Document:

PLA ASSUMPTION AGREEMENT

      THIS ASSUMPTION AGREEMENT (the "Agreement") is executed as of the 3rd day
of May, 2004 ("Execution Date") by and between Federated National Insurance
Company, a Florida licensed and authorized insurance company (hereinafter
referred to as "Carrier") and Citizens Property Insurance Corporation
(hereinafter referred to as "CITIZENS").

                                    RECITALS

      I. Definitions. Any term not defined in this section which is defined
elsewhere in this Agreement shall have the meaning ascribed to it therein.

            a. "Aggregate Losses" shall mean those losses which include, but are
not limited to, compensatory, punitive, bad faith and other damages arising
from, and all loss adjustment expenses relating to, the adjustment or defense of
any and all claims with respect to losses occurring on or after the Assumption
Date with respect to the Policies.

            b. "Assumed Premium" shall mean Initial Assumed Premium as adjusted
by a monthly remittance and bordereau process developed by the Carrier and
CITIZENS to account for policy cancellations, return premiums and policyholder
requested coverage changes after the Assumption Date with the positive and
negative adjustments.

            c. "Assumption" shall mean the transference of risks from CITIZENS
to the Carrier whereby the Carrier agrees to assume all obligations of CITIZENS
with respect to the Policies and agrees to pay one hundred percent (100%) of the
Aggregate Losses of the Policies as of a date and time certain.

            d. "Assumption Date" shall mean that date upon which an Assumption
is consummated.

            e. "Assumption Procedures" shall mean those procedures required by
CITIZENS to comply with the provisions of Section 627.3517, Florida Statutes,
and this Agreement, as set forth in Exhibit E attached hereto.

            f. "Carrier" shall mean the insurance company designated above which
company is, and shall remain during the term of this Agreement, a duly licensed
entity authorized to transact property and casualty insurance business in the
State of Florida.

            g. "Carrier's Policy" shall mean the insurance policy offered by the
Carrier to a CITIZENS insured upon expiration of a Policy pursuant to this
Agreement.

            h. "Ceding Commission Rate" shall be as defined in Exhibit B
attached hereto.

            i. "CITIZENS" shall mean Citizens Property Insurance Corporation as
created by the Legislature of the State of Florida pursuant to Section
627.351(6), Florida Statutes, and any successor entity.

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

            k. "Escrow Agent" shall mean the party that shall join in the
execution of the Escrow Agreement in the capacity of the Escrow Agent.

            l. "Escrow Agreement" shall mean the Escrow Agreement to be executed
between the parties establishing an escrow account (the "Escrow Account") in
accordance with the requirements of this Agreement.

            m. "Independent Auditor" shall mean a certified public accountant or
certified public accounting firm, licensed in the State of Florida, to perform
professional auditing services and who is without bias with respect to the
outcome of the audit services and with respect to the Carrier.

            n. "Initial Assumed Premium" shall mean Written Premium, less the
Written Premium earned by CITIZENS with respect to the Policies as of the
Assumption Date.

            o. "Parties" shall mean the Carrier and CITIZENS.

            p. "Plan" shall mean the Plan of Operation of CITIZENS, as amended.

            r. "Policy" or "Policies" or "Removed Policy or "Removed Policies"
shall mean those CITIZENS Policies removed by the Carrier from the Personal
Lines Account of CITIZENS pursuant to this Agreement. "Policy" or "Policies" as
the context requires, may refer to individual Policies.

            s. "Program" shall mean the Takeout Incentive Program(s) approved by
CITIZENS and the Department pursuant to ss.627.351(6)(g)3, Florida Statutes, and
available to the Carrier on the Execution Date for removal of certain Policies
from the Personal Lines Account of CITIZENS.

                                       2

            t. "Takeout Bonus" shall mean those monies to which the Carrier is
eligible for removing Policies from CITIZENS pursuant to this Agreement.

            u. "Written Premium" shall mean the gross written premium of
CITIZENS on the Policies, less policy cancellation and return premiums, as of
the Assumption Date.

            Written Premium shall not include fees or surcharges invoiced for
collection by CITIZENS on the Policies for (i) Market Equalization Surcharges,
(ii) Tax-Exempt Surcharge, and (iii) the mandatory $2.00 per policy EMPA charge.

      II. Carrier and CITIZENS desire, pursuant to this Agreement, to have the
Carrier remove up to a maximum of 31,000 Policies by Assumption from CITIZENS
and offer at renewal the Carrier's Policy in accordance with the requirements of
this Agreement and the Program.

      NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the Parties hereto do covenant and agree as follows:

      WHEREAS, CITIZENS has adopted a Program pursuant to which Program the
Carrier has made application to CITIZENS to remove policies; and

      WHEREAS, CITIZENS finds the Carrier eligible to participate in the
Program.

      1. Agreement to Remove Policies.

            A. The Carrier and CITIZENS shall, prior to an Assumption Date,
agree upon those Policies eligible to be removed under the Program by the
Carrier on the Assumption Date and shall set forth those Policies by CITIZENS
policy number and expiration date on Exhibit A or any supplement thereto, which
Exhibit A or supplement shall be attached hereto and made a part hereof by
reference.

            B. Pursuant to this Agreement and the Assumption Procedures, the
Carrier shall remove by Assumption all of the Removed Policies set forth on
Exhibit A or supplements thereto, if available for removal on the Assumption
Date.

      2. Terms of Assumption.

            A. Liabilities:

                                       3

                  (i) The Carrier agrees to assume and pay one hundred percent
(100%) of the Aggregate Losses occurring on or after 12:01 A.M. Eastern Standard
Time on May 4, 2004 (the "Assumption Date") for which CITIZENS is or becomes
obligated under the approximately 3,000 Policies initially set forth in Exhibit
A.

                  (ii) The Carrier, in addition, agrees to assume and undertake
all other obligations ofCITIZENS with respect to the Policies in the manner
provided herein.

                  (iii) CITIZENS shall remain liable for all Aggregate Losses
for the Policies occurring prior to the Assumption Date, and the Carrier shall
have no responsibility with respect to such losses.

                  (iv) For the purposes of this Agreement, annual Emergency
Management Preparedness and Assistance Trust Fund Policy Surcharge ("EMPA")
charges, if any, applicable premium taxes and any remittance obligations related
to the Policies will be the sole responsibility of CITIZENS in the same manner
as if this Agreement did not exist, and CITIZENS agrees to pay all such charges,
taxes and obligations on a timely basis.

                  (v) The cost of any notice and ancillary documentation to
current CITIZENS policyholders to effectuate Assumption of the Policies shall be
borne equally by the Parties. The Carrier agrees that its portion of such cost
may be withheld from any Assumed Premium paid to Carrier by CITIZENS pursuant to
this Agreement or any amendments or addenda to this Agreement. In the event
CITIZENS, for whatever reason, does not withhold the Carrier's portion of such
cost from any Assumed Premium paid to Carrier, Carrier agrees to pay said sum to
CITIZENS within thirty (30) days of its receipt of a billing statement from
CITIZENS.

                  (vi) CITIZENS shall pay by wire transfer to the Carrier the
Assumed Premium multiplied by 1.000 minus the applicable Ceding Commission Rate
on or before the 20th day following the Assumption Date. Any subsequent amounts
due to or from CITIZENS as a result of the monthly remittance and bordereau
process shall be remitted to the appropriate Party net of Ceding Commission
within ten (10) days following the end of each month without interest.

            B. Servicing of Policies:

                  (i) The consideration for services to be performed by CITIZENS
on behalf of the Carrier is specifically encompassed in the Ceding Commission
Rate referenced in Exhibit B attached hereto.

                                       4

                  (ii) From an Assumption Date until expiration of the Policies,
CITIZENS shall continue to process endorsements and cancellations for Policies
which have not yet been replaced by the Carrier at renewal pursuant to
subsection (iii) below, and accordingly shall remain responsible for all agent
commissions and fees to CITIZENS servicing companies with respect to such
Policies.

                  (iii) Commencing on an Assumption Date, the Carrier shall
become responsible for offering and processing renewals with respect to the
Policies, utilizing its own approved rates and forms and for processing
endorsements to, and cancellations and renewals of, the Carrier's Policies. The
Carrier shall be responsible for all agent and brokerage commissions for the
Carrier's Policies, for all return premiums for cancellations of the Carrier's
Policies occurring after renewal, and for all fees to its servicing companies
accruing on or after the initial issuance of the Carrier's Policies. The Carrier
shall be entitled to one hundred percent (100%) of the premiums payable with
respect to the Carrier's Policies from date of renewal forward.

            C. Loss Payments and Settlements:

                  (i) Commencing on an Assumption Date, CITIZENS shall, with
respect to the Policies, service all claims for Aggregate Losses occurring prior
to the Assumption Date.

                  (ii) Servicing of claims for losses occurring on or after an
Assumption Date shall be the sole responsibility of the Carrier. CITIZENS shall
have no responsibility for payment of losses or loss adjustment expenses or for
the servicing of claims with respect to losses occurring under the Policies on
or after the Assumption Date.

                  (iii) CITIZENS agrees to abide by the loss settlements of the
Carrier and/or its claims administration contractor with respect to the
obligations assumed hereunder, such settlement to be considered as satisfactory
payment of loss. The Carrier undertakes to settle losses on Policies assumed
hereunder and to provide staffing for the adjustment of such losses in
accordance with CITIZENS Claims Manual and prudent insurance practice.

                  (iv) With regard to the Policies, CITIZENS agrees that it
shall give notice promptly to the Carrier of any claim by a third party or the
commencement of any legal proceedings against CITIZENS with respect to such
claim. The Carrier shall have the exclusive right to control the contest and
defense of any such claim or litigation and the result of any such proceeding
will be binding upon the parties hereto. The liability of the Carrier under the
Policies shall always follow that of CITIZENS, and any error or omission of
CITIZENS or its agents shall in no way relieve the Carrier of its liability or
obligations in respect of the matters affected by such errors or omissions, it
being understood and agreed that the Carrier shall follow and share the same
fortune as CITIZENS under all circumstances.

                                       5

                  (v) CITIZENS agrees to assign to the Carrier any and all
salvage and subrogation rights arising with respect to losses occurring on or
after an Assumption Date, which CITIZENS may have with respect to the Policies.

            D. Conditions to Closing:

      The following conditions must be met prior to an Assumption Date:

                  (i) Department approval of an Assumption by issuance of a
Consent Order, which Consent Order shall be attached hereto as Exhibit C.

                  (ii) The Carrier shall enter into a Confidentiality Agreement
with CITIZENS as such relates to the Policies. CITIZENS agrees to allow the
Carrier to make coverage verifications electronically with CITIZENS servicing
companies, subject to the Confidentially Agreement.

      3. Takeout Bonus.

      The following provisions shall be applicable if the Carrier has applied
for and qualifies for a Takeout Bonus for Removed Policies:

            A. The Carrier shall remove by Assumption the Policies set forth on
Exhibit A in accordance with this Agreement and the Assumption Procedures and
shall offer to issue and renew the Carrier's Policy for a period of three (3)
years subsequent to the expiration of the assumed Policy. During the aforenoted
period, the Carrier's renewals of a Carrier's Policy shall be at the Carrier's
approved rates and on substantially similar terms unless the Carrier's Policy is
cancelled by the Carrier for a lawful reason other than reduction of hurricane
exposure.

            B. Contemporaneously with the execution of this Agreement, the
parties shall negotiate, execute and deliver an Escrow Agreement establishing an
escrow account and Escrow Agent. The Escrow Agreement executed by the parties
hereto shall, among other matters, specify (i) the investment policy and (ii)
the terms and procedures by which the Carrier will be able to draw on the Escrow
Account for claim payments.

                                       6

            C. Once the Carrier removes at least 10,000 Policies in the
aggregate from CITIZENS under this Agreement, CITIZENS shall, within fifteen
(15) days after an Assumption Date, deposit with the Escrow Agent under the
Bonus Escrow Agreement a sum equal to the Written Premium for the Removed
Policies eligible for a Takeout Bonus times the relevant Takeout Bonus
percentage from Exhibit D. If necessary, CITIZENS shall also deposit any
additional Takeout Bonus amounts to reflect the total number of Removed Policies
eligible for a Takeout Bonus under this Agreement.

            D. The following rules will be used to adjust the amount of money
ultimately received by the Carrier under this Agreement:

                  (i) If the insured later voluntarily terminates the Carrier's
Policy or subsequently does not accept the Carrier's offer of the Carrier's
Policy, the Carrier will be entitled to retain the Takeout Bonus for that
policy. Cancellation of a Policy or a Carrier's Policy for nonpayment of premium
shall be deemed a voluntary termination by the insured. Failure of the insured
to accept the Carrier's offer of renewal, if such renewal is in accordance with
the terms of this Agreement, shall be deemed a voluntary termination by the
insured.

                  (ii) If the Carrier fails to offer to issue or renew, cancels
or non-renews a Carrier's Policy for any reason other than non-payment of
premium, the Carrier will forfeit its entitlement to a Takeout Bonus for that
Policy, and the bonus amount will be returned to CITIZENS from the Bonus Escrow
Account together with any investment income thereon.

                  (iii) All monies, if any, in the Escrow Account shall be
returned to CITIZENS at the time it is determined that the total number of
Policies with wind coverage removed, or to be removed, and eligible for a
Takeout Bonus by the Carrier under this Agreement will be less than Ten Thousand
(10,000).

            E. Thirty-six (36) months after the first Assumption Date, the
Carrier shall provide to CITIZENS an Independent Auditor's report performed in
accordance with instructions received from CITIZENS and containing all pertinent
data to verify the satisfactory completion of the Carrier's performance
hereunder. Prior to commencing work hereunder, the Independent Auditor shall be
approved by CITIZENS, which approval shall not be unreasonably withheld. All
expenses of the Independent Auditor shall be paid by the Carrier. Based upon the
report of the Independent Auditor and its own review, CITIZENS shall adjust the
number of policies for which payment of a Takeout Bonus pursuant to this
Agreement is due.

                                       7

            F. If the Carrier is not otherwise in material breach or default of
a material provision of this Agreement or any applicable provision of law, as
the Policies issued by the Carrier reach the end of the thirty-six (36) month
coverage period and any adjustment pursuant to 3.E. above has been completed,
CITIZENS shall instruct the Escrow Agent to transfer from the Bonus Escrow
Account to the Carrier an amount equal to the Takeout Bonus on the Removed
Policies reaching the end of the thirty-six (36) month coverage period or
otherwise due a bonus pursuant to the terms of this Agreement at such time. The
applicable Takeout Bonus shall be determined in accord with the Program
Requirements and Incentives in Exhibit D. The Carrier must meet all of the
requirements in a Takeout Incentive Program to qualify for the Takeout Bonus
associated with that Program.

            G. At the time the final Takeout Bonus amounts are paid the Carrier,
the Carrier shall also be paid any funds in the Escrow Account attributable as
investment income on the Takeout Bonus paid the Carrier.

      4. Policy Data. CITIZENS shall provide, or has provided, to the Carrier,
by electronic data transfer, or by such other means as is acceptable to the
Carrier, relevant information regarding the Policies. The first such
transmission of data shall be provided to the Carrier at the earliest possible
date convenient to the Carrier and CITIZENS and thereafter on a basis as agreed
to by the Carrier and CITIZENS until none of the Policies remain in CITIZENS.

      5. Department Oversight. CITIZENS shall provide a fully executed copy of
this Agreement to the Department. The Carrier shall respond to any requests for
information by the Department regarding the proposal or this Agreement. The
Carrier and CITIZENS are, and shall remain, subject to all applicable laws of
the State of Florida and the supervision, rules, regulations and orders of the
Department.

      6. Right of Audit. CITIZENS or its representatives, upon reasonable
advance written notice, shall be entitled to audit, at its own cost and expense,
the relevant books and records of the Carrier during normal business hours to
confirm the Carrier's compliance with the terms and conditions of this
Agreement.

      7. Indemnification. Carrier shall indemnify CITIZENS, its Board of
Governors, officers, agents and employees ("CITIZENS Indemnitees") against any
costs, expenses (including reasonable counsel fees and costs of litigation),
claims, demands, actions, losses or liabilities that CITIZENS Indemnitees may
suffer or that may be asserted or claimed against CITIZENS Indemnitees, caused
by or arising directly out of the negligent acts or omissions or any breach of
this Agreement by the Carrier in connection with this Agreement or the
Assumption of Policies from CITIZENS.

                                       8

      CITIZENS shall indemnify Carrier, its officers, directors, agents,
employees, subsidiaries and affiliates ("Carrier Indemnitees") against any
costs, expenses, (including reasonable counsel fees and costs of litigation),
claims, demands, actions, losses or liabilities that the Carrier Indemnitees may
suffer, caused by or arising directly out of the negligent acts or omissions of
CITIZENS in connection with this Agreement.

      8. Carrier's Continuing Status. The Carrier, during such period as it is
entitled to Takeout Bonuses pursuant to this Agreement, shall remain licensed
and authorized to transact property and casualty insurance business in the State
of Florida. Should the Carrier fail to maintain its authority and licensing to
conduct such business, or should the Carrier become the subject to an adverse
finding pursuant to Chapter 631, Florida Statutes, or any other order of the
Department or a court of competent jurisdiction that in any material form or
manner limits or constrains the ability of the Carrier to engage in the business
of property and casualty insurance, other than the initial Consent Order issued
by the Department in connection with this Agreement, such occurrence shall
constitute and be deemed a material breach and default of this Agreement by the
Carrier.

      9. Default, Curative Period and Remedies. Should any breach or default
occur concerning any material obligation, representation or undertaking as set
forth herein, the non-defaulting party shall give the defaulting party written
notice of the material breach or default. Failure of the defaulting party to
cure the material breach or default within fifteen (15) days of the receipt of
the written notice as herein provided shall constitute and be deemed a material
breach and default of this Agreement unless the material breach or default is
not capable of being cured within such period of time, and the defaulting party
has commenced good faith efforts to cure such material breach or default within
fifteen (15) days, and thereafter continues in good faith to diligently pursue
curing until the material breach or default is cured to the reasonable
satisfaction of the non-breaching party. Should the Carrier materially breach or
default in any obligation as set forth in this Agreement and not timely cure
such material default and breach as set forth in this paragraph, CITIZENS may
terminate this Agreement. Upon such a termination by CITIZENS this Agreement
shall be deemed as voided, and the Carrier shall lose all rights to any Takeout
Bonus pursuant to this Agreement. In addition to any rights and remedies set
forth in this Agreement, the non-defaulting party shall have all rights and
remedies available at law and/or equity, including, but not being limited to,
the right to specific performance, damages or injunctive relief.

                                       9

      Notwithstanding any breach of this Agreement, the Carrier shall remain
responsible for Removed Policies unless and until a judicial determination is
rendered relieving, altering or limiting Carrier's responsibility.

      10. Attorney's Fees. If either of the parties hereto shall bring a Court
action alleging material breach of this Agreement or seeking to enforce,
rescind, renounce, declare void or terminate this Agreement or any provisions
thereof, the prevailing party shall be entitled to recover all of its legal
expenses, including reasonable attorney's fees and costs (including attorney's
fees and costs for any appeals taken), and to have the same awarded as part of
the judgment in the proceeding in which such legal expenses and attorney's fees
and costs were incurred.

      11. Benefits. This Agreement shall be binding upon the parties, their
heirs, legal representatives, successors and assigns.

      12. Captions. The paragraph captions as to contents of the particular
paragraphs herein are inserted only for convenience and are in no way to be
construed as part of this Agreement or as a limitation of the scope of the
particular paragraph in which they are referred.

      13. Construction of Agreement. Words of a gender used in this Agreement
shall be held to include any other gender, and words in a singular number shall
be held to include the plural, when the sentence so requires.

      14. Entire Agreement. This Agreement contains all of the oral and/or
previously written agreements, representations, and arrangements between the
parties hereto concerning the Program, and all rights which the respective
parties may have had under any prior written or oral agreements are hereby
canceled and terminated, and all parties agree that there are no representations
or warranties other than those set forth herein.

      15. Florida Law. It is acknowledged that this Agreement was executed in
and shall be construed and governed in accordance with the laws of the State of
Florida and the rules, orders and regulations of the Department in effect at the
time of the execution of this Agreement.

      16. Insolvency. Notwithstanding any other provision to the contrary, in
the event of the insolvency of CITIZENS, the obligations assumed under this
Agreement shall be payable by the Carrier on the basis of the liability of the
Carrier for the business assumed hereunder, without diminution because of such
insolvency, directly to the payees under such Policies and in substitution for
the obligations of CITIZENS to such payees. The Carrier shall be given written
notice of the pendency of each claim or loss which may involve the
indemnification provided by this Agreement within a reasonable time after such
claim or loss is filed in the insolvency proceedings. The Carrier shall have the
right to investigate each such claim or loss and interpose at its own expense,
in the proceedings where the claim or loss is to be adjudicated, any defense
available to CITIZENS, its liquidator, receiver, or statutory successor. The
expense thus incurred by the Carrier shall be chargeable, subject to court
approval, against the insolvent CITIZENS as part of the expense of liquidation
to the extent of a proportionate share of the benefit which may accrue to
CITIZENS solely as a result of the defense undertaken by the Carrier.

                                       10

      Nothing contained in this section is intended to change the relationship
of the parties to this Agreement or to enlarge upon the rights and obligations
of either party hereunder except as provided herein, to wit, to pay or satisfy
the obligations of the statutory successor of CITIZENS on the basis of the
amount of liability determined in the liquidation or receivership proceeding
rather than on the basis of the actual amount of loss paid by the liquidator,
receiver or statutory successor to allowed claimants.

      17. Invalidation. Should any part, provision or term of this Agreement for
any reason be declared invalid, or should any term or performance under this
Agreement by either Party be held as a violation of law by a court of competent
jurisdiction or the Department, this Agreement shall terminate. Upon such
termination, if CITIZENS is required to take back any of the Policies removed by
the Carrier, the Carrier will not be entitled to any Takeout Bonus for such
Policies and the Carrier shall reimburse CITIZENS for all administrative and
legal costs and expenses incurred by CITIZENS in taking back the Policies. In
addition, upon a termination the Parties shall enter into an agreement
concerning, but not being limited to, an allocation of any unearned premium,
responsibility for incurred claims and such other matters as may be necessary to
effectuate the prompt and equitable return of the Policies.

      18. No Intermediary. The Carrier represents and warrants that it has not,
and CITIZENS represents and warrants that it has not, incurred an obligation to
make payment of any fees to any intermediary with respect to the obligations
afforded under this Agreement.

      19. Modification. No change or modification of this Agreement shall be
valid unless the same shall be in writing and signed by all of the parties
hereto and not disapproved by the Department.

                                       11

      20. Notices. Any and all notices, designations, consents, offers,
acceptances, or any other communications provided for herein shall be given in
writing, by hand delivery, by overnight carrier, by registered or certified
mail, or by facsimile transmission and shall be addressed as follows:

                  As to Carrier:    FEDERATED NATIONAL INSURANCE COMPANY
                                    P.O. Box 407193
                                    Fort Lauderdalae, Florida  33340

                                    Attn:    Chief Executive Officer
                                    Telefax: (954) 316-9201

                  As to CITIZENS:   CITIZENS PROPERTY INSURANCE CORPORATION
                                    101 North Monroe Street, Suite 1000
                                    Tallahassee, FL  32301

                                    Attn:    Executive Director
                                    Telefax: (850) 513-3900

      Notices sent by hand delivery shall be deemed delivered on the date of
hand delivery. Notices sent by overnight carrier shall be deemed delivered on
the next business day after being placed into the hands of the overnight
carrier. Notices sent by registered or certified mail shall be deemed delivered
on the third business day after being deposited into the post office. Notices
sent by facsimile transmission shall be deemed to be delivered on the day when
sent if sent prior to 4:30 p.m. (the time being determined by the time zone of
the recipient) otherwise they shall be deemed delivered on the next business
day.

      21. Parties Represented. The parties acknowledge that each party and its
counsel have reviewed and revised this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement or
any amendments or exhibits hereto.

      22. Special Provisions:

            A. The parties shall coordinate the mailing of any documentation or
notices required by this Agreement.

                                       12

            B. The parties hereto acknowledge that, pursuant to the Program,
CITIZENS will use its sole judgment and discretion in implementing the
Assumption Procedures for participating Carriers.

            C. Should the parties fail to agree on the Removed Policies to be
set forth on Exhibit A, no obligation shall be created pursuant to this
Agreement.

            D. The Carrier and CITIZENS agree to allow the Carrier to supplement
Exhibit A from time to time with lists of additional CITIZENS Policies to be
removed from CITIZENS, but such additional Policies must be designated and
assumed by the Carrier not later than eighteen (18) months from the initial
Assumption Date. All Assumptions for each supplement to Exhibit A (e.g., Exhibit
A-1, A-2, etc.) shall be in accordance with the terms and provisions of this
Agreement and the Assumption Procedures. The Policies so identified in any such
supplement to Exhibit A shall be treated as Removed Policies as of the date of
their Assumption for the purposes of this Agreement. All such supplements to
this Agreement shall be executed in writing by the Parties to effectuate and
document such additional Assumptions.

            E. CITIZENS shall not enter into an agreement with any other insurer
for the removal of the Policies listed in Exhibit A and, further, shall not post
the Policies on an electronic bulletin board or on a list of policies published
for the industry for purposes of depopulation unless such Policies are not
removed by the Carrier in accordance with the terms and provisions of this
Agreement.

      IN WITNESS WHEREOF, the parties hereto have set their hands and seals as
of the day and year first above set forth.

WITNESSES:

                                       CITIZENS PROPERTY INSURANCE CORPORATION
                                       ("CITIZENS")

                                       BY:
---------------------------               -------------------------------------
                                          As its Executive Director

---------------------------
As to "CITIZENS"

                                       FEDERATED NATIONAL INSURANCE COMPANY
                                       ("Carrier")

                                       BY:
---------------------------               -------------------------------------
                                          As its Chief Executive Officer

---------------------------
As to the "Carrier"

                                       13

Exhibits:

      A.    Schedule of Policies
      B.    Ceding Commission Rate
      C.    Department Notification and Consent Order
      D.    Program Requirements and Incentives
      E.    Assumption Procedures

                                       14

                                    EXHIBIT B

                             CEDING COMMISSION RATE

      "Ceding Commission Rate" shall be set initially at .160, which is
multiplied by either the Initial Assumed Premium or the Assumed Premium, as
appropriate, to determine the amount owed (i.e., the Ceding Commission) by the
Carrier to CITIZENS for the expenses and services described in Section 2.A.(iv)
and Section 2.B.(ii) of this Agreement.

      As an additional incentive for a Carrier that removes a large number of
policies from the Personal Lines Account, CITIZENS agrees to reduce the Ceding
Commission Rate stated above according to the schedule below:

                             PERSONAL LINES ACCOUNT
           NUMBER OF POLICIES
       ELIGIBLE FOR A TAKEOUT BONUS              CEDING COMMISSION RATE
       ----------------------------              ----------------------
            LESS THAN 60,000                         REMAINS AT .160
            60,000 TO 74,999                         REDUCED TO .120
            75,000 TO 89,999                         REDUCED TO .090
             90,000 AND UP                           REDUCED TO .060

      At the time the number of Removed Policies qualifies for a reduced Ceding
Commission Rate, CITIZENS will recalculate the Ceding Commission due from the
Carrier and make such payment to the Carrier as is appropriate without interest.

      At the time the number of Removed Policies eligible for a Takeout Bonus is
determined for the purpose of releasing funds to the Carrier from the Escrow
Account, the final Ceding Commission Rate will also be determined. CITIZENS
shall pay such funds, if any, at that time that it owes the Carrier. If the
Carrier's previous Ceding Commission payments to CITIZENS are determined to be
less than the amount owed to CITIZENS based on the number of Removed Policies
actually eligible for a Takeout Bonus, the amount owed to CITIZENS shall be
deducted first from the investment earnings on the funds in the Escrow Account.
If this is insufficient to pay CITIZENS the amount owed, the Carrier shall pay
the remaining balance to CITIZENS within 10 days of the date CITIZENS provides
the Carrier with a statement showing the amount owed. CITIZENS will not
authorize the Escrow Agent to release bonus funds from the Escrow Account until
the Carrier has made the required payment to CITIZENS.

                                    EXHIBIT D

                        PROGRAM REQUIREMENTS & INCENTIVES

TAKEOUT INCENTIVE PROGRAM A

1.    The Carrier must remove a minimum of 10,000 Policies with wind coverage
      from the Personal Lines Account during the takeout contract period.

2.    Of the Policies with wind coverage removed from the Personal Lines
      Account, at least 40% must cover residential properties with HO2, HO3 or
      Dwelling Fire policies located in Miami-Dade, Broward or Palm Beach
      Counties.

3.    A Takeout Bonus will be paid at the rate of 12.5% of Written Premium for
      the Policies with wind coverage in coastal counties removed from the
      Personal Lines Account.

TAKEOUT INCENTIVE PROGRAM B

1.    The Carrier must remove a minimum of 30,000 Policies with wind coverage
      from the Personal Lines Account during the takeout contract period.

2.    Of the Policies with wind coverage removed from the Personal Lines
      Account, at least 60% must cover residential properties with HO2, HO3 and
      Dwelling Fire policies located in Miami-Dade, Broward or Palm Beach
      Counties.

3.    A Takeout Bonus will be paid at the rate of 15.0% of Written Premium for
      the Policies with wind coverage in coastal counties removed from the
      Personal Lines Account.

TAKEOUT INCENTIVE PROGRAM C

1.    The Carrier must remove a minimum of 50,000 Policies with wind coverage
      from the Personal Lines Account during the takeout contract period.

2.    Of the Policies with wind coverage removed from the Personal Lines
      Account, at least 80% must cover residential properties with HO2, HO3 and
      Dwelling Fire policies located in Miami-Dade, Broward or Palm Beach
      Counties.

3.    A Takeout Bonus at the rate of 17.5% of Written Premium will be paid for
      the Policies with wind coverage in coastal counties removed from the
      Personal Lines Account.

                                    EXHIBIT E

                        TAKEOUT OF POLICIES BY ASSUMPTION
                              UNDER CONSUMER CHOICE

                          PROCESS FOR REMOVING POLICIES

o     At any point in time, an Insurer may request, for purposes of
      depopulation, a data file of policies from Citizens. All policies not
      currently pending cancellation, not set for non-renewal or tagged for
      another insurer as described below, will be included in the data file.

o     Takeouts/Assumptions will only occur on the 1st of any given month (or
      other day so specified by Citizens to account for weekends and holidays).

o     Each Takeout will consist of paired Assumptions one month apart. The first
      Assumption is for Group A policies (the Initial Assumption) and the second
      is for Group B policies (the Final Assumption). (See below for Group
      definitions).

                               TIMELINE OF EVENTS

AT LEAST 45 DAYS BEFORE INITIAL ASSUMPTION

o     The Insurer must have obtained approval for the proposed Takeout from the
      Citizens Board and have an executed Consent Order from the Office of
      Insurance Regulation to proceed with the next steps in the assumption
      process.

45 DAYS BEFORE INITIAL ASSUMPTION

o     45 days prior to the specified Assumption date, the Insurer must execute
      an Assumption Agreement with Citizens and provide Citizens with a policy
      pre-selection file and a list of its Appointed Agents. As of the Execution
      Date, the Assumption Agreement will not have Exhibit A attached and no
      policies will be tagged at that time.

45 TO 30 DAYS BEFORE INITIAL ASSUMPTION

o     Citizens will review the policy pre-selection file and the agent
      appointment list to determine the status of each selected policy. Each
      policy will be examined to determine if it is still eligible for the
      Takeout (not cancelled or non-renewed), if it complies with the Blackout
      period (i.e., not renewing at any period from 15 days before the
      assumption to 62 days after the assumption), and if the policy was written
      by Agent with an appointment for the Insurer. Citizens will also determine
      that the assumption will result in a reduction of its probable maximum
      loss in the account from which the policies are being assumed.

IF ONLY ONE INSURER IS PARTICIPATING IN THE TAKEOUT, THE FOLLOWING PROVISIONS
APPLY:

      GROUP A (THE ASSUMABLE POLICIES)

            Policies where the Agent is appointed for the Insurer. The policies
            identified in Group A are eligible for immediate assumption. Because
            the agent for these policyholders is already appointed for the
            takeout insurer, the provisions of Section 627.3517 do not apply and
            the policy can be immediately assumed under the same procedures that
            have governed Takeouts prior to the passage of Consumer Choice.

      GROUP B(THE SOLICITED POLICIES)

            Policies where the Agent is not appointed for the Insurer. These
            policies are not immediately eligible for assumption. Before a
            policy in Group B can be assumed, the Insurer must either seek and
            obtain an agreement from the Agent to be appointed for the Insurer
            (which confers on that policy the same status as those in Group A),
            or directly solicit the Policyholder to obtain permission to assume
            the policy with the understanding that the insured will not be able
            to retain his or her current Agent.

IF MORE THAN ONE INSURER IS PARTICIPATING IN THE SAME MONTHLY TAKEOUT, THE
FOLLOWING PROVISIONS APPLY:

      GROUP A (THE ASSUMABLE POLICIES)

            1.    Policies where the Agent is appointed and the policy was only
                  selected by that Insurer.)

            2.    Policies where both Insurers selected the policy and the Agent
                  has an appointment for one Insurer and not the other.

            3.    Policies where both Insurers selected the policy and the Agent
                  has an appointment for both Insurers. These policies will be
                  divided as equally as possible between the Insurers using the
                  following method:

                  o     Group the policies by Form Type
                  o     Group the policies by County
                  o     Divide based on Total Exposure or Total Premium.

      GROUP B (THE SOLICITED POLICIES)

            1.    Policies where the Agent is not appointed for the Insurer and
                  the policy was selected only by that Insurer.

            2.    Policies where both Insurers selected the policy and the Agent
                  is not appointed for either Insurer. These policies will be
                  divided as equally as possible between the Insurers using the
                  following method:

                  o     Group the Policies by Agent

                  o     Divide the Agents based on Total Exposure or Total
                        Premium.

THE FOLLOWING PROVISIONS APPLY REGARDLESS OF THE NUMBER OF INSURERS
PARTICIPATING IN A MONTHLY TAKEOUT:

30 DAYS BEFORE INITIAL ASSUMPTION

o     On the first day of the month preceding the Initial Assumption, Citizens
      will distribute to the Insurer(s) in the Takeout (1) an Exhibit A which
      contains its Assumable Policies and (2) a separate list of its Solicited
      Policies. After the Insurer(s) agrees to Exhibit A and the Solicited
      Policies list, the policies reflected on Exhibit A and the Solicited
      Policies will be tagged for the appropriate Insurer(s) and will not be
      included in any depopulation data file until the end of the tagged period.
      (See below).

INITIAL ASSUMPTION (EXHIBIT A POLICIES ONLY)

o     On the Initial Assumption date, all Exhibit A policies eligible for
      assumption will be assumed by the assigned Insurer. The policies will be
      set for non-renewal by Citizens, and the affected policyholders will be
      sent a Notice of Nonrenewal and Assumption in accordance with prior
      takeout procedures, along with a Certificate of Assumption from the
      Insurer. The Insurer will be provided a data file with information about
      all of the policies that were successfully assumed. Any policies not
      assumed (for whatever reason) will be released from tagging and will be
      included in any future Insurer requested data file.

60 DAYS BEFORE FINAL ASSUMPTION (SOLICITED POLICIES ONLY)

o     The Solicited Policies, those that cannot be immediately assumed, are
      subject to direct solicitation by the Insurer. Citizens will send, at its
      own expense, a letter to each policyholder of a Solicited Policy to
      explain the solicitation, the proposed Takeout and the Insured's rights
      under the Consumer Choice Statute. A copy of this letter must also be
      included in any Insurer's solicitation materials. If requested, Citizens
      will also provide information about the policy's renewal rate (subject to
      future rate filings/increases) for use in the Insurer's solicitation
      materials. The cost of the solicitation by the Insurer will be borne
      solely by the Insurer.

60 DAYS TO 15 DAYS BEFORE FINAL ASSUMPTION (SOLICITED POLICIES ONLY)

o     During the period that policies are tagged, the Insurers may solicit the
      agents or the policyholders assigned to them as Solicited Policies. Any
      Insurer solicitation of a policyholder must include:

      o     A cover letter explaining that they have been selected to receive an
            offer of coverage from a takeout insurer; that to accept the offer,
            they may not retain their current agent;

      o     A copy of the original letter from Citizens concerning the Takeout
            (referenced above);

      o     Marketing material from the Insurer which compares rates (if
            requested) and coverages;

      o     A postcard for the policyholder (named insured) to return within 20
            days to exercise the option to accept the Takeout.

15 DAYS BEFORE FINAL ASSUMPTION (SOLICITED POLICIES ONLY)

o     The Insurer must deliver to Citizens a listing of all policies for which
      acceptance of the Takeout has been received or where an Agent appointment
      for the Insurer has been arranged. These policies will be reflected on a
      supplementary Exhibit A to the Assumption Agreement.

o     At this time, all policies originally designated as Solicited Policies,
      but which were not in the acceptance file will be untagged and will be
      included in any Insurer requested data file.

FINAL ASSUMPTION (SOLICITED POLICIES ONLY)

o     On the first of the month, all policies on the supplementary Exhibit A
      eligible for assumption will be assumed by the assigned Insurer. The
      policies will be set for non-renewal by Citizens, and the affected
      policyholders will be sent a Notice of Nonrenewal and Assumption in
      accordance with prior takeout procedures, along with a Certificate of
      Assumption from the Insurer. The Insurer will receive a data file with
      information about all of the policies that were successfully assumed. Any
      policy not assumed (for whatever reason) will be untagged and will be
      included in any future Insurer requested data file.ESCROW AGREEMENT

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

                                   BACKGROUND

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

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

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

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

                             STATEMENT OF AGREEMENT

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

                                       1
<PAGE>

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

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

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

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

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

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

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

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

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

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

                                       2
<PAGE>

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

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

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

            4. Disbursements of Escrow Funds.

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

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

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

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

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

                                        3
<PAGE>

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

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

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

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

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

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

                  b. in obligations with the Federal Farm Credit Banks;

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

                                       4
<PAGE>

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

                  e. in obligations of the Federal National Mortgage
Association;

                  f. in obligations of the Government National Mortgage
Association;

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

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

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

                                       5
<PAGE>

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

            8. Liability of Escrow Agent.

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

                                       6
<PAGE>

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

                                       7
<PAGE>

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

                                       8
<PAGE>

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

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

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

            11. Representations and Warranties; Legal Opinions.

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

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

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

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

                                       9
<PAGE>

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

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

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

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

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

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

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

                                       10
<PAGE>

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

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

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

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

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

                                       11
<PAGE>

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

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

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

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

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

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

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

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

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

                                       12
<PAGE>
            20. Termination. Upon the first to occur of the disbursement of all
amounts in the Escrow Funds, pursuant to Written Directions or the disbursement
of all amounts in the Escrow Funds, pursuant to paragraph 4 . hereof, this
Escrow Agreement shall terminate and Escrow Agent shall have no further
obligation or liability whatsoever with respect to this Escrow Agreement or the
Escrow Funds.

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

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

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

                                       13
<PAGE>

                                    DEPOSITOR:

                                    CITIZENS PROPERTY INSURANCE CORPORATION

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

                                    RECIPIENT:

                                    FEDERATED NATIONAL INSURANCE COMPANY

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

                                    DEPOSITOR REPRESENTATIVE:

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

                                    RECIPIENT REPRESENTATIVE:

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

                                    ESCROW AGENT:

                                    WELLS FARGO BANK, N.A.

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

                                       14
<PAGE>

                                    EXHIBIT B

                          FEES PAYABLE TO ESCROW AGENT

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

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

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