1 EXHIBIT 10.16 PROPERTY QUOTA SHARE REINSURANCE CONTRACT ORIGINALLY EFFECTIVE: JULY 1, 1993 TERMS EFFECTIVE: JANUARY 1, 1998 Financial Pacific Insurance Company Sacramento, California (hereinafter referred to as the "Company") REINSURANCE...

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EXHIBIT 10.16

PROPERTY QUOTA SHARE
REINSURANCE CONTRACT
ORIGINALLY EFFECTIVE: JULY 1, 1993
TERMS EFFECTIVE: JANUARY 1, 1998

Financial Pacific Insurance Company
Sacramento, California
(hereinafter referred to as the "Company")

REINSURANCE CONFIRMATION SLIP

ARTICLE I - CLASSES OF BUSINESS REINSURED

A. By this Contract the Company obligates itself to cede to the Reinsurer and
the Reinsurer obligates itself to accept quota share reinsurance of the
Company's net liability under policies, contracts and binders of insurance
or reinsurance (hereinafter called "policies") issued or renewed on or
after the effective date hereof, and classified by the Company as
Automobile Physical Damage, Commercial Multiple Peril (Section I) and
Inland Marine business.

B. "Net liability" as used herein is defined as the Company's gross liability
remaining after cessions, if any, to other pro rata reinsurers.

C. The liability of the Reinsurer with respect to each cession hereunder
shall commence obligatorily and simultaneously with that of the Company,
subject to the terms, conditions and limitation hereinafter set forth.

ARTICLE II - COMMENCEMENT AND TERMINATION

A. This Contract shall become effective on January 1, 1998, with respect to
losses occurring under policies allocated to underwriting years commencing
on or after that date, and shall continue in force thereafter until
terminated.

B. Either party may terminate this Contract on December 31, 1998, or any
December 31 thereafter, by giving the other party not less than 90 days
prior notice by certified mail.

C. Unless the Company elects to reassume the ceded unearned premium in force
on the effective date of termination, and so notifies the Reinsurer prior
to or as promptly as possible after the effective date of termination,
reinsurance hereunder on business in force on the effective date of
termination shall remain in full force and effect until expiration,
cancellation or next premium anniversary of such business, whichever first
occurs, but in no event beyond 12 months following the effective date of
termination.

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D. "Underwriting year" as used herein shall mean the period from January 1,
1997 through December 31, 1997, and each subsequent 12-month period shall
be a separate underwriting year. However, in the event this Contract is
terminated, the final underwriting year shall be from the beginning of the
then current underwriting year through the effective date of termination.
All premiums and losses from policies allocated to an underwriting year
shall be credited or charged, respectively, to such underwriting year,
regardless of the date said premiums earn or such losses occur, it being
understood that a policy will be allocated to the underwriting year which
is in effect as of:

1. As respects all new policies, the effective date of such policies;

2. As respects renewals of one year or less term policies, the renewal
date of such policies;

3. As respects continuous or greater than one year term policies, the
premium anniversary date of such policies.

Such policies shall remain in the same underwriting year, as originally
allocated, until the next renewal date or premium anniversary date, at
which time such policies shall be reallocated to the underwriting year in
effect as of such date as provided in subparagraphs 2 and 3 above.

ARTICLE III - TERRITORY

The liability of the Reinsurer shall be limited to losses under policies
covering property located within the territorial limits of the United States of
America, its territories or possessions, and the District of Columbia; but this
limitation shall not apply to moveable property if the Company's policies
provide coverage when said moveable property is outside the aforesaid
territorial limits.

ARTICLE IV - EXCLUSIONS

A. This Contract does not apply to and specifically excludes the following:

1. Business accepted by the Company as reinsurance from other insurers
except Agency Reinsurance where risk underwriting and all servicing,
including claim handling, is done by the Company.

2. Any loss or liability accruing to the Company directly or indirectly
from any insurance written by or through any pool or association
including pools or associations in which membership by the Company
is required under any statutes or regulations.

3. 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.

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"Insolvency Fund" includes any guarantee fund, insolvency fund,
plan, pool, association, fund or other arrangement, howsoever
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.

4. 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.

5. Insurance against earthquake, when written as such.

6. Insurance on growing crops, however, this exclusion shall not apply
to greenhouses and their contents with insured values of $150,000 or
less.

7. Insurance against flood, surface water, waves, tidal water or tidal
wave, overflow of streams or other bodies of water or spray from any
of the foregoing, all whether driven by wind or not, when written as
such.

8. Liability under coverage afforded for loss or damage resulting from
failure to account or pay for any goods or merchandise sold on
credit, delivered under deferred payment agreements, consigned for
sale or delivered under any trust or floor plan agreements, except
under standard accounts receivable policies.

9. Boiler and Machinery, when written as such.

10. Mortgage impairment insurance and similar kinds of insurance,
howsoever styled.

11. Difference in conditions insurance and similar kinds of insurance,
howsoever styled.

12. Risks which have a total insurable value of more than $250,000,000.

13. Mobile homes unless written as part of a Commercial Multiple Peril
policy.

14. Loss and/or damage and/or costs and/or expenses arising from seepage
and/or pollution and/or contamination, other than contamination from
smoke. Nevertheless, this exclusion does not preclude payment of the
cost of removing debris of property damaged by a loss otherwise
covered hereunder, subject always to a limit of 25% of the Company's
property loss under the applicable original policy.

15. Fidelity and Surety Business.

16. Satellites.

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17. Ocean Marine when written as such.

18. Inland Marine business with respect to the following:

a. All bridges and tunnels;

b. Cargo insurance when written as such with respect to ocean,
lake, or inland waterways vessels;

c. Commercial negative film insurance and cast insurance;

d. Stationary drilling rigs;

e. Furriers' customers' policies;

f. Garment contractors' policies;

g. Insurance on livestock under so-called "mortality policies";

h. Jewelers' block policies and furriers' block policies;

i. Mining equipment;

j. Registered mail insurance when the limit of any one addressee
on any one day is more than $50,000;

k. Watercraft other than watercraft insured under property
floaters, yacht and/or outboard policies provided they are
less than 50 feet in length;

l. Petrochemical and utility risks;

m. Transmission and distribution lines.

19. Nuclear risks as defined in the "Nuclear Incident Exclusion
Clause-Physical Damage Reinsurance" attached to and forming part of
this Contract.

20. Railroad business, specifically insurance for "line" or "track"
operations of actual railroads.

21. Oil and gas risks, by which is meant drilling rigs, exploration
risks, cracking plants, refineries and depots, oil and gas
pipelines, offshore oil and gas properties.

B. If, without the knowledge of a member of the Company's underwriting
department, the Company becomes bound on a risk specifically excluded from
this Contract, such

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reinsurance as would have been afforded for the risk by this Contract if
the risk had not been excluded shall nevertheless apply to such risk with
respect to losses occurring prior to the 66th day (60 discovery days plus
5 mailing days) after discovery by a member of such underwriting
department of the existence of the hazard which makes the exclusion
applicable. In case, within such 65 day period (60 discovery days plus 5
mailing days), the Company shall have forwarded to the Reinsurer complete
underwriting information and shall have received from the Reinsurer
written notice of its approval of the risk for the policy period reported,
the risk shall be covered hereunder in the same manner as if such risk
were not so excluded, subject, however, to the terms of such notice of
approval.

ARTICLE V - RETENTION AND LIMIT

A. As respects business subject to this Contract, the Company shall retain
and be liable for 30.0% of its net liability. The Company shall cede to
the Reinsurer and the Reinsurer agrees to accept 70.0% of the Company's
net liability.

B. Notwithstanding the provisions of paragraph A above, the liability of the
Reinsurer for loss hereunder shall not exceed $15,000,000 each loss
occurrence.

C. The term 'loss occurrence' shall mean the sum of all individual losses
directly occasioned by any one disaster, accident or loss or series of
disasters, accidents or losses arising out of one event which occurs
within the area of one state of the United States or province of Canada
and states or provinces contiguous thereto and to one another. However,
the duration and extent of any one 'loss occurrence' shall be limited to
all individual losses sustained by the Company occurring during any period
of 168 consecutive hours arising out of and directly occasioned by the
same event, except that the term "loss occurrence" shall be further
defined as follows:

1. As regards windstorm, hail, tornado, hurricane, cyclone, including
ensuing collapse and water damage, all individual losses sustained
by the Company occurring during any period of 72 consecutive hours
arising out of and directly occasioned by the same event. However,
the event need not be limited to one state or province or states or
provinces contiguous thereto.

2. As regards riot, riot attending a strike, civil commotion, vandalism
and malicious mischief, all individual losses sustained by the
Company occurring during any period of 72 consecutive hours within
the area of one municipality or county and the municipalities or
counties contiguous thereto arising out of and directly occasioned
by the same event. The maximum duration of 72 consecutive hours may
be extended in respect of individual losses which occur beyond such
72 consecutive hours during the continued occupation of an assured's
premises by strikers, provided such occupation commenced during the
aforesaid period.

3. As regards earthquake (the epicentre of which need not necessarily
be within the territorial confines referred to in paragraph A of
this Article) and fire following directly

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occasioned by the earthquake, only those individual fire losses
which commence during the period of 168 consecutive hours may be
included in the Company's 'loss occurrence.'

4. As regards 'freeze,' only individual losses directly occasioned by
collapse, breakage of glass and water damage (caused by bursting
frozen pipes and tanks and melting snow) may be included in the
Company's 'loss occurrence.'

Except for those 'loss occurrences' referred to in subparagraphs 1 and 2
above, the Company may choose the date and time when any such period of
consecutive hours commences, provided that it is not earlier than the date
and time of the occurrence of the first recorded individual loss sustained
by the Company arising out of that disaster, accident or loss, and
provided that only one such period of 168 consecutive hours shall apply
with respect to one event.

However, as respects those 'loss occurrences' referred to in subparagraphs
1 and 2 above, if the disaster, accident or loss occasioned by the event
is of greater duration than 72 consecutive hours, then the Company may
divide that disaster, accident or loss into two or more 'loss
occurrences,' provided that no two periods overlap and no individual loss
is included in more than one such period, and provided that no period
commences earlier than the date and time of the occurrence of the first
recorded individual loss sustained by the Company arising out of that
disaster, accident or loss.

It is understood that losses arising from a combination of two or more
perils as a result of the same event shall be considered as having arisen
from one 'loss occurrence.' Notwithstanding the foregoing, the hourly
limitations as stated above shall not be exceeded as respects the
applicable perils and no single 'loss occurrence' shall encompass a time
period greater than 168 consecutive hours."

ARTICLE VI - LOSS IN EXCESS OF POLICY LIMITS/ECO

A. In the event the Company pays or is held liable to pay an amount of loss
in excess of its policy limit (bailee coverage only), but otherwise within
the terms of its policy (hereinafter called "loss in excess of policy
limits") or any punitive, exemplary, compensatory or consequential
damages, other than loss in excess of policy limits (hereinafter called
"extra contractual obligations") because of alleged or actual bad faith or
negligence on its part in rejecting a settlement within policy limits, or
in discharging its duty to defend or prepare the defense in the trial of
an action against its policyholder, or in discharging its duty to prepare
or prosecute an appeal consequent upon such an action, or in otherwise
handling a claim under a policy subject to this Contract, 90% of the loss
in excess of policy limits and/or 90% of the extra contractual obligations
shall be added to the (Company's loss, if any, under the policy involved,
and the sum thereof (not exceeding, however, $2,000,000) shall be subject
to the provisions of Article V.

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B. An extra contractual obligation shall be deemed to have occurred on the
same date as the loss covered or alleged to be covered under the policy.

C. Notwithstanding anything stated herein, this Contract shall not apply to
any loss in excess of policy limits or any extra contractual obligation
incurred by the Company as a result of any fraudulent and/or criminal act
by any officer or director of the Company acting individually or
collectively or in collusion with any individual or corporation or any
other organization or party involved in the presentation, defense or
settlement of any claim covered hereunder.

D. Recoveries from any form of insurance or reinsurance which protects the
Company against claims the subject matter of this Article shall inure to
the benefit of this Contract.

ARTICLE VII - OTHER REINSURANCE

A. The Company shall have the option to purchase excess of loss reinsurance
to protect its net, recoveries under which to inure solely to the benefit
of the Company and be entirely disregarded in applying all of the
provisions of this Contract.

B. The Company shall purchase or be deemed to have purchased inuring excess
facultative reinsurance to limit its loss subject hereto (inclusive of
loss in excess of policy limits and extra contractual obligations) to
$2,000,000 each risk, each loss.

ARTICLE VIII - LOSSES AND LOSS ADJUSTMENT EXPENSES

A. Losses shall be reported by the Company in summary form as hereinafter
provided, however, whenever a loss is reserved by the Company for an
amount greater than $100,000, the Company shall notify the Reinsurer. The
Reinsurer shall have the right to participate in the adjustment of losses
subject to this Contract at its own expense.

B. All loss settlements made by the Company, whether under strict policy
conditions or by way of compromise, shall be binding upon the Reinsurer,
and the Reinsurer agrees to pay or allow, as the case may be, its
proportion of each such settlement in accordance with Article XIV. It is
agreed, however, that if the Company's gross loss is equal to or greater
than $100,000, the Reinsurer shall pay its share of said loss as
promptly as possible after receipt of reasonable evidence of the amount
paid (or scheduled to be paid) by the Company.

C. In the event of a claim under a policy subject hereto, the reinsurer shall
be liable for its proportionate share of loss adjustment expenses incurred
by the Company in connection therewith, and shall be credited with its
proportionate share of any recoveries of such expense.

D. "Loss adjustment expense" means all costs and expenses allocable to a
specific claim that are incurred by the Company in the investigation,
appraisal, adjustment, settlement, litigation, defense or appeal of a
specific claim, including court costs and costs of

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supersedes and appeal bonds, and including 1) prejudgment interest, unless
included as part of the award or judgment; 2) postjudgment interest; 3)
legal expenses and costs incurred in connection with coverage questions
and legal actions connected thereto; and 4) a pro rata share of salaries
and expenses of Company field employees, and expenses of other Company
employees who have been temporarily diverted from their normal and
customary duties and assigned to the field adjustment of losses covered by
this Contract. Loss adjustment expense does not include unallocated loss
adjustment expense. Unallocated loss adjustment expense includes, but is
not limited to, salaries and expenses of employees, other than (4) above
and office and other overhead expenses.

ARTICLE IX - ALTERNATE PAYEE

A. It is understood that in order to make the Company's policies generally
acceptable to certain mortgagees and lending institutions, ▇▇▇▇▇▇▇ Global
Reinsurance Corporation of America, New York, New York (hereinafter
referred to as "▇▇▇▇▇▇▇ Global") has agreed to issue supplemental
reinsurance endorsements which guarantee that ▇▇▇▇▇▇▇ Global will pay
valid claims under any of the Company's policies to which said
endorsements are attached if the Company fails to pay because of its
insolvency.

B. Now, therefore, it is agreed that if ▇▇▇▇▇▇▇ Global, under the provisions
of a supplemental reinsurance endorsement, pays or becomes liable to pay
any claim or claims under any policy or policies subject to this Contract,
▇▇▇▇▇▇▇ Global shall be substituted for the Company as payee of any
reinsurance recoverable hereunder in respect of such claim or claims, and
the Reinsurer, upon notice from ▇▇▇▇▇▇▇ Global, shall make payment thereof
directly to ▇▇▇▇▇▇▇ Global.

C. In the event the foregoing provisions apply, all the other provisions of
this Contract shall apply to ▇▇▇▇▇▇▇ Global in the same manner as if
▇▇▇▇▇▇▇ Global were substituted for the Company as the reinsured party
hereunder, and to the extent this Contract reinsures ▇▇▇▇▇▇▇ Global,
coverage hereunder shall be excluded as respects the Company.

ARTICLE X - SALVAGE AND SUBROGATION

The Reinsurer shall be credited with its proportionate share of salvage (i.e.,
reimbursement obtained or recovery made by the Company, less the actual cost,
excluding salaries officials and employees of the Company and sums paid to
attorneys as retainer, of obtaining such reimbursement or making such recovery)
on account of claims and settlements involving reinsurance hereunder.

ARTICLE XI - ORIGINAL CONDITIONS

A. All reinsurance under this Contract shall be subject to the same rates,
terms, conditions and waivers, and to the same modifications and
alterations as the respective policies of the

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Company. The Reinsurer shall be credited with its exact proportion of the
original premiums collected by the Company, prior to disbursement of any
dividends, but after deduction of premiums, if any, ceded by the Company
for inuring reinsurance.

B. Except as provided in Article IX, nothing herein shall in any manner
create any obligations or establish any rights against the Reinsurer in
favor of any third party or any persons not parties to this Contract.

ARTICLE XII - PROVISIONAL CEDING COMMISSION

The Reinsurer shall allow the Company a 37.5% provisional commission on all
premiums ceded to the Reinsurer hereunder. The Company shall allow the Reinsurer
return commission on return premiums at the same rate.

ARTICLE XIII - COMMISSION ADJUSTMENT

A. The provisional commission allowed the Company shall be adjusted
periodically for each underwriting year in accordance with the provisions
set forth herein. The adjusted commission rate shall be calculated as
follows and be applied to premiums earned for the underwriting year under
consideration:

1. If the ratio of losses incurred to premiums earned is 67.5% or
greater, the adjusted commission rate for the underwriting year
under consideration shall be 25.0%;

2. If the ratio of losses incurred to premiums earned is less than
67.5%, but not less than 55.0%, the adjusted commission rate for the
underwriting year under consideration shall be 25.0%, plus the
difference in percentage points between 67.5% and the actual ratio
of losses incurred to premiums earned;

3. If the ratio of losses incurred to premiums earned is less than
55.0%, but not less than 45.0%, the adjusted commission rate for the
underwriting year under consideration shall be 37.5%, plus one-half
the difference in percentage points between 55.0% and the actual
ratio of losses incurred to premiums earned;

4. If the ratio of losses incurred to premiums earned is less than
45.0%, but not less than 40.0%, the adjusted commission rate for the
underwriting year under consideration shall be 42.5%, plus the
difference in percentage points between 45.0% and the actual ratio
of losses incurred to premiums earned;

5. If the ratio of losses incurred to premiums earned is 40.0% or less,
the adjusted commission rate for the underwriting year under
consideration shall be 47.5%.

B. If the ratio of losses incurred to premiums, earned for any underwriting
year is greater than 67.5%, the difference in percentage points between
the actual ratio of losses incurred to

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premiums earned and 67.5% shall be, multiplied by premiums earned for the
underwriting year and the product shall be carried forward to the next
underwriting year as a debit (addition) to losses incurred. If the ratio
of losses incurred to premiums earned for any underwriting year is less
than 40.0%, the difference in percentage points between 40.0% and the
actual ratio of losses incurred to premiums earned shall be multiplied by
premiums earned for the underwriting year and the product shall be carried
forward to the next underwriting year as a credit to (subtraction from)
losses incurred.

C. Within 45 days after the end of each underwriting year the Company shall
calculate and report the adjusted commission on premiums earned for the
underwriting year. If the adjusted commission on premiums earned is less
than commissions previously allowed by the Reinsurer on premiums earned
for the underwriting year, the Company shall remit the difference to the
Reinsurer with its report. If the adjusted commission on premiums earned
is greater than commissions previously allowed by the Reinsurer on
premiums earned for the underwriting year, the Reinsurer shall remit the
difference to the Company as promptly as possible after receipt and
verification of the Company's report.

D. In the event the adjusted commission calculation for any underwriting year
is based partly on ceded reserves for losses and/or loss adjustment
expenses, the adjusted commission shall be recalculated within 45 days
after the end of each subsequent 12-month period until all losses under
policies with effective or renewal dates during the underwriting year have
been settled. Any balance shown to be due either party as a result of any
such recalculation shall be remitted promptly by the other party.

E. "Losses incurred" as used herein shall mean ceded losses and loss
adjustment expenses paid as of the effective date of calculation, plus the
ceded reserves for losses and loss adjustment expenses outstanding as of
the same date, plus (minus) the debit (credit) from the preceding
underwriting year, it being understood and agreed that all losses and
related loss adjustment expenses under policies allocated to the
underwriting year shall be charged to that underwriting year, regardless
of the date said losses actually occur, unless this Contract is terminated
on a "cutoff" basis, in which event the Reinsurer shall have no liability
for losses occurring after the effective date of termination.

F. "Premiums earned" as used herein shall mean ceded net written premiums for
policies allocated to the underwriting year, less the unearned portion
thereof as of the effective date of calculation, it being understood and
agreed that all premiums for policies allocated to an underwriting year
shall be credited to that underwriting year, unless this Contract is
terminated on a "cutoff" basis, in which event the unearned reinsurance
premium (less previously allowed provisional ceding commission) as of the
effective date of termination shall be returned by the Reinsurer to the
Company.

G. It is expressly agreed that the ceding commission allowed the Company
includes provision for all dividends, commissions and taxes, and all
board, exchange and bureau assessments, and all other expenses of whatever
nature, except loss adjustment expenses.

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ARTICLE XIV - REPORTS AND REMITTANCES

A. Within 45 days after the end of each month, the Company shall report to
the Reinsurer:

1. Ceded net written premium for the month by underwriting year;

2. Collected subject premium for the month by underwriting year;

3. Provisional ceding commission allowed on (2) above;

4. Ceded losses and loss adjustment expenses paid during the month (net
of any recoveries during the calendar month under the "cash call"
provisions of Article VIII);

5. Ceded unearned premiums and ceded outstanding loss reserves as of
the end of the month.

The positive balance of (2) less (3) less (4) shall be remitted by the
Company with its report. Any balance shown to be due the Company shall be
remitted by the Reinsurer as promptly as possible after receipt and
verification of the Company's report.

B. Annually, the Company shall furnish the Reinsurer with such information as
the Reinsurer may require to complete its Annual Convention Statement.

ARTICLE XV - OFFSET (BRMA 36C)

The Company and the Reinsurer shall have the right to offset any balance or
amounts due from one party to the other under the terms of this Contract. The
party asserting the right of offset may exercise such right any time whether the
balances due are on account of premiums or losses or otherwise.

ARTICLE XVI - ACCESS TO RECORDS (BRMA 1D)

The Reinsurer or its designated representatives shall have access at any
reasonable time to all records of the Company which pertain in any way to this
reinsurance.

ARTICLE XVII - ERRORS AND OMISSIONS (BRMA 14F)

Inadvertent delays, errors or omissions made in connection with this Contract or
any transaction hereunder shall not relieve either party from any liability
which would have attached had such delay, error or omission not occurred,
provided always that such error or omission will be rectified as soon as
possible after discovery.

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ARTICLE XVIII - TAXES (BRMA 50B)

In consideration of the terms under which this Contract is issued, the Company
will not claim a deduction in respect of the premium hereon when making tax
returns, other than income or profits tax returns, to any state or territory of
the United States of America or the District of Columbia

ARTICLE XIX - UNAUTHORIZED REINSURERS

A. If the Reinsurer is unauthorized in any state of the United States of
America or the District of Columbia, the Reinsurer agrees to fund its
share of the Company's ceded unearned premium and outstanding loss and
loss adjustment expense reserves (including incurred but not reported loss
reserves) by:

1. Clean, irrevocable and unconditional letters of credit issued and
confirmed, if confirmation is required by the insurance regulatory
authorities involved, by a bank or banks meeting the NAIC Securities
Valuation Office credit standards for issuers of letters of credit
and acceptable to said insurance regulatory authorities; and/or

2. Escrow accounts for the benefit of the Company; and/or

3. Cash advances;

if, without such funding, a penalty would accrue to the Company on any
financial statement it is required to file with the insurance regulatory
authorities involved. The Reinsurer, at its sole option, may fund in other
than cash if its method and form of funding are acceptable to the
insurance regulatory authorities involved.

B. With regard to funding in whole or in part by letters of credit, it is
agreed that each letter of credit will be in a form acceptable to
insurance regulatory authorities involved, will be issued for a term of at
least one year and will include an "evergreen clause," which automatically
extends the term for at least one additional year at each expiration date
unless written notice of non-renewal is given to the Company not less than
30 days prior to said expiration date. The Company and the Reinsurer
further agree, notwithstanding anything to the contrary in this Contract,
that said letters of credit may be drawn upon by the Company or its
successors in interest at any time, without diminution because of the
insolvency of the Company or the Reinsurer, but only for one or more of
the following purposes:

1. To reimburse itself for the Reinsurer's share of unearned premiums
returned to insureds on account of policy cancellations, unless paid
in cash by the Reinsurer;

2. To reimburse itself for the Reinsurer's share of losses and/or loss
adjustment expenses paid under the terms of policies reinsured
hereunder, unless paid in cash by the Reinsurer;

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3. To reimburse itself for the Reinsurer's share of any other amounts
claimed to be due hereunder, unless paid in cash by the Reinsurer;

4. To fund a cash account in an amount equal to the Reinsurer's share
of any ceded unearned premium and/or outstanding loss and loss
adjustment expense reserves (including incurred but not reported
loss reserves) funded by means of a letter of credit which is under
non-renewal notice, if said letter of credit has not been renewed or
replaced by the Reinsurer 10 days prior to its expiration date;

5. To refund to the Reinsurer any sum in excess of the actual amount
required to fund the Reinsurer's share of the Company's ceded
unearned premium and/or outstanding loss and loss adjustment expense
reserves (including incurred but not reported loss reserves), if so
requested by the Reinsurer.

In the event the amount drawn by the Company on any letter of credit is in
excess of the actual amount required for B(1), B(2) or B(4), or in the
case of B(3), the actual amount determined to be due, the Company shall
promptly return to the Reinsurer the excess amount so drawn.

Article XX - INSOLVENCY

A. In the event of the insolvency of the Company, this reinsurance shall be
payable directly to the Company or to its liquidation, receiver,
conservator or statutory successor immediately upon demand, with
reasonable provision for verification, on the basis of the liability of
the Company without diminution because of the insolvency of the Company or
because the liquidator, receiver, conservator or statutory successor of
the Company has failed to pay all or a portion of any claim. It is agreed,
however, that the liquidator, receiver, conservator or statutory successor
of the Company shall give written notice to the Reinsurer of the pendency
of a claim against the Company indicating the policy or bond reinsured
which claim would involve a possible liability on the part of the
Reinsurer within a reasonable time after such claim is filed in the
conservation or liquidation proceeding or in the receivership, and that
during the pendency of such claim, the Reinsurer may investigate such
claim and interpose, at its own expense, in the proceeding where such
claim is to be adjudicated, any defense or defenses that it may deem
available to the Company or its liquidator, receiver, conservator or
statutory successor. The expense thus incurred by the Reinsurer shall be
chargeable, subject to the approval of the Court, against the Company as
part of the expense of conservation or liquidation to the extent of a pro
rata share of the benefit which may accrue to the Company solely as a
result of the defense undertaken by the Reinsurer.

B. Where two or more reinsurers are involved in the same claim and a majority
in interest elect to interpose defense to such claim, the expense shall be
apportioned in accordance with the terms of this Contract as though such
expense had been incurred by the Company.

C. It is further understood and agreed that, in the event of the insolvency
of the Company, the reinsurance under this Contract shall be payable
directly by the Reinsurer to the Company or

Page 13
14
to its liquidator, receiver or statutory successor, except as provided by
Section 4118(a) of the New York Insurance Law or except (a) where this
Contract specifically provides another payee of such reinsurance in the
event of the insolvency of the Company or (b) where the Reinsurer with the
consent of the direct insured or insureds has assumed such policy
obligations of the Company as direct obligations of the Reinsurer to the
payees under such policies and in substitution for the obligations of the
Company to such payees.

D. Any hold harmless and indemnity agreement affecting payment under this
Contract shall be considered an endorsement to and therefore part of this
Contract, irrespective of any language to the contrary. Any indemnitee
shall be considered a 'payee' within this Article. In no event shall any
reinsurer have double indemnity for any loss or expense under this
Contract, it being the intent that any payments by the reinsurer to any
payee as provided herein shall not be subject to and also collectible in
any liquidation or similar proceeding.

ARTICLE XXI - ARBITRATION

A. As a condition precedent to any right of action hereunder, in the event of
any dispute or difference of opinion hereafter arising with respect to
this Contract, it is hereby mutually agreed that such dispute or
difference of opinion shall be submitted to arbitration. One Arbiter shall
be chosen by the Company, the other by the Reinsurer, and an Umpire shall
be chosen by the two Arbiters before they enter upon arbitration, all of
whom shall be active or retired disinterested executive officers of
insurance or reinsurance companies or ▇▇▇▇▇'▇ London Underwriters. In the
event that either party should fail to choose an Arbiter within 30 days
following a written request by the other party to do so, the requesting
party may choose two Arbiters who shall in turn choose an Umpire before
entering upon arbitration. If the two Arbiters fail to agree upon the
selection of an Umpire within 30 days following their appointment, each
Arbiter shall nominate three candidates within 10 days thereafter, two of
whom the other shall decline, and the decision shall be made by drawing
lots.

B. Each party shall present its case to the Arbiters within 30 days following
the date of appointment of the Umpire. The Arbiters shall consider this
Contract as an honorable engagement rather than merely as a legal
obligation and they are relieved of all judicial formalities and may
abstain from following the strict rules of law. The decision of the
Arbiters shall be final and binding on both parties; but failing to agree,
they shall call in the Umpire and the decision of the majority shall be
final and binding upon both parties. Judgment upon the final decision of
the Arbiters may be entered in any court of competent jurisdiction.

C. If more than one reinsurer is involved in the same dispute, all such
reinsurers shall constitute and act as one party for purposes of this
Article and communications shall be made by the Company to each of the
reinsurers constituting one party, provided, however, that nothing herein
shall impair the rights of such reinsurers to assert several, rather than
joint, defenses or claims, nor be construed as changing the liability of
the reinsurers participating under the terms of this Contract from several
to joint.

Page 14
15
D. Each party shall bear the expense of its own Arbiter, and shall jointly
and equally bear with the other the expense of the Umpire and of the
arbitration. In the event that the two Arbiters are chosen by one party,
as above provided, the expense of the Arbiters, the Umpire and the
arbitration shall be equally divided between the two parties.

E. Any arbitration proceedings shall take place in Sacramento, California,
but notwithstanding the location of the arbitration, all proceedings
pursuant hereto shall be governed by the law of the State of California.

ARTICLE XXII - SERVICE OF SUIT (BRMA 49C)

(Applicable if the Reinsurer is not domiciled in the United States of America,
and/or is not authorized in any State, Territory or District of the United
States where authorization is required by insurance regulatory authorities)

A. It is agreed that in the event the Reinsurer fails to pay any amount
claimed to be due hereunder, the Reinsurer, at the request of the Company,
will submit to the jurisdiction of any court of competent jurisdiction
within the United States. Nothing in this Article constitutes or should be
understood to constitute a waiver of the Reinsurer's rights to commence an
action in any court of competent jurisdiction in the United States, to
remove an action to a United States District Court, or to seek a transfer
of a case to another court as permitted by the laws of the United States
or of any state in the United States.

B. Further, pursuant to any statute of any state, territory or district of
the United States which makes provision therefor, the Reinsurer hereby
designates the party named in its Interests and Liabilities Agreement, or
if no party is named therein, the Superintendent, Commissioner or Director
of Insurance or other officer specified for that purpose in the statute,
or his successor or successors in office, as its true and lawful attorney
upon whom may be served any lawful process in any action, suit or
proceeding instituted by or on behalf of the Company or any beneficiary
hereunder arising out of this Contract.

ARTICLE XXIII - INTERMEDIARY

▇. ▇. ▇▇▇▇▇▇ Co. is hereby recognized as the Intermediary negotiating this
Contract for all business hereunder. All communications (including but not
limited to notices, statements, premium, return premium, commissions, taxes,
losses, loss adjustment expense, salvages and loss settlements) relating thereto
shall be transmitted to the Company or the Reinsurer through ▇. ▇. ▇▇▇▇▇▇ Co.,
Reinsurance Services, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
Payments by the Company to the Intermediary shall be deemed to constitute
payment to the Reinsurer. Claims notice by the Company to the Intermediary shall
be deemed to constitute notice to the Reinsurer. Payments by the Reinsurer to
the Intermediary shall be deemed to constitute payment to the Company only to
the extent that such payments are actually received by the Company.

Page 15
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FIRST EXCESS CASUALTY
REINSURANCE CONTRACT
EFFECTIVE: JANUARY 1, 1997
TERMS EFFECTIVE: JANUARY 1, 1998

Financial Pacific Insurance Company
Sacramento, California
(hereinafter referred to as the "Company")

REINSURANCE CONFIRMATION SLIP

ARTICLE I - CLASSES OF BUSINESS REINSURED

A. By this Contract the Reinsurer agrees to reinsure the excess liability
which may accrue to the Company under its policies, contracts and binders
of insurance or reinsurance (hereinafter called "policies") issued or
renewed on or after the effective date hereof, and classified by the
Company as Commercial Multiple Peril (Section II) and Automobile Liability
business, subject to the terms, conditions and limitations hereinafter set
forth.

B. It is understood that the classes of business reinsured under this
Contract are deemed to include:

1. Coverages required for non-resident drivers under the motor vehicle
financial responsibility law or the motor vehicle compulsory
insurance law or any similar law of any state or province, following
the provisions of the Company's policies when they include or are
deemed to include so-called "Out of State Insurance" provisions;

2. Coverages required under Section 30 of the Motor Carrier Act of 1980
and/or any amendments thereto.

ARTICLE II - COMMENCEMENT AND TERMINATION

A. This Contract shall become originally effective on January 1, 1997, with
respect to losses arising under policies allocated to underwriting years
commencing on or after that date, and shall continue in force thereafter
until terminated.

B. Either party may terminate this Contract on December 31, 1998 or any other
December 31 thereafter, by giving the other party not less than 90 days
prior notice by certified mail.

C. Notwithstanding the provisions of paragraph B, it is understood and agreed
that this Contract may be terminated on a "runoff" or "cutoff" basis, as
defined in paragraph D below, by

Page 1
17
giving 30 days notice prior to each quarter end by certified mail to the
other party upon the happening of any one of the following circumstances:

1. Either party may terminate this Contract if the other party is sold
during the 1997 calendar year;

2. Either party may terminate this Contract if the other party's A. M.
Best rating drops below A-;

3. The Company may terminate any reinsurers participation at any time
if the policyholders surplus of that respective reinsurer drops more
than 10% from the prior year end surplus level;

4. The Reinsurer may terminate this Contract at any time if the
Company's policyholders surplus drops below $5 million.

D. Unless the Company elects to reassume the ceded unearned premium in force
on the effective date of termination, and so notifies the Reinsurer prior
to or as promptly as possible after the effective date of termination,
reinsurance hereunder on business in force on the effective date of
termination shall remain in full force and effect until expiration,
cancellation or next premium anniversary of such business, whichever first
occurs, but in no event beyond 12 months following the effective date of
termination.

E. "Underwriting year" as used herein shall mean the period from January 1,
1997 through December 31, 1997, and each subsequent 12-month period shall
be a separate underwriting year. However, in the event this Contract is
terminated, the final underwriting year shall be from the beginning of the
then current underwriting year through the effective date of termination.
All premiums and losses from policies allocated to an underwriting year
shall be credited or charged, respectively, to such underwriting year,
regardless of the date said premiums earn or such losses occur, it being
understood that a policy will be allocated to the underwriting year which
is in effect as of:

1. As respects all new policies, the effective date of such policies;

2. As respects renewals of one year or less term policies, the renewal
date of such policies;

3. As respects continuous or greater than one year term policies, the
premium anniversary date of such policies.

Page 2
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ARTICLE III - TERRITORY

This Contract shall only apply to policies issued to insureds domiciled in the
United States of America, its territories and possessions and the District of
Columbia; but this limitation shall not apply to losses if the Company's
policies provide coverage outside the aforesaid territorial limits.

ARTICLE IV - EXCLUSIONS

A. This Contract does not apply to and specifically excludes the following:

1. Business accepted by the Company as reinsurance from other insurers
except agency reinsurance where risk underwriting and all servicing,
including claim handling, is done by the Company.

3. 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
guarantee fund, insolvency fund, plan, pool, association, fund or
other arrangement, howsoever 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.

5. Business written to apply in excess of a deductible or self-insured
amount of more than $100,000, including Umbrella business.

6. Aviation liability including aerospace and satellite business.

7. Workers' Compensation business, including Longshoremen's and Harbor
Workers' Act and ▇▇▇▇▇ Act.

8. Kidnap and ▇▇▇▇▇▇, Surety, Credit, Financial Guarantee or Fiduciary
Insurance.

9. Retail liquor law liability except where liquor constitutes less
than 50% of sales. Specifically excluded are bars and retail liquor
stores.

Page 3
19
10. Insurance covering damage claims for the withdrawal, inspection,
repair, replacement, or loss of use of the insured's products or of
any property of which such products form a part of, or if such
products or property are withdrawn from the market or from use
because of any known or suspected defect or deficiency therein.

11. Liabilities for bodily injury, personal damage and/or property
damage from asbestos and/or asbestos products, including but not
limited to liability arising from the mining, manufacture,
installation, transport, storage, habitation or use of materials,
products or structure containing asbestos.

12. Any loss or liability accruing to the Company arising out of the
Employee Retirement Income Security Act of 1974 (ERISA), or
amendments thereto.

13. Fidelity and Surety.

14. Watercraft liability except for boats less than 50 feet in length.

15. All professional liability and/or malpractice insurance except as
pertains to ▇▇▇▇▇▇ and beauty shops, funeral directors, druggists,
opticians and optometrists.

16. Liability insurance relating to products or completed operations
involving the manufacture or importation of:

a. Cosmetics, hair or skin products;

b. Drugs, pharmaceuticals or agricultural chemicals;

c. Aircraft, aircraft parts or aircraft engines, all motorized
vehicles, or mobile equipment;

d. Heavy machinery and equipment, home power tools, or oil
drilling equipment.

17. Liability insurance relating to premises or operations primarily
involving:

a. Aircraft or airports, as respects coverage for all liability
arising out of the ownership, maintenance, or use of any
aircraft or flight operations;

b. Amusement parks, carnivals, circuses, speed contests and
racing;

c. Manufacturing, packing, handling, shipping or storage of
explosives, ammunitions, fuses, arms, magnesium, fireworks,
nitroglycerin, celluloid, pyroxylin or explosive substances
intended for use as an explosive;

d. Gas or public utility companies, gas or public utility works,
or gas lease operations;

Page 4
20
e. Production, refining, handling, shipping or storage of natural
or artificial fuel gases, synthetic or coal or shale based
fuel, butane, propane, gasoline or liquefied petroleum gas;

f. Oil and gas risks, by which is meant drilling rigs,
exploration risks, cracking plants, refineries and depots, and
oil and gas pipelines;

g. Railroad operations, specifically "line" or "on track"
operations of actual railroads;

h. Ship building, ship repair yard, dry docks, stevedoring;

i. Tunneling, subway and underground mining;

j. Offshore or subaqueous work;

k. Wrecking of structures over eight stories in height, or marine
wrecking;

l. Ski resorts;

m. Waste disposal and deposit sites except when written in
conjunction with either a refuse hauler or recycling account;

▇. ▇▇▇▇▇ rentals without operators whose primary business is
crane rentals;

o. Scaffold installation, repair, removal or rental, unless
incidental;

p. Aerial crop dusting to include application of fertilizers,
herbicides, pesticides;

q. Warehousemen's legal liability;

r. Automobile racing and racetracks;

s. Taxis;

t. Blasting contractors;

u. Licensed roofing contractors whose primary business is such;

v. Wrap up construction projects.

18. Nuclear risks as defined in the "Nuclear Incident Exclusion
Clause-Liability - Reinsurance" attached to and forming part of this
Contract.

Page 5
21
19. Pollution liability as excluded by the Company's policies. It is
hereby warranted that any Commercial General Liability policy issued
by the Company will include ISO pollution exclusion language.

B. If the Company provides insurance for an insured with respect to any
premises, operations, products or completed operations listed in
subparagraphs 16 and 17 of paragraph A above, except subparagraphs 17(c)
and 17(d), and if such premises, operations, products or completed
operations constitute only a minor incidental part of the total premises,
operations, products or completed operations of the insured, such
exclusion(s) shall not apply.

C. If the Company is bound, without the knowledge of and contrary to the
instructions of the Company's supervisory underwriting personnel, on any
business falling within the scope of one or more of the exclusions set
forth in subparagraphs 14 through 19 of paragraph A above, these
exclusions, except those set forth in subparagraphs 15, 17(c), 17(d), 18
and 19 shall be suspended with respect to such business until 65 days (60
discovery days plus 5 mailing days) after an underwriting supervisor of
the Company acquires knowledge of such business.

ARTICLE V - RETENTION AND LIMIT

A. If the Company's ultimate net loss as respects any one insured, any one
occurrence is less than or equal to $1,000,000, the following provisions
shall apply:

1. The Company shall retain and be liable for the first $250,000 of
ultimate net loss (whether involving any one or any combination of
the classes of business covered hereunder, regardless of the number
of policies under which such loss is payable) as respects each
insured, each occurrence. The Reinsurer shall then be liable for the
amount by which such ultimate net loss exceeds the Company's
retention, but the liability of the Reinsurer shall not exceed
$750,000 each insured, each occurrence.

2. If the Company's losses arising out of any one occurrence involve
losses under policies allocated to more than one underwriting year,
the Company's retention applicable to such occurrence for each
underwriting year shall be reduced to that portion of the Company's
retention determined by dividing the Company's losses arising out of
the occurrence by the number of underwriting years to which such
policies are allocated with pro rata consideration given depending
on the primary policy limits or reinsurance retention of the
underwriting years affected. The Reinsurer's limit of liability
applicable to such occurrence for each such underwriting year shall
be arrived at in the same manner.

B. If the Company's ultimate net loss as respects any one insured, any one
occurrence exceeds $1,000,000, the Company shall retain and be liable for
the first amount of policy period ultimate net loss (whether involving any
one or any combination of the classes of business covered hereunder,
regardless of the number of policies under which such loss is payable)
equal to 25% of such policy period ultimate net loss, subject to a maximum
retention of

Page 6
22
$250,000 each insured, each occurrence, per each underwriting year
affected. The Reinsurer shall then be liable for 75% of such policy period
ultimate net loss, but the liability of the Reinsurer shall not exceed
$750,000 (being 75% of $1,000,000) each insured, each occurrence, per each
underwriting year affected.

ARTICLE VI - DEFINITIONS

A. "Ultimate net loss" as used herein is defined as the sum or sums
(including loss in excess of policy limits, extra contractual obligations
and loss adjustment expenses, as hereinafter provided) paid or payable by
the Company in settlement of claims and in satisfaction of judgments
rendered on account of such claims, after deduction of all salvage, all
recoveries and all claims on inuring insurance or reinsurance, whether
collectible or not. Nothing herein shall be construed to mean that losses
under this Contract are not recoverable until the Company's ultimate net
loss has been ascertained. Ultimate net loss shall include the following
loss adjustment expenses, as hereinafter defined:

1. Ultimate net loss shall include loss adjustment expenses which
reduce the Company's limit of liability involved;

2. If the Company's ultimate net loss exclusive of loss adjustment
expenses as respects each insured, each occurrence is less than
$250,000, ultimate net loss shall include loss adjustment expenses
incurred by the Company which do not reduce the Company's limit of
liability under the policy involved, but the amount of such loss
adjustment expenses to be included in ultimate net loss shall not
exceed $750,000 as respects each insured, each occurrence.

B. "Policy period ultimate net loss" as used herein is defined as the
Company's ultimate net loss as respects each insured, each occurrence,
divided by the number of policy periods involved in that occurrence.

C. "Policy period" as used herein shall mean the period from the inception or
renewal date of the primary policy through the expiration, termination or
first premium anniversary date of the policy, whichever first occurs. As
respects continuous or greater than one year term policies, each premium
anniversary date shall be considered the beginning of a new policy period.

D. "Loss in excess of policy limits" and "extra contractual obligations" as
used herein shall be defined as follows:

1. "Loss in excess of policy limits" shall mean 90.0% of any amount
paid or payable by the Company in excess of its policy limits, but
otherwise within the terms of its policy, as a result of an action
against it by its insured or its insured's assignee to recover
damages the insured is legally obligated to pay to a third party
claimant because of the Company's alleged or actual negligence or
bad faith in rejecting a settlement within policy limits, or in
discharging its duty to defend or prepare the defense in the trial
of

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23
an action against its insured, or in discharging its duty to prepare or
prosecute an appeal consequent upon such an action.

2. "Extra contractual obligations" shall mean 90.0% of any punitive,
exemplary, compensatory or consequential damages, other than loss in
excess of policy limits, paid or payable by the Company as a result
of an action against it by its insured, its insured's assignee or a
third party claimant, which action alleges negligence or bad faith
on the part of the Company in handling a claim under a policy
subject to this Contract. An extra contractual obligation shall be
deemed to have occurred on the same date as the loss covered or
alleged to be covered under the policy.

Notwithstanding anything stated herein, this Contract shall not apply to
any loss in excess of policy limits or any extra contractual obligation
incurred by the Company as a result of any fraudulent and/or criminal act
by any officer or director of the Company acting individually or
collectively or in collusion with any individual or corporation or any
other organization or party involved in the presentation, defense or
settlement of any claim covered hereunder.

E. "Occurrence" as used herein is defined as an accident or occurrence or a
series of accidents or occurrences arising out of or caused by one event.
However, as respects policies where the Company's limit of liability for
Products and Completed Operations coverages is determined on the basis of
the insured's aggregate losses during a policy period, all such losses
proceeding from or traceable to the same causative agency shall, at the
Company's option, be deemed to have been caused by one occurrence
commencing at the beginning of the policy period, it being understood and
agreed that each renewal or annual anniversary date of the policy involved
shall be deemed the beginning of a new policy period.

F. "Loss adjustment expense" means all costs and expenses allocable to a
specific claim that are incurred by the Company in the investigation,
appraisal, adjustment, settlement, litigation, defense or appeal of a
specific claim, including court costs and costs of supersedeas and appeal
bonds, and including 1) prejudgment interest, unless included as part of
the award or judgment; 2) postjudgment interest; 3) legal expenses and
costs incurred in connection with coverage questions and legal actions
connected thereto; and 4) a pro rata share of salaries and expenses of
Company field employees, and expenses of other Company employees who have
been temporarily diverted from their normal and customary duties and
assigned to the field adjustment of losses covered by this Contract. Loss
adjustment expense does not include unallocated loss adjustment expense.
Unallocated loss adjustment expense includes, but is not limited to,
salaries and expenses of employees, other than (4) above and office and
other overhead expenses.

ARTICLE VII - CLAIMS AND LOSS ADJUSTMENT EXPENSES

A. Whenever a claim is reserved by the Company for an amount greater than
50.0% of its retention hereunder and/or whenever a claim appears likely to
result in a claim under this Contract, the Company shall notify the
Reinsurer. The Reinsurer shall have the right to participate, at its own
expense, in the defense or control of any claim or suit or proceeding
involving this reinsurance.

Page 8
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B. All claim settlements made by the Company, provided they are within the
terms of this Contract, shall be binding upon the Reinsurer, and the
Reinsurer agrees to pay all amounts for which it may be liable upon
receipt of reasonable evidence of the amount paid by the Company.

C. In the event of loss hereunder for which the Company's ultimate net loss
exclusive of loss adjustment expenses as respects each insured, each
occurrence is greater than or equal to $250,000, loss adjustment expenses
incurred by the Company in connection therewith which do not reduce the
Company's limit of liability under the policy involved shall be shared by
the Company and the Reinsurer in the proportion the ultimate net loss paid
or payable by the Reinsurer bears to the total loss paid or payable by the
Company, prior to any reinsurance recoveries, but after deduction of all
salvage, subrogation and other recoveries. However, if a verdict or
judgment is reduced by any process other than by the trial court,
resulting in an ultimate saving to the Reinsurer, or a judgment is
reversed outright, the expenses incurred in securing such reduction or
reversal shall be shared by the Company and the Reinsurer in the
proportion that each benefits from such reduction or reversal, and the
expenses incurred up to the time of the original verdict or judgment which
do not reduce the Company's limit of liability under the policy involved
shall be shared in proportion to each party's interest in such original
verdict or judgment. The Reinsurer's liability for such loss adjustment
expenses shall be in addition to its liability for ultimate net loss.

ARTICLE VIII - SALVAGE AND SUBROGATION

The Reinsurer shall be credited with salvage (i.e., reimbursement obtained or
recovery made by the Company, less the actual cost, excluding salaries of
officials and employees of the Company and sums paid to attorneys as retainer,
of obtaining such reimbursement or making such recovery) on account of claims
and settlements involving reinsurance hereunder. Salvage thereon shall always be
used to reimburse the excess carriers in the reverse order of their priority
according to their participation before being used in any way to reimburse the
Company for its primary loss.

ARTICLE IX - PROVISIONAL PREMIUM

A. As provisional premium for the reinsurance provided hereunder for each
underwriting year, the Company shall pay the Reinsurer 16.0% of its net
written premium for the underwriting year.

B. Within 45 days after the end of each month within each underwriting year,
the Company shall report its net written premium for the month. The
provisional premium due the Reinsurer shall be paid by the Company with
its report at the rate shown in paragraph A, multiplied by the actual
amount of premium collected by the Company during the month from policies
allocated to the underwriting year.

Page 9
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ARTICLE X - PREMIUM ADJUSTMENT

A. The provisional premium paid by the Company shall be adjusted periodically
in accordance with the provisions set forth herein. The first adjustment
period shall be from the effective date of this Contract through December
31, 1999, and each subsequent 36-month period shall be a separate
adjustment period, unless this Contract is terminated, in which event the
final adjustment period shall be from the beginning of the then current
adjustment period through the date of termination.

B. The adjusted premium for each adjustment period shall be equal to 160% of
the Reinsurer's losses incurred for the adjustment period, plus 5.20% of
the Company's net earned premium for the first underwriting year, plus
4.80% of the Company's net earned premium for each underwriting year
thereafter. However, the adjusted premium for any one adjustment period
shall not exceed an amount equal to 25.60% of the Company's net earned
premium for the adjustment period.

C. The Company shall calculate and report the adjusted premium for each
adjustment period at the following times:

1. Within 45 days after the end of each underwriting year within the
adjustment period;

2. Within 45 days after the end of the adjustment period; and

3. Within 45 days after the end of each 12-month period after the end
of the adjustment period until all losses arising out of occurrences
commencing during the adjustment period have been finally settled.

Each such calculation shall be based on the Reinsurer's losses incurred
and the Company's net earned premium for the adjustment period as of the
date of the calculation.

D. As respects calculations made in accordance with subparagraph (b) or (c)
of subparagraph 3 above, if the adjusted premium is less than reinsurance
premiums previously paid for the adjustment period, the Reinsurer shall
remit the difference to the Company within 45 days after receipt and
verification of the Company's report, subject to the following schedule:

1. 33.33% of the adjusted premium shown to be due as of the calculation
due within 45 days after the end of the adjustment period;

2. 66.67% of the adjusted premium shown to be due as of the calculation
due within 45 days after 12 months after the end of the adjustment
period (less any adjustment premium amounts previously paid);

3. 100.0% of the adjusted premium shown to be due as of the calculation
due within 45 days after 24 months after the end of the adjustment
period (less any adjustment premium amounts previously paid) and as
of the calculation due within 45 days after the end of any 12-month
period thereafter.

Page 10
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It is further agreed that all payments under the provisions of this
paragraph shall be net of ceding commission allowed thereon.

E. "Net written premium" as used herein is defined as gross written premium
of the Company for the Casualty classes of business reinsured hereunder,
less cancellations and return premiums, and less premiums ceded by the
Company for excess facultative reinsurance or other reinsurance which
inures to the benefit of this Contract.

F. "Losses incurred" as used herein shall mean losses and loss adjustment
expense paid by the Reinsurer as of the effective date of calculation,
plus the ceded reserves for losses and loss adjustment expense outstanding
as of the same date, it being understood and agreed that all losses under
policies allocated to underwriting years within an adjustment period shall
be charged to that adjustment period, regardless of the date said losses
actually occur, unless this Contract is terminated on a "cutoff" basis, in
which event the Reinsurer shall have no liability for losses arising out
of occurrences commencing after the effective date of termination under
policies allocated to underwriting years within the final adjustment
period.

G. "Net earned premium" as used herein is defined as the Company's net
written premium for policies allocated to underwriting years within the
adjustment period, less the unearned portion thereof as of the effective
date of calculation, it being understood and agreed that all premiums for
policies allocated to underwriting years within an adjustment period shall
be credited to that adjustment period, unless this Contract is terminated
on a "cutoff" basis, in which event the unearned reinsurance premium as of
the effective date of termination shall be returned by the Reinsurer to
the Company.

ARTICLE XI - COMMISSION (BRMA 1OA)

A. The Reinsurer shall allow the Company a 37.5% commission on all premiums
ceded to the Reinsurer hereunder. The Company shall allow the Reinsurer
return commission on return premiums at the same rate.

B. It is expressly agreed that the ceding commission allowed the Company
includes provision for all dividends, commissions, taxes, assessments, and
all other expenses of whatever nature, except loss adjustment expense.

ARTICLE XII - OFFSET (BRMA 36C)

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ARTICLE XIII - ACCESS TO RECORDS (BRMA ID)

The Reinsurer or its designated representatives shall have access at any
reasonable time to all records of the Company which pertain in any way to this
reinsurance.

ARTICLE XIV - LIABILITY OF THE REINSURER

A. The liability of the Reinsurer shall follow that of the Company in every
case and be subject in all respects to all the general and specific
stipulations, clauses, waivers and modifications of the Company's policies
and any endorsements thereon. However, in no event shall this be construed
in any way to provide coverage outside the terms and conditions set forth
in this Contract.

B. Nothing herein shall in any manner create any obligations or establish any
rights against the Reinsurer in favor of any third party or any persons
not parties to this Contract.

ARTICLE XV - NET RETAINED LIABILITY

This Contract shall apply only to that portion of any insurance or reinsurance
the Company retains net for its own account, and in calculating the amount of
any loss hereunder and the amount in excess of which this Contract attaches,
only loss or losses with respect to that portion of any insurance or reinsurance
the Company retains net for its own account shall be included. It is understood
and agreed, however, that the Reinsurer's liability hereunder with respect to
any loss or losses shall not be increased by reason of the inability of the
Company to collect from any other reinsurers, whether specific or general, any
amounts which may be due from them, whether such inability arises from the
insolvency of such other reinsurers or otherwise.

ARTICLE XVI - ERRORS AND OMISSIONS (BRMA 14F)

ARTICLE XVII - TAXES (BRMA 50B)

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ARTICLE XVIII - UNAUTHORIZED REINSURERS

2. Escrow accounts for the benefit of the Company; and/or

3. Cash advances;

1. To reimburse itself for the Reinsurer's share of unearned premiums
returned to insureds on account of policy cancellations, unless paid
in cash by the Reinsurer;

2. To reimburse itself for the Reinsurer's share of losses and/or loss
adjustment expenses paid under the terms of policies reinsured
hereunder, unless paid in cash by the Reinsurer;

3. To reimburse itself for the Reinsurer's share of any other amounts
claimed to be due hereunder, unless paid in cash by the Reinsurer;

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5. To refund to the Reinsurer any sum in excess of the actual amount
required to fund the Reinsurer's share of the Company's ceded
unearned premium and/or outstanding loss and loss adjustment expense
reserves (including incurred but not reported loss reserves), if so
requested by the Reinsurer.

ARTICLE XIX - INSOLVENCY

A. In the event of the insolvency of the Company, this reinsurance shall be
payable directly to the Company or to its liquidator, receiver,
conservator or statutory successor immediately upon demand, with
reasonable provision for verification, on the basis of the liability of
the Company without diminution because of the insolvency of the Company or
because the liquidator, receiver, conservator or statutory successor of
the Company has failed to pay all or a portion of any claim. It is agreed,
however, that the liquidator, receiver, conservator or statutory successor
of the Company shall give written notice to the Reinsurer of the pendency
of a claim against the Company indicating the policy or bond reinsured
which claim would involve a possible liability on the part of the
Reinsurer within a reasonable time after such claim is filed in the
conservation or liquidation proceeding or in the receivership, and that
during the pendency of such claim, the Reinsurer may investigate such
claim and interpose, at its own expense, in the proceeding where such
claim is to be adjudicated, any defense or defenses that it may deem
available to the Company or its liquidator, receiver, conservator or
statutory successor. The expense thus incurred by the Reinsurer shall be
chargeable, subject to the approval of the Court, against the Company as
part of the expense of conservation or liquidation to the extent of a pro
rata share of the benefit which may accrue to the Company solely as a
result of the defense undertaken by the Reinsurer.

C. It is further understood and agreed that, in the event of the insolvency
of the Company, the reinsurance under this Contract shall be payable
directly by the Reinsurer to the Company or to its liquidator, receiver or
statutory successor, except as provided by Section 4118(a) of the New York
Insurance Law or except (a) where this Contract specifically provides
another payee of such reinsurance in the event of the insolvency of the
Company or (b) where the Reinsurer with the consent of the direct insured
or insureds has assumed such policy obligations of the Company as direct
obligations of the Reinsurer to the payees under such policies and in
substitution for the obligations of the Company to such payees.

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ARTICLE XX - ARBITRATION

A. As a condition precedent to any right of action hereunder, in the event of
any dispute or difference of opinion hereafter arising with respect to
this Contract, it is hereby mutually agreed that such dispute or
difference of opinion shall be submitted to arbitration. One Arbiter shall
be chosen by the Company, the other by the Reinsurer, and an Umpire shall
be chosen by the two Arbiters before they enter upon arbitration, all of
whom shall be active or retired disinterested executive officers of
insurance or reinsurance companies or ▇▇▇▇▇'▇ London Underwriters. In the
event that either party should fail to choose an Arbiter within thirty
(30) days following a written request by the other party to do so, the
requesting party may choose two Arbiters who shall in turn choose an
Umpire before entering upon arbitration. If the two Arbiters fail to agree
upon the selection of an Umpire within thirty (30)days following their
appointment, each Arbiter shall nominate three candidates within ten (10)
days thereafter, two of whom the other shall decline, and the decision
shall be made by drawing lots.

B. Each party shall present its case to the Arbiters within thirty (30) days
following the date of appointment of the Umpire. The Arbiters shall
consider this Contract as an honorable engagement rather than merely as a
legal obligation and they are relieved of all judicial formalities and may
abstain from following the strict rules of law. The decision of the
Arbiters shall be final and binding on both parties; but failing to agree,
they shall call in the Umpire and the decision of the majority shall be
final and binding upon both parties. Judgment upon the final decision of
the Arbiters may be entered in any court of competent jurisdiction.

C. If more than one reinsurer is involved in the same dispute, all such
reinsurers shall constitute and act as one party for purposes of this
Article and communications shall be made by the Company to each of the
reinsurers constituting one party, provided, however, that nothing herein
shall impair the rights of such reinsurers to assert several, rather than
Joint, defenses or claims, nor be construed as changing the liability of
the reinsurers participating under the terms of this Contract from several
to joint.

D. Each party shall bear the expense of its own Arbiter, and shall jointly
and equally bear with the other the expense of the Umpire and of the
arbitration. In the event that the two Arbiters are chosen by one party,
as above provided, the expense of the Arbiters, the Umpire and the
arbitration shall be equally divided between the two parties.

ARTICLE XXI - SERVICE OF SUIT (BRMA 49C)

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B. Further, pursuant to any statute of any state, territory or district of
the United States which makes provision therefor, the Reinsurer hereby
designates the party named in its Interests and Liabilities Agreement, or
if no party is named therein, the Superintendent, Commissioner or Director
of Insurance or other officer specified for that purpose in the statute,
or his successor or successors in office, as its true and lawful attorney
upon whom may be served any lawful beneficiary hereunder arising out of
this Contract.

ARTICLE XXII - INTERMEDIARY

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Financial Pacific Insurance Company
Sacramento, California

CONTINGENT EXCESS OF LOSS
REINSURANCE CONTRACT
EFFECTIVE: JANUARY 1, 1998

REINSURANCE CONFIRMATION

BUSINESS A. By this Contract the Reinsurer agrees to reinsure the
REINSURED: excess liability which may accrue to the Company under
its policies, contracts and binders of insurance or
reinsurance (hereinafter called "policies") in force on
the effective date hereof or issued or renewed on or
after that date, and classified by the Company as
Commercial Multiple Peril (Section II) and Automobile
Liability business (hereinafter referred to as "Casualty
business") and Commercial Multiple Peril (Section I),
Automobile Physical Damage and Inland Marine business
(hereinafter referred to as "Property business"),
subject to the terms, conditions and limitations
hereinafter set forth.

B. It is understood that the classes of business reinsured
under this Contract are deemed to include:

1. Coverages required for non-resident drivers under
the motor vehicle financial responsibility law or
the motor vehicle compulsory insurance law or any
similar law of any state or province, following
the provisions of the Company's policies when such
policies include or are deemed to include
so-called "Out of State Insurance" provisions;

2. Coverages required under Section 30 of the Motor
Carrier Act of 1980 and/or any amendments thereto.

COMMENCEMENT A. This Contract shall become effective on January 1, 1998,
AND with respect to losses arising under policies allocated
TERMINATION: to underwriting years commencing on or after that date,
and shall continue in force thereafter until terminated.

B. Either party may terminate this Contract on December 31,
1998 or on any December 31 thereafter by giving the
other party not less than 90 days prior notice by
certified mail.

C. Unless the Company elects to reassume the ceded unearned
premium

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in force on the effective date of termination, and so
notifies the Reinsurer prior to or as promptly as
possible after the effective date of termination,
reinsurance hereunder on business in force on the
effective date of termination shall remain in full force
and effect until expiration, cancellation or next
premium anniversary of such business, whichever first
occurs, but in no event beyond 12 months following the
effective date of termination.

D. "Underwriting year" as used herein shall mean the period
from January 1, 1998 through December 31, 1998, and each
12-month period thereafter shall be a separate
underwriting year. All premiums and losses from policies
allocated to an underwriting year shall be credited or
charged, respectively, to such underwriting year,
regardless of the date said premiums earn or such losses
occur, it being understood that a policy will be
allocated to the underwriting year which is in effect as
of:

1. As respects all new policies, the effective date
of such policies;

2. As respects renewals of one year or less term
policies, the renewal date of such policies;

3. As respects continuous or greater than one year
term policies, the premium anniversary date of
such policies.

Policies shall remain in the same underwriting year, as
originally allocated, until the next renewal date or
premium anniversary date, at which time such policies
shall be reallocated to the underwriting year in effect
as of such date as provided in subparagraphs 2 and 3
above.

EXCLUSIONS: See attached.

RETENTION AND A. As regards all Property business the subject of this
LIMIT: Reinsurance

To pay up to $2,000,000 Ultimate Net Loss, each Insured
each loss occurrence, in excess of $2,000,000 Ultimate
Net Loss, each Insured each loss occurrence.

B. As regards the Casualty business the subject of this
Reinsurance

1a. As respects new and renewal business only with
policy limits of $1,000,000 or less.

To pay up to $2,000,000 Ultimate Net Loss, each Insured
each loss

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occurrence, in excess of $1,000,000 Ultimate Net Loss,
each insured each loss occurrence.

1b. As regards business with limits excess of
$1,000,000.

To pay up to $2,000,000 Ultimate net Loss, each Insured
each loss occurrence, in excess of $11,000,000 Ultimate
Net Loss, each Insured each loss occurrence.

C. Coverage hereunder shall apply only in the event the
Reinsured sustains liability for Extra Contractual
Obligations and/or losses in excess of original policy
limits, arising under policies written by them.

D. In the event that two or more policies covered under
this Contract are involved in the same occurrence but
allocated to different underwriting years, the amount to
be retained by the Company for each underwriting year
shall be reduced to the percentage that the Company's
retained losses on the policies allocated to each
underwriting year bears to the total of all the
Company's retained losses contributing to the same
occurrence. The indemnity and/or recovery shall be
arrived at in the same manner.

OTHER A. The Company shall maintain in force facultative
REINSURANCE: certificates or semi-automatic facultative facilities
that apply on an individual risk basis which cover
indemnity loss and may or may not cover extra
contractual obligations and loss in excess of policy
limits in accordance with the terms of the individual
certificate or semi-automatic facultative facility.
Recoveries under such reinsurance shall inure to the
benefit of this Contract.

B. The Company shall be permitted to carry underlying
reinsurance, recoveries under which shall inure solely
to the benefit of the Company and be entirely
disregarded in applying all of the provisions of this
Contract.

ULTIMATE NET See attached. Includes 100% ECO and 100% XPL.
LOSS:

CLAIMS AND Individual loss notices and settlements. Pro rata loss
LOSS adjustment expense in addition to the limit.
ADJUSTMENT

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EXPENSE:

PREMIUM: .2825% of net earned premium for the contract year (including
the runoff contract year, if any), subject to an annual
minimum premium of $130,000. Adjusted within 45 days after the
end of each contract year.

Annual deposit premium of $130,000 in four equal installments
of $32,500 on January 1, April 1, July 1, and October 1, of
each contract year (including the runoff contract year, if
any).

REINSTATEMENT: One full reinstatement in all, the additional premium for
which shall be calculated at 100% for time and pro rata for
amount.

Other Salvage and Subrogation
Provisions: Offset (BRMA 36C)
Access to Records (BRMA 1D)
Liability of the Reinsurer
Net Retained Lines (BRMA 32E)
Errors and Omissions (BRMA 14F)
Taxes (BRMA 50B)
Unauthorized Reinsurers (Evergreen LOC for outstanding
losses/LAE; excluding IBNR)
Insolvency
Arbitration
Service of Suit (BRMA 49C)
Intermediary

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EXCLUSIONS

This Contract does not apply to and specifically excludes the following:

A. The following General Exclusions:

1. Business accepted by the Company as reinsurance from other insurers
except Agency Reinsurance where risk underwriting and all servicing,
including claim handling, is done by the Company.

5. Business written to apply in excess of a deductible or
self-insured amount of more than $100,000 or business written to
apply specifically in excess over underlying insurance. However,
this exclusion shall not apply to Umbrella business.

6. Aviation liability including aerospace and satellite business.

7. Workers' Compensation business, including Longshoremen's and Harbor
Workers' Act and ▇▇▇▇▇ Act.

8. Kidnap and ▇▇▇▇▇▇, Surety, Credit, Financial Guarantee or Fiduciary
Insurance.

9. Retail liquor law liability, except where liquor constitutes less
than 50.0% of sales. Specifically excluded are bars and retail
liquor stores.

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10. Insurance covering damages claims for the withdrawal, inspection,
repair, replacement, or loss of use of the insured's products or of
any property of which such products form a part of, or if such
products or property are withdrawn from the market or from use
because of any known or suspected defect or deficiency therein.

12. Any loss or liability accruing to the Company arising out of the
Employee Retirement Income Security Act of 1974 (ERISA), or
amendments thereto.

13. Fidelity and Surety.

B. The following Property Exclusions:

1. Insurance against earthquake, when written as such.

2. Insurance on growing crops.

3. Insurance against flood, surface water, waves, tidal water or tidal
wave, overflow of streams or other bodies of water or spray from any
of the foregoing, all whether driven by wind or not, when written as
such.

4. Liability under coverage specifically afforded for loss or damages
resulting from misappropriation, secretion, conversion, infidelity
or any dishonest act on the part of the insured or other party of
interest, his/her or their employees or agents, or any person or
persons to whom merchandise may be entrusted (carriers for hire
excepted).

5. Liability under coverage afforded for loss or damage resulting from
failure to account or pay for any goods or merchandise sold on
credit, delivered under deferred payment agreements, consigned for
sale, or delivered under any trust or floor plan agreements, except
under standard accounts receivable policies.

6. Boiler and Machinery, when written as such.

7. Mortgage impairment insurance and similar kinds of insurance,
howsoever styled.

8. Difference in conditions insurance and similar kinds of insurance,
howsoever styled.

9. Risks which have a total insurable value of more than $250,000,000.

10. Mobile homes unless written as part of a commercial multiple peril
policy.

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11. Loss and/or damage and/or costs and/or expenses arising from seepage
and/or pollution and/or contamination, other than contamination from
smoke. Nevertheless, this exclusion does not preclude payment of the
cost of removing debris of property damaged by a loss otherwise
covered hereunder, subject always to a limit of 25% of the Company's
property loss under the applicable original policy.

12. Satellites.

13. Ocean Marine when written as such.

14. Nuclear risks as defined in the "Nuclear Incident Exclusion Clause -
Physical Damage-Reinsurance" attached to and forming part of this
Contract.

15. Railroad business, specifically insurance for "line" or "track"
operations of actual railroads.

16. Oil and gas risks, by which is meant drilling rigs, exploration
risks, cracking plants, refineries and depots, oil and gas
pipelines, offshore oil and gas properties.

17. As respects aviation, hull and ingestion.

C. The following Casualty Exclusions:

1. Watercraft liability except for boats less than 50 feet in length.

2. All professional liability and/or malpractice insurance except as
pertains to ▇▇▇▇▇▇ and beauty shops, funeral directors, druggists,
opticians and optometrists.

3. Liability insurance relating to products or completed operations
involving the manufacture or importation of:

a. Cosmetics, hair or skin products;

b. Drugs, pharmaceuticals or agricultural chemicals;

c. Aircraft, aircraft parts or aircraft engines, all motorized
vehicles, or mobile equipment;

d. Heavy machinery and equipment, home power tools, or oil
drilling equipment;

4. Liability insurance relating to premises or operations primarily
involving:

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a. Aircraft or airports, as respects coverage for all liability
arising out of the ownership, maintenance, or use of any
aircraft or flight operations;

b. Amusement parks, carnivals, circuses, speed contests and
racing;

c. Manufacturing, packing, handling, shipping or storage of
explosives, ammunitions, fuses, arms, magnesium, fireworks,
nitroglycerine, celluloid, pyroxylin or explosive substances
intended for use as an explosive;

d. Gas or public utility companies, gas or public utility works,
or gas lease operations;

e. Production, refining, handling, shipping or storage of natural
or artificial fuel gases, synthetic or coal or shale based
fuel, butane, propane, gasoline or liquefied petroleum gas;

f. Oil and gas risks, by which is meant drilling rigs,
exploration risks, cracking plants, refineries and depots, and
oil and gas pipelines;

g. Railroad operations, specifically "line" or "on track"
operations of actual railroads;

h. Ship building, ship repair yard, dry docks, stevedoring;

i. Tunneling, subway and underground mining;

i. Offshore or subaqueous work;

k. Wrecking of structures over eight stories in height, or marine
wrecking;

l. Ski resorts;

m. Waste disposal and deposit sites except when written in
conjunction with either a refuse hauler or recycling account.

▇. ▇▇▇▇▇ rentals without operators whose primary business is
crane rentals;

o. Scaffold installation, repair, removal or rental, unless
incidental;

p. Existence, construction or maintenance of dams;

q. Aerial crop dusting to include application of fertilizers,
herbicides, pesticides;

r. Warehousemen's legal liability;

s. Automobile racing and racetracks;

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t. Taxis;

u. Blasting contractors;

v. Licensed roofing contractors whose primary business is such;

w. General contractors with revenues in excess of $50,000,000;

x. Wrap up construction projects.

5. Nuclear risks as defined in the "Nuclear Incident Exclusion Clause -
Liability-Reinsurance" attached to and forming part of this Contract.

6. Pollution liability as excluded by the Company's policies. It is hereby
warranted that any Commercial General Liability policy issued by the
Company will include ISO pollution exclusion language.

7. Any loss, cost, or expense arising out of any governmental direction or
request that the insured test for, monitor, clean up, remove, contain,
treat, detoxify or neutralize pollutants.

If the Company provides insurance for an insured with respect to any
premises, operations, products or completed operations listed in
subparagraphs 3 and 4 of this paragraph, except subparagraphs 4(c) and
4(d), and if such premises, operations, products or completed operations
constitute only a minor incidental part of the total premises, operations,
products or completed operations of the insured, such exclusion(s) shall
not apply.

If the Company is bound, without the knowledge of and contrary to the
instructions of the Company's supervisory underwriting personnel, on any
business falling within the scope of one or more of the exclusions set
forth in this paragraph, these exclusions, except those set forth in
subparagraphs 2, 4(c), 4(d), 5, 6 and 7, shall be suspended with respect
to such business until 30 days after an underwriting supervisor of the
Company acquires knowledge of such business.

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ULTIMATE NET LOSS

A. "Ultimate net loss" as used herein is defined as the sum or sums paid or
payable by the Company in settlement of claims and in satisfaction of
judgments rendered on account of such claims, after deduction of all
salvage, all recoveries and all claims on inuring insurance or
reinsurance, whether collectible or not. Nothing herein shall be construed
to mean that losses under this Contract are not recoverable until the
Company's ultimate net loss has been ascertained.

B. "Loss in excess of policy limits" and "extra contractual obligations" as
used herein shall be defined as follows:

1. "Loss in excess of policy limits" shall mean 100% of any amount
paid or payable by the Company in excess of its policy limits, but
otherwise within the terms of its policy, as a result of an action
against it by its insured or its insured's assignee to recover
damages the insured is legally obligated to pay to a third party
claimant because of the Company's alleged or actual negligence or
bad faith in rejecting a settlement within policy limits, or in
discharging its duty to defend or prepare the defense in the trial
of an action against its insured, or in discharging its duty to
prepare or prosecute an appeal consequent upon such an action.

2. "Extra contractual obligations" shall mean 100% of any punitive,
exemplary, compensatory or consequential damages, other than loss in
excess of policy limits, paid or payable by the Company as a result
of an action against it by its insured, its insured's assignee or a
third party claimant, which action alleges negligence or bad faith
on the part of the Company in handling a claim under a policy
subject to this Contract. An extra contractual obligation shall be
deemed to have occurred on the same date as the loss covered or
alleged to be covered under the policy.

C. "Loss adjustment expense" as used herein shall mean expenses allocable to
the investigation, defense and/or settlement of specific claims, including
litigation expenses and interest on judgments, but not including office
expenses or salaries of the Company's regular employees.

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1 EXHIBIT 10.16 PROPERTY QUOTA SHARE REINSURANCE CONTRACT ORIGINALLY EFFECTIVE: JULY 1, 1993 TERMS EFFECTIVE: JANUARY 1, 1998 Financial Pacific Insurance Company Sacramento, California (hereinafter referred to as the "Company") REINSURANCE...

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