PENN AMERICA GROUP INC
EXHIBIT 10.17.III
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>6
<FILENAME>paex1017-iii.txt
<DESCRIPTION>EXHIBIT 10.17.III
<TEXT>
                                                               Exhibit 10-17-iii

                            GENERAL AGENT CONTINGENT
                           PROFIT COMMISSION ADDENDUM




         This Addendum, effective January 1, 2001, made by and between
Penn-America Insurance Company and Penn-Star Insurance Company (hereinafter
collectively referred to as "Penn-America") and [[MANNAM]] (hereinafter referred
to as "Agent"), supersedes and replaces, in its entirety, the General Agency
Profit Sharing Addendum effective January 1, 1999 ("the 1999 Addendum"), by and
between the parties hereto, and forms a part of the General Agency Agreement by
and between Penn-America and Agent dated [[CNTDATE]], and any amendments
thereto, as follows.

1.       Agreement: It is agreed that as a reward to Agent for Agent's favorable
         underwriting results, Penn-America will pay to Agent, in addition to
         the commissions payable in accordance with the General Agency
         Agreement, a contingent profit commission based on the underwriting
         profits realized by Penn-America on the business written by Agent under
         the General Agency Agreement, except such business as is ineligible
         herein;

2.       Ineligible Business: This Addendum shall not apply to premiums, losses
         and expenses applicable to the following businesses: (a) assigned risk;
         (b) umbrella policies; (c) that portion of any premiums, losses and
         expenses relating to a limit of liability in excess of $1 million,
         pursuant to Penn-America's Increased General Liability Limits Program;
         (d) personal and commercial automobile liability and physical damage;
         and (e) any business hereinafter deemed ineligible by Penn-America;

3.       Contingent Profit Commission: If Agent meets the terms, conditions and
         qualifications set forth herein, Agent shall be entitled to a
         contingent profit commission, calculated as follows:

         a.       By March 1 of the year following the contingent year,
                  Penn-America shall perform the following calculation;

                  (1)      Determine a combined ratio for all eligible business
                           written by the Agent in the aggregate during the
                           contingent year and two (2) immediately preceding
                           calendar years. Said combined ratio shall be the sum
                           of the "Loss and LAE (Loss Adjustment Expenses)
                           Incurred Ratio", "Commissions and Filed Fees Ratio",
                           "Premium Tax Ratio" and "Company Expense Ratio"
                           during the contingent year and two (2) immediately
                           preceding calendar years;

                  (2)      Determine the growth rate in written premium between
                           the contingent year and the immediately preceding
                           calendar year;

                  (3)      Apply the combined ratio and growth rate to the
                           Contingent Profit Commission Table, attached hereto
                           as "Exhibit 1", to determine the Contingent Profit
                           Commission Rate Earned. Note: Final calculations
                           subject to rounding to the nearest 10th and
                           interpolation;

                  (4)      Multiply the Contingent Profit Commission Rate Earned
                           by earned premium for the contingent year to
                           determine the contingent profit (year) commission;


         b.       All calculations are on a calendar year basis;

         c.       An example of the above-stated calculation is attached hereto
                  as "Exhibit 2";




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4.       Payment Provisions:

         a.       The contingent profit commission is paid, one hundred (100%)
                  percent, by March 1 of the year following the contingent year;

         b.       Payment shall be made 100% in cash, unless Agent notifies
                  Penn-America in writing that it desires payment in
                  Penn-America Group, Inc. (NYSE:PNG) common stock - in 25%,
                  50%, 75% or 100% increments;

         c.       For purposes of payment in PNG common stock, the stock shall
                  be valued as of the closing price of the stock on the New York
                  Stock Exchange at the close of business on December 31st of
                  the contingent year. If the New York Stock Exchange is not
                  open on that date, the stock shall be valued on the same basis
                  as of the close of business on the nearest previous business
                  day on which the Stock Exchange was open;

         d.       PNG stock distributed to Agent cannot be sold until August 1
                  of the year following the contingent year and will be leg
                  ended accordingly;

         e.       PNG stock will be delivered free of all commission and
                  transaction costs. Agent is responsible for any commissions
                  and/or transaction costs related to any disposition of said
                  stock subsequent to delivery;

         f.       The contingent profit commission may be subject to income tax.
                  Agent should seek the advice of a personal tax advisor in this
                  regard;

5.       Qualifications: To qualify for a contingent profit commission under
         this Addendum, Agent recognizes that:

         a.       Agent must produce total minimum written premium of:

                  (1)      $500,000 as of December 31, 2001;

                  (2)      $750,000 as of December 31, 2002; and,

                  (3)      $1 million as of December 31, 2003 and each
                           succeeding December 31st calendar year thereafter;

         b.       Agent must be in compliance with the General Agency Agreement
                  between Penn-America and Agent;

         c.       Agent must maintain Errors and Omissions coverage in
                  conformity with Penn-America's standards for such coverage;

         d.       Penn-America's records and calculations are final;

         e.       Any contingent profit commission earned may not be deducted by
                  Agent from Agent's accounts current;

         f.       Agent cannot pledge, assign, sell or otherwise alienate this
                  Addendum without the prior written consent of an officer of
                  Penn-America. Any purported or attempted assignment of this
                  Addendum without such prior written consent shall not be
                  binding on Penn-America.

6.       Amendment and Termination:

         a.       This Addendum may be amended at any time by Penn-America by
                  providing written notice to Agent of such amendment. To the


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                  extent that Penn-America amends this Addendum on or before
                  July 1 of a calendar year, said amendment shall be effective
                  as of January 1 of said calendar year in which the amendment
                  is made. To the extent that Penn-America amends this Addendum
                  subsequent to July 1, said amendment shall not be effective
                  until January 1 of the next succeeding calendar year;

(1)                    This Addendum may be terminated at any time in accordance
                       with the termination provisions of the General Agency
                       Agreement between the parties hereto, of which this
                       Addendum forms a part;

(2)                    If Agent terminates the General Agency Agreement, and/or
                       if this Addendum is terminated for cause, due to Agent's
                       breach of the Addendum or General Agency Agreement or
                       otherwise, Penn-America shall have no further obligation
                       to Agent relative to alleged outstanding contingent
                       profit commissions due under this Addendum;

(3)                    If this Addendum is terminated by Penn-America other than
                       for cause, Penn-America will honor the Addendum relative
                       to any payment(s) due only for the contingent year in
                       which notice of termination is given, as well as for any
                       previous contingent year for which any applicable
                       contingent profit commission has not been paid;

7.       Definitions:

         a.       "Calendar year" = From January 1 to December 31;

         b.       "Commissions and Filed Fees Ratio" = The sum of the actual
                  amount of regular commissions generated on eligible business
                  written by Agent in the calendar year, plus filed fees
                  generated on admitted eligible business written by Agent in
                  the calendar year, divided by written premium in that same
                  calendar year;

         c.       "Company Expense Ratio"= Penn-America's operating expenses,
                  plus reinsurance costs [costs related to Loss and LAE (Loss
                  Adjustment Expenses) Incurred in excess of $500,000 per
                  occurrence, plus property catastrophic reinsurance costs]
                  related to Agent's eligible business during a calendar year,
                  divided by written premium in that same calendar year. Said
                  expenses and costs are subject to change at any time based on
                  Penn-America's reasonable determination and discretion;

         d.       "Contingent year" = The calendar year on which an Agent's
                  performance (which compares revenue growth and profitability
                  over a period of prior calendar years - irrespective of
                  whether or not Agent met the eligibility requirements in any
                  of those prior calendar years) is measured for purposes of
                  determining the contingent profit commission to be paid the
                  following year;

         e.       "Earned premium" = That portion of the written premium
                  recognized as earned ratably during a calendar year;

         f.       "Growth rate" = The difference between the contingent year and
                  the immediately preceding calendar year written premium,
                  divided by the immediately preceding calendar year written
                  premium, expressed as a percentage;

         g.       "Loss" = On eligible business, the losses paid during the
                  calendar year, less net salvage recovered, plus the sum of the
                  outstanding loss reserves at the end of the calendar year,
                  minus the sum of the outstanding loss reserves at the end of
                  the immediately preceding calendar year, plus the net change
                  for the calendar year in reserves for incurred but not
                  reported losses;



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         h.       "LAE (Loss Adjustment Expenses)" = The expenses of
                  investigating and settling claims, including legal fees,
                  internal and external adjustment expenses and other general
                  expenses of administering the claims adjustment process,
                  incurred during a calendar year;

         i.       "Loss and LAE (Loss Adjustment Expenses) Incurred" = The sum
                  of Loss and LAE (Loss Adjustment Expenses) incurred in a
                  calendar year, subject to a maximum limit of $500,000 per
                  occurrence;

         j.       "Loss and LAE (Loss Adjustment Expenses) Incurred Ratio" = The
                  total Loss and LAE (Loss Adjustment Expenses) Incurred in the
                  calendar year, divided by earned premium for that same
                  calendar year;

         k.       "Premium Tax Ratio" = The actual amount of premium taxes
                  incurred by Penn-America relating to eligible business written
                  by Agent in a calendar year, divided by written premium for
                  that same calendar year;

         l.       "Written premium" = Gross premium written, less policy returns
                  and cancellations, less ineligible business in a calendar
                  year.

         This Addendum constitutes the entire and exclusive agreement between
Penn-America and Agent relative to contingent profit commissions and supersedes
and replaces any and all prior or contemporaneous agreements, representations,
and understandings, written and/or oral, on this subject. The undersigned
signatories hereby warrant that they have full power and authority to execute
this Addendum on behalf of the respective parties hereto.

         IN WITNESS WHEREOF, the parties hereto have executed this Addendum as
follows:

PENN-AMERICA INSURANCE COMPANY                [[MANNAM]]
PENN-STAR INSURANCE COMPANY



By:                                           By:
   ---------------------------                   -----------------------------
         Jon S. Saltzman                     [[PRNNAM]]
         President & CEO                     [[PRNTIT]]








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<TABLE>
<CAPTION>
                                                    PENN-AMERICA INSURANCE GROUP
                                                 CONTINGENT PROFIT COMMISSION TABLE



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                                                    Percentage Change in Written Premium Over Prior Year
                   -----------------------------------------------------------------------------------------------------------------
Combined Ratio     -15.0% or Greater           -14.9% to -5.0%         -4.9% to 4.9%        5.0% to 14.9%         15% or Greater
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<S>                    <C>                       <C>                    <C>                  <C>                    <C>
     100                0.00%                     0.00%                  0.00%                0.00%                  0.00%
      99                0.00%                     0.00%                  0.00%                0.00%                  0.00%
      98                0.00%                     0.00%                  0.50%                0.63%                  0.75%
      97                0.00%                     0.00%                  0.75%                0.94%                  1.13%
      96                0.32%                     0.77%                  0.90%                1.13%                  1.35%
      95                0.37%                     0.89%                  1.05%                1.31%                  1.58%
      94                0.49%                     1.19%                  1.40%                1.75%                  2.10%
      93                0.61%                     1.49%                  1.75%                2.01%                  2.19%
      92                0.74%                     1.79%                  2.10%                2.42%                  2.63%
      91                0.86%                     2.08%                  2.45%                2.82%                  3.06%
      90                0.98%                     2.18%                  2.80%                3.22%                  3.50%
      89                1.03%                     2.36%                  2.95%                3.39%                  3.69%
      88                1.07%                     2.46%                  3.07%                3.51%                  3.81%
      87                1.11%                     2.54%                  3.18%                3.62%                  3.92%
      86                1.16%                     2.64%                  3.30%                3.74%                  4.04%
      85                1.26%                     2.88%                  3.60%                3.87%                  4.14%
      84                1.37%                     3.12%                  3.90%                4.19%                  4.49%
      83                1.47%                     3.36%                  4.20%                4.52%                  4.83%
      82                1.58%                     3.60%                  4.50%                4.84%                  5.18%
      81                1.68%                     3.84%                  4.80%                5.16%                  5.52%
      80                1.79%                     4.08%                  5.10%                5.48%                  5.87%
      79                1.89%                     4.32%                  5.40%                5.81%                  6.21%
      78                2.00%                     4.56%                  5.70%                6.13%                  6.56%
      77                2.10%                     4.80%                  6.00%                6.45%                  6.90%
      76                2.21%                     5.04%                  6.30%                6.77%                  7.25%
      75                2.31%                     5.28%                  6.60%                7.10%                  7.59%
      74                2.42%                     5.52%                  6.90%                7.42%                  7.94%
      73                2.52%                     5.76%                  7.20%                7.74%                  8.28%
      72                2.63%                     6.00%                  7.50%                8.06%                  8.63%
      71                2.73%                     6.24%                  7.80%                8.39%                  8.97%
      70                2.84%                     6.48%                  8.10%                8.71%                  9.32%
      69                2.94%                     6.72%                  8.40%                9.03%                  9.66%
      68                3.05%                     6.96%                  8.70%                9.35%                  10.00%
      67                3.15%                     7.20%                  9.00%                9.68%                  10.00%
      66                3.26%                     7.44%                  9.30%                10.00%                 10.00%
      65                3.36%                     7.68%                  9.60%                10.00%                 10.00%
      64                3.47%                     7.92%                  9.90%                10.00%                 10.00%
      63                3.50%                     8.00%                 10.00%                10.00%                 10.00%
      62                3.50%                     8.00%                 10.00%                10.00%                 10.00%
      61                3.50%                     8.00%                 10.00%                10.00%                 10.00%
      60                3.50%                     8.00%                 10.00%                10.00%                 10.00%
      59                3.50%                     8.00%                 10.00%                10.00%                 10.00%

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</TABLE>

Note:  Calculations are subject to interpolation to the nearest 10th.

                                                            "Exhibit 1"


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