explicitly to assume and agree to be bound by this Agreement;
 
                    (xii) a  Termination  of  Employment  by  Executive  for any
               reason or no  reason  at any time  during  the  one-month  period
               commencing on the first day after the end of the 12-month  period
               commencing   on  the  Effective   Date;   provided  that  
 
                                      E-22
<PAGE>
 
 
               such a Termination  of Employment  during a Post-Merger of Equals
               Period  shall not  qualify as Good  Reason for  purposes  of this
               clause (xii); or
 
                    (xiii) in the event that a Merger of Equals  Cessation shall
               occur at any time during the Post-Change Period, a Termination of
               Employment  by Executive  for any reason or no reason at any time
               (whether during or after the Post-Change Period) that is both (x)
               after  the  last day of the  12-month  period  commencing  on the
               Effective  Date and (y) not more than 60 days  after the  Company
               gives  Executive  a Merger  of  Equals  Cessation  Notice  or, if
               sooner,  Executive  obtains  actual  knowledge  of the  Merger of
               Equals Cessation;
 
          provided, however, that any action or omission by the Company during a
          Post-Merger  of Equals Period that is specified in clauses (i),  (ii),
          (iii), (v), (vi), (vii),  (viii) or (xi) of this Section 3.4(b) and is
          not intentional or willful shall not constitute Good Reason unless (x)
          Executive shall give the Company a written notice that identifies such
          action or omission and  specifically  refers to this Section,  and (y)
          the  Company  shall fail for any  reason to cure such act or  omission
          within 30 days after Executive gives the Company such notice.
 
               (c) Any  reasonable  determination  by Executive  that any of the
          events  specified in subsection (b) above has occurred and constitutes
          Good Reason shall be conclusive  and binding for all purposes,  unless
          the  Company   establishes  by  clear  and  convincing  evidence  that
          Executive did not have any reasonable basis for such determination.
 
               (d) In the event of any  Termination  of  Employment by Executive
          for Good Reason,  Executive  shall as soon as  practicable  thereafter
          notify the  Company of the events  constituting  such Good Reason by a
          Notice  of  Termination.  A delay in the  delivery  of such  Notice of
          Termination  or a failure  by  Executive  to  include in the Notice of
          Termination any fact or circumstance  that contributes to a showing of
          Good  Reason  shall  not  waive  any  right of  Executive  under  this
          Agreement  or  preclude   Executive   from   asserting  such  fact  or
          circumstance in enforcing rights under this Agreement;  provided, 
 
                                      E-23
<PAGE>
 
          that no act or omission by the  Company  shall  qualify as Good Reason
          (i) if Executive's  Termination  Date is more than 12 months after the
          first date on which Executive obtained actual knowledge of such act or
          omission or (ii) if such act or  omission  would not  constitute  Good
          Reason  during  a  Post-Merger   of  Equals  Period  and   Executive's
          Termination  Date is more than 12 months after the first date on which
          Executive  obtained  actual  knowledge  of the fact  that no Merger of
          Equals has occurred or that a Merger of Equals Cessation has occurred.
 
               (e) In the event that the Company  fraudulently  conceals any act
          or omission by the Company that occurs during the  Post-Change  Period
          and qualifies as Good Reason, any subsequent Termination of Employment
          (whether  by  the  Company  or by  Executive  and  regardless  of  the
          circumstances of such  Termination) that occurs on any date (but in no
          event  more than 12 months  after  the first  date on which  Executive
          obtains actual  knowledge of such act or omission) shall  conclusively
          be deemed to be a  Termination  of  Employment  by Executive  for Good
          Reason,  notwithstanding  any  provision  of  this  Agreement  to  the
          contrary.
 
 
                                   ARTICLE IV.
             COMPANY'S OBLIGATIONS UPON A TERMINATION OF EMPLOYMENT
 
     4.1 IF BY EXECUTIVE  FOR GOOD REASON OR BY THE COMPANY OTHER THAN FOR CAUSE
OR  DISABILITY.  If,  during the  Post-Change  Period,  the  Company  terminates
Executive's  employment  other  than for Cause or  Disability,  or if  Executive
terminates  employment  for Good  Reason,  the  Company's  sole  obligations  to
Executive under Sections 2.1 and 2.2 and this Article shall be as follows:
 
          (a) The Company shall pay Executive,  in addition to all vested rights
     arising from Executive's  employment as specified in Article II, a lump-sum
     cash amount equal to the sum of the following:
 
               (i) all Accrued Obligations;
 
               (ii)  Executive's  Pro-rata  Annual Bonus  reduced (but not below
          zero) by the amount of any Annual Bonus paid to Executive with respect
          to the Company's fiscal year in which the Termination Date occurs;
 
               (iii)  Executive's  Pro-rata  LTIP Bonus  reduced  (but not below
          zero) by the amount of any LTIP Bonus paid to  Executive  with respect
          to the Company's fiscal year in which the Termination Date occurs;
 
               (iv) all  amounts  previously  deferred  by,  or  accrued  to the
          benefit of,  Executive  under any defined  contribution  Non-Qualified
          Plans,  whether or not  vested,  together  with any  accrued  earnings
          thereon,  to the extent that such amounts and  earnings  have not been
          previously  paid by the  Company  (whether  pursuant to Section 2.4 or
          otherwise);
 
                                      E-24
<PAGE>
 
               (v) an  amount  equal to three  (3.0)  times  the sum of (x) Base
          Salary,  (y) the Target  Annual  Bonus,  and (z) the  Annualized  LTIP
          Bonus, each determined as of the Termination Date; provided,  however,
          that any reduction in Executive's Base Salary,  Target Annual Bonus or
          Annualized  LTIP  Bonus that would  qualify  as Good  Reason  shall be
          disregarded for this purpose; and
 
               (vi) to the  extent  not paid  pursuant  to  clause  (iv) of this
          Section  4.1(a),  an  amount  equal  to the  sum of the  value  of the
          unvested portion of Executive's accounts or accrued benefits under any
          defined  contribution  Plan  (whether or not  qualified  under Section
          401(a) of the Code)  maintained  by the Company as of the  Termination
          Date and  forfeited  by  Executive  by  reason of the  Termination  of
          Employment.
 
     Such  lump-sum  amount shall be paid no more than five  business days after
     the Termination Date; provided, however, that such lump-sum amount shall be
     paid no more than 30  calendar  days after a  Termination  Date that occurs
     during a Post-Merger of Equals Period.
 
          (b) The Company shall pay Executive, in lieu of all benefits under all
     defined  benefit  Non-Qualified  Plans  that have  accrued on or before the
     Termination  Date but remain unpaid as of such date, a lump-sum cash amount
     equal to the positive difference, if any, between:
 
               (i) the sum of the Lump-Sum  Values of each Maximum  Annuity that
          would be payable to Executive  under any defined benefit Plan (whether
          or not qualified under Section 401(a) of the Code) if Executive had:
 
                    (1) become fully  vested in all such  benefits to the extent
               that such benefits are unvested as of the Termination Date,
 
                    (2) attained as of the Termination Date an age that is three
               years greater than Executive's actual age,
 
                    (3)  accrued a number of years of service  (for  purposes of
               determining  the amount of such  benefits,  entitlement  to early
               retirement  benefits,  and all  other  purposes  of such  defined
               benefit  plans)  that is three years  greater  than the number of
               years  of  service  actually  accrued  by  Executive  as  of  the
               Termination Date, and
 
                    (4) received the lump-sum  severance  benefits  specified in
               Section  4.1(a)  (excluding  all LTIP  Bonuses and any  severance
               multiples thereof, and all amounts in respect of Stock Options or
               Restricted  Shares,  if any) as  covered  compensation  in  equal
               monthly installments during the Severance Period,
 
         minus
 
                                      E-25
<PAGE>
 
               (ii) the sum of (x) the  Lump-Sum  Values of the Maximum  Annuity
          benefits vested and payable (whether currently or at some future date)
          to Executive  under each defined  benefit Plan that is qualified under
          Section   401(a)   of  the   Code  and  (y)  the   aggregate   amounts
          simultaneously  or previously paid (whether pursuant to Section 2.4 or
          otherwise) to Executive  under the defined  benefit Plans  (whether or
          not qualified  under Section  401(a) of the Code)  described in clause
          (i) of this Section 4.1(b).
 
     Such  lump-sum  amount shall be paid no more than five  business days after
     the Termination Date; provided, however, that such lump-sum amount shall be
     paid no more than 30  calendar  days after a  Termination  Date that occurs
     during a Post-Merger of Equals Period.
 
          (c) (i) On the  Termination  Date, all of  Executive's  unvested Stock
     Options then  outstanding  (whether  granted  before or after the Agreement
     Date) shall immediately  become fully vested and exercisable,  and (ii) all
     of Executive's  Restricted Shares then outstanding shall immediately become
     fully vested and  nonforfeitable.  This Section amends all award agreements
     dated as of any date before the Agreement Date.
 
          (d)  All of  Executive's  then-outstanding  Stock  Options  that  were
     granted  after  the  Agreement  Date,  whether  vested  on  or  before  the
     Termination  Date, shall thereafter  remain  exercisable  until the last to
     occur  of (x)  the  first  anniversary  of the  Termination  Date,  (y) the
     expiration  of any  restrictions  on  Executive's  right to sell the shares
     issuable upon the exercise of such Stock Options,  which  restrictions were
     imposed to permit a  Reorganization  Transaction  to be accounted  for on a
     pooling-of-interests  basis,  and (z) any period provided in the applicable
     stock option  agreement  or stock option plan as then in effect,  but in no
     event shall such period of exercisability  continue after the date on which
     such Stock Options would have expired if Executive had remained an employee
     of the Company.
 
          (e) Within five business days after Executive's  Termination Date, the
     Company shall deliver to Executive  certificates for all Restricted  Shares
     theretofore held by or on behalf of the Company.
 
          (f) The Company shall pay on behalf of Executive all  reasonable  fees
     and costs charged by the outplacement firm selected by Executive to provide
     outplacement services to Executive or, at the election of Executive,  shall
     pay to  Executive  within  five  business  days of its receipt of notice of
     Executive's  election an amount equal to the  reasonable  fees and expenses
     such outplacement firm would charge.
 
          (g) Until the third  anniversary of the Termination Date or such later
     date as any Plan may specify (the  "SEVERANCE  PERIOD"),  the Company shall
     continue to provide to
 
                                      E-26
 
<PAGE>
 
     Executive and  Executive's  family  welfare  benefits  (including  medical,
     prescription,  dental,  disability,  salary  continuance,  individual life,
     group  life,  accidental  death and  travel  accident  insurance  plans and
     programs) that are at least as favorable as the most favorable Plans of the
     Company  applicable to other peer  executives  and their families as of the
     Termination  Date,  but which are in no event less  favorable than the most
     favorable  Plans of the Company  applicable  to other peer  executives  and
     their families  during the 90-day period  immediately  before the Effective
     Date. The cost of such welfare  benefits to Executive  shall not exceed the
     cost of such benefits to Executive  immediately before the Termination Date
     or, if less,  the  Effective  Date.  Executive's  rights under this Section
     shall  be in  addition  to,  and  not  in  lieu  of,  any  post-termination
     continuation  coverage or conversion  rights Executive may have pursuant to
     applicable law, including continuation coverage required by Section 4980 of
     the Code.  Notwithstanding any of the above, such welfare benefits shall be
     secondary  to  any  similar  welfare   benefits   provided  by  Executive's
     subsequent employer.
 
     4.2 IF BY THE COMPANY  FOR CAUSE.  If the  Company  terminates  Executive's
employment  for  Cause  during  the  Post-Change   Period,  the  Company's  sole
obligation to Executive  under Sections 2.1 and 2.2 and this Article shall be to
pay Executive a lump-sum cash amount equal to all Accrued Obligations determined
as of the Termination Date.
 
     4.3 IF BY  EXECUTIVE  OTHER THAN FOR GOOD REASON.  If Executive  terminates
employment during the Post-Change Period other than for Good Reason,  Disability
or death,  the Company's sole obligation to Executive under Sections 2.1 and 2.2
and this Article  shall be to pay  Executive a lump-sum cash amount equal to all
Accrued Obligations determined as of the Termination Date.
 
     4.4 IF BY THE COMPANY FOR DISABILITY. If the Company terminates Executive's
employment by reason of Executive's  Disability  during the Post-Change  Period,
the Company's sole  obligation to Executive  under Sections 2.1 and 2.2 and this
Article shall be as follows:
 
          (a) to pay  Executive  a lump-sum  cash  amount  equal to all  Accrued
     Obligations determined as of the Termination Date, and
 
          (b) to  provide  Executive  disability  and other  benefits  after the
     Termination  Date that are not less  favorable to  Executive  than the most
     favorable of such  benefits  then  available  under Plans of the Company to
     disabled peer executives of the Company.
 
                                      E-27
<PAGE>
 
Such  disability and other benefits shall also be not materially less favorable,
in the  aggregate,  to Executive  than the most  favorable of the disability and
other  benefits  available to  Executive  under such Plans in effect at any time
during the 90-day period immediately preceding the Effective Date.
 
     4.5 IF UPON DEATH.  If  Executive's  employment  is terminated by reason of
Executive's death during the Post-Change  Period, the Company's sole obligations
to Executive under Sections 2.1 and 2.2 and this Article shall be as follows:
 
          (a) to pay  Executive's  estate or  Beneficiary a lump-sum cash amount
     equal to all Accrued Obligations; and
 
          (b) to provide  Executive's  estate or Beneficiary  survivor and other
     benefits  that are not less  than the most  favorable  survivor  and  other
     benefits  then  available  under Plans of the Company to the estates or the
     surviving families of peer executives of the Company.
 
Such survivor benefits shall also be no less favorable,  in the aggregate,  than
the most favorable of the survivor benefits available to Executive under such
Plans in effect at any time during the 90-day period  immediately  preceding the
Effective Date.
 
     4.6 AMOUNT CONTESTED.
 
          (a) In the event of any dispute  between the Company and  Executive as
     to the nature or extent of the Company's obligation to make any payments or
     provide  other  benefits to Executive  or  Executive's  family  pursuant to
     Sections 4.1 or 2.4, Executive shall have the right, exercisable by written
     notice given to the Company at any time on or after an Effective  Date,  to
     obtain,  within 30 days after the Company's  receipt of Executive's  demand
     therefor,  a written  certificate  prepared by the Company and certified by
     Allstate's independent auditors (a "SECTION 4.6 CERTIFICATE").  The Section
     4.6 Certificate shall specify in detail either (i) the amount and nature of
     each  payment or other  benefit  that the Company  believes is then due and
     owing to Executive  pursuant to Section 2.4 or 4.1, as applicable,  or (ii)
     if the Company  asserts that the conditions to  Executive's  entitlement to
     severance or other benefits  pursuant to Section 4.1 or 2.4, as applicable,
     have for any  reason  not been  satisfied,  the  amount  and nature of each
     payment or other benefit that the Company  believes  would be due and owing
     to Executive pursuant to Section 4.1 or 2.4, as applicable,  if all of such
     applicable  conditions had been fully  satisfied.  Executive may not demand
     more than one  Section  4.6  Certificate  in respect  of his  rights  under
     Section  4.1 or more than one  Section  4.6  Certificate  in respect of his
     rights under Section 2.4.
 
          (b) Each Section 4.6 Certificate  shall include schedules that specify
     in detail how each amount or other benefit  specified therein was computed,
     together  with  appropriate  references  to  specific  provisions  of  this
     Agreement or of any applicable Plans 
 
                                      E-28
<PAGE>
 
     or Policies  of the  Company,  copies of which  Plans or Policies  shall be
     attached to such schedules.
 
          (c) The Company shall be precluded  from asserting that any portion of
     the payments or other benefits due to Executive  pursuant to Section 4.1 or
     2.4, as  applicable,  is less than the amount  specified in the Section 4.6
     Certificate.  The Section 4.6  Certificate  shall in no event be binding on
     Executive and  Executive  shall have the right to assert that any or all of
     the  payments or other  benefits to be provided  pursuant to Section 4.1 or
     2.4 are greater than or different  from those  specified in the Section 4.6
     Certificate.
 
          (d) If the Company shall for any reason fail to deliver to Executive a
     Section 4.6  Certificate  in  compliance  with this Section  within 30 days
     after  the  Company's  receipt  of  Executive's  written  demand  therefor,
     Executive's  determination  of the amount and nature of  payments  or other
     benefits due to  Executive  (i) pursuant to Section 4.1 and set forth in an
     Executive's Severance  Determination (as defined below) or (ii) pursuant to
     Section  2.4  and  set  forth  in  an  Executive's  Deferred   Compensation
     Determination  (as defined  below) shall be conclusive  and binding for all
     purposes of this Agreement unless the Company shall establish, by clear and
     convincing   evidence,   that   Executive's   Severance   Determination  or
     Executive's  Deferred  Compensation   Determination,   as  applicable,   is
     incorrect  and that a  different  amount  (which  may be zero or a positive
     amount) or nature of  payments or other  benefits is correct.  "EXECUTIVE'S
     SEVERANCE   DETERMINATION"  means  an  opinion  of  nationally   recognized
     executive  compensation counsel to the effect that the amount and nature of
     severance  and other  benefits due to Executive  pursuant to Section 4.1 is
     the amount and nature that a court of  competent  jurisdiction,  based on a
     final judgment not subject to further  appeal,  is most likely to decide to
     have been  calculated in accordance with this Agreement and applicable law.
     "EXECUTIVE'S  DEFERRED  COMPENSATION  DETERMINATION"  means an  opinion  of
     nationally recognized executive compensation counsel to the effect that the
     amount of payments due to  Executive  pursuant to Section 2.4 is the amount
     that a court  of  competent  jurisdiction,  based on a final  judgment  not
     subject to further appeal, is most likely to decide to have been calculated
     in accordance with this Agreement and applicable law.
 
 
                                   ARTICLE V.
                   CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY
 
          5.1 GROSS-UP FOR CERTAIN TAXES.
 
               (a) If it is determined by Allstate's  independent  auditors that
          any monetary or other benefit received or deemed received by Executive
          from the  Company  or any  Affiliate  pursuant  to this  Agreement  or
          otherwise, whether or not in connection with a Change of Control (such
          monetary or other  benefits  collectively,  the  "POTENTIAL  PARACHUTE
         
 
                                      E-29
<PAGE>
 
          PAYMENTS"),  is or will become subject to any excise tax under Section
          4999 of the Code or any similar tax under any United  States  federal,
          state,  local or other law (such excise tax and all such similar taxes
          collectively,  "EXCISE  TAXES"),  then the Company  shall,  subject to
          Sections  5.6  and  5.7,   within  five   business   days  after  such
          determination,  pay Executive an amount (the "GROSS-UP PAYMENT") equal
          to the product of:
 
                    (i) the amount of such Excise Taxes
 
          multiplied by
 
                    (ii) the Gross-Up Multiple (as defined in Section 5.4).
 
          The  Gross-Up  Payment is intended  to  compensate  Executive  for all
          Excise Taxes payable by Executive with respect to Potential  Parachute
          Payments  and all Taxes or Excise  Taxes  payable  by  Executive  with
          respect to the Gross-Up Payment.
 
               (b)  The   determination  of  Allstate's   independent   auditors
          described in Section  5.1(a),  including the detailed  calculations of
          the amounts of the  Potential  Parachute  Payments,  Excise  Taxes and
          Gross-Up Payment and the assumptions  relating  thereto,  shall be set
          forth  in  a  written  certificate  of  such  auditors  (the  "COMPANY
          CERTIFICATE") delivered to Executive.  Executive or the Company may at
          any time  request  the  preparation  and  delivery to  Executive  of a
          Company  Certificate.  The Company shall cause the Company Certificate
          to be delivered to Executive as soon as reasonably possible after such
          request.
 
     5.2 DETERMINATION BY EXECUTIVE.
 
               (a)  If  (i)  the  Company   shall  fail  to  deliver  a  Company
          Certificate  to  Executive  within 30 days  after its  receipt  of his
          written  request  therefor,  or (ii)  at any  time  after  Executive's
          receipt of a Company  Certificate,  Executive  disputes either (x) the
          amount  of  the  Gross-Up   Payment  set  forth  therein  or  (y)  the
          determination set forth therein to the effect that no Gross-Up Payment
          is due by reason of Section 5.7 or otherwise, then Executive may elect
          to  require  the  Company  to pay a  Gross-Up  Payment  in the  amount
          determined by Executive as set forth in an Executive  Counsel  Opinion
          (as defined in Section  5.5).  Any such demand by  Executive  shall be
          made by delivery to the Company of a written notice that specifies the
          Gross-Up Payment  determined by Executive  (together with the detailed
          calculations of the amounts of Potential  Parachute  Payments,  Excise
          Taxes and Gross-Up Payment and the assumptions  relating  thereto) and
          an Executive  Counsel  Opinion  regarding such Gross-Up  Payment (such
          written notice and opinion  collectively,  the  "EXECUTIVE'S  GROSS-UP
          DETERMINATION").  Within  30 days  after  delivery  of an  Executive's
          Gross-Up  Determination  to the Company,  the Company shall either (i)
          pay  Executive  the  Gross-Up  Payment  set  forth in the  Executive's
          Gross-Up  Determination  (less the portion thereof, if any, previously
          paid to  
 
                                      E-30
<PAGE>
 
          Executive  by the  Company)  or (ii)  deliver to  Executive  a Company
          Certificate and a Company Counsel Opinion (as defined in Section 5.5),
          and pay  Executive  the  Gross-Up  Payment  specified  in such Company
          Certificate.  If for any reason the  Company  fails to comply with the
          preceding sentence,  the Gross-Up Payment specified in the Executive's
          Gross-Up Determination shall be controlling for all purposes.
 
               (b) If Executive does not request a Company Certificate,  and the
          Company does not deliver a Company Certificate to Executive,  then (i)
          the Company  shall,  for  purposes  of Section  5.7, be deemed to have
          determined  that no Gross-Up  Payment is due and (ii) Executive  shall
          not pay any Excise  Taxes in respect of Potential  Parachute  Payments
          except in accordance with Sections 5.6(a) or (d).
 
     5.3 ADDITIONAL  GROSS-UP  AMOUNTS.  If for any reason (whether  pursuant to
subsequently  enacted  provisions of the Code,  final  regulations  or published
rulings of the IRS, a final  judgment of a court of  competent  jurisdiction,  a
determination  of the  Company's  independent  auditors  set  forth in a Company
Certificate  or,  subject  to the last  two  sentences  of  Section  5.2(a),  an
Executive's  Gross-Up  Determination)  it is later determined that the amount of
Excise Taxes  payable by Executive is greater than the amount  determined by the
Company or  Executive  pursuant to Section 5.1 or 5.2, as  applicable,  then the
Company  shall,  subject to Sections 5.6 and 5.7, pay Executive an amount (which
shall also be deemed a Gross-Up Payment) equal to the product of:
 
          (a) the sum of (i) such additional Excise Taxes and (ii) any interest,
     penalties,  expenses or other costs  incurred by  Executive  as a result of
     having taken a position in accordance with a determination made pursuant to
     Section 5.1 or 5.2, as applicable,
 
multiplied by
 
          (b) the Gross-Up Multiple.
 
     5.4 GROSS-UP MULTIPLE.  The "GROSS-UP MULTIPLE" shall equal a fraction, the
numerator of which is one (1.0), and the denominator of which is one (1.0) minus
the lesser of (i) the sum,  expressed as a decimal  fraction,  of the  effective
after-tax  marginal  rates of all Taxes and any Excise Taxes  applicable  to the
Gross-Up  Payment or (ii) 0.80,  it being  intended  that the Gross-Up  Multiple
shall in no event exceed five (5.0).  (If different  rates of tax are applicable
to various  portions of a Gross-Up  Payment,  the weighted average of such rates
shall be used.) For purposes of this  Section,  Executive  shall be deemed to be
subject to the highest effective after-tax marginal rate of Taxes.
 
     5.5 OPINION OF COUNSEL.  "EXECUTIVE  COUNSEL  OPINION"  means an opinion of
nationally recognized executive  compensation counsel to the effect (i) that the
amount of the Gross-Up Payment  determined by Executive  pursuant to Section 5.2
is the amount that a court of competent jurisdiction,  based on a final judgment
not subject to further appeal,  is most likely to decide to have been calculated
in accordance  with this Article and  applicable law and (ii) if the Company has
previously  delivered  a Company  Certificate  to  Executive,  that  there is no
reasonable basis or no substantial authority for the calculation of the Gross-Up
Payment set forth
 
                                      E-31
<PAGE>
 
in the  Company  Certificate.  "COMPANY  COUNSEL  OPINION"  means an  opinion of
nationally recognized executive  compensation counsel to the effect that (i) the
amount of the  Gross-Up  Payment  set forth in the  Company  Certificate  is the
amount that a court of  competent  jurisdiction,  based on a final  judgment not
subject to further  appeal,  is most likely to decide to have been calculated in
accordance with this Article and applicable law and (ii) for purposes of Section
6662 of the Code,  Executive has substantial  authority to report on his federal
income  tax  return  the  amount  of  Excise  Taxes  set  forth  in the  Company
Certificate.
 
     5.6 AMOUNT INCREASED OR CONTESTED.
 
          (a)  Executive  shall  notify the Company in writing (an  "EXECUTIVE'S
     NOTICE") of any claim by the IRS or other taxing authority (an "IRS CLAIM")
     that, if successful, would require the payment by Executive of Excise Taxes
     in respect of  Potential  Parachute  Payments in an amount in excess of the
     amount of such Excise Taxes  determined in  accordance  with Section 5.1 or
     5.2, as applicable.  Executive's Notice shall include the nature and amount
     of such IRS Claim,  the date on which such IRS Claim is due to be paid (the
     "IRS CLAIM  DEADLINE),  and a copy of all  notices and other  documents  or
     correspondence  received  by  Executive  in  respect  of  such  IRS  Claim.
     Executive shall give the Executive's Notice as soon as practicable,  but no
     later  than the  earlier of (i) 10  business  days  after  Executive  first
     obtains  actual  knowledge  of such IRS  Claim or (ii) five  business  days
     before the IRS Claim Deadline;  provided, however, that any failure to give
     such Executive's  Notice shall affect the Company's  obligations under this
     Article only to the extent that the Company is actually  prejudiced by such
     failure.  If at least one  business  day before the IRS Claim  Deadline the
     Company shall:
 
               (i) deliver to Executive a Company Certificate to the effect that
          the IRS Claim has been reviewed by the Company's  independent auditors
          and,  notwithstanding  the IRS  Claim,  the  amount of  Excise  Taxes,
          interest or  penalties  payable by  Executive  is less than the amount
          specified in the IRS Claim,
 
               (ii) pay to  Executive  an amount  (which  shall also be deemed a
          Gross-Up Payment) equal to the positive difference between the product
          of (x) the amount of Excise Taxes, interest and penalties specified in
          the  Company  Certificate,  if any,  multiplied  by (y)  the  Gross-Up
          Multiple, less the portion of such product, if any, previously paid to
          Executive by the Company, and
 
               (iii) direct Executive  pursuant to Section 5.6(d) to contest the
          balance of the IRS Claim,
 
     then Executive shall pay only the amount, if any, of Excise Taxes, interest
     and  penalties  specified  in the  Company  Certificate.  In no event shall
     Executive  pay an IRS Claim  earlier  than 30 days  after  having  given an
     Executive's Notice to the Company (or, if sooner, the IRS Claim Deadline).
 
          (b) At any time after the payment by Executive of any amount of Excise
     Taxes or related  interest or penalties  in respect of Potential  Parachute
     Payments (whether or not 
 
                                      E-32
<PAGE>
 
     such amount was based on a Company  Certificate,  an  Executive's  Gross-Up
     Determination or an IRS Claim),  the Company may in its discretion  require
     Executive  to pursue a claim for a refund (a "REFUND  CLAIM") of all or any
     portion of such  Excise  Taxes,  interest or  penalties  as the Company may
     specify by written notice to Executive.
 
          (c) If the  Company  notifies  Executive  in writing  that the Company
     desires  Executive  to  contest  an IRS Claim or to pursue a Refund  Claim,
     Executive shall:
 
               (i) give the Company all information that it reasonably  requests
          in  writing  from  time to time  relating  to such IRS Claim or Refund
          Claim, as applicable,
 
               (ii) take such action in connection with such IRS Claim or Refund
          Claim (as  applicable) as the Company  reasonably  requests in writing
          from  time to time,  including  accepting  legal  representation  with
          respect thereto by an attorney selected by the Company, subject to the
          approval  of  Executive  (which  approval  shall  not be  unreasonably
          withheld or delayed),
 
               (iii)  cooperate  with the Company in good faith to contest  such
          IRS Claim or pursue such Refund Claim, as applicable,
 
               (iv)  permit  the  Company  to  participate  in  any  proceedings
          relating to such IRS Claim or Refund Claim, as applicable, and
 
               (v)  contest  such  IRS  Claim  or  prosecute  Refund  Claim  (as
          applicable) to a determination before any administrative  tribunal, in
          a court of initial  jurisdiction and in one or more appellate  courts,
          as the Company may from time to time determine in its discretion.
 
     The Company shall control all proceedings in connection with such IRS Claim
     or Refund Claim (as  applicable)  and in its discretion may cause Executive
     to  pursue  or  forego  any and all  administrative  appeals,  proceedings,
     hearings and conferences  with the IRS or other taxing authority in respect
     of such IRS Claim or Refund Claim (as  applicable);  provided  that (i) any
     extension  of the statute of  limitations  relating to payment of taxes for
     the taxable year of Executive  relating to the IRS Claim is limited  solely
     to such IRS Claim,  (ii) the  Company's  control of the IRS Claim or Refund
     Claim (as  applicable)  shall be limited to issues with  respect to which a
     Gross-Up Payment would be payable, and (iii) Executive shall be entitled to
     settle or contest, as the case may be, any other issue raised by the IRS or
     other taxing authority.
 
          (d) The Company may at any time in its discretion  direct Executive to
     (i)  contest  the IRS Claim in any  lawful  manner  or (ii) pay the  amount
     specified  in an IRS Claim and pursue a Refund  Claim;  provided,  however,
     that if the  Company  directs  Executive  to pay an IRS Claim and  pursue a
     Refund  Claim,  the Company  shall  advance  the amount of such  payment to
     Executive on an interest-free  basis and shall indemnify 
 
                                      E-33
<PAGE>
 
     Executive,  on an after-tax basis, for any Taxes,  Excise Taxes and related
     interest or penalties imposed with respect to such advance.
 
          (e) The Company  shall pay  directly all legal,  accounting  and other
     costs and expenses  (including  additional interest and penalties) incurred
     by the  Company or  Executive  in  connection  with any IRS Claim or Refund
     Claim, as applicable, and shall indemnify Executive, on an after-tax basis,
     for any Taxes, Excise Taxes and related interest and penalties imposed as a
     result of such payment of costs and expenses.
 
     5.7 LIMITATIONS ON GROSS-UP PAYMENTS.
 
          (a)  Notwithstanding  any other  provision  of this  Article V, if the
     aggregate  After-Tax  Amount (as defined below) of the Potential  Parachute
     Payments  and Gross-Up  Payment  that,  but for this Section 5.7,  would be
     payable to Executive,  does not exceed 110% of the  After-Tax  Floor Amount
     (as defined below), then no Gross-Up Payment shall be made to Executive and
     the aggregate amount of Potential  Parachute  Payments payable to Executive
     shall be reduced  (but not below the Floor  Amount) to the  largest  amount
     that would both (i) not cause any Excise  Taxes to be payable by  Executive
     and (ii) not cause any Potential Parachute Payments to become nondeductible
     by the  Company  by reason of  Section  280G of the Code (or any  successor
     provision).  For purposes of the  preceding  sentence,  Executive  shall be
     deemed to be subject to the highest  effective  after-tax  marginal rate of
     Taxes.
 
          (b) For purposes of this Agreement:
 
               (i)  "AFTER-TAX  AMOUNT" means the portion of a specified  amount
          that would remain after  payment of all Taxes and Excise Taxes paid or
          payable by Executive in respect of such specified amount; and
 
               (ii)  "FLOOR  AMOUNT"  means  the  greatest   pre-tax  amount  of
          Potential  Parachute  Payments that could be paid to Executive without
          causing  Executive to become liable for any Excise Taxes in connection
          therewith; and
 
               (iii)  "AFTER-TAX FLOOR AMOUNT" means the After-Tax Amount of the
          Floor Amount.
 
     5.8  REFUNDS.  If, after the receipt by Executive of any payment or advance
of Excise Taxes by the Company pursuant to this Article,  Executive receives any
refund  with  respect to such  Excise  Taxes,  Executive  shall  (subject to the
Company's  complying with any applicable  requirements  of Section 5.6) promptly
pay the Company the amount of such refund  (together  with any interest  paid or
credited  thereon  after Taxes  applicable  thereto).  If,  after the receipt by
Executive  of an amount  advanced  by the  Company  pursuant  to Section  5.6, a
determination  is made that  Executive  shall not be entitled to any refund with
respect to such claim and the Company  does not notify  Executive  in writing of
its  intent to  contest  such  determination  within 30 days  after the  Company
receives  written  notice  of such  determination,  then such  advance  shall be
forgiven  and shall not be required to be repaid and the amount of such  advance
shall offset, to 
 
                                      E-34
<PAGE>
 
the extent thereof,  the amount of Gross-Up Payment required to
be paid. Any contest of a denial of refund shall be controlled by Section 5.6.
 
 
                                   ARTICLE VI.
                              EXPENSES AND INTEREST
 
     6.1 LEGAL AND OTHER EXPENSES.
 
          (a) If Executive  incurs legal fees (including fees in connection with
     the delivery of an Executive Counsel Opinion) or other expenses  (including
     expert  witness and  accounting  fees) in an effort to  determine,  secure,
     preserve, establish entitlement to, or obtain benefits under this Agreement
     (collectively,  "LEGAL AND OTHER EXPENSES"),  the Company shall, regardless
     of the outcome of such effort,  pay or reimburse  Executive  for such Legal
     and Other Expenses in accordance  with Section  6.1(b),  and shall also pay
     Executive an additional  payment (an "EXPENSE  GROSS-UP") such that,  after
     payment of all Taxes and Excise  Taxes on such  amount and such  additional
     payment, there remains a balance sufficient to pay all such Legal and Other
     Expenses.
 
          (b) All Legal and Other  Expenses and the Expense  Gross-Ups  shall be
     paid or  reimbursed  on a monthly  basis  within 10 days  after  Allstate's
     receipt of Executive's  written  request  accompanied by evidence that such
     Legal and Other Expenses were incurred.
 
          (c) If Executive does not prevail  (after  exhaustion of all available
     judicial  remedies)  in respect of a claim by  Executive  or by the Company
     hereunder,  and  the  Company  establishes  before  a  court  of  competent
     jurisdiction,  by clear and  convincing  evidence,  that  Executive  had no
     reasonable  basis  for his  claim  hereunder,  or for his  response  to the
     Company's claim hereunder,  or acted in bad faith, no further payment of or
     reimbursement  for Legal and Other  Expenses  shall be due to  Executive in
     respect of such claim and  Executive  shall  refund any amounts  previously
     paid or reimbursed hereunder with respect to such claim.
 
          (d) All  accrued  but  unpaid  obligations  of the  Company  to pay or
     reimburse  Executive for Legal and Other Expenses  pursuant to this Section
     (other  than any  portion of such  Expenses  that are  accrued  prior to an
     Effective  Date) shall be secured by an irrevocable  $5.0 million letter of
     credit in the form attached as Exhibit 1 to this  Agreement (the "LETTER OF
     CREDIT").  Allstate shall cause Executive to be listed as an "Executive" in
     the  applicable  annex  to the  Letter  of  Credit  as soon  as  reasonably
     practicable  after the Agreement  Date. In addition,  Executive shall be an
     intended third-party  beneficiary of the Escrow Agreement referenced in the
     Letter of Credit and attached hereto as Exhibit 2.
 
     6.2 INTEREST.  If the Company does not pay an amount due to Executive under
this Agreement  within five business days after such amount first became due and
owing,  interest  
 
                                      E-35
<PAGE>
 
shall  accrue on such  amount  from the date it became due and
owing  until the date of  payment at an annual  rate  equal to 200 basis  points
above the base  commercial  lending rate published in The Wall Street Journal in
effect from time to time during the period of such nonpayment.
 
 
                                  ARTICLE VII.
                            NO SET-OFF OR MITIGATION
 
     7.1 NO  SET-OFF  BY  COMPANY.  Executive's  right to  receive  when due the
payments  and other  benefits  provided  for under this  Agreement  is absolute,
unconditional  and subject to no  set-off,  counterclaim  or legal or  equitable
defense.  Time  is of the  essence  in the  performance  by the  Company  of its
obligations  under this  Agreement.  Any claim that the Company may have against
Executive, whether for a breach of this Agreement or otherwise, shall be brought
in a separate  action or proceeding  and not as part of any action or proceeding
brought by  Executive  to enforce  any rights  against  the  Company  under this
Agreement,  except if (i) the  Company's  claim is determined by a court to be a
compulsory  counterclaim under applicable law or (ii) if a court determines that
the Company  would  otherwise be  materially  prejudiced if its claim were to be
brought in a separate action.
 
     7.2 NO  MITIGATION.  Executive  shall  not have any  duty to  mitigate  the
amounts payable by the Company under this Agreement by seeking new employment or
self-employment following termination. Except as specifically otherwise provided
in this Agreement,  all amounts payable pursuant to this Agreement shall be paid
without  reduction  regardless of any amounts of salary,  compensation  or other
amounts that may be paid or payable to  Executive  as the result of  Executive's
employment by another employer or self-employment.
 
                                  ARTICLE VIII.
                              RESTRICTIVE COVENANTS
 
     8.1  NON-COMPETITION.  If Executive  remains employed by the Company on the
Effective Date,  Executive shall not at any time during the period  beginning on
the Effective Date and ending on the first  anniversary of the Termination Date,
directly or indirectly, in any capacity:
 
          (a) engage or participate  in, become employed by, serve as a director
     of, or render advisory or consulting or other services in connection  with,
     any Competitive Business; provided, however, that this Section 8.1(a) shall
     not preclude  Executive  from being an employee of, or  consultant  to, any
     business unit of a Competitive  Business if (i) such business unit does not
     qualify as a Competitive  Business in its own right and (ii) Executive does
     not have any direct or indirect  involvement in, or responsibility for, any
     operations  of such  Competitive  Business  that  cause it to  qualify as a
     Competitive Business; or
 
          (b) make or retain any  financial  investment,  whether in the form of
     equity or debt, or own any interest, in any Competitive Business; provided,
     however,  that nothing 
 
                                      E-36
<PAGE>
 
     in this  subsection  shall restrict  Executive from making an investment in
     any Competitive  Business if such investment (i) represents no more than 1%
     of the aggregate market value of the outstanding  capital stock or debt (as
     applicable) of such Competitive Business,  (ii) does not give Executive any
     right or  ability,  directly or  indirectly,  to control or  influence  the
     policy decisions or management of such Competitive Business, and (iii) does
     not create a conflict of interest  between  Executive's  duties  under this
     Agreement and his interest in such investment.
 
     8.2  NON-SOLICITATION.  If Executive remains employed by the Company on the
Effective Date,  Executive shall not at any time during the period  beginning on
the Effective Date and ending on the first  anniversary of the Termination Date,
directly or indirectly:
 
          (a) other than in connection  with the  good-faith  performance of his
     duties as an officer of the Company, encourage any employee or agent of the
     Company to terminate his relationship with the Company;
 
          (b)  employ,  engage  as a  consultant  or  adviser,  or  solicit  the
     employment or  engagement  as a consultant  or adviser,  of any employee or
     agent of the  Company  (other than by the  Company or its  Affiliates),  or
     cause or encourage any Person to do any of the foregoing;
 
          (c)  establish  (or take  preliminary  steps to  establish) a business
     with,  or  encourage  others to  establish  (or take  preliminary  steps to
     establish) a business with, any employee or agent of the Company; or
 
          (d) interfere with the  relationship  of the Company with, or endeavor
     to entice away from the Company, any Person who or which at any time during
     the  period  commencing  one year prior to the  Agreement  Date was or is a
     material  customer  or  material  supplier  of, or  maintained  a  material
     business relationship with, the Company.
 
     8.3 REASONABLENESS OF RESTRICTIVE COVENANTS.
 
          (a) Executive  acknowledges  that the covenants  contained in Sections
     8.1 and 8.2 are reasonable in the scope of the activities  restricted,  the
     geographic  area  covered  by the  restrictions,  and the  duration  of the
     restrictions,  and that such covenants are reasonably  necessary to protect
     the Company's  relationships  with its employees,  customers and suppliers.
     Executive  further  acknowledges  such covenants are essential  elements of
     this Agreement and that, but for such covenants, the Company would not have
     entered into this Agreement.
 
          (b)  The  Company  and  Executive   have  each  consulted  with  their
     respective   legal   counsel   and  have  been   advised   concerning   the
     reasonableness and propriety of such covenants. Executive acknowledges that
     his observance of the covenants  contained in Sections 8.1 and 8.2 will not
     deprive  him  of the  ability  to  earn  a  livelihood  or to  support  his
     dependents.
 
                                      E-37
<PAGE>
 
     8.4 RIGHT TO INJUNCTION; SURVIVAL OF UNDERTAKINGS.
 
          (a) In  recognition  of the  necessity  of  the  limited  restrictions
     imposed  by  Sections  8.1 and  8.2,  the  parties  agree  that it would be
     impossible  to measure  solely in money the damages that the Company  would
     suffer  if  Executive  were to breach  any of his  obligations  under  such
     Sections.  Executive  acknowledges that any breach of any provision of such
     Sections  would  irreparably  injure the  Company.  Accordingly,  Executive
     agrees  that the  Company  shall be  entitled,  in  addition  to any  other
     remedies  to which the  Company may be  entitled  under this  Agreement  or
     otherwise,  to  an  injunction  to  be  issued  by  a  court  of  competent
     jurisdiction,  to restrain any actual breach, or threatened breach, of such
     provisions,  and  Executive  hereby  waives any right to assert any defense
     that the Company has an adequate remedy at law for any such breach.
 
          (b) If a court  determines that any of the covenants  included in this
     Article  VIII  is  unenforceable  in  whole  or in  part  because  of  such
     covenant's  duration or geographical or other scope,  such court may modify
     the duration or scope of such provision, as the case may be, so as to cause
     such covenant as so modified to be enforceable.
 
          (c) All of the  provisions  of this  Article  VIII shall  survive  any
     Termination  of  Employment  without  regard  to (i) the  reasons  for such
     termination or (ii) the expiration of the Agreement Term.
 
     8.5 NON-DISPARAGEMENT.  If Executive remains employed by the Company on the
Effective  Date,  Executive  shall not at any time  during the  two-year  period
commencing on the  Termination  Date (a) make any written or oral statement that
brings the Company or any of its then-current or former  employees,  officers or
agents into  disrepute,  or tarnishes any of their images or  reputations or (b)
publish,  comment on or disseminate  any  statements  suggesting or accusing the
Company or any of its  then-current  or former agents,  employees or officers of
any  misconduct  or unlawful  behavior.  This Section  shall not be deemed to be
breached  by  testimony  of  Executive  given in any  judicial  or  governmental
proceeding that Executive  reasonably  believes to be truthful at the time given
or by any other  action of  Executive  that he  reasonably  believes is taken in
accordance with the requirements of applicable law or administrative regulation.
 
 
                                   ARTICLE IX.
                            NON-EXCLUSIVITY OF RIGHTS
 
     9.1 WAIVER OF CERTAIN OTHER RIGHTS. To the extent that Executive shall have
received  severance payments or other severance benefits under any other Plan or
agreement  of the  Company  prior  to  receiving  severance  payments  or  other
severance  benefits  pursuant to Article IV, the  severance  payments  and other
severance  benefits  under such other Plan or  agreement  shall  reduce (but not
below zero) the corresponding  severance payments or other severance benefits to
which Executive shall be entitled under Article IV. To the extent that Executive
receives  payments or other benefits  pursuant to Article IV,  Executive  hereby
waives the right to receive a corresponding  amount of future severance payments
or other severance 
 
                                      E-38
<PAGE>
 
benefits  under any other Plan or agreement  of the Company.  To the extent that
Executive receives payments pursuant to Section 4.1(b),  Executive hereby waives
the right to receive  payments or other  benefits under any  Non-Qualified  Plan
that have accrued as of the Termination Date.
 
     9.2 OTHER  RIGHTS.  Except as  expressly  provided  in  Section  9.1,  this
Agreement  shall  not  prevent  or  limit   Executive's   continuing  or  future
participation  in any benefit,  bonus,  incentive or other Plans provided by the
Company and for which  Executive may qualify,  nor shall this Agreement limit or
otherwise  affect such rights as Executive  may have under any other  agreements
with the  Company.  Amounts  that are  vested  benefits  or which  Executive  is
otherwise  entitled to receive  under any Plan and any other  payment or benefit
required by law at or after the Termination  Date shall be payable in accordance
with such Plan or applicable law except as expressly modified by this Agreement.
 
                                   ARTICLE X.
                                  MISCELLANEOUS
 
     10.1 NO ASSIGNABILITY.  This Agreement is personal to Executive and without
the prior  written  consent of the Company  shall not be assignable by Executive
otherwise than by will or the laws of descent and  distribution.  This Agreement
shall  inure  to  the  benefit  of  and  be  enforceable  by  Executive's  legal
representatives.
 
     10.2  SUCCESSORS.  This  Agreement  shall  inure to the  benefit  of and be
binding on the Company and its successors and assigns.  The Company will require
any successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially  all of the business or assets of the Company
to assume  expressly and agree to perform this  Agreement in the same manner and
to the same extent  that the Company  would be required to perform it if no such
succession  had taken  place.  Any  successor  to the  business or assets of the
Company that  assumes or agrees to perform  this  Agreement by operation of law,
contract,  or otherwise  shall be jointly and severally  liable with the Company
under this Agreement as if such successor were the Company.
 
     10.3 PAYMENTS TO BENEFICIARY. If Executive dies before receiving amounts to
which Executive is entitled under this Agreement,  such amounts shall be paid in
a lump sum to one or more  beneficiaries  designated  in  writing  by  Executive
(each, a "Beneficiary"), or if none is so designated, to Executive's estate.
 
     10.4  NON-ALIENATION  OF BENEFITS.  Benefits  payable under this  Agreement
shall not be subject in any manner to anticipation,  alienation, sale, transfer,
assignment, pledge, encumbrance,  charge, garnishment,  execution or levy of any
kind,  either  voluntary  or  involuntary,  before  actually  being  received by
Executive,  and any such  attempt to dispose  of any right to  benefits  payable
under this Agreement shall be void.
 
     10.5 NO DEFERENCE.  Unless otherwise  expressly provided in this Agreement,
no determination  pursuant to, or interpretation  of, this Agreement made by the
board of  directors  (or 
 
                                      E-39
<PAGE>
 
any  committee  thereof)  of  Allstate  or any  Successor  Corporation  shall be
entitled to any  presumptive  validity or other deference in connection with any
judicial  or  administrative  proceeding  relating  to  or  arising  under  this
Agreement.
 
     10.6 SEVERABILITY.  If any one or more Articles, Sections or other portions
of this  Agreement  are  declared by any court or  governmental  authority to be
unlawful  or  invalid,  such  unlawfulness  or  invalidity  shall  not  serve to
invalidate any Article,  Section or other portion not so declared to be unlawful
or invalid. Any Article,  Section or other portion so declared to be unlawful or
invalid  shall be  construed  so as to  effectuate  the  terms of such  Article,
Section or other portion to the fullest extent possible while  remaining  lawful
and valid.  10.7  Amendments.  This  Agreement  shall not be amended or modified
except by written instrument executed by Executive, Allstate and AIC.
 
     10.8 NOTICES.  All notices and other  communications  under this  Agreement
shall be in writing and  delivered by hand, by  nationally  recognized  delivery
service that  promises  overnight  delivery,  or by  first-class  registered  or
certified mail, return receipt requested, postage prepaid, addressed as follows:
 
                    If to  Executive,  to  Executive  at his  most  recent  home
                    address on file with the Company.
 
                    If to Allstate or AIC:
 
                    The  Allstate  Corporation  
                    2775  Sanders  Road  
                    Northbrook, Illinois 60062 
                    Attention: General Counsel
 
or to such other  address as either  party shall have  furnished to the other in
writing.  Notice and communications shall be effective when actually received by
the addressee.
 
     10.9  COUNTERPARTS.   This  Agreement  may  be  executed  in  two  or  more
counterparts,  each of  which  shall be  deemed  an  original,  but all of which
together constitute one and the same instrument.
 
     10.10 GOVERNING LAW. This Agreement shall be interpreted and construed
in  accordance  with the laws of the State of  Illinois,  without  regard to its
choice of law principles.
 
     10.11  CAPTIONS.  The  captions  of  this  Agreement  are not a part of the
provisions hereof and shall have no force or effect.
 
     10.12 NUMBER AND GENDER.  Wherever appropriate,  the singular shall include
the plural,  the plural shall  include the  singular,  and the  masculine  shall
include the feminine.
 
     10.13 TAX  WITHHOLDING.  The Company may withhold from any amounts  payable
under  this  Agreement  any  Taxes  that  are  required  to be  withheld  by any
applicable law or regulation.
 
                                      E-40
<PAGE>
 
     10.14 NO WAIVER.  Executive's failure to insist upon strict compliance with
any provision of this  Agreement  shall not be deemed a waiver of such provision
or any other  provision  of this  Agreement.  A waiver of any  provision of this
Agreement shall not be deemed a waiver of any other provision, and any waiver of
any  default  in any such  provision  shall  not be deemed a waiver of any later
default thereof or of any other provision.
                                         
     10.15 JOINT AND SEVERAL  LIABILITY.  The obligations of Allstate and AIC to
Executive under this Agreement shall be joint and several.
 
     10.16 NO RIGHTS PRIOR TO EFFECTIVE DATE.  Notwithstanding  any provision of
this Agreement to the contrary,  this Agreement  shall not entitle  Executive to
any compensation,  severance or other benefits of any kind prior to an Effective
Date.
 
     10.17 ENTIRE AGREEMENT. This Agreement contains the entire
understanding of Allstate, AIC and Executive with respect to its subject matter.
 
     IN WITNESS WHEREOF,  Executive,  Allstate and AIC have executed this Change
of Control Employment Agreement as of the date first above written.
 
 
                                    EXECUTIVE
 
 
                                    Edward M. Liddy
 
 
                                    THE ALLSTATE CORPORATION
 
                                    By:           
 
                                    Title:    
 
                                   ALLSTATE INSURANCE COMPANY
 
                                    By: 
           
                                    Title: