Document:

EXHIBIT 4.1

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                           PAAC PURCHASE AGREEMENT

                                 by and among

                      HALLMARK FINANCIAL SERVICES, INC.,

                                     and

                  SAMUEL M. CANGELOSI, DONATE A. CANGELOSI,

                              and CAROL A. MEYER

                        DATED AS OF NOVEMBER 23, 2005

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                This Agreement is subject to arbitration under
                  the rules and regulations of the American
                     Arbitration Association as provided
                             in Article X hereof.

                              TABLE OF CONTENTS

                                                                     Page
                                                                     ----
 ARTICLE I TERMS OF THE PURCHASE AND SALE.........................     1
      Section 1.1   Sale of Shares................................     1
      Section 1.2   Purchase Price................................     1
      Section 1.3   Payment of the Purchase Price.................     1
      Section 1.4   Effective Date of Purchase and Sale...........     2

 ARTICLE II CLOSING ..............................................     2
      Section 2.1   Closing.......................................     2
      Section 2.2   Deliveries by the Sellers.....................     2
      Section 2.3   Deliveries by Purchaser.......................     3
      Section 2.4   Simultaneous Deliveries.......................     3

 ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLERS............     3
      Section 3.1   Title to Shares...............................     3
      Section 3.2   Power and Authority...........................     3
      Section 3.3   Execution and Validity........................     3
      Section 3.4   No Conflict; Consents.........................     4
      Section 3.5   Company Organization; Good Standing; Delivery
                    of Charter Documents..........................     4
      Section 3.6   Corporate Power and Authority.................     4
      Section 3.7   Capitalization................................     4
      Section 3.8   No Undisclosed Liabilities....................     4
      Section 3.9   Sufficiency and Condition of and Title to the
                    Company Assets................................     4
      Section 3.10  Real and Personal Property....................     5
      Section 3.11  Compliance with Laws..........................     5
      Section 3.12  Insurance.....................................     6
      Section 3.13  Contracts.....................................     6
      Section 3.14  Litigation; Orders............................     6
      Section 3.15  Permits.......................................     6
      Section 3.16  Intangible Assets.............................     6
      Section 3.17  Employees.....................................     7
      Section 3.18  Employee Benefits.............................     7
      Section 3.19  Taxes.........................................     9
      Section 3.20  Bank Accounts; Powers of Attorney.............     9
      Section 3.21  Affiliated Transactions.......................     9
      Section 3.22  Books and Records.............................    10
      Section 3.23  Full Disclosure...............................    10
      Section 3.24  Brokers.......................................    10
      Section 3.25  Absence of Sensitive Payment..................    10
      Section 3.26  Financial Statements..........................    10

 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER...........    11
      Section 4.1   Organization; Good Standing; Delivery
                    of Charter Documents..........................    11
      Section 4.2   Power and Authority...........................    11
      Section 4.3   Authorization; Execution and Validity.........    11
      Section 4.4   No Conflict; Purchaser Consents...............    11
      Section 4.5   Full Disclosure...............................    11
      Section 4.6   Brokers.......................................    11

 ARTICLE V COVENANTS OF SELLERS...................................    11
      Section 5.1   Cooperation of the Sellers....................    11
      Section 5.2   Pre-Closing Access to Information.............    12
      Section 5.3   Conduct of Business...........................    12
      Section 5.4   No Business Changes...........................    12
      Section 5.5   Permitted Actions.............................    12
      Section 5.6   Supplements to Schedules......................    13
      Section 5.7   Standstill....................................    13
      Section 5.8   Discharge of Encumbrances.....................    13
      Section 5.9   Non-Disclosure; Non-Competition;
                    Non-Solicitation..............................    13

 ARTICLE VI COVENANTS OF PURCHASER................................    15
      Section 6.1   Cooperation by Purchaser......................    15
      Section 6.2   Confidentiality Agreement.....................    15

 ARTICLE VII MUTUAL COVENANTS.....................................    16
      Section 7.1   Fees and Expenses.............................    16
      Section 7.2   Governmental Consents.........................    16
      Section 7.3   Consents to Assign Leases and Contracts.......    16
      Section 7.4   Permits.......................................    16
      Section 7.5   Further Assurances............................    17
      Section 7.6   Supplemental Agreements and Consents..........    17
      Section 7.7   Tax Matters...................................    17
      Section 7.8   Employee Benefit Plans; Employment............    17

 ARTICLE VIII CONDITIONS PRECEDENT TO CLOSING.....................    18
      Section 8.1   Conditions Precedent to Purchaser's
                    Obligations...................................    18
      Section 8.2   Conditions Precedent to the Sellers'
                    Obligations...................................    19

 ARTICLE IX TERMINATION PRIOR TO CLOSING..........................    19
      Section 9.1   Termination of Agreement......................    19
      Section 9.2   Procedure Upon Termination....................    20

 ARTICLE X INDEMNIFICATION AND OFFSET.............................    20
      Section 10.1  Indemnification by Sellers....................    20
      Section 10.2  Indemnification by Buyer......................    20
      Section 10.3  Claims for Indemnification....................    20
      Section 10.4  Defense by Indemnifying Party.................    21
      Section 10.5  Offset........................................    21

 ARTICLE XI ARBITRATION AND EQUITABLE REMEDIES....................    22
      Section 11.1  Settlement Meeting............................    22
      Section 11.2  Arbitration Proceedings.......................    22
      Section 11.3  Place of Arbitration..........................    22
      Section 11.4  Discovery.....................................    22
      Section 11.5  Equitable Remedies............................    23
      Section 11.6  Exclusive Jurisdiction........................    23
      Section 11.7  Judgments.....................................    23
      Section 11.8  Expenses......................................    23
      Section 11.9  Cost of the Arbitration.......................    23
      Section 11.10 Exclusivity of Remedies.......................    23

 ARTICLE XII MISCELLANEOUS........................................    23
      Section 12.1  Amendment.....................................    23
      Section 12.2  Counterparts..................................    23
      Section 12.3  Entire Agreement..............................    24
      Section 12.4  Expenses......................................    24
      Section 12.5  GOVERNING LAW.................................    24
      Section 12.6  Consent to Service of Process.................    24
      Section 12.7  No Assignment.................................    24
      Section 12.8  No Third Party Beneficiaries..................    24
      Section 12.9  Notices.......................................    24
      Section 12.10 Public Announcements..........................    25
      Section 12.11 Representation by Legal Counsel...............    26
      Section 12.12 Schedules.....................................    26
      Section 12.13 Severability..................................    26
      Section 12.14 Specific Performance..........................    26
      Section 12.15 Successors....................................    26
      Section 12.16 Time of the Essence...........................    26
      Section 12.17 Waiver........................................    26

 SCHEDULES
      Schedule 1.1     Shares
      Schedule 3.7     Capitalization
      Schedule 3.8     Undisclosed Liabilities
      Schedule 3.10(b) Leased Real Property
      Schedule 3.10(c) Owned Personal Property
      Schedule 3.10(d) Leased Personal Property
      Schedule 3.10(e) Personal Property Owned by Others
      Schedule 3.12    Insurance
      Schedule 3.13    Contracts
      Schedule 3.14    Litigation
      Schedule 3.15    Permits
      Schedule 3.16(a) Owned Intangible Assets
      Schedule 3.16(b) Licensed Intangible Assets
      Schedule 3.17(a) Employees
      Schedule 3.17(b) Employee Contracts
      Schedule 3.18(a) Identification of Company Plans and Exceptions
      Schedule 3.19(c) Taxes
      Schedule 3.20    Bank Accounts; Powers of Attorney
      Schedule 3.21    Affiliated Transactions
      Schedule 3.26    Financial Statements
      Schedule 5.8     Encumbrances Not Discharged
      Schedule 7.3(b)  Pre-Closing; Required Consents
      Schedule 7.4(b)  Pre-Closing; Required Permits
      Schedule 7.8(a)  Assumed Plans

<PAGE>

                           PAAC PURCHASE AGREEMENT

      THIS PAAC PURCHASE AGREEMENT (this  "Agreement"), dated as of  November
 23, 2005  (the "Signing  Date"), is  made by  and among  Hallmark  Financial
 Services, Inc.,  a Nevada  corporation ("Purchaser"),  Samuel M.  Cangelosi,
 Donate A.  Cangelosi  and Carol  A.  Meyer (individually,  a  "Seller"  and,
 collectively, the "Sellers").

                            PRELIMINARY STATEMENTS

       A.  The Sellers collectively  own all  of the  issued and  outstanding
  shares of the Class  A common stock, no par value per share (the  "Stock"),
  of Pan American Acceptance Corporation, a Texas corporation ("PAAC" or  the
  "Company"), which shares  constitute all the issued and outstanding  equity
  securities of PAAC.

       B.  Purchaser and the Sellers are  collectively referred to herein  as
  the "Parties" or individually as a "Party."

       C.  The  Sellers  desires  to  sell,  and  the  Purchaser  desires  to
  purchase, all of the  Stock on the terms and subject to the conditions  set
  forth in this Agreement.

       E.  Capitalized terms used in this Agreement and rules of construction
  are defined or indexed in Appendix A for the convenience of the reader  and
  in  order  to eliminate  the  need  for cross-references.   Appendix  A  is
  incorporated herein by this reference.

                            STATEMENT OF AGREEMENT

      NOW, THEREFORE,  in  consideration  of  the  premises  and  the  mutual
 agreements, covenants,  representations and  warranties  set forth  in  this
 Agreement and for other good, valid  and binding consideration, the  receipt
 and sufficiency of which are hereby acknowledged, the Parties, intending  to
 be legally bound, hereby agree as follows:

                                  ARTICLE I
                                  ---------
                        TERMS OF THE PURCHASE AND SALE
                        ------------------------------

      Section 1.1    Sale of Shares.  Subject to the terms and conditions and
 in reliance  upon  the representations  and  warranties set  forth  in  this
 Agreement, at the Closing  each Seller shall sell  and assign to  Purchaser,
 and Purchaser shall  purchase and acquire  from each Seller,  the number  of
 shares of the Stock listed on Schedule 1.1 opposite the name of such  Seller
 (collectively,  the  "Shares"),  in  each  case   free  and  clear  of   all
 Encumbrances, for the Purchase Price set  forth in Section 1.2 hereof.  Such
 Shares shall represent all  of the issued and  outstanding capital stock  of
 any class of PAAC.

      Section 1.2    Purchase Price.  The total consideration for the  Shares
 (the "Purchase Price") shall be $725,000.00.

      Section 1.3    Payment of the Purchase Price.  The Purchase Price shall
 be payable to the Sellers at the Closing in proportion to their ownership of
 the Stock, as set forth in Schedule 1.1.

      Section 1.4    Effective  Date  of  Purchase  and  Sale.   The  Parties
 hereto agree that the effective date for the sale of the Shares shall be the
 earlier of the Closing Date or January 1, 2006 (the "Effective Date").

                                  ARTICLE II
                                  ----------
                                   CLOSING
                                   -------

      Section 2.1    Closing.        The  consummation  of  the  transactions
 contemplated by  this Agreement  (the "Closing")  shall  take place  at  the
 offices of Mark  Holland, P.C.,  9901 IH-10  West, Suite  795, San  Antonio,
 Texas  78230 on the first business  day of the calendar month following  the
 date on which all of the conditions set forth in Article VIII, to the extent
 not waived, are satisfied.  The Closing may be postponed to such other  date
 as the Parties may mutually agree.   The date on which the Closing  actually
 occurs is hereinafter referred to as the "Closing Date."

      Section 2.2    Deliveries by the Sellers.  At the Closing, the  Sellers
 or each Seller, as the case may be, shall deliver the following:

      (a)  the closing and  secretary's certificates referred  to in  Section
 8.1(e) and Section 8.1(f);

      (b)  certificates representing the number of Shares of the Stock listed
 on Schedule 1.1 opposite the name of each Seller, in each case duly endorsed
 in blank or accompanied by duly  executed stock transfer powers in favor  of
 Purchaser dated the Effective Date;

      (c)  a certificate  dated  within  ten (10)  business  days  prior  the
 Closing Date from the Secretary of State of the State of Texas certifying as
 to the Company's valid existence and good standing in such jurisdiction;

      (d)  the recorded Charter Documents of the Company, recently  certified
 by the Secretary of State of the State of Texas;

      (e)  all Books and Records of the Company;

      (f)  executed  counterparts  of  all  Required  Consents  and  Required
 Permits;

      (g)  a receipt for the payment of the Purchase Price;

      (h)  each of the agreements referred to in Section 7.6(a) to which  any
 Seller is a party, each executed by the appropriate Seller(s);

      (i)  each of the consents referred to in Section 7.6(b);

      (j)  a written  opinion of  counsel to  the  Sellers addressed  to  the
 Purchaser confirming that  the representations and  warranties contained  in
 Section 3.1 through Section  3.7 hereof are true,  correct and complete  and
 that,  to  the  best  of  such  counsel's  knowledge,  the  Sellers'   other
 representations and warranties are true, correct and complete, which opinion
 shall be in form and substance reasonably satisfactory to the Purchaser  and
 its counsel; and

      (k)  all  other  previously  undelivered  documents,  instruments   and
 writings required to be delivered by the Sellers to Purchaser at or prior to
 the Closing pursuant to this Agreement and such other documents, instruments
 and certificates as Purchaser may reasonably request in connection with  the
 transactions contemplated by this Agreement.

      Section 2.3    Deliveries by Purchaser.    At  the  Closing,  Purchaser
 shall deliver, or cause to be delivered, to the Sellers the following:

      (a)  the Purchase Price;

      (b)  the closing and secretary's  certificates referred to in  Sections
 8.2(d) and 8.2(e);

      (c)  each of  the agreements  referred to  in Section  7.6(a) to  which
 Purchaser is a party, each executed by Purchaser;

      (d)  all  other  previously  undelivered  documents,  instruments   and
 writings required to be delivered by Purchaser to the Sellers at or prior to
 the Closing pursuant to this Agreement and such other documents, instruments
 and certificates as the  Sellers may reasonably  request in connection  with
 the transactions contemplated by this Agreement.

      Section 2.4    Simultaneous Deliveries.  The  delivery of the documents
 required to be delivered at the Closing pursuant to this Agreement shall  be
 deemed to occur simultaneously.   No delivery  shall be effective until each
 Party  has  received,  or  waived  receipt  of, all the documents  that this
 Agreement entitles such Party to receive.

                                 ARTICLE III
                                 -----------
                  REPRESENTATIONS AND WARRANTIES OF SELLERS
                  -----------------------------------------

      Each Seller, jointly and severally,  hereby represents and warrants  to
 Purchaser that the statements made in this Article III are true, correct and
 complete.

      Section 3.1    Title  to  Shares.    Each  Seller  is  the  record  and
 beneficial owner of the number of Shares of the Stock listed on Schedule 1.1
 opposite the name of such  Seller, free and clear  of all Encumbrances.   At
 the Closing, each Seller will transfer to Purchaser its entire right,  title
 and interest in and to the Shares free and clear of all Encumbrances.

      Section 3.2    Power and Authority.   Each  Seller  has  the  requisite
 power and authority to  execute and deliver this  Agreement, to perform  its
 obligations  hereunder  and  to  consummate  the  transactions  contemplated
 hereby, including  the execution,  delivery and  performance of  all of  the
 Transaction Documents to which such Seller is a party.

      Section 3.3    Execution  and  Validity.     Each  of  the  Transaction
 Documents, when executed  by each Seller  and delivered  to Purchaser,  will
 constitute a valid, legal and binding obligation of such Seller, enforceable
 against such  Seller  in  accordance with  the  terms  of  such  Transaction
 Document, subject to any Law Affecting Creditors' Rights.

      Section 3.4    No  Conflict;  Consents.  The  execution,  delivery  and
 performance by each Seller of each Transaction Document will not (a) violate
 any Law, (b) violate any of the  Charter Documents of any of the  Companies,
 (c) violate any Order to which such Seller or  the Company is a party or  by
 which such Seller, the Company or any of their respective assets are  bound,
 (d) result in the creation of any Encumbrance  on any of the Shares, or  (e)
 require any Consent from any Person that will not be obtained and  delivered
 on or before the Closing.

      Section 3.5    Company Organization; Good Standing; Delivery of Charter
 Documents.  The Company  is  a corporation duly organized, validly  existing
 and in good standing under the laws of the  State of Texas.  The Company  is
 duly qualified or licensed as a foreign corporation in each jurisdiction  in
 which the nature of the Company's business makes qualification or  licensing
 necessary.  Prior to the Signing Date, the Company has delivered, or  caused
 to be  delivered, to  Purchaser  true and  complete  copies of  the  Charter
 Documents of the Company as in effect on the Signing Date.

      Section 3.6    Corporate Power and Authority.    The  Company  has  all
 the requisite corporate power  and  authority necessary to own, operate  and
 lease its assets and to carry on its business as and where conducted.

      Section 3.7    Capitalization.   Schedule  3.7  lists the total  number
 of authorized, issued and outstanding shares  of all classes of the  capital
 stock of  the  Company and  the  record holder(s)  of  all such  issued  and
 outstanding shares.  All issued and  outstanding shares of the Company  have
 been  duly  authorized   and  validly  issued   and  are   fully  paid   and
 nonassessable.  There is no authorized or outstanding option,  subscription,
 warrant, call,  preemptive right,  commitment or  other right  or  agreement
 (each, a "Subscription Right") obligating the  Company to issue or sell  any
 shares  of  its  capital  stock  or  any  securities  convertible  into   or
 exercisable for any shares of its capital stock.  None of the shares of  the
 Company were issued  or will be  transferred pursuant to  this Agreement  in
 violation of  any  preemptive or  preferential  rights or  rights  of  first
 refusal of any Person.  Other than as reflected in Schedule 3.7, the Company
 does not  have  any  subsidiaries  or  own  any  shares  of  capital  stock,
 partnership interests or other beneficial  ownership interests in any  other
 Person.

      Section 3.8    No Undisclosed Liabilities.   Except  as  set  forth  in
 Schedule 3.8,  the  Company is  not  subject to  any  Claim of  any  nature,
 absolute or contingent, and no events  have occurred or circumstances  exist
 that could give rise to any future Claim, that could have a Material Adverse
 Effect on the assets or business of the Company.

      Section 3.9    Sufficiency and Condition  of and Title  to the  Company
 Assets.

      (a)  Sufficiency of the Company  Assets.  The  assets reflected on  the
 Books and  Records  of  the Company  (collectively,  the  "Company  Assets")
 constitute all the assets, properties, licenses and other arrangements which
 are presently being used  or are reasonably related  to the business of  the
 Company, and are sufficient to operate such business in a manner  consistent
 with past practice and historic capacity.

      (b)  Condition of  the Company  Assets.   Each  of the  Company  Assets
 complies with Law and is in good and normal operating condition and  repair,
 structurally sound with no known defects (ordinary wear and tear  excepted),
 and suitable for its intended use.

      (c)  Title to the  Company Assets.   At the Closing,  the Company  will
 hold good, valid and  indefeasible title to, or  a valid leasehold  interest
 in, each of the  Company Assets, free and  clear of all Encumbrances,  other
 than Permitted Encumbrances.

      (d)  No Transfers.  Except as expressly provided herein, during the six
 month period preceding the Closing Date, the Company has not transferred any
 Company Assets to a Seller  or affiliate of any  Seller nor has the  Company
 made any distribution  of cash  to any Seller  or affiliate  of any  Seller,
 except for  salaries and  expense reimbursement  in the  ordinary course  of
 business.

      Section 3.10   Real and Personal Property.

      (a)  Owned Real Property.   The Company  does not own  any interest  in
 real property.

      (b)  Leased Real Property.  Schedule 3.10(b)  lists, as of the  Signing
 Date, all leases of real property (collectively, the "Real Property Leases")
 to which the Company is a  party.  As of the Signing  Date, all of the  Real
 Property Leases are valid,  binding and in full  force and effect.   Neither
 the Company nor, to the Sellers'  Knowledge, any other Person is in  default
 under  any  of  the  Real  Property  Leases,  nor  is  there  any  event  or
 circumstance which with notice or lapse of time, or both, would constitute a
 default thereunder by the Company or any other Person.

      (c)  Owned Personal  Property.   Schedule  3.10(c)  lists,  as  of  the
 Signing Date,  all  of  the depreciable  personal  property  (including  all
 machinery, equipment, vehicles, structures, fixtures and furniture) owned by
 the Company  and used  in the  business of  the Company  or located  on  its
 premises.

      (d)  Leased Personal  Property.   Schedule  3.10(d)  lists, as  of  the
 Signing Date, all leases of  personal property (collectively, the  "Personal
 Property Leases") to which the Company is a party.  As of the Signing  Date,
 all of the Personal Property Leases are valid, binding and in full force and
 effect.   Neither the  Company nor,  to the  Sellers' Knowledge,  any  other
 Person is in default under any of the Personal Property Leases, nor is there
 any event or circumstance which with notice or lapse of time, or both, would
 constitute a default thereunder by the Company or any other Person.

      (e)  Personal Property Owned by Others.  Schedule 3.10(e) lists, as  of
 the Signing  Date,  all artwork,  memorabilia  and other  personal  property
 routinely located on the premises of the  Company which is not owned by  the
 Company, together  with  the  name(s)  of  the  owner(s)  of  such  personal
 property.

      Section 3.11   Compliance with Laws.   The  Company  has complied  with
 all Laws in the conduct of its business.   The Company has not received  any
 notice from any Governmental  Authority or other  Person asserting that  the
 Company has  violated any  Law.   No events  have occurred  or, to  Sellers'
 Knowledge, circumstances exist that could cause  the Company to violate  any
 Law in the future.

      Section 3.12   Insurance.   Schedule 3.12  lists,  as  of  the  Signing
 Date, all insurance policies which insure the business of the Company or any
 of the  assets of  the Company  against loss  (collectively, the  "Insurance
 Policies"), including each  insurer's name, coverage  deductible and  limit,
 expiration date and current premium.  Each Insurance Policy is in full force
 and effect, all premiums with respect  thereto have been paid to the  extent
 due, and no  notice of cancellation  or termination has  been received  with
 respect to any such policy, other than  any policy that will be replaced  or
 is intended  to be  replaced prior  to the  expiration thereof  by  policies
 providing  substantially  the  same  coverage   from  an  insurer  that   is
 financially sound and reputable.  The Insurance Policies provide the Company
 with adequate insurance coverage against the  risks involved in the  conduct
 of the business of the Company and  ownership of the assets of the  Company.
 The coverage  provided by  the Insurance  Policies will  not in  any way  be
 affected by, or  terminate or lapse  by reason of,  the consummation of  the
 transactions contemplated by this  Agreement.  True  and complete copies  of
 all Insurance Policies have been provided to Purchaser.

      Section 3.13   Contracts.   Schedule 3.13  lists,  as  of  the  Signing
 Date, all contracts relating to the business and assets of the Company or by
 which any of  the assets  of the  Company is  bound, pursuant  to which  the
 obligations of  any party  thereto  are, or  are  contemplated to  be,  with
 respect to any  such contract  (a) in excess  of $10,000  during any  twelve
 month period during the  term thereof, (b) not  terminable prior to 90  days
 after the Signing  Date, or (c)  otherwise material to  the business of  the
 Company.  All  of the contracts  listed on Schedule  3.13 and any  contracts
 entered  into  after  the  Signing  Date  in  accordance  with  Section  5.3
 (collectively, the "Material Contracts")  are or will  be valid and  binding
 and in full force and effect,  subject to Laws Affecting Creditors'  Rights.
 Neither the Company nor, to the  Sellers' Knowledge, any other Person is  in
 default under any Material Contract, nor is there any event or  circumstance
 which with notice  or lapse  of time, or  both, would  constitute a  default
 thereunder by the Company or any other Person.   The Company is not a  party
 to any contract which  (x) requires the  Consent of any  Person in order  to
 consummate the  transactions  contemplated  by  this  Agreement,  except  as
 otherwise stated on Schedule 3.13, (y) is in excess of the normal,  ordinary
 and usual requirements of the business  of the Company, or (z) is  excessive
 in price  or  quantity.   True  and  complete  copies of  all  the  Material
 Contracts have been provided to Purchaser.

      Section 3.14   Litigation; Orders.  Except  as  set forth  in  Schedule
 3.14, there are no Actions pending, or to the Sellers' Knowledge, threatened
 against or affecting the Company,  its business or any  of its assets as  of
 the Signing Date.  The Company is not subject to any Order.

      Section 3.15   Permits.    Schedule  3.15  lists  all  of  the  Permits
 related to the assets  of the Company  or operation of  the business of  the
 Company, and indicates those Permits for which the Consent of any Person  is
 required to assign  such Permit.   The  Company has  obtained, maintains  in
 effect, and complies with the terms  and conditions of all Permits  required
 by  Law.   There  is  no  Action pending  or,  to  the  Sellers'  Knowledge,
 threatened in writing to revoke or limit any Permit listed on Schedule 3.15.
 The Company has  all Permits necessary  for the business  of the Company  as
 presently conducted.

      Section 3.16   Intangible Assets.

      (a)  Owned Intangible  Assets.   Schedule  3.16(a)  lists  all  of  the
 Intangible Assets owned by the Company as of the Signing Date.  With respect
 to the  Intangible  Assets  listed  on  Schedule  3.16(a)  and  all  of  the
 Intangible Assets  obtained  or developed  prior  to the  Closing,  (i)  the
 Company owns all right, title and interest in and to such Intangible  Assets
 free and  clear  of  all  Encumbrances,  (ii)  the  Company  has  not  sold,
 transferred, licensed, sub-licensed or conveyed any interest in any of  such
 Intangible Assets, and (iii) to Sellers' Knowledge, no Person has  infringed
 upon or misappropriated any of such Intangible Assets.

      (b)  Licensed Intangible Assets.   Schedule 3.16(b) lists all  licenses
 and contracts related to any Intangible Asset used by the Company as of  the
 Signing Date.  Each license or contract listed on Schedule 3.16(b) and  each
 license or contract  related to an  Intangible Asset which  is entered  into
 after  the  Signing Date  in  accordance  with Section 5.3 is valid, binding
 and  in  full  force  and  effect.  The Company  has not infringed  upon  or
 misappropriated any Intangible Asset owned by another Person.

      Section 3.17   Employees.

      (a)  Employees.  Schedule 3.17(a)  lists the name,  job title, date  of
 employment and current annual compensation (salary, bonus and  participation
 in any  non-qualified deferred  or incentive  compensation arrangement)  for
 each employee of the Company employed as of the Signing Date  (collectively,
 the "Employees").  All  Employees  are  either  United  States  citizens  or
 otherwise authorized  to  engage  in employment  in  the  United  States  in
 accordance  with  all Laws.  All sums  due  for  Employee  compensation  and
 benefits and all vacation time owing to any Employee (including all  persons
 whose employment by  the Company is  terminated prior to  the Signing  Date)
 have been duly and adequately accrued on the accounting Books and Records of
 the Company.

      (b)  Contracts.  Except as set forth  in Schedule 3.17(b), the  Company
 is not a party to (i) any contract for employment between the Company and an
 Employee of the Company that cannot  be terminated at will without cost,  or
 (ii) any collective bargaining  agreement or other contract  to or with  any
 labor union, Employee representative or group  of Employees.  The  Company's
 employment of an Employee of the  Company is terminable at will without  any
 penalty or severance obligation of any kind on the part of the Company.

      (c)  Compliance with  Labor Laws.   The  Company  has complied  and  is
 presently complying  with  all  Laws respecting  employment  and  employment
 practices, terms and conditions of employment,  and wages and hours, and  is
 not engaged in any unfair labor practice or unlawful employment practice.

      Section 3.18   Employee Benefits.

      (a)  Identification of Company  Plans.  Schedule  3.18(a) sets forth  a
 list of all Employee Benefit Plans which provide compensation or benefits to
 employees, officers,  directors or  consultants  of the  Company  including,
 without limitation,  all  Employee  Benefit  Plans  and  all  employment  or
 executive  compensation  agreements  (collectively,  the  "Company  Plans").
 Sellers have delivered to Purchaser true and complete copies of: (i) each of
 the Company  Plans and  any related  funding agreements  thereto  (including
 insurance contracts)  including all  amendments, all  of which  are  legally
 valid and binding and  in full force  and effect and  there are no  defaults
 thereunder, (ii) the currently effective Summary Plan Description pertaining
 to each of the Company Plans, (iii) the three most recent annual reports for
 each of the Company Plans, (iv) the most recent IRS determination letter for
 each Company Plan  which is intended  to constitute a  qualified plan  under
 Section 401  of the  Code,  and (v)  financial  statements for  each  funded
 Company Plan.  Notwithstanding any statement or indication in this Agreement
 to the  contrary, except  as disclosed  on Schedule  3.18(a), there  are  no
 Company Plans which the Company or  Purchaser will not be able to  terminate
 (or in which the Company will not be able to terminate the participation  of
 its employees) immediately after the Closing in accordance with their  terms
 and ERISA, and without  incurring any expenses  (including, but not  limited
 to, loads or termination charges imposed with respect to insurance  policies
 or mutual funds used to fund such Company Plans), other than  administrative
 expenses in connection with such termination and benefits accrued as of  the
 date of termination.

      (b)  Compliance with Applicable  Laws.  All  Company Plans comply  with
 and are and have been operated  in material compliance with each  applicable
 provision of ERISA, the Code, other federal statutes, state Law  (including,
 without limitation,  state  insurance Law)  and  the regulations  and  rules
 promulgated  pursuant  thereto  or  in  connection  therewith.  Neither  the
 Company nor any  member of the  same controlled group  of businesses as  the
 Company within  the  meaning of  Section  4001(a)(14) of  ERISA  (an  "ERISA
 Affiliate") has failed  to make  any material  contributions or  to pay  any
 material amounts due and owing as required by the terms of any Company Plan.
 Other than routine claims for benefits under the Company Plans, there are no
 pending or, to Sellers'  Knowledge, threatened investigations,  proceedings,
 claims, lawsuits, disputes, actions,  audits or controversies involving  the
 Company Plans or the fiduciaries, administrators, or trustees of any of  the
 Company Plans or any  ERISA Affiliate as the  employer or sponsor under  any
 Company Plan, with  any of  the IRS, the  Department of  Labor, the  Pension
 Benefit Guaranty  Corporation,  any participant  in  or beneficiary  of  any
 Company Plan or any other Person  whomsoever.  To Sellers' Knowledge,  there
 is no  reasonable basis  for any  such claim,  lawsuit, dispute,  action  or
 controversy.

      (c)  Pension  Benefit  Plans.    Neither  the  Company  nor  any  ERISA
 Affiliate is or ever has  been a sponsor or  obligated to contribute to  any
 plan covered  by Title  IV of  ERISA or  Section  412 of  the Code,  or  any
 "multiemployer plan," within the meaning of Section 3(37) of ERISA.  Each of
 the Company Plans  which is intended  to be a  qualified plan under  Section
 401(a) of the Code  has received a favorable  determination letter from  the
 IRS, and has been  operated substantially in accordance  with its terms  and
 with the provisions of the Code.

      (d)  Welfare Benefit Plans.   Each Company  Plan which  is required  to
 comply with the provisions  of Part 6 of  Title I of  ERISA, Section 601  et
 seq., and Code  Section 4980B and  the provisions of  Part 7 of  Title I  of
 ERISA, Section  701 et  seq., and  Code Section  4980D has  complied in  all
 material respects.   Except as  required by such  Sections of  the Code,  no
 Company Plan  which  is  a  Welfare Benefit  Plan  provides  for  any  post-
 employment benefits.

      (e)  Effect of  Consummation.   The  consummation of  the  transactions
 contemplated by this Agreement  will not (i) entitle  any current or  former
 employee of the Company or any  other individual to a bonus, severance  pay,
 unemployment compensation or similar payment by the Company, (ii)  otherwise
 accelerate the time  of payment or  vesting, or increase  the amount of  any
 compensation due to  any current or  former employee of  the Company,  (iii)
 result in any prohibited  transaction described in Section  406 of ERISA  or
 Section 4975 of the Code for which an exemption is not available, or (iv) in
 any way result in any liability of the Company with respect to any  Employee
 Benefit Plan of any Person.   The Company is not a  party or subject to  any
 agreement, contract or other  obligation which would  require the making  of
 any payment, other than payments as  contemplated by this Agreement, to  any
 employee of the Company, Sellers or to any  other Person as a result of  the
 consummation of the transactions contemplated herein.

      Section 3.19   Taxes.

      (a)  Tax  Returns.  All Tax  returns  (including  amended  returns  and
 claims  for   refund),   reports,   and  declarations   of   estimated   Tax
 (collectively, "Returns") which  were required to  be filed  by the  Company
 with any Governmental  Authority have been  timely filed.   All Returns  are
 true and correct and accurately reflect the Tax liabilities of the  Company.
 All Taxes shown to be due pursuant to such Returns have been paid in full.

      (b)  Statute of  Limitations  and  Tax Actions.  The  Company  has  not
 executed any  presently effective  waiver or  extension  of any  statute  of
 limitations against  assessments and  collection of  Taxes.   There  are  no
 pending or,  to  the  Sellers' Knowledge,  threatened  Claims,  assessments,
 notices, proposals to assess, deficiencies or audits with respect to Taxes.

      (c)  Miscellaneous Tax Representations.   Proper  and accurate  amounts
 have been withheld and remitted by the Company from and with respect to  all
 Persons from  whom it  is required  by applicable  law to  withhold for  all
 periods in  compliance with  the tax  withholding  provisions of  all  Laws.
 Neither the Company nor,  to the Sellers'  Knowledge, any other  corporation
 has filed an election under Section 341(f) of the Code that is applicable to
 the Company  or any  of the  assets of  the Company.   Except  as listed  on
 Schedule 3.19(c), the Company is not  a party to any tax sharing  agreement.
 There is  no  contract,  plan  or  arrangement  covering  any  Person  that,
 individually or collectively, would give rise  to the payment of any  amount
 that would not be deductible by the  Company by reason of Section 162(m)  or
 Section 280G of the Code.  The Company is not a "foreign person" within  the
 meaning of Section  1445(f)(3) of the  Code.  Except  as listed on  Schedule
 3.19(c), the Company  has never  been a  member of  any group  that filed  a
 consolidated federal income tax return.

      Section 3.20   Bank  Accounts;  Powers  of  Attorney.    Schedule  3.20
 lists the names of (a)  each bank, trust company  and stock or other  broker
 with which the Company has  an account, credit line  or safe deposit box  or
 vault, or  otherwise  maintains relations  (the  "Bank Accounts"),  (b)  all
 Persons authorized  to draw  on, or  to have  access to,  each of  the  Bank
 Accounts, and (c) all Persons authorized  by proxies, powers of attorney  or
 other like  instruments  to act  on  behalf of  the  Company in  any  matter
 concerning the business of  the Company.   Each of the  Bank Accounts has  a
 positive cash  balance.   No  proxies,  powers  of attorney  or  other  like
 instruments are irrevocable.

      Section 3.21   Affiliated  Transactions.     Except  as  set  forth  on
 Schedule 3.21, there are no outstanding loans or other transactions  between
 the Company and  any Seller, officer,  director, shareholder, consultant  or
 affiliate of the  Company or any  spouse or child  of any such  person.   No
 Seller, officer,  director,  shareholder,  consultant or  affiliate  of  the
 Company nor any spouse or child of any such person owns or has any  interest
 in, directly or indirectly, any real or personal property owned by or leased
 to the Company.

      Section 3.22   Books  and  Records.   The  Books  and  Records  of  the
 Company, all of  which have been  made available to  Purchaser prior to  the
 Signing Date, are  true, correct and  complete and have  been maintained  in
 accordance with sound  business practices, including  the maintenance of  an
 adequate system of internal controls.

      Section 3.23   Full Disclosure.  No  representation or warranty  of any
 Seller made  in  this Agreement,  nor  any written  statement  furnished  to
 Purchaser  pursuant   hereto  or   in  connection   with  the   transactions
 contemplated hereby,  contains or  will contain  any untrue  statement of  a
 material fact  which affects  the business  or  financial condition  of  any
 Company, or omits or will  omit to state a  material fact necessary to  make
 the statements or facts contained herein or therein not misleading.

      Section 3.24   Brokers.  Sellers  have  engaged Philo Smith  &  Company
 to advise them with respect to this  Transaction.  The Sellers will pay  all
 fees of Philo Smith & Company  pursuant to their agreement with funds  other
 than those of the Company.   No other person is  or will become entitled  to
 receive any brokerage or finder's fee, advisory fee or other similar payment
 for the transactions contemplated by this Agreement by virtue of having been
 engaged by or acted on behalf of any  Seller or the Company.  Sellers  agree
 to indemnify and defend  the Purchaser and to  hold Purchaser harmless  from
 any claim  by  any  individual  or  entity  asserting  a  broker  or  agency
 relationship relative to this Transaction.

      Section 3.25   Absence  of Sensitive  Payment.   The  Company  has  not
 made or maintained (i) any contributions, payments or gifts of its funds  or
 property to any governmental  official, employee or  agent where either  the
 payment or  the purpose  of such  contribution, payment  or gift  was or  is
 illegal under the laws  of the United  States or any  state thereof, or  any
 other jurisdiction  (foreign  or domestic);  or  (ii) any  contribution,  or
 reimbursement of  any  political gift  or  contribution made  by  any  other
 person, to candidates for  public office, whether  federal, state, local  or
 foreign, where  such  contributions  by  the Company  were  or  would  be  a
 violation of applicable law.

      Section 3.26   Financial Statements.  The  Sellers  have  delivered  to
 the Purchaser copies of the financial statements of the Company described on
 Schedule 3.26 (collectively, the  "Financial Statements").   To the best  of
 Sellers' knowledge,  the Financial  Statements were  prepared in  accordance
 with GAAP applied  on a consistent  basis and fairly  present the  financial
 position of the  Company as  of their respective  dates and  the results  of
 operations and cash flows of the Company for the respective periods  covered
 thereby  in  accordance  with  GAAP  (subject,  in  the  case  of  unaudited
 statements, to normal, recurring adjustments, consistently applied, none  of
 which, individually or in the aggregate, is material).  Except as set  forth
 in Schedule  3.26, the  Company  does not  have  any material  liability  or
 obligation of  any  kind  or  nature (fixed  or  contingent)  which  is  not
 reflected, reserved against  or disclosed  in the  Financial Statements  and
 accompanying footnotes.

                                  ARTICLE IV
                                  ----------
                 REPRESENTATIONS AND WARRANTIES OF PURCHASER
                 -------------------------------------------

      Purchaser hereby  represents  and  warrants to  the  Sellers  that  the
 statements set forth in this Article IV are correct and complete.

      Section 4.1    Organization;  Good   Standing;  Delivery   of   Charter
 Documents.  Purchaser is a corporation  duly organized, validly existing and
 in good standing under the laws of the State  of Nevada.  Purchaser  is duly
 qualified as a foreign corporation in the State of Texas.

      Section 4.2    Power and  Authority.      Purchaser has  all  requisite
 corporate  power  and  authority  necessary  to  execute  and  deliver  this
 Agreement, to  perform  its  obligations hereunder  and  to  consummate  the
 transactions contemplated  hereby,  including the  execution,  delivery  and
 performance of all  of the  Transaction Documents  to which  Purchaser is  a
 party.

      Section 4.3    Authorization; Execution  and  Validity.   Each  of  the
 Transaction Documents, when  executed and  delivered by  Purchaser, will  be
 duly authorized, executed and delivered, and will constitute a valid,  legal
 and binding  obligation  of  Purchaser,  enforceable  against  Purchaser  in
 accordance with the terms of such  Transaction Document, subject to any  Law
 Affecting Creditors' Rights.

      Section 4.4   No Conflict; Purchaser Consents.  The execution, delivery
 and  performance by Purchaser  of  each Transaction Document to  which it is
 a  party  will  not  (a) violate any Law,  (b) violate any  Charter Document
 of Purchaser, (c)  violate any Order  to which Purchaser  is a  party or  by
 which Purchaser or its assets is bound, or (d) require any Consent from  any
 Person.

      Section 4.5    Full  Disclosure.   No  representation  or  warranty  of
 Purchaser made in this Agreement, nor any written statement furnished to the
 Sellers pursuant hereto or in connection with the transactions  contemplated
 hereby, contains or  will contain any  untrue statement of  a material  fact
 which affects the business or financial condition of Purchaser, or omits  or
 will omit to state a material fact necessary to make the statements or facts
 contained herein or therein not misleading.

      Section 4.6    Brokers.   No  Person  is  or  will  become entitled  to
 receive any brokerage or finder's fee, advisory fee or other similar payment
 for the transactions contemplated by this Agreement by virtue of having been
 engaged by or acted  on behalf of Purchaser.  Purchaser agrees to  indemnify
 and defend  Sellers and  to hold  Sellers  harmless from  any claim  by  any
 individual  or  entity  asserting  a  broker  or  agency  relationship  with
 Purchaser relating to this Transaction.

                                  ARTICLE V
                                  ---------
                             COVENANTS OF SELLERS
                             --------------------

      Section 5.1    Cooperation  of  the  Sellers.  From  the  Signing  Date
 through the Closing Date, the Sellers  shall use all reasonable efforts  (a)
 to take  all  actions  and  to  do all  things  necessary  or  advisable  to
 consummate the transactions contemplated by this Agreement, (b) to cooperate
 with Purchaser in connection with the foregoing, including using  reasonable
 efforts to obtain all of  the Consents, and (c)  subject to the other  terms
 and conditions of this Agreement, to  cause all the conditions set forth  in
 Section 8.1, the satisfaction of which is in the reasonable control of  such
 Seller, to be satisfied on or prior to Closing.

      Section 5.2    Pre-Closing Access to Information.    From  the  Signing
 Date through the Closing Date, the Sellers shall afford to Purchaser and its
 Representatives access to the  properties and the Books  and Records of  the
 Company.

      Section 5.3    Conduct of Business.   From  the  Signing  Date  through
 the Closing Date, the Sellers shall, and shall cause the Company to, use all
 reasonable efforts to (i) preserve substantially the relationships with  its
 Representatives, suppliers and customers, (ii) perform its obligations under
 all contracts, leases  and Permits in  all material  respects, (iii)  comply
 with all Laws, (iv) confer with Purchaser regarding operational matters of a
 material nature, (v) report periodically  to Purchaser regarding the  status
 of its business  and the  results of its  operations, and  (vi) conduct  its
 business in the ordinary course and consistent with past practices.

      Section 5.4    No Business Changes.   From  the  Signing  Date  through
 the Closing Date, the Sellers shall not, and shall cause the Company not to,
 without the express written  consent of the Purchaser:   (i) enter into  any
 material agreement relating  to the assets,  properties or  business of  the
 Company, other  than  in the  ordinary  course of  business;  (ii) incur  or
 discharge any  material  obligation or  liability,  except in  the  ordinary
 course of business; (iii) commit to make  or make any capital  expenditures;
 (iv) cancel or  fail to renew  any Permit; (v)  impose any  lien, pledge  or
 encumbrance upon the Shares or any of  the assets of the Company; (vi)  make
 any change or authorize to  be made any change  to the Charter Documents  of
 the Company;  (vii) declare,  set aside,  or pay  any dividend  or make  any
 distribution with respect  to the  Shares (whether in  cash or  in kind)  or
 redeem, purchase,  or otherwise  acquire any  of the  Shares; (viii)  issue,
 deliver or sell any shares of the capital stock of any class of the  Company
 or split, combine  or reclassify any  of the capital  stock of the  Company;
 (ix) incur any indebtedness  for borrowed money;  (x) forgive or cancel  any
 indebtedness owing to  the Company or  waive any claims  or rights of  value
 belonging to the Company, (xi) sell, lease, license or otherwise dispose  of
 any of the assets or properties of  the Company, other than in the  ordinary
 course of business; (xii) pay or increase the rate or terms of  compensation
 or benefits  payable  to or  to  become payable  to  any of  the  directors,
 officers, employees, consultants or agents of the Company above the  amounts
 reflected in Schedule 3.17(a); (xiii) amend or otherwise make any changes to
 any of the  Company Plans  or increase  the rate  or terms  of any  benefits
 payable under the Company Plans; (xiv) make any other change in the terms of
 employment of any Employee, other than  in the ordinary course of  business;
 (xv) make or rescind any express or deemed election relating to any Tax;  or
 (xvi) commit  pursuant to  a legally  binding  agreement to  do any  of  the
 foregoing.

      Section 5.5    Permitted Actions.  Notwithstanding  the  provisions  of
 Section  5.3  and  Section  5.4,  after the Signing  Date but  prior to  the
 Closing Date, the Sellers  shall be permitted to  cause PAAC  to declare and
 pay to  Sellers  (or  such  other  employees of  PAAC  as  the  Sellers  may
 determine) cash bonus compensation in an amount equal to the lesser of:  (i)
 the net income  of PAAC for  the nine months  ended  September 30, 2005,  as
 reflected in the interim Financial Statements for such period prepared on  a
 consistent basis with past practice; or (ii) 110% of the net income of  PAAC
 for the nine months  ended September 30, 2004,  as reflected in the  interim
 Financial Statements for  such period prepared  on a  consistent basis  with
 past practice.

      Section 5.6    Supplements  to  Schedules.   If,  between  the  Signing
 Date and  the  Closing  Date, any  Seller  becomes  aware that  any  of  its
 representations and warranties in  this Agreement or  the schedules to  this
 Agreement was inaccurate when made or if during such period any event occurs
 or condition changes that causes any of such representations and  warranties
 to be inaccurate, then such Seller shall notify Purchaser thereof in writing
 and supplement  the schedules  hereto to  account for  any such  inaccuracy,
 event or change.  Any such supplement  to the schedules shall not be  deemed
 to have been disclosed as of the Signing  Date, or to have cured any  breach
 of a representation and warranty made in this Agreement, unless so agreed in
 writing by Purchaser.

      Section 5.7    Standstill.  Until the earlier  to  occur of the Closing
 or the termination  of this Agreement  pursuant to Article  IX, each  Seller
 shall  not,  nor  shall  any  Seller  permit  the  Company  or  any  of  its
 Representatives to, (a) directly or indirectly encourage, solicit,  initiate
 or  participate  in  discussions  or  negotiations  with,  or  provide   any
 information or  assistance to,  any Person  (other  than Purchaser  and  its
 Representatives)  concerning  any  merger,  sale  of  securities,  sale   of
 substantial assets, investment  proposals or  similar transaction  involving
 the  Company,  (b)  entertain  or  discuss  any  acquisition  or  investment
 proposals whatsoever with respect to the Company, (c) except as required  by
 law after not less than five days notice to Purchaser, disclose to any third
 party any non-published information concerning the Company, the business  of
 the Company  or the  Company's financial  condition,  or (d)  withdraw  such
 Seller's intention to sell its Shares to Purchaser.  Each Seller shall,  and
 shall cause the  Company to, promptly  notify Purchaser if  it receives  any
 such proposal  or offer  or any  inquiry or  contact with  respect  thereto.
 Until termination of this Agreement, no Seller will, directly or indirectly,
 (i) sell, transfer,  pledge, encumber, assign  or otherwise  dispose of,  or
 enter into any contract, option or  other arrangement or understanding  with
 respect to  the sale,  transfer, pledge,  encumbrance, assignment  or  other
 disposition of, any of  its Shares, or (ii)  grant any proxies, deposit  any
 Shares into a voting trust or enter into a voting agreement with respect  to
 such Shares.

      Section 5.8    Discharge of Encumbrances.    Except  as  set  forth  in
 Schedule 5.8, the Company and each Seller shall take all actions and do  all
 things  necessary   to  cause   all  Encumbrances,   other  than   Permitted
 Encumbrances, on  any of  the Shares  or the  assets of  the Company  to  be
 terminated or otherwise discharged at or prior to the Closing.

      Section 5.9    Non-Disclosure; Non-Competition; Non-Solicitation.

      (a)   Non-Disclosure   Agreement.    Sellers   acknowledge   that   the
 Confidential Information obtained or possessed by them will be the  property
 of Purchaser and the  Company from and after  the  Closing Date.  Therefore,
 Sellers each agree  that they will  not (i) disclose to  any person,  either
 directly or indirectly, any Confidential  Information, unless and solely  to
 the extent that such Confidential Information is required to be disclosed by
 law or pursuant to a  final judicial order or  decree, (ii) use for its  own
 account  or  use,  cause,  facilitate  or  allow  any  third  party  to  use
 Confidential Information  in  any  way,  or  (iii) remove  any  Confidential
 Information or  any  copy,  summary  or  compilation  of  any  kind  of  any
 Confidential Information from the premises of the Company or the premises of
 the Company's customers following the Closing  Date.  Sellers further  agree
 to deliver to Purchaser  all memoranda, notes,  plans, records, reports  and
 other documents (and copies thereof) relating to the Company or the  conduct
 of the Company's business that they may possess or have under control at the
 Closing Date.

      (b)  Work  Product.   All   records   and   documents   embodying   any
 Confidential Information or pertaining to the existing or contemplated scope
 of the Company's business, which have been conceived, prepared or  developed
 by a Seller in connection with his ownership interest in the Company, use by
 the Company or otherwise, either alone  or with others (herein called  "Work
 Product"), shall be the sole property  of the Company.   At or prior to  the
 Closing Date, such Seller shall deliver all Work Product to the Company.

      (c)  Non-Competition Agreement.  For a period  of five (5) years  after
 the Closing, no Seller  shall, directly or  indirectly, without the  express
 written consent of the Purchaser, (i) own, engage in, manage, operate, join,
 control, or participate in the ownership, management, operation, or  control
 of, or be connected  as a stockholder,  director, officer, employee,  agent,
 partner, joint  venturer, member,  beneficiary, or  otherwise with,  in  any
 "Competing  Business"   (defined   below)  anywhere   in   the   "Restricted
 Territories" (defined below);  (ii) induce any customers  of the Company  to
 patronize any  Competing Business;  (iii) solicit  or accept  any  Competing
 Business from  any  customer of  the  Company; (iv) request  or  advise  any
 customers of  the Company  to withdraw,  curtail or  cancel such  customer's
 business with the  Company; or  (v) disclose to  any other  person, firm  or
 corporation engaged in any Competing Business the names or addresses of  any
 of the customers of the Company.   For purposes of this Agreement, the  term
 "Competing Business" is defined to mean any activity or business that is  or
 would be competitive with the business conducted by the Company at any  time
 prior to the Closing.  The term "Restricted Territories" is defined to  mean
 the states of Arkansas, Louisiana, New Mexico, Oklahoma, and Texas.

      (d)  Non-Solicitation Agreement.  For a period of five (5) years  after
 the Closing each Seller shall not, either on its own behalf or on behalf  of
 any business competing with Purchaser, directly or indirectly (i) solicit or
 induce, or in any  manner attempt to solicit  or induce any person  employed
 by, or an  agent of,  the Company or  Purchaser to  terminate such  person's
 employment or agency, as the case may be, with such entity, or (ii) solicit,
 divert, or attempt to solicit or  divert, or otherwise accept as a  supplier
 or customer, any Person  which sells or furnishes  any products or  services
 to, or receives any products or services from, the Company or Purchaser, nor
 will such Seller attempt  to induce any such  supplier or customer to  cease
 being (or any prospective supplier or customer not to become) a supplier  or
 customer of the Company or Purchaser.

      (e)  Modification of Restrictions.  Sellers agree that if an arbitrator
 or a court of competent jurisdiction  determines that the length of time  or
 any other restriction, or portion thereof, set forth in this Section 5.8  is
 overly restrictive and unenforceable, the  arbitrator or court shall  reduce
 or  modify  such  restrictions  to  those  which  it  deems  reasonable  and
 enforceable under  the circumstances,  and as  so reduced  or modified,  the
 Parties agree that the restrictions of this Section 5.8 shall remain in full
 force and effect.  Sellers further agree  that if an arbitrator or court  of
 competent jurisdiction determines that any provision of this Section 5.8  is
 invalid  or  against  public  policy,  the  remaining  provisions  of   this
 Section 5.8 and  the  remainder of  this  Agreement shall  not  be  affected
 thereby, and shall remain in full force and effect.

      (f)  Injunctive Relief.   In the event  of any  pending, threatened  or
 actual breach of any of the covenants or provisions of this Section 5.8,  as
 determined by an  arbitrator or  a court  of competent  jurisdiction, it  is
 understood and agreed by Sellers that the remedy at law for a breach of  any
 of the covenants or  provisions of this Section  5.8 may be inadequate  and,
 therefore, the Purchaser and the Company shall be entitled to a  restraining
 order or injunctive relief in addition to  any other remedies at law and  in
 equity, as determined by an arbitrator or a court of competent jurisdiction.
 The Sellers waive any bond, surety, or other security that might be required
 of the Purchaser or the Company as a condition of any such restraining order
 or injunctive relief.

      (g)  Acknowledgments of Sellers.  Each Seller acknowledges that (i) any
 public disclosure  of  the Confidential  Information  will have  an  adverse
 effect on the Company, Purchaser and  the business of the Company, (ii)  the
 Company and Purchaser would suffer irreparable  injury if a Seller  breaches
 any of the terms of this Section  5.8, (iii) the Company and Purchaser  will
 be at a substantial competitive disadvantage if such entity fails to acquire
 and maintain exclusive ownership of the Confidential Information or to abide
 by the restrictions provided for in this Section 5.8, (iv) the scope of  the
 protective restrictions provided for in this Section 5.8 are reasonable when
 taking into account (A)  the negotiations between the  Parties and (B)  that
 the Sellers are the direct beneficiary  of the Purchase Price paid  pursuant
 to this Agreement, (v) the consideration being paid to the Sellers  pursuant
 to this Agreement is sufficient inducement  for the Sellers to agree to  the
 terms hereof, (vi)  the provisions of  this Section 5.8  are reasonable  and
 necessary to protect the  business of the Company,  to prevent the  improper
 use or disclosure of the Confidential Information and to provide the Company
 and Purchaser with exclusive ownership of all such Confidential  Information
 and (vii) the terms of this  Section 5.8 preclude the Sellers from  engaging
 in the conduct of the business of the Company for a reasonable period.

      (h)  Release.  Each Seller, in the capacity as a shareholder, director,
 officer and/or  employee of  the Company,  as applicable,  hereby agrees  to
 execute and deliver on the Closing  Date, in a form reasonably  satisfactory
 to the Purchaser, a written release of  the Company from any and all  claims
 resulting from or related to any  matter arising prior to the Closing  Date,
 except as provided in this Agreement.

                                  ARTICLE VI
                                  ----------
                            COVENANTS OF PURCHASER
                            ----------------------

      Section 6.1    Cooperation  by  Purchaser.     From  the  Signing  Date
 through the Closing Date, Purchaser shall use all reasonable efforts (a)  to
 take all actions and to do  all things necessary or advisable to  consummate
 the transactions contemplated by this Agreement,  (b) to cooperate with  the
 Company and each Seller  in connection with  the foregoing, including  using
 reasonable efforts to obtain all of  the Consents and the Releases, and  (c)
 subject to the other  terms and conditions of  this Agreement, to cause  all
 the conditions set forth in Section 8.2, the satisfaction of which is in the
 reasonable control of Purchaser, to be satisfied on or prior to Closing.

      Section 6.2    Confidentiality Agreement.   The Purchaser  acknowledges
 and agrees that, through  the Closing Date, the  Purchaser remains bound  by
 that certain Confidentiality Agreement with Texas General Agency, Inc. dated
 May 25, 2005.

                                 ARTICLE VII
                                 -----------
                               MUTUAL COVENANTS
                               ----------------

      Section 7.1    Fees  and  Expenses.      Each  Party  hereto  will   be
 responsible for and bear all its own costs and expenses incurred at any time
 in connection with pursuing, negotiating or consummating this Agreement  and
 all other agreements  contemplated by the  Transaction Documents,  including
 without limitation the preparation, negotiation and execution of the  Letter
 of Interest related  hereto.  Such  costs and expenses  incurred by  Sellers
 will be paid by Sellers with funds other than those of the Company.

      Section 7.2    Governmental  Consents.    Promptly  after  the  Signing
 Date, each  Party shall  take all  actions and  do all  things necessary  to
 obtain all Consents required by any Governmental Authority to consummate the
 transactions contemplated hereby.

      Section 7.3    Consents to Assign Leases and Contracts.

      (a)  Cooperation and Reasonable Efforts.   Each Party hereby agrees  to
 use reasonable efforts,  to take reasonable  actions (including  Purchaser's
 delivery to  third  parties of  its  audited financial  statements)  and  to
 cooperate with each other as may be necessary to obtain Consents to transfer
 and assign the Encumbered Instruments.  Except as expressly provided herein,
 no Party shall be  required to pay any  sum, to incur  any obligation or  to
 agree to any amendment of any  Encumbered Instrument in order to obtain  any
 such Consent to transfer and assign the Encumbered Instrument.

      (b)  Pre-Closing;  Required  Consents.    Schedule  7.3(b)  lists   the
 Encumbered Instruments to  which a Consent  to transfer and  assign must  be
 obtained from the  appropriate third party  prior to Closing  (collectively,
 the "Required Consents").  Except for  the Required Consents, the  obtaining
 of any  Consents  related to  the  Encumbered  Instruments shall  not  be  a
 condition to Closing, and  Closing shall occur  irrespective of whether  any
 such Consent has been obtained.

      Section 7.4    Permits.

      (a)  Cooperation and Reasonable Efforts.   Each Party hereby agrees  to
 use reasonable efforts,  to take reasonable  actions and  to cooperate  with
 each other as may be necessary to transfer to Purchaser, or assist Purchaser
 in obtaining, all Permits required to  conduct the business of the  Company.
 On or as soon as practicable after the Signing Date, each Party shall  file,
 separately or  jointly  with  any other  Party,  as  the case  may  be,  all
 applications necessary to transfer or obtain the Permits.  Each Party  shall
 use reasonable  efforts  to resolve  such  objections,  if any,  as  may  be
 asserted by  any Governmental  Authority with  respect to  the  applications
 contemplated hereby.  The Sellers, as a group, and Purchaser shall each  pay
 one-half of the fees and expenses  incurred in connection with  transferring
 or obtaining all Permits.

      (b)  Pre-Closing; Required Permits.  Schedule 7.4(b) lists the  Permits
 which must be transferred to or obtained by Purchaser prior to Closing  (the
 "Required Permits").   Except  for the  Required  Permits, the  transfer  or
 issuance to Purchaser of any Permit shall not be a condition to Closing, and
 Closing shall  occur  irrespective  of whether  any  such  Permit  has  been
 transferred or obtained.

      Section 7.5    Further Assurances.   Subject  to  the  other terms  and
 conditions of this  Agreement, at any  time and from  time to time,  whether
 before  or  after  Closing,  each  Party  shall  execute  and  deliver   all
 instruments and documents and take all  other action that the other  Parties
 may reasonably request to consummate or to evidence the consummation of  the
 transactions contemplated by this Agreement.

      Section 7.6    Supplemental Agreements and Consents.

      (a)  At or prior to the Closing, the Sellers shall execute the releases
 required pursuant to Section 5.8(h).

      (b)  Prior to the Closing, the Sellers shall have obtained the Required
 Consents, in form and substance reasonably satisfactory to Purchaser, to the
 transactions contemplated by the Transaction Documents.

      Section 7.7    Tax Matters.

      (a)  All federal, state, local and foreign income, ad valorem,  excise,
 sales, use, payroll, unemployment, and other taxes and assessments ("Taxes")
 that are due and payable by  the Company or by any  Seller on behalf of  the
 Company  have  been  properly  computed,  duly  reported,  fully  paid,  and
 discharged.  There are no unpaid  Taxes that are or  could become a lien  on
 the property or  assets of the  Company or require  payment by the  Company,
 except for current Taxes not yet due and payable . All current Taxes not yet
 due and payable  by the Company  have been properly  accrued on the  balance
 sheet of  the Company.   The  Company  has not  incurred any  liability  for
 penalties, assessments, or  interest under the  Internal Revenue  Code.   No
 unexpired waiver executed by or on behalf of the Company with respect to any
 Taxes is in effect.

      (b)  Tax Audits.  Whenever any Taxing Authority asserts a claim,  makes
 an assessment, or otherwise disputes the amount of Taxes of the Company  for
 which the Sellers are or may be liable under this Agreement, Purchaser  will
 promptly notify  the Sellers  and the  Sellers  shall fully  cooperate  with
 Purchaser and the Company  in connection with  any disputes, proceedings  or
 determinations relating  to any  Taxes to  the  extent such  proceedings  or
 determinations affect the amount of Taxes  for which the Sellers are  liable
 under this Agreement.

      Section 7.8    Employee Benefit Plans; Employment.

      (a)  Employee Benefit Plans.   From and after  the Effective Date,  the
 Company shall elect to continue as  a participating employer in the  Company
 Plans listed on Schedule  7.8(a) (the "Assumed Plans")  and the coverage  of
 the Employees  under  all  the  Assumed Plans  shall  remain  in  effect  in
 accordance with the terms of the Assumed Plans.  Purchaser may elect in  its
 sole discretion at any time to become the plan administrator and  sponsoring
 employer with  the sole  authority to  designate the  plan administrator  or
 amend or terminate any Assumed Plan.

      (b)  No Representations.   Without  the written  consent of  Purchaser,
 neither Sellers nor the Company will make any promises or commitments to any
 employee of the  Company with regard  to his or  her employment status  with
 Purchaser or  the  Company, or  the  terms  or conditions  upon  which  such
 employment might occur or be continued.

                                 ARTICLE VIII
                                 ------------
                       CONDITIONS PRECEDENT TO CLOSING
                       -------------------------------

      Section 8.1    Conditions Precedent  to  Purchaser's  Obligations.  The
 obligation of Purchaser to consummate the transactions contemplated by  this
 Agreement shall be subject to the satisfaction of the following  conditions,
 any of which may be waived in writing by Purchaser.

      (a)  Accuracy of Representations and  Warranties.  The  representations
 and warranties made by  each Seller in this  Agreement shall have been  true
 and complete as of  the Signing Date and  as of the  Closing Date as  though
 made as of the  Closing Date, except to  the extent such representations  or
 warranties made as of a specific  date shall have been correct and  complete
 as of the specified date.

      (b)  Performance of Covenants.  The Company and each Seller shall  have
 performed and  complied  with  all  agreements,  covenants  and  obligations
 required by this Agreement to be performed by such party prior to or at  the
 Closing.

      (c)  No Material Adverse  Change.  The  Company has  not undergone  any
 Material Adverse Change since the Signing Date.

      (d)  Consents.  The Company and each Seller, as the case may be,  shall
 have received and delivered to Purchaser  all the Required Consents and  the
 Required Permits, each in form and substance satisfactory to Purchaser,  and
 shall have given all notices  required to be given  to any Persons prior  to
 the consummation of the transactions contemplated by this Agreement.

      (e)  Closing Certificate.  Each Seller and an executive officer of  the
 Company shall have delivered to Purchaser  a certificate confirming (i)  the
 satisfaction of  the conditions  set forth  in Sections  8.1(a), 8.1(b)  and
 8.1(c) and (ii) the continuing force and effect of the Required Consents and
 Required Permits.

      (f)  Secretary's Certificate.   The  Company  shall have  delivered  to
 Purchaser a certificate executed by the secretary or an assistant  secretary
 of the Company certifying  as to (i) the  Company's Charter Documents,  (ii)
 the Company's good standing,  (iii) the resolutions  in which the  Company's
 board of directors approved the Transaction  Documents to which the  Company
 is  a  party  and  the  transactions  contemplated  thereby,  and  (iv)  the
 incumbency of the Company's officers who execute any documents on behalf  of
 the Company in connection with this Agreement.

      (g)  Deliveries.  The  Company and  each Seller,  as the  case may  be,
 shall have delivered the documents required  by Sections 2.2 and such  other
 documents as Purchaser may reasonably require.

      (h)  No Order or  Action.  No  Order shall be  in effect forbidding  or
 enjoining the  consummation  of  the transactions  contemplated  hereby.  No
 Action shall be pending or threatened before any court or other Governmental
 Authority seeking to enjoin the Closing or seeking damages against Purchaser
 or any  of  its Representatives  as  a result  of  any of  the  transactions
 contemplated by this Agreement, provided that  neither Purchaser nor any  of
 its affiliates instituted such Action.

      (i)  Contemporaneous Closing.   The transactions  contemplated by  that
 certain Purchase  Agreement  dated  November  9,  2005,  by  and  among  the
 Purchaser, Samuel M. Cangelosi, Donate A. Cangelosi and Donald E. Meyer with
 respect to  the  purchase  of  all of  the  issued  and  outstanding  equity
 securities of Texas General Agency, Inc. and TGA Special Risk, Inc., each  a
 Texas corporation,  shall  have  previously  been  or  contemporaneously  be
 consummated.

      Section 8.2   Conditions Precedent  to the Sellers' Obligations.    The
 obligation of each  Seller to  consummate the  transactions contemplated  by
 this Agreement  shall  be  subject to  the  satisfaction  of  the  following
 conditions, any of which may be waived in writing by the Sellers.

      (a)  Accuracy of Representations and  Warranties.  The  representations
 and warranties made by Purchaser in this Agreement shall have been true  and
 complete as of the Signing Date and as of the Closing Date as though made as
 of the Closing Date, except to the extent such representations or warranties
 made as of a specific date  shall have been correct  and complete as of  the
 specified date.

      (b)  Performance of  Covenants.   Purchaser  shall have  performed  and
 complied with all  agreements, covenants  and obligations  required by  this
 Agreement to be performed by Purchaser prior to or at the Closing.

      (c)  Closing Certificate.  An executive officer of Purchaser shall have
 delivered to the Sellers  a certificate confirming  the satisfaction of  the
 conditions set forth in Sections 8.2(a) and 8.2(b).

      (d)  Secretary's Certificate.   Purchaser shall have  delivered to  the
 Sellers a certificate executed by the secretary or an assistant secretary of
 Purchaser certifying as to (i) the resolutions in which Purchaser's board of
 directors approved this Agreement and the transactions contemplated  hereby,
 and (ii) the incumbency of Purchaser's officers who execute any documents on
 behalf of Purchaser in connection with this Agreement.

      (e)  Deliveries.  Purchaser shall have delivered the documents required
 by Section  2.3 and  such  other documents  as  the Sellers  may  reasonably
 require.

      (f)  No Order or  Action.  No  Order shall be  in effect  forbidding or
 enjoining  the  consummation  of  the transactions  contemplated hereby.  No
 Action shall be pending or threatened before any court or other Governmental
 Authority seeking  to enjoin  the Closing  or  seeking damages  against  the
 Company or any Seller or any of their Representatives as a result of any  of
 the transactions contemplated by this  Agreement, provided that neither  the
 Company nor any Seller nor any of their affiliates instituted such Action.

                                  ARTICLE IX
                                  ----------
                         TERMINATION PRIOR TO CLOSING
                         ----------------------------

      Section 9.1    Termination  of  Agreement.     This  Agreement  may  be
 terminated at any time prior to the Closing:

      (a)  by mutual agreement of Purchaser and the Sellers;

      (b)  by Purchaser  at  any time  after  the occurrence  of  a  Material
 Adverse Change in the Company; or

      (c)  by Purchaser or any Seller at any time on or after March 30, 2006,
 if any of the conditions provided  for in Section 8.1 or 8.2,  respectively,
 shall not have been met or waived in writing prior to such date.

      Section 9.2  Procedure Upon Termination.  In  the  event of termination
 pursuant  to  Section  9.1,  written  notice  thereof  shall  be immediately
 given  to  the  other  Parties  and  the  transactions contemplated  by this
 Agreement shall be terminated, without any further action  by any Party.  If
 the transactions contemplated by this Agreement  are  terminated as provided
 herein:

      (a)  each Party  shall  return all  documents,  work papers  and  other
 materials of  the  other  parties, whether  obtained  before  or  after  the
 execution hereof, to the party furnishing the same; and

      (b)  such termination shall not in any  way limit, restrict or  relieve
 any Party of liability for any breach of this Agreement.

                                  ARTICLE X
                                  ---------
                          INDEMNIFICATION AND OFFSET
                          --------------------------

      Section 10.1   Indemnification  by  Sellers.    Sellers,  jointly   and
 severally, shall indemnify  and hold  harmless Purchaser,  the Company,  and
 their respective  directors,  officers,  employees,  agents,  attorneys  and
 shareholders (collectively, the "Purchaser Group") in respect of any and all
 Claims incurred by the Purchaser Group,  in connection with each and all  of
 the following:

      (a)  Any breach of any representation or  warranty made by the  Sellers
 in this Agreement; and

      (b)  The breach of  any covenant,  agreement or  obligation of  Sellers
 contained in  this  Agreement  or any  other  instrument  delivered  at  the
 Closing, including,  without  limitation,  the agreement  and  covenants  of
 Sellers set forth in Section 5.8 of this Agreement.

      Section 10.2   Indemnification by Buyer.  Purchaser shall indemnify and
 hold harmless Sellers in respect of  any and all Claims reasonably  incurred
 by Sellers, in connection with each and all of the following:

      (a)  Any breach of any representation or warranty made by Purchaser  in
 this Agreement; and

      (b)  The breach of any covenant,  agreement or obligation of  Purchaser
 contained in  this  Agreement  or any  other  instrument  delivered  at  the
 Closing.

      Section 10.3   Claims for Indemnification.   Whenever  any Claim  shall
 arise for indemnification hereunder,  the party entitled to  indemnification
 (the "Indemnified  Party")  shall  promptly  notify  the  other  party  (the
 "Indemnifying Party") of the Claim and,  when known, the facts  constituting
 the basis for such  Claim.  In  the event of  any Claim for  indemnification
 hereunder  resulting  from  or  in  connection  with  any  Claim  or   legal
 proceedings by a  third party, the  notice to the  Indemnifying Party  shall
 specify, if known, the amount or an estimate of the amount of the  liability
 potentially arising therefrom.   The Indemnified Party  shall not settle  or
 compromise any  Claim  by  a  third  party  for  which  it  is  entitled  to
 indemnification  hereunder  without  the   prior  written  consent  of   the
 Indemnifying Party.

      Section 10.4   Defense by Indemnifying Party.   In connection with  any
 Claim giving rise to  indemnity hereunder resulting from  or arising out  of
 any Claim  or legal  proceeding by  a Person  who  is not  a party  to  this
 Agreement, the Indemnifying  Party at its  sole cost and  expense may,  upon
 written notice to the Indemnified Party given within twenty (20) days  after
 delivery of the written notice referred to in Section 10.3 hereof assume the
 defense of any  such Claim  or legal proceeding  if it  acknowledges to  the
 Indemnified Party in  writing its obligations  to indemnify the  Indemnified
 Party with respect to all elements of such Claim.  Without the prior written
 consent of the Indemnified Party, the Indemnifying Party will not enter into
 any settlement of  any third-party claim  which would lead  to liability  or
 create any financial  or other  obligation on  the part  of the  Indemnified
 Party for which  the Indemnified Party  is not  entitled to  indemnification
 hereunder, or which  provides for  injunctive or  other non-monetary  relief
 applicable to the Indemnified  Party, or does  not include an  unconditional
 release of all Indemnified Parties.  The Indemnified Party shall be entitled
 to participate in (but not control) the defense of any such action, with its
 own counsel and  at its own  expense.  If  the Indemnifying  Party does  not
 assume the defense of any such Claim or litigation resulting therefrom  with
 counsel  reasonably  satisfactory   to  the  Indemnified   Party,  (a)   the
 Indemnified Party  may defend  against such  Claim  or litigation,  in  such
 manner as it may deem appropriate,  including, but not limited to,  settling
 such  Claim  or  litigation,  after  giving  notice  of  the  same  to   the
 Indemnifying Party,  on  such  terms  as  the  Indemnified  Party  may  deem
 appropriate, and (b) the Indemnifying Party shall be entitled to participate
 in (but not control) the defense of such action, with its counsel and at its
 own expense.   If the Indemnifying  Party thereafter seeks  to question  the
 manner in which the Indemnified Party defended such third party Claim or the
 amount or nature of any such  settlement, the Indemnifying Party shall  have
 the burden to prove by a preponderance of the evidence that the  Indemnified
 Party did  not defend  or settle  such  third party  Claim in  a  reasonably
 prudent manner as a prudent businessman would if his own funds were  subject
 to such suit.

      Section 10.5   Offset.  The Indemnified Party  shall have the right  to
 offset any amounts for  which it is entitled  to indemnification under  this
 Article X against any amounts otherwise payable by the Indemnified Party  to
 the Indemnifying Party under  this Agreement.   The Purchaser shall  further
 have the  right to  offset  against any  amounts  otherwise payable  to  the
 Sellers any liabilities arising from any Claim described in Schedule 3.8, as
 well as any other amount expressly permitted under this Agreement.

                                  ARTICLE XI
                                  ----------
                      ARBITRATION AND EQUITABLE REMEDIES
                      ----------------------------------

      Section 11.1   Settlement Meeting.  The  Parties  shall attempt in good
 faith to resolve promptly  through negotiations any  Claim or dispute  under
 this Agreement.   If any  such Claim or  dispute should  arise, the  Parties
 shall meet at least once to  attempt to resolve the matter (the  "Settlement
 Meeting").  Any Party may request  the other Parties to attend a  Settlement
 Meeting at a mutually agreed time  and place within ten days after  delivery
 of a notice of a Claim or dispute.   The occurrence of a Settlement  Meeting
 with respect to a Claim or dispute shall be a condition precedent to seeking
 any arbitration or  judicial remedy,  provided that  if a  Party refuses  to
 attend a  Settlement Meeting  the other  Parties may  proceed to  seek  such
 remedy.

      Section 11.2   Arbitration  Proceedings.    If  the  Parties  have  not
 resolved a monetary Claim  or dispute at the  Settlement Meeting, any  Party
 may submit the matter  to arbitration.  A  panel of three arbitrators  shall
 conduct the arbitration proceedings in accordance with the provisions of the
 Federal Arbitration Act  (99 U.S.C. Section  1 et seq.)  and the  Commercial
 Arbitration Rules of the American Arbitration Association (the  "Arbitration
 Rules").  The decision of a majority of  the panel shall be the decision  of
 the arbitrators.

      (a)  Arbitration Notice.   To  submit a  monetary Claim  or dispute  to
 arbitration, a  Party  shall furnish  the  other Parties  and  the  American
 Arbitration Association with a notice (the "Arbitration Notice")  containing
 (i) the name  and address of  such Party, (ii)  the nature  of the  monetary
 Claim or dispute in reasonable detail, (iii) the Party's intent to  commence
 arbitration proceedings under this Agreement, and (iv) the other information
 required under the Federal Arbitration Act and the Arbitration Rules.

      (b)  Selection of Arbitrators.  Within ten  days after delivery of  the
 Arbitration Notice, Purchaser and Sellers, as a group, shall each select one
 arbitrator from the list of the American Arbitration Association's  National
 Panel of Commercial Arbitrators.  Within ten days after the selection of the
 last of those two arbitrators, those two arbitrators shall select the  third
 arbitrator from such  list.  If  the first two  arbitrators cannot select  a
 third arbitrator  within  such  ten day  period,  the  American  Arbitration
 Association  shall  select  such  third  arbitrator  from  the  list.   Each
 arbitrator shall be an individual not subject to disqualification under Rule
 No. 19  of  the  Arbitration  Rules  with  experience  in  settling  complex
 litigation involving mergers and acquisitions.

      (c)  Arbitration Final.  The arbitration of the matters in  controversy
 and the determination of any amount  of damages or indemnification shall  be
 final and binding upon the Parties  to the maximum extent permitted by  Law,
 provided that any Party may seek any equitable remedy available under Law as
 provided in this Agreement.  This agreement to arbitrate is irrevocable.

      Section 11.3   Place  of  Arbitration.    Any  arbitration  proceedings
 shall be conducted in San  Antonio, Texas or at  such other location as  the
 Parties may agree.  The arbitrators  shall hold the arbitration  proceedings
 within sixty (60) days after the selection of the third arbitrator.

      Section 11.4   Discovery.     During  the  period  beginning  with  the
 selection of the  third arbitrator  and ending  upon the  conclusion of  the
 arbitration proceedings, the arbitrators shall have the authority to  permit
 the  Parties  to  conduct  such   discovery  as  the  arbitrators   consider
 appropriate.

      Section 11.5   Equitable Remedies.  Notwithstanding  anything  else  in
 this Agreement to the contrary, after  the Settlement Meeting a Party  shall
 be entitled to seek any equitable remedies available under Law, including an
 injunction prohibiting a breach of the provisions of Section 5.8 or an Order
 requiring a Seller to perform this  Agreement.  Any such equitable  remedies
 shall be in  addition to  any damages  or indemnification  rights that  such
 Party may assert in an arbitration proceeding.

      Section 11.6   Exclusive Jurisdiction.   The  Parties  agree  that  any
 claim for equitable relief relating to this Agreement shall be instituted in
 a federal or  state court sitting  in San Antonio,  Texas, which courts  and
 their respective appellate courts shall be the exclusive venue for any  such
 claim.  Each Party waives any  objection that it may  have to the laying  of
 such venue, and irrevocably  submits to the jurisdiction  of any such  court
 with respect to any such claim.  Any service of process and other notice  in
 any such  case  shall be  effective  against  a Party  when  transmitted  in
 accordance with Section 12.9, provided that  a Party also may serve  process
 in any manner permitted by Law.

      Section 11.7   Judgments.  Any  arbitration  award under this Agreement
 shall  be  final  and  binding.  Any court  having  jurisdiction  may  enter
 judgment on such arbitration award upon application of a Party.

      Section 11.8  Expenses.  If any Party commences arbitration proceedings
 or  court  proceedings  seeking  equitable  relief  with  respect  to   this
 Agreement, the prevailing Party in such arbitration proceedings or case  may
 receive  as  part  of  any  award or judgment reimbursement of such  Party's
 reasonable attorneys' fees and expenses to  the extent that the  arbitrators
 or court considers appropriate.

      Section 11.9   Cost of the Arbitration.  The  arbitrators  shall assess
 the costs  of the  arbitration proceedings,  including  their fees,  to  the
 Parties in such proportions as the arbitrators consider reasonable under the
 circumstances.

      Section 11.10  Exclusivity of Remedies.   To  the  extent permitted  by
 Law, the  arbitration and  judicial remedies  set forth  in this  Article XI
 shall be the exclusive remedies available to the Parties with respect to any
 dispute under this Agreement or Claim for damages under this Agreement.

                                 ARTICLE XII
                                 -----------
                                MISCELLANEOUS
                                -------------

      Section 12.1   Amendment.  No  amendment  of  this  Agreement shall  be
 effective unless in a writing signed by Purchaser and each Seller.

      Section 12.2   Counterparts.  This  Agreement  may  be executed in  any
 number of counterparts,  each of  which shall be  deemed to  be an  original
 agreement, but all  of which shall  constitute one and  the same  agreement.
 Any Party may execute  and deliver this Agreement  by an executed  signature
 page transmitted by a facsimile machine.  If a Party transmits its signature
 page by a facsimile machine, such Party shall promptly thereafter deliver an
 originally executed signature page to the  other Parties, provided that  any
 failure to  deliver such  an originally  executed signature  page shall  not
 affect the validity, legality, or enforceability of this Agreement.

      Section 12.3   Entire  Agreement.     This  Agreement  constitutes  the
 entire agreement and  understanding between  the Parties and supersedes  all
 prior agreements and understandings, both written and oral, with respect  to
 the subject matter of this Agreement.

      Section 12.4   Expenses.   Each  Party shall bear its own expenses with
 respect to  the  negotiation  and preparation  of  this  Agreement  and  the
 Closing, including any  fees and expenses  of its Representatives,  provided
 that if a Party terminates this Agreement because of another Party's  breach
 of this  Agreement,  the  non-breaching Party  shall  be  entitled  to  seek
 reimbursement of its expenses  as part of its  damages with respect to  such
 breach.  The Sellers, as a group,  shall bear any Tax imposed in  connection
 with the transfer of the Shares to Purchaser pursuant to this Agreement.

      Section 12.5   GOVERNING  LAW.  THIS  AGREEMENT  SHALL  BE GOVERNED  BY
 THE LAWS OF THE STATE OF TEXAS, REGARDLESS OF THE LAWS THAT MIGHT  OTHERWISE
 GOVERN UNDER THE CONFLICTS OF LAWS PRINCIPLES OF SUCH STATE.

      Section 12.6   Consent to Service of Process.  Each  Party  waives  any
 objection that such party may now or  hereafter have to the laying of  venue
 of any such Action, and irrevocably submits to the jurisdiction of any  such
 court in any  such Action.   Any and all  service of process  and any  other
 notice in  any  such Action  shall  be  effective against  such  Party  when
 transmitted in accordance with Section 12.9.  Nothing contained herein shall
 be deemed to affect the right  of any Party to  serve process in any  manner
 permitted by Law.

      Section 12.7   No Assignment.  No  Party  may  assign  its benefits  or
 delegate its duties under this Agreement  without the prior written  consent
 of all of the other Parties.  Any attempted assignment or delegation without
 such prior consent shall be void.  Notwithstanding this prohibition  against
 assignment and delegation, Purchaser may assign its rights and delegate  its
 duties under  this  Agreement  to a  wholly-owned  subsidiary  of  Purchaser
 without the Sellers' consent.  Upon  Purchaser's assignment of its  benefits
 and delegation of  its duties under  this Agreement to  such a wholly  owned
 subsidiary, Purchaser  shall be  released from  any obligations  under  this
 Agreement.  In addition, after the Closing, Purchaser may assign its  rights
 under this  Agreement to  a purchaser  of all  of the  assets or  equity  of
 Purchaser without  the Sellers'  consent, and  any  such purchaser  and  any
 subsequent purchasers  of all  of  the assets  or  equity of  Purchaser  may
 similarly assign such rights.

      Section 12.8   No Third Party Beneficiaries.   This Agreement is solely
 for the benefit  of the Parties  and no other  Person shall have  any right,
 interest, or claim under this Agreement.

      Section 12.9   Notices.    All claims, consents, designations, notices,
 waivers, and other communications in connection with this Agreement shall be
 in writing.   Such  claims, consents,  designations, notices,  waivers,  and
 other communications shall be considered received  (i) on the day of  actual
 transmittal when transmitted by facsimile with written confirmation of  such
 transmittal, (ii) on the next business day following actual transmittal when
 transmitted by a nationally  recognized overnight courier,  or (iii) on  the
 third  business  day  following  actual  transmittal  when  transmitted   by
 certified mail, postage prepaid, return receipt requested; in each case when
 transmitted to a  Party at its  address set forth  below (or  to such  other
 address to which  such Party has  notified the other  Parties in  accordance
 with this  Section to  send such  claims, consents,  designations,  notices,
 waivers, and other communications):

           Purchaser:  Hallmark Financial Services, Inc.
                       777 Main Street, Suite 1000
                       Fort Worth, Texas 76102
                       Phone:  (817) 348-1800
                       Fax:  (817) 348-1815
                       Attn.:  Mr. Mark Morrison

      with a copy to:  McGuire, Craddock & Strother, P.C.
                       3550 Lincoln Plaza
                       500 North Akard
                       Dallas, Texas 75201
                       Phone:  (214) 954-6800
                       Fax:  (214) 954-6868
                       Attn.:  Steven D. Davidson

             Sellers:  Pan American Acceptance Corporation
                       7411 John Smith Dr., Ste. 1400
                       San Antonio, Texas  78229
                       Phone:  (210) 949-9100
                       Fax:  (210) 949-9121
                       Attn:  Mr. Samuel M. Cangelosi

      with a copy to:  Mark Holland, P.C.
                       9901 IH-10 West, Suite 795
                       San Antonio, Texas 78230
                       Phone:  (210) 690-1956
                       Fax:  (210) 690-1735
                       Attn.:  Mark Holland

      Section 12.10  Public Announcements.  The  Parties  shall agree on  the
 terms of any press  releases or other public  announcements related to  this
 Agreement, and  shall  consult with  each  other before  issuing  any  press
 releases or other public announcements related to this Agreement;  provided,
 however, that any Party may  make a public disclosure  if in the opinion  of
 such Party's counsel it is  required by Law or  the rules of the  Securities
 Exchange Commission, American Stock Exchange  or other regulatory agency  to
 make such disclosure.   The  Parties agree,  to the  extent practicable,  to
 consult with each other  regarding any such  public announcement in  advance
 thereof.

      Section 12.11  Representation  by  Legal  Counsel.   Each  Party  is  a
 sophisticated Person that was advised by experienced legal counsel and other
 advisors in the negotiation and preparation of this Agreement.

      Section 12.12  Schedules.      All  references  in  this  Agreement  to
 schedules shall mean the schedules identified  in this Agreement, which  are
 incorporated into  this  Agreement  and  shall be  deemed  a  part  of  this
 Agreement for all purposes.  Each Section of this Agreement that refers to a
 schedule shall have a separate schedule.  In addition, any disclosure  under
 a particular  Section's schedule  shall be  made under  the heading  of  any
 relevant subsection of such Section.  A disclosure of an item in a  schedule
 for a particular Section or under a heading in a schedule corresponding to a
 particular subsection shall not  be a disclosure  under any other  Section's
 schedule or  any other  subsection, unless  so  noted specifically  on  such
 schedule.  The Sellers  have delivered to Purchaser  a correct and  complete
 copy of each  document described on  each schedule to  this Agreement and  a
 correct and complete  written description of  each unwritten arrangement  or
 other item described on each such schedule.

      Section 12.13  Severability.  Any  provision  of this Agreement that is
 prohibited or unenforceable  in any  jurisdiction shall  not invalidate  the
 remaining  provisions  of   this  Agreement  or   affect  the  validity   or
 enforceability of such provision  in any other  jurisdiction.  In  addition,
 any such prohibited or unenforceable provision shall be given effect to  the
 extent possible in the  jurisdiction where such  provision is prohibited  or
 unenforceable.

      Section 12.14  Specific Performance.   Each  Seller  acknowledges  that
 the benefits that Purchaser will  derive from the transactions  contemplated
 by this Agreement are unique and irreplaceable.  Accordingly, if such Seller
 improperly abandons or terminates this  Agreement, Purchaser would not  have
 an adequate remedy at law.  Purchaser therefore shall be entitled to a court
 order requiring such Seller to perform  this Agreement.  No Seller shall  be
 entitled to specific performance of this Agreement.

      Section 12.15  Successors.  This Agreement  shall  be binding upon  and
 shall  inure  to   the  benefit  of   each  Party  and   its  heirs,   legal
 representatives, permitted  assigns,  and  successors,  provided  that  this
 Section shall not permit the assignment or other transfer of this Agreement,
 whether by  operation of  law  or otherwise,  if  such assignment  of  other
 transfer is not otherwise permitted under this Agreement.

      Section 12.16  Time of the Essence.  Time  is  of  the  essence in  the
 performance of this Agreement  and all dates and  periods specified in  this
 Agreement.

      Section 12.17  Waiver.    No  provision  of  this  Agreement  shall  be
 considered waived unless such waiver is  in writing and signed by the  Party
 that benefits from  the enforcement  of such provision.   No  waiver of  any
 provision in  this  Agreement,  however,  shall be  deemed  a  waiver  of  a
 subsequent breach of such provision or a waiver of a similar provision.   In
 addition, a  waiver of  any breach  or  a failure  to  enforce any  term  or
 condition of this Agreement shall not in  any way affect, limit, or waive  a
 Party's rights under this Agreement at any time to enforce strict compliance
 thereafter with every term and condition of this Agreement.

      IN WITNESS WHEREOF, each  Party executed, or  caused a duly  authorized
 officer to execute, this Agreement as of the Signing Date.

 PURCHASER:                    HALLMARK FINANCIAL SERVICES, INC.

                               By:
                                      --------------------------
                               Name:
                                      --------------------------
                               Title:
                                      --------------------------

 SELLERS:

                               ---------------------------------
                               Samuel M. Cangelosi

                               ---------------------------------
                               Donate A. Cangelosi

                               ---------------------------------
                               Carol A. Meyer

<PAGE>

                                  APPENDIX A
                   DEFINITIONS AND  RULES OF INTERPRETATION

      Definitions.  Unless the context otherwise requires, the terms  defined
 in this Appendix shall have the meanings specified below for all purposes of
 this Agreement:

           "Action"  means  any  action,  arbitration  proceeding,  cause  of
 action, charge,  counterclaim, cross  claim, inquiry,  investigation,  legal
 action, litigation, Order, proceeding, or suit.

           "Agreement" shall have the meaning set forth in the Preamble.

           "Arbitration Notice" shall have the  meaning set forth in  Section
 11.2(a).

           "Arbitration Rules" shall  have the meaning  set forth in  Section
 11.2.

           "Assumed Plans"  shall  have  the meaning  set  forth  in  Section
 7.8(a).

           "Bank Accounts" shall have the meaning set forth in Section 3.20.

           "Books  and  Records"  shall  mean  all  the  books  and   records
 maintained by or for  any Person, including  all accounting records,  minute
 books, stock  records,  computerized  records  and  storage  media  and  the
 software used in connection therewith.

           "Charter Documents" shall mean (i) in  the case of a  corporation,
 its articles or  certificate of incorporation  and its bylaws,  (ii) in  the
 case of  a  partnership, its  partnership  certificate and  its  partnership
 agreement, and  (iii) in  the case  of  any other  Person, its  organic  and
 governing documents;  in each  case as  such document  has been  amended  or
 supplemented from time to time prior to the Signing Date.

           "Claim" shall  mean  any arbitration  award,  assessment,  charge,
 citation, claim, damage, demand,  directive, expense, fine, interest,  joint
 or several  liability, lawsuit,  notice,  obligation, payment,  penalty,  or
 summons of any  kind or nature  whatsoever, including  any damages  incurred
 because of  the claimant's  negligence or  gross  negligence or  any  strict
 liability imposed upon the claimant, any consequential or punitive  damages,
 and any  reasonable  attorneys'  fees  and  expenses.    A  Claim  shall  be
 considered to exist even though it may be conditional, contingent, indirect,
 potential,  secondary,  unaccrued,  unasserted,  unknown,  unliquidated,  or
 unmatured.

           "Closing" shall have the meaning set forth in Section 2.1.

           "Closing Date" shall have the meaning set forth in Section 2.1.

           "Code" shall mean the Internal Revenue Code of 1986, as amended.

           "Company" shall have the meaning set forth in Recital A.

           "Company Assets"  shall  have the  meaning  set forth  in  Section
 3.9(a).

           "Company Plans"  shall  have  the meaning  set  forth  in  Section
 3.18(a).

           "Competing Business" shall have the  meaning set forth in  Section
 5.8(c).

           "Confidential Information" means any proprietary information,  and
 any information  which Purchaser  reasonably  considers to  be  proprietary,
 pertaining to the  Company's and  Purchaser's past,  present or  prospective
 business secrets, methods or policies, earnings, finances, security holders,
 lenders, key employees, nature of services performed by such entity's  sales
 personnel,  procedures,  standards  and  methods,  information  relating  to
 arrangements with suppliers, the  identity and requirements of  arrangements
 with customers,  all policyholder  information of  policyholders, the  type,
 volume or profitability  of services  or products  for customers,  drawings,
 records, reports,  documents,  manuals,  techniques,  ratings,  information,
 data, statistics, trade  secrets and all  other information of  any kind  or
 character relating  to  each of  the  Parties,  whether or  not  reduced  to
 writing.

           "Consent" shall mean a consent, approval, order, authorization  or
 waiver from,  notice to  or declaration,  registration  or filing  with  any
 Person.

           "Effective Date" shall mean  shall have the  meaning set forth  in
 Section 1.4.

            "Employee Benefit Plan" shall mean any  (i) Pension Benefit Plan,
 (ii) Welfare Benefit Plan, (iii) accident, dental, disability, health, life,
 medical,  or  vision  plan  or  insurance  policy,  (iv)  bonus,  executive,
 incentive or deferred compensation  plan, (v) change  in control plan,  (vi)
 fringe benefits and perquisites, (vii)  holiday, sick pay, leave,  vacation,
 moving or  tuition  reimbursement  or other  similar  policy,  (viii)  stock
 option,  stock   purchase,  phantom   stock,  restricted   stock  or   stock
 appreciation plan, (ix) severance plan,  or (x) other employee  arrangement,
 commitment, custom, policy or practice.

           "Employees" shall have the meaning set forth in Section 3.17(a).

           "Encumbered Instrument" shall mean any  contract or lease that  by
 its terms requires Consent from a third party by reason of the  transactions
 contemplated by the Transaction Documents.

           "Encumbrance" shall mean any title defect or objection,  mortgage,
 lien, deed  of trust,  equity, judgment,  claim, restrictive  covenant,  use
 restriction, charge, pledge, security interest  or other encumbrance of  any
 nature whatsoever,  including  all leases,  chattel  mortgages,  conditional
 sales  contracts,  collateral  security  arrangements  and  other  title  or
 interest retention arrangements.

           "ERISA" shall mean the Employee Retirement Income Security Act  of
 1974, as amended.

           "ERISA Affiliate"  shall have  the meaning  set forth  in  Section
 3.18(b).

           "Financial Statements" shall have the meaning set forth in Section
 3.26.

           "GAAP" shall  mean  generally accepted  accounting  principles  in
 effect in the United States of America as of the Signing Date.

           "Governmental Authority"  shall mean  any federal,  state,  local,
 tribal,  foreign   or  other   governmental  agency,   department,   branch,
 commission, board, bureau, court, instrumentality or body.

           "Indemnified  Party"  shall   have  the  meaning   set  forth   in
 Section 10.3.

           "Indemnifying  Party"  shall  have   the  meaning  set  forth   in
 Section 10.3.

           "Insurance Policies" shall have the  meaning set forth in  Section
 3.12.

           "Intangible Asset"  shall mean  any patent,  trademark,  trademark
 license, servicemark, servicemark  license, computer  software, trade  name,
 masthead, brand name, slogan, copyright, reprint right, franchise,  license,
 process, authorization, invention, know-how, formula, trade secret and other
 intangible asset, together  with any  pending application,  continuation-in-
 part or extension therefor.

           "Law" shall mean  any applicable code,  statute, law, common  law,
 rule,  regulation,  order,  ordinance,  judgment,  decree,  order,  writ  or
 injunction of any Governmental Authority.

           "Law Affecting  Creditors'  Rights"  shall  mean  any  bankruptcy,
 fraudulent conveyance or  transfer, insolvency, moratorium,  reorganization,
 or other law affecting the enforcement  of creditors' rights generally,  and
 any general principles of equity.

           "Material Adverse Change"  shall mean, with  respect to a  Person,
 that such Person has (i) breached a Material Contract, (ii) incurred a Claim
 or become a party to an Action that could have a significant and detrimental
 effect upon it, (iii) suffered a  Material Adverse Effect, or (iv)  violated
 any Law or Order to which it or any of its assets is subject or bound.

           "Material Adverse Effect"  shall mean, with  respect to a  Person,
 the occurrence of an  event or the  existence of a  circumstance that has  a
 material adverse  effect  on such  Person's  assets, business,  cash  flows,
 financial condition, liabilities,  operations, prospects, or  relationships,
 including the occurrence of any event  or the existence of any  circumstance
 that could cause such an effect in the future in an amount of $100,000.00 or
 more.

           "Material Contracts" shall have the  meaning set forth in  Section
 3.13.

           "Order" shall  mean  any consent  decree,  decree,  determination,
 injunction, judgment,  order,  or writ  of  any arbitrator  or  Governmental
 Authority.

           "PAAC" shall have the meaning set forth in Recital A.

           "Parties" and "Party" shall have the meaning set forth in  Recital
 B.

           "Pension Benefit Plan" shall mean (i) an "employee pension benefit
 plan" as defined in Section 3(2)  of ERISA, and (ii) a "multiemployer  plan"
 as defined in Section 4001(a)(3) of ERISA.

           "Permit" shall mean any license, approval, certificate, franchise,
 registration,  qualification,  permit  or  authorization  issuable  by   any
 Governmental Authority or industry self-regulating organization.

           "Permitted  Encumbrance"  shall  mean  any  Encumbrance   directly
 related to (i) workers', repairmen's and similar Encumbrances imposed by Law
 that have been incurred in the  ordinary course of business, (ii)  retention
 of title agreements with  suppliers entered into in  the ordinary course  of
 business, and (iii) the rights of others to customer deposits.

           "Person"  shall  mean  any  association,  bank,  business   trust,
 corporation,   estate,   general   partnership,   Governmental    Authority,
 individual,  joint  stock  company,  joint  venture,  labor  union,  limited
 liability company, limited partnership, non-profit corporation, professional
 association, professional corporation, trust,  or any other organization  or
 entity.

           "Personal Property Leases"  shall have  the meaning  set forth  in
 Section 3.10(d). .

           "Purchase Price" shall have the meaning set forth in Section 1.2.

           "Purchaser" shall have the meaning set forth in the Preamble.

           "Purchaser Group"  shall have  the meaning  set forth  in  Section
 10.1.

           "Real Property Leases" shall have the meaning set forth in Section
 3.10(b).

           "Representatives" shall  mean,  with  respect to  a  Person,  such
 Person's directors,  employees, officers,  agents, accountants,  affiliates,
 consultants, investment  bankers,  attorneys, lenders,  representatives  and
 shareholders.

           "Required Consents" shall  have the meaning  set forth in  Section
 7.3(b).

           "Required Permits" shall  have the  meaning set  forth in  Section
 7.4(b).

           "Restricted Territories"  shall  have  the meaning  set  forth  in
 Section 5.8(c).

           "Returns" shall have the meaning set forth in Section 3.19(a).

           "Sellers" shall have the meaning set forth in the Preamble.

           "Sellers' Knowledge" shall  mean the  actual knowledge  as of  the
 date that a  specific representation  or warranty  is made  or deemed  made,
 after reasonable inquiry, of an individual Seller.

           "Settlement Meeting" shall have the  meaning set forth in  Section
 10.1.

           "Shares" shall have the meaning set forth in Section 1.1.

           "Signing Date" shall have the meaning set forth in the Preamble.

           "Stock" shall have the meaning set forth in Recital A.

           "Subscription Right" shall have the  meaning set forth in  Section
 3.7.

            "Tax" shall mean any assessment, charge, duty, fee, impost, levy,
 tariff, or  tax  of  any  nature  whatsoever  imposed  by  any  Governmental
 Authority or payable pursuant  to any tax  sharing agreement, including  any
 income, payroll,  withholding, excise,  gift, alternative  minimum,  capital
 gain, added value, social security, sales, use, real and personal  property,
 use and occupancy, business and occupation, mercantile, real estate, capital
 stock, and  franchise tax  or charge,  together with  any related  interest,
 penalties or additions thereon.

           "Taxing Authority" shall mean the Internal Revenue Service and any
 other  domestic  or  foreign  Governmental  Authority  responsible  for  the
 administration of any Tax.

            "Transaction  Documents"   shall   mean   this   Agreement,   the
 Supplemental Agreements, and  all other documents  and instruments  executed
 and delivered pursuant to or in furtherance of this Agreement.

           "Welfare Benefit  Plan" shall  mean an  "employee welfare  benefit
 plan" as defined  in Section 3(1)  of ERISA, including  an employee  welfare
 benefit plan which is a "multiemployer  welfare plan" as defined in  Section
 3(37) of ERISA and a "multiple  employer welfare arrangement" as defined  in
 Section 3(40) of ERISA.

           "Work Product" shall have the meaning set forth in Section 5.8(b).

      Accounting Terms.  Except as otherwise provided in this Agreement,  all
 accounting terms defined in this Agreement, whether defined in this  Article
 or otherwise, shall be construed in  accordance with GAAP on a  consolidated
 basis.

      Articles, Sections,  Exhibits and  Schedules.   Except as  specifically
 stated otherwise, references to  Articles, Sections, Exhibits and  Schedules
 refer to the Articles, Sections, Exhibits and Schedules of this Agreement.

      Attorneys'  Fees.    Whenever  this  Agreement  refers  to  a  Person's
 "attorneys' fees and expenses," such reference  also shall include any  fees
 and expenses of accountants, experts, investigators, and other  professional
 advisors whose  services  such  Person's attorney  considered  advisable  in
 connection with the prosecution or defense of the particular matter.

      Breach.  The term "breach" with  respect to any contract or  instrument
 means any  breach  or violation  of,  or  default under,  such  contract  or
 instrument,  any  conflict  with  another  contract  or  instrument  or  any
 emergence of a  right of  another party to  such contract  or instrument  to
 accelerate,  cancel,  modify  or  terminate  such  contract  or  instrument,
 including any such breach, violation, default, conflict, or right that  will
 arise after notice or lapse of time.

      Drafting.  Neither this Agreement nor  any provision set forth in  this
 Agreement shall be interpreted in favor of or against any Party because such
 Party or its  legal counsel drafted  this Agreement or  such provision.   No
 prior draft of this Agreement or  any provision set forth in this  Agreement
 shall be used when interpreting this Agreement or its provisions.

      Headings.  Article and Section headings are used in this Agreement only
 as a  matter  of  convenience  and  shall  not  have  any  effect  upon  the
 construction or interpretation of this Agreement.

      Include.  The term  "include" or any derivative  of such term does  not
 mean that the items following such term are the only types of such items.

      Or.  The term  "or" shall not  be interpreted as  excluding any of  the
 items described.

      Plural and Singular Words.  Whenever the plural form of a word is  used
 in this Agreement, that word shall  include the singular form of that  word.

 Whenever the singular form of  a word is used  in this Agreement, that  word
 shall include the plural form of that word.

      Predecessors.   Any  of  the Sellers'  representations  and  warranties
 concerning any Claim against the Company, any liability or obligation of the
 Company, or any  violation of Law  by the Company  shall include any  Claims
 with respect to each  predecessor of the Company,  including all direct  and
 indirect predecessors of any such predecessor.

      Pronouns.  Whenever a  pronoun of a particular  gender is used in  this
 Agreement, if appropriate that pronoun also shall refer to the other  gender
 and the neuter.   Whenever a neuter  pronoun is used  in this Agreement,  if
 appropriate that  pronoun also  shall refer  to the  masculine and  feminine
 gender.

      Representations  and  Warranties.   The  Sellers'  representations  and
 warranties  under  this  Agreement   shall  mean  the  representations   and
 warranties set forth in  Article III and the  reaffirmation of the  Sellers'
 representations and warranties in certificates delivered pursuant to Article
 II.  Purchaser's representations and  warranties under this Agreement  shall
 mean the representations  and warranties  set forth  in Article  IV and  the
 reaffirmation of those  representations and warranties  in the  certificates
 delivered pursuant to Article II.

      Statutes.  Any reference to Law  or any specific statute shall  include
 any changes to such law or statute after the Signing Date, any successor law
 or statute, and  any regulations  and rules  promulgated under  such law  or
 statute and  any successor  law or  statute, whether  promulgated before  or
 after the Signing Date.<PAGE>
                                                                    Exhibit 4.01

THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN CERTIFICATED
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION ("DTC"), TO A NOMINEE OF DTC OR BY DTC OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITARY. UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
TO CITIGROUP FUNDING INC. OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

No. R-1                                             INITIAL PRINCIPAL AMOUNT
CUSIP: 17308C 77 5                                  REPRESENTED $20,250,000
ISIN: US17308C7754                                  representing 2,025,000 Notes
                                                    ($10 per Note)

                             CITIGROUP FUNDING INC.
                      Stock Market Upturn Notes Based Upon
                      the S&P 500 Index(R) Due May 29, 2007

        Citigroup Funding Inc., a Delaware corporation (hereinafter referred to
as the "Company", which term includes any successor corporation under the
Indenture herein referred to), for value received and on condition that this
Note is not redeemed by the Company prior to May 29, 2007 (the "Stated Maturity
Date"), hereby promises to pay to CEDE & CO., or its registered assigns, the
Maturity Payment (as defined below), on the Stated Maturity Date. This Note will
not bear interest, is not subject to any sinking fund, is not subject to
redemption at the option of the holder thereof prior to the Stated Maturity
Date, and is not subject to the defeasance provisions of the Indenture. The
payments on this Note are fully and unconditionally guaranteed by Citigroup
Inc., a Delaware corporation (the "Guarantor").

        Payment of the Maturity Payment with respect to this Note shall be made
upon presentation and surrender of this Note at the corporate trust office of
the Trustee in the Borough of Manhattan, The City and State of New York, in such
coin or currency of the United States as at the time of payment is legal tender
for payment of public and private debts.

        This Note is one of the series of 2,025,000 Stock Market Upturn
Notes(SM) Based Upon the S&P 500 Index(R) (the "Index") Due May 29, 2007 (the
"Notes").

CFI SPX Upturn Notes Due 2007
Specimen Note

<PAGE>

INTEREST

        The Notes do not bear interest. No payments on the Notes will be made
until the Stated Maturity Date.

PAYMENT AT MATURITY

        On the Stated Maturity Date, holders of the Notes will receive for each
Note the Maturity Payment described below.

DETERMINATION OF THE MATURITY PAYMENT

        The Maturity Payment for each Note equals the sum of the initial
principal amount of $10 per Note plus the Index Return Amount.

        The "Index Return Amount" is calculated as follows:

      -     If the Index Return is positive, the Index Return Amount will equal
            the product of:

                      $10 * Upside Participation Rate * Index Return.

      -     If the Index Return is negative, the Index Return Amount will equal
            the product of:

                               $10 * Index Return

      -     If the Index Return is zero, the Index Return Amount will be zero.

        The "Index Return" equals:

                          Ending Value - Starting Value
                                 Starting Value

        provided that the Index Return will be subject to a cap of 5.334%.

        The "Upside Participation Rate" is 300%.

        The "Starting Value" is 1254.85, the closing value of the Index on
November 21, 2005.

        The "Ending Value" will be the closing value of the Index on the third
Index Business Day before the Stated Maturity Date.

        If no closing value of the Index is available on the third business day
before the Stated Maturity Date because of a Market Disruption Event or
otherwise, the value of the Index for that Index Business Day, unless deferred
by the calculation agent as described below, will be the arithmetic mean, as
determined by the calculation agent, of the value of the Index obtained from as
many dealers in equity securities (which may include Citigroup Global Markets
Inc. or any of

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<PAGE>

the Company's other affiliates), but not exceeding three such dealers, as will
make such value available to the calculation agent. The determination of the
value of the Index by the calculation agent in the event of a Market Disruption
Event may be deferred by the calculation agent for up to five consecutive Index
Business Days on which a Market Disruption Event is occurring, but not past the
Index Business Day prior to the Stated Maturity Date.

        An "Index Business Day" means a day, as determined by the calculation
agent, on which the Index or any successor index is calculated and published and
on which securities comprising more than 80% of the value of the Index on such
day are capable of being traded on their relevant exchanges or markets during
the one-half hour before the determination of the closing value of the Index.
All determinations made by the calculation agent will be at the sole discretion
of the calculation agent and will be conclusive for all purposes and binding on
the Company, the Guarantor and the beneficial owners of the Notes, absent
manifest error.

        A "Market Disruption Event" means, as determined by the calculation
agent in its sole discretion, the occurrence or existence of any suspension of
or limitation imposed on trading (by reason of movements in price exceeding
limits permitted by any relevant exchange or market or otherwise) of, or the
unavailability, through a recognized system of public dissemination of
transaction information, for a period longer than two hours, or during the
one-half hour period preceding the close of trading, on the applicable exchange
or market, of accurate price, volume or related information in respect of (a)
stocks which then comprise 20% or more of the value of the Index or any
successor index, (b) any options or futures contracts, or any options on such
futures contracts relating to the Index or any successor index, or (c) any
options or futures contracts relating to stocks which then comprise 20% or more
of the value of the Index or any successor index on any exchange or market if,
in each case, in the determination of the calculation agent, any such
suspension, limitation or unavailability is material. For the purpose of
determining whether a Market Disruption Event exists at any time, if trading in
a security included in the Index is materially suspended or materially limited
at that time, then the relevant percentage contribution of that security to the
value of the Index will be based on a comparison of the portion of the value of
the Index attributable to that security relative to the overall value of the
Index, in each case immediately before that suspension or limitation.

DISCONTINUANCE OF THE S&P 500 Index(R)

        If Standard & Poor's ("S&P") discontinues publication of the Index or if
it or another entity publishes a successor or substitute index that the
calculation agent determines, in its sole discretion, to be comparable to the
Index, then the value of the Index will be determined by reference to the value
of that index, which we refer to as a "successor index."

        Upon any selection by the calculation agent of a successor index, the
calculation agent will cause notice to be furnished to the Company and the
Trustee, who will provide notice of the selection of the successor index to the
registered holders of the Notes.

        If S&P discontinues publication of the Index and a successor index is
not selected by the calculation agent or is no longer published on any date of
determination of the value of the Index, the value to be substituted for the
Index for that date will be a value computed by the

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<PAGE>
calculation agent for that date in accordance with the procedures last used to
calculate the Index prior to any such discontinuance.

        If S&P discontinues publication of the Index prior to the determination
of the Index Return Amount and the calculation agent determines that no
successor index is available at that time, then on each Index Business Day until
the earlier to occur of (a) the determination of the Index Return Amount and (b)
a determination by the calculation agent that a successor index is available,
the calculation agent will determine the value that is to be used in computing
the value of the Index as described in the preceding paragraph. The calculation
agent will cause notice of those daily closing values to be published not less
often than once each month in The Wall Street Journal (or another newspaper of
general circulation).

        If a successor index is selected or the calculation agent calculates a
value as a substitute for the Index as described above, the successor index or
value will be substituted for the Index for all purposes, including for purposes
of determining whether an Index Business Day or Market Disruption Event occurs.

        All determinations made by the calculation agent will be at the sole
discretion of the calculation agent and will be conclusive for all purposes and
binding on the Company, the Guarantor and the beneficial owners of the Notes,
absent manifest error.

ALTERATION OF METHOD OF CALCULATION

        If at any time the method of calculating the Index or a successor index
is changed in any material respect, or if the Index or any successor index is in
any other way modified so that the value of the Index or the successor index
does not, in the opinion of the calculation agent, fairly represent the value of
that index had the changes or modifications not been made, then, from and after
that time, the calculation agent will, at the close of business in New York, New
York, make those adjustments as, in the good faith judgment of the calculation
agent, may be necessary in order to arrive at a calculation of a value of a
stock index comparable to the Index or the successor index as if the changes or
modifications had not been made, and calculate the value of the index with
reference to the Index or the successor index. Accordingly, if the method of
calculating the Index or any successor index is modified so that the value of
the Index or the successor index is a fraction or a multiple of what it would
have been if it had not been modified, then the calculation agent will adjust
that index in order to arrive at a value of the index as if it had not been
modified.

GENERAL

        This Note is one of a duly authorized issue of debt securities of the
Company (the "Debt Securities"), issued and to be issued in one or more series
under a Senior Debt Indenture, dated as of June 1, 2005 (the "Indenture"), among
the Company, the Guarantor and The Bank of New York, as trustee (the "Trustee",
which term includes any successor trustee under the Indenture), to which
Indenture reference is hereby made for a statement of the respective rights,
limitations of rights, duties and immunities thereunder of the Company, the
Guarantor, the Trustee and the holders of the Notes, and the terms upon which
the Notes are, and are to be, authenticated and delivered.

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<PAGE>

        If an Event of Default with respect to the Notes shall have occurred and
be continuing, the amount declared due and payable upon any acceleration of the
Notes permitted by the Indenture will be determined by the calculation agent and
will be equal to, with respect to this Note, the Maturity Payment calculated as
though the Stated Maturity Date of this Note were the date of early repayment.
In case of default at the Stated Maturity Date of this Note, this Note shall
bear interest, payable upon demand of the beneficial owners of this Note in
accordance with the terms of the Note, from and after the Stated Maturity Date
through the date when payment of such amount has been made or duly provided for,
at the rate of 5.25% per annum on the unpaid amount due.

        The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the Guarantor and the rights of the holders of the Debt Securities
of each series to be affected under the Indenture at any time by the Company,
the Guarantor and a majority in aggregate principal amount of the Debt
Securities at the time Outstanding of each series affected thereby. The
Indenture also contains provisions permitting the holders of specified
percentages in aggregate principal amount of the Debt Securities of any series
at the time Outstanding, on behalf of the holders of all Debt Securities of such
series, to waive compliance by the Company and the Guarantor with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the holder of this Note shall
be conclusive and binding upon such holder and upon all future holders of this
Note and of any Note issued upon the registration of transfer hereof or in
exchange herefor or in lieu hereof, whether or not notation of such consent or
waiver is made upon this Note.

        The holder of this Note may not enforce such holder's rights pursuant to
the Indenture or the Notes except as provided in the Indenture. No reference
herein to the Indenture and no provision of this Note or of the Indenture shall
alter or impair the obligation of the Company and the Guarantor to pay the
Maturity Payment with respect to this Note, and to pay any interest on any
overdue amount thereof at the time, place and rate, and in the coin or currency,
herein prescribed.

        All terms used in this Note which are defined in the Indenture but not
in this Note shall have the meanings assigned to them in the Indenture.

        Unless the certificate of authentication hereon has been executed by the
Trustee by manual signature, this Note shall not be entitled to any benefit
under the Indenture or be valid or obligatory for any purposes.

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<PAGE>

        IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.

                                CITIGROUP FUNDING INC.

                                By:   /s/ Geoffrey S. Richards
                                    ---------------------------------------
                                   Name: Geoffrey S. Richards
                                   Title: Vice President and Assistant Treasurer

Corporate Seal
Attest:

By:  /s/ Douglas C. Turnbull
   --------------------------------------
    Name:  Douglas C. Turnbull
    Title:    Assistant Secretary

Dated: November 29, 2005

CERTIFICATE OF AUTHENTICATION
     This is one of the Notes referred to in
     the within-mentioned Indenture.

The Bank of New York,
as Trustee

By: /s/ Geovanni Barris
   -----------------------------------------
    Name: Geovanni Barris

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