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<SEC-DOCUMENT>0001095811-01-502595.txt : 20010605
<SEC-HEADER>0001095811-01-502595.hdr.sgml : 20010605
ACCESSION NUMBER:		0001095811-01-502595
CONFORMED SUBMISSION TYPE:	S-3
PUBLIC DOCUMENT COUNT:		6
FILED AS OF DATE:		20010604

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			MERCURY GENERAL CORP
		CENTRAL INDEX KEY:			0000064996
		STANDARD INDUSTRIAL CLASSIFICATION:	FIRE, MARINE & CASUALTY INSURANCE [6331]
		IRS NUMBER:				952211612
		STATE OF INCORPORATION:			CA
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		S-3
		SEC ACT:		
		SEC FILE NUMBER:	333-62228
		FILM NUMBER:		1653830

	BUSINESS ADDRESS:	
		STREET 1:		4484 WILSHIRE BOULEVARD
		CITY:			LOS ANGELES
		STATE:			CA
		ZIP:			90010
		BUSINESS PHONE:		2139371060

	MAIL ADDRESS:	
		STREET 1:		LOS ANGELES
</SEC-HEADER>
<DOCUMENT>
<TYPE>S-3
<SEQUENCE>1
<FILENAME>a73188ors-3.txt
<DESCRIPTION>FORM S-3
<TEXT>

<PAGE>   1

      AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 4, 2001
                                                  Registration No. 333-[_______]
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM S-3
                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933
                                -----------------
                           MERCURY GENERAL CORPORATION
             (Exact name of registrant as specified in its charter)

               CALIFORNIA                              95-221-1612
   (State or other jurisdiction of                   (I.R.S. Employer
    incorporation or organization)                   Identification)

                             4484 WILSHIRE BOULEVARD
                          LOS ANGELES, CALIFORNIA 90010
                                 (323) 937-1060
               (Address, including zip code, and telephone number,
        including area code, of registrant's principal executive offices)
                                -----------------
                                 GABRIEL TIRADOR
                   VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
                             4484 WILSHIRE BOULEVARD
                          LOS ANGELES, CALIFORNIA 90010
                                 (323) 937-1060
            (Name, address, including zip code, and telephone number,
       including area code, of registrant's agent for service of process)

                                   COPIES TO:

                             THOMAS W. DOBSON, ESQ.
                                LATHAM & WATKINS
                        633 WEST FIFTH STREET, SUITE 4000
                          LOS ANGELES, CALIFORNIA 90071
                                 (213) 485-1234
                                -----------------

        APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after the registration statement becomes effective, as determined
by market and other conditions.

        If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]

        If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]

        If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

        If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

        If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]


<PAGE>   2

                             CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
====================================================================================================
                                                          PROPOSED       PROPOSED
                                                          MAXIMUM         MAXIMUM
                                        AMOUNT TO BE     AGGREGATE       AGGREGATE       AMOUNT OF
         TITLE OF SECURITIES             REGISTERED      PRICE PER        OFFERING      REGISTRATION
          TO BE REGISTERED                 (1)(2)         UNIT(3)       PRICE(2)(3)         FEE
- ----------------------------------------------------------------------------------------------------
<S>                                     <C>              <C>           <C>              <C>
Debt Securities                         $300,000,000        100%        $300,000,000      $75,000
</TABLE>

(1)   An indeterminate principal amount of debt securities of Mercury General as
      may from time to time be issued at indeterminate prices, as shall result
      in an aggregate initial offering price for all debt securities in an
      amount not to exceed $300,000,000.

(2)   This amount represents the principal amount of any debt securities issued
      at their stated principal amount and the issue price of any debt
      securities issued at other than the stated principal amount.

(3)   Estimated solely for the purpose of calculating the registration fee,
      which is calculated in accordance with Rule 457(o) of the rules and
      regulations under the Securities Act of 1933, exclusive of accrued
      interest, if any.

        THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.


                                       2
<PAGE>   3
The information in this preliminary prospectus is not complete and may be
changed. We may not sell these debt securities until the registration statement
filed with the Securities and Exchange Commission is effective. This preliminary
prospectus is not an offer to sell these debt securities and it is not
soliciting an offer to buy these debt securities in any state where the offer or
sale is not permitted.


                        SUBJECT TO COMPLETION, DATED JUNE 4, 2001

PRELIMINARY PROSPECTUS


                                  $300,000,000


                           MERCURY GENERAL CORPORATION
                                 DEBT SECURITIES

                                  -------------

        We may offer and sell the debt securities from time to time in one or
more offerings. This prospectus provides you with a general description of the
debt securities we may offer.

        Each time we sell debt securities, we will provide a supplement to this
prospectus that contains specific information about the offering and the terms
of the debt securities. The supplement may also add, update or change
information contained in this prospectus. You should carefully read this
prospectus and the accompanying prospectus supplement, as well as the
information we refer to under "Where You Can Find More Information," before you
invest in any of our debt securities.

                                  -------------

        NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE DEBT SECURITIES OR PASSED UPON
THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.




                                  -------------

                The date of this prospectus is ___________, 2001
<PAGE>   4

                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                            Page
<S>                                                                         <C>
ABOUT THIS PROSPECTUS.........................................................2
FORWARD-LOOKING STATEMENTS....................................................3
WHERE YOU CAN FIND MORE INFORMATION...........................................4
MERCURY GENERAL CORPORATION...................................................5
USE OF PROCEEDS...............................................................5
RATIO OF EARNINGS TO FIXED CHARGES............................................6
DESCRIPTION OF DEBT SECURITIES................................................7
PLAN OF DISTRIBUTION.........................................................17
EXPERTS......................................................................18
LEGAL MATTERS................................................................18
</TABLE>

                              ABOUT THIS PROSPECTUS

        This prospectus is part of a "shelf" registration statement that we
filed with the United States Securities and Exchange Commission. By using a
shelf registration statement, we may sell up to $300,000,000 aggregate offering
price of debt securities described in this prospectus from time to time and in
one or more offerings. This prospectus only provides you with a general
description of the debt securities that we may offer. Each time we sell debt
securities, we will provide a supplement to this prospectus that contains
specific information about the terms of the debt securities. The supplement may
also add, update or change information contained in this prospectus. Before
purchasing any debt securities, you should carefully read both this prospectus
and the accompanying prospectus supplement, together with the additional
information described under the heading "Where You Can Find More Information."

        You should rely only on the information contained or incorporated by
reference in this prospectus and in any prospectus supplement. We have not
authorized any other person to provide you with different information. If anyone
provides you with different or inconsistent information, you should not rely on
it. We will not make an offer to sell these debt securities in any jurisdiction
where the offer or sale is not permitted. You should assume that the information
appearing in this prospectus and the accompanying prospectus supplement is
accurate as of the dates on their respective covers. Our business, financial
condition, results of operations and prospects may have changed since those
dates.

        When we refer to "we," "our" and "us" in this prospectus, we mean
Mercury General Corporation, excluding, unless the context otherwise requires or
as otherwise expressly stated, our subsidiaries. When we refer to "you" or
"yours," we mean the offerees or holders of the applicable series of debt
securities.


                                       2
<PAGE>   5

                           FORWARD-LOOKING STATEMENTS

        This prospectus, any accompanying prospectus supplement, and the
documents they incorporate by reference may contain statements that are not
historical fact and constitute "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Forward-looking statements are
indicated by words or phrases such as "believe," "intend," "anticipate,"
"estimate," "plan," "project," "continuing," "ongoing," "expect," "may,"
"should," "management believes," "we believe," "we intend" and other similar
words or phrases. These statements may address, among other things, our strategy
for growth, business development, regulatory approvals, market position,
expenditures, financial results and reserves. Forward-looking statements are not
guarantees of performance and are subject to risks and uncertainties posed by
factors and events that could cause our actual business, prospects and results
of operations to differ materially from the historical information contained in
this prospectus and from those that may be expressed or implied by the
forward-looking statements. Factors that could cause or contribute to such
differences include, among others:

    -   the intense competition currently existing in the California automobile
        insurance markets,

    -   our success in expanding our business in states outside of California,

    -   the impact of potential third party "bad-faith" legislation,

    -   changes in laws or regulations, third party relations and approvals, and
        decisions of courts, regulators and governmental bodies, particularly in
        California,

    -   our ability to obtain the approval of the California Insurance
        Commissioner for premium rate changes for private passenger automobile
        policies issued in California and similar rate approvals in other
        states where we do business,

    -   our success in integrating and profitably operating the businesses we
        have acquired,

    -   the level of investment yields we are able to obtain with our
        investments in comparison to recent yields,

    -   the cyclical and general competitive nature of the property and casualty
        insurance industry and general uncertainties regarding loss reserve
        estimates, and

    -   other uncertainties, all of which are difficult to predict and many of
        which are beyond our control.

        These risks and uncertainties are discussed in more detail under
"Business" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in our Annual Report on Form 10-K for the year ended
December 31, 2000, our Quarterly Report on Form 10-Q for the three-month period
ended March 31, 2001, and other documents we have filed with the SEC. You may
obtain copies of these documents as described under "Where You Can Find More
Information" in this prospectus.

        We assume no obligation to update any forward-looking statements as a
result of new information or future events or developments. Investors are
cautioned not to place undue reliance on any forward-looking statements, which
speak only as of the date of this prospectus or, in the case of any document we
incorporate by reference, the date of that document. Investors also should
understand that it is not possible to predict or identify all factors and should
not consider the risks set forth above to be a complete statement of all
potential risks and uncertainties. If the expectations or assumptions underlying
our forward-looking statements prove inaccurate or if risks or uncertainties
arise, actual results could differ materially from those predicted in any
forward-looking statements.


                                       3
<PAGE>   6

                       WHERE YOU CAN FIND MORE INFORMATION

AVAILABLE INFORMATION

        Mercury General files reports, proxy statements and other information
with the SEC. Information we file with the SEC can be inspected and copied at
the Public Reference Room maintained by the SEC and at the SEC's Regional
Offices at the following addresses:

<TABLE>
<S>                       <C>                       <C>
 Public Reference Room    New York Regional Office    Chicago Regional Office
 450 Fifth Street, N.W.     7 World Trade Center          Citicorp Center
       Room 1024                 Suite 1300           500 West Madison Street
 Washington, D.C. 20549   New York, New York 10048          Suite 1400
                                                    Chicago, Illinois 60661-2551
</TABLE>

        You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates. Further information on the operation of the
SEC's Public Reference Room in Washington, D.C. can be obtained by calling the
SEC at 1-800-SEC-0330.

        The SEC also maintains a web site that contains reports, proxy
statements and other information about issuers, such as us, who file
electronically with the SEC. The address of that web site is http://www.sec.gov.

        Our common stock is listed on the New York Stock Exchange (NYSE: MCY),
and reports, proxy statements and other information concerning us can also be
inspected at the offices of the New York Stock Exchange at 20 Broad Street, New
York, New York 10005. Our web site address is http://www.mercuryinsurance.com.
The information on our web site, however, is not, and should not be deemed to
be, a part of this prospectus.

        This prospectus is part of a registration statement that we filed with
the SEC. The full registration statement may be obtained from the SEC or us. The
indenture is filed as an exhibit to the registration statement. Statements in
this prospectus about the indenture are summaries. You should refer to the
actual document for a more complete description of the indenture and the debt
securities.

INCORPORATION BY REFERENCE

        The rules of the SEC allow us to incorporate information into this
prospectus by reference, which means that we can disclose important information
to you by referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this prospectus,
and later information that we file with the SEC will automatically update and
supersede that information. Specifically, this prospectus incorporates by
reference the documents listed or described below that have been previously
filed or we will file with the SEC. These documents contain important
information about us which you are encouraged to read.

    -   Our Annual Report on Form 10-K for the year ended December 31, 2000;

    -   our Quarterly Report on Form 10-Q for the three-month period ended March
        31, 2001; and

    -   all documents we file with the SEC pursuant to Sections 13(a), 13(c), 14
        or 15(d) of the Exchange Act after the date of this prospectus and
        before the termination of any offering of debt securities.

        You may request a free copy of any of the documents incorporated by
reference in this prospectus (other than exhibits, unless the exhibits are
specifically incorporated by reference in the documents) by writing or
telephoning at the following address or telephone number:

                           Mercury General Corporation
                             4484 Wilshire Boulevard
                          Los Angeles, California 90010
                           Attention: Gabriel Tirador
                                 (323) 937-1060


                                       4
<PAGE>   7

                           MERCURY GENERAL CORPORATION

        Mercury General is an insurance holding company for a group of property
and casualty insurance companies engaged primarily in writing automobile
insurance in California, Florida, Georgia, Illinois, Oklahoma, Texas and
Virginia. The types of coverage offered to our automobile policyholders include
bodily injury liability, underinsured and uninsured motorist, personal injury
protection, property damage liability, comprehensive, collision and other
hazards, each as specified in the applicable policy. Our subsidiaries also write
homeowners' insurance, mechanical breakdown insurance, commercial and dwelling
fire insurance and commercial property insurance. The insurance policies offered
by our subsidiaries are sold to the public through more than 2,000 independent
insurance agents. With approximately 771,000 private passenger automobile
policies in force in California as of December 31, 2000, Mercury General was the
sixth largest automobile insurer in California among both direct and agency
insurance companies.

        Our operations in California are conducted through Mercury Casualty
Company, a California insurance company founded in 1961 by George Joseph, our
president, chief executive officer and chairman of our board of directors, and
two other insurance subsidiaries, Mercury Insurance Company and California
Automobile Insurance Company. In 1989, we began expanding our operations outside
of California, initially in Georgia and Illinois. Since that time, we have
continued to expand our operations in Georgia and Illinois and have begun
operations in Florida, Oklahoma, Texas and Virginia through acquisitions and
internal growth.

        In 2000, A.M. Best & Co. assigned a rating of A+ (Superior) to all of
our insurance subsidiaries other than American Mercury Insurance Company and
American Mercury Lloyds Insurance Company, which are rated A- (Excellent), and
other than Mercury County Mutual Insurance Company, which we acquired in
September 2000 and which is currently under review by A.M. Best & Co.

        As a holding company with no significant business operations of its own,
Mercury General relies on dividends from its insurance subsidiaries as the
principal source of funds to meet its obligations, including the payment of
principal of and any interest on its debt obligations, and to pay dividends to
its shareholders. Each of our insurance subsidiaries is subject to the
regulatory powers of the insurance department of its respective state of
domicile. These states' insurance laws prohibit casualty insurance companies
from paying dividends or advances within any twelve-month period, without prior
regulatory approval, in excess of the greater of:

    -   10% of the insurance company's statutory earned surplus at the preceding
        December 31; or

    -   the insurance company's net income for the calendar year preceding the
        date the dividend is paid.

        Under this test, Mercury General's direct insurance subsidiaries may pay
dividends to Mercury General during 2001 of approximately $94 million.

        The above information is only a summary and is not comprehensive. For
additional information concerning us, you should refer to the information
described under "Where You Can Find More Information" in this prospectus.

        Mercury General's principal offices are located at 4484 Wilshire
Boulevard, Los Angeles, California 90010. Our telephone number is (323)
937-1060. We also maintain offices in a number of locations in California,
Florida, Illinois, Georgia, New York, Oklahoma, Texas and Virginia.

                                 USE OF PROCEEDS

        We intend to use the net proceeds from the sale of the debt securities
for general corporate purposes, including repaying, redeeming or repurchasing
our existing debt or common stock, and for working capital, capital expenditures
and acquisitions. We may invest funds not required immediately in securities.


                                       5
<PAGE>   8

                       RATIO OF EARNINGS TO FIXED CHARGES

        The following table sets forth the ratio of our earnings to fixed
charges for each of the years in the five-year period ended December 31, 2000
and for the three months ended March 31, 2001:


<TABLE>
<CAPTION>
                                           THREE MONTHS
                                               ENDED
                                              MARCH 31,              YEAR ENDED DECEMBER 31,
                                           -------------  --------------------------------------------
                                                2001       2000      1999     1998      1997      1996
                                               -----      -----     -----    -----     -----     -----
<S>                                             <C>        <C>       <C>      <C>       <C>       <C>
Ratio of earnings to fixed charges.......      12.5       14.1      23.9     36.1      32.5      40.3
</TABLE>

        We have computed the ratio of earnings to fixed charges by dividing
earnings before income taxes plus fixed charges by fixed charges. Fixed charges
consist of interest expense and one-third of the annual rent expense, which is
a reasonable approximation of rental expense interest.



                                       6
<PAGE>   9

                         DESCRIPTION OF DEBT SECURITIES

        The following is a general description of the terms and provisions of
the debt securities we may offer and sell by this prospectus. This summary is
not meant to be a complete description of the debt securities. This prospectus
together with any accompanying prospectus supplement will contain the material
terms and conditions for each series of debt securities. The applicable
prospectus supplement may add, update or change the terms and conditions of the
debt securities as described in this prospectus.

        The debt securities will be governed by an indenture between us and Bank
One Trust Company, N.A., as trustee. The indenture gives us broad authority to
set the particular terms of each series of debt securities, including the right
to modify certain of the terms contained in the indenture. The particular terms
of a series of debt securities and the extent, if any, to which the particular
terms of the issue modify the terms of the indenture will be described in the
prospectus supplement relating to such series of debt securities.

        The indenture contains the full legal text of the matters described in
this section. Because this section is a summary, it does not describe every
aspect of the debt securities or the indenture. This summary is subject to and
qualified in its entirety by reference to all the provisions of the indenture,
including definitions of terms used in the indenture. A copy of the indenture is
attached as an exhibit to the registration statement of which this prospectus is
a part. We also include references in parentheses to certain sections of the
indenture. Whenever we refer to particular sections or defined terms of the
indenture in this prospectus or in a prospectus supplement, these sections or
defined terms are incorporated by reference into this prospectus or into the
prospectus supplement. This summary also is subject to and qualified by
reference to the description of the particular terms of a particular series of
debt securities described in the applicable prospectus supplement or
supplements.

        The indenture is subject to and governed by the Trust Indenture Act of
1939, as amended, and may be supplemented or amended from time to time following
its execution.

GENERAL

        We may issue an unlimited amount of debt securities under the indenture
in one or more series. We need not issue all debt securities of one series at
the same time and, unless otherwise provided in a prospectus supplement, we may
reopen a series without the consent of the holders of the debt securities of
that series for issuances of additional debt securities of that series.

        The debt securities will be issued as senior debt securities. The debt
securities will be unsecured obligations and will rank equally with all of our
other unsecured and unsubordinated indebtedness.

        We refer you to the applicable prospectus supplement for a description
of the following terms of each series of debt securities:

        (a) the title of the debt securities;

        (b) any limit upon the aggregate principal amount of the debt
securities;

        (c) the person to whom interest is payable if other than the person in
whose name the debt securities is registered;

        (d) the date or dates on which principal will be payable or how to
determine the dates and the right, if any, to shorten or extend the date on
which principal will be payable and the conditions to any such change;

        (e) the rate or rates or method of determination of interest, the date
or dates from which interest will accrue, the dates on which interest will be
payable, which we refer to as the "interest payment dates," the manner of
determination of such interest payment dates, and any record dates for the
interest payable on the interest payment dates;

        (f) whether we may extend the interest payment periods and, if so, the
terms of any extensions;


                                       7
<PAGE>   10

        (g) the place or places where we must make payments on the debt
securities and where any debt securities issued in registered form may be sent
for transfer or exchange;

        (h) the period or periods during which, and the price or prices at
which, and the terms and conditions on which the debt securities may be
redeemed, in whole or in part, at our option;

        (i) the obligation, if any, of us to redeem or purchase the debt
securities under any sinking fund, purchase fund or analogous provisions or at
the option of a holder and the details of that obligation;

        (j) the denominations in which the debt securities will be issuable (if
other than denominations of $1,000 and any integral multiple thereof);

        (k) any index or formula for determining the amount of principal of,
premium, if any, or interest on the debt securities, and the manner of
determining those amounts;

        (l) the currency, currencies, or currency units in which the principal
of, premium, if any, or interest on any debt securities will be payable and the
manner of determining the equivalent in the currency of the United States of
America;

        (m) the currency, currencies or currency units in which the principal
of, premium, if any, and interest is payable, at our option or the option of the
holders, in one or more currencies or currency units other than those the debt
securities are stated to be payable, and the terms and conditions of the option;

        (n) the amount we will pay or the manner in which such amount shall be
determined if the maturity of the debt securities is accelerated;

        (o) if the principal amount payable on the maturity date will not be
determinable on any one or more dates prior to the maturity date, the amount
which will be deemed to be the principal amount as of any date for any purpose,
including the principal amount which will be due and payable upon any maturity
other than the maturity date, or the manner of determining that amount;

        (p) whether any terms of the indenture described below under "Defeasance
and Covenant Defeasance" will not apply to any of the debt securities;

        (q) whether the debt securities are to be issued, in whole or in part,
in the form of one or more global debt securities and, if so, the identity of
the depositary for the global debt securities;

        (r) any addition, modification or deletion to any events of default or
covenants that apply to the debt securities; and

        (s) any other terms of the debt securities of that series.

(See Section 301.)

PAYMENTS

        Unless we indicate differently in a prospectus supplement, we will pay
interest on the debt securities on each interest payment date to the person in
whose name the debt securities are registered as of the close of business on the
regular record date relating to the interest payment date. However, if we
default in paying interest on a debt security, we will set a special record and
payment date and pay defaulted interest on the payment date to the registered
holder of the debt security as of the close of business on a special record
date, or we can propose to the trustee any other lawful manner of payment that
is consistent with the requirements of any debt securities exchange on which the
debt securities are listed for trading. (See Section 307.)

        Unless we indicate differently in a prospectus supplement, we will pay
principal of and any premium and interest on the debt securities at stated
maturity, upon redemption or otherwise, upon presentation of the debt securities
at the office of the trustee, as the paying agent. Any other paying agent
initially designated for the debt securities of a particular series will be
named in the applicable prospectus supplement. We may designate additional


                                       8
<PAGE>   11

paying agents, rescind the designations of any paying agent or approve a change
in the office through which any paying agent acts, but we must maintain a paying
agent in each place where payments on the debt securities are payable. (See
Section 1002.)

        If any maturity date, redemption date or interest payment date of the
debt securities is not a business day at any place of payment, then payment of
the principal, premium, if any, and interest may be made on the next business
day at that place of payment. (See Section 113.)

FORM; TRANSFERS; EXCHANGES

        The debt securities will be issued

        (a) only in fully registered form;

        (b) without coupons; and

        (c) unless otherwise specified in a prospectus supplement, in
denominations that are even multiples of $1,000. (See Section 302.)

        Unless we otherwise state in a prospectus supplement, you may have your
debt securities divided into debt securities of smaller denominations (of at
least $1,000) or combined into debt securities of larger denominations, each
containing identical terms and provisions, as long as the total principal amount
is not changed. This is called an "exchange." (See Section 305.)

        Unless we otherwise state in a prospectus supplement, you may exchange
or transfer debt securities at the office of the trustee. The trustee acts as
our agent for registering debt securities in the names of holders and exchanging
and transferring debt securities. We may appoint another agent or act as our own
agent for these purposes. The entity performing the role of maintaining the list
of registered holders is called the "security registrar." It will also perform
transfers. (See Section 305.)

        In our discretion, we may change the place for registration of transfer
or exchange of the debt securities and may remove and/or appoint one or more
additional security registrars. (See Sections 305 and 1002.)

        Except as otherwise provided in a prospectus supplement, there will be
no service charge for any transfer or exchange of the debt securities, but you
may be required to pay a sum sufficient to cover any tax or other governmental
charge payable in connection with the transfer or exchange. We may block the
transfer or exchange of (a) debt securities during a period of 15 days prior to
giving any notice of redemption or (b) any debt security selected for
redemption, in whole or in part, except the unredeemed portion of any debt
security being redeemed in part. (See Section 305.)

GLOBAL SECURITIES

        We may issue the debt securities of a series, in whole or in part, in
the form of one or more global debt securities that we will deposit with a
depositary or its nominee that we identify in the applicable prospectus
supplement. We will describe the specific terms of the depositary arrangement
covering the debt securities in the prospectus supplement relating to that
series. We anticipate that the following provisions will apply to all depositary
arrangements.

        Upon the issuance of a global security, the depositary for the global
security or its nominee will credit to accounts in its book-entry registration
and transfer system the principal amounts of the debt securities represented by
the global security. The underwriters or agents with respect to the debt
securities or we, if the debt securities are offered and sold directly by us,
will designate these accounts. Only institutions that have accounts with the
depositary or its nominee and persons who hold beneficial interests through
those participants may own beneficial interests in a global security. Ownership
of beneficial interests in a global security will be shown only on, and the
transfer of those ownership interests will be effected only through, records
maintained by the depositary, its nominee or any participants of the depositary
or its nominee, as the case may be. The laws of some states require that some


                                       9
<PAGE>   12

purchasers of securities take physical delivery of securities in definitive
form. These laws may limit the market, if any, for your beneficial interests in
a global security.

        As long as the depositary or its nominee is the registered owner of a
global security, the depositary or nominee will be considered the sole owner or
holder of the debt securities represented by the global security. Except as
described below, owners of beneficial interests in a global security will not be
entitled to have debt securities registered in their names and will not be
entitled to receive physical delivery of the debt securities in definitive form.

        We will make all payments of principal of, any premium and interest on,
and any additional amounts with respect to, debt securities issued as global
securities to the depositary or its nominee. Neither we nor the trustee, any
paying agent or the security registrar assumes any responsibility or liability
for any aspect of the depositary's or any participant's records relating to, or
for payments made on account of, beneficial interests in a global security.

        We expect that the depositary for a series of debt securities or its
nominee, upon receipt of any payment with respect to the debt securities, will
immediately credit participants' accounts with payments in an amount
proportionate to their respective beneficial interests in the principal amount
of the global security for the debt securities as shown on the records of the
depositary or its nominee. We also expect that payments by participants to
owners of beneficial interests in the global security held through participants
will be governed by standing instructions and customary practices, as is now the
case with securities held for the accounts of customers registered in "street
name," and will be the responsibility of the participants.

        The indenture provides that if:

    -   the depositary notifies us that it is unwilling or unable to continue as
        depositary for a series of debt securities, or if the depositary is no
        longer legally qualified to serve in that capacity, and we have not
        appointed a successor depositary within 90 days of written notice; or

    -   we determine that a series of debt securities will no longer be
        represented by global securities and we execute and deliver an order to
        that effect to the trustee;

then the global securities for that series may be exchanged for registered debt
securities in definitive form. The definitive debt securities will be registered
in the name or names with which the depositary instructs the trustee. (See
Section 305.)

REDEMPTION

        We will set forth any terms for the redemption of debt securities in a
prospectus supplement. Unless we indicate differently in a prospectus
supplement, and except with respect to debt securities redeemable at the option
of the registered holder, debt securities will be redeemable upon notice by mail
between 30 and 60 days prior to the redemption date. If less than all of the
debt securities of any series or any tranche of a series are to be redeemed, the
trustee will select the debt securities to be redeemed. In the absence of any
provision for selection, the trustee will choose a method of random selection it
deems fair and appropriate. (See Sections 1102, 1103 and 1104.)

        Debt securities will cease to bear interest on the redemption date. We
will pay the redemption price and any accrued interest once you surrender the
debt security for redemption. (See Section 1106.) If only part of a debt
security is redeemed, the trustee will deliver to you a new debt security of the
same series for the remaining portion without charge. (See Section 1107.)

        We may make any redemption conditional upon the receipt by the paying
agent, on or prior to the date fixed for redemption, of money sufficient to pay
the redemption price. If the paying agent has not received the money by the date
fixed for redemption, we will not be required to redeem the debt securities.
(See Section 1104.)

EVENTS OF DEFAULT

        An "event of default" will occur with respect to the debt securities of
any series if:


                                       10
<PAGE>   13

        (a) we do not pay any interest on any debt securities of the applicable
series within 30 days of the due date (following any deferral allowed under the
terms of the debt securities and elected by us);

        (b) we do not pay any principal of or premium on any debt securities of
the applicable series on the due date;

        (c) we do not make sinking fund payments on any debt securities of the
applicable series on the due date;

        (d) we default in the performance or remain in breach of a covenant,
excluding default in the performance or breach of covenants solely applicable to
another series of debt securities issued under the indenture, in the indenture
or the debt securities of the applicable series for 90 days after we receive a
written notice of default stating we are in default or breach and requiring
remedy of the default or breach; the notice must be sent by either the trustee
or registered holders of at least 25% in principal amount of the outstanding
debt securities of the affected series;

        (e) we file for bankruptcy or other specified events in bankruptcy,
insolvency, receivership or reorganization occur; or

        (f) any other event of default specified in the applicable prospectus
supplement for such series occurs.

        (See Section 501.)

        We will furnish the trustee with an annual statement as to our
compliance with the terms, provisions and conditions in the indenture.

        No event of default with respect to a series of debt securities
necessarily constitutes an event of default with respect to the debt securities
of any other series issued under the indenture.

REMEDIES

    Acceleration

        If an event of default occurs and is continuing with respect to any
series of debt securities, then either the trustee or the registered holders of
at least 25% in principal amount of the outstanding debt securities of that
series may declare the principal amount of all of the debt securities of that
series, together with accrued and unpaid interest thereon, to be due and payable
immediately. (See Section 502.)

    Rescission of Acceleration

        After the declaration of acceleration has been made with respect to any
series of debt securities and before the trustee has obtained a judgment or
decree for payment of the money due, the registered holders of a majority in
principal amount of the outstanding debt securities of that series, by written
consent to us and the trustee, may rescind and annul such declaration and its
consequences, if:

        (a) we pay or deposit with the trustee a sum sufficient to pay:

            (1) all overdue interest on the debt securities of that series,
other than interest which has become due by declaration of acceleration;

            (2) the principal of and any premium on the debt securities of that
series which have become due other than by declaration of acceleration and
overdue interest on these amounts;

            (3) interest on overdue interest, other than interest which has
become due by declaration of acceleration, on the debt securities of that series
to the extent lawful; and

            (4) all amounts due to the trustee under the indenture; and


                                       11
<PAGE>   14

        (b) all events of default with respect to the debt securities of that
series, other than the nonpayment of the principal and interest which has become
due solely by the declaration of acceleration, have been cured or waived as
provided in the indenture.

(See Section 502.)

        For more information as to waiver of defaults, see "--Waiver of Default
and of Compliance" below.

    Control by Registered Holders; Limitations

        If an event of default with respect to the debt securities of any series
occurs and is continuing, the registered holders of a majority in principal
amount of the outstanding debt securities of that series, voting as a single
class, without regard to the holders of outstanding debt securities of any other
series that may also be in default, will have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
trustee with respect to the debt securities of that series or exercising any
trust or power conferred on the trustee with respect to the debt securities of
that series; provided that

        (a) the registered holders' directions do not conflict with any rule of
law or the indenture;

        (b) the trustee may take any other action it deems proper which is not
inconsistent with the registered holders' direction, and

        (c) the direction is not unduly prejudicial to the rights of holders of
the debt securities of that series who do not join in that action. (See Section
512.)

        In addition, the indenture provides that no registered holder of debt
securities of any series will have any right to institute any proceeding,
judicial or otherwise, with respect to the indenture or for any other remedy
thereunder unless:

        (a) that registered holder has previously given the trustee written
notice of a continuing event of default;

        (b) the registered holders of at least 25% in aggregate principal amount
of the outstanding debt securities of that series have made a written request to
the trustee to institute proceedings in respect of that event of default and
have offered the trustee reasonable security or indemnity against costs,
expenses and liabilities incurred in complying with the request; and

        (c) for 60 days after receipt of the notice, the trustee has failed to
institute a proceeding and no direction inconsistent with the request has been
given to the trustee during the 60-day period by the registered holders of a
majority in aggregate principal amount of outstanding debt securities of that
series. (See Section 507.)

        The trustee is not required to exercise any of its rights or powers at
the request or direction of any of the holders unless the holders offer the
trustee reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in complying with the request. (See
Section 603.)

        However, each registered holder has an absolute and unconditional right
to receive payment when due and to bring a suit to enforce that right. (See
Section 508.)

        If an event of default is continuing with respect to all the series of
debt securities, the registered holders of a majority in aggregate principal
amount of the outstanding debt securities of all the series, considered as one
class, will have the right to make such direction, and not the registered
holders of the debt securities of any one of the series. (See Section 512.)

NOTICE OF DEFAULT

        The trustee is required to give the registered holders of debt
securities of the affected series notice of any default under the indenture to
the extent required by the Trust Indenture Act, unless the default has been
cured or waived. (See Section 602.) The Trust Indenture Act currently permits
the trustee to withhold notices of default


                                       12
<PAGE>   15

(except for certain payment defaults) if the trustee in good faith determines
the withholding of the notice to be in the interests of the registered holders.

WAIVER OF DEFAULT AND OF COMPLIANCE

        The registered holders of a majority in aggregate principal amount of
the outstanding debt securities of any series, voting as a single class, without
regard to the holders of outstanding debt securities of any other series, may
waive, on behalf of all registered holders of the debt securities of that
series, any past default under the indenture, except a default in the payment of
principal, premium or interest, or with respect to compliance with certain
provisions of the indenture that cannot be amended without the consent of the
registered holder of each outstanding debt security of that series. (See Section
513.)

        Compliance with certain covenants in the indenture or otherwise provided
with respect to debt securities of any series may be waived by the registered
holders of a majority in aggregate principal amount of the debt securities of
such series. (See Section 1006.)

CONSOLIDATION, MERGER AND CONVEYANCE OF ASSETS AS AN ENTIRETY

        We may not consolidate or merge with or into any other person, or
convey, transfer or lease our properties and assets substantially as an entirety
to any person and we may not permit another person to consolidate with or merge
into us, unless:

        (a) the person formed by the consolidation or into which we are merged,
or the person which acquires us or which leases our property and assets
substantially as an entirety, is a person organized and existing under the laws
of the United States of America or any State of the United States or the
District of Columbia, and expressly assumes, by supplemental indenture, the due
and punctual payment of the principal, premium and interest on all the
outstanding debt securities and the performance of all of our covenants under
the indenture, as supplemented; and

        (b) immediately after giving effect to the transactions, no event of
default, and no event which after notice or lapse of time or both would become
an event of default, will have occurred and be continuing. (See Section 801.)

LIMITED RESTRICTIONS

        Unless we otherwise state in the prospectus supplement, the indenture
does not limit our ability to incur debt and does not give holders of debt
securities protection in the event of a sudden and significant decline in our
credit quality or a takeover, recapitalization or highly leveraged or similar
transaction involving us. Accordingly, we could in the future enter into
transactions that could increase the amount of indebtedness outstanding at that
time or otherwise affect our capital structure or credit rating.

COVENANTS

        Any covenants with respect to any particular series of debt securities
will be set forth in the applicable prospectus supplement.

MODIFICATION OF INDENTURE

        Without Registered Holder Consent. Without the consent of any registered
holders of debt securities of any series, we and the trustee may enter into one
or more supplemental indentures for any of the following purposes:

        (a) to evidence the succession of another person to us and the
assumption by such person of the covenants in the indenture and the debt
securities;

        (b) to add one or more covenants for the benefit of the holders of all
or any series of debt securities or to surrender any right or power conferred
upon us;

        (c) to add any additional events of default for all or any series of
debt securities;


                                       13
<PAGE>   16

        (d) to add or change any provision of the indenture to facilitate the
issuance of debt securities in bearer form, registrable or not registrable, with
or without coupon and to facilitate the issuance of debt securities in
uncertificated form;

        (e) to change or eliminate any provision of the indenture or to add any
new provision to the indenture that does not adversely affect the interests of
the registered holders;

        (f) to provide security for the debt securities of any series;

        (g) to establish the form or terms of debt securities of any series, as
permitted by the indenture;

        (h) to evidence and provide for the acceptance of appointment of a
separate or successor trustee; or

        (i) to cure any ambiguity, defect or inconsistency or to make any other
changes with respect to any series of debt securities that do not adversely
affect the interests of the holders of debt securities of that series in any
material respect. (See Section 901.)

        If the Trust Indenture Act is amended after the date of the indenture so
as to require changes to the indenture or so as to permit changes to, or the
elimination of, provisions which, at the date of the indenture or at any time
thereafter, were required by the Trust Indenture Act to be contained in the
indenture, the indenture will be deemed to have been amended so as to conform to
the amendment of the Trust Indenture Act or to effect the changes or elimination
required by the Trust Indenture Act, and Mercury General and the trustee may,
without the consent of any registered holders, enter into one or more
supplemental indentures to effect or evidence the same.

        With Registered Holder Consent. Subject to the following sentence, we
and the trustee may, with some exceptions, amend or modify the indenture with
the consent of the registered holders of at least a majority in aggregate
principal amount of the debt securities of each series affected by the amendment
or modification. However, no amendment or modification may, without the consent
of the registered holder of each outstanding debt security affected thereby:

        (a) change the stated maturity of the principal of or interest on any
debt security (other than pursuant to the terms of the debt security) or reduce
the principal amount of , interest or premium payable upon redemption, or reduce
the principal payable upon acceleration or change the currency in which any debt
security is payable, or impair the right to bring suit to enforce any payment;

        (b) reduce the percentages of registered holders whose consent is
required for any supplemental indenture or waiver; or

        (c) modify certain of the applicable provisions in the indenture
relating to supplemental indentures and waivers of certain covenants and past
defaults.

        A supplemental indenture which changes or eliminates any provision of
the indenture expressly included solely for the benefit of holders of debt
securities of one or more particular series will be deemed not to affect the
interests under the indenture of the holders of debt securities of any other
series.

(See Section 902.)


                                       14
<PAGE>   17

DEFEASANCE AND COVENANT DEFEASANCE

        Unless otherwise stated in a prospectus supplement, we may, upon
satisfying several conditions, cause ourselves to be:

        (a) discharged from our obligations, with some exceptions, with respect
to any series of debt securities, which we refer to as "defeasance"; and

        (b) released from our obligations under specified covenants with respect
to any series of debt securities, which we refer to as "covenant defeasance."

        One condition we must satisfy is the irrevocable deposit with the
trustee, in trust, of an amount of money and/or government obligations which,
through the scheduled payment of principal and interest on those obligations,
would provide sufficient moneys to pay the principal of and any premium and
interest on those debt securities on the maturity dates of the payments or upon
redemption.

        The indenture permits defeasance with respect to any series of debt
securities even if a prior covenant defeasance has occurred with respect to the
debt securities of that series. Following a defeasance, payment of the debt
securities defeased may not be accelerated because of an event of default.
Following a covenant defeasance, payment of the debt securities may not be
accelerated by reference to the specified covenants affected by the covenant
defeasance. However, if an acceleration were to occur, the realizable value at
the acceleration date of the money and government obligations in the defeasance
trust could be less than the principal and interest then due on the respective
debt securities, since the required deposit in the defeasance trust would be
based upon scheduled cash flows rather than market value, which would vary
depending upon interest rates and other factors.

        Under current United States federal income tax law, the defeasance
contemplated in the preceding paragraphs would be treated as an exchange of the
relevant debt securities in which holders of the debt securities might recognize
gain or loss. In addition, the amount, timing and character of amounts that
holders would be required after the defeasance to include in income might be
different from that which would be includible in the absence of the defeasance.
Prospective investors are urged to consult their own tax advisors as to the
specific consequences of a defeasance, including the applicability and effect of
tax laws other than United States federal income tax laws.

        Under current United States federal income tax laws, unless accompanied
by other changes in the terms of the debt securities, covenant defeasance
generally should not be treated as a taxable exchange.

RESIGNATION AND REMOVAL OF THE TRUSTEE

        The trustee with respect to any series of debt securities may resign at
any time by giving written notice to us. The trustee may also be removed with
respect to the debt securities of any series by act of the registered holders of
a majority in principal amount of the then outstanding debt securities of such
series, and in certain circumstances may be removed by us. No resignation or
removal of the trustee, and no appointment of a successor trustee, will become
effective until the acceptance of appointment by a successor trustee in
accordance with the requirements of the indenture. (See Section 610.)

CERTAIN TAX MATTERS

        We will describe U.S. federal income tax considerations applicable to
debt securities in the applicable prospectus supplement.

MISCELLANEOUS PROVISIONS

        The indenture provides that certain debt securities, including those for
which payment or redemption money has been deposited or set aside in trust, will
not be deemed to be "outstanding" in determining whether the registered holders
of the requisite principal amount of the outstanding debt securities have given
or taken any demand, direction, consent or other action under the indenture as
of any date, or are present at a meeting of registered holders for quorum
purposes. (See Section 101.)


                                       15
<PAGE>   18

        We are entitled to set any day as a record date for the purpose of
determining the registered holders of outstanding debt securities of any series
entitled to give or take any demand, direction, consent or other action under
the indenture, in the manner and subject to the limitations provided in the
indenture. In certain circumstances, the trustee also is entitled to set a
record date for action by registered holders of any series of outstanding debt
securities. If a record date is set for any action to be taken by registered
holders of particular debt securities, the action may be taken only by persons
who are registered holders of the respective debt securities on the record date.
(See Section 104.)

GOVERNING LAW

        The indenture and the debt securities will be governed by and construed
in accordance with the laws of the State of New York. (See Section 112.)

INFORMATION CONCERNING THE TRUSTEE

        Subject to the provisions of the Trust Indenture Act, the trustee is
under no obligation to exercise any of the powers vested in it by the indenture
at the request of any holder of the debt securities unless the holders offer the
trustee reasonable security or indemnity against the costs, expenses and
liabilities which might result. The trustee is not required to expend or risk
its own funds or otherwise incur personal financial liability in performing its
duties if the trustee reasonably believes that it is not reasonably assured of
repayment or adequate indemnity. (See Section 601).

        An affiliate of the trustee may be one of the underwriters, agents or
dealers through whom we sell debt securities.



                                       16
<PAGE>   19

                              PLAN OF DISTRIBUTION

        We may sell the debt securities described in this prospectus from time
to time in one or more transactions

        (a) to purchasers directly;

        (b) to or through underwriters for public offering and sale by them;

        (c) through agents;

        (d) through dealers; or

        (e) through a combination of any of the foregoing methods of sale.

        We may distribute the debt securities from time to time in one or more
transactions at:

        (a) a fixed price or prices, which may be changed;

        (b) market prices prevailing at the time of sale;

        (c) prices related to such prevailing market prices; or

        (d) negotiated prices.

    We will state in the applicable prospectus supplement the terms of the
offering of the debt securities, including the name or names of any
underwriters, dealers or agents, the purchase price of the debt securities and
the proceeds we will receive from the sale, any underwriting discounts and
commissions and other items constituting underwriters compensation, any initial
public offering price and any discounts or concessions allowed or reallowed or
paid to dealers. We may change the initial public offering price, discounts or
concessions allowed or reallowed or paid to dealers from time to time.

    Direct Sales

        We may sell the debt securities directly to institutional investors or
others who may be deemed to be underwriters within the meaning of the Securities
Act with respect to any resale of the debt securities.

    To Underwriters

        Underwriters will purchase the debt securities for their own account and
may re-offer and re-sell the debt securities at a fixed price or prices, which
may be changed, or from time to time at market prices, prices related to
prevailing market prices or at negotiated prices. Underwriters may be deemed to
have received compensation from us from sales of debt securities in the form of
underwriting discounts or commissions and may also receive commissions from
purchasers of debt securities for whom they may act as agent.

        Underwriters may sell debt securities to or through dealers, and such
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and may also receive commissions which may be
changed from time to time from the purchasers for whom they may act as agent.

        Debt securities may be offered to the public either through underwriting
syndicates represented by managing underwriters or directly by managing
underwriters.

        Unless otherwise provided in a prospectus supplement, the obligations of
any underwriters to purchase debt securities or any series of debt securities
will be subject to certain conditions precedent, and the underwriters will be
obligated to purchase all such debt securities if any are purchased.


                                       17
<PAGE>   20

    Through Agents and Dealers

        We may authorize agents to solicit offers to purchase our debt
securities from time to time. We will name any agent involved in a sale of debt
securities, as well as any commissions payable by us to such agent, in a
prospectus supplement. Unless we indicate differently in the prospectus
supplement, any agent will be acting on a reasonable efforts basis for the
period of its appointment.

        We may also utilize a dealer in the sale of the debt securities being
offered pursuant to this prospectus and, in that case, we will name the dealer
and the terms of the transaction in the applicable prospectus supplement. If we
sell the debt securities to the dealer as principal, the dealer may resell them
to the public at varying prices to be determined by the dealer at the time of
resale.

    Delayed Delivery Contracts

        If we so specify in the applicable prospectus supplement, we will
authorize underwriters, dealers and agents to solicit offers by certain
institutions to purchase debt securities pursuant to contracts providing for
payment and delivery on future dates. Such contracts will be subject to only
those conditions set forth in the applicable prospectus supplement.

        The underwriters, dealers and agents will not be responsible for the
validity or performance of the contracts. We will set forth in the prospectus
supplement relating to the contracts the price to be paid for the debt
securities, the commissions payable for solicitation of the contracts and the
date in the future for delivery of the debt securities.

    General Information

        Underwriters, dealers and agents who may participate in a sale of the
debt securities may be deemed to be underwriters as defined in the Securities
Act, and any discounts and commissions received by them and any profit realized
by them on resale of the debt securities may be deemed to be underwriting
discounts and commissions under the Securities Act. We may have or execute
agreements with underwriters, dealers and agents to indemnify them against
certain civil liabilities, including liabilities under the Securities Act, and
to reimburse them for certain expenses, including contributions with respect to
payments which the underwriters, dealers and agents may be required to make.

        Underwriters, dealers or agents and their associates may be customers
of, engage in transactions with or perform services for us and/or our affiliates
in the ordinary course of business.

        Unless we indicate differently in a prospectus supplement, we will not
list the debt securities on any securities exchange. The debt securities will be
a new issue of debt securities with no established trading market. Any
underwriters that purchase debt securities for public offering and sale may make
a market in such debt securities, but such underwriters will not be obligated to
do so and may discontinue any market making at any time without notice. We make
no assurance as to the liquidity of or the trading markets for any debt
securities.

                                     EXPERTS

        The consolidated financial statements and the related financial
statement schedule incorporated in this prospectus from our Annual Report on
Form 10-K for the year ended December 31, 2000 have been audited by KPMG LLP,
independent auditors, as stated in their reports, which are incorporated herein
by reference and have been so incorporated in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.

                                  LEGAL MATTERS

        Latham & Watkins, Los Angeles, California, will pass upon the validity
of the debt securities offered pursuant to this prospectus by Mercury General.


                                       18
<PAGE>   21

                                    PART II.

                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

<TABLE>
<S>                                                                        <C>
        Securities and Exchange Commission registration fee ...............$75,000
        Printing expenses .................................................$20,000
        Trustee fees and expenses .........................................$7,000
        Legal fees and expenses ...........................................$100,000
        Accounting fees and expenses ......................................$40,000
        Blue Sky fees and expenses ........................................$5,000
        Rating Agency fees ................................................$150,000
        Miscellaneous .....................................................$53,000

        Total .............................................................$450,000
</TABLE>

All of the above except the Securities and Exchange Commission registration fee
are estimated.

ITEM 15.  INDEMNIFICATION OF OFFICERS AND DIRECTORS.

        Section 317 of the Corporations Code of the State of California permits
a corporation to provide indemnification to its directors and officers under
certain circumstances. Our Articles of Incorporation and Amended and Restated
Bylaws, each as amended to date, eliminate the liability of directors for
monetary damages to the fullest extent permissible under California law and
provide that indemnification for liability for monetary damages incurred by our
directors, officers and other agents shall be allowed, subject to certain
limitations, in excess of the indemnification otherwise permissible under
California law. In addition, we have indemnification agreements with each of our
directors that provide for indemnification for monetary damages to the fullest
extent permissible under California law. We maintain liability insurance and are
also insured against loss for which we may be required or permitted by law to
indemnify our directors and officers for our related acts.

        Our directors and officers are covered by insurance policies
indemnifying them against certain liabilities, including certain liabilities
arising under the Securities Act, which might be incurred by them in their
capacities as directors and/or officers and against which they cannot be
indemnified by us.

ITEM 16. EXHIBITS.

1.1*    Form of Underwriting Agreement.

4.1     Indenture between Mercury General and Bank One Trust Company, N.A, as
        trustee.

4.2     Form of Note (included in Exhibit 4.1).

5.1     Opinion of Latham & Watkins.

12.1    Statement regarding the computation of ratio of earnings to fixed
        charges for the three month period ended March 31, 2001 and the years
        ended December 31, 2000, 1999, 1998, 1997 and 1996.

23.1    Consent of Latham & Watkins (included in Exhibit 5.1).

23.2    Consent of KPMG LLP, Independent Certified Public Accountants.

24.1    Powers of Attorney (included in the signature page of this registration
        statement).

25.1**  Statement of Eligibility on Form T-1 under the Trust Indenture Act of
        1939, as amended, Bank One Trust Company, N.A., as Trustee under the
        Indenture.

- ----------------


                                       19
<PAGE>   22

*       To be filed by amendment or incorporated by reference in connection with
        the offering of the debt securities.

**      Filed pursuant to Section 305(b)(2) of the TIA.


ITEM 17. UNDERTAKINGS.

        The undersigned registrant hereby undertakes:

        (1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:

            (i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;

            (ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
debt securities offered (if the total dollar value of debt securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Securities and Exchange Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement;
and

            (iii) to include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;

provided, however, that (i) and (ii) do not apply if the information required to
be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Securities and Exchange
Commission by the registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in the registration statement.

        (2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the debt securities offered therein, and the
offering of such debt securities at that time shall be deemed to be the initial
bona fide offering thereof.

        (3) To remove from registration by means of post-effective amendment any
of the debt securities being registered which remain unsold at the termination
of the offering.

        (4) That, for purposes of determining any liability under the Securities
Act, each filing of Mercury General's annual report pursuant to Section 13(a) or
Section 15(d) of the Exchange Act that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the debt securities offered herein, and the offering of such debt
securities at that time shall be deemed to be the initial bona fide offering
thereof.

        (5) That, insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the provisions described under Item 15 above, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by a registrant of expenses incurred or paid by a director, officer or
controlling person in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with
the debt securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.

        (6) That, for purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form


                                       20
<PAGE>   23

of prospectus filed by us pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration statement as of
the time it was declared effective.

        (7) That, for purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.




                                       21
<PAGE>   24

                                   SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Los Angeles, California, on June 4, 2001.


                                  MERCURY GENERAL CORPORATION

                                  By:    /s/ George Joseph
                                         ---------------------------------------
                                         George Joseph
                                         Chairman of the Board, President and
                                         Chief Executive Officer


                                POWER OF ATTORNEY

        KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below does hereby constitute and appoint George Joseph and Gabriel
Tirador, and each of them, with full power of substitution and full power to act
without the other, his true and lawful attorney-in-fact and agents to act for
him in his name, place and stead, in any and all capacities, to sign a
registration statement on Form S-3 and any or all amendments thereto (including
without limitation any post-effective amendments thereto), and any registration
statement for the same offering that is to be effective under Rule 462(b) of the
Securities Act, and to file each of the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same as fully, to all intents and purposes, as they or he might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by each of the following persons in the
capacities and on the dates indicated.


<TABLE>
<CAPTION>
               SIGNATURE                                TITLE                        DATE
               ---------                                -----                        ----
<S>                                      <C>                                   <C>
/s/ George Joseph                        Chairman of the Board, President      June 4, 2001
- -----------------------------------      and Chief Executive Officer
George Joseph

/s/ Gabriel Tirador                      Vice President and Chief Financial    June 4, 2001
- -----------------------------------      Officer (Principal Financial
Gabriel Tirador                          Officer)


/s/ Theodore Stalick                     Chief Accounting Officer (Principal   June 4, 2001
- -----------------------------------      Accounting Officer)
Theodore Stalick

/s/ Nathan Bessin                        Director                              June 4, 2001
- -----------------------------------
Nathan Bessin

/s/ Bruce A. Bunner                      Director                              June 4, 2001
- -----------------------------------
Bruce A. Bunner

/s/ Michael D. Curtius                   Director                              June 4, 2001
- -----------------------------------
Michael D. Curtius
</TABLE>



                                       22
<PAGE>   25

<TABLE>
<CAPTION>
               SIGNATURE                                TITLE                        DATE
               ---------                                -----                        ----
<S>                                      <C>                                   <C>
/s/ Richard E. Grayson                   Director                              June 4, 2001
- -----------------------------------
Richard E. Grayson

/s/ Gloria Joseph                        Director                              June 4, 2001
- -----------------------------------
Gloria Joseph

/s/ Charles McClung                      Director                              June 4, 2001
- -----------------------------------
Charles McClung

/s/ Donald P. Newell                     Director                              June 4, 2001
- -----------------------------------
Donald P. Newell

/s/ Donald R. Spuehler                   Director                              June 4, 2001
- -----------------------------------
Donald R. Spuehler
</TABLE>




                                       23

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.1
<SEQUENCE>2
<FILENAME>a73188orex4-1.txt
<DESCRIPTION>EXHIBIT 4.1
<TEXT>

<PAGE>   1
                                                                     EXHIBIT 4.1

                  --------------------------------------------



                           MERCURY GENERAL CORPORATION







                          BANK ONE TRUST COMPANY, N.A.

                                     TRUSTEE



                  --------------------------------------------



                                    INDENTURE



                            DATED AS OF JUNE 1, 2001



                  --------------------------------------------

<PAGE>   2
           CERTAIN SECTIONS OF THIS INDENTURE RELATING TO SECTIONS 310
           THROUGH 318, INCLUSIVE, OF THE TRUST INDENTURE ACT OF 1939:

<TABLE>
<CAPTION>
    TRUST INDENTURE
      ACT SECTION                                                INDENTURE SECTION
- -----------------------                                          -----------------
<S>                                                              <C>
 Section 310(a)(1).....................................................   609
             (a)(2)....................................................   609
             (a)(3)....................................................   Not Applicable
             (a)(4)....................................................   Not Applicable
             (b).......................................................   608, 610
 Section 311(a)........................................................   613
             (b).......................................................   613
 Section 312(a)........................................................   701, 702
             (b).......................................................   702
             (c).......................................................   702
 Section 313(a)........................................................   703
             (b).......................................................   703
             (c).......................................................   703
             (d).......................................................   703
 Section 314(a)........................................................   704
             (a)(4)                                                       101, 1005
             (b).......................................................   Not Applicable
             (c)(1)....................................................   102
             (c)(2)....................................................   102
             (c)(3)....................................................   Not Applicable
             (d).......................................................   Not Applicable
             (e).......................................................   102
 Section 315(a)........................................................   601
             (b).......................................................   602
             (c).......................................................   601
             (d).......................................................   601
             (e).......................................................   514
 Section 316(a)........................................................   101
             (a)(1)(A).................................................   502, 512
             (a)(1)(B).................................................   513
             (a)(2)....................................................   Not Applicable
             (b).......................................................   508
             (c).......................................................   104
 Section 317(a)(1).....................................................   503
             (a)(2)....................................................   504
             (b).......................................................   1003
 Section 318(a)........................................................   107
</TABLE>

- -------------

Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.


                                       i
<PAGE>   3
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                          Page
                                                                                          ----
<S>                                                                                       <C>
ARTICLE I. DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION...........................1

    Section 101.  Definitions................................................................1
    Section 102.  Compliance Certificates and Opinions.......................................6
    Section 103.  Form of Documents Delivered to Trustee.....................................7
    Section 104.  Acts of Holders; Record Dates..............................................8
    Section 105.  Notices, Etc., to Trustee and Corporation.................................10
    Section 106.  Notice to Holders; Waiver.................................................10
    Section 107.  Conflict with Trust Indenture Act.........................................11
    Section 108.  Effect of Headings and Table of Contents..................................11
    Section 109.  Successors and Assigns....................................................11
    Section 110.  Separability Clause.......................................................11
    Section 111.  Benefits of Indenture.....................................................11
    Section 112.  Governing Law.............................................................11
    Section 113.  Legal Holidays............................................................11
    Section 114.  No Security Interest Created..............................................12

ARTICLE II. SECURITY FORMS..................................................................12

    Section 201.  Forms Generally...........................................................12
    Section 202.  Form of Face of Security..................................................12
    Section 203.  Form of Reverse of Security...............................................14
    Section 204.  Form of Legend for Global Securities......................................18
    Section 205.  Form of Trustee's Certificate of Authentication...........................19

ARTICLE III. The Securities.................................................................19

    Section 301.  Amount Unlimited; Issuable in Series......................................19
    Section 302.  Denominations.............................................................22
    Section 303.  Execution, Authentication, Delivery and Dating............................22
    Section 304.  Temporary Securities......................................................24
    Section 305.  Registration, Registration of Transfer and Exchange.......................24
    Section 306.  Mutilated, Destroyed, Lost and Stolen Securities..........................26
    Section 307.  Payment of Interest; Interest Rights Preserved............................27
    Section 308.  Persons Deemed Owners.....................................................28
    Section 309.  Cancellation..............................................................28
    Section 310.  Computation of Interest...................................................29
    Section 311.  CUSIP Numbers.............................................................29

ARTICLE IV. Satisfaction and Discharge......................................................29

    Section 401.  Satisfaction and Discharge of Indenture...................................29
    Section 402.  Application of Trust Money................................................30
</TABLE>


                                       ii

<PAGE>   4
<TABLE>
<S>                                                                                         <C>
ARTICLE V. Remedies.........................................................................31

    Section 501.  Events of Default.........................................................31
    Section 502.  Acceleration of Maturity; Rescission and Annulment........................32
    Section 503.  Collection of Indebtedness and Suits for Enforcement by Trustee...........33
    Section 504.  Trustee May File Proofs of Claim..........................................34
    Section 505.  Trustee May Enforce Claims Without Possession of Securities...............34
    Section 506.  Application of Money Collected............................................35
    Section 507.  Limitation on Suits.......................................................35
    Section 508.  Unconditional Right of Holders to Receive Principal, Premium and
                  Interest..................................................................36
    Section 509.  Restoration of Rights and Remedies........................................36
    Section 510.  Rights and Remedies Cumulative............................................36
    Section 511.  Delay or Omission Not Waiver..............................................36
    Section 512.  Control By Holders........................................................37
    Section 513.  Waiver of Past Defaults...................................................37
    Section 514.  Undertaking for Costs.....................................................37
    Section 515.  Waiver of Stay or Extension Laws..........................................38

ARTICLE VI. THE TRUSTEE.....................................................................38

    Section 601.  Certain Duties and Responsibilities.......................................38
    Section 602.  Notice of Defaults........................................................38
    Section 603.  Certain Rights of Trustee.................................................38
    Section 604.  Not Responsible for Recitals or Issuance of Securities....................40
    Section 605.  May Hold Securities.......................................................40
    Section 606.  Money Held in Trust.......................................................40
    Section 607.  Compensation and Reimbursement............................................40
    Section 608.  Conflicting Interests.....................................................41
    Section 609.  Corporate Trustee Required; Eligibility...................................41
    Section 610.  Resignation and Removal; Appointment of Successor.........................41
    Section 611.  Acceptance of Appointment by Successor....................................43
    Section 612.  Merger, Conversion, Consolidation or Succession to Business...............44
    Section 613.  Preferential Collection of Claims Against Corporation.....................44
    Section 614.  Appointment of Authenticating Agent.......................................44
    Section 615.  Trustee's Application for Instructions from the Corporation...............46

ARTICLE VII. HOLDERS' LISTS AND REPORTS BY TRUSTEE AND CORPORATION..........................46

    Section 701.  Corporation to Furnish Trustee Names and Addresses of Holders.............46
    Section 702.  Preservation of Information; Communications to Holders....................47
    Section 703.  Reports by Trustee........................................................47
    Section 704.  Reports by Corporation....................................................47

ARTICLE VIII. CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER.................................48

    Section 801.  Corporation May Consolidate, Etc., Only on Certain Terms..................48
    Section 802.  Successor Substituted.....................................................48
</TABLE>


                                      iii
<PAGE>   5
<TABLE>
<S>                                                                                        <C>
ARTICLE IX. SUPPLEMENTAL INDENTURES.........................................................49

    Section 901.  Supplemental Indentures Without Consent of Holders........................49
    Section 902.  Supplemental Indentures With Consent of Holders...........................50
    Section 903.  Execution of Supplemental Indentures......................................51
    Section 904.  Effect of Supplemental Indentures.........................................51
    Section 905.  Conformity with Trust Indenture Act.......................................51
    Section 906.  Reference in Securities to Supplemental Indentures........................52

ARTICLE X. COVENANTS........................................................................52

    Section 1001. Payment of Principal, Premium and Interest................................52
    Section 1002. Maintenance of Office or Agency...........................................52
    Section 1003. Money for Securities Payments to Be Held in Trust.........................52
    Section 1004. Corporate Existence.......................................................54
    Section 1005. Statement by Officers as to Default.......................................54
    Section 1006. Waiver of Certain Covenants...............................................54

ARTICLE XI. REDEMPTION OF SECURITIES........................................................54

    Section 1101. Applicability of Article..................................................54
    Section 1102. Election to Redeem; Notice to Trustee.....................................54
    Section 1103. Selection by Trustee of Securities to Be Redeemed.........................55
    Section 1104. Notice of Redemption......................................................55
    Section 1105. Deposit of Redemption Price...............................................57
    Section 1106. Securities Payable on Redemption Date.....................................57
    Section 1107. Securities Redeemed in Part...............................................57

ARTICLE XII. SINKING FUNDS..................................................................58

    Section 1201. Applicability of Article..................................................58
    Section 1202. Satisfaction of Sinking Fund Payments with Securities.....................58
    Section 1203. Redemption of Securities for Sinking Fund.................................58

ARTICLE XIII. DEFEASANCE AND COVENANT DEFEASANCE............................................59

    Section 1301. Applicability of Article..................................................59
    Section 1302. Defeasance and Discharge..................................................59
    Section 1303. Covenant Defeasance.......................................................59
    Section 1304. Conditions to Defeasance or Covenant Defeasance...........................60
    Section 1305. Deposited Money and Government Obligations to Be Held in Trust;
                  Miscellaneous Provisions..................................................61

ARTICLE XIV. IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS................61

    Section 1401. Indenture and Securities Solely Corporate Obligations.....................61
</TABLE>



                                       iv
<PAGE>   6
        INDENTURE, dated as of June 1, 2001, between Mercury General
Corporation, a corporation duly organized and existing under the laws of the
State of California (herein called the "Corporation") with its principal
executive office at 4484 Wilshire Boulevard, Los Angeles, California 90010, and
Bank One Trust Company, N.A., a national banking association duly organized and
existing under the laws of the United States of America, as Trustee (herein
called the "Trustee").

        The Corporation has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured senior
debentures, notes or other evidences of indebtedness (herein called the
"Securities"), to be issued in one or more series as in this Indenture provided.
All things necessary to make this Indenture a valid agreement of the
Corporation, in accordance with its terms, have been done.

        For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities or of series thereof, as
follows:

                                    ARTICLE I
                        DEFINITIONS AND OTHER PROVISIONS
                             OF GENERAL APPLICATION

SECTION 101.  DEFINITIONS.

        For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:

               (1) the terms defined in this Article have the meanings assigned
        to them in this Article and include the plural as well as the singular;

               (2) all other terms used herein which are defined in the Trust
        Indenture Act, either directly or by reference therein, have the
        meanings assigned to them therein;

               (3) all accounting terms not otherwise defined herein have the
        meanings assigned to them in accordance with generally accepted
        accounting principles, and, except as otherwise herein expressly
        provided, the term "generally accepted accounting principles" with
        respect to any computation required or permitted hereunder shall mean
        such accounting principles as are generally accepted in the United
        States of America;

               (4) unless the context otherwise requires, any reference to an
        "Article" or a "Section" refers to an Article or a Section, as the case
        may be, of this Indenture; and

               (5) the words "herein," "hereof" and "hereunder" and other words
        of similar import refer to this Indenture as a whole and not to any
        particular Article, Section or other subdivision.

        "Act," when used with respect to any Holder, has the meaning specified
in Section 104.



                                       1
<PAGE>   7
        "Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.

        "Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 614 to act on behalf of the Trustee to authenticate
Securities of one or more series.

        "Board of Directors" means either the board of directors of the
Corporation or any duly authorized committee of that board.

        "Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Corporation to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.

        "Business Day," when used with respect to any Place of Payment, means a
day other than (i) a Saturday or a Sunday, (ii) a day on which banking
institutions in that Place of Payment or Los Angeles, California, are authorized
or obligated by law or executive order to remain closed or (iii) a day on which
the Corporate Trust Office of the Trustee is closed for business.

        "Commission" means the Securities and Exchange Commission, from time to
time constituted, created under the Exchange Act, or, if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.

        "Corporation" means the Person named as the "Corporation" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Corporation" shall mean such successor Person.

        "Company Request" or "Company Order" means a written request or order
signed in the name of the Corporation by any one of its Chairman of the Board,
its President, its Chief Financial Officer, any Vice President, its Treasurer or
any Assistant Treasurer, and delivered to the Trustee.

        "Corporate Trust Office" means the office of the Trustee at which at any
particular time this Indenture shall be principally administered, which office
at the date hereof is located at 1 Bank One Plaza, Suite IL1-0126, Chicago,
Illinois 60670-0126, Attention: Corporate Trust Administration.

        "corporation" means a corporation, association, company, joint-stock
company or business trust.

        "Covenant Defeasance" has the meaning specified in Section 1303.

        "Defaulted Interest" has the meaning specified in Section 307.

                                       2
<PAGE>   8

        "Defeasance" has the meaning specified in Section 1302.

        "Depositary" means, with respect to Securities of any series issuable in
whole or in part in the form of one or more Global Securities, a clearing agency
registered under the Exchange Act that is designated to act as Depositary for
such Securities as contemplated by Section 301.

        "Event of Default" has the meaning specified in Section 501.

        "Exchange Act" means the Securities Exchange Act of 1934 and any statute
successor thereto, in each case as amended from time to time.

        "Expiration Date" has the meaning specified in Section 104.

        "Global Security" means a Security that evidences all or part of the
Securities of any series which is issued to a Depositary or a nominee thereof
for such series in accordance with Section 301(17).

        "Government Obligation" has the meaning specified in Section 1304.

        "Holder" means a Person in whose name a Security is registered in the
Security Register.

        "Indenture" means this instrument as originally executed and as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively. The term "Indenture" shall also include the terms of particular
series of Securities established as contemplated by Section 301.

        "interest," when used with respect to an Original Issue Discount
Security which by its terms bears interest only after Maturity, means interest
payable after Maturity.

        "Interest Payment Date," when used with respect to any Security, means
the Stated Maturity of an installment of interest on such Security.

        "Investment Company Act" means the Investment Company Act of 1940 and
any statute successor thereto, in each case as amended from time to time.

        "Maturity," when used with respect to any Security, means the date on
which the principal of such Security or an installment of principal becomes due
and payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.

        "Notice of Default" means a written notice of the kind specified in
Section 501(4).

        "Officer's Certificate" means a certificate signed by any one of the
Chairman of the Board, the Chief Executive Officer, the President, the Chief
Financial Officer, any Vice President, the


                                       3
<PAGE>   9
Treasurer, any Assistant Treasurer, the Controller, any Assistant Controller,
the Secretary or any Assistant Secretary, of the Corporation, and delivered to
the Trustee. One of the officers signing an Officer's Certificate given pursuant
to Section 1005 shall be the principal executive, financial or accounting
officer of the Corporation.

        "Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Corporation, or other counsel.

        "Original Issue Discount Security" means any Security which provides for
an amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section 502.

        "Outstanding," when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:

               (1) Securities theretofore canceled by the Trustee or delivered
        to the Trustee for cancellation;

               (2) Securities for whose payment or redemption the necessary
        amount of money or money's worth has been theretofore deposited with the
        Trustee or any Paying Agent (other than the Corporation) in trust or set
        aside and segregated in trust by the Corporation (if the Corporation
        shall act as its own Paying Agent) for the Holders of such Securities;
        provided that, if such Securities are to be redeemed, notice of such
        redemption has been duly given pursuant to this Indenture or provision
        therefor satisfactory to the Trustee has been made;

               (3) Securities as to which Defeasance has been effected pursuant
        to Section 1302; and

               (4) Securities which have been paid pursuant to Section 306 or in
        exchange for or in lieu of which other Securities have been
        authenticated and delivered pursuant to this Indenture, other than any
        such Securities in respect of which there shall have been presented to
        the Trustee proof satisfactory to it that such Securities are held by a
        bona fide purchaser in whose hands such Securities are valid obligations
        of the Corporation;

provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given, made or taken any
request, demand, authorization, direction, notice, consent, waiver or other
action hereunder as of any date, (A) the principal amount of an Original Issue
Discount Security which shall be deemed to be Outstanding shall be the amount of
the principal thereof which would be due and payable as of such date upon
acceleration of the Maturity thereof to such date pursuant to Section 502, (B)
if, as of such date, the principal amount payable at the Stated Maturity of a
Security is not determinable, the principal amount of such Security which shall
be deemed to be Outstanding shall be the amount as specified or determined as
contemplated by Section 301, (C) the principal amount of a Security denominated
in one or more foreign currencies or currency units which shall be deemed to be
Outstanding shall be the U.S. dollar equivalent, determined as of such date in
the manner provided



                                       4
<PAGE>   10

as contemplated by Section 301, of the principal amount of such Security (or, in
the case of a Security described in Clause (A) or (B) above, of the amount
determined as provided in such Clause), and (D) Securities owned by the
Corporation or any other obligor upon the Securities or any Affiliate of the
Corporation or of such other obligor, whether of record or beneficially, shall
be disregarded and deemed not to be Outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent, waiver or other action, only
Securities which a Responsible Officer of the Trustee actually knows to be so
owned shall be so disregarded. Securities so owned which have been pledged in
good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Securities and that the pledgee is not the Corporation or any other obligor upon
the Securities or any Affiliate of the Corporation or of such other obligor.

        "Paying Agent" means any Person authorized by the Corporation to pay the
principal of or any premium or interest on any Securities on behalf of the
Corporation.

        "Periodic Offering" means an offering of Securities of a series from
time to time the specific terms of which Securities, including without
limitation the rate or rates of interest or formula for determining the rate or
rates of interest thereon, if any, the Stated Maturity or Maturities thereof and
the redemption provisions, if any, with respect thereto, are to be determined by
the Corporation upon the issuance of such Securities.

        "Person" means any individual, corporation, partnership, limited
liability company or corporation, joint venture, trust, unincorporated
organization or government or any agency or political subdivision thereof.

        "Place of Payment," when used with respect to the Securities of any
series, means the place or places where the principal of and any premium and
interest on the Securities of that series are payable as specified as
contemplated by Section 301.

        "Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.

        "Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.

        "Redemption Price," when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.

        "Regular Record Date" for the interest payable on any Interest Payment
Date on the Securities of any series means the date specified for that purpose
as contemplated by Section 301.

        "Responsible Officer," when used with respect to the Trustee, means any
officer assigned by the Trustee to administer corporate matters and also means,
with respect to a particular



                                       5
<PAGE>   11

corporate trust matter, any other officer to whom such matter is referred
because of such person's knowledge of and familiarity with the particular
subject and who shall have direct responsibility for the administration of this
Indenture.

        "Securities" has the meaning stated in the first recital of this
Indenture and more particularly means any Securities authenticated and delivered
under this Indenture.

        "Securities Act" means the Securities Act of 1933 and any statute
successor thereto, in each case as amended from time to time.

        "Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.

        "Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 307.

        "Stated Maturity," when used with respect to any Security or any
installment of principal thereof or interest thereon, means the date specified
in such Security as the date on which the principal of such Security or such
installment of principal or interest is due and payable, in the case of such
principal, as such date may be advanced or extended as provided pursuant to the
terms of such Security and this Indenture.

        "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force
at the date as of which this instrument was executed; provided, however, that in
the event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" shall mean, to the extent required by any such amendment, the
Trust Indenture Act of 1939 as so amended.

        "Trustee" means the Person named as the "Trustee" in the first paragraph
of this instrument until a successor Trustee shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Trustee" shall mean
or include each Person who is then a Trustee hereunder, and if at any time there
is more than one such Person, "Trustee" as used with respect to the Securities
of any series shall mean the Trustee with respect to Securities of that series.

        "Vice President," when used with respect to the Corporation or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president."

SECTION 102.  COMPLIANCE CERTIFICATES AND OPINIONS.

        Upon any application or request by the Corporation to the Trustee to
take any action under any provision of this Indenture, the Corporation shall
furnish to the Trustee such certificates and opinions as may be required under
the Trust Indenture Act. Each such certificate or opinion shall be given in the
form of an Officer's Certificate, if to be given by an officer of the
Corporation, or an Opinion of Counsel, if to be given by counsel, and shall
comply with the requirements of the Trust Indenture Act and any other
requirements set forth in this Indenture.


                                       6
<PAGE>   12
        Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include:

               (1) a statement that each individual signing such certificate or
        opinion has read such covenant or condition and the definitions herein
        relating thereto;

               (2) a brief statement as to the nature and scope of the
        examination or investigation upon which the statements or opinions
        contained in such certificate or opinion are based;

               (3) a statement that, in the opinion of each such individual, he
        or she has made such examination or investigation as is necessary to
        express an informed opinion as to whether or not such covenant or
        condition has been complied with; and

               (4) a statement as to whether, in the opinion of each such
        individual, such condition or covenant has been complied with.

SECTION 103.   FORM OF DOCUMENTS DELIVERED TO TRUSTEE.

        In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.

        Any certificate or opinion of an officer of the Corporation may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which such Officer's Certificate or opinion is
based are erroneous. Any such certificate or opinion of counsel may be based,
insofar as it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Corporation stating that the
information with respect to such factual matters is in the possession of the
Corporation, unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous.

        Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.

        Whenever, subsequent to the receipt by the Trustee of any Board
Resolution, Officer's Certificate, Opinion of Counsel or other document or
instrument, a clerical, typographical or other inadvertent or unintentional
error or omission shall be discovered therein, a new document or instrument may
be substituted therefor in corrected form with the same force and effect as if
originally filed in the corrected form and, irrespective of the date or dates of
the actual execution and/or delivery thereof, such substitute document or
instrument shall be deemed to have been



                                       7
<PAGE>   13

executed and/or delivered as of the date or dates required with respect to the
document or instrument for which it is substituted. Anything in this Indenture
to the contrary notwithstanding, if any such corrective document or instrument
indicates that action has been taken by or at the request of the Corporation
which could not have been taken had the original document or instrument not
contained such error or omission, the action so taken shall not be invalidated
or otherwise rendered ineffective but shall be and remain in full force and
effect, except to the extent that such action was a result of willful misconduct
or bad faith. Without limiting the generality of the foregoing, any Securities
issued under the authority of such defective document or instrument shall
nevertheless be the valid obligations of the Corporation entitled to the
benefits of this Indenture equally and ratably with all other Outstanding
Securities, except as aforesaid.

SECTION 104.   ACTS OF HOLDERS; RECORD DATES.

        Any request, demand, authorization, direction, notice, consent, waiver
or other action provided or permitted by this Indenture to be given, made or
taken by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Corporation.
Such instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 601) conclusive in favor of the Trustee and
the Corporation, if made in the manner provided in this Section.

        The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
a signer acting in a capacity other than the signer's individual capacity, such
certificate or affidavit shall also constitute sufficient proof of the signer's
authority. The fact and date of the execution of any such instrument or writing,
or the authority of the Person executing the same, may also be proved in any
other manner which the Trustee deems sufficient.

        The ownership of Securities shall be proved by the Security Register.

        Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Security shall bind every future Holder of the
same Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Corporation
in reliance thereon, whether or not notation of such action is made upon such
Security.

        The Corporation may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities of any series entitled to
give, make or take any request, demand, authorization, direction, notice,
consent, waiver or other action provided or permitted by



                                       8
<PAGE>   14

this Indenture to be given, made or taken by Holders of Securities of such
series; provided that the Corporation may not set a record date for, and the
provisions of this paragraph shall not apply with respect to, the giving or
making of any notice, declaration, request or direction referred to in the next
paragraph. If any record date is set pursuant to this paragraph, the Holders of
Outstanding Securities of the relevant series on such record date, and no other
Holders, shall be entitled to take or revoke the relevant action, whether or not
such Holders remain Holders after such record date; provided that no such action
shall be effective hereunder unless taken on or prior to the applicable
Expiration Date by Holders of the requisite principal amount of Outstanding
Securities of such series on such record date. Nothing in this paragraph shall
be construed to prevent the Corporation from setting a new record date for any
action for which a record date has previously been set pursuant to this
paragraph (whereupon the record date previously set shall automatically and with
no action by any Person be canceled and of no effect), and nothing in this
paragraph shall be construed to render ineffective any action taken by Holders
of the requisite principal amount of Outstanding Securities of the relevant
series on the date such action is taken. Promptly after any record date is set
pursuant to this paragraph, the Corporation, at its own expense, shall cause
notice of such record date, the proposed action by Holders and the applicable
Expiration Date to be given to the Trustee in writing and to each Holder of
Securities of the relevant series in the manner set forth in Section 106.

        The Trustee may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities of any series entitled to join
in the giving or making of (i) any Notice of Default, (ii) any declaration of
acceleration referred to in Section 502, (iii) any request to institute
proceedings referred to in Section 507(2) or (iv) any direction referred to in
Section 512, in each case with respect to Securities of such series. If any
record date is set pursuant to this paragraph, the Holders of Outstanding
Securities of such series on such record date, and no other Holders, shall be
entitled to join in such notice, declaration, request or direction or to revoke
the same, whether or not such Holders remain Holders after such record date;
provided that no such action shall be effective hereunder unless taken on or
prior to the applicable Expiration Date by Holders of the requisite principal
amount of Outstanding Securities of such series on such record date. Nothing in
this paragraph shall be construed to prevent the Trustee from setting a new
record date for any action for which a record date has previously been set
pursuant to this paragraph (whereupon the record date previously set shall
automatically and with no action by any Person be canceled and of no effect),
and nothing in this paragraph shall be construed to render ineffective any
action taken by Holders of the requisite principal amount of Outstanding
Securities of the relevant series on the date such action is taken. Promptly
after any record date is set pursuant to this paragraph, the Trustee, at the
Corporation's expense, shall cause notice of such record date, the proposed
action by Holders and the applicable Expiration Date to be sent to the
Corporation in writing and to each Holder of Securities of the relevant series
in the manner set forth in Section 106.

        With respect to any record date set pursuant to this Section, the party
hereto which sets such record date may designate any day as the "Expiration
Date" and from time to time may change the Expiration Date to any earlier or
later day; provided that no such change shall be effective unless notice of the
proposed new Expiration Date is given to the other party hereto in writing, and
to each Holder of Securities of the relevant series in the manner set forth in
Section 106, on or prior to the existing Expiration Date. If an Expiration Date
is not designated



                                       9
<PAGE>   15

with respect to any record date set pursuant to this Section, the party hereto
which set such record date shall be deemed to have initially designated the
180th day after such record date as the Expiration Date with respect thereto,
subject to its right to change the Expiration Date as provided in this
paragraph. Notwithstanding the foregoing, no Expiration Date shall be later than
the 180th day after the applicable record date.

        Without limiting the foregoing, a Holder entitled hereunder to take any
action hereunder with regard to any particular Security may do so with regard to
all or any part of the principal amount of such Security or by one or more duly
appointed agents each of which may do so pursuant to such appointment with
regard to all or any part of such principal amount.

SECTION 105.  NOTICES, ETC., TO TRUSTEE AND CORPORATION.

        Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,

               (1) the Trustee by any Holder or by the Corporation shall be
        sufficient for every purpose hereunder if made, given, furnished or
        filed in writing (which may be made via facsimile) to or with a
        Responsible Officer of the Trustee at its Corporate Trust Office, or

               (2) the Corporation by the Trustee or by any Holder shall be
        sufficient for every purpose hereunder (unless otherwise herein
        expressly provided) if in writing and mailed, first-class postage
        prepaid, to the Corporation addressed to it at the address of its
        principal office specified in the first paragraph of this instrument,
        Attention: Chief Financial Officer, or at any other address previously
        furnished in writing to the Trustee by the Corporation.

SECTION 106.  NOTICE TO HOLDERS; WAIVER.

        Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Security Register, not later
than the latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where notice to Holders is
given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders. Where this Indenture provides for notice
in any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.



                                       10
<PAGE>   16

        In case by reason of the suspension of regular mail service or by reason
of any other cause it shall be impracticable to give such notice by mail, then
such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.

SECTION 107.   CONFLICT WITH TRUST INDENTURE ACT.

        If any provision hereof limits, qualifies or conflicts with a provision
of the Trust Indenture Act which is required under such Act to be a part of and
govern this Indenture, the latter provision shall control. If any provision of
this Indenture modifies or excludes any provision of the Trust Indenture Act
which may be so modified or excluded, the latter provision shall be deemed to
apply to this Indenture as so modified or to be excluded, as the case may be.

SECTION 108.   EFFECT OF HEADINGS AND TABLE OF CONTENTS.

        The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.

SECTION 109.   SUCCESSORS AND ASSIGNS.

        All covenants and agreements in this Indenture by the Corporation shall
bind its successors and assigns, whether so expressed or not.

SECTION 110.   SEPARABILITY CLAUSE.

        In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.

SECTION 111.   BENEFITS OF INDENTURE.

        Unless otherwise specified pursuant to Section 301 with respect to the
Securities of any series, nothing in this Indenture or in the Securities,
express or implied, shall give to any Person, other than the parties hereto,
their successors hereunder and the Holders, any benefit or any legal or
equitable right, remedy or claim under this Indenture.

SECTION 112.   GOVERNING LAW.

        This Indenture and the Securities shall be governed by and construed in
accordance with the laws of the State of New York, without regard to conflicts
of laws principles thereof.

SECTION 113.   LEGAL HOLIDAYS.

        Unless otherwise specified pursuant to Section 301 with respect to the
Securities of any series, in any case where any Interest Payment Date,
Redemption Date or Stated Maturity of any Security shall not be a Business Day,
then (notwithstanding any other provision of this Indenture or of the Securities
(other than a provision of any Security which specifically states that such
provision shall apply in lieu of this Section)) payment of interest or principal
(and premium, if any)



                                       11
<PAGE>   17

need not be made on such date, but may be made on the next succeeding Business
Day, unless that Business Day is in a different calendar year, in which case the
payment will be made on the preceding Business Day, in each case, with the same
force and effect as if made on the Interest Payment Date or Redemption Date, or
at the Stated Maturity.

SECTION 114.  NO SECURITY INTEREST CREATED.

        Nothing in this Indenture or in the Securities expressed or implied,
shall be construed to constitute a security interest under the Uniform
Commercial Code or similar legislation, as now or hereafter enacted and in
effect in any jurisdiction where property of the Corporation or its subsidiaries
is located.

                                   ARTICLE II.
                                 SECURITY FORMS

SECTION 201.  FORMS GENERALLY.

        The Securities of each series shall be in substantially the form set
forth in this Article, or in such other form as shall be established by or
pursuant to one or more Board Resolutions or in one or more indentures
supplemental hereto, in each case with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture, and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may be required to comply
with the rules of any securities exchange or Depositary therefor or as may,
consistently herewith, be determined by the officers executing such Securities,
as evidenced by their execution thereof. If the form of Securities of any series
is established by action taken pursuant to a Board Resolution, a copy of an
appropriate record of such action shall be certified by the Secretary or an
Assistant Secretary of the Corporation or an Officer's Certificate pursuant to
Section 301 and delivered to the Trustee at or prior to the delivery of the
Company Order contemplated by Section 303 for the authentication and delivery of
such Securities.

        The definitive Securities shall be printed, lithographed or engraved on
steel engraved borders or may be produced in any other manner, all as determined
by the officers executing such Securities, as evidenced by their execution of
such Securities.

SECTION 202.  FORM OF FACE OF SECURITY.

        [Insert any legend required by the Internal Revenue Code and the
regulations thereunder or by the Depositary.]



                                       12
<PAGE>   18

                           MERCURY GENERAL CORPORATION

                              ---------------------

                                                             $__________________
No. _________                                                     CUSIP No. ____

        Mercury General Corporation, a corporation duly organized and existing
under the laws of the State of California (herein called the "Corporation,"
which term includes any successor Person under the Indenture hereinafter
referred to), for value received, hereby promises to pay to ________________, or
registered assigns, the principal sum of ________ Dollars on
_________________________ [if the Security is to bear interest prior to Maturity
and interest payment periods are not extendable, insert - , and to pay interest
thereon from __________ or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, [insert - semi-annually, quarterly,
monthly or other description of the relevant payment period] on [________,
________,] and __________ in each year, commencing _______________, at the rate
of ____% per annum, until the principal hereof is paid or made available for
payment [if applicable, insert - , provided that any principal and premium, and
any such installment of interest, which is overdue shall bear interest at the
rate of ___% per annum (to the extent that the payment of such interest shall be
legally enforceable), from the dates such amounts are due until they are paid or
made available for payment, and such interest shall be payable on demand]. The
interest so payable, and punctually paid or duly provided for, on any Interest
Payment Date will, as provided in such Indenture, be paid to the Person in whose
name this Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest, which shall be
the ___________________ (whether or not a Business Day), as the case may be,
next preceding such Interest Payment Date. Any such interest not so punctually
paid or duly provided for will forthwith cease to be payable to the Holder on
such Regular Record Date and may either be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee, notice whereof shall be given to Holders of Securities
of this series not less than 10 days prior to such Special Record Date, or be
paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities of this series
may be listed, and upon such notice as may be required by such exchange, all as
more fully provided in said Indenture].

        [If the Security is not to bear interest prior to Maturity, insert - The
principal of this Security shall not bear interest except in the case of a
default in payment of principal upon acceleration, upon redemption or at Stated
Maturity and in such case the overdue principal and any overdue premium shall
bear interest at the rate of ____% per annum (to the extent that the payment of
such interest shall be legally enforceable), from the dates such amounts are due
until they are paid or made available for payment. Interest on any overdue
principal or premium shall be payable on demand. Any such interest on overdue
principal or premium which is not paid on demand shall bear interest at the rate
of ____% per annum (to the extent that the payment of such interest on interest
shall be legally enforceable), from the date of such demand until the amount so
demanded is paid or made available for payment. Interest on any overdue interest
shall be payable on demand.]



                                       13
<PAGE>   19
        Payment of the principal of (and premium, if any) and [if applicable,
insert - any such] interest on this Security will be made at the office or
agency of the Corporation maintained for that purpose in New York, New York, in
such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts [if applicable, insert -
; provided, however, that at the option of the Corporation payment of interest
may be made by check mailed to the address of the Person entitled thereto as
such address shall appear in the Security Register or by wire transfer at such
place and to such account at a banking institution in the United States as may
be designated in writing to the Trustee at least fifteen (15) days prior to the
date for payment by the Person entitled thereto]. [In the case of a Global
Security registered in the name of the Depository Trust Company or its nominee,
insert--Notwithstanding the foregoing, so long as the Holder of this Security is
the Depositary or its nominee, payment of the principal of (and premium, if any)
and [if applicable, insert--any such] interest on this Security will be made by
wire transfer of immediately available funds.]

        Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.

        Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.

        IN WITNESS WHEREOF, the Corporation has caused this instrument to be
duly executed.

Dated as of Date of Authentication:            MERCURY GENERAL CORPORATION


                                               By
                                                 -------------------------------
                                               By
                                                  ------------------------------

SECTION 203.  FORM OF REVERSE OF SECURITY.

        This Security is one of a duly authorized issue of securities of the
Corporation (herein called the "Securities"), issued and to be issued in one or
more series under an Indenture, dated as of June 1, 2001 (herein called the
"Indenture," which term shall have the meaning assigned to it in such
instrument), between the Corporation and Bank One Trust Company, N.A., as
Trustee (herein called the "Trustee," which term includes any successor trustee
under the Indenture), and reference is hereby made to the Indenture for a
statement of the respective rights, limitation of rights, duties and immunities
thereunder of the Corporation, the Trustee and the Holders of the Securities and
of the terms upon which the Securities are, and are to be, authenticated and
delivered. This Security is one of the series designated on the face hereof [if
applicable, insert - , limited in aggregate principal amount to $__________].



                                       14
<PAGE>   20

        If applicable, insert - The Securities of this series are subject to
redemption upon not less than 30 days' nor more than 60 days' prior written
notice by mail, [if applicable, insert - (1) on ____________ in any year
commencing with the year _____ and ending with the year _____ through operation
of the sinking fund for this series at a Redemption Price equal to 100% of the
principal amount, and (2)] at any time [if applicable, insert - on or after
___________, ____], as a whole or in part, at the election of the Corporation,
at the following Redemption Prices (expressed as percentages of the principal
amount): If redeemed [if applicable, insert - on or before _________________,
___%, and if redeemed] during the 12-month period beginning _________ of the
years indicated,

<TABLE>
<CAPTION>
      YEAR           REDEMPTION PRICE           YEAR          REDEMPTION PRICE
      ----           ----------------           ----          ----------------
<S>                  <C>                        <C>           <C>
</TABLE>



and thereafter at a Redemption Price equal to ____% of the principal amount,
together in the case of any such redemption [if applicable, insert - (whether
through operation of the sinking fund or otherwise)] with accrued interest to
the Redemption Date, but interest installments whose Stated Maturity is on or
prior to such Redemption Date will be payable to the Holders of such Securities,
or one or more Predecessor Securities, of record at the close of business on the
relevant Record Dates referred to on the face hereof, all as provided in the
Indenture.]

        [If applicable, insert - The Securities of this series are subject to
redemption upon not less than 30 days' nor more than 60 days' prior written
notice by mail, (1) on ____________ in any year commencing with the year ______
and ending with the year _____ through operation of the sinking fund for this
series at the Redemption Prices for redemption through operation of the sinking
fund (expressed as percentages of the principal amount) set forth in the table
below, and (2) at any time [if applicable, insert - on or after _____________],
as a whole or in part, at the election of the Corporation, at the Redemption
Prices for redemption otherwise than through operation of the sinking fund
(expressed as percentages of the principal amount) set forth in the table below:
If redeemed during the 12- month period beginning ________ of the years
indicated,

<TABLE>
<CAPTION>
                           REDEMPTION PRICE         REDEMPTION PRICE FOR
                                  FOR             REDEMPTION OTHERWISE THAN
                          REDEMPTION THROUGH          THROUGH OPERATION
                           OPERATION OF THE              OF THE SINKING
            YEAR             SINKING FUND                   FUND
            ----          -------------------     --------------------------
<S>        <C>            <C>                     <C>
</TABLE>


and thereafter at a Redemption Price equal to _____% of the principal amount,
together in the case of any such redemption (whether through operation of the
sinking fund or otherwise) with



                                       15
<PAGE>   21

accrued interest to the Redemption Date, but interest installments whose Stated
Maturity is on or prior to such Redemption Date will be payable to the Holders
of such Securities, or one or more Predecessor Securities, of record at the
close of business on the relevant Record Dates referred to on the face hereof,
all as provided in the Indenture.]

        [If applicable, insert - Notwithstanding the foregoing, the Corporation
may not, prior to _________, redeem any Securities of this series as
contemplated by [if applicable, insert - Clause (2) of] the preceding paragraph
as a part of, or in anticipation of, any refunding operation by the application,
directly or indirectly, of moneys borrowed having an interest cost to the
Corporation (calculated in accordance with generally accepted financial
practice) of less than ____% per annum.]

        [If applicable, insert - The sinking fund for this series provides for
the redemption on __________ in each year beginning with the year _______ and
ending with the year ______ of [if applicable, insert - not less than
$___________ ("mandatory sinking fund") and not more than] $____________
aggregate principal amount of Securities of this series. Securities of this
series acquired or redeemed by the Corporation otherwise than through [if
applicable, insert - mandatory] sinking fund payments may be credited against
subsequent [if applicable, insert - mandatory] sinking fund payments otherwise
required to be made [if applicable, insert - , in the inverse order in which
they become due].]

        [If the Security is subject to redemption of any kind, insert - In the
event of redemption of this Security in part only, a new Security or Securities
of this series and of like tenor for the unredeemed portion hereof will be
issued in the name of the Holder hereof upon the cancellation hereof.]

        [If the Security is not subject to redemption, insert - The Securities
are not subject to redemption prior to the Stated Maturity of the principal
thereof.]

        [If applicable, insert - The Indenture contains provisions for
defeasance at any time of [the entire indebtedness of this Security] [or]
[certain restrictive covenants and Events of Default with respect to this
Security] [, in each case] upon compliance with certain conditions set forth in
the Indenture.]

        [If the Security is not an Original Issue Discount Security, insert - If
an Event of Default with respect to Securities of this series shall occur and be
continuing, the principal of and accrued and unpaid interest on the Securities
of this series may be declared due and payable in the manner and with the effect
provided in the Indenture.]

        [If the Security is an Original Issue Discount Security, insert - If an
Event of Default with respect to Securities of this series shall occur and be
continuing, an amount of principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture. Such amount shall be equal to [insert formula for determining the
amount]. Upon payment (i) of the amount of principal so declared due and payable
and (ii) of interest on any overdue principal, premium and interest (in each
case to the extent that the payment of such interest shall be legally
enforceable), all of the Corporation's obligations in



                                       16
<PAGE>   22

respect of the payment of the principal of and premium and interest, if any, on
the Securities of this series shall terminate.]

        The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Corporation and the rights of the Holders of the Securities of all series
affected under the Indenture at any time by the Corporation and the Trustee with
the consent of the Holders of a majority in principal amount of the Securities
of all series at the time Outstanding affected thereby (voting as one class).
The Indenture contains provisions permitting the Holders of not less than a
majority in principal amount of the Securities of all series at the time
Outstanding with respect to which a default under the Indenture shall have
occurred and be continuing (voting as one class), on behalf of the Holders of
the Securities of all such series, to waive, with certain exceptions, such past
default with respect to all such series and its consequences. The Indenture also
permits the Holders of not less than a majority in principal amount of the
Securities of each series at the time Outstanding, on behalf of the Holders of
all Securities of such series, to waive compliance by the Corporation with
certain provisions of the Indenture. Any such consent or waiver by the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the registration
of transfer hereof or in exchange therefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security.

        As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity, and the Trustee
shall not have received from the Holders of a majority in principal amount of
Securities of this series at the time Outstanding a direction inconsistent with
such request, and shall have failed to institute any such proceeding, for 60
days after receipt of such notice, request and offer of indemnity. The foregoing
shall not apply to any suit instituted by the Holder of this Security for the
enforcement of any payment of principal hereof or any premium or interest hereon
on or after the respective due dates expressed herein.

        No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Corporation,
which is absolute and unconditional, to pay the principal of and any premium and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.

        As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Corporation in any place where the principal of and any
premium and interest on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Corporation and the Security Registrar duly executed by, the Holder hereof or
his attorney duly authorized in writing, and thereupon one or more new
Securities of this series and of like tenor, of authorized denominations



                                       17
<PAGE>   23

and for the same aggregate principal amount, will be issued to the designated
transferee or transferees.

        The Securities of this series are issuable only in registered form
without coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series and of like tenor of a different authorized
denomination, as requested by the Holder surrendering the same.

        No service charge shall be made for any such registration of transfer or
exchange, but the Corporation may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.

        Prior to due presentment of this Security for registration of transfer,
the Corporation, the Trustee and any agent of the Corporation or the Trustee may
treat the Person in whose name this Security is registered as the owner hereof
for all purposes, whether or not this Security be overdue, and neither the
Corporation, the Trustee nor any such agent shall be affected by notice to the
contrary.

        All terms used in this Security which are defined in the Indenture and
not defined herein shall have the meanings assigned to them in the Indenture.

        The Indenture and the Securities issued thereby shall be governed by and
construed in accordance with the laws of the State of New York.

        Section 204.  Form of Legend for Global Securities.

        Unless otherwise specified as contemplated by Section 301 for the
Securities evidenced thereby, every Global Security authenticated and delivered
hereunder shall bear a legend in substantially the following form:

               THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
               INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME
               OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE
               EXCHANGED IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND NO
               TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED,
               IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE
               THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
               INDENTURE.



                                       18
<PAGE>   24

SECTION 205.  FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.

        The Trustee's certificate of authentication shall be in substantially
the following form:

        This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.

                                       Bank One Trust Company, N.A.,
                                       As Trustee


                                       By:______________________________________
                                                   Authorized Signatory

Dated:  _________________


                                  ARTICLE III.
                                 THE SECURITIES

SECTION 301.   AMOUNT UNLIMITED; ISSUABLE IN SERIES.

        The aggregate principal amount of Securities which may be authenticated
and delivered under this Indenture is unlimited.

        The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution and, subject to Section 303,
set forth, or determined in the manner provided, in an Officer's Certificate, or
established in one or more indentures supplemental hereto, prior to the issuance
of Securities of any series,

               (1) the title of the Securities of the series (which shall
        distinguish the Securities of the series from Securities of any other
        series);

               (2) any limit upon the aggregate principal amount of the
        Securities of the series which may be authenticated and delivered under
        this Indenture (except for Securities authenticated and delivered upon
        registration of transfer of, or in exchange for, or in lieu of, other
        Securities of the series pursuant to Section 304, 305, 306, 906 or 1106
        and except for any Securities which, pursuant to Section 303, are deemed
        never to have been authenticated and delivered hereunder);

               (3) the Person to whom any interest on a Security of the series
        shall be payable, if other than the Person in whose name that Security
        (or one or more Predecessor Securities) is registered at the close of
        business on the Regular Record Date for such interest;

               (4) the date or dates on which the principal of any Securities of
        the series is payable or the method by which such date shall be
        determined and the right, if any, to



                                       19
<PAGE>   25

        shorten or extend the date on which the principal of any Securities of
        the series is payable and the conditions to any such change;

               (5) the rate or rates at which any Securities of the series shall
        bear interest, if any, or the method by which such rate or rates shall
        be determined; the date or dates from which any such interest shall
        accrue; the Interest Payment Dates on which any such interest shall be
        payable; the manner (if any) of determination of such Interest Payment
        Dates; and the Regular Record Date, if any, for any such interest
        payable on any Interest Payment Date;

               (6) the right, if any, to extend the interest payment periods
        and the terms of such extension or extensions;

               (7) the place or places where the principal of and any premium
        and interest on any Securities of the series shall be payable and
        whether, if acceptable to the Trustee, any principal of such Securities
        shall be payable without presentation or surrender thereof;

               (8) the period or periods within which, or the date or dates on
        which, the price or prices at which and the terms and conditions upon
        which any Securities of the series may be redeemed, in whole or in part,
        at the option of the Corporation and, if other than by a Board
        Resolution, the manner in which any election by the Corporation to
        redeem the Securities shall be evidenced;

               (9) the obligation, if any, of the Corporation to redeem or
        purchase any Securities of the series pursuant to any sinking fund,
        purchase fund or analogous provisions or at the option of the Holder
        thereof and the period or periods within which, the price or prices at
        which and the terms and conditions upon which any Securities of the
        series shall be redeemed or purchased, in whole or in part, pursuant to
        such obligation;

               (10) if other than denominations of $1,000 and any integral
        multiple thereof, the denominations in which any Securities of the
        series shall be issuable;

               (11) if the amount of principal of or any premium or interest on
        any Securities of the series may be determined with reference to an
        index or pursuant to a formula, the manner in which such amounts shall
        be determined;

               (12) if other than the currency of the United States of America,
        the currency, currencies or currency units in which the principal of or
        any premium or interest on any Securities of the series shall be payable
        and the manner of determining the equivalent thereof in the currency of
        the United States of America for any purpose, including for purposes of
        the definition of "Outstanding" in Section 101;

               (13) if the principal of or any premium or interest on any
        Securities of the series is to be payable, at the election of the
        Corporation or the Holder thereof, in one or more currencies or currency
        units other than that or those in which such Securities are stated to be
        payable, the currency, currencies or currency units in which the
        principal of or any premium or interest on such Securities as to which
        such election is made shall be payable,



                                       20
<PAGE>   26

        the periods within which and the terms and conditions upon which such
        election is to be made and the amount so payable (or the manner in which
        such amount shall be determined);

               (14) if other than the entire principal amount thereof, the
        portion of the principal amount of any Securities of the series which
        shall be payable upon declaration of acceleration of the Maturity
        thereof pursuant to Section 502;

               (15) if the principal amount payable at the Stated Maturity of
        any Securities of the series will not be determinable as of any one or
        more dates prior to the Stated Maturity, the amount which shall be
        deemed to be the principal amount of such Securities as of any such date
        for any purpose thereunder or hereunder, including the principal amount
        thereof which shall be due and payable upon any Maturity other than the
        Stated Maturity or which shall be deemed to be Outstanding as of any
        date prior to the Stated Maturity (or, in any such case, the manner in
        which such amount deemed to be the principal amount shall be
        determined);

               (16) if either or both of Sections 1302 and 1303 do not apply to
        any Securities of the series;

               (17) if applicable, that any Securities of the series shall be
        issuable in whole or in part in the form of one or more Global
        Securities and, in such case, the respective Depositary or Depositaries
        for such Global Securities, the form of any legend or legends which
        shall be borne by any such Global Security in addition to or in lieu of
        that set forth in Section 204 and any circumstances in addition to or in
        lieu of those set forth in Clause (2) of the last paragraph of Section
        305 in which any such Global Security may be exchanged in whole or in
        part for Securities registered, and any transfer of such Global Security
        in whole or in part may be registered, in the name or names of Persons
        other than the Depositary for such Global Security or a nominee thereof;

               (18) any addition, modification or deletion of any Events of
        Default or covenants provided with respect to any Securities of the
        series and any change in the right of the Trustee or the requisite
        Holders of such Securities to declare the principal amount thereof due
        and payable pursuant to Section 502;

               (19) any addition to or change in the covenants set forth in
        Article Ten which applies to Securities of the series; and

               (20) any other terms of the series.

        All Securities of any one series shall be substantially identical except
as to denomination and except as may otherwise be provided in or pursuant to the
Board Resolution referred to above and (subject to Section 303) set forth, or
determined in the manner provided, in the Officer's Certificate referred to
above or in any such indenture supplemental hereto.

        If any of the terms of the series are established by action taken
pursuant to a Board Resolution, a copy of an appropriate record of such action
shall be certified by the Secretary or an



                                       21
<PAGE>   27

Assistant Secretary of the Corporation and delivered to the Trustee at or prior
to the delivery of the Officer's Certificate setting forth the terms or the
manner of determining the terms of the series.

        With respect to Securities of a series offered in a Periodic Offering,
the Board Resolution (or action taken pursuant thereto), Officer's Certificate
or supplemental indenture referred to above may provide general terms or
parameters for Securities of such series and provide either that the specific
terms of particular Securities of such series shall be specified in a Company
Order or that such terms shall be determined by the Corporation in accordance
with other procedures specified in a Company Order as contemplated by the third
paragraph of Section 303.

        Notwithstanding Section 301(2) herein and unless otherwise expressly
provided with respect to a series of Securities, the aggregate principal amount
of a series of Securities may be increased and additional Securities of such
series may be issued up to the maximum aggregate principal amount authorized
with respect to such series as increased.

SECTION 302.   DENOMINATIONS.

        The Securities of each series shall be issuable only in fully registered
form without coupons and only in such denominations as shall be specified as
contemplated by Section 301. In the absence of any such specified denomination
with respect to the Securities of any series, the Securities of such series
shall be issuable in denominations of $1,000 and any integral multiple thereof.

SECTION 303.   EXECUTION, AUTHENTICATION, DELIVERY AND DATING.

        The Securities shall be executed on behalf of the Corporation by its
Chairman of the Board, its President, or a Vice President and the Secretary, an
Assistant Secretary, the Chief Financial Officer or an Assistant Treasurer. The
signature of any of these officers on the Securities may be manual or facsimile.

        Securities bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Corporation shall bind the
Corporation, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Securities or
did not hold such offices at the date of such Securities.

        At any time and from time to time after the execution and delivery of
this Indenture, the Corporation may deliver Securities of any series executed by
the Corporation to the Trustee for authentication, together with a Company Order
for the authentication and delivery of such Securities, and the Trustee in
accordance with the Company Order shall authenticate and deliver such
Securities, provided, however, that in the case of Securities offered in a
Periodic Offering, the Trustee shall authenticate and deliver such Securities
from time to time in accordance with such other procedures (including, without
limitation, the receipt by the Trustee of oral or electronic instructions from
the Corporation or its duly authorized agents, promptly confirmed in writing)
acceptable to the Trustee as may be specified by or pursuant to a Company Order
delivered to the Trustee prior to the time of the first authentication of
Securities of such series. If



                                       22
<PAGE>   28

the form or terms of the Securities of the series have been established by or
pursuant to one or more Board Resolutions as permitted by Sections 201 and 301,
in authenticating such Securities, and accepting the additional responsibilities
under this Indenture in relation to such Securities, the Trustee shall be
provided with, and (subject to Section 601) shall be fully protected in relying
upon, an Opinion of Counsel stating,

               (1) if the form of such Securities has been established by or
        pursuant to Board Resolution as permitted by Section 201, that such form
        has been established in conformity with the provisions of this
        Indenture;

               (2) if the terms of such Securities have been, or in the case of
        Securities of a series offered in a Periodic Offering, will be,
        established by or pursuant to Board Resolution as permitted by Section
        301, that such terms have been, or in the case of Securities of a series
        offered in a Periodic Offering, will be, established in conformity with
        the provisions of this Indenture, subject, in the case of Securities of
        a series offered in a Periodic Offering, to any conditions specified in
        such Opinion of Counsel; and

               (3) that such Securities, when issued and executed by the
        Corporation and when authenticated and delivered by the Trustee in the
        manner and subject to any conditions specified in such Opinion of
        Counsel, will constitute valid and legally binding obligations of the
        Corporation enforceable in accordance with their terms, subject to
        bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
        and similar laws of general applicability relating to or affecting
        creditors' rights and to general equity principles.

        If such form or terms have been so established, the Trustee shall not be
required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties or
immunities under the Securities and this Indenture or otherwise in a manner
which is not reasonably acceptable to the Trustee.

        Notwithstanding the provisions of Section 301 and of the preceding
paragraph, if all Securities of a series are not to be originally issued at one
time, it shall not be necessary to deliver the Officer's Certificate otherwise
required pursuant to Section 301 or the Company Order and Opinion of Counsel
otherwise required pursuant to such preceding paragraph at or prior to the
authentication of each Security of such series if such documents are delivered
at or prior to the authentication upon original issuance of the first Security
of such series to be issued.

        With respect to Securities of a series offered in a Periodic Offering,
the Trustee may rely, as to the authorization by the Corporation of any of such
Securities, the form and terms thereof and the legality, validity, binding
effect and enforceability thereof, upon the Opinion of Counsel and the other
documents delivered pursuant to Sections 201 and 301 and this Section, as
applicable, in connection with the first authentication of Securities of such
series.

        Each Security shall be dated the date of its authentication.



                                       23
<PAGE>   29

        No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature of an authorized officer, and such
certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered
hereunder. Notwithstanding the foregoing, if any Security shall have been
authenticated and delivered hereunder but never issued and sold by the
Corporation, and the Corporation shall deliver such Security to the Trustee for
cancellation as provided in Section 309, for all purposes of this Indenture such
Security shall be deemed never to have been authenticated and delivered
hereunder and shall never be entitled to the benefits of this Indenture.

SECTION 304.  TEMPORARY SECURITIES.

        Pending the preparation of definitive Securities of any series, the
Corporation may execute, and upon Company Order the Trustee shall authenticate
and deliver, temporary Securities which are printed, lithographed, typewritten,
mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Securities in lieu of which they
are issued and with such appropriate insertions, omissions, substitutions and
other variations as the officers executing such Securities may determine, as
evidenced by their execution of such Securities.

        If temporary Securities of any series are issued, the Corporation will
cause definitive Securities of that series to be prepared without unreasonable
delay. After the preparation of definitive Securities of such series, the
temporary Securities of such series shall be exchangeable for definitive
Securities of such series upon surrender of the temporary Securities of such
series at the office or agency of the Corporation in a Place of Payment for that
series, without charge to the Holder. Upon surrender for cancellation of any one
or more temporary Securities of any series, the Corporation shall execute and
the Trustee shall authenticate and deliver in exchange therefor one or more
definitive Securities of the same series, of any authorized denominations and of
like tenor and aggregate principal amount. Until so exchanged, the temporary
Securities of any series shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities of such series and tenor.

SECTION 305.   REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.

        The Corporation shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office or in any other
office or agency of the Corporation in a Place of Payment being herein sometimes
referred to as the "Security Register") in which, subject to such reasonable
regulations as it may prescribe, the Corporation shall provide for the
registration of Securities and of transfers of Securities. The Trustee is hereby
appointed "Security Registrar" for the purpose of registering Securities and
transfers of Securities as herein provided.

        Upon surrender for registration of transfer of any Security of a series
at the office or agency of the Corporation in a Place of Payment for that
series, the Corporation shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or



                                       24
<PAGE>   30

transferees, one or more new Securities of the same series, of any authorized
denominations and of like tenor and aggregate principal amount.

        At the option of the Holder, Securities of any series may be exchanged
for other Securities of the same series, of any authorized denominations and of
like tenor and aggregate principal amount, upon surrender of the Securities to
be exchanged at such office or agency. Whenever any Securities are so
surrendered for exchange, the Corporation shall execute, and the Trustee shall
authenticate and deliver, the Securities which the Holder making the exchange is
entitled to receive.

        All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Corporation, evidencing the
same debt, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.

        Every Security presented or surrendered for registration of transfer or
for exchange shall (if so required by the Corporation or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Corporation and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.

        No service charge shall be assessed against the Holder for any
registration of transfer or exchange of Securities, but the Corporation may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Securities, other than exchanges pursuant to Section 304, 906 or
1106 not involving any transfer.

        If the Securities of any series (or of any series and specified tenor)
are to be redeemed, the Corporation shall not be required (A) to issue, register
the transfer of or exchange any Securities of that series (or of that series and
specified tenor, as the case may be) during a period beginning at the opening of
business 15 days before the day of the mailing of a notice of redemption of any
such Securities selected for redemption and ending at the close of business on
the day of such mailing, or (B) to register the transfer of or exchange any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.

        The provisions of Clauses (1), (2), (3) and (4) below shall apply only
to Global Securities:

               (1) Each Global Security authenticated under this Indenture shall
        be registered in the name of the Depositary designated for such Global
        Security or a nominee thereof and delivered to such Depositary or a
        nominee thereof or custodian therefor, and each such Global Security
        shall constitute a single Security for all purposes of this Indenture.

               (2) Notwithstanding any other provision in this Indenture, no
        Global Security may be exchanged in whole or in part for Securities
        registered, and no transfer of a Global Security in whole or in part may
        be registered, in the name of any Person other than the Depositary for
        such Global Security or a nominee thereof unless (A) such Depositary has
        notified the Corporation that it is unwilling or unable to continue as
        Depositary for such



                                       25
<PAGE>   31

        Global Security and a successor Depositary has not been appointed by the
        Corporation within 90 days of receipt by the Corporation of such
        notification, (B) if at any time the Depositary ceases to be a clearing
        agency registered under the Exchange Act at a time when the Depositary
        is required to be so registered to act as such Depositary and no
        successor Depositary shall have been appointed by the Corporation within
        90 days after it became aware of such cessation, or (C) there shall
        exist such circumstances, if any, in addition to or in lieu of the
        foregoing as have been specified for this purpose as contemplated by
        Section 301. Notwithstanding the foregoing, the Corporation may at any
        time in its sole discretion determine that Securities issued in the form
        of a Global Security shall no longer be represented in whole or in part
        by such Global Security, and the Trustee, upon receipt of a Company
        Order therefor, shall authenticate and deliver definitive Securities in
        exchange in whole or in part for such Global Security.

               (3) Subject to Clause (2) above, any exchange or transfer of a
        Global Security for other Securities may be made in whole or in part,
        and all Securities issued in exchange for or upon transfer of a Global
        Security or any portion thereof shall be registered in such names as the
        Depositary for such Global Security shall direct.

               (4) Every Security authenticated and delivered upon registration
        of transfer of, or in exchange for or in lieu of, a Global Security or
        any portion thereof, whether pursuant to this Section, Section 304, 306,
        906 or 1106 or otherwise, shall be authenticated and delivered in the
        form of, and shall be, a Global Security, unless such Security is
        registered in the name of a Person other than the Depositary for such
        Global Security or a nominee thereof.

SECTION 306.  MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES.

        If any mutilated Security is surrendered to the Trustee, the Corporation
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of the same series and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.

        If there shall be delivered to the Corporation and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Security
and (ii) such security or indemnity as may be required by them to save each of
them and any agent of either of them harmless, then, in the absence of notice to
the Corporation or the Trustee that such Security has been acquired by a bona
fide purchaser, the Corporation shall execute and the Trustee shall authenticate
and deliver, in lieu of any such destroyed, lost or stolen Security, a new
Security of the same series and of like tenor and principal amount and bearing a
number not contemporaneously outstanding.

        In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Corporation in its discretion
may, instead of issuing a new Security, pay such Security.

        Upon the issuance of any new Security under this Section, the
Corporation may require the payment of a sum sufficient to cover any tax, fee,
assessment or other governmental charge


                                       26


<PAGE>   32
that may be imposed in relation thereto and any other expenses (including the
fees and expenses of the Trustee and its agents and counsel) connected
therewith.

        Every new Security of any series issued pursuant to this Section in lieu
of any destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Corporation, whether or not the
destroyed, lost or stolen Security shall be at any time enforceable by anyone,
and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Securities of that series duly issued
hereunder.

        The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.

SECTION 307. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.

        Except as otherwise provided as contemplated by Section 301 with respect
to any series of Securities, interest on any Security which is payable, and is
punctually paid or duly provided for, on any Interest Payment Date shall be paid
to the Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest.

        Except as otherwise provided as contemplated by Section 301 with respect
to any series of Securities, any interest on any Security of any series which is
payable, but is not punctually paid or duly provided for, on any Interest
Payment Date (herein called "Defaulted Interest") shall forthwith cease to be
payable to the Holder on the relevant Regular Record Date by virtue of having
been such Holder, and such Defaulted Interest may be paid by the Corporation, at
its election in each case, as provided in Clause (1) or (2) below:

                (1) The Corporation may elect to make payment of any Defaulted
        Interest to the Persons in whose names the Securities of such series (or
        their respective Predecessor Securities) are registered at the close of
        business on a Special Record Date for the payment of such Defaulted
        Interest, which shall be fixed in the following manner. The Corporation
        shall notify the Trustee in writing of the amount of Defaulted Interest
        proposed to be paid on each Security of such series and the date of the
        proposed payment, and at the same time the Corporation shall deposit
        with the Trustee an amount of money equal to the aggregate amount
        proposed to be paid in respect of such Defaulted Interest or shall make
        arrangements satisfactory to the Trustee for such deposit prior to the
        date of the proposed payment, such money when deposited to be held in
        trust for the benefit of the Persons entitled to such Defaulted Interest
        as in this Clause provided. Thereupon the Trustee shall fix a Special
        Record Date for the payment of such Defaulted Interest which shall be
        not more than 15 days and not less than 10 days prior to the date of the
        proposed payment and not less than 10 days after the receipt by the
        Trustee of the notice of the proposed payment. The Trustee shall
        promptly notify the Corporation of such Special Record Date and, in the
        name and at the expense of the Corporation, shall cause notice of the
        proposed payment of such Defaulted Interest and the Special Record Date
        therefor to be given to each Holder of Securities of such series in the
        manner set forth in Section 106,


                                       27


<PAGE>   33
        not less than 10 days prior to such Special Record Date. Notice of the
        proposed payment of such Defaulted Interest and the Special Record Date
        therefor having been so mailed, such Defaulted Interest shall be paid to
        the Persons in whose names the Securities of such series (or their
        respective Predecessor Securities) are registered at the close of
        business on such Special Record Date and shall no longer be payable
        pursuant to the following Clause (2).

                (2) The Corporation may make payment of any Defaulted Interest
        on the Securities of any series in any other lawful manner not
        inconsistent with the requirements of any securities exchange, if any,
        on which such Securities may be listed, and upon such notice as may be
        required by such exchange, if, after notice given by the Corporation to
        the Trustee of the proposed payment pursuant to this Clause, such manner
        of payment shall be deemed practicable by the Trustee.

        Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.

SECTION 308. PERSONS DEEMED OWNERS.

        Prior to due presentment of a Security for registration of transfer, the
Corporation, the Trustee and any agent of the Corporation or the Trustee may
treat the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of and any premium
and (subject to Section 307) any interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Corporation, the Trustee nor any agent of the Corporation or the Trustee shall
be affected by notice to the contrary.

        None of the Company, the Trustee, any Paying Agent or the Security
Registrar will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership interest
of a Global Security or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.

        Notwithstanding the foregoing, with respect to any Global Security,
nothing herein shall prevent the Company, the Trustee, or any Agent of the
Company or the Trustee, from giving effect to any written certification, proxy
or other authorization furnished by any depositary, as a Holder, with respect to
such Global Security or impair, as between such depositary and owners of
beneficial interests in such Global Security, the operation of customary
practices governing the exercise of the rights of such depositary as Holder of
such Global Security.

SECTION 309. CANCELLATION.

        All Securities surrendered for payment, redemption, registration of
transfer or exchange or for credit against any sinking fund payment shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly canceled by it. The Corporation may at


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<PAGE>   34
any time deliver to the Trustee for cancellation any Securities previously
authenticated and delivered hereunder which the Corporation may have acquired in
any manner whatsoever, and may deliver to the Trustee (or to any other Person
for delivery to the Trustee) for cancellation any Securities previously
authenticated hereunder which the Corporation has not issued and sold, and all
Securities so delivered shall be promptly canceled by the Trustee. No Securities
shall be authenticated in lieu of or in exchange for any Securities canceled as
provided in this Section, except as expressly permitted by this Indenture. All
canceled Securities held by the Trustee shall be disposed of as directed by a
Company Order; provided, however, that the Trustee shall not be required to
destroy such canceled Securities.

SECTION 310. COMPUTATION OF INTEREST.

        Except as otherwise specified as contemplated by Section 301 for
Securities of any series, interest on the Securities of each series shall be
computed on the basis of a 360-day year of twelve 30-day months.

SECTION 311. CUSIP NUMBERS.

        The Corporation in issuing the Securities may use CUSIP numbers (if then
generally in use), and, if so, the Trustee shall use CUSIP numbers in notices of
redemption as a convenience to Holders; provided that any such notice may state
that no representation is made as to the correctness of such numbers either as
printed on the Securities or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers printed on the
Securities, and any such redemption shall not be affected by any defect in or
omission of such numbers. The Corporation shall promptly notify the Trustee of
any change in the CUSIP numbers with respect to the Securities.

                                   ARTICLE IV.
                           SATISFACTION AND DISCHARGE

SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE.

        This Indenture shall upon Company Request cease to be of further effect
with respect to any series of Securities specified in such Company Request
(except as to those surviving rights and obligations specified below), and the
Trustee, at the expense of the Corporation, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture as to such series,
when

                (1) either

                    (A) all Securities of such series theretofore authenticated
                and delivered (other than (i) Securities of such series which
                have been destroyed, lost or stolen and which have been replaced
                or paid as provided in Section 306 and (ii) Securities of such
                series for whose payment money has theretofore been deposited in
                trust or segregated and held in trust by the Corporation and
                thereafter repaid to the Corporation or discharged from such
                trust, as provided in Section 1003) have been delivered to the
                Trustee for cancellation; or


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<PAGE>   35
                    (B) all such Securities of such series not theretofore
                delivered to the Trustee for cancellation

                         (i) have become due and payable, or

                         (ii) will become due and payable at their Stated
                    Maturity within one year, or

                         (iii) are to be called for redemption within one year
                    under arrangements satisfactory to the Trustee for the
                    giving of notice of redemption by the Trustee in the name,
                    and at the expense, of the Corporation,

                and the Corporation, in the case of (B) above, has deposited or
                caused to be deposited with the Trustee as trust funds in trust
                for the purpose (i) money in an amount, (ii) Government
                Obligations (as defined in Section 1304) which through the
                scheduled payment of principal and interest in respect thereof
                in accordance with their terms will provide, not later than the
                due date of any payment, money in an amount, or (iii) a
                combination thereof, sufficient, in the case of (ii) or (iii),
                in the opinion of a nationally recognized firm of independent
                public accountants expressed in a written certification thereof
                delivered to the Trustee, to pay and discharge, and which shall
                be applied by the Trustee to pay and discharge, the entire
                indebtedness on such Securities not theretofore delivered to the
                Trustee for cancellation, for principal and any premium and
                interest to the date of such deposit (in the case of Securities
                which have become due and payable) or to the Stated Maturity or
                Redemption Date, as the case may be;

                (2) the Corporation has paid or caused to be paid all other sums
        payable hereunder by the Corporation; and

                (3) the Corporation has delivered to the Trustee an Officer's
        Certificate and an Opinion of Counsel, each stating that all conditions
        precedent herein provided for relating to the satisfaction and discharge
        of this Indenture as to such series have been complied with.

        Notwithstanding the satisfaction and discharge of this Indenture with
respect to any series of Securities, the obligations of the Corporation to the
Trustee under Section 607, the obligations of the Corporation to any
Authenticating Agent under Section 614 and, if money shall have been deposited
with the Trustee pursuant to subclause (B) of Clause (1) of this Section, the
obligations of the Trustee and the Corporation with respect to the Securities of
such series under Section 402 and the last paragraph of Section 1003 shall
survive such satisfaction and discharge.

SECTION 402. APPLICATION OF TRUST MONEY.

        Subject to the provisions of the last paragraph of Section 1003, all
money deposited with the Trustee pursuant to Section 401 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any


                                       30


<PAGE>   36
Paying Agent (including the Corporation acting as its own Paying Agent) as the
Trustee may determine, to the Persons entitled thereto, of the principal and any
premium and interest for whose payment such money has been deposited with the
Trustee.

                                   ARTICLE V.
                                    REMEDIES

SECTION 501. EVENTS OF DEFAULT.

        "Event of Default," wherever used herein with respect to Securities of
any series, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body),
unless it is specifically deleted or modified in the Board Resolution (or action
taken pursuant thereto), Officer's Certificate or supplemental indenture under
which such series of Securities is issued or has been deleted or modified in an
indenture supplemental hereto:

                (1) default in the payment of any interest upon any Security of
        that series when it becomes due and payable, and continuance of such
        default for a period of 30 days; provided, however, that if the
        Corporation is permitted by the terms of the Securities of such series
        to defer the payment in question, the date on which such payment is due
        and payable shall be the date on which the Corporation is required to
        make payment following such deferral, if such deferral has been elected
        pursuant to the terms of the Securities; or

                (2) default in the payment of the principal of or any premium on
        any Security of that series at its Maturity; or

                (3) default in the making of any sinking fund payment, when and
        as due by the terms of a Security of that series; or

                (4) default in the performance, or breach, of any covenant of
        the Corporation in this Indenture (other than a covenant a default in
        whose performance or whose breach is elsewhere in this Section
        specifically dealt with or which has expressly been included in this
        Indenture solely for the benefit of series of Securities other than that
        series) or the Securities of that series, and continuance of such
        default or breach for a period of 90 days after there has been given, by
        registered or certified mail, to the Corporation by the Trustee or to
        the Corporation and the Trustee by the Holders of at least 25% in
        principal amount of the Outstanding Securities of that series a written
        notice specifying such default or breach and requiring it to be remedied
        and stating that such notice is a "Notice of Default" hereunder, unless
        the Trustee, or the Trustee and the Holders of a principal amount of
        Securities of such series not less than the principal amount of
        Securities the Holders of which gave such notice, as the case may be,
        shall agree in writing to an extension of such period prior to its
        expiration; provided, however, that the Trustee, or the Trustee and the
        Holders of such principal amount of Securities of such series, as the
        case may be, shall be deemed to have agreed to an extension of such
        period if corrective action is initiated by the Corporation within such
        period and is being diligently pursued; or


                                       31


<PAGE>   37
                (5) the entry by a court having jurisdiction in the premises of
        (A) a decree or order for relief in respect of the Corporation in an
        involuntary case or proceeding under any applicable federal or state
        bankruptcy, insolvency, reorganization or other similar law or (B) a
        decree or order adjudging the Corporation a bankrupt or insolvent, or
        approving as properly filed a petition seeking reorganization,
        arrangement, adjustment or composition of or in respect of the
        Corporation under any applicable federal or state law, or appointing a
        custodian, receiver, liquidator, assignee, trustee, sequestrator or
        other similar official of the Corporation or of any substantial part of
        its property, or ordering the winding-up or liquidation of its affairs,
        and the continuance of any such decree or order for relief or any such
        other decree or order unstayed and in effect for a period of 90
        consecutive days; or

                (6) the commencement by the Corporation of a voluntary case or
        proceeding under any applicable federal or state bankruptcy, insolvency,
        reorganization or other similar law or of any other case or proceeding
        to be adjudicated a bankrupt or insolvent, or the consent by it to the
        entry of a decree or order for relief in respect of the Corporation in
        an involuntary case or proceeding under any applicable federal or state
        bankruptcy, insolvency, reorganization or other similar law or to the
        commencement of any bankruptcy or insolvency case or proceeding against
        it, or the filing by it of a petition or answer or consent seeking
        reorganization or relief under any applicable federal or state law, or
        the consent by it to the filing of such petition or to the appointment
        of or taking possession by a custodian, receiver, liquidator, assignee,
        trustee, sequestrator or other similar official of the Corporation or of
        any substantial part of its property, or the making by it of an
        assignment for the benefit of creditors, or the admission by it in
        writing of its inability to pay its debts generally as they become due,
        or the authorization of any such action by the Board of Directors; or

                (7) any other Event of Default provided with respect to
        Securities of that series.

SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.

        If an Event of Default with respect to Securities of any series at the
time Outstanding occurs and is continuing, then in every such case the Trustee
or the Holders of not less than 25% in principal amount of the Outstanding
Securities of that series may declare the principal amount of all the Securities
of that series (or, if any Securities of that series are Original Issue Discount
Securities, such portion of the principal amount of such Securities as may be
specified by the terms thereof) and accrued and unpaid interest, if any, thereon
to be due and payable immediately, by a notice in writing to the Corporation
(and to the Trustee if given by Holders), and upon any such declaration such
principal amount (or specified amount) and accrued and unpaid interest, if any,
thereon shall become immediately due and payable.

        At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in principal


                                       32


<PAGE>   38
amount of the Outstanding Securities of such series, by written notice to the
Corporation and the Trustee, may rescind and annul such declaration and its
consequences if

                (1) the Corporation has paid or deposited with the Trustee a sum
        sufficient to pay

                    (A) all overdue interest on all Securities of that series,
                which has become due otherwise than by such declaration of
                acceleration,

                    (B) the principal of (and premium, if any, on) any
                Securities of that series which have become due otherwise than
                by such declaration of acceleration and any interest thereon at
                the rate or rates prescribed therefor in such Securities,

                    (C) to the extent that payment of such interest is lawful,
                interest upon overdue interest at the rate or rates prescribed
                therefor in such Securities, and

                    (D) all sums paid or advanced by the Trustee hereunder and
                the reasonable compensation, expenses, disbursements and
                advances of the Trustee, its agents and counsel;

        and

                (2) all Events of Default with respect to Securities of that
        series, other than the non-payment of the principal of Securities of
        that series which have become due solely by such declaration of
        acceleration, have been cured or waived as provided in Section 513.

                No such rescission shall affect any subsequent default or impair
        any right consequent thereon.

SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE.

        The Corporation covenants that if

                (1) default is made in the payment of any interest on any
        Security when such interest becomes due and payable and such default
        continues for a period of 30 days, or

                (2) default is made in the payment of the principal of (or
        premium, if any, on) any Security at the Maturity thereof,

the Corporation will, upon demand of the Trustee, pay to it, for the benefit of
the Holders of such Securities, the whole amount then due and payable on such
Securities for principal and any premium and interest and, to the extent that
payment of such interest shall be legally enforceable, interest on any overdue
principal and premium and on any overdue interest, at the rate or rates
prescribed therefor in such Securities, and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.


                                       33


<PAGE>   39
        If the Corporation fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, and may
prosecute such proceeding to judgment or final decree, and may enforce the same
against the Corporation or any other obligor upon such Securities and collect
the moneys adjudged or decreed to be payable in the manner provided by law out
of the property of the Corporation or any other obligor upon such Securities,
wherever situated.

        If an Event of Default with respect to Securities of any series occurs
and is continuing, the Trustee may in its discretion proceed to protect and
enforce its rights and the rights of the Holders of Securities of such series by
such appropriate judicial proceedings as the Trustee shall deem most effectual
to protect and enforce any such rights, whether for the specific enforcement of
any covenant or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.

SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM.

        In case of any judicial proceeding relative to the Corporation (or any
other obligor upon the Securities), its property or its creditors, the Trustee
shall be entitled and empowered, by intervention in such proceeding or
otherwise, to take any and all actions authorized under the Trust Indenture Act
in order to have claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such claims
and to distribute the same; and any custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee and, in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 607.

        No provision of this Indenture shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding; provided,
however, that the Trustee may, on behalf of the Holders, vote for the election
of a trustee in bankruptcy or similar official and be a member of a creditors'
or other similar committee.

SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES.

        All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and


                                       34


<PAGE>   40
advances of the Trustee, its agents and counsel, be for the ratable benefit of
the Holders of the Securities in respect of which such judgment has been
recovered.

SECTION 506. APPLICATION OF MONEY COLLECTED.

        Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal or any premium
or interest, upon presentation of the Securities and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:

                First: To the payment of all amounts due the Trustee under
        Section 607;

                Second: To the payment of the amounts then due and unpaid for
        principal of and any premium and interest on the Securities in respect
        of which or for the benefit of which such money has been collected,
        ratably, without preference or priority of any kind, according to the
        amounts due and payable on such Securities for principal and any premium
        and interest, respectively; and

                Third: To the payment of the balance, if any, to the Corporation
        or any other Person or Persons legally entitled thereto.

SECTION 507. LIMITATION ON SUITS.

        No Holder of any Security of any series shall have any right to
institute any proceeding, judicial or otherwise, with respect to this Indenture,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless

                (1) such Holder has previously given written notice to the
        Trustee of a continuing Event of Default with respect to the Securities
        of that series;

                (2) the Holders of not less than 25% in principal amount of the
        Outstanding Securities of all affected series, considered as one class,
        or, in the case of an Event of Default of the character specified above
        in Section 501(1), (2) or (3), that series, shall have made written
        request to the Trustee to institute proceedings in respect of such Event
        of Default in its own name as Trustee hereunder;

                (3) such Holder or Holders have offered to the Trustee
        reasonable indemnity against the costs, expenses and liabilities to be
        incurred in compliance with such request;

                (4) the Trustee for 60 days after its receipt of such notice,
        request and offer of indemnity has failed to institute any such
        proceeding; and

                (5) no direction inconsistent with such written request has been
        given to the Trustee during such 60-day period by the Holders of a
        majority in principal amount of the Outstanding Securities of all
        affected series, considered as one class, or, in the case of an Event of
        Default of the character specified above in Section 501(1), (2) or (3),
        that series,


                                       35


<PAGE>   41
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all of such
Holders.

SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM AND
INTEREST.

        Notwithstanding any other provision in this Indenture, the Holder of any
Security shall have the right, which is absolute and unconditional, to receive
payment of the principal of and any premium and (subject to Section 307)
interest on such Security on the respective Stated Maturities expressed in such
Security (or, in the case of redemption, on the Redemption Date) and to
institute suit for the enforcement of any such payment, and such rights shall
not be impaired without the consent of such Holder.

SECTION 509. RESTORATION OF RIGHTS AND REMEDIES.

        If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Corporation, the Trustee and the Holders
shall be restored severally and respectively to their former positions hereunder
and thereafter all rights and remedies of the Trustee and the Holders shall
continue as though no such proceeding had been instituted.

SECTION 510. RIGHTS AND REMEDIES CUMULATIVE.

        Except as otherwise provided with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Securities in the last paragraph of
Section 306, no right or remedy herein conferred upon or reserved to the Trustee
or to the Holders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.

SECTION 511. DELAY OR OMISSION NOT WAIVER.

        No delay or omission of the Trustee or of any Holder of any Securities
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein.

        Every right and remedy given by this Article or by law to the Trustee or
to the Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders, as the case may be.


                                       36


<PAGE>   42
SECTION 512. CONTROL BY HOLDERS.

        The Holders of a majority in principal amount of the Outstanding
Securities of any series shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, with respect to the
Securities of such series; provided that

                (1) such direction shall not be in conflict with any rule of law
        or with this Indenture,

                (2) the Trustee may take any other action deemed proper by the
        Trustee which is not inconsistent with such direction, and

                (3) such direction is not unduly prejudicial to the rights of
        other Holders of Securities of that series not joining in that action.

        If an Event of Default is continuing with respect to all Outstanding
Securities, the Holders of a majority in principal amount of all the Outstanding
Securities, considered as one class, shall have the right to make such
direction, and not the Holders of Securities of any one series.

SECTION 513. WAIVER OF PAST DEFAULTS.

        The Holders of not less than a majority in principal amount of the
Outstanding Securities of any series with respect to which any default under the
Indenture shall have occurred and be continuing may, on behalf of the Holders of
all Securities of such series, waive such past default under the Indenture and
its consequences, except a default

                (1) in the payment of the principal of or any premium or
        interest on any Security of such series, or

                (2) in respect of a covenant or provision hereof which under
        Article Nine cannot be modified or amended without the consent of the
        Holder of each Outstanding Security of such series affected.

Upon any such waiver, such default shall cease to exist and be deemed not to
have occurred, and any Event of Default arising therefrom shall be deemed to
have been cured and not to have occurred, for every purpose of this Indenture;
but no such waiver shall extend to any subsequent or other default or impair any
right consequent thereon.

SECTION 514. UNDERTAKING FOR COSTS.

        In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit to
file an undertaking to pay the costs, including legal fees and expenses of such
suit, and may assess costs against any such party litigant, in the manner and to
the extent provided in the Trust Indenture Act; provided that neither this
Section nor the Trust Indenture Act shall be deemed to authorize any court to
require such an undertaking or to make


                                       37


<PAGE>   43
such an assessment in (i) any suit instituted by the Trustee, (ii) any suit
instituted by any Holder, or group of Holders, holding in the aggregate more
than 10% in principal amount of the Outstanding Securities of any series, or
(iii) any suit instituted by any Holder for the enforcement of the payment of
the principal of (or premium, if any) or interest on any Security on or after
the respective Stated Maturities expressed in such Security (or, in the case of
redemption, on or after the Redemption Date).

SECTION 515. WAIVER OF STAY OR EXTENSION LAWS.

        The Corporation covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, or plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Corporation (to the extent that it
may lawfully do so) hereby expressly waives all benefit or advantage of any such
law and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.

                                   ARTICLE VI.
                                   THE TRUSTEE

SECTION 601. CERTAIN DUTIES AND RESPONSIBILITIES.

        The duties and responsibilities of the Trustee shall be as provided in
this Indenture and no duties shall be inferred or implied against the Trustee.
Notwithstanding the foregoing, no provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or in the exercise
of any of its rights or powers. Whether or not therein expressly so provided,
every provision of this Indenture relating to the conduct or affecting the
liability of or affording protection to the Trustee shall be subject to the
provisions of this Section.

SECTION 602. NOTICE OF DEFAULTS.

        If a default occurs hereunder with respect to Securities of any series,
the Trustee shall give the Holders of Securities of such series notice of such
default as and to the extent provided by the Trust Indenture Act. For the
purpose of this Section, the term "default" means any event which is, or after
notice or lapse of time or both would become, an Event of Default with respect
to Securities of such series.

SECTION 603. CERTAIN RIGHTS OF TRUSTEE.

        Subject to the provisions of Section 601:

                (1) the Trustee may rely and shall be protected in acting or
        refraining from acting upon any resolution, certificate, statement,
        instrument, opinion, report, notice, request, direction, consent, order,
        bond, debenture, note or other paper or document


                                       38


<PAGE>   44
        (whether in original or facsimile form) believed by it to be genuine and
        to have been signed or presented by the proper party or parties;

                (2) any request or direction of the Corporation mentioned herein
        shall be sufficiently evidenced by a Company Request or Company Order or
        as otherwise expressly provided herein, and any resolution of the Board
        of Directors shall be sufficiently evidenced by a Board Resolution;

                (3) whenever in the administration of this Indenture the Trustee
        shall deem it desirable that a matter be proved or established prior to
        taking, suffering or omitting any action hereunder, the Trustee (unless
        other evidence be herein specifically prescribed) may, in the absence of
        bad faith on its part, rely upon an Officer's Certificate;

                (4) the Trustee may consult with counsel of its selection and
        the advice of such counsel or any Opinion of Counsel with respect to
        legal matters shall be full and complete authorization and protection in
        respect of any action taken, suffered or omitted by it hereunder in good
        faith and in reliance thereon;

                (5) the Trustee shall be under no obligation to exercise any of
        the rights or powers vested in it by this Indenture at the request or
        direction of any of the Holders pursuant to this Indenture, unless such
        Holders shall have offered to the Trustee reasonable security or
        indemnity against the costs, expenses and liabilities which might be
        incurred by it in compliance with such request or direction;

                (6) the Trustee shall not be bound to make any investigation
        into the facts or matters stated in any resolution, certificate,
        statement, instrument, opinion, report, notice, request, direction,
        consent, order, bond, debenture, note, other evidence of indebtedness or
        other paper or document, but the Trustee, in its discretion, may make
        such further inquiry or investigation into such facts or matters as it
        may see fit, and, if the Trustee shall determine to make such further
        inquiry or investigation, it shall be entitled, at reasonable times
        previously notified to the Corporation, to examine the relevant books,
        records and premises of the Corporation, personally or by agent or
        attorney;

                (7) the Trustee may execute any of the trusts or powers
        hereunder or perform any duties hereunder either directly or by or
        through agents or attorneys and the Trustee shall not be responsible for
        any misconduct or negligence on the part of any agent or attorney
        appointed with due care by it hereunder;

                (8) the Trustee shall not be liable for any action taken,
        suffered, or omitted to be taken by it in good faith and reasonably
        believed by it to be authorized or within the discretion or rights or
        powers conferred upon it by this Indenture; and

                (9) the Trustee shall not be deemed to have notice of any
        Default or Event of Default unless a Responsible Officer of the Trustee
        has actual knowledge thereof or unless written notice of any event which
        is in fact such a default is received by the Trustee at the


                                       39


<PAGE>   45
        Corporate Trust Office of the Trustee, and such notice references the
        Securities and this Indenture.

SECTION 604. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.

        The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Corporation, and neither the Trustee nor any Authenticating Agent assumes
any responsibility for their correctness. The Trustee makes no representations
as to the validity or sufficiency of this Indenture or of the Securities.
Neither the Trustee nor any Authenticating Agent shall be accountable for the
use or application by the Corporation of Securities or the proceeds thereof.

SECTION 605. MAY HOLD SECURITIES.

        The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Corporation, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
608 and 613, may otherwise deal with the Corporation with the same rights it
would have if it were not Trustee, Authenticating Agent, Paying Agent, Security
Registrar or such other agent.

SECTION 606. MONEY HELD IN TRUST.

        Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed in writing with the Corporation.

SECTION 607. COMPENSATION AND REIMBURSEMENT.

        The Corporation agrees:

                (1) to pay to the Trustee from time to time such compensation as
        shall be agreed to in writing between the Corporation and the Trustee
        for all services rendered by it hereunder (which compensation shall not
        be limited by any provision of law in regard to the compensation of a
        trustee of an express trust);

                (2) except as otherwise expressly provided herein, to reimburse
        the Trustee upon its request for all reasonable expenses, disbursements
        and advances incurred or made by the Trustee in accordance with any
        provision of this Indenture (including the reasonable compensation and
        the expenses and disbursements of its agents and counsel), except any
        such expense, disbursement or advance as may be attributable to its
        negligence, willful misconduct or bad faith; and

                (3) to indemnify the Trustee for, and to hold it harmless
        against, any and all loss, liability, damage, claim or expense,
        including taxes (other than taxes based on the income of the Trustee)
        incurred without negligence, willful misconduct or bad faith on its
        part, arising out of or in connection with the acceptance or
        administration of the trust or trusts hereunder, including the costs and
        expenses of defending itself against any claim or


                                       40


<PAGE>   46
        liability in connection with the exercise or performance of any of its
        powers or duties hereunder.

        The Trustee shall have a lien prior to the Securities upon all property
and funds held by it hereunder for any amount owing it or any predecessor
Trustee pursuant to this Section 607, except with respect to funds held in trust
for the benefit of the Holders of particular Securities.

        Without limiting any rights available to the Trustee under applicable
law, when the Trustee incurs expenses or renders services in connection with an
Event of Default specified in Section 501(5) or Section 501(6), the expenses
(including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable federal or state bankruptcy, insolvency or
other similar law.

        The provisions of this Section shall survive resignation or removal of
the Trustee and the termination of this Indenture.

SECTION 608. CONFLICTING INTERESTS.

        If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture. To the extent
permitted by such Act, the Trustee shall not be deemed to have a conflicting
interest by virtue of being a trustee under this Indenture with respect to
Securities of more than one series.

SECTION 609. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.

        There shall at all times be a Trustee hereunder with respect to the
Securities of each series, which may be Trustee hereunder for Securities of one
or more other series. Each Trustee shall be a Person that is eligible pursuant
to the Trust Indenture Act to act as such and has a combined capital and surplus
of at least $50,000,000. If any such Person publishes reports of condition at
least annually, pursuant to law or to the requirements of its supervising or
examining authority, then for the purposes of this Section and to the extent
permitted by the Trust Indenture Act, the combined capital and surplus of such
Person shall be deemed to be its combined capital and surplus as set forth in
its most recent report of condition so published. If at any time the Trustee
with respect to the Securities of any series shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect hereinafter specified in this Article.

SECTION 610. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.

        No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 611.

        The Trustee may resign at any time with respect to the Securities of one
or more series by giving written notice thereof to the Corporation. If the
instrument of acceptance by a successor Trustee required by Section 611 shall
not have been delivered to the Trustee within 30 days after


                                       41


<PAGE>   47
the giving of such notice of resignation, the resigning Trustee may petition, at
the expense of the Corporation, any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Securities of such
series.

        The Trustee may be removed at any time with respect to the Securities of
any series by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series, delivered to the Trustee and to the
Corporation. Upon such removal, the Corporation may petition, at its expense,
any court of competent jurisdiction for the appointment of a successor Trustee
with respect to the Securities of such series.

        If at any time:

                (1) the Trustee shall fail to comply with Section 608 after
        written request therefor by the Corporation or by any Holder who has
        been a bona fide Holder of a Security for at least six months, or

                (2) the Trustee shall cease to be eligible under Section 609 and
        shall fail to resign after written request therefor by the Corporation
        or by any such Holder, or

                (3) the Trustee shall become incapable of acting or shall be
        adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
        property shall be appointed or any public officer shall take charge or
        control of the Trustee or of its property or affairs for the purpose of
        rehabilitation, conservation or liquidation,

then, in any such case, (A) the Corporation by a Board Resolution may remove the
Trustee with respect to all Securities, or (B) subject to Section 514, any
Holder who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee with respect to all
Securities and the appointment of a successor Trustee or Trustees.

        If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause, with respect
to the Securities of one or more series, the Corporation, by a Board Resolution,
shall promptly appoint a successor Trustee or Trustees with respect to the
Securities of that or those series (it being understood that any such successor
Trustee may be appointed with respect to the Securities of one or more or all of
such series and that at any time there shall be only one Trustee with respect to
the Securities of any particular series) and shall comply with the applicable
requirements of Section 611. If, within one year after such resignation, removal
or incapability, or the occurrence of such vacancy, a successor Trustee with
respect to the Securities of any series shall be appointed by Act of the Holders
of a majority in principal amount of the Outstanding Securities of such series
delivered to the Corporation and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment in accordance
with the applicable requirements of Section 611, become the successor Trustee
with respect to the Securities of such series and to that extent supersede the
successor Trustee appointed by the Corporation. If no successor Trustee with
respect to the Securities of any series shall have been so appointed by the
Corporation or the Holders and accepted appointment in the manner required by
Section 611, any Holder who has been a bona


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<PAGE>   48
fide Holder of a Security of such series for at least six months may, on behalf
of himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee with respect to the
Securities of such series.

        The Corporation shall give notice of each resignation and each removal
of the Trustee with respect to the Securities of any series and each appointment
of a successor Trustee with respect to the Securities of any series to all
Holders of Securities of such series in the manner provided in Section 106. Each
notice shall include the name of the successor Trustee with respect to the
Securities of such series and the address of its Corporate Trust Office.

SECTION 611. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.

        In case of the appointment hereunder of a successor Trustee with respect
to all Securities, every such successor Trustee so appointed shall execute,
acknowledge and deliver to the Corporation and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on the request
of the Corporation or the successor Trustee, such retiring Trustee shall, upon
payment of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder.

        In case of the appointment hereunder of a successor Trustee with respect
to the Securities of one or more (but not all) series, the Corporation, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates, (2)
if the retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary or desirable to confirm
that all the rights, powers, trusts and duties of the retiring Trustee with
respect to the Securities of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the retiring Trustee, and
(3) shall add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, it being understood that nothing herein or
in such supplemental indenture shall constitute such Trustees co-trustees of the
same trust and that each such Trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such Trustee; and upon the execution and delivery of such supplemental
indenture the resignation or removal of the retiring Trustee shall become
effective to the extent provided therein and each such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee with respect to the
Securities of that or those series to which the appointment of such successor
Trustee relates; but, on request of the Corporation or any successor Trustee,
such retiring Trustee shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder with


                                       43


<PAGE>   49
respect to the Securities of that or those series to which the appointment of
such successor Trustee relates.

        Upon request of any such successor Trustee, the Corporation shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts referred
to in the first or second preceding paragraph, as the case may be.

        No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.

SECTION 612. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.

        Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided that
such corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated with the same effect
as if such successor Trustee had itself authenticated such Securities.

SECTION 613. PREFERENTIAL COLLECTION OF CLAIMS AGAINST CORPORATION.

        If and when the Trustee shall be or become a creditor of the Corporation
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Corporation (or any such other obligor).

SECTION 614. APPOINTMENT OF AUTHENTICATING AGENT.

        The Trustee may appoint an Authenticating Agent or Agents acceptable to
the Corporation with respect to one or more series of Securities which shall be
authorized to act on behalf of the Trustee to authenticate Securities of such
series issued upon exchange, registration of transfer or partial redemption
thereof or pursuant to Section 306, and Securities so authenticated shall be
entitled to the benefits of this Indenture and shall be valid and obligatory for
all purposes as if authenticated by the Trustee hereunder. Wherever reference is
made in this Indenture to the authentication and delivery of Securities by the
Trustee or the Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Corporation and shall at all times be a corporation organized
and doing business under the laws of the United States of America, any State
thereof or the District of Columbia, authorized under such laws to act as
Authenticating Agent, having a combined capital and surplus of not less than
$50,000,000 and subject to supervision or examination by federal or state


                                       44


<PAGE>   50
authority. If such Authenticating Agent publishes reports of condition at least
annually, pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section, the combined capital
and surplus of such Authenticating Agent shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time an Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section, such Authenticating Agent shall
resign immediately in the manner and with the effect specified in this Section.

        Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to all or substantially all the
corporate agency or corporate trust business of an Authenticating Agent, shall
continue to be an Authenticating Agent, provided that such corporation shall be
otherwise eligible under this Section, without the execution or filing of any
paper or any further act on the part of the Trustee or the Authenticating Agent.

        An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Corporation. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Corporation. Upon receiving such a
notice of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Corporation and shall give notice of such
appointment in the manner provided in Section 106 to all Holders of Securities
of the series with respect to which such Authenticating Agent will serve. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section.

        The Corporation agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section.

        If an appointment with respect to one or more series is made pursuant to
this Section, the Securities of such series may have endorsed thereon, in
addition to the Trustee's certificate of authentication, an alternative
certificate of authentication in the following form:


                                       45


<PAGE>   51
        This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.

                              Bank One Trust Company, N.A.,
                              As Trustee


                              By:
                                 -------------------------------
                              As Authenticating Agent


                              By:
                                 -------------------------------
                              Authorized Signatory

SECTION 615. TRUSTEE'S APPLICATION FOR INSTRUCTIONS FROM THE CORPORATION.

        Any application by the Trustee for written instructions from the
Corporation may, at the option of the Trustee, set forth in writing any action
proposed to be taken or omitted by the Trustee under this Indenture and the date
on and/or after which such action shall be taken or such omission shall be
effective. The Trustee shall not be liable to the Corporation for any action
taken by, or omission of, the Trustee in accordance with a proposal included in
such application on or after the date specified in such application (which date
shall not be less than five Business Days after the date any officer of the
Corporation actually receives such application, unless any such officer shall
have consented in writing to any earlier date) unless prior to taking any such
action (or the effective date in the case of an omission), the Trustee shall
have received written instructions in response to such application specifying
the action to be taken or omitted.

                                  ARTICLE VII.
              HOLDERS' LISTS AND REPORTS BY TRUSTEE AND CORPORATION

SECTION 701. CORPORATION TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS.

        The Corporation will furnish or cause to be furnished to the Trustee:

                (1) 15 days after each Regular Record Date, a list, in such form
        as the Trustee may reasonably require, of the names and addresses of the
        Holders of Securities of each series as of such Regular Record Date, and

                (2) at such other times as the Trustee may request in writing,
        within 30 days after the receipt by the Corporation of any such request,
        a list of similar form and content as of a date not more than 15 days
        prior to the time such list is furnished;

excluding from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.


                                       46


<PAGE>   52
SECTION 702. PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS.

        The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.

        The rights of Holders to communicate with other Holders with respect to
their rights under this Indenture or under the Securities, and the corresponding
rights and privileges of the Trustee, shall be as provided by the Trust
Indenture Act.

        Every Holder of Securities, by receiving and holding the same, agrees
with the Corporation and the Trustee that neither the Corporation nor the
Trustee nor any agent of either of them shall be held accountable by reason of
any disclosure of information as to names and addresses of Holders made pursuant
to the Trust Indenture Act.

SECTION 703. REPORTS BY TRUSTEE.

        The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto. If
required by Section 313(a) of the Trust Indenture Act, the Trustee shall, within
60 days after each May 15 following the date of this Indenture, deliver to
Holders a brief report, dated as of such May 15, which complies with the
provisions of such Section 313(a).

        A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee, with each stock exchange upon which any
Securities are listed, with the Commission and with the Corporation. The
Corporation will promptly notify the Trustee when any Securities are listed on
any stock exchange or any delisting thereof.

SECTION 704. REPORTS BY CORPORATION.

        The Corporation shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant to such Act; provided that any such
information, documents or reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the
Trustee within 15 days after the same is so required to be filed with the
Commission. Delivery of such reports, information and documents to the Trustee
is for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Corporation's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officer's Certificates).


                                       47


<PAGE>   53
                                  ARTICLE VIII.
                  CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER

SECTION 801. CORPORATION MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.

        The Corporation shall not consolidate with or merge into any other
Person or convey, transfer or lease its properties and assets substantially as
an entirety to any Person, and no Person shall consolidate with or merge into
the Corporation, unless:

                (1) in case the Corporation shall consolidate with or merge into
        another Person or convey, transfer or lease its properties and assets
        substantially as an entirety to any Person, the Person formed by such
        consolidation or into which the Corporation is merged or the Person
        which acquires by conveyance or transfer, or which leases, the
        properties and assets of the Corporation substantially as an entirety
        shall be a corporation, partnership, limited liability company or trust
        organized and existing under the laws of the United States of America or
        any State thereof or the District of Columbia and shall expressly
        assume, by an indenture supplemental hereto, executed and delivered to
        the Trustee, in form satisfactory to the Trustee, the due and punctual
        payment of the principal of (and premium, if any) and interest on all
        the Securities and the performance of every covenant of this Indenture
        on the part of the Corporation to be performed or observed;

                (2) immediately after giving effect to such transaction, no
        Event of Default, and no event which, after notice or lapse of time, or
        both, would become an Event of Default, shall have occurred and be
        continuing;

                (3) such other conditions as may be specified pursuant to
        Section 301 with respect to the Securities of any series shall have been
        satisfied; and

                (4) the Corporation shall deliver to the Trustee an Officer's
        Certificate and an Opinion of Counsel, each stating that such
        consolidation, merger, conveyance or transfer and, if a supplemental
        indenture is required in connection with such transaction, such
        supplemental indenture comply with this Article and that all conditions
        precedent herein provided for relating to such transaction have been
        complied with; and the Trustee, subject to Section 601, may rely upon
        such Officer's Certificate and Opinion of Counsel as conclusive evidence
        that such transaction complies with this Section 801.

SECTION 802. SUCCESSOR SUBSTITUTED.

        Upon any consolidation of the Corporation with, or merger of the
Corporation into, any other Person or any conveyance or transfer or lease of the
properties and assets of the Corporation substantially as an entirety in
accordance with Section 801, the successor Person formed by such consolidation
or into which the Corporation is merged or to which such conveyance or transfer
or lease is made shall succeed to, and be substituted for, and may exercise
every right and power of, the Corporation under this Indenture with the same
effect as if such successor Person had been named as the Corporation herein, and
thereafter the predecessor Person shall be relieved of all obligations and
covenants under this Indenture and the Securities.


                                       48


<PAGE>   54
        Such successor Person may cause to be signed, and may issue either in
its own name or in the name of the Corporation, any or all of the Securities
issuable hereunder which theretofore shall not have been signed by the
Corporation and delivered to the Trustee; and, upon the order of such successor
Person instead of the Corporation, and subject to all the terms, conditions and
limitations in this Indenture prescribed, the Trustee shall authenticate and
shall deliver any Securities which previously shall have been signed and
delivered by the officers of the Corporation to the Trustee for authentication
pursuant to such provisions and any Securities which such successor Person
thereafter shall cause to be signed and delivered to the Trustee on its behalf
for the purpose pursuant to such provisions. All the Securities so issued shall
in all respects have the same legal rank and benefit under this Indenture as the
Securities theretofore or thereafter issued in accordance with the terms of this
Indenture as though all of such Securities had been issued at the date of the
execution hereof.

        In case of any such consolidation, merger, sale, conveyance or lease,
such changes in phraseology and form may be made in the Securities thereafter to
be issued as may be appropriate.

                                   ARTICLE IX.
                             SUPPLEMENTAL INDENTURES

SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.

        Without the consent of any Holders, the Corporation, when authorized by
a Board Resolution, and the Trustee, at any time and from time to time, may
enter into one or more indentures supplemental hereto, in form reasonably
satisfactory to the Trustee, for any of the following purposes:

                (1) to evidence the succession of another Person to the
        Corporation and the assumption by any such successor of the covenants of
        the Corporation herein and in the Securities; or

                (2) to add to the covenants of the Corporation for the benefit
        of the Holders of all or any series of Securities (and if such covenants
        are to be for the benefit of less than all series of Securities, stating
        that such covenants are expressly being included solely for the benefit
        of such series) or to surrender any right or power herein conferred upon
        the Corporation; or

                (3) to add any additional Events of Default for the benefit of
        the Holders of all or any series of Securities (and if such additional
        Events of Default are to be for the benefit of less than all series of
        Securities, stating that such additional Events of Default are expressly
        being included solely for the benefit of such series); or

                (4) to add to or change any of the provisions of this Indenture
        to such extent as shall be necessary to permit or facilitate the
        issuance of Securities in bearer form, registrable or not registrable as
        to principal, and with or without interest coupons, or to facilitate the
        issuance of Securities in uncertificated form; or


                                       49


<PAGE>   55
                (5) to add to, change or eliminate any of the provisions of this
        Indenture in respect of one or more series of Securities; provided that
        any such addition, change or elimination (A) shall neither (i) apply to
        any Security of any series created prior to the execution of such
        supplemental indenture and entitled to the benefit of such provision nor
        (ii) modify the rights of the Holder of any such Security with respect
        to such provision or (B) shall become effective only when there is no
        such Security Outstanding; or

                (6) to secure the Securities; or

                (7) to establish the form or terms of Securities of any series
        as permitted by Sections 201 and 301; or

                (8) to evidence and provide for the acceptance of appointment
        hereunder by a successor Trustee with respect to the Securities of one
        or more series and to add to or change any of the provisions of this
        Indenture as shall be necessary to provide for or facilitate the
        administration of the trusts hereunder by more than one Trustee,
        pursuant to the requirements of Section 611; or

                (9) to cure any ambiguity, to correct or supplement any
        provision herein which may be defective or inconsistent with any other
        provision herein, or to make any other provisions with respect to
        matters or questions arising under this Indenture; provided that such
        action pursuant to this Clause (9) shall not adversely affect the
        interests of the Holders of Securities of any series in any material
        respect.

SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.

        With the consent of the Holders of not less than a majority in principal
amount of the Outstanding Securities of all series affected by such supplemental
indenture (voting as one class), by Act of said Holders delivered to the
Corporation and the Trustee, the Corporation, when authorized by a Board
Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of any
supplemental indenture, or modifying in any manner the rights of the Holders of
Securities under this Indenture; provided, however, that no such supplemental
indenture shall, without the consent of the Holder of each Outstanding Security
affected thereby,

                (1) change the Stated Maturity of the principal of, or any
        installment of principal of or interest on, any Security (other than
        pursuant to the terms of such Security), or reduce the principal amount
        thereof or the rate of interest thereon or any premium payable upon the
        redemption thereof, or reduce the amount of the principal of an Original
        Issue Discount Security or any other Security which would be due and
        payable upon a declaration of acceleration of the Maturity thereof
        pursuant to Section 502 or change the coin or currency in which any
        Security or any premium or interest thereon is payable, or impair the
        right to institute suit for the enforcement of any such payment on or
        after the Stated Maturity thereof (or, in the case of redemption, on or
        after the Redemption Date), or


                                       50


<PAGE>   56
                (2) reduce the percentage in principal amount of the Outstanding
        Securities of any series, the consent of whose Holders is required for
        any such supplemental indenture, or the consent of whose Holders is
        required for any waiver (of compliance with certain provisions of this
        Indenture or certain defaults hereunder and their consequences) provided
        for in this Indenture, or

                (3) modify any of the provisions of this Section, Section 513 or
        Section 1006, except to increase any such percentage or to provide that
        certain other provisions of this Indenture cannot be modified or waived
        without the consent of the Holder of each Outstanding Security affected
        thereby; provided, however, that this clause shall not be deemed to
        require the consent of any Holder with respect to changes in the
        references to "the Trustee" and concomitant changes in this Section and
        Section 1006, or the deletion of this proviso, in accordance with the
        requirements of Sections 611 and 901(8).

        A supplemental indenture which changes or eliminates any covenant or
other provision of this Indenture which has expressly been included solely for
the benefit of one or more particular series of Securities, or which modifies
the rights of the Holders of Securities of such series with respect to such
covenant or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.

        It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.

SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES.

        In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 601) shall be fully protected in relying upon, an
Officer's Certificate and an Opinion of Counsel each stating that the execution
of such supplemental indenture is authorized or permitted by this Indenture. The
Trustee may, but shall not be obligated to, enter into any such supplemental
indenture which affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise.

SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES.

        Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.

SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT.

        Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.


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<PAGE>   57
SECTION 906. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES.

        Securities of any series authenticated and delivered after the execution
of any supplemental indenture pursuant to this Article may, and shall if
required by the Trustee, bear a notation in form approved by the Trustee as to
any matter provided for in such supplemental indenture. If the Corporation shall
so determine, new Securities of any series so modified as to conform, in the
opinion of the Trustee and the Corporation, to any such supplemental indenture
may be prepared and executed by the Corporation and authenticated and delivered
by the Trustee in exchange for Outstanding Securities of such series.

                                   ARTICLE X.
                                    COVENANTS

SECTION 1001. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST.

        The Corporation covenants and agrees for the benefit of each series of
Securities that it will duly and punctually pay the principal of and any premium
and interest on the Securities of that series in accordance with the terms of
the Securities and this Indenture.

SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY.

        The Corporation will maintain in each Place of Payment for any series of
Securities an office or agency where Securities of that series may be presented
or surrendered for payment, where Securities of that series may be surrendered
for registration of transfer or exchange and where notices and demands to or
upon the Corporation in respect of the Securities of that series and this
Indenture may be served. The Corporation will give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency. If at any time the Corporation shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the Corporation hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.

        The Corporation may also from time to time designate one or more other
offices or agencies where the Securities of one or more series may be presented
or surrendered for any or all such purposes and may from time to time rescind
such designations; provided, however, that no such designation or rescission
shall in any manner relieve the Corporation of its obligation to maintain an
office or agency in each Place of Payment for Securities of any series for such
purposes. The Corporation will give prompt written notice to the Trustee of any
such designation or rescission and of any change in the location of any such
other office or agency.

SECTION 1003. MONEY FOR SECURITIES PAYMENTS TO BE HELD IN TRUST.

        If the Corporation shall at any time act as its own Paying Agent with
respect to any series of Securities, it will, on or before each due date of the
principal of or any premium or interest on any of the Securities of that series,
segregate and hold in trust for the benefit of the Persons entitled thereto a
sum sufficient to pay the principal and any premium and interest so becoming


                                       52


<PAGE>   58
due until such sums shall be paid to such Persons or otherwise disposed of as
herein provided and will promptly notify the Trustee of its action or failure so
to act.

        Whenever the Corporation shall have one or more Paying Agents for any
series of Securities, it will, on or prior to each due date of the principal of
or any premium or interest on any Securities of that series, deposit with a
Paying Agent a sum sufficient to pay such amount, such sum to be held as
provided by the Trust Indenture Act, and (unless such Paying Agent is the
Trustee) the Corporation will promptly notify the Trustee of its action or
failure so to act.

        The Corporation will cause each Paying Agent for any series of
Securities other than the Trustee to execute and deliver to the Trustee an
instrument in which such Paying Agent shall agree with the Trustee, subject to
the provisions of this Section, that such Paying Agent will (1) hold all sums
held by it for the payment of the principal of (and premium, if any) or interest
on Securities in trust for the benefit of the Persons entitled thereto until
such sums shall be paid to such Persons or otherwise disposed of as herein
provided, (2) give the Trustee notice of any default by the Corporation (or any
other obligor upon the Securities) in the making of any payment of principal
(and premium, if any) or interest, (3) comply with the provisions of the Trust
Indenture Act applicable to it as a Paying Agent and (4) during the continuance
of any default by the Corporation (or any other obligor upon the Securities of
that series) in the making of any payment in respect of the Securities of that
series, upon the written request of the Trustee, forthwith pay to the Trustee
all sums held in trust by such Paying Agent for payment in respect of the
Securities of that series.

        The Corporation may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust hereunder by the Corporation or such Paying Agent, such sums to be held by
the Trustee upon the same trusts as those upon which such sums were held by the
Corporation or such Paying Agent; and, upon such payment by any Paying Agent to
the Trustee, such Paying Agent shall be released from all further liability with
respect to such money.

        Any money deposited with the Trustee or any Paying Agent, or then held
by the Corporation, in trust for the payment of the principal of or any premium
or interest on any Security of any series and remaining unclaimed for two years
after such principal, premium or interest has become due and payable shall be
paid to the Corporation on Company Request, or (if then held by the Corporation)
shall be discharged from such trust; and the Holder of such Security shall
thereafter, as an unsecured general creditor, look only to the Corporation for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Corporation as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Corporation cause to be published once, in a newspaper published
in the English language, customarily published on each Business Day and of
general circulation in the Borough of Manhattan, City of New York, New York,
notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such publication,
any unclaimed balance of such money then remaining will be repaid to the
Corporation.


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<PAGE>   59
SECTION 1004. CORPORATE EXISTENCE.

        Subject to Article Eight, the Corporation will do or cause to be done
all things necessary to preserve and keep in full force and effect its corporate
existence, rights (charter and statutory) and franchises.

SECTION 1005. STATEMENT BY OFFICERS AS TO DEFAULT.

        The Corporation will deliver to the Trustee, on or before October 15 of
each calendar year or on or before such other day in each calendar year as the
Corporation and the Trustee may from time to time agree upon, an Officer's
Certificate, stating whether or not to the best knowledge of the signers thereof
the Corporation is in default in the performance and observance of any of the
terms, provisions and conditions of this Indenture (without regard to any period
of grace or requirement of notice provided hereunder) and, if the Corporation
shall be in default, specifying all such defaults and the nature and status
thereof of which they may have knowledge.

SECTION 1006. WAIVER OF CERTAIN COVENANTS.

        Except as otherwise specified as contemplated by Section 301 for
Securities of such series, the Corporation may, with respect to the Securities
of any series, omit in any particular instance to comply with any term,
provision or condition set forth in any covenant provided pursuant to Section
301(19), 901(2) or 901(7) for the benefit of the Holders of such series if
before the time for such compliance the Holders of not less than a majority in
principal amount of the Outstanding Securities of such series shall, by Act of
such Holders, either waive such compliance in such instance or generally waive
compliance with such term, provision or condition, but no such waiver shall
extend to or affect such term, provision or condition except to the extent so
expressly waived, and, until such waiver shall become effective, the obligations
of the Corporation and the duties of the Trustee in respect of any such term,
provision or condition shall remain in full force and effect.

                                   ARTICLE XI.
                            REDEMPTION OF SECURITIES

SECTION 1101. APPLICABILITY OF ARTICLE.

        Securities of any series which are redeemable before their Stated
Maturity shall be redeemable in accordance with their terms and (except as
otherwise specified as contemplated by Section 301 for such Securities) in
accordance with this Article.

SECTION 1102. ELECTION TO REDEEM; NOTICE TO TRUSTEE.

        The election of the Corporation to redeem any Securities shall be
evidenced by a Board Resolution or in another manner specified as contemplated
by Section 301 for such Securities. In case of any redemption at the election of
the Corporation, the Corporation shall, at least 45 days prior to the Redemption
Date fixed by the Corporation (unless a shorter notice shall be satisfactory to
the Trustee), notify the Trustee of such Redemption Date, of the principal
amount of Securities of such series to be redeemed and, if applicable, of the
tenor of the Securities to be


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<PAGE>   60
redeemed. In the case of any redemption of Securities (A) prior to the
expiration of any restriction on such redemption provided in the terms of such
Securities or elsewhere in this Indenture, or (B) pursuant to an election of the
Corporation which is subject to a condition specified in the terms of such
Securities or elsewhere in this Indenture, the Corporation shall furnish the
Trustee with an Officer's Certificate evidencing compliance with such
restriction or condition.

SECTION 1103. SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED.

        If less than all the Securities of any series are to be redeemed (unless
all the Securities of such series and of a specified tenor are to be redeemed or
unless such redemption affects only a single Security), the particular
Securities to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Securities of such series
not previously called for redemption, by such method as the Trustee shall deem
fair and appropriate and which may provide for the selection for redemption of a
portion of the principal amount of any Security of such series; provided that
the unredeemed portion of the principal amount of any Security shall be in an
authorized denomination (which shall not be less than the minimum authorized
denomination) for such Security. If less than all the Securities of such series
and of a specified tenor are to be redeemed (unless such redemption affects only
a single Security), the particular Securities to be redeemed shall be selected
not more than 60 days prior to the Redemption Date by the Trustee, from the
Outstanding Securities of such series and specified tenor not previously called
for redemption in accordance with the preceding sentence.

        The Trustee shall promptly notify the Corporation in writing of the
Securities selected for redemption as aforesaid and, in the case of any
Securities selected for partial redemption as aforesaid, the principal amount
thereof to be redeemed.

        The provisions of the two preceding paragraphs shall not apply with
respect to any redemption affecting only a single Security, whether such
Security is to be redeemed in whole or in part. In the case of any such
redemption in part, the unredeemed portion of the principal amount of the
Security shall be in an authorized denomination (which shall not be less than
the minimum authorized denomination) for such Security.

        For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.

SECTION 1104. NOTICE OF REDEMPTION.

        Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register.

        All notices of redemption shall identify the Securities to be redeemed
(including CUSIP number(s)) and shall state:


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<PAGE>   61
                    (1) the Redemption Date;

                    (2) the Redemption Price;

                    (3) if less than all the Outstanding Securities of any
                series and of a specified tenor consisting of more than a single
                Security are to be redeemed, the identification (and, in the
                case of partial redemption of any such Securities, the principal
                amounts) of the particular Securities to be redeemed and, if
                less than all the Outstanding Securities of any series and of a
                specified tenor consisting of a single Security are to be
                redeemed, the principal amount of the particular Security to be
                redeemed;

                    (4) that on the Redemption Date the Redemption Price,
                together with accrued interest, if any, to the Redemption Date,
                will become due and payable upon each such Security to be
                redeemed and, if applicable, that interest thereon will cease to
                accrue on and after said date;

                    (5) the place or places where each such Security is to be
                surrendered for payment of the Redemption Price and accrued
                interest, if any, unless it shall have been specified as
                contemplated by Section 301 with respect to such Securities that
                such surrender shall not be required;

                    (6) that the redemption is for a sinking fund, if such is
                the case; and

                    (7) such other matters as the Corporation shall deem
                desirable or appropriate.

        Unless otherwise specified with respect to any Securities in accordance
with Section 301, with respect to any redemption of Securities at the election
of the Corporation, unless, upon the giving of notice of such redemption,
Defeasance shall have been effected with respect to such Securities pursuant to
Section 1302, such notice may state that such redemption shall be conditional
upon the receipt by the Trustee or the Paying Agent(s) for such Securities, on
or prior to the date fixed for such redemption, of money sufficient to pay the
principal of and any premium and interest on such Securities and that if such
money shall not have been so received such notice shall be of no force or effect
and the Corporation shall not be required to redeem such Securities. In the
event that such notice of redemption contains such a condition and such money is
not so received, the redemption shall not be made and within a reasonable time
thereafter notice shall be given, in the manner in which the notice of
redemption was given, that such money was not so received and such redemption
was not required to be made, and the Trustee or Paying Agent(s) for the
Securities otherwise to have been redeemed shall promptly return to the Holders
thereof any of such Securities which had been surrendered for payment upon such
redemption.

        Notice of redemption of Securities to be redeemed at the election of the
Corporation, and any notice of non-satisfaction of redemption as aforesaid,
shall be given by the Corporation or, at the Corporation's request, by the
Trustee in the name and at the expense of the Corporation. Subject to the
preceding paragraph, any such notice of redemption shall be irrevocable.


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<PAGE>   62
SECTION 1105. DEPOSIT OF REDEMPTION PRICE.

        On or prior to the Redemption Date specified in the notice of redemption
given as provided in Section 1104, the Corporation will deposit with the Trustee
or with one or more Paying Agents (or if the Corporation is acting as its own
Paying Agent, the Corporation will segregate and hold in trust as provided in
Section 1003) an amount of money sufficient to pay the Redemption Price of; and
any accrued interest on, all the Securities which are to be redeemed on that
date.

SECTION 1106. SECURITIES PAYABLE ON REDEMPTION DATE.

        Notice of redemption having been given as aforesaid, and the conditions,
if any, set forth in such notice having been satisfied, the Securities or
portions thereof so to be redeemed shall, on the Redemption Date, become due and
payable at the Redemption Price therein specified, and from and after such date
(unless, in the case of an unconditional notice of redemption, the Corporation
shall default in the payment of the Redemption Price and accrued interest, if
any) such Securities or portions thereof, if interest-bearing, shall cease to
bear interest. Upon surrender of any such Security for redemption in accordance
with said notice, such Security or portion thereof shall be paid by the
Corporation at the Redemption Price, together with accrued interest, if any, to
the Redemption Date; provided, however, that no such surrender shall be a
condition to such payment if so specified as contemplated by Section 301 with
respect to such Security, and provided further that, unless otherwise specified
as contemplated by Section 301, installments of interest whose Stated Maturity
is on or prior to the Redemption Date will be payable to the Holders of such
Securities, or one or more Predecessor Securities, registered as such at the
close of business on the relevant Record Dates according to their terms and the
provisions of Section 307.

        If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal and any premium shall, until
paid, bear interest from the Redemption Date at the rate prescribed therefor in
the Security.

SECTION 1107. SECURITIES REDEEMED IN PART.

        Any Security which is to be redeemed only in part shall be surrendered
at a Place of Payment therefor (with, if the Corporation or the Trustee so
requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Corporation and the Trustee duly executed by, the Holder
thereof or his attorney duly authorized in writing), and the Corporation shall
execute, and the Trustee shall authenticate and deliver to the Holder of such
Security without service charge, a new Security or Securities of the same series
and of like tenor, of any authorized denomination as requested by such Holder,
in aggregate principal amount equal to and in exchange for the unredeemed
portion of the principal of the Security so surrendered.


                                       57


<PAGE>   63
                                  ARTICLE XII.
                                  SINKING FUNDS

SECTION 1201. APPLICABILITY OF ARTICLE.

        The provisions of this Article shall be applicable to any sinking fund
for the retirement of Securities of any series except as otherwise specified as
contemplated by Section 301 for such Securities.

        The minimum amount of any sinking fund payment provided for by the terms
of any Securities is herein referred to as a "mandatory sinking fund payment,"
and any payment in excess of such minimum amount provided for by the terms of
such Securities is herein referred to as an "optional sinking fund payment." If
provided for by the terms of any Securities, the cash amount of any sinking fund
payment may be subject to reduction as provided in Section 1202. Each sinking
fund payment shall be applied to the redemption of Securities as provided for by
the terms of such Securities.

SECTION 1202. SATISFACTION OF SINKING FUND PAYMENTS WITH SECURITIES.

        The Corporation (1) may deliver Outstanding Securities of a series
(other than any previously called for redemption) and (2) may apply as a credit
Securities of a series which have been redeemed either at the election of the
Corporation pursuant to the terms of such Securities or through the application
of permitted optional sinking fund payments pursuant to the terms of such
Securities, in each case in satisfaction of all or any part of any sinking fund
payment with respect to any Securities of such series required to be made
pursuant to the terms of such Securities as and to the extent provided for by
the terms of such Securities; provided that the Securities to be so credited
have not been previously so credited. The Securities to be so credited shall be
received and credited for such purpose by the Trustee at the Redemption Price,
as specified in the Securities so to be redeemed, for redemption through
operation of the sinking fund and the amount of such sinking fund payment shall
be reduced accordingly.

SECTION 1203. REDEMPTION OF SECURITIES FOR SINKING FUND.

        Not less than 45 days prior to each sinking fund payment date for any
Securities, the Corporation will deliver to the Trustee an Officer's Certificate
specifying the amount of the next ensuing sinking fund payment for such
Securities pursuant to the terms of such Securities, the portion thereof, if
any, which is to be satisfied by payment of cash and the portion thereof, if
any, which is to be satisfied by delivering and crediting Securities pursuant to
Section 1202 and stating the basis for such credit and that such Securities have
not been previously so credited and will also deliver to the Trustee any
Securities to be so delivered. Not less than 30 days prior to each such sinking
fund payment date, the Trustee shall select the Securities to be redeemed upon
such sinking fund payment date in the manner specified in Section 1103 and cause
notice of the redemption thereof to be given in the name of and at the expense
of the Corporation in the manner provided in Section 1104. Such notice having
been duly given, the redemption of such Securities shall be made upon the terms
and in the manner stated in Sections 1105 and 1106.


                                       58


<PAGE>   64
                                  ARTICLE XIII.
                       DEFEASANCE AND COVENANT DEFEASANCE

SECTION 1301. APPLICABILITY OF ARTICLE.

        Unless, pursuant to Section 301, provision is made that either or both
of (A) defeasance of any Securities or any series of Securities under Section
1302 and (B) covenant defeasance of any Securities or any series of Securities
under Section 1303 shall not apply to such Securities of a series, then the
provisions of either or both of Sections 1302 and Section 1303, as the case may
be, together with Sections 1304 and 1305, shall be applicable to the Outstanding
Securities of such series upon compliance with the conditions set forth below in
this Article.

SECTION 1302. DEFEASANCE AND DISCHARGE.

        The Corporation may cause itself to be discharged from its obligations
with respect to any Securities or any series of Securities on and after the date
the conditions set forth in Section 1304 are satisfied (hereinafter called
"Defeasance"). For this purpose, such Defeasance means that the Corporation
shall be deemed to have paid and discharged the entire indebtedness represented
by such Securities and to have satisfied all its other obligations under such
Securities and this Indenture insofar as such Securities are concerned (and the
Trustee, at the expense of the Corporation, shall execute proper instruments
acknowledging the same), subject to the following which shall survive until
otherwise terminated or discharged hereunder: (1) the rights of Holders of such
Securities to receive, solely from the trust fund described in Section 1304 and
as more fully set forth in such Section, payments in respect of the principal of
and any premium and interest on such Securities when payments are due, (2) the
Corporation's obligations with respect to such Securities under Sections 304,
305, 306, 1002 and 1003 and with respect to the Trustee under Section 607, (3)
the rights, powers, trusts, duties and immunities of the Trustee hereunder and
(4) this Article. Subject to compliance with this Article, Defeasance with
respect to any Securities or any series of Securities by the Corporation is
permitted under this Section 1302 notwithstanding the prior exercise by the
Corporation of its rights under Section 1303 with respect to such Securities.
Following a Defeasance, payment of such Securities may not be accelerated
because of an Event of Default.

SECTION 1303. COVENANT DEFEASANCE.

        The Corporation may cause itself to be released from its obligations
under any covenants provided pursuant to Section 301(19), 901(2), 901(6) or
901(7) with respect to any Securities or any series of Securities for the
benefit of the Holders of such Securities and the occurrence of any event
specified in Sections 501(4) (with respect to any such covenants provided
pursuant to Section 301(19), 901(2), 901(6) or 901(7)) or 501(7) shall be deemed
not to be or result in an Event of Default with respect to such Securities as
provided in this Section, in each case on and after the date the conditions set
forth in Section 1304 are satisfied (hereinafter called "Covenant Defeasance").
For this purpose, such Covenant Defeasance means that, with respect to such
Securities, the Corporation may omit to comply with and shall have no liability
in respect of any term, condition or limitation set forth in any such specified
Section (to the extent so specified in the case of Section 501(4)), whether
directly or indirectly by reason of any reference elsewhere


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<PAGE>   65
herein to any such Section or by reason of any reference in any such Section to
any other provision herein or in any other document, but the remainder of this
Indenture and such Securities shall be unaffected thereby.

SECTION 1304. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE.

        The following shall be the conditions to the application of Section 1302
or Section 1303 to any Securities or any series of Securities, as the case may
be:

                (1) The Corporation shall irrevocably have deposited or caused
        to be deposited with the Trustee as trust funds in trust for the purpose
        of making the following payments, specifically pledged as security for,
        and dedicated solely to, the benefit of the Holders of such Securities,
        (A) money in an amount, or (B) Government Obligations which through the
        scheduled payment of principal and interest in respect thereof in
        accordance with their terms will provide, not later than the due date of
        any payment, money in an amount, or (C) a combination thereof,
        sufficient, in the case of (B) or (C), in the opinion of a nationally
        recognized firm of independent public accountants expressed in a written
        certification thereof delivered to the Trustee, to pay and discharge,
        and which shall be applied by the Trustee to pay and discharge, the
        principal of and any premium and interest on such Securities on the
        respective Stated Maturities or on any Redemption Date established
        pursuant to Clause (3) below, in accordance with the terms of this
        Indenture and such Securities. As used herein, "Government Obligation"
        means (x) any security which is (i) a direct obligation of the United
        States of America or the government which issued the foreign currency in
        which such Securities are payable, for the payment of which its full
        faith and credit is pledged or (ii) an obligation of a Person controlled
        or supervised by and acting as an agency or instrumentality of the
        United States of America or such government which issued the foreign
        currency in which such Securities are payable, the payment of which is
        unconditionally guaranteed as a full faith and credit obligation by the
        United States of America or such other government, which, in either case
        (i) or (ii), is not callable or redeemable at the option of the issuer
        thereof, and (y) any depositary receipt issued by a bank (as defined in
        Section 3(a)(2) of the Securities Act) as custodian with respect to any
        Government Obligation which is specified in clause (x) above and held by
        such bank for the account of the holder of such depositary receipt, or
        with respect to any specific payment of principal of or interest on any
        Government Obligation which is so specified and held, provided that
        (except as required by law) such custodian is not authorized to make any
        deduction from the amount payable to the holder of such depositary
        receipt from any amount received by the custodian in respect of the
        Government Obligation or the specific payment of principal or interest
        evidenced by such depositary receipt.

                (2) No event which is, or after notice or lapse of time or both
        would become, an Event of Default with respect to such Securities or any
        other Securities shall have occurred and be continuing at the time of
        such deposit or, with regard to any such event specified in Sections
        501(5) and (6), at any time on or prior to the 90th day after the date
        of such deposit (it being understood that this condition shall not be
        deemed satisfied until after such 90th day).


                                       60


<PAGE>   66
                (3) If the Securities are to be redeemed prior to Stated
        Maturity (other than from mandatory sinking fund payments or analogous
        payments), notice of such redemption shall have been duly given pursuant
        to this Indenture or provision therefor satisfactory to the Trustee
        shall have been made.

                (4) The Corporation shall have delivered to the Trustee an
        Officer's Certificate and an Opinion of Counsel, each stating that all
        conditions precedent with respect to such Defeasance or Covenant
        Defeasance have been complied with.

SECTION 1305. DEPOSITED MONEY AND GOVERNMENT OBLIGATIONS TO BE HELD IN TRUST;
              MISCELLANEOUS PROVISIONS.

        Subject to the provisions of the last paragraph of Section 1003, all
money and Government Obligations (including the proceeds thereof) deposited with
the Trustee pursuant to Section 1304 in respect of any Securities shall be held
in trust and applied by the Trustee, in accordance with the provisions of such
Securities and this Indenture, to the payment, either directly or through any
such Paying Agent (including the Corporation acting as its own Paying Agent) as
the Trustee may determine, to the Holders of such Securities, of all sums due
and to become due thereon in respect of principal and any premium and interest,
but money so held in trust need not be segregated from other funds except to the
extent required by law.

        The Corporation shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the Government Obligations
deposited pursuant to Section 1304 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of Outstanding Securities.

        Anything in this Article to the contrary notwithstanding, the Trustee
shall deliver or pay to the Corporation from time to time upon Company Request
any money or Government Obligations held by it as provided in Section 1304 with
respect to any Securities which, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect the Defeasance or Covenant Defeasance, as
the case may be, with respect to such Securities.

                                  ARTICLE XIV.
                           IMMUNITY OF INCORPORATORS,
                      STOCKHOLDERS, OFFICERS AND DIRECTORS

SECTION 1401. INDENTURE AND SECURITIES SOLELY CORPORATE OBLIGATIONS.

        No recourse for the payment of the principal of or any premium or
interest on any Security, or for any claim based thereon or otherwise in respect
thereof, and no recourse under or upon any obligation, covenant or agreement of
the Corporation in this Indenture or in any supplemental indenture, or in any
Security, or because of the creation of any indebtedness represented thereby,
shall be had against any incorporator, stockholder, officer or director, as
such, past, present or future, of the Corporation or of any successor
corporation, either directly or


                                       61


<PAGE>   67
through the Corporation or any successor corporation, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise; it being expressly understood that all such liability is
hereby expressly waived and released as a condition of, and as a consideration
for, the execution of this Indenture and the issue of the Securities.

        This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.

                            (Signature page follows)


                                       62


<PAGE>   68
        In Witness Whereof, the parties hereto have caused this Indenture to be
duly executed as of the day and year first above written.

                                     MERCURY GENERAL CORPORATION



                                     By /s/ George Joseph
                                       -------------------------------

                                     By /s/ Gabriel Tirador
                                       -------------------------------



                                     Bank One Trust Company, N.A.,
                                     as Trustee


                                     By /s/ Steven E. Charles
                                       -------------------------------
                                             Authorized Signatory


                                       63


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-5.1
<SEQUENCE>3
<FILENAME>a73188orex5-1.txt
<DESCRIPTION>EXHIBIT 5.1
<TEXT>

<PAGE>   1
                                                                     EXHIBIT 5.1

                          [LATHAM & WATKINS LETTERHEAD]




                                  June 4, 2001

Mercury General Corporation
4484 Wilshire Boulevard
Los Angeles, California 90010


               Re:  $300,000,000 Aggregate Offering Price of Debt Securities of
                    Mercury General Corporation

Ladies and Gentlemen:

        This opinion is furnished in connection with the registration statement
on Form S-3 (the "Registration Statement") being filed by Mercury General
Corporation (the "Company") with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, relating to the offering by the Company
from time to time, as set forth in the prospectus contained in the Registration
Statement (the "Prospectus") and as shall be set forth in one or more
supplements to the Prospectus of up to $300,000,000 aggregate offering price (as
such amount may be increased pursuant to a registration statement filed with the
Commission under Rule 462(b) in connection with the Registration Statement) of
debt securities (the "Debt Securities"). The Debt Securities will be issued
pursuant to the indenture, dated as of June 1, 2001, between the Company and
Bank One Trust Company, National Association, as Trustee, as it may be amended
or supplemented by resolutions and one or more supplemental indentures or
officers' certificates in accordance with the indenture (as so amended or
supplemented, the "Indenture"). The Indenture is attached as an exhibit to the
Registration Statement.

        We are familiar with the proceedings taken and proposed to be taken by
the Company in connection with the authorization and issuance of the Debt
Securities, and we have examined such matters of fact and questions of law we
considered appropriate for purposes of rendering the opinion expressed below. We
have been furnished with and relied upon certificates of officers of the Company
and others with respect to factual matters.

        We are opining herein as to the effect on the subject transaction only
of the federal laws of the United States, the internal laws of the State of New
York, and General Corporation Law of the State of California, and we express no
opinion with respect to the applicability thereto, or the effect thereon, of the
laws of any other jurisdiction, or in the case of California, any other laws, or
as to any matters of municipal law or the laws of any local agencies within any
state.

<PAGE>   2

LATHAM & WATKINS

June 4, 2001
Page 2



        Subject to the foregoing and the other matters set forth herein, it is
our opinion that, as of the date hereof, when (a) the specific terms of the Debt
Securities have been duly established in accordance with the Indenture and
applicable law, (b) such further corporate authorization as may be requisite has
been duly taken, and (c) the Debt Securities are duly executed, authenticated
and delivered against payment therefor in the manner contemplated by the
Indenture, the Debt Securities will constitute legally valid and legally binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms.

        The opinion set forth above relating to enforceability of the Debt
Securities is subject to the following exceptions, limitations and
qualifications: (i) the effect of bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other similar laws now or hereafter in
effect relating to or affecting the rights and remedies of creditors; (ii) the
effect of general principles of equity, whether enforcement is considered in a
proceeding in equity or at law, and the discretion of the court before which any
proceeding therefor may be brought, and (iii) the unenforceability under certain
circumstances under law or court decisions of provisions providing for the
indemnification of or contribution to a party with respect to a liability where
such indemnification or contribution is contrary to public policy. We express no
opinion (i) concerning the enforceability of the waiver of rights or defenses
contained in Section 515 of the Indenture or (ii) with respect to whether
acceleration of Debt Securities may affect the collectibility of any portion of
the stated principal amount thereof which might be determined to constitute
unearned interest thereon.

        To the extent that the obligations of the Company under the Indenture
may be dependent upon such matters, we assume for purposes of this opinion that
the Trustee is duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization and has complied with any obligations
to file returns and pay taxes under the Franchise Tax Law of the State of
California; that the Trustee is duly qualified to engage in the activities
contemplated by the Indenture; that the Indenture has been duly authorized,
executed and delivered by the Trustee and constitutes the legal, valid and
binding obligation of the Trustee, enforceable against the Trustee in accordance
with its terms; that the Trustee is in compliance, generally and with respect to
acting as a trustee under the Indenture, with all applicable laws and
regulations; and that the Trustee has the requisite organizational and legal
power and authority to perform its obligations under the Indenture.

        We consent to your filing this opinion as an exhibit to the Registration
Statement and to the reference to our firm under the caption "Legal Matters" in
the prospectus included therein.

                                            Very truly yours,

                                            Latham & Watkins


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.1
<SEQUENCE>4
<FILENAME>a73188orex12-1.txt
<DESCRIPTION>EXHIBIT 12.1
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 12.1

     STATEMENT REGARDING COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES


MERCURY GENERAL CORPORATION

<TABLE>
<CAPTION>

                                       Three Months
                                           Ended                   Year Ended December 31
                                         March 31,    ----------------------------------------------------
                                            2001        2000       1999       1998       1997       1996
                                       ------------   --------   --------   --------   --------   --------
                                                       (Amounts in millions, except ratios)

<S>                                      <C>          <C>        <C>        <C>        <C>        <C>
EARNINGS

Income Before Income Taxes               $ 28,597     $128,555   $168,539   $235,280   $209,779   $136,590
Fixed Charges                               2,494        9,789      7,354      6,695      6,656      3,474
                                         --------     --------   --------   --------   --------   --------
  Adjusted Earnings                      $ 31,091     $138,344   $175,893   $241,975   $216,435   $140,064
                                         ========     ========   ========   ========   ========   ========

FIXED CHARGES

Interest Expense                         $  1,863     $  7,292   $  4,960   $  4,842   $  4,976   $  2,004
Portion of Rents Deemed Representative
     Of Interest Factor (1)                   631        2,497      2,394      1,853      1,680      1,470
                                         --------     --------   --------   --------   --------   --------
  Total Fixed Charges                    $  2,494     $  9,789   $  7,354   $  6,695   $  6,656   $  3,474
                                         ========     ========   ========   ========   ========   ========

RATIO OF EARNINGS TO FIXED CHARGES           12.5         14.1       23.9       36.1       32.5       40.3
                                         ========     ========   ========   ========   ========   ========
</TABLE>

(1) Generally deemed to be one-third of rental expense.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.2
<SEQUENCE>5
<FILENAME>a73188orex23-2.txt
<DESCRIPTION>EXHIBIT 23.2
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 23.2


               CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


Board of Directors
Mercury General Corporation:


We consent to the use of our report incorporated herein by reference and to the
reference of our firm under the heading "Experts" in the prospectus.



KPMG, LLP


Los Angeles, California
June 1, 2001








</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-25.1
<SEQUENCE>6
<FILENAME>a73188orex25-1.txt
<DESCRIPTION>EXHIBIT 25.1
<TEXT>

<PAGE>   1
                                                                   EXHIBIT 25.1

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM T-1

                                 ---------------


                            STATEMENT OF ELIGIBILITY
                      UNDER THE TRUST INDENTURE ACT OF 1939
                  OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE

                CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
                  OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) __

                                 ---------------

                  BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION
               (EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)

 A NATIONAL BANKING ASSOCIATION                                 31-0838515
                                                            (I.R.S. EMPLOYER
                                                         IDENTIFICATION NUMBER)

100 EAST BROAD STREET, COLUMBUS, OHIO                          43271-0181
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                       (ZIP CODE)

                  BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION
                        1 BANK ONE PLAZA, SUITE IL1-0430
                          CHICAGO, ILLINOIS 60670-0430
             ATTN: SANDRA L. CARUBA, VICE PRESIDENT, (312) 336-9436
            (NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)


                                 ---------------

                           MERCURY GENERAL CORPORATION
               (EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)



             CALIFORNIA                                          95-2211612
    (STATE OR OTHER JURISDICTION OF                          (I.R.S. EMPLOYER
     INCORPORATION OR ORGANIZATION)                       IDENTIFICATION NUMBER)

4484 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA                                           90010
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                       (ZIP CODE)

                                 DEBT SECURITIES
                         (TITLE OF INDENTURE SECURITIES)

<PAGE>   2



ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE
        TRUSTEE:

        (a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.

               Comptroller of Currency, Washington, D.C.;
               Federal Deposit Insurance Corporation,
               Washington, D.C.; The Board of Governors of
               the Federal Reserve System, Washington D.C.

        (b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.

               The trustee is authorized to exercise corporate trust powers.

ITEM 2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE
        TRUSTEE, DESCRIBE EACH SUCH AFFILIATION.

               No such affiliation exists with the trustee.


ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS
         STATEMENT OF ELIGIBILITY.

        1. A copy of the articles of association of the trustee now in effect.*

        2. A copy of the certificate of authority of the trustee to commence
           business.*

        3. A copy of the authorization of the trustee to exercise corporate
           trust powers.*

        4. A copy of the existing by-laws of the trustee.*

        5. Not Applicable.

        6. The consent of the trustee required by Section 321(b) of the Act.


<PAGE>   3




        7. A copy of the latest report of condition of the trustee published
           pursuant to law or the requirements of its supervising or examining
           authority.

        8. Not Applicable.

        9. Not Applicable.


Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the
trustee, Bank One Trust Company, National Association, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this Statement of Eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of Chicago
and State of Illinois, on the 26th day of April, 2001.


        BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION, TRUSTEE

        BY  /s/ SANDRA L. CARUBA
            ----------------------------
                SANDRA L. CARUBA
                VICE PRESIDENT


*EXHIBITS 1, 2, 3, AND 4 ARE HEREIN INCORPORATED BY REFERENCE TO EXHIBITS
BEARING IDENTICAL NUMBERS IN ITEM 16 OF THE FORM T-1 OF BANK ONE TRUST COMPANY,
NATIONAL ASSOCIATION, FILED AS EXHIBIT 25 TO THE REGISTRATION STATEMENT ON FORM
S-4 OF U S WEST COMMUNICATIONS, INC., FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ON MARCH 24, 2000 (REGISTRATION NO. 333-32124).
<PAGE>   4




                                    EXHIBIT 6



                       THE CONSENT OF THE TRUSTEE REQUIRED
                          BY SECTION 321(b) OF THE ACT


                                                                 April 26, 2001



Securities and Exchange Commission
Washington, D.C.  20549

Ladies and Gentlemen:

In connection with the qualification of an indenture between Mercury General
Corporation and Bank One Trust Company, National Association, as Trustee, the
undersigned, in accordance with Section 321(b) of the Trust Indenture Act of
1939, as amended, hereby consents that the reports of examinations of the
undersigned, made by Federal or State authorities authorized to make such
examinations, may be furnished by such authorities to the Securities and
Exchange Commission upon its request therefor.


                                    Very truly yours,

                                    BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION



                                    BY:   /s/ SANDRA L. CARUBA
                                        ------------------------------------
                                              SANDRA L. CARUBA
                                              VICE PRESIDENT



<PAGE>   5
                                    EXHIBIT 7

<TABLE>
<S>                    <C>                            <C>                       <C>                 <C>
Legal Title of Bank:   Bank One Trust Company, N.A.   Call Date: 12/31/00       State #:  391581    FFIEC 032
Address:               100 Broad Street               Vendor ID:  D             Cert #:  21377      Page RC-1
City, State  Zip:      Columbus, OH 43271             Transit #:  04400003
</TABLE>

CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR DECEMBER 31, 2000

All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding of the last business day of the
quarter.

SCHEDULE RC--BALANCE SHEET


<TABLE>
<CAPTION>
                                                                                              DOLLAR AMOUNTS IN THOUSANDS    C300
                                                                                              RCON     BIL MIL THOU
                                                                                              ----     ------------

<S>                                                                                           <C>      <C>                   <C>
ASSETS
1.  Cash and balances due from depository institutions (from Schedule
    RC-A):                                                                                     RCON
    a. Noninterest-bearing balances and currency and coin(1) ...................               0081            64,969         1.a
    b. Interest-bearing balances(2) ............................................               0071                 0         1.b
2.  Securities
    a. Held-to-maturity securities(from Schedule RC-B, column A) ...............               1754                 0         2.a
    b. Available-for-sale securities (from Schedule RC-B, column D) ............               1773             4,286         2.b
3.  Federal funds sold and securities purchased under agreements to
    resell .....................................................................               1350         1,056,754         3.
4. Loans and lease financing receivables:
    a. Loans and leases, net of unearned income (from Schedule                                 RCON
    RC-C) ......................................................................               2122           346,052         4.a
    b. LESS: Allowance for loan and lease losses ...............................               3123               372         4.b
    c. LESS: Allocated transfer risk reserve ...................................               3128                 0         4.c
    d. Loans and leases, net of unearned income, allowance, and                                RCON
       reserve (item 4.a minus 4.b and 4.c) ....................................               2125           345,680         4.d
5.  Trading assets (from Schedule RD-D) ........................................               3545                 0         5.
6.  Premises and fixed assets (including capitalized leases) ...................               2145            21,835         6.
7.  Other real estate owned (from Schedule RC-M) ...............................               2150                 0         7.
8.  Investments in unconsolidated subsidiaries and associated
    companies (from Schedule RC-M) .............................................               2130                 0         8.
9.  Customers' liability to this bank on acceptances outstanding ...............               2155                 0         9.
10. Intangible assets (from Schedule RC-M) .....................................               2143            13,697        10.
11. Other assets (from Schedule RC-F) ..........................................               2160           131,390        11.
12. Total assets (sum of items 1 through 11) ...................................               2170         1,638,611        12.
</TABLE>

- --------
(1) Includes cash items in process of collection and unposted debits.

(2) Includes time certificates of deposit not held for trading.



<PAGE>   6

<TABLE>
<S>                    <C>                            <C>                       <C>                 <C>
Legal Title of Bank:   Bank One Trust Company, N.A.   Call Date: 12/31/00       State #:  391581    FFIEC 032
Address:               100 Broad Street               Vendor ID:  D             Cert #:  21377      Page RC-2
City, State  Zip:      Columbus, OH 43271             Transit #:  04400003
</TABLE>

SCHEDULE RC-CONTINUED

<TABLE>
<CAPTION>
                                                                                                          DOLLAR AMOUNTS IN
                                                                                                              THOUSANDS
                                                                                                              ---------
<S>                                                                                           <C>         <C>              <C>
LIABILITIES
13. Deposits:
    a. In domestic offices (sum of totals of columns A and C                                   RCON
       from Schedule RC-E, part I) .............................................               2200         1,410,826       13.a
       (1) Noninterest-bearing(1) ..............................................               6631           830,363       13.a1
       (2) Interest-bearing ....................................................               6636           580,463       13.a2

    b. In foreign offices, Edge and Agreement subsidiaries, and
       IBFs (from Schedule RC-E, part II) ......................................
       (1) Noninterest bearing .................................................
       (2) Interest-bearing ....................................................
14. Federal funds purchased and securities sold under agreements
    to repurchase: .............................................................               RCFD 2800            0        14
15. a. Demand notes issued to the U.S. Treasury ................................               RCON 2840            0        15.a
    b. Trading Liabilities(from Schedule RC-D) .................................               RCFD 3548            0        15.b

16. Other borrowed money:                                                                      RCON
    a. With original maturity of one year or less ..............................               2332                 0        16.a
    b. With original maturity of more than one year ............................               A547                 0        16.b
    c. With original maturity of more than three years .........................               A548                 0        16.c

17. Not applicable
18. Bank's liability on acceptance executed and outstanding ....................               2920                 0        18.
19. Subordinated notes and debentures ..........................................               3200                 0        19.
20. Other liabilities (from Schedule RC-G) .....................................               2930            75,186        20.
21. Total liabilities (sum of items 13 through 20) .............................               2948         1,486,012        21.
22. Not applicable
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus ..............................               3838                 0        23.
24. Common stock ...............................................................               3230               800        24.
25. Surplus (exclude all surplus related to preferred stock) ...................               3839            45,157        25.
26. a. Undivided profits and capital reserves ..................................               3632           106,620        26.a
    b. Net unrealized holding gains (losses) on available-for-sale
        securities .............................................................               8434                22        26.b
    c. Accumulated net gains (losses) on cash flow hedges ......................               4336                 0        26.c
27. Cumulative foreign currency translation adjustments ........................
28. Total equity capital (sum of items 23 through 27) ..........................               3210           152,599        28.
29. Total liabilities, limited-life preferred stock, and equity
    capital (sum of items 21, 22, and 28) ......................................               3300         1,638,611        29.
</TABLE>


Memorandum

To be reported only with the March Report of Condition.

<TABLE>
<S>                                                                                    <C>          <C>    <C>
1. Indicate in the box at the right the number of the statement below that best
describes the most comprehensive level of auditing work performed for the bank                             Number
by independent external auditors as of any date during 1996........................... RCFD 6724    N.A.    M.1.
</TABLE>

<TABLE>
<S>                                                                <C>
1 =  Independent audit of the bank conducted in accordance         4 =  Directors' examination of the bank performed by other
     with generally accepted auditing standards by a certified          external  auditors (may be required by state chartering
     public accounting firm which submits a report on the bank          authority)
2 =  Independent audit of the bank's parent holding company        5 =  Review of the bank's financial statements by external
     conducted in accordance with generally accepted auditing           auditors
     standards by a certified public accounting firm which         6 =  Compilation of the bank's financial statements by external
     submits a report on the consolidated holding company               auditors
     (but not on the bank separately)                              7 =  Other audit procedures (excluding tax preparation work)
3 =  Directors' examination of the bank conducted in               8 =  No external audit work
     accordance with generally accepted auditing standards
     by a certified public accounting firm (may be required
     by state chartering authority)
</TABLE>

- ---------------

(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.


</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
