HALLMARK FINANCIAL SERVICES INC
GENERAL AGENCY AGREEMENT
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>exh10-1.txt
<DESCRIPTION>GENERAL AGENCY AGREEMENT
<TEXT>

                                                                 EXHIBIT 10.1



                           GENERAL AGENCY AGREEMENT
                     (hereinafter called the "Agreement")

                                   between

                        HALLMARK GENERAL AGENCY, INC.
                   (hereinafter called the "General Agent")

                                     and

                     CLARENDON NATIONAL INSURANCE COMPANY
                      (hereinafter called the "Company")

<PAGE>

                              DECLARATIONS PAGE


           These Declarations, together with the Agreement and all Schedules,
 Exhibits and Amendments thereto constitute the general agency agreement
 between the Company and the General Agent.  Capitalized terms used in these
 Declarations and not otherwise defined herein shall have the meanings
 ascribed to them in Section 1.1 in the Agreement (all such meanings to be
 equally applicable in the singular and plural forms).


 A.   Names and Addresses of the Parties:

         Clarendon National Insurance Company (the "Company")
         7 Times Square
         New York, NY  10036

         Hallmark General Agency, Inc. (the "General Agent")
         777 Main Street, Suite 1000
         Fort Worth, TX 76102

         Hallmark Financial Services, Inc. (the "Parent Guarantor")
         777 Main Street, Suite 1000
         Fort Worth, TX 76102


 B.   Effective Date:      July 1, 2004


 C.   Authorized Coverages and Maximum Limits of Liability.

           The coverages and limits set forth on Exhibit A attached to this
      Declarations Page, are subject to and limited by the reinsurance terms
      under the Quota Share Treaty.  If the Quota Share Treaty has not been
      executed, the coverage and limits of liability shall be based upon the
      proposed reinsurance terms set forth in the reinsurance placement slip
      for the Quota Share Treaty.  Notwithstanding anything in Exhibit A or
      this Agreement to the contrary, the coverages and limits of liability
      shall conform to the Quota Share Treaty as if the terms of the Quota
      Share Treaty have been incorporated into this Agreement.


 D.   States.

      The states set forth on Exhibit B attached to this Declarations Page.


 E.   Maximum Volume per Underwriting Year.

      $80,000,000 of Net Written Premium.


 F.   First Underwriting Year.

      The first Underwriting Year is the period from August 15th, 2001 to and
 including June 30th of 2002, and each subsequent Underwriting Year will be
 the period commencing July 1st and ending June 30th of such year.


 G.   Commission Formula:

   (1)  During the period from August 15th, 2001 to and including June 30,
        2004, the General Agent's compensation shall be determined as set
        forth in the August 15th, 2001General Agency Agreement as amended by
        Addendum #1 and , Addendum #2.

   (2)  Effective July 1, 2004, the General Agent's compensation shall be
        determined in accordance with Item G.(2) of the Declaration Page and
        Article 3 of this Agreement.

      (i) Initial Provisional Commission Rate;

      Twenty Four  percent (24.00%) of collected Net Written Premium

      (ii) Company's Pre-Tax Retained Fee Rate (exclusive of state mandated
      fees including but not limited to taxes, boards and bureaus);

      Five percent (5.00%) [of collected Net Written Premium]

      (iii) Tax Allowance Rate (inclusive of state mandated fees including
      but not limited to taxes, boards and bureaus);

      Three percent (3.00%) [of collected Net Written Premium]

      (iv) Audit Premium Collateral Rate;

      N/A percent (N/A%) [of collected Net Written Premium]

      (v) Audit Premium Proportionate Share Rate;

      N/A percent (N/A%) [of uncollected Audit Premium for which the General
      Agent may be liable to the Company provided that the General Agent has
      diligently performed the actions set forth in Section 4.3(b).]


 H.   Addenda:

      The following addendum/addenda shall be attached to and considered an
      integral part of this Agreement, and shall be deemed incorporated into
      this Agreement.

      August 15th, 2001 General Agency Agreement, effective August 15th, 2001
      Addendum #1, effective October 10th, 2003
      Addendum #2, effective August 15th, 2003

 I.   The Company's Underwriting Guidelines.

      The Company' underwriting guidelines, underwriting standards and/or
      filed rates and forms, if so imposed and not otherwise set forth in
      this Agreement, may be attached to this Declarations page as Exhibit C,
      and shall be part of the Underwriting Standards as defined in the
      Agreement.


 Dated:    New York, NY
           Date


 Attest:                       HALLMARK GENERAL AGENCY, INC.


 /s/ Joyce Wilhelm             By: /s/ Kevin Kasitz
 ----------------------        ------------------------------
                               Title:

 Attest:                       CLARENDON NATIONAL INSURANCE COMPANY


 /s/ Luba Ilyasova             By: /s/ Gary Ketels
 ----------------------        ------------------------------
                               Title:

<PAGE>

                                  EXHIBIT A
                                  ---------

              AUTHORIZED COVERAGES, MAXIMUM LIMITS OF LIABILITY
              -------------------------------------------------

 Authorized Coverages                    Maximum Limits of Liability
 --------------------                    ---------------------------
 Automobile BI
 - Automobile PD                              $500,000
 - Automobile CSL                             $1,000,000
 - Uninsured/Underinsured                     $1,000,000
 - Garage Liability                           $1,000,000/$3,000,000

 General Liability:
 - Each Occurrence                            $1,000,000
 - General Aggregate                          $2,000,000
 - Prod/Comp Opps Agg                         $2,000,000

 Medical Payments
 - Personal Injury
 - Personal Injury                            $10,000
 - Personal Injury                            $1,000,000
 - Professional Liability                     $1,000,000
 - Employer Liability (Stop Gap - ID,         $500,000/$500,000/$500,000
   OR & WA)

 Commercial Property                          $5,000,000 any risk
 - Commercial Inland Marine                   $2,000,000
 - Commercial Crime                           $500,000

<PAGE>

                                  EXHIBIT B
                                  ---------

                              AUTHORIZED STATES
                              -----------------


 Idaho
 New Mexico
 Oregon
 Texas
 Washington


                                   RECITALS
                                   --------

           A.   The Company would like the General Agent to produce and
 administer the Company's insurance policies and renewals thereof
 ("Policies", or individually, the "Policy") for the insurance coverages
 listed on Exhibit A attached to the Declarations and in the states listed
 on Exhibit B attached to the Declarations during the period from the date of
 this Agreement ("Effective Date") until this Agreement terminates, and the
 General Agent is willing to do so on behalf of the Company in accordance
 with the terms of this Agreement.

           B.   The General Agent acknowledges that the Company is at risk
 under, and has ultimate responsibility for, the Policies; therefore, the
 General Agent agrees that the Company will make the final decision on all
 matters pertaining to the Policies.

           C.   The parties intend that the Company shall earn a profit from
 the issuance of the Policies.   In keeping with that intention, the General
 Agent will diligently perform its duties under this Agreement in an ethical,
 legal and professional manner, and to the best of its abilities.  The
 Company and the General Agent have agreed to amend and restate their rights
 and obligations under the August 15th, 2001 General Agency Agreement as
 amended by Addendum #1 and Addendum #2, which are attached hereto and
 incorporated herein by reference.  The Company and the General Agent agree
 that any dispute arising under the August 15th, 2001 General Agency
 Agreement as amended by Addendum #1 and Addendum #2 will be resolved in
 accordance with the terms of this Agreement.


           IN CONSIDERATION OF THE MUTUAL PROMISES EXCHANGED, the parties
 agree as follows:


                                  ARTICLE 1

                                 DEFINITIONS
                                 -----------

      1.1   Defined Terms. As used in this Agreement, the following terms
 have the following meanings, which apply to both the singular and plural
 forms of the terms defined:

      "Adjusted Commission" is defined in Section 3.2(b).

      "Adjusted Commission Rate" is defined in Section 3.6.

      "Agent" is defined in Section 2.1.

      "Agreement" means this agreement.

      "Audit Premium" is defined in Section 4.3.

      "Audit Premium Collateral" is defined in Section 3.4(b).

      "Audit Premium Collateral Rate" means the percentage of Net Written
 Premium to be withheld by the Company as collateral from commission payable
 to the General Agent to secure audit premium, which rate is set in Item G of
 the Declarations.

      "Audit Premium Proportionate Share Rate" means the maximum percentage
 of uncollected Audit Premium for which the General Agent may be liable to
 the Company provided that the General Agent has diligently performed the
 actions set forth in Section 4.3(b).  The "Audit Premium Proportionate
 Share Rate" is set in Item G of the Declarations.

      "Company" means the entity or entities designated as the Company in
 Item A of the Declarations.

      "Company's Fee Rate" means the sum of the Company's Pre-Tax Retained
 Fee Rate and the Tax Allowance Rate.

      "Company's Pre-Tax Retained Fee Rate" means the percentage of Net
 Written Premium retained by the Company under the terms of this Agreement,
 excluding state mandated fees, taxes, boards and bureaus, which rate is set
 in Item G of the Declarations.

      "Declarations" means the terms and/or definitions attached hereto on
 the "Declarations Page".

      "Effective Date" means the date of this Agreement designated as the
 Effective Date in Item B of the Declarations.

      "Forms and Rates" is defined in Section 2.6(h).

      "General Agent" means the entity or entities designated as the General
 Agent in Item A of the Declarations.

      "Guarantor" means the person or persons designated as the Guarantor in
 Item A of the Declarations.

      "Initial Provisional Commission Rate" means that provisional commission
 rate used in Section 3.5(b) if a Quota Share Treaty (i) has not been
 executed, or (ii) has terminated and is not in effect and does not reinsure
 the Company for Policies with effective dates on or after the termination
 date of the respective Quota Share Treaty, which rate is set in Item G of
 the Declarations.

      "Loss Corridor Collateral" is defined in Section 3.3(b).

      "Loss Corridor Rate" means the portion of losses and loss adjustment
 expenses, expressed as a percentage of Net Written Premium, which are not
 recoverable by the Company under the terms of the Quota Share Treaty.

      "MGA Notification" is defined in Section 2.7(c).

      "Net Written Premium" means gross written premium less premium returned
 for Policy cancellations.

      "Policy" is defined in recital A.

      "Policyholder" means the holder of a Policy.

      "Provisional Commission" is defined in Section 3.2(a).

      "Provisional Commission Rate" is defined in Section 3.5.

      "Quota Share Treaty" means the relevant quota share reinsurance
 agreement reinsuring the insured risks under the Policies.

      "Return Commission" is defined in Section 3.1(a).

      "Tax Allowance Rate" means the percentage of Net Written Premium
 retained by the Company under the terms of this Agreement for state mandated
 fees, taxes, boards and bureaus, which rate is set in Item G of the
 Declarations.

      "Underwriting Standards" is defined in Section 2.5(c).

      "Underwriting Year" means each accounting period as defined in Section
 2.6(f).


                                  ARTICLE 2

                            UNDERWRITING AUTHORITY
                            ----------------------

      2.1   Authority to Issue Policies.   From the Effective Date to the
 termination of this Agreement the General Agent shall have the authority
 to issue Policies and binders in compliance with the standards set forth
 in Sections 2.5 and 2.6 through duly licensed insurance brokers, agents,
 producers, or similar persons or companies (collectively "Agents").
 The appointment of, and authority granted to, the General Agent is not
 exclusive, and the Company may, if it wishes, appoint additional general
 agents to issue Policies.

      2.2   Appointment of Agents.   In those states where the insurer is
 required to appoint Agents, the Agents shall be appointed by or on behalf
 of the Company.  The General Agent shall reimburse the Company for any fees
 and appointment costs (including any costs incurred by the Company, Company
 affiliates or through an independent vendor on the Company's behalf to
 process agency appointments) that the Company is required to pay to appoint
 the General Agent or any Agent.  The General Agent shall not authorize or
 permit any Agent to issue Policies on behalf of the Company unless the
 Company has given the General Agent its written approval for such
 authorization.

      2.3   Responsibility for Agents.   The General Agent shall be solely
 responsible for overseeing the placement of business through Agents, and any
 agreements regarding the placement of such business shall be made directly
 between the General Agent and the Agents.  Such agreements entered into by
 the General Agent after the Effective Date shall contain language stating
 that the Agents shall have no claim against the Company, and will look
 solely to the General Agent, to recover any costs, expenses, or damages
 incurred by the Agents as a result of any act or omission of the General
 Agent, whether the General Agent is acting on its own behalf or on behalf of
 the Company.  The General Agent agrees to indemnify the Company against any
 fines levied against, or expenses incurred by, the Company as a result of
 (i) the General Agent accepting business from an unlicensed Agent, (ii) the
 failure of the General Agent or any Agent or the Company due to the General
 Agent's action or inaction to comply with any applicable statute, rule or
 requirement regulating the business relationship between the Company and the
 General Agent or any Agent, or (iii) the failure of the General Agent or any
 Agent to comply with any applicable duties and obligations under the Gramm-
 Leach-Bliley Act or any state law or regulation implementing the same; and
 the General Agent shall upon discovery promptly notify the Company of any
 such non-compliance.

      2.4   Form 1099.   The General Agent shall prepare separate, itemized
 monthly statements of the business placed by each Agent through the General
 Agent, and shall furnish each Agent with an IRS Form 1099 each year when
 required.

      2.5   Standards for Issuing Policies and for Underwriting Services.

           (a)   The General Agent is authorized to bind coverage, issue and
 endorse Policies in the name of the Company, and cancel or refuse to renew
 binders or Policies in its reasonable judgment and in accordance with all
 applicable laws and regulations.

           (b)   Upon signing this Agreement, the General Agent shall provide
 to the Company a copy of its then in effect underwriting standards, and the
 General Agent shall provide to the Company any updates, modifications, or
 amendments thereof no less than annually throughout the term of this
 Agreement.

           (c)   Prior to the issuance of any Policies, the General Agent
 shall submit proposed written standards or guidelines ("Underwriting
 Standards") to the Company for the underwriting services to be provided by
 the General Agent under this Agreement. The Underwriting Standards shall be
 subject to the approval of the Company. All underwriting services to be
 provided by the General Agent under this Agreement shall conform to the
 Underwriting Standards.  After the Underwriting Standards have been approved
 by the Company, the General Agent shall be solely responsible for assuring
 that they comply with all governmental statutes, rules, or regulations
 of any applicable jurisdiction.  The General Agent shall perform its
 obligations in conformity with any standards, instructions, practices or
 procedures which the Company may, from time to time, provide to the General
 Agent, which standards, instructions, practices and procedures shall, when
 provided to the General Agent, become part of the Underwriting Standards.
 The General Agent shall submit any proposed updates and changes to the
 Underwriting Standards to the Company for approval, and if such updates and
 changes are approved by the Company, then such approved updates and changes
 shall become part of the Underwriting Standards.  The Underwriting Standards
 shall include, without limitation, the basis of premium rates to be charged,
 the lines of insurance coverages which may be written, maximum limits of
 liability, applicable exclusions from coverage, territorial limitations,
 cancellation provisions, the maximum Policy period, and control of Policy
 issuance.

           (d)   The Company agrees that it will keep confidential any
 underwriting guidelines proposed by the General Agent for one year after
 termination of this Agreement, unless the GA is terminated for cause .

           (e)   The Underwriting Standards shall also include the
 limitations and exclusions set forth in the Company's Quota Share Treaties
 covering business produced under this Agreement and the Policies.  The
 Company agrees to, where applicable, provide the relevant sections of the
 Quota Share Treaties to the General Agent, either directly or through a
 reinsurance intermediary or other representative.  Once the General Agent
 receives copies of the Quota Share Treaties, the limitations and exclusions
 set forth in the Quota Share Treaties will become part of the Underwriting
 Standards, and the General Agent will be bound by such limitations and
 exclusions, unless such limitations and exclusions are or have been
 expressly waived by the Company.

           (f)   Unless expressly authorized by the Company, the General
 Agent has no authority to issue a policy covering risks not covered by
 reinsurance.  In the event the General Agent seeks the Company's consent to
 issue such a policy, the Company may either (i) inform the General Agent not
 to write the risk, (ii) provide its consent and authorize the General Agent
 to write the risk, or (iii) instruct the General Agent to modify the policy
 form to exclude damages caused by the risks excluded under the Quota Share
 Treaty.  If a risk is expressly covered by the filed and approved policy
 form (e.g., definition of Insured) but the reinsurance agreement, by its
 express terms, does not cover a particular risk, the General Agent still has
 the obligation to obtain the Company's consent before issuing a policy for
 the risk excluded by the reinsurance agreement.  The General Agent cannot
 and shall not rely upon the Company's filed policy form as evidence of the
 Company's consent pursuant to Section 2.5(f)(ii) in the event the Company
 brings a claims for damages arising from the issuance of a policy outside
 the scope of the General Agent's authority for a risk excluded by the Quota
 Share Treaty.

           (g)   Notwithstanding the foregoing or anything in this Agreement
 or elsewhere to the contrary, the Company (i) shall retain ultimate control
 and responsibility of the functions it has delegated hereunder, and (ii) has
 and will retain the authority to make the final decisions on underwriting
 matters including, without limitation, the acceptance, rejection, or
 canceling of risks.  The General Agent acknowledges that the Company is at
 risk under, and has ultimate responsibility for, the Policies; therefore,
 the General Agent agrees that the Company retains the right to make the
 final decision on all matters pertaining to the Policies.  The General Agent
 will diligently perform its duties under this Agreement in an ethical, legal
 and professional manner, and to the best of its abilities.

           (h)   The General Agent shall be and remain in compliance with,
 and shall ensure that all Agents are in compliance with the laws and
 regulations pertaining to the Gramm-Leach-Bliley Act or any state law or
 regulation implementing the same.

      2.6   Provisions and Authority.   The General Agent shall adhere to the
 following provisions when exercising its authority under this Agreement:

           (a)   Policies shall be issued only for the coverages listed on
 Exhibit A attached to the Declarations and only in the states listed on
 Exhibit B attached to the Declarations.

           (b)   Policies shall be issued only in strict accordance with the
 Underwriting Standards for such Policies.

           (c)   Policies shall be issued in accordance with terms and
 conditions of the applicable reinsurance agreement or contract to which the
 Company is a party or by which the Company may be bound.

           (d)   The General Agent shall maintain control procedures relating
 to binder and Policy issuance, notification of insureds, and other matters
 relating to Policy administration.

           (e)   Any binder or Policy issued by or at the request of the
 General Agent that does not comply with the Underwriting Standards or the
 Company's explicit written instructions for such Policy shall, at the
 Company's request, be promptly terminated by the General Agent consistent
 with the terms of the Policy and applicable state laws and regulations; and
 the General Agent agrees to indemnify the Company against any liability
 arising under or relating to such binder or Policy, or its cancellation.

           (f)   The General Agent shall not write business in excess of the
 amount of Net Written Premium set forth in Item E of the Declarations for
 the first and each subsequent Underwriting Year of this Agreement, unless
 otherwise agreed to in writing by the Company and the General Agent.  The
 first Underwriting Year is the period from the Effective Date to and
 including the date set forth in Item F of the Declarations; and each
 subsequent Underwriting Year will be the period commencing on the day after
 the end of the prior Underwriting Year and terminating on the anniversary of
 the end of the prior Underwriting Year.

           (g)   Binders shall not be issued for a term exceeding thirty (30)
 days and Policies shall not be issued for a term exceeding one (1) year.

           (h)   The General Agent shall utilize only insurance contract
 wording, endorsement wording, and rates and rules, that are approved in
 writing by the Company and, to the extent necessary, are properly filed with
 or approved in writing by the appropriate regulatory authority.   Before
 issuing any Policies, the General Agent shall provide to the Company for its
 review and approval the proposed insurance contracts, endorsements, binders,
 rating plans and rules (collectively "Forms and Rates"), to be used by the
 General Agent in administering the Policies.  The Forms and Rates shall
 comply with applicable  statutes, regulations and directives.   The General
 Agent shall pay all expenses incurred by (1) the General Agent, (2) third
 parties, and (3) filing fees incurred by the Company or affiliates of the
 Company who are acting at the General Agent's request, in (i) preparing the
 Forms and Rates, and (ii) in filing the Forms and Rates with the appropriate
 regulatory authorities.

           (i)   The General Agent shall have no authority to:

                (i)   cede, purchase or bind any reinsurance or
 retrocessions, including, but not limited to, treaty reinsurance, on behalf
 of the Company, except for the facultative reinsurance with the prior
 Company approval;

                (ii)   commit the Company to participate in insurance or
 reinsurance syndicates;

                (iii)   appoint any Agent without reasonable assurance that
 such Agent is legally licensed to transact the insurance business for which
 it is appointed;

                (iv)   collect any payment from a reinsurer or commit the
 Company to a claim settlement with a reinsurer without the Company's prior
 approval; and if such approval is given, a report shall be promptly
 forwarded to the Company by the General Agent;

                (v)   permit any of its Agents or any employee of any of its
 Agents to sit on its board of directors;

                (vi)   jointly employ an individual, who is employed with the
 Company;

                (vii)   appoint a sub-managing general agent;

                (viii)   terminate a Policy midterm or prior to its stated
 expiration date, and offer to issue a new policy and/or a renewal of such
 terminated Policy, to the same Policyholder with policy effective dates
 within the stated term of such terminated Policy, without the prior written
 consent of the Company; or

                (ix)   employ or continue to employ, as an officer, director,
 employee, agent, subcontractor, or other person authorized to act on behalf
 of the General Agent, any individual who has ever been convicted of any
 state or federal criminal felony involving dishonesty or a breach of trust
 or any crime under 18 U.S.C. S 1033 unless the individual has obtained the
 prior written consent of the insurance regulatory official possessing
 regulatory authority over such individual.

           (j)   The General Agent shall process all assigned risk Policies
 at the same commission rate as provided in Article 3.

           (k)   The General Agent shall perform loss control services for
 every Policyholder, including but not limited to actions to reduce the
 frequency and/or severity of losses, and provide all other Policyholder
 services and administration which may be required or advisable under or
 related to any Policy.

           (l)   The General Agent shall secure, in the event any Policy is
 issued with a deductible endorsement, all unpaid deductible obligations,
 actuarially valued to their ultimate cost, with collateral acceptable to the
 Company.  In the event any Policy is subject to retrospective rating, all
 projected retrospective premium due the Company shall be similarly secured.

           (m)   The Company may require the General Agent to terminate the
 coverage provided by any Policy so long as such termination does not violate
 any law or regulation.  If the Company wishes to terminate coverage, the
 Company may instruct the General Agent to send such non-renewal or
 cancellation notice as may be required by the Policy or the applicable
 regulatory authority and the General Agent shall promptly comply with such
 instructions.  If (i) the General Agent receives written notice from the
 entity administering claims under the Policies on behalf of the Company, or
 (ii) the General Agent as the entity administering claims under the Policies
 on behalf of the Company determines, that sums due the Company from the
 Policyholder (for example, deductible reimbursement) are more than thirty
 (30) days overdue, the General Agent shall, within five (5) business days
 thereafter, send written notice to the Policyholder canceling the Policy,
 where allowed, or otherwise non-renew the Policy upon the anniversary.  The
 General Agent will diligently work with the Claims Administrator to assist
 to collect outstanding deductibles and/or take appropriate underwriting
 action on the policy.

           (n)   The General Agent is responsible for ensuring that Policies
 are administered according to customary and usual customer service and
 Policy administration standards.  The General Agent shall promptly respond
 to inquiries, correspondence and communications, whether written, telephonic
 or electronic.  Endorsements and all matters affecting the issuance and
 maintenance of Policies shall be performed in a timely and competent manner,
 and in compliance with usual insurance industry regulatory and professional
 standards. The General Agent shall ensure that it has sufficient staffing
 and systems to perform all its functions and obligations hereunder, and to
 assist in servicing the business and Policies, as required by this
 Agreement.

           (o)   The General Agent shall ensure that the aggregate limits of
 liability for all Policies issued in any Underwriting Year shall not exceed
 the aggregate exposure limitations or restrictions set forth in the
 Company's Quota Share Treaties and other applicable reinsurance treaties.

           (p)   Where required by law, the General Agent shall provide,
 prior to the issuance of any Policy, and in accordance with applicable state
 and federal law, each new Policyholder with an initial notice of the
 Company's privacy policies and practices, and, if necessary or required by
 law, an opt-out notice explaining the Policyholder's rights as the case may
 be, to opt out of the disclosure of nonpublic personal information.  Not
 less than annually thereafter, the General Agent shall distribute a copy of
 the Company's annual privacy notice, as may be amended from time to time, to
 each existing Policyholder.  In addition, the General Agent shall, at the
 request of the Company, distribute revised privacy notices and opt-out
 notices as applicable to each Policyholder to reflect any revisions which
 may be made to the Company's privacy policies and practices.  In each case,
 the Company shall be responsible for providing the General Agent with a copy
 of its privacy policies and practices and its opt-out notice, which shall be
 used to provide the notices described in this section 2.6(p).  The General
 Agent shall be responsible for providing any of its employees, agents,
 representatives, contractors and subcontractors, who are performing direct
 or indirect services for the Policies or Policyholders, with a copy of the
 Company's privacy policies and practices, and for ensuring that such
 employees, agents, representatives, contractors and subcontractors are
 complying with such privacy policies and practices.

      2.7   Insurance Coverages to be Maintained by the General Agent.

           (a)   The General Agent shall acquire and maintain an errors and
 omissions insurance policy issued by an insurance carrier admitted to
 transact business in the state of New Jersey, subject to the approval of the
 Company, with policy limits of not less than the greater of (i) One Million
 Dollars ($1,000,000), or (ii) Twenty Five Percent (25%) of direct premium
 written from business attributable to the General Agent for the previous
 calendar year, but in no event shall policy limits be less than $1,000,000
 nor greater than $5,000,000, the coverage hereunder to be adjusted, if
 necessary, on or before April 1st of each year.  The policy shall not be
 written by the Company or an affiliate of the Company.  Proof satisfactory
 to the Company of the issuance and maintenance of such errors and omissions
 policy shall be submitted annually to the Company not later than April 30th
 of each year.

           (b)   The General Agent shall acquire and maintain a fidelity bond
 in an amount not less than $500,000 issued by an insurance carrier subject
 to the approval of the Company.  The executed bond shall be promptly
 submitted to the Company.

           (c)   If at any time during the term of this Agreement the Company
 makes a determination that the General Agent is a "managing general agent"
 as defined in the New Jersey Managing General Agent's Act, the Company shall
 so notify the General Agent ("MGA Notification") and the General Agent shall
 within thirty (30) days thereafter acquire and maintain, in addition to the
 coverages provided for in subparagraph 2.7(a) and 2.7(b), a surety bond for
 the protection of the Company issued by an insurance carrier admitted to
 transact fidelity and surety business in the state of New Jersey, subject to
 the approval of the Company, in an amount of not less than the greater of
 (i) One Hundred Thousand Dollars ($100,000), or (ii) Ten Percent (10%) of
 direct premium written from business attributable to the General Agent for
 the previous calendar year, but in no event shall the surety bond be less
 than $100,000 nor greater than $500,000, the coverage hereunder to be
 adjusted, if necessary, on or before April 1st of each year.  The bond shall
 not be written by the Company nor an affiliate of the Company.  The executed
 bond shall be promptly submitted to the Company.

      2.8   Compliance with Law.   The Company and the General Agent shall
 each maintain all licenses and regulatory approvals necessary to conduct the
 business to which this Agreement refers.  If an MGA Notification is sent to
 the General Agent, the General Agent shall as soon as practicable thereafter
 apply for a license as an insurance producer in the state of New Jersey,
 whether or not New Jersey is a state in which the General Agent is
 authorized under this Agreement to issue Policies and whether or not the
 General Agent is domiciled or located in a state or states other than New
 Jersey.  The General Agent shall be and remain in compliance with, and shall
 ensure that all Agents are in compliance with, the laws and regulations,
 including the Gramm-Leach-Bliley Act, which affect the binders, Policies and
 other regulated documents issued pursuant to this Agreement.


                                  ARTICLE 3

                                 COMPENSATION
                                 ------------

      Capitalized terms used in this Article 3 which are not defined in this
 Article 3, are defined in Section 1.1.

      3.1   Commission Payments.

           (a)   The Company shall pay the General Agent commission equal to
 Provisional Commission plus Adjusted Commission pursuant to Sections 3.1(b)
 and 3.1(c).  The General Agent shall pay the Company a return commission
 ("Return Commission") on return premium at the rate or rates commission was
 paid to the General Agent.

           (b)   The General Agent shall submit written Provisional
 Commission payment requests to the Company on a monthly basis, in the form
 provided by the Company.  The Company shall pay Provisional Commission due
 the General Agent within seven (7) days after receipt of the Provisional
 Commission payment requests, unless the Company disputes the Provisional
 Commission payment requests, in which case the undisputed amounts requested
 shall be paid within seven (7) days after receipt of the Provisional
 Commission payment request.  Return Commission due the Company shall be
 offset against commissions due the General Agent.  All Provisional
 Commission amounts shall be paid by wire or electronic transfer unless
 agreed otherwise.

           (c)   Adjusted Commission shall be paid to the General Agent when
 ultimate incurred losses are determined with reasonable certainty by the
 Company.

           (d)   The Company shall remit to the General Agent, any amount by
 which Provisional Commission plus Adjusted Commission plus profit sharing
 commission (if any) to which the General Agent was entitled exceeds the
 actual commission paid to the General Agent, within thirty (30) days after
 the Company determines ultimate incurred losses with reasonable certainty.
 If the Company determines that the commission paid to the General Agent
 exceeds the amount of Provisional Commission plus Adjusted Commission plus
 profit sharing commission (if any) to which the General Agent was entitled,
 the General Agent shall pay the excess amount to the Company within five
 (5) business days after demand.

           (e)   If the actual state mandated fees, taxes, boards, and
 bureaus exceed the Tax Allowance Rate times Net Written Premium, then in
 such event the Company, may at its sole option, either (i) increase the Tax
 Allowance Rate (set forth in item G of the Declarations) by notice to the
 General Agent, or (ii) bill and recover such differences from the General
 Agent.  If the actual state mandated fees, taxes, boards and bureaus are
 less than the Tax Allowance Rate times Net Written Premium, then the Company
 shall retain the difference, and no additional commission shall be due the
 General Agent.

      3.2   Provisional Commission and Adjusted Commission.

           (a)   Provisional commission ("Provisional Commission") shall be
 based on the minimum provisional ceding commission authorized under the
 Quota Share Treaty.  Provisional Commission shall equal:

                (i)  the Provisional Commission Rate times Net Written
                     Premium;

           plus (ii) any applicable Policy and service fees collected
                     by the General Agent;

          minus (iii) any applicable premium taxes on such Policy
                      and service fees.

           (b)   Adjusted commission ("Adjusted Commission") shall be
 based on the difference between (i) minimum provisional ceding commission
 authorized under the Quota Share Treaty and (ii) actual ceding commission
 paid to the Company under the Quota Share Treaty after adjustments (if any)
 for incurred losses.  If there is no executed Quota Share Treaty in effect
 then there shall be no Adjusted Commission.  Adjusted Commission shall
 equal:

                (i)  the Adjusted Commission Rate times Net Written Premium.

      3.3   Loss Corridor Commission Reduction, Collateral, Losses and
 Payments.

           (a)   In order to provide an inducement to write profitable
 business, the General Agent shall reduce its commission to the extent the
 Company pays losses and loss adjustment expenses not recoverable under the
 Quota Share Treaty because of loss corridor provisions in the Quota Share
 Treaty.

           (b)   The General Agent shall provide collateral ("Loss Corridor
 Collateral") to the Company to secure its obligation under Section 3.3(a).
 The Loss Corridor Collateral shall be withheld by the Company from
 commission payments due the General Agent (pursuant to Section 3.1(b)).
 Loss Corridor Collateral shall equal:

                (i)  the Loss Corridor Rate times Net Written Premium.

           (c)   The Company may draw upon the Loss Corridor Collateral to
 satisfy the General Agent's obligations as provided under Section 3.3(a).
 The Company shall release Loss Corridor Collateral, not otherwise used by
 the Company, when ultimate incurred losses are determined with reasonable
 certainty by the Company.

      3.4   Audit Premium Security Account, Commission Reduction, Collateral,
 and Payments.

           (a)   In order to secure potential uncollected audit premium, the
 General Agent shall reduce its commission to the extent determined below.

           (b)   The General Agent shall provide collateral ("Audit Premium
 Collateral") to the Company to secure its obligation under Section 3.4(a).
 The Audit Premium Collateral shall be withheld by the Company from
 commission payments due the General Agent (pursuant to Section 3.1(b)).
 Audit Premium Collateral shall equal:

                (i)  the Audit Premium Collateral Rate times Net Written
                     Premium.

           (c)   The Company may draw upon the Audit Premium Collateral to
 satisfy the General Agent's obligations as provided under Section 3.4(a).
 The Company shall release Audit Premium Collateral, not otherwise used or
 required by the Company, when ultimate audit premium has been (i) determined
 with reasonable certainty by the Company, and (ii) received by or drawn from
 the Audit Premium Collateral by the Company.

      3.5   Provisional Commission Rate.   The provisional commission rate
 ("Provisional Commission Rate") shall be determined as follows:

           (a)   If a Quota Share Treaty has been executed and is in effect,
 then the Provisional Commission Rate shall equal:

                   (x1) the minimum ceding commission rate under the Quota
                        Share Treaty;

           minus   (y1) the Company's Fee Rate;

           minus   (y2) the Loss Corridor Rate (if applicable) under the
                        Quota Share Treaty;

           minus   (y3) the Audit Premium Collateral Rate (if applicable).

           (b)   If a Quota Share Treaty (i) has not been executed, or (ii)
 has terminated and is not in effect and does not reinsure the Company for
 Policies with effective dates on or after the termination date, then the
 Provisional Commission Rate shall equal:

                   (x1) the Initial Provisional Commission Rate;

           minus   (y1) the Audit Premium Collateral Rate (if applicable).

      3.6   Adjusted Commission Rate.   The Adjusted Commission Rate shall
            equal:

                 (x1) the actual ceding commission rate under the effective
                      Quota Share Treaty after any adjustments for incurred
                      losses and excluding any profit sharing;

           minus (y1) the minimum ceding commission rate under the effective
                      Quota Share Treaty.


                                  ARTICLE 4

                       RECORDS, REPORTS AND PROCEDURES
                       -------------------------------

      4.1  General.   The General Agent shall prepare and maintain complete,
 accurate and orderly underwriting books, files, records and accounts of all
 transactions involving the business transacted pursuant to this Agreement,
 and will maintain same in accordance with generally accepted insurance and
 accounting practices.  The Company's representatives, at the Company's
 expense, shall have the right (but not the obligation) from time to time,
 during normal business hours, on reasonable notice to the General Agent, to
 inspect, audit, copy and make extracts from the General Agent's books,
 files, records and accounts relating to business transacted pursuant to this
 Agreement and in compliance with any and all information privacy laws and
 regulations.  The Company may conduct a semi-annual examination of all books
 and records maintained by the General Agent which relate to business placed
 pursuant to this Agreement.  In addition, if the Company's aggregate premium
 volume increases by 30% or more in any 30-day period after the second semi-
 annual examination (as provided for herein), the Company may conduct an
 additional examination of the books and records of the General Agent which
 relate to the coverage placed under this Agreement.

      4.2   Premiums and Premium Bank Account.

           (a)  The General Agent shall remit to the Company all premiums due
 the Company, including any Audit Premium and/or other retrospective premium,
 whether collected or not unless otherwise expressly excepted herein, which
 premiums shall be calculated from the effective date of coverage under the
 applicable Policies.

           (b)  Immediately upon receipt, the General Agent shall deposit
 all premiums and other funds collected in respect of the Policies into a
 deposit-only bank account to be established and controlled solely by the
 Company ("Premium Bank Account").  The General Agent shall deposit all
 uncollected premium and other funds due the Company into the Premium Bank
 Account no later than ninety (90) days after the premium due date.  The
 General Agent shall not deposit any premium or other funds due the Company
 into a bank account controlled by the General Agent, including but not
 limited to an "account current" bank account.

           (c)  The General Agent shall be deemed to have a fiduciary
 responsibility to the Company with respect to such premiums and other funds.

           (d)  If premium is not paid by a holder of a Policy when it is
 due, the General Agent shall cancel the Policy in accordance with the
 Underwriting Standards.  The General Agent shall, nevertheless, be and
 remain responsible for depositing into the Premium Bank Account all premiums
 as and when due, whether collected or not, calculated from the effective
 date of the Policies involved to the termination date of such Policies.

           (e)  The General Agent shall have no right to offset (i)
 commission or other compensation against premium or return premium, or (ii)
 premium against return premium.

           (f)  The Company shall be authorized to sweep funds from the
 Premium Bank Account on a daily basis.

           (g)  The General Agent shall not earn interest on the "cash float"
 in the Premium Bank Account.

           (h)  The Company shall offset commissions due the General Agent
 against Return Commission due the Company, on a monthly basis.  In the event
 Return Commission exceeds commissions due the General Agent for any month,
 the General Agent shall deposit such excess amount into the Premium Bank
 Account, and the General Agent shall receive no commission payment for that
 month.

      4.3   Audit Premium Collection.  With respect to any premium that may
 remain due from all Policyholders at the end of the Policy period ("Audit
 Premium"), the General Agent shall determine and bill Audit Premium owed to
 the Company by all Policyholders within three (3) months after the end of
 each Policy period.  The General Agent shall use reasonable efforts to
 collect Audit Premium.

           (a)   The General Agent shall be responsible for the payment to
 the Company of all Audit Premium due the Company whether collected or not.

           (b)   Notwithstanding the foregoing, the General Agent shall only
 be obligated to pay a proportional share of uncollected Audit Premium to the
 Company provided the General Agent makes a good faith effort to collect said
 premium as follows:

                (i)  send a bill to each Policyholder for Audit Premium due
 (as permitted and/or required by the terms of each Policy), no later than
 three (3) months after the end of the respective Policy period;

                (ii)  notify the Company that certain Audit Premium is
 uncollected within sixty (60) days after initial billing therefor; and

                (iii) forward to the Company copies of all correspondence
 relating to its collection effort within ninety (90) days after initial
 billing therefor.

           (c)   If the General Agent has made a good faith effort to collect
 Audit Premium as set forth in Section 4.3(b) for all Policies authorizing
 the payment of Audit Premium, then the General Agent shall only be liable
 to pay to the Company uncollected Audit Premium in an amount equal to
 uncollected Audit Premium times the Audit Premium Proportionate Share Rate
 (for example if $100 of audit premium is uncollected despite a good faith
 effort pursuant to Section 4.3(b) and if the Audit Premium Proportionate
 Share Rate is 90% then the General Agent must pay to the Company $90 of
 the total of $100 for the uncollected Audit Premium).  Audit Premium may be
 calculated quarterly and payments of Audit Premium owed by the General Agent
 to the Company shall be made within 30 days after each calculation.

           (d)   No commission shall be paid to the General Agent on Audit
 Premium not collected by the General Agent.

      4.4   Policy Collection Register.   All funds deposited into the
 Premium Bank Account shall be supported by the "Policy Collection Register"
 (defined in Schedule 1).  The General Agent shall reconcile cash deposited
 into the Premium Bank Account to the Policy Collection Register on a monthly
 basis.  The Policy Collection Register shall include accounting entries for
 Return Premium and commissions.

      4.5   Policy Register.   The General Agent shall maintain and furnish
 to the Company, or its data processing facility, a "Policy Register" (as
 defined in Schedule 1).  The General Agent shall process and include all
 bound Policies on the Policy Register within ten (10) days after each
 Policy's effective date.

      4.6   Receivable Register.   The General Agent shall establish and
 maintain a "Receivable Register" (as defined in Schedule 1) and shall
 furnish a copy each month to the Company.  The Receivable Register shall
 be reconciled each month in the manner provided in Schedule 1).

      4.7   Return Premium Register.   The General Agent shall establish
 and maintain a "Return Premium Register" (as defined in Schedule 1) setting
 forth return premium paid for each Policy canceled and/or return premium
 endorsement.

      4.8   Return Premium Account.   The Company shall establish, fund and
 maintain a separate bank account ("Return Premium Account") upon which the
 General Agent may draw to pay return premium due holders of Policies, and
 third party underwriting expenses authorized to be paid by the General Agent
 under this Agreement.  The General Agent shall be responsible for payment of
 all third party underwriting expenses from its commission unless the Company
 expressly agrees to pay such expenses pursuant to the terms of this
 Agreement.  The General Agent shall:

           (a) deliver to the Company in writing, funding requests on a
 weekly basis, and the Company shall provide the necessary funds promptly by
 wire transfer;

           (b) reconcile all disbursements from the Return Premium Account
 each month by type and amount of disbursement (e.g. return premium, company
 approved expenses); and

           (c) send a copy of such monthly reconciliation to the Company on
 or before the 8th business day of the following month.

           4.9   Further Monthly Reconciliations.  The General Agent shall
 also provide monthly reconciliations to the following:

           (a)  a reconciliation of cash processed pursuant to Schedule 2 to
 cash deposited into the Premium Bank Account;

           (b)  a reconciliation of premium deposited into the Premium Bank
 Account to the Policy Collection Register; and

           (c)  a reconciliation of the Receivable Register to the Policy
 Register and to the Premium Bank Account.

      4.10   Additional Reporting.  The General Agent shall additionally
 provide the following:

           (a)  Monthly updates on average premium per exposure by Policy
 year; and

           (b)  Quarterly loss development triangles by Underwriting Year and
 "Accident Year" listing paid losses, case incurred, reported claim count and
 open claims count.

      4.11   Procedures.

           (a)  The General Agent shall establish and maintain written
 operational procedures to handle all business related to the Policies.

           (b)  All reports and reconciliations to be provided to the Company
 under this Article 4 (whether in hard copy or maintained on computers) shall
 be forwarded to the Company not later than seven (7) days after the end of
 each month.  The electronic files maintained by the General Agent shall
 be delivered to the Company, by floppy disk, compact disk, email etc., as
 frequently as may be reasonably requested by the Company.  The General Agent
 shall also, at the Company's request, furnish the Company with updated
 copies of the General Agent's computer data base ("Data") maintained in
 support of the business written pursuant to this Agreement.  The Data shall
 be in a format (i) acceptable to the Company and any entity which requires
 that the Company supply it with the Data, (ii) readable on the Company's or
 such entity's computer system, and (iii) which complies with the file layout
 specifications set forth on Schedule 2, or any subsequent file layout
 specifications provided to the General Agent by the Company.  The Data shall
 include all information contained in the Registers described in Schedule 1.
 The reports to be provided to the Company shall include, but shall not be
 limited to, information and statistical data (i) required by the Insurance
 Services Office ("ISO"), (ii) necessary for the Company to prepare any
 reports required by the National Association of Insurance Commissioners
 or National Council of Compensation Insurers (including unit statistical
 reports and data calls relating to any workers' compensation Policies), and
 (iii) necessary for any other purpose the Company may reasonably require
 same including, without limitation, to enable the Company to monitor and
 evaluate the business written under this Agreement, and to enable the
 Company to comply with any current or future state or rating agency
 reporting requirements.  The General Agency shall also prepare necessary
 reports for the ISO including the data and detail required by the ISO,
 and in the format required by the ISO, and shall (i) submit such reports
 directly to the ISO with a copy to the Company, or (ii) submit such reports
 to the Company for transmission to the ISO.  Any request by the Company
 for information to monitor and evaluate the business written under this
 Agreement or to comply with current or future state or other reporting
 requirements shall be deemed a reasonable request.  Notwithstanding anything
 to the contrary elsewhere in this Agreement, the General Agent shall deliver
 all such reports to the Company at least fifteen (15) days before applicable
 filing deadlines.

           (c) If, in the sole judgment of the Company, the General Agent is
 not in compliance with subsection 4.11(b), the Company may, at its option,
 suspend the General Agent's underwriting authority  in accordance with terms
 of this Agreement or terminate this Agreement in accordance with Article 8,
 Section 8.2(l) hereof.

           (d) The General Agent shall maintain permanent copies of Policies,
 applications for Policies and correspondence relating to Policies, as hard
 copies, on microfiche, or archived on fixed or movable media.  These
 permanent copies shall not be destroyed without the prior written permission
 of the Company for a period of at least five (5) years from the termination
 date of the applicable Policy, or the period specified by the applicable
 state statute regulating preservation of records, whichever is longer.  All
 documents and/or copies which are destroyed should be shredded to protect
 confidential information.  The General Agent shall provide access to,
 and copies of, its books and records to any insurance department having
 jurisdiction with respect to the Policies, in such form as may by usable by
 the department.

           (e)  Within ninety (90) days after the end of each of its fiscal
 years the General Agent shall furnish the Company with copies of its audited
 financial statements certified as true, complete and accurate by its chief
 executive officer and chief financial officer.

           (f)  The Company's acceptance of any deposit of funds to the
 Premium Bank Account, or any transfer of funds to or from the Operating
 Account, shall not be deemed an acknowledgment by the Company of the
 accuracy of any report submitted by the General Agent, nor shall it be
 deemed a waiver of any right or remedy of the Company under this Agreement
 or at law.

           (g)  If the General Agent or the Company receives an inquiry or
 complaint from any regulatory authority having jurisdiction concerning a
 violation of insurance law or regulation, or a complaint disputing coverage
 under any Policy, or any process or litigation document, or threat of
 litigation, with respect to any matter covered in this Agreement, prompt
 notice and a true copy shall be given to the other party.  If a response
 affecting the Company is required, the General Agent shall, within five
 (5) business days (or such lesser time period as may be allowed by the
 applicable regulatory authority or by any process) after the receipt of the
 inquiry, complaint or other notice, draft a response and submit the draft to
 the Company for its prior approval before submission of the response.

           (h)  The Company may suspend the General Agent's underwriting
 authority for such periods as the Company may determine in the event the
 General Agent breaches any provision of this Agreement.

           (i)  The General Agent shall perform an annual post-Policy period
 audit, for every Policy which authorizes such audits and audit premium,
 within ninety (90) days following either termination or natural expiration
 of the Policy term.

           (j) The General Agent shall be prohibited from disclosing or using
 any nonpublic personal financial information or nonpublic personal health
 information related to any Policyholder or beneficiary, or to any consumer
 or customer (as such terms are defined under applicable state and federal
 privacy laws), except as necessary to carry out its duties and obligations
 under this Agreement or as otherwise required under applicable state or
 federal law, including, without limitation, the Gramm-Leach-Bliley Act and
 any state law or regulation implementing the same.

           (k)  The General Agent shall use its best efforts to provide the
 Company, without charge, and at a price no greater than that which the GA is
 being charged now, with a limited license to use the software system used by
 the General Agent in connection with the administration and run-off of the
 business produced under this Agreement, including all computer programs and
 updated source and object codes ("Software").  The General Agent shall
 deliver the Software, as well as all necessary manuals and instructions,
 to the Company within six (6) months after the Effective Date, and shall
 provide monthly updates and changes thereafter.  If the General Agent (i)
 fails to provide the Software, necessary manuals and instructions to the
 Company, without charge, within six (6) months after the Effective Date, or
 (ii) fails to provide updates to the Software and documentation on a monthly
 basis or as such updates are issued, then the Company may contact the
 Software vendor and/or owner directly, and procure a license to obtain
 and use copies of the Software and necessary documentation from the
 Software vendor, and charge all expenses for such licenses, Software and
 documentation to the General Agent, and the General Agent agrees to pay or
 reimburse the Company for all such incurred costs. The Company acknowledges
 and agrees that its use of Data and Software obtained from the General
 Agent, shall be limited to the run-off of the business produced under this
 Agreement, and the furnishing of Data and Software to the Company by the
 General Agent shall not be construed to convey title to same, or any part
 thereof, to the Company, and shall not be construed as conferring upon the
 Company any right to sell, lease, transfer or dispose of all or any portion
 of the Data or Software (except that same may be used by the Company's
 designee, if any, for the purpose of administering and running-off the
 business).  The Company further agrees that (i) it shall not copy any part
 of the Data or Software obtained from the General Agent, or the associated
 source or object code, except as may be required to administer and run-off
 the business, and (ii) promptly upon completion of the administration and
 run-off of the business it shall return to the General Agent any Data,
 Software, source and object codes, and any other documents proprietary to
 the General Agent which were delivered to the Company by the General Agent
 pursuant to this Section 4.11.  Should the Company choose to obtain a
 limited license directly, this provision shall still be in effect.

      4.12   Unclaimed Property.

           (a)  The General Agent shall comply with the Company's unclaimed
 property policy ("Unclaimed Property Policy"), as such policy may be amended
 from time to time.  The General Agent shall maintain a register of all
 checks, drafts, or other debits from the Return Premium Account which are
 unclaimed, uncashed and/or abandoned by the person entitled to receive such
 payment ("Unclaimed Funds Register").  The information in the Unclaimed
 Funds Register shall include all information necessary and sufficient
 for the Company to comply with applicable state unclaimed property laws,
 including but not limited to, the date and amount of the check, draft or
 debit, the date of the report, the policy number, the payee, the payee's
 address and the purpose of the payment.  A copy of the Unclaimed Funds
 Register shall be sent to the Company monthly.  The General Agent shall
 maintain a separate Unclaimed Funds Register for each state in which
 policies are administered under this Agreement.

           (b)  The General Agent shall comply, and shall ensure the Company
 complies, with all applicable laws, rules and regulations related to
 abandoned and unclaimed property, whether tangible or intangible, including
 all laws applicable to the escheat or custodial taking of any abandoned or
 unclaimed property in the possession or control of the General Agent.

                                  ARTICLE 5

                                   EXPENSES
                                   --------

      5.1   General Agent's Expenses.  The General Agent shall (i) pay all
 expenses the General Agent incurs, and (ii) reimburse the Company or its
 affiliates for all expenses incurred by the Company or its affiliates at
 the General Agent's request or as agreed to by the General Agent and the
 Company, in connection with marketing, producing, underwriting and servicing
 the Policies including, but not limited to, the following:

           (a)   Printing of proposals, Policy jackets, contracts of
 insurance, endorsements, cancellation notices, premium notices, records
 and reports, printing and mailing of Policyholder notices mandated by the
 regulatory authority of any state, and all other documents required to
 fulfill the obligations of the General Agent under this Agreement.

           (b)   Advertising, public relations and transportation expenses.
 The General Agent shall obtain the prior written approval of the Company
 before issuing any advertisement, circular, pamphlet, or other publication
 which refers to the Company.

           (c)   The General Agent's office expenses, including rent,
 salaries of its personnel, utilities, data processing performed by or at
 the request of the General Agent, furniture, fixtures, equipment, supplies,
 telephone, postage, and other general overhead expenses.

           (d)   Agent and subcontractor expenses including processing costs,
 compliance costs, licensing costs, fees and appointment costs (including any
 costs incurred by the Company, its affiliates or through an independent
 vendor on the Company's behalf to process agency appointments).

           (e)   Compliance work expenses (including the cost of producing
 and sending privacy notices), licensing costs and processing costs
 (including the cost of rate and form filings for approval by the appropriate
 regulatory authorities).

      5.2   Reimbursement of Expenses.  The Company will charge back to
 the General Agent on a monthly basis any costs incurred by the Company or
 affiliates of the Company (i) at the General Agent's request, or (ii) agreed
 to by the Company and the General Agent.

      5.3   Company's Expenses.   The Company shall pay all expenses directly
 attributable to its overhead and operations.

      5.4   Recovery of Expenses in the Event of Breach.  In addition to all
 other rights and remedies of the Company under this Agreement and at law,
 the Company shall be entitled to immediate payment or reimbursement from the
 General Agent for all Expenses (as later defined) incurred or paid by the
 Company by reason of the General Agent's breach or non-performance of any
 obligation on its part to be observed or performed under this Agreement.
 The obligations of the General Agent referred to in this Section 5.4
 include, but are not limited to:

           (a)   the obligation to deposit, report and remit premiums to the
 Company;

           (b)   the obligation to remit return premiums to insureds when
 due;

           (c)   the obligation to process all Policies, endorsements, and
 notices of cancellation or non-renewal, pursuant to, and otherwise to be in
 compliance with, the Underwriting Standards;

           (d)   the obligation to comply with the Company's Agent
 appointment procedures;

           (e)   the obligation to observe and comply with applicable laws,
 regulations, rules and rates affecting the transaction of business under
 this Agreement; and

           (f)   the obligation to comply with Article 4 of this Agreement.

 The term "Expenses" as used in this Agreement shall include, but shall not
 be limited to, losses, costs, charges, fines, penalties, and the following
 reasonable and necessary expenses:  legal, accounting, data processing, file
 retrieval, software, clerical help, professional services, travel, and all
 internal expenses of the Company related to the business covered by this
 Agreement.  The General Agent shall pay or reimburse the Company for all
 Expenses immediately upon receipt of a written statement setting forth such
 Expenses.  Interest at the rate of the lesser of (i) 18% per annum or (ii)
 the highest rate of interest permitted by applicable law, shall accrue with
 respect to any Expenses remaining unpaid for thirty (30) days after
 presentation of such statement until payment in full of the Expenses with
 accrued interest.


                                  ARTICLE 6

                                  INDEMNITY
                                  ---------

      6.1     General  Agent's Indemnity.  The General Agent agrees to
 indemnify the Company, its subsidiaries, successors and assigns, and the
 shareholders, directors, officers, agents and employees of any of them
 (collectively "Company Indemnitees"), against and in respect of any and
 all claims (not including covered claims made under any Policy properly
 issued in accordance with this Agreement), demands, actions, proceedings,
 liability, losses, damages (except consequential damages), judgments, costs
 and expenses, including, without limitation, attorneys' fees, disbursements,
 and court costs, and any loss in excess of Policy limits, as well as extra-
 contractual obligations, including but not limited to punitive, exemplary,
 or compensatory damages, suffered made or instituted against or incurred by
 the Company Indemnitees, or any of them, and which directly or indirectly
 arise out of or relate to (i) negligence of the General Agent or any Agent,
 or its employees or representatives, in discharging its obligations to the
 Company or to the Policyholders, (ii) failure by the General Agent, or any
 Agent, or its employees or representatives to comply with any applicable
 information privacy laws, and/or (iii) any failure by the General Agent or
 any Agent, or its employees or representatives to perform its obligations
 under or relating to this Agreement provided however that the actions of the
 General Agent described in subsection (i) or (ii) were not taken pursuant to
 the written instructions of the Company.. The General Agent also agrees
 to indemnify the Company for one hundred percent (100%) of any losses,
 including loss adjustment expenses, incurred by the Company under any
 Policy which when issued did not comply with criteria required pursuant to
 Sections 2.6(a), 2.6(b) and 2.6(c).  The General Agent also agrees to
 indemnify the Company for any losses, including loss adjustment expenses,
 under the Policies in excess of a one hundred percent (100%) Loss Ratio, as
 defined in Section 3.3(c).

      6.2   Security for General Agent's Indemnity.   To secure performance
 of its obligation to indemnify the Company Indemnitees, the General Agent
 hereby assigns, transfers, pledges and grants to the Company, as collateral
 security, all of its rights, title and interest in and to the following
 rights and property (all of which is hereafter referred to collectively as
 the "Collateral") and which includes (i) all rights or remedies it may have
 now or in the future against any Agent or subcontractor under any contract
 or otherwise relating in any manner to the Policies, (ii) all of its rights
 to renew the Policies generated under this Agreement and under any other
 agency agreements to which the Company and the General Agent are parties
 ("Policy Renewal Rights"), (iii) all of its underwriting and claim files,
 records and computer tapes, disks and other storage devices relating to the
 administration of the Policies under this Agreement and policies under any
 other agreement to which the Company and the General Agent  and/or their
 affiliates, are parties, and (iv) all rights to unpaid commission.  The
 General Agent affirms that it has granted a continuing security interest
 in the Collateral in favor of the Company to secure any and all present
 and future indebtedness of the General Agent under Section 6.1 of this
 Agreement.  Subject to this section 6.2 and the Company's security interest
 as described herein, the General Agent shall be entitled to retain all
 payments and to exercise all rights in and to the Collateral.  No further
 documentation shall be required to evidence the assignments referred to
 herein.  At the Company's request, however, the General Agent shall execute
 and deliver such financing statements, and take whatever other actions are
 requested by the Company to perfect and continue the Company's security
 interest in the Collateral.  Upon the occurrence of an event described in
 section 6.1 for which General Agent is required to indemnify Company and
 upon the request of the Company, the General Agent shall deliver to the
 Company any and all documents evidencing or constituting the Collateral.
 When applicable law provides more than one method of perfection of the
 Company's security interest, the Company may choose the method(s) to be
 used.  Furthermore, the General Agent hereby irrevocably: (a) appoints the
 Company as its attorney-in-fact for the purpose of executing any documents
 necessary to perfect or continue the security interest granted in this
 Agreement, and (b) authorizes the Company to file financing statements,
 continuation statements, amendments thereto, and any other documents
 necessary to perfect or continue the security interest granted in this
 Agreement.

      6.3   Company's Indemnity.   The Company agrees to indemnify the
 General Agent, its subsidiaries, successors and assigns, and the
 shareholders, directors, officers, agents and employees of any of them
 (collectively "General Agent Indemnitees"), against and in respect of any
 and all claims (not including covered claims made under any Policy properly
 issued in accordance with this Agreement), demands, actions, proceedings,
 liability, losses, damages (except consequential damages), judgments, costs
 and expenses, including, without limitation, attorneys' fees, disbursements
 and court costs, and any loss in excess of Policy limits, as well as extra-
 contractual obligations, including but not limited to punitive, exemplary,
 or compensatory damages, suffered, made or instituted against or incurred
 by the General Agent Indemnitees, or any of them, and which, directly or
 indirectly, arise out of or relate to any failure by the Company, or its
 employees or representatives, to perform its obligations under or relating
 to this Agreement.


                                  ARTICLE 7

                                   NOTICES
                                   -------

      Any notice or other communication hereunder shall be in writing and
 shall be deemed fully made or given (a) when hand delivered, (b) on the
 business day after it is delivered to a recognized overnight courier service
 for overnight delivery to a party at the address of such party as stated in
 Item A of the Declarations (or to such changed address as such party may
 have fixed by notice) to the attention of the President, or (c) three (3)
 business days after it is mailed to a party, postage prepaid, by registered
 or certified mail, return receipt requested, addressed to such party at its
 address as stated in Item A of the Declarations (or to such changed address
 as such party may have fixed by notice) to the attention of the President.


                                  ARTICLE 8

                                 TERMINATION
                                 -----------

      8.1   Voluntary Termination.   This Agreement may be terminated by
 either party, without cause, by giving the other party not less than sixty
 (120) days prior notice of such termination.

      8.2   Termination for Cause:  This Agreement shall terminate:

           (a)   at the election of the Company, upon notice to the General
 Agent, (i) only with respect to a specific state, otherwise authorized under
 this Agreement, if any public authority cancels or declines to renew any
 license in that state which is necessary for the legal performance of the
 General Agent's obligations in that state, or (ii) in its entirety if any
 public authority cancels, declines to renew, or suspends, any license or
 certificate of authority of the General Agent which is necessary to the
 legal performance of its obligations under this Agreement, or (iii) in its
 entirety if any license of the General Agent is canceled, suspended or not
 renewed by reason of fraud or other willful misconduct of the General Agent;

           (b)   with respect to any state in which the General Agent is
 authorized under this Agreement to issue Policies, if any public authority
 cancels or declines to renew any Company license required to be maintained
 in such state;

           (c)   at the election of the Company, upon notice to the General
 Agent, in the event of a change of control (as defined in Section 9.5),
 unless (i) the General Agent has provided the appropriate notice as
 described in Section 9.5 and (ii) the Company agrees in writing to such
 change of control;

           (d)   at the election of the Company, upon notice to the General
 Agent, if the General Agent becomes insolvent, if it makes an assignment for
 the benefit of its creditors, if a petition for relief under the Bankruptcy
 Code is filed by or against it, or if a trustee, receiver or other custodian
 of its assets is appointed;

           (e)   upon the filing by or against the Company of a petition for
 relief under the Bankruptcy Code, or the issuance of an order of liquidation
 or rehabilitation or similar action against the Company by any public
 authority having jurisdiction;

           (f)   at the election of the Company, upon notice to the General
 Agent, if the General Agent commits any of the following acts or omissions:
 fraud, gross negligence or willful misconduct (which includes, but is not
 limited to, willful violation of the Company's instructions, willful
 violation of any covenant in this Agreement on its part to be performed,
 or willful violation of any insurance department regulation or statutory
 provision applicable to the General Agent);

           (g)   at the election of the Company, if the General Agent
 breaches any provision of  this Agreement (other than breaches or violations
 by the General Agent covered elsewhere in this Section 8.2) and fails to
 cure such breach within ten (30) days after notice of the breach is given
 to the General Agent by the Company; for purposes of this subdivision (g),
 routine differences in the accounting methods of the General Agent and the
 Company which involve minor amounts of money, and do not involve premiums
 collected and knowingly withheld by the General Agent, shall not constitute
 failure to account for and pay over premiums provided all items not in
 dispute are paid in accordance with the collection and remittance procedures
 set forth in this Agreement;

           (h)   with respect to any state in which the General Agent is
 authorized under this Agreement to issue Policies, at the election of the
 Company, upon notice to the General Agent, in the event of any material
 change in the Company's obligations under the Policies, or in its business
 prospects, caused by (i) a change in law or insurance regulations in such
 state or (ii) any suspension, prohibition or cease and desist order or
 decree issued by any public authority having jurisdiction affecting any
 business produced under this Agreement;

           (i)   at the election of the Company, upon notice to the General
 Agent, in the event of the cancellation of, or an adverse change in the
 terms, conditions or coverage of, the Company's reinsurance agreements with
 respect to the Policies;

           (j)   at the election of the Company, upon notice to the General
 Agent, in the event there is no reinsurance coverage in effect at terms
 agreeable to the Company;

           (k)   at the election of the Company, upon notice to the General
 Agent, in the event the Loss Ratio at the end of any Underwriting Year is
 greater than 100%.  For the purposes of this provision, "Loss Ratio" means
 the percentage obtained by dividing losses incurred (including incurred but
 not reported losses as determined by the Company) under the Policies by
 earned premium; or

           (l)   at the election of the Company, upon notice to the General
 Agent, in the event the General Agent is in non-compliance with the
 requirements of Article 4 hereof on a date ninety (90) or more days after
 the effective date hereof.

      8.3   Rights Upon Termination.   Upon termination of this Agreement in
 accordance with this Article 8:

           (a)  the obligations of the General Agent and the Company to the
 effective date of termination shall be discharged promptly;

           (b)  the General Agent's records and the use, ownership and
 control of the Policy Renewal Rights and the right to commission therein
 shall remain the property of the General Agent, provided the General Agent
 is (i) substantially in compliance with its obligations to the Company under
 this Agreement, and (ii) has provided to the Company a first perfected
 security interest in and to all of said rights and such rights to
 commissions.  If however, no such first perfected security interest has been
 created and perfected, then the Company shall have the right to compel the
 General Agent to convey to the Company on demand, all of the Policy Renewal
 Rights and rights to commissions thereon; and

           (c)   except as otherwise provided under Section 8.4(c), when a
 notice of termination is received by the General Agent, the General Agent
 (i) shall have no authority to issue quotes, binders or Policies with
 effective dates on or after the effective date of termination of this
 Agreement, and (ii) shall immediately withdraw all outstanding quotes.

           (d) The Company may suspend the General Agent's underwriting
 authority during the pendency of any dispute regarding termination of this
 Agreement; provided, however, that the Company and the General Agent shall
 fulfill their obligations under in-force Policies regardless of any such
 dispute.


      8.4   Procedures Upon Termination.   The following procedures shall be
 followed in the event of a termination of this Agreement:

           (a)   If an MGA Notification was sent to the General Agent, then
 within fifteen (15) days of any termination of this Agreement the Company
 shall file written notice thereof with the New Jersey Insurance Department
 on a form established by the Department.  The termination shall not be
 effective until receipt of such notice of termination by the New Jersey
 Insurance Department.

           (b)   The General Agent shall promptly return to the Company, or
 destroy with the Company's permission, forms or other supplies imprinted
 with the Company's name regardless of who incurred the cost for same.

           (c)  The Company may elect to run-off the in-force business itself
 or through its designee, in which case it may do so.  However, if requested
 to do so by the Company in writing,  the General Agent shall, at its sole
 expense, run-off the in-force business to normal expiration in accordance
 with the provisions of this Agreement.  If this Agreement is terminated
 pursuant to Section 8.2, subdivisions (a), (c), (d), (f) or (g), or if the
 General Agent has committed fraud, gross negligence or willful misconduct,
 then the General Agent shall nevertheless be liable for all reasonable
 expenses of the run-off operation, regardless of whether or not the Company
 is running-off the in-force business itself or through its designee; if,
 however, the termination is for reasons other than those set forth in those
 subdivisions, and if the General Agent has not committed fraud, gross
 negligence or willful misconduct, then the Company shall bear the expense
 of the run-off if it elects to run-off the business itself or through its
 designee.  The term "run-off" as used in this Agreement shall mean
 (i) confirming coverage under the Policies to claims adjusters, (ii)
 administering the in-force Policies and any required renewals thereof and
 endorsements thereto, (iii) renewing any Policies which may be required to
 be renewed consistent with applicable state laws and regulations, (iv)
 providing reports to the Company as required by this Agreement, (v) paying
 premiums to the Company and return premiums to the insureds, (vi) collecting
 all sums due from Agents, including return commissions, and (vii) such other
 activities as required of the General Agent under this Agreement.  If this
 Agreement is terminated pursuant to Section 8.2, subdivisions (a), (c), (d),
 (f) or (g), or if the General Agent has committed fraud, gross negligence or
 willful misconduct, and the Company elects to run-off the in-force business,
 then the General Agent shall have no right to unearned commissions and will
 immediately pay to the Company all unearned commissions theretofore paid to
 the General Agent.

           (d)   If the General Agent is unable, or refuses, to run-off the
 in-force Policies, or if the Company elects to run-off such Policies itself
 or through its designee, the General Agent shall promptly provide the
 Company, without charge, with a tape back-up of all Data files.

      8.5   No Consequential Damages.   Neither the General Agent, nor any
 Agent, or any of their employees or representatives, shall have or assert
 any claim against the Company, its subsidiaries, successors, or assigns, or
 the shareholders, directors, officers, agents or employees of any of them,
 for loss of business, loss of profits, or damage to goodwill or reputation,
 as a result of the termination of this Agreement.


                                  ARTICLE 9

                                MISCELLANEOUS
                                -------------

      9.1   Relationship of Parties.   Nothing contained in this Agreement
 shall be deemed to create the relationship of partners, joint venturers,
 or employer/employee between the Company and the General Agent, it being
 understood that the General Agent is an independent contractor of the
 Company for the purposes set forth in this Agreement.  For purposes of
 interpreting the provisions of this Agreement, the General Agent shall
 be deemed to be the Company's agent, and it shall perform all of its
 obligations under this Agreement to the full extent required of an agent
 under the law.

      9.2   Subcontracting.  The General Agent may not enter into a
 subcontract or subcontracts with another person, entity or entities
 ("Subcontractors", or individually "Subcontractor") pursuant to which such
 Subcontractor or Subcontractors shall perform any of the services or produce
 any of the reports to be performed or produced pursuant to this Agreement,
 except the hiring of independent (i) adjustors, (ii) investigators, and/or
 (iii) counsel, as otherwise permitted under this Agreement for specific
 Policies and on an as needed basis only, unless the identity of any such
 Subcontractor and the form and content of any subcontract therewith is
 approved in advance in writing by the Company.  No such subcontract shall
 relieve the General Agent of responsibility for the fulfillment of any of
 its obligations hereunder.  All Subcontractors are to be advised of the
 Company's privacy policies and shall agree to comply with such privacy
 policies.

      9.3   Assignment.   The General Agent shall not assign or otherwise
 transfer this Agreement or any rights hereunder without the prior written
 consent of the Company.

      9.4   Trust Funds.

           (a)   In any action or proceeding brought by the Company to
 recover premiums or return premiums or other funds due the Company under
 this Agreement or due the insureds under the Policies (collectively "Trust
 Funds"), the General Agent shall be obligated to account on its own records
 for such Trust Funds and to pay the Company all sums for which it cannot
 account. The Company shall be entitled to bring any action or proceeding
 available at law or equity to recover Trust Funds and to assert claims
 therein including, without limitation, claims for an accounting, for breach
 of contract and for conversion.  In any such action or proceeding it shall
 be conclusively presumed that the General Agent is a fiduciary of the
 Company with respect to Trust Funds and is liable to the Company for Trust
 Funds which have not been timely paid; and the General Agent waives (i) any
 right it may have to assert any counterclaim, cross-claim, or set-off in the
 action or proceeding, and (ii) the right to trial by jury and any claim that
 the forum or situs is inconvenient.  The General Agent shall retain the
 right to bring any separate proceeding it deems appropriate to recover any
 claims it may have as a creditor of the Company, or otherwise, but the
 pendency of such proceeding shall not delay, hinder or defeat the Company's
 right to promptly recover any Trust Funds then due or to levy upon any
 judgment therefor.

           (b)   The General Agent shall cause the principal shareholder(s)
 and the president of the General Agent to execute and deliver to the Company
 a guarantee of payment of the Trust Funds.  The guarantee shall be in the
 form attached as Schedule 3.  Notwithstanding the foregoing in this Section
 9.4(b), a guarantee of payment of the Trust Funds shall not be required if
 the General Agent is a publicly traded company listed on the NYSE, AMEX or
 NASDAQ.

      9.5   Change of Control.   The General Agent shall notify the Company
 in writing at least thirty (30) days prior to any of the following
 occurrences, each of which shall be deemed a "change of control":

           (a)   A sale, transfer or pledge, or the issuance to a new
 shareholder or member, of ten (10%) percent or more of the voting stock or
 membership interests of the General Agent; or

           (b)   A sale, transfer or pledge of a substantial portion of the
 material assets of the General Agent, or any merger or consolidation of the
 General Agent with another entity or entities; or

           (c)   A change in any director or principal officer of the General
 Agent; or

           (d)   An assignment or transfer of this Agreement or any rights
 hereunder by the General Agent.

      9.6   Governing Law; Consent to Jurisdiction.  This Agreement shall
 be governed in all respects, including its validity, construction and
 performance, by the laws of the State of New York applicable to contracts
 to be performed in the State of New York.  The parties agree that any
 action or proceeding, however characterized, arising out of or relating to
 this Agreement shall be brought only in the Supreme Court of the State of
 New York sitting in the county of New York or the United States District
 Court for the Southern District of New York, and the parties irrevocably
 submit to the exclusive jurisdiction of either such court for the purposes
 of any such action or proceeding.  The parties waive any objection they may
 now or hereafter have to the venue of any such action or proceeding in
 either such court and any claim that such action or proceeding has been
 brought in an inconvenient forum.  Any order or judgment of either of the
 foregoing courts may be enforced in any court having jurisdiction of the
 parties and/or the subject matter.  Process in any action or proceeding in
 either of the foregoing New York courts may be served by certified mail,
 which service shall be sufficient to confer in-personam jurisdiction over
 the party so served.  The parties agree that in any action or proceeding
 arising out of or relating to this Agreement, or the enforcement of any
 provisions thereof, the Court is empowered to grant any legal or equitable
 relief which may be available, including without limitation, specific
 performance, injunctive relief and any mandatory injunction it deems
 appropriate.

      9.7   Waiver of Jury Trial.  TO THE FULLEST EXTENT PERMITTED BY LAW,
 EACH OF THE PARTIES HERETO HEREBY WAIVES THEIR RESPECTIVE RIGHTS TO A JURY
 TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR
 RELATING TO THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM ARISING OUT OF OR
 RELATING TO THE SUBJECT MATTER OF THE TRANSACTIONS CONTEMPLATED HEREIN.
 The scope of this waiver is intended to be all-encompassing of any and all
 disputes that may be filed in any court and that arise out of or relate to
 the subject matter of this Agreement, including, without limitation,
 contract claims, tort claims, breach of duty claims, and all other common
 law and statutory claims.  This waiver shall apply to any subsequent
 amendments, renewals, supplements or modifications to this Agreement.

      9.8   Waiver of Certain Defenses. Each of the parties hereto waives
 their respective rights to assert the defenses of laches, statute(s) of
 limitation or any other defense based upon the theory that the pertinent
 cause of action is time-barred or stale.

      9.9   No Third Party Benefits.   This Agreement is for the sole and
 exclusive benefit of the parties and their successors and permitted assigns,
 and no third party is intended to or shall have any rights hereunder.

      9.10   No Waiver.   The failure of either party to insist upon strict
 compliance with any provision of this Agreement, or to exercise any right or
 remedy under this Agreement, shall not constitute a waiver by such party of
 the provision or prevent such party from exercising such right or remedy in
 the future.

      9.11   Entire Agreement.   This Agreement, and the Schedules attached,
 sets forth the entire understanding of the parties with regard to its
 subject matter, and supersedes and merges all prior discussions, agreements,
 promises, representations, warranties and arrangements between them with
 regard to such subject matter.   Neither party shall be bound by any
 agreement, representation or warranty regarding such subject matter other
 than as expressly set forth in this Agreement or in a subsequent writing
 signed by the party to be bound thereby.  This Agreement may not be modified
 or supplemented, nor may any provision be waived, except by a writing signed
 by the party to be bound thereby.

      9.12   Severability.   If any provision of this Agreement is held to
 be invalid or unenforceable, such impediment shall attach only to such
 provision and shall not render invalid or unenforceable any other provision
 of this Agreement.

      9.13   Headings.   The headings used in this Agreement or any Schedules
 are inserted for convenience only and shall not affect the meaning or
 interpretation of the Agreement.

      9.14   Counterparts.   This Agreement may be executed in two or more
 counterparts, each of which shall be deemed an original, but all of which
 together shall be deemed one and the same instrument.

      9.15   Schedules.   The Schedules referred to in this Agreement are an
 integral part of, and shall be deemed incorporated in, the Agreement.

      9.16   Further Assurances.   The parties shall execute and deliver
 such other documents or instruments and take such other action as may be
 reasonably required to more effectively implement the provisions and intent
 of this Agreement.

      9.17   Benefit of Parties.  This Agreement shall bind and benefit the
 successors and permitted assigns of the parties.

      9.18   Survival.   All of the terms, covenants, agreements,
 obligations, conditions, representations and warranties set forth in this
 Agreement and in any document or other writing delivered pursuant hereto,
 shall survive the termination of this Agreement and shall continue in full
 force and effect so long as any liability or obligation under this Agreement
 is outstanding or unpaid.

      9.19   Violent Crime Control and Law Enforcement Act of 1994.  The
 General Agent represents and warrants to the Company on the date hereof that
 the General Agent is in compliance with the Violent Crime Control and Law
 Enforcement Act of 1994 and that none of the General Agent's officers,
 directors, employees, agents, subcontractors, or other persons authorized to
 act on behalf of the General Agent has ever been convicted of any state or
 federal criminal felony involving dishonesty or a breach of trust or any
 crime under 18 U.S.C. S 1033 unless such individual has obtained the prior
 written consent of the insurance regulatory official possessing regulatory
 authority over such individual.


      IN WITNESS WHEREOF, the parties have caused this Agreement to be
 executed by their duly authorized officers as of the day and year first
 above written.

 Attest:                       HALLMARK GENERAL AGENCY, INC.


 /s/ Joyce Wilhelm             By: /s/ Kevin Kasitz
 ----------------------        ------------------------------
                               Title:


 Attest:                       [CLARENDON NATIONAL] INSURANCE COMPANY


 /s/ Luba Ilyasova             By: /s/ Gary Ketels
 ----------------------        ------------------------------
                               Title:

<PAGE>

                                  SCHEDULE 1
                                  ----------

                      ACCOUNTING REGISTERS - DEFINITIONS
                      ----------------------------------

 The "Policy Collection Register" shall include but not be limited to:

      -    State and Annual Statement Line of Business
      -    Policy number
      -    Name of insured
      -    Policy effective date and expiration date
      -    Name and/or number of producing agent
      -    Gross premium
      -    Provisional Commission due producing agents
      -    Provisional Commission due General Agent
      -    Other charges or credits by type
      -    Net cash received
      -    An accounting for the difference (if any) between gross premium
           and net cash received
      -    Cash disbursement requests for return premiums and/or commissions
      -    Return premium
      -    Authorized underwriting expenses.


 The "Policy Register" shall list policies and endorsements issued and shall
 include but not be limited to:

      -    State and Annual Statement Line of Business
      -    Type of transaction (new, renewal, cancellation,
           endorsement, etc.)
      -    Policy number
      -    Name of insured
      -    Policy or endorsement effective date and expiration date
           -    Policy Effective Date
           -    Effective Transaction Date for Endorsements
      -    Name and/or number of producing agent
      -    Gross premium by line of coverage
      -    Commission due producing agents
      -    Provisional Commission due General Agent
      -    Other charges or credits by type
      -    An Accounting for the differences between gross written
           premium and Policy amounts processed and issued.
      -    Premiums written by
           -    Month
           -    Year to Date
           -    Inception to Date

 Note: Policy Register and Return Premium Register may be combined with
 written approval of the Company's Accounting Department.

 The "Return Premium Register" shall list each cancellation and return
 premium endorsement and shall include but not be limited to:

      -    State and Annual Statement Line of Business
      -    Date and check number of disbursement
      -    Policy number
      -    Name of insured
      -    Effective date of cancellation and original Policy expiration date
      -    Payee
      -    Gross return premium
      -    Producing agent's return commission
      -    General Agent's Return Commission
      -    Net return premium
      -    Amount of disbursement to payee
      -    An accounting for the difference (if any) between net return
           premium and amount of disbursement


 The "Receivable Register" shall be reconciled by Policy and shall include
 the following for each Policy:

      -    Policy number
      -    Past due premium
      -    Past due aging (30, 60, 90 days)
      -    Deferred premium by month (if applicable)


 The General Agent shall reconcile the Receivable Register each month as
 follows:

                Beginning Receivable

      plus      Premium due Company (per Policy Register)

      less      Premium deposited (to Premium Bank Account)

      equals    Ending Receivable

<PAGE>

                                 SCHEDULE  2

<TABLE>

 Policy Master Fields Listings

 Following are field descriptions, attributes, maximum lengths and
 definitions for the Policy Record

 -----------------------------------------------------------------------------------
 Policy Master     Type       Length Required    Sample   Definitions
 -----------------------------------------------------------------------------------
 <S>               <C>       <C>     <C>       <C>        <C>
 Program ID        Number          6      Yes      34     Numeric code provided by
                                                          CNIC

 Group Number      Character      20       No   20000001  An alphanumeric code to
                                                          identify a Group for
                                                          Workers Comp and  A & H

 Policy Number     Character      30      Yes   00000001  An alphanumeric code used
                                                          by the program to identify
                                                          a policy

 Effective Date    Date           10      Yes  10/10/1997 Effective date of the
                                                          policy in year 2000 format
                                                          MM/DD/YYYY

 Expiration Date   Date           10      Yes  10/10/1998 Expiration date of the
                                                          policy in year 2000 format
                                                          MM/DD/YYYY

 Cancellation Date Date           10       No  10/10/1998 Cancellation date of the
                                                          policy in year 2000 format
                                                          MM/DD/YYYY; required if
                                                          policy is cancelled

 Insured Name      Character      40      Yes  Ford Motor Name of the insured

 Insured Address   Character      50      Yes  123 Watson Street address of the
                                                 Street   insured

 Insured City      Character      30      Yes Painesville Insured City

 Insured State     Character       2      Yes      ND     Insured State

 Insured Zip       Character      10      Yes  12345-1234 Insured Zip Code

 Insured County    Character      25       No     Lake    Insured County

 Territory Code    Character       3       No      19     ISO Territory Code

 Risk State        Character       2      Yes      ND     State listed on a policy in
                                                          location of risk-not
                                                          billing

 Risk Zip Code     Character      10      Yes  43535-9875 Zip code listed on a policy
                                                          in location of risk-not
                                                          billing

 System Date       Date           10      Yes  10/23/1997 A date assigned to a
                                                          transaction by the system
                                                          in a year 2000 format,
                                                          MM/DD/YYYY

 Accounting Date   Date           10      Yes  10/31/1997 A day, month, and year the
                                                          transaction was sent to
                                                          company in year 2000
                                                          format, MM/DD/YYYY


 Policy Premium by Line Fields Listing

 Following are field descriptions, attributes, maximum lengths and
 definitions for the Policy Premium by Line Record

 -----------------------------------------------------------------------------------
 Policy Premium    Type      Length  Required    Sample   Definitions
 by Line
 -----------------------------------------------------------------------------------
 <S>               <C>       <C>     <C>       <C>        <C>
 Program ID        Number         6       Yes      34     Numeric code provided by
                                                          CNIC

 Policy Number     Character     30       Yes   00000001  An alphanumeric code used
                                                          by the program to identify
                                                          a policy

 Premium Type      Number         2       Yes      10     Numeric code provided by
                                                          CNIC

 AS Line           Character      5       Yes     21.1    Annual Statement Line.
                                                          Refer to "Annual Statement
                                                          Yellow Book"

 Agent's Line of   Character     40       Yes  Collision  To distinguish multiple
 Business                                                 lines from an annual
                                                          statement line*

 Premium           Number         2       Yes      10     Numeric code provided by
 Transaction Code                                         CNIC

 Written Premium   Number        22       Yes     4525    Amount of Written Premium

 Limits            Character     30       Yes  1,000,000  Policy limits for this
                                                          line of business.  If
                                                          N/A place 0

 Deductibles       Number        22       Yes   5,000.00  Dollar deductible for this
                                                          line of business on this
                                                          risk. If N/A place 0

 Policy Effective  Date          10       Yes  10/10/1997 Effective date of the
 Date                                                     policy in year 2000 format
                                                          MM/DD/YYYY

 Transaction       Date          10       Yes  10/23/1997 A date when a transaction
 Effective Date                                           is effective

 System Date       Date          10       Yes  10/23/1997 A date assigned to a
                                                          transaction by the system
                                                          in a year 2000 format,
                                                          MM/DD/YYYY

 Accounting Date   Date          10       Yes  10/31/1997 The last day of an
                                                          accounting period in year
                                                          2000 format, MM/DD/YYYY

 Policy Risk State Character      2        No      ND     State listed on a policy
                                                          in location of risk-not
                                                          billing



 Policy In-force Premium Fields Listing

 Following are field descriptions, attributes, maximum lengths and
 definitions for the Policy In-force Premium by Line Record

 -----------------------------------------------------------------------------------
 Policy In-force   Type      Length  Required    Sample   Definitions
 Premium
 -----------------------------------------------------------------------------------
 <S>               <C>       <C>     <C>       <C>        <C>
 Program ID        Number         6       Yes      34     Numeric code provided by
                                                          CNIC

 Policy Number     Character     30       Yes   00000001  An alphanumeric code used
                                                          by the program to identify
                                                          a policy

 Premium Type      Number         2       Yes      10     Numeric code provided by
                                                          CNIC

 AS Line           Character      5       Yes     19.4    Annual Statement Line.
                                                          Refer to "Annual Statement
                                                          Yellow Book"

 Agent's Line of   Character     40       Yes  Collision  To distinguish multiple
 Business                                                 lines from an annual
                                                          statement line*

 End of Month Date Date          10       Yes  10/31/1999 The last day of an
                                                          accounting period in year
                                                          2000 format, MM/DD/YYYY

 In-force Premium  Number        22       Yes     4525    Full term amount of
                                                          premium In-force as of end
                                                          of an accounting period.

 Unearned Premium  Number        22       Yes     4525    Amount of unearned premium
                                                          as of end of an accounting
                                                          period.

 Policy Effective  Date          10       Yes  10/10/1997 Effective date of the
 Date                                                     policy in year 2000 format
                                                          MM/DD/YYYY

 Policy Risk State Character      2        No      ND     State listed on a policy
                                                          in location of risk-not
                                                          billing



 Policy Billing Transactions Fields Listing

 Following are field descriptions, attributes, maximum lengths and
 definitions for the Policy Billing Transactions Record

 Policy Billing    Type      Length  Required    Sample   Definitions
 Transactions
 -----------------------------------------------------------------------------------
 <S>               <C>       <C>     <C>       <C>        <C>
 Program ID        Number         6       Yes      34     Numeric code provided by
                                                          CNIC

 Policy Number     Character     30       Yes   00000001  An alphanumeric code used
                                                          by the program to identify
                                                          a policy

 Billing Type      Number         2       Yes     11-     Numeric code provided by
                                              Installment CNIC

 Billing Date      Date          10       Yes   10/31/99  Date the insured was bille

 Billed Amount     Number        22       Yes   1,380.00  Current amount billed on
                                                          policy transaction, net of
                                                          commissions*

 Premium Billed    Number        22       Yes   1,680.00  Current premium amount
 Amount                                                   billed on policy
                                                          transaction, not net of
                                                          commissions *

 Commission Billed Number        22       Yes    300.00   Current commission amount
 Amount                                                   billed on policy
                                                          transaction. If N/A
                                                          place 0*

 System Date       Date          10       Yes   10/31/99  A date assigned to a
                                                          transaction by the system
                                                          in a year 2000 format,
                                                          MM/DD/YYYY

 Accounting Date   Date          10       Yes  10/31/1999 The last day of an
                                                          accounting period in year
                                                          2000 format, MM/DD/YYYY

 Policy Effective  Date          10       Yes  10/10/1997 Effective date of the
 Date                                                     policy in year 2000 format
                                                          MM/DD/YYYY

 Policy Risk State Character      2        No      ND     State listed on a policy
                                                          in location of risk-not
                                                          billing


 * If there is no Commission Billed Amount then Billed Amount and Premium
 Billed Amount are the same. Otherwise Billed Amount is equal to Premium
 Billed Amount less Commission Billed Amount.



 Policy Cash Transactions Fields Listing

 Following are field descriptions, attributes, maximum lengths and
 definitions for the Policy Cash Transactions Record

 -----------------------------------------------------------------------------------
 Policy Cash       Type      Length  Required   Sample    Definitions
 Transactions
 -----------------------------------------------------------------------------------
 <S>               <C>       <C>     <C>       <C>        <C>
 Program ID        Number         6       Yes     34      Numeric code provided by
                                                          CNIC

 Policy Number     Character     30       Yes  00000001   An alphanumeric code used
                                                          by the program to identify
                                                          a policy

 Payment ID        Character     15       Yes    6754     Record number on method of
                                                          payment

 Cash Received     Date          10       Yes  11/12/99   Date actual payment posted
 Date                                                     to Account Receivable

 Billing Type      Number         2       Yes     11-     Method of payment in which
                                              Installment cash is received

 Collected Amount  Number        22       Yes    1,134    An actual dollar value of
                                                          payment received, net of
                                                          commissions

 Premium Collected Number        22       Yes  1,380.00   An actual dollar value of
 Amount                                                   gross premium received, if
                                                          NA place 0. *

 Commission        Number        22       Yes     246     An actual dollar value of
 Collected Amount                                         gross commission paid, if
                                                          NA place 0. *

 Payment Comments  Character     40        No   payment   Used to note offsets-
                                             comments and partials-credit transfers
                                               or notes   from another policy, etc.

 System Date       Date          10       Yes  10/31/99   A date assigned to a
                                                          transaction by the system
                                                          in a year 2000 format,
                                                          MM/DD/YYYY

 Accounting Date   Date          10       Yes 10/31/1999  The last day of an
                                                          accounting period in year
                                                          2000 format, MM/DD/YYYY

 Policy Effective  Date          10       Yes  10/0/1997  Effective date of the
 Date                                                     policy in year 2000 format
                                                          MM/DD/YYYY

 Policy Risk State Character      2        No     ND      State listed on a policy i
                                                          location of risk-not
                                                          billing




 Aged Policy Receivables Fields Listing

 Following are field descriptions, attributes, maximum lengths and
 definitions for the Net Policy Receivables Record

 -----------------------------------------------------------------------------------
 Aged Policy       Type      Length  Required      Sample Definitions
 Receivables
 -----------------------------------------------------------------------------------
 <S>               <C>       <C>     <C>       <C>        <C>
 Program ID        Number         6       Yes          34 Numeric code provided by
                                                          CNIC

 Policy Number     Character     30       Yes    00000001 An alphanumeric code used
                                                          by the program to identify
                                                          a policy

 Total Amount Due  Number        22       Yes    3,420.00 Total amount due on a
                                                          policy, if NA place 0, the
                                                          sum of all current due

 Advance Premium   Number        22       Yes             Total cash received in
                                                          advance

 Total Current     Number        22       Yes         300 Total current amount due o
 Amount Due                                               a policy, if NA place 0,

                                                          the sum of all current due

 Amount due 0-30   Number        22       Yes         300 Current amount due in 30
 days                                                     days on a policy

 Amount due 31-60  Number        22       Yes             Current amount due between
 days                                                     31-60 days on a policy

 Amount due 61-90  Number        22       Yes             Current amount due between
 days                                                     61-90 days on a policy

 Amount due Over   Number        22       Yes             Current amount due over 30
 90 days                                                  days on a policy

 Amount Deferred   Number        22       Yes    3,120.00 Amount deferred on policy
                                                          transaction, if N/A
                                                          place 0. **

 End Of Month Date Date          10       Yes  10/31/1999 The last day of an
                                                          accounting period  in year
                                                          2000 format, MM/DD/YYYY

 Policy Effective  Date          10       Yes  10/10/1997 Effective date of the
 Date                                                     policy in year 2000 format
                                                          MM/DD/YYYY

 Policy Risk State Character      2        No          ND State listed on a policy i
                                                          location of risk-not
                                                          billing


 Total Amount Due = Sum(PremiumByLine[Written Premium])-PolicyCash[Premium
 Collected Amount]

 Total Current Amount Due = PolicyBilling[Premium Billed Amount]-
 PolicyCash[Premium Collected Amount]

 Amount Deferred = Total Due - Total Current Due  or
 Sum(PremiumByLine[WrittenPremium]-PolicyBilling[PremiumBilledAmount])

 Advanced Premium = Premium Collected Amount Cash Received per Policy Cash
 Listing when no billing exists yet.

 Amount Due 0-30 days + Amount Due 31-60 days + Amount Due 61-90 days +
 Amount Due Over 90 days =
 Total Current Amount Due.

 Aging bucket for Amount Due determined by End of Month Date - Original
 Billing Date.



 Gross Policy Collected and Change in Receivables Fields Listing

 Following are field descriptions, attributes, maximum lengths and
 definitions for the Gross Policy Receivables Record

 -----------------------------------------------------------------------------------
 Gross Policy    Type        Length  Required   Sample    Definitions
 Receivables
 -----------------------------------------------------------------------------------
 <S>               <C>       <C>     <C>       <C>        <C>
 Program ID      Number           6       Yes     34      Numeric code provided by
                                                          CNIC

 Policy Number   Character       30       Yes  00000001   An alphanumeric code used
                                                          by the program to identify
                                                          a policy

 Monthly Written Number          22       Yes    4500     Total premium written
 Premium                                                  transferred to accounts
                                                          receivable for this month,
                                                          including policy fees.*

 Monthly Policy  Number          22       Yes     25      Total policy fee collected
 Fees Collected                                           for this month.

 Monthly         Number          22       Yes    1380     Total dollars gross
 Collected                                                premium received, if NA
 Premium                                                  place 0. **

 Service Charge  Number          22       Yes     25      Total service charge
 Amount                                                   collected for this month.

 Inspection Fee  Number          22       Yes     75      Total inspection fee
                                                          collected for this month

 Installment Fee Number          22       Yes      0      Total installment fee
                                                          collected for this month.

 Late Fee        Number          22       Yes      0      Total late fees collected
                                                          for this month.

 MVR Fee         Number          22       Yes      0      Total MVR fees collected
                                                          for this month.

 NSF Fee         Number          22       Yes      0      Total NSF fees collected
                                                          for this month.

 Expense ConstantNumber          22        No     55      Pertains to workers
 Amount                                                   compensation, expense
                                                          constant fee collected per
                                                          policy.

 Security DepositNumber          22       Yes      0      Total security deposit
                                                          collected for this month.

 Municipal Tax   Character        2        No      KY     The state of municipal tax
 State 1                                                  charged to the company
                                                          that is recoverable from
                                                          the insured.

 Municipal Tax   Number          22       Yes     55      Total municipal tax
 Amount 1                                                 collected for this month

 Municipal Tax   Character        2        No             The state of municipal tax
 State 2                                                  charged to the company
                                                          that is recoverable from
                                                          the insured.

 Municipal Tax   Number          22       Yes      0      Total municipal tax
 Amount 2                                                 collected for this month

 Municipal Tax   Character        2        No             The state of municipal tax
 State 3                                                  charged to the company
                                                          that is recoverable from
                                                          the insured.

 Municipal Tax   Number          22       Yes      0      Total municipal tax
 Amount 3                                                 collected for this month

 Municipal Tax   Character        2        No             The state of municipal tax
 State 4                                                  charged to the company
                                                          that is recoverable from
                                                          the insured.

 Municipal Tax   Number          22       Yes      0      Total municipal tax
 Amount 4                                                 collected for this month

 Municipal Tax   Character        2        No             The state of municipal tax
 State 5                                                  charged to the company
                                                          that is recoverable from
                                                          the insured.

 Municipal Tax   Number          22       Yes      0      Total municipal tax
 Amount 5                                                 collected for this month

 Surcharge Type 1Character       30        No      NJ     The type of surcharge
                                                          charged to the company
                                                          that is recoverable from
                                                          the insured.

 Surcharge 1     Number          22       Yes     55      Total surcharge dollars
                                                          for the specified
                                                          surcharge type

 Surcharge Type 2Character       30        No             The type of surcharge
                                                          charged to the company
                                                          that is recoverable from
                                                          the insured.

 Surcharge 2     Number          22       Yes      0      Total surcharge dollars
                                                          for the specified
                                                          surcharge type

 Surcharge Type 3Character       30        No             The type of surcharge
                                                          charged to the company
                                                          that is recoverable from
                                                          the insured.

 Surcharge 3     Number          22       Yes      0      Total surcharge dollars
                                                          for the specified
                                                          surcharge type

 Surcharge Type 4Character       30        No             The type of surcharge
                                                          charged to the company
                                                          that is recoverable from
                                                          the insured.

 Surcharge 4     Number          22       Yes      0      Total surcharge dollars
                                                          for the specified
                                                          surcharge type

 Surcharge Type 5Character       30        No             The type of surcharge
                                                          charged to the company
                                                          that is recoverable from
                                                          the insured.

 Surcharge 5     Number          22       Yes      0      Total surcharge dollars
                                                          for the specified

                                                          surcharge type

 Other Premium   Number          22       Yes     10      Total other charges
 Charges                                                  collected for this month.

 Change in PolicyNumber          22       Yes    4800     Total dollars transferred
 Receivable                                               to accounts receivable for
                                                          this month. ***

 Commissionable  Number          22       Yes    1080     Total dollars transferred
 Collected                                                to accounts payable for
 Premium                                                  this month. ****

 End Of Month    Date            10       Yes 10/31/1999  The last day of an
 Date                                                     accounting period in year
                                                          2000 format, MM/DD/YYYY

 Policy EffectiveDate            10       Yes 10/10/1997  Effective date of the
 Date                                                     policy in year 2000 format
                                                          MM/DD/YYYY

 Policy Risk     Character        2        No     ND      State listed on a policy
 State                                                    in location of risk-not
                                                          billing

 * Written Premium = Sum(PremiumByLine[Written Premium]),  which includes
 Policy Fees

 ** Monthly Collected Premium = Sum(PolicyCashTransactions[Premium Collected
 amount])

 *** Change in Policy Receivable = Monthly Written Premium - Monthly
 Collected Premium

 **** Commissionable Collected Premium = Monthly Collected Premium - (Monthly
 Policy Fees + Inspection Fee + Installment Fee + Late Fee + MVR Fee + NFS
 Fee + Service Charge + Expense Constant + Security Deposit + Municipal Tax 1
 + Municipal Tax 2 + Municipal Tax 3 + Municipal Tax 4 + Municipal Tax 5 +
 Surcharge 1 + Surcharge 2 + Surcharge 3 + Surcharge 4 + Surcharge 5 + Other
 Premium Charges)


 Policy Premium by Category Fields Listing

 Workers Compensation
 Following are field descriptions, attributes, maximum lengths and
 definitions for the Policy Premium by Category Record

 -----------------------------------------------------------------------------------
 Policy Premium by Type      Length Required    Sample    Definitions
 Category
 -----------------------------------------------------------------------------------
 <S>               <C>       <C>     <C>       <C>        <C>
 Program ID        Number         6      Yes      34      Numeric code provided by
                                                          CNIC

 Group Number      Number        10      Yes   20000001   An alphanumeric code to
                                                          identify a Group for
                                                          Workers Comp and A & H.

 Policy Number     Character     30      Yes   00000001   An alphanumeric code used
                                                          by the program to identify
                                                          a policy

 Manual Premium    Number        22      Yes    6,800     The NAIC Manual premium.

 Modified Premium  Number        22      Yes    5,800     The NAIC Manual premium
                                                          less the Experience
                                                          Modification Factor.

 Standard Premium  Number        22      Yes    4,800     The modified premium less
                                                          additional credits.
                                                          Actual Premium Written.

 Experience        Number        22      Yes    1,000     Credit used to calculate
 Modification                                             Manual Premium to Modified
 Credit                                                   Premium

 Schedule Credits  Number        22      Yes     143      Credit used to calculate
                                                          Modified Premium to
                                                          Standard Premium.

 Drug Free Credits Number        22      Yes     143      Credit used to calculate
                                                          Modified Premium to
                                                          Standard Premium.

 Managed Care      Number        22      Yes     143      Credit used to calculate
 Credits                                                  Modified Premium to
                                                          Standard Premium.

 Premium Discount  Number        22      Yes     143      Credit used to calculate
 Credits                                                  Modified Premium to
                                                          Standard Premium.

 Contracting       Number        22      Yes     143      Credit used to calculate
 Premium Credit                                           Modified Premium to
                                                          Standard Premium.

 Safety Premium    Number        22      Yes     143      Credit used to calculate
 Credit                                                   Modified Premium to
                                                          Standard Premium.

 Other Credits     Number        22      Yes     143      Credit used to calculate
                                                          Modified Premium to
                                                          Standard Premium.

 Other Debits      Number        22      Yes     143      Debits used to calculate
                                                          Modified Premium to
                                                          Standard Premium.

 Accounting Date   Date          10      Yes  10/31/1997  The last day of an
                                                          accounting period in year
                                                          2000 format, MM/DD/YYYY

 System Date       Date          10      Yes  10/23/1997  A date assigned to a
                                                          transaction by the system
                                                          in a year 2000 format.
                                                          MM/DD/YYYY

 Policy Effective  Date          10      Yes  10/10/1997  Effective date of the
 Date                                                     policy in year 2000 format
                                                          MM/DD/YYYY

 Policy Risk State Character      2       No      ND      State listed on a policy
                                                          in location of risk-not
                                                          billing



 Policy Facultative by Line Listing

 Following are field descriptions, attributes, maximum lengths and
 definitions for the Policy Facultative by Line Listing Record

 -----------------------------------------------------------------------------------
 Policy Premium by Type      Length Required    Sample    Definitions
 Category
 -----------------------------------------------------------------------------------
 <S>               <C>       <C>     <C>       <C>        <C>
 Program ID        Number         6      Yes      34      Numeric code provided by
                                                          CNIC

 Policy Number     Character     30      Yes   00000001   An alphanumeric code used
                                                          by the program to identify
                                                          a policy

 Policy Effective  Date          10      Yes  10/10/1997  Effective date of the
 Date                                                     policy in year 2000 format
                                                          MM/DD/YYYY

 Premium Type      Number         2      Yes      15      A Numeric Code provided by
                                                          CNIC

 AS Line           Number         5      Yes      17      Annual Statement Line.
                                                          Refer to " Annual
                                                          Statement Yellow Book"

 Agent's Line of   Character     40      Yes     D&O      To distinguish multiple
 Business                                     Liability   lines from an annual
                                                          statement line

 Premium           Number         2      Yes      10      A Numeric Code provided by
 Transaction Code                                         CNIC

 Attachment Point  Number        22      Yes 10,000,000   Amount of Clarendon
                                                          Retained Loss Paid where
                                                          Fac Coverage First Kicks
                                                          in

 Limits            Number        22      Yes 15,000,000   Amount of Clarendon
                                                          Retained Loss Paid where
                                                          Fac Coverage is exhausted

 Participation     Number        22      Yes     20%      Rate of  Fac Coverage to
 Rate                                                     Clarendon Retained Loss

 Reinsurer         Character     40      Yes  General Re  Name of Reinsurer Covering
                                                          Fac Cert.

 Facultative       Character     30      Yes   GR567123   An Alphanumeric code  used
 Certificate #                                            by the program to identify
                                                          a Fac Policy

 Facultative       Date          10      Yes  10/10/1997  Effective Date of the Fac
 Certificate                                              Cert.
 Effective Date

 Facultative       Date          10      Yes  10/10/1998  Expiration Date of the Fac
 Certificate                                              Cert.
 Expiration Date

 Facultative       Date          10       No  04/10/1998  Expiration Date of the Fac
 Certificate                                              Cert., required if
 Cancellation Date                                        cancelled

 Facultative Gross Number        22      Yes  20,000.00   Amount of the Fac Written
 Premium                                                  Premium

 Facultative GA    Number        22       No   2,000.00   General Agent's portion of
 Commission                                               Fac Commission

 Facultative       Number        22       No   1,000.00   Broker's portion of Fac
 Broker Commission                                        Commission

 Facultative       Number        22       No   6,000.00   Total Ceding Commission to
 Ceding                                                   CNIC on Fac Policy
 Commission

 Policy Risk State Character      2       No      NY      State listed on a policy
                                                          in location of risk-not
                                                          billing

 Transaction       Date          10      Yes  10/23/1997  A date when a transaction
 Effective Date                                           is effective in year 2000
                                                          format, MM/DD/YYYY

 System Date       Date          10      Yes  10/23/1997  A date assigned to a
                                                          transaction by the system
                                                          in a year 2000 format,
                                                          MM/DD/YYYY

 Accounting Date   Date          10      Yes  10/31/1997  The last day of an
                                                          accounting period in year
                                                          2000 format, MM/DD/YYYY

 NAIC #            Number         5      Yes    12345     Five Digit  Insurer /
                                                          Reinsurer NAIC Code

 FEIN #            Character     10      Yes  12-3456789  Nine Digit, 10 Character
                                                          Federal Tax Identification
                                                          Number of Reinsurer

 Domiciliary       Character     25      Yes   Chicago,   City, State of Reinsurer
 Jurisdiction                                    IL       Domiciled (City, Country
                                                          if Foreign Reinsurer)

 Reinsurer         Character      3      Yes      yes     See Comment Below for
 Authorized in                                            State of Authorization
 State of Insurer

</TABLE>

 Note on State of Authorization.  The following is a list of Clarendon
 Insurance Group Insurance Companies, and their corresponding state of
 Domicile:

 Clarendon National Insurance Company    -    New Jersey
 Clarendon America Insurance Company     -    New Jersey
 Harbor Specialty Insurance Company      -    New Jersey
 Clarendon Select Insurance Company      -    Florida
 Redland Insurance Company               -    New Jersey

<PAGE>

                                  SCHEDULE 3
                                  ----------

                     GUARANTEE OF PAYMENT OF TRUST FUNDS


                                   RECITALS
                                   --------

           A.   CLARENDON NATIONAL INSURANCE COMPANY (the "Company")
 and HALLMARK GENERAL AGENCY, INC.  (the "General Agent") are parties to
 a General Agency Agreement dated July 1, 2004  (the "Agency Agreement"),
 pursuant to which, among other things, (i)  premiums, return premiums,
 Profit Commissions, Corridor Return Commissions, Return Commissions (as
 such things are defined in the Agency Agreement) and other funds are due
 the Company or due the insureds under the Policies covered by the Agency
 Agreement, which funds are collectively withheld  as and deemed to be
 "Trust Funds" with respect to which the General Agent is a fiduciary of
 the Company, and (ii) the General Agent is obligated to cause the principal
 shareholder(s) and the president of the General Agent to guarantee payment
 of the Trust Funds.

           B.  Hallmark Financial Services, Inc. (the "Parent Guarantor") is
 the ultimate parent corporation of the General Agent

           C. The Company desires, as a condition precedent to its entering
 into the Agency Agreement, that the Parent Guarantor unconditionally
 guarantee to the Company, its successors and assigns, the full and prompt
 payment of Trust Funds as and when they are due and payable pursuant to the
 Agency Agreement.

           NOW, THEREFORE, in consideration of the mutual promises exchanged
 in the Agency Agreement, the Parent Guarantor hereby unconditionally
 guarantees to the Company, its successors and assigns, the full and prompt
 payment of trust funds as and when they are due and payable pursuant the
 Agency Agreement.

           The Parent Guarantor further agrees as follows:

                1.   The Parent Guarantor waives (a) notice of, and consent
 to, any amendment or extension of the Agency Agreement, (b) notice of any
 non-performance of, or default under, the Agency Agreement, (c) trial by
 jury in any action brought on this guarantee as well as any right to
 interpose a defense based upon any statute of limitations or claim of
 laches, and (d) the performance of every  condition precedent to which the
 Parent Guarantor or the General Agent might otherwise be entitled by law.
 The Parent Guarantor agrees that the Company may institute an action or
 claim under this guarantee without joining the General Agent as a party.

                2.   The Company shall have no obligation to mitigate the
 Parent Guarantor's liability under this guarantee, and nothing herein shall
 require the Company, as a condition of this guarantee, to take any action
 against the General Agent to enforce payment of trust funds or to realize
 on the Company's security interest in any collateral provided for under the
 Agency Agreement; and any of   the foregoing actions taken by the Company
 shall not be deemed an election of remedies or waiver of any rights under
 this guarantee.

                3.   The obligations of the Parent Guarantor under this
 guarantee shall be absolute and unconditional and shall remain in full
 force and effect without regard to, and shall not be released, suspended,
 discharged, terminated, or otherwise affected by, any circumstance or
 occurrence, including without limitation: (a) any renewal, extension,
 amendment or substitution of, addition or supplement to, or deletion from,
 this guarantee or the Agency Agreement, (b) any waiver, consent, extension,
 indulgence or other action or inaction under or in respect of this guarantee
 or the Agency Agreement, (c) any furnishing of additional security to the
 Company or release of security by the Company, (d) any limitation on any
 party's liability or obligations under this guarantee or the Agency
 Agreement, (e) any bankruptcy, insolvency, reorganization, composition,
 adjustment, dissolution, liquidation or other like proceeding relating to
 the Parent Guarantor or the General Agent, or any assets pledged to the
 Company by either of them, or any action taken with respect to this
 guarantee or the Agency Agreement by any trustee or receiver, or by any
 court, in any such proceeding, whether or not the Parent Guarantor or the
 General Agent shall have knowledge of any of the foregoing, and (f) any
 unenforceability, illegality or invalidity of the obligation being
 guaranteed hereunder.

                4.   This guarantee and its validity, construction and
 performance shall be governed in all respects by the laws of the State of
 New York.  Any action or proceeding arising out of or relating to this
 guarantee or the enforcement thereof shall be brought in the Supreme Court
 of the State of New York, County of New York, or in the United States
 District Court for the Southern District of New York, and the Parent
 Guarantor submits and consents to the non-exclusive jurisdiction of either
 of such courts for the purposes of such action or proceeding; and the Parent
 Guarantor further consents that process in any such action or proceeding may
 be served by registered or certified mail addressed to the party at his or
 its last known address, and such service shall be sufficient to confer in
 personam jurisdiction over the party so served.

                5.   This guarantee:

                     (a)   may not be terminated, amended or supplemented,
 nor may any provision be waived, except by a writing signed by the party to
 be bound thereby;

                     (b)   may be executed in counterparts, each of which
 shall be deemed an original, but all of which together shall be deemed one
 and the same instrument;

                     (c)   shall bind and benefit the heirs, executors,
 administrators, personal representatives, successors and assigns of the
 Parent Guarantor and the Company.

                               HALLMARK FINANCIAL SERVICES, INC.

                               By: /s/ Mark Morrison
                               -----------------------------------

<PAGE>

                                 ADDENDUM ONE
                                 ------------

               PROFIT COMMISSION AND CORRIDOR RETURN COMMISSION
               ------------------------------------------------

 This Addendum One to the General  Agency Agreement ("Agreement") dated  July
 1,  2004  between  Hallmark  General  Agency,  Inc.  ("General  Agent")  and
 Clarendon National Insurance Company ("Clarendon")  is effective as of  July
 1, 2004.   This Addendum One  shall be considered  an integral  part of  the
 Agreement and shall be deemed incorporated into the Agreement.

      1.   Capitalized terms  used in  this Addendum  One and  not  otherwise
 defined herein shall have  the meanings ascribed to  them in the  Agreement.
 As used in the Agreement, the  following terms have the following  meanings,
 which apply to both the singular and plural forms of the terms defined,  and
 are hereby added to Section 1.1.

 "Base Loss Ratio" is defined in Section 3.3(a).

 "Corridor Loss Ratio" is defined in Section 3.3(d).

 "Corridor Return Commission" is defined in Section 3.3(d).

 "Losses" is defined in Sections and 3.3(c) and 3.3(f), respectively.

 "Loss Ratio" is defined in Sections 3.3(c) and 3.3(f), respectively.

 "Net Net Written Premium" means Net Written Premium less premiums paid by
 Clarendon for inuring excess reinsurance for the Policies.

  "Profit Commission" is defined in Section 3.3(a).


      2.   The definitions provided for "Loss Corridor Collateral" and  "Loss
 Corridor Rate"  set  forth  in  Section 1.1  are  hereby  deleted  in  their
 entirety.

      3.   Section 3.3  is  deleted in  its  entirety and  the  following  is
 inserted in place thereof:

      3.3   Profit Commission and Corridor Return Commission.

           (a)  Profit Commission.  Subject to  Section 3.3(b), in the  event
 the Loss Ratio (as defined in  Section 3.3(c)) for Policies produced  during
 the first Underwriting Year is less  than sixty-four and two tenths  percent
 (64.2%) (the "Base Loss  Ratio"), then the  Provisional Commission shall  be
 increased by an  amount equal to  (i) collected and  earned Net Net  Written
 Premium for Policies produced during the first Underwriting Year, multiplied
 by (ii) the percentage difference between the Base Loss Ratio less the  Loss
 Ratio (the "Profit Commission").

           (b)  Payment of  Profit  Commission.    Within  thirty  (30)  days
 following the  second  anniversary  of  the  first  Underwriting  Year,  the
 Company's accountants shall calculate the Loss Ratio (as defined in  Section
 3.3(c)) and  corresponding  Profit  Commission,  if  any,  with  respect  to
 Policies produced during the  first Underwriting Year.   Within thirty  (30)
 days  thereafter,  the  Company  shall  remit  a  copy  of  its  Loss  Ratio
 calculation  to  the  General  Agent  along  with  payment  of  the   Profit
 Commission, if any, owed to the General Agent.   On or before August 1st  of
 each year thereafter (until  such time as all  losses under the Policies  at
 issue have been  fully settled and  paid), the  Company's accountants  shall
 annually recalculate the  Loss Ratio and,  if necessary,  adjust the  Profit
 Commission as  set  forth  herein.   In  the  event  the  Profit  Commission
 recalculated during the  year at issue  is less than  the Profit  Commission
 calculated in the immediately preceding year, the General Agent shall return
 the difference between such amounts to the Company.  In the event the Profit
 Commission recalculated during the year at issue is greater than the  Profit
 Commission calculated in the immediately  preceding year, the Company  shall
 pay the difference  to the General  Agent as  additional Profit  Commission.
 Any Profit  Commission adjustments  payable to  the Company  or the  General
 Agent, as the case may be, shall be paid  on or before September 1st of  the
 year at  issue.   The  Company's  obligation  to pay  Profit  Commission  or
 Provisional Commission shall be  subject at all times  to any offset  rights
 the Company may have  under the Agreement  or otherwise, including,  without
 limitation, the right  to offset against  such amounts  any Corridor  Return
 Commission owed to the Company.   If the General  Agent fails to return  any
 portion of  the Profit  Commission due  the Company,  the Company  shall  be
 entitled to draw against the Letter of Credit required under Section  3.3(e)
 to satisfy any  shortfall or seek  payment under the  guarantee attached  as
 Schedule 3 to the Agreement.

           (c)  Definition of Loss  Ratio.  For  purposes of calculating  the
 Profit Commission, the  term "Loss Ratio"  means an amount  equal to  Losses
 divided by collected and  earned Net Net Written  Premium.  For purposes  of
 Sections 3.3(c) only,  the term  "Losses" means the  sum of  (a) all  losses
 incurred under the Policies (including outstanding case reserves), plus  (b)
 all  allocated  and  unallocated   loss  adjustment  expenses  incurred   in
 connection with  such  losses  (provided  that  the  amount  of  Legal  Loss
 Adjustment Expenses,  as  defined  in  that  certain  Claims  Administration
 Agreement between the General Agent and the Company, dated August 15,  2001,
 shall be limited to  four percent (4.0%) of  Net Written Premium), plus  (c)
 losses incurred but not  reported, as determined  using the applicable  IBNR
 factor listed in the chart below, provided that if such IBNR factor is  less
 than the expected amount of losses incurred but not reported, as  determined
 by Clarendon's  actuaries  at their  sole  reasonable discretion,  then  the
 amount of losses  incurred but  not reported  for purposes  of this  Section
 3.3(c)  shall  be  the  amount  determined  by  Clarendon  rather  than  the
 applicable IBNR factor.

    -----------------------------------------------------------------
                  IBNR Factors for Calculating the Loss Ratio
                             For Profit Commission
    -----------------------------------------------------------------

    25-36 Month Calculation              15.0% of Net Written Premium

    37-48 Month Recalculation            12.0% of Net Written Premium

    49-60 Month Recalculation           7.0% of Net Written Premium

    61-72 Month Recalculation           5.0% of Net Written Premium

    All Subsequent Recalculations        0.0% of Net Written Premium


           (d)  Corridor Return Commission.  If at any time the Corridor Loss
 Ratio (as defined below) exceeds the  Base Loss Ratio, as determined by  the
 Company in its sole reasonable discretion, the General Agent shall return to
 the Company immediately  upon written notice  a portion  of the  Provisional
 Commission equal to one percent (1.0%) of collected Net Written Premium  for
 each corresponding one percent  (1.0%) increase in  the Corridor Loss  Ratio
 above the Base  Loss Ratio (or  any portion thereof),  subject to  a cap  or
 limit on the portion of the  Provisional Commission to be returned equal  to
 fifteen and eight tenths  percent (15.8%) of  collected Net Written  Premium
 (the "Corridor Return Commission").  If the General Agent fails to  promptly
 remit the entire amount of Corridor  Return Commission due the Company  upon
 request, the Company shall be entitled to draw against the Letter of  Credit
 required under  Section 3.3(e)  to satisfy  any Corridor  Return  Commission
 shortfall or seek payment under the guarantee attached as Schedule 3 to  the
 Agreement.  For purposes of calculating the Corridor Return Commission,  the
 term "Corridor  Loss Ratio"  means an  amount equal  to (a)  all losses  and
 allocated and unallocated loss adjustment  expenses paid under the  Policies
 (provided that the amount of Legal  Loss Adjustment Expenses, as defined  in
 that certain Claims Administration Agreement  between the General Agent  and
 the Company, dated August 15, 2001, shall be limited to four percent  (4.0%)
 of Net Written Premium), divided by (b) collected and earned Net Net Written
 Premium.

           (e)  Letter of Credit.  As security for performance by the General
 Agent of its  obligations under  this Article  3, the  General Agent  shall,
 substantially contemporaneously with the execution of the Agreement, provide
 the Company  a clean,  irrevocable, evergreen  Letter  of Credit,  or  other
 deposits or guarantees  acceptable to the  Company in  its sole  discretion.
 The Letter of Credit, or any replacement  or renewal thereof, shall be in  a
 form, and from  a bank, acceptable  to the Company  in its sole  discretion.
 For this purpose, any NAIC approved bank shall be deemed to be acceptable to
 the Company.  The initial amount of the  Letter of Credit shall be not  less
 than Two Million Dollars ($2,000,000).  Commencing October 1, 2004 and  each
 quarter thereafter, the General Agent shall  cause the amount of the  Letter
 of Credit to be increased by an additional Two Million Dollars ($2,000,000).
 In the event  the amount  of Net Written  Premium at  the end  of the  first
 Underwriting Year exceeds Eighty Million Dollars ($80,000,000), the  General
 Agent shall cause the Letter of Credit to be increased to an amount equal to
 ten percent (10%) of Net Written Premium within ninety days thereafter.

           (f)  Additional Funding Obligations.  If at any time (i) the  Loss
 Ratio (as defined in this Section  3.3(f)) for the Policies exceeds  seventy
 four and two tenths  percent (74.2%), which  calculation shall be  performed
 within thirty  days following  the  end of  each  anniversary of  the  first
 Underwriting Year,  (ii) the  Agreement is  not renewed  at the  end of  any
 Underwriting Year or  is otherwise  terminated, (iii)  regulatory action  is
 taken against  the  General  Agent  resulting  in  the  loss,  cancellation,
 declination, or  suspension  of  any license  or  certificate  of  authority
 required by the  General Agent to  perform its  obligations hereunder,  (iv)
 there is a Change  of Control of  the General Agent,  as defined in  Section
 9.5,  or  (v)  the  policyholders'  surplus  for  either  American  Hallmark
 Insurance Company  of Texas  or Phoenix  Indemnity Insurance  Company  falls
 below Eight  Million  Dollars ($8,000,000),  then  the General  Agent  shall
 immediately cause the Letter of Credit to be increased to, and  subsequently
 maintained at, an amount equal to  fifteen and eight tenths percent  (15.8%)
 of Net Written Premium.  For purposes of this Section 3.3(f) only, the  term
 "Loss Ratio" means an amount equal to Losses divided by collected and earned
 Net Net Written Premium, where the term "Losses" is equal to the sum of  (a)
 all  losses  incurred  under   the  Policies  (including  outstanding   case
 reserves), plus (b) all allocated  and unallocated loss adjustment  expenses
 incurred in connection with such losses  (provided that the amount of  Legal
 Loss Adjustment Expenses, as defined  in that certain Claims  Administration
 Agreement between the General Agent and the Company, dated August 15,  2001,
 shall be limited to  four percent (4.0%) of  Net Written Premium), plus  (c)
 losses incurred but not  reported, as determined  using the applicable  IBNR
 factor listed in the chart below, provided that if such IBNR factor is  less
 than the expected amount of losses incurred but not reported, as  determined
 by Clarendon's  actuaries  at their  sole  reasonable discretion,  then  the
 amount of losses  incurred but  not reported  for purposes  of this  Section
 3.3(f)  shall  be  the  amount  determined  by  Clarendon  rather  than  the
 applicable IBNR factor.

    -----------------------------------------------------------------
              IBNR Factors for Calculating the Loss Ratio for
                       Additional Funding Obligations
    -----------------------------------------------------------------

   13-24 Month Calculation           25.0% of Net Written Premium

   25-36 Month Recalculation         15.0% of Net Written Premium

   37-48 Month Recalculation     12.0% of Net Written Premium

   49-60 Month Recalculation       7.0% of Net Written Premium

   61-72 Month Recalculation       5.0% of Net Written Premium

   All             Subsequent      0.0% of Net Written Premium
   Recalculations


      (g)  Release of Collateral.   Within  thirty days  following the  third
 anniversary of  the end  of the  first  Underwriting Year,  Clarendon  shall
 evaluate the  expected  ultimate incurred  Losses.    If at  such  time  (i)
 Clarendon determines that  the amount of  the Letter of  Credit exceeds  the
 General Agent's  expected ultimate  Corridor Return  Commission  obligations
 with respect to the Policies (as determined from Clarendon's calculation  of
 the expected  ultimate incurred  Losses), (ii)  the Agreement  has not  been
 terminated, and  (iii) the  General Agent  is  not then  in default  of  its
 obligations to  Clarendon under  the Agreement,  then, at  Clarendon's  sole
 discretion, Clarendon may allow the General Agent to decrease the amount  of
 the Letter of Credit to an  amount necessary to satisfy the General  Agent's
 expected ultimate Corridor Return Commission  obligations going forward.   A
 similar  evaluation  will  be  performed  at  twelve  (12)-month   intervals
 thereafter until all Losses are paid.  The General Agent agrees that in  the
 event the  General  Agent's  expected ultimate  Corridor  Return  Commission
 obligations with  respect  to  the Policies,  valued  at  the  most  current
 evaluation date, exceed  the then present  amount of the  Letter of  Credit,
 then the General  Agent shall immediately  fund, in cash  or other  security
 deemed in writing by Clarendon to be acceptable, any such deficiency.  In no
 event shall the  Letter of  Credit be  reduced to  an amount  less than  the
 amount necessary to  satisfy in full  Hallmark's Corridor Return  Commission
 obligations, as set forth herein.

           (j)  Subsequent Underwriting Years.   Unless  otherwise agreed  by
 the parties hereto, the  provisions of this Section  3.3 shall apply to  the
 Policies issued or renewed  during each such Underwriting  Year in the  same
 manner as they apply to the Policies produced during the first  Underwriting
 Year.  For purposes of this Section 3.3, the first Underwriting Year is  the
 period from July 1, 2004 to and including June 30, 2005 and each  subsequent
 Underwriting Year will  be the period  commencing July 1st  and ending  June
 30th of such year.

      3.   In all other respects the Agreement shall remain unchanged and in
 full force and effect.


      IN WITNESS WHEREOF, the parties have cause this Addendum One to be
 executed by their duly authorized officers as of the day and year first
 written above.


 Attest:                       HALLMARK GENERAL AGENCY, INC.


 /s/ Joyce Wilhelm             By: /s/ Kevin Kasitz
 ----------------------        ------------------------------
                               Title:


 Attest:                       CLARENDON NATIONAL INSURANCE COMPANY


 /s/ Luba Ilyasova             By: /s/ Gary Ketels
 ----------------------        ------------------------------
                               Title:

</TEXT>
</DOCUMENT>
