PAULA FINANCIAL
EXHIBIT 10.49
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<DESCRIPTION>EXHIBIT 10.49
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<p align="right" style="margin:0in 0in .0001pt;text-align:right;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">EXHIBIT 10.49</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">[LOGO]</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">HARRY W. LOW</font></b></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">INSURANCE COMMISSIONER</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">March 12, 2002</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<table border="0" cellspacing="0" cellpadding="0" width="86%" style="border-collapse:collapse;width:86.58%;">
 <tr>
  <td width="78%" valign="top" style="padding:0in .7pt 0in .7pt;width:78.52%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Mr. Jeffrey
  A. Snider, Chairman</font></p>
  </td>
  <td width="7%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:7.4%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="14%" valign="top" style="padding:0in .7pt 0in .7pt;width:14.08%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="78%" valign="top" style="padding:0in .7pt 0in .7pt;width:78.52%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">PAULA
  Insurance Company</font></p>
  </td>
  <td width="7%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:7.4%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Agreed</font></p>
  </td>
  <td width="14%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:14.08%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="78%" valign="top" style="padding:0in .7pt 0in .7pt;width:78.52%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">300 North
  Lake Avenue, Suite 300</font></p>
  </td>
  <td width="7%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:7.4%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="14%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:14.08%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="78%" valign="top" style="padding:0in .7pt 0in .7pt;width:78.52%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Pasadena,
  California 91101</font></p>
  </td>
  <td width="7%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:7.4%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="14%" valign="top" style="padding:0in .7pt 0in .7pt;width:14.08%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
</table>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Re:&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Letter Agreement of Regulatory
Oversight of PAULA Insurance Company</u></font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Dear Mr. Snider:</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The Annual Statement filed March 1, 2002 with
the California Department of Insurance (&#147;Department&#148;) has confirmed unfavorable
operating trends and significant deterioration in the statutory surplus of
PAULA Insurance Company (&#147;PAULA&#148;), and shows PAULA to be insolvent as of
December 31, 2001.&#160; However, the
Department has also found that PAULA has significant invested assets, including
over $89 million of investments in statutory workers&#146; compensation deposits, and
the current capability to pay both claims and operating expenses as those
obligations come due.&#160; In addition, the
Company has voluntarily terminated all writing of new or renewal premiums.&#160; In light of those positive factors and
PAULA&#146;s desire to cooperate with the Department in voluntary runoff of its
existing losses, the Department and PAULA have agreed to the following:</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>The Department will appoint a Special Deputy Examiner to provide
supervision and regulatory oversight on behalf of the Commissioner to
PAULA.&#160; The Special Deputy Examiner, in
consultation with the Commissioner and his staff, may retain other staff as
provided by Insurance Code Section 733(g) to assist in that supervision and
oversight.&#160; Costs for the retention of
the Special Deputy Examiner and any other staff shall be borne by PAULA.</p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>PAULA shall not make any payment to, or engage in any transaction or
enter into any agreement directly or indirectly with its parent company or any
affiliated company, without the prior approval of the Department.&#160; The Department is aware of the existing
agreements between PAULA and its affiliates.&#160;
No further payments shall be made under these agreements until the
Department has again reviewed the agreements and specifically approved
them.&#160; Any subsequent amendment or
modification of any agreement shall be subject to prior Departmental approval
if the effect of such modification or amendment would be to materially change
the obligations or rights of PAULA or to increase payments from PAULA to PAULA&#146;s
parent company or affiliated companies under the agreement.</p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">300 CAPITOL
MALL, SUITE 1700<br>
SACRAMENTO, CALIFORNIA 95814<br>
(916) 492-3500</font></b></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">&nbsp;</font></b></p>


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<!-- ZEQ.=1,SEQ=1,EFW="2074801",CP="PAULA FINANCIAL",DN="4",CHK=858462,FOLIO='',FILE="DISK020:[02BHL3.02BHL1403.EDGAR]EX10-49_1403.CHC",USER="MCREED",CD='Mar 28 09:56 2002' -->
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<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>PAULA shall not make any dividend payment or other distribution to
its parent company without the prior approval of the Department.</p>

<p style="margin:0in 0in .0001pt .2in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>PAULA shall not make any withdrawal of monies from its bank
accounts, disbursement or payment outside the ordinary course of business
without prior approval by the Department.</p>

<p style="margin:0in 0in .0001pt .2in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>PAULA shall not incur any debt, obligation or liability for borrowed
money not related directly to the ordinary course of business without prior
approval by the Department.</p>

<p style="margin:0in 0in .0001pt .2in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>PAULA shall not write any new or renewal business of any type
without the prior approval of the Department.</p>

<p style="margin:0in 0in .0001pt .2in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">7.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>PAULA shall file statutory financial statements (balance sheet and
income statement) on a monthly basis (except for quarter ending periods of
March, June, and September for which PAULA shall continue to file regular
quarterly statements) no later than 45 days following the month being reported
upon.</p>

<p style="margin:0in 0in .0001pt .2in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">8.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>PAULA shall file by April 1, 2002, a detailed business plan which
sets forth forecasted premiums earned, losses and expenses, for year 2002.&#160; The budget forecast shall be in sufficient
detail to allow for monitoring of actual versus planned expenditures.&#160; No later than 45 days following the month
being reported upon, PAULA shall file actual results (in a format approved by
the Department) with a comparison to the budgeted amounts and relevant
explanations for material variances.</p>

<p style="margin:0in 0in .0001pt .2in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">9.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>PAULA shall not enter into any new material reinsurance agreement
nor amend in any material respect any existing material reinsurance agreement
without prior approval by the Department; provided, however, PAULA may continue
to renew existing reinsurance arrangements.</p>

<p style="margin:0in 0in .0001pt .2in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">10.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>PAULA shall not add any individual who is not currently a senior
executive officer of PAULA, or one of its affiliates, to the board of directors
of PAULA without first notifying the Department.&#160; The Department reserves the right to require the resignation of
members of the board of directors and senior executive officers of the
insurance companies and shall have the right to prior review and approve any
new appointments by PAULA to such positions.</p>

<p style="margin:0in 0in .0001pt .2in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">11.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>PAULA shall not change the terms of any written plans for
remuneration, consulting, deferred compensation or bonus plans for directors,
officers and employees of PAULA without first obtaining the approval of the
Department.&#160; PAULA shall also advise the
Department of any such changes made since December 31, 2002.</p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2</font></p>


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<!-- ZEQ.=1,SEQ=2,EFW="2074801",CP="PAULA FINANCIAL",DN="4",CHK=800431,FOLIO='2',FILE="DISK020:[02BHL3.02BHL1403.EDGAR]EX10-49_1403.CHC",USER="MCREED",CD='Mar 28 09:56 2002' -->
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<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">12.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>PAULA shall not enter into any new agreement nor revise any existing
agreement for any form of current or future remuneration or other compensation,
including severance agreements (other than severance agreements documenting
terminations under existing plans, policies and agreements) for services
rendered to PAULA by employees of PAULA, without the prior approval of the
Department. PAULA shall also advise the Department of any such new agreements
entered into or revisions to existing agreements made since December 31, 2001.</p>

<p style="margin:0in 0in .0001pt .5in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">13.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Other than security interests granted in connection with repurchase
agreements acquired in the ordinary course of business, PAULA shall not pledge
nor assign any of its assets to secure indebtedness for borrowed money without
prior approval by the Department.</p>

<p style="margin:0in 0in .0001pt .2in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">14.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>PAULA shall provide to the Department any additional reports that
the Department reasonably determines are necessary to ascertain the financial
condition of PAULA.</p>

<p style="margin:0in 0in .0001pt .2in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">15.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>PAULA shall not pay any fees related to the non-consummation of any
material agreement without the consent of the Department.</p>

<p style="margin:0in 0in .0001pt .2in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">16.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>PAULA shall obtain a resolution from the Board of Directors which
consents to the terms of this agreement, and requests Mr. Jeffrey A. Snider,
Chairman of PAULA Insurance Company, to execute the agreement on its behalf.</p>

<p style="margin:0in 0in .0001pt .2in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">17.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>The Department reserves the right to amend or supplement this
agreement, in good faith and at its sole discretion, as deemed necessary.</p>

<p style="margin:0in 0in .0001pt .2in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">18.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>The agreement shall remain in full force and effect until a) the
Department provides written notice to PAULA that it is released from the
obligations required herein or b) the agreement is superceded by a Department
Administrative Order or a Superior Court Order.</p>

<p style="margin:0in 0in .0001pt .2in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">19.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>If PAULA breaches this agreement in any material way, or if the
Department, in good faith, determines that the provisions of this agreement,
including any amendments or supplements, are no longer adequate to protect
policyholders from financial hazard, it is hereby agreed by PAULA and its
direct and indirect parent companies that they shall not oppose appropriate and
lawful Department Administrative Orders or Applications for Superior Court
Orders.&#160; PAULA and its direct and indirect
parent companies hereby acknowledge that the Department has no duty to provide
prior notice of such Orders and Applications, except as provided for by law.</p>

<p style="margin:0in 0in .0001pt .2in;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="font-size:10.0pt;margin:0in 0in .0001pt .5in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">20.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>All documents and copies thereof obtained by or disclosed to the
Department pursuant to this agreement shall be kept strictly confidential by
the Department, except that the Department may share such information and
documents with other state regulators pursuant to a confidentiality
agreement.&#160; This provision does not
apply to documents already deemed public by law or regulation, e.g., quarterly
financial statements.</p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3</font></p>


<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

<hr size="2" width="100%" noshade color="gray" align="left">

</font></div>

<font size="2" face="Times New Roman" style="font-size:10.0pt;">
<!-- ZEQ.=1,SEQ=3,EFW="2074801",CP="PAULA FINANCIAL",DN="4",CHK=882938,FOLIO='3',FILE="DISK020:[02BHL3.02BHL1403.EDGAR]EX10-49_1403.CHC",USER="MCREED",CD='Mar 28 09:56 2002' -->
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<p align="center" style="font-size:10.0pt;margin:0in 0in .0001pt;text-align:center;">&nbsp;</p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Any questions
related to this agreement and all filings required by this agreement should be
directed to Norris W. Clark, Deputy Commissioner, Financial Surveillance,
Department of Insurance, 300 South Spring Street, Los Angeles, CA 90013.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Sincerely,</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">
 <tr>
  <td width="65%" colspan="5" valign="top" style="padding:0in .7pt 0in .7pt;width:65.26%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/ Harry W.
  Low</font></p>
  </td>
  <td width="34%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:34.74%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="65%" colspan="5" valign="top" style="padding:0in .7pt 0in .7pt;width:65.26%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Harry W. Low</font></p>
  </td>
  <td width="34%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:34.74%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="65%" colspan="5" valign="top" style="padding:0in .7pt 0in .7pt;width:65.26%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Insurance
  Commissioner</font></p>
  </td>
  <td width="34%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:34.74%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="65%" colspan="5" valign="top" style="padding:0in .7pt 0in .7pt;width:65.26%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="34%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:34.74%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="65%" colspan="5" valign="top" style="padding:0in .7pt 0in .7pt;width:65.26%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Agreed as to
  all provisions:</font></p>
  </td>
  <td width="34%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:34.74%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="65%" colspan="5" valign="top" style="padding:0in .7pt 0in .7pt;width:65.26%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="34%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:34.74%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="32%" colspan="4" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:32.62%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/ Jeffrey
  A. Snider</font></p>
  </td>
  <td width="32%" valign="top" style="padding:0in .7pt 0in .7pt;width:32.64%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="4%" valign="top" style="padding:0in .7pt 0in .7pt;width:4.7%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Date:</font></p>
  </td>
  <td width="17%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:17.72%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">18 March
  2002</font></p>
  </td>
  <td width="12%" valign="top" style="padding:0in .7pt 0in .7pt;width:12.32%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="65%" colspan="5" valign="top" style="padding:0in .7pt 0in .7pt;width:65.26%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Jeffrey A.
  Snider</font></p>
  </td>
  <td width="34%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:34.74%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="4%" valign="top" style="padding:0in .7pt 0in .7pt;width:4.46%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Title:</font></p>
  </td>
  <td width="28%" colspan="3" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:28.16%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Chairman</font></p>
  </td>
  <td width="32%" valign="top" style="padding:0in .7pt 0in .7pt;width:32.64%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="34%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:34.74%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="65%" colspan="5" valign="top" style="padding:0in .7pt 0in .7pt;width:65.26%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="34%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:34.74%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="65%" colspan="5" valign="top" style="padding:0in .7pt 0in .7pt;width:65.26%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Agreed as to
  provision number 18:</font></p>
  </td>
  <td width="34%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:34.74%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="65%" colspan="5" valign="top" style="padding:0in .7pt 0in .7pt;width:65.26%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="34%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:34.74%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="65%" colspan="5" valign="top" style="padding:0in .7pt 0in .7pt;width:65.26%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">PAULA
  Financial Corporation</font></p>
  </td>
  <td width="34%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:34.74%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="65%" colspan="5" valign="top" style="padding:0in .7pt 0in .7pt;width:65.26%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="34%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:34.74%;">
  <p style="font-size:10.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="65%" colspan="5" valign="top" style="padding:0in .7pt 0in .7pt;width:65.26%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="4%" valign="top" style="padding:0in .7pt 0in .7pt;width:4.7%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Date:</font></p>
  </td>
  <td width="17%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:17.72%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">18 March
  2002</font></p>
  </td>
  <td width="12%" valign="top" style="padding:0in .7pt 0in .7pt;width:12.32%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="32%" colspan="4" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:32.62%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/ Jeffrey
  A. Snider</font></p>
  </td>
  <td width="32%" valign="top" style="padding:0in .7pt 0in .7pt;width:32.64%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="34%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:34.74%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="5%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:5.36%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Name:</font></p>
  </td>
  <td width="27%" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:27.26%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Jeffrey A.
  Snider</font></p>
  </td>
  <td width="32%" valign="top" style="padding:0in .7pt 0in .7pt;width:32.64%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="34%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:34.74%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width="4%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:4.54%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Title:</font></p>
  </td>
  <td width="28%" colspan="2" valign="top" style="border:none;border-bottom:solid windowtext .5pt;padding:0in .7pt 0in .7pt;width:28.08%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Chairman</font></p>
  </td>
  <td width="32%" valign="top" style="padding:0in .7pt 0in .7pt;width:32.64%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
  <td width="34%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:34.74%;">
  <p style="font-size:1.0pt;margin:0in 0in .0001pt;">&nbsp;</p>
  </td>
 </tr>
 <tr height="0">
  <td width="32" style="border:none;"></td>
  <td width="1" style="border:none;"></td>
  <td width="6" style="border:none;"></td>
  <td width="197" style="border:none;"></td>
  <td width="236" style="border:none;"></td>
  <td width="34" style="border:none;"></td>
  <td width="128" style="border:none;"></td>
  <td width="89" style="border:none;"></td>
 </tr>
</table>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4</font></p>


<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

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