Document:

<PAGE>

                                                                   Exhibit 10.20

                             LARGE LINES REAL ESTATE

                 Managing General Agency Agreement - VSC2003/64

         This Agreement, entered into on the 1st day of August 1, 2003 (the
"Agreement") by and between VIRGINIA SURETY COMPANY, INC., an Illinois
corporation ("Company") and TOWER RISK MANAGEMENT CORPORATION, a New York
corporation ("Agent").
                                    PREAMBLE

         WHEREAS, Company desires to appoint Agent as its agent for performing
responsibilities set forth in this Agreement; and

         WHEREAS, Agent desires to perform such responsibilities;

         NOW, THEREFORE, Company and Agent, in consideration of the mutual
promises herein contained and for other good and valuable consideration, the
receipt and sufficiency whereof is hereby acknowledged, agree as follows:

         1. Appointment.

         1.1 Appointment. Company does hereby nominate, constitute, and appoint
Agent as its agent for: (i) the soliciting, underwriting, quoting, binding,
issuing, and servicing of Company's insurance policies classified in the
schedule attached hereto as Exhibit A (such insurance and any policies,
contracts, binders, endorsements, certificates, agreements, or evidence of
insurance, individually and collectively, will be referred to as "Policy" or
"Policies" hereunder); and (ii) for the servicing of the Reinsurance Agreements
("Reinsurance Agreements"), in accordance with Exhibit C attached hereto,
between Company and its Reinsurers.

                                       1
<PAGE>

         1.2 Authority. Agent is authorized to:

            1.2.1 Issue Policies subject to: (i) the scope and limits granted in
Exhibit A attached hereto; (ii) the terms and conditions (including exclusions)
of any Policies issued, underwritten, or serviced pursuant to this Agreement;
(iii) the terms and conditions of the Reinsurance Agreements in effect at the
inception of this Agreement; (iv) applicable state insurance laws, rules, and
regulations; (v) the underwriting policies, rules, and guidelines of Company as
set forth in Exhibit B or as otherwise provided from time to time by Company;
(vi) Company's ultimate right to veto the solicitation, underwriting, quoting,
binding, and issuing of any Policy by Agent; (vii) Company's ultimate right to
cancel any Policy subject to applicable governmental regulatory requirements for
cancellation and non-renewal; (viii) Company's ultimate right to veto the
appointment by Agent of any agent or broker, and the ultimate power of Company
to cancel any such agency pursuant to Section 1.2.7; (ix) Company's right to
approve all advertising with respect to the Policies in which Company's name is
used. 1.2.2 Collect, account, receipt for, and pay premiums on Policies Agent
writes on behalf of Company in accordance with Sections 1.2.3, 4, and 7, and, as
full compensation, to retain commissions out of premiums so collected in amounts
as specified in Exhibit A attached hereto. Agent agrees to pay all costs and
expenses of collection from insureds where premium to be received by the Agent
pursuant to this Agreement are not paid in full by the insured. Agent agrees
that all premiums, including return premiums received by Agent, are Company's
property.

            1.2.3 Hold all premiums, including return premiums received by
Agent, in a fiduciary capacity for Company in accordance with Section 4.1.15.

            1.2.4 Exercise Agent's authority through authorized employees of
Agent or its affiliates.

                                       2
<PAGE>

            1.2.5 Represent other companies.

            1.2.6 Exercise exclusive and independent control of Agent's time and
conduct.

            1.2.7 To secure or obtain agents and producers to produce business.
Company appointments will follow upon Agent providing evidence that the agents
and producers are lawfully licensed to transact this type of insurance and are
not serving on Company's or Agent's board of directors. The agents and producers
must meet the applicable compliance regulations for licensure.

            1.2.8 Terminate agents and producers.

            1.2.9 Investigate and settle claims as provided in Section 5 below
and establish reserves for such claims.

         1.3 Performance. Agent hereby accepts the foregoing appointment and
agrees faithfully to perform the duties thereof in a professional manner as an
agent of Company and to obey promptly such reasonable instructions as it may
receive from time to time from Company in accordance with this Agreement.

         1.4 Failure of Performance. If Agent breaches this Agreement, Company
may, as one remedy but not as an exclusive remedy, require its own employees or
designated representatives to carry out Agent's duties hereunder. Agent shall
reimburse Company for Company's reasonable expenses, including salaries,
incurred for having Company's employees or representatives perform such duties,
or, at Company's option, shall pay such employees or representatives directly.
Such reimbursement or direct payments shall be made by Agent within five (5)
days after Agent's receipt of invoices of such expenses.

                                       3
<PAGE>

         2. Territory.

         Agent's authority to solicit, quote, underwrite, bind, issue, or
service Policies extends only to insureds or prospective insureds located in the
states specified in Exhibit A attached hereto, subject to: (i) the applicable
licensing authority of Company, Company having made and received approval of all
necessary regulatory filings and (ii) Agent obtaining licenses wherever required
for activities conducted by Agent pursuant to this Agreement. Agent hereby
agrees to obtain such licenses and Company at its sole discretion may revoke
Agent's authority as regards any particular insured or prospective insured.

         3. Representations and Warranties.

         3.1 Representations and Warranties of Agent. On the effective date
hereof, during the term of this Agreement, and for any period described in
Section 10.5, Agent hereby represents and warrants to Company as follows:

            3.1.1 Laws and Licenses. Agent has complied and will comply with all
applicable laws, rules, and regulations. Agent shall provide current copies of
Agent's license, which will be maintained in Company's records. Company will
appoint Agent in all applicable states. Prior to processing Company's
appointment, Company will conduct a background report on Agent. If the
background report is satisfactory, the appointment will be processed
accordingly. Agent will obtain and maintain at its own expense all licenses
required for it to perform this Agreement.

            3.1.2 No Breach. This Agreement is a valid and binding obligation of
Agent. The execution and delivery of this Agreement and the consummation of the
transactions contemplated herein will not breach or conflict with Agent's
by-laws or articles of incorporation, nor with any agreement, covenant, or
understanding (oral or written) to which Agent is bound, and will not adversely
affect the application for issuance or the validity of any license of Agent.

            3.1.3 Status. Agent is a duly organized and validly existing
corporation in the State of New York.

                                       4
<PAGE>

            3.1.4 Authorization. The execution, delivery, and performance of
this Agreement by Agent has been duly and properly authorized by it.

            3.2 Representations and Warranties of Company. On the effective date
hereof, during the term of this Agreement, and for any period described in
Section 10.5, Company hereby represents and warrants to Agent as follows:

            3.2.1 Laws and Licenses. Company has complied and will comply with
all applicable laws, rules and regulations and shall, whenever necessary, obtain
and maintain at its own expense all licenses required for it to perform this
Agreement.

            3.2.2 No Breach. This Agreement is a valid and binding obligation of
Company. The execution and delivery of this Agreement and the consummation of
the transactions contemplated herein will not breach or conflict with Company's
by-laws or articles of incorporation, nor with any agreement, covenant, or
understanding (oral or written) to which Company is bound, and will not
adversely affect the application for issuance or the validity of any license of
Company.

            3.2.3 Status. Company is a duly organized and validly existing
corporation in the State of Illinois.

            3.2.4 Authorization. The execution, delivery, and performance of
this Agreement by Company has been duly and properly authorized by it.

         4. Duties and Responsibilities.

         4.1 General. Subject to Company's supervision and instructions, Agent
agrees to perform the following duties and services in addition to those
otherwise enumerated in this Agreement:

                                       5
<PAGE>

            4.1.1 Agent acknowledges that Company intends for each Policy issued
hereunder to be reinsured under the Reinsurance Agreements or any renewal
thereof, which may have different or additional participants provided that
Company has given its approval for any such different or additional
participants. If, as of the effective date of this Agreement first written
above, or any time thereafter, reinsurance as required by the terms of this
Section is not available to Company, it is understood and agreed that Agent will
not bind any Policy on behalf of Company to take effect at or after said date.
Agent shall have no authority to commit Company to participate in insurance or
reinsurance syndicates.

            4.1.2 Process payment of reinsurance premiums to and collections
from the Reinsurers, with copies to Company, pursuant to the terms and
conditions of the Reinsurance Agreements.

            4.1.3 Solicit, underwrite, quote, bind, issue, secure proper
countersignature when required by applicable laws, and service Policies on
behalf of Company.

            4.1.4 Cancel Policies issued or underwritten by Agent in accordance
with the terms of the Policies and applicable state regulations.

            4.1.5 Issue Policies only on forms approved by Company and filed
with and approved by regulatory authorities wherever such filing and approval is
required, unless such forms are modified with the prior written consent of
Company.

            4.1.6 Underwrite and issue Policies in accordance with the premium
rates and underwriting criteria and guidelines as defined in Exhibit B hereto
(or as may be modified from time to time as agreed upon by Company and Agent).

            4.1.7 Investigate and settle claims as provided in Section 5 below
and establish reserves for such claims.

                                       6
<PAGE>

            4.1.8 Maintain at Agent's expense data processing systems and
equipment, an office or offices and a staff of employees sufficient in number
and qualifications to perform the duties set forth in this Agreement.

            4.1.9 Perform Agent's responsibilities under Section 7 of this
Agreement.

            4.1.10 Pay to Company a policy-issuing fee of 8% on the first
$10,000,000 of collected gross net written premium, 7% on collected gross net
written premium from $10,000,001 to $20,000,000 and 6% on $20,000,001 to
$30,000,000 of the collected gross net written premiums, as defined in Exhibit A
attached hereto, on all Policies issued under the terms hereof. The Agent shall
also remit to the Company a deposit of 3% of collected gross net written
premiums for all premium taxes, local, county or municipal taxes or fees,
assessments, guaranty funds, second injury funds, pooling assessments, residual
market loads and all other fees, expenses or charges of any kind, (hereinafter
called "Taxes, Fees, and Assessments"), imposed upon Company pursuant to any law
or regulation as a result of the Policies issued under the terms of this
Agreement. Such deposit shall be reconciled by Agent and Company on an annual
basis to actual assessed Taxes, Fees, and Assessments.

            4.1.11 Pay to Company any fines imposed by regulatory authorities,
taxation authorities, and their agents for data collection and advisory
organizations, due to late filing or poor quality of data provided by Agent in
accordance with Section 7.3.2.

            4.1.12 Pay to Company any fines imposed by regulatory authorities
upon Company due to the use of unapproved forms or rates by Agent or due to
other market conduct violations caused by Agent's conduct.

                                       7
<PAGE>

            4.1.13 Maintain separately for Company and each other insurer with
which Agent does business, complete and current records and accounts, including
underwriting files, which Agent shall retain in accordance with Section 8 and
any applicable laws.

            4.1.14 Refund within sixty (60) days of the end of each calendar
month, return commissions on Policy cancellations or premium reduction, in each
case at the same rate at which such commissions were originally retained.

            4.1.15 Hold all monies, including premiums, return premiums, and
reinsurance monies received by Agent, in a fiduciary capacity for Company.
Except as otherwise authorized by this Agreement, Agent shall maintain such
monies in a separate and segregated bank account in a bank that is a member of
the Federal Reserve System and is insured by the Federal Deposit Insurance
Corporation. This account shall not be used for any purpose other than payments
to or on behalf of Company. Any investment income produced from this bank
account shall vest and become the property of Agent.

            4.1.16 Comply with all regulatory requirements including, but not
limited to, the cancellation, non-renewal, or conditional renewal of policies.
4.1.17 Return upon demand after termination of this Agreement, all unused
Policies, forms, and other property furnished to Agent by Company. Such items
remain the property of Company. Agent shall fully cooperate with and assist
Company in recovering such items from third parties, if any.

                                       8
<PAGE>

         5. Claim Settlement Authority

         5.1 Claims. Agent shall investigate, negotiate, and settle all Policy
claims or losses on behalf of Company; however, Agent shall obtain the prior
approval of Company before handling and settling any Policy claim or loss which
is in excess of Fifty Thousand Dollars ($50,000) gross incurred loss. Agent
shall determine coverage for claims; however, Agent shall obtain the prior
written approval of Company for the handling of claims in which Company is named
as a defendant or claims in which Agent seeks declaratory relief on behalf of
Company. All claims or losses shall be reported in monthly statements pursuant
to Section 7 below. In addition, Agent shall immediately notify Company in
writing of any claim or loss of the following kind, provide the amount of the
reserve for such claim or loss as established by Agent, the facts and
circumstance of the claim or loss, Agent's analysis of the insured's liability
for the claim or loss, Agent's analysis of damages resulting from the claim or
loss, Agent's analysis of the applicability of coverage for the claim or loss,
and such other information and records concerning such claim or loss as Company
requests upon receiving notice or knowledge of: (i) any Policy claim or loss in
excess of Fifty Thousand Dollars ($50,000) gross incurred loss; or (ii) any loss
regardless of incurred dollar amount involving the following: fatalities; brain
stem/brain damage injuries; spinal cord injuries; heart attacks; severe,
non-accumulative hearing loss; severe, non-accumulative vision loss; amputation
of major body part; paraplegia; quadriplegia; serious burns (i.e. second or
third degree and/or burns over 50% of the body); non-union, compound,
comminuted, serious fractures; injury to the spine or pervasive nerve damage;
class action suits; allegations of criminal conduct by an insured or allegations
of criminal conduct on the insured's premises; bad faith claims or suits;
demands in excess of policy limits; actual or alleged violations of the
Deceptive Trade Practices Act; actual or alleged violations of the applicable
State Insurance Codes; actual or alleged violation of law by Agent; or
litigation naming Company as a defendant. These individually reported claims or
losses should be updated semi-annually and more frequently upon the occurrence
of any material change in any claim or loss or any information previously
reported to Company. Company shall be immediately notified if Agent is closing a
file on a reported claim or loss and of the reason for this file closure.
Failure to promptly notify Company of claims under this Section 5.1 shall be
considered a material breach of this Agreement and subject to all the remedies
provided herewith.

                                       9
<PAGE>

         5.2 Legal Counsel and Allocated Claim Costs. Whenever Agent shall deem
it prudent to engage legal counsel or loss adjusters to protect Company's
interest regarding claims or losses, such services shall be provided only by
qualified attorneys-at-law and/or licensed loss adjusters selected by Agent, who
have substantial experience in the handling of claims litigation of the type
involved. Upon execution of this Agreement, Agent shall submit to Company for
approval a list of the attorneys and loss adjusters it intends to use. Such list
shall be considered approved unless Company objects to any of such firms or
individuals within 14 days after receipt of such list. Any provision hereof to
the contrary notwithstanding, it is agreed that, with respect to any claim or
loss of any amount, Agent shall promptly furnish Company, or its designee, any
additional claim or loss information requested by Company with respect to a
claim or loss pertaining to any Policy covered by this Agreement, and it is
further agreed with respect to any claim or loss of any amount as follows:

            a)    Company may assign an attorney of its own choice to be
                  associated in the defense of any claim or loss reported to
                  Company and, in the event an attorney has already been
                  employed by Agent, the service of such attorney which has
                  already been employed by Agent shall be terminated by Agent
                  forthwith and Agent shall waive any conflict of interest that
                  may have been created by such attorney's employment by Agent.

            b)    In the event that Company is named as a defendant in any
                  lawsuit, Agent shall, as soon as it has notice or knowledge of
                  such lawsuit, immediately give written notice thereof to
                  Company accompanied by a copy of the complaint and any court
                  papers related to such lawsuit.

                                       10
<PAGE>

         5.3 Unallocated Costs. Company shall reimburse Agent for the salaries,
office expenses or other expenses incurred by or on behalf of Agent (including
overhead) in the handling of Company's claims or losses. Company shall reimburse
Agent for fees to attorneys, and service providers who are employees of, or on
permanent retainers to, Agent. Company hereby agrees to pay for the claims
adjustment services rendered by Agent as well as legal defense services rendered
by the law offices of Steven G. Fauth in accordance with the fee structure set
forth in Exhibit D. Company's obligation to pay for such unallocated costs is
contingent upon recovery of such costs from the reinsurer. Company shall have no
obligation to pay any unallocated costs if such costs are not received from the
reinsurer.

         5.4 Claim Fund. During the course of any calendar month, paid claims,
allocated loss adjustment expenses and unallocated costs shall be deducted from
the collected gross net written premium. If during the course of any calendar
month, paid claims, allocated loss adjustment expenses and unallocated costs
exceed the collected gross net written premium Agent agrees to fund payment of
the claims, allocated loss adjustment expenses and unallocated costs and seek
recovery from Reinsurers in accordance with the terms and conditions of the
Reinsurance Agreements and Section 7.2 of this Agreement.

         6. Expenses.

         6.1 Agent shall pay from its own monies (and not seek reimbursement
from Company for) all commissions to any agents, sub-agents, brokers, and
sub-producers, all inspection fees, expenses of examinations of Agent, and other
governmental expenses in connection therewith, all refunds of unearned
commissions owed to Company on canceled policies, all costs to print and
inventory Policy forms, all costs to service claims as stated in Section 5.3
above, and all costs to collect premiums in regard to Policies issued,
underwritten, or serviced pursuant to this Agreement.

                                       11
<PAGE>

         6.2 In the event Company is notified by a regulatory authority of the
need for an independent actuarial, accounting, and/or legal opinion not
originally contemplated by this Agreement, Company shall notify Agent who will
in turn reimburse any expenses incurred by Company.

         7. Accounting and Reporting Procedures.

         Agent shall:

         7.1 Within thirty (30) days after the end of each month, remit to
Company the policy-issuing fee and deposit for taxes, fees, and assessments, in
accordance with Section 4.1.10, on all Policies issued under the terms of this
Agreement. Agent may not offset balances due to Company hereunder against
balances due Agent under any other contract with Company;

         7.2 On behalf of Company supply accounting, underwriting, and claim
bordereaux and pay the reinsurance premium to and make collections from the
Reinsurance Agreements, with copies to Company, pursuant to their terms and
conditions;

         7.3 With regard to business placed by Agent with Company hereunder,
furnish to Company, in electronic format:

            7.3.1 Within 30 days after the end of each month: (i) a bank
statement and bank reconciliation report for the accounts as described in
Section 4.1.15 and Section 5.4; and (ii) a report of: written, earned, and
unearned premiums; losses and loss adjustment expenses paid and outstanding;
loss and loss adjustment expenses incurred; commissions earned by Agent;
Reinsurance Agreements earned and unearned premiums, commissions, and losses
(including losses and loss adjustment expenses paid and outstanding) ceded; all
of the foregoing in the following format: (a) monthly transactions; (b)
inception-to-date statutory amounts, by state, by line of business; (c)
inception-to-date amounts actually transacted, by state, by line of business;
and (d) such other information as may be reasonably requested by Company, which
information Company shall maintain on file and shall make available to insurance
regulatory authorities for review;

                                       12
<PAGE>

            7.3.2 Provide detail and summary reports, in an electronic or
printed medium, as are required to meet all reporting requirements of state
regulatory or taxation authorities, their agents for data collection, and
advisory organizations including but not limited to:

            a.    Within 30 days of the close of the calendar quarter: direct
                  premiums (written and earned); in force premiums; policy
                  counts (written and in force); direct losses and loss
                  adjustment expenses including subrogation (paid and reserved);
                  number of claims open, closed with payment, and closed without
                  payment; as prescribed by state regulatory authorities.

            b.    Within 30 days of the close of the calendar quarter: direct
                  written premium, losses, and loss adjustment expense including
                  subrogation (paid and reserved) transaction data as prescribed
                  by advisory organizations providing loss cost and policy
                  forms.

            c.    30 days prior to the prescribed deadline: the reports of
                  direct premiums (written and earned), losses, and loss
                  adjustment expenses including salvage and subrogation (paid
                  and reserved) as required by state regulatory data collection
                  agents, including but not limited to financial calls, unit
                  statistical data, summary statistical data, and detailed claim
                  information for National Council on Compensation Insurance
                  (NCCI), Insurance Services Office (ISO), and National
                  Association of Independent Insurers (NAII), and various
                  state-specific reporting requirements as necessary.

                                       13
<PAGE>

         7.4 By the first business day of February of each year, Agent shall
provide Company with any information Company may require in order to complete
its statutory financial statements.

         7.5 Failure by the Agent to comply with its payment obligations within
the time periods as herein provided will result in a compound interest payment
payable at a rate equal to the 90-day Treasury Bill ask yield as published in
the Money Rate Section or any successor section in the Midwest Edition of The
Wall Street Journal on the first business day following the date a remittance
becomes due, plus 1 % per annum, to be compounded and adjusted quarterly. Any
interest that occurs shall be calculated by the Agent and agreed to by the
Company. The accumulation of the number of days that any payment is past due
shall stop on the date that the Company receives payment. Any interest that
occurs may be waived by the Company. Waiver of such interest, however, shall not
affect the Company's rights to similar interest for any other failure by the
Agent to make payment when due.

         8. Rooks and Record.

         Agent shall at its own expense keep such books and records as may be
(i) reasonably requested by Company; or (ii) required by law, rulings, or orders
of the insurance departments of the states having jurisdiction over: (a) Agent
or Agent's business; (b) any Policies; or (c) the Reinsurance Agreements
connected with this Agreement. Agent shall make such books and records available
for examination, audit, and copying by the insurance departments of such states
and by Company, or by their authorized representatives. Company and the
Reinsurers shall have the right to examine and review at any reasonable time all
books, records, files, and papers, including, but not by way of limitation,
claim files and underwriting files maintained and kept by Agent which relate to
this Agreement, the Policies, and the Reinsurance Agreements. Agent shall
institute and maintain retention and disposal systems for claim files and
underwriting files in accordance with procedures and requirements as prescribed
by law. All books and records of Agent shall be maintained at the principal
place of business of Agent and shall be complete, accurate, and up-to-date, and
shall reflect all monies paid or received by Agent and all transactions of Agent
pursuant to this Agreement. Anything to the contrary notwithstanding, all of the
books, records, files, and papers maintained and kept by Agent relating to
underwriting and claims matters involving this Agreement or the Policies, shall
be and remain the sole and exclusive property of Company except that upon
termination of this Agreement, all right, title, and interest in and to all
Policy renewals or expirations and all records with respect to renewals and
expirations shall automatically and irrevocably transfer to and vest in Agent
provided Agent has accounted for and has made payments of all amounts due
Company and/or the Reinsurers and continues to do so.

                                       14
<PAGE>

         9. Indemnification.

         Agent shall indemnify and hold harmless Company from and against all
losses, damages, costs, expenses, claims, fines, penalties, or liabilities of
any description suffered by Company with respect to Agent or any Policies issued
or underwritten by Agent, including, without limitation, any attorney's fees, in
connection with or arising out of: (i) any allegations, whether or not such
allegations are groundless, that Agent has not complied with any laws, rules, or
regulations to which it is subject; (ii) any breach of any warranty or
representation of Agent made in this Agreement or any other breach of this
Agreement by Agent; or (iii) any alleged misconduct, negligence,
misrepresentation, or other acts or failures to act of Agent or of it officers,
directors, employees, agents, sub-producers, or independent contractors.

                                       15
<PAGE>

         10. Termination of Agreement.

         10.1 Except as specified in Sections 10.2 - 10.4 of this Agreement,
this Agreement shall terminate on December 31, 2004 at 12:01 a.m. Central
Standard Time.

         10.2 This Agreement may be terminated immediately by Company upon
giving written notice to Agent via electronic, certified or registered mail in
the event of:

            10.2.1 The misappropriation by Agent of any of Company's funds or
property;

            10.2.2 The fraud, gross negligence, or willful misconduct of Agent;

            10.2.3 The Agent's license or certificate of authority in the
Agent's state of residence is canceled, non-renewed or suspended by any public
authority;

            10.2.4 An assignment by Agent for the benefit of creditors; the
dissolution or liquidation of Agent; the appointment of a conservator, receiver,
or liquidator for a substantial part of Agent's property; the institution of
bankruptcy, insolvency, or similar proceedings by or against Agent;

            10.2.5 Material breach by Agent of any provision of this Agreement;

            10.2.6 Termination of the Reinsurance Agreements for any reason;

            10.2.7 If any law or regulation of the federal, state, or local
government of any jurisdiction in which Agent is doing business shall render
illegal or invalid any transaction contemplated by this Agreement, any term of
this Agreement or the Reinsurance Agreements, this Agreement may be terminated
insofar as it applies to such jurisdiction by Company giving notice to Agent to
such effect or by Agent giving notice to Company to such effect;

            10.2.8 Change in ownership of ten percent (10%) or more of the
outstanding voting stock of Agent, sale or transfer of all Agent's assets,
merger of Agent, or change or resignation of any principal officer or director
of Agent;

                                       16
<PAGE>

            10.2.9 Agent's licenses required for it to perform this Agreement
expire, are terminated, or are not valid pursuant to the law of the State in
which the Agent is transacting business on behalf of the Company.

         10.3 This Agreement may be terminated at any time by either party by
giving at least ninety (90) days written notice of termination to the other
party.

         10.4 This Agreement may be terminated at any time by mutual written
agreement.

         10.5 Upon termination of this Agreement:

            10.5.1 If at any time Company sends notice of termination to Agent
as provided in Section 10.2 above or the Agreement is otherwise terminated as
provided herein, Agent shall not solicit, underwrite, quote, bind, or issue any
Policies or renew any existing Policies for which the inception date or renewal
date falls after the effective date of termination of this Agreement, nor shall
Agent cancel and rewrite any existing Policies to provide for inception or
anniversary dates prior to the effective date of termination of this Agreement.
Unless instructed otherwise by Company in writing, anniversary dates of Policies
shall be regarded as renewal dates for this purpose, and Agent shall terminate
any such Policies on its next anniversary date after the effective date of
termination of this Agreement, subject to applicable governmental regulatory
requirements for cancellation or non-renewal. Upon termination of this
Agreement, the authority of Agent to underwrite or issue Policies on behalf of
Company shall also terminate.

         10.5.2 Unless otherwise indicated by this Agreement or Company
otherwise notifies Agent in writing, Agent's duties and responsibilities under
this Agreement shall survive termination of this Agreement until such time as
all Policies issued, underwritten, or serviced by Agent pursuant to this
Agreement have expired and the Reinsurance Agreements have expired, all known
losses there under have been paid or settled, have run off or otherwise have
been disposed of in the judgment of Company, all incurred but not reported loss
reserves have been reduced to zero, and any amounts owed to Company by others or
under the Reinsurance Agreements have been collected by Company. The only
compensation Agent shall receive for its performance of its duties hereunder
(both during and after the term of this Agreement) is set forth in the
Commissions Section of Exhibit A attached hereto.

                                       17
<PAGE>

            10.5.3 Agent shall, unless notified in writing to the contrary by
Company:

            a.    Continue to represent Company for the purpose of servicing
                  Policies placed by Agent with Company which are in force on,
                  or renewed at Company's election, or as required by law, after
                  the date of termination of this Agreement, and Agent shall
                  continue to receive its normal compensation for such services.

            b.    Issue and countersign appropriate endorsements on Policies in
                  force, provided that without prior written approval of
                  Company, such endorsement shall not increase nor extend
                  Company's liability nor extend the term of any Policy.

            c.    Collect and receipt for premiums and retain commissions out of
                  premiums collected as full compensation.

         10.6 Any notice issued pursuant to this Section shall be effective on
the day after it is received by Agent.

         11. Suspension of Agent's Authority.

         11.1 In lieu of terminating this Agreement, Company may give written
notice to Agent that Company is immediately suspending Agent's authority in its
entirety or in any particular state to bind new or renewal business, change any
existing Policy and/or settle any claim during the pendency of any of the
following events:

                                       18
<PAGE>

            11.1.1 Agent is delinquent in payment of any monies due Company;

            11.1.2 Any dispute exists between Agent and Company regarding the
existence of any of the events listed in Section 10.2;

            11.1.3 The Reinsurance Agreements are not executed between Company
and its Reinsurers within nine months from inception of the Reinsurance
Agreements; or

            11.1.4 Agent has announced its intention to pursue the possible
sale, merger, joint venture, or strategic alliance of Agent with any other
company(ies), corporation(s), or individual(s) not controlling the Agent's
operations at the inception of this Agreement.

         11.2 Such suspension shall remain in effect until such delinquency is
cured or dispute is resolved and Agent receives written notification from
Company to that effect. If such delinquency is not cured within fifteen (15)
days from the date of receipt of written notification by Agent of such
delinquency, Company may exercise its right to terminate this Agreement under
Section 10.2.

         11.3 Unless otherwise notified in writing to the contrary by Company,
Agent's obligation under this Agreement shall continue during the suspension of
Agent's authority under this Agreement.

         11.4 Any notice of suspension issued pursuant to this Section shall be
effective immediately.

         12. Ownership of Expirations.

         Subject to Section 8 Books and Record, the use and control of
expirations will remain the property of the Agent; and the Company will not (a)
refer or communicate to any other agent or broker, the Company's records of
insureds, expiration dates and other material information relating to specific
risks except for loss or claims information specifically requested by the
insured or the insured's authorized representative nor (b) use such material
information relating to specific risks for purposes of solicitation.

                                       19
<PAGE>

         13. Mediation and Arbitration.

         If any dispute arises between Company and Agent with reference to the
interpretation, performance, or breach of this Agreement (whether the dispute
arises before or after termination of this Agreement) such dispute, if not
resolved by the parties, must be submitted to non-binding mediation. If such
dispute is not resolved by non-binding mediation within sixty (60) days it will
then be submitted for decision to a panel of three arbitrators. Notice
requesting arbitration will be in writing and sent certified or registered mail,
return receipt requested.

         One arbitrator shall be chosen by each party and the two arbitrators
shall, before instituting the hearing, choose an impartial third arbitrator who
shall preside at the hearing. If either party fails for any reason to appoint
its arbitrator within thirty (30) days after being requested to do so by the
other party, the latter, after ten (10) days notice by certified or registered
mail of its intention to do so, may appoint the second arbitrator. If the two
arbitrators are unable to agree upon the third arbitrator within thirty (30)
days of their appointment, the third arbitrator shall be selected from a list of
six individuals (three named by each arbitrator) by a judge of the United States
District Court having jurisdiction over the geographical area in which the
arbitration is to take place, or if that court declines to act, the state court
having general jurisdiction in such area.

         All arbitrators shall be active or retired disinterested officials of
insurance or reinsurance companies not under the control or management of either
party to this Agreement and will not have personal or financial interests in the
result of the arbitration.

         Within thirty (30) days after notice of appointment of all arbitrators,
the panel shall meet and determine timely periods for briefs, discovery
procedures, and schedules for hearings.

                                       20
<PAGE>

         The panel shall be relieved of all judicial formality and shall not be
bound by the strict rules of procedure and evidence. Unless the panel agrees
otherwise, arbitration shall take place in Chicago, Illinois, but the venue may
be changed when deemed by the panel to be in the best interest of the
arbitration proceeding. Insofar as the arbitration panel looks to substantive
law, it shall consider the law of the State of Illinois. The decision of any two
arbitrators when rendered in writing shall be final and binding. The panel is
empowered to grant interim relief as it may deem appropriate.

         The panel shall interpret this Agreement as an honorable engagement
rather than merely a legal obligation and shall make its decision considering
the custom and practice of the applicable insurance and reinsurance businesses
within sixty (60) days following the termination of the hearing unless the
parties consent to an extension. Judgment upon the award may be entered in any
court having jurisdiction thereof.

         Punitive damages will not be awarded. The arbitrators may, however, at
their discretion award such other costs and expenses as they deem appropriate,
including but not limited to attorneys' fees, the cost of arbitration, and
arbitrators' fees, to the extent permitted by law.

         Agent agrees to hold harmless and fully indemnify Company in respect
all costs and expenses, of whatsoever nature, incurred or suffered by Company in
the event arbitration proceedings are initiated between Agent and the
Reinsurers, which involve no dispute of substance between Company and Agent.

         14. Miscellaneous.

         14.1 This Agreement may be revised by mutual agreement of Agent and
Company and such revision shall be evidenced by a written agreement duly
executed by authorized representatives of Agent and Company, which specifies the
effective date thereof.

                                       21
<PAGE>

         14.2 Agent shall not have authority to represent Company on any
exclusive basis with respect to any policy form, line, or class or subclass of
business, unless otherwise authorized in writing by Company. 14.3 Agent shall
not commit Company to any expenses or obligations not specifically provided for
herein without the prior written permission of Company.

         14.4 Company shall have the right to oversee and supervise the
operation of this Agreement, including but not limited to the right at all
reasonable times to have access to and to copy at Company's expense Agent's
books and records as they relate to this Agreement, which rights shall survive
the termination or expiration of this Agreement. The director or commissioner of
insurance of any state where Agent issues Policies on behalf of Company shall
have at all reasonable times the right of access to all books, records, and bank
account of Agent in a form usable by such official.

         14.5 During the term of this Agreement, Agent shall obtain and maintain
in full force and effect, at its expense, fidelity insurance with a minimum
policy limit of $1,000,000, errors and omissions insurance with a minimum policy
limit of $2,000,000, directors and officers insurance with a minimum policy
limit of $2,000,000, and general liability insurance with a minimum policy limit
of $1,000,000 and on such terms as are reasonably acceptable to Company. Agent
shall furnish Company with copies of the certificates of insurance for such
insurance, and shall not cancel or amend any such insurance without Company's
prior written consent.

         14.6 During the term of this Agreement and until all premium applicable
to policies issued hereunder is fully earned, Agent shall obtain and maintain in
full force and effect, at its own expense, an Account Receivable Guarantee Bond
with a minimum policy limit of $1,000,000/$3,000,000 and issued by a carrier
acceptable to Company.

                                       22
<PAGE>

         14.7 Agent shall provide to Company, copies of its quarterly financial
reports and annual audited financial reports.

         14.8 If the Agent fails in any respect to fulfill its duties and
responsibilities under this Agreement, then the expense incurred by the Company
in order to fulfill the Agent's duties and responsibilities under this Agreement
will be fully reimbursed by the Agent.

         14.9 This Agreement may not be directly or indirectly assigned by
either party in whole or in part, nor may Agent appoint a sub managing general
agent. 14.10 Any provision of this Agreement which conflicts with applicable law
or regulation will be amended to the minimum extent necessary to effectuate
compliance with such law or regulation. 14.11 Agent is an independent
contractor, not an employee of Company, and nothing in this Agreement shall be
construed to create an employer/employee relationship between Company and Agent.

         14.12 This Agreement shall be construed in accordance with the laws of
the State of Illinois.

         14.13 Neither Company nor Agent shall disclose material details of this
Agreement and the Policies without the prior consent of the other party.
However, this restriction will not apply to disclosures made by Company or Agent
to its agents, producers, shareholders, policyholders, auditors, accountants,
arbitrators, legal counsel, or other third parties as required in the ordinary
course of business, nor to disclosures required by arbitration panels,
governmental agencies, regulatory authorities, or courts of law.

                                       23
<PAGE>

         14.14 Failure of either party to enforce compliance with any term or
condition of this Agreement shall not constitute a waiver of such term or
condition. No waiver of any breach or default hereunder shall be valid unless in
writing and signed by the party giving such waiver, and no such waiver shall be
deemed a waiver of any subsequent breach or default of the same or similar
nature.

         14.15 Agent acknowledges and agrees that it will benefit from this
Agreement and that a breach by it of the covenants contained in Sections 1, 2,
4, 5, or 10.5 herein would cause Company irreparable damages that could not
adequately be compensated for only by monetary compensation. Accordingly, it is
understood and agreed that in the event of any such breach or threatened breach,
Company may apply to a court of competent jurisdiction for, and shall be
entitled to, injunctive relief from such court, without the requirement of
posting a bond or proof of damages, designed to cure existing breaches and to
prevent a future occurrence or threatened future occurrence of like breaches on
the part of Agent. It is further understood and agreed that the remedies and
recourses herein provided shall be in addition to, and not in lieu of, any other
remedy or recourse which is available to Company either at law or in equity in
the absence of this paragraph including without limitation the right to damages.

         14.16 Agent shall notify Company in writing via electronic, certified
or registered mail, within five (5) days if there is a change in ownership of
ten percent (10%) or more of the outstanding voting stock of Agent, sale or
transfer of all Agent's assets, merger of Agent, or change of any principal
officer or director of Agent including, but not limited to, resignation.

         14.17 Any notice or other communications required or permitted
hereunder shall be sufficiently given if sent by electronic, certified or
registered mail, postage prepaid, if to Agent, addressed to Tower Risk
Management Corporation, 120 Broadway, 14th Floor, New York, New York, 10271,
Attention: Michael H. Lee, President and if to Company addressed to Virginia
Surety Company, Inc., 175 West Jackson Blvd. Suite 1100, Chicago, IL 60604,
Attention: Wayne J. Baliga, Senior Vice President, with copy to: Oriana L.
Bakka, Senior Vice President 175 West Jackson Blvd., Suite 1100, Chicago, IL
60604, or such other address as notified by either party to the other.

                                       24
<PAGE>

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

TOWER RISK MANAGEMENT CORPORATION

By: /s/

Title:  Vice President

Date:  December 16, 2003

Attest:
       -------------------------------------

VIRGINIA SURETY COMPANY, INC.

By:   /s/

Title:  Senior Vice President

Date:  November 20, 2003

Attest:
       -------------------------------------

                                       25
<PAGE>

                                    Exhibit A

                              SCHEDULE OF AUTHORITY

                  Effective August 1, 2003 to December 1, 2004

Agent is only authorized to accept or bind business, as defined in the
Classification Section below, subject to the amounts and stipulations indicated
below. Amounts in excess of the authorized limits or classifications must be
referred to Company for review and approval prior to binding.

         GROSS NET WRITTEN PREMIUM LIMIT A maximum of $ 20,000,000 unless Agent
         obtains the prior written consent of Company. Gross Net Written Premium
         shall mean gross written premium of Company less returned premium for
         cancellations and reductions.

         POLICY TERM       Not more than one year.

         POLICY LIMITS AND COVERAGE CLASSIFICATIONS

         Large Lines Real Estate General Liability Program.

        ------------------------------ -----------------------------------------
        Coverage                       Limit
        ------------------------------ -----------------------------------------
        General Liability
                                       $1 million per Occurrence / $2 Million
                                       Aggregate
        ------------------------------ -----------------------------------------

        ------------------------------ -----------------------------------------

         The above coverages are provided on ISO forms and certain independent
         manuscript forms to be agreed.

         No other classes of insurance may be written on Company's insurance
         policies.

                                       26
<PAGE>

         COMMISSIONS Company will allow Agent a commission equal to the
         commissions provided for in the Quota Share and from such commissions,
         Agent shall pay to Company the policy issuing fee and taxes, fees and
         assessments as provided for in Section 4.1.10 of the managing General
         Agency Agreement between Company and Agent.

         TERRITORIAL LIMITATIONS Agent shall not issue any policy in any
         jurisdiction other than the authorized states defined as New York, New
         Jersey, Pennsylvania and Connecticut. Agent may provide coverage for
         risks located in states other than the authorized states if such risks
         are ancillary to a schedule of locations in a policy where the majority
         of the risks are located within the authorized states. Company as its
         own discretion may limit or revoke Agent's authority as regards any
         particular state.

         RATES AND UNDERWRITING Agent shall not issue any policy that does not
         meet the rate and Tower Group Underwriting Guidelines set forth in
         Exhibit B attached to the Managing General Agency Agreement between
         Company and Agent, as amended from time to time by Company, and
         incorporated herein by reference, unless such policy is referred to
         Company for review and approval prior to binding.

         REINSURANCE Agent is not allowed to purchase treaty or facultative
         reinsurance on behalf of Company.

         PROFIT COMMISSION Thirty six (36) months after the expiration of this
         Agreement, and annually thereafter, Company will consider commuting the
         Quota Share Reinsurance Agreement with PXRE Reinsurance Company,
         reference number AR 15439, effective August 1, 2003 to December 31,
         2004 (PXRE Quota Share). Company will use the most recent actuarial
         review submitted by Agent in this consideration process. If the
         Company, with agreement of Agent, elects to commute said PXRE Quota
         Share, Company and Agent agree that Company will pay a Profit
         Commission from the commutation to Agent. The Profit Commission will be
         calculated by Agent when Company notifies Agent that it has commuted
         PXRE Quota Share and the annually thereafter each by June 1st using
         December 31st figures as follows:

                                       27
<PAGE>

                  PXRE Quota Share's Commutation Premium less:

                  (i)   Reserves for losses reported and outstanding;

                  (ii)  Reserves for losses incurred but not reported;

                  (iii) Reserves for loss expenses;

                  (iv)  Reserves for unearned premiums;

                  (v)   Reasonable expenses incurred by the Company if the
                        company is required to carry out the Agent's duties in
                        accordance with the authority granted to them under this
                        Agreement and

                  (vi)  Any amounts Agents owes Company in accordance with the
                        terms and conditions of this Agreement.

         First Calculation - If the calculation produces a positive number that
         number will be multiplied by 50% to calculate the Profit Commission due
         Agent. Company will retain the remaining 50%. If the calculation
         produces a deficit number, Company will seek reimbursement under the
         terms and conditions of Quota Share Reinsurance Agreement with Tower
         Insurance Company of New York, reference number VSC2003/63, effective
         August 1, 2003 to December 31, 2004 (TICNY Quota Share).

                                       28
<PAGE>

         Second and Subsequent Calculations - If the calculation produces a
         positive number, that number will be multiplied by the applicable
         percentage listed below to calculate the Profit Commission due Agent
         less any previously paid Profit Commission

                  Second Annual Calculation - 60%
                  Third Annual Calculation - 70%
                  Fourth Annual Calculation - 80%
                  Fifth Annual Calculation - 90%
                  Sixth Annual Calculation - 100%

         The remaining profit, if any, will be retained by Company. If the
         calculation produces a deficit number, Agent will pay back any Profit
         Commission paid from previous calculations and, if still in a deficit,
         Company will seek reimbursement under the terms and conditions of TICNY
         Quota Share.

         Any Profit Commission due Agent will be paid by Company within thirty
         (30) days after receipt and confirmation by Company. Any return Profit
         Commission due Company will be paid by Agent with its calculation.

         It is agreed that Company may request an interim calculation if it is
         determined that the calculation will result in a deficit to Company.
         Agent warrants that it will immediately return any previously paid
         Profit Commission by wire transfer to Company's account. The validity
         of this interim calculation may be contested under the provisions of
         this Agreement but Agent will advance 100% of any previously paid
         Profit Commission while it is contesting.

                                       29
<PAGE>

         It is agreed that reserves for losses incurred but not reported will be
         determined by Agent's actuary and approved by Company's actuary. In
         event Company and Agent cannot agree on the value of (i) through (v) as
         set forth above, they will mutually appoint an independent actuary
         and/or appraiser to assess such obligations. Any expense associated
         with the appointment of an independent actuary and/or appraiser will be
         paid by Agent.

         Profit Commission calculations will be cumulative if Company elects to
         renew this Agreement and PXRE Quota Share with PXRE or another
         reinsurer.

         Company's obligations to pay any profit commission is contingent upon
         receipt of such profit commission amounts from the reinsurer. The
         Company shall have no obligation to pay any profit commission if such
         profit commission is not received from the reinsurer. The Company shall
         have 30 (thirty) days from receipt of the profit commission to remit
         the commission to the Agent. The Company shall have no obligation to
         calculate any profit commission pursuant to the terms of this
         paragraph.

                                       30
<PAGE>

                                    EXHIBIT B

                             UNDERWRITING GUIDELINES

                  Effective August 1, 2003 to December 31, 2004

TO BE RETAINED ON FILE AT AGENT'S PRINCIPAL OFFICE

                                       31
<PAGE>

                                    EXHIBIT C

                             REINSURANCE AGREEMENTS

                  Effective August 1, 2003 to December 31, 2004

Quota Share Reinsurance Agreement with PXRE Reinsurance Company, reference
number AR 15439- -8/1/03, effective August 1, 2003 to December 31, 2004 12:01
a.m. standard time.

Quota Share Reinsurance Agreement with Tower Insurance Company of New York,
reference number VSC2003/63, effective August 1, 2003 to December 31, 2004 12:01
a.m. standard time.

                                       32
<PAGE>

                                    EXHIBIT D

                              Claims Billing Rates

Liability Claims                    -     $  60   -   $  90
Sr. Liability Claims                -     $  90   -   $ 110
Complex Claims                      -     $ 110   -   $ 130
Coverage Examiner                   -     $  90   -   $ 130
Property Claims                     -     $  60   -   $ 100
Property Field Adjuster             -     $  70   -   $ 120
Sr. Property Claims                 -     $ 110   -   $ 120
Auto Claims                         -     $  60   -   $  90
Sr. Auto Claims                     -     $  90   -   $ 110
WC Claims                           -     $  60   -   $  90
Sr. WC Claims                       -     $  90   -   $ 110
Subrogation Specialist              -     $  60   -   $  85
Litigation Claims Analyst           -     $  90   -   $ 130
Claims Supervisor                   -     $ 110   -   $ 130
Claims Manager                      -     $ 125   -   $ 150
Coverage Counsel                    -     $ 185   -   $ 250

Paralegal                           -     $  55   -   $  75
Staff Attorney                      -     $ 100   -   $ 145
Senior Staff Attorney               -     $ 145   -   $ 185
Trial Attorney                      -     $ 175   -   $ 195
Managing Attorney                   -     $ 195   -   $ 225

                                       33<PAGE>

                                                                   Exhibit 10.21

                            GENERAL AGENCY AGREEMENT

         THIS GENERAL AGENCY AGREEMENT (this "Agreement") is made and entered
into as of January 1, 2004, by and among STATE NATIONAL INSURANCE COMPANY, INC.,
an insurance company organized under the laws of the State of Texas ("Company"),
TOWER INSURANCE COMPANY OF NEW YORK, an insurance company organized under the
laws of the State of New York ("Reinsurer"), and TOWER RISK MANAGEMENT CORP., a
company organized under the laws of the State of New York ("General Agent");

                              W I T N E S S E T H:

         THAT, in consideration of the mutual covenants hereinafter contained
and upon the terms and conditions herein below set forth, the parties hereto
agree as follows:

                                    PREAMBLE

         The Company and CONVERIUM REINSURANCE (NORTH AMERICA) INC. , HANNOVER
REINSURANCE (IRELAND) LIMITED and E+S REINSURANCE (IRELAND) LIMITED, and TOKIO
MILLENNIUM RE LTD. (collectively the "2004 State National Quota Share
Reinsurers") have entered into Quota Share Reinsurance Agreements dated as of
January 1, 2004 (collectively the "2004 State National Quota Share Reinsurance
Agreements"), and the Company, General Agent and Reinsurer have entered into an
Excess of Liability Reinsurance Agreement dated as of January 1, 2004 (the "2004
Excess of Liability Reinsurance Agreement"), true and complete copies of which
are attached hereto as Exhibits A and B respectively, and fully incorporated
herein by this reference (the 2004 State National Quota Share Reinsurance
Agreements and the 2004 Excess of Liability Reinsurance Agreement shall be
referred to collectively as the "Reinsurance Agreements"), which Reinsurance
Agreements require the appointment of the General Agent to perform certain
specified acts on behalf of the Company and the respective reinsurers as set
forth in the Reinsurance Agreements. The General Agent desires to perform the
functions and duties necessary under the Reinsurance Agreements. It is therefore
mutually agreed by the parties that the General Agent will perform all functions
necessary for the production, service and management of policies issued under
the Reinsurance Agreements in accordance with the terms and conditions set forth
therein and herein. To the extent that there is any conflict between the terms
of this Agreement and the Reinsurance Agreements, the Reinsurance Agreements
shall govern. Notwithstanding any provisions to the contrary contained elsewhere
herein or in any other document, it is expressly understood that the execution
and delivery of this Agreement and the Company's performance hereunder shall not
under any circumstances be interpreted to affect, weaken or modify the
Reinsurer's obligation to indemnify and hold the Company harmless from and
against the business, credit and insurance risks as set forth in the 2004 Excess
of Liability Reinsurance Agreement. The contractual assumption by the Reinsurer
of these risks in the 2004 Excess of Liability Reinsurance Agreement is a
condition precedent to the Company's entering into this Agreement with the
General Agent.

                                   ARTICLE I
                             APPOINTMENT AND DUTIES

1.01     The Company, at the direction of the Reinsurer, hereby appoints the
General Agent as its managing general agent for the purpose of producing and
handling the business, which is the

                                       1
<PAGE>

subject of the Reinsurance Agreements, issued or renewed on or after the
effective date of this Agreement. The Company, at the request of the Reinsurer,
hereby grants authority to the General Agent to solicit, accept and receive
applications for such classes of coverage as are specified in the Reinsurance
Agreements; to secure, at its own expense, reasonable underwriting information
through reporting agencies or other appropriate sources relating to each risk
insured; to issue, renew and countersign policies, certificates, endorsements
and binders which the Company may, from time to time, authorize to be issued,
delivered, renewed and countersigned; and to collect and receipt for the
premiums thereon and therefor.

1.02     All activities of the General Agent pursuant to this Agreement shall be
in strict compliance with the terms of the Reinsurance Agreements and all rules,
regulations and instructions of the Company, including, but not limited to, all
rules, instructions and specifications included in the Company's rate manuals,
rate brochures and rate schedules.

1.03     The Company, at the Reinsurer's request, further authorizes the General
Agent to perform all acts and duties under policies of insurance issued by the
Company as would otherwise be performed by the Company, including, but not
limited to, properly sending and/or receiving reports and notices and remitting
and/or receiving monies due from or to the Company, and adjusting and paying
losses or other claims. The Company grants to the General Agent the authority to
settle claims on behalf of the Company. However, the maximum dollar amount of
such authority per claim shall not exceed $100,000. For claims settlement in
excess of $100,000, the General Agent may only settle such claims with prior
approval of the Company and the 2004 State National Quota Share Reinsurers. The
Company retains final authority to determine any disputes relating to claims
settlement and setting of loss reserves. In performing each of the acts
mentioned above, the General Agent shall be under the direct supervision and
control of the Reinsurer, and the Reinsurer shall be solely responsible for the
acts of the General Agent. While there are acts of the General Agent which may
be required by applicable law to be performed on behalf of the Company, the
Reinsurer shall remain ultimately responsible for such acts and will indemnify
and hold the Company completely harmless for any damage, cost, liability,
expense and/or loss (including attorneys' fees and expenses) incurred by the
Company as respects such acts of the General Agent. The General Agent must send
to the Company a report, as soon as it becomes known, that a claim (i) involves
a coverage dispute; (ii) involves a demand in excess of policy limits; (iii)
alleges bad faith; (iv) exceeds General Agent's claims settlement authority; (v)
is open for more than six months; or (vi) alleges a violation of any applicable
unfair practices and unfair competition statutes. The Company may suspend or
terminate the settlement authority of the General Agent during the pendency of
any dispute regarding any event of default by the General Agent.

1.04     Claims handling shall be accomplished by the General Agent through its
designated representative ("Claims Administrator"), which designation is subject
to the Company's and Reinsurer's continuing approval. The agreement between the
General Agent and the Claims Administrator shall be subject to the approval of
the Reinsurer and the Company and shall not be inconsistent with the terms and
conditions of this Agreement. Payment to the Claims Administrator shall be made
by the General Agent, on behalf of the Company, directly to the Claims
Administrator. The Claims Administrator shall accept notice of and investigate
any claim arising under any of the Policies, and pay, adjust, settle, resist, or
compromise any such claim, unless the Company specifically directs to the
contrary with respect to any individual claim. All such loss settlements,
whether under strict policy conditions or by way of compromise, shall be
unconditionally binding upon the Company and the Reinsurer. However, should the
Company be

                                       2
<PAGE>

ordered or instructed by the Texas Department of Insurance or any other
regulatory agency of competent jurisdiction to take any action or refrain from
taking any action with regard to any claim, the Reinsurer and the General Agent
shall be bound by and shall follow the order or instructions of such regulatory
agency as though the General Agent were the object of such order or instruction.
The General Agent will exercise the authority granted hereunder in good faith
and toward the end of paying any and all valid claims. The General Agent is
authorized to have claims adjusted through independent claims adjusters, subject
to the supervision of the Reinsurer. The selection of independent claims
adjusters shall be subject to prior written approval of the Reinsurer and
Company. Such independent claims adjusters are not the agents of the Company and
the Company shall be held harmless and indemnified by the Reinsurer for any
liability, claim, demand, expense and/or cost of whatever kind or character as a
result of, related to or connected with any action or inaction of such claims
adjusters.

1.05     The Company shall not be responsible for the General Agent's expenses
and costs, including, but not limited to, salaries, bonuses, rentals,
transportation facilities, clerk hire, solicitors' fees, postage, advertising,
exchange, personal license fees, adjustment by the General Agent of losses under
policies issued by the General Agent, or any other agency expenses whatsoever.
The General Agent's sole compensation shall be the amounts payable to the
General Agent in Article III of this Agreement.

1.06     The General Agent understands and agrees that it has no power or
authority granted to it by the Company independent of this Agreement and the
2004 Excess of Liability Reinsurance Agreement, and that this Agreement and the
General Agent's authority hereunder shall cease immediately upon the
termination, for any reason, of this Agreement or any of the Reinsurance
Agreements (excepting only the General Agent's responsibilities with regard to
run-off and other matters as set forth herein or in the Reinsurance Agreements).

1.07     The General Agent shall not have the power to accept or bind risk other
than as set forth herein, as set forth in the 2004 Excess of Liability
Reinsurance Agreement or as may be subsequently authorized by the Company and
Reinsurer in writing. The General Agent may not bind or cede reinsurance or
retrocession on behalf of the Company, may not commit the Company to
participation in insurance or reinsurance syndicates, and may not commit the
Company to a claim settlement with a reinsurer without the prior written
approval of the Company. If such prior written approval is given, the General
Agent shall forward promptly a report to the Company concerning such transaction
and/or payment. The Company hereby authorizes the General Agent to collect
payments for losses and loss adjustment expenses from a reinsurer. The General
Agent shall send a report to the Company concerning such transactions promptly.

1.08     The General Agent acknowledges that, with respect to any state in which
business is permitted to be written under the Reinsurance Agreements, this
Agreement shall not become effective until the General Agent is first duly
appointed by the Company with the applicable regulatory authority. The General
Agent agrees that any producing agent receiving commission pursuant to this
Agreement shall first be duly registered by the Company and said appointment on
file with any applicable state insurance department. The General Agent further
agrees to be responsible for the payment of any penalty assessed to the Company
for any violation by the General Agent or any producing agent or broker
registered by the General Agent pursuant to the provisions of Article IV hereof
of any license or appointment provision of the Texas Insurance Code, or other
applicable state statutes, and the rules and regulations promulgated
thereunder. If

                                       3
<PAGE>

the General Agent fails to pay such penalty, the Reinsurer shall in accordance
with the 2004 Excess of Liability Reinsurance Agreement pay it immediately upon
written notification by the Company of the General Agent's failure to pay such
penalty.

1.09     It is understood that the Reinsurer has acknowledged that the Company
shall not be required to monitor the General Agent's compliance with the terms
of either the Reinsurance Agreements or this Agreement and the Reinsurer shall
be responsible for monitoring the General Agent's compliance with the
Reinsurance Agreements and this Agreement.

1.10     The authority and limitations of the General Agent to issue policies
are as follows:

         (a)      the maximum annual premium volume the General Agent may
         produce under this Agreement is $50,000,000 (fifty million dollars);

         (b)      the basis of the rates charged are as provided in the
         Company's rate manuals, rate brochures and rate schedules which the
         General Agent shall follow, and the General Agent shall not decrease
         rates or increase discounts without the prior approval of the Company
         and Reinsurer;

         (c)      the only classes of business the General Agent is authorized
         to produce and handle under this Agreement are the classes of business
         specified in the Reinsurance Agreements;

         (d)      the General Agent may issue policies under this Agreement only
         to insured residents in the states in which business is permitted to be
         produced under the Reinsurance Agreements; but this limitation shall
         not apply to losses if said policies provide coverage outside the
         aforesaid territorial limit;

         (e)      the General Agent shall only cancel policies as set forth in
         the policy form for the policies produced hereunder or as otherwise
         permitted by applicable law;

         (f)      the maximum term for any policy issued hereunder shall be
         twelve (12) months;

         (g)      the General Agent shall employ all reasonable and appropriate
         measures to control and keep a record of the issuance of the Company's
         insurance policies hereunder, including, but not limited to, keeping
         records of policy numbers issued and maintaining policy inventories;

         (h)      the excluded risks are those set forth in the 2004 State
         National Quota Share Reinsurance Agreements.

         (i)      the maximum limits of liability for policies to be produced
         are as follows:

         1.       General Liability - $1,000,000 (one million dollars) per
         occurrence; $2,000,000 (two million dollars) aggregate;

         2.       Automobile Liability - $1,000,000 (one million dollars)
         combined single limit or $1,000,000 (one million dollars)/$1,000,000
         (one million dollars) split limit;

         3.       Property - $10,000,000 (ten million dollars) per risk

                                       4
<PAGE>

         The above limits apply to all segments for General Liability. These
         limits also apply to the Small Market and Middle Market for Property
         and Automobile policies only.

In underwriting policies, the General Agent shall follow the underwriting
guidelines developed by the General Agent, the Reinsurer and the Company, and
these guidelines are herein incorporated by reference.

                                   ARTICLE II
                                    PREMIUMS

2.01     It is expressly agreed and understood that all premiums collected by
the General Agent are collected on behalf of the Company; that such premiums are
the property of the Company, the 2004 State National Quota Share Reinsurers and
the Reinsurer as their respective interests may appear pursuant to the
Reinsurance Agreements, less such commissions and fees as are due the General
Agent as specified herein. All premiums on policies issued hereunder shall be
collected within seventy-five (75) days of the effective date of the policy or
the General Agent shall cancel such policy. All premiums collected by the
General Agent on the business produced under the Reinsurance Agreements shall be
held in trust by the General Agent in a fiduciary capacity on behalf of the
Company and shall be deposited immediately in a segregated trust account that is
maintained separate and apart from all other bank accounts of the General Agent
and which reflects the ownership of the account by the Company (the "Operating
Fund"). The General Agent shall not commingle any funds deposited in the
Operating Fund with its general assets. The General Agent shall have no legal or
beneficial right, title or interest in the Operating Fund. The General Agent is
responsible for full compliance with all applicable laws, regulations, rules and
requirements regarding fiduciary trust accounts.

         (a)      All premiums collected by the General Agent shall be deposited
         immediately in the Operating Fund. The only disbursements from the
         Operating Fund shall be the payment of claims, claims expenses, return
         premiums, commission due the General Agent as authorized herein, Ceding
         Fee (as defined in Article 3.02 of this Agreement) due the Company and
         remittances in accordance with Article 12, Accounts, Remittances and
         Loss Settlements of the 2004 State National Quota Share Reinsurance
         Agreements. Within ten (10) days after the end of each month, the
         General Agent will furnish an accounting of the cash transactions
         reported in the Operating Fund. Such accounting will include: (i) a
         summary of premiums, net of cancellations and returns, deposited in the
         account; (ii) losses and loss adjustment expenses paid, net of any
         salvage and subrogation; (iii) commissions paid or received; (iv)
         interest or other investment income received; (v) any bank charges
         deducted; (vi) Ceding Fees and premium taxes paid; (vii) detail of all
         such other amounts that increased or decreased the reported cash
         balance in a level of detail sufficient to enable the Company to meet
         its Statutory financial reporting requirements; and (viii) copies of
         bank statements and of the reconciliation of same to the reported
         financial amounts.

         (b)      The General Agent, via an investment manager, shall have the
         power to direct the investment of the funds held in the Operating Fund.
         The General Agent shall satisfy any financial obligation of the Company
         to the 2004 State National Quota Share Reinsurers by remitting funds
         deposited in the Operating Fund to such 2004 State National Quota Share
         Reinsurers. In addition, any interest earned on funds deposited in the
         Operating Fund shall inure to the benefit of the General Agent. The
         Operating Fund shall be established so that the Company will receive on
         a monthly basis a detailed report on all investment transactions,

                                       5
<PAGE>

         copied on all executed trade tickets, and receive monthly account
         reporting directly from the Custodian so that all disbursements and
         transactions can be reconciled.

         (c)      The bank costs incurred for the Operating Fund shall be
         deducted from interest income earned on the Operating Fund balance. The
         General Agent shall be responsible for any bank costs that exceed the
         interest income earned on the Operating Fund.

The General Agent shall not make personal use of any funds in this account. The
commissions payable to the General Agent are debts due to the General Agent by
the Reinsurer and the privilege herein granted of deducting commissions from
said premiums should not be taken as a waiver by the Company of its exclusive
ownership rights of premiums as provided herein. Should any dispute arise
between the Company, the Reinsurer and/or the General Agent regarding payment of
premium, the General Agent shall remit immediately all money and property,
without deductions for commissions, to the Operating Fund with full reservation
of any and all rights reserved by the parties.

2.02     The General Agent shall furnish to the Company and the Reinsurer all
necessary premium and loss data (in a form acceptable to the Reinsurer and the
Company) no later than thirty (30) days following the end of the month during
which the business is written or losses are incurred to enable the Company to
record statistics required by statutes, regulation or upon call by authorities
having competent jurisdiction. Such data shall include, but is not limited to,
premiums written and unearned premium. Said data shall be segregated by lines of
insurance and location of risk.

2.03     The keeping of an account with the General Agent on the Company's books
as a creditor and debtor account is declared a record memorandum of business
transacted and neither such keeping of an account, nor alteration in commission
rate, nor failure to enforce prompt remittance or compromise or settlement or
declaration of balance of account, shall be held to waive assertion of the trust
relation as to premiums collected by the General Agent.

2.04     The General Agent shall be liable for the payment of all premiums upon
all policies of insurance written through the General Agent or any sub-agents of
the General Agent.

2.05     The General Agent shall remit to the Reinsurer, or Company as
applicable, any funds of or due to the Company under this Agreement at the
earlier of the following: (1) forty-five (45) days from the end of the month in
which premium is recorded; or (2) forty-five (45) days from the end of the month
in which the coverage under this Agreement became effective.

2.06     The General Agent shall hold all funds of or due the Company in a
fiduciary capacity.

                                  ARTICLE III
                        COMPENSATION TO THE GENERAL AGENT

3.01     In partial consideration for the services rendered hereunder and under
the Reinsurance Agreements, the General Agent is entitled to the commission
payable by the Reinsurer as specified herein. In addition, the Company shall
allow the General Agent a provisional commission as specified in Article 10,
Section A and B of the 2004 State National Quota Share Reinsurance Agreements
less 1.0% (one point zero percent) on all subject collected net written
premiums, as defined in the 2004 State National Quota Share Reinsurance
Agreements with such amounts to be paid to the General Agent on all subject
collected net written premiums produced under this

                                       6
<PAGE>

Agreement. The Company shall not pay the General Agent any commission amounts in
respect of net written premiums which are not received by the Company. The
General Agent shall assume the credit risk associated with the underlying
insureds and shall pay to the Company a Ceding Fee in respect of the net written
premiums whether collected or not by the General Agent.

3.02     The General Agent shall pay direct to the Company 7.0% (seven point
zero percent) of all net written premiums produced under this agreement ("Ceding
Fee"), and to the 2004 State National Quota Share Reinsurers and 2004 Excess of
Liability Reinsurer their premiums, as specified in the respective Reinsurance
Agreements, and the amounts for assignments, assessments, premium taxes, fines
and penalties as specified in such Reinsurance Agreements. This above Ceding Fee
due the Company shall not be reduced by any payments due by the General Agent to
third parties except for return net written premiums. The General Agent shall
allow the Company to return commission on return net written premiums and policy
fees at the same rates as received by the General Agent.

3.03     The General Agent's commission on premiums ceded to the various
Reinsurers is subject to adjustment as specified in Article 10, Section A. and
B. of the 2004 State National Quota Share Reinsurance Agreements less 1.0% (one
point zero percent).

3.04     The Company shall not be liable for or responsible for any commissions
or other monies payable by the 2004 State National Quota Share Reinsurers to the
General Agent. The General Agent shall not sue or seek arbitration against the
Company for any actions by, or debts owing from, the 2004 State National Quota
Share Reinsurers.

3.05     In the event the Company or the 2004 State National Quota Share
Reinsurers, during the continuance of this Agreement or after its termination,
refunds premiums under any policy of insurance by reasons of cancellation or
otherwise, the General Agent agrees immediately to return to the Company or the
2004 State National Quota Share Reinsurers, as applicable, the commission
previously received by it on the portion of the premium refunded. The General
Agent shall not be required to return, as commission or return commission,
monies greater than the total commission paid or otherwise payable to the
General Agent.

                                   ARTICLE IV
                                   SUB-AGENTS

4.01     The General Agent shall comply with, and shall be responsible to insure
the compliance by, all such producing agents with the terms of this Agreement
and the Reinsurance Agreements and all other written rules and regulations of
the Company, and treat as confidential and use only in the interest of the
Company all instructions, information and materials received from the Company.

4.02     The General Agent shall be solely responsible for the performances of
any producing agents under all of the terms and provisions hereof, including,
but not limited to, the collections of premiums and refunds of premiums.

4.03     Each such producing agent must be registered or appointed, as required,
as an agent of the Company through the appropriate regulatory body before any
application shall be accepted from him or other insurance performances on behalf
of the Company are performed. The General Agent

                                       7
<PAGE>

shall be ultimately responsible for the obligation of the producing agent to
obtain an appointment as provided herein.

4.04     It is also specified that the General Agent shall be responsible for
all commissions payable to any producing agents. The General Agent and any
producing agent shall not seek to hold the Company or Reinsurer liable through
litigation, arbitration or otherwise for commissions payable to such producing
agents.

4.05     The Company, in its sole discretion with or without cause, and without
prior written notice, may terminate the appointment of any producing agent.

4.06     The General Agent shall not permit its subagents or subproducers to
serve on its Board of Directors.

4.07     The General Agent shall not appoint sub-managing general agents.

                                   ARTICLE V
                           ADDITIONAL DUTIES OF AGENT

5.01     The General Agent shall, at all times during the period of this
Agreement, comply with all applicable laws and all orders, policy decisions or
other requirements of the Texas Department of Insurance or other applicable
state insurance department.

5.02     All books, records, accounts, documents and correspondence of the
General Agent and any producing agent pertaining to the Company's and
Reinsurer's business shall, at all times, be open to examination by any
authorized representative of the Company, Reinsurer or any of the 2004 State
National Quota Share Reinsurers. The General Agent shall make copies of records
available upon request by the Company or Reinsurer any of the 2004 State
National Quota Share Reinsurers, whether such request is before or after
termination of this Agreement or the Reinsurance Agreements. The General Agent
must maintain separate records of business, including, but not limited to,
underwriting files for each insurer for whom it acts as a general agent. Such
records must be maintained for five (5) years or until the completion of a
financial examination by the insurance department of the state in which the
Company is domiciled, whichever is longer.

5.03     The General Agent shall maintain adequate accounting procedures and
systems, at no cost or expense to the Company, and shall provide statistics in a
timely manner for all reporting requirements under the Reinsurance Agreements or
as shall be required from time to time by the regulatory authorities of the
State of Texas or any other applicable governmental agency or authority. Such
statistical information shall be provided to the Company by the General Agent at
the General Agent's sole cost and expense.

5.04     The General Agent shall forward to the Company, no later than the 30th
day of the month following the month being accounted for, a report in detail of
all policies of insurance written or placed, or liability increased or
decreased, or policies continued or renewed or canceled by or through the
General Agent during the month being accounted for, which shall include all
premiums due thereon whether collected or not. Such report shall show the net
amount due to the Company and Reinsurer on all such business on the lines of
business authorized to be written by the General Agent and the amounts paid in
losses, loss adjustment expenses and commissions. Such report shall also
include, to the extent not already included, both insurance and reinsurance
transactions, including:

                                       8
<PAGE>

         (i)      statement of written, earned and unearned premiums;

         (ii)     losses and loss expenses outstanding;

         (iii)    losses incurred but not reported; and

         (iv)     any management fees.

The report shall be received by or confirmed to the Company no later than thirty
(30) days from the close of the month for which business is reported. The
Company shall maintain such account reports on file for at least five (5) years
and shall make the account reports available to the Commissioner of Insurance of
the State of Texas (the "Commissioner"), or other applicable state department of
insurance, for review upon request.

5.05     The General Agent shall account for and furnish to the Company, upon
request with reasonable notice, complete copies of all policies issued, copies
of all spoiled, voided or otherwise unissued policies, and copies of all claim
files created with respect to all loss occurrences under any policy issued under
this Agreement.

5.06     The title of all undelivered policies, books, supplies, or other
property related to the reinsured business is in the Company, and these shall be
delivered to the Company by the General Agent immediately upon the termination
of this Agreement. The General Agent agrees to surrender peaceably the same
without compelling the Company to resort to any legal proceedings whatsoever.

5.07     The General Agent shall not insert any advertisement respecting the
Company in any publication or issue any circular or paper referring to the
Company without first obtaining the written consent of the Company. The General
Agent shall comply with all statutes and regulations pertaining to advertising,
and establish and maintain records of any such advertising as required by the
applicable laws of the states in which it is doing business.

5.08     The General Agent shall maintain on behalf of the Company and Reinsurer
complete copies of all policies issued hereunder and copies of all claim files
created with respect to all loss occurrences thereunder. Any or all policies
and/or claim files required to be maintained by General Agent pursuant to this
Section 5.08 may be maintained in electronic data storage form accessible by
computer and if so stored in this fashion, no physical copy of such items need
be maintained. Where electronic claims files are maintained by the General
Agent, any data from such files requested or required by the Company shall be
provided within thirty (30) days or less if so requested by the Company.

5.09     The General Agent shall pay to the account specified in Section 2.01
hereof the positive balance, if any, no later than forty-five (45) days
following the end of the month during which the business was written net
collected premiums hereunder (being defined as premiums collected less return
premiums) less the General Agent's commissions and less loss adjustment expenses
and loss payments. Should such balance be a negative amount, the Reinsurer shall
promptly pay the General Agent upon receipt and verification of the amount due
as reported by the General Agent.

5.10     The General Agent shall be solely responsible for procuring any
renewal, extension, or new policy of insurance that may be required by any state
or rule or regulation of any state

                                       9
<PAGE>

insurance department with respect to policies originally written directly for
the Company. The General Agent and Reinsurer, in accordance with the Reinsurance
Agreements, shall indemnify the Company and hold it harmless from any loss,
damage, cost, claim or expense whatsoever that the Company may incur, or for
which it may become liable, as a result of the said General Agent's failure,
refusal or neglect to fulfill said responsibility.

5.11     The General Agent agrees that its duties and obligations under this
Agreement shall be due and owing also to the Company's and Reinsurer's
successors and assigns.

5.12     Nothing in this Article V shall be construed as requiring the Company
to monitor the book of business which is the subject of the Reinsurance
Agreements for the benefit of the Reinsurer.

5.13     The Company shall conduct or cause to be conducted a semi-annual
examination of the General Agent, in accordance with the Company's audit
guidelines. Furthermore, if the Company's aggregate premium volume increases by
thirty (30) percent in any thirty (30) day period, the Reinsurer at no expense
to the Company, and on behalf of the Company, shall examine or cause to be
examined within ninety (90) days the General Agent if it writes more than twenty
(20) percent of the Company's volume and has also experienced a twenty (20)
percent increase in premium volume during that same thirty (30) day period.

The examinations required under the preceding paragraph shall adequately provide
the Commissioner with the information outlined in (a) through (e) below, shall
be made available to the Commissioner for review, shall remain on file with the
Company for a minimum of three (3) years and shall, at a minimum, contain
information concerning the following:

         (a)      claims procedures of the General Agent;

         (b)      timeliness of claims payments by the General Agent (i.e., lag
                  time between date claim is reported and date claim is paid);

         (c)      timeliness of premium reporting and collection by the General
                  Agent;

         (d)      compliance by the General Agent with underwriting guidelines
                  under Section 1.10 hereof; and

         (e)      reconciliation of policy inventory.

5.14     The General Agent shall return any unearned premium due insureds or
other persons on the business which is the subject of the Reinsurance
Agreements; if for any reason, the General Agent does not return such unearned
premium, then the Reinsurer shall pay such amount and/or amounts.

5.15     The General Agent shall be duly licensed as a managing general agent or
as otherwise required under applicable law to perform its duties hereunder.

5.16     Should any state insurance department make a request to the Company for
any data required to comply with a statistical data call, the General Agent
shall be solely responsible to provide the Company with such data. Should the
request from such state insurance department require the Company to contract the
services of an outside source, such as an actuarial firm, to compile the

                                       10
<PAGE>

data required, the General Agent shall be responsible for its proportionate
share of the total cost for services rendered.

5.17     General Agent, when placing business under this Agreement, may not
charge a per-policy fee in excess any fees allowed by the applicable insurance
regulatory authority.

5.18     The General Agent shall provide Company, at General Agent's expense, an
independent financial examination in a form acceptable to the applicable state
departments of insurance, or other regulatory body, if required.

5.19     The General Agent shall provide annually to Company, at General Agent's
expense, an independent actuary opinion attesting to the adequacy of loss
reserves established for losses incurred and outstanding on business produced
hereunder if General Agent establishes total loss reserves including IBNR, if
required by the applicable insurance regulatory authority.

5.20     The General Agent acknowledges receipt of the Company's Statistical
Reporting Policy and Procedure Manual, and will act in accordance therewith. The
General Agent will act, at its sole cost and expense, on behalf of the Company
to produce, prepare, and file statistical information with the designated
statistical reporting bureau. The General Agent will also furnish the Company,
and other parties as designated by the Company, with monthly, quarterly and
annual reports showing statistical data in respect of the business written as
required.

5.21     Company will provide to the General Agent the percentage of written
premium to remit directly to Company on a monthly basis for bureau fees related
to statistical reporting, and boards and bureaus participation ("Bureau Fees").
In addition to the Bureau Fees, should the Company be charged any fines or
penalties for incomplete, inaccurate, or delinquent reporting, the General Agent
shall pay such fines or penalties immediately upon written notice. The General
Agent will remit Bureau Fees as designated by the Company until notified of any
necessary adjustments to the amount of the Bureau Fees. Should the General Agent
fail to remit any amounts due to Company under this Section 5.21, then the
Reinsurer shall pay such amounts within 60 days written notice from the Company.
The initial Bureau Fees shall be .25% of written premium. The Bureau Fees are in
addition to other fees and expenses expressly enumerated herein.

5.22     General Agent shall at all times during the term of this Agreement
maintain Errors and Omissions insurance coverage in an amount not less than
$2,000,000 (two million dollars) per occurrence and $2,000,000 (two million
dollars) annual aggregate. General Agent shall provide the Company and the 2004
State National Quota Share Reinsurers with evidence of such coverage prior to
execution of this Agreement. General Agent shall provide the Company and the
2004 State National Quota Share Reinsurers with written notice of any change to,
or amendment of, such insurance coverage or any receipt by General Agent of any
notice of cancellation of such insurance coverage within ten (10) calendar days
of any such change, amendment or its receipt of notice of cancellation.

                                   ARTICLE VI
                              TERM AND TERMINATION

6.01     The effective date of this Agency Agreement is 12:01 a.m., Eastern
Standard Time, on January 1, 2004, and shall remain continuously in force unless
canceled as follows:

                                       11
<PAGE>

         (a)      This Agreement may be canceled by either party by giving at
         least ninety (90) days prior written notice to the other party. Notice
         shall be provided by registered mail, return receipt requested, and
         notice shall be deemed to have been provided on the date of mailing.

         (b)      Immediately by mutual consent of the Company and General
         Agent.

         (c)      At any time, by the Company, without prior notice in the event
         of the General Agent declaring bankruptcy or being declared or found
         bankrupt or insolvent, or being the subject of a cease and desist
         order, corrective order, or being placed in, or subject to, a
         proceeding of supervision, conservation, rehabilitation or liquidation.

         (d)      Immediately upon written notice by the Company in the event of
         the cancellation or non-renewal of the General Agent's license, as it
         relates to the business produced in that state, by the New York
         Department of Insurance or other applicable state insurance department.

         (e)      Immediately upon written notice by the General Agent in the
         event any action against the Company is commenced by Texas Department
         of Insurance or other applicable state insurance department pursuant to
         rehabilitation or liquidation. The Company agrees to furnish notice of
         such action immediately to the General Agent.

         (f)      If the General Agent shall fail to make any remittances due
         from the Company to any of the 2004 State National Quota Share
         Reinsurers in accordance with Article 12, Accounts, Remittances and
         Loss Settlements of the 2004 State National Quota Share Reinsurance
         Agreements, then the Company may at its sole discretion cancel this
         contract by giving the General Agent written notice of cancellation
         served personally or by mail, which shall be effective immediately.

         (g)      If the General Agent shall defraud or attempt to defraud the
         Company; or any policyholder, then the Company may at its sole
         discretion cancel this contract by giving the General Agent written
         notice of cancellation served personally or by mail, which shall be
         effective immediately.

         (h)      As provided in Section 8.11 of this Agreement.

         (i)      Automatically and immediately, without notice, upon the
         cancellation or termination of the 2004 State National Quota Share
         Reinsurance Agreements, including any special termination invoked by
         any of the 2004 State National Quota Share Reinsurers pursuant to
         Article 14, Special Termination of the 2004 State National Quota Share
         Reinsurance Agreements.

         (j)      If the Reinsurer's A.M. Best rating drops below a "B+" then
         the Company may at its sole discretion cancel this contract by giving
         the General Agent written notice of cancellation served personally or
         by mail, which shall be effective immediately.

         (k)      In the event of a reduction of more than 20% (twenty percent)
         of the Reinsurer's statutory surplus from the Reinsurer's Statutory
         Surplus Level at December 31, 2003 then the Company may at its sole
         discretion cancel this contract by giving the General Agent

                                       12
<PAGE>

         written notice of cancellation served personally or by mail, which
         shall be effective immediately.

         (l)      If there is a change in the office of President or CEO of the
         Reinsurer then the Company may at its sole discretion cancel this
         contract by giving the General Agent written notice of cancellation
         served personally or by mail, which shall be effective immediately.

         (m)      In the event of the Insolvency, Rehabilitation, or Regulatory
         Supervision of the Reinsurer then the Company may at its sole
         discretion cancel this contract by giving the General Agent written
         notice of cancellation served personally or by mail, which shall be
         effective immediately.

         (n)      If the Reinsurer ceases underwriting new property and casualty
         business then the Company may at its sole discretion cancel this
         contract by giving the General Agent written notice of cancellation
         served personally or by mail, which shall be effective immediately.

         (o)      If the Reinsurer sells 50% or more of its assets or reinsures
         50% or more of its Net Written Premium or net liabilities (all as of
         January 1, 2004) to an unaffiliated third party then the Company may at
         its sole discretion cancel this contract by giving the General Agent
         written notice of cancellation served personally or by mail, which
         shall be effective immediately.

         (p)      If an insurance regulatory authority or governmental entity in
         any United States jurisdiction revokes, suspends or forces the
         Reinsurer to withdraw its certificate of authority in such jurisdiction
         then the Company may at its sole discretion cancel this contract by
         giving the General Agent written notice of cancellation served
         personally or by mail, which shall be effective immediately.

6.02     This Agreement shall automatically become renewed from year to year
upon the renewal of the license or certificate of authority granted to the
Company by the New York Department of Insurance and other applicable state
insurance department, provided this Agreement shall not be otherwise canceled.

6.03     It is expressly agreed and understood that nothing in this Article VI
authorizes the General Agent to write any new business under this Agreement
should the 2004 State National Quota Share Reinsurance Agreements terminate,
except the business that is required to be renewed or issued because of
applicable law or regulation, as provided in Article 3, A. of the 2004 State
National Quota Share Reinsurance Agreements. The General Agent also agrees, that
upon termination of the 2004 State National Quota Share Reinsurance Agreements,
to terminate and/or non-renew, as soon as allowable under the applicable law
and/or regulation, all business written under this Agreement.

6.04     The Company shall have no liability to the General Agent by virtue of
the Company's termination of this Agreement as set forth in this Article; it
being expressly understood that partial consideration for the Company's grant of
agency authority to the General Agent is the General Agent's promise that the
Company shall not be responsible for any damages which might arise by virtue of
any termination of this Agreement.

6.05     In the event of termination of this Agreement, after the General Agent
having promptly accounted for and paid over premiums for which it may be liable,
the General Agent's records,

                                       13
<PAGE>

use and control of expirations shall remain the property of the General Agent
and left in its undisputed possession.

6.06     In the event that this Agreement is terminated, the General Agent, for
no additional fee, shall have the authority (unless revoked by the Company at
its sole discretion in which case the Reinsurer shall appoint a successor at no
cost to the Company) as provided in this Agreement to continue to perform all of
its duties under this Agreement on the remaining policies during the run-off
period. The General Agent's duties during the run-off period shall include
handling and servicing of all policies through their natural expiration,
together with any policy renewals required to be made by the provisions of
applicable law, whether or not the effective date of such renewal is subsequent
to the effective date of cancellation of this Agreement. Further, upon
termination of this Agreement, the General Agent shall not be relieved of or
released from any obligation created by or under this Agreement in relation to
payment, expenses, reports, accounting or handling, which relate to the
outstanding insurance business under this Agreement existing on the date of such
termination. The Company and the General Agent will cooperate in handling all
such business until the business has expired either by cancellation or by the
terms of the policies and all outstanding losses and loss adjustment expenses
have been settled.

6.07     As the 2004 Excess of Liability Reinsurance Agreement provides for
termination on a run-off basis, the relevant provisions of this Agreement shall
apply to business being run-off. It is also expressly agreed that the terms,
conditions and obligations of the Preamble and Articles II, IV and V, Sections
6.04, 6.05, 6.06, 6.07 and 6.08, Article VII, Section 8.11 and Article IX herein
shall survive termination of this Agreement.

6.08     The Company may suspend the authority of the General Agent during the
pendency of any dispute regarding any event of default by the General Agent.

                                  ARTICLE VII
                        HOLD HARMLESS AND INDEMNIFICATION

         The General Agent agrees to and does hereby indemnify and hold the
Company harmless from and against any and all actions, causes of actions, suits,
arbitrations, or proceedings of any kind, liabilities, losses, claims, damages,
costs, or expenses (including attorneys' fees and expenses), incurred by the
Company by reason of, arising out of, or relating in any way to this Agreement
or any action taken or inaction by the General Agent. In addition, if the
Reinsurer does not indemnify and hold the Company harmless as required by the
Reinsurance Agreements, the General Agent shall fulfill the obligations of the
Reinsurer and make the payments required pursuant to the Reinsurance Agreements.

                                  ARTICLE VIII
                                  MISCELLANEOUS

8.01     This Agreement has been made and entered into in the State of Texas and
shall be governed by and construed in accordance with the laws of the State of
Texas.

8.02     This Agreement is not exclusive and the Company reserves the right to
appoint other agents in the territory covered by this Agreement and the General
Agent reserves the right to act as General Agent for other insurers or
reinsurers.

                                       14
<PAGE>

8.03     This Agreement shall be binding upon the parties hereto, together with
their respective successors and permitted assigns.

8.04     The Company shall have no right of control over the General Agent as to
time, means or manner of the General Agent's conduct within the terms of the
Agreement and the Reinsurance Agreements and the authority herein granted and
nothing herein is intended or shall be deemed to constitute the General Agent an
employee or servant of the Company. The General Agent shall at all times be an
independent contractor.

8.05     This Agreement shall be deemed performable at the Company's
administrative office in Fort Worth, Texas, and it is agreed that the venue of
any controversy arising out of this Agreement, or for the breach thereof, shall
be in Tarrant County, Texas.

8.06     The General Agent shall not assign any of its rights or obligations
under this Agreement without the prior written consent of the Company. No verbal
modification will be recognized by any party hereto and this Agreement cannot be
modified by any subsequent practices or course of dealing by the parties
inconsistent herewith. If the Company or the General Agent shall fail to take
advantage of a breach, if any, by another party of the terms, conditions,
covenants, or any of them herein contained, such failure shall not be deemed to
constitute, or be construed as, a waiver of any rights on the part of the
General Agent or Company to thereafter enforce any of the said terms, conditions
or covenants.

8.07     This Agreement may be amended, modified or supplemented only by a
written instrument executed by all parties hereto. All such amendments or
changes shall specify the effective date of such amendments or changes.

8.08     This Agreement supersedes any and all provisions, terms and/or
conditions of any other general agency agreements, whether oral or written, by
between and among the parties with respect to the subject matter hereof.

8.09     The General Agent shall notify the Company in writing within thirty
(30) days when there is a change in the ownership of 10% or more of the
outstanding stock in the General Agent or when there is any change in the
General Agent's principal officers or directors.

8.10     The General Agent shall not offset balances due under this Agreement
against balances due or owing under any other contract.

8.11     This Agreement shall be interpreted in conformance with applicable
Texas law and regulation. If it is found or ordered by a court or regulatory
body that any provision or term of this Agreement does not conform to such law
or regulation then this Agreement shall be deemed to be amended, and modified to
be in accordance with such law. However, where this Agreement is found not to
comply with applicable law or regulations, the Company may in its sole
discretion terminate this Agreement immediately and without prior notice.

                                   ARTICLE IX
                                  ARBITRATION

9.01     As a condition precedent to any right of action hereunder, in the event
of any dispute or difference of opinion hereafter arising between the Company,
on the one hand, and the General

                                       15
<PAGE>

Agent, on the other hand, with respect to this Agreement or with respect to the
General Agent's and/or the Company's obligations hereunder, it is hereby
mutually agreed that such dispute or difference of opinion shall be submitted to
arbitration.

9.02     The Company shall choose one arbiter (an "Arbiter") and the General
Agent shall choose one Arbiter. An umpire (an "Umpire") shall be chosen by the
two Arbiters, all of whom shall be active or retired disinterested executive
officers of property and casualty insurance or reinsurance companies.

9.03     Both the General Agent and the Company shall choose an Arbiter within
30 days following a written request by one party to the other to name an
Arbiter. In the event either the Company or the General Agent fails to choose an
Arbiter within this time period, the party who has chosen its Arbiter may choose
the unchosen Arbiter. Thereafter, the Arbiters shall choose an Umpire before
entering upon arbitration. If the Arbiters fail to agree upon the selection for
the Umpire within 30 days following their appointment, each Arbiter shall name
three nominees, of whom the other shall decline two and the decision shall be
made by drawing lots.

9.04     Each side shall present its case to the Arbiters and Umpire, in a
hearing in Dallas, Texas. The Arbiters and Umpire shall consider this Agreement
as an honorable engagement, as well as a legal obligation, and they are relieved
of all judicial formalities and may abstain from following the strict rules of
law regarding entering of evidence. The decision in writing by a majority of the
Arbiters and Umpire when filed with the Company and the General Agent shall be
final and binding. Judgment upon the final decision of the Arbiters and Umpire
may be entered in any court of competent jurisdiction.

9.05     In the event of a dispute between the Company and the General Agent
concerning this Agreement and the Quota Share Reinsurance Agreement between the
Company and the Reinsurer, regardless of whether either party has claims against
the Reinsurer, the entire dispute between the Company and the General Agent
shall be subject to arbitration as provided under this Article IX.

9.06     The costs of the arbitration, including the fees of the Arbiters and
the Umpire, shall be borne equally by the sides unless the Arbiters and Umpire
shall decide otherwise.

9.07     This Agreement shall be interpreted under the laws of Texas and the
arbitration shall be governed by the Texas Arbitration Code.

                                   ARTICLE X
                                    PRIVACY

10.01    The General Agent shall provide to each new policyholder, prior to or
upon the issuance of any Policies written under this Agreement, and in
accordance with applicable state and federal laws, an initial notice of the
Company's privacy policies and practices. Not less than annually thereafter, the
General Agent, upon the request of the Company, distribute a copy of the
Company's annual privacy notice, as may be amended from time to time, to each
existing policyholder. In addition, the General Agent shall, upon the request of
the Company, distribute revised privacy notices and opt-out notices as
applicable to each policyholder to reflect any revisions which may be made to
the Company's privacy policies and practices. In each case, the Company shall be
responsible for providing the Agency with a copy of the form for its privacy
policies and practices notice,

                                       16
<PAGE>

which forms the General Agent shall use to create and deliver the notices
described herein, at the Agency's sole cost and expense. These notices shall be
created and delivered independent of any separate legal obligation the General
Agent may have to create and deliver its own such notices.

10.02    The General Agent shall not disclose or use any nonpublic personal
financial information or nonpublic personal health information related to any
policyholder, or to any consumer or customer (as such terms are defined under
applicable state and federal privacy laws), except as necessary to carry out its
duties and obligations under this Agreement or as otherwise permitted under
applicable state or federal law.

10.03    The General Agent shall develop and implement, in accordance with
applicable state and federal laws, a comprehensive written information security
program designed to (i) ensure the security and confidentiality of nonpublic
personal financial information and nonpublic personal health information related
to any policyholder, or to any consumer or customer (as such terms are defined
under applicable state and federal privacy laws), (ii) protect against any
anticipated threats or hazards to the security or integrity of such information,
and (iii) protect against unauthorized access to or use of such information that
could result in substantial harm or inconvenience to any customer.

                                       17
<PAGE>

         IN WITNESS WHEREOF, the Parties hereto by their respective duly
authorized representatives have executed this Agreement as of the date first
above written.

STATE NATIONAL INSURANCE COMPANY, INC.

BY:  /s/
   -------------------------------------------------------

ITS:   President
    ------------------------------------------------------

DATE:   3/11/04
     -----------------------------------------------------

TOWER RISK MANAGEMENT CORP.

BY:  /s/
   -------------------------------------------------------

ITS:   Vice President
    ------------------------------------------------------

DATE:   March 4, 2004
     -----------------------------------------------------

TOWER INSURANCE COMPANY OF NEW YORK

BY:   /s/
   -------------------------------------------------------

ITS:   Vice President
    ------------------------------------------------------

DATE:  March 4, 2004
     -----------------------------------------------------

                                       18

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00068-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00068-of-00352.parquet"}]]