EXHIBIT 10.2

AMENDED AND RESTATED

CREDIT AGREEMENT

dated as of

June 30, 2003

between

ATLANTIC AMERICAN CORPORATION

and

WACHOVIA BANK, NATIONAL ASSOCIATION

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TABLE OF CONTENTS

    Page ARTICLE I DEFINITIONS 1         Section 1.01    Definitions 1
        Section 1.02    Accounting Terms and Determinations 14         Section
1.03    Use of Defined Terms 14         Section 1.04     Terminology 14
        Section 1.05     References 14 ARTICLE II THE CREDITS 14         Section
2.01    Commitment to Make the Term Loan 14         Section 2.02    Conversion
and Continuation of Loan 15         Section 2.03     Notes 15         Section
2.04    Mandatory Repayment of Loan 16         Section 2.05     Interest Rates
16         Section 2.06    Optional Prepayments 18         Section
2.07    General Provisions as to Payments 19         Section 2.08    Computation
of Interest 20 ARTICLE III CONDITIONS TO TERM LOAN 20         Section
3.01    Conditions to Term Loan 20 ARTICLE IV REPRESENTATIONS AND WARRANTIES 21
        Section 4.01    Corporate Existence and Power 21         Section
4.02    Corporate and Governmental Authorization; No Contravention 22
        Section 4.03    Binding Effect 22         Section 4.04    Financial
Information 22         Section 4.05    Litigation 23         Section
4.06    Compliance with ERISA 23         Section 4.07    Taxes 23
        Section 4.08    Subsidiaries 23         Section 4.09    Not an
Investment Company 24         Section 4.10    Public Utility Holding Company Act
24         Section 4.11    Ownership of Property; Liens 24         Section
4.12    No Default 24         Section 4.13    Full Disclosure 24         Section
4.14    Environmental Matters 24         Section 4.15    Compliance with Laws 25
        Section 4.16    Capital Stock 25         Section 4.17    Margin Stock 25
        Section 4.18    Insolvency 25         Section 4.19    Insurance 25
        Section 4.20    Debt and Redeemable Preferred Stock 25 ARTICLE V
COVENANTS 26         Section 5.01    Information 26         Section
5.02    Inspection of Property, Books and Records 27         Section
5.03    Ratio of Funded Debt to Consolidated Total Capitalization 28
        Section 5.04    Ratio of Funded Debt to EBITDA 28         Section
5.05    Minimum Consolidated Tangible Net Worth 28         Section
5.06    Restricted Payments 28         Section 5.07    Capital Expenditures 28
        Section 5.08    Loans or Advances 28         Section 5.09    Investments
29         Section 5.10    Negative Pledge 29         Section
5.11    Maintenance of Existence 30         Section 5.12    Dissolution 30
        Section 5.13    Consolidations, Mergers and Sales of Assets 30
        Section 5.14    Use of Proceeds 31         Section 5.15    Compliance
with Laws; Payment of Taxes 31         Section 5.16    Insurance 31
        Section 5.17    Change in Fiscal Year 31         Section
5.18    Maintenance of Property 31         Section 5.19    Environmental Notices
32         Section 5.20    Environmental Matters 32         Section
5.21    Environmental Release 32         Section 5.22    Additional Covenants,
Etc 32         Section 5.23    Transactions with Affiliates 33         Section
5.24    Risk-Based Capital Ratio 33         Section 5.25    Maintenance of
Statutory Surplus 33         Section 5.26    Minimum Investment in NAIC Rated
Bonds; Maximum Investment in Investment Properties 33         Section
5.27    Senior Indebtedness under Indenture 33         Section 5.28    Other
Obligations of Borrower 33 ARTICLE VI DEFAULTS 34         Section 6.01    Events
of Default 34 ARTICLE VII CHANGE IN CIRCUMSTANCES; COMPENSATION 37
        Section 7.01    Basis for Determining Interest Rate Inadequate or Unfair
37         Section 7.02    Illegality 37         Section 7.03    Increased Cost
and Reduced Return 37         Section 7.04    Base Rate Loans Substituted for
Affected Euro-Dollar Loans 39         Section 7.05    Compensation 39 ARTICLE
VIII MISCELLANEOUS 40         Section 8.01    Notices 40         Section
8.02    No Waivers 40         Section 8.03    Expenses; Documentary Taxes;
Indemnification; Increased Cost and Reduced Return 40         Section
8.04    CONSEQUENTIAL DAMAGES 41         Section 8.05    Setoffs 41
        Section 8.06    Amendments and Waivers 42         Section
8.07    Successors and Assigns 42         Section 8.08    Confidentiality 43
        Section 8.09    Survival of Certain Obligations 44         Section
8.10    Georgia Law 44         Section 8.11    Severability 44         Section
8.12    Interest 44         Section 8.13    Interpretation 44         Section
8.14    Consent to Jurisdiction 44         Section 8.15    Counterparts 45

      EXHIBIT A Note EXHIBIT B Form of Opinion of Counsel for the Borrower
EXHIBIT C Form of Closing Certificate of Borrower EXHIBIT D Form of Secretary's
Certificate EXHIBIT E Form of Compliance Certificate EXHIBIT F Form of
Assignment and Acceptance EXHIBIT G Form of Notice of Conversion or Continuation

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AMENDED AND RESTATED

CREDIT AGREEMENT

        AGREEMENT dated as of June 30, 2003 between ATLANTIC AMERICAN
CORPORATION and WACHOVIA BANK, NATIONAL ASSOCIATION.

        This Amended and Restated Credit Agreement amends and restates the
conditions under which the Bank has extended certain loans to the Borrower
pursuant to that Credit Agreement dated of July 1, 1999 between the Borrower and
the Bank, as amended by that First Amendment to Credit Agreement dated as of
March 24, 2000, that Second Amendment to Credit Agreement dated as of February
9, 2001, that Third Amendment to Credit Agreement dated as of December 31, 2001,
that Fourth Amendment to Credit Agreement dated as of November 21, 2002, and
that Fifth Amendment to Credit Agreement dated as of April 23, 2003. The parties
hereto agree as follows:

ARTICLE I

DEFINITIONS

         Section 1.01   Definitions.   The terms as defined in this Section 1.01
shall, for all purposes of this Agreement and any amendment hereto (except as
herein otherwise expressly provided or unless the context otherwise requires),
have the meanings set forth herein:

         "2002 Debentures" has the meaning given to the term "Debentures" in the
2002 Indenture.

         "2003 Debentures" has the meaning given to the term "Debentures" in the
2003 Indenture.

         "2002 Indenture" means that certain indenture delivered in connection
with the Trust Preferred Transaction dated December 4, 2002 by and between the
Borrower and State Street Bank and Trust Company of Connecticut, National
Association, as Trustee.

         "2003 Indenture" means that certain indenture delivered in connection
with the Trust Preferred Transaction dated May 15, 2003 by and between the
Borrower and U.S. Bank National Association, as Trustee.

         "2002 Trust Preferred Transaction" means a transaction in which: (a)
the Borrower established the Statutory Trust I and acquired all of the Statutory
Trust I’s common securities; (b) the Statutory Trust I acquired up to
$18,042,000 of the Borrower’s subordinated debentures with proceeds received
from the issuance of its own trust preferred securities; and (c) the Borrower
provided a limited-recourse guaranty to pay the Statutory Trust I’s obligations
on the trust preferred securities, but only to the extent the Statutory Trust I
has funds available for the payment of such obligations.

         "2003 Trust Preferred Transaction" means a transaction in which: (a)
the Borrower established the Statutory Trust II and acquired all of the
Statutory Trust II’s common securities; (b) the Statutory Trust II acquired up
to $23,196,000 of the Borrower’s subordinated debentures with proceeds received
from the issuance of its own trust preferred securities; and (c) the Borrower
provided a limited-recourse guaranty to pay the Statutory Trust II’s obligations
on the trust preferred securities, but only to the extent the Statutory Trust II
has funds available for the payment of such obligations.

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         “Adjusted Capital” shall mean, as to any Insurance Subsidiary, the
total amount identified as “Total Adjusted Capital” in column 1 in the five-year
historical data exhibit of the Annual Statement of each Insurance Subsidiary,
prepared in accordance with statutory accounting principles.

        “Adjusted London Interbank Offered Rate” has the meaning set forth in
Schedule 2.05(c).

        “Affiliate” of any Person means (i) any other Person which directly, or
indirectly through one or more intermediaries, controls such Person, (ii) any
other Person which directly, or indirectly through one or more intermediaries,
is controlled by or is under common control with such Person, or (iii) any other
Person of which such Person owns, directly or indirectly, 20% or more of the
common stock or equivalent equity interests. As used herein, the term “control”
means possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.

        “Aggregate Value of NAIC Rated Bonds” shall mean the aggregate cost,
without duplication, of all bonds rated “2” or better by NAIC, owned by the
Borrower or any Consolidated Subsidiary and held as investments, as shown on the
books and records of the Borrower or such Consolidated Subsidiary and as
determined in accordance with GAAP.

        “Aggregate Value of Total Investments” shall mean the aggregate cost,
without duplication, of all bonds, redeemable preferred stocks, non-redeemable
preferred stocks, common stocks, mortgage loans, loans to policy holders, other
long term investments, short term investments and other properties of the
Borrower or any Consolidated Subsidiary held for investment purposes, as shown
on the books and records of the Borrower or such Consolidated Subsidiary and as
determined in accordance with GAAP.

        “Agreement” means this Amended and Restated Credit Agreement, together
with all amendments and supplements hereto.

        “Amortization” means for any period the sum of all amortization expenses
of the Borrower and its Consolidated Subsidiaries for such period, determined in
accordance with GAAP, exclusive of the amortization of deferred acquisition
costs.

        “Annual Statement” means, with respect to any Insurance Subsidiary, the
annual report, statement or other filing made by such Insurance Subsidiary with
the insurance department or other governmental authority of the state in which
such Insurance Subsidiary is formed or incorporated which regulates, supervises
or otherwise has jurisdiction over such Insurance Subsidiary, all in accordance
with statutory accounting principles.

         “Applicable Margin” has the meaning set forth in Section 2.05(a).

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         “Assignee” has the meaning set forth in Section 8.07(c).

        “Assignment and Acceptance” means an Assignment and Acceptance executed
in accordance with Section 8.07(c) in the form attached hereto as Exhibit F.

         “Authority” has the meaning set forth in Section 7.02.

        “Bank” means Wachovia Bank, National Association, a national banking
association, and its successors and assigns.

        “Base Rate” means for any day, the rate per annum equal to the higher as
of such day of (i) the Prime Rate, and (ii) one-half of one percent above the
Federal Funds Rate for such day. For purposes of determining the Base Rate for
any day, changes in the Prime Rate and the Federal Funds Rate shall be effective
on the date of each such change.

        “Base Rate Loan” means a Loan which bears or is to bear interest at a
rate based upon the Base Rate.

        “Book Value” means with respect to any asset, the cost of such asset,
minus accumulated depreciation or amortization, if any, with respect to such
asset.

        “Borrower” means Atlantic American Corporation, a Georgia corporation,
and its successors and permitted assigns.

        “Capital Expenditures” means for any period the sum of all capital
expenditures incurred during such period by the Borrower and its Consolidated
Subsidiaries, as determined in accordance with GAAP.

        “Capital Stock” means any redeemable or nonredeemable capital stock of
the Borrower or any Consolidated Subsidiary (to the extent issued to a Person
other than the Borrower), whether common or preferred.

        “CERCLA” means the Comprehensive Environmental Response Compensation and
Liability Act, 42 U.S.C. §9601 et seq. and its implementing regulations and
amendments.

         “CERCLIS” means the Comprehensive Environmental Response Compensation
and Liability Information System established pursuant to CERCLA.

         “Change of Law” shall have the meaning set forth in Section 7.02.

         “Closing Certificate” has the meaning set forth in Section 3.01(d).

         “Closing Date” means June 30, 2003.

        “Code” means the Internal Revenue Code of 1986, as amended, or any
successor Federal tax code. Any reference to any provision of the Code shall
also be deemed to be a reference to any successor provision or provisions
thereof.

         “Commitment” means $15,000,000.

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        “Company Action Level” means 200% of the Authorized Control Level
Risk-Based Capital of each Insurance Subsidiary. The Authorized Control Level
Risk-Based Capital of each Insurance Subsidiary shall be computed in the manner
from time to time prescribed by the applicable state insurance department or
regulatory authority for inclusion in the Annual Statement of each Insurance
Subsidiary to such department or regulatory authority.

         “Compliance Certificate” has the meaning set forth in Section 5.01(c).

        “Consolidated Interest Expense” for any period means interest, whether
expensed or capitalized, in respect of Debt of the Borrower and any of its
Consolidated Subsidiaries outstanding during such period.

        “Consolidated Net Income” means, for any period, the Net Income of the
Borrower and its Consolidated Subsidiaries determined on a consolidated basis,
but excluding (i) extraordinary gains and (ii) any equity interests of the
Borrower or any Subsidiary in the unremitted earnings of any Person that is not
a Subsidiary in excess of $500,000, determined on a consolidated basis, per
annum.

        “Consolidated Subsidiary” means at any date with respect to any Person,
any Subsidiary or other entity the accounts of which, in accordance with GAAP,
would be consolidated with those of such Person in its consolidated financial
statements as of such date.

        “Consolidated Tangible Net Worth” means, at any time, Stockholders’
Equity, less the sum of the value, as set forth or reflected on the most recent
consolidated balance sheet of the Borrower and its Consolidated Subsidiaries,
prepared in accordance with GAAP, of

 

        (A)      Any change in equity resulting from any write-up of assets
subsequent to December 31, 2002 (other than the usual and customary valuation of
the investment portfolio of the Borrower or any Consolidated Subsidiary from
time to time);

 

        (B)      All assets which would be treated as intangible assets for
balance sheet presentation purposes under GAAP, related to the compliance by the
Borrower with the provisions of Financial Accounting Statement Board Statement
No. 141, all determined in accordance with GAAP; provided, however, deferred
acquisition costs, as determined in accordance with GAAP, shall not be deducted
from Stockholders Equity;

 

        (C)      To the extent not included in (B) of this definition, deferred
expenses, other than deferred acquisition costs, as determined in accordance
with GAAP, provided, however, that deferred expenses in an amount not to exceed
$2,000,000 incurred as a result of financings of Funded Debt, including, without
limitation, the 2002 Trust Preferred Transaction and the 2003 Trust Preferred
Transaction, shall be excluded from this definition; and provided further, that
prepaid expenses shall not constitute deferred expenses for the purposes of this
definition; and

 

        (D)      Other than in the ordinary course of business, loans or
advances to stockholders, directors, officers or employees.

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        “Consolidated Total Assets” means, at any time, the total assets of the
Borrower and its Consolidated Subsidiaries, determined on a consolidated basis,
as set forth or reflected on the most recent consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries, prepared in accordance with GAAP.

        “Consolidated Total Capitalization” means, at any time, the sum of (i)
Consolidated Tangible Net Worth, and (ii) Funded Debt.

        “Controlled Group” means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower, are treated as a single
employer under Section 414 of the Code.

         “Debentures” means the 2002 Debentures and the 2003 Debentures,
collectively.

        “Debt” of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person as lessee under capital leases,
(v) all obligations of such Person to reimburse any bank or other Person in
respect of amounts payable under a banker’s acceptance, (vi) all Redeemable
Preferred Stock of such Person (in the event such Person is a corporation),
(vii) all obligations (absolute or contingent) of such Person to reimburse any
bank or other Person in respect of amounts paid under a letter of credit or
similar instrument, (viii) all Debt of others secured by a Lien on any asset of
such Person, whether or not such Debt is assumed by such Person, and (ix) all
Debt of others Guaranteed by such Person.

        “Default” means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived in writing, become an Event of Default.

         “Default Rate” means, on any day, the sum of the Base Rate plus 2%.

        “Depreciation” means for any period the sum of all depreciation expenses
of the Borrower and its Consolidated Subsidiaries for such period, as determined
in accordance with GAAP.

        “Dividend Ability” means, at any time and for any Insurance Subsidiary,
the greater of (i) 10% of Statutory Surplus or (ii) (a) if such Insurance
Subsidiary is a life insurer, the “Net Gain from Operations” of such Insurance
Subsidiary as set forth on the most recent Annual Statement or Quarterly
Statement of such Insurance Subsidiary, prepared in accordance with statutory
accounting principles or (b) if such Insurance Subsidiary is not a life insurer,
the “Net Income” of such Insurance Subsidiary as set forth on the most recent
Annual Statement or Quarterly Statement of such Insurance Subsidiary, prepared
in accordance with statutory accounting principles; provided, however, that (i)
realized capital gains shall not be included in such calculations; and (ii) any
extraordinary dividend approved by the appropriate regulatory authorities shall
be included in such calculation.

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        “Dividends” means for any period the sum of all dividends paid or
declared during such period in respect of any Capital Stock and Redeemable
Preferred Stock (other than dividends paid or payable in the form of additional
Capital Stock).

         “Dollars” or “$” means dollars in lawful currency of the United States
of America.

        “Domestic Business Day” means any day except a Saturday, Sunday or other
day on which commercial banks in Georgia are authorized or required by law to
close.

        “EBITDA” for any period means the sum of (i) Consolidated Net Income,
(ii) taxes on income, (iii) Consolidated Interest Expense, (iv) Depreciation and
(v) Amortization, all determined with respect to the Borrower and its
Consolidated Subsidiaries on a consolidated basis for such period and in
accordance with GAAP. In determining EBITDA for any period, (i) any Consolidated
Subsidiary acquired during such period by the Borrower or any other Consolidated
Subsidiary shall be included on a pro forma, historical basis as if it had been
a Consolidated Subsidiary during such entire period and (ii) any amounts which
would be included in a determination of EBITDA for such period with respect to
assets acquired during such period by the Borrower or any Consolidated
Subsidiary shall be included in the determination of EBITDA for such period and
the amount thereof shall be calculated on a pro forma, historical basis as if
such assets had been acquired by the Borrower or such Consolidated Subsidiary
prior to the first day of such period.

        “Environmental Authority” means any foreign, federal, state, local or
regional government that exercises any form of jurisdiction or authority under
any Environmental Requirement.

        “Environmental Authorizations” means all licenses, permits, orders,
approvals, notices, registrations or other legal prerequisites for conducting
the business of the Borrower or any Subsidiary required by any Environmental
Requirement.

        “Environmental Judgments and Orders” means all judgments, decrees or
orders arising from or in any way associated with any Environmental
Requirements, whether or not entered upon consent or written agreements with an
Environmental Authority or other entity arising from or in any way associated
with any Environmental Requirement, whether or not incorporated in a judgment,
decree or order.

        “Environmental Laws” means any and all federal, state, local and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges or releases of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or hazardous substances or wastes into
the environment, including, without limitation, ambient air, surface water,
groundwater or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, petroleum or petroleum products, chemicals or
industrial, toxic or hazardous substances or wastes or the clean-up or other
remediation thereof.

        “Environmental Liabilities” means any liabilities, whether accrued,
contingent or otherwise, arising from and in any way associated with any
Environmental Requirements.

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        “Environmental Notices” means written notice from any Environmental
Authority of possible or alleged noncompliance with or liability under any
Environmental Requirement, including without limitation any complaints,
citations, demands or requests from any Environmental Authority for correction
of any violation of any Environmental Requirement or any investigations
concerning any violation of any Environmental Requirement.

        “Environmental Proceedings” means any judicial or administrative
proceedings arising from or in any way associated with any Environmental
Requirement.

        “Environmental Releases” means releases as defined in CERCLA or under
any applicable state or local environmental law or regulation.

        “Environmental Requirements” means any legal requirement relating to
health, safety or the environment and applicable to the Borrower, any Subsidiary
or the Properties, including but not limited to any such requirement under
CERCLA or similar state legislation and all federal, state and local laws,
ordinances, regulations, orders, writs, decrees and common law.

        “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended from time to time, or any successor law. Any reference to any provision
of ERISA shall also be deemed to be a reference to any successor provision or
provisions thereof.

        “Euro-Dollar Business Day” means any Domestic Business Day on which
dealings in Dollar deposits are carried out in the London interbank market.

        “Euro-Dollar Loan” means a Loan which bears or is to bear interest at a
rate based upon the London Interbank Offered Rate.

         “Euro-Dollar Reserve Percentage” has the meaning set forth in Section
2.05(c).

         “Event of Default” has the meaning set forth in Section 6.01.

        “Fair Market Value” means, with respect to any asset, the greater of:
(i) the Gross Proceeds received by the Borrower or any Subsidiary in connection
with the sale, transfer or other disposition by the Borrower or such Subsidiary
(as the case may be) of such asset, or (ii) the Book Value of such asset.

        “Federal Funds Rate” means, for any day, the rate per annum (rounded
upward, if necessary, to the next higher 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Business Day next
succeeding such day, provided that (i) if the day for which such rate is to be
determined is not a Business Day, the Federal Funds Rate for such day shall be
such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (ii) if such rate is not so
published for any day, the Federal Funds Rate for such day shall be the average
rate charged to the Bank on such day on such transactions as determined by the
Bank.

         “Final Maturity Date” means June 30, 2008.

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        “Financing” shall mean (i) any transaction or series of transactions for
the incurrence by the Borrower of any Debt or for the establishment of a
commitment to make advances which would constitute Debt of the Borrower, which
Debt (in either of the foregoing cases) is not by its terms subordinate and
junior to Debt of the Borrower arising hereunder, (ii) an obligation incurred in
a transaction or series of transactions in which assets of the Borrower are sold
and leased back, or (iii) a sale of accounts or other receivables or any
interest therein, other than a sale or transfer of accounts or receivables
attendant to a sale permitted hereunder of an operating division.

         “Fiscal Quarter” means any fiscal quarter of the Borrower.

         “Fiscal Year” means any fiscal year of the Borrower.

        “Forfeiture Proceeding” means any action, proceeding or investigation
affecting the Borrower or any of its Subsidiaries before any court, governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, if such action, proceeding or investigation could result in (i) the
seizure or forfeiture of any of their assets, revenues or share capital, which
when the Fair Market Value of such assets, revenues or share capital subject to
such seizure or forfeiture when aggregated with the Fair Market Value of all
other assets, revenues and share capital of the Borrower and its Subsidiaries
seized or forfeited since the Closing Date exceeds $1,000,000, or (ii) a
Material Adverse Effect.

        “Funded Debt” means, at any date, the total Debt of the Borrower and its
Subsidiaries determined on a consolidated basis, provided however, that for the
purposes of determining compliance with the covenant contained in Section 5.04
only, Funded Debt shall exclude the Subordinated Debt.

        “GAAP” means generally accepted accounting principles applied on a basis
consistent with those which, in accordance with Section 1.02, are to be used in
making the calculations for purposes of determining compliance with the terms of
this Agreement.

        “Gross Proceeds” means any and all cash, plus the face amount of any and
all notes, bonds, debentures, instruments and evidences of indebtedness, and the
value of any other property, of whatever kind or nature, received by the
Borrower or any Subsidiary in connection with the sale, transfer or other
disposition by the Borrower or such Subsidiary (as the case may be) of any of
its assets.

        “Guarantee” by any Person means any obligation, contingent or otherwise,
of such Person directly or indirectly guaranteeing any Debt or other obligation
of any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
secure, purchase or pay (or advance or supply funds for the purchase or payment
of) such Debt or other obligation (whether arising by virtue of partnership
arrangements, by agreement to keep-well, to purchase assets, goods, securities
or services, to provide collateral security, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for the
purpose of assuring in any other manner the obligee of such Debt or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part), provided that the term Guarantee shall
not include endorsements for collection or deposit in the ordinary course of
business. The term “Guarantee” used as a verb has a corresponding meaning.

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        “Hazardous Materials” includes, without limitation, (a) solid or
hazardous waste, as defined in the Resource Conservation and Recovery Act of
1980, 42 U.S.C. §6901 et seq. and its implementing regulations and amendments,
or in any applicable state or local law or regulation, (b) any “hazardous
substance”, “pollutant” or “contaminant”, as defined in CERCLA, or in any
applicable state or local law or regulation, (c) gasoline, or any other
petroleum product or by-product, including crude oil or any fraction thereof,
(d) toxic substances, as defined in the Toxic Substances Control Act of 1976, or
in any applicable state or local law or regulation and (e) insecticides,
fungicides, or rodenticides, as defined in the Federal Insecticide, Fungicide,
and Rodenticide Act of 1975, or in any applicable state or local law or
regulation, as each such Act, statute or regulation may be amended from time to
time.

        “Holding Company Expense” means, as applied to the Borrower for any
period, the aggregate amount of expenses incurred by the Borrower and/or
payments made by the Borrower on behalf of the Borrower’s Subsidiaries in
connection with services provided by the Borrower to its Subsidiaries.

        “Insurance Subsidiaries” means those Persons set forth on Schedule 4.08A
attached hereto, together with their respective successors, and any other
Subsidiary which at any time after the Closing Date is engaged principally in
the property and casualty insurance business, the accident and health insurance
business or the life insurance business or any combination thereof.

        “Intercompany Billing” means amounts received by the Borrower from
Subsidiaries and/or payments made by the Borrower on behalf of the Borrower’s
Subsidiaries as payment for services provided by the Borrower to such
Subsidiaries.

        “Interest Coverage” for any period means (a) the sum of Dividend
Ability, Intercompany Billing and Tax Sharing Payments minus (b) Holding Company
Expense, all determined with respect to the Borrower.

        “Interest Period” means, with respect to each Euro-Dollar Loan, the
period commencing on the date that such Euro-Dollar Loan is first made,
converted or continued and ending on the numerically corresponding day in the
first, second, third or sixth month thereafter, as the Borrower may elect;
provided that:

 

        (a)      any Interest Period (subject to clause (c) below) which would
otherwise end on a day which is not a Euro-Dollar Business Day shall be extended
to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business
Day falls in another calendar month, in which case such Interest Period shall
end on the next preceding Euro-Dollar Business Day;

 

        (b)      any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the appropriate subsequent calendar month) shall, subject
to clause (c) below, end on the last Euro-Dollar Business Day of the appropriate
subsequent calendar month; and

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        (c)      no Interest Period may be selected which begins before the
Final Maturity Date and would otherwise end after the Final Maturity Date.

        “Investment” means any investment in any Person, whether by means of
purchase or acquisition of obligations or securities of such Person, capital
contribution to such Person, loan or advance to such Person, making of a time
deposit with such Person, Guarantee or assumption of any obligation of such
Person or otherwise.

        “Investment Properties” for any period means all real property owned by
the Borrower and its Consolidated Subsidiaries during the applicable period;
provided, however, the definition of Investment Properties shall exclude any
real property if: (i) at least fifty percent (50%) of the net leasable area with
respect to such real property is occupied by the Borrower and/or its
Subsidiaries; and (ii) the primary use of such real property is the operation of
the Borrower’s and/or Subsidiaries’ respective businesses.

        “Lending Office” means, as to the Bank, its office located at its
address set forth on the signature pages hereof (or identified on the signature
pages hereof as its Lending Office) or such other office as the Bank may
hereafter designate as its Lending Office by notice to the Borrower.

        “Lien” means, with respect to any asset, any mortgage, deed to secure
debt, deed of trust, lien, pledge, charge, security interest, security title,
preferential arrangement which has the practical effect of constituting a
security interest or encumbrance, servitude or encumbrance of any kind in
respect of such asset to secure or assure payment of a Debt or a Guarantee,
whether by consensual agreement or by operation of statute or other law, or by
any agreement, contingent or otherwise, to provide any of the foregoing. For the
purposes of this Agreement, the Borrower or any Subsidiary shall be deemed to
own subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such asset.

         “Loan” means the Term Loan.

        “Loan Documents” means this Agreement, the Note, the Pledge Agreement,
any other document evidencing, relating to or securing the Loan, and any other
document or instrument delivered from time to time in connection with this
Agreement, the Note or the Loan, as such documents and instruments may be
amended or supplemented from time to time.

         “London Interbank Offered Rate” has the meaning set forth in Section
2.05(c).

        “Margin Stock” means “margin stock” as defined in Regulation T, U or X
of the Board of Governors of the Federal Reserve System, as in effect from time
to time, together with all official rulings and interpretations issued
thereunder.

        “Material Adverse Effect” means, with respect to any event, act,
condition or occurrence of whatever nature (including any adverse determination
in any litigation, arbitration, or governmental investigation or proceeding),
whether singly or in conjunction with any other event or events, act or acts,
condition or conditions, occurrence or occurrences, whether or not related, a
material adverse change in, or a material adverse effect upon, any of (a) the
financial condition, operations, business or properties of the Borrower and its
Consolidated Subsidiaries taken as a whole, (b) the rights and remedies of the
Bank under the Loan Documents, or the ability of the Borrower to perform its
obligations under the Loan Documents to which it is a party, as applicable, or
(c) the legality, validity or enforceability of any Loan Document.

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         “Multiemployer Plan” shall have the meaning set forth in Section
4001(a)(3) of ERISA.

         “NAIC” means the National Association of Insurance Commissioners.

        “Net Income” means, as applied to any Person for any period, the
aggregate amount of net income of such Person, after taxes, for such period, as
determined in accordance with GAAP.

        “Note” means the amended and restated promissory note of the Borrower,
substantially in the form of Exhibit A hereto, evidencing the obligation of the
Borrower to repay the Loan.

         “Notice of Continuation or Conversion” has the meaning as specified in
Section 2.02.

         “Officer's Certificate” has the meaning set forth in Section 3.01(e).

         “Participant” has the meaning set forth in Section 8.07(b).

        “PBGC” means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.

        “Permitted Acquisition” means the acquisition by the Borrower or any
Subsidiary of shares of capital stock of any Person or assets from any Person,
if: (A) in the case of the acquisition of shares of capital stock of any Person,
immediately after giving effect to such acquisition (i) such Person is a
Consolidated Subsidiary; (ii) the Borrower controls such Person directly or
indirectly through a Subsidiary; (iii) no Default shall have occurred and be
continuing; (iv) the line or lines of business engaged in by such Person are the
same or substantially the same as the lines of business engaged in by the
Borrower and its Subsidiaries on the Closing Date; and (v) such acquisition is
made on a negotiated basis with the approval of the Board of Directors of the
Person to be acquired and, if necessary, the shareholders of the Person to be
acquired; and (B) in the case of the acquisition of assets from any Person,
immediately after giving effect to such acquisition: (i) the assets acquired by
the Borrower or such Subsidiary shall be used by the Borrower or such Subsidiary
in a line of business the same or substantially the same as the lines of
business engaged in by the Borrower and its Subsidiaries on the Closing Date;
and (ii) no Default shall have occurred and be continuing.

        “Person” means an individual, a corporation, a limited liability
company, a partnership (including without limitation, a joint venture), an
unincorporated association, a trust or any other entity or organization,
including, but not limited to, a government or political subdivision or an
agency or instrumentality thereof.

        “Plan” means at any time an employee pension benefit plan which is
covered by Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code and is either (i) maintained by a member of the
Controlled Group for employees of any member of the Controlled Group or (ii)
maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
a member of the Controlled Group is then making or accruing an obligation to
make contributions or has within the preceding 5 plan years made contributions.

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        “Pledge Agreement” means the Amended and Restated Pledge Agreement dated
as of June 30, 2003 executed by the Borrower for the benefit of the Bank, as the
same may be amended, restated, supplemented or otherwise modified from time to
time, pursuant to which the Borrower has pledged to the Bank the stock or other
equity interests it holds in the following Subsidiaries: American Southern
Insurance Company, Association Casualty Insurance Company, Georgia Casualty &
Surety Company and Bankers Fidelity Life Insurance Company, and agrees to pledge
any stock or equity interests it obtains in the future with respect to existing
Subsidiaries or Persons which become Subsidiaries, as more fully set forth
therein.

        “Prime Rate” refers to that interest rate so denominated and set by the
Bank from time to time as an interest rate basis for borrowings. The Prime Rate
is but one of several interest rate bases used by the Bank. The Bank lends at
interest rates above and below the Prime Rate.

        “Properties” means all real property owned, leased or otherwise used or
occupied by the Borrower or any Subsidiary, wherever located.

        “Quarterly Statement” means, with respect to any Insurance Subsidiary,
the quarterly report, statement or other filing made by such Insurance
Subsidiary with the insurance department or other governmental authority of the
state in which such Insurance Subsidiary is formed or incorporated which
regulates, supervises or otherwise has jurisdiction over such Insurance
Subsidiary, all in accordance with statutory accounting principles.

         “Rate Determination Date” has the meaning set forth in Section 2.05(a).

        “Redeemable Preferred Stock” of any Person means any preferred stock
issued by such Person which is at any time prior to the Final Maturity Date
either (i) mandatorily redeemable (by sinking fund or similar payments or
otherwise) or (ii) redeemable at the option of the holder thereof.

        “Restricted Payment” means (i) any dividend or other distribution on any
shares of the Borrower’s capital stock (except dividends payable solely in
shares of its capital stock) or (ii) any payment on account of the purchase,
redemption, retirement or acquisition of (a) any shares of the Borrower’s
capital stock (except shares acquired upon the conversion thereof into other
shares of its capital stock) or (b) any option, warrant or other right to
acquire shares of the Borrower’s capital stock.

         “Series C Preferred Stock” means the Borrower's Series C Preferred
Stock.

        “Statutory Surplus” means, at any time for any Insurance Subsidiary, the
“Statutory Surplus” of such Insurance Subsidiary as set forth or reflected on
the most recent Annual Statement or Quarterly Statement of such Insurance
Subsidiary, prepared in accordance with statutory accounting principles.

        “Statutory Trust I” means ATLANTIC AMERICAN STATUTORY TRUST I, a
Connecticut statutory trust.

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        “Statutory Trust II” means ATLANTIC AMERICAN STATUTORY TRUST II, a
Connecticut statutory trust.

        “Stockholders’ Equity” means, at any time, the shareholders’ equity of
the Borrower and its Consolidated Subsidiaries, as set forth or reflected on the
most recent consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries prepared in accordance with GAAP, but excluding (i) any Redeemable
Preferred Stock of the Borrower or any of its Consolidated Subsidiaries and (ii)
the amount appearing as “accumulated other comprehensive income” on the balance
sheets of the Borrower. Shareholders’ equity generally would include, but not be
limited to (i) the par or stated value of all outstanding Capital Stock, (ii)
capital surplus, (iii) retained earnings, and (iv) various deductions such as
(A) purchases of treasury stock, (B) valuation allowances, (C) receivables due
from an employee stock ownership plan, (D) employee stock ownership plan debt
guarantees, and (E) translation adjustments for foreign currency transactions.

        “Subordinated Debt” means Debt of the Borrower and its Subsidiaries
incurred in connection with the 2002 Trust Preferred Transaction and the 2003
Trust Preferred Transaction.

        “Subsidiary” means as to any Person, any corporation or other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person.

         “Taxes” has the meaning set forth in Section 2.07(c).

        “Tax Sharing Agreement” means, that Tax Allocation Agreement among the
Borrower and certain Subsidiaries of the Borrower, including, among others, the
following: (i) American Southern Insurance Company, effective January 1, 1996;
(ii) American Safety Insurance Company, effective January 1, 1996; (iii)
Banker’s Fidelity Life Insurance Company, effective January 28, 1994; (iv)
Georgia Casualty and Surety Company, effective January 28, 1994; and (v)
Association Casualty Insurance Company, effective July 1, 1999.

        “Tax Sharing Payments” means those payments received by the Borrower
from its Subsidiaries as a result of the Tax Sharing Agreement.

        “Term Loan” means the term loan advanced to the Borrower in accordance
with Sections 2.01(a).

        “Third Parties” means all lessees, sublessees, licensees and other users
of the Properties, excluding those users of the Properties in the ordinary
course of the Borrower’s or any Subsidiary’s business and on a temporary basis.

         “Transferee” has the meaning set forth in Section 8.07(d).

        “Wholly Owned Subsidiary” means any Subsidiary all of the shares of
capital stock or other ownership interests of which (except directors’
qualifying shares) are at the time directly or indirectly owned by the Borrower.

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         Section 1.02    Accounting Terms and Determinations. Unless otherwise
specified herein, all terms of an accounting character used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with (a) in the case of the Borrower and each Subsidiary, GAAP,
applied on a basis consistent (except for changes concurred in by the Borrower’s
independent public accountants or otherwise required by a change in GAAP) with
the most recent audited consolidated financial statements of the Borrower and
its Consolidated Subsidiaries delivered to the Bank, unless with respect to any
such change concurred in by the Borrower’s independent public accountants or
required by GAAP, in determining compliance with any of the provisions of this
Agreement or any of the other Loan Documents: (i) the Borrower shall have
objected to determining such compliance on such basis at the time of delivery of
such financial statements, or (ii) the Bank shall so object in writing within 30
days after the delivery of such financial statements, in either of which events
such calculations shall be made on a basis consistent with those used in the
preparation of the latest financial statements as to which such objection shall
not have been made (which, if objection is made in respect of the first
financial statements delivered under Section 5.01 hereof, shall mean the
financial statements referred to in Section 4.04), and (b) in the case of any
Insurance Subsidiary, statutory accounting principles as in effect from time to
time, applied on a consistent basis.

         Section 1.03    Use of Defined Terms. All terms defined in this
Agreement shall have the same meanings when used in any of the other Loan
Documents, unless otherwise defined therein or unless the context shall
otherwise require.

         Section 1.04    Terminology. All personal pronouns used in this
Agreement, whether used in the masculine, feminine or neuter gender, shall
include all other genders; the singular shall include the plural and the plural
shall include the singular. Titles of Articles and Sections in this Agreement
are for convenience only, and neither limit nor amplify the provisions of this
Agreement.

         Section 1.05    References. Unless otherwise indicated, references in
this Agreement to “Articles”, “Exhibits”, “Schedules”, and “Sections” are
references to articles, exhibits, schedules and sections hereof.

ARTICLE II

THE CREDITS

         Section 2.01    Commitment to Make the Term Loan.

 

        (a)      The Bank hereby agrees, on the terms and conditions set forth
herein, to establish a term loan facility by making the Term Loan to the
Borrower on the Closing Date in an aggregate principal amount equal to the
Commitment. The Bank and the Borrower agree that on the Closing Date the
aggregate amount of the Base Rate Loans and Euro-Dollar Loans outstanding shall
automatically convert into the Term Loan. The Commitment shall terminate on the
Closing Date and the Bank shall have no further obligation to advance moneys to
the Borrower.

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         Section 2.02   Conversion and Continuation of Loan.

 

        (a)      The Term Loan shall initially be a Euro-Dollar Loan in an
amount equal to the Commitment with an Interest Period of three months.
Thereafter, on the terms and subject to the conditions of this Agreement, the
Borrower may elect (A) at the end of any Interest Period with respect to the
Euro-Dollar Loan to convert such Euro-Dollar Loan into a Base Rate Loan or to
continue such Euro-Dollar Loan for an additional Interest Period, or (B) at any
time to convert a Base Rate Loan to a Euro-Dollar Loan. The Borrower shall make
each such election by delivering to the Bank a notice in the form of Exhibit G
(a “Notice of Continuation or Conversion”) prior to 11:00 a.m. (Atlanta, Georgia
time) at least 3 Euro-Dollar Business Days prior to the effective date of any
conversion to or continuation of a Euro-Dollar Loan, and prior to 10:00 a.m.
(Atlanta, Georgia time) on the same Domestic Business Day as the effective date
of any conversion to a Base Rate Loan, specifying (x) in the case of a
conversion to or continuation of a Euro-Dollar Loan, the Interest Period; (y)
the date of conversion or continuation (which shall be a Euro-Dollar Business
Day, in the case of a conversion to or continuation of a Euro-Dollar Loan and a
Domestic Business Day in the case of a conversion to a Base Rate Loan); and (z)
the amount and type of conversion or continuation. Upon timely receipt of a
Notice of Continuation or Conversion, the Bank shall promptly notify the
Borrower of the applicable interest rate for the Interest Period selected in
such Notice of Continuation or Conversion; provided that the failure by the Bank
to provide any such notice shall not, in any way, affect or diminish the
Borrower’s obligations to the Bank or the Bank’s rights under this Agreement,
the Notes or any of the other Loan Documents. If, within the time period
required under this Section, the Bank shall not have received a Notice of
Continuation or Conversion with respect to a Euro-Dollar Loan from the Borrower
of an election to continue such loans for an additional Interest Period, then,
upon the expiration of the Interest Period therefor, such Loan shall be
converted automatically into a Base Rate Loan.

 

        (b)      No more than one Interest Period shall be applicable to the
Term Loan on any day.

 

        (c)      Notwithstanding anything to the contrary contained in this
Agreement, the Term Loan may not be continued as, or converted to, a Euro-Dollar
Loan if at the time of continuation or conversion there shall have occurred an
Event of Default, which Event of Default shall not have been cured or waived in
writing.

         Section 2.03   Notes.

 

        (a)      The Term Loan shall be evidenced by a Note payable to the order
of the Bank for the account of its Lending Office in an amount equal to the
original principal amount of the Commitment.

 

        (b)      The Bank shall record, and prior to any transfer of the Note
shall endorse on the schedule forming a part thereof appropriate notations to
evidence, the date, amount and maturity of the Loan made by it, the interest
rates from time to time applicable thereto and the date and amount of each
payment of principal made by the Borrower with respect thereto and such schedule
shall constitute rebuttable presumptive evidence of the principal amount owing
and unpaid on the Bank’s Note; provided that the failure of the Bank to make, or
any error in making, any such recordation or endorsement shall not affect the
obligation of the Borrower hereunder or under the Note or the ability of the
Bank to assign its Note. The Bank is hereby irrevocably authorized by the
Borrower so to endorse the Note and to attach to and make a part of the Note a
continuation of any such schedule as and when required.

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         Section 2.04   Mandatory Repayment of Loan.

 

         (a)     The Term Loan shall be repaid in the amounts and on the dates
as set forth in the table below:

July 1, 2004 $2,000,000 December 31, 2004 $1,000,000 June 30, 2005 $500,000
December 31, 2005 $1,250,000 June 30, 2006 $500,000 December 31, 2006 $1,250,000
June 30, 2007 $500,000 December 31, 2007 $1,250,000 June 30, 2008 $6,750,000

 

        (b)      Unless due sooner pursuant to the provisions of Article VI, the
Borrower agrees to repay the remaining principal of the Term Loan on the Final
Maturity Date in an amount equal to the unpaid principal balance of, and accrued
but unpaid interest on, the Loan.

         Section 2.05   Interest Rates.

 

        (a)      “Applicable Margin” shall be determined quarterly based upon
the ratio of Funded Debt to Consolidated Total Capitalization (calculated as of
the last day of each Fiscal Quarter), as follows:

Ratio of Funded Debt to
Consolidated Total Capitalization

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Base Rate Loans

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Euro-Dollar Loans

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     Greater than 45% 0% 2.50%      Greater than or equal to 40% but less
     than or equal to 45% 0% 2.00%      Less than 40% 0% 1.75%

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        The Applicable Margin shall be determined effective as of the date
(herein, the “Rate Determination Date”) which is 60 days after the last day of
the Fiscal Quarter as of the end of which the foregoing ratio is being
determined, based on the quarterly financial statements of the Borrower for such
Fiscal Quarter, and the Applicable Margin so determined shall remain effective
from such Rate Determination Date until the date which is 60 days after the last
day of the Fiscal Quarter in which such Rate Determination Date falls (which
latter date shall be a new Rate Determination Date); provided that (i) for the
period from and including the Closing Date to but excluding the Rate
Determination Date next following the Closing Date, the Applicable Margin shall
be 0% for Base Rate Loans and 2.50% for Euro-Dollar Loans (ii) in the case of
any Applicable Margin determined for the fourth and final Fiscal Quarter of a
Fiscal Year, the Rate Determination Date shall be the date which is 120 days
after the last day of such final Fiscal Quarter and such Applicable Margin shall
be determined based upon the annual audited financial statements of the Borrower
for the Fiscal Year ended on the last day of such final Fiscal Quarter, and
(iii) if on any Rate Determination Date the Borrower shall have failed to
deliver to the Banks the financial statements required to be delivered pursuant
to Section 5.01(a) or Section 5.01(b) with respect to the Fiscal Year or Fiscal
Quarter, as the case may be, most recently ended prior to such Rate
Determination Date, then for the period beginning on such Rate Determination
Date and ending (subject to Section 7.05 and the provisions relating to Interest
Periods contained in this Agreement) on the date such financial statements are
delivered, the Applicable Margin shall be determined as if the ratio of Funded
Debt to Consolidated Total Capitalization was more than 45% at all times during
such period. Any change in the Applicable Margin on any Rate Determination Date
shall result in a corresponding change, effective on and as of such Rate
Determination Date, in the interest rate applicable to each Loan outstanding on
such Rate Determination Date, provided that no Applicable Margin shall be
decreased pursuant to this Section 2.05 if a Default is in existence on the Rate
Determination Date until such Default shall have been cured or waived in
accordance with the terms of this Agreement.

 

        (b)       Each Base Rate Loan shall bear interest on the outstanding
principal amount thereof, for each day from the date such Loan is made until it
becomes due, at a rate per annum equal to the Base Rate for such day plus the
Applicable Margin. Such interest shall be payable on the first Domestic Business
Day of each calendar month while such Base Rate Loan is outstanding, on the date
such Base Rate Loan is converted to a Euro-Dollar Loan and, if a Base Rate Loan
is then outstanding, on the Final Maturity Date. Any overdue principal of and,
to the extent permitted by applicable law, overdue interest on any Base Rate
Loan shall bear interest, payable on demand, for each day until paid at a rate
per annum equal to the Default Rate.

 

        (c)       Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for the Interest Period applicable thereto, at a rate
per annum equal to the sum of the Applicable Margin plus the applicable Adjusted
London Interbank Offered Rate for such Interest Period; provided that if any
Euro-Dollar Loan shall, as a result of clause (1)(c) of the definition of
Interest Period, have an Interest Period of less than one month, such
Euro-Dollar Loan shall bear interest during such Interest Period at the rate
applicable to Base Rate Loans during such period. Interest on each Euro-Dollar
Loan shall be payable for each Interest Period on the last day thereof and, if
such Interest Period is longer than 3 months, at intervals of 3 months after the
first day thereof. Any overdue principal of and, to the extent permitted by
applicable law, overdue interest on any Euro-Dollar Loan shall bear interest,
payable on demand, for each day until paid at a rate per annum equal to the
Default Rate.

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        The “Adjusted London Interbank Offered Rate” applicable to any Interest
Period means a rate per annum equal to the quotient obtained (rounded upward, if
necessary, to the next higher 1/100th of 1%) by dividing (i) the applicable
London Interbank Offered Rate for such Interest Period by (ii) 1.00 minus the
Euro-Dollar Reserve Percentage.

        The “London Interbank Offered Rate” applicable to any Euro-Dollar Loan
means for the Interest Period of such Euro-Dollar Loan the rate per annum
determined on the basis of the rate for deposits in Dollars of amounts equal or
comparable to the principal amount of such Euro-Dollar Loan offered for a term
comparable to such Interest Period, which rate appears on the display designated
as Page “3750” of the Telerate Service (or such other page as may replace page
3750 of that service or such other service or services as may be nominated by
the British Banker’s Association for the purpose of displaying London Interbank
Offered Rates for U.S. dollar deposits) determined as of 1:00 p.m. New York City
time, 2 Euro-Dollar Business Days prior to the first day of such Interest
Period.

        “Euro-Dollar Reserve Percentage” means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the applicable reserve requirement for the Bank in respect of
“Eurocurrency liabilities” (or in respect of any other category of liabilities
which includes deposits by reference to which the interest rate on Euro-Dollar
Loans is determined or any category of extensions of credit or other assets
which includes loans by a non-United States office of the Bank to United States
residents). The Adjusted London Interbank Offered Rate shall be adjusted
automatically on and as of the effective date of any change in the Euro-Dollar
Reserve Percentage.

 

        (d)       The Bank shall determine the interest rates applicable to the
Loan hereunder in accordance with the terms of this Agreement. The Bank shall
give prompt notice to the Borrower by telecopy of each rate of interest so
determined, and its determination thereof shall be conclusive in the absence of
manifest error.

 

        (e)       After the occurrence and during the continuance of a Default,
the principal amount of the Loan (and, to the extent permitted by applicable
law, all accrued interest thereon) may, at the election of the Bank, bear
interest at the Default Rate.

         Section 2.06   Optional Prepayments.

 

         (a)      The Borrower may, upon at least 1 Domestic Business Day’s
notice to the Bank, prepay any Base Rate Loan in whole at any time, or from time
to time in part in amounts aggregating at least $500,000, or any larger multiple
of $100,000, by paying the principal amount to be prepaid together with accrued
interest thereon to the date of prepayment.

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         (b)      The Borrower may not prepay all or any portion of the
principal amount of any Euro-Dollar Loan prior to the last day of an Interest
Period applicable thereto, unless the Borrower complies with Section 7.05.

         Section 2.07   General Provisions as to Payments.

 

         (a)      The Borrower shall make each payment of principal of, and
interest on, the Bank’s Loan and of fees hereunder, not later than 11:00 A.M.
(Atlanta, Georgia time) on the date when due, in Federal or other funds
immediately available at the place where payment is due, to the Bank at its
address set forth on the signature pages hereof.

 

         (b)      Whenever any payment of principal of, or interest on, the Base
Rate Loan or of fees shall be due on a day which is not a Domestic Business Day,
the date for payment thereof shall be extended to the next succeeding Domestic
Business Day. Whenever any payment of principal of or interest on the
Euro-Dollar Loan shall be due on a day which is not a Euro-Dollar Business Day,
the date for payment thereof shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another
calendar month, in which case the date for payment thereof shall be the next
preceding Euro-Dollar Business Day. If the date for any payment of principal is
extended by operation of law or otherwise, interest thereon shall be payable for
such extended time.

 

         (c)      All payments of principal, interest and fees and all other
amounts to be made by the Borrower pursuant to this Agreement with respect to
any Loan or fee relating thereto shall be paid without deduction for, and free
from, any tax, imposts, levies, duties, deductions, or withholdings of any
nature now or at anytime hereafter imposed by any governmental authority or by
any taxing authority thereof or therein excluding in the case of the Bank, taxes
imposed on or measured by its net income, and franchise taxes imposed on it, by
the jurisdiction under the laws of which the Bank is organized or any political
subdivision thereof and, in the case of the Bank, taxes imposed on its income,
and franchise taxes imposed on it, by the jurisdiction of the Bank’s applicable
Lending Office or any political subdivision thereof (all such non-excluded
taxes, imposts, levies, duties, deductions or withholdings of any nature being
“Taxes”). In the event that the Borrower is required by applicable law to make
any such withholding or deduction of Taxes with respect to any Loan or fee or
other amount, the Borrower shall pay such deduction or withholding to the
applicable taxing authority, shall promptly furnish to the Bank in respect of
which such deduction or withholding is made all receipts and other documents
evidencing such payment and shall pay to the Bank additional amounts as may be
necessary in order that the amount received by the Bank after the required
withholding or other payment shall equal the amount the Bank would have received
had no such withholding or other payment been made. If no withholding or
deduction of Taxes are payable in respect of any Loan or fee relating thereto,
the Borrower shall furnish the Bank, at the Bank’s request, a certificate from
each applicable taxing authority or an opinion of counsel acceptable to the
Bank, in either case stating that such payments are exempt from or not subject
to withholding or deduction of Taxes. If the Borrower fails to provide such
original or certified copy of a receipt evidencing payment of Taxes or
certificate(s) or opinion of counsel of exemption, the Borrower hereby agrees to
compensate the Bank for, and indemnify it with respect to, the tax consequences
of the Borrower’s failure to provide evidence of tax payments or tax exemption.

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        In the event the Bank receives a refund of any Taxes paid by the
Borrower pursuant to this Section 2.07, it will pay to the Borrower the amount
of such refund promptly upon receipt thereof; provided, however, if at any time
thereafter it is required to return such refund, the Borrower shall promptly
repay to it the amount of such refund.

        Without prejudice to the survival of any other agreement of the Borrower
hereunder, the agreements and obligations of the Borrower contained in this
Section 2.07 shall be applicable with respect to any Participant, Assignee or
other Transferee, and any calculations required by such provisions (i) shall be
made based upon the circumstances of such Participant, Assignee or other
Transferee (provided that each Participant shall not be entitled to any
compensation greater than that which would have been received by the Bank under
similar circumstances), and (ii) constitute a continuing agreement and shall
survive the termination of this Agreement and the payment in full or
cancellation of the Notes.

Section 2.08 Computation of Interest. Interest on Base Rate Loans shall be
computed on the basis of a year of 365 days and paid for the actual number of
days elapsed (including the first day but excluding the last day). Interest on
Euro-Dollar Loans shall be computed on the basis of a year of 360 days and paid
for the actual number of days elapsed, calculated as to each Interest Period
from and including the first day thereof to but excluding the last day thereof.

ARTICLE III

CONDITIONS TO TERM LOAN

         Section 3.01   Conditions to Term Loan.    The obligation of the Bank
to make the Term Loan is subject to the following conditions:

 

         (a)     receipt by the Bank from the Borrower of a duly executed
counterpart of this Agreement signed by the Borrower;

 

         (b)      receipt by the Bank of the duly executed Note for the account
of the Bank complying with the provisions of Section 2.03;

 

         (c)      receipt by the Bank of an opinion (together with any opinions
of local counsel relied on therein) of Jones Day, counsel for the Borrower,
dated as of the Closing Date, substantially in the form of Exhibit B hereto and
covering such additional matters relating to the transactions contemplated
hereby as the Bank may reasonably request;

 

         (d)      receipt by the Bank of a certificate (the “Closing
Certificate”), dated the Closing Date, substantially in the form of Exhibit C
hereto, signed by a principal financial officer of the Borrower, to the effect
that (i) no Default has occurred and is continuing on the Closing Date and
(ii) the representations and warranties of the Borrower contained in Article IV
are true on and as of the Closing Date;

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         (e)      receipt by the Bank of all documents which the Bank may
reasonably request relating to the existence of the Borrower, the corporate
authority for and the validity of this Agreement, the Note, and any other
matters relevant hereto, all in form and substance satisfactory to the Bank,
including without limitation a certificate of incumbency from the Borrower (the
“Officer’s Certificate”), signed by the Secretary or an Assistant Secretary of
the Borrower substantially in the form of Exhibit D hereto, certifying as to the
names, true signatures and incumbency of the officer or officers of the Borrower
authorized to execute and deliver the Loan Documents to which it is a party, and
certified copies of the following items with respect to the Borrower: (i)
Certificate of Incorporation, (ii) Bylaws, (iii) a certificate of the Secretary
of State of the state of organization of the Borrower as to the good standing of
the Borrower as a corporation organized under the laws of such state, and (iv)
the action taken by the Board of Directors of the Borrower authorizing the
Borrower’s execution, delivery and performance of the Loan Documents to which it
is a party;

 

         (f)      receipt by the Bank of UCC Financing Statements in form and
substance satisfactory to the Bank in its sole discretion, providing for a
continuation of the Bank’s first priority security interest in the stock or
other equity interests held by the Borrower in all Subsidiaries of the Borrower
(which such UCC Financing Statements the Borrower hereby authorizes the Bank to
file);

 

         (g)      receipt by the Bank from each Insurance Subsidiary of a
certificate signed by the Chief Actuary or Chief Financial Officer of such
Insurance Subsidiary to the effect that the reserves of such Insurance
Subsidiary are adequate under statutory accounting principles and the applicable
laws of the state under the laws of which such Insurance Subsidiary was
organized or incorporated as of December 31, 2002;

 

         (h)      the fact that, immediately before and after the making of the
Term Loan, no Default shall have occurred and be continuing;

 

         (i)      the fact that the representations and warranties of the
Borrower contained in Article IV of this Agreement shall be true on and as of
the Closing Date; and

 

         (j)      payment by the Borrower of the reasonable fees and expenses of
Womble Carlyle Sandridge & Rice, special counsel to the Bank, in connection with
the negotiation, preparation, execution and delivery of this Agreement and the
Loan hereunder.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

         The Borrower represents and warrants that:

         Section 4.01    Corporate Existence and Power. The Borrower is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, is duly qualified to transact business
in every jurisdiction where, by the nature of its business, such qualification
is necessary, and has all corporate powers and all governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted, if the failure to be so qualified or to have such powers, licenses,
authorizations, consents or approvals could reasonably be expected, alone or in
the aggregate, to have or cause a Material Adverse Effect.

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         Section 4.02    Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Borrower of this
Agreement, the Note and the other Loan Documents (i) are within the Borrower’s
corporate powers, (ii) have been duly authorized by all necessary corporate
action, (iii) require no action by or in respect of, or filing with, any
governmental body, agency or official, which has not been obtained, (iv) do not
contravene, or constitute a default under, any provision of applicable law or
regulation or of the certificate of incorporation or by-laws of the Borrower or
of any material agreement, judgment, injunction, order, decree or other
instrument binding upon the Borrower or any of its Subsidiaries, and (v) do not
result in the creation or imposition of any Lien on any asset of the Borrower or
any of its Subsidiaries other than as provided therein.

         Section 4.03    Binding Effect. This Agreement constitutes a valid and
binding agreement of the Borrower enforceable in accordance with its terms, and
the Note and the other Loan Documents, when executed and delivered in accordance
with this Agreement, will constitute valid and binding obligations of the
Borrower enforceable in accordance with their respective terms, provided that
the enforceability hereof and thereof is subject in each case to general
principles of equity and to bankruptcy, insolvency and similar laws affecting
the enforcement of creditors’ rights generally.

         Section 4.04    Financial Information.

 

         (a)      As of the Closing Date, the consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as of December 31, 2002 and the
related consolidated statements of income, shareholders’ equity and cash flows
for the Fiscal Year then ended, reported on by an independent public accounting
firm of nationally recognized standing, copies of which have been delivered to
the Bank, and the unaudited consolidated financial statements of the Borrower
for the interim period ended March 31, 2003, copies of which have been delivered
to the Bank, fairly present, in conformity with GAAP, the consolidated financial
position of the Borrower and its Consolidated Subsidiaries as of such dates and
their consolidated results of operations and cash flows for such periods stated.

 

         (b)      The Annual Statements of the Insurance Subsidiaries together
with supplemental schedules thereto, dated as of December 31, 2002, and the
Quarterly Statements of the Insurance Subsidiaries together with supplemental
schedules thereto, dated as of March 31, 2003, copies of which have been
delivered to the Bank, fairly present the respective financial positions of the
Insurance Subsidiaries as of such dates.

 

         (c)      Since March 31, 2003 there has been no event, act, condition
or occurrence having a Material Adverse Effect.

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         Section 4.05   Litigation.   Except as provided as Schedule 4.05
attached hereto, there is no action, suit or proceeding pending, or to the
knowledge of the Borrower threatened, against or affecting the Borrower or any
of its Subsidiaries before any court or arbitrator or any governmental body,
agency or official which could have a Material Adverse Effect or which in any
manner draws into question the validity or enforceability of, or could impair
the ability of the Borrower to perform its obligations under, this Agreement,
the Note or any of the other Loan Documents.

         Section 4.06    Compliance with ERISA.

 

         (a)     The Borrower and each member of the Controlled Group have
fulfilled their obligations under the minimum funding standards of ERISA and the
Code with respect to each Plan and are in compliance in all material respects
with the presently applicable provisions of ERISA and the Code, and have not
incurred any material liability to the PBGC or a Plan under Title IV of ERISA.

 

         (b)     Neither the Borrower nor any member of the Controlled Group is
or ever has been obligated to contribute to any Multiemployer Plan.

         Section 4.07    Taxes.   There have been filed on behalf of the
Borrower and its Subsidiaries all Federal, state and local income, excise,
property and other tax returns which are required to be filed by them and all
taxes due pursuant to such returns or pursuant to any assessment received by or
on behalf of the Borrower or any Subsidiary have been paid. The charges,
accruals and reserves on the books of the Borrower and its Subsidiaries in
respect of taxes or other governmental charges are, in the opinion of the
Borrower, adequate. United States income tax returns of the Borrower and its
Subsidiaries have been examined and closed through the Fiscal Year ended
December 31, 1983.

         Section 4.08   Subsidiaries.

 

         (a)      Each of the Borrower’s Subsidiaries is a corporation or other
business entity or other business entity duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation or
organization, is duly qualified to transact business in every jurisdiction
where, by the nature of its business, such qualification is necessary, and has
all corporate powers and all governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted, if the failure to
be so qualified, or to have such powers, licenses, authorizations, consents or
approvals could reasonably be expected, alone or in the aggregate, to have or
cause a Material Adverse Effect.

 

         (b)      As of the Closing Date, the Borrower has no Insurance
Subsidiaries except those Subsidiaries listed on Schedule 4.08A, which
accurately sets forth each such Insurance Subsidiary’s complete name and
jurisdiction of incorporation.

 

         (c)      Schedule 4.08B accurately sets forth the complete name of each
Subsidiary of the Borrower as of the Closing Date which is not an Insurance
Subsidiary, as well as its jurisdiction of incorporation.

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         Section 4.09    Not an Investment Company.   Neither the Borrower nor
any of its Subsidiaries is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.

         Section 4.10   Public Utility Holding Company Act.   Neither the
Borrower nor any of its Subsidiaries is a “holding company”, or a “subsidiary
company” of a “holding company”, or an “affiliate” of a “holding company” or of
a “subsidiary company” of a “holding company”, as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended.

         Section 4.11   Ownership of Property; Liens.   Each of the Borrower and
its Consolidated Subsidiaries has title to its properties sufficient for the
conduct of its business, and none of such property is subject to any Lien
(including tax liens) except as permitted in Section 5.10.

         Section 4.12   No Default.   Neither the Borrower nor any of its
Consolidated Subsidiaries is in default under or with respect to any agreement,
instrument or undertaking to which it is a party or by which it or any of its
property is bound which could have or cause a Material Adverse Effect. No
Default or Event of Default has occurred and is continuing.

         Section 4.13   Full Disclosure.   All information heretofore furnished
by the Borrower to the Bank for purposes of or in connection with this Agreement
or any transaction contemplated hereby is, and all such information hereafter
furnished by the Borrower to the Bank will be, true, accurate and complete in
every material respect or based on reasonable estimates on the date as of which
such information is stated or certified. As of the Closing Date, the Borrower
has disclosed to the Bank in writing any and all facts specific to the
Borrower’s business and finances and known to the Borrower which could
reasonably be expected to have or cause a Material Adverse Effect and are not
generally known by or available to the Bank.

         Section 4.14   Environmental Matters.

 

         (a)      Neither the Borrower nor any Subsidiary is subject to any
Environmental Liability which could have or cause a Material Adverse Effect and
neither the Borrower nor any Subsidiary has been designated as a potentially
responsible party under CERCLA or under any state statute similar to CERCLA.
None of the Properties has been identified on any current or proposed (i)
National Priorities List under 40 C.F.R. § 300, (ii) CERCLIS list or (iii) any
list arising from a state statute similar to CERCLA.

 

         (b)      No Hazardous Materials have been or are being used, produced,
manufactured, processed, treated, recycled, generated, stored, disposed of,
managed or otherwise handled at, or shipped or transported to or from the
Properties or are otherwise present at, on, in or under the Properties, or, to
the best of the knowledge of the Borrower, at or from any adjacent site or
facility, except for Hazardous Materials, such as cleaning solvents, pesticides
and other materials used, produced, manufactured, processed, treated, recycled,
generated, stored, disposed of, and managed or otherwise handled in minimal
amounts in the ordinary course of business in compliance with all applicable
Environmental Requirements.

 

         (c)      The Borrower, and each of its Subsidiaries and Affiliates, has
procured all Environmental Authorizations necessary for the conduct of its
business, and is in compliance with all Environmental Requirements in connection
with the operation of the Properties and the Borrower’s, and each of its
Subsidiary’s and Affiliate’s, respective businesses.

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         Section 4.15    Compliance with Laws.   The Borrower and each
Subsidiary is in compliance with all applicable laws, including, without
limitation, all Environmental Laws, except where any failure to comply with any
such laws would not, alone or in the aggregate, have a Material Adverse Effect.

         Section 4.16   Capital Stock.   All Capital Stock, debentures, bonds,
notes and all other securities of the Borrower and its Subsidiaries presently
issued and outstanding are validly and properly issued in accordance with all
applicable laws, including, but not limited to, the “Blue Sky” laws of all
applicable states and the federal securities laws. The issued shares of Capital
Stock of the Borrower’s Wholly Owned Subsidiaries are directly or indirectly
owned by the Borrower free and clear of any Lien or adverse claim, other than
Liens arising under the Loan Documents. At least a majority of the issued shares
of voting capital stock of each of the Borrower’s other Subsidiaries (other than
Wholly Owned Subsidiaries) is owned by the Borrower free and clear of any Lien
or adverse claim, other than Liens arising under the Loan Documents.

         Section 4.17    Margin Stock.   Neither the Borrower nor any of its
Subsidiaries is engaged principally, or as one of its important activities, in
the business of purchasing or carrying any Margin Stock, and no part of the
proceeds of any Loan will be used to purchase or carry any Margin Stock or to
extend credit to others for the purpose of purchasing or carrying any Margin
Stock, or be used for any purpose which violates, or which is inconsistent with,
the provisions of Regulation X.

         Section 4.18    Insolvency.   After giving effect to the execution and
delivery of the Loan Documents and the making of the Loan under this Agreement,
the Borrower will not be “insolvent,” within the meaning of such term as used in
O.C.G.A. § 18-2-22 or as defined in § 101 of Title 11 of the United States Code
or Section 2 of the Uniform Fraudulent Transfer Act, or any other applicable
state law pertaining to fraudulent transfers, as each may be amended from time
to time, or be unable to pay its debts generally as such debts become due, or
have an unreasonably small capital to engage in any business or transaction,
whether current or contemplated.

         Section 4.19   Insurance.   The Borrower maintains and each Subsidiary
maintains (either in the name of the Borrower or in such Subsidiary’s own name),
with financially secure and reputable insurance companies, insurance on all its
Properties in at least such amounts and against at least such risks as are
usually insured against in the same general area by companies of established
repute engaged in the same or similar business.

         Section 4.20    Debt and Redeemable Preferred Stock.   As of the
Closing Date, the Borrower has no Debt or Redeemable Preferred Stock outstanding
except as described on Schedule 4.20 attached hereto.

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ARTICLE V

COVENANTS

        The Borrower agrees that, so long as the Bank has any Commitment
hereunder or any amount payable under any Note remains unpaid:

         Section 5.01   Information. The Borrower will deliver to the Bank (or,
in the case of clauses (a), (b), (e) and (f) of this Section, make available on
a continuous basis on “EDGAR” (the Electronic Data Gathering, Analysis, and
Retrieval system of the Securities and Exchange Commission) at
www.edgar-online.com or on the website of the SEC at
“http://www.sec.gov/edgarhp.htm”):

 

         (a)     (i) as soon as available and in any event within 100 days after
the end of each Fiscal Year, a consolidated balance sheet of the Borrower and
its Consolidated Subsidiaries as of the end of such Fiscal Year and the related
consolidated statements of income, shareholders’ equity and cash flows for such
Fiscal Year, setting forth in each case in comparative form the figures for the
previous fiscal year, all certified by an independent public accounting firm of
nationally recognized standing, with such certification to be free of exceptions
and qualifications not acceptable to the Bank, and (ii) as soon as available and
in any event within 70 days after the end of each fiscal year of each Insurance
Subsidiary, a copy of the Annual Statement of each such Insurance Subsidiary,
together with all supplemental schedules thereto, as of the end of such Fiscal
Year, all prepared in accordance with statutory accounting principles;

 

         (b)      (i) as soon as available and in any event within 50 days after
the end of each of the first 3 Fiscal Quarters of each Fiscal Year, a
consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as
of the end of such Fiscal Quarter and the related statement of income and
statement of cash flows for such Fiscal Quarter and for the portion of the
Fiscal Year ended at the end of such Fiscal Quarter, setting forth in each case
in comparative form the figures for the corresponding Fiscal Quarter and the
corresponding portion of the previous Fiscal Year, all certified (subject to
normal year-end adjustments) as to fairness of presentation, GAAP and
consistency by the chief financial officer or the chief accounting officer of
the Borrower, and (ii) as soon as available and in any event within 70 days
after the end of each fiscal quarter of each fiscal year of each Insurance
Subsidiary, a copy of the Quarterly Statement of each such Insurance Subsidiary,
together with all supplement schedules thereto, as of the end of such fiscal
quarter, all prepared in accordance with statutory accounting principles;

 

         (c)      simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate,
substantially in the form of Exhibit E (a “Compliance Certificate”), of the
chief financial officer or the chief accounting officer of the Borrower (i)
setting forth in reasonable detail the calculations required to establish
whether the Borrower was in compliance with the requirements of Sections 5.03
through 5.07, inclusive, 5.10, 5.24, 5.25 and 5.26 on the date of such financial
statements and (ii) stating whether any Default exists on the date of such
certificate and, if any Default then exists, setting forth the details thereof
and the action which the Borrower is taking or proposes to take with respect
thereto;

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         (d)      within 5 Domestic Business Days after the Borrower becomes
aware of the occurrence of any Default, a certificate of the chief financial
officer or the chief accounting officer of the Borrower setting forth the
details thereof and the action which the Borrower is taking or proposes to take
with respect thereto;

 

         (e)     promptly upon the mailing thereof to the shareholders of the
Borrower generally, copies of all financial statements, reports and proxy
statements so mailed;

 

         (f)      promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements on
Form S-8 or its equivalent) and annual, quarterly or monthly reports which the
Borrower shall have filed with the Securities and Exchange Commission;

 

         (g)      if and when the Borrower or any member of the Controlled Group
(i) gives or is required to give notice to the PBGC of any “reportable event”
(as defined in Section 4043 of ERISA) with respect to any Plan which might
constitute grounds for a termination of such Plan under Title IV of ERISA, or
knows that the plan administrator of any Plan has given or is required to give
notice of any such reportable event, a copy of the notice of such reportable
event given or required to be given to the PBGC; (ii) receives notice of
complete or partial withdrawal liability under Title IV of ERISA, a copy of such
notice; or (iii) receives notice from the PBGC under Title IV of ERISA of an
intent to terminate or appoint a trustee to administer any Plan, a copy of such
notice;

 

         (h)      promptly after the Borrower knows of the commencement thereof,
notice of any litigation, dispute or proceeding involving a claim against the
Borrower and/or any Subsidiary for $1,000,000 or more in excess of amounts
covered in full by applicable insurance;

 

         (i)      promptly after the Borrower knows of the commencement, notice
of any Forfeiture Proceeding; and

 

         (j)      from time to time such additional information regarding the
financial position or business of the Borrower and its Subsidiaries as the Bank
may reasonably request.

         Section 5.02   Inspection of Property, Books and Records.   The
Borrower will (i) keep, and will cause each Subsidiary to keep, proper books of
record and account in which full, true and correct entries in conformity with
GAAP (and, in the case of Insurance Subsidiaries, statutory accounting
principles) shall be made of all dealings and transactions in relation to its
business and activities; and (ii) permit, and will cause each Subsidiary to
permit, representatives of the Bank at the Bank’s expense prior to the
occurrence of an Event of Default and at the Borrower’s expense after the
occurrence of an Event of Default to visit and inspect any of their respective
properties, to examine and make abstracts from any of their respective books and
records and to discuss their respective affairs, finances and accounts with
their respective officers, employees and independent public accountants. The
Borrower agrees to cooperate and assist in such visits and inspections, in each
case at such reasonable times and as often as may reasonably be desired.

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         Section 5.03   Ratio of Funded Debt to Consolidated Total
Capitalization.   The ratio of Funded Debt to Consolidated Total Capitalization
will not at any time exceed 50%.

         Section 5.04    Ratio of Funded Debt to EBITDA.   As of the end of each
Fiscal Quarter beginning with the Fiscal Quarter ending June 30, 2003, the ratio
of Funded Debt as of the end of such Fiscal Quarter to EBITDA for the period of
4 consecutive Fiscal Quarters then ended shall be less than 3.10 to 1.0.

         Section 5.05   Minimum Consolidated Tangible Net Worth.   Consolidated
Tangible Net Worth will at no time be less than $59,500,000 plus 50% of the
cumulative Consolidated Net Income during any period after December 31, 2002
(taken as one accounting period), calculated quarterly at the end of each Fiscal
Quarter, but excluding from such calculations of Consolidated Net Income for
purposes of this Section, any Fiscal Quarter in which Consolidated Net Income is
negative.

         Section 5.06    Restricted Payments.   The Borrower will not declare or
make any Restricted Payment during any Fiscal Year; provided that: (1) the
Borrower may redeem shares of the Borrower’s capital stock for the purpose of
satisfying the Borrower’s obligations under its 401K plan and stock options
provided by the Borrower to its executive officers, in the ordinary course of
business and consistent with practices existing on the Closing Date; (2) the
total number of shares of the Borrower’s capital stock redeemed pursuant to the
preceding subsection (1) shall not exceed five hundred thousand in the aggregate
in any Fiscal Year; and (3) the aggregate amount expended by the Borrower in
connection with the redemptions made pursuant to the preceding subsection (1)
shall not exceed $2,000,000 in the aggregate in any Fiscal Year; and provided
further that the Borrower may make Restricted Payments on or in connection with
the Series C Preferred Stock, so long as, (a) the dividend rate payable on such
Series C Preferred Stock shall not exceed nine percent (9%) per annum, (b) the
redemption value of the Series C Preferred Stock shall not be greater than
$2,000,000 and (c) no Event of Default shall be in existence or shall result
from the making of such Restricted Payment.

         Section 5.07    Capital Expenditures.   Capital Expenditures will not
exceed in the aggregate in any Fiscal Year the sum of $2,000,000; provided that
after giving effect to the incurrence of any Capital Expenditures permitted by
this Section, no Default shall have occurred and be continuing.

         Section 5.08    Loans or Advances.   Neither the Borrower nor any of
its Subsidiaries shall make loans or advances to any Person except: (i) advances
made to insurance agents of the Borrower’s Subsidiaries, with respect to such
agent’s commissions, made in the ordinary course of business and consistently
with practices existing on the Closing Date; (ii) deposits required by
government agencies or public utilities; (iii) loans and advances made by the
Statutory Trust I to the Borrower in connection with the 2002 Trust Preferred
Transaction and Investments made by the Borrower in the Statutory Trust I to the
extent allowed in Section 5.09; and (iv) loans and advances made by the
Statutory Trust II to the Borrower in connection with the 2003 Trust Preferred
Transaction and Investments made by the Borrower in the Statutory Trust II to
the extent allowed in Section 5.09; provided that after giving effect to the
making of any loans, advances or deposits permitted by clause (i) and (ii) of
this Section, no Default shall have occurred and be continuing.

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         Section 5.09    Investments. Neither the Borrower nor any of its
Subsidiaries shall make Investments in any Person except as permitted by Section
5.08 and except Investments (i) in direct obligations of the United States
Government maturing within one year, (ii) in certificates of deposit issued by a
commercial bank whose credit is satisfactory to the Bank, (iii) in commercial
paper rated A-1 or the equivalent thereof by Standard & Poor’s Corporation or
P-1 or the equivalent thereof by Moody’s Investors Service, Inc. and in either
case maturing within 6 months after the date of acquisition, (iv) in tender
bonds the payment of the principal of and interest on which is fully supported
by a letter of credit issued by a United States bank whose long-term
certificates of deposit are rated at least AA or the equivalent thereof by
Standard & Poor’s Corporation and AA or the equivalent thereof by Moody’s
Investors Service, Inc., (v) with respect to the 2002 Trust Preferred
Transaction, Investments by the Borrower in the Statutory Trust I, Investments
by the Statutory Trust I in the Borrower, the Borrower’s guaranty of the
Statutory Trust I’s obligations, and other Investments made by the Borrower and
the Statutory Trust I, (vi) with respect to the 2003 Trust Preferred
Transaction, Investments by the Borrower in the Statutory Trust II, Investments
by the Statutory Trust II in the Borrower, the Borrower’s guaranty of the
Statutory Trust II’s obligations, and other Investments made by the Borrower and
the Statutory Trust II, (vii) constituting Permitted Acquisitions in an
aggregate amount not exceeding $3,000,000; provided, however, that this Section
5.09 shall not prohibit Investments made in the ordinary course of business
involving the investment portfolio of any Insurance Subsidiary.

         Section 5.10    Negative Pledge.   Neither the Borrower nor any
Consolidated Subsidiary will create, assume or suffer to exist any Lien on any
asset now owned or hereafter acquired by it, except:

 

         (a)      Liens existing on the date of this Agreement securing Debt
outstanding on the date of this Agreement in an aggregate principal amount not
exceeding $25,000,000;

 

         (b)     any Lien existing on any specific fixed asset of any
corporation at the time such corporation becomes a Consolidated Subsidiary and
not created in contemplation of such event;

 

         (c)      any Lien on any specific fixed asset securing Debt incurred or
assumed for the purpose of financing all or any part of the cost of acquiring or
constructing such asset, provided that such Lien attaches to such asset
concurrently with or within 18 months after the acquisition or completion of
construction thereof;

 

         (d)      any Lien on any specific fixed asset of any corporation
existing at the time such corporation is merged or consolidated with or into the
Borrower or a Consolidated Subsidiary and not created in contemplation of such
event;

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         (e)     any Lien existing on any specific fixed asset prior to the
acquisition thereof by the Borrower or a Consolidated Subsidiary and not created
in contemplation of such acquisition;

 

         (f)      any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the foregoing
paragraphs of this Section, provided that (i) such Debt is not secured by any
additional assets, and (ii) the amount of such Debt secured by any such Lien is
not increased;

 

         (g)      Liens incidental to the conduct of its business or the
ownership of its assets which (i) do not secure Debt and (ii) do not in the
aggregate materially detract from the value of its assets or materially impair
the use thereof in the operation of its business;

 

         (h)     any Lien on Margin Stock;

 

         (i)     Debt owing to the Borrower or another Subsidiary;

 

         (j)     Liens created under the Pledge Agreement and the other Loan
Documents; and

 

         (k)      Liens not otherwise permitted by the foregoing clauses of this
Section securing Debt (other than indebtedness represented by the Note) in an
aggregate principal amount at any time outstanding not to exceed $100,000.

         Section 5.11    Maintenance of Existence.   The Borrower shall, and
shall cause each Subsidiary to (a) maintain its corporate existence and carry on
its business in substantially the same manner and in substantially the same
fields as such business is now carried on and maintained; and (b) preserve,
renew and keep in full force and effect their respective rights, privileges,
licenses (including, without limitation, insurance licenses) and franchises
necessary or desirable in the normal conduct of business; provided that the
Borrower may dissolve or cause the dissolution of the Statutory Trust I after
the redemption of all of the Statutory Trust I’s Capital Stock and the Borrower
may dissolve or cause the dissolution of the Statutory Trust II after the
redemption of all of the Statutory Trust II’s Capital Stock.

         Section 5.12   Dissolution.   Neither the Borrower nor any of its
Subsidiaries shall suffer or permit dissolution or liquidation either in whole
or in part or redeem or retire any shares of its own stock or that of any
Subsidiary, except through corporate reorganization to the extent permitted by
Section 5.13 or as permitted in Section 5.11.

         Section 5.13   Consolidations, Mergers and Sales of Assets.

 

         (a)      The Borrower will not, nor will it permit any Subsidiary to,
consolidate or merge with or into any other Person, provided that:

 

                 (i) the Borrower may merge with another Person if (i) such
Person was organized under the laws of the United States of America or one of
its states, (ii) the Borrower is the corporation surviving such merger and (iii)
immediately after giving effect to such merger, no Default shall have occurred
and be continuing; and (iii) Subsidiaries of the Borrower may merge with one
another.

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         (b)      The Borrower will not, and will not permit any Subsidiary to,
sell, lease, transfer, or otherwise dispose of in any one transaction or series
of transactions (excluding sales in the ordinary course of business of
investment securities that are part of a Subsidiary’s investment portfolio) any
assets, if the Book Value of such assets when aggregated with the Book Value of
all assets sold, leased, transferred or otherwise disposed of after the Closing
Date exceeds 10% of Consolidated Total Assets of the Borrower and its
Consolidated Subsidiaries as of the last day of the Fiscal Quarter immediately
preceding the date of such sale, lease, transfer or other disposition without
the prior written consent of the Bank (which consent shall not be unreasonably
withheld).

         Section 5.14    Use of Proceeds.   No portion of the proceeds of the
Loan will be used by the Borrower or any Subsidiary (i) in connection with any
tender offer for, or other acquisition of, stock of any corporation with a view
toward obtaining control of such other corporation (other than any Permitted
Acquisition), (ii) directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of purchasing or carrying any Margin Stock, or (iii) for
any purpose in violation of any applicable law or regulation.

         Section 5.15    Compliance with Laws; Payment of Taxes.   The Borrower
will, and will cause each of its Subsidiaries and each member of the Controlled
Group to, comply with applicable laws (including but not limited to ERISA),
regulations and similar requirements of governmental authorities (including but
not limited to PBGC), except where the necessity of such compliance is being
contested in good faith through appropriate proceedings diligently pursued. The
Borrower will, and will cause each of its Subsidiaries to, pay promptly when due
all taxes, assessments, governmental charges, claims for labor, supplies, rent
and other obligations which, if unpaid, might become a lien against the property
of the Borrower or any Subsidiary, except liabilities being contested in good
faith by appropriate proceedings diligently pursued and against which, if
requested by the Bank, the Borrower shall have set up reserves in accordance
with GAAP.

         Section 5.16    Insurance.   The Borrower will maintain, and will cause
each of its Subsidiaries to maintain (either in the name of the Borrower or in
such Subsidiary’s own name), with financially sound and reputable insurance
companies, insurance on all its Property in at least such amounts and against at
least such risks as are usually insured against in the same general area by
companies of established repute engaged in the same or similar business.

         Section 5.17   Change in Fiscal Year.   The Borrower will not change
its Fiscal Year without the consent of the Bank.

         Section 5.18   Maintenance of Property.   The Borrower shall, and shall
cause each Subsidiary to, maintain all of its properties and assets in good
condition, repair and working order, ordinary wear and tear excepted.

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         Section 5.19   Environmental Notices.   The Borrower shall furnish to
the Bank prompt written notice of all material Environmental Liabilities,
pending, threatened or anticipated Environmental Proceedings, Environmental
Notices, Environmental Judgments and Orders, and Environmental Releases at, on,
in, under or in any way affecting the Properties or any adjacent property, and
all facts, events, or conditions that could reasonably be expected to lead to
any of the foregoing.

         Section 5.20   Environmental Matters.   The Borrower and its
Subsidiaries will not, and will not permit any Third Party to, use, produce,
manufacture, process, treat, recycle, generate, store, dispose of, manage at, or
otherwise handle or ship or transport to or from the Properties any Hazardous
Materials except for Hazardous Materials such as cleaning solvents, pesticides
and other similar materials used, produced, manufactured, processed, treated,
recycled, generated, stored, disposed, managed or otherwise handled in minimal
amounts in the ordinary course of business in compliance with all applicable
Environmental Requirements.

         Section 5.21    Environmental Release.   The Borrower agrees that upon
the occurrence of a material Environmental Release at or on any of the
Properties it will act immediately to investigate the extent of, and to take
appropriate remedial action to eliminate, such Environmental Release, whether or
not ordered or otherwise directed to do so by any Environmental Authority.

         Section 5.22   Additional Covenants, Etc.   In the event that at any
time this Agreement is in effect or the Note remains unpaid the Borrower shall
enter into any agreement, guarantee, indenture or other instrument governing,
relating to, providing for commitments to advance, guaranteeing, providing for
security interests or liens to secure, or otherwise affording any credit support
or credit enhancement for, any Financing or to amend any terms and conditions
applicable to any Financing, which agreement, guarantee, indenture or other
instrument includes covenants, warranties, representations, defaults or events
of default (or any other type of restriction which would have the practical
effect of any of the foregoing, including, without limitation, any “put” or
mandatory prepayment of such debt) or other terms or conditions or provides for
security interests, liens or guarantees, credit support or credit enhancement
(whether provided by the Borrower or any other Person) not substantially as, or
in addition to those, provided in this Agreement or any other Loan Document, or
more favorable to the lender or other counterparty thereunder than those
provided in this Agreement or any other Loan Document, the Borrower shall
promptly so notify the Bank. Thereupon, if the Bank shall request by written
notice to the Borrower, the Borrower and the Bank shall enter into an amendment
to this Agreement and if requested by the Bank, the Borrower shall cause any
Person providing such other guarantees, credit support or credit enhancement to
deliver such documentation as the Bank may reasonably request, all providing for
substantially the same such covenants, warranties, representations, defaults or
events of default, security interests, liens or other guarantees, credit support
or credit enhancement (in which the Bank shall participate on a pari passu basis
with such other lender), or other terms or conditions as those provided for in
such agreement, guarantee, indenture or other instrument, to the extent required
and as may be selected by the Bank, such amendment and other documentation to
remain in effect, unless otherwise specified in writing by the Bank, for the
entire duration of the stated term to maturity of such Financing (to and
including the date to which the same may be extended at the Borrower’s option),
notwithstanding that such Financing might be earlier terminated by prepayment,
refinancing, acceleration or otherwise, provided that if any such agreement,
guarantee, indenture or other instrument shall be modified, supplemented,
amended or restated so as to modify, amend or eliminate from such agreement,
guarantee, indenture or other instrument any such covenant, warranty,
representation, default or event of default, security interest, lien, or other
credit support or enhancement or other term or condition so made a part of this
Agreement, then unless required by the Bank pursuant to this Section, such
modification, supplement or amendment shall not operate to modify, amend or
eliminate such covenant, warranty, representation, default or event of default,
security interest, lien or other credit support or enhancement or other term or
condition as so made a part of this Agreement.

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         Section 5.23    Transactions with Affiliates. Neither the Borrower nor
any of its Subsidiaries shall enter into, or be a party to, any transaction with
any Affiliate of the Borrower or such Subsidiary (which Affiliate is not the
Borrower or a Subsidiary), except as permitted by law and in the ordinary course
of business and pursuant to reasonable terms, and are no less favorable to the
Borrower or such Subsidiary than would be obtained in a comparable arm’s length
transaction with a Person which is not an Affiliate.

         Section 5.24    Risk-Based Capital Ratio.   The Borrower shall
maintain, or cause to be maintained, at all times the Adjusted Capital for the
Insurance Subsidiaries on a consolidated basis in an amount equal to or greater
than 200% of the Company Action Level for the Insurance Subsidiaries on a
consolidated basis.

         Section 5.25   Maintenance of Statutory Surplus.   The Borrower shall
maintain or cause to be maintained at all times the Statutory Surplus of each of
its Insurance Subsidiaries in an amount equal to or greater than the sum of (i)
the Statutory Surplus required under applicable law for such Insurance
Subsidiary, plus (ii) $1,000,000.

         Section 5.26   Minimum Investment in NAIC Rated Bonds; Maximum
Investment in Investment Properties.   The Borrower will not at any time permit:
(i) the Aggregate Value of NAIC Rated Bonds to be less than 70% of the Aggregate
Value of Total Investments; or (ii) the aggregate value of Investment Properties
to exceed 5% of the Aggregate Value of Total Investments.

         Section 5.27   Senior Indebtedness under Indenture.   The Borrower
hereby covenants that the obligations of the Borrower to the Bank under this
Agreement shall at all times constitute “Senior Indebtedness” as that term is
defined in each of the 2002 Indenture and the 2003 Indenture.

         Section 5.28    Other Obligations of Borrower.   The Borrower hereby
agrees that the Borrower shall be and at all times shall remain the obligated
party under the Debentures and shall be the party responsible for the payment of
all obligations under the Debentures.

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ARTICLE VI

DEFAULTS

         Section 6.01   Events of Default. If one or more of the following
events ("Events of Default") shall have occurred and be continuing:

 

         (a)      the Borrower shall fail to pay when due any principal of any
Loan or shall fail to pay any interest on any Loan within 5 Business Days after
such interest shall become due, or shall fail to pay any fee or other amount
payable hereunder within 5 Business Days after such fee or other amount becomes
due; or

 

         (b)      the Borrower shall fail to observe or perform any covenant
contained in Sections 5.02(ii), 5.03 to 5.14, inclusive, Section 5.17, Section
5.22 or Sections 5.24 to 5.28, inclusive; or

 

         (c)      the Borrower shall fail to observe or perform any covenant or
agreement contained or incorporated by reference in this Agreement (other than
those covered by clause (a) or (b) above or clause (n) below) for thirty days
after the earlier of (i) the first day on which the Borrower has knowledge of
such failure or (ii) written notice thereof has been given to the Borrower by
the Bank; or

 

         (d)      any representation, warranty, certification or statement made
or deemed made by the Borrower in Article IV of this Agreement, the Loan
Documents or in any certificate, financial statement or other document delivered
pursuant to this Agreement shall prove to have been incorrect or misleading in
any material respect when made (or deemed made); or

 

         (e)      the Borrower or any Subsidiary shall fail to make any payment
in respect of Debt outstanding in an aggregate amount equal to or in excess of
$1,000,000 (other than the Notes) when due or within any applicable grace
period; or

 

         (f)      any event or condition shall occur which results in the
acceleration of the maturity of Debt outstanding in an aggregate amount equal to
or in excess of $1,000,000 of the Borrower or any Subsidiary or the mandatory
prepayment or purchase of such Debt by the Borrower (or its designee) or such
Subsidiary (or its designee) prior to the scheduled maturity thereof, or enables
the holders of such Debt or any Person acting on such holders’ behalf to
accelerate the maturity thereof or require the mandatory prepayment or purchase
thereof prior to the scheduled maturity thereof, without regard to whether such
holders or other Person shall have exercised or waived their right to do so; or

 

         (g)      the Borrower or any Subsidiary shall commence a voluntary case
or other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally, or shall admit in writing its
inability, to pay its debts as they become due, or shall take any corporate
action to authorize any of the foregoing; or

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         (h)      an involuntary case or other proceeding shall be commenced
against the Borrower or any Subsidiary seeking liquidation, reorganization or
other relief with respect to it or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 60 days; or an order for
relief shall be entered against the Borrower or any Subsidiary under the federal
bankruptcy laws as now or hereafter in effect; or

 

         (i)      the Borrower or any member of the Controlled Group shall fail
to pay when due any material amount which it shall have become liable to pay to
the PBGC or to a Plan under Title IV of ERISA; or notice of intent to terminate
a Plan or Plans shall be filed under Title IV of ERISA by the Borrower, any
member of the Controlled Group, any plan administrator or any combination of the
foregoing and such filing could reasonably be expected to have or cause a
Material Adverse Effect; or the PBGC shall institute proceedings under Title IV
of ERISA to terminate or to cause a trustee to be appointed to administer any
such Plan or Plans or a proceeding shall be instituted by a fiduciary of any
such Plan or Plans to enforce Section 515 or 4219(c)(5) of ERISA and such
proceeding shall not have been dismissed within 30 days thereafter; or a
condition shall exist by reason of which the PBGC would be entitled to obtain a
decree adjudicating that any such Plan or Plans must be terminated; or the
Borrower or any other member of the Controlled Group shall enter into,
contribute or be obligated to contribute to, terminate or incur any withdrawal
liability with respect to, a Multiemployer Plan; or

 

         (j)      one or more judgments or orders for the payment of money in an
aggregate amount in excess of $500,000 shall be rendered against the Borrower or
any Subsidiary and such judgment or order shall continue unsatisfied and
unstayed for a period of 30 days; or

 

         (k)      a federal tax lien shall be filed against the Borrower under
Section 6323 of the Code or a lien of the PBGC shall be filed against the
Borrower or any Subsidiary under Section 4068 of ERISA and in either case such
lien shall remain undischarged for a period of 25 days after the date of filing;
or

 

         (l)      (i) any Person or two or more Persons (other than J. Mack
Robinson and members of his family) acting in concert shall have acquired
beneficial ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Securities Exchange Act of 1934) of 20% or more of
the outstanding shares of the voting stock of the Borrower; or (ii) as of any
date a majority of the Board of Directors of the Borrower consists of
individuals who were not either (A) directors of the Borrower as of the
corresponding date of the previous year, (B) selected or nominated to become
directors by the Board of Directors of the Borrower of which a majority
consisted of individuals described in clause (A), or (C) selected or nominated
to become directors by the Board of Directors of the Borrower of which a
majority consisted of individuals described in clause (A) and individuals
described in clause (B); or

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         (m)      the occurrence of any event, act or condition which the Bank
determines either does cause or has a reasonable probability of causing a
Material Adverse Effect and failure by the Borrower to cure the same within 60
days following notice from the Bank to the Borrower identifying such event, act
or condition; or

 

         (n)      the Borrower shall fail to observe or perform any obligation
under the Pledge Agreement or the Bank shall cease to have a first priority
perfected security interest in the Collateral (as defined in the Pledge
Agreement); or

 

         (o)     Georgia Casualty & Surety Company, Bankers Fidelity Life
Insurance Company, American Southern Insurance Company or any Subsidiary of
American Southern Insurance Company shall fail to maintain an AM Best rating of
"B+" or better; or

 

         (p)      the Borrower shall at any time or times and for any reason
cease to own (either directly or indirectly through a Wholly Owned Subsidiary)
at least 80% of the Capital Stock and other ownership interests of each of
American Southern Insurance Company, Georgia Casualty & Surety Company, Bankers
Fidelity Life Insurance Company and Associated Casualty Insurance Company; or

 

         (q)      either (i) any Forfeiture Proceeding shall have been commenced
or the Borrower shall have given the Bank written notice of the commencement or
threatened commencement of any Forfeiture Proceeding as provided in Section
5.01(i); or (ii) the Bank has a good faith basis to believe that a Forfeiture
Proceeding has been threatened or commenced;

then, and in every such event, the Bank may (i) terminate the Commitment and it
shall thereupon terminate, and (ii) by notice to the Borrower declare the Note
(together with accrued interest thereon) and all other amounts payable hereunder
and under the other Loan Documents to be, and the Note (together will all
accrued interest thereon) and all other amounts payable hereunder and under the
other Loan Documents shall thereupon become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower; provided that if any Event of Default specified
in clause (g) or (h) above occurs with respect to the Borrower or any
Subsidiary, without any notice to the Borrower or any other act by the Bank, the
Commitment shall thereupon automatically terminate and the Note (together with
accrued interest thereon) and all other amounts payable hereunder and under the
other Loan Documents shall automatically become immediately due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Borrower. Notwithstanding the foregoing, the Bank shall
have available to it all other remedies at law or equity.

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ARTICLE VII

CHANGE IN CIRCUMSTANCES; COMPENSATION

         Section 7.01   Basis for Determining Interest Rate Inadequate or
Unfair.   If on or prior to the first day of any Interest Period:

 

         (a)     the Bank determines that deposits in Dollars (in the applicable
amounts) are not being offered in the relevant market for such Interest Period,
or

 

         (b)      the Bank determines that the London Interbank Offered Rate as
determined by the Bank will not adequately and fairly reflect the cost to the
Bank of funding any Euro-Dollar Loan for such Interest Period, the Bank shall
forthwith give notice thereof to the Borrower, whereupon until the Bank notifies
the Borrower that the circumstances giving rise to such suspension no longer
exist, the obligations of the Bank to make the Euro-Dollar Loan specified in
such notice shall be suspended and such Loan shall instead be continued as a
Base Rate Loan. Unless the Borrower notifies the Bank at least 2 Domestic
Business Days before the date of any Euro-Dollar Loan for which a Notice of
Continuation or Conversion has previously been given that it elects not to
borrow on such date, such Loan shall instead be continued as a Base Rate Loan.

         Section 7.02   Illegality.   If, after the date hereof, the adoption of
any applicable law, rule or regulation, or any change in any existing or future
law, rule or regulation, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof (any such authority, bank or
agency being referred to as an “Authority” and any such event being referred to
as a “Change of Law”), or compliance by the Bank (or its Lending Office) with
any request or directive (whether or not having the force of law) of any
Authority shall make it unlawful or impossible for the Bank (or its Lending
Office) to maintain or fund the Euro-Dollar Loans and the Bank shall so notify
the Borrower, whereupon until the Bank notifies the Borrower that the
circumstances giving rise to such suspension no longer exist, the obligation of
the Bank to maintain Euro-Dollar Loans shall be suspended. Before giving any
notice to the Borrower pursuant to this Section, the Bank shall designate a
different Lending Office if such designation will avoid the need for giving such
notice and will not, in the judgment of the Bank, be otherwise disadvantageous
to the Bank. If the Bank shall determine that it may not lawfully continue to
maintain and fund any outstanding Euro-Dollar Loans to maturity and shall so
specify in such notice, the Borrower shall immediately prepay in full the then
outstanding principal amount of each Euro-Dollar Loan, together with accrued
interest thereon and any amount due the Bank pursuant to Section 7.05(a).
Concurrently with prepaying each such Euro-Dollar Loan, the Borrower shall
borrow a Base Rate Loan in an equal principal amount from the Bank, and the Bank
shall make such a Base Rate Loan.

         Section 7.03   Increased Cost and Reduced Return.

 

         (a)      If after the date hereof, a Change of Law or compliance by the
Bank (or its Lending Office) with any request or directive (whether or not
having the force of law) of any Authority:

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                  (i)      shall subject the Bank (or its Lending Office) to any
tax, duty or other charge with respect to Euro-Dollar Loans, the Note or its
obligation to maintain Euro-Dollar Loans, or shall change the basis of taxation
of payments to the Bank (or its Lending Office) of the principal of or interest
on Euro-Dollar Loans or any other amounts due under this Agreement in respect of
Euro-Dollar Loans or its obligation to make Euro-Dollar Loans (except for
changes in the rate of tax on the overall net income of the Bank or its Lending
Office imposed by the jurisdiction in which the Bank’s principal executive
office or Lending Office is located); or

 

                  (ii)      shall impose, modify or deem applicable any reserve,
special deposit or similar requirement (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve System, but
excluding with respect to any Euro-Dollar Loan any such requirement included in
an applicable Euro-Dollar Reserve Percentage) against assets of, deposits with
or for the account of, or credit extended by, the Bank (or its Lending Office);
or

 

                  (iii)      shall impose on the Bank (or its Lending Office) or
the London interbank market any other condition affecting Euro-Dollar Loans, the
Note or its obligation to maintain Euro-Dollar Loans;

and the result of any of the foregoing is to increase the cost to the Bank (or
its Lending Office) of maintaining any Euro-Dollar Loan, or to reduce the amount
of any sum received or receivable by the Bank (or its Lending Office) under this
Agreement or under the Note with respect thereto, by an amount deemed by the
Bank to be material, then, within 15 days after demand by the Bank, the Borrower
shall pay to the Bank such additional amount or amounts as will compensate the
Bank for such increased cost or reduction which accrued within 90 days
immediately prior to such notice.

 

         (b)      If the Bank shall have determined that after the date hereof
the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change in any existing or future law, rule or regulation, or
any change in the interpretation or administration thereof, or compliance by the
Bank (or its Lending Office) with any request or directive regarding capital
adequacy (whether or not having the force of law) of any Authority, has or would
have the effect of reducing the rate of return on the Bank’s capital as a
consequence of its obligations hereunder to a level below that which the Bank
could have achieved but for such adoption, change or compliance (taking into
consideration the Bank’s policies with respect to capital adequacy) by an amount
deemed by the Bank to be material, then from time to time, within 15 days after
demand by the Bank, the Borrower shall pay to the Bank such additional amount or
amounts as will compensate the Bank for such reduction which accrued or occurred
within 90 days immediately prior to such notice.

 

         (c)      The Bank will promptly notify the Borrower of any event of
which it has knowledge, occurring after the date hereof, which will entitle the
Bank to compensation pursuant to this Section and will designate a different
Lending Office if such designation will avoid the need for, or reduce the amount
of, such compensation and will not, in the judgment of the Bank, be otherwise
disadvantageous to the Bank. A certificate of the Bank claiming compensation
under this Section and setting forth the additional amount or amounts to be paid
to it hereunder shall be conclusive in the absence of manifest error. In
determining such amount, the Bank may use any reasonable averaging and
attribution methods.

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         (d)      The provisions of this Section 7.03 shall be applicable with
respect to any Participant, Assignee or other Transferee, and any calculations
required by such provisions shall be made based upon the circumstances of such
Participant, Assignee or other Transferee.

         Section 7.04   Base Rate Loans Substituted for Affected Euro-Dollar
Loans.   If (i)the obligation of the Bank to make or maintain Euro-Dollar Loans
has been suspended pursuant to Section 7.02 or (ii) any Bank has demanded
compensation under Section 7.03, and the Borrower shall, by at least 5
Euro-Dollar Business Days’ prior notice to the Bank, have elected that the
provisions of this Section shall apply to the Bank, then, unless and until the
Bank notifies the Borrower that the circumstances giving rise to such suspension
or demand for compensation no longer apply:

 

         (a)      all Loans which would otherwise be made by the Bank as
Euro-Dollar Loans shall be made instead as Base Rate Loans, and

 

         (b)      after each Euro-Dollar Loan has been repaid, all payments of
principal which would otherwise be applied to repay Euro-Dollar Loans shall be
applied to repay Base Rate Loans instead.

In the event that the Borrower shall elect that the provisions of this Section
shall apply to the Bank, the Borrower shall remain liable for, and shall pay to
the Bank as provided herein, all amounts due the Bank under Section 7.03 in
respect of the period preceding the date of conversion of the Loans resulting
from the Borrower’s election.

         Section 7.05   Compensation.   Upon the request of the Bank, delivered
to the Borrower, the Borrower shall pay to the Bank such amount or amounts as
shall compensate the Bank for any actual loss, cost or expense incurred by the
Bank as a result of:

 

         (a)      any payment or prepayment (pursuant to Section 2.05, Section
2.06, Section 7.02 or otherwise) of a Euro-Dollar Loan on a date other than the
last day of an Interest Period for such Euro-Dollar Loan;

 

         (b)     any failure by the Borrower to prepay a Euro-Dollar Loan on the
date for such prepayment specified in the relevant notice of prepayment
hereunder; or

 

         (c)      any failure by the Borrower to borrow a Euro-Dollar Loan on
the date such Euro-Dollar Loan is a part specified in the applicable Notice of
Continuation or Conversion delivered pursuant to Section 2.02;

-39-

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such compensation to include, without limitation, an amount equal to the excess,
if any, of (x) the amount of interest which would have accrued on the amount so
paid or prepaid or not prepaid or borrowed for the period from the date of such
payment, prepayment or failure to prepay or borrow to the last day of the then
current Interest Period for such Euro-Dollar Loan (or, in the case of a failure
to prepay or borrow, the Interest Period for such Euro-Dollar Loan which would
have commenced on the date of such failure to prepay or borrow) at the
applicable rate of interest for such Euro-Dollar Loan provided for herein
(excluding, however, the Applicable Margin) over (y) the amount of interest (as
reasonably determined by the Bank) the Bank would have paid on deposits in
Dollars of comparable amounts having terms comparable to such period placed with
it by leading banks in the London interbank market (if such Loan is a
Euro-Dollar Loan).

ARTICLE VIII

MISCELLANEOUS

         Section 8.01   Notices.   All notices, requests and other
communications to any party hereunder shall be in writing (including facsimile
transmission or similar writing) and shall be given to such party at its address
or telecopy number set forth on the signature pages hereof or such other address
or telecopy number as such party may hereafter specify for the purpose by notice
to each other party. Each such notice, request or other communication shall be
effective (i) if given by telecopier, when such telecopy is transmitted to the
telecopy number specified in this Section and the telecopy machine used by the
sender provides a written confirmation that such telecopy has been so
transmitted or receipt of such telecopy transmission is otherwise confirmed,
(ii) if given by mail, 72 hours after such communication is deposited in the
mails with first class postage prepaid, addressed as aforesaid, and (iii) if
given by any other means, when delivered at the address specified in this
Section; provided that notices to the Bank under Article II shall not be
effective until received.

         Section 8.02   No Waivers.   No failure or delay by the Bank in
exercising any right, power or privilege hereunder or under the Note or other
Loan Document shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.

         Section 8.03   Expenses; Documentary Taxes; Indemnification; Increased
Cost and Reduced Return.

 

         (a)      The Borrower shall pay (i) all out-of-pocket expenses of the
Bank, including reasonable fees and disbursements of counsel for the Bank
actually incurred, in connection with the preparation of this Agreement and the
other Loan Documents, any waiver or consent hereunder or thereunder or any
amendment hereof or thereof or any Default or alleged Default hereunder or
thereunder and (ii) if a Default occurs, all out-of-pocket expenses incurred by
the Bank, including reasonable fees and disbursements of counsel actually
incurred, in connection with such Default and collection and other enforcement
proceedings resulting therefrom, including out-of-pocket expenses incurred in
enforcing this Agreement and the other Loan Documents.

-40-

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

 

         (b)      The Borrower shall indemnify the Bank against any transfer
taxes, documentary taxes, assessments or charges made by any Authority by reason
of the execution and delivery of this Agreement or the other Loan Documents.

 

         (c)      The Borrower shall indemnify the Bank and each Affiliate
thereof and their respective directors, officers, employees and agents from, and
hold each of them harmless against, any and all losses, liabilities, claims or
damages to which any of them may become subject, insofar as such losses,
liabilities, claims or damages arise out of or result from any actual or
proposed use by the Borrower of the proceeds of any extension of credit by the
Bank hereunder or breach by the Borrower of this Agreement or any other Loan
Document or from investigation, litigation (including, without limitation, any
actions taken by the Bank to enforce this Agreement or any of the other Loan
Documents) or other proceeding (including, without limitation, any threatened
investigation or proceeding) relating to the foregoing, and the Borrower shall
reimburse the Bank, and each Affiliate thereof and their respective directors,
officers, employees and agents, upon demand for any expenses (including, without
limitation, legal fees) incurred in connection with any such investigation or
proceeding; but excluding any such losses, liabilities, claims, damages or
expenses incurred by reason of the gross negligence or willful misconduct of the
Person to be indemnified.

         Section 8.04   CONSEQUENTIAL DAMAGES.   THE BANK SHALL NOT BE
RESPONSIBLE OR LIABLE TO THE BORROWER OR ANY OTHER PERSON OR ENTITY FOR ANY
PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF
THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.

         Section 8.05   Setoffs.

 

         (a)      The Borrower hereby grants to the Bank, as security for the
full and punctual payment and performance of the obligations of the Borrower
under this Agreement, a continuing lien on and security interest in all deposits
and other sums credited by or due from the Bank to the Borrower or subject to
withdrawal by the Borrower; and regardless of the adequacy of any collateral or
other means of obtaining repayment of such obligations, the Bank may at any time
upon or after the occurrence of any Event of Default, and without notice to the
Borrower, set off the whole or any portion or portions of any or all such
deposits and other sums against such obligations, whether or not any other
Person or Persons could also withdraw money therefrom.

 

         (b)      The Borrower agrees, to the fullest extent it may effectively
do so under applicable law, that any holder of a participation in a Note may
exercise rights of set-off or counterclaim and other rights with respect to such
participation as fully as if such holder of a participation were a direct
creditor of the Borrower in the amount of such participation.

-41-

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         Section 8.06   Amendments and Waivers.   Any provision of this
Agreement, the Note or any other Loan Documents may be amended or waived if, but
only if, such amendment or waiver is in writing and is signed by the Borrower
and the Bank.

         Section 8.07   Successors and Assigns.

 

         (a)      The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns; provided that the Borrower may not assign or otherwise transfer any of
its rights under this Agreement.

 

         (b)      The Bank may at any time sell to one or more Persons (each a
“Participant”) participating interests in any Loan owing to the Bank, any Note
held by the Bank, any Commitment hereunder or any other interest of the Bank
hereunder. In the event of the sale by the Bank of a participating interest to a
Participant, the Bank’s obligations under this Agreement shall remain unchanged,
the Bank shall remain solely responsible for the performance thereof, the Bank
shall remain the holder of any such Note for all purposes under this Agreement,
and the Borrower shall continue to deal solely and directly with the Bank in
connection with the Bank’s rights and obligations under this Agreement. In no
event shall the Bank be obligated to the Participant to take or refrain from
taking any action hereunder except that the Bank may agree that it will not
(except as provided below), without the consent of the Participant, agree to
(i) the change of any date fixed for the payment of principal of or interest on
the related Loan or Loans, (ii) the change of the amount of any principal,
interest or fees due on any date fixed for the payment thereof with respect to
the related Loan or Loans, (iii) the change of the principal of the related Loan
or Loans, (iv) any change in the rate at which either interest is payable
thereon or (if the Participant is entitled to any part thereof) commitment fee
is payable hereunder from the rate at which the Participant is entitled to
receive interest or commitment fee (as the case may be) in respect of such
participation, (v) the release or substitution of all or any substantial part of
the collateral (if any) held as security for the Loans, or (vi) the release of
any guaranty given to support payment of the Loans. If the Bank sells a
participating interest in any Loan, Note, Commitment or other interest under
this Agreement, it shall within 10 Domestic Business Days of such sale, provide
the Borrower with written notification stating that such sale has occurred and
identifying the Participant and the interest purchased by such Participant.

 

         (c)      The Bank may at any time assign to one or more banks or
financial institutions (each an “Assignee”) all, or a proportionate part of all,
of its rights and obligations under this Agreement, the Note and the other Loan
Documents, and such Assignee shall assume all such rights and obligations,
pursuant to an Assignment and Acceptance in the form attached hereto as Exhibit
F, executed by such Assignee and the Bank (and, in the case of an Assignee that
is not an Affiliate of the Bank, by the Borrower); provided that (i) the amount
of the Loans or Commitment subject to such assignment (determined as of the
effective date of the assignment) shall be equal to or greater than $5,000,000,
and (ii) unless a Default shall have occurred and be continuing, no interest may
be sold by the Bank pursuant to this paragraph (c) to any Assignee that is not
then an Affiliate of the Bank without the consent of the Borrower, which consent
shall not be unreasonably withheld. Upon (A) execution of the Assignment and
Acceptance by the Bank, such Assignee and (if applicable) the Borrower,
(B) delivery of an executed copy of the Assignment and Acceptance to the
Borrower, (C) payment by such Assignee to the Bank of an amount equal to the
purchase price agreed between the Bank and such Assignee, such Assignee shall
for all purposes be the party to this Agreement and shall have pro rata share of
all the rights and obligations of the Bank under this Agreement to the same
extent as if it were an original party hereto with a Commitment as set forth in
such instrument of assumption, and the Bank shall be released from its
obligations hereunder to a corresponding extent, and no further consent or
action by the Borrower or the Bank shall be required. Upon the consummation of
any transfer to an Assignee pursuant to this paragraph (c), the Bank and the
Borrower shall make appropriate arrangements so that, if required, a new Note is
issued to each of such Assignee and the Bank.

-42-

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

 

         (d)      Subject to the provisions of Section 8.08, the Borrower
authorizes the Bank to disclose to any Participant, Assignee or other transferee
(each a “Transferee”) and any prospective Transferee any and all financial and
other information in the Bank’s possession concerning the Borrower which has
been delivered to the Bank by the Borrower pursuant to this Agreement or which
has been delivered to the Bank by the Borrower in connection with the Bank’s
credit evaluation prior to entering into this Agreement.

 

         (e)      Anything in this Section 8.07 to the contrary notwithstanding,
the Bank may assign and pledge all or any portion of the Loans and/or
obligations owing to it to any Federal Reserve Bank or the United States
Treasury as collateral security pursuant to Regulation A of the Board of
Governors of the Federal Reserve System and Operating Circular issued by such
Federal Reserve Bank, provided that any payment in respect of such assigned
Loans and/or obligations made by the Borrower to the assigning and/or pledging
Bank in accordance with the terms of this Agreement shall satisfy the Borrower’s
obligations hereunder in respect of such assigned Loans and/or obligations to
the extent of such payment. No such assignment shall release the assigning
and/or pledging Bank from its obligations hereunder.

         Section 8.08    Confidentiality.   The Bank agrees to exercise its best
efforts to keep any information delivered or made available by the Borrower to
it which is clearly indicated to be confidential information, confidential from
anyone other than persons employed or retained by such Bank who are or are
expected to become engaged in evaluating, approving, structuring or
administering the Loans; provided, however, that nothing herein shall prevent
the Bank from disclosing such information (i) upon the order of any court or
administrative agency, (ii) upon the request or demand of any regulatory agency
or authority having jurisdiction over the Bank, (iii) which has been publicly
disclosed, (iv) to the extent reasonably required in connection with any
litigation to which the Bank or its respective Affiliates may be a party, (v) to
the extent reasonably required in connection with the exercise of any remedy
hereunder, (vi) to the Bank’s legal counsel and independent auditors and (vii)
to any actual or proposed Participant, Assignee or other Transferee of all or
part of its rights hereunder which has agreed in writing to be bound by the
provisions of this Section 8.08; provided, further, that to the extent
practicable under the circumstances, prior to disclosing such information
pursuant to clause (i) or (ii) of this Section, the Bank will provide notice to
the Borrower of such disclosure and, if reasonably requested by the Borrower,
shall cooperate with any attempt by the Borrower to overturn or invalidate any
request for such information (provided that the Bank shall not be required to
cooperate with any such attempt if the Bank determines, in its sole discretion,
that it would be materially prejudicial to the Bank or its interests to so
cooperate).

-43-

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

         Section 8.09    Survival of Certain Obligations.   Section 8.03 and the
obligations of the Borrower thereunder, shall survive, and shall continue to be
enforceable notwithstanding, the termination of this Agreement and the
Commitment and the payment in full of the principal of and interest on all
Loans.

         Section 8.10   Georgia Law.   This Agreement and the Note shall be
construed in accordance with and governed by the law of the State of Georgia.

         Section 8.11   Severability.   In case any one or more of the
provisions contained in this Agreement, the Note or any of the other Loan
Documents should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and therein shall not in any way be affected or impaired thereby and
shall be enforced to the greatest extent permitted by law.

         Section 8.12   Interest.   In no event shall the amount of interest due
or payable hereunder or under the Note exceed the maximum rate of interest
allowed by applicable law, and in the event any such payment is inadvertently
made to the Bank by the Borrower or inadvertently received by the Bank, then
such excess sum shall be credited as a payment of principal, unless the Borrower
shall notify the Bank in writing that it elects to have such excess sum returned
forthwith. It is the express intent hereof that the Borrower not pay and the
Bank not receive, directly or indirectly in any manner whatsoever, interest in
excess of that which may legally be paid by the Borrower under applicable law.

         Section 8.13    Interpretation.   No provision of this Agreement or any
of the other Loan Documents shall be construed against or interpreted to the
disadvantage of any party hereto by any court or other governmental or judicial
authority by reason of such party having or being deemed to have structured or
dictated such provision.

         Section 8.14   Consent to Jurisdiction.   The Borrower (a) submits to
personal jurisdiction in the State of Georgia, the courts thereof and the United
States District Courts sitting therein, for the enforcement of this Agreement,
the Note and the other Loan Documents, (b) waives any and all personal rights
under the law of any jurisdiction to object on any basis (including, without
limitation, inconvenience of forum) to jurisdiction or venue within the State of
Georgia for the purpose of litigation to enforce this Agreement, the Note or the
other Loan Documents, and (c) agrees that service of process may be made upon it
in the manner prescribed in Section 8.01 for the giving of notice to the
Borrower. Nothing herein contained, however, shall prevent the Bank from
bringing any action or exercising any rights against any security and against
the Borrower personally, and against any assets of the Borrower, within any
other state or jurisdiction.

-44-

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         Section 8.15   Counterparts.   This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.

[The remainder of this page intentionally left blank]

-45-

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        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, under seal, by their respective authorized officers as of the day
and year first above written.

ATTEST: ATLANTIC AMERICAN CORPORATION                                /s/   Janie
L. Ryan                           , Secretary By:                    /s/  John
G. Sample, Jr.                 (SEAL)                          [CORPORATE SEAL]
Title:  Senior Vice President and Chief Financial Officer     4370 Peachtree
Road, N.E.
Atlanta, Georgia 30319-3000
Attention:  John G. Sample, Jr.,
                    Senior Vice President and
                    Chief Financial Officer
Telecopy number: (404) 266-5702
Telephone number: (404) 266-5501     WACHOVIA BANK, NATIONAL
ASSOCIATION     By:                      /s/   Thomas L.
Stitchberry            (SEAL)   Title:                       Managing
Director                                     Lending Office
Wachovia Bank, National Association
1339 Chestnut Street, PA4819
Philadelphia, PA 19107
Attention: Thomas Stitchberry
Telecopy number: (267) 321-7101
Telephone number: (267) 321-7034

-46-

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SCHEDULE 4.05

LITIGATION

        Bankers Fidelity Life Insurance Company (“Bankers”), prior to October
2002, retained the services of an independent “lead card” marketing organization
based in Dallas, Texas. That organization has subsequently been closed. In
connection therewith, the Office of the Inspector General served Bankers a
subpoena. The subpoena requested documents related to the Company’s use of
certain “lead cards” which the OIG believes violate Section 1140 of the Social
Security Act. To date, Bankers has met with OIG attorneys who indicated that the
matter could take as long as a year to resolve. Bankers has not been sued nor
has it received any complaints related to such “lead cards.”

        During 2000, American Southern Insurance Company (“American Southern”)
renewed one of its larger accounts. Although this contract was renewed through a
competitive bid process, one of the parties bidding for this particular contract
contested the award of this business to American Southern and filed a claim to
nullify the contract. During the fourth quarter of 2000, American Southern
received an unfavorable judgment relating to this litigation and appealed the
ruling. The contract, which accounts for approximately 10% of annualized premium
revenue of Atlantic American, remained in effect pending the appeal. On March 4,
2003, the South Carolina Court of Appeals reversed the lower court ruling and
remanded the case back to the Procurement Review Panel to determine if American
Southern is entitled to vendor preference. The contract subject to dispute
contractually terminated on April 30, 2003.

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

SCHEDULE 4.08A

EXISTING INSURANCE SUBSIDIARIES

 
Name of Subsidiary

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

Jurisdiction of
Incorporation

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

American Southern Insurance Company

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

Kansas

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

American Safety Insurance Company

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

Georgia

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

Association Casualty Insurance Company

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

Texas

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

Bankers Fidelity Life Insurance Company

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

Georgia

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

Georgia Casualty & Surety Company

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

Georgia

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

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

SCHEDULE 4.08B

EXISTING SUBSIDIARIES WHICH
ARE NOT INSURANCE SUBSIDIARIES

 
 
Name of Subsidiary

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

Jurisdiction of
Incorporation or
Organization

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

Self-Insurance Administrators, Inc.

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

Georgia

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

Association Risk Management General Agency, Inc.

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

Texas

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

Atlantic American Statutory Trust I

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

Connecticut

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

Atlantic American Statutory Trust II

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

Connecticut

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

The following companies are 100%
owned by American Southern Insurance Company:     Premier Adjusting and Claim
Services, Inc.

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

Georgia

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

Automobile Safety Management, Inc.

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

Delaware

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

Automated Systems of Georgia, Inc.

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

Georgia

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

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SCHEDULE 4.20

REDEEMABLE PREFERRED STOCK AND DEBT
EXISTING ON CLOSING DATE

 
Holder

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

Principal Amount
Outstanding

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

 
Interest Rate

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

 
Maturity Date

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

 
Amortization

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

Privately held

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

$17,500,000

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

Variable rate

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

December 4, 2033

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

None

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

Privately held

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

$22,500,000

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

Variable rate

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

May 15, 2034

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

None

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

J. Mack Robinson
and Family
 

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

$13,400,000 of
Series B Preferred
Stock

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

9.00%
 
 

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

Not
redeemable(1)
 

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

None
 
 

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

Delta Life Insurance
Company/Delta
Fire and Casualty
Insurance Company

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

$2,000,000 of Series
C Preferred Stock
 
 

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

9.00%
 
 
 

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

Not redeemable(2)
 
 
 

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

None
 
 
 

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

Wachovia Bank,
National Association

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

$15,000,000
 

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

Variable rate
 

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

June 30, 2004
 

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

 

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

(1) Series B Preferred Stock is redeemable only by the Borrower

(2) Series C Preferred Stock is redeemable only by the Borrower

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

EXHIBIT A

AMENDED AND RESTATED NOTE

$15,000,000

Atlanta, Georgia
June 30, 2003

        For value received, ATLANTIC AMERICAN CORPORATION, a Georgia corporation
(the “Borrower”), promises to pay to the order of WACHOVIA BANK, NATIONAL
ASSOCIATION (the “Bank”), for the account of its Lending Office, the principal
sum of Fifteen Million and No/100 Dollars ($15,000,000), or such lesser amount
as shall equal the unpaid principal amount of the Term Loan made by the Bank to
the Borrower pursuant to the Credit Agreement referred to below, on the dates
and in the amounts provided in the Credit Agreement. The Borrower promises to
pay interest on the unpaid principal amount of this Amended and Restated Note on
the dates and at the rate or rates provided for in the Credit Agreement.
Interest on any overdue principal of and, to the extent permitted by law,
overdue interest on the principal amount hereof shall bear interest at the
Default Rate, as provided for in the Credit Agreement. All such payments of
principal and interest shall be made in lawful money of the United States in
Federal or other immediately available funds at the office of the Bank located
at 191 Peachtree Street, N.E., Atlanta, Georgia 30303, or such other address as
may be specified from time to time pursuant to the Credit Agreement.

        The Loans made by the Bank, the respective maturities thereof, the
interest rates from time to time applicable thereto and all repayments of the
principal thereof shall be recorded by the Bank and, prior to any transfer
hereof, endorsed by the Bank on the schedule attached hereto, or on a
continuation of such schedule attached to and made a part hereof; provided, that
the failure of the Bank to make, or any error of the Bank in making, any such
recordation or endorsement shall not affect the obligations of the Borrower
hereunder or under the Credit Agreement.

        This Amended and Restated Note is the Note referred to in the Amended
and Restated Credit Agreement dated as of June 30, 2003 between the Borrower and
the Bank (as the same may be amended or modified from time to time, the “Credit
Agreement”) and amends and restates that certain Note dated July 1, 1999 made by
the Borrower to the Bank. Terms defined in the Credit Agreement are used herein
with the same meanings. Reference is made to the Credit Agreement for provisions
for the prepayment and the repayment hereof and the acceleration of the maturity
hereof.

        The Borrower hereby waives presentment, demand, protest, notice of
demand, protest and nonpayment and any other notice required by law relative
hereto, except to the extent as otherwise may be expressly provided for in the
Credit Agreement.

        The Borrower agrees, in the event that this Amended and Restated Note or
any portion hereof is collected by law or through an attorney at law, to pay all
reasonable costs of collection, including, without limitation, reasonable
attorneys’ fees.

A-1

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        IN WITNESS WHEREOF, the Borrower has caused this Amended and Restated
Note to be duly executed under seal, by its duly authorized officer as of the
day and year first above written.

  ATLANTIC AMERICAN CORPORATION     By: /s/ John G. Sample, Jr.
                                           (SEAL)
       Title: Senior Vice President and Chief Financial Officer

A-2