EXHIBIT 10 (bq)


                         THIRD MODIFICATION AGREEMENT

      This MODIFICATION AGREEMENT ("Modification")  is entered into this  1st
 day of November, 2002  by and among Hallmark  Finance Corporation as  seller
 (the "Seller"), and FPF, Inc., ("FPF").

 WITNESSETH;

      WHEREAS, pursuant to that certain  Sale and Assignment Agreement  dated
 as of  November  18,  1999  by  and  among  the  FPF  and  the  Seller  (the
 "Agreement"), FPF agrees  to purchase, and  Seller agrees  to sell  Eligible
 Premium; and

      WHEREAS,  Seller  and  FPF  have  entered  into  those  certain   other
 Modifications dated June 27, 2001 and December 11, 2001; and.

      WHEREAS, all capitalized terms used herein and not otherwise defined in
 the Agreement shall have the meaning set forth herein; and

      WHEREAS, Seller and  FPF desire to  modify and amend  the Agreement  as
 hereinafter set forth.

      NOW, THEREFORE,  in  consideration  of the  covenants,  conditions  and
 agreements contained in the  Agreement, the parties  hereto intending to  be
 legally bound, hereby agree as follows:

      1.   Term.  The term "Term" as  defined in Schedule A of the  Agreement
           is hereby amended in its entirety to read as follows:

                   "Term" means the Term of this Agreement commencing on  the
                   Effective Date and, if not earlier terminated as  provided
                   in  this Agreement, all new  sales shall terminate on  May
                   1,  2004.   Upon written consent  of both  Seller and  FPF
                   prior to May  1, 2004, the term may be extended to May  1,
                   2005.

      2.   Commitment Fee.  The term "Commitment Fee" as defined in  Schedule
           A of the Agreement  is hereby amended in  its entirety to read  as
           follows:

                   "Commitment  Fee" shall mean a  commitment fee payable  to
                   FPF in  an amount equal to the  product of (a) the  Unused
                   Portion and (b) (i) if such Unused Portion is equal to  or
                   less  than 20% of the  Maximum Purchase Commitment,  0.25%
                   per annum and (ii) if such Unused Portion is greater  than
                   20% of the Maximum Purchase Commitment, 0.50% per annum.

      3.   Interest Rate:  The term "Interest Rate" as defined in Schedule  A
           of the Agreement  is hereby  amended in  its entirety  to read  as
           follows:

                   "Interest Rate" shall be the greater of:

                   a.)  the Floor Rate of 5.75%; or

                   b.)  the Prime  Rate plus 1.00% per  annum, so long as  an
                        Insurance Company  Downgrade Event has not  occurred;
                        or

                   c.)  the  Prime  Rate  plus  1.50%  per  annum  upon   and
                        following  the  occurrence of  an  Insurance  Company
                        Downgrade Event.

      4.   Insurance Company Downgrade  Event.  The  term "Insurance  Company
           Downgrade Event" is hereby defined as follows:

                   "Insurance  Company   Downgrade  Event"  shall  mean   the
                   occurrence  of Dorinco  Reinsurance Company's  Standard  &
                   Poor's or A.M.  Best rating falling below "A" or  American
                   Hallmark  Insurance Company  of Texas's  A.M. Best  rating
                   falling below "C+" (including any "NR" designation).

      5.   Sale of Conveyed Property.    The condition described in Section 2
           (c) (ii) of  the Agreement is  hereby amended in  its entirety  to
           read as follows:

                   (ii)  No  Material  Adverse Change  or  Insurance  Company
                      Downgrade Event has occurred;

      6.   Termination Fee:    The  term  "Termination  Fee"  as  defined  in
           Schedule A of the Agreement is  hereby amended in its entirety  to
           read as follows:

                   "Termination  Fee" shall be  $30,000 if Seller  terminates
                   this Agreement  pursuant to Section 3  on or prior to  May
                   1,  2003.  If  such termination occurs  after May 1,  2003
                   but prior to  November 1, 2003, the Termination Fee  shall
                   be  $15,000.    No Termination  Fee  shall  be  due  after
                   November 1, 2003.

      7.   Insurance Company Concentration Limits:  The concentration  limits
           described in  Schedule B  Section A1  of the  Agreement is  hereby
           amended in its entirety to read as follows:

                   For  Eligible Insurance  Companies  covered by  the  Texas
                   insurance guaranty  fund, the following allocations  shall
                   apply:

                                                          Maximum % of
                    Insurance Company's                 Eligible Premium
                    A.M. Best Rating                    Rec. per Carrier
                    -------------------                 ----------------
                    "A" or better                           no limit

                    "A-" or "B++"                            25.0%

                    "B+", "B" or "B-"                         5.0%

                    All others*                               0.0%

                    *Note:  under "all others" above, "C," "D," "E," "F,"
                                 "N/F," "S" are not eligible.


                   Exception:  The financed policies are issued by State  and
                   County  Mutual Fire Insurance Company  ("S&C").  S&C  acts
                   as  a "fronting"  company and cedes  100% of  the risk  to
                   American  Hallmark Insurance Company  ("AHIC") via a  100%
                   Quota Share Reinsurance Agreement between S&C and AHIC.

                   To  administer this sales  program, S&C  has also  entered
                   into  a  General Agency  Agreement  with an  affiliate  of
                   AHIC,  Brokers   General,  Inc.  now  known  as   American
                   Hallmark General Agency, Inc. ("AHGA").  AHGA acts as  the
                   administrator of  the program, appoints agents,  processes
                   policies,  returns unearned premium  upon cancellation  of
                   policies,  including financed  policies, and  settles  and
                   pays claims.

                   AHIC  in turn  reinsures  50-75% of  its risk  related  to
                   these   policies  through   Dorinco  Reinsurance   Company
                   ("Dorinco").   The reinsurance  is accomplished through  a
                   Quota Share Retrocession Agreement.

                   Dorinco  has also entered into  a Guaranty Agreement  with
                   S&C,  providing  for  direct performance  and  payment  by
                   Dorinco  in the  event AHIC fails  to perform  any of  its
                   duties and obligations or fails to make timely payment  to
                   S&C.

                   Finance  contracts originated  under the  above  described
                   structure shall  be eligible.  Further, if AHIC  maintains
                   reinsurance  treaties that  accept a  quota share  of  the
                   insurance risk and guarantee the full performance  similar
                   to those currently existing with companies that are  rated
                   "A"  or better  by A.M.  Best and  have a  Financial  Size
                   Category  Class  of  V there  shall  be  no  concentration
                   limitations.

      8.  Agreement Ratification:   All  terms, conditions  and covenants  of
          the Agreement, not otherwise  modified herein, are hereby  ratified
          and confirmed and this  Modification, when executed by the  parties
          hereto, shall  become a part  of the Agreement  and shall have  the
          same force and  effect as if the  terms and conditions hereof  were
          originally incorporated  in the  Agreement prior  to the  execution
          thereof.

      IN WITNESS  WHEREOF, this  Modification Agreement  is executed  by  the
 undersigned parties as of the day and year first set forth above.


                               SELLER:

                               HALLMARK FINANCIAL CORPORATION

                               By:  /s/ Linda H. Sleeper
                               -------------------------
                               Name:  Linda H. Sleeper
                               Title: President & Chief Executive Officer


                               FPF, INC.

                               By:  /s/ Bruce I. Lundy
                               -----------------------
                               Name:  Bruce I. Lundy
                               Title: President