ESCROW AGREEMENT

      THIS ESCROW AGREEMENT, dated as of May 3, 2004 ("Escrow Agreement"), is by
and between CITIZENS PROPERTY INSURANCE CORPORATION, legislatively created
pursuant to Section 627.351(6), Florida Statutes, ("Depositor"); FEDERATED
NATIONAL INSURANCE COMPANY being a Florida licensed and authorized insurance
company ("Recipient"); and WELLS FARGO BANK, N.A., a National Banking
Association, as Escrow Agent hereunder ("Escrow Agent").

                                   BACKGROUND

      A. Depositor and Recipient have entered into an Assumption Agreement (the
"Underlying Agreement"), dated May _______, 2004, pursuant to which Agreement
Recipient will remove certain insurance policies from Depositor. The Underlying
Agreement provides that Depositor shall deposit certain monies, as calculated
and provided for in the Underlying Agreement, in a segregated escrow account to
be held by Escrow Agent for the purpose of paying Recipient a bonus for each
policy removed from Depositor by Recipient in accordance with the Underlying
Agreement and applicable Florida Statutes. A true and correct copy of the
Underlying Agreement is attached hereto and incorporated herein as Exhibit "A."

      B. Escrow Agent has agreed to accept, hold, and disburse the funds
deposited with it and the earnings thereon in accordance with the terms of the
Underlying Agreement and this Escrow Agreement.

      C. Depositor and Recipient have each appointed the Representatives (as
defined below) to represent them for all purposes in connection with the funds
to be deposited with Escrow Agent, the Underlying Agreement, and this Escrow
Agreement.

      D. In order to establish the escrow of funds and to effect the provisions
of the Underlying Agreement and applicable Florida Statutes, and specifically
section 627.3511, Florida Statutes, the parties hereto have entered into this
Escrow Agreement.

                             STATEMENT OF AGREEMENT

      NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, for
themselves, their successors and assigns, hereby agree as follows:


                                       1
<PAGE>

            1. Definitions. In addition to terms otherwise defined herein the
following terms shall have the following meanings when used herein:

                  a. "Department" shall mean the Office of Insurance Regulation.

                  b. "Depositor Representative" shall mean the Chief Financial
Officer of the Depositor, or any other person designated in a writing signed by
the Executive Director of the Depositor and delivered to Escrow Agent and the
Recipient Representative in accordance with the notice provisions of this Escrow
Agreement, to act as its representative under this Escrow Agreement.

                  c. "Escrow Funds" shall mean the funds deposited by Depositor
with Escrow Agent pursuant to the Underlying Agreement and this Agreement,
together with any interest and other income thereon.

                  d. "Escrow Period" shall mean the period commencing on the
date hereof and ending on that date that Escrow Agent no longer holds any sums
in escrow pursuant to the Underlying Agreement.

                  e. "Joint Written Direction" shall mean a written direction
joined in by Depositor and Recipient as may be required by the Escrow Agreement.

                  f. "Written Direction" shall mean a written direction executed
by the Depositor Representative and directing Escrow Agent to disburse all or a
portion of the Escrow Funds or to take or refrain from taking an action pursuant
to the Underlying Agreement and this Escrow Agreement.

                  g. "Recipient Representative" shall mean Richard A. Widdicombe
or any other person designated in a writing signed by Recipient and delivered to
Escrow Agent and the Depositor Representative in accordance with the notice
provisions of this Escrow Agreement, to act as its representative under this
Escrow Agreement.

                  h. "Representatives" shall mean the Depositor Representative
and/or the Recipient Representative.

            2. Appointment of and Acceptance by Escrow Agent. Depositor,
Recipient and the Representatives hereby appoint Escrow Agent to serve as Escrow
Agent hereunder. Escrow Agent hereby accepts such appointment and, upon receipt
by wire transfer of Escrow Funds in accordance with paragraph 3. below, agrees
to hold, invest and disburse the Escrow Funds in accordance with the Underlying
Agreement and this Escrow Agreement.


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<PAGE>

            3. Creation of Escrow Funds. Pursuant to the Underlying Agreement
(paragraph 3.C.), Depositor will transfer to Escrow Agent, subsequent to the
execution of this Escrow Agreement, the bonus amounts for Removed Policies in
accordance with the Underlying Agreement. The transfer of funds shall be by wire
transfer of immediately available funds, to the following account:

                   WELLS FARGO BANK, N.A.
                   ABA # 121000248
                   A/C # 0001038377
                   FFC: CITIZENS / ATLANTIC PREFERRED ESCROW
                   NOTIFY: BRIAN CLARK (904) 332-9671

            Simultaneously with the wire transfer of funds as above set forth
the Depositor shall give facsimile notice to the Escrow Agent and Recipient of
such transfer at the facsimile number set forth in paragraph 13.hereof.

            4. Disbursements of Escrow Funds.

                  a. Written Direction. Escrow Agent shall disburse Escrow Funds
in accordance with a Written Direction of Depositor pursuant to paragraphs 4.D.,
E., F., G., and H. of the Underlying Agreement.

                  b. Authorization for Disbursement to Pay Claims. During the
Escrow Term the Escrow Agent shall, pursuant to section 627.3511, Florida
Statutes, disburse Escrow Funds to the Recipient for the payment of claims upon
receipt by the Escrow Agent of a Joint Written Direction.

                  c. Expiration of Escrow Period. Upon the expiration of the
Escrow Period, Escrow Agent shall distribute, in accordance with a Written
Direction of Depositor, as promptly as practicable, all previously undistributed
Escrow Funds.

            All disbursements of funds from the Escrow Funds shall be subject to
the claims of Escrow Agent and the Indemnified Parties (as defined below)
pursuant to paragraph 9. below.

            5. Disbursement Into, or Petition to Circuit Court. If, at any time,
there shall exist any dispute between the Escrow Agent, Depositor, Recipient or
the Representatives with respect to the holding or disposition of any portion of
the Escrow Funds or any other obligations of Escrow Agent hereunder, or if at
any time Escrow Agent is unable to determine, to Escrow Agent's sole
satisfaction, the proper disposition of any portion of the Escrow Funds or
Escrow Agent's proper actions with respect to its obligations hereunder, or if
the Representatives have not within thirty (30) days of the furnishing by Escrow
Agent of a notice of resignation pursuant to paragraph 7. hereof, appointed a
successor Escrow Agent to act hereunder, then Escrow Agent may, in its sole
discretion, take any or all of the following actions:


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<PAGE>

                  a. suspend the performance of any of its obligations under
this Escrow Agreement until such dispute or uncertainty shall be resolved to the
sole satisfaction of Escrow Agent or until a successor Escrow Agent shall have
been appointed (as the case may be); provided however, that Escrow Agent shall
continue to invest the Escrow Funds in accordance with paragraph 6. hereof.
Should the period of suspended performance exceed fifteen (15) days the Escrow
Agent will immediately institute a petition pursuant to (b.) below, and
thereafter perform in accordance with the instructions of the Department;

                  b. petition the Circuit Court in and for Leon County, Florida,
for instructions with respect to such dispute or uncertainty;

                  c. pay into the Registry of the Circuit Court of Leon County,
Florida, all funds held by it as the Escrow Funds for holding and disposition in
accordance with the instructions of the Circuit Court of Leon County, Florida.

            Escrow Agent shall have no liability to Depositor, Recipient, their
respective shareholders or any other person with respect to any such suspension
of performance or disbursement to the Registry of the Circuit Court in
accordance with this provision, specifically including therein any liability or
claimed liability that may arise, or be alleged to have arisen, out of or as a
result of any delay in the disbursement of funds held in the Escrow Funds or any
delay in or with respect to any other action required or requested of Escrow
Agent.

            6. Investment of Funds. Escrow Agent pursuant to this Agreement, is
authorized to, and shall invest and reinvest the funds held in the Escrow Funds
pursuant to the investment requirements set forth below at the written direction
of the Recipient:

                  a. in direct obligations of the United States of America or
obligations the principal of and the interest on which are unconditionally
guaranteed by the United States of America;

                  b. in obligations with the Federal Farm Credit Banks;

                  c. in obligations of the Federal Home Loan Banks and its
district banks;


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<PAGE>

                  d. in commercial paper of prime quality of the highest letter
and numerical rating as provided for by at least one nationally recognized
rating service;

                  e. in obligations of the Federal National Mortgage
Association;

                  f. in obligations of the Government National Mortgage
Association;

                  g. in any money market fund all of which is invested in the
foregoing investment categories, including any money market fund managed by
Escrow Agent and any of its affiliates.

            If Escrow Agent has not received written instructions from the
Recipient at any time that an investment decision must be made, Escrow Agent
shall invest the Escrow Funds, or such portion thereof as to which no written
instruction has been received, in investments described in clause (g) above.
Each of the foregoing investments shall be made in the name of Escrow Agent. No
investment shall be made in any instrument or security that has a maturity of
greater than twelve (12) months. The Escrow Agent will use its expertise and
best efforts to maintain the funds invested on a basis so as to provide the
greatest possible liquidity between July 1st and November 30th the "Liquidity
Period") of each year during the Escrow Period. The aforestated Liquidity Period
may be extended by a Joint Written Direction delivered to the Escrow Agent on or
before November 25th of any year during the Escrow Period. During the Liquidity
Period, Escrow Funds will be invested in investments described in clauses (a),
(d), and/or (g) above. Notwithstanding anything to the contrary contained
herein, Escrow Agent may, without notice to the Representatives, sell or
liquidate any of the foregoing investments at any time if the proceeds thereof
are required for any release of funds required hereunder, and Escrow Agent shall
not be liable or responsible for any loss, cost or penalty resulting from any
such sale or liquidation if such sale or liquidation is required to meet the
Escrow Agent's obligations pursuant to paragraph 4. above. With respect to any
funds received by Escrow Agent for deposit into the Escrow Funds after one
thirty o'clock (1:30) p.m., Jacksonville, Florida time, Escrow Agent shall not
be required to invest such funds or to effect such investment instruction until
the next day upon which banks in Jacksonville, Florida are open for business.

            The parties hereto acknowledge that Escrow Funds constituting
Takeout Bonuses may be delivered to the Escrow Agent pursuant to other Takeout
Agreements between the Depositor and other Recipients and Escrow Agreements
executed in accordance with Takeout Agreements between the Depositor and such
other Recipients. Should the Escrow Agent come into possession of such other
Escrow Funds the parties hereto acknowledge and authorize the Escrow Agent to
commingle and pool such other Escrow Funds with the Escrow Funds delivered
pursuant to this Agreement for the purposes of investment and reinvestment
pursuant to paragraph 6. hereof, conditioned on the fact that the investment
policy relating to such other Escrow Funds is the same as contained and set
forth in this Agreement.


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<PAGE>

            7. Resignation and Removal of Escrow Agent. Escrow Agent may resign
from the performance of its duties hereunder at any time by giving thirty (30)
days prior written notice to the Representatives or may be removed, with or
without cause, by the Representatives, acting jointly by furnishing a Joint
Written Direction to Escrow Agent, at any time by the giving of thirty (30) days
prior written notice to Escrow Agent. Such resignation or removal shall take
effect upon the appointment of a successor Escrow Agent as provided hereinbelow.
Upon any such notice of resignation or removal, the Representatives jointly
shall appoint a successor Escrow Agent hereunder, which shall be a commercial
bank, trust company or other financial institution with a combined capital and
surplus in excess of $10,000,000. Upon the acceptance in writing of any
appointment as Escrow Agent hereunder by a successor Escrow Agent, such
successor Escrow Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Escrow Agent, and the
retiring Escrow Agent shall be discharged from its duties and obligations as
Escrow Agent under this Escrow Agreement, but shall not be discharged from any
liability for actions taken as Escrow Agent hereunder prior to such succession.
After any retiring Escrow Agent's resignation or removal, the provisions of this
Escrow Agreement shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Escrow Agent under this Escrow Agreement.

            8. Liability of Escrow Agent.

                  a. Escrow Agent shall have no liability or obligation with
respect to the Escrow Funds except for Escrow Agent's willful misconduct or
negligence. Escrow Agent's sole responsibility shall be for the safekeeping,
investment, and disbursement of the Escrow Funds in accordance with the terms of
this Escrow Agreement and the Underlying Agreement. Escrow Agent shall have no
implied duties or obligations and shall not be charged with knowledge or notice
of any fact or circumstance not specifically set forth herein. Escrow Agent may
rely upon any instrument, not only as to its due execution, validity and
effectiveness, but also as to the truth and accuracy of any information
contained therein, which Escrow Agent shall in good faith believe to be genuine,
to have been signed or presented by the person or parties purporting to sign the
same and to conform to the provisions of this Escrow Agreement. In no event
shall Escrow Agent be liable for incidental, indirect, special, consequential or
punitive damages. Escrow Agent shall not be obligated to take any legal action
or commence any proceeding in connection with the Escrow Funds, any account in
which Escrow Funds are deposited, this Escrow Agreement or the Underlying
Agreement, or to appear in, prosecute or defend any such legal action or
proceeding. Escrow Agent may consult legal counsel selected by it in the event
of any dispute or question as to the construction of any of the provisions
hereof or of any other agreement or of its duties hereunder, and shall incur no
liability and shall be fully indemnified from any liability whatsoever, except
as above set forth, in acting in accordance with the opinion or instruction of
such counsel. Depositor and Recipient, jointly and severally, shall promptly
pay, upon demand, the reasonable fees and expenses of any such counsel.


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<PAGE>

                  b. The Escrow Agent shall comply with orders issued or process
entered by any court or the Department with respect to the Escrow Funds, without
determination by the Escrow Agent of the jurisdiction of the court or the
Department in the matter. If any portion of the Escrow Funds are at any time
attached, garnished or levied upon under any Order of court or the Department,
or in case the payment, assignment, transfer, conveyance or delivery of any such
property shall be stayed or enjoined by any court or Order or direction of the
Department, or in case any order, judgment or decree shall be made or entered by
any court or the Department affecting such property or any part thereof, then
and in any such event, the Escrow Agent is authorized, in its sole discretion,
to rely upon and comply with any such order, writ, judgment or decree after
giving three (3) days advance written notice to Depositor and Recipient which it
is advised by legal counsel selected by it is binding upon it without the need
for appeal or other action; and if the Escrow Agent complies with any such
order, writ, judgment or decree, it shall not be liable to any of the parties
hereto or to any other person or entity by reason of such compliance even though
such order, writ, judgment or decree may be subsequently reversed, modified,
annulled, set aside or vacated.

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<PAGE>

            9. Indemnification of Escrow Agent. From and at all times after the
date of this Escrow Agreement, Depositor and Recipient, jointly and severally,
shall, to the fullest extent permitted by law and to the extent provided herein,
indemnify and hold harmless Escrow Agent and each director, officer, employee,
attorney, agent and affiliate of Escrow Agent (collectively, the "Indemnified
Parties") against any and all actions, claims (whether or not valid), losses,
damages, liabilities, costs and expenses of any kind or nature whatsoever
(including without limitation reasonable attorneys' fees, costs and expenses)
incurred by or asserted against any of the Indemnified Parties from and after
the date hereof, whether direct, indirect or consequential, as a result of or
arising from or in any way relating to any claim, demand, suit, action or
proceeding (including any inquiry or investigation) by any person, including
without limitation Depositor or Recipient, whether threatened or initiated,
asserting a claim for any legal or equitable remedy against any person under any
statute or regulation, including, but not limited to, any federal or state
securities laws, or under any common law or equitable cause or otherwise,
arising from or in connection with the negotiation, preparation, execution,
performance or failure of performance of this Escrow Agreement or any
transactions contemplated herein, whether or not any such Indemnified Party is a
party to any such action, proceeding, suit or the target of any such inquiry or
investigation; provided, however, that no Indemnified Party shall have the right
to be indemnified hereunder for any liability finally determined by a court of
competent jurisdiction, subject to no further appeal, to have resulted solely
from the negligence or willful misconduct of such Indemnified Party. If any such
action or claim shall be brought or asserted against any Indemnified Party, such
Indemnified Party shall promptly notify Depositor and Recipient in writing, and
Depositor and Recipient shall assume the defense thereof, including the
employment of counsel and the payment of all expenses. Such Indemnified Party
shall, in its sole discretion, have the right to employ separate counsel (who
may be selected by such Indemnified Party in its sole discretion) in any such
action and to participate in the defense thereof, and the fees and expenses of
such counsel shall be paid by such Indemnified Party, except that Depositor
and/or Recipient shall be required to pay such fees and expenses if (a)
Depositor and/or Recipient agree to pay such fees and expenses, or (b) Depositor
and/or Recipient shall fail to assume the defense of such action or proceeding
or shall fail, in the reasonable discretion of such Indemnified Party, to employ
counsel satisfactory to the Indemnified Party in any such action or proceeding,
or (c) Depositor and/or Recipient is the plaintiff in any such action or
proceeding or (d) the named parties to any such action or proceeding (including
any impleaded parties) include both Indemnified Party and Recipient and/or
Depositor, and Indemnified Party shall have been advised by counsel that there
may be one or more legal defenses available to it which are different from or
additional to those available to Recipient or Depositor. Depositor and Recipient
shall be jointly and severally liable to pay fees and expenses of counsel
pursuant to the preceding sentence, except that any obligation to pay under
clause (a) shall apply only to the party so agreeing. All such fees and expenses
payable by Recipient and/or Depositor pursuant to the foregoing sentence shall
be paid from time to time as incurred, both in advance of and after the final
disposition of such action or claim. All of the foregoing losses, damages, costs
and expenses of the Indemnified Parties shall be payable by Depositor and
Recipient, jointly and severally, to the extent of the Escrow Funds upon demand
by such Indemnified Party. Upon exhaustion of the Escrow Funds, the
indemnification obligations of Depositor and Recipient hereunder shall be borne
equally by Depositor and Recipient. The obligations of Depositor and Recipient
under this paragraph 9. shall survive any termination of this Escrow Agreement
and the resignation or removal of Escrow Agent.


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<PAGE>

            The parties agree that neither the payment by Depositor or Recipient
of any claim by Escrow Agent for indemnification hereunder nor the disbursement
of any amounts to Escrow Agent from the Escrow Funds in respect of a claim by
Escrow Agent for indemnification shall impair, limit, modify, or affect, as
between Depositor and Recipient, the respective rights and obligations of
Depositor, on the one hand, and Recipient, on the other hand, under the
Underlying Agreement.

            10. Fees and Expenses of Escrow Agent. Depositor and Recipient shall
compensate Escrow Agent for its services hereunder in accordance with Exhibit B
attached hereto.

            Recipient, Depositor and the Representatives hereby grant to Escrow
Agent a security interest in and lien upon the Escrow Funds and all funds
therein to secure all obligations pursuant to paragraph 10. hereof, to Escrow
Agent, and Escrow Agent shall have the right to offset the amount of any
compensation or reimbursement due against the Escrow Funds. If for any reason
funds in the Escrow Funds are insufficient to cover such compensation and
reimbursement, Depositor and Recipient shall promptly pay such amounts to Escrow
Agent upon receipt of an itemized invoice.

            11. Representations and Warranties; Legal Opinions.

                  a. Depositor makes the following representations and
warranties to Escrow Agent:

                        (i) Depositor is a legislatively created corporation
created pursuant to Section 627.351(6), Florida Statutes, and duly organized,
validly existing, and in good standing under the laws of the State of Florida,
and has full power and authority to execute and deliver this Escrow Agreement
and to perform its obligations hereunder;

                        (ii) This Escrow Agreement has been duly approved by all
necessary action of Depositor, has been executed by duly authorized officers of
Depositor, and constitutes a valid and binding agreement of Depositor,
enforceable in accordance with its terms.

                        (iii) The execution, delivery, and performance by
Depositor of this Escrow Agreement is in accordance with the Underlying
Agreement and will not violate, conflict with, or cause a default under the
Second Amended Plan of Operation of Depositor, any applicable law or regulation,
any court order or administrative ruling or decree to which Depositor is a party
or any of its property is subject, or any agreement, contract, indenture, or
other binding arrangement, including without limitation the Underlying
Agreement, to which Depositor is a party or any of its property is subject.


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<PAGE>

                        (iv) The Executive Director has full power and authority
to execute, deliver, and perform this Escrow Agreement, and to designate the
Chief Financial Officer of Depositor as its Depositor Representative with full
power to execute and deliver any Written Direction of Depositor or Joint Written
Direction, to amend, modify or waive any provision of this Agreement and to take
any and all other actions as the Depositor Representative under this Agreement,
all without further consent or direction from, or notice to, Depositor or any
other party.

                        (v) No party other than the parties hereto, their heirs,
successors or assigns have, or shall have, any lien, claim or security interest
in the Escrow Funds or any part thereof. The successor or assignee of any party
hereto shall be bound by the obligations of the Underlying Agreement and this
Escrow Agreement. No financing statement under the Uniform Commercial Code is on
file in any jurisdiction claiming a security interest in or describing (whether
specifically or generally) the Escrow Funds or any part thereof.

                        (vi) All of the representations and warranties of
Depositor contained herein are true and complete as of the date hereof and will
be true and complete at the time of any disbursement from the Escrow Funds.

                  b. Recipient makes the following representations and
warranties to Escrow Agent:

                        (i) Recipient is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Florida, and has
full power and authority to execute and deliver this Escrow Agreement and to
perform its obligations hereunder;

                        (ii) This Escrow Agreement has been duly approved by all
necessary corporate action of Recipient, including any necessary shareholder
approval, has been executed by duly authorized officers of Recipient, and
constitutes a valid and binding agreement of Recipient, enforceable in
accordance with its terms.

                        (iii) The execution, delivery, and performance by
Recipient of this Escrow Agreement is in accordance with the Underlying
Agreement and will not violate, conflict with, or cause a default under the
articles of incorporation or bylaws of Recipient, any applicable law or
regulation, any court order or administrative ruling or decree to which
Recipient is a party or any of its property is subject, or any agreement,
contract, indenture, or other binding arrangement, including without limitation
the Underlying Agreement, to which Recipient is a party or any of its property
is subject.


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<PAGE>

                        (iv) Richard Widdicombe has been duly appointed to act
as the representative of Recipient hereunder and has full power and authority to
execute, deliver, and perform this Escrow Agreement, to execute and deliver any
Joint Written Direction, to amend, modify or waive any provision of this
Agreement and to take any and all other actions as the Recipient Representative
under this Agreement, all without further consent or direction from, or notice
to, Recipient or any other party.

                        (v) No party other than the parties hereto, their heirs,
successors or assigns have, or shall have, any lien, claim or security interest
in the Escrow Funds or any part thereof. The successor or assignee of any party
hereto shall be bound by the obligations of the Underlying Agreement and this
Escrow Agreement. No financing statement under the Uniform Commercial Code is on
file in any jurisdiction claiming a security interest in or describing (whether
specifically or generally) the Escrow Funds or any part thereof.

            12. Consent to Jurisdiction and Venue. In the event that any party
hereto commences a lawsuit or other proceeding relating to or arising from this
Agreement, the parties hereto agree that the Circuit Court in and for Leon
County, Florida shall have the sole and exclusive jurisdiction over any such
proceeding.

            13. Notice. All notices and other communications hereunder shall be
in writing and shall be deemed to have been validly served, given or delivered
five (5) days after deposit in the United States mails, by certified mail with
return receipt requested and postage prepaid, when delivered personally, one (1)
day after delivery to any overnight courier, or when transmitted by facsimile
transmission facilities, and addressed to the party to be notified as follows:

If to Depositor at:             CITIZENS PROPERTY INSURANCE CORPORATION
                                101 NORTH MONROE STREET, SUITE 1000
                                TALLAHASSEE, FL  32301
                                ATTENTION: ROBERT L. RICKER, EXECUTIVE DIRECTOR
                                FACSIMILE NUMBER: (850) 513-3900

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<PAGE>

If to the Escrow Agent at:      WELLS FARGO BANK, N.A.,
                                AS ESCROW AGENT
                                CORPORATE TRUST GROUP
                                7077 BONNEVAL ROAD, SUITE 400
                                JACKSONVILLE, FLORIDA 32216
                                ATTENTION: BRIAN CLARK
                                FACSIMILE NUMBER: (904) 332-9673

If to Recipient at:             FEDERATED NATIONAL INSURANCE COMPANY
                                P.O. BOX 407193
                                FORT LAUDERDALE, FLORIDA  33340
                                ATTENTION: RICHARD WIDDICOMBE
                                FACSIMILE NUMBER:  (954) 316-9201

or to such other address as each party may designate for itself by like notice.

            14. Amendment or Waiver. This Escrow Agreement may be changed,
waived, discharged or terminated only by a Joint Written Direction signed by the
Representatives and Escrow Agent. No delay or omission by any party in
exercising any right with respect hereto shall operate as a waiver. A waiver on
any one occasion shall not be construed as a bar to, or waiver of, any right or
remedy on any future occasion.

            15. Severability. To the extent any provision of this Escrow
Agreement is prohibited by or invalid under applicable law, such provision shall
be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Escrow Agreement.

            16. Governing Law. This Escrow Agreement shall be construed and
interpreted in accordance with the laws of the State of Florida.

            17. Entire Agreement. This Escrow Agreement constitutes the entire
agreement between the parties relating to the holding, investment and
disbursement of the Escrow Funds and sets forth in their entirety the
obligations and duties of Escrow Agent with respect to the Escrow Funds.

            18. Binding Effect. All of the terms of this Escrow Agreement, as
amended from time to time, shall be binding upon, inure to the benefit of and be
enforceable by the respective heirs, successors and assigns of Depositor,
Recipient, the Representatives and Escrow Agent.

            19. Execution in Counterparts. This Escrow Agreement and any Joint
Written Direction may be executed in two or more counterparts, which when so
executed shall constitute one and the same agreement or direction.

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<PAGE>
            20. Termination. Upon the first to occur of the disbursement of all
amounts in the Escrow Funds, pursuant to Written Directions or the disbursement
of all amounts in the Escrow Funds, pursuant to paragraph 4 . hereof, this
Escrow Agreement shall terminate and Escrow Agent shall have no further
obligation or liability whatsoever with respect to this Escrow Agreement or the
Escrow Funds.

            21. Dealings. The Escrow Agent and any stockholder, director,
officer or employee of the Escrow Agent may buy, sell, and deal in any of the
securities of the Depositor or Recipient and become pecuniarily interested in
any transaction in which the Depositor or Recipient may be interested, and
contract and lend money to the Depositor or Recipient and otherwise act as fully
and freely as though it were not the Escrow Agent under this Agreement. Nothing
herein shall preclude the Escrow Agent from acting in any other capacity for the
Depositor or Recipient or for any other entity.

            22. Attorneys' Fees and Costs. In any litigation concerning the
breach or enforcement of this Escrow Agreement the prevailing party in such
litigation shall be entitled to recover reasonable attorneys' fees and costs
including therein, such fees and costs incurred in any appellate proceeding.

            IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be executed under seal as of the date first above written.


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<PAGE>

                                    DEPOSITOR:

                                    CITIZENS PROPERTY INSURANCE CORPORATION

                                    By:
                                          --------------------------------------
                                          ROBERT L. RICKER
                                          Executive Director

                                    RECIPIENT:

                                    FEDERATED NATIONAL INSURANCE COMPANY

                                    By:
                                          --------------------------------------
                                          RICHARD A. WIDDICOMBE
                                          Chief Executive Officer

                                    DEPOSITOR REPRESENTATIVE:

                                    By:
                                          --------------------------------------
                                          JESSICA BUSS
                                          Chief Financial Officer

                                    RECIPIENT REPRESENTATIVE:

                                    By:
                                          --------------------------------------
                                          RICHARD A. WIDDICOMBE
                                          Chief Executive Officer

                                    ESCROW AGENT:

                                    WELLS FARGO BANK, N.A.

                                    By:
                                          --------------------------------------
                                          BRIAN P. CLARK
                                          Vice President


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<PAGE>

                                    EXHIBIT B


                          FEES PAYABLE TO ESCROW AGENT

      Pursuant to paragraph 10. of the Escrow Agreement, Wells Fargo, N.A.
("Escrow Agent") shall be compensated at an annual fee of $1,500.00 (the "Fee")
which Fee shall compensate Escrow Agent for all services to be performed by the
Escrow Agent under this Escrow Agreement for the following 12 month period.

      The Fee shall be payable to the Escrow Agent on an annual basis from the
Escrow Funds commencing the first day the Funds are deposited. At the end of the
Escrow Period, or if the Escrow Agent is terminated or resigns, the Escrow Agent
shall include in the final distribution of Escrow Funds an amount, if any, equal
to the unearned portion of Fees paid to the Escrow Agent out of Escrow Funds at
the beginning of the 12 month period. The amount of unearned Fees to be
reimbursed will be calculated by comparing 1) the number of days from the end of
the Escrow Period or 2) the date the Escrow Agent is terminated or resigns to
the end of the 12 month period covered by the last annual payment of Fees
divided by 365. The obligation of the Escrow Agent to reimburse unearned Fees
under this Exhibit B shall survive any termination of this Escrow Agreement.