Document:

<PAGE>
                                                                   Exhibit 10.13

                                FOURTH AMENDMENT
                                       TO
                 SEVENTH AMENDED AND RESTATED SECURITY AGREEMENT

         THIS FOURTH AMENDMENT TO SEVENTH AMENDED AND RESTATED SECURITY
AGREEMENT (the "Amendment") made and entered into as of the 26th day of
November, 2003, by and between DIRECT GENERAL FINANCIAL SERVICES, INC., a
Tennessee corporation whose address is 1281 Murfreesboro Road, Nashville,
Tennessee 37217 (f/k/a Direct Financial Services, Inc.) ("Grantor"), and FIRST
TENNESSEE BANK NATIONAL ASSOCIATION, whose address is 165 Madison Avenue,
Memphis, Tennessee 38103, Attention: Metropolitan Division (in its agency
capacity being herein referred to as "Agent," and in its individual capacity as
"FTBNA"), as agent for itself, and for HIBERNIA NATIONAL BANK, Baton Rouge,
Louisiana ("Hibernia"), and for U. S. BANK NATIONAL ASSOCIATION, St. Louis,
Missouri ("U. S. Bank"), and for REGIONS BANK, Birmingham, Alabama ("Regions"),
and for CAROLINA FIRST BANK, Greenville, South Carolina ("Carolina First"), and
for BANK ONE, NA (Main Office -- Chicago, Illinois), Baton Rouge, Louisiana
("Bank One"), and for NATIONAL CITY BANK OF KENTUCKY, Louisville, Kentucky
("National City Bank"), and for FIFTH THIRD BANK, Franklin, Tennessee ("Fifth
Third") (Agent, Hibernia, U. S. Bank, Regions, Carolina First, National City
Bank, Fifth Third, and Bank One collectively, the "Banks," and each
individually, a "Bank"), pursuant to the Eighth Amended and Restated Loan
Agreement dated as of October 31, 2002, as amended (the "Loan Agreement") among
Grantor, Banks and the other parties named therein.

                                Recitals of Fact

         Pursuant to that certain Seventh Amended and Restated Security
Agreement dated as of October 31, 2002, as amended by that certain First
Amendment to Seventh Amended and Restated Security Agreement dated as of March
31, 2003, as amended by that certain Second Amendment to Seventh Amended and
Restated Security Agreement dated as of May 28, 2003, and as amended by that
certain Third Amendment to the Seventh Amended and Restated Security Agreement
dated as of June 30, 2003 (as amended, the "Security Agreement"), between
Grantor and the Banks, Grantor assigned and pledged Receivables (as defined in
the Loan Agreement) and other contractual rights to the Agent for the benefit of
the Banks as collateral security for all of the Obligations (as defined in the
Security Agreement) of Grantor to the Banks.

         The Grantor and the Banks now desire to modify certain terms of the
Security Agreement as hereinafter set forth.

         NOW, THEREFORE, in consideration of the premises as set forth in the
Recitals of Fact, the mutual covenants and agreements hereinafter set out, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, it is agreed by the parties as follows:

                                   Agreements

         1.       All capitalized terms used and not defined herein shall have
the meaning ascribed to them in the Loan Agreement.

         2.       To induce the Banks to enter into this Amendment, the Grantor
does hereby absolutely and unconditionally, certify, represent and warrant to
the Banks, and covenants and agrees with the Banks, that:

                  (a)      All representations and warranties made by the
         Grantor in the Loan Agreement, as amended, in the Security Agreement,
         as amended, and in all other loan documents (all of which are herein
         sometimes called the "Loan Documents"), are true, correct and complete
         in all material respects as of the date of this Amendment.
<PAGE>

                  (b)      As of the date hereof and with the execution of this
         Amendment, there are no existing events, circumstances or conditions
         which constitute, or would, with the giving of notice, lapse of time,
         or both, constitute Events of Default.

                  (c)      There are no existing offsets, defenses or
         counterclaims to the obligations of the Grantor, as set forth in the
         Notes, the Security Agreement, the Loan Agreement, as amended, or in
         any other Loan Document executed by the Grantor, in connection with the
         Loan.

                  (d)      The Grantor does not have any existing claim for
         damages against the Banks arising out of or related to the Loan; and,
         if and to the extent (if any) that the Grantor has or may have any such
         existing claim (whether known or unknown), the Grantor does hereby
         forever release and discharge, in all respects, the Banks with respect
         to such claim.

                  (e)      The Loan Documents, as amended by this Amendment, are
         valid, genuine, enforceable in accordance with their respective terms,
         and in full force and effect.

         3.       Section 2(a) of the Security Agreement, is hereby deleted in
its entirety and the following is inserted in lieu thereof:

                  (a)      The full and prompt payment, when due, of the
         indebtedness (and interest thereon) evidenced and to be evidenced by
         those certain promissory notes,

                           (i)      dated as of November 26, 2003, in the
                                    principal sum of Forty Million Dollars
                                    ($40,000,000.00), executed by Grantor and
                                    payable to the order of First Tennessee Bank
                                    National Association;

                           (ii)     dated as of November 26, 2003, in the
                                    principal sum of Twenty Million Dollars
                                    ($20,000,000.00), executed by Grantor and
                                    payable to the order of Hibernia;

                           (iii)    dated as of November 26, 2003, in the
                                    principal sum of Thirty Million Dollars
                                    ($30,000,000.00), executed by Grantor and
                                    payable to the order of U. S. Bank;

                           (iv)     dated as of November 26, 2003, in the
                                    principal sum of Twenty-Five Million Dollars
                                    ($25,000,000.00), executed by Grantor and
                                    payable to the order of Regions;

                           (v)      dated as of November 26, 2003, in the
                                    principal sum of Fifteen Million Dollars
                                    ($15,000,000.00), executed by Grantor and
                                    payable to the order of Carolina First;

                           (vi)     dated as of November 26, 2003, in the
                                    principal sum of Fifteen Million Dollars
                                    ($15,000,000.00), executed by Grantor and
                                    payable to the order of National City Bank;

                           (vii)    dated as of November 26, 2003, in the
                                    principal sum of Ten Million Dollars
                                    ($10,000,000.00), executed by Grantor and
                                    payable to the order of Fifth Third; and

                           (viii)   dated as of November 26, 2003, in the
                                    principal sum of Thirty-Five Million Dollars
                                    ($35,000,000.00), executed by Grantor and
                                    payable to the order of Bank One,

                                       2
<PAGE>

         together with and any and all renewals, modifications, and extensions
         of any of said notes, in whole or in part; and

         4.       All terms and provisions of the Security Agreement, as
heretofore amended, which are inconsistent with the provisions of this Amendment
are hereby modified and amended to conform hereto; and, as so modified and
amended, the Security Agreement is hereby ratified, approved and confirmed.
Except as otherwise may be expressly provided herein, this Amendment shall
become effective as of the date set forth in the initial paragraph hereof.

         5.       All references in all Loan Documents (including, but not
limited to, the Notes, the Security Agreement, and the Loan Agreement) to the
"Security Agreement" shall, except as the context may otherwise require, be
deemed to constitute references to the Security Agreement as amended hereby.

                        [SEPARATE SIGNATURE PAGES FOLLOW]

                                       3
<PAGE>

                                 SIGNATURE PAGE
                                       TO
       FOURTH AMENDMENT TO SEVENTH AMENDED AND RESTATED SECURITY AGREEMENT

================================================================================

         IN WITNESS WHEREOF, the Grantor, the Banks and the Agent have caused
this Agreement to be executed by their duly authorized officers, all as of the
day and year first above written.

                                  GRANTOR:

                                  DIRECT GENERAL FINANCIAL SERVICES, INC.,
                                  a Tennessee corporation

                                  By:  /s/ Brian G. Moore
                                     -----------------------------------------
                                  Title:  President
                                        --------------------------------------

                                  BANKS:

                                  FIRST TENNESSEE BANK NATIONAL ASSOCIATION

                                  By:  /s/ Sam Jenkins
                                     -----------------------------------------
                                  Title:  SVP
                                        --------------------------------------

                                  HIBERNIA NATIONAL BANK

                                  By:  /s/ Janet Olson Rack
                                     -----------------------------------------
                                  Title:  Senior Vice President
                                        --------------------------------------

                                  U. S. BANK NATIONAL ASSOCIATION

                                  By:  /s/ Russell S. Rogers
                                     -----------------------------------------
                                  Title:  Vice President
                                        --------------------------------------

                                  CAROLINA FIRST BANK

                                  By:  /s/ Charles Chamberlin
                                     -----------------------------------------
                                  Title:  Executive Vice President
                                        --------------------------------------

                           [SIGNATURE PAGE CONTINUED]

<PAGE>

                                  BANKS (continued):

                                  BANK ONE, NA
                                  (MAIN OFFICE - CHICAGO, ILLINOIS)

                                  By:  /s/ Robert D. Bond
                                     -----------------------------------------
                                  Title:  First Vice President
                                        --------------------------------------

                                  REGIONS BANK

                                  By:  /s/ Sam Prudhomme
                                     -----------------------------------------
                                  Title:  Assistant Vice President
                                        --------------------------------------

                                  NATIONAL CITY BANK OF KENTUCKY

                                  By:  /s/ Kevin C. Anderson
                                     -----------------------------------------
                                  Title:  SVP
                                        --------------------------------------

                                  FIFTH THIRD BANK

                                  By:  /s/ David Hicks
                                     -----------------------------------------
                                  Title:  VP
                                        --------------------------------------

                                  AGENT:

                                  FIRST TENNESSEE BANK NATIONAL ASSOCIATION

                                  By:  /s/ Sam Jenkins
                                     -----------------------------------------
                                  Title:  SVP
                                        --------------------------------------

                                      S-2<PAGE>

                                                                   EXHIBIT 10.23

                                                 Guy Carpenter & Company, Inc.
GUY CARPENTER                                    Centennial Lakes, Suite 400
                                                 3600 Minnesota Drive
                                                 Edina, MN  55435
                                                 952 920 3300  Fax 952 920 9382

Cover Note

                                           File #: 8958-00-0017-00
                                           Effective Date: January 1, 2004
                                           Issue Date:

COMPANY:

         Direct General Group
         Rock Hill, South Carolina
         including Direct Insurance Company, Direct General Insurance Company,
         Direct General Insurance Company of Louisiana, Direct General Insurance
         Company of Mississippi, and/or any other companies that are now or may
         hereafter become members of the Direct General Group (hereinafter
         referred to collectively as the "Company").

TYPE:

         Private Passenger Automobile Quota Share

COVER:

         A.       Subject to the limits hereof, the Company will cede, and the
                  Reinsurer will accept as reinsurance, the percentage share set
                  forth below (the "Quota Share Percentage") of the Company's
                  Loss arising from its Net Retained Liability for all business
                  reinsured hereunder:

                  1.       As respects Direct General Insurance Company, 20%;

                  2.       As respects Direct Insurance Company, 20%;

                  3.       As respects Direct General Insurance Company of
                           Mississippi, 20%;

                  4.       As respects Direct General Insurance Company of
                           Louisiana, 20%.

                  The Company shall have the option to adjust the Quota Share
                  Percentage as respects each individually named reinsured
                  company hereunder, effective on the first day of any calendar
                  quarter, by giving the Reinsurer notice on or before the first
                  day of such calendar quarter. The Company shall have the
                  option to adjust the Quota Share Percentage, as respects each
                  individually named reinsured company, to any percentage from
                  0% through 40%; however, the total cession shall not be less
                  than 10%, nor shall it exceed 30%, for all named reinsured
                  companies combined, as respects Policies with new or renewal
                  Policy periods effective during any one Contract Year.

<PAGE>

GUY CARPENTER                              Page: 2 of 45
                                           File #: 8958-00-0017-00
                                           Effective Date: January 1, 2004
                                           Issue Date:

         B.       The ceded premium for the treaty year shall not be less than
                  $50,000,000.

         C.       In the event the Incurred Loss Ratio exceeds the Loss
                  Corridor, Reinsurer may elect to have the Company recalculate
                  the Incurred Loss Ratio based upon subject business as defined
                  by the following parameters, in the order indicated below:

                  1.       The Loss Ratio will be calculated as though the
                           cession were made evenly throughout the year.

                  2.       The Loss Ratio will be calculated as though the
                           cessions were made evenly among named reinsured
                           member companies of the Direct General Group (Direct
                           Insurance Company, Direct General Insurance Company,
                           Direct General Insurance Company of Mississippi and
                           Direct General Insurance Company of Louisiana).

                  3.       The maximum ceded premium from the state of Florida
                           will be 55% of the overall cession.

EFFECTIVE:

         To take effect 12:01 a.m. (Central Standard Time), January 1, 2004, and
         shall continue in force until terminated as per the Cancellation
         Article.

ACCOUNT BASIS:

         Underwriting Year.

CANCELLATION:

         In the event this Agreement is terminated under Paragraphs A, B or C
         (below), the Company will have the sole option to elect termination on
         either a run-off or cut-off basis. In the event cut-off of the in-force
         business is elected, Reinsurer shall return the unearned Ceded Premium,
         net of Ceding Commission, minus the net unpaid Ceded Premium and it
         shall not be liable for losses occurring after the effective date of
         cancellation.

         A.       This Agreement may be terminated by either party at 12:01
                  a.m., Central Standard Time, on January 1, 2005, or any
                  January 1 thereafter by giving to the other party not less
                  than Ninety (90) days notice by certified or registered mail,
                  return receipt requested.

<PAGE>

GUY CARPENTER                              Page: 3 of 45
                                           File #:8958-00-0017-00
                                           Effective Date: January 1, 2004
                                           Issue Date:

         B.       This Agreement may be terminated by the Reinsurer at 12:01
                  a.m., Central Standard Time, on July 1, 2004, or any July 1
                  thereafter by giving to the Company not less than Thirty (30)
                  days notice by certified or registered mail, return receipt
                  requested.

         C.       Either party to this Agreement shall also have the right to
                  cancel this Agreement immediately by giving written notice to
                  the other party by certified or registered mail in the event
                  that one party:

                  1.       Has its financial condition impaired by a reduction
                           of consolidated statutory policyholders surplus to a
                           level below $40,000,000. Determination is made based
                           upon the consolidated statutory policyholders surplus
                           at the end of every calendar quarter.

                  2.       Becomes insolvent, files a petition in bankruptcy,
                           goes into liquidation, enters voluntary supervision,
                           enters rehabilitation or has a receiver appointed.
                           The party shall immediately notify the other party of
                           any regulatory involvement.

                  3.       The Company's Risk Based Capital ratio is reduced
                           below 250% on a consolidated basis, or any member
                           Company's Risk Based Capital ratio is reduced below
                           200%. This calculation will be provided by the
                           Company at the end of each calendar quarter.

                  4.       If the Company files for overall countrywide rate
                           changes (increases and decreases) which effect
                           greater than a 5.0% weighted average rate reduction
                           on the current Agreement Year without obtaining
                           Reinsurer approval in advance at the quarterly
                           actuarial meeting.

         Notwithstanding Articles A and B above, in the event the Company is
         more than 30 days delinquent with its monthly reports and/or
         remittances, the Reinsurer may tender written notice of cancellation.
         Following receipt of such notice, the Company will have 15 working days
         to bring the account current, otherwise this Agreement will be
         terminated on a cut-off basis, effective as of the date through which
         the most recent monthly report and remittance provided subject premium.

TERRITORY:

         This Agreement shall cover wherever the Company's original policies
         cover but is limited to Losses occurring on policies issued to insureds
         located in the United States of America and its territories and
         possessions.

<PAGE>

GUY CARPENTER                              Page: 4 of 45
                                           File #: 8958-00-0017-00
                                           Effective Date: January 1, 2004
                                           Issue Date:

EXCLUSIONS:

         As attached.

PREMIUM CAP:

         A.       As respects the first Agreement Year, the Company's Gross Net
                  Written Premium for Policies subject to this Agreement shall
                  not exceed the Premium Cap of $600,000,000 for all states.

                  If any Premium Cap is exceeded, or is projected by the Company
                  to be exceeded, during the Agreement Year, Reinsurer will have
                  the right to waive the Premium Cap, or to invoke the following
                  option, within 30 days of the date which written notice is
                  given to the Reinsurer that the Premium Cap is exceeded or
                  projected to be exceeded:

                  Reduce the quota share percentage under this Agreement, as
                  respects the business for which the Premium Cap was exceeded,
                  to the proportion that the Quota Share ceded premium within
                  the Premium Cap bears to the total Gross Net Written Premium
                  under this Agreement.

                  Failure to make an election within 30 days will constitute
                  waiver of the Premium Cap.

         B.       Business from the state of Texas shall contribute no more than
                  12.5% of the overall cession, and business from the states of
                  Virginia and Missouri combined shall contribute no more than
                  3.5% of the overall cession.

BUSINESS REINSURED:

         This Contract is to share with the Reinsurer the interests and
         liabilities of the Company's Loss and Loss Adjustment Expenses on its
         Net Retained Liability under all policies, endorsements, and/or other
         evidences of liability for Private Passenger Automobile Physical Damage
         and Liability business written or renewed by the Company, or on its
         behalf by State National Specialty Insurance Company of Fort Worth,
         Texas, or Old American County Mutual Insurance Company of Dallas,
         Texas, in the States of Arkansas, Florida, Georgia, Kentucky,
         Louisiana, Mississippi, Missouri, North Carolina, South Carolina,
         Texas, Tennessee, and Virginia during the Agreement Year (hereinafter
         referred to as "policy(ies)"), subject to the terms and conditions
         herein contained.

<PAGE>

GUY CARPENTER                              Page: 5 of 45
                                           File #: 8958-00-0017-00
                                           Effective Date: January 1, 2004
                                           Issue Date:

LOSS LIMIT:

         For purposes of determining the liability of the Reinsurer, the limits
         of liability of the Company for Loss with respect to any one policy
         shall be deemed not to exceed the greater of the minimum statutory
         limits in the applicable state in which the Company is licensed, or the
         following:

<TABLE>
<S>                                                                            <C>
Automobile Bodily Injury Liability                                             $10,000 per person/
                                                                               $20,000 per occurrence

        Property Damage Liability                                              $5,000 per occurrence

Uninsured/Underinsured Motorists                                               $10,000 per person/
     Bodily Injury Liability                                                   $20,000 per occurrence

Uninsured/Underinsured Motorists
     Property Damage Liability                                                 $5,000 per occurrence

Personal Injury Protection                                                     Statutory Coverages

Medical Payments                                                               $10,000 per person
</TABLE>

         These limits of liability are further subject to the following maximum
limits:

<TABLE>
<S>                                                                            <C>
Automobile Physical Damage                                                     $75,000 each vehicle,
                                                                                        or so deemed
</TABLE>

PROPERTY PER OCCURRENCE LIMITATION:

         The Company and the Reinsurer will share, on a pro rata basis, a gross
         maximum property loss of $2,000,000 per occurrence.

LOSS AND LOSS ADJUSTMENT EXPENSES:

         Subject to the terms and conditions of this Agreement, any Loss
         settlement made by the Company within the terms and conditions of the
         policy shall be unconditionally binding upon the Reinsurer in
         proportion to its participation, and the Reinsurer shall benefit
         proportionally in all salvages and recoveries.

         As an allowance for Loss Adjustment Expense (including declaratory
         judgment expenses), the Reinsurer shall be liable for an amount equal
         to 6% of the ceded Gross

<PAGE>

GUY CARPENTER                              Page: 6 of 45
                                           File #:8958-00-0017-00
                                           Effective Date: January 1, 2004
                                           Issue Date:

         Net Earned Premium hereunder. The Reinsurer shall also reimburse the
         Company for a pro rata share of any outside legal expenses incurred,
         but the Reinsurer's liability for such expenses under this Agreement
         shall not exceed 2.5% of ceded Gross Net Earned Premium under the
         Agreement. Total allowance for Loss Adjustment Expense and outside
         legal expenses incurred will not exceed 8.5% of ceded Gross Net Earned
         Premium under the Agreement.

LOSS CORRIDOR:

         As respects policies attaching during the Agreement Year, the Company
         shall retain, under this Agreement, 100% of Losses Incurred above a
         Loss Ratio of 80.5%. The Company will remain liable for such Losses
         Incurred unless the Loss Ratio exceeds 89.5%, at which point the
         Reinsurer's liability will resume (based on its pro rata share) for any
         Losses Incurred in excess of an 89.5% Loss Ratio. Said additional
         retention is called the "Loss Corridor." The Loss Corridor is not
         subject to any effect from a deficit carryforward.

LOSS RATIO CAP:

         Reinsurers' liability for further Losses on the Agreement Year will
         cease in the event the Loss Ratio for the Agreement Year exceeds 120%
         that is, Reinsurers' aggregate limit of liability under this Contract
         after application of the Loss Corridor shall be an amount equal to 111%
         of the Ceded Gross Net Earned Premium of the Company after application
         of the Cessions Contract from policies attaching to that Agreement
         Year. The Company will retain all liability for further Losses beyond
         the 120% Loss Ratio Cap.

REINSURANCE PREMIUM:

         Company will pay Reinsurer the quota share percentage of the Gross Net
         Written Premium.

PROVISIONAL CEDING COMMISSION:

         Reinsurer will allow the Company a provisional ceding commission of
         19.75% of the Ceded Gross Net Written Premium remitted to the Reinsurer
         as per item A.1. of the Accounts and Remittances Section. On all return
         premiums the Company will return the ceding commission to the
         Reinsurer.

<PAGE>

GUY CARPENTER                              Page: 7 of 45
                                           File #: 8958-00-0017-00
                                           Effective Date: January 1, 2004
                                           Issue Date:

SCOPE OF COMMISSIONS:

         It is expressly agreed that the ceding commission includes provision
         for all acquisition costs, administrative fees, and for all other
         expenses (other than the flat 6% charge and up to an additional 2.5%
         charge for outside legal expense relating to Loss Adjustment Expenses)
         of whatever nature.

ADJUSTMENT OF CEDING COMMISSION:

         The provisional ceding commission will be adjusted in accordance with
         the Companies Incurred Loss experience, in accordance with the schedule
         below:

<TABLE>
<CAPTION>
                                                                INCURRED LOSS RATIO
                            CEDING COMMISSION                   (INCLUDING ALL LAE)            SLIDE
                            -----------------                   -------------------            -----
<S>                         <C>                     <C>         <C>                            <C>
Minimum:                         15.75%             @                  80.5%                    1:1

Provisional:                     19.75%             @                  76.5%                    1:1

Maximum:                         29.75%             @                  66.5%
</TABLE>

         The first calculation of the adjusted ceding commission will take place
         twelve (12) months after the close of the Agreement Year. The Company
         will provide the Reinsurer with a detailed report showing its
         adjustment calculation. In the event funds are due the Company, the
         Reinsurers will remit said funds to the Company when the Company agrees
         to commute the Agreement Year and accept a final commission adjustment
         calculation and remittance.

         Adjustments will continue to be made each January 1st thereafter until
         all Losses and Loss Adjustment Expenses for Agreement Year have been
         closed, at which time a final adjustment will be made.

ACCOUNTS AND REMITTANCES:

         A.       Within 30 days following the end of each month, the Company
                  shall render a net account to the Reinsurer, segregated by
                  Agreement Year. Such account shall contain the following
                  information, summarized by line of business:

                  1.       Ceded Gross Net Earned Premium Income during the
                           month; less,

<PAGE>

GUY CARPENTER                              Page: 8 of 45
                                           File #: 8958-00-0017-00
                                           Effective Date: January 1, 2004
                                           Issue Date:

                  2.       The provisional ceding commission rate (applied to
                           Gross Net Earned Premium remitted) as provided for in
                           this Agreement; less,

                  3.       Loss and Loss Expenses paid on losses ascribed to the
                           Agreement Year (net of Company's cumulative retention
                           under the Loss Corridor for the Agreement Year, if
                           any); plus,

                  4.       Subrogation, salvage, or other recoveries on losses
                           ascribed to the Agreement Year.

                  The Company's cumulative retention of Incurred (Paid) Losses
                  under this Agreement shall equal (i) the quota share retention
                  percentage of the inception-to-date accumulated Gross Net
                  Earned Premium (GNEP) from policies attaching to the Agreement
                  Year; plus (ii) the lesser of a) 9.0% of the inception-to-date
                  accumulated ceded GNEP from policies attaching to the
                  Agreement Year and b) the amount, if any, by which
                  inception-to-date accumulated Incurred (Paid) Losses exceed
                  80.5% of the inception-to-date ceded GNEP from policies
                  attaching to the Agreement Year; plus (iii) the amount, if
                  any, by which inception-to-date accumulated Incurred (Paid)
                  Losses, prior to the application of the Loss Corridor, exceed
                  120.0% of inception-to-date accumulated ceded GNEP from
                  policies attaching to the Agreement Year prior to the
                  application of the Loss Corridor.

                  Any balances (as calculated in Paragraphs A.1. through A.4.
                  above) due to the Reinsurer shall be paid by the Company
                  within 30 days following the end of the month. Any balances
                  due to the Company shall be paid by the Reinsurer as soon as
                  is reasonably practicable after receiving the monthly report,
                  but not to exceed 30 days following receipt of the monthly
                  report.

         B.       Notwithstanding the above, in the event that the Reinsurer has
                  its "Best's" rating lowered below "A-", the Company shall
                  withhold from payment amounts due the Reinsurer hereunder,
                  provided it establishes a Security Fund Agreement (the "Fund")
                  for the payment and/or settlement of amounts due to and from
                  the Reinsurer under this Contract. The Security Fund language
                  is attached. This Fund will be established and the Reinsurer
                  will be responsible for funding the cumulative positive
                  balance for this Agreement Year plus any cumulative positive
                  balances that may be calculated for prior Agreement Years,
                  calculated as follows:

                  1.       Cumulative Ceded Gross Net Earned Premium Income
                           remitted to date for the Agreement Year(s); less

<PAGE>

GUY CARPENTER                              Page: 9 of 45
                                           File #: 8958-00-0017-00
                                           Effective Date: January 1, 2004
                                           Issue Date:

                  2.       The provisional ceding commission rate [as applied to
                           Gross Net Earned Premium remitted to date] as
                           provided for in the Agreement Year(s); less

                  3.       The Reinsurers' Projected Margin for the Agreement
                           Year(s); less

                  4.       Cumulative Loss and Loss Expenses paid on losses
                           ascribed to the Agreement Year(s) [net of Company's
                           cumulative retention under the Loss Corridor and Loss
                           Ratio Cap for the Agreement year(s)], if any; plus

                  5.       Subrogation, salvage, or other recoveries on losses
                           ascribed to the Agreement Year(s).

                  The Company shall be permitted to withdraw from the fund any
                  such payable amounts.

                  In such event, in lieu of the provisions of paragraph A above,
                  the Company shall remit to the Reinsurer only the Reinsurer's
                  Margin, calculated as 3.75% of the Reinsurance Premium due,
                  and the remaining Reinsurance Premium, net of ceding
                  commission, loss and loss expenses paid on losses ascribed to
                  the Agreement Year(s) [net of subrogation, salvage, or other
                  recoveries on losses ascribed to the Agreement Year(s) and the
                  Company's retention under the Loss Corridor and Loss Ratio Cap
                  for the Agreement year(s), if any, shall be deposited in the
                  Fund.

                  Thereafter, in lieu of the provisions of paragraph A above,
                  the Company's monthly report shall show:

                  1.       Ceded Gross Net Earned Premium Income during the
                           month; less

                  2.       The provisional ceding commission rate (applied to
                           Gross Net Earned Premium remitted) as provided for in
                           this Agreement; less,

                  3.       The Reinsurers' Margin of 3.75% of (1) above; less

                  4.       Loss and Loss Expenses paid on losses ascribed to the
                           Agreement year (net of Company's cumulative retention
                           under Loss Corridor for the Agreement year, if any);
                           plus,

                  5.       Subrogation, salvage, or other recoveries on losses
                           ascribed to the Agreement Year.

<PAGE>

GUY CARPENTER                              Page: 10 of 45
                                           File #: 8958-00-0017-00
                                           Effective Date: January 1, 2004
                                           Issue Date:

                  If the net balance is positive, the Company shall deposit that
                  amount in the Fund. The Company shall hold any amounts due the
                  Reinsurer until such time that the Reinsurer's liability for
                  losses ascribed to the Underwriting Year has been commuted, or
                  all losses have been closed or settled for the Underwriting
                  Year.

                  If said balance is negative, the Company shall withdraw such
                  amount from the Fund. To the extent the Fund balance is less
                  than the amount due, the Reinsurer shall remit the amount due
                  promptly upon receipt and verification of the Company's
                  report.

                  In the event that the "Best's" rating of the Reinsurer is
                  raised to a level of "A-" or better, the provisions of
                  paragraph A above shall apply to this Contract, in lieu of the
                  provisions of this paragraph, and the Company shall
                  immediately pay to the Reinsurer the current balance of the
                  Fund and the Fund shall be terminated and all securities
                  therein released to the Company.

         C.       This account will also bear a notation advising of the Gross
                  Net Written Premium, outstanding Loss and Loss Adjustment
                  Expense reserve, summarized by line of business, and the
                  unearned premium reserve at the end of the period, summarized
                  by line of business, segregated by Agreement Year. Should Loss
                  and Loss Adjustment Expense attributable to an ISO
                  catastrophe(s) be involved, the account should bear a notation
                  showing the ISO number(s) and the paid loss and outstanding
                  loss applicable.

         D.       Within 60 days following the end of each annual accounting
                  period, the Company shall furnish to the Reinsurer any other
                  information which the Reinsurer may require for its Annual
                  Convention Statement which may be reasonably available to the
                  Company.

OTHER REINSURANCE:

         The Company is permitted to carry an Excess Cessions reinsurance
         contract, as well as Excess Catastrophe reinsurance, that inures to the
         benefit of this Agreement.

WARRANTIES:

         A.       Company will provide quarterly loss ratio estimates.

         B.       Inuring reinsurance purchases shall deduct the lesser of
                  actual cost and 2% from Gross Net Written Premium.

<PAGE>

GUY CARPENTER                              Page: 11 of 45
                                           File #: 8958-00-0017-00
                                           Effective Date: January 1, 2004
                                           Issue Date:

         C.       The Company will not cede business written in states other
                  than those listed in the BUSINESS REINSURED article.

DEFINITIONS:

         "Loss" shall mean amounts paid or payable by Company for indemnity
         under the policies reinsured under this Agreement.

         "Net Retained Liability" shall mean the Company's gross liability for
         Loss and Loss Adjustment Expense under the Policies, after application
         of any reinsurance which inures to the benefit of this Agreement.

         "Private Passenger Automobile Physical Damage and Liability Business"
         shall mean that business classified as private passenger automobile
         insurance, including liability, physical damage, uninsured/underinsured
         motorists and personal injury protection.

         "Gross Net Written Premium" shall mean the gross written premium income
         on subject business, without any reduction due to bad debts, less
         returns and cancellations and less written premium income paid for
         reinsurances, recoveries under which would inure to the benefit of the
         Agreement subject to the provisions of paragraph B of the WARRANTIES
         Article. Gross Net Written Premium income shall not include premium
         finance income, billing fees and policy fees, collected by the Company
         in connection with business covered hereunder, regardless of whether
         these fees are taxed as premium by the jurisdiction in question.

         "Gross Net Earned Premium" shall mean the earned portion of the ceded
         Gross Net Written Premium.

         "Loss Ratio" shall mean: (a) the Losses Incurred arising from Policies
         with effective or renewal dates during the Contract Year; divided by,
         (b) the Gross Net Earned Premium from policies with effective or
         renewal dates during the Contract Year.

         "Adjusted Loss Ratio" shall mean the Loss Ratio after application of
         the Loss Corridor and IBNR.

         "Losses Incurred" shall mean paid ceded Loss, Loss Adjustment Expense
         and outside legal expense, plus outstanding reserves under this
         Agreement.

         "IBNR" shall mean the amount added to Losses Incurred for purposes of
         determining the Adjusted Loss Ratio for the adjustment of ceding
         commission for each Contract Year. As respects each Contract Year, the
         IBNR factor for the first computation of

<PAGE>

GUY CARPENTER                              Page: 12 of 45
                                           File #: 8958-00-0017-00
                                           Effective Date: January 1, 2004
                                           Issue Date:

         adjusted commission for said Contract Year will be 6% of ceded Auto
         Liability Gross Net Earned Premium (excluding property damage) under
         this Contract. For the second computation, the IBNR factor will be
         reduced to 3% of said premium. IBNR will be eliminated for subsequent
         computations of adjusted commission for said Contract Year.

         "Agreement Year" shall mean the 12-month period beginning 12:01 a.m.,
         Central Standard Time, January 1, 2004, and each subsequent 12-month
         period that this Contract remains in force shall be a separate Contract
         Year. In the event of termination, the final Contract Year shall be
         from the beginning of the then current Contract Year through the date
         of termination.

OTHER PROVISIONS:

         Reinsurers will be subject to the terms, rates, conditions,
         interpretations, waivers, modifications and alterations of Company's
         policies that are subject to this Contract.

         Original Conditions
         Currency

         Letters of Credit (applicable only to reinsurers not qualifying for
              credit for reinsurance by Company) for ceded UEP and outstanding
              Loss plus IBNR. Reinsurer to agree to IBNR calculation, such
              Agreement not to be unreasonably withheld.

         Taxes  (Attached)
         Offset Clause (between parties among all treaties part of Direct's PPA
         program)
         Delay, Omission or Error
         Inspection
         Severability (BRMA 72B)
         Arbitration (Nashville, Tennessee)
         Service of Suit
         Mode of Execution (attached)
         Insolvency
         Entire Agreement (Attached)
         No Third Party Rights (Attached)
         Guy Carpenter & Company, Inc. Intermediary Clause

WORDING:

         To be agreed.

<PAGE>

GUY CARPENTER                              Page: 13 of 45
                                           File #: 8958-00-0017-00
                                           Effective Date: January 1, 2004
                                           Issue Date:

REGULATION 98:

         Premium and Loss payments made to Guy Carpenter & Company, Inc. shall
         be deposited in a Premium and Loss Account in accordance with Section
         32.3(a)(1) of Regulation 98 of the New York Insurance Department. The
         parties hereto consent to withdrawals from said account in accordance
         with Section 32.3(a)(3) of the Regulation, including interest and
         Federal Excise Tax.

<PAGE>

GUY CARPENTER                              Page: 14 of 45
                                           File #: 8958-00-0017-00
                                           Effective Date: January 1, 2004
                                           Issue Date:

EFFECTED WITH:

<TABLE>
<CAPTION>
Reinsurer                              Reference #        FEIN #             NAIC #               Signed %
---------                              -----------        ------             ------               --------
<S>                                    <C>                <C>                <C>                  <C>
TOTAL
</TABLE>

This Cover Note confirms the terms and conditions of the reinsurance negotiated
with the listed reinsurers on your behalf. In the event that any of these
details do not meet with your approval, or the security of the participating
reinsurers does not meet with your requirements, please notify this office
immediately. If all is in order, please sign and return one copy of this Cover
Note to confirm your approval and complete our files.

__________________________________________  ____________________________________
 Robert T. Bleckinger, Managing Director      Joel M. Napgezek, Vice President
      Guy Carpenter & Company, Inc.             Guy Carpenter & Company, Inc.

__________________________________________
                 Date

__________________________________________
          The Direct General Group

__________________________________________
                 Date

<PAGE>

GUY CARPENTER                              Page: 15 of 45
                                           File #: 8958-00-0017-00
                                           Effective Date: January 1, 2004
                                           Issue Date:

                                   EXCLUSIONS

This Contract shall not apply to and specifically excludes the following perils,
risks and classes of business:

1.       As regards interests which at time of Loss or damage are on shore, no
         liability shall attach hereto in respect of any Loss or damage which is
         occasioned by war, invasion, hostilities, acts of foreign enemies,
         civil war, rebellion, insurrection, military or usurped power, or
         martial law or confiscation by order of any government or public
         authority. This War Exclusion Clause shall not, however, apply to
         interests which at time of Loss or damage are within the territorial
         limits of the United States of America (comprising the fifty States of
         the Union, the District of Columbia, and including bridges between the
         U.S.A. and Mexico provided they are under United States ownership),
         Canada, St. Pierre and Miquelon, provided such interests are insured
         under policies, endorsements or binders containing a standard war or
         hostilities or warlike operations exclusion clause.

2.       Business excluded by the following attached Nuclear Incident Exclusion
         Clauses:

         a.       Nuclear Incident Exclusion Clause - Physical Damage -
                  Reinsurance U.S.A.

         b.       Nuclear Incident Exclusion Clause - Liability - Reinsurance -
                  U.S.A.

3.       Pools, Associations, Syndicates, and Guaranty Funds, except Losses from
         Assigned Risk Plans or similar plans are not excluded. It is further
         agreed that business ceded to the North Carolina Reinsurance Facility
         is excluded hereunder.

4.       Reinsurance except for Agency and Intra Group Company Reinsurance,
         except Private Passenger Automobile business assumed under "fronting"
         facilities with State National Specialty Insurance Company and Old
         American County Mutual Insurance Company.

5.       Mortgage Impairment Insurance or other similar covers, however styled.

6.       All liability of the Company arising by contract, operation of law, or
         otherwise, from its participation or membership, whether voluntary or
         involuntary, in any insolvency fund. "Insolvency fund" includes any
         guaranty fund (other than recoupment fees), insolvency fund, plan,
         pool, association, fund or other arrangement, however denominated,
         established or governed, which provides for any assessment of or
         payment or assumption by the Company of part or all of any claim, debt,
         charge, fee or other obligation of an insurer, or its successors or
         assigns, which has been declared by any competent authority to be
         insolvent, or which is otherwise deemed unable to meet any claim, debt,
         charge, fee or other obligation in whole or in part.

<PAGE>

GUY CARPENTER                              Page: 16 of 45
                                           File #: 8958-00-0017-00
                                           Effective Date: January 1, 2004
                                           Issue Date:

7.       Products Liability, Professional Malpractice Liability, Directors' &
         Officers' Liability, Securities and Exchange Commission Liability,
         Workers' Compensation and Employers' Liability.

8.       Loss arising out of the ownership, maintenance or use of any vehicle,
         the principal use of which is:

         (a)      As a public or livery conveyance;

         (b)      Emergency vehicles;

         (c)      Drive yourself motor vehicles available for leasing periods of
                  less than six months;

         (d)      Automobiles used in speed contests and races.

         (e)      Motorcycles.

9.       Commercial Automobile Physical Damage and Liability business.

10.      Accidental Death, Towing and Rental Reimbursement, and Life Insurance
         when written as such.

11.      Coverages written in conjunction with Motor Club Memberships, Accident
         Hospital Indemnity, Vehicle Protection Plans or Travel Protection
         Plans.

12.      Losses arising from seepage and pollution, provided however, that this
         exclusion will not apply, if and when a court invalidates the Company's
         pollution liability exclusion notwithstanding that such liability was
         intended to be excluded from coverage.

13.      Extra contractual obligations and excess policy limits awards.

14.      Automobile Dealers Open Lot Coverage, Garage and Garagekeepers Legal
         Liability, and Vendors Single Interest Coverages.

<PAGE>

GUY CARPENTER                              Page: 17 of 45
                                           File #: 8958-00-0017-00
                                           Effective Date: January 1, 2004
                                           Issue Date:

In the event the Company becomes bound on an excluded risk without its
knowledge, either as a result of an existing insured extending its operations or
through an inadvertent error by an agent, the exclusions hereunder, other than
exclusions 1, 2, 4, 6, 12, and 14 shall be suspended with respect to such
insured risk until 30 days after an underwriting supervisor of the Company
acquires knowledge thereof and until the Company can legally cancel or terminate
its coverage of such risk.

Business which is beyond the terms, conditions or limitations of this Contract
may be submitted to the Reinsurers for special acceptance hereunder and such
business, if accepted by the reinsurers, shall be subject to all of the terms,
conditions and limitations of this contract except as modified by the special
acceptance.

<PAGE>

GUY CARPENTER                              Page: 18 of 45
                                           File #: 8958-00-0017-00
                                           Effective Date: January 1, 2004
                                           Issue Date:

   NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE - REINSURANCE - U.S.A.

1.       This Reinsurance does not cover any Loss or liability accruing to the
         Reassured, directly or indirectly, and whether as Insurer or Reinsurer,
         from any Pool of Insurers or Reinsurers formed for the purpose of
         covering Atomic or Nuclear Energy risks.

2.       Without in any way restricting the operation of paragraph (1) of this
         clause, this Reinsurance does not cover any Loss or liability accruing
         to the Reassured, directly or indirectly and whether as Insurer or
         Reinsurer, from any insurance against Physical Damage (including
         business interruption or consequential Loss arising out of such
         Physical Damage) to:

         I.       Nuclear reactor power plants including all auxiliary property
                  on the site, or

         II.      Any other nuclear reactor installation, including laboratories
                  handling radioactive materials in connection with reactor
                  installations, and "critical facilities" as such, or

         III.     Installations for fabricating complete fuel elements or for
                  processing substantial quantities of "special nuclear
                  material", and for reprocessing, salvaging, chemically
                  separating, storing or disposing of "spent" nuclear fuel or
                  waste materials, or

         IV.      Installations other than those listed in paragraph (2) III
                  above using substantial quantities of radioactive isotopes or
                  other products of nuclear fission.

3.       Without in any way restricting the operations of paragraphs (1) and (2)
         hereof, this Reinsurance does not cover any Loss or liability by
         radioactive contamination accruing to the Reassured, directly or
         indirectly, and whether as Insurer or Reinsurer, from any insurance on
         property which is on the same site as a nuclear reactor power plant or
         other nuclear installation and which normally would be insured
         therewith except that this paragraph (3) shall not operate

         (a)      where Reassured does not have knowledge of such nuclear
                  reactor power plant or nuclear installation, or

         (b)      where said insurance contains a provision excluding coverage
                  for damage to property caused by or resulting from radioactive
                  contamination, however caused. However on and after 1st
                  January 1960 this sub-paragraph (b) shall only apply provided
                  the said radioactive contamination exclusion provision has
                  been approved by the Governmental Authority having
                  jurisdiction thereof.

<PAGE>

GUY CARPENTER                              Page: 19 of 45
                                           File #: 8958-00-0017-00
                                           Effective Date: January 1, 2004
                                           Issue Date:

4.       Without in any way restricting the operations of paragraphs (1), (2)
         and (3) hereof, this Reinsurance does not cover any Loss or liability
         by radioactive contamination accruing to the Reassured, directly or
         indirectly, and whether as Insurer or Reinsurer, when such radioactive
         contamination is a named hazard specifically insured against.

5.       It is understood and agreed that this clause shall not extend to risks
         using radioactive isotopes in any form where the nuclear exposure is
         not considered by the Reassured to be the primary hazard.

6.       The term "special nuclear material" shall have the meaning given it in
         the Atomic Energy Act of 1954 or by any law amendatory thereof.

7.       Reassured to be sole judge of what constitutes:

         (a)      substantial quantities, and

         (b)      the extent of installation, plant or site.

Note: Without in any way restricting the operation of paragraph (1) hereof, it
is understood and agreed that

         (a)      all policies issued by the Reassured on or before 31st
                  December 1957 shall be free from the application of the other
                  provisions of this Clause until expiry date or 31st December
                  1960 whichever first occurs whereupon all the provisions of
                  this Clause shall apply.

         (b)      with respect to any risk located in Canada policies issued by
                  the Reassured on or before 31st December 1958 shall be free
                  from the application of the other provisions of this Clause
                  until expiry date or 31st December 1960 whichever first occurs
                  whereupon all the provisions of this Clause shall apply.

<PAGE>

GUY CARPENTER                              Page: 20 of 45
                                           File #: 8958-00-0017-00
                                           Effective Date: January 1, 2004
                                           Issue Date:

         12/12/57
         NMA 1119

         NOTES:              Wherever used herein the terms:

                             "Reassured"       shall be understood to mean
                                               "Company", "Reinsured",
                                               "Reassured" or whatever other
                                               term is used in the attached
                                               reinsurance document to designate
                                               the reinsured company or
                                               companies.

                             "Agreement"       shall be understood to mean
                                               "Agreement", "Contract", "Policy"
                                               or whatever other term is used to
                                               designate the attached
                                               reinsurance document.

                             "Reinsurers"      shall be understood to mean
                                               "Reinsurers", "Underwriters" or
                                               whatever other term is used in
                                               the attached reinsurance document
                                               to designate the reinsurer or
                                               reinsurers.

<PAGE>

GUY CARPENTER                              Page: 21 of 45
                                           File #: 8958-00-0017-00
                                           Effective Date: January 1, 2004
                                           Issue Date:

      NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY - REINSURANCE - U.S.A.

         (1)      This reinsurance does not cover any Loss or liability accruing
                  to the Reassured as a member of, or subscriber to, any
                  association of insurers or reinsurers formed for the purpose
                  of covering nuclear energy risks or as a direct or indirect
                  reinsurer of any such member, subscriber or association.

         (2)      Without in any way restricting the operation of paragraph (1)
                  of this Clause it is understood and agreed that for all
                  purposes of this reinsurance all the original policies of the
                  Reassured (new, renewal and replacement) of the classes
                  specified in Clause II of this paragraph (2) from the time
                  specified in Clause III in this paragraph (2) shall be deemed
                  to include the following provision (specified as the Limited
                  Exclusion Provision):

                  LIMITED EXCLUSION PROVISION.*

                  I.       It is agreed that the policy does not apply under any
                           liability coverage, to

                                   injury, sickness, disease, death or
                                   destruction

                                   bodily injury or property damage

                           with respect to which an insured under the policy is
                           also an insured under a nuclear energy liability
                           policy issued by Nuclear Energy Liability Insurance
                           Association, Mutual Atomic Energy Liability
                           Underwriters or Nuclear Insurance Association of
                           Canada, or would be an insured under any such policy
                           but for its termination upon exhaustion of its limit
                           of liability.

                  II.      Family Automobile Policies (liability only), Special
                           Automobile Policies (private passenger automobiles,
                           liability only), Farmers Comprehensive Personal
                           Liability Policies (liability only), Comprehensive
                           Personal Liability Policies (liability only) or
                           policies of a similar nature; and the liability
                           portion of combination forms related to the four
                           classes of policies stated above, such as the
                           Comprehensive Dwelling Policy and the applicable
                           types of Homeowners Policies.

                  III.     The inception dates and thereafter of all original
                           policies as described in II above, whether new,
                           renewal or replacement, being policies which either

                           (a)      become effective on or after 1st May, 1960,
                                    or

<PAGE>

GUY CARPENTER                              Page: 22 of 45
                                           File #: 8958-00-0017-00
                                           Effective Date: January 1, 2004
                                           Issue Date:

                           (b)      become effective before that date and
                                    contain the Limited Exclusion Provision set
                                    out above;

                           provided this paragraph (2) shall not be applicable
                           to Family Automobile Policies, Special Automobile
                           Policies, or policies or combination policies of a
                           similar nature, issued by the Reassured on New York
                           risks, until 90 days following approval of the
                           Limited Exclusion Provision by the Governmental
                           Authority having jurisdiction thereof.

         (3)      Except for those classes of policies specified in Clause II of
                  paragraph (2) and without in any way restricting the operation
                  of paragraph (1) of this Clause, it is understood and agreed
                  that for all purposes of this reinsurance the original
                  liability policies of the Reassured (new, renewal and
                  replacement) affording the following coverages:

                           Owners, Landlords and Tenants Liability, Contractual
                           Liability, Elevator Liability, Owners or Contractors
                           (including railroad) Protective Liability,
                           Manufacturers and Contractors Liability, Product
                           Liability, Professional and Malpractice Liability,
                           Storekeepers Liability, Garage Liability, Automobile
                           Liability (including Massachusetts Motor Vehicle or
                           Garage Liability)

                  shall be deemed to include, with respect to such coverages,
                  from the time specified in Clause V of this paragraph (3), the
                  following provision (specified as the Broad Exclusion
                  Provision):

                  BROAD EXCLUSION PROVISION.*

                  It is agreed that the policy does not apply:

                  I.       Under any Liability Coverage, to

                           injury, sickness, disease, death or destruction

                           bodily injury or property damage

                           (a)      with respect to which an insured under the
                                    policy is also an insured under a nuclear
                                    energy liability policy issued by Nuclear
                                    Energy Liability Insurance Association,
                                    Mutual Atomic Energy Liability Underwriters
                                    or Nuclear Insurance Association of Canada,
                                    or would be an insured under any such policy
                                    but for its termination upon exhaustion of
                                    its limit of liability; or

<PAGE>

GUY CARPENTER                              Page: 23 of 45
                                           File #: 8958-00-0017-00
                                           Effective Date: January 1, 2004
                                           Issue Date:

                           (b)      resulting from the hazardous properties of
                                    nuclear material and with respect to which
                                    (1) any person or organization is required
                                    to maintain financial protection pursuant to
                                    the Atomic Energy Act of 1954, or any law
                                    amendatory thereof, or (2) the insured is,
                                    or had this policy not been issued would be,
                                    entitled to indemnity from the United States
                                    of America, or any agency thereof, under any
                                    agreement entered into by the United States
                                    of America, or any agency thereof, with any
                                    person or organization.

                  II.      Under any Medical Payments Coverage, or under any
                           Supplementary Payments Provision relating to

                                    immediate medical or surgical relief

                                    first aid,

                           to expenses incurred with respect to

                                    bodily injury, sickness, disease or death

                                    bodily injury

                           resulting from the hazardous properties of nuclear
                           material and arising out of the operation of a
                           nuclear facility by any person or organization.

                  III.     Under any Liability Coverage, to

                                    injury, sickness, disease, death or
                                    destruction

                                    bodily injury or property damage

                           resulting from the hazardous properties of nuclear
                           material, if

                           (a)      the nuclear material (1) is at any nuclear
                                    facility owned by, or operated by or on
                                    behalf of, an insured or (2) has been
                                    discharged or dispersed therefrom;

                           (b)      the nuclear material is contained in spent
                                    fuel or waste at any time possessed,
                                    handled, used, processed, stored,
                                    transported or disposed of by or on behalf
                                    of an insured; or

                           (c)      the

<PAGE>

GUY CARPENTER                              Page: 24 of 45
                                           File #: 8958-00-0017-00
                                           Effective Date: January 1, 2004
                                           Issue Date:

                                    injury, sickness, disease, death or
                                    destruction

                                    bodily injury or property damage

                           arises out of the furnishing by an insured of
                           services, materials, parts or equipment in connection
                           with the planning, construction, maintenance,
                           operation or use of any nuclear facility, but if such
                           facility is located within the United States of
                           America, its territories or possessions or Canada,
                           this exclusion (c) applies only to

                                    injury to or destruction of property at such
                                    nuclear facility.

                                    property damage to such nuclear facility and
                                    any property thereat.

                  IV.      As used in this endorsement:

                           "HAZARDOUS PROPERTIES" include radioactive, toxic or
                           explosive properties; "NUCLEAR MATERIAL" means source
                           material, special nuclear material or byproduct
                           material; "SOURCE MATERIAL", "SPECIAL NUCLEAR
                           MATERIAL", and "BYPRODUCT MATERIAL" have the meanings
                           given them in the Atomic Energy Act of 1954 or in any
                           law amendatory thereof; "SPENT FUEL" means any fuel
                           element or fuel component, solid or liquid, which has
                           been used or exposed to radiation in a nuclear
                           reactor; "WASTE" means any waste material (1)
                           containing byproduct material other than the tailings
                           or wastes produced by the extraction or concentration
                           of uranium or thorium from any ore processed
                           primarily for its source material content and (2)
                           resulting from the operation by any person or
                           organization of any nuclear facility included under
                           the first two paragraphs of the definition of nuclear
                           facility; "NUCLEAR FACILITY" means

                           (a)      any nuclear reactor,

                           (b)      any equipment or device designed or used for
                                    (1) separating the isotopes of uranium or
                                    plutonium, (2) processing or utilizing spent
                                    fuel, or (3) handling, processing or
                                    packaging waste,

                           (c)      any equipment or device used for the
                                    processing, fabricating or alloying of
                                    special nuclear material if at any time the
                                    total amount of such material in the custody
                                    of the insured at the premises where such
                                    equipment or device is located consists of
                                    or contains more than

<PAGE>

GUY CARPENTER                              Page: 25 of 45
                                           File #: 8958-00-0017-00
                                           Effective Date: January 1, 2004
                                           Issue Date:

                                    25 grams of plutonium or uranium 233 or any
                                    combination thereof, or more than 250 grams
                                    of uranium 235,

                           (d)      any structure, basin, excavation, premises
                                    or place prepared or used for the storage or
                                    disposal of waste,

                           and includes the site on which any of the foregoing
                           is located, all operations conducted on such site and
                           all premises used for such operations; "NUCLEAR
                           REACTOR" means any apparatus designed or used to
                           sustain nuclear fission in a self-supporting chain
                           reaction or to contain a critical mass of fissionable
                           material;

                           With respect to injury to or destruction of property,
                           the word "injury" or "destruction" includes all forms
                           of radioactive contamination of property. "property
                           damage" includes all forms of radioactive
                           contamination of property.

                  V.       The inception dates and thereafter of all original
                           policies affording coverages specified in this
                           paragraph (3), whether new, renewal or replacement,
                           being policies which become effective on or after 1st
                           May, 1960, provided this paragraph (3) shall not be
                           applicable to

                           (i)      Garage and Automobile Policies issued by the
                                    Reassured on New York risks, or

                           (ii)     statutory liability insurance required under
                                    Chapter 90, General Laws of Massachusetts,

                           until 90 days following approval of the Broad
                           Exclusion Provision by the Governmental Authority
                           having jurisdiction thereof.

         (4)      Without in any way restricting the operation of paragraph (1)
                  of this Clause, it is understood and agreed that paragraphs
                  (2) and (3) above are not applicable to original liability
                  policies of the Reassured in Canada and that with respect to
                  such policies this Clause shall be deemed to include the
                  Nuclear Energy Liability Exclusion Provisions adopted by the
                  Canadian Underwriters' Association or the Independent
                  Insurance Conference of Canada.

<PAGE>

GUY CARPENTER                              Page: 26 of 45
                                           File #: 8958-00-0017-00
                                           Effective Date: January 1, 2004
                                           Issue Date:

*NOTE. THE WORDS PRINTED IN ITALICS IN THE LIMITED EXCLUSION PROVISION AND IN
THE BROAD EXCLUSION PROVISION SHALL APPLY ONLY IN RELATION TO ORIGINAL LIABILITY
POLICIES WHICH INCLUDE A LIMITED EXCLUSION PROVISION OR A BROAD EXCLUSION
PROVISION CONTAINING THOSE WORDS.

         NOTES:   Wherever used herein the terms:

                  "Reassured"       shall be understood to mean "Company",
                                    "Reinsured", "Reassured" or whatever other
                                    term is used in the attached reinsurance
                                    document to designate the reinsured company
                                    or companies.

                  "Agreement"       shall be understood to mean "Agreement",
                                    "Contract", "Policy" or whatever other term
                                    is used to designate the attached
                                    reinsurance document.

                  "Reinsurers"      shall be understood to mean "Reinsurers",
                                    "Underwriters" or whatever other term is
                                    used in the attached reinsurance document to
                                    designate the reinsurer or reinsurers.

<PAGE>

GUY CARPENTER                              Page: 27 of 45
                                           File #: 8958-00-0017-00
                                           Effective Date: January 1, 2004
                                           Issue Date:

                                      TAXES

A.       In consideration of the terms under which this Contract is issued, the
         Company undertakes not to claim any deduction of the premium hereon
         when making Canadian tax returns or when making tax returns, other than
         Income or Profits Tax returns, to any state or territory of the United
         States of America or to the District of Columbia.

B.       1.       Each Subscribing Reinsurer has agreed to allow, for the
                  purpose of paying the Federal Excise Tax, 1% of the premium
                  payable hereon to the extent such premium is subject to
                  Federal Excise Tax.

         2.       In the event of any return of premium becoming due hereunder,
                  the Subscribing Reinsurer shall deduct 1% from the amount of
                  the return, and the Company or its agent should take steps to
                  recover the Tax from the U.S. Government.

<PAGE>

GUY CARPENTER                              Page: 28 of 45
                                           File #: 8958-00-0017-00
                                           Effective Date: January 1, 2004
                                           Issue Date:

                                ENTIRE AGREEMENT

This Contract sets forth all of the duties and obligations between the Company
and the Reinsurer and supersedes any and all prior or contemporaneous or written
agreements with respect to matters referred to in this Contract. The Contract
may not be modified, amended or changed except by an agreement in writing signed
by both parties.

<PAGE>

GUY CARPENTER                              Page: 29 of 45
                                           File #: 8958-00-0017-00
                                           Effective Date: January 1, 2004
                                           Issue Date:

                              NO THIRD PARTY RIGHTS

This Contract is solely between the Company and the Reinsurer, and in no
instance shall any insured, claimant or other third party have any rights under
this Contract except as may be expressly provided otherwise herein.

<PAGE>

                                          Security Fund Language

                           REINSURANCE TRUST AGREEMENT

Trust Agreement, dated as of the ___ day of __________________ ("Effective
Date") by and among ___________ Reinsurance Company, a corporation organized
under the laws of the State of ____________ (the "Grantor"), Direct Insurance
Company, an insurance company organized under the laws of the State of
Tennessee, for itself as a Beneficiary and as Agent on behalf of its affiliates,
Direct General Insurance Company, an insurance company organized under the laws
of the State of South Carolina, Direct General Insurance Company of Louisiana,
an insurance company organized under the laws of the State of Louisiana, and
Direct General Insurance Company of Mississippi, an insurance company organized
under the laws of the State of Mississippi, together with any successor thereof
by operation of law, including, without limitation, any liquidator,
rehabilitator, receiver or conservator (collectively the "Beneficiaries") and
_________________Bank as trustee ("Trustee"). (The Grantor, the Beneficiaries
and the Trustee are hereinafter each sometimes referred to individually as a
"Party" and collectively as the "Parties").

                                   WITNESSETH:

         WHEREAS, the Beneficiaries desire that Grantor create a trust account
for the sole and exclusive benefit of the Beneficiaries for the purpose of
providing collateral to secure payments for the Grantor's Obligations (as
hereinafter defined) under the past, current or future terms of reinsurance
agreements specified in Exhibit A hereto, between Grantor and Beneficiaries
(collectively, and as the same may be supplemented or amended from time to time,
the "Reinsurance Agreements"). Terms used, but not defined herein, shall have
the meanings ascribed thereto in the Reinsurance Agreements;

         WHEREAS, Direct Insurance Company has been appointed by the
Beneficiaries to act as Agent on behalf of all the Beneficiaries (referred to
hereafter as "Agent" or "Beneficiaries' Agent");

         WHEREAS, the Grantor desires to transfer to the Trustee for deposit to
a trust account (the "Trust Account") assets in order to secure payments under
or in connection with the Reinsurance Agreements;

         WHEREAS, the Trustee has agreed to act as Trustee hereunder, and to
hold such assets in trust in the Trust Account for the sole use and benefit of
the Beneficiaries; and

         WHEREAS, this Agreement is made for the sole use and benefit of the
Beneficiaries and for the purpose of setting forth the duties and powers of the
Trustee with respect to the Trust Account;

         NOW, THEREFORE, for and in consideration of the premises and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the Parties hereby agree as follows:

                                                                   Page 30 of 45

<PAGE>

                                                     Security Fund Language

1.       DEPOSIT OF ASSETS TO THE TRUST ACCOUNT.

                  (a)      The Grantor shall establish the Trust Account and the
Trustee shall administer the Trust Account in its name as Trustee for the
Beneficiaries. The Trust Account shall be subject to withdrawal by the
Beneficiaries solely as provided herein. The Trustee shall provide a statement
to the Grantor and the Beneficiaries' Agent of all Assets deposited upon
inception of the Trust Account.

                  (b)      The Grantor shall transfer to the Trustee, for
deposit to the Trust Account, the assets listed in Exhibit B hereto, and may
transfer to the Trustee, for deposit to the Trust Account, such other assets as
it may from time to time desire (all such assets actually received in the Trust
Account are herein referred to individually as an "Asset" and collectively as
the "Assets").

                  (c)      The Beneficiaries' Agent will periodically review the
Obligations (as hereinafter defined), beginning in the first quarter after
formation of the Trust Account, and within 45 days after the end of each
calendar quarter thereafter , to determine the adequacy of the Trust Account. At
the Grantor's request the Beneficiaries' Agent will co-operate with the Grantor
or Grantor's designated actuarial consultant in the conduct of such reviews. If
as a result of any such periodic review, the Beneficiaries' Agent determines
that the Market Value of the Trust Account is less than the Obligations (as
hereinafter defined) and the Beneficiaries' Agent requests an increase in the
Market Value of the Trust Account in writing, the Grantor agrees to provide the
increase within thirty (30) days of the date of the request. If the
Beneficiaries' Agent finds that the Market Value (as hereinafter defined) of the
Trust Account is in excess of the Obligations, the Beneficiaries' Agent will
instruct the Trustee in writing to return such surplus to the Grantor upon a
written request as specified in Section 3 - Application of Assets. The periodic
calculation of the Obligations and any adjustment thereto shall be communicated
by the Beneficiaries' Agent to the Grantor and be subject to the agreement of
the Grantor. In the event Grantor disputes the periodic calculation, Grantor and
the Beneficiaries' Agent shall have thirty (30) days to negotiate a compromise
valuation. If no compromise is reached within thirty (30) days, the calculation
shall be presented to the Reinsurance Intermediary (as defined in the
Reinsurance Agreement) for the Reinsurance Agreements and their determination of
the calculation of Obligations shall apply, subject to the result of the next
periodic calculation.

                  (d)      The Assets shall consist only of cash (United States
legal tender) and Eligible Securities (as hereinafter defined). In addition,
amounts in the Income Account, as defined in Section 5 below, shall become
Assets as provided in Section 5. Assets necessary for the fulfillment of
Grantor's Obligations (as hereinafter defined) held in the Trust Account,
pursuant to this Agreement, shall constitute a secured claim and shall not be
subject to any claims of any other creditors of Grantor.

                  (e)      The Grantor hereby represents and warrants (i) that
any Assets transferred by the Grantor to the Trustee for deposit to the Trust
Account will be in such form that the Beneficiary whenever necessary may, and
the Trustee upon direction by the Beneficiary will, negotiate any such Assets
without consent or signature from the Grantor or any person in accordance with
the terms of this Agreement

                                                                   Page 31 of 45
<PAGE>

                                                     Security Fund Language

                  (f)      The Trustee shall have no responsibility to determine
whether the Assets in the Trust Account are sufficient to secure the Grantor's
liabilities under the Reinsurance Agreements.

2.       WITHDRAWAL OF ASSETS FROM THE TRUST ACCOUNT.

                  (a)      Upon notice in accordance with Section 18-Notices,
the Beneficiaries shall have the right, at any time and from time to time, to
withdraw from the Trust Account (the "Withdrawal Notice"), such Assets as are
specified in such Withdrawal Notice. The Withdrawal Notice shall be delivered to
the Trustee and shall state the name of the individual Beneficiary on whose
behalf the withdrawal is requested, the amount of Obligations owed to such
individual Beneficiary by the Grantor and that the withdrawal is made in
satisfaction of such Obligations. Under no circumstances shall any Beneficiary,
nor shall the Beneficiaries' Agent acting on behalf of any Beneficiary, withdraw
any amounts from the Trust Account in excess of the aggregate amount of the
Obligations owed by the Grantor to such Beneficiary at the time of withdrawal.
The Withdrawal Notice may designate a third party (the "Designee") to whom
Assets specified therein shall be delivered and may condition delivery of such
Assets to such Designee upon receipt and deposit to the Trust Account of other
Assets specified in such Withdrawal Notice. The Beneficiaries' Agent need
present no statement or document in addition to a Withdrawal Notice in order to
withdraw any Assets; nor is said right of withdrawal or any other provision of
this Agreement subject to any conditions or qualifications not contained in this
Agreement.

                  (b)      Upon receipt of a Withdrawal Notice, the Trustee
shall immediately take any and all steps necessary to transfer the Assets
specified in such Withdrawal Notice and shall deliver such assets to or for the
account of the individual Beneficiary or such Designee as specified in such
Withdrawal Notice. The individual Beneficiary shall confirm delivery of such
assets by signing a receipt, which shall be delivered to Grantor.

                  (c)      Subject to paragraph (a) of this Section 2 and to
Section 4 of this Agreement, in the absence of a Withdrawal Notice, the Trustee
shall allow no substitution or withdrawal of any Asset from the Trust Account.
In the event the Trustee receives Withdrawal Notices from both the
Beneficiaries' Agent and an individual Beneficiary regarding the same
transaction on behalf of the individual Beneficiary, the Trustee shall follow
the instructions in the Withdrawal Notice from the individual Beneficiary, and
disregard the Withdrawal Notice from the Beneficiaries' Agent.

                  (d)      The Trustee shall have no responsibility whatsoever
to determine that any Assets withdrawn from the Trust Account pursuant to this
Section 2 will be used and applied in the manner contemplated by Section 3 of
this Agreement.

3.       APPLICATION OF ASSETS.

The Beneficiaries hereby covenant to the Grantor that they shall use and apply
any withdrawn Assets, without diminution because of the insolvency of an
individual Beneficiary or the Grantor, for the following purposes only:

                                                                   Page 32 of 45
<PAGE>

                                                     Security Fund Language

                  (i)      to pay or reimburse the Beneficiary for the Grantor's
share under the Reinsurance Agreements regarding any losses and allocated loss
expenses paid by the Beneficiary but not recovered from the Grantor, for
unearned premiums due to the Beneficiary, or for adjustments to the provisional
ceding commission, as this term is defined in the Reinsurance Agreement, if not
otherwise paid by the Grantor in accordance with the terms of the Reinsurance
Agreements;

                  (ii)     to make payment to the Grantor of any amounts held in
the Trust Account that exceed 100% of the Obligations (as hereinafter defined)
upon written instructions by the Beneficiaries' Agent to the Trustee, and

                  (iii)    if the Beneficiaries have not received a Rating
Notice (as hereinafter defined) pursuant to Section 11 hereof, and have received
a Termination Notice (as hereinafter defined) pursuant to Section 11 of this
Agreement and where the Grantor's entire Obligations (as hereinafter defined)
remain unliquidated and undischarged ten days prior to the Termination Date (as
hereinafter defined), to withdraw amounts equal to such Obligations (as
hereinafter defined) and deposit such amounts in a separate account, in the name
of the individual Beneficiary, in a United States bank or trust company that is
(a) subject to regulation, supervision and examination by the Federal Reserve
System, (b) acceptable to the Grantor, and (c) not a parent, subsidiary or
affiliate of the Grantor or any Beneficiary, apart from its other assets, in
trust for the uses and purposes specified in subparagraphs (i) and (ii) of this
Section as may remain executory after such withdrawal and for any period after
such Termination Date. For the purposes of this subparagraph (iii), the phrase
"the Trust Account" in subparagraph (ii) of this Section shall be deemed to read
"the separate account" established pursuant to this subparagraph (iii).

                  (iv)     where the Beneficiaries have received a Termination
Notice pursuant to Section 11 of this Agreement and where all of the Grantor's
Obligations have been liquidated or discharged ten (10) days prior to the
Termination Date, to make payment to the Grantor of any amounts held in the
Trust Account.

4.       REDEMPTION, INVESTMENT AND SUBSTITUTION OF ASSETS.

                  (a)      The Trustee shall surrender for payment all maturing
Assets and all Assets called for redemption without the consent of the
Beneficiaries' Agent, provided the Trustee gives written notice to the
Beneficiaries' Agent and the Grantor in accordance with Section 18 - Notices and
immediately deposits the proceeds of any such payment into the Trust Account.

                  (b)      From time to time, at the written order and direction
of the Grantor and with the prior written approval of the Beneficiaries' Agent,
which approval the Beneficiaries' Agent shall not unreasonably withhold or deny,
the Trustee shall invest and reinvest Assets in the Trust Account in Eligible
Securities. Trustee shall reinvest all Cash in the Trust Account in Eligible
Securities as soon as practicable.

                  (c)      The Grantor shall have the right to appoint an
investment manager, pursuant to a separate investment management agreement, to
manage investment of Assets in the Trust Account.

                                                                   Page 33 of 45
<PAGE>

                                                     Security Fund Language

                  (d)      All investments and substitutions of securities
referred to in paragraph (b) of this Section 4 shall be in compliance with the
relevant provisions of the Tennessee Insurance Law, as set forth in the
definition of "Eligible Securities" in Section 12 of this Agreement. The Trustee
shall have no responsibility whatsoever to determine that any Assets in the
Trust Account are or continue to be Eligible Securities. Any instruction or
order concerning such investments or substitutions of securities shall be
referred to herein as an "Investment Order." The Trustee shall execute
Investment Orders and settle securities transactions by itself or by means of an
agent or broker. The Trustee shall not be responsible for any loss suffered by
the Beneficiaries' Agent, any individual Beneficiary, or the Grantor due to the
insolvency of any agent or broker, unless the Trustee negligently, willfully or
with a lack of good faith chooses such agent or broker.

                  (e)      Any loss incurred from any investment pursuant to the
terms of this Section 4 shall be borne exclusively by the Trust Account. The
Trustee shall have no liability for any loss sustained as a result of any
investment in an investment made pursuant to the terms of this Agreement or as a
result of any liquidation of any investment prior to its maturity or for the
failure of the Parties to give the Trustee instructions to invest or reinvest
the Trust Account, provided the Trustee has not acted negligently, with willful
misconduct or a lack of good faith.

                  (f)      In the event that any security held in the Trust
Account shall cease to be an Eligible Security due to a decline in the rating of
the security, the Grantor shall take all necessary action to substitute cash
and/or a security that is an Eligible Security for such down-graded security,
provided that the Market Value of any such substituted security plus the cash
being substituted shall at least equal the Market Value of the security for
which the substitution is being made.

5.       INCOME ACCOUNT.

                  All payments of interest, dividends and other income in
respect to Assets in the Trust Account shall be posted and credited by the
Trustee, subject to deduction of the Trustee's compensation and expenses as
provided in Section 8 of this Agreement, in the separate income column of the
custody ledger (the "Income Account") within the Trust Account established and
maintained by the Grantor at an office of the Trustee in __________. Any
interest, dividend or other income automatically posted and credited on the
payment date to the Income Account, which is subsequently received by the
Trustee, shall be added to the Assets of the Trust Account. Any interest,
dividend or other income automatically posted and credited on the payment date
to the Income Account, which is not subsequently received by the Trustee, shall
be reimbursed by the Grantor to the Trustee and the Trustee may debit the Income
Account for this purpose. Any amounts contained in the Income Account are part
of the Assets, and as such, are subject to the terms and conditions of this
Agreement with respect to the Assets.

6.       RIGHT TO VOTE ASSETS.

                  The Trustee shall forward all annual and interim stockholder
reports and all proxies and proxy materials relating to the Assets in the Trust
Account to the Grantor. The Grantor shall have the full and unqualified right to
vote any Assets in the Trust Account. The Trustee and the Beneficiaries' Agent
shall have no voting rights with respect to Assets in the Trust Account.

                                                                   Page 34 of 45

<PAGE>

                                                     Security Fund Language

7.       ADDITIONAL RIGHTS AND DUTIES OF THE TRUSTEE.

                  (a)      The Trustee shall notify the Grantor and the
Beneficiaries' Agent in writing within ten days following each deposit to, or
withdrawal from, the Trust Account.

                  (b)      Before accepting any Asset for deposit to the Trust
Account, the Trustee shall determine that such Asset is in such form that the
Beneficiaries whenever necessary may, or the Trustee upon direction by the
Beneficiaries' Agent will, negotiate such Asset without consent or signature
from the Grantor or any person or entity other than the Trustee in accordance
with the terms of this Agreement.

                  (c)      The Trustee may deposit any Assets in the Trust
Account in a book-entry account maintained at the Federal Reserve Bank or in
depositories such as the Depository Trust Company. Assets may be held in the
name of a nominee maintained by the Trustee or by any such depository.

                  (d)      The Trustee shall accept and open all mail directed
to the Grantor or the Beneficiaries in care of the Trustee. However, such mail
shall be forwarded to the Grantor and the Beneficiaries' Agent as soon as
practicable.

                  (e)      The Trustee shall furnish to the Grantor and the
Beneficiary a statement of all Assets in the Trust Account upon the inception of
the Trust Account and at the end of each calendar quarter thereafter.

                  (f)      Upon the request of the Grantor or the Beneficiary,
the Trustee shall promptly permit the Grantor or the Beneficiary, their
respective agents, employees or independent auditors to examine, audit, excerpt,
transcribe and copy, during the Trustee's normal business hours, any books,
documents, papers and records relating to the Trust Account or the Assets.

                  (g)      Unless otherwise provided in this Agreement, the
Trustee is authorized to follow and rely upon all instructions given by officers
named in incumbency certificates furnished to the Trustee from time to time by
the Grantor and the Beneficiary respectively, and by attorneys-in-fact acting
under written authority furnished to the Trustee by the Grantor or the
Beneficiary, including, without limitation, instructions given by letter,
facsimile transmission, telegram, teletype, cablegram or electronic media, if
the Trustee believes such instructions to be genuine and to have been signed,
sent or presented by the proper party or parties. The Trustee shall not incur
any liability to anyone resulting from actions taken by the Trustee in reliance
in good faith on such instructions. The Trustee shall not incur any liability in
executing instructions (i) from an attorney-in-fact prior to receipt by it of
notice of the revocation of the written authority of the attorney-in-fact or
(ii) from any officer of the Grantor or the Beneficiary.

                  (h)      The duties and Obligations (as hereinafter defined)
of the Trustee shall only be such as are specifically set forth in this
Agreement, as it may from time to time be amended, and no implied duties or
obligations shall be read into this Agreement against the Trustee. The Trustee
shall only be liable for its own negligence, willful misconduct or lack of good
faith.

                                                                   Page 35 of 45

<PAGE>

                                                     Security Fund Language

                  (i)      No provision of this Agreement shall require the
Trustee to take any action which, in the Trustee's reasonable judgment, would
result in any violation of this Agreement or any provision of law. Anything in
this Agreement to the contrary notwithstanding, in no event shall the Trustee be
liable under or in connection with this Agreement for indirect, special,
incidental, punitive or consequential losses or damages of any kind whatsoever,
including but not limited to lost profits, whether or not foreseeable, even if
the Trustee has been advised of the possibility thereof and regardless of the
form of action in which such damages are sought.

                  (j)      The Trustee shall not be responsible for the
existence, genuineness or value of any of the Assets or for the validity,
perfection, priority or enforceability of the liens in any of the Assets,
whether impaired by operation of law or by reason of any action or omission to
act on its part hereunder, except to the extent such action or omission
constitutes gross negligence, bad faith or willful misconduct on the part of the
Trustee, for the validity of title to the Assets, for insuring the Assets or for
the payment of taxes, charges, assessments or liens upon the Assets.

                  (k)      The Trustee may confer with counsel of its own choice
in relation to matters arising under this Agreement and shall have full and
complete authorization from the other Parties hereunder or any action taken or
suffered by it under this Agreement or under any transaction contemplated hereby
in good faith and in accordance with opinion of such counsel.

8.       THE TRUSTEE'S COMPENSATION, EXPENSES AND INDEMNIFICATION.

                  (a)      The Grantor shall pay the Trustee, as compensation
for its services under this Agreement, a fee computed at rates determined by the
Trustee from time to time and communicated in writing to the Grantor. The
Grantor shall pay or reimburse the Trustee for all of the Trustee's expenses and
disbursements in connection with its duties under this Agreement (including
attorney's fees and expenses), except any such expense or disbursement as may
arise from the Trustee's negligence, willful misconduct, or lack of good faith.
In the event that the Grantor shall fail to pay the Trustee's compensation
and/or expenses within thirty (30) days of the receipt of an invoice thereon,
the Trustee shall be entitled to deduct its compensation and expenses from
payments of dividends, interest and other income in respect of the Assets held
in the Trust Account prior to the deposit thereof to the Income Account as
provided in Section 5 of this Agreement; and the Trustee shall provide prompt
notice of such deduction to the Grantor and the Beneficiaries' Agent. The
Grantor and Beneficiaries hereby indemnify the Trustee jointly but not severally
for, and hold it harmless against, any loss, liability, costs or expenses
(including attorney's fees and expenses) incurred or made without negligence,
willful misconduct or lack of good faith on the part of the Trustee, arising out
of or in connection with the performance of its obligations in accordance with
the provisions of this Agreement, including any loss, liability, costs or
expenses arising out of or in connection with the status of the Trustee and its
nominee as the holder of record of the Assets. The Beneficiaries will not
indemnify the Trustee for any losses arising from the negligence, willful
misconduct or lack of good faith of the Grantor arising in connection with the
performance of its obligations under this Agreement. The Grantor will not
indemnify the Trustee for any losses arising from the negligence, willful
misconduct or lack of good faith of the Beneficiaries' Agent or the
Beneficiaries arising in connection with the performance of its or their
respective obligations under this Agreement. The Grantor and Beneficiaries
hereby acknowledge that the foregoing indemnities shall survive the resignation
or discharge of the Trustee or the termination of this Agreement and

                                                                   Page 36 of 45

<PAGE>

                                                     Security Fund Language

hereby grant the Trustee a lien, right of set-off and security interest in the
funds in the Income Account for the payment of any claim for compensation,
reimbursement or indemnity hereunder.

                  (b)      No Assets shall be withdrawn from the Trust Account
or used in any manner for paying compensation to, or reimbursement or
indemnification of, the Trustee.

9.       TINs.

                  The Grantor and the Beneficiary each represent that its
correct Taxpayer Identification Number ("TIN") assigned by the Internal Revenue
Service or any other taxing authority is set forth in Schedule 1. Upon execution
of this Agreement, the Grantor shall provide the Trustee with a fully executed
W-8 or W-9 Internal Revenue Service form, which shall include the Grantor's Tax
Identification Number (TIN), as assigned by the Internal Revenue Service. All
interest or other income earned under this Agreement shall be allocated and/or
paid pursuant to the terms of this Agreement and reported by the recipient to
the Internal Revenue Service or any other taxing authority. Notwithstanding such
written directions, Trustee shall report and, as required, withhold any taxes as
it determines may be required by any law or regulation in effect at the time of
the distribution. In the event that any earnings remain undistributed at the end
of any calendar year, Trustee shall report to the Internal Revenue Service or
such other authority such earnings as it deems appropriate or as required by any
applicable law or regulation or, to the extent consistent therewith, as directed
in writing by the Grantor. In addition, Trustee shall withhold any taxes it
deems appropriate and shall remit such taxes to the appropriate authorities.

10.      RESIGNATION OR REMOVAL OF THE TRUSTEE.

                  (a)      The Trustee may resign at any time by giving not less
than forty five (45) days written notice thereof to the Beneficiaries' Agent and
to the Grantor, such resignation to become effective on the acceptance of
appointment by a successor trustee and the transfer to such successor trustee of
all Assets in the Trust Account in accordance with paragraph (b) of this Section
10.

                  (b)      Upon receipt of the Trustee's notice of resignation,
the Grantor and the Beneficiaries' Agent shall appoint a successor trustee. Any
successor trustee shall be a bank that is a member of the Federal Reserve System
and shall not be a Parent, a Subsidiary or an Affiliate of the Grantor or any
individual Beneficiary. Upon the acceptance of the appointment as trustee
hereunder by a successor trustee, payment of all fees due the Trustee and the
transfer to such successor trustee of all Assets in the Trust Account, the
resignation of the Trustee shall become effective. Thereupon, such successor
trustee shall succeed to and become vested with all the rights, powers,
privileges and duties of the Trustee, and the resigning or removed Trustee shall
be discharged from any future duties and obligations under this Agreement, but
the Trustee shall continue after its resignation to be entitled to the benefits
of the indemnities provided herein for the Trustee.

11.      TERMINATION OF THE TRUST ACCOUNT.

                  (a)      The Trust Account and this Agreement, except for the
indemnities provided herein, may be terminated only after (i) written notice
from the Grantor to the Beneficiaries' Agent and the Trustee of the Grantor's
intention to terminate the Trust Account based upon Grantor having a

                                                                   Page 37 of 45

<PAGE>

                                                     Security Fund Language

rating from A.M. Best of "A-" or higher (the "Rating Notice"); (ii) the Grantor
or the Beneficiaries' Agent has given the Trustee written notice of its
intention to terminate the Trust Account (the "Notice of Intention"), and (iii)
the Trustee has given the Grantor and the Beneficiaries' Agent the written
notice specified in paragraph (b) of this Section 11. The Rating Notice and the
Notice of Intention shall specify the date on which the notifying Party intends
the Trust Account to terminate (the "Proposed Date").

                  (b)      Within ten (10) Business Days following receipt by
the Trustee of a Rating Notice or a Notice of Intention, the Trustee shall give
written notification (the "Termination Notice") to the Beneficiaries' Agent and
the Grantor of the date (the "Termination Date") on which the Trust Account
shall terminate. The Termination Date shall be (a) the Proposed Date (or if not
a Business Day, the next Business Day thereafter) if the Proposed Date is at
least thirty (30) days but no more than forty five (45) days subsequent to the
date the Termination Notice is given; (b) thirty (30) days subsequent to the
date the Termination Notice is given (or if not a Business Day, the next
Business Day thereafter) if the Proposed Date is fewer than thirty (30) days
subsequent to the date the Termination Notice is given; or (c) forty five (45)
days subsequent to the date the Termination Notice is given (or if not a
Business Day, the next Business Day thereafter) if the Proposed Date is more
than forty five (45) days subsequent to the date the Termination Notice is
given.

                  (c)      On the Termination Date, upon receipt of written
approval of the Beneficiaries' Agent, the Trustee shall transfer to the Grantor
any Assets remaining in the Trust Account, at which time all liability of the
Trustee with respect to such Assets shall cease.

12.      DEFINITIONS.

                  Except as the context shall otherwise require, the following
terms shall have the following meanings for all purposes of this Agreement (the
definitions to be applicable to both the singular and the plural forms of each
term defined if both such forms of such term are used in this Agreement):

                  The term "Affiliate" with respect to any corporation shall
mean a corporation which directly, or indirectly through one of more
intermediaries, controls or is controlled by, or is under common control with,
such corporation. The term "control" (including the related terms "controlled
by" and "under common control with") shall mean the ownership, directly or
indirectly, of more than fifty percent (50%) of the voting stock of a
corporation.

                  The term "Business Day" shall mean any day other than a
Saturday, Sunday or any other day on which the Trustee located at the notice
address set forth on Schedule 1 is authorized or required by law or executive
order to remain closed.

                  The term "Eligible Securities" shall mean and include
certificates of deposit issued by a United States bank and payable in United
States legal tender and securities representing investments of the types
specified in subsections (1), (2), and (7) of Section 56-3-402 of the Tennessee
Insurance Law; provided, however, that no such securities shall have been issued
by a Parent, a Subsidiary or an Affiliate of either the Grantor or the
Beneficiaries.

                                                                   Page 38 of 45

<PAGE>

                                                     Security Fund Language

                  The term "Market Value" shall mean, as of the time any
determination thereof is made, (i) with respect to Cash, the dollar amount
thereof, and (ii) with respect to all other non-Cash Eligible Securities, the
prices of such non-Cash Eligible Securities furnished by a nationally recognized
securities valuation service (the "Valuation Service") employed by the Trustee
for such valuation. Assets for which the Valuation Service may provide prices
but which are not Eligible Securities at the time of such determination shall be
deemed to have no Market Value.

                  The term "Obligations" (as such term is defined in the
Reinsurance Agreement) shall mean, with respect to the Reinsurance Agreements,
aggregate ceded premiums remitted to the Grantor; less (a) aggregate losses and
allocated loss expenses paid (net of subrogation, salvage and other recoveries
on losses) to the Beneficiaries by the Grantor, (b) aggregate ceding commissions
paid to the Beneficiaries by the Grantor, and (c) the Grantor's projected margin
under the Reinsurance Agreements.

                  The term "person" shall mean and include an individual, a
corporation, a partnership, an association, a trust, an unincorporated
organization or a government or political subdivision thereof.

                  The term "Parent" shall mean an institution that, directly or
indirectly, controls another institution.

                  The term "Subsidiary" shall mean an institution controlled,
directly or indirectly, by another institution.

13.      GOVERNING LAW.

                  This Agreement shall be subject to and governed by the laws of
the State of Tennessee. Each party hereto irrevocably waives any objection on
the grounds of venue, forum non-conveniens or any similar grounds and
irrevocably consents to service of process by mail or in any other manner
permitted by applicable law and consents to the jurisdiction of the courts
located in the State of New York. The parties further hereby waive any right to
a trial by jury with respect to any lawsuit or judicial proceeding arising or
relating to this Agreement.

14.      SUCCESSORS AND ASSIGNS.

                  No Party may assign this Agreement or any of its obligations
hereunder, without the prior, written consent of the other Parties; provided,
however, that this Agreement shall inure to the benefit of and bind those who,
by operation of law, become successors to the Parties, including, without
limitation, any liquidator, rehabilitator, receiver or conservator and any
successor merged or consolidated entity and provided further that, in the case
of the Trustee, the successor trustee is eligible to be a trustee under the
terms hereof. Any corporation or association into which the Trustee may be
merged or converted or with which it may be consolidated, or any corporation or
association to which all or substantially all the escrow business of the
Trustee's corporate trust line of business may be transferred, shall be the
Trustee under this Agreement without further act.

                                                                   Page 39 of 45

<PAGE>

                                                     Security Fund Language

15.      SEVERABILITY.

                  In the event that any provision of the Agreement shall be
declared invalid or unenforceable by any regulatory body or court having
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remaining portions of this Agreement.

16.      ENTIRE AGREEMENT.

                  This Agreement constitutes the entire agreement among the
Parties, and there are no understandings or agreements, conditions or
qualifications relative to this Agreement which are not fully expressed in this
Agreement.

17.      AMENDMENTS.

                  This Agreement may be modified or otherwise amended, and the
observance of any term of this Agreement may be waived, if such modification,
amendment or waiver is in writing and signed by all of the Parties.

18.      NOTICES.

                  Unless otherwise provided in this Agreement, all
communications hereunder shall be in writing and shall be deemed to be duly
given and received:

                  (i) upon delivery if delivered personally or upon confirmed
transmittal if by facsimile; prepaid telex, telegraph, telecopier or electronic
media;

                  (ii) on the next Business Day if sent by overnight courier; or

                  (iii) four (4) Business Days after mailing if mailed by
prepaid registered mail, return receipt requested, and when addressed as
follows:

  If to the Grantor:

         _______ Reinsurance Company
         (Address)
         Attention: ___________________
         T:  ______________
         F:  ______________

    If to Beneficiaries:
         c/o Direct Insurance Company, Beneficiaries' Agent
         1281 Murfreesboro Road
         Nashville, Tennessee 37217
         Attention: V.P. - Finance & Treasurer

                                                                  Page  40 of 45

<PAGE>

                                                     Security Fund Language

    If to Trustee:
         _________________Bank
         (Address)
         Attention:  ___________________
         T:  _____________
         F:  _____________

         Each Party may from time to time designate a different address for
         notices, directions, requests, demands, acknowledgments and other
         communications by giving written notice of such change to the other
         Parties. Notwithstanding the above, in the case of communications
         delivered to the Trustee pursuant to (ii) and (iii) of this Section 18,
         such communications shall be deemed to have been given on the date
         received by the Trustee. In the event that the Trustee, in its sole
         discretion, shall determine that an emergency exists, the Trustee may
         use such other means of communication as the Trustee deems appropriate.

19.      COUNTERPARTS.

                  This Agreement may be executed in any number of counterparts,
each of which, when so executed and delivered, shall constitute an original, but
such counterparts together shall constitute one and the same Agreement.

20.      SECURITY PROCEDURES.

                  In the event funds transfer instructions are given (other than
in writing at the time of execution of this Agreement), whether in writing, by
telecopier or otherwise, the Trustee is authorized to seek confirmation of such
instructions by telephone call-back to the person or persons designated on
Schedule 2 hereto, and the Trustee may rely upon the confirmation in writing of
anyone purporting to be the person or persons so designated. The persons and
telephone numbers for call-backs may be changed only in a writing actually
received and acknowledged by the Trustee. The Trustee and the Beneficiaries'
bank(s), in any funds transfer, may rely solely upon any account numbers or
similar identifying numbers provided by the Grantor or the Beneficiaries in
writing to identify (i) the individual Beneficiary, (ii) the individual
Beneficiary's bank, or (iii) an intermediary bank.

21.      FORCE MAJEURE.

In the event that any Party to this Agreement is unable to perform its
obligations under the terms of this Agreement because of acts of God, strikes,
equipment or transmission failure or damage reasonably beyond its control, or
other cause reasonably beyond its control, such Party shall not be liable for
damages to the other Parties for any unforeseeable damages resulting from such
failure to perform or otherwise from such causes. Performance under this
Agreement shall resume when the affected Party is able to perform substantially
that Party's duties.

                                                                   Page 41 of 45

<PAGE>

                                                     Security Fund Language

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
and delivered by their respective officers thereunto duly authorized as of the
date first above written.

                  as Grantor:

                           _____________________________REINSURANCE COMPANY

                           By:______________________________________________
                              Title:

                  as Beneficiary, and Agent for all Beneficiaries:

                           DIRECT INSURANCE COMPANY

                           By:______________________________________________
                              Title:

                  as Beneficiaries:

                           DIRECT GENERAL INSURANCE COMPANY

                           By:______________________________________________
                              Title:

                           DIRECT GENERAL INSURANCE COMPANY OF LOUISIANA

                           By:______________________________________________
                              Title:

                           DIRECT GENERAL INSURANCE COMPANY OF MISSISSIPPI

                           By:______________________________________________
                              Title:

                  as Trustee:

                           _____________________________BANK

                           By:______________________________________________
                              Title:

                                                                   Page 42 of 45

<PAGE>

                                                     Security Fund Language

                                   SCHEDULE 1

                     Taxpayer Identification Number ("TIN")

Grantor: ______________

Beneficiary:
     Direct Insurance Company:                        62-1461730
     Direct General Insurance Company:                62-1695059
     Direct General Insurance Company of Louisiana:   72-1103648
     Direct General Insurance Company of Mississippi: 62-1715487

                                                                   Page 43 of 45

<PAGE>

                                                     Security Fund Language

                                   SCHEDULE 2

                     TELEPHONE NUMBER(S) FOR CALL-BACKS AND
           PERSON(S) DESIGNATED TO CONFIRM FUNDS TRANSFER INSTRUCTIONS

If to Grantor:

                  Name                                    Telephone Number

     1.

     2.

     3.

If to Beneficiary:

    1.

    2.

    3.

Telephone call-backs shall be made to each Grantor and Beneficiary if joint
instructions are required pursuant to the Agreement.

                                                                   Page 44 of 45

<PAGE>

                                                     Security Fund Language

                                    EXHIBIT A

                              REINSURANCE CONTRACTS

<TABLE>
<CAPTION>
                                              EFFECTIVE               EXPIRATION
  REF #             CONTRACT TITLE              DATE                     DATE
  -----             --------------              ----                     ----
<S>                 <C>                       <C>                     <C>

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

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

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

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

---------------------------------------------------------------------------------
</TABLE>

                                    EXHIBIT B

                 List of Assets Deposited to the Trust Account:

         Cusip:

                  Par Value:

                  Description:
                                                                   Page 45 of 45
<PAGE>

                          2004 Quota Share Reinsurers

                        Dorinco Reinsurance Company (Dom)
       National Union Fire Insurance Company of Pittsburgh (Dom-o/b/o AIG)
                   Swiss Reinsurance America Corporation (Dom)
                                 AXA Re (Paris)

<PAGE>

GUY CARPENTER                                    Page :          14 of 45
                                                 File #:         8958-00-0017-00
                                                 Effective Date: January 1, 2004

ACCEPTED:
  30%                  REFERENCE # TA 33587-04

REINSURER:             DORINCO REINSURANCE COMPANY

FEIN #:                38-2145898

NAIC #:                33499

AUTHORIZED SIGNATURE:  /s/ DAVID E. CHAMBERLAIN

DATE:                  3/1/2004

<PAGE>

GUY CARPENTER                                    Page :          14 of 45
                                                 File #:         8958-00-0017-00
                                                 Effective Date: January 1, 2004

ACCEPTED:
  30%                  REFERENCE # __________________

REINSURER:             NATIONAL UNION FIRE INSURANCE COMPANY OF PITTS BURGH, Pa.

FEIN #:                ________________________________________________

NAIC #:                ________________________________________________

AUTHORIZED SIGNATURE:  /s/ Robert J. Lords ATTORNEY-IN-FACT

DATE:                  March 1, 2004

<PAGE>

GUY CARPENTER                                    Page            14 of 45
                                                 File #:         8958-00-0017-00
                                                 Effective Date: January 1, 2004

ACCEPTED:
   30%                 Reference # TM0000770A
                       SWISS REINSURANCE AMERICA CORPORATION
                       By: Swiss Re Underwriters Agency Inc.,
                           Its authorized agent

Reinsurer:             By: KENNETH J. HAMMELL

FEIN.#                 13-1675535

NAIC #:                25364

Authorized Signature:  /s/ KENNETH J. HAMMELL

Date:                  3/2/04

<PAGE>

GUY CARPENTER                                    Page:           14 of 45
                                                 File #:         8958-00-0017-00
                                                 Effective Date: January 1, 2004

ACCEPTED:

10,00%                 REFERENCE # 220314/2004

REINSURER:             NOTWITHSTANDING ANY CONTRARY TERM
                       OR CONDITION, ALL TERMS WORDINGS,
                       SPECIAL AGREEMENTS AND AMENDMENTS
                         TO BE AGREED BY AXA RE

FEIN.#                 [ILLEGIBLE]

NAIC #:                [ILLEGIBLE]

AUTHORIZED SIGNATURE:  /s/ CHRISTOPHER RENIA

DATE:                  [ILLEGIBLE] 1, 2004

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00061-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00061-of-00352.parquet"}]]