Exhibit 10.52
                            PARTICIPATION AGREEMENT


         This PARTICIPATION  AGREEMENT (this "Agreement") is made as of this 
16th day of March, 1998, by and between American  Physicians Service Group, Inc.
, a Texas corporation  ("Seller"),  and the  undersigned  under the  heading,  
"Purchaser" ("Purchaser"), (Seller and each Purchaser are referred to herein 
separately as a "Participant" and collectively, as "Participants").

                              W I T N E S S E T H :

         WHEREAS,  Seller  has made or will  make a line of  credit  loan in the
maximum principal amount of Two Million Four Hundred Thousand and No/100 DOLLARS
($2,400,000) to Barton Acquisition,  Inc., a Texas corporation (the "Borrower"),
which loan shall be secured by a lien on all Borrower's assets including certain
real property located in Bexar,  Fort Bend and Travis  Counties,  Texas, as more
fully set forth on Exhibit "A" attached  hereto,  together  with all  equipment,
fixtures and personal property located thereon (the "Property"); and

         WHEREAS,  in  connection  with the  making of the line of credit  loan,
Borrower has executed or will execute and deliver the loan  documents  set forth
in the  schedule  attached  hereto,  marked  Exhibit "B", and hereby made a part
hereof (the "Loan Documents"); and

         WHEREAS,  Seller is duly  authorized  to sell  participation  shares in
loans originated by it and the participation created hereby is eligible for such
sale; and

         WHEREAS,  Purchaser  further  desires  to  participate  in  owning  the
evidences of the Loan and the security  therefor,  with Seller  serving as agent
and trustee for Purchaser in certain respects as hereinafter set forth.

         NOW,  THEREFORE,  in consideration of the mutual covenants  hereinafter
set forth and other good and valuable consideration,  receipt of which is hereby
acknowledged, the parties hereto agree as follows:

         1.       AGREEMENT FOR PURCHASE OF THE PARTICIPATION.

                  a. By its execution of this Agreement and in  consideration of
the mutual  covenants  herein set  forth,  Purchaser  does  hereby  purchase  an
undivided  interest  (the   "Participation"),   the  percentage  of  which  (the
"Percentage  Interest") shall be calculated as set forth in Section 2 hereof, in
(i) all of Seller's  loans and other  extensions of credit to or for the benefit
of Borrower under the Loan  Documents (all loans and other  extensions of credit
are  hereinafter  referred to as the "Loan"),  (ii) all existing and future real
and personal  property and interests  therein  securing the Loan,  including the
Property  ("Collateral"),  (iii) all existing and future claims against  persons
liable for the Loan ("Guaranty Claims"). The Participation includes a Percentage
Interest  in all  amounts,  other than those  amounts,  if any,  which are to be
retained by Seller or otherwise  allocated  to  Purchaser or Seller  pursuant to
Sections 4, 5 and 13 hereof, which are received by Seller on account of the Loan
("Payments"),  whether from (i) Borrower, (ii) the Collateral,  (iii) guarantors
or others  obligated to Seller with respect to the Loan (an "Obligor"),  or (iv)
any other  source,  including,  without  limitation,  recovery  from  litigation
without  limitation,  recovery from any setoff of Borrower's  accounts deposited
with  Seller,  proceeds  of title  insurance  claims,  other  insurance  claims,
condemnation  awards or recovery from  litigation.  Purchaser  acknowledges  and
understands  the  liens  and  security  interests  against  the  Collateral  are
secondary and inferior to other substantial loans to third party lenders.
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                  b.  PARTICIPATION.   Purchaser  has  advanced  to  Seller  its
respective  Contribution  Percentage,  as defined in Section 2 hereof,  of funds
advanced,  or to be advanced, by Seller to Borrower pursuant to the Loan. Seller
shall deposit all Contribution Percentages, to the extent not initially advanced
under the Loan,  into an escrow account with Seller ("Escrow  Account").  Seller
shall invest the funds in the Escrow  Account at its discretion and any interest
earned  thereon  shall be held on each  Purchaser's  behalf in their  respective
Contribution  Interest.  Seller shall,  from time to time,  pay to Purchaser all
amounts in which Purchaser has an interest in the manner herein provided.

                  c. NATURE OF RELATIONSHIP.  The relationship between Purchaser
and  Seller  is and  shall  be that of a  purchaser  and  seller  of a  property
interest, respectively,  (i.e., an outright purchase and sale of assets being an
assignment of a partial  interest in the Loan,  the  Collateral and the Guaranty
Claims)  and not a  creditor-debtor,  partner,  or  joint  venture  relationship
provided that any documents, monies or other property received, retained or held
by Seller for Purchaser shall be held by Seller in trust for Purchaser.

                  d.   SERVICING   COMPENSATION.   Seller   shall   receive   no
compensation for servicing the Loan.

         2.  PERCENTAGE  INTEREST;  CONTRIBUTION  PERCENTAGE;  MAXIMUM AMOUNT OF
PURCHASER'S  COMMITMENT.  As used herein, the term "Percentage  Interest",  when
used  with  respect  to  any  Purchaser,  shall  mean  the  percentage  by  each
Purchaser's  name as set forth and  described  in Exhibit  "D"  attached  hereto
multiplied by the aggregate amount of principal  advanced and outstanding at any
particular time. As used herein, the term "Percentage Interest",  when used with
respect to Seller, shall mean the remaining percentage of eighty-nine and 20/100
percent (89.20%) of the aggregate amount of outstanding  principal  advanced and
outstanding,  and from time to time as each such respective  Percentage Interest
bears  at  such  time  to the  aggregate  principal  balance  of the  Loan  then
outstanding.  As used herein,  the term  "Contribution  Percentage" of Purchaser
shall mean the same as the Percentage Interest.

         3.       FUNDING CRITERIA.

                  a. ESTABLISHMENT OF PARTICIPATION.  Upon execution of the Loan
Documents,  Seller  shall  deliver  to  Purchaser  a  Participation  Certificate
executed by Seller evidencing Purchaser's  contribution to the Loan, in the form
attached hereto as Exhibit "C" and hereby made a part hereof.

                  b. DEFAULT BY PURCHASER.  Any failure by Purchaser to make any
required advance when requested by Seller,  shall constitute a default hereunder
as of the day on which the payment was to be made by Purchaser.

         4. ALLOCATION OF PAYMENTS.  Distributions  of principal and interest to
Purchaser or to the Escrow  Account on behalf of  Purchaser  with respect to its
Participation Interest shall be made and payable only out of Payments.  Payments
shall be applied by Seller to the indebtedness owing by Borrower and distributed
to the Participants in the following order: (i) to all  Extraordinary  Expenses,
as hereinafter  defined,  to the extent thereof;  (ii) to liquidated damages and
late fees or charges  (other than  interest  and loan fees) owing under the Loan
Documents,  to the  extent  thereof;  (iii) to loan  fees  owing  under the Loan
Documents,  to the  extent  thereof;  (iv) to  accrued  interest,  to the extent
thereof;  and (v) to  unpaid  principal  of the  Loan.  Such  Payments  shall be
allocated among the Participants on the basis of Sections 5 and 13 hereof.

         5.       PAYMENTS TO PARTICIPANTS.

                  a.       ALLOCATIONS.  Subject to Sections 5(b), 5(c) and 13 
hereof,  each Participant  shall be entitled to share in the following payments 
to the extent and in the manner hereinafter set forth:

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                           (i)  Extraordinary  Expenses, to the extent  advanced
by the  Participants, shall be reimbursed to the Participants on the basis which
the amount of Extraordinary Expenses advanced by each  Participant  bears to the
total  Extraordinary  Expenses  advanced  by all Participants.

                           (ii) All liquidated damages, late fees or charges and
other ancillary income (other than as provided
herein) shall be paid solely to Seller;

                           (iii) All loan,  extension,  prepayment  charges  and
reconveyance fees received from Borrower shall be
distributed to the Participants in accordance with their respective Percentage 
Interests;

                           (iv) All interest  payments  received from  Borrower,
excluding interest paid at the "Default Interest
Rate," as defined in the Note, shall be paid first to each  Participant,  or the
Escrow  Account  at  Seller's  election,  on the  basis  of  such  Participant's
respective  Percentage Interest,  to the extent the interest accrued at the rate
set forth in the Note on amounts advanced by such Participant from the date that
such amounts  were  disbursed to  Borrower;  and interest  payments  received by
Seller  from  Borrower  at the  Default  Interest  Rate  shall  be  paid  to the
Participants,  or the Escrow Account at Seller's election, on the basis of their
Percentage Interests, net of a 25 basis point servicing override to be allocated
to  Seller  and paid to  Seller  after  the  Participants  have  received  their
respective allocations of Default Interest Rate interest payment due and payable
under  the  Note  in  accordance  with  the  foregoing   Default  Interest  Rate
distribution; and

                           (v)  All  Payments  in  respect  of  and  applied  to
principal of the Loan received by Seller from Borrower
shall be paid to the Escrow Account on behalf of each  Participant in accordance
with their respective Percentage Interests.

                  b.  RIGHTS  TO FUNDS IN THE  EVENT OF  DEFAULT  BY  PURCHASER.
Notwithstanding the provisions of Section 5(a) hereof,  following any default by
Purchaser and in the event Payments are  insufficient  to pay the  Participant's
their respective  Percentage Interests under both Sections 5(a)(iv) and 5(a)(v),
each  Participant,  or the Escrow Account on behalf of each  Participant,  shall
receive its prorata share,  and only to the extent Seller  accepts,  in its sole
discretion, partial Payments.

                  c.  EFFECTIVE  DATE;  RETURNED  FUNDS.  For  purposes  of  the
calculations  of  amounts  due  to or  from  Purchaser,  Payments  allocated  to
principal and interest of the Loan shall be apportioned between the Participants
as of the time such Payments are received by Seller.  If any Payment received by
Seller and  distributed  or credited to Purchaser is later returned or repaid by
Seller to Borrower or its representative or successor in interest because of the
legal  obligation of Seller to do so,  Purchaser  shall,  upon notice by Seller,
immediately pay to Seller Purchaser's pro rata share of such Payment so returned
or repaid.  All funds held in the Escrow  Account shall be distributed in a time
and manner as reasonably  determined by Seller, but in no event will Payments in
respect of interest or principal payments be held in the Escrow Account for more
than sixty (60) days after the  Termination  Date.  All  interest  or  dividends
earned on the Escrow  Account  shall be  distributed  sixty (60) days after each
quarterly Payment under the Loan by Seller to Purchaser in accordance with their
respective Percentage Interest.

                  d. FORM OF PAYMENTS TO PURCHASER. Amounts payable to Purchaser
hereunder  shall be made by Seller to the  account  of  Purchaser.  Payments  or
credits in accordance  with Sections  5(a),  5(b) and 13 hereof shall be made by
check,  and, made on or before the 60th calendar day after Seller  receives such
amounts.

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         6. ACCESS TO INFORMATION;  INDEPENDENT INVESTIGATION. Seller shall make
its files  relating to Borrower  available  for review by  Purchaser.  Purchaser
acknowledges that prior to its execution hereof it will have independently,  and
without  reliance  upon any  representations  of  Seller,  and  based on (i) the
financial  information  referred  to or set  forth in the Loan  Documents,  (ii)
various  information  provided  to  Purchaser  by  Borrower,   (iii)  its  prior
experience and  communications  with Borrower and the Collateral,  and (iv) such
other  financial  statements,  documents  and  information  as Purchaser  deemed
appropriate,  made and  relied  upon its own credit  analysis  and  judgment  to
execute this Agreement.  Seller shall use its best efforts to give prompt notice
to Purchaser as to any default of which it has actual  knowledge under the terms
of any Loan  Document,  or of any other  matter  which  materially  affects  the
interest of Purchaser in the Loan.

         7. DOCUMENTS AND OTHER AGREEMENTS REGARDING ADMINISTRATION OF THE LOAN.
To facilitate  Seller's  administration  and  enforcement of the Loan on its own
behalf,  and as agent and as applicable,  trustee for  Purchaser,  and to induce
Seller to enter into this Agreement,  Purchaser  acknowledges and agrees that it
is in Purchaser's best interest that (i) Seller hold for itself,  and as trustee
for Purchaser, all executed original copies of the Loan Documents, at its office
at 1301 Capital of Texas Highway,  Suite C-300,  Austin,  Texas 78746;  and (ii)
Seller shall not be required to segregate from its own funds Payments  allocable
to Purchaser hereunder.  Upon written notice from Purchaser,  Seller will permit
Purchaser's agents, at any reasonable time during business hours, to examine the
originals  and/or copies of the Loan Documents which are in Seller's  possession
and  Seller's  books  and  records  relating  to the  Loan;  Seller  will,  upon
Purchaser's request, and at Purchaser's expense,  furnish to Purchaser copies of
such  documents  and  agreements  relating to the Loan as Seller may have in its
possession;  and Seller will use its best efforts,  at no expense to Seller,  to
obtain such other  documents  and  information  from or  concerning  Borrower as
Purchaser may reasonably request.

         8.  SELLER'S  REPRESENTATIONS,  DUTY  OF  CARE  AND  RESPONSIBILITY  TO
PURCHASER.

                  a.  LIMITED  WARRANTIES  AND  REPRESENTATIONS.  Seller  hereby
represents and warrants to Purchaser  that, at the time of closing the Loan, (i)
to the best of Seller's knowledge,  information and belief, no condition or fact
exists which would permit Seller to accelerate the Loan under the Loan Documents
and (ii) the Loan  conforms  in all  respects  to the  requirements  of the Loan
Documents.  Notwithstanding  the  foregoing,  to the extent of its  Contribution
Interest,  each  party  accepts  the  full  risk of  non-payment  of the Loan by
Borrower.  Seller shall not be responsible  for the performance or observance by
Borrower or any Obligor of any of the terms, covenants or conditions of the Loan
Documents  or for  the  inspection  or  policing  of the  Collateral.  Purchaser
specifically  acknowledges that Seller has made no warranty or representation to
Purchaser with respect to the  collectibility of the Loan or with respect to the
solvency,  financial  condition or future financial condition of Borrower or any
Obligor or the genuineness, existence or value of the Collateral.

                  b. DUTY OF CARE.  Seller shall manage and service the Loan and
Escrow Account in accordance with prudent practices,  modified from time to time
as it deems appropriate under the circumstances on its behalf and as independent
contractor  and trustee on behalf of  Purchaser,  and,  except as expressly  set
forth in Section 10 hereof,  Seller  shall be entitled to take all actions  with
respect to the Loan as if there were no other  Participant and as if Seller were
solely  involved in making the Loan.  Seller may act upon any  notice,  consent,
certificate,  cable,  telex or other instrument or writing believed by Seller to
be genuine, and Seller may consult with legal counsel,  independent accountants,
appraisers  and other experts  selected by Seller,  and provided that Seller has
not breached any duty of care as set forth in this  Section  8(b),  Seller shall
not be liable  for any  action  taken or  omitted  to be taken in good  faith by
Seller in accordance with the advice of such counsel, accountants, appraisers or
experts.  Seller shall not be liable to Purchaser under any circumstances except
for actual losses, if any, suffered by Purchaser hereunder which are proximately
caused either by Seller's  negligence,  gross negligence,  willful misconduct or
bad faith or by Seller's violation of the provisions of Section 10 hereof.

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<PAGE>

         9. WAIVERS AND RELEASE OF RIGHTS UNDER LOAN  DOCUMENTS.  Subject to the
affirmative  obligations imposed on Seller in Section 10 hereof, Seller reserves
the  right,  in its  sole  discretion,  at any  time or  times  hereafter,  upon
reasonable prior notice to Purchaser,  (i) to release any of the Collateral in a
manner which would not  materially  and adversely  impair the value of the Loan,
(ii) to modify,  waive or release  any of the terms of the Loan  Documents,  but
only if such  modification,  waiver or release does not materially and adversely
increase  risks  relating  to the  Loan,  (iii)  to  exercise  or  refrain  from
exercising  any powers or rights  which  Seller may have as a matter of law,  or
under, or in respect of the Loan Documents,  including,  without limitation, the
right to enforce the obligations of Borrower or any Obligor, and (v) to take any
other action  allowed  under the Loan  Documents or  applicable  law;  provided,
however,  that Seller shall not have the power or authority  hereunder,  without
the prior written  consent of Purchaser,  to waive any rights against or release
the Obligors. Seller shall not settle any judicial proceeding between it and any
Borrower without  obtaining the prior consent of Purchaser,  which consent shall
not be unreasonably withheld or delayed.

         10.  RESTRICTIONS  ON CHANGES IN FUNDAMENTAL  TERMS OF LOAN  DOCUMENTS.
Unless previously accomplished,  Seller shall at closing on the Loan execute and
deliver and cause  Borrower and each  Obligor to execute and deliver  those Loan
Documents required to be filed,  recorded or otherwise  perfected in such manner
as shall be  necessary  and  appropriate  to fully  secure the real and personal
property  securing the Loan, the rights,  privileges,  powers and benefits which
such Loan  Documents  are  intended  to confer  upon  Seller and  Purchaser.  In
addition,  Seller shall not,  without the written  consent of  Purchaser,  which
consent shall not be unreasonably withheld or delayed, take any of the following
actions:  (i) waive any  default by Borrower  involving  the payment of money to
Seller pursuant to the Loan Documents; (ii) extend the time of payment of any of
Borrower's  obligations with respect to the Loan for more than 60 days after any
due date;  (iii) agree to any change in the rate of interest payable by Borrower
with respect to the Loan (except for reductions  which are  contemplated  by the
Loan Documents);  (iv) release any liens or security  interests which secure the
Loan and relate to equipment,  fixtures or real estate if such release will have
a materially  adverse impact on the  Collateral;  or (v) terminate any financing
statements filed with respect to any of the Collateral.

         11. EXPENSES. Except as set forth herein, all normal costs and expenses
of monitoring and  collecting the Loan shall be borne by Seller.  Upon demand by
Seller,  Purchaser  shall  pay  its  share  of all  Extraordinary  Expenses,  as
hereinafter defined, incurred by Seller in connection with the Loan based on its
Percentage Interest. The term "Extraordinary Expenses" means all costs, expenses
(including,  without  limitation,  attorneys' fees and legal  expenses),  taxes,
costs and  expenses  of  appeals,  and  out-of-pocket  advances  (not  including
ordinary   overhead  expenses  or  salary  expenses  for  Seller's  clerical  or
supervisory  personnel)  which  are  incurred  by  Seller  at any  time or times
hereafter,  in connection  with (i) the  collection or  enforcement of the Loan;
(ii) the acquisition and preservation of the Collateral; (iii) the collection or
enforcement  of Borrower's  liabilities  to Seller,  or the  liabilities  of any
Obligor liable with respect to the Loan; (iv) the operation,  sale,  disposition
or other  realization  upon or the  recovery  of  possession  of the  Collateral
(including  the  collection  of  loss  proceeds  for  destruction   thereof  and
collection  of  awards  for  the  condemnation  thereof);  (v)  the  filing  and
prosecution of a complaint with respect to any of the above matters; or (vi) the
defense of any claim, actual or threatened by Borrower, a receiver or trustee in
bankruptcy for Borrower,  any Obligor or third party,  for, or on account of, or
with respect to the Loan, or the Loan Documents,  whether to recover damages for
business interference, for liabilities for debts of Borrower, including, but not
limited  to,  taxes,  for  alleged  preferences  or  fraudulent  conveyances  or
transfers  received or alleged to have been  received  from Borrower or any such
Obligor as a result of the Loan or in connection  with any Payments,  otherwise,
and shall include the amount of any recovery  from Seller in such  litigation or
proceeding, whether by settlement or pursuant to a judgment (except for any such
recovery  resulting  from the gross  negligence or willful  misconduct of Seller
about which Purchaser had no actual  knowledge or, if known by Purchaser,  about
which Purchaser objected by giving written notice to Seller).

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         12. SELLER'S BOOKS AND RECORDS CORRECT.  Seller's books and records and
all  entries  thereon,  and  statement  received by  Purchaser  from Seller with
respect to the Loan,  will at all times (i) evidence both  Purchaser's  interest
and Seller's interest in the Loan; and, (ii) identify the same as such.

         13.      DEFAULT BY BORROWER.

                  a. In the event  default  occurs in the  payment  to Seller of
principal or interest on the Loan, Seller at its option,  but without obligation
to do so, may re-purchase any or all Purchasers' interests in the Loan.

                  b. In the event  Seller is unable to collect any sums when due
on the Loan,  after  exercising  reasonable  efforts to do so, Seller shall give
notice thereof to Purchaser, and, Seller may, if it determines it is in the best
interest of the Participants,  proceed to foreclose upon the Collateral securing
the Loan by  appropriate  proceedings,  or sale in lieu of  foreclosure.  Seller
shall in no way be required to take title to the  Collateral in its own name. If
Seller  determines  necessary,  Seller  may  create  a  separate  entity  as  an
Extraordinary Expense to take title to the Collateral.

                  c. If Seller or another  designated entity shall acquire title
to any of the Property or Collateral  covered by the Loan Documents after, or in
lieu of, foreclosure, all monies received or collected by it (including, but not
limited to, proceeds of title insurance claims) from the operation of or sale of
such property shall be applied in the following order of priority:

                           (i)   First, to the  reimbursement of  Extraordinary 
Expenses to the extent advanced by the Participants on the basis of their 
respective Percentage Interests;

                           (ii) Second, to the payment of any reconveyance fees,
prepayment penalties on the basis set forth in
clause (iii) of Section 5(a) hereof;

                           (iii) Third, to the payment of the entire amount then
due and payable under the Loan Documents for
accrued  interest in accordance with the terms thereof,  on the basis and in the
manner required by clause (iv) of Section 5(a) hereof (subject to the provisions
of Section 5(b) hereof);

                           (iv)  Fourth,  to  the  payment  of  the  outstanding
principal balance of the Loan in the manner required by
clause (v) of Section 5(a) hereof (subject to the provisions of Section 5(b) 
hereof);

                           (v) Fifth,  to the  payment of all accrued but unpaid
liquidated damages and late fees or charges (other
than interest and loan fees) which shall be paid solely to Seller; and

                           (vi) Sixth,  any surplus  shall be paid to Seller and
Purchaser in accordance with their respective
Percentage  Interests  provided that no Participant  which is then in default of
its  obligations  hereunder  shall in any event  receive  more  than the  unpaid
principal balance it has advanced in respect of the Loan.

                  d. In the event any or all of the Collateral encumbered by the
Loan Documents,  including the Property, are acquired by foreclosure, or by deed
in lieu of  foreclosure,  at a time  when  both  Seller  and  Purchaser  have an
interest in the Loan,  they shall have an undivided  interest in such Collateral
equal to the amount of their then respective  Percentage Interests as tenants in
common.

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<PAGE>

                  e.  In  the  event  Seller  shall  purchase  the  interest  of
Purchaser  pursuant to the  provisions  of this Section 13, the  purchase  price
shall be equal to the sum of: (i) all accrued but unpaid  interest in respect of
principal advanced by the selling party to which such party is entitled and such
other  amounts  accrued  but unpaid to the selling  party  pursuant to Section 5
hereof  through the date of such purchase,  and, (ii) all principal  advanced by
the  selling  party  and  subtracting   from  the  foregoing  sum   unreimbursed
Extraordinary Expenses advanced by the purchasing party.

         14.  SHARING OF SETOFFS AND  COLLATERAL.  Neither  Seller nor Purchaser
shall  set-off  against the amount of its  Percentage  Interest or other  claims
against Borrower, any of Borrower's accounts or funds now or hereafter received.
If Purchaser  shall receive  possession of any of the  Collateral for any reason
whatsoever,  such  Collateral  shall be held by Purchaser as Seller's  agent and
shall,  on demand,  be delivered to Seller.  Any  security  interest  granted by
Borrower to  Purchaser,  or Seller at any time or times  hereafter in all or any
part of the Collateral  described in the Loan Documents  shall be subordinate in
all respects to the interest of Purchaser and Seller  created by this  Agreement
or the Loan  Documents,  regardless of the actual date or order of filing of any
financing  statements or other means of perfection  under applicable law, or the
date of any loan or advance by Seller under the Loan Documents, and if Seller or
Purchaser  shall at any time hereafter hold any lien or security  interest other
than the  Collateral,  then  neither  shall not  commence  or take any action to
enforce that lien or security interest without giving the other thirty (30) days
prior written  notice.  Seller and Purchaser  each hereby  appoints the other as
their  agent for the  purpose of  perfecting  a security  interest in any of the
Collateral  which  may at any  time  come  into  the  possession  of  Seller  or
Purchaser.

         15.   PURCHASER'S   COMPLIANCE   WITH  LAW;  RESALE  OR  ASSIGNMENT  OF
PARTICIPATION; SALE OF ADDITIONAL PARTICIPATIONS.  Purchaser hereby warrants and
represents  to  Seller  that (i)  Purchaser's  execution  and  delivery  of this
Agreement and purchase of the  Participation  does not constitute a violation by
Purchaser of any agreement,  law,  statute,  decree or decisions  (including any
legal  lending  limits)  which is binding on  Purchaser;  and (ii)  Purchaser is
acquiring  the  Participation  for its own  account  and will not sell,  pledge,
encumber or assign its Participation, or any part thereof, to any person without
Seller's  prior written  consent.  Purchaser  may,  without  further  consent of
Seller,  and without releasing  Purchaser from liability  hereunder,  assign its
Participation  to a parent  or a  wholly  owned  subsidiary  of  Purchaser.  Any
prohibited  transfer  of an  interest  in the  Participation  shall  be  void if
attempted without Seller's written consent.  Purchaser may at any time, and from
time  to  time,   enter  into  one  or  more  agreements  with  other  financial
institutions to reparticipate its Participation; provided, however, that (i) any
such  reparticipation  shall not be deemed to be an  assignment  or  transfer of
Purchaser's Participation to such financial institution, (ii) any such financial
institution shall not be and shall not be deemed to be a party hereto or a third
party  beneficiary  hereof and Seller  shall have no duty or  liability  to such
financial institution whatsoever,  (iii) neither Seller's nor Purchaser's duties
hereunder may be assigned or transferred  hereunder,  (iv) such  reparticipation
shall not in any manner whatsoever relieve Purchaser from any of its obligations
or liabilities hereunder,  (v) such reparticipation shall not involved more than
one financial  institution,  which shall have previously engaged in the purchase
or  sale  of  participations  and  to all  of  which  full,  true  and  complete
information  concerning the Loan and Borrower shall have been provided, and (vi)
Purchaser  and each of its  participants  shall each have equal  shares with one
another.  Seller  may  participate,  reparticipate,  sell,  pledge or assign its
interest  in  the  Loan  or  its  Participation  to  any  other  person  without
Purchaser's consent. A Participation shall not be, and shall not be construed to
be, a "security" under any federal or state securities law.

         16.      CERTAIN REPRESENTATIONS AND WARRANTIES.

                  a. By Seller.  Seller  represents and warrants that it is duly
organized and validly existing as a Texas corporation; that it has all power and
authority  and has taken all  actions  necessary  to execute  and  deliver  this

                                       7
<PAGE>

Agreement,  the Loan Documents,  and each document required hereunder;  and that
this Agreement,  the Loan Documents and each document  required  hereunder;  and
that this Agreement,  the Loan Documents and each document  required  hereunder,
when executed and delivered by it, shall constitute the legal, valid and binding
act of Seller, enforceable, each in accordance with its respective terms, except
as limited  by  bankruptcy,  insolvency,  moratorium,  reorganization  and other
similar  laws  affecting  the  rights  of  creditors  or  depositors  of  Seller
generally, and by the exercise of judicial discretion in accordance with general
principles of equity.

                  b. BY PURCHASER. Purchaser represents and warrants that is has
all power and  authority  and has taken all  actions  necessary  to execute  and
deliver this Agreement and each document required  hereunder,  when executed and
delivered by it, shall constitute the legal, valid and binding act of Purchaser,
enforceable,  each in accordance with its respective terms, except as limited by
bankruptcy,  insolvency,  moratorium,  reorganization  and  other  similar  laws
affecting the rights of creditors or depositors of Purchaser  generally,  and by
the exercise of judicial  discretion  in accordance  with general  principles of
equity.

         17.      DEFAULTS.

                  a. BY  SELLER.  It shall be an event of default on the part of
Seller if: (i) Seller has failed to observe  and  perform  each and every one of
the terms,  covenants,  promises and  agreements  on its part to be observed and
performed under this Agreement;  or (ii) any  representation or warranty made by
Seller  shall prove untrue in any  material  respect;  or (iii) there shall be a
filing by or  against  Seller of a  petition  in  bankruptcy  or  insolvency  or
reorganization or the appointment of a receiver or trustee due to insolvency, or
the making by Seller of any  assignment  for the  benefit of  creditors,  or the
filing of a petition or  arrangement  by Seller,  or in the event of any similar
act or  occurrence,  Seller  admits in writing its inability to pay its debts as
they mature; or (iv) Seller shall fail to promptly remit pursuant to Sections 4,
5 and 13 all sums payable hereunder.

                  b. BY  PURCHASER.  It shall be an event of default on the part
of Purchaser if: (i) Purchaser shall have failed to observe and perform each and
every one of the terms,  covenants,  promises and  agreements  on its part to be
observed and  performed  under this  Agreement;  or (ii) any  representation  or
warranty made by Purchaser shall prove untrue in any material respect;  or (iii)
there shall be a filing by or against  Purchaser of a petition in  bankruptcy or
insolvency or  reorganization or the appointment of a receiver or trustee due to
insolvency,  or the making by  Purchaser  of an  assignment  for the  benefit of
creditors,  or the filing of a petition or arrangement  by Purchaser,  or in the
event  of any  similar  act or  occurrence,  Purchaser  admits  in  writing  its
inability  to pay its debts as they  mature;  or (iv)  Purchaser  shall  fail to
promptly remit pursuant to Sections 3(a) or 11 all sums payable hereunder.

         18.      REMEDIES.

                  a. BY PURCHASER.  Upon the  occurrence of any event of default
by Seller,  Purchaser shall give Seller notice thereof and Seller shall have (A)
with  respect to a default  arising  under  clause (i) or (ii) of Section  17(a)
hereof  thirty (30) days within  which to cure such  default or within  which to
commence  such  judicial or other  appropriate  action as will  efficiently  and
effectively remedy such default; and (B) with respect to a default arising under
clause  (iv) of Section  17(a)  hereof ten (10) days  within  which to cure such
default; and (C) with respect to a default arising under clause (iii) of Section
17(a) hereof,  sixty (60) days within which to obtain the dismissal or discharge
of any such  proceeding.  Upon  failure  by Seller  to timely  cure any event of
default by it, any and all Purchasers shall have the option to: (i) purchase the
interest  of Seller at the  purchase  price set forth in Section  13(e) in their
prorata  share;  (ii) with  respect to (C) of this Section  18(a)  above,  after
expiration of the sixty day period,  any and all Purchasers shall  automatically
succeed to all rights, titles, status and responsibilities which Seller may have
regarding the holding and servicing of the Loan,  may exercise all of the powers

                                       8
<PAGE>

hereinabove granted to Seller, have the option to designate any one Purchaser on
behalf of all  Purchasers  or any person or firm in its  discretion  to exercise
such powers on behalf of all  Purchasers  and,  in such event,  the Loan and all
books and records thereof shall be delivered to a Purchaser or its designee,  as
applicable,  together  with  necessary  or  proper  assignments,  transfers  and
documents of  authority;  and/or  (iii)  exercise any and all of the remedies to
which  Purchaser  may be entitled at law or equity.  Seller  hereby  indemnifies
Purchaser from any and all loss, damage or expenses (including,  but not limited
to reasonable attorneys' fees) which Purchaser may sustain or incur by reason of
or in  consequence  of the exercise of its remedies upon any event of default by
Seller  pursuant  to this  Section  18(a) other than  direct  costs  incurred in
connection with any purchase of Seller's interest.

                  b. BY SELLER.  Upon the  occurrence of any event of default by
Purchaser,  Seller shall give Purchaser  notice thereof and Purchaser shall have
(A) with respect to a default  arising under clause (i) or (ii) of Section 17(b)
hereof  thirty (30) days within  which to cure such  default or within  which to
commence  such  judicial or other  appropriate  action as will  efficiently  and
effectively remedy such default; and (B) with respect to a default arising under
clause  (iv) of Section  17(b)  hereof ten (10) days  within  which to cure such
default; and (C) with respect to a default arising under clause (iii) of Section
17(b) hereof,  sixty (60) days within which to obtain the dismissal or discharge
of any such  proceeding.  Upon  failure by Purchaser to timely cure any event of
default by it,  Seller  shall have the option to: (i)  purchase  the interest of
Purchaser at the purchase price set forth in Section 13(e); (ii) with respect to
(C) of this  Section  18(b)  above,  after  expiration  of the sixty day period,
Seller  shall  automatically   succeed  to  all  rights,   titles,   status  and
responsibilities which Purchaser may have regarding the holding and servicing of
the Loan, may exercise all of the powers hereinabove granted to Purchaser,  have
the  option to  designate  itself or any  person  or firm in its  discretion  to
exercise  such powers  and,  in such  event,  the Loan and all books and records
thereof shall be delivered to Seller or its designee,  as  applicable,  together
with  necessary or proper  assignments,  transfers  and  documents of authority;
and/or  (iii)  exercise  any and all of the  remedies  to  which  Seller  may be
entitled at law or equity.  Purchaser hereby indemnifies Seller from any and all
loss, damage or expenses  (including,  but not limited to reasonable  attorneys'
fees) which  Seller may sustain or incur by reason of or in  consequence  of the
exercise of its remedies upon any event of default by Purchaser pursuant to this
Section 18(b) other than direct costs  incurred in connection  with any purchase
of Purchaser's interest.

         19. NO WAIVER OR AMENDMENT UNLESS IN WRITING. No waiver or modification
of any provision of this Agreement nor any  termination of this Agreement  shall
be effective unless in writing and signed by the party against which the waiver,
modification  or termination  is sought to be enforced,  nor shall any waiver be
applicable except in the specific instance for which it is given.

         20. NOTICE.  All notices,  demands,  requests,  consents,  approvals or
other communications  (collectively,  "Notices") desired or required to be given
under  this  Agreement  shall be in  writing,  and,  any law or  statute  to the
contrary notwithstanding,  shall be effective for any purpose if given or served
by prepaid certified or registered mail, return receipt requested,  addressed as
follows.  If to Purchaser to: to the address shown on the signature page hereto.
If to Seller, to: American Physicians Service Group, Inc., 1301 Capital of Texas
Highway,  Suite C-300, Austin, Texas 78746,  Attention:  Duane Boyd. All Notices
shall be deemed given or served on the earlier to occur of actual receipt or the
second  business day after being  deposited in the United  States mail,  postage
prepaid in the manner  previously  specified.  Any party to this  Agreement  may
change the address to which  Notice  shall be  delivered to him or it and his or
its  representatives  by notice in  accordance  with this Section 20. As used in
this  Agreement,  the term  "business day" shall mean any day on which Seller is
open for business with the general public.

                                       9
<PAGE>

         21.  DESCRIPTIVE  HEADINGS.  The  descriptive  headings  of the several
Articles and Sections of this  Agreement are inserted for  convenience  only and
shall  not be  deemed  to  affect  the  meaning  or  construction  of any of the
provisions hereof.

         22. EXPENSES OF  ENFORCEMENT.  In the event this Agreement is placed in
the hands of an attorney for  enforcement,  the prevailing party shall reimburse
the non-prevailing party for all reasonable expenses incurred thereby, including
reasonable costs and attorneys' fees.

         23. ENTIRE UNDERSTANDING;  COUNTERPARTS. This Agreement constitutes the
entire  agreement and supersedes all prior agreements and  understandings,  both
written and oral,  among the parties with respect to the subject  matter  hereof
and may be executed by one or more of the parties in several counterparts,  each
of which shall be deemed an original  with respect to the party so signing,  but
all of which together shall constitute one and the same instrument.

         24. SUCCESSORS; GOVERNING LAW. This Agreement shall be binding upon and
shall inure to the benefit of the legal representatives,  successors and assigns
of the  respective  parties  hereto and shall be governed by and  interpreted in
accordance with the law of the State of Texas.

                                       10

<PAGE>


                                 SIGNATURE PAGES
                             PARTICIPATION AGREEMENT




         IN WITNESS  WHEREOF,  the  parties  have  executed  this  Participation
Agreement as of the date first set forth herein.

                                    "Seller"

                                     AMERICAN PHYSICIANS SERVICE GROUP, INC., 
                                     a Texas corporation


                                     By:                                        
                                     Name:                                      
                                     Title:                                     


                                    "Purchaser"


Address for Notice                                                              
c/o American Physicians Service Group, Inc.         /s/ Richard J. Clark
1301 Capital of Texas Hwy.                          ---------------------
Suite C-300                                             Richard J. Clark
Austin, Texas  78746


Address for Notice:                              DUANE K. BOYD, JR. TRUST
c/o American Physicians Service Group, Inc.
1301 Capital of Texas Hwy.
Suite C-300                                      By /s/ Dunane K. Boyd, Jr.     
                                                 ---------------------------    
Austin, Texas  78746                             Duane K. Boyd, Jr., Trustee


Address for Notice:                                                             
c/o American Physicians Service Group, Inc.      /s/ Robert L. Myer
1301 Capital of Texas Hwy.                       -------------------
Suite C-300                                          Robert L. Myer
Austin, Texas  78746


Address:                                         J. A. MURPHY DESCENDANTS' TRUST
c/o American Physicians Service Group, Inc.
1301 Capital of Texas Hwy.                       By:  Bank of Bermuda, Trustee
Suite C-300
Austin, Texas  78746                             By: /s/ Robert C H Masters
                                                 Name:   Robert C.H. Masters
                                                 Title:  Trust Manager

                                      S-1
<PAGE>

Address:                                                                        
c/o American Physicians Service Group, Inc.      /s/ William A. Searles
1301 Capital of Texas Hwy.                       -----------------------
Suite C-300                                          William A. Searles
Austin, Texas  78746


Address:                                                                        
c/o American Physicians Service Group, Inc.      /s/ Kenneth S. Shifrin
1301 Capital of Texas Hwy.                       -----------------------
Suite C-300                                          Kenneth S. Shifrin
Austin, Texas  78746


Address:                                                                        
c/o American Physicians Service Group, Inc.      /s/ Samuel Granett
1301 Capital of Texas Hwy.                       -------------------
Suite C-300                                          Saumel Granett
Austin, Texas  78746


Address:                                                                        
c/o American Physicians Service Group, Inc.      /s/ William H. Hayes
1301 Capital of Texas Hwy.                       ---------------------
Suite C-300                                          William H. Hayes
Austin, Texas  78746


Address:                                                                        
c/o American Physicians Service Group, Inc.      /s/ H. J. Howard III
1301 Capital of Texas Hwy.                       ---------------------
Suite C-300                                          H. J. Howard III
Austin, Texas  78746

                                      S-2


<PAGE>





                                    EXHIBIT A

                                  REAL PROPERTY

Tract 1: A 0.8800 acre tract now known as Lot 4, Block B, New City Block  17305,
OAKWELL FARMS,  UNIT 7B, PLANNED UNIT  DEVELOPMENT,  City of San Antonio,  Bexar
County, Texas, according to plat thereof recorded in Volume 9535, Page 203, Deed
and Plat Records of Bexar County, Texas.

Tract 2: All that certain tract or parcel of land, containing 1.6756 acres, more
or less, being out of the Elijah Alcorn Survey, Abstract No. l, situated in Fort
Bend County,  Texas.  Said 1.6756 acres being all of Commercial  Reserve "F" and
part of Commercial Reserve "D" of the Replat of the Amending Plat for Edgewater,
Section  Two (2),  according  to the map or plat  thereof  recorded in Slide No.
1353/A of the Plat Records of Fort Bend County,  Texas.  Said 1.6756 acres being
more particularly described by metes and bounds in Exhibit "A-1" attached hereto
and  made a part  hereof;  together  with  those  nonexclusive  easement  rights
described in that  Ingress and Egress  Easement,  recorded in Volume 2364,  Page
1480 of the County Clerk Official Records of Fort Bend County,  Texas, and those
easement  rights reserved in that deed recorded in Volume 2364, Page 1452 of the
County Clerk Official Records of Fort Bend County, Texas.

Tract 3: A tract or parcel of land being 0.2008 acres, more or less,  located in
the Elijah Alcorn League Survey, Abstract No. l, being out of Commercial Reserve
"D" of the Replat of the Amending Plat for Edgewater, Section Two (2), according
to the map or plat thereof  recorded in Slide No.  1353/A of the Plat Records of
Fort Bend County, Texas. Said 0.2008 acres being more particularly  described by
metes and bounds in Exhibit "B-1" attached hereto and made a part hereof.

Tract 4: Lot 2A, Block "B", of RESUBDIVISION OF LOT 2, BLOCK "B" MILWOOD SECTION
SIX, a subdivision  in Travis  County,  Texas,  according to the map or plat, of
record in Volume 95, Page 231, of the Plat Records of Travis County, Texas.

Tract 5: Lot 2B, Block "B", of RESUBDIVISION OF LOT 2, BLOCK "B" MILWOOD SECTION
SIX, a subdivision  in Travis  County,  Texas,  according to the map or plat, of
record in Volume 95, Page 231, of the Plat Records of Travis County, Texas.



<PAGE>


                                    EXHIBIT B


1.       Promissory Note (Line of Credit)
2.       Deed of Trust (Security Agreement, Assignment of Leases and Rents and
                        Financing Statement)
3.       Security Agreement
4.       Financing Statement



<PAGE>


                                    EXHIBIT C

                            PARTICIPATION CERTIFICATE



         This Participation  Certificate  certifies that  ("Participant") has an
interest  of the  following  percentage  and  equal to the  given  amount in the
subject loan which has a principal balance as shown, made by American Physicians
Service  Group,  Inc., a Texas  corporation  ("Seller")  which is described in a
certain  Participation  Agreement  between  Participant and Seller dated March ,
1998 ("Agreement").


Percentage Interest     Participant's Loan Amount      Current Principal Balance

                                                                                



         The Participant shall receive for its Percentage  Interest in the Loan,
the Percentage  Amount listed above of any principal paid or prepaid pursuant to
the Agreement.


Dated:                               American Physicians Service Group, Inc.,
                                              a Texas corporation


                                     By:                                        
                                     Name:                                      
                                     Title:                                     


<PAGE>


                                    EXHIBIT D

                          PURCHASER PERCENTAGE SCHEDULE



   Purchaser's Name                                          Percentage Interest

   Richard J. Clark                                                  .50%
   Duane K. Boyd, Jr. Trust                                         2.50%
   Robert L. Myer                                                   2.25%
   J. A. Murphy Descendants' Trust                                  1.00%
   William A. Searles                                               1.30%
   Kenneth S. Shifrin                                               1.50%
   Samuel Granett                                                    .50%
   William H. Hayes                                                 1.00%
   H. J. Howard III                                                  .25%