THIRD AMENDMENT TO LOAN AGREEMENT AND GUARANTOR CONSENT


      THIS  THIRD  AMENDMENT  TO  LOAN  AGREEMENT AND GUARANTOR CONSENT (the
"Third Amendment") is made as of September 17, 1998, among HALLMARK FINANCE
CORPORATION,  referred  to  herein  as  the    Borrower,  HALLMARK FINANCIAL
SERVICES,  INC.,  HALLMARK  CLAIMS  SERVICE, INC., AMERICAN HALLMARK GENERAL
AGENCY,  INC.,  ACO  HOLDINGS,  INC.,  and  AMERICAN HALLMARK AGENCIES, INC.
(collectively,  the "Guarantors"), and NATIONSBANK, N.A., a national banking
association  previously  known  as  NationsBank  of Texas, N.A., referred to
herein as the "Lender". 

                              R E C I T A L S:

      A.    The  Borrower  and  the  Lender  are parties to a Loan Agreement
dated as of March 17, 1997 (the "Original Loan Agreement"). 

      B.    The  Guarantors  executed  Guaranty  Agreements  in favor of the
Lender pursuant to the Original Loan Agreement.

      C.    The  Original  Loan  Agreement has been amended pursuant to that
certain  First Amendment to Loan Agreement and Guarantor Consent (the "First
Amendment")  dated as of July 31, 1997, by that certain Second Amendment to
Loan  Agreement  and  Guarantor Consent (the "Second Amendment") dated as of
October  1,  1997,  among  the Borrower, the Guarantors, and the Lender (the
Original  Loan  Agreement,  as  amended  by  the First Amendment, the Second
Amendment,  and  the  Third  Amendment  is  hereinafter  called  the   "Loan
Agreement").

      D.    The  Expiration  Date  as  defined in the Loan Agreement means 2
p.m.  (Dallas,  Texas  time)  on  September  17,  1998  and the Borrower has
requested  that Lender amend the Loan Agreement to extend such maturity date
to 2 p.m. (Dallas, Texas time) on November 1, 1998 but that all other terms,
conditions  and covenants of the Loan Agreement continue unaffected.  Lender
is  willing  to amend the Loan Agreement to so extend such maturity date but
subject to the terms and conditions set forth below.

      E.    Each of the Guarantors desires to consent to such amendment.

      NOW,  THEREFORE,  in  consideration of the premises and for other good
and  valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

      1.    Same Terms.  All terms used herein which are defined in the Loan
Agreement  have the same meanings when used herein unless the context hereof
otherwise  requires  or  provides.   In addition, all references in the Loan
Documents to the "Agreement" mean the Original Loan Agreement, as amended by
the  First  Amendment,  the Second Amendment and by this Third Amendment, as
the same are hereafter amended from time to time.

      2.    Amendment  to  Loan Agreement.   Effective as of the date above,
the Loan Agreement is hereby amended as follows:

            (a)   Section  1.0  is  amended  to  delete  the  definition  of
 "Expiration  Date"   contained therein and substituting in lieu thereof the
following:
<PAGE>
                   "Expiration  Date"   means 2 p.m. (Dallas, Texas time) on
November 1, 1998 or any other date on which the Loans become due and payable
pursuant to the terms of this Agreement.

      3.    Certain  Representations.      The  Borrower  and  each  of  the
Guarantors,  jointly  and severally, represents and warrants that, as of the
date hereof:            

            (a)   the  representations  and warranties contained in the Loan
Agreement  as  amended  hereby  are  true  and correct on and as of the date
hereof as made on and as of such date;

            (b)   no  event has occurred and is continuing which constitutes
a Default or an Event of Default;

            (c)   The  Borrower represents and warrants that, as of the date
hereof:  (i) the Borrower has full power and authority to execute this Third
Amendment, and this Third Amendment constitutes the legal, valid and binding
obligation  of the Borrower enforceable in accordance with its terms, except
as  enforceability  may  be  limited  by  applicable bankruptcy, insolvency,
reorganization, moratorium, and other similar laws affecting the enforcement
of creditors' rights generally; and (ii) no authorization, approval, consent
or other action by, notice to, or filing with, any governmental authority or
other  person is required for the execution, delivery and performance by the
Borrower of this Third Amendment.

            (d)   Each  Guarantor  represents  and  warrants that, as of the
date  hereof:    (i)  such Guarantor has full power and authority to execute
this  Third Amendment, and this Third Amendment constitutes the legal, valid
and  binding obligation of such Guarantor enforceable in accordance with its
terms,  except  as  enforceability  may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other similar laws affecting the
enforcement  of  creditors'  rights  generally;  and  (ii) no authorization,
approval,  consent  or  other  action  by,  notice  to,  or filing with, any
governmental  authority  or  other  person  is  required  for the execution,
delivery and performance by such Guarantor of this Third Amendment.

      4.    Guarantors'   Acknowledgment.    By  signing  below, each of the
Guarantors:  (i)  acknowledges  and  consents to the execution, delivery and
performance  of  this  Third  Amendment; (ii) agrees that its obligations in
respect  of its Guaranty are not released, modified, impaired or affected in
any  manner  by  this  Third Amendment or any of the provisions contemplated
herein;  and (iii) acknowledges that it has no claims or offsets against, or
defenses or counterclaims to, its Guaranty.

      5.    Conditions  of  Effectiveness.    This  Third Amendment shall be
effective  as  of  the  date  and  year  first above written, subject to the
following:

            (a)   The  Lender  shall  have  received  this  Third  Amendment
executed by Borrower and each Guarantor;

            (b)   The Lender shall have received the Renewal Promissory Note
executed  by  Borrower  and satisfactory in form and content to Lender, such
Renewal  Promissory  Note  being  in  renewal  and  extension  of the unpaid
principal balance of the Promissory Note dated March 17, 1997;
<PAGE>
            (c)   The  Lender shall have received certificates of incumbency
and  containing specimen signatures of all officers of the Borrower and each
of  the Guarantors who will be authorized to execute or attest to any of the
documents  contemplated  hereby  on  behalf  of the Borrower and each of the
Guarantors  executed  by  the President and by the Secretary of the Borrower
and each of the Guarantors on the date hereof, and such certification may be
conclusively  relied  upon by the Lender until the Lender receives notice in
writing  from  the  Borrower  and each of the Guarantors to the contrary and
providing a substitute certificate conforming to the requirements hereof;

            (d)   All  of the conditions precedent set forth in Section 4.0,
Conditions  Precedent  to  Subsequent  Loans, of the Loan Agreement shall be
satisfied; and

            (e)   The  Lender  shall  have  received  such  other documents,
opinions, certifications, consents, waivers, agreements, and evidence as the
Lender may reasonably request.

      6.    Limitation  on  Agreements.   The modifications set forth herein
are  limited  precisely  as  written  and  shall  not be deemed: (a) to be a
consent  under or a waiver of or an amendment to any other term or condition
in  the  Loan  Agreement  or  any  of  the  other  Loan Documents; or (b) to
prejudice  any  right  or rights which the Lender now has or may have in the
future  under  or  in  connection with the Loan Agreement and the other Loan
Documents, each as amended hereby, or any of the other documents referred to
herein  or therein. This Third Amendment constitutes a Loan Document for all
purposes. The Loan Agreement, as amended by this Third Amendment, and all of
the  other  Loan Documents executed in connection therewith, shall remain in
full force and effect and are each hereby ratified and confirmed.

      7.    ARBITRATION.    ANY  CONTROVERSY  OR  CLAIM BETWEEN OR AMONG THE
PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING
TO  THIS  AGREEMENT  OR ANY RELATED AGREEMENTS OR INSTRUMENTS, INCLUDING ANY
CLAIM  BASED  ON  OR  ARISING  FROM  AN ALLEGED TORT, SHALL BE DETERMINED BY
BINDING  ARBITRATION  IN  ACCORDANCE WITH THE FEDERAL ARBITRATION ACT (OR IF
NOT  APPLICABLE,  THE  APPLICABLE  STATE  LAW).    THE RULES OF PRACTICE AND
P R OCEDURE  FOR  THE    ARBITRATION  OF  COMMERCIAL  DISPUTES  OF  JUDICIAL
ARBITRATION  AND MEDIATION SERVICES, INC. (J.A.M.S.), AND THE  SPECIAL RULES
SET FORTH BELOW.  IN THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL
CONTROL.    JUDGMENT  UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT
HAVING  JURISDICTION.    ANY  PARTY  TO  THIS AGREEMENT MAY BRING AN ACTION,
INCLUDING  A  SUMMARY  OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY
CONTROVERSY  OR  CLAIM  TO  WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING
JURISDICTION OVER SUCH ACTION.

            A.    Special  Rules.  THE ARBITRATION SHALL BE CONDUCTED IN THE
CITY  OF  THE  BORROWER'S DOMICILE AT TIME OF THIS AGREEMENT'S EXECUTION AND
ADMINISTERED  BY  J.A.M.S.  WHO  WILL  APPOINT AN ARBITRATOR; IF J.A.M.S. IS
UNABLE  OR  LEGALLY  PRECLUDED  FROM ADMINISTERING THE ARBITRATION, THEN THE
AMERICAN  ARBITRATION ASSOCIATION WILL SERVE.  ALL ARBITRATION HEARINGS WILL
BE  COMMENCED  WITHIN  90  DAYS  OF THE DEMAND FOR ARBITRATION; FURTHER, THE
ARBITRATOR  SHALL  ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE
COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS.

            B.    Reservation of Rights.  NOTHING IN THIS AGREEMENT SHALL BE
DEEMED  TO: (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES
OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS AGREEMENT; OR (II)
BE  A WAIVER BY THE BANK OF THE PROTECTION  AFFORDED TO IT BY 12 U.S.C. SEC.
<PAGE>
91  OR  ANY  SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF
THE BANK HERETO: (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED
TO)  SET  OFF;  OR  (B)  TO  FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY
COLLATERAL;  OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES
SUCH  AS  (BUT  NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE
APPOINTMENT  OF  A  RECEIVER.   THE BANK MAY EXERCISE SUCH SELF HELP RIGHTS,
FORECLOSE  UPON  SUCH  PROPERTY,  OR  OBTAIN  SUCH  PROVISIONAL OR ANCILLARY
REMEDIES  BEFORE, DURING OR AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING
BROUGHT  PURSUANT  TO  THIS  AGREEMENT.   NEITHER THIS EXERCISE OF SELF HELP
REMEDIES  NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR
PROVISIONAL  OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF
ANY  PARTY,  INCLUDING  THE  CLAIMANT  IN  ANY SUCH ACTION, TO ARBITRATE THE
MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES.

      8.    Entirety,  Etc.   This instrument together with all of the other
Loan  Documents  embodies  the  entire  agreement between the parties.  THIS
AGREEMENT  AND ALL OF THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN  THE  PARTIES  AND  MAY  NOT  BE  CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS  OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

      IN  WITNESS  WHEREOF,  the  parties  hereto  have  executed this Third
Amendment  to  Loan  Agreement to be effective as of the date and year first
above written.
                                    
                                    BORROWER:

Address:                            HALLMARK FINANCE CORPORATION

14651 Dallas Parkway
Suite 900
Dallas, Texas  75240                By:
                                    Name:
                                    Title:



                                    GUARANTORS:

Address:                            HALLMARK FINANCIAL SERVICES, INC.

14651 Dallas Parkway
Suite 900
Dallas, Texas  75240                By:
                                    Name:
                                    Title:


Address:                            HALLMARK CLAIMS SERVICE, INC. 

14651 Dallas Parkway
Suite 900
Dallas, Texas  75240                By:
                                    Name:
                                    Title:


<PAGE>
Address:                            AMERICAN HALLMARK GENERAL
                                    AGENCY, INC.
14651 Dallas Parkway
Suite 900
Dallas, Texas  75240                By:
                                    Name:
                                    Title:


Address:                            ACO HOLDINGS, INC.

14651 Dallas Parkway
Suite 900
Dallas, Texas  75240                By:
                                    Name:
                                    Title:


Address:                            AMERICAN HALLMARK AGENCIES,
                                    INC.
14651 Dallas Parkway
Suite 900
Dallas, Texas  75240                By:
                                    Name:
                                    Title:

                                    LENDER:

Address:                            NATIONSBANK OF TEXAS, N.A.

NationsBank Plaza
900 Main Street, 7th Floor
Dallas, Texas  75202                By:                                    
                                    Susan M. Raher, Senior Vice President