8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report: June 26, 2002
(Date of Earliest Event Reported)

Insurance Management Solutions Group, Inc.

(Exact name of Registrant as specified in its charter)

Florida	000-25273	59-3422536
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification Number)
360 Central Avenue St. Petersburg, Florida		33701
(Address of principal executive offices)		(Zip Code)

(727) 803-2040

(Registrant’s telephone number, including area code)

Item 5. Other Events and Regulation FD Disclosure.

     Insurance Management Solutions Group, Inc. (including its subsidiaries, the “Company”) is filing this Current Report on Form 8-K to report (i) the resignation and replacement of its Chairman of the Board of Directors and (ii) modifications in its existing service arrangements with Bankers Insurance Group, Inc. (including its subsidiaries, “BIG”).

     On June 26, 2002, David K. Meehan resigned as Chairman of the Board of Directors of the Company, effective as of July 1, 2002. Mr. Meehan’s resignation as Chairman of the Board coincides with his appointment as President and Chief Executive Officer of each of Bankers Insurance Company, First Community Insurance Company and Bankers Security Insurance Company, all direct or indirect subsidiaries of BIG, the Company’s principal customer and majority shareholder. Mr. Meehan will remain as a Director of the Company. On June 26, 2002, the Board of Directors of the Company elected David M. Howard as Chairman of the Board of Directors, effective July 1, 2002. Mr. Howard has served as a Director of the Company since June 2000, as President of the Company since August 1999, and as Chief Executive Officer of the Company since January 2000.

     Effective July 1, 2002, the Company amended its existing Administration Services Agreement, effective October 1, 2001, with BIG (the “Service Agreement” and, as amended, the “Amended Service Agreement”), such that, as of July 1, 2002, the Company no longer provides policy administration or claims processing services for BIG’s personal (i.e., automobile and homeowners) insurance lines of business or claims processing for BIG’s commercial insurance lines of business. However, the Company will continue to provide policy administration, claims administration and data processing services in connection with BIG’s flood insurance line of business, with no change in the existing fee structure. In addition, pursuant to the Amended Service Agreement, the Company will continue to provide BIG with information technology hosting and support services for a fixed monthly fee. The Company will also continue to provide BIG with various other back-office support services, including cash office processing, records management, policy assembly, and print and mail distribution services, in connection with all of BIG’s personal and commercial insurance lines of business. For the foregoing services, BIG will pay the Company a monthly fee based upon a percentage of the direct written premium for each line of business (except if provided in connection with BIG’s flood insurance line, where no additional fee will be imposed over that mentioned above). With respect to the service fees payable in connection with BIG’s personal (i.e., automobile and homeowners) and commercial insurance lines of business, the applicable percentage of direct written premium being charged has been reduced to reflect the reduction in the services being provided in connection with such lines of business. If the Amended Service Agreement had been in effect as of January 1, 2002, the Company’s affiliated outsourcing services revenues for the three months ended March 31, 2002, which were $7.1 million on an actual basis, would have been $3.0 million.

-2-

     Also effective July 1, 2002, in connection with the foregoing modifications to the Service Agreement, the Company terminated 98 employees, or approximately 28% of its total workforce. Of these employees, 81 worked in claims processing and 17 worked in policy administration. BIG has informed the Company that all of these employees have been offered comparable positions by BIG. The Company expects to realize savings of approximately $5.1 million in annual payroll costs and related expenses as a result of this reduction in its workforce. Moreover, as previously reported, the Company has recently taken other actions designed to improve the Company’s cost structure, including terminating two facility subleases with BIG and its affiliates effective as of June 30, 2002 and August 28, 2002, respectively. The Company expects to realize cost savings of approximately $725,000 annually as a result of the termination of these two subleases.

     Management of the Company believes that the foregoing actions, including the implementation of the Amended Service Agreement, will likely have a nominal adverse impact on the Company’s net income for the remainder of 2002. Nevertheless, management also believes that such actions are necessary to ensure the Company’s long-term financial viability in light of the anticipated continued downward trend in the amount of direct written premium generated by BIG’s personal (i.e., automobile and homeowners) and commercial insurance lines of business. If such actions were not taken, management of the Company believes that, given current trends, by the fourth quarter of 2002 the costs of maintaining the personnel and infrastructure necessary to continue to provide claims processing and policy administration services in connection with BIG’s personal and commercial insurance lines of business would exceed the revenue generated therefrom under the Service Agreement.

     The modifications to the Company’s existing Service Agreement with BIG, as well as the corresponding reduction in the Company’s workforce, were approved by the Audit Committee of the Board of Directors of the Company on June 26, 2002. Management of the Company and the Audit Committee of the Board of Directors believe that the modifications to its service arrangements with BIG effected by the Amended Service Agreement, coupled with the cost reduction measures that have been taken to date, will improve the Company’s financial performance in the long-term and may better position the Company to potentially implement certain strategic alternatives currently being contemplated by the Special Committee of the Company’s Board of Directors. No assurances can be given, however, as to the future financial performance of the Company or as to whether any strategic alternatives will be recommended or undertaken or, if so, upon what terms and conditions.

     The foregoing description of the Amended Service Agreement is qualified in its entirety by reference to (1) the Insurance Administration Services Agreement previously filed as Exhibit 10.71 to the Annual Report on Form 10-K/A for the year ended December 31, 2001 filed by the Company on April 9, 2002 and (2) the First Amendment to Insurance Administration Services Agreement, effective July 1, 2002, included as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.

-3-

     Certain statements contained in this Current Report, including statements regarding anticipated trends in BIG’s business, the potential impact of modifications to the Company’s service arrangements with BIG on, among other things, the Company’s financial condition and results of operations, and the other statements contained herein regarding matters that are not historical facts, are “forward-looking” statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to, uncertainties regarding economic conditions and the market, uncertainties regarding BIG (including its subsidiaries), its business and financial condition, and those risks and uncertainties discussed in filings made by the Company with the Securities Exchange Commission including those risks and uncertainties contained under the heading “Item 1: Business—Risk Factors” in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2001.

Item 7. Financial Statements and Exhibits.

     (a) Financial statements of business acquired.

     Not applicable.

     (b) Pro forma financial information.

     Not applicable.

     (c) Exhibits.

10.1. First Amendment to Insurance Administration Services Agreement, effective July 1, 2002, by and between Insurance Management Solutions, Inc. and each of Bankers Insurance Company, Bankers Security Insurance Company and First Community Insurance Company.

-4-

SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

INSURANCE MANAGEMENT
SOLUTIONS GROUP, INC.

By: /s/ David M. Howard

David M. Howard
Chairman of the Board, President and Chief Executive Officer

Date: July 10, 2002

-5-

EXHIBIT INDEX

Exhibit No	Description
10.1	First Amendment to Insurance Administration Services Agreement, effective July 1, 2002, by and between Insurance Management Solutions, Inc. and each of Bankers Insurance Company, Bankers Security Insurance Company and First Community Insurance Company.

E-1 EX-10.1 3 g77184exv10w1.txt FIRST AMENDMENT TO INSURANCE ADMIN SERVICES AGRMNT Exhibit 10.1 FIRST AMENDMENT TO INSURANCE ADMINISTRATION SERVICES AGREEMENT This FIRST AMENDMENT ("Amendment"), effective as of July 1, 2002, is made to that certain INSURANCE ADMINISTRATION SERVICES AGREEMENT (the "Agreement") dated October 1, 2001 by and between INSURANCE MANAGEMENT SOLUTIONS, INC. ("IMS"), a corporation organized and existing under the laws of the State of Florida with its principal place of business located at 801 94th Avenue North, St. Petersburg, Florida, and each of BANKERS INSURANCE COMPANY ("BIC'), BANKERS SECURITY INSURANCE COMPANY ("BSIC") and FIRST COMMUNITY INSURANCE COMPANY ("FCIC"), herein collectively referred to as "Customer", all having their principal place of business at 360 Central Avenue, St. Petersburg, Florida 33701. WHEREAS, IMS is engaged by Customer to provide certain policy administration services and claims administration services, respectively, as provided in the Agreement; and WHEREAS, Customer and IMS mutually desire to eliminate certain services being provided by IMS to Customer relating to the "At Risk Lines" of business, and to also change the pricing structure for certain services that IMS will continue to provided pursuant to the Agreement, as the same are more specifically set forth herein. NOW THEREFORE, IN CONSIDERATION OF the mutual covenants and agreements hereinafter set forth, and for the considerations set forth in the Agreement, the parties hereto hereby covenant and agree as follows: 1. Insurance Administration Services. "EXHIBIT I" of the Agreement describing the "INSURANCE ADMINISTRATION SERVICES (AT RISK LINES)" is hereby deleted in its entirety and replaced with the "REVISED EXHIBIT I" attached hereto and made a part hereof. EXHIBIT II of the Agreement shall remain as is, without modification. Accordingly, all of the "claims" services to be provided by IMS are hereby deleted except for the "claims" services related to the WYO Flood as described on EXHIBIT II. 2. Fees and Expenses. "SCHEDULE B" of the Agreement describing the "PRICING SCHEDULE" is hereby deleted in its entirety and replaced with the "REVISED SCHEDULE B" attached hereto and made a part hereof. (a) The Fees set forth in the REVISED SCHEDULE B that pertain only to the "At Risk Lines" as described in the REVISED EXHIBIT I shall expire on the one (1) year anniversary of the effective date of this Amendment ("At Risk Fee Expiration Date"). If the parties are unable to mutually agree on Fees pertaining to the "At Risk Lines" as described in the REVISED EXHIBIT I on or before the At Risk Fee Expiration Date, then all of the services provided by IMS to Customer for the "At Risk Lines" pursuant to the REVISED EXHIBIT I shall automatically terminate, and all Fees and costs associated with such services shall likewise automatically terminate. Provided, however, the termination of the "At Risk Lines" as described in the REVISED EXHIBIT I, shall not effect IMS' obligations to provide the services described in EXHIBIT II and for Customer to pay the Fees and costs of such services pursuant to the REVISED SCHEDULE B. (b) The Fees set forth in the REVISED SCHEDULE B that pertain only to the IT Hosting Services and Support shall expire on the one (1) year anniversary of the effective date of this Amendment ("IT Fee Expiration Date"). If the parties are unable to mutually agree on Fees pertaining to the "IT Hosting Services and Support" on or before the IT Fee Expiration Date, then all of the services provided by IMS to Customer for the "IT Hosting Services and Support" shall automatically terminate, and all Fees and costs associated with such services shall likewise automatically terminate. 3. All Other Terms. Except as specifically modified by the terms of this First Amendment, all other terms, definitions, conditions, exhibits and schedules contained in or otherwise attached to the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties hereto by their respective duly authorized representatives have executed this Amendment as of the date and year first set forth above. "IMS" INSURANCE MANAGEMENT SOLUTIONS, INC. By: /s/ Robert G. Gantley -------------------------------- As its: Chief Operating Officer ---------------------------- "CUSTOMER" BANKERS INSURANCE COMPANY By: /s/ Edwin C. Hussemann -------------------------------- As its: Treasurer ---------------------------- BANKERS SECURITY INSURANCE COMPANY By: /s/ Edwin C. Hussemann -------------------------------- As its: Treasurer ---------------------------- FIRST COMMUNITY INSURANCE COMPANY By: /s/ Edwin C. Hussemann -------------------------------- As its: Treasurer ---------------------------- 2 REVISED SCHEDULE B PRICING SCHEDULE [*] * Indicates that material has been omitted and confidential treatment has been requested therefor. All such omitted material has been filed separately with the SEC pursuant to Rule 24b-2. REVISED EXHIBIT I INSURANCE ADMINISTRATION SERVICES (AT RISK LINES) 1) DEFINITIONS: Capitalized terms not otherwise defined in the Agreement or in this Exhibit shall be construed as otherwise generally understood in the insurance and data processing industry. 2) POLICY ADMINISTRATION: IMS shall perform the services listed hereunder for the Customer's at risk policies ("At Risk Policies") in accordance with the applicable rules and regulations. The term "At Risk Policies" includes the Auto, Homeowner, Commercial, and X-Flood Authorized Line of Business. Section I - Services 1. Policy Issuance and Document packaging. - At Risk Policy document packaging including forms, printing and assembly for new business, renewals and endorsements and any other policy transaction where declaration page issuance is required. 2. Cash, Billing & Collection, Accounting Administration/Premium, Treasury. - Post all incoming cash according to received date (any cash not able to be processed will be sent back to Customer); - Print At Risk Policy premium disbursements; - Credit Card processing via lockbox for Customer Companies: BIC & FCIC; - NSF processing; - Cash correction services; - Process voided checks and stop payment of return premium checks; - Provide one lockbox per P.O. Box; - Imaging - creation, storage and retrieval. 3. Print & Distribution Services. - Automated document library; - Electronic document assembly; - Print invoices, reminders, cancellation notification; - Electronic document archival/retrieval; - Automated finishing/insertion facility; - Provide all paper and supplies; - Forms management; - Mail pre-sort facility; - Mailing At Risk Policy, At Risk Policy billings and At Risk Policy renewals (postage excluded); - Imaging - incoming mail and outgoing print. 2 3) HOSTING SERVICES AND SUPPORT. IMS shall administer services and support Customer's IT needs as listed hereunder. Section I - IT Hosting Services and Support Table 4.0

SERVICES: IT SERVICES FEE: --------- ---------------- Server Hosting* * 840 Production Hosting** * 840 Development Hosting** * 840 Websphere Hosting** * Lawson Hosting*** * Homeowner Software Support**** * Automobile Software Support**** * Monthly Fee *

- *Server Hosting - Server Hardware - Network Access - Availability - Rent - OS/Security - Storage/Backup/Archive/Retrieval - **AS/400 Hosting: - Includes all Server Hosting Items Above - 3rd Party Software: - ASC: Pilot, Abstract, Status, Sequel - ASI: PKZip400 - Gurnbo: Report Designer - MKS: Implementor - ProData: DBU - Tangent: Surpass - Websphere Standard Edition Application Server - ***Lawson Hosting: - Includes All Server Hosting Items Above - 3rd Party Software - Lawson Financials - ****Automobile Software Support (FL, SC, CA, WA & OR only) - Backend software support (current system configuration) - Forms management (existing forms only) - IVR management (edify) - Global system support for policy processing includes the following components: - Comments - Policy Activity - Insured - Multi-lender - Transaction processing (current configuration only) - Discount surcharges - Forms and endorsements - Prior losses - Rating *Indicates that material has been omitted and confidential treatment has been requested therefore. All such omitted material has been filed separately with the SEC pursuant to Rule 245-2. 3 - Product definition - Correspondence - Application Security - Reporting (existing reports only) - Claims entry - Adjuster processing - Payment - Salvage - Subrogation - Cash - Lockbox - Billing - Disbursement - Production - Forms packaging - - **** Homeowners Software Support (CA, NV, AZ, FL & SC only) - Backend software support (current system configuration) - Forms management (existing forms- only) - IVR management (Edify) - Internet (FL only) - Global system support for policy processing includes the following components: - Comments - Policy activity - Insured - Multi-lender - Transaction processing (current configuration only) - Discount surcharges - Forms and endorsements (existing only) - Prior losses - Rating - Product definition - Correspondence - Application Security - Reporting (existing reports only) - Claims entry - Adjuster processing - Payment - Salvage - Subrogation - Cash - Lockbox - Billing - Disbursement - Production - Forms packaging 4) TELECOM SERVICES AND EQUIPMENT. IMS shall provide use of the telecom equipment to consideration of Customer administrating the system and providing technical support. 4 5) MISCELLANEOUS FEES. Section I - Miscellaneous Fees 1. Customer shall pay for any service that is outside of the scope of the Insurance Administration Services as may be mutually agreed by IMS and Customer. 2. IMS will provide data entry services at IMS' servicing office at the time and materials rate of $30.00 per person, per hour. 3. From the Effective Date of the original agreement until the one year anniversary of the Effective Date of the original agreement ("1st Yr. Anniversary"), Customer shall reimburse IMS for all postage expenses incurred by IMS in the performance of the Insurance Administration Services. After the 1st Yr. Anniversary, all postage expenses incurred by IMS in the performance of the Insurance Administration Services shall be the responsibility of IMS. Notwithstanding the foregoing, if there is any Change of Control of IMS from the Effective Date until the three (3) year anniversary of the Effective Date ("3rd Yr. Anniversary"), Customer shall thereafter reimburse IMS for all postage expenses incurred by IMS in the performance of the Insurance Administration Services from the date of the Change of Control until the 3rd Yr. Anniversary. 4. Customer shall reimburse IMS for its use of the following pre-approved third party information services: credit score, MYF A+, CDS Business Mapping, CLUE. Customer may request at any time that IMS discontinue use of the above third party information services. For all of the following expenses, only if requested in writing and in advance by Customer: 1. System modifications, enhancements, interfaces to Customer or other third-parties systems that fall outside of this agreement will be performed on a time and materials basis of $100.00 per person, per hour, subject to an annual adjustment based on IMS' then current standard fee. 2. Data conversion from existing Customer system to IMS' Proprietary System will be performed on a time and materials basis at the rate of $100.00 per person, per hour. 3. Third-party information services used to provide the Insurance Administration Services will be a pass-through expense to Customer. 4. Data communication line charges (used by IMS solely for Customer) will be a pass-through expense to Customer. 5. Any service to be performed by IMS that is outside of the scope of this Agreement shall be at a fee rate that shall be mutually agreed upon between IMS and Customer. 6) ADJUSTING FIRM. IMS' Colonial Catastrophe Claims Service will be one of the authorized adjusting firms ("Adjusting Firm") for claim catastrophe adjusting work on behalf of Customer. However, IMS may designate a different Adjusting Firm with written notice to Customer. 7) DISASTER RECOVERY PLAN. IMS shall perform its' full range Disaster Recovery Plan on an annual basis. Customer has the right to observe the Disaster Recover Plan at its own expense, provided that it has requested in writing to participate within thirty (30) days of planned execution. 8) SPECIAL SERVICES. Additional Fees & Services. Additional services not specified in this Agreement may be provided by as mutually agreed upon in writing between the Customer and IMS in writing. 5 -----END PRIVACY-ENHANCED MESSAGE-----

EX-10.1

                                                                    Exhibit 10.1

                               FIRST AMENDMENT TO
                  INSURANCE ADMINISTRATION SERVICES AGREEMENT


         This FIRST AMENDMENT ("Amendment"), effective as of July 1, 2002, is
made to that certain INSURANCE ADMINISTRATION SERVICES AGREEMENT (the
"Agreement") dated October 1, 2001 by and between INSURANCE MANAGEMENT
SOLUTIONS, INC. ("IMS"), a corporation organized and existing under the laws of
the State of Florida with its principal place of business located at 801 94th
Avenue North, St. Petersburg, Florida, and each of BANKERS INSURANCE COMPANY
("BIC'), BANKERS SECURITY INSURANCE COMPANY ("BSIC") and FIRST COMMUNITY
INSURANCE COMPANY ("FCIC"), herein collectively referred to as "Customer", all
having their principal place of business at 360 Central Avenue, St. Petersburg,
Florida 33701.

         WHEREAS, IMS is engaged by Customer to provide certain policy
administration services and claims administration services, respectively, as
provided in the Agreement; and

         WHEREAS, Customer and IMS mutually desire to eliminate certain services
being provided by IMS to Customer relating to the "At Risk Lines" of business,
and to also change the pricing structure for certain services that IMS will
continue to provided pursuant to the Agreement, as the same are more
specifically set forth herein.

         NOW THEREFORE, IN CONSIDERATION OF the mutual covenants and agreements
hereinafter set forth, and for the considerations set forth in the Agreement,
the parties hereto hereby covenant and agree as follows:

1.       Insurance Administration Services. "EXHIBIT I" of the Agreement
         describing the "INSURANCE ADMINISTRATION SERVICES (AT RISK LINES)" is
         hereby deleted in its entirety and replaced with the "REVISED EXHIBIT
         I" attached hereto and made a part hereof. EXHIBIT II of the Agreement
         shall remain as is, without modification. Accordingly, all of the
         "claims" services to be provided by IMS are hereby deleted except for
         the "claims" services related to the WYO Flood as described on EXHIBIT
         II.

2.       Fees and Expenses. "SCHEDULE B" of the Agreement describing the
         "PRICING SCHEDULE" is hereby deleted in its entirety and replaced with
         the "REVISED SCHEDULE B" attached hereto and made a part hereof.

         (a) The Fees set forth in the REVISED SCHEDULE B that pertain only to
         the "At Risk Lines" as described in the REVISED EXHIBIT I shall expire
         on the one (1) year anniversary of the effective date of this Amendment
         ("At Risk Fee Expiration Date"). If the parties are unable to mutually
         agree on Fees pertaining to the "At Risk Lines" as described in the
         REVISED EXHIBIT I on or before the At Risk Fee Expiration Date, then
         all of the services provided by IMS to Customer for the "At Risk Lines"
         pursuant to the REVISED EXHIBIT I shall automatically terminate, and
         all Fees and costs associated with such services shall likewise
         automatically terminate. Provided, however, the termination of the "At
         Risk Lines" as described in the REVISED EXHIBIT I, shall not effect
         IMS' obligations to provide the services described in EXHIBIT II and
         for Customer to pay the Fees and costs of such services pursuant to the
         REVISED SCHEDULE B.




         (b) The Fees set forth in the REVISED SCHEDULE B that pertain only to
         the IT Hosting Services and Support shall expire on the one (1) year
         anniversary of the effective date of this Amendment ("IT Fee Expiration
         Date"). If the parties are unable to mutually agree on Fees pertaining
         to the "IT Hosting Services and Support" on or before the IT Fee
         Expiration Date, then all of the services provided by IMS to Customer
         for the "IT Hosting Services and Support" shall automatically
         terminate, and all Fees and costs associated with such services shall
         likewise automatically terminate.

3.       All Other Terms. Except as specifically modified by the terms of this
         First Amendment, all other terms, definitions, conditions, exhibits and
         schedules contained in or otherwise attached to the Agreement shall
         remain in full force and effect.

IN WITNESS WHEREOF, the parties hereto by their respective duly authorized
representatives have executed this Amendment as of the date and year first set
forth above.



"IMS"

INSURANCE MANAGEMENT SOLUTIONS, INC.

By: /s/ Robert G. Gantley
    --------------------------------
As its: Chief Operating Officer
        ----------------------------


"CUSTOMER"

BANKERS INSURANCE COMPANY

By: /s/ Edwin C. Hussemann
    --------------------------------
As its: Treasurer
        ----------------------------



BANKERS SECURITY INSURANCE COMPANY

By: /s/ Edwin C. Hussemann
    --------------------------------
As its: Treasurer
        ----------------------------




FIRST COMMUNITY INSURANCE COMPANY

By: /s/ Edwin C. Hussemann
    --------------------------------
As its: Treasurer
        ----------------------------




                                       2



                               REVISED SCHEDULE B

                                PRICING SCHEDULE

[*]

     *   Indicates that material has been omitted and confidential treatment has
         been requested therefor. All such omitted material has been filed
         separately with the SEC pursuant to Rule 24b-2.








                                REVISED EXHIBIT I

                INSURANCE ADMINISTRATION SERVICES (AT RISK LINES)

1)       DEFINITIONS: Capitalized terms not otherwise defined in the Agreement
or in this Exhibit shall be construed as otherwise generally understood in the
insurance and data processing industry.

2)       POLICY ADMINISTRATION: IMS shall perform the services listed hereunder
for the Customer's at risk policies ("At Risk Policies") in accordance with the
applicable rules and regulations. The term "At Risk Policies" includes the Auto,
Homeowner, Commercial, and X-Flood Authorized Line of Business.

Section I - Services

1.       Policy Issuance and Document packaging.

         -        At Risk Policy document packaging including forms, printing
                  and assembly for new business, renewals and endorsements and
                  any other policy transaction where declaration page issuance
                  is required.

2.       Cash, Billing & Collection, Accounting Administration/Premium,
         Treasury.

         -        Post all incoming cash according to received date (any cash
                  not able to be processed will be sent back to Customer);

         -        Print At Risk Policy premium disbursements;

         -        Credit Card processing via lockbox for Customer Companies: BIC
                  & FCIC;

         -        NSF processing;

         -        Cash correction services;

         -        Process voided checks and stop payment of return premium
                  checks;

         -        Provide one lockbox per P.O. Box;

         -        Imaging - creation, storage and retrieval.

3.       Print & Distribution Services.

         -        Automated document library;

         -        Electronic document assembly;

         -        Print invoices, reminders, cancellation notification;

         -        Electronic document archival/retrieval;

         -        Automated finishing/insertion facility;

         -        Provide all paper and supplies;

         -        Forms management;

         -        Mail pre-sort facility;

         -        Mailing At Risk Policy, At Risk Policy billings and At Risk
                  Policy renewals (postage excluded);

         -        Imaging - incoming mail and outgoing print.


                                        2





         3)       HOSTING SERVICES AND SUPPORT. IMS shall administer services
                  and support Customer's IT needs as listed hereunder.

                  Section I - IT Hosting Services and Support

                  Table 4.0



                              SERVICES:                  IT SERVICES FEE:
                              ---------                  ----------------
                                                      
                           Server Hosting*                      *
                      840 Production Hosting**                  *
                      840 Development Hosting**                 *
                       840 Websphere Hosting**                  *
                          Lawson Hosting***                     *
                   Homeowner Software Support****               *
                   Automobile Software Support****              *
                             Monthly Fee                        *


         -        *Server Hosting

                  -        Server Hardware

                  -        Network Access

                  -        Availability

                  -        Rent

                  -        OS/Security

                  -        Storage/Backup/Archive/Retrieval

         -        **AS/400 Hosting:

                  -        Includes all Server Hosting Items Above

                  -        3rd Party Software:

                    -        ASC: Pilot, Abstract, Status, Sequel

                    -        ASI: PKZip400

                    -        Gurnbo: Report Designer

                    -        MKS: Implementor

                    -        ProData: DBU

                    -        Tangent: Surpass

                    -        Websphere Standard Edition Application Server

         -        ***Lawson Hosting:

                  -        Includes All Server Hosting Items Above

                  -        3rd Party Software

                  -        Lawson Financials

         -        ****Automobile Software Support (FL, SC, CA, WA & OR only)

                  -        Backend software support (current system
                           configuration)

                  -        Forms management (existing forms only)

                  -        IVR management (edify)

                  -        Global system support for policy processing includes
                           the following components:

                    -        Comments

                    -        Policy Activity

                    -        Insured

                    -        Multi-lender

                    -        Transaction processing (current configuration only)

                    -        Discount surcharges

                    -        Forms and endorsements

                    -        Prior losses

                    -        Rating


*Indicates that material has been omitted and confidential treatment has been
requested therefore. All such omitted material has been filed separately with
the SEC pursuant to Rule 245-2.

                                        3



                  -        Product definition

                  -        Correspondence

                  -        Application Security

                  -        Reporting (existing reports only)

                  -        Claims entry

                  -        Adjuster processing

                  -        Payment

                  -        Salvage

                  -        Subrogation

                  -        Cash

                  -        Lockbox

                  -        Billing

                  -        Disbursement

                  -        Production

                  -        Forms packaging



- - ****            Homeowners Software Support (CA, NV, AZ, FL & SC only)

                  -        Backend software support (current system
                           configuration)

                  -        Forms management (existing forms- only)

                  -        IVR management (Edify)

                  -        Internet (FL only)

                  -        Global system support for policy processing includes
                           the following components:

                           -        Comments

                           -        Policy activity

                           -        Insured

                           -        Multi-lender

                           -        Transaction processing (current
                                    configuration only)

                           -        Discount surcharges

                           -        Forms and endorsements (existing only)

                           -        Prior losses

                           -        Rating

                           -        Product definition

                           -        Correspondence

                           -        Application Security

                           -        Reporting (existing reports only)

                           -        Claims entry

                           -        Adjuster processing

                           -        Payment

                           -        Salvage

                           -        Subrogation

                           -        Cash

                           -        Lockbox

                           -        Billing

                           -        Disbursement

                           -        Production

                           -        Forms packaging

4)       TELECOM SERVICES AND EQUIPMENT. IMS shall provide use of the telecom
         equipment to consideration of Customer administrating the system and
         providing technical support.


                                        4






5)       MISCELLANEOUS FEES.

         Section I - Miscellaneous Fees

         1.       Customer shall pay for any service that is outside of the
                  scope of the Insurance Administration Services as may be
                  mutually agreed by IMS and Customer.

         2.       IMS will provide data entry services at IMS' servicing office
                  at the time and materials rate of $30.00 per person, per hour.

         3.       From the Effective Date of the original agreement until the
                  one year anniversary of the Effective Date of the original
                  agreement ("1st Yr. Anniversary"), Customer shall reimburse
                  IMS for all postage expenses incurred by IMS in the
                  performance of the Insurance Administration Services. After
                  the 1st Yr. Anniversary, all postage expenses incurred by IMS
                  in the performance of the Insurance Administration Services
                  shall be the responsibility of IMS. Notwithstanding the
                  foregoing, if there is any Change of Control of IMS from the
                  Effective Date until the three (3) year anniversary of the
                  Effective Date ("3rd Yr. Anniversary"), Customer shall
                  thereafter reimburse IMS for all postage expenses incurred by
                  IMS in the performance of the Insurance Administration
                  Services from the date of the Change of Control until the 3rd
                  Yr. Anniversary.

         4.       Customer shall reimburse IMS for its use of the following
                  pre-approved third party information services: credit score,
                  MYF A+, CDS Business Mapping, CLUE. Customer may request at
                  any time that IMS discontinue use of the above third party
                  information services.

For all of the following expenses, only if requested in writing and in advance
by Customer:

         1.       System modifications, enhancements, interfaces to Customer or
                  other third-parties systems that fall outside of this
                  agreement will be performed on a time and materials basis of
                  $100.00 per person, per hour, subject to an annual adjustment
                  based on IMS' then current standard fee.

         2.       Data conversion from existing Customer system to IMS'
                  Proprietary System will be performed on a time and materials
                  basis at the rate of $100.00 per person, per hour.

         3.       Third-party information services used to provide the Insurance
                  Administration Services will be a pass-through expense to
                  Customer.

         4.       Data communication line charges (used by IMS solely for
                  Customer) will be a pass-through expense to Customer.

         5.       Any service to be performed by IMS that is outside of the
                  scope of this Agreement shall be at a fee rate that shall be
                  mutually agreed upon between IMS and Customer.

6)       ADJUSTING FIRM. IMS' Colonial Catastrophe Claims Service will be one of
         the authorized adjusting firms ("Adjusting Firm") for claim catastrophe
         adjusting work on behalf of Customer. However, IMS may designate a
         different Adjusting Firm with written notice to Customer.

7)       DISASTER RECOVERY PLAN. IMS shall perform its' full range Disaster
         Recovery Plan on an annual basis. Customer has the right to observe the
         Disaster Recover Plan at its own expense, provided that it has
         requested in writing to participate within thirty (30) days of planned
         execution.

8)       SPECIAL SERVICES.

         Additional Fees & Services. Additional services not specified in this
         Agreement may be provided by as mutually agreed upon in writing between
         the Customer and IMS in writing.

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