<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>3
<FILENAME>jd6-4_offer.txt
<DESCRIPTION>(A) (1)
<TEXT>
                                                                  Exhibit (a)(1)

                           OFFER TO PURCHASE FOR CASH
                     ALL OUTSTANDING SHARES OF COMMON STOCK
                                       OF
                            ALLCITY INSURANCE COMPANY
                                       AT
                               $2.75 NET PER SHARE
                                       BY
                          LEUCADIA NATIONAL CORPORATION

--------------------------------------------------------------------------------
                   THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE
          AT 9:00 A.M., NEW YORK CITY TIME ON WEDNESDAY, JUNE 11, 2003
                          UNLESS THE OFFER IS EXTENDED.
--------------------------------------------------------------------------------


           YOU SHOULD READ THIS ENTIRE DOCUMENT CAREFULLY BEFORE DECIDING
WHETHER TO TENDER YOUR SHARES. NEITHER THE SECURITIES AND EXCHANGE COMMISSION
NOR ANY STATE SECURITIES COMMISSION NOR ANY STATE INSURANCE REGULATORY AUTHORITY
HAS APPROVED OR DISAPPROVED OF THIS TRANSACTION, PASSED UPON THE FAIRNESS OR
MERITS OF THIS TRANSACTION, OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE
DISCLOSURE CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

           THE BOARD OF DIRECTORS OF ALLCITY INSURANCE COMPANY ("ALLCITY"),
BASED SOLELY UPON AND FOR THE REASONS STATED BY THE SPECIAL COMMITTEE OF
DIRECTORS OF ALLCITY NOT AFFILIATED WITH LEUCADIA NATIONAL CORPORATION
("LEUCADIA") HAS (i) DETERMINED THAT THE OFFER (AS HEREINAFTER DEFINED) IS FAIR
TO AND IN THE BEST INTERESTS OF THE UNAFFILIATED SECURITY HOLDERS OF ALLCITY,
(ii) APPROVED THE OFFER AND (iii) RECOMMENDS ACCEPTANCE OF THE OFFER BY THE
SHAREHOLDERS OF ALLCITY.

           ON MARCH 18, 2003, SANDERS MORRIS HARRIS INC., FINANCIAL ADVISOR TO
THE SPECIAL COMMITTEE, DELIVERED AN OPINION TO THE SPECIAL COMMITTEE, WHICH WAS
REISSUED AND REAFFIRMED ON MARCH 31, 2003, TO THE EFFECT THAT, AS OF SUCH DATES
AND SUBJECT TO THE ASSUMPTIONS AND LIMITATIONS CONTAINED THEREIN, THE
CONSIDERATION TO BE RECEIVED IN THE OFFER BY ALLCITY'S UNAFFILIATED SECURITY
HOLDERS WAS FAIR TO SUCH SHAREHOLDERS FROM A FINANCIAL POINT OF VIEW. SEE
"SPECIAL FACTORS - 2. RECOMMENDATION OF THE SPECIAL COMMITTEE OF THE BOARD;
FAIRNESS OF THE OFFER."

           THIS OFFER IS CONDITIONED UPON AT LEAST 265,886 SHARES BEING VALIDLY
TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER (THE
"MINIMUM CONDITION"). THIS OFFER IS ALSO SUBJECT TO CERTAIN ADDITIONAL
CONDITIONS. SEE "THE TENDER OFFER -- 11. CERTAIN CONDITIONS TO THE OFFER."




April 29, 2003,

as amended June 4, 2003


<PAGE>
<TABLE>
<CAPTION>

                                TABLE OF CONTENTS
                                                                                                                       PAGE
<S>       <C>                                                                                                    <C>
SUMMARY TERM SHEET........................................................................................................1

INTRODUCTION.............................................................................................................10


SPECIAL FACTORS

1.         Background of the Offer.......................................................................................13

2.         Recommendation of the Special Committee of the Board; Fairness of the Offer...................................16

3.         Position of Leucadia Regarding Fairness of the Offer..........................................................28

4.         Purpose and Structure of the Offer; Reasons of Leucadia for the Offer.........................................30

5.         Plans for Allcity After the Offer; Certain Effects of the Offer...............................................30

6.         Interests of Certain Persons in the Offer.....................................................................32

7.         The Plan of Acquisition and the Merger........................................................................33

8.         Dissenters' Rights............................................................................................33

9.         Beneficial Ownership of Common Stock..........................................................................37

10.        Transactions and Arrangements Concerning the Shares...........................................................38

11.        Related Party Transactions....................................................................................39


THE TENDER OFFER

1.         Terms of the Offer; Expiration Date...........................................................................40

2.         Acceptance for Payment and Payment............................................................................41

3.         Procedures for Accepting the Offer and Tendering Shares.......................................................43

4.         Withdrawal Rights.............................................................................................46

5.         Certain Tax Consequences......................................................................................47

6.         Price Range of the Shares; Dividends..........................................................................48

7.         Effect of the Offer on the Market for the Shares; Exchange Act Registration...................................49

8.         Certain Information Concerning Allcity........................................................................50

9.         Certain Information Concerning Leucadia and Empire............................................................54

10.        Source and Amount of Funds....................................................................................56

11.        Certain Conditions to the Offer...............................................................................56

12.        Certain Legal Matters; Required Regulatory Approvals..........................................................57


                                       i
<PAGE>
13.        Certain Fees and Expenses.....................................................................................58

14.        Miscellaneous.................................................................................................58

Schedule I -- Directors and Executive Officers of Leucadia and Empire....................................................60

Annex A - Opinion of Sanders Morris Harris Inc..........................................................................A-1

Annex B - Section 623 of the Business Corporation Law of the State of New York..........................................B-1

Annex C - Section 7119 of the Insurance Law of the State of New York....................................................C-1

</TABLE>


                                       ii
<PAGE>
                               SUMMARY TERM SHEET

           Leucadia National Corporation, a New York corporation ("Leucadia")
hereby offers to purchase all outstanding shares of common stock, par value
$1.00 per share (the "Common Stock") of Allcity Insurance Company, a New York
corporation ("Allcity"), not already owned by Leucadia and its affiliates at a
price of $2.75 per share in cash, without interest thereon (the "Offer Price"),
upon the terms and subject to the conditions, including the condition that at
least 265,886 shares of Common Stock are purchased by Leucadia (the "Minimum
Condition"), set forth in this Offer to Purchase and in the related Letter of
Transmittal (which together constitute the "Offer").

           The following are some of the questions that you, as a shareholder of
Allcity, may have and answers to those questions. We urge you to carefully read
the remainder of this Offer to Purchase and the accompanying Letter of
Transmittal because the information in this summary is not complete and
additional important information is contained in the remainder of this Offer to
Purchase and the accompanying Letter of Transmittal.

WHO IS OFFERING TO BUY MY SECURITIES?

           The offer to purchase all of the outstanding shares of Common Stock
of Allcity is being made by Leucadia. As of the date hereof, Leucadia, through
its indirect wholly-owned subsidiary, Empire Insurance Company ("Empire"), owns
5,987,401 shares of Allcity Common Stock, which represents approximately 84.58%
of the outstanding Common Stock as of March 31, 2003. Through another
subsidiary, Leucadia also owns shares of Common Stock, which when added to the
shares of Common Stock owned through Empire, results in an aggregate ownership
by Leucadia of 6,458,808 shares of Common Stock, representing approximately
91.24% of the outstanding Common Stock as of March 31, 2003. See "THE TENDER
OFFER -- 9. CERTAIN INFORMATION CONCERNING LEUCADIA AND EMPIRE."

           Leucadia is a diversified holding company engaged in a variety of
businesses, including telecommunications, banking and lending, manufacturing,
real estate activities, winery operations, and property and casualty
reinsurance, principally in markets in the United States, and development of a
copper mine in Spain. Leucadia also currently has equity interests of more than
5% in the following domestic public companies: AmeriKing, Inc. (6.8%), Carmike
Cinemas, Inc. (11.1%), GFSI Holdings, Inc. (6.9%), HomeFed Corporation (30.3%),
Jackson Products, Inc. (8.8%), Jordan Industries, Inc. (10.1%), Parkervision,
Inc. (10.2%), The FINOVA Group, Inc. (25%) (through its interest in a joint
venture) and WilTel Communications Group, Inc. (47.4%).

HOW MUCH ARE YOU OFFERING TO PAY AND WHAT IS THE FORM OF PAYMENT?

           We are offering to pay $2.75 per share, net to you in cash, without
interest. If you are the record owner of your shares and you tender your shares
to us in the Offer, you will not have to pay brokerage fees or similar expenses
to the Information Agent or the Depositary. If you own your shares through a
broker or other nominee, and your broker tenders your shares on your behalf,
your broker or nominee may charge you a fee for doing so. You should consult
your broker or nominee to determine whether any charges will apply. See
"INTRODUCTION" and "THE TENDER OFFER -- 3. PROCEDURES FOR ACCEPTING THE OFFER
AND TENDERING SHARES."


                                       1
<PAGE>
WHAT IS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE?

           On January 15, 2003, the last trading day before Leucadia's initial
proposal to possibly acquire the shares of Common Stock not already owned by
Leucadia and its affiliates for $2.00 per share was publicly announced, the last
sale price of the shares reported on the Over the Counter Bulletin Board (the
"OTC BB") was $0.19 per share. On March 24, 2003, the last trading day before
Leucadia's proposal to possibly acquire the shares of Common Stock not already
owned by Leucadia and its affiliates for $2.75 per share was publicly announced,
the last sale price of the shares reported on the OTC BB was $1.80 per share. We
advise you to obtain a recent quotation for the shares in deciding whether to
tender your shares. See "THE TENDER OFFER -- 6. PRICE RANGE OF THE SHARES;
DIVIDENDS."

WHAT IS THE PURPOSE OF THE TENDER OFFER?

           The purpose of the tender offer is to acquire all of the outstanding
Common Stock that Leucadia does not already beneficially own and to provide you
with value and liquidity for your shares at a price the Special Committee (as
that term is hereinafter defined) has determined to be fair to the unaffiliated
security holders of Allcity (i.e., security holders other than Leucadia and its
affiliates). If, following consummation of the Offer, Leucadia beneficially owns
less than 100% but at least 95% of the Common Stock, subject to the approval of
the New York Insurance Department (the "NYID"), Leucadia can acquire beneficial
ownership of 100% of the Common Stock pursuant to a plan for the acquisition of
minority interests in Allcity (the "Plan of Acquisition") under Section 7118 of
the New York Insurance Law (the "NYSIL"). Section 1408 of the NYSIL imposes
limitations on the recorded value reflected on Empire's statutory financial
statements filed with the NYID of Empire's investment in Allcity, its insurance
company subsidiary. Applying the adjustments required under NYSIL Section
1408(b), the recorded value of Empire's investment in Allcity was reduced by
$8,361,000 at December 31, 2002, and as a result, Empire's stand-alone statutory
surplus was reduced by that amount. Consequently, as of December 31, 2002,
Empire's stand-alone statutory surplus was approximately $2,000,000 above the
minimum level of capital and surplus required under the NYSIL. Empire's low
level of statutory surplus could negatively affect Allcity's ability to collect
reinsurance amounts due from Empire, which in the aggregate totaled
approximately $91,700,000 as of December 31, 2002. Further, if Empire's
statutory surplus were to fall below the minimum level required under the NYSIL,
Empire could be subject to adverse regulatory action which also could impair
Allcity's ability to collect reinsurance amounts due from Empire. If the Offer
and the Plan of Acquisition are consummated, Leucadia intends to cause Allcity
to merge with and into Empire, subject to NYID approval, thereby eliminating the
negative effects of Section 1408 of the NYSIL on Empire's statutory surplus
levels. See "INTRODUCTION" AND "SPECIAL FACTORS - 1. BACKGROUND OF THE OFFER; -
4. PURPOSE AND STRUCTURE OF THE OFFER; REASONS OF LEUCADIA FOR THE OFFER; - 5.
PLANS FOR ALLCITY AFTER THE OFFER; CERTAIN EFFECTS OF THE OFFER."

DO YOU HAVE THE FINANCIAL RESOURCES TO MAKE PAYMENT?

           We estimate that we will need approximately $2.3 million to purchase
all the shares of Common Stock, and to pay all the expenses involved in the
Offer. We intend to pay the purchase price and related expenses using our


                                       2
<PAGE>
existing cash and/or other liquid assets converted into cash. See "THE TENDER
OFFER -- 10. SOURCE AND AMOUNT OF FUNDS."

IS YOUR FINANCIAL CONDITION RELEVANT TO MY DECISION TO TENDER IN THE OFFER?

           We do not think our financial condition is relevant to your decision
whether to tender in the Offer because the form of payment consists solely of
cash, and all of our funding will come from our existing cash and/or other
liquid assets on hand. It should be noted that at December 31, 2002, Leucadia's
consolidated net assets was in excess of $2.5 billion. Additionally, the Offer
is not subject to any financing condition. See "THE TENDER OFFER -- 10. SOURCE
AND AMOUNT OF FUNDS."

HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN THE OFFER?

           You will have at least until 9:00 a.m., New York City time, on
Wednesday, June 11, 2003, to decide whether to tender your shares in the Offer.
Further, if you cannot deliver everything that is required in order to make a
valid tender by that time, you may be able to use a guaranteed delivery
procedure, which is described later in this Offer to Purchase. See "THE TENDER
OFFER -- 3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES."


WHY WAS A SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS OF ALLCITY FORMED?

           Because 5 of the 13 directors of Allcity are also executive officers
of Leucadia (two of whom, Ian M. Cumming and Joseph S. Steinberg, are also
directors and principal shareholders of Leucadia) and one of the other thirteen
directors of Allcity is also a director of Leucadia, the Board of Directors of
Allcity has established a Special Committee that is comprised of two directors
who are not affiliated with Leucadia (the "Special Committee"). In addition,
each of the members of the Board of Directors of Allcity is also a member of the
Board of Directors of Empire. The Special Committee has retained Sanders Morris
Harris Inc. ("Sanders Morris") as its financial advisor and has retained its own
counsel in connection with the Offer.

WHAT POSITION DOES ALLCITY'S BOARD OF DIRECTORS TAKE WITH RESPECT TO THE OFFER?

           THE BOARD OF DIRECTORS OF ALLCITY, BASED SOLELY UPON AND FOR THE
REASONS STATED BY THE SPECIAL COMMITTEE OF DIRECTORS OF ALLCITY NOT AFFILIATED
WITH LEUCADIA, HAS (I) DETERMINED THAT THE OFFER IS FAIR TO AND IN THE BEST
INTERESTS OF THE UNAFFILIATED SECURITY HOLDERS OF ALLCITY, (II) APPROVED THE
OFFER AND (III) RECOMMENDS ACCEPTANCE OF THE OFFER BY THE SHAREHOLDERS OF
ALLCITY.

DID THE SPECIAL COMMITTEE RECEIVE ANY OPINIONS, APPRAISALS OR REPORTS REGARDING
THE FAIRNESS OF THE OFFER?

           Yes. The Special Committee received a written opinion, dated March
18, 2003, from Sanders Morris, to the effect that, as of that date and subject
to the assumptions and limitations contained in the opinion, the consideration
to be received in the Offer by Allcity's unaffiliated security holders is fair
to such holders from a financial point of view. Sanders Morris thereafter


                                       3
<PAGE>
reissued and reaffirmed its opinion on March 31, 2002 following review of
Allcity's Annual Report on Form 10-K for the year ended December 31, 2002,
including the audited financial statements contained therein.

HOW WAS THE OFFER PRICE DETERMINED?

           The Offer Price was determined as a result of negotiations between
the President of Leucadia and the Special Committee. The Special Committee
determined that the Offer Price represents a fair price based on the factors
described in this Offer to Purchase, including the historical and projected
performance of Allcity and that the Offer Price represents a premium of 1,347%
over the $0.19 closing price on January 15, 2003, the last trading day before
Leucadia's initial offer of $2.00 was publicly announced and represents a
premium of approximately 53% over the $1.80 trading price on March 24, 2003, the
last trading day before the Offer Price was publicly announced by Allcity. See
"SPECIAL FACTORS -- 3. POSITION OF LEUCADIA REGARDING FAIRNESS OF THE OFFER."

CAN THE OFFER BE EXTENDED AND UNDER WHAT CIRCUMSTANCES?

           We reserve the right to extend the Offer without the consent of
Allcity from time to time. See "THE TENDER OFFER -- 1. TERMS OF THE OFFER;
EXPIRATION DATE."

HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED?

           If we extend the Offer, we will make a public announcement of the
extension, not later than 9:00 a.m., New York City time, on the next business
day after the day on which the Offer was scheduled to expire. See "THE TENDER
OFFER -- 1. TERMS OF THE OFFER; EXPIRATION DATE."

HOW DO I TENDER MY SHARES?

           To tender your shares, you must deliver the certificates evidencing
your shares, together with a completed Letter of Transmittal, to American Stock
Transfer & Trust Company, at its address set forth on the back cover of this
Offer to Purchase, not later than the time the Offer expires. If your shares are
held in street name (that is, through a broker, dealer or other nominee), the
shares can be tendered by your nominee through The Depository Trust Company. If
you are unable to deliver everything that is required to the Depositary by the
expiration of the Offer, you may obtain extra time to do so by having a broker,
bank or other fiduciary who is a member of the Securities Transfer Agent
Medallion Program or other eligible institution guarantee that the missing items
will be received by the Depositary within three National Association of
Securities Dealers Automatic Quotation System, Inc. trading days. However, the
Depositary must receive the missing items within that three-day trading period
or your shares will not be validly tendered. See "THE TENDER OFFER -- 3.
PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES."


                                       4
<PAGE>
UNTIL WHAT TIME CAN I WITHDRAW PREVIOUSLY TENDERED SHARES?


           You can withdraw previously tendered shares at any time until the
Offer has expired and, if we have not agreed to accept your shares for payment
by June 11, 2003, you can withdraw them at any time after such time until we do
accept your shares for payment. See "THE TENDER OFFER -- 1. TERMS OF THE OFFER;
EXPIRATION DATE" AND "-- SECTION 4. WITHDRAWAL RIGHTS."


HOW DO I WITHDRAW PREVIOUSLY TENDERED SHARES?

           To withdraw shares you must deliver a written notice of withdrawal,
or a facsimile of one, with the required information to the Depositary while you
still have the right to withdraw the shares. See "THE TENDER OFFER -- 4.
WITHDRAWAL RIGHTS."

FOLLOWING THE TENDER OFFER, WILL ALLCITY CONTINUE AS A PUBLIC COMPANY?

           If the Minimum Condition is satisfied, Leucadia, directly, or
indirectly through one of its subsidiaries, intends to acquire the shares of
Common Stock that were not tendered in the Offer pursuant to a Plan of
Acquisition. If the Plan of Acquisition is consummated, Allcity will cease to be
a public company. Following consummation of the Plan of Acquisition, Leucadia
intends to cause Empire and Allcity to enter into a short-form merger whereby
Allcity would be merged with and into Empire (the "Merger"). However, both the
Plan of Acquisition and the Merger would be subject to the prior approval of the
NYID and there can be no assurance that approval will be obtained.

           If NYID approval for the Plan of Acquisition is not obtained,
shareholders of Allcity following the consummation of the Offer will remain
shareholders of Allcity. In that event, Allcity would continue as a public
company unless it has fewer than 300 registered shareholders, in which case,
Leucadia would cause Allcity to deregister the Common Stock under the Securities
Exchange Act of 1934, as amended. Accordingly, following the Offer there may be
no publicly traded Common Stock of Allcity outstanding.

           If the Plan of Acquisition is not approved, Leucadia intends to
evaluate its options to acquire beneficial ownership of the remainder of the
outstanding Common Stock, including, without limitation, by causing Empire to
propose a merger with Allcity that could be on terms that are the same or
different from the terms of this Offer and the Plan of Acquisition. While Empire
currently owns a sufficient percentage of the outstanding Common Stock to assure
shareholder approval of a merger on terms acceptable to Empire and Allcity,
consummation of such merger would require prior approval of the NYID pursuant to
NYSIL Section 7105. In addition, Leucadia, directly or through its subsidiaries,
may purchase additional shares of Common Stock from time to time in the open
market, in privately negotiated transactions with third parties or otherwise,
which could result in Allcity having fewer than 300 registered shareholders. See
"INTRODUCTION", "SPECIAL FACTORS - 5. PLANS FOR ALLCITY AFTER THE OFFER; CERTAIN
EFFECTS OF THE OFFER" and " - 7. EFFECT OF THE OFFER ON THE MARKET FOR THE
SHARES; EXCHANGE ACT REGISTRATION."


                                       5
<PAGE>
WILL THE TENDER OFFER BE FOLLOWED BY THE PLAN OF ACQUISITION AND/OR A MERGER IF
NOT ALL OF THE PUBLICLY TRADED SHARES OF ALLCITY ARE TENDERED IN THE OFFER?

           If the Minimum Condition is satisfied, Leucadia, directly, or
indirectly through one of its subsidiaries, intends to file with the NYID a Plan
of Acquisition pursuant to Section 7118 of the NYSIL to acquire all of the
shares of Common Stock that were not tendered in the Offer at a price equal to
that paid in the Offer. Pursuant to Section 7118 of the NYSIL, a company owning
95% of the outstanding common stock of a New York insurance company (the
"Subsidiary") can acquire those shares of the Subsidiary not already owned
without the approval of the Subsidiary's shareholders upon adoption and
implementation of a plan of acquisition, subject to the prior approval of the
NYID. Following the consummation of a Plan of Acquisition and subject to the
approval of the NYID, Leucadia intends to cause a merger between Empire and
Allcity, with Empire as the surviving corporation. If the Plan of Acquisition
that provides for the payment of consideration equal to the price paid in the
Offer is consummated, all of the remaining shareholders of Allcity (other than
Leucadia and its affiliates, including Empire) who did not tender their shares
in the Offer will receive either the price paid in the Offer or appraisal rights
pursuant to NYSIL Section 7119 and NYBCL Section 623 (such appraisal rights
hereinafter referred to as "Dissenters' Rights"). However, the NYID may not
approve the Plan of Acquisition or may seek to impose different terms and
conditions, including consideration in an amount that is less than or more than
the Offer Price. There can be no assurance that the NYID will approve the Plan
of Acquisition upon the terms and conditions to be submitted by Leucadia or one
of its subsidiaries. See "SPECIAL FACTORS - 7. THE PLAN OF ACQUISITION AND THE
MERGER."

IF I DECIDE NOT TO TENDER BUT THE MINIMUM CONDITION IS SATISFIED, HOW WILL THE
OFFER AFFECT MY SHARES?

           If the Minimum Condition is satisfied, as indicated above, subject to
the prior approval of the NYID, Leucadia, directly, or indirectly through one of
its subsidiaries, intends to acquire ownership of the remaining shares of Common
Stock pursuant to a Plan of Acquisition and Allcity would cease being a public
company. Subject to the prior approval of the NYID of the terms and conditions
of the Plan of Acquisition that provides for the payment of consideration equal
to the price paid in the Offer, shareholders not tendering their shares of
Common Stock in the Offer (or tendering and properly withdrawing) would receive
in the Plan of Acquisition the same amount of cash per share that they would
have received had they tendered their shares in the Offer. Notwithstanding the
foregoing, if you demand and properly perfect appraisal rights available to you
in connection with the Plan of Acquisition (but not in the tender offer) and
therefore seek appraisal of your shares pursuant to Section 7119 of the NYSIL
and Section 623 of the New York Business Corporation Law ("NYBCL"), you will not
receive cash in the Plan of Acquisition, but rather you will be entitled to
payment of the fair value of your shares in accordance with Section 7119 of the
NYSIL and Section 623 of the NYBCL. The appraisal process may result in your
receiving an amount that is less than, more than or equal to the Offer Price you
would have received had you tendered your shares in the Offer. If the NYID does
not approve the Plan of Acquisition, or seeks to impose different terms and
conditions, there can be no assurance that a Plan of Acquisition will be
consummated. Moreover, even if the Plan of Acquisition is not approved, if
Allcity has fewer than 300 registered shareholders, Leucadia will cause Allcity
to deregister the Common Stock under the Securities Exchange Act of 1934, as
amended. See "SPECIAL FACTORS - 5. PLANS FOR ALLCITY AFTER THE OFFER; CERTAIN


                                       6
<PAGE>
EFFECTS OF THE OFFER" and " - 7. EFFECT OF THE OFFER ON THE MARKET FOR THE
SHARES; EXCHANGE ACT REGISTRATION."

DOES THE TENDER OFFER PROVIDE ANY BENEFIT TO ALLCITY?

           Yes. If the Offer is successful and the Plan of Acquisition is
consummated, Allcity would become a privately held corporation. Causing Allcity
to be privately held would reduce management's commitment of resources with
respect to procedural and compliance requirements of a public company and would
reduce costs associated with Allcity's obligations and reporting requirements
under the securities laws, including the costs of preparing, printing and
mailing annual reports and proxy statements and the fees and expenses of a
transfer agent and registrar. For calendar year 2002, Allcity spent
approximately $150,000 in shareholder related expenses that would be eliminated
if Allcity was no longer required to file reports or proxy statements with the
Securities and Exchange Commission. This amount does not reflect the value of
management's time spent in preparing these reports or statements. The merger
would eliminate the negative effects of Section 1408 of the NYSIL on Empire's
statutory surplus levels. In addition, consummation of the Plan of Acquisition
will eliminate the procedural and compliance requirements of a public company
and would simplify the liquidation of Empire and Allcity by permitting Leucadia
to operate and oversee the liquidation of Allcity without the conflict of
interests that may be present as a result of the existence of Allcity's minority
shareholders. See "SPECIAL FACTORS -- 2. RECOMMENDATION OF THE SPECIAL COMMITTEE
OF THE BOARD; FAIRNESS OF THE OFFER."

WHAT ARE THE MATERIAL CONDITIONS TO THE TENDER OFFER?

           The Offer is conditioned upon at least 265,886 shares being validly
tendered and not withdrawn prior to the expiration of the Offer. This is called
the Minimum Condition. The Offer is also subject to certain additional
conditions described in this Offer to Purchase. See the sections "THE TENDER
OFFER -- 1. TERMS OF THE OFFER; EXPIRATION DATE" and "--11. CERTAIN CONDITIONS
TO THE OFFER".

WHAT ARE THE MATERIAL CONDITIONS TO THE PLAN OF ACQUISITION AND THE MERGER?

           The Plan of Acquisition and the Merger would be subject to the prior
approval of the NYID. Following the consummation of the Plan of Acquisition,
Leucadia will cause Allcity to deregister the Common Stock under the Securities
Exchange Act of 1934, as amended. However, if the NYID does not approve the Plan
of Acquisition, then shareholders of Allcity who did not tender their shares in
the Offer will remain shareholders of Allcity.



                                       7
<PAGE>
WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF TENDERING MY SHARES?

           Sale or exchange of shares of Common Stock pursuant to the Offer, the
Plan of Acquisition or upon the exercise of Dissenters' Rights will be a taxable
transaction for federal income tax purposes and may also be a taxable
transaction under applicable state, local, foreign and other tax laws. If you
sell or exchange shares of Common Stock pursuant to the Offer, the Plan of
Acquisition or upon the exercise of Dissenters' Rights, you will generally
recognize gain or loss for federal income tax purposes in an amount equal to the
difference, if any, between the amount of cash received and your adjusted tax
basis for the shares of Common Stock sold or exchanged pursuant to the Offer,
the Plan of Acquisition or the exercise of Dissenters' Rights, as the case may
be. This gain or loss will be capital gain or loss, provided the shares of
Common Stock are held as capital assets and the capital gain or loss will be
long term if, as of the date of sale or exchange, the shares of Common Stock
were held for more than one year or will be short term if, as of such date, you
held the shares of Common Stock for one year or less. You are urged to consult
with your own tax advisors regarding the tax consequences of tendering your
shares in the Offer.

WHAT ARE MY RIGHTS IF I DO NOT TENDER MY SHARES AND I AM AGAINST THE PLAN OF
ACQUISITION?

           If you do not tender your shares in the Offer, you may be entitled to
Dissenters' Rights in connection with the Plan of Acquisition. See "SPECIAL
FACTORS - 8. DISSENTERS' RIGHTS."

WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE TENDER OFFER?

           You can call Innisfree M&A Incorporated at (212) 750-5833 (banks and
brokers call collect) or (888) 750-5834 (call toll free). Innisfree M&A
Incorporated is acting as the Information Agent for our Offer. See the back
cover of this Offer to Purchase.



                                       8
<PAGE>
                                    IMPORTANT

                     If you wish to tender all or any part of your shares,
before the tender offer expires, you must:

-    If the shares are registered in your name, follow the instructions
     described in "THE TENDER OFFER - 3. PROCEDURES FOR ACCEPTING THE OFFER AND
     TENDERING SHARES" carefully, including completing a Letter of Transmittal
     in accordance with the instructions and delivering it, along with your
     share certificates and any other required items, to American Stock Transfer
     & Trust Company, as Depository for the tender offer; or

-    If your shares are registered in the name of a broker, dealer, commercial
     bank, trust company or other nominee, contact the nominee if you desire to
     tender your shares and request that the nominee tender them for you.

           If you want to tender shares and the certificates for the shares are
not immediately available, or cannot be delivered to the Depository, or you
cannot comply with the procedure for book-entry transfer or whose other required
documents cannot be delivered to the Depository, prior to expiration of the
tender offer, then you must tender the shares pursuant to the guaranteed
delivery procedure set forth in "THE TENDER OFFER - 3. PROCEDURES FOR ACCEPTING
THE OFFER AND TENDERING SHARES."

           To properly tender shares, shareholders must validly complete the
Letter of Transmittal.

           If you have questions, need assistance or require additional copies
of this Offer to Purchase, this Letter of Transmittal or the Notice of
Guaranteed Delivery, you should contact INNISFREE M&A INCORPORATED, as
Information Agent for the offer, at its address and telephone numbers set forth
on the back cover of this Offer to Purchase.

           WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION OR TO
MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFER OTHER THAN THOSE
CONTAINED IN THIS OFFER TO PURCHASE OR THE RELATED LETTER OF TRANSMITTAL. IF
ANYONE MAKES ANY RECOMMENDATION OR GIVES ANY INFORMATION OR REPRESENTATION, YOU
MUST NOT RELY UPON THAT RECOMMENDATION, INFORMATION OR REPRESENTATION AS HAVING
BEEN AUTHORIZED BY LEUCADIA OR ALLCITY.



                                       9
<PAGE>
     To: All Holders of Shares of Common Stock of Allcity Insurance Company

                                  INTRODUCTION

           Leucadia National Corporation, a New York corporation ("Leucadia"),
hereby offers to purchase all outstanding common shares, par value $1.00 per
share (the "Common Stock"), of Allcity Insurance Company, a New York corporation
("Allcity"), at a price of $2.75 per share, net to the seller in cash, without
interest thereon (the "Offer Price"), upon the terms and subject to the
conditions, including, but not limited to, the condition that at least 265,886
shares of Common Stock are purchased by Leucadia (the "Minimum Condition"), set
forth in this Offer to Purchase and in the related Letter of Transmittal (which
together constitute the "Offer").

           The Offer is being made by Leucadia. If the Minimum Condition to the
Offer is satisfied, subject to the prior approval of the New York Insurance
Department (the "NYID") as soon as practicable after the completion of the
Offer, Leucadia, directly, or indirectly through one of its subsidiaries,
intends to acquire ownership of the remaining shares of Common Stock pursuant to
a plan of acquisition (the "Plan of Acquisition") under Section 7118 of the New
York Insurance Law (the "NYSIL"). Thereafter, subject to the approval of the
NYID Leucadia intends to cause Allcity to merge (the "Merger") with and into its
immediate parent company, Empire Insurance Company ("Empire") in accordance with
the applicable provisions of the New York Business Corporation Law (the "NYBCL")
and the NYSIL. Following the consummation of the Plan of Acquisition, Allcity
will be a privately held company and indirect wholly-owned subsidiary of
Leucadia. Following the Merger, Empire will be the surviving corporation (the
"Surviving Corporation") and the separate existence of Allcity shall cease. Upon
the consummation of the Plan of Acquisition (the "Effective Time"), each issued
and outstanding share of Common Stock (other than shares of Common Stock owned
by Leucadia or any of its subsidiaries, including Empire), and shares of Common
Stock held by shareholders who properly exercise appraisal rights (the
"Dissenting Shares") under the NYBCL and the NYSIL will be converted into and
represent the right to receive the consideration offered in the Plan of
Acquisition.

           If the Minimum Condition is not satisfied, Leucadia intends to
evaluate its options to acquire beneficial ownership of the remainder of the
outstanding Common Stock, including, without limitation, by causing Empire to
propose a merger with Allcity that could be on terms that are the same or
different from the terms of this Offer. Adoption of any such merger agreement
would require the approval of the Board of Directors of Allcity and the
affirmative vote of the holders of 66-2/3% of the outstanding Common Stock and
either an information statement or proxy solicitation statement being mailed to
the shareholders (depending on whether shareholder proxies were being
solicited). While Empire currently owns approximately 84.58% of the outstanding
Common Stock, thereby assuring shareholder approval of such a merger on terms
acceptable to Empire and Allcity, consummation of any such merger would require
prior approval of the NYID under Section 7105 of the NYSIL. In addition,
following termination of the Offer, if the Plan of Acquisition does not take
place, Leucadia, directly or through its subsidiaries, may purchase additional
shares of Common Stock from time to time in the open market, in privately
negotiated transactions with third parties or otherwise. See "SPECIAL FACTORS -
7. THE PLAN OF ACQUISITION AND THE MERGER."


                                       10
<PAGE>
           BECAUSE 5 OF THE 13 DIRECTORS OF ALLCITY ARE ALSO EXECUTIVE OFFICERS
OF LEUCADIA (TWO OF WHOM, IAN M. CUMMING AND JOSEPH S. STEINBERG, ARE ALSO
DIRECTORS AND PRINCIPAL SHAREHOLDERS OF LEUCADIA) AND ONE OF THE OTHER THIRTEEN
DIRECTORS OF ALLCITY IS ALSO A DIRECTOR OF LEUCADIA, THE BOARD OF DIRECTORS OF
ALLCITY ESTABLISHED A SPECIAL COMMITTEE THAT IS COMPRISED OF TWO DIRECTORS WHO
ARE NOT AFFILIATED WITH LEUCADIA (THE "SPECIAL COMMITTEE"). IN ADDITION, EACH OF
THE MEMBERS OF THE BOARD OF DIRECTORS OF ALLCITY IS ALSO A MEMBER OF THE BOARD
OF DIRECTORS OF EMPIRE. THE SPECIAL COMMITTEE HAS RETAINED SANDERS MORRIS HARRIS
INC. ("SANDERS MORRIS"), AS ITS FINANCIAL ADVISOR AND HAS RETAINED ITS OWN
COUNSEL IN CONNECTION WITH THE OFFER.

           THE BOARD OF DIRECTORS OF ALLCITY, BASED SOLELY UPON AND FOR THE
REASONS STATED BY THE SPECIAL COMMITTEE OF DIRECTORS OF ALLCITY NOT AFFILIATED
WITH LEUCADIA, HAS (I) DETERMINED THAT THE OFFER IS FAIR TO AND IN THE BEST
INTERESTS OF THE UNAFFILIATED SECURITY HOLDERS OF ALLCITY, (II) APPROVED THE
OFFER AND (III) RECOMMENDS ACCEPTANCE OF THE OFFER BY THE SHAREHOLDERS OF
ALLCITY.

           ON MARCH 18, 2003, SANDERS MORRIS DELIVERED AN OPINION TO THE SPECIAL
COMMITTEE, WHICH WAS SUBSEQUENTLY REISSUED AND REAFFIRMED ON MARCH 31, 2003
AFTER REVIEW OF ALLCITY'S ANNUAL REPORT OF FORM 10-K FOR THE YEAR ENDED DECEMBER
31, 2002 (THE "2002 10-K"), TO THE EFFECT THAT, AS OF SUCH DATES AND SUBJECT TO
THE ASSUMPTIONS AND LIMITATIONS CONTAINED THEREIN, THE CONSIDERATION TO BE
RECEIVED IN THE OFFER BY ALLCITY'S UNAFFILIATED SECURITY HOLDERS WAS FAIR TO
SUCH HOLDERS FROM A FINANCIAL POINT OF VIEW. A COPY OF THE OPINION OF SANDERS
MORRIS IS ATTACHED HERETO AS ANNEX A.

           THE OFFER IS CONDITIONED UPON AT LEAST 265,886 SHARES OF COMMON STOCK
BEING TENDERED. THE OFFER IS ALSO SUBJECT TO CERTAIN ADDITIONAL CONDITIONS
DESCRIBED IN THIS OFFER TO PURCHASE. SEE "THE TENDER OFFER -- 1. TERMS OF THE
OFFER; EXPIRATION DATE" AND "--11. CERTAIN CONDITIONS TO THE OFFER".

           Tendering shareholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of shares of Common Stock by
Leucadia pursuant to the Offer. However, tendering shareholders may be subject
to a required backup federal income tax withholding at a statutory established
rate (30% for reportable payments made in 2003) unless such shareholders, in
accordance with United States Treasury Regulations: (i) deliver a properly
executed Form W-8BEN, W-8ECI, W-8EXP or W-8IMY (with applicable attachments) as
appropriate, or (ii) properly provide such shareholders' taxpayer identification
number on a properly executed Form W-9 (included in the Letter of Transmittal).
Tendering shareholders who own their shares of Common Stock through a broker or
other nominee may be charged a fee by such broker or other nominee for tendering
the shares of Common Stock on behalf of such shareholders. Leucadia will pay all
charges and expenses of American Stock Transfer & Trust Company, as Depositary
(the "Depositary"), and Innisfree M&A Incorporated, as Information Agent (the
"Information Agent"), incurred in connection with the Offer. See "THE TENDER
OFFER -- 13. CERTAIN FEES AND EXPENSES".



                                       11
<PAGE>
           THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION THAT SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.






                                       12
<PAGE>
                                 SPECIAL FACTORS

1.         BACKGROUND OF THE OFFER

                     INFORMATION CONCERNING THE EMPIRE INSURANCE GROUP

           In 1986, as part of its acquisition of the former Baldwin-United
Corporation, Leucadia acquired its initial interest in Allcity. Since 1986,
Leucadia's equity interest in the Group (as defined below), including Allcity,
has increased over time to its current approximate 91.24% interest held through
its indirect wholly-owned subsidiaries, Empire and Baldwin Enterprises, Inc.

           All insurance business written by Allcity is subject to a pooling
agreement with Empire under which Allcity and Empire effectively operate as one
company for their insurance operations. The pooling agreement and subsequent
amendments were approved by the NYID. Allcity operates under the same general
management as Empire and has full use of Empire's personnel, information
technology systems and facilities. As of March 31, 2003, Empire and Allcity had
88 full time employees. Under the pooling agreement, all insurance premiums,
losses, loss adjustment expenses and other underwriting expenses are shared on
the basis of 70% to Empire and 30% to Allcity.

           During the past several years, Allcity and Empire, (collectively
referred to as "the Group"), experienced poor underwriting results and adverse
reserve development in all of its lines of business. During 2001, the Group
explored its options for developing a new business model and strategy. After
evaluating these options, the Group announced in December 2001 that it had
determined that it was in the best interest of its shareholders and
policyholders to commence an orderly liquidation of all of the Group's
operations. The Group only accepts business that it is obligated to accept by
contract or New York insurance law; it does not engage in any other business
activities except for its claims runoff operations. By the end of 2005, the
Group expects that its voluntary liquidation will be substantially complete,
premium revenue will be immaterial, infrastructure and overhead costs will be
substantially reduced, and all that it expects to remain will be the
administration and settlement of claims with long tail settlement
characteristics, principally workers' compensation and certain liability claims.
Given the Group's and Allcity's current financial condition, the expected costs
to be incurred during the claims runoff period, and the inherent uncertainty
over ultimate claim settlement values, no assurance can be given that Allcity's
shareholders will be able to receive any value at the conclusion of the
voluntary liquidation of its operations.

           As of March 31, 2003, the Group was rated "F" (in liquidation) by
A.M. Best Company ("Best"). Given the Group's decision to voluntarily liquidate
all of its operations, the Best rating is not expected to have any impact on
Allcity's operations. As with all ratings, Best ratings are subject to change at
any time.

           During the third quarter of 2001, the NYID informed the Group of its
examination findings concerning the three-year period ended December 31, 1999.
The triennial report was subsequently filed by the NYID in November 2001. Among
other matters, the triennial report noted that the Group's organizational
structure caused Empire's stand-alone statutory surplus to be reduced by the
statutory limitation imposed by Section 1408(b) of the NYSIL on the value of its


                                       13
<PAGE>
investment in Allcity, its insurance company subsidiary. In response to this
report, Empire submitted to the NYID a plan for remedying the stand-alone
surplus impairment that existed at that time (the "Plan to Remedy"), including
the merger of a wholly-owned insurance subsidiary into Empire. In addition to
other provisions, the Plan to Remedy also included a proposal to merge Empire
and Allcity, as well as a proposal to have Allcity pay a cash dividend to
increase Empire's stand-alone surplus. While, it was determined that any action
with respect to a merger of Empire and Allcity would be deferred until a later
date, to permit other elements of the Plan to Remedy to be implemented, on
August 14, 2002, Allcity paid to its shareholders of record at the close of
business on August 5, 2002 a $0.335 per share cash dividend (the "Dividend")
aggregating $2,371,340. The Dividend had the effect of increasing the
stand-alone statutory surplus of Empire by approximately $2,000,000.

           At the present time, Empire's stand-alone statutory surplus continues
to be negatively affected by the statutory limitations imposed by Section
1408(b) of the NYSIL. Applying the adjustments required under Section 1408(b) of
the NYSIL, the recorded value of Empire's investment in Allcity was reduced for
statutory surplus calculations by $8,361,000 as of December 31, 2002.
Consequently, as of December 31, 2002, Empire's stand alone statutory surplus
was approximately $2,000,000 above the minimum level of capital and surplus
required by the NYID. Empire's low level of statutory surplus could negatively
affect Allcity's ability to collect reinsurance amounts due from Empire, which
in the aggregate totaled approximately $91,700,000 as of December 31, 2002.
Given Empire's statutory surplus level, in August 2002 Empire and Allcity again
reviewed the options proposed in the Plan to Remedy and concluded that the
Merger would be in the best interests of both companies and the public
shareholders of Allcity. The Merger would eliminate the negative effects of
Section 1408(b) on Empire's stand alone statutory surplus. Preliminary
discussions as to a possible structure for a combination of Empire and Allcity
were begun in the fall of 2002 with the NYID, because any merger between Empire
and Allcity would require the prior approval of the NYID.

           Empire has drafted proposed legislation to amend Section 1408 of the
NYSIL to allow the New York Superintendent of Insurance to modify or waive the
prohibitions and/or limitations on a domestic insurer's valuation of insurance
company shares required by the NYSIL if such prohibitions and/or limitations
result in the insurer becoming subject to rehabilitation or liquidation under
the NYSIL. Empire is in the process of submitting this proposed legislation to
the Chairman of the New York State Senate's Insurance Committee, and is also
trying to have the proposed legislation introduced into the New York State
Senate and Assembly Committees during the current legislative session. There can
be no assurance that the proposed legislation will become law or that Empire
would receive the necessary waiver from the New York Superintendent of
Insurance.

           Beginning in August 2002, management of the Group approached
management of Leucadia to inquire about support for a combination of Empire and
Allcity. Leucadia management indicated that it was supportive but was not
interested in investing any additional funds in the Group so that any
combination of Empire and Allcity should be accomplished without cost to
Leucadia. As a result, management of the Group initially considered transactions
involving only Allcity and Empire. However, any transaction involving only
Allcity and Empire would have required the prior approval of the NYID. In
September 2002, management of the Group again approached management of Leucadia


                                       14
<PAGE>
to see if Leucadia would make a tender offer for the shares of Common Stock,
which would not require the prior approval of the NYID, followed by a plan of
acquisition for the remaining shares of Common Stock, if any, and a merger of
Allcity into Empire. Over the course of the next several weeks, Leucadia
considered the proposed transaction and subsequently advised the Board of
Directors of Allcity that it would consider making a proposal.

           PRELIMINARY DISCUSSIONS AS TO A POSSIBLE STRUCTURE FOR THE
COMBINATION

           Leucadia considered alternative structures for combining Empire and
Allcity, including a one-step transaction pursuant to which Allcity would be
merged into Empire pursuant to a long-form merger. Leucadia determined that the
process of the Offer, the Plan of Acquisition and the Merger was likely to be
consummated in less time than a long form merger and that this process afforded
the public shareholders with an opportunity to receive cash for their shares
more quickly at the consummation of the Offer. Moreover, because the
consummation of the Offer (with Leucadia as the offeror) would not require
approval from the NYID, the Offer would be able to be accomplished more quickly
than any other transaction.

           On December 16, 2002, the Board of Directors of Allcity formed the
Special Committee comprised of a director, Martin B. Bernstein, not affiliated
with Leucadia to negotiate the terms of any offer to purchase the Common Stock
by Leucadia or Empire and/or a merger of Allcity and Empire. Mr. Bernstein was
elected to chair the Special Committee and was given the authority to select
another director of Allcity not affiliated with Leucadia to join the Special
Committee. Thereafter, a second director of Allcity, Lucius Theus, also not
affiliated with Leucadia was appointed to the Special Committee.

           On January 15, 2003, Leucadia sent a letter to the Special Committee
proposing a possible tender offer to acquire all the outstanding shares of
Common Stock not already owned by Leucadia for $2.00 per share. The proposal
stated that the acquisition of such shares by Leucadia would take the form of a
tender offer by Leucadia, subject to customary conditions, as well as enough
shares of Common Stock being tendered so that, together with the shares Leucadia
currently beneficially owns, Leucadia would beneficially own at least 95% of the
outstanding shares of Common Stock. Promptly following consummation of the
tender offer and subject to the prior approval of NYID, the remaining shares of
Common Stock not already owned by Leucadia or its affiliates would be
beneficially acquired by Leucadia at the same cash price pursuant to the Plan of
Acquisition. A copy of the letter is attached hereto as Exhibit A and
incorporated herein by reference.

           In March 2003, Joseph S. Steinberg, on behalf of Leucadia, and Martin
B. Bernstein, on behalf of the Special Committee, had a meeting at which the
offer price was negotiated from $2.00 per share to $2.75 per share.


                                       15
<PAGE>
2.         RECOMMENDATION OF THE SPECIAL COMMITTEE OF THE BOARD; FAIRNESS OF THE
OFFER

           RECOMMENDATION OF THE SPECIAL COMMITTEE OF THE BOARD OF ALLCITY

           Because 5 of the 13 directors of Allcity are also executive officers
of Leucadia (two of whom, Ian M. Cumming and Joseph S. Steinberg, are also
directors and principal shareholders of Leucadia) and one of the other thirteen
directors of Allcity is also a director of Leucadia, the Board of Directors of
Allcity established the Special Committee that is comprised solely of directors
who are not affiliated with Leucadia. In addition, each of the members of the
Board of Directors of Allcity is also a member of the Board of Directors of
Empire. The Special Committee has retained Sanders Morris as its financial
advisor and has retained its own counsel.

           THE BOARD OF DIRECTORS OF ALLCITY, BASED SOLELY UPON AND FOR THE
REASONS STATED BY THE SPECIAL COMMITTEE OF DIRECTORS OF ALLCITY NOT AFFILIATED
WITH LEUCADIA, HAS (I) DETERMINED THAT THE OFFER IS FAIR TO AND IN THE BEST
INTERESTS OF THE UNAFFILIATED SECURITY HOLDERS OF ALLCITY, (II) APPROVED THE
OFFER AND (III) RECOMMENDS ACCEPTANCE OF THE OFFER BY THE SHAREHOLDERS OF
ALLCITY.

           THE SPECIAL COMMITTEE RECEIVED A WRITTEN OPINION, DATED MARCH 18,
2003, FROM SANDERS MORRIS, WHICH WAS REISSUED AND REAFFIRMED ON MARCH 31, 2003
AFTER SANDERS MORRIS REVIEWED THE 2002 10-K, TO THE EFFECT THAT, AS OF THOSE
DATES AND SUBJECT TO THE ASSUMPTIONS AND LIMITATIONS CONTAINED IN THE OPINION,
THE CONSIDERATION TO BE RECEIVED IN THE OFFER BY ALLCITY'S UNAFFILIATED SECURITY
HOLDERS WAS FAIR TO SUCH HOLDERS FROM A FINANCIAL POINT OF VIEW.

           On March 31, 2003, the Special Committee unanimously determined that
the terms of the Offer are fair to, and in the best interest of, the
unaffiliated security holders of Allcity, and unanimously determined to
recommend that the Board of Allcity (i) approve the Offer, (ii) determine that
the Offer is fair to and in the best interests of the unaffiliated security
holders of Allcity and (iii) recommend that Allcity's unaffiliated security
holders accept the Offer and tender their shares of Common Stock pursuant to the
Offer.

           At a meeting held on April 8, 2003, the Board of Allcity by the
unanimous vote of all those present, based solely on the favorable
recommendation of the Special Committee, determined (i) to accept the Special
Committee's recommendation and determined that the terms of the Offer are fair
to and in the best interests of the unaffiliated security holders of Allcity,
(ii) to approve the Offer and (iii) to recommend that Allcity's unaffiliated
security holders accept the Offer and tender their shares of Common Stock
pursuant to the Offer. This approval included the unanimous vote of all the
directors of Allcity who are not employed by Allcity or Leucadia.

           The Board of Directors of Allcity believes that Allcity would derive
a corporate benefit from the Plan of Acquisition. If the Offer is successful and
the Plan of Acquisition and the Merger are consummated, Empire and Allcity will
become one entity. Causing Allcity to be privately held would reduce
management's commitment of resources with respect to procedural and compliance
requirements of a public company and would reduce costs associated with
Allcity's obligations and reporting requirements under the securities laws,
including the costs of preparing, printing and mailing annual reports and proxy


                                       16
<PAGE>
statements and the fees and expenses of a transfer agent and registrar. For
calendar year 2002, Allcity spent approximately $150,000 in shareholder related
expenses that would be eliminated if Allcity was no longer required to file
reports or proxy statements with the Securities and Exchange Commission (the
"Commission"). This amount does not reflect the value of management's time spent
in preparing these reports or statements. The Merger would eliminate the
negative effects of Section 1408 of the NYSIL on Empire's statutory surplus
levels. In addition, eliminating the procedural and compliance requirements of a
public company would simplify the liquidation of the Group by permitting
Leucadia to operate and oversee the liquidation of Allcity without considering
the interests of Allcity's minority shareholders.

           POSITION OF THE SPECIAL COMMITTEE REGARDING FAIRNESS OF THE OFFER

           The Special Committee believes that the Offer is substantively fair
to Allcity's unaffiliated security holders. However, the Special Committee
expresses no opinion as to substantive fairness of the Offer to Leucadia and its
affiliates. The Special Committee's belief as to the substantive fairness of the
Offer is based on various factors, including:

          o    Presentation of Sanders Morris. The presentation Sanders Morris
               made to the Special Committee on March 31, 2003 and the written
               opinion of Sanders Morris dated March 31, 2003 to the effect
               that, as of such date and subject to certain matters stated in
               the opinion, the proposed transaction is fair to the public
               shareholders of Allcity from a financial point of view. The
               Special Committee concluded that the analysis performed by
               Sanders Morris supported the Special Committee's conclusion that
               the Offer is fair to, and in the best interests of, Allcity's
               unaffiliated security holders. The Special Committee reviewed the
               analyses presented and the opinion delivered by Sanders Morris
               and on March 31, 2003 adopted Sanders Morris' conclusions
               regarding the fairness of the Offer. See "Opinion of Financial
               Advisor to the Special Committee" below.

          o    Fairness of the Consideration. The Special Committee engaged
               Sanders Morris to serve as independent financial advisor to the
               Special Committee, and the Special Committee received a fairness
               opinion from Sanders Morris that, from a financial point of view,
               the consideration to be received by the unaffiliated security
               holders of Allcity is fair to such security holders.

          o    The Offer Price Represents a Premium over the Historical Trading
               Prices of the Common Stock. The Special Committee considered the
               current and historical trading prices of the Common Stock prior
               to the Offer. The Offer Price represents a substantial premium
               over the trading price of the Common Stock prior to the time
               Leucadia's initial offer of $2.00 was publicly announced. In
               addition, the Offer Price of $2.75 is substantially higher than
               the $2.00 price initially proposed by Leucadia.


                                       17
<PAGE>
          o    Offer Price. The Special Committee believes that the Offer Price
               Leucadia has agreed to pay represents the highest price that
               Leucadia would be willing to pay in acquiring the Common Stock.
               The determination was the result of the Special Committee's
               negotiations with the President of Leucadia in an attempt to
               obtain the highest possible price.

          o    Limited Liquidity of the Common Stock. The limited public float
               and Allcity's small shareholder base, as indicated by the
               approximately 481 holders of record as defined by Rule 12g5-1 of
               the Exchange Act and approximately 750 beneficial owners,
               decreases the likelihood there will be a significant active
               trading market for the Common Stock in the foreseeable future.

          o    Structure of the Offer. The structure of the going-private
               transaction, which is designed, among other things, to result in
               the receipt by the shareholders of cash consideration at the
               earliest practicable time.

          o    Cost Savings. There are considerable costs associated with
               remaining a publicly-traded company, including the legal,
               auditing, accounting and other expenses involved in the
               preparation, filing and dissemination of annual and other
               periodic reports as well as the significant amount of time
               expended by Allcity's management in connection with such matters.

          o    Allcity's Business and Financial Condition. Allcity's business,
               financial condition, results of operations, prospects, current
               business strategy, competitive position in its industry,
               including the potential impairment of Empire's stand alone
               statutory surplus and Allcity's ability to collect its
               reinsurance balances receivable from Empire, which was
               approximately $91,700,000 as of December 31, 2002, and general
               economic and stock market conditions.

          o    Recognition that Allcity is in Voluntary Liquidation. The Special
               Committee recognized that Allcity is in voluntary liquidation and
               given the Group's and Allcity's current financial condition, the
               expected costs to be incurred during the claims runoff period,
               and the inherent uncertainty over ultimate claims settlement
               values, no assurance can be given that Allcity's shareholders
               will be able to receive any value at the conclusion of the
               voluntary liquidation of its operations.

          o    Uncertainty of the Stock Market. There is a possibility that a
               further decline in the market price of the Common Stock, or the
               stock market in general, could occur and the price ultimately
               received by shareholders in the open market or in a future
               transaction might be less than the $2.75 Offer Price provided for
               in the Offer.

           In addition to the factors listed above, the Special Committee, in
reviewing the fairness opinion and presentations of Sanders Morris, also
considered certain negative factors including the fact that consummation of the
Offer would eliminate the opportunity of the unaffiliated security holders to
participate in any potential future liquidation distributions to shareholders of


                                       18
<PAGE>
Allcity and that those shareholders of Allcity who elect not to tender their
shares of Common Stock in the Offer may suffer increased illiquidity.

           During the preceding two years, although the Group attempted to sell
its business in whole and in part, the Group did not receive any offers from
independent third parties for the merger or consolidation of the Group with
another company, the sale of all or any substantial part of the Group's assets
or the purchase of shares of Common Stock that would enable the holder to
exercise control of the Group, and the Special Committee, in reviewing the
fairness opinion and presentations of Sanders Morris, considered such factors in
connection with its determination regarding fairness.

           The Special Committee's belief was based upon various factors in
determining the procedural fairness of the Offer to the unaffiliated security
holders of Allcity. The Special Committee believes that appropriate procedural
safeguards were taken in connection with the deliberation and approval of the
Offer because:

          o    Appointment of the Special Committee. On December 16, 2002, the
               Board of Directors of Allcity appointed a Special Committee
               comprised of a director not affiliated with Leucadia and
               authorized it to consider, evaluate and negotiate the terms of
               and make recommendations to the Board as to the fairness of the
               Offer.

          o    Authority of the Special Committee. The Special Committee was
               authorized to engage its own counsel, an independent financial
               advisor and such other professional advisors it deemed
               appropriate. In addition, no restrictions were placed on the
               Special Committee in terms of the scope of its review or its
               ability to independently evaluate any proposal.

          o    Membership of the Special Committee. The Special Committee
               consisted entirely of directors not affiliated with Leucadia.

          o    Engagement of Sanders Morris. The Special Committee engaged
               Sanders Morris, an independent financial advisor that has not
               previously performed services for Leucadia or Allcity, to serve
               as independent financial advisor to the Special Committee, and
               the Special Committee received a fairness opinion from Sanders
               Morris that, from a financial point of view, the consideration to
               be received by the unaffiliated security holders of Allcity
               pursuant to the Offer is fair to such security holders.

          o    Retention of Counsel. The Special Committee engaged counsel that
               has not previously performed services for Leucadia or Allcity to
               serve as independent legal counsel to the Special Committee.

          o    Deliberations of the Special Committee. The Special Committee
               engaged in deliberations concerning the Offer during the period
               from January 13, 2003 to March 31, 2003. During this period, the
               Special Committee held several meetings to fully evaluate the
               Offer.


                                       19
<PAGE>
          o    Representation of Unaffiliated Security Holders. The Special
               Committee represented solely the interests of Allcity's
               unaffiliated security holders in connection with the Offer and,
               intended to act, and did in fact act, in the best interests of
               these security holders in connection with its negotiations and
               deliberations.

          o    Negotiation of the Offer Price. The Offer Price and terms of the
               Offer were negotiated by the Special Committee, resulting in an
               increase in the Offer Price from $2.00 to $2.75.

          o    Option of the Shareholders to Tender. Each shareholder can
               determine individually whether to tender shares of Common Stock
               in the Offer. Accordingly, those shareholders that do not believe
               in the fairness of the Offer are not required to tender their
               shares of Common Stock and can pursue dissenters' rights under
               the NYBCL and NYSIL in connection with the Plan of Acquisition.

          o    Availability of Dissenters' Rights. The shareholders who do not
               tender their shares of Common Stock pursuant to the Offer will
               have the right in connection with the Plan of Acquisition to
               demand appraisal of the fair value of their shares of Common
               Stock under the NYBCL and NYSIL, even though a shareholder vote
               is not required in connection with the Offer or the Plan of
               Acquisition. See "SPECIAL FACTORS - 8. DISSENTERS' RIGHTS."

           The Special Committee did not appoint an independent representative
to act exclusively as the agent of the unaffiliated shareholders for the purpose
of negotiating the terms of the Offer. In addition, the Special Committee
recognizes that the Offer is not being submitted to a vote of the unaffiliated
shareholders and is not subject to acceptance of the Offer by a majority of the
public shareholders. However, given the above listed procedural safeguards, the
Special Committee believes, based on its counsel's advice, that the Offer is
procedurally fair to Allcity's unaffiliated security holders despite the fact
that the Offer is not being submitted to a vote of the shareholders and is not
subject to acceptance of the Offer by a majority of the public shareholders and
there is no separate independent unaffiliated representative for the
unaffiliated shareholders.


           In determining that the Offer is fair to Allcity's unaffiliated
security holders, the Special Committee based its determination as to the
fairness of the Offer on the above factors as a whole and did not assign
specific or relative weights to them. Neither Allcity nor the Board of Allcity
has conducted its own independent analysis as to the fairness of the Offer to
Allcity's unaffiliated security holders and has instead relied upon the Special
Committee's findings and unanimous recommendation that the Board of Allcity
approve the Offer. In turn, the Special Committee relied on the opinion and
related financial analyses of Sanders Morris regarding the Offer. The Board of
Allcity, Ian M. Cumming (a director of Allcity, Chairman of the Board of
Leucadia and a principal shareholder of Leucadia) and Joseph S. Steinberg
(Chairman of the Board of Allcity, a director of Leucadia and a principal
shareholder of Leucadia) (See "SPECIAL FACTORS - 9. BENEFICIAL OWNERSHIP OF
COMMON STOCK"), each adopted the analyses and conclusions of the Special
Committee regarding the fairness of the Offer. As disclosed elsewhere in this


                                       20
<PAGE>
Offer to Purchase, Mr. Steinberg participated in the negotiations with respect
to the Offer on behalf of Leucadia. Although Mr. Cumming did not personally
participate in any of the negotiations relating to the Offer, Mr. Cumming was
kept apprised of the status of the negotiations between the Special Committee
and Leucadia in his capacity as a director of Allcity and Leucadia. Based on the
foregoing factors described above, the Special Committee, each of the Board, Mr.
Cumming and Mr. Steinberg believe that the Offer is substantively and
procedurally fair to Allcity's unaffiliated security holders.


           OPINION OF FINANCIAL ADVISOR TO THE SPECIAL COMMITTEE

           The following paragraphs summarize the financial and comparative
analyses performed by Sanders Morris in connection with its opinion and also
represent a summary of the presentation made by Sanders Morris to the Special
Committee on March 31, 2003. The summary does not represent a complete
description of the analyses performed by Sanders Morris. Sanders Morris, as part
of its investment banking business, is frequently engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, secondary distributions of listed and unlisted
securities, private placements, and valuations for estate, corporate and other
purposes. Sanders Morris was selected as the financial advisor because its
investment banking services were known to the chairman of the Special Committee.
Sanders Morris has not previously provided services to Leucadia or Allcity.

           The Special Committee retained Sanders Morris as its financial
advisor in connection with the proposed Offer by Leucadia to acquire all of the
outstanding shares of common stock of Allcity at a price of $2.75 per share in
cash (the "Transaction"). Sanders Morris made a presentation to the Special
Committee and delivered its oral opinion (subsequently confirmed in writing) to
the Special Committee during the March 17, 2003 and March 31, 2003 meetings of
the Special Committee to the effect that as of March 17, 2003 and March 31, 2003
and based on and subject to the assumptions, limitations and qualifications set
forth in the opinion, from a financial point of view, the financial terms of the
proposed Transaction were fair to the public shareholders of Allcity.

           Sanders Morris delivered its written opinion on March 18, 2003 to the
effect that, as of March 18, 2003, and based on and subject to the assumptions,
limitations and qualifications set forth in the opinion, from a financial point
of view, the financial terms of the proposed Transaction was fair to the public
shareholders of Allcity. This opinion was subsequently reissued and reaffirmed
on March 31, 2003 by Sanders Morris, after Sanders Morris reviewed Allcity's
Annual Report on Form 10-K for the year ended December 31, 2002 and confirmed
that Allcity did not disclose any information that would adversely affect the
opinion.

           THE FULL TEXT OF THE SANDERS MORRIS WRITTEN OPINION DATED MARCH 31,
2003 IS ATTACHED AS ANNEX A TO THIS OFFER TO PURCHASE. YOU MAY READ SUCH OPINION
FOR A DISCUSSION OF ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS OF THE
REVIEW UNDERTAKEN BY SANDERS MORRIS IN RENDERING ITS OPINION. THE SUMMARY OF THE
MATERIAL TERMS OF ITS OPINION AND THE METHODOLOGY USED TO RENDER THE OPINION SET


                                       21
<PAGE>
FORTH IN THIS OFFER TO PURCHASE IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FULL TEXT OF THE OPINION.

           Sanders Morris' opinion is for the information and assistance of the
Special Committee in connection with its consideration of the proposed
Transaction. Sanders Morris' opinion is limited to the fairness, from a
financial point of view, of the proposed Transaction to Allcity and the
unaffiliated security holders of Allcity, and it expresses no opinion as to the
merits of the underlying decision to engage in the Transaction. Sanders Morris'
opinion necessarily is based upon market, economic and other conditions as they
existed and could be evaluated on March 18 and March 31, 2003, as the case may
be, and Sanders Morris assumes no responsibility to update or revise its opinion
based upon circumstances or events occurring after March 31, 2003. Sanders
Morris' opinion is not intended to be and does not constitute a recommendation
to any of Allcity's shareholders as to whether or not they should tender or
withdraw their shares of Common Stock in the Transaction.

           The preparation of a fairness opinion involves various determinations
as to the most appropriate and relevant methods of financial and comparative
analysis and the application of those methods to the particular circumstances
and, therefore, such an opinion is not readily susceptible to summary
description. Furthermore, in arriving at its opinion, Sanders Morris did not
attribute any set weight to any factor considered by it, but, rather, made
qualitative judgments as to the significance and relevance of each factor. As
such, Sanders Morris believes that its analyses must be considered as a whole
and that considering any portion of such analyses and factors, without
considering all analyses and factors, could create a misleading or incomplete
view of the process underlying its opinion. Likewise, the Special Committee, in
adopting the conclusions of Sanders Morris also did not place any particular
reliance or weight on any individual analysis, but instead concluded that
Sanders Morris' analysis, taken as a whole, was appropriate and accurate.

           No limitations were imposed by Allcity on the scope of Sanders
Morris' investigation or the procedures to be followed by Sanders Morris in
rendering its opinion, and the management of Allcity cooperated fully with
Sanders Morris in connection therewith. In arriving at its opinion, Sanders
Morris' fairness analysis was primarily that the estimated fair market value
range of "items given up" by Allcity's shareholders was reasonably close to, or
less than, the estimated fair market value range of "value received."

           In arriving at its opinion, Sanders Morris has, among other things:

o    Reviewed Allcity's publicly available audited annual and unaudited
     quarterly GAAP financial statements from December 31, 1998 to December 31,
     2002;

o    Reviewed Allcity's annual and quarterly statutory financial statements from
     December 31, 1998 to September 30, 2002;

o    Reviewed Allcity's recent press releases dated January 15, 2003, November
     14, 2002, August 14, 2002, July 25, 2002, May 13, 2002, April 1, 2002,
     November 14, 2001, August 14, 2001, May 15, 2001, and April 2, 2001;

o    Reviewed the Group's "Discussion Memorandum" dated July 1, 2002;

o    Reviewed the Group's "Leucadia Operations Meeting" Presentation dated
     December 11, 2001;


                                       22
<PAGE>
o    Reviewed the Group's "Board of Directors Meeting Financial and Operations
     Summary" Presentation dated December 17, 2001;

o    Reviewed the Group's "Operating Plan During Runoff" Presentation dated
     December 2001;

o    Reviewed the Group's "Board of Directors Meeting" Presentations dated
     March, August, September and December 2002 and March 2003;

o    Discussed with management the unaudited preliminary December 31, 2002
     balance sheet and adjusted net book value of Allcity and the related
     assumptions;

o    Reviewed Allcity's budgeted statement of income for Allcity's projected
     runoff period, dated February 13, 2003;

o    Reviewed a memo from Allcity's Chief Actuary regarding loss and loss
     adjustment expense reserves as of December 31, 2002, dated February 13,
     2003;

o    Discussed with management of Allcity the outlook for future operating
     results, the assets and liabilities of Allcity, materials in the foregoing
     documents, and other matters Sanders Morris considered relevant to its
     inquiry; and

o    Conducted such other studies, analyses and investigations, as Sanders
     Morris deemed appropriate.


           With the Special Committee's permission, Sanders Morris assumed and
relied upon, without assuming any responsibility for verification, the accuracy
and completeness of all of the financial and other information provided to,
discussed with, or reviewed by or for Sanders Morris for purposes of its
opinion, and has further relied upon the assurances of Allcity's management that
it is not aware of any facts that will make such information inaccurate or
misleading in any respect material to its analysis. Sanders Morris has neither
made nor obtained any independent evaluations or appraisals of Allcity's assets
or liabilities, nor has Sanders Morris conducted a physical inspection of
Allcity's properties and facilities, nor has Sanders Morris undertaken any audit
or actuarial work.

           Sanders Morris has assumed that the financial forecasts provided to
it by Allcity's management and the Special Committee have been reasonably
determined on bases reflecting the best currently available estimates and
judgment of Allcity's management. Sanders Morris has further assumed in its
analyses that, in all material respects, such forecasts and projections will be
realized in the amounts and times indicated thereby. Sanders Morris expresses no
view as to such forecasts or the assumptions on which they were based. Sanders
Morris has relied, as to all legal, accounting and tax matters with respect to
the Transaction, on legal counsel, accountants and its other financial advisors.
Sanders Morris was not authorized to negotiate the terms of the Transaction, and
it has based its opinion solely upon the proposed tender offer as negotiated by
others. Sanders Morris was not asked to, and did not, solicit third party offers
to acquire all or part of Allcity.

           Items which follow are noted to create a record of critical factors
considered in conjunction with (a) Sanders Morris' overall knowledge of fairness
and business transactions from a financial point of view and (b) Sanders Morris'
business judgment in rendering a fairness opinion to the Special Committee.
Sanders Morris defines "fair market value" as "the price agreed upon between a
willing buyer and a willing seller with each having full knowledge of all
relevant facts and neither being under any compulsion to act."


                                       23
<PAGE>
           1. The Offer Prices Represents a Premium over the Historical Trading
Prices of the Common Stock. The current tender offer price of $2.75 is a
substantial premium over where the stock traded prior to news of the Transaction
on January 15, 2003. The facts that (a) the price of Allcity's common stock
prior to January 15, 2003 was a substantial discount to $2.75 per share and (b)
even the current (March 18, 2003) post-announcement price of approximately $1.75
per share is a discount to $2.75 per share are an important indication of the
fairness of the Transaction.

           2. There are no other Known Parties Interested in Acquiring Allcity
in a more Favorable Financial Transaction. There appears to be no other party
interested in paying as much as $2.00, let alone $2.75, per share for Allcity.
In July 2002, the Group began a serious and reasonable effort to sell its assets
and/or operations to any interested party. There were no formal bids or
proposals received by the Group. The fact that the Group, after making a
reasonable effort, has been unable to generate meaningful interest from any
potential buyers of 100% of Allcity at a price near to or greater than $2.75 per
share is another important reason why the Transaction is fair to Allcity's
public shareholders.

           3. Based upon the Liquidation Value Valuation Methodology, the
Liquidation Value is likely to be less than $2.75. Liquidation value is a
variation of the adjusted net book value methodology valuation: The adjusted net
book value method estimates the market value of each asset and liability,
including off balance-sheet items. Liquidation value is a variation of this
method and is appropriate in this case because voluntary liquidation is underway
and appears to be the best strategy for Allcity's shareholders. Sanders Morris
relied upon the adjusted net book value method over other traditional valuation
methodologies because (a) Allcity is not profitable and its operations no longer
reflect a normal going concern, (b) Allcity is being liquidated and currently
has no earnings, and (c) Sanders Morris and Allcity's management are not aware
of any comparable companies or comparable transactions.

           Allcity is expected to experience operating losses for the next
several years primarily due to applicable insurance laws that require Allcity to
renew a certain number of private passenger automobile policies (which are not
expected to be profitable), the obligation to pay all claims on all existing
policies that cannot be cancelled and the overhead and administrative costs that
will be required to settle all outstanding claims and maintain the corporate
legal entity during the voluntary liquidation. An added "reserve for future
operating losses" liability of approximately $10 million was created based upon
discussions between Sanders Morris and Allcity's management to account for these
future losses and these future losses were discounted to a present value at 2%
and 3% discount rates.

           A second adjustment was made to reduce Allcity's net claim
liabilities by discounting future claims payments to a present value at 2% and
3% discount rates.

           A 2% discount rate was selected by Allcity's management and
independently accepted and adopted as part of a 2-3% range by Sanders Morris
primarily for the following reasons:


                                       24
<PAGE>
     a)   2% is the average rate of return that Allcity's management reasonably
          expects Allcity's invested assets to generate during the run-off
          period. The average duration of Allcity's invested assets is currently
          less than one year and its management does not expect to significantly
          increase average duration due to the expected timing of the payment of
          losses, loss adjustment expense ("LAE"), operating expenses and other
          cash transactions. Allcity's management believes the duration of
          Allcity's assets and liabilities are reasonably matched after
          considering the uncertainty of the timing of actual loss and LAE
          payment activity during Allcity's voluntary run-off. Given the short
          duration of the investment portfolio and current market yields, the 2%
          average return is what Allcity currently expects to earn.

     b)   Under the NYSIL, property/casualty insurance companies, including
          Allcity, are subject to quantitative and qualitative restrictions on
          their investments intended to ensure that an insurance company's
          assets consist of conservative investments of appropriate liquidity
          for the purpose of protecting against loss of capital and income.
          Therefore, because the types of assets in which Allcity is permitted
          to invest is limited, Allcity's ability to increase its investment
          return by investing in less conservative assets is also limited.

     c)   In order to comply with applicable insurance laws and regulations
          governing the required capitalization of an insurance company, any
          potential buyer of Allcity would be required to cause Allcity to
          retain its assets and surplus, and would not be permitted, without
          prior regulatory approval, to use Allcity's assets for its own
          purposes or reinvest those assets in an effort to increase the
          purchaser's return on its investment in Allcity.

           In reviewing the reasons noted by Allcity's management for assuming a
2% discount rate, Sanders Morris independently evaluated and agrees that a
buyer's financial model for Allcity would assume that the funds to pay future
insurance losses (net of proceeds from reinsurance) would come from Allcity's
investment portfolio. Sanders Morris believes that a discount rate of 2-3% is
reasonable based on recent conversations with insurance professionals not
affiliated with Allcity, a conference call on February 27, 2003 with Allcity's
Chief Financial Officer and Chief Actuary and Sanders Morris' other independent
research. Sanders Morris considered calculations assuming both 2% (the "2%
Case") and 3% (the "3% Case"), as stated in the table of critical calculations
which follows.


                                       25
<PAGE>
<TABLE>
<CAPTION>

                        Summary of Critical Calculations
                        --------------------------------

                                                                (in 000's, except per    Adjusted Book Value (in 000's, except per
                                                                share data)              share data)
                                    12/31/02
                                                                        Book Value              2% Case                  3% Case

<S>                                                           <C>                       <C>                          <C>
 Liability for losses & loss adjustment expenses:                       $175,588
  Asset for reinsurance:                                                $118,510
    Net Liability                                                        $57,078                   $53,716                $52,194
    Amount of this adjustment:                                                                      $3,362                 $4,884

  Added reserve for future operating
     losses:                                                                 -0-                   $10,207                $10,020
                                                                                                   -------                -------

  Net increase in total liabilities:                                                                $6,845                 $5,136

  Resulting decrease in equity:                                                                     $6,845                 $5,136

  Resulting equity                                                       $19,718                   $12,873                $14,582

  Shares outstanding                                                                                 7,079                  7,079

                                                                                           ----------------
  Equity value per share                                                                             $1.82                  $2.06
                                                                                           ----------------

  Range of equity value per share:
       High (21% range) (a)                                                                          $3.55                  $3.79
       Low (21% range) (a)                                                                           $0.08                  $0.33

  Total assets                                                          $208,465
  Total liabilities                                                     $188,747
  Net worth (equity)                                                     $19,718

</TABLE>


     (a) In order to calculate the High (21% range) and Low (21% range), Sanders
Morris calculated plus or minus 21% of $58,437, which amount represents the sum
of the "net liability" of $57,078 shown above plus the statutory basis
reinsurance recoverable on paid loss/LAE of $1,359. This range was recommended
by Allcity's Chief Actuary and considered appropriate by Sanders Morris.

           Sanders Morris concluded a buyer of Allcity would plan to liquidate
Allcity fairly quickly, would assume it is buying an entity that would lose
money for several years (no chance of an early operating profit) and later would
end up with perhaps roughly $5-20 million of remaining liquid assets and no
liabilities (note that the 2% Case has a range of approximately $1 - 25 million
of equity value) and would consider the risk that Empire would become insolvent
and thus that the remaining Allcity assets would be much less than expected.

           Sanders Morris concluded that because the cash value of $2.75 per
share is 51% above the mid-point in the 2% Case in the preceding "adjusted
balance sheet" calculation of $1.82 per share and within the range shown of


                                       26
<PAGE>
$0.08-3.55, the Transaction appears to be fair to Allcity's public shareholders
from a financial point of view.

           4. Comparable Transaction and Comparable Company Analysis are not
Appropriate Valuation Methodologies for the Transaction. Sanders Morris is
unaware of any transactions that it would consider meaningfully comparable to
the Transaction. In connection with its evaluation, Sanders Morris conducted a
search of appropriate deal databases but was unable to find any such
transactions. Accordingly, Sanders Morris concluded that the comparable
transaction analysis method of valuation is not an appropriate method to value
the Transaction.

           Sanders Morris is unaware of any companies that it would consider
meaningfully comparable to Allcity. In connection with its evaluation of the
Transaction, Sanders Morris conducted a search of appropriate databases to
identify publicly traded companies comparable to Allcity, but was unable to find
any such companies. Accordingly, Sanders Morris concluded that the trading
market method of valuation is not appropriate or useful.

           Accordingly, Sanders Morris did not use either (a) the comparable
transaction analysis method or (b) the trading market method in valuing Allcity.

           5. The Present Value of Future Profits Method of Valuation is not an
Appropriate Valuation Methodology for the Transaction. The present value of
future profits method uses estimates of future profits and cash flows in
connection with present value calculations, in order to value a company. Due to
the fact that Allcity is in a voluntary liquidation and is no longer engaged in
any business activities except for its claims runoff operations, Allcity is not
profitable and its operations no longer reflect a normal going concern. Sanders
Morris concluded the present value of future profits is not an appropriate
valuation methodology for Allcity.

           In addition, as part of Sanders Morris' due diligence, Sanders Morris
noted the following: (i) Allcity's Chief Financial Officer believed that the
proposed tender offer at $2.75 per share from Leucadia is the best alternative
for the public shareholders of Allcity, even if other potential buyers are
contacted and an auction is conducted. Sanders Morris believes Allcity's Chief
Financial Officer has an excellent understanding of both (a) the expected future
operating performance of Allcity during the claims runoff period and (b) the
estimated fair market value of Allcity's assets, liabilities and future
obligations; (ii) based on a letter sent to Sanders Morris on March 12, 2003
outlining the proposed tender offer, it appears that there is no plan for a
provision requiring approval of a majority of the public shareholders; and (iii)
Allcity's Chief Operating Officer and Chief Financial Officer indicated that
they were not aware of any reason why the Transaction is not fair to the
Company's public shareholders.

           Pursuant to an engagement letter dated January 27, 2003, Allcity paid
Sanders Morris a fee of $50,000 for the financial advisory services provided by
Sanders Morris in connection with the Transaction plus out of pocket expenses
and disbursements, including fees and disbursements of counsel to Sanders
Morris, actually incurred by Sanders Morris.


                                       27
<PAGE>
3.         POSITION OF LEUCADIA REGARDING FAIRNESS OF THE OFFER

           Leucadia believes that the Offer is substantively and procedurally
fair to the unaffiliated security holders. Leucadia bases its belief on various
factors, including:

          o    Formation and Approval of the Offer by the Special Committee. The
               Special Committee consists entirely of directors who are not
               affiliated with Leucadia. The Special Committee recommended that
               the Board of Directors of Allcity approve the Offer and recommend
               that the unaffiliated security holders of Allcity accept the
               Offer.

          o    Authority of the Special Committee. The Special Committee was
               authorized to engage its own counsel, an independent financial
               advisor and such other professional advisors it deemed
               appropriate. In addition, no restrictions were placed on the
               Special Committee in terms of the scope of its review or its
               ability to independently evaluate any proposal.

          o    Opinion of Independent Financial Adviser. The opinion of Sanders
               Morris rendered to the Special Committee and the Allcity Board
               that the consideration to be received by the unaffiliated
               security holders of Allcity pursuant to the Offer is fair from a
               financial point of view.

          o    Procedurally Fair Negotiations. The Offer Price was negotiated
               between the President of Leucadia and the Special Committee,
               which acted on behalf of the unaffiliated security holders of
               Allcity, with the assistance of their financial and legal
               advisors, in a manner intended to ensure procedural fairness.

          o    Allcity's Business and Financial Condition. Allcity's business,
               financial condition, results of operations, prospects, current
               business strategy, competitive position in its industry,
               including the potential impairment of Empire's stand alone
               statutory surplus and Allcity's ability to collect its
               reinsurance balances receivable from Empire, which was
               approximately $91,700,000 as of December 31, 2002, and general
               economic and stock market conditions.

          o    The Offer Price Represents a Premium Over the Historical Trading
               Prices of the Common Stock. Leucadia considered the current and
               historical trading prices of the Common Stock prior to the Offer.
               The Offer Price represents a premium of 1,347% over the $0.19
               closing price on January 15, 2003, the last trading day before
               Leucadia's initial offer of $2.00 was publicly announced and a
               premium of 53% over the $1.80 closing price on March 24, 2003,
               the day before the Offer Price was publicly announced by Allcity.
               In addition, the Offer Price of $2.75 is substantially higher
               than the $2.00 price initially proposed by Leucadia.

          o    Limited Liquidity of the Common Stock. The trading market for the
               shares of Common Stock has been relatively illiquid and the Offer
               provides Allcity's shareholders with the opportunity to receive
               liquidity in the form of cash for their shares of Common Stock at

                                       28
<PAGE>
               a significant premium to historical trading prices without any
               transaction costs.

          o    Consideration in the Offer. The consideration to be paid in the
               Offer to holders of shares of Common Stock is all cash,
               eliminating any uncertainties in valuing the consideration to be
               received by the public holders and allowing shareholders to
               receive cash despite an illiquid market for the shares of Common
               Stock.

          o    Structure of the Transaction. The transaction has been structured
               to include a first-step cash tender offer for all of the
               outstanding shares of Common Stock that is not dependent upon the
               prior approval of the NYID, thereby enabling shareholders who
               tender their shares of Common Stock to promptly receive $2.75 per
               share in cash, and, if the Plan of Acquisition that provides for
               consideration equal to the price received in the Offer is
               approved by the NYID, any public shareholders who do not tender
               their shares of Common Stock and who do not perfect their
               Dissenters' Rights pursuant to the subsequent Plan of Acquisition
               will receive the same cash price per share and there would be no
               transaction costs to the shareholders of Allcity

          o    Availability of Dissenters' Rights. The shareholders who do not
               tender their shares of Common Stock pursuant to the Offer will
               have the right in connection with the Plan of Acquisition to
               demand appraisal of the fair value of their shares of Common
               Stock under the NYBCL and NYSIL, even though a shareholder vote
               is not required in connection with the Offer or the Plan of
               Acquisition. See "SPECIAL FACTORS - 8. DISSENTERS' RIGHTS."

           The Offer is not structured to require that a majority of the Common
Stock owned by the public tender their shares in the Offer. The Board of
Directors of Allcity has established a Special Committee that is comprised of
directors of Allcity not affiliated with Leucadia for purposes of negotiating
the terms of the Offer and/or preparing a report concerning the fairness of the
transaction. The Special Committee has retained its own financial advisor and
counsel in connection with the Offer.

           Leucadia did not quantify or otherwise attempt to assign relative
weights to the specific factors they each considered in reaching their
conclusions as to fairness.

           Leucadia had no involvement in the Special Committee's evaluation of
the fairness of the Offer to the unaffiliated security holders of Allcity.
Leucadia has determined that the Offer is substantively and procedurally fair
based upon the factors stated in this Offer to Purchase, including the approval
by the Special Committee and Allcity's Board of Directors, the opinion of
Sanders Morris and arms length negotiations between the President of Leucadia
and the Special Committee. In addition, given the above listed procedural
safeguards, Leucadia believes that the Offer is procedurally fair to Allcity's
unaffiliated security holders despite the fact that the Offer is not being
submitted to a vote of the shareholders and is not subject to acceptance of the
Offer by a majority of the public shareholders and there was no separate
independent unaffiliated representative to act as the agent of the unaffiliated
shareholders for the purpose of negotiating the terms of the Offer. Leucadia did


                                       29
<PAGE>
not consider any other factors to be relevant to their determination as to the
fairness of the Offer to the unaffiliated security holders of Allcity.

           The foregoing discussion of the information and factors considered
and given weight by Leucadia is not intended to be exhaustive but is believed to
include all material factors considered by Leucadia in connection with the
fairness of the Offer to Allcity's unaffiliated security holders.

4.         PURPOSE AND STRUCTURE OF THE OFFER; REASONS OF LEUCADIA FOR THE OFFER

           The purpose of the Offer is for Leucadia to increase its ownership of
the outstanding Common Stock of Allcity from approximately 91.24% to not less
than 95%. The consummation of the Offer would permit Leucadia to beneficially
acquire the remaining shares of Common Stock pursuant to a Plan of Acquisition
in accordance with Section 7118 of the NYSIL and would permit Empire to effect a
short form merger, in each case subject to the prior approval of the NYID.

           The acquisition of shares of Common Stock not owned by Leucadia or
its affiliates has been structured as a cash tender offer followed by the Plan
of Acquisition in order to effect a prompt and orderly transfer of ownership of
Allcity from its public shareholders to Leucadia and to provide those
shareholders with cash for all of their shares of Common Stock. Proceeding with
the Offer at this time would also afford Allcity's shareholders an opportunity
to dispose of their shares at a significant premium over market prices prior to
the commencement of the Offer without any transaction costs. Consummation of the
Offer is not conditioned upon approval of the NYID, but consummation of each of
the Plan of Acquisition and the Merger is subject to NYID prior approval and
there can be no assurance that such approval will be obtained.

           Causing Allcity to be privately held would reduce management's
commitment of resources with respect to procedural and compliance requirements
of a public company and would reduce costs associated with Allcity's obligations
and reporting requirements under the securities laws, including the costs of
preparing, printing and mailing annual reports and proxy statements and the fees
and expenses of a transfer agent and registrar. For calendar year 2002, Allcity
spent approximately $150,000 in shareholder related expenses that would be
eliminated if Allcity was no longer required to file reports or proxy statements
with the Commission. This amount does not reflect the value of management's time
spent in preparing these reports or statements. The Merger would eliminate the
negative effects of Section 1408 of the NYSIL on Empire's statutory surplus
levels. In addition, eliminating the procedural and compliance requirements of a
public company would simplify the liquidation of the Group by permitting
Leucadia to operate and oversee the liquidation of Allcity without considering
the interests of Allcity's minority shareholders.

5.         PLANS FOR ALLCITY AFTER THE OFFER; CERTAIN EFFECTS OF THE OFFER

           In the event that the Minimum Condition is satisfied, upon completion
of the Offer Leucadia intends to, directly, or indirectly through one of its
subsidiaries, acquire beneficial ownership of the shares of Common Stock that
were not tendered in the offer pursuant to the Plan of Acquisition. The Plan of
Acquisition would be subject to the prior approval of the NYID. See "SPECIAL


                                       30
<PAGE>
FACTORS - 7. THE PLAN OF ACQUISITION AND THE MERGER." Thereafter, Leucadia
intends to cause Empire and Allcity to merge, which would also be subject to the
prior approval of the NYID. Except as otherwise described in this Offer to
Purchase, and other than the Plan of Acquisition and the Merger, Leucadia has no
current plans or proposals or negotiations which relate to or would result in:
(i) an extraordinary corporate transaction, such as a merger, reorganization or
liquidation involving Allcity; (ii) any purchase, sale or transfer of a material
amount of assets of Allcity; (iii) any change in the management of Allcity or
any change in any material term of the employment contract of any executive
officer; or (iv) any other material change in Allcity's corporate structure or
business. The NYID may not approve the Plan of Acquisition or may seek to impose
different terms and conditions, including consideration in an amount that is
less than or more than the Offer Price. There can be no assurance that the NYID
will approve the Plan of Acquisition upon the terms and conditions submitted by
Leucadia or one of its subsidiaries.

           As previously indicated, Empire and Allcity are sometimes referred to
in this Offer to Purchase as "the Group". As previously announced, the Group has
commenced a voluntarily liquidation of all of the operations of the Group and it
is not expected that the Plan of Acquisition or the Merger will affect such
liquidation. Empire and Allcity currently operate under a pooling agreement. As
a result of the Merger, the pooling agreement will be eliminated and Empire and
Allcity will be a single entity with Empire as the surviving corporation.
Leucadia expressly reserves the right to cause Allcity to make any changes that
it deems necessary or appropriate in light of future developments (including not
pursuing the Merger) and may pursue transactions such as sales of certain
operations that result in benefits to Allcity.

           As a result of the Offer, the direct and indirect interest of
Leucadia in Allcity's net book value and net earnings will increase to the
extent of the number of shares of Common Stock acquired under the Offer.
Currently, Leucadia has an approximate 91.24% interest of Allcity's net book
value and net losses (approximately $18 million and $(3.4) million,
respectively, based on Allcity's audited consolidated financial statements as of
and for the fiscal year ended December 31, 2002). Following consummation of the
Plan of Acquisition, Leucadia's direct and indirect interest in such items will
increase to 100% (which would have equaled approximately $19.7 million and
$(3.7) million respectively, based on Allcity's audited consolidated financial
statements as of and for the fiscal year ended December 31, 2002) and Leucadia
and its subsidiaries will be entitled to all benefits resulting from that
interest, including all income generated by Allcity's operations and any future
increase in Allcity's value and the right to elect all members of Allcity's
Board of Directors. .Similarly, Leucadia will also bear the risk of losses
generated by Allcity's operations and any decrease in the value of Allcity after
the Plan of Acquisition. As a result, if the Offer and the Plan of Acquisition
are consummated, the unaffiliated security holders will not be permitted to
share in the remaining net book value or net earnings of Allcity following its
liquidation. Leucadia will be able to direct the liquidation of the Group
through Empire and Allcity without having to consider the interests of Allcity's
public shareholders. Upon consummation of the Plan of Acquisition, Allcity will
become a privately held corporation and the shares of Common Stock will cease to
be quoted on the OTC BB. In addition, depending upon the success of the Offer,
the registration of the shares of Common Stock under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), may be terminated upon application by
Allcity to the Commission as the shares of Common Stock are not listed on a
national securities exchange and there will be fewer than 300 record holders.
Accordingly, following the Offer there may be no publicly traded common stock of


                                       31
<PAGE>
Allcity outstanding. See "THE TENDER OFFER--7. EFFECT OF THE OFFER ON THE MARKET
FOR THE SHARES; EXCHANGE ACT REGISTRATION."

6.         INTERESTS OF CERTAIN PERSONS IN THE OFFER

           Management. Allcity does not remunerate its executive officers
directly. Executive officers of Allcity are also officers of Empire, which pays
all salaries. Allcity operates under the same general management as Empire and
has full use of Empire's personnel, information technology systems and
facilities. All such salaries and other operating expenses are shared by Allcity
and Empire pursuant to the pooling arrangement under which 30% of such expenses
are charged to Allcity.

           Interlocking Directors and Officers. Shareholders should be aware
that certain officers and directors of Leucadia and Allcity have interests in
the Offer which may present them with certain potential conflicts of interest.
In particular, 5 of the 13 directors of Allcity are also executive officers of
Leucadia (two of whom, Ian M. Cumming and Joseph S. Steinberg, are also
directors and principal shareholders of Leucadia) and one of the other thirteen
directors of Allcity is also a director of Leucadia. In addition, each of the
members of the Board of Directors of Allcity is also a member of the Board of
Directors of Empire. Also, as mentioned above, each executive officer of Allcity
is also an officer of Empire. The Board of Directors of Allcity appointed a
Special Committee that is comprised of directors not affiliated with Leucadia to
represent the interests of the public shareholders. See "SPECIAL FACTORS - 2.
RECOMMENDATION OF THE SPECIAL COMMITTEE OF THE BOARD; FAIRNESS OF THE OFFER."

           Ownership Interest of Leucadia. Shareholders also should be aware
that, as a result of Leucadia's current beneficial ownership of approximately
91.24% of the issued and outstanding shares of Common Stock and its nominees who
serve on Allcity's Board, Leucadia controls Allcity. The Boards of Directors of
Empire and Allcity are currently identical.

           Financial Advisors. Pursuant to an engagement letter dated January
27, 2003, Allcity has paid Sanders Morris an opinion fee of $50,000 for the
financial advisory services provided by Sanders Morris in connection with the
Offer plus out of pocket expenses and disbursements, including fees and
disbursements of counsel to Sanders Morris, actually incurred by Sanders Morris.

           Indemnification. Each member of the Board of Directors is entitled to
certain rights of indemnification and to be insured by Allcity with respect to
certain matters in connection with the Offer, the Plan of Acquisition and any
related transactions.


                                       32
<PAGE>
7.         THE PLAN OF ACQUISITION AND THE MERGER

           The Plan of Acquisition and the Merger. In the event that at least
265,886 shares of Common Stock are purchased in the Offer and Leucadia (or one
of its subsidiaries) receives the approval of the NYID for the Plan of
Acquisition, Leucadia, directly, or indirectly through one of its subsidiaries,
intends to acquire beneficial ownership of the shares of Common Stock not
tendered in the Offer pursuant to the Plan of Acquisition in accordance with the
applicable provisions of the NYSIL.

           The NYID may not approve the Plan of Acquisition or may seek to
impose different terms and conditions, including consideration in an amount that
is less than or more than the Offer Price. There can be no assurance that the
NYID will approve the Plan of Acquisition upon the terms and conditions
submitted by Leucadia or one of its subsidiaries.

           Following consummation of the Plan of Acquisition, Leucadia will
beneficially own 100% of the Common Stock of Allcity. By virtue of the Plan of
Acquisition and without any action on the part of the holder of any shares of
Common Stock, each issued and outstanding share of Common Stock (other than
shares owned by Allcity and any shares owned by Leucadia and its affiliates and
Dissenting Shares) automatically will be converted into the right to receive the
Offer Price in cash without interest and each holder of a certificate
representing any such shares of Common Stock will cease to have any rights with
respect thereto, except to receive the Offer Price upon surrender of such
certificate, without interest.

           The Merger. Following consummation of the Plan of Acquisition and
subject to the prior approval of the NYID, Leucadia intends to cause Allcity to
merge with and into Empire in accordance with the applicable provisions of the
NYBCL and the NYSIL. Following the Merger, the separate corporate existence of
Allcity will cease and Empire will continue as the Surviving Corporation and
Empire will continue as an indirect wholly-owned subsidiary of Leucadia.

           Dissenters' Rights. Shares of Common Stock that are issued and
outstanding immediately prior to the Effective Time and which are held by
shareholders who did not tender such shares in the Offer and who comply with the
relevant provisions of Section 623 of the NYBCL and Section 7119 of the NYSIL
will not be converted into or be exchangeable for the right to receive the
consideration offered in the Plan of Acquisition. Instead such shareholders will
have the fair value of their shares appraised pursuant to statutory procedures
contained in Section 623 of the NYBCL and Section 7119 of the NYSIL. The
appraisal process may result in shareholders receiving an amount that is less
than, more than or equal to the Offer Price they would have received had they
tendered their shares in the Offer. See "SPECIAL FACTORS - 8. DISSENTERS'
RIGHTS."

8.         DISSENTERS' RIGHTS

           Allcity shareholders do not have any appraisal rights in connection
with the Offer. However, pursuant to Section 623 of the NYBCL and Section 7119
of the NYSIL, any holder of shares of Common Stock at the Effective Time (a
"Remaining Shareholder") who does not wish to accept the consideration offered
pursuant to the Plan of Acquisition will have the right to seek an appraisal and
be paid the "fair value" of its shares of Common Stock as of the Effective Time


                                       33
<PAGE>
(exclusive of any element of value arising from the accomplishment or
expectation of the Plan of Acquisition) judicially determined and paid to it in
cash provided that such holder complies with the provisions of Section 623 of
the NYBCL and Section 7119 of the NYSIL.

           The following is a brief summary of the statutory procedures to be
followed by a Remaining Shareholder in order to perfect appraisal rights under
New York law. This summary is not intended to be complete and is qualified in
its entirety by reference to Section 623 of the NYBCL and Section 7119 of the
NYSIL, the text of which are respectively set forth in Annex B and Annex C
hereto. Any Remaining Shareholder considering demanding appraisal is advised to
consult legal counsel since the failure to comply strictly within these
provisions will result in loss of dissenters' rights. Appraisal rights will not
be available unless and until the Plan of Acquisition is consummated.

           APPRAISAL RIGHTS CANNOT BE EXERCISED AT THIS TIME. THE INFORMATION
SET FORTH BELOW IS FOR INFORMATIONAL PURPOSES ONLY WITH RESPECT TO ALTERNATIVES
AVAILABLE TO SHAREHOLDERS IF THE PLAN OF ACQUISITION IS CONSUMMATED.
SHAREHOLDERS WHO WILL BE ENTITLED TO APPRAISAL RIGHTS IN CONNECTION WITH THE
PLAN OF ACQUISITION WILL RECEIVE ADDITIONAL INFORMATION CONCERNING APPRAISAL
RIGHTS AND THE PROCEDURES TO BE FOLLOWED IN CONNECTION THEREWITH BEFORE SUCH
SHAREHOLDERS HAVE TO TAKE ANY ACTION RELATING THERETO.

           SHAREHOLDERS WHO SELL SHARES IN THE OFFER WILL NOT BE ENTITLED TO
EXERCISE APPRAISAL RIGHTS WITH RESPECT THERETO BUT, RATHER, WILL RECEIVE THE
PRICE PAID IN THE OFFER FOR SUCH SHARES.

           The corporation acquiring the shares of Common Stock not tendered in
the Offer is required to mail to the Remaining Shareholders a copy of the Plan
of Acquisition or a summary thereof that has been approved by the NYID (the
"Notice of Plan of Acquisition") to the effect that the Plan of Acquisition is
effective and that appraisal rights are available (and includes in such notice a
statement clearly describing the rights of dissenting shareholders to demand
appraisal and any other information required thereby) within 20 days of such
date.

           Remaining Shareholders of record who desire to exercise their
appraisal rights must fully satisfy all of the following conditions. Within 20
days after the giving of such notice, any Remaining Shareholder who elects to
dissent must file with the corporation that filed and adopted the Plan of
Acquisition, or if Allcity is the entity that files and adopts the Plan of
Acquisition, to Leucadia (in each case the entity that the dissent is filed with
is referred to as the "Corporation"), a written notice of such election, stating
the shareholder's name and residence address, the number of shares of Common
Stock as to which dissent is made and a demand for payment of the fair value of
such shares. A shareholder may not dissent as to less than all Common Shares
beneficially owned by him.

           A demand for appraisal must be executed by or for the shareholder of
record, fully and correctly, as the shareholder's name appears on the stock
certificates. If shares are owned of record in a fiduciary capacity, such as by
a trustee, guardian or custodian, such demand must be executed by the fiduciary.


                                       34
<PAGE>
If shares of Common Stock are owned of record by more than one person, as in a
joint tenancy or tenancy in common, such demand must be executed by all joint
owners. An authorized agent, including an agent for two or more joint owners,
may execute the demand for appraisal for a shareholder of record; however, the
agent must identify the record owner and expressly disclose the fact that, in
exercising the demand, he is acting as agent for the record owner.

           A record owner, such as a broker, who holds shares of Common Stock as
a nominee for others, may exercise appraisal rights with respect to the shares
of Common Stock held for all or less than all beneficial owners of shares of
Common Stock as to which the holder is the record owner. In that case the
written demand must set forth the number of shares of Common Stock covered by
the demand. Where the number of shares is not expressly stated, the demand will
be presumed to cover all shares of Common Stock outstanding in the name of such
record owner. Beneficial owners who are not record owners and who intend to
exercise appraisal rights should instruct the record owner to comply strictly
with the statutory requirements with respect to the exercise of appraisal rights
within 20 days following the mailing of the Notice of Plan of Acquisition.

           At the time of filing the notice of election to dissent or within one
month thereafter, such Remaining Shareholder must submit certificates
representing all such Common Stock to Allcity or its transfer agent. Failure to
submit the certificates may result in the loss of such shareholder's dissenter's
rights. Within 15 days after the expiration of the period within which
shareholders may file their notices of election to dissent, or within 15 days
after consummation of the Plan of Acquisition, whichever is later, the
corporation that filed and adopted the Plan of Acquisition shall make a written
offer to each such dissenting shareholder who has filed such notice of election
to pay for the Common Shares at the consideration offered in the Plan of
Acquisition. At any time within sixty (60) days after the consummation of the
Plan of Acquisition, any Remaining Shareholder shall have the right to withdraw
his or her demand for appraisal and to accept the consideration offered in the
Plan of Acquisition. Except that if a written offer is made to such Remaining
Shareholder(s) after the statutory 15 day period following the consummation of
the Plan of Acquisition, the time for withdrawing a notice of election to
dissent shall be extended until sixty days from the date such offer is made.
After this period, such holder may withdraw his or her demand for appraisal only
with the consent of the corporation acquiring the shares of Common Stock.

           If the Corporation fails to make the offer within the fifteen day
period or if the Corporation makes the offer within the fifteen day period and
any Remaining Shareholders fail to agree with it upon the price to be paid for
the shares within thirty days thereafter, the Corporation shall within 20 days
after the expiration of the applicable period referred to above, institute a
proceeding in the Supreme Court to determine the rights of Remaining
Shareholders and to fix the fair value of the shares. If the Corporation fails
to institute such proceeding within such 20 day period, the Remaining
Shareholder may institute such proceeding for the same purpose not later than 30
days after the expiration of such 20 day period. All Remaining Shareholders,
except those who have agreed with the Corporation as to the price to be paid for
their shares shall be made parties to the proceeding. If no proceeding for
appraisal is instituted with the Supreme Court by a dissenting shareholder
within such 30 day period referred to above, any dissenters' rights will be lost


                                       35
<PAGE>
unless the Supreme Court, for good cause shown, directs otherwise. Inasmuch as
Allcity has no obligation to file such a petition, and Leucadia has no present
intention to cause or permit the acquiring corporation to do so, any shareholder
who desires such a petition to be filed is advised to file it on a timely basis.
No petition timely filed in the New York Supreme Court demanding appraisal shall
be dismissed as to any shareholder without the approval of the New York Supreme
Court and such approval may be conditioned upon such terms as the New York
Supreme Court deems just.

           If the corporation that filed and adopted the Plan of Acquisition and
the dissenting Remaining Shareholders are unable to agree as to what constitutes
fair value, Section 623 of NYBCL provides for judicial determination of fair
value. The court should determine the fair value of the shares without a jury
and without referral to an appraiser or referee. In determining fair value, the
New York Court of Appeals is to take into account all relevant factors. In
Friedman v. Beway Realty Corp., the New York Court of Appeals discussed the
factors that could be considered in determining fair value in an appraisal
proceeding, stating that the "three major elements of fair value are net asset
value, investment value and market value. The particular facts and circumstances
will dictate which elements must influence the result." The New York Court of
Appeals stated that in making this determination of fair value the court should
consider "the subsequent economic impact on value of the very transaction giving
rise to appraisal rights, as supplemental to the three basic value factors (net
asset, investment and market values)."

           Each party will bear its own costs and expenses for any appraisal
proceedings, including legal and other professional fees and expenses. However,
the New York Supreme Court may in its discretion, apportion and assess all or
any part of the costs, expenses and fees against any or all of the dissenting
shareholders if the Court finds that their refusal to accept the corporate offer
was arbitrary, vexatious or otherwise not in good faith. Conversely, all or any
of the costs, expenses and fees may be apportioned and against the corporation
adopting the Plan if the New York Supreme Court makes a determination, among
other things, that the fair value exceeds the offer price or that the action of
the corporation adopting the Plan was arbitrary, vexatious or otherwise not in
good faith. Under NYBCL Section 623(h)(6), the New York Supreme Court can also
award interest on amounts payable to a dissenting shareholder under certain
circumstances.

           Upon consummation of the Plan of Acquisition, a dissenting
shareholder shall cease to have any of the rights of a shareholder, except the
right to be paid the fair value of the shares and any other rights under Section
7119 of the NYSIL and Section 623 of NYBCL.

           Failure to take any required step in connection with the exercise of
appraisal rights may result in the termination or waiver of such rights.



                                       36
<PAGE>
9.         BENEFICIAL OWNERSHIP OF COMMON STOCK

           The following table sets forth certain information as of March 31,
2003, regarding the amount of Common Stock beneficially owned by each of the
executive officers, each director of Allcity, all directors and executive
officers of Allcity as a group, and each person known to Allcity to own
beneficially more than five percent of the outstanding shares of Common Stock.
All shares of Common Stock shown reflect sole voting and investment power except
as otherwise noted.

           According to rules adopted by the Commission, a person is the
"beneficial owner" of securities if that person has or shares the power to vote
such securities or to direct their investment or has the right to acquire
beneficial ownership of such securities within 60 days through the exercise of
an option, warrant or right of conversion of a security, or otherwise. Allcity
only has shares of Common Stock outstanding.


<TABLE>
<C>                                            <C>                                                <C>
                                             Number of Shares and
Name or Group                                Nature of Beneficial Ownership                      Percent of Class
-------------                                ------------------------------                      ----------------
Empire Insurance Company
45 Main Street
Brooklyn, NY 112011                                      5,987,401                                     84.58%
Baldwin Enterprises, Inc.
529 East South Temple
Salt Lake City, Utah 841021                               471,407                                       6.66%
Ian M. Cumming                                              (2)                                          (2)
Joseph S. Steinberg                                         (2)                                          (2)
Martin Bernstein                                            (3)                                          (3)
James E. Jordan                                             (3)                                          (3)
Christopher J. Gruttemeyer                                  (3)                                          (3)
Thomas E. Mara                                              (3)                                          (3)
Rocco J. Nittoli                                            (3)                                          (3)
Joseph A. Orlando                                           (3)                                          (3)
H.E. Scruggs                                                (3)                                          (3)
Louis V. Siracusano                                          0                                            0
Daniel G. Stewart                                            0                                            0
Lucius Theus                                                 0                                            0
Harry H. Wise                                               (3)                                          (3)
Douglas Whitenack                                           (3)                                          (3)
Edward Hayes                                                 0                                            0
All   current   directors   and   executive
officers as a group (15 persons)                            (3)                                          (3)

</TABLE>


1    Leucadia indirectly owns 100% of the capital stock of Empire and Baldwin
     Enterprises, Inc.

2    Although neither Mr. Cumming nor Mr. Steinberg directly owns any Common
     Stock, by virtue of their respective interest of approximately 16.6% and
     15.4% in Leucadia (as of April 11, 2003) and their positions as directors


                                       37
<PAGE>
     and Chairman and President, respectively, of Leucadia, each may be deemed
     to be the beneficial owner of shares of common stock of Allcity
     beneficially owned by Leucadia through its subsidiaries, Empire and Baldwin
     Enterprises, Inc.


3    Messrs. Bernstein, Gruttemeyer, Jordan, Mara, Orlando, Scruggs, Wise,
     Nittoli and Whitenack do not own any shares of Common Stock. However, each
     of Messrs. Bernstein, Gruttemeyer, Jordan, Mara, Orlando, Scruggs, Wise,
     Nittoli and Whitenack beneficially owns common shares and/or the right to
     acquire common shares of Leucadia, which shares individually and in the
     aggregate represent less than 1% of Leucadia's common shares outstanding.

10.        TRANSACTIONS AND ARRANGEMENTS CONCERNING THE SHARES

           To Leucadia's and Empire's knowledge, no transactions in the shares
of Common Stock, have been effected during the past sixty (60) days by Allcity
or its executive officers, directors and affiliates, or by Leucadia or its
executive officers, directors, affiliates or majority owned subsidiaries
(including Empire) and any executive officer or director of any subsidiary of
Leucadia. Except as set forth in this Offer to Purchase, no transactions in the
shares of Common Stock have been effected by Leucadia or Empire during the past
two years.

           Except as set forth in this Offer to Purchase, neither Leucadia nor,
to Leucadia's knowledge, any of Allcity's affiliates, directors or executive
officers or any person (other than Leucadia) controlling Allcity is a party to
any contract, arrangement, understanding or relationship with any other person
relating, directly or indirectly, to, or in connection with, the Offer with
respect to any securities of Allcity (including, without limitation, any
contract, arrangement, understanding or relationship concerning the transfer or
the voting of any such securities, joint ventures, loan or option arrangements,
puts or calls, guarantees of loans, guarantees against loss or the giving or
withholding of proxies, consents or authorizations). Except as described in this
Offer to Purchase, since the second full fiscal year preceding the date of this
Offer to Purchase, no contracts or negotiations concerning a merger,
consolidation, or acquisition, a tender offer for or other acquisition of any
securities of Allcity, an election of directors of Allcity, or a sale or other
transfer of a material amount of assets of Allcity, has been entered into or has
occurred between any affiliates of Allcity, Leucadia or Empire or between
Allcity or any of its affiliates and any non affiliated person. Except as
described in this Offer to Purchase, since the third full fiscal year preceding
the date of this Offer to Purchase, Allcity has not made any underwritten public
offering of the shares of Common Stock that was (i) registered under the
Securities Act of 1933 or (ii) exempt from registration under the Securities Act
of 1933 pursuant to Regulation A thereunder.

           To the best of Leucadia's knowledge, after reasonable inquiry, all of
the directors or executive officers of Allcity, other than those individuals, if
any, for whom the tender of shares of Common Stock could cause them to incur
liability under the provisions of Section 16(b) of the Exchange Act, and other
than those individuals who intend to make charitable contributions of shares of
Common Stock, intend to tender pursuant to the Offer or sell shares of Common
Stock held by them.


                                       38
<PAGE>
11.        RELATED PARTY TRANSACTIONS

           All insurance business written by Allcity is subject to a pooling
agreement with Empire under which Allcity and Empire effectively operate as one
company for their insurance operations. The pooling agreement and subsequent
amendments were approved by the NYID. Allcity operates under the same general
management as Empire and has full use of Empire's personnel, information
technology systems and facilities. As of March 31, 2003, Empire and Allcity had
88 full time employees. Currently, all premiums, losses, loss adjustment
expenses and other underwriting expenses are shared on the basis of 70% to
Empire and 30% to Allcity.

           Pursuant to the pooling agreement, Allcity has a net reinsurance
recoverable from Empire. As of December 31, 2002, Allcity's reinsurance
recoverable from Empire is $91,700,000, representing 44% of Allcity's total
assets. While this liability is reflected on Empire's stand-alone statutory
financial statements, Empire's statutory surplus (after deducting this
liability) is approximately $5,300,000 as of December 31, 2002, which is
approximately $2,000,000 above the minimum required under New York insurance
regulations. Further deterioration in Empire's surplus could impair Empire's
ability to pay the full amount due to Allcity. Further, any adverse regulatory
action taken against Empire in the future could also impair Allcity's ability to
fully collect its reinsurance recoverable.

           Allcity has been included in the consolidated federal income tax
returns of Leucadia since 1993. Under the terms of the tax sharing agreement
between Leucadia and Allcity, Allcity computes its tax provision on a separate
return basis and is either charged its share of federal income tax resulting
from its taxable income or is credited for tax benefits resulting from its
losses to the extent Allcity could use the losses on a separate return basis.

           The information set forth in Allcity's Annual Reports on Form 10-K
for the years ended December 31, 2002 and December 31, 2001, as amended, under
the title "Item 13 - Certain Relationships and Related Transactions" is
incorporated herein by reference.


                                       39
<PAGE>
                                THE TENDER OFFER



           1. TERMS OF THE OFFER; EXPIRATION DATE. Upon the terms and subject to
the conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of any such extension or amendment), Leucadia will accept
for payment and thereby purchase all shares of Common Stock validly tendered and
not withdrawn in accordance with the procedures set forth in "4. Withdrawal
Rights" on or prior to the Expiration Date (as hereinafter defined). The term
"Expiration Date" means 9:00 a.m., New York City time, on Wednesday, June 11,
2003, unless and until Leucadia, in its sole discretion, shall have extended the
period of time for which the Offer is open, in which event the term "Expiration
Date" shall mean the time and date at which the Offer, as so extended by
Leucadia, shall expire.


           Leucadia may waive any or all of the conditions to its obligation to
purchase shares of Common Stock pursuant to the Offer. If by the initial
Expiration Date or any subsequent Expiration Date any or all of the conditions
to the Offer have not been satisfied or waived, Leucadia may elect to (i)
terminate the Offer and return all tendered shares of Common Stock to tendering
shareholders, (ii) waive all of the unsatisfied conditions and, subject to any
required extension, purchase all shares of Common Stock validly tendered by the
Expiration Date and not properly withdrawn or (iii) extend the Offer and,
subject to the right of shareholders to withdraw shares of Common Stock until
the new Expiration Date, retain the shares of Common Stock that have been
tendered until the expiration of the Offer as extended.

           Subject to the applicable regulations of the Commission, Leucadia
also expressly reserves the right, in its sole discretion, at any time or from
time to time, to (i) delay acceptance for payment of or, regardless of whether
such shares of Common Stock were theretofore accepted for payment, payment for
any shares of Common Stock pending receipt of any regulatory or governmental
approvals specified in "12. Certain Legal Matters; Required Regulatory
Approvals," (ii) terminate the Offer (whether or not any shares of Common Stock
have theretofore been accepted for payment) if any of the conditions referred to
in "11. Certain Conditions to the Offer" has not been satisfied or upon the
occurrence of any of the events specified in "11. Certain Conditions to the
Offer" and (iii) waive any condition or otherwise amend the Offer in any
respect, in each case, by giving oral or written notice of such delay,
termination, waiver or amendment to the Depositary and by making a public
announcement thereof. Leucadia acknowledges (i) that Rule 14e-1(c) and Rule
13e-4(f) under the Exchange Act requires Leucadia to pay the consideration
offered or return the shares of Common Stock tendered promptly after the
termination or withdrawal of the Offer and (ii) that Leucadia may not delay
acceptance for payment of, or payment for (except as provided in clause (i) of
the preceding sentence), any shares of Common Stock upon the occurrence of any
of the conditions specified in "11. CERTAIN CONDITIONS TO THE OFFER" without
extending the period of time during which the Offer is open. See "THE TENDER
OFFER -- 11. CERTAIN CONDITIONS TO THE OFFER."

           Any such extension, delay, termination, waiver or amendment will be
followed as promptly as practicable by public announcement thereof, and such
announcement in the case of an extension will be made no later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date. Without limiting the manner in which Leucadia may choose to
make any public announcement, subject to applicable law (including Rules
13e-3(e), 13e-4(e), 13e-4(d), 14d-4(d), 14d-6(c) and 14e-1 under the Exchange


                                       40
<PAGE>
Act, which require that material changes be promptly disseminated to holders of
shares of Common Stock), Leucadia shall have no obligation to publish, advertise
or otherwise communicate any such public announcement other than by issuing a
release to the Dow Jones News Service.

           If Leucadia makes a material change in the terms of the Offer, or if
it waives a material condition to the Offer, Leucadia will extend the Offer and
disseminate additional tender offer materials to the extent required by Rules
13e-3(e), 13e-4(e), 13e-4(f), 14d-4(d), 14d-6(c) and 14e-1 under the Exchange
Act. The minimum period during which an Offer must remain open following
material changes in the terms of the Offer, other than a change in price or a
change in percentage of securities sought or a change in any dealer's soliciting
fee, will depend upon the facts and circumstances, including the materiality, of
the changes. With respect to a change in price or, subject to certain
limitations, a change in the percentage of securities sought or a change in any
dealer's soliciting fee, a minimum ten business day period from the date of such
change is generally required to allow for adequate dissemination to
shareholders. Accordingly, if prior to the Expiration Date, Leucadia decreases
the number of shares of Common Stock being sought, or increases or decreases the
consideration offered pursuant to the Offer, and if the Offer is scheduled to
expire at any time earlier than the period ending on the tenth business day from
the date that notice of such increase or decrease is first published, sent or
given to holders of shares of Common Stock, the Offer will be extended at least
until the expiration of such ten business day period. For purposes of the Offer,
a "business day" means any day other than a Saturday, Sunday or a Federal
holiday and consists of the time period from 12:01 a.m. through 12:00 midnight,
New York City time.

           Allcity has provided Leucadia with Allcity's shareholder lists and
security position listings for the purpose of disseminating the Offer to holders
of shares of Common Stock. This Offer to Purchase and the related Letter of
Transmittal will be mailed to record holders of shares of Common Stock and will
be furnished to brokers, dealers, banks and similar persons whose names, or the
names of whose nominees, appear on the shareholder lists or, if applicable, who
are listed as participants in a clearing agency's security position listing, for
subsequent transmittal to beneficial owners of shares of Common Stock, or who
are listed as participants in a clearing agency's security position listing for
subsequent transmittal to beneficial owners of shares of Common Stock.

           2. ACCEPTANCE FOR PAYMENT AND PAYMENT. Upon the terms and subject to
the conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of the Offer as so extended or amended), Leucadia will
purchase, by accepting for payment, and will pay for, all shares of Common Stock
validly tendered and not withdrawn (as permitted by "4. Withdrawal Rights")
prior to the Expiration Date promptly after the later to occur of (i) the
Expiration Date and (ii) the satisfaction or waiver of the conditions to the
Offer set forth in "11. Certain Conditions to the Offer". In addition, subject
to applicable rules of the Commission, Leucadia expressly reserves the right to
delay acceptance for payment of, or payment for, shares of Common Stock pending
receipt of any regulatory or governmental approvals specified in "12. Certain
Legal Matters; Required Regulatory Approvals."

           In all cases, payment for shares of Common Stock purchased pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
certificates representing such shares of Common Stock or timely confirmation (a


                                       41
<PAGE>
"Book-Entry Confirmation") of the book-entry transfer of such shares of Common
Stock into the Depositary's account at The Depository Trust Company (the
"Book-Entry Transfer Facility"), pursuant to the procedures set forth in "3.
Procedures for Accepting the Offer and Tendering Shares", (ii) the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed, with
any required signature guarantees, or an Agent's Message (as defined below) in
connection with a book-entry transfer, and (iii) any other documents required by
the Letter of Transmittal.

           The term "Agent's Message" means a message, transmitted by a
Book-Entry Transfer Facility to, and received by, the Depositary and forming a
part of a Book-Entry Confirmation, which states that such Book-Entry Transfer
Facility has received an express acknowledgment from the participant in such
Book-Entry Transfer Facility tendering the shares of Common Stock which are the
subject of such Book-Entry Confirmation, that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that Leucadia
may enforce such agreement against such participant.

           For purposes of the Offer, Leucadia will be deemed to have accepted
for payment, and thereby purchased, shares of Common Stock validly tendered and
not withdrawn, if and when Leucadia gives oral or written notice to the
Depositary of Leucadia's acceptance of such shares of Common Stock for payment
pursuant to the Offer. In all cases, upon the terms and subject to the
conditions of the Offer, payment for shares of Common Stock purchased pursuant
to the Offer will be made by deposit of the Offer Price therefor with the
Depositary, which will act as agent for tendering shareholders for the purpose
of receiving payment from Leucadia and transmitting payment to validly tendering
shareholders. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE FOR
SHARES OF COMMON STOCK BE PAID BY LEUCADIA BY REASON OF ANY DELAY IN MAKING SUCH
PAYMENT.

           If any tendered shares of Common Stock are not purchased pursuant to
the Offer for any reason, or if certificates representing shares of Common Stock
are submitted representing more shares of Common Stock than are tendered,
certificates representing unpurchased or untendered shares of Common Stock will
be returned, without expense to the tendering shareholder (or, in the case of
shares of Common Stock delivered by book-entry transfer into the Depositary's
account at the Book-Entry Transfer Facility pursuant to the procedures set forth
in "3. Procedures for Accepting the Offer and Tendering Shares," such shares of
Common Stock will be credited to an account maintained within such Book-Entry
Transfer Facility), as promptly as practicable following the expiration,
termination or withdrawal of the Offer.

           Leucadia reserves the right to transfer or assign, in whole or from
time to time in part, to one or more of Leucadia's subsidiaries or affiliates
the right to purchase all or any portion of the shares of Common Stock tendered
pursuant to the Offer, but any such transfer or assignment will not relieve
Leucadia of its obligations under the Offer or prejudice the rights of tendering
shareholders to receive payment for shares of Common Stock validly tendered and
accepted for payment pursuant to the Offer.


                                       42
<PAGE>
3.         PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES.

VALID TENDER OF SHARES

           Except as set forth below, in order for shares of Common Stock to be
validly tendered pursuant to the Offer, the Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, together with any
required signature guarantees, or an Agent's Message in connection with a
book-entry delivery of shares of Common Stock, and any other documents required
by the Letter of Transmittal, must be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase on or prior to
the Expiration Date and either (i) certificates representing tendered shares of
Common Stock must be received by the Depositary, or such shares of Common Stock
must be tendered pursuant to the procedure for book-entry transfer set forth
below and a Book-Entry Confirmation must be received by the Depositary, in each
case on or prior to the Expiration Date, or (ii) the guaranteed delivery
procedures set forth below must be complied with.

           Shareholders who hold shares through brokers or banks are urged to
consult with such brokers and banks to determine whether transaction costs are
applicable if the shareholders tender shares through brokers or banks and not
directly to the Depositary.

           THE METHOD OF DELIVERY OF CERTIFICATES REPRESENTING TENDERED SHARES
OF COMMON STOCK, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS
AT THE OPTION AND SOLE RISK OF THE TENDERING SHAREHOLDER, AND THE DELIVERY WILL
BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.

BOOK-ENTRY TRANSFER

           The Depositary will make a request to establish accounts with respect
to the shares of Common Stock at the Book-Entry Transfer Facility for purposes
of the Offer within two business days after the date of this Offer to Purchase.
Any financial institution that is a participant in the system of the Book-Entry
Transfer Facility may make book-entry delivery of shares of Common Stock by
causing the Book-Entry Transfer Facility to transfer the shares of Common Stock
into the Depositary's account at such Book-Entry Transfer Facility in accordance
with the Book-Entry Transfer Facility's procedures for such transfer. However,
although delivery of shares of Common Stock may be effected through book-entry
transfer into the Depositary's account at a Book-Entry Transfer Facility, the
Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees, or an Agent's Message in
connection with a book-entry transfer, and any other required documents must, in
any case, be transmitted to and received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase on or prior to
the Expiration Date, or the guaranteed delivery procedure set forth below must
be complied with.


                                       43
<PAGE>
           DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE
WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY
TO THE DEPOSITARY.

SIGNATURE GUARANTEES

           No signature guarantee is required on the Letter of Transmittal (i)
if the Letter of Transmittal is signed by the registered holder(s) (which term,
for purposes of this paragraph, includes any participant in the Book Entry
Transfer Facility's systems whose name appears on a security position listing as
the owner of the shares of Common Stock) of shares of Common Stock tendered
therewith and such registered holder(s) has not completed either the box
entitled "Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter of Transmittal or (ii) if such shares of Common
Stock are tendered for the account of a financial institution (including most
commercial banks, savings and loan associations and brokerage houses) that is a
participant in the Security Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange
Medallion Program (each, an "Eligible Institution" and, collectively, "Eligible
Institutions"). In all other cases, all signatures on Letters of Transmittal
must be guaranteed by an Eligible Institution. See Instructions 1 and 5 to the
Letter of Transmittal. If the certificates for shares of Common Stock are
registered in the name of a person other than the signer of the Letter of
Transmittal, or if payment is to be made, or certificates for shares of Common
Stock not tendered or not accepted for payment are to be returned, to a person
other than the registered holder of the certificates surrendered, then the
tendered certificates for such shares of Common Stock must be endorsed or
accompanied by appropriate stock powers, in either case, signed exactly as the
name or names of the registered holders or owners appear on the certificates,
with the signatures on the certificates or stock powers guaranteed as aforesaid.
See Instruction 5 to the Letter of Transmittal.

GUARANTEED DELIVERY

           If a shareholder desires to tender shares of Common Stock pursuant to
the Offer and its certificates for shares of Common Stock are not immediately
available or the procedures for book-entry transfer cannot be completed on a
timely basis or time will not permit all required documents to reach the
Depositary prior to the Expiration Date, such shareholder's tender may be
effected if all the following conditions are met:

           (i) such tender is made by or through an Eligible Institution;

           (ii) a properly completed and duly executed Notice of Guaranteed
           Delivery, substantially in the form provided by Leucadia, is received
           by the Depositary, as provided below, prior to the Expiration Date;
           and

           (iii) the certificates for (or a Book-Entry Confirmation with respect
           to) the shares of Common Stock, together with a properly completed
           and duly executed Letter of Transmittal (or facsimile thereof), with
           any required signature guarantees, or, in the case of a book-entry
           transfer, an Agent's Message, and any other required documents, are
           received by the Depositary within three (3) trading days after the


                                       44
<PAGE>
           date of execution of such Notice of Guaranteed Delivery. A "trading
           day" is any day on which the National Association of Securities
           Dealers Association Automatic Quotation System, Inc. is open for
           business.

           The Notice of Guaranteed Delivery may be delivered by hand to the
Depositary or transmitted by telegram, facsimile transmission or mailed to the
Depositary and must include a guarantee by an Eligible Institution in the form
set forth in such Notice of Guaranteed Delivery.

           Notwithstanding any other provision hereof, payment for shares of
Common Stock accepted for payment pursuant to the Offer will in all cases be
made only after timely receipt by the Depositary of certificates for, or of
Book-Entry Confirmation with respect to, such shares of Common Stock, a properly
completed and duly executed Letter of Transmittal (or facsimile thereof),
together with any required signature guarantees (or, in the case of a book-entry
transfer, an Agent's Message), and any other documents required by the Letter of
Transmittal. Accordingly, payment might not be made to all tendering
shareholders at the same time, and will depend upon when certificates
representing, or Book-Entry Confirmations of, such shares of Common Stock are
received into the Depositary's account at a Book-Entry Transfer Facility.

BACKUP FEDERAL TAX WITHHOLDING

           UNDER THE U.S. BACKUP FEDERAL INCOME TAX WITHHOLDING RULES APPLICABLE
TO CERTAIN SHAREHOLDERS OTHER THAN CERTAIN EXEMPT SHAREHOLDERS, INCLUDING, AMONG
OTHERS, ALL CORPORATIONS AND CERTAIN FOREIGN ENTITIES, THE DEPOSITARY WILL BE
REQUIRED TO WITHHOLD ANY PAYMENTS MADE TO THOSE SHAREHOLDERS PURSUANT TO THE
OFFER AT A STATUTORY ESTABLISHED RATE (30% FOR REPORTABLE PAYMENTS MADE IN
2003). TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING ON PAYMENTS WITH RESPECT
TO THE PURCHASE PRICE OF SHARES OF COMMON STOCK PURCHASED PURSUANT TO THE OFFER,
EACH SHAREHOLDER SHOULD CERTIFY TO THE DEPOSITARY THAT HE IS NOT SUBJECT TO
BACKUP FEDERAL INCOME TAX WITHHOLDING BY PROPERLY PROVIDING THE DEPOSITARY WITH
(I) A PROPERLY EXECUTED FORM W-8BEN, W-8ECI, W-8EXP OR W-8IMY (WITH APPLICABLE
ATTACHMENTS) AS APPROPRIATE, OR (II) SUCH SHAREHOLDERS' TAXPAYER IDENTIFICATION
NUMBER ON A PROPERLY EXECUTED FORM W-9 (INCLUDED IN THE LETTER OF TRANSMITTAL).
SEE INSTRUCTION 10 OF THE LETTER OF TRANSMITTAL.

APPOINTMENT AS PROXY

           By executing the Letter of Transmittal, a tendering shareholder
irrevocably appoints designees of Leucadia, and each of them, as such
shareholder's attorneys-in-fact and proxies, with full power of substitution, in
the manner set forth in the Letter of Transmittal, to the full extent of such
shareholder's rights with respect to the shares of Common Stock tendered by such
shareholder and accepted for payment and paid for by Leucadia and with respect
to all other shares of Common Stock and other securities or rights issued or
issuable in respect of such shares of Common Stock on or after the date of this
Offer to Purchase. All such powers of attorney and proxies shall be considered
irrevocable and coupled with an interest in the tendered shares of Common Stock.
Such appointment will be effective when, and only to the extent that, Leucadia
pays for such shares of Common Stock by depositing the purchase price therefor
with the Depositary. Upon such payment, all powers of attorney and proxies given
by such shareholder with respect to such shares of Common Stock, and such other
securities or rights prior to such payment will be revoked, without further


                                       45
<PAGE>
action, and no subsequent powers of attorney and proxies may be given by such
shareholder (and, if given, will not be deemed effective). The Depositary or
other designees of Leucadia will, with respect to the shares of Common Stock for
which such appointment is effective, be empowered to exercise all voting and
other rights of the shareholder as they in their sole discretion may deem proper
at any annual or special meeting of Allcity's shareholders, or any adjournment
or postponement thereof. Leucadia reserves the right to require that, in order
for shares of Common Stock to be deemed validly tendered, immediately upon the
payment for such shares of Common Stock, Leucadia or its designee must be able
to exercise full voting rights with respect to such shares of Common Stock and
other securities, including voting at any meeting of shareholders.

DETERMINATION OF VALIDITY

           All questions as to the form of documents and validity, eligibility
(including time of receipt) and acceptance for payment of any tender of shares
of Common Stock will be determined by Leucadia, in its sole discretion, whose
determination shall be final and binding on all parties. Leucadia reserves the
absolute right to reject any or all tenders determined by it not to be in proper
form or the acceptance of or payment for which may, in the opinion of Leucadia's
counsel, be unlawful. Leucadia also reserves the absolute right to waive any of
the conditions of the Offer or any defect or irregularity in any tender of
shares of Common Stock of any particular shareholder whether or not similar
defects or irregularities are waived in the case of other shareholders.

           Leucadia's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the instructions thereto) will be final
and binding. No tender of shares of Common Stock will be deemed to have been
validly made until all defects and irregularities with respect to such tender
have been cured or waived. None of Leucadia, or any of its affiliates or
assigns, if any, the Depositary, the Information Agent or any other person will
be under any duty to give any notification of any defects or irregularities in
tenders or incur any liability for failure to give any such notification.

           Leucadia's acceptance for payment of shares of Common Stock tendered
pursuant to any of the procedures described above will constitute a binding
agreement between the tendering shareholder and Leucadia upon the terms and
subject to the conditions of the Offer.


           4. WITHDRAWAL RIGHTS. Except as otherwise provided in this section,
tenders of shares of Common Stock made pursuant to the Offer are irrevocable.
Shares of Common Stock tendered pursuant to the Offer may be withdrawn at any
time on or prior to the Expiration Date and, unless theretofore accepted for
payment as provided herein, may also be withdrawn at any time after June 11,
2003 (or such later date as may apply in case the Offer is extended).


           If, for any reason whatsoever, acceptance for payment of any shares
of Common Stock tendered pursuant to the Offer is delayed, or Leucadia is unable
to accept for payment or pay for shares of Common Stock tendered pursuant to the
Offer, then, without prejudice to Leucadia's rights set forth herein, the
Depositary may, nevertheless, on behalf of Leucadia, retain tendered shares of
Common Stock and such shares of Common Stock may not be withdrawn except to the
extent that the tendering shareholder is entitled to and duly exercises
withdrawal rights as described in this section. Any such delay will be by an
extension of the Offer to the extent required by law.


                                       46
<PAGE>
           To be effective, a written, telegraphic or facsimile transmission
notice of withdrawal must be timely received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase. Any such notice
of withdrawal must specify the name of the person who tendered the shares of
Common Stock to be withdrawn, the number of shares of Common Stock to be
withdrawn and the name of the registered holder of the shares of Common Stock to
be withdrawn, if different from the name of the person who tendered the shares
of Common Stock. If certificates evidencing shares of Common Stock to be
withdrawn have been delivered or otherwise identified to the Depositary, then,
prior to the physical release of such certificates, the serial numbers shown on
such certificates must be submitted to the Depositary and, unless such shares of
Common Stock have been tendered by an Eligible Institution, the signatures on
the notice of withdrawal must be guaranteed by an Eligible Institution. If
shares of Common Stock have been delivered pursuant to the procedures for
book-entry transfer as set forth in "3. Procedures for Accepting the Offer and
Tendering Shares," any notice of withdrawal must also specify the name and
number of the account at the Book-Entry Transfer Facility to be credited with
the withdrawn shares of Common Stock and otherwise comply with such Book-Entry
Transfer Facility's procedures.

           Withdrawals of shares of Common Stock may not be rescinded. Any
shares of Common Stock properly withdrawn will be deemed not validly tendered
for purposes of the Offer, but may be re-tendered at any subsequent time prior
to the Expiration Date by following any of the procedures described in "3.
Procedures for Accepting the Offer and Tendering Shares."

           All questions as to the form and validity (including time of receipt)
of notices of withdrawal will be determined by Leucadia, in its sole discretion,
whose determination shall be final and binding. None of Leucadia or any of its
affiliates or assigns, if any, the Depositary, the Information Agent or any
other person will be under any duty to give any notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification.

5.         CERTAIN TAX CONSEQUENCES.

FEDERAL INCOME TAX

           Sale or exchange of shares of Common Stock pursuant to the Offer, the
Plan of Acquisition or upon exercise of Dissenters' Rights will be a taxable
transaction for federal income tax purposes and may also be a taxable
transaction under applicable state, local, foreign and other tax laws. A
shareholder who accepts the Offer, or who exchanges shares of Common Stock in
the Plan of Acquisition or upon exercise of Dissenters' Rights, will generally
recognize gain or loss for federal income tax purposes in an amount equal to the
difference, if any, between the amount of cash received and his adjusted tax
basis for the shares of Common Stock sold or exchanged pursuant to the Offer,
the Plan of Acquisition or the exercise of Dissenters' Rights, as the case may
be. Such gain or loss will be capital gain or loss, provided the shares of
Common Stock are held as capital assets, and any such capital gain or loss will
be long term if, as of the date of sale or exchange, the shares of Common Stock
were held for more than one year or will be short term if, as of such date, the
shares of Common Stock were held for one year or less.


                                       47
<PAGE>
           The foregoing discussion may not be applicable to certain types of
shareholders, including shareholders who acquired shares of Common Stock
pursuant to the exercise of options or otherwise as compensation, individuals
who are not citizens or residents of the United States and foreign corporations
who are engaged in a United States trade or business or have certain other
connections with the United States, shares of Common Stock held as part of a
straddle, hedge, constructive sale, conversion transaction, synthetic security
or other integrated investment, or entities that are otherwise subject to
special tax treatment under the Internal Revenue Code of 1986, as amended (such
as dealers in securities or foreign currency, traders in securities that elect
to apply mark-to-market method of accounting, insurance companies, regulated
investment companies, tax-exempt entities, financial institutions, foreign
persons and investors in pass-through entities).

           THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR
GENERAL INFORMATION ONLY. EACH SHAREHOLDER IS URGED TO CONSULT HIS TAX ADVISOR
WITH RESPECT TO THE TAX CONSEQUENCES TO HIM OF THE OFFER, INCLUDING WITH RESPECT
TO FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES.

           6. PRICE RANGE OF THE SHARES; DIVIDENDS. The shares of Common Stock
are listed and traded principally on the OTC BB under the symbol "ALCI.OB." The
following table sets forth, for the periods indicated, the reported high and low
sale prices for the shares of Common Stock on the OTC BB, all as reported in
published financial sources.

FISCAL YEAR ENDING DECEMBER 31, 2003             HIGH                 LOW
------------------------------------             ----                 ---

First Quarter                                    $2.650               $0.190
Second Quarter (through April 24, 2003)          $2.710               $2.710

FISCAL YEAR ENDING DECEMBER 31, 2002             HIGH                 LOW
------------------------------------             ----                 ---

Fourth Quarter                                   $0.650               $0.150
Third Quarter                                     0.640                0.300
Second Quarter                                    0.360                0.320
First Quarter                                     0.920                0.310


FISCAL YEAR ENDING DECEMBER 31, 2001             HIGH                 LOW
------------------------------------             ----                 ---

Fourth Quarter                                   $1.500               $0.200
Third Quarter                                     2.000                1.000
Second Quarter                                    4.950                1.800
First Quarter                                     7.125                4.875



                                       48
<PAGE>
FISCAL YEAR ENDING DECEMBER 31, 2000             HIGH                 LOW
------------------------------------             ----                 ---

Fourth Quarter                                  $ 8.000               $6.000
Third Quarter                                    11.500                8.000
Second Quarter                                    9.250                6.875
First Quarter                                     9.750                5.875

           On January 15, 2003, the last full day before Leucadia made a
proposal to Allcity with respect to a possible tender offer for the shares of
Common Stock not already owned by Leucadia and its affiliates, the reported
closing price on the OTC BB for the shares of Common Stock was $0.19 per Share.
SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES OF
COMMON STOCK.

           Allcity paid a cash dividend of $0.335 per share on August 14, 2002
to shareholders of record on the close of business on August 5, 2002. Prior to
such dividend, Allcity did not pay any dividends on the Common Stock since 1975.
The NYSIL prohibits New York domestic stock property/casualty insurance
companies from paying stockholder dividends except out of earned surplus.
Without the prior approval of the NYID, no New York domestic stock
property/casualty insurer may declare or distribute any dividend to shareholders
which, together with any such dividends declared or distributed by it during the
preceding twelve months, exceeds the lesser of (1) 10% of the insurer's
statutory surplus as shown in its last statutory annual statement or (2) 100% of
the insurer's adjusted net investment income during such period.

           7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; EXCHANGE ACT
REGISTRATION .

EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES

           The purchase of shares of Common Stock pursuant to the Offer will
reduce the number of shares of Common Stock that might otherwise trade publicly
and could adversely affect the liquidity and market value of the remaining
shares of Common Stock held by the public. The purchase of shares of Common
Stock pursuant to the Offer can also be expected to reduce the number of holders
of shares of Common Stock.

EXCHANGE ACT REGISTRATION

           The shares of Common Stock are currently registered under the
Exchange Act. The purchase of the shares of Common Stock pursuant to the Offer
may result in the shares of Common Stock becoming eligible for deregistration
under the Exchange Act. Registration of the shares of Common Stock may be
terminated upon application by Allcity to the Commission if the shares of Common
Stock which are not listed on a "national securities exchange" are held by fewer
than 300 record holders. Termination of registration of the shares of Common
Stock under the Exchange Act would substantially reduce the information required
to be furnished by Allcity to its shareholders and the Commission and would make
certain provisions of the Exchange Act, such as the short-swing profit recovery
provisions of Section 16(b) and the requirements of furnishing a proxy statement


                                       49
<PAGE>
in connection with shareholders' meetings pursuant to Section 14(a), no longer
applicable to Allcity. If the shares of Common Stock are no longer registered
under the Exchange Act, the requirements of Rule 13e-3 under the Exchange Act
with respect to "going private" transactions would no longer be applicable to
Allcity. Furthermore, the ability of "affiliates" of Allcity and persons holding
"restricted securities" of Allcity to dispose of such securities pursuant to
Rule 144 promulgated under the Securities Act of 1933, as amended, may be
impaired or eliminated. If, as a result of the purchase of shares of Common
Stock pursuant to the Offer, Allcity is no longer required to maintain
registration of the shares of Common Stock under the Exchange Act, Leucadia
intends to cause Allcity to apply for termination of such registration. If the
Plan of Acquisition is consummated, Allcity will be privately held and will not
be subject to the reporting requirements of the Exchange Act. See "SPECIAL
FACTORS - 5. PLANS FOR ALLCITY AFTER THE OFFER; CERTAIN EFFECTS OF THE OFFER and
7. THE PLAN OF ACQUISITION AND THE MERGER."

           8. CERTAIN INFORMATION CONCERNING ALLCITY. Allcity is a New York
domestic stock property/casualty insurer. Empire, a property/casualty insurer,
owns approximately 84.58% of the outstanding Common Stock of Allcity. Empire's
common shares are 100% owned and controlled, through subsidiaries, by Leucadia.
Additionally, Leucadia indirectly owns an additional 6.66% of the outstanding
common shares of Allcity. Allcity was incorporated in New York in 1962. Its
principal executive offices are located at 45 Main Street, Brooklyn, NY 11201,
telephone (718) 422-4000.

           Prior to December 31, 2001, the Group also included Empire's
wholly-owned insurance subsidiary Centurion Insurance Company, which was merged
into Empire effective December 31, 2001. Historically, the Group specialized in
commercial and personal property/casualty insurance business primarily in the
New York metropolitan area. The Group offered insurance products for vehicles
(including medallion and radio-controlled livery vehicles), general liability
coverage, property coverage (including mercantile and multi-family residential
real estate) and workers' compensation to commercial accounts and private
passenger automobile and homeowners products to individuals.

           During the past several years, the Group experienced poor
underwriting results and adverse reserve development in all of its lines of
business. During 2001, the Group explored its options for developing a new
business model and strategy. After evaluating these options, the Group announced
in December 2001 that it had determined that it was in the best interest of its
shareholders and policyholders to commence an orderly liquidation of all of its
operations. The Group will only accept business that it is obligated to accept
by contract or pursuant to the NYSIL; it does not engage in any other business
activities except for its claims run-off operations. By the end of 2005, the
Group expects that its voluntary liquidation will be substantially complete, its
premium revenue will be immaterial, its infrastructure and overhead costs will
be substantially reduced, and its remaining insurance operations will be limited
to the administration and settlement of claims arising under insurance policies
covering "long-tail" exposures, principally arising from workers' compensation
and certain liability claims. Given the Group's and Allcity's current financial
condition, the expected costs to be incurred during its claims run-off period,
and the inherent uncertainty over ultimate claims settlement values, no


                                       50
<PAGE>
assurance can be given that Allcity's shareholders will be able to receive any
value at the conclusion of the voluntary liquidation of its operations.

           As of March 31, 2003, the Group was rated "F" (in liquidation) by
A.M. Best Company. Given the Group's decision to voluntarily liquidate all of
its operations, the Best rating is not expected to have any impact on Allcity's
operations. As with all ratings, Best ratings are subject to change at any time.

           Net earned premium revenues of Allcity were $4.2 million, $18.3
million and $30.9 million for the years ended December 31, 2002, 2001 and 2000,
respectively. Allcity's earned premiums declined in all lines of business during
2002 and 2001 as a result of actions announced during late 2000 and the first
quarter of 2001. During the fourth quarter of 2000, the Group announced that it
would no longer issue new private passenger automobile policies. Existing
policies of private passenger automobile insurance will be either sold,
non-renewed or cancelled in accordance with the NYSIL. If the Group's private
passenger automobile book of business is not sold, it is expected that the Group
will continue to renew portions of its private passenger automobile insurance
policies over the next several years in accordance with applicable insurance
laws. In March 2001, the Group announced that, effective immediately, it would
no longer issue any new (as compared to renewal) insurance policies and that it
had filed with the NYID plans for its orderly withdrawal from the New York
insurance marketplace as required by the NYSIL.

           All commercial lines policies have been non-renewed or canceled in
accordance with the NYSIL, or replaced by Tower Insurance Company of New York or
Tower Risk Management (collectively, "Tower") in accordance with that certain
2001 agreement between Tower and the Group for the sale of the Group's renewal
rights in respect of these commercial lines policies (the "Tower Agreement").
Allcity has no renewal obligations for those commercial lines insurance policies
transferred to Tower Insurance Company of New York. The Group will continue to
be responsible for the remaining term of its existing commercial lines policies
and all claims incurred thereunder prior to the expiration of those policies.
Renewal rights for all of the Group's personal lines policies (meaning policies
of homeowners, dwelling, fire, personal insurance coverage and personal umbrella
insurance) were also transferred pursuant to the Tower Agreement. Although the
NYSIL required the Group to offer renewals for these policies for a three-year
policy period, the Tower Agreement obligated Tower Insurance Company of New York
to offer its own policies in replacement of the Group's policies. As a result,
nearly all of the Group's personal lines policies were either renewed through
Tower, not renewed by the policyholder or cancelled by the Group in accordance
with the NYSIL, and the Group has no renewal obligations for personal lines
policies except for certain private passenger automobile insurance policies
which the Group is statutorily prohibited from non-renewing, which policies had
an in-force premium volume of $5.3 million as of December 31, 2002. As indicated
above, the Group's premium volume will continue to decline as the Group
exercises its non-renewal rights under the NYSIL or policyholders choose not to
renew their policies with the Group.

           Allcity's estimate of its losses in respect of (i) the remaining term
of those policies that are being or have been sold or non-renewed at the
expiration of the policy term, and (ii) all other policies which Allcity may be
required to renew under the NYSIL, will be based on its accumulated loss
experience in those lines of insurance as well as industry trends. Allcity


                                       51
<PAGE>
anticipates that its accident year loss ratios for certain of these policies, in
particular private passenger automobile, will remain high, reflecting the
overall poor loss experience sustained by Allcity and the insurance industry in
the past.

                 SELECTED CONSOLIDATED FINANCIAL DATA OF ALLCITY

           The selected financial information of Allcity and its consolidated
subsidiaries set forth below has been excerpted and derived from Allcity's 2002
Annual Report. More comprehensive financial information is included in such
reports (including management's discussion and analysis of results of operations
and financial position) and other documents filed with the Commission and the
NYID. The following financial information is qualified in its entirety by
reference to the 2002 Annual Report and all other such reports and documents
filed with the Commission and all of the financial statements and related notes
contained therein. The 2002 Annual Report and certain other reports may be
examined and copies may be obtained at the offices of the Commission in the
manner set forth below.

<TABLE>
<CAPTION>


                                                              YEAR ENDED DECEMBER 31,
                                                        2002             2001          2000           1999           1998
                                                        ----             ----          ----           ----           ----
                                                     (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<S>                                               <C>             <C>             <C>             <C>
Total Revenues                                        $  8,593        $ 29,728         $ 42,303     $  55,662     $ 92,070

Net (Loss)/Income (a) (b)                             $ (3,748)       $(18,048)        $(30,800)    $ (3,731)     $    504

Basic and Diluted (Loss)/Earnings
Per share:
(Loss)/Income (a)                                     $  (0.53)       $  (2.55)        $  (4.35)     $  (0.53)     $  0.07
Dividends paid per share                              $  0.335               -                -             -            -



                                                                             AT  DECEMBER 31,
                                             -------------------------------------------------------------------------------
                                             2002            2001          2000             1999             1998
                                             ----            ----          ----             ----             ----
                                                              (IN THOUSANDS)

    Total assets                          $ 208,465       $302,240       $372,284        $490,520         $605,704
Invested assets                              81,693        129,639        163,873         205,246          234,039

    Surplus note:
   Face value                                 7,000          7,000          7,000            7,000           7,000
  Accrued  interest   (c)                       249            114          9,486            8,851           8,300
    Common shareholders'
      equity (b) (d)                         19,718         25,904         43,791           71,716          78,200




                                       52
<PAGE>
                                                                FOR THE YEARS ENDED DECEMBER 31,
                                                    -----------------------------------------------------------------
                                                      2002             2001            2000       1999           1998
                                                      ----             ----            ----       ----           ----

GAAP Combined Ratio(e)                                296.8%         261.7%          193.1%        139.9%       129.4%
    SAP Combined Ratio (e)                            353.4%         304.4%          192.3%        145.2%       134.4%
    Industry SAP Combined
      Ratio (f)                                        N/A           115.9%          110.1%        107.8%       106.0%
    Premium to Surplus
      Ratio (g)                                       0.1x             0.3x            0.5x          0.5x         0.8x


(a)  Net (Loss) Income includes net securities gains/(losses), net of applicable
     tax (in thousands) of $1,408, $1,870, $(213), $(1,084) and $3,951 for the
     years ended December 31, 2002, 2001, 2000, 1999 and 1998, respectively.

(b)  The following is a reconciliation of net loss and shareholders' equity and
     surplus as reported on a statutory basis ("SAP") to net loss and common
     shareholders' equity as determined in conformity with GAAP (in thousands):

                                                       YEARS ENDED DECEMBER 31,
                                                       ------------------------------------
 " " " " " " " " " " " " ""                            2002            2001           2000           1999            1998
                                                       ----            ----           ----           ----            ----

Statutory net loss                                     $(2,619)      $(25,171)   $(16,694)         (4,174)            (50)
Add (deduct):
  Change in deferred policy acquisition costs               --         (3,035)       (380)         (1,950)         (1,714)
  Change in allowances for doubtful accounts               121          1,200          42               5            (256)
  Policyholders' dividends                                  --             30          36             234              90
  Capitalized systems development costs                   (825)        (1,100)       (696)            582           1,440
  Other postretirement benefits                            (37)           (46)        (41)            253             210
  Current tax (expense) benefit                             (1)            (1)        338            (688)            688
  Deferred tax expense                                      --             --     (13,198)          2,542          (1,301)
  Interest on surplus note                                (136)         9,372        (634)           (551)           (591)
  Pension plan curtailment gain                              --            --           --             --           1,964
  Other                                                    (251)          703         427              16              24
                                                          ------        ------      -------
                       GAAP Net (Loss) or Gain          $(3,748)     $(18,048)    $(30,800)       $(3,731)          $ 504
                                                        ========       =======      =======         ======          =======



                                                           YEARS ENDED DECEMBER 31,
                                                           -------------------------------------
 " " " " " " " " " " " " " "`                               2002            2001            2000            1999            1998
                                                            ----            ----            ----            ----            ----

Statutory Shareholders' Equity and Surplus            $ 24,943           $29,013          53,707          69,422           72,701
 Add (deduct):
  Deferred policy acquisition costs                         --                --           3,035           3,415            5,365
  Non-admitted premiums receivable,
    less allowance for doubtful accounts                    87               588             250             907            1,919
  Capitalized systems development costs                     --               825           1,926           2,622            2,040
  Provision for unauthorized reinsurance                   155               110             110             110              205
  Policy holder dividends                                   --                --             (30)            (66)            (300)
  Current tax payable                                       --                --              --            (338)             350
  Deferred tax benefit                                      --                --              --          14,438           10,413
  Other postretirement benefits                           (128)              (91)            (45)             (4)            (257)
  Net unrealized appr/(depr) on investments                665               303             196          (3,800)             515
  Surplus note                                          (7,249)           (7,114)        (16,486)        (15,851)         (15,300)
  Other                                                  1,245             2,270           1,128             861              549
                                                         ------           ------           -----             ---              ---
                           GAAP Shareholders' Equity    $19,718          $25,904         $43,791         $71,716          $78,200
                                                         ======           ======         =======         =======           ======

</TABLE>


                                       53
<PAGE>
(c)  Effective .January 1, 1980, Allcity issued a surplus note to Empire in the
     principal amount of $7.0 million. During 2002 and 2001, with the approval
     of the Superintendent of Insurance of the State of New York, Allcity paid
     Empire $0.2 million and $9.9 million, respectively, of interest that had
     been accrued on the surplus note through March 31, 2002 and September 30,
     2001, respectively.

(d)  Includes unrealized appreciation of approximately $0.7 million in 2002,
     $0.7 million in 2001, $0.6 million in 2000 and $0.5 million in 1998 and
     unrealized depreciation of approximately $2.3 million in 1999, all net of
     tax, on investments classified as available for sale.

(e)  For all years presented, the difference between the GAAP Combined Ratio and
     the SAP Combined Ratio is affected by the accounting for certain costs,
     which are treated differently under SAP and GAAP. In 2002 and 2001, this
     difference was more pronounced due to Allcity's net premiums written
     declining at a rate faster than the decline in earned premiums. For 1998,
     the difference in the accounting treatment for curtailment gains relating
     to the defined benefit pension plans was the principal reason for the
     difference between the GAAP Combined Ratio and the SAP Combined Ratio.

(f)  Source: Best's Aggregates & Averages, Property/Casualty, 2002 Edition.
     Industry Combined Ratios may not be comparable as a result of, among other
     things, differences in Allcity's geographic concentration and limited mix
     of property and casualty insurance products.

(g)   Premium to Surplus Ratio was calculated by dividing annual statutory net
      premiums written by statutory surplus at the end of the year.

           Allcity is subject to the information and reporting requirements of
the Exchange Act and in accordance therewith is required to file periodic
reports, proxy statements and other information with the Commission relating to
its business, financial condition and other matters. Certain information, as of
particular dates, concerning Allcity's directors and certain officers (including
their remuneration), the principal holders of Allcity's securities, any material
interests of such persons in transactions with Allcity and certain other matters
is required to be disclosed in proxy statements and annual reports distributed
to Allcity's shareholders and filed with the Commission. Such reports, proxy
statements and other information may be inspected and copied at the Commission's
public reference facilities at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and copies may be obtained by mail at prescribed
rates, from the principal office of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission also maintains a website at
http://www.sec.com that contains reports, proxy statements and other information
relating to Allcity which have been filed electronically via the EDGAR system.

           9. CERTAIN INFORMATION CONCERNING LEUCADIA AND EMPIRE. The principal
executive offices of Leucadia are located at 315 Park Avenue South, New York, NY
10010, telephone (212) 460-1900. Leucadia is a diversified holding company
engaged in a variety of businesses, including telecommunications, banking and
lending, manufacturing, real estate activities, winery operations, and property
and casualty reinsurance, principally in markets in the United States, and
development of a copper mine in Spain. Leucadia also currently has equity
interests of more than 5% in the following domestic public companies: AmeriKing,
Inc. (6.8%), Carmike Cinemas, Inc. (11.1%), GFSI Holdings, Inc. (6.9%), HomeFed
Corporation (30.3%), Jackson Products, Inc. (8.8%), Jordan Industries, Inc.
(10.1%), Parkervision, Inc. (10.2%), The FINOVA Group, Inc. (25%) (through its
interest in a joint venture) and WilTel Communications Group, Inc. (47.4%).


                                       54
<PAGE>
           Empire was incorporated in February 1925 under the laws of the State
of New York. Empire's insurance operations consist of commercial and personal
property/casualty insurance primarily in the New York metropolitan area
conducted through Empire and Allcity and combined pursuant to the pooling
agreement that was approved by the NYID. In December 2001, Leucadia caused the
Group to commence an orderly, voluntary liquidation of the Group and has
classified the Group as a discontinued operation.

           The name, business address, and present principal occupation or
employment and material occupations, positions, offices or employments for the
past five years of each of the directors and executive officers of Leucadia and
Empire are set forth in Schedule I of this Offer to Purchase.

           Leucadia is subject to the information and reporting requirements of
the Exchange Act, and, accordingly, files reports or other information with the
Commission relating to its business, financial condition and other matters.

           Except as set forth elsewhere in this Offer to Purchase: (i) None of
Leucadia nor, to the best knowledge of Leucadia, any of the persons listed in
Schedule I hereto or any associate or majority-owned subsidiary of Leucadia or
any of the persons so listed, beneficially owns or has a right to acquire any
shares of Common Stock or any other equity securities of Allcity; (ii) none of
Leucadia nor, to the knowledge of Leucadia, any of the persons or entities
referred to in clause (i) above or any of their executive officers, directors or
subsidiaries has effected any transaction in the shares of Common Stock or any
other equity securities of Allcity during the past 60 days; (iii) none of
Leucadia nor, to the knowledge of Leucadia, any of the persons listed in
Schedule I hereto, has any contract, arrangement, understanding or relationship
with any other person with respect to any securities of Allcity, including, but
not limited to, the transfer or voting thereof, joint ventures, loan or option
arrangements, puts or calls, guarantees of loans, guarantees against loss or the
giving or withholding of proxies, consents or authorizations; (iv) except as set
forth below or as described in "SPECIAL FACTORS - 11. RELATED PARTY
TRANSACTIONS" above, since April 29, 2001, there have been no transactions which
would require reporting under the rules and regulations of the Commission
between any of Leucadia or any of its respective subsidiaries or, to the best
knowledge of Leucadia, any of the persons listed in Schedule I hereto, on the
one hand, and Allcity or any of its executive officers, directors or affiliates,
on the other hand; and (v) except as described in "SPECIAL FACTORS - 1.
BACKGROUND OF THE OFFER" above, since April 29, 2001 there have been no
contracts, negotiations or transactions between any of Leucadia or any of their
respective subsidiaries or, to the best knowledge of Leucadia, any of the
persons listed in Schedule I hereto, on the one hand, and Allcity or its
subsidiaries or affiliates, on the other hand, concerning a merger,
consolidation or acquisition, tender offer or other acquisition of securities,
an election of directors or a sale or other transfer of a material amount of
assets of Allcity. See "SPECIAL FACTORS - 10. TRANSACTIONS AND ARRANGEMENTS
CONCERNING THE SHARES."


                                       55
<PAGE>
           10. SOURCE AND AMOUNT OF FUNDS. The total amount of funds required by
Leucadia to consummate the Offer and to pay related fees and expenses is
estimated to be approximately $2.3 million. Leucadia has the funds required to
consummate the Offer in cash and other liquid assets.


           11. CERTAIN CONDITIONS TO THE OFFER. Notwithstanding any other
provision of the Offer, Leucadia shall not be required to accept for payment or,
subject to any applicable rules and regulations of the Commission, including
Rule 14e-1(c) and Rule 13e-4(f) under the Exchange Act (relating to Leucadia's
obligation to pay for or return tendered shares of Common Stock promptly after
termination or withdrawal of the Offer), pay for, and may delay the acceptance
for payment of or, subject to the restriction referred to above, the payment
for, any tendered shares of Common Stock, and may amend the Offer or terminate
the Offer and not accept for payment any tendered shares of Common Stock.
Notwithstanding any other provisions of the Offer, or any extension of the
Offer, Leucadia will not be required to accept for purchase any shares of Common
Stock if any of the following conditions have occurred or exists or have not
been satisfied or waived before or as of the expiration of the Offer:


           (a) at least 265,886 shares of Common Stock are validly tendered and
not properly withdrawn prior to the expiration of the Offer and are purchased by
Leucadia;

           (b) any action or proceeding shall have been instituted or threatened
in any court or by or before any governmental agency or body with respect to the
Offer which, in Leucadia's judgment, would reasonably be expected to impair the
ability of Leucadia to proceed with the Offer;

           (c) any law, statute, rule or regulation shall have been adopted or
enacted which, in Leucadia's judgment, would reasonably be expected to impair
the ability of Leucadia to proceed with the Offer;

           (d) a banking moratorium shall have been declared by United States
federal or New York State authorities which, in Leucadia's judgment, would
reasonably be expected to impair the ability of Leucadia to proceed with the
Offer;

           (e) trading on the New York Stock Exchange or generally in the United
States over-the-counter market shall have been suspended by order of the
Commission or any other governmental authority which, in Leucadia's judgment,
would reasonably be expected to impair the ability of Leucadia to proceed with
the Offer; or

           (f) any governmental approval has not been obtained, which approval
Leucadia shall, in its sole discretion, deem necessary for the consummation of
the Offer as contemplated hereby.


           The foregoing conditions are for the sole benefit of Leucadia and may
be asserted by it regardless of the circumstances giving rise to such conditions
or may be waived by Leucadia, in whole or in part at any time or from time to
time before or as of the expiration of the Offer in the sole discretion of
Leucadia. The failure by Leucadia at any time to exercise any of the foregoing
rights will not be deemed a waiver of any right, the waiver of such right with
respect to any particular facts or circumstances shall not be deemed a waiver


                                       56
<PAGE>
with respect to any other facts or circumstances, and each right will be deemed
an ongoing right which may be asserted at any time and from time to time.


           12. CERTAIN LEGAL MATTERS; REQUIRED REGULATORY APPROVALS. Except as
set forth in this Offer to Purchase, based on its review of publicly available
filings by Allcity with the Commission and other publicly available information
regarding Allcity, Leucadia is not aware of any licenses or regulatory permits
that would be material to the business of Allcity and its subsidiaries, taken as
a whole, and that might be adversely affected by Leucadia's acquisition of
shares of Common Stock (and the indirect acquisition of the stock of Allcity's
subsidiaries) as contemplated herein, or any filings, approvals or other actions
by or with any domestic, foreign or supranational governmental authority or
administrative or regulatory agency that would be required prior to the
acquisition of shares of Common Stock (or the indirect acquisition of the stock
of Allcity's subsidiaries) by Leucadia pursuant to the Offer as contemplated
herein. Should any such approval or other action be required, there can be no
assurance that any such additional approval or action, if needed, would be
obtained without substantial conditions or that adverse consequences might not
result to Allcity's business, or that certain parts of Allcity's or Leucadia's
business might not have to be disposed of or held separate or other substantial
conditions complied with in order to obtain such approval or action or in the
event that such approvals were not obtained or such actions were not taken.
Leucadia's obligation to purchase and pay for shares of Common Stock is subject
to certain conditions, including conditions with respect to governmental
actions. See the "INTRODUCTION" and "THE TENDER OFFER -- 11 CERTAIN CONDITIONS
TO THE OFFER" for a description of certain conditions to the Offer, including
with respect to litigation and governmental actions.

           State Takeover Laws. A number of states (including New York, where
Allcity is incorporated) have adopted takeover laws and regulations which
purport, to varying degrees, to be applicable to attempts to acquire securities
of corporations which are incorporated in such states or which have substantial
assets, security holders, principal executive offices or principal places of
business therein. In Edgar v. MITE Corp., the Supreme Court of the United States
(the "Supreme Court") invalidated on constitutional grounds the Illinois
Business Takeover statute, which, as a matter of state securities law, made
certain corporate acquisitions more difficult. However, in 1987, in CTS Corp v.
Dynamics Corp. of America, the Supreme Court held that the State of Indiana may,
as a matter of corporate law and, in particular, with respect to those aspects
of corporate law concerning corporate governance, constitutionally disqualify a
potential acquiror from voting on the affairs of a target corporation without
the prior approval of the Remaining Shareholders. The state law before the
Supreme Court was by its terms applicable only to corporations that had a
substantial number of shareholders in the state and were incorporated there.

           Leucadia does not believe that the antitakeover laws and regulations
of any state other than the State of New York will by their terms apply to the
Offer, and except as described herein, Leucadia has not attempted to comply with
any state takeover statutes in connection with the Offer. Leucadia reserves the
right to challenge the validity or applicability of any state law allegedly
applicable to the Offer and nothing in this Offer to Purchase nor any action
taken in connection herewith is intended as a waiver of that right. In the event
that any state takeover statute is found applicable to the Offer, Leucadia might
be unable to accept for payment or purchase shares of Common Stock tendered
pursuant to the Offer or be delayed in continuing or consummating the Offer. In


                                       57
<PAGE>
such case, Leucadia may not be obligated to accept for purchase, or pay for, any
shares of Common Stock tendered. See "THE TENDER OFFER -- 11. CERTAIN CONDITIONS
TO THE OFFER".

           Antitrust. Under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations that have been promulgated
thereunder by the Federal Trade Commission (the "FTC"), certain acquisition
transactions may not be consummated until certain information and documentary
material has been furnished for review by the Antitrust Division of the
Department of Justice and the FTC and certain waiting period requirements have
been satisfied. The purchase of shares of Common Stock pursuant to the Offer is
not subject to such requirements because Leucadia currently own in excess of 50%
of Allcity's issued and outstanding Common Stock.

13.        CERTAIN FEES AND EXPENSES.

           Innisfree M&A Incorporated has been retained by Leucadia as
Information Agent in connection with the Offer. The Information Agent may
contact holders of shares of Common Stock by mail, telephone, telex, telegraph
and personal interview and may request brokers, dealers and other nominee
shareholders to forward material relating to the Offer to beneficial owners.
Customary compensation will be paid for all such services in addition to
reimbursement of reasonable out-of-pocket expenses. Leucadia has agreed to
indemnify the Information Agent against certain liabilities and expenses,
including liabilities under the federal securities laws.

           In addition, American Stock Transfer & Trust Company has been
retained as the Depositary. The Depositary has not been retained to make
solicitations or recommendations in its role as Depositary. The Depositary will
receive reasonable and customary compensation for its services in connection
with the Offer, will be reimbursed for its reasonable out-of-pocket expenses and
will be indemnified against certain liabilities and expenses in connection
therewith.

           Except as set forth above, Leucadia will not pay any fees or
commissions to any broker, dealer or other person for soliciting tenders of
shares of Common Stock pursuant to the Offer. Brokers, dealers, commercial banks
and trust companies and other nominees will, upon request, be reimbursed by
Leucadia for customary clerical and mailing expenses incurred by them in
forwarding materials to their customers.

The following is an estimate of expenses incurred or to be incurred in
connection with the Offer.

           Legal Fees                                             $  430,000
           Printing and Mailing                                   $   30,000
           Filing Fees                                            $      138
           Depositary Fees                                        $    7,500
           Information Agent Fees                                 $    5,000
                                          TOTAL                     $472,638

           14. MISCELLANEOUS. The Offer is not being made to (nor will tenders
be accepted from or on behalf of) holders of shares of Common Stock residing in
any jurisdiction in which the making of the Offer or the acceptance thereof
would not be in compliance with the securities, blue sky or other laws of such
jurisdiction. However, Leucadia may, in its discretion, take such action as it


                                       58
<PAGE>
may deem necessary to make the Offer in any jurisdiction and extend the Offer to
holders of shares of Common Stock in such jurisdiction.

           In any jurisdiction where the securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the Offer will be
deemed to be made on behalf of Leucadia by one or more registered brokers or
dealers that are licensed under the laws of such jurisdiction.

           Leucadia has filed with the Commission a Tender Offer Statement on
Schedule TO, together with exhibits, pursuant to Regulation M-A under the
Exchange Act, furnishing certain additional information with respect to the
Offer which includes the information required by Schedule 13E-3, and may file
amendments thereto. Such Schedule TO and any amendments thereto, including
exhibits, may be examined and copies may be obtained from the office of the
Commission in the same manner as described in "8. Certain Information Concerning
Allcity" with respect to information concerning Allcity, except that they will
not be available at the regional offices of the Commission.

           No person has been authorized to give any information or to make any
representation on behalf of Leucadia not contained in this Offer to Purchase or
in the Letter of Transmittal and, if given or made, any such information or
representation must not be relied upon as having been authorized. Neither the
delivery of the Offer to Purchase nor any purchase pursuant to the Offer shall,
under any circumstances, create any implication that there has been no change in
the affairs of Leucadia or Allcity since the date as of which information is
furnished or the date of this Offer to Purchase.

                                     LEUCADIA NATIONAL CORPORATION


                                      April 29, 2003,
                                      as amended June 4, 2003




                                       59
<PAGE>
                                   SCHEDULE I

             DIRECTORS AND EXECUTIVE OFFICERS OF LEUCADIA AND EMPIRE

                     Set forth below are the name, business address and present
principal occupation or employment, and material occupations, positions,
offices or employments for the past five years of each director and executive
officer of Leucadia and Empire.

1.         DIRECTORS AND EXECUTIVE OFFICERS OF LEUCADIA
           --------------------------------------------
<TABLE>
<CAPTION>

                                     Present Principal Occupation or Employment;
  Name and Business Address          Material Positions Held During the Past Five Years
  -------------------------          --------------------------------------------------
<S>                               <C>
  Ian M. Cumming                      Chairman of the Board and a Director of Leucadia
  c/o Leucadia National Corporation   since June 1978; Chairman of the Board of The
  529 E. South Temple                 FINOVA Group, Inc. (a middle market lender) since
  Salt Lake City, Utah  84102         August 2001. Director of Skywest, Inc. (a
                                      Utah-based regional air carrier) since June 1986.
                                      Director of MK Gold Company (an international gold
                                      mining company) since June 1995. Director of
                                      HomeFed Corporation (a real estate development
                                      company) since May 1999. Director of Carmike
                                      Cinemas, Inc. (a motion picture exhibitor) since
                                      January 2002. Chairman of WilTel Communications
                                      Group, Inc. since October 2002. Director of Empire
                                      and Allcity since 1988.



  Joseph S. Steinberg                 President of Leucadia since January 1979 and
  c/o Leucadia National Corporation   Director since December 1978. Director of Jordan
  315 Park Avenue South               Industries, Inc. (a public company that owns and
  New York, NY 10010                  manages manufacturing companies) since June 1988.
                                      Director of MK Gold Company since June 1995;
                                      Chairman of HomeFed Corporation since August 1998.
                                      Director of The FINOVA Group, Inc. since August
                                      2001. Director of White Mountains Insurance Group,
                                      Ltd. (a publicly traded insurance company) since
                                      June 2001. Director of WilTel Communications
                                      Group, Inc. since October 2002. Director of the
                                      Empire and Allcity since 1988 and Chairman of the
                                      Board of Allcity since August 1998.

Paul M. Dougan                        Director of Leucadia. Director, President and
c/o Equity Oil Company                Chief Executive Officer of Equity Oil Company (a
10 West 300 South                     company engaged in oil and gas exploration and
Salt Lake City, Utah  84102           production having an office in Salt Lake City,
                                      Utah).


Lawrence D. Glaubinger               Director of Leucadia. Private Investor; President
c/o Lawrence Economic                of Lawrence Economic Consulting Inc., (a
Consulting, Inc.                     management consulting firm). Director of Marisa
P.O. Box 3567 Hallandale Beach,      Christina Inc. Chairman of the Board of Stern &
FL 33008                             Stern Industries, Inc. from November 1977 P.O. Box
                                     3567 through 2000.


                                       60
<PAGE>
                                    Present Principal Occupation or Employment;
Name and Business Address           Material Positions Held During the Past Five Years
-------------------------           --------------------------------------------------
James E. Jordan                      Director of Leucadia. Managing Director of Arnhold
c/o Arnhold and S. Bleichroeder      and S. Bleichroeder Advisors, Inc. (a company
Advisors, Inc.                       engaged in asset management services). Director of
1345 Avenue of the Americas          Empire and Allcity since 1997. Director of First
New York, N.Y.  10105                Eagle family of mutual funds and JZ Equity
                                     Partners Plc., a British investment trust company.


Jesse Clyde Nichols, III              Director of Leucadia. Private investor. President
4945 Glendale Road                    of Crimsco, Inc. From May 1974 through 2000.
Westwood Hills, KS 66205

Thomas E. Mara                        Executive Vice President of Leucadia since May
c/o Leucadia National Corporation     1980 and Treasurer of Leucadia since January 1993.
315 Park Avenue South                 Director of MK Gold since February 2000. Director
New York, NY 10010                    and Chief Executive Officer of The FINOVA Group,
                                      Inc. since September 2002. Director of Empire and
                                      Allcity since 1994.

Joseph A. Orlando                     Vice President and Chief Financial Officer of
c/o Leucadia National Corporation     Leucadia. Director of Empire and Allcity since
315 Park Avenue South                 1998.
New York, NY 10010


Mark Hornstein                        Vice President of Leucadia.
c/o Leucadia National Corporation
315 Park Avenue South
New York, NY 10010

Philip M. Cannella                    Asst. Vice President of Leucadia.
c/o Leucadia National Corporation
315 Park Avenue South
New York, NY 10010

Barbara L. Lowenthal                  Vice President and Comptroller of Leucadia.
c/o Leucadia National Corporation
315 Park Avenue South
New York, NY 10010




                                       61
<PAGE>
H. E. Scruggs                           Vice President of Leucadia since August
c/o Leucadia National Corporation       2002 as well as from March 2000 until
315 Park Avenue South                   December 2001. Senior Vice President of
New York, NY 10010                      WilTel Communications Group, Inc.
                                        President, Chief Executive Officer and
                                        Director of Empire and Allcity since
                                        September 2000. Chairman of American
                                        Investment Bank, another Leucadia
                                        subsidiary, since 1997. Director of MK
                                        Gold (an international mining company)
                                        since March 2001.





Laura E. Ulbrandt                      Secretary of Leucadia.
c/o Leucadia National Corporation
315 Park Avenue South
New York, NY 10010

</TABLE>


2          DIRECTORS AND EXECUTIVE OFFICERS OF EMPIRE.
           -------------------------------------------

           The following table sets forth the name and present principal
occupation or employment, and material occupations, positions, offices or
employments for the past five years, of each director and executive officer of
Empire. The business address of each such person is c/o Empire Insurance
Company, 45 Main Street, Brooklyn, NY 11201.

                                            Present Principal Occupation or
                                            Employment; Material Positions
Name                                        Held During the Past Five Years
-------------------------                   ------------------------------------

Ian M. Cumming                              Director of Empire and Allcity since
                                            1988. Chairman of the Board and a
                                            Director of Leucadia since June
                                            1978; Chairman of the Board of The
                                            FINOVA Group, Inc. (a middle market
                                            lender) since August 2001. Director
                                            of Skywest, Inc. (a Utah-based
                                            regional air carrier) since June
                                            1986. Director of MK Gold Company
                                            (an international gold mining
                                            company) since June 1995. Director
                                            of HomeFed Corporation (a real
                                            estate development company) since
                                            May 1999. Director of Carmike
                                            Cinemas, Inc. (a motion picture
                                            exhibitor) since January 2002.
                                            Chairman of WilTel Communications
                                            Group, Inc. since October 2002.

Joseph S. Steinberg                         Director of Empire and Allcity since
                                            1988 and Chairman of the Board of
                                            Allcity since August, 1998.
                                            President of Leucadia since January
                                            1979 and Director since December
                                            1978. Director of Jordan Industries,
                                            Inc. (a public company that owns and
                                            manages manufacturing companies)
                                            since June 1988. Director of MK Gold
                                            Company since June 1995; Chairman of
                                            HomeFed Corporation since August
                                            1998. Director of The FINOVA Group,
                                            Inc. since August 2001. Director of
                                            White Mountains Insurance Group,
                                            Ltd. (a publicly traded insurance
                                            company) since June 2001. Director
                                            of WilTel Communications Group, Inc.
                                            since October 2002.

Thomas E. Mara                              Director of Empire and Allcity since
                                            1994. Executive Vice President of
                                            Leucadia since May 1980 and
                                            Treasurer of Leucadia since January
                                            1993. Director of MK Gold since
                                            February 2000. Director and Chief
                                            Executive Officer of The FINOVA
                                            Group, Inc. since September 2002.



                                       62
<PAGE>
James E. Jordan                             Director of Empire and Allcity since
                                            1997. Director of Leucadia. Managing
                                            Director of Arnhold and S.
                                            Bleichroeder Advisors, Inc. (a
                                            company engaged in asset management
                                            services). Director of First Eagle
                                            family of mutual funds and JZ Equity
                                            Partners Plc., a British investment
                                            trust company.

Joseph A. Orlando                           Director of Empire and Allcity since
                                            1998. Vice President and Chief
                                            Financial Officer of Leucadia since
                                            1996.

H.E. Scruggs                                Vice President of Leucadia since
                                            August 2002 as well as from March
                                            2000 until December 2001. Senior
                                            Vice President of WilTel
                                            Communications Group, Inc.
                                            President, Chief Executive Officer
                                            and Director of Empire and Allcity
                                            since September 2000. Chairman of
                                            American Investment Bank, another
                                            Leucadia subsidiary, since 1997.
                                            Director of MK Gold (an
                                            international mining company) since
                                            March 2001.

Rocco J. Nittoli                            Director of Empire and Allcity since
                                            March 2001. Chief Operating Officer
                                            of Empire and Allcity since February
                                            2001. Previously, Senior Vice
                                            President & Chief Information
                                            Officer of Empire and Allcity from
                                            January 2000 to February 2001, Vice
                                            President and Controller of the
                                            Empire and Allcity from June 1999 to
                                            January 2000; Controller from
                                            September 1997 to June 1999.

Christopher J. Gruttemeyer                  Director of Empire and Allcity since
                                            March 2001. Vice President of Empire
                                            and Allcity since December 2000.
                                            Previously, Assistant Vice President
                                            of the Empire and Allcity from
                                            September 1999 to December 2000;
                                            Senior Financial Analyst of Empire
                                            and Allcity from December 1996 to
                                            September 1999.

Martin  B. Bernstein                        Director of Empire and Allcity since
                                            1988. President and Director of
                                            Ponderosa Fibres of America, Inc. (a
                                            pulp manufacturer for paper
                                            producers) from 1988 through July
                                            2002. Chairman, Bedford Capital and
                                            private investor since July 2002.

Louis  V. Siracusano                        Director of Empire and Allcity since
                                            1985. Partner with McKenna,
                                            Fehringer, Siracusano & Chianese (a
                                            law firm) since 1976.

Lucius Theus                                Director of Empire and Allcity since
                                            1980. President, The U.S. Associates
                                            (consultants in civic affairs, human
                                            resources and business management)
                                            since 1989. Principal and Chief
                                            Operating Officer of The Wellness
                                            Group, Inc. (a provider of health
                                            promotion programs) since 1989.

Harry H. Wise                               Director of Empire and Allcity since
                                            1988. President and Director, H.W.
                                            Associates, Inc. (an investment
                                            advisory firm).

Daniel G. Stewart                           Director of Empire and Allcity since
                                            1980. Independent consulting actuary
                                            since November 1991.

Doug Whitenack                              Chief Financial Officer of Empire
                                            and Allcity since December 2002.
                                            Vice President and Controller of
                                            Empire and Allcity from January 2000
                                            to December 2002. Assistant Vice
                                            President of Empire and Allcity from
                                            September 1997 to January 2000.

Edward Hayes                                Senior Vice President, Claims for
                                            Allcity and Empire since November
                                            1999. Previously, attorney with
                                            Hawkins, Feretic, Daly, Maroney &
                                            Hayes (a law firm) from May 1997 to
                                            November 1999.


                                       63
<PAGE>
                                     ANNEX A

                      OPINION OF SANDERS MORRIS HARRIS INC.


March 31, 2003

The Special Committee                                  G. CLYDE BUCK
Allcity Insurance Company                              SENIOR VICE PRESIDENT &
45 Main Street, 3rd Floor                              MANAGING DIRECTOR
Brooklyn, NY 11201

Gentlemen:

           You have advised Sanders Morris Harris ("SMH") that Leucadia National
Corporation ("Leucadia") has proposed a tender offer by Leucadia to acquire the
publicly held outstanding common stock of Allcity Insurance Company ("Allcity")
(approximately 9% of the total shares outstanding) at a price of approximately
$2.75 per share in cash (the "Transaction"). The Special Committee has retained
SMH as its financial advisor, which assignment includes SMH issuing a written
opinion ("Opinion") as to the fairness, from a financial point of view, to the
public shareholders of Allcity of the financial terms of the proposed
Transaction.

           SMH, as part of its investment banking business, is frequently
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements, and valuations for estate,
corporate and other purposes.

           In arriving at our Opinion, we have, among other things:

          1.   Reviewed Allcity's publicly available audited annual and
               unaudited quarterly GAAP financial statements from December 31,
               1998 to December 31, 2002;

          2.   Reviewed Allcity's annual and quarterly statutory financial
               statements from December 31, 1998 to December 31, 2002;


                                      A-1
<PAGE>
          3.   Reviewed Allcity's recent press releases dated January 15, 2003,
               November 14, 2002, August 14, 2002, July 25, 2002, May 13, 2002,
               April 1, 2002, November 14, 2001, August 14, 2001, May 15, 2001,
               and April 2, 2001;


          4.   Reviewed Empire Insurance Group's "Discussion Memorandum" dated
               July 1, 2002;


          5.   Reviewed Empire Insurance Group's "Leucadia Operations Meeting"
               Presentation dated December 11, 2001;

          6.   Reviewed Empire Insurance Group's "Board of Directors Meeting
               Financial and Operations Summary" Presentation dated December 17,
               2001;

          7.   Reviewed Empire Insurance Group's "Operating Plan During Runoff"
               Presentation dated December 2001;

          8.   Reviewed Empire Insurance Group's "Board of Directors Meeting"
               Presentations dated March, August, September and December 2002
               and March 2003;

          9.   Reviewed and discussed with management the unaudited preliminary
               December 31, 2002 balance sheet and adjusted net book value of
               the Company and the related assumptions;

          10.  Reviewed the Company's budgeted statement of income for the
               Company's projected runoff period, dated February 13, 2003;

          11.  Reviewed a memo from the Company's actuary, David Christhilf,
               regarding loss and loss adjustment expense reserves as of
               December 31, 2002, dated February 13, 2003;

          12.  Discussed with management of Allcity the outlook for future
               operating results, the assets and liabilities of Allcity,
               materials in the foregoing documents, and other matters we
               considered relevant to our inquiry; and

          13.  Considered such other information, financial studies, analyses
               and investigations, as we deemed relevant under the
               circumstances.


                                      A-2
<PAGE>
           In our review and in arriving at our Opinion, we have, with your
permission, (i) not independently verified any of the foregoing information and
have relied upon its being complete and accurate in all material respects, (ii)
with respect to any estimates, evaluations and projections furnished to us,
assumed that such information was reasonably prepared and based upon the best
currently available information and good faith judgement of the person
furnishing the same, and (iii) not made an independent evaluation or appraisal
of specific assets or liabilities of Allcity.

We are not experts in the evaluation of insurance reserves. In rendering our
Opinion, we have relied upon the reserve information furnished by Allcity.

Our Opinion is based upon market, economic and other conditions as they exist
and can be evaluated as of the date of this letter. SMH consents to the
inclusion of the text of this Opinion in any notice or appropriate disclosure to
the public shareholders of Allcity and in any filing Allcity is required by law
to make.

           Based upon and subject to the foregoing, it is our Opinion that, as
of the date hereof, the proposed Transaction is fair to the public shareholders
of Allcity from a financial point of view.

                                            SANDERS MORRIS HARRIS, INC.

                                            By: /s/ G. Clyde Buck
                                                --------------------------------
                                                G. Clyde Buck
                                                Managing Director


                                      A-3
<PAGE>
                                     ANNEX B

                 SECTION 623 OF THE BUSINESS CORPORATION LAW OF
                              THE STATE OF NEW YORK

           (a) A shareholder intending to enforce his right under a section of
this chapter to receive payment for his shares if the proposed corporate action
referred to therein is taken shall file with the corporation, before the meeting
of shareholders at which the action is submitted to a vote, or at such meeting
but before the vote, written objection to the action. The objection shall
include a notice of his election to dissent, his name and residence address, the
number and classes of shares as to which he dissents and a demand for payment of
the fair value of his shares if the action is taken. Such objection is not
required from any shareholder to whom the corporation did not give notice of
such meeting in accordance with this chapter or where the proposed action is
authorized by written consent of shareholders without a meeting.

           (b) Within ten days after the shareholders' authorization date, which
term as used in this section means the date on which the shareholders' vote
authorizing such action was taken, or the date on which such consent without a
meeting was obtained from the requisite shareholders, the corporation shall give
written notice of such authorization or consent by registered mail to each
shareholder who filed written objection or from whom written objection was not
required, excepting any shareholder who voted for or consented in writing to the
proposed action and who thereby is deemed to have elected not to enforce his
right to receive payment for his shares.

           (c) Within twenty days after the giving of notice to him, any
shareholder from whom written objection was not required and who elects to
dissent shall file with the corporation a written notice of such election,
stating his name and residence address, the number and classes of shares as to
which he dissents and a demand for payment of the fair value of his shares. Any
shareholder who elects to dissent from a merger under section 905 (Merger of
subsidiary corporation) or paragraph (c) of section 907 (Merger or consolidation
of domestic and foreign corporations) or from a share exchange under paragraph
(g) of section 913 (Share exchanges) shall file a written notice of such
election to dissent within twenty days after the giving to him of a copy of the
plan of merger or exchange or an outline of the material features thereof under
section 905 or 913.

           (d) A shareholder may not dissent as to less than all of the shares,
as to which he has a right to dissent, held by him of record, that he owns
beneficially. A nominee or fiduciary may not dissent on behalf of any beneficial
owner as to less than all of the shares of such owner, as to which such nominee
or fiduciary has a right to dissent, held of record by such nominee or
fiduciary.

           (e) Upon consummation of the corporate action, the shareholder shall
cease to have any of the rights of a shareholder except the right to be paid the
fair value of his shares and any other rights under this section. A notice of


                                      B-1
<PAGE>
election may be withdrawn by the shareholder at any time prior to his acceptance
in writing of an offer made by the corporation, as provided in paragraph (g),
but in no case later than sixty days from the date of consummation of the
corporate action except that if the corporation fails to make a timely offer, as
provided in paragraph (g), the time for withdrawing a notice of election shall
be extended until sixty days from the date an offer is made. Upon expiration of
such time, withdrawal of a notice of election shall require the written consent
of the corporation. In order to be effective, withdrawal of a notice of election
must be accompanied by the return to the corporation of any advance payment made
to the shareholder as provided in paragraph (g). If a notice of election is
withdrawn, or the corporate action is rescinded, or a court shall determine that
the shareholder is not entitled to receive payment for his shares, or the
shareholder shall otherwise lose his dissenters` rights, he shall not have the
right to receive payment for his shares and he shall be reinstated to all his
rights as a shareholder as of the consummation of the corporate action,
including any intervening preemptive rights and the right to payment of any
intervening dividend or other distribution or, if any such rights have expired
or any such dividend or distribution other than in cash has been completed, in
lieu thereof, at the election of the corporation, the fair value thereof in cash
as determined by the board as of the time of such expiration or completion, but
without prejudice otherwise to any corporate proceedings that may have been
taken in the interim.

           (f) At the time of filing the notice of election to dissent or within
one month thereafter the shareholder of shares represented by certificates shall
submit the certificates representing his shares to the corporation, or to its
transfer agent, which shall forthwith note conspicuously thereon that a notice
of election has been filed and shall return the certificates to the shareholder
or other person who submitted them on his behalf. Any shareholder of shares
represented by certificates who fails to submit his certificates for such
notation as herein specified shall, at the option of the corporation exercised
by written notice to him within forty-five days from the date of filing of such
notice of election to dissent, lose his dissenter's rights unless a court, for
good cause shown, shall otherwise direct. Upon transfer of a certificate bearing
such notation, each new certificate issued therefor shall bear a similar
notation together with the name of the original dissenting holder of the shares
and a transferee shall acquire no rights in the corporation except those which
the original dissenting shareholder had at the time of transfer.

           (g) Within fifteen days after the expiration of the period within
which shareholders may file their notices of election to dissent, or within
fifteen days after the proposed corporate action is consummated, whichever is
later (but in no case later than ninety days from the shareholders`
authorization date), the corporation or, in the case of a merger or
consolidation, the surviving or new corporation, shall make a written offer by
registered mail to each shareholder who has filed such notice of election to pay
for his shares at a specified price which the corporation considers to be their
fair value. Such offer shall be accompanied by a statement setting forth the
aggregate number of shares with respect to which notices of election to dissent
have been received and the aggregate number of holders of such shares. If the
corporate action has been consummated, such offer shall also be accompanied by


                                      B-2
<PAGE>
(1) advance payment to each such shareholder who has submitted the certificates
representing his shares to the corporation, as provided in paragraph (f), of an
amount equal to eighty percent of the amount of such offer, or (2) as to each
shareholder who has not yet submitted his certificates a statement that advance
payment to him of an amount equal to eighty percent of the amount of such offer
will be made by the corporation promptly upon submission of his certificates. If
the corporate action has not been consummated at the time of the making of the
offer, such advance payment or statement as to advance payment shall be sent to
each shareholder entitled thereto forthwith upon consummation of the corporate
action. Every advance payment or statement as to advance payment shall include
advice to the shareholder to the effect that acceptance of such payment does not
constitute a waiver of any dissenters' rights. If the corporate action has not
been consummated upon the expiration of the ninety day period after the
shareholders' authorization date, the offer may be conditioned upon the
consummation of such action. Such offer shall be made at the same price per
share to all dissenting shareholders of the same class, or if divided into
series, of the same series and shall be accompanied by a balance sheet of the
corporation whose shares the dissenting shareholder holds as of the latest
available date, which shall not be earlier than twelve months before the making
of such offer, and a profit and loss statement or statements for not less than a
twelve month period ended on the date of such balance sheet or, if the
corporation was not in existence throughout such twelve month period, for the
portion thereof during which it was in existence. Notwithstanding the foregoing,
the corporation shall not be required to furnish a balance sheet or profit and
loss statement or statements to any shareholder to whom such balance sheet or
profit and loss statement or statements were previously furnished, nor if in
connection with obtaining the shareholders' authorization for or consent to the
proposed corporate action the shareholders were furnished with a proxy or
information statement, which included financial statements, pursuant to
Regulation 14A or Regulation 14C of the United States Securities and Exchange
Commission. If within thirty days after the making of such offer, the
corporation making the offer and any shareholder agree upon the price to be paid
for his shares, payment therefor shall be made within sixty days after the
making of such offer or the consummation of the proposed corporate action,
whichever is later, upon the surrender of the certificates for any such shares
represented by certificates.

           (h) The following procedure shall apply if the corporation fails to
make such offer within such period of fifteen days, or if it makes the offer and
any dissenting shareholder or shareholders fail to agree with it within the
period of thirty days thereafter upon the price to be paid for their shares:

          1.   The corporation shall, within twenty days after the expiration of
               whichever is applicable of the two periods last mentioned,
               institute a special proceeding in the supreme court in the
               judicial district in which the office of the corporation is
               located to determine the rights of dissenting shareholders and to
               fix the fair value of their shares. If, in the case of merger or
               consolidation, the surviving or new corporation is a foreign
               corporation without an office in this state, such proceeding


                                      B-3
<PAGE>
               shall be brought in the county where the office of the domestic
               corporation, whose shares are to be valued, was located.

          2.   If the corporation fails to institute such proceeding within such
               period of twenty days, any dissenting shareholder may institute
               such proceeding for the same purpose not later than thirty days
               after the expiration of such twenty day period. If such
               proceeding is not instituted within such thirty day period, all
               dissenter's rights shall be lost unless the supreme court, for
               good cause shown, shall otherwise direct.

          3.   All dissenting shareholders, excepting those who, as provided in
               paragraph (g), have agreed with the corporation upon the price to
               be paid for their shares, shall be made parties to such
               proceeding, which shall have the effect of an action quasi in rem
               against their shares. The corporation shall serve a copy of the
               petition in such proceeding upon each dissenting shareholder who
               is a resident of this state in the manner provided by law for the
               service of a summons, and upon each nonresident dissenting
               shareholder either by registered mail and publication, or in such
               other manner as is permitted by law. The jurisdiction of the
               court shall be plenary and exclusive.

          4.   The court shall determine whether each dissenting shareholder, as
               to whom the corporation requests the court to make such
               determination, is entitled to receive payment for his shares. If
               the corporation does not request any such determination or if the
               court finds that any dissenting shareholder is so entitled, it
               shall proceed to fix the value of the shares, which, for the
               purposes of this section, shall be the fair value as of the close
               of business on the day prior to the shareholders' authorization
               date. In fixing the fair value of the shares, the court shall
               consider the nature of the transaction giving rise to the
               shareholder's right to receive payment for shares and its effects
               on the corporation and its shareholders, the concepts and methods
               then customary in the relevant securities and financial markets
               for determining fair value of shares of a corporation engaging in
               a similar transaction under comparable circumstances and all
               other relevant factors. The court shall determine the fair value
               of the shares without a jury and without referral to an appraiser
               or referee. Upon application by the corporation or by any
               shareholder who is a party to the proceeding, the court may, in
               its discretion, permit pretrial disclosure, including, but not
               limited to, disclosure of any expert's reports relating to the
               fair value of the shares whether or not intended for use at the
               trial in the proceeding and notwithstanding subdivision (d) of
               section 3101 of the civil practice law and rules.



                                      B-4
<PAGE>
          5.   The final order in the proceeding shall be entered against the
               corporation in favor of each dissenting shareholder who is a
               party to the proceeding and is entitled thereto for the value of
               his shares so determined.

          6.   The final order shall include an allowance for interest at such
               rate as the court finds to be equitable, from the date the
               corporate action was consummated to the date of payment. In
               determining the rate of interest, the court shall consider all
               relevant factors, including the rate of interest which the
               corporation would have had to pay to borrow money during the
               pendency of the proceeding. If the court finds that the refusal
               of any shareholder to accept the corporate offer of payment for
               his shares was arbitrary, vexatious or otherwise not in good
               faith, no interest shall be allowed to him.

          7.   Each party to such proceeding shall bear its own costs and
               expenses, including the fees and expenses of its counsel and of
               any experts employed by it. Notwithstanding the foregoing, the
               court may, in its discretion, apportion and assess all or any
               part of the costs, expenses and fees incurred by the corporation
               against any or all of the dissenting shareholders who are parties
               to the proceeding, including any who have withdrawn their notices
               of election as provided in paragraph (e), if the court finds that
               their refusal to accept the corporate offer was arbitrary,
               vexatious or otherwise not in good faith. The court may, in its
               discretion, apportion and assess all or any part of the costs,
               expenses and fees incurred by any or all of the dissenting
               shareholders who are parties to the proceeding against the
               corporation if the court finds any of the following: (A) that the
               fair value of the shares as determined materially exceeds the
               amount which the corporation offered to pay; (B) that no offer or
               required advance payment was made by the corporation; (C) that
               the corporation failed to institute the special proceeding within
               the period specified therefor; or (D) that the action of the
               corporation in complying with its obligations as provided in this
               section was arbitrary, vexatious or otherwise not in good faith.
               In making any determination as provided in clause (A), the court
               may consider the dollar amount or the percentage, or both, by
               which the fair value of the shares as determined exceeds the
               corporate offer.

          8.   Within sixty days after final determination of the proceeding,
               the corporation shall pay to each dissenting shareholder the
               amount found to be due him, upon surrender of the certificates
               for any such shares represented by certificates.

           (i) Shares of Common Stock acquired by the corporation upon the
payment of the agreed value therefor or of the amount due under the final order,
as provided in this section, shall become treasury shares or be cancelled as


                                      B-5
<PAGE>
provided in section 515 (Reacquired shares), except that, in the case of a
merger or consolidation, they may be held and disposed of as the plan of merger
or consolidation may otherwise provide.

           (j) No payment shall be made to a dissenting shareholder under this
section at a time when the corporation is insolvent or when such payment would
make it insolvent. In such event, the dissenting shareholder shall, at his
option:

          1.   Withdraw his notice of election, which shall in such event be
               deemed withdrawn with the written consent of the corporation; or

          2.   Retain his status as a claimant against the corporation and, if
               it is liquidated, be subordinated to the rights of creditors of
               the corporation, but have rights superior to the non-dissenting
               shareholders, and if it is not liquidated, retain his right to be
               paid for his shares, which right the corporation shall be obliged
               to satisfy when the restrictions of this paragraph do not apply.

          3.   The dissenting shareholder shall exercise such option under
               subparagraph (1) or (2) by written notice filed with the
               corporation within thirty days after the corporation has given
               him written notice that payment for his shares cannot be made
               because of the restrictions of this paragraph. If the dissenting
               shareholder fails to exercise such option as provided, the
               corporation shall exercise the option by written notice given to
               him within twenty days after the expiration of such period of
               thirty days.

           (k) The enforcement by a shareholder of his right to receive payment
for his shares in the manner provided herein shall exclude the enforcement by
such shareholder of any other right to which he might otherwise be entitled by
virtue of share ownership, except as provided in paragraph (e), and except that
this section shall not exclude the right of such shareholder to bring or
maintain an appropriate action to obtain relief on the ground that such
corporate action will be or is unlawful or fraudulent as to him.

           (l) Except as otherwise expressly provided in this section, any
notice to be given by a corporation to a shareholder under this section shall be
given in the manner provided in section 605 (Notice of meetings of
shareholders).

           (m) This section shall not apply to foreign corporations except as
provided in subparagraph (e) (2) of section 907 (Merger or consolidation of
domestic and foreign corporations).


                                      B-6
<PAGE>
                                     ANNEX C

                      SECTION 7119 OF THE INSURANCE LAW OF
                              THE STATE OF NEW YORK


           (a) A shareholder of a domestic company, by complying with section
six hundred twenty-three of the business corporation law except as otherwise
provided in subsections (b) and (c) hereof, shall have the right to receive
payment for the fair value of his shares, and such other rights and benefits as
are provided by such section of the business corporation law, in the following
cases:

          (1)  a shareholder entitled to vote who does not assent to the taking
               of any action specified in section seven thousand one hundred two
               of this article; or

          (2)  a shareholder whose shares are acquired pursuant to section seven
               thousand one hundred eighteen of this article.

           (b) A shareholder who elects to dissent from an acquisition proposed
under section seven thousand one hundred eighteen of this article shall, in lieu
of the procedures set forth in paragraphs (a), (b) and (c) of section six
hundred twenty-three of the business corporation law, file a written notice of
his election to dissent with the parent within twenty days after the delivery to
him of either a copy of the plan or a summary thereof pursuant to subsection (e)
of section seven thousand one hundred eighteen of this article.

                     (c) For purposes of this section, the provisions of section
six hundred twenty-three of the business corporation law, other than
paragraphs (i) and (m) thereof, are applicable except that:

          (1)  the references to "this chapter" in paragraph (a) of such section
               of the business corporation law are deemed to refer to this
               article;

          (2)  in the case of shares acquired pursuant to section seven thousand
               one hundred eighteen of this article, the references to
               "shareholders' authorization date" in paragraph (g) of such
               section of the business corporation law are deemed to refer to
               the date of delivery of the plan or a summary thereof as provided
               in subsection (e) of section seven thousand one hundred eighteen
               of this article; and

          (3)  upon payment of the value of the shares of a shareholder who has
               dissented from a merger or consolidation, as provided in
               paragraph (g) or (h) of such section of the business corporation
               law, the shares shall be cancelled.


                                      C-1
<PAGE>
                                    EXHIBIT A

                             JANUARY 15, 2003 LETTER
                     FROM LEUCADIA TO THE SPECIAL COMMITTEE



                          Leucadia National Corporation
                              315 Park Avenue South
                               New York, NY 10010


                                January 15, 2003



BY HAND

Allcity Insurance Company
45 Main Street
Brooklyn, NY 11201
Attn:   Martin Bernstein, Chairman, Special Committee of the Board of Directors

        Re: Potential Tender Offer for Common Stock of Allcity Insurance Company
            --------------------------------------------------------------------

Dear Mr. Bernstein:

           We are pleased to propose the acquisition of all of the outstanding
shares of common stock of Allcity Insurance Company (the "Company") not
beneficially owned by Leucadia National Corporation and its affiliates
("Leucadia") for a cash purchase price of $2.00 per share.

           It is currently contemplated that the acquisition of such shares by
Leucadia would take the form of a tender offer by Leucadia, subject to customary
conditions, as well as enough shares of the Company's common stock being
tendered so that, together with the shares Leucadia currently beneficially owns,
Leucadia would beneficially own at least 95% of the outstanding shares of the
Company's common stock. Promptly following consummation of the tender offer and
subject to the approval of New York Insurance Department, the remaining shares
of the Company's common stock would be acquired by Leucadia's wholly-owned
subsidiary, Empire Insurance Company ("Empire"), at the same cash price pursuant
to a short form merger between Empire and the Company pursuant to Section 7118
of the New York Insurance Law. The transactions contemplated by our proposal
would only be consummated following a favorable recommendation by the Special
Committee to the Company's shareholders. The proposal is not contingent on any
financing conditions.


                                    Ex. A-1
<PAGE>
           We request that the Special Committee of the Board of Directors,
together with its financial and legal advisors, proceed to evaluate the fairness
of this proposal for purposes of the Special Committee making a recommendation
with respect to the proposal. We are prepared to meet with you and your
financial and legal advisers at your convenience to review our proposal at the
earliest possible date.

           Depending on the response of the Special Committee to this proposal,
and other factors deemed relevant by us, we may formulate other plans and/or
make other proposals, and take such actions with respect to our investment in
the Company, as we may determine to be appropriate. We may also amend or
withdraw this proposal at any time at our sole discretion.

           Our proposal is merely an expression of interest and is not intended
to be legally binding in any way. If an offer were to be made, it would be made
in accordance with all applicable securities laws and would involve the filing
of appropriate materials with the Securities and Exchange Commission and the
mailing of appropriate materials to the public shareholders of the Company.

           Please be advised that we intend to disclose this proposal in an
amendment to our Schedule 13D relating to shares of the Company's common stock
currently owned by us, as required by law. We also intend to file this letter
under cover of Schedule TO as a preliminary communication in accordance with
Rule 14d-2(b) under the Securities Exchange Act of 1934, as amended.

           We appreciate your consideration of this proposal and look forward to
your response.

                                              Very truly yours,

                                              Leucadia National Corporation


                                              By: /s/ Joseph A. Orlando
                                                 -------------------------------
                                                 Name: Joseph A. Orlando
                                                 Title: Vice President

cc: Board of Directors of Allcity Insurance Company
    Joseph Bartlett, Esq.
    Counsel to Special Committee





                                    Ex. A-2
<PAGE>
           Facsimile copies of the Letter of Transmittal, properly completed and
duly executed, will be accepted. The Letter of Transmittal, certificates for
shares of Common Stock and Rights and any other required documents should be
sent or delivered by each shareholder of Allcity or his broker, dealer,
commercial bank, trust company or other nominee to the Depositary at one of its
addresses set forth below:

                        THE DEPOSITARY FOR THE OFFER IS:
                     American Stock Transfer & Trust Company
                       59 Maiden Lane, New York, NY 10038
                                 (800) 937-5449

<TABLE>
<C>                                           <C>                                       <C>

               By Mail:                                        By Hand:                             By Overnight Delivery:
American Stock Transfer & Trust Company        American Stock Transfer & Trust Company     American Stock Transfer & Trust Company
  59 Maiden Lane, New York, NY 10038              59 Maiden Lane, New York, NY 10038          59 Maiden Lane, New York, NY 10038

</TABLE>

                           By Facsimile Transmissions:
                        (for Eligible Institutions only)

                                 (718) 234-5001

                              Confirm Facsimile By
                                   Telephone:

                                (800) 937-5449 or

                                 (212) 936-5100

           Questions and requests for assistance may be directed to the
Information Agent the address and telephone numbers listed below. Additional
copies of this Offer to Purchase, the Letter of Transmittal and other tender
offer materials may be obtained from the Information Agent as set forth below,
and will be furnished promptly at Leucadia's expense. You may also contact your
broker, dealer, commercial bank, trust company or other nominee for assistance
concerning the Offer.

                     THE INFORMATION AGENT FOR THE OFFER IS:

                           INNISFREE M&A INCORPORATED
                         501 Madison Avenue, 20th Floor
                            New York, New York 10022
                   Shareowners Call Toll-Free: (888) 750-5834
                 Banks and Brokers Call Collect: (212) 750-5833



</TEXT>
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