CREDIT AGREEMENT



                                      among



                             ASCENT ASSURANCE, INC.,

                                  as Borrower,



                   Each Lender Party Hereto from Time to Time,



               CREDIT SUISSE FIRST BOSTON MANAGEMENT CORPORATION,

                      as Administrative Agent and Arranger











                           Dated as of April 17, 2001







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                                TABLE OF CONTENTS

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                                                                                                       Page


<S>        <C>                                                                                          <C>
ARTICLE 1.  DEFINITIONS..................................................................................1

   1.1     Defined Terms.................................................................................1
   1.2     Interpretation...............................................................................12

ARTICLE 2.  AMOUNT AND TERMS OF COMMITMENTS.............................................................13

   2.1     Commitments..................................................................................13
   2.2     Notes........................................................................................13
   2.3     Procedure for Borrowing......................................................................14
   2.4     [Reserved.]..................................................................................15
   2.5     Optional Prepayment and Repayment at Maturity................................................15
   2.6     Interest Rate; Default Rate; Payment Dates...................................................16
   2.7     Computation of Interest; Making of Payments..................................................17
   2.8     Pro Rata Treatment and Payments; Funding Reliance............................................17
   2.9     Illegality...................................................................................18
   2.10    Requirements of Law..........................................................................18
   2.11    Taxes........................................................................................18
   2.12    Lending Offices..............................................................................20

ARTICLE 3.  REPRESENTATIONS AND WARRANTIES..............................................................20

   3.1     Financial Condition..........................................................................20
   3.2     No Change....................................................................................21
   3.3     Corporate Existence; Compliance with Law.....................................................21
   3.4     Corporate Power; Authorization; Enforceable Obligations......................................22
   3.5     No Legal Bar.................................................................................22
   3.6     No Material Litigation.......................................................................22
   3.7     No Default...................................................................................23
   3.8     Ownership of Property; Liens.................................................................23
   3.9     Intellectual Property........................................................................23
   3.10    [Reserved.]..................................................................................23
   3.11    Taxes........................................................................................23
   3.12    Federal Margin Regulations...................................................................24
   3.13    ERISA........................................................................................24
   3.14    Holding Company; Investment Company Act; Other Regulations...................................25
   3.15    Purpose of Loans.............................................................................25
   3.16    Environmental Matters........................................................................25
   3.17    Insurance; Reinsurance Agreements............................................................25
   3.18    Accuracy and Completeness of Information.....................................................26
   3.19    Leaseholds, Permits, etc.....................................................................26
   3.20    No Restrictive Covenants.....................................................................27
   3.21    Solvency.....................................................................................27
   3.22    Subsidiaries.................................................................................27
   3.23    Credit Arrangements..........................................................................27
   3.24    Pledge Agreement.............................................................................28

ARTICLE 4.  CONDITIONS PRECEDENT........................................................................28

   4.1     Conditions to Initial Loans..................................................................28
   4.2     Conditions to Each Loan......................................................................31
   4.3     Representation...............................................................................32

ARTICLE 5.  AFFIRMATIVE COVENANTS.......................................................................32

   5.1     Financial Statements.........................................................................32
   5.2     Certificates; Other Information..............................................................33
   5.3     Payment of Obligations.......................................................................35
   5.4     Maintenance of Existence.....................................................................35
   5.5     Maintenance of Property; Insurance...........................................................36
   5.6     Inspection of Property; Books and Records; Discussions.......................................36
   5.7     Other Notices................................................................................36
   5.8     Environmental Laws...........................................................................37
   5.9     ERISA........................................................................................38
   5.10    Use of Proceeds..............................................................................38
   5.11    Margin Stock.................................................................................38
   5.12    Maintain Ownership of Insurance Businesses...................................................38
   5.13    Fees.........................................................................................38
   5.14    Pledge Agreement.............................................................................38
   5.15    Relief From Automatic Stay in Bankruptcy.....................................................38
   5.16    Application of Capital Contributions.........................................................39
   5.17    [Reserved]...................................................................................39
   5.18    [Reserved]...................................................................................39

ARTICLE 6.  NEGATIVE COVENANTS..........................................................................39

   6.1     Financial Covenants..........................................................................40
   6.2     Limitation on Fundamental Changes............................................................40
   6.3     Limitation on Transactions with Affiliates...................................................40
   6.4     Limitation on Liens..........................................................................41
   6.5     Hedging Arrangements.........................................................................41
   6.6     Limitation on Guaranties.....................................................................42
   6.7     Limitation on Sale of Assets.................................................................42
   6.8     Limitation on Investments, Loans and Advances................................................42
   6.9     Limitations Relating to Stock of Subsidiaries, Dividends and Stock Repurchases...............42
   6.10    Limitation on Indebtedness...................................................................43
   6.11    Limitation on Capital Expenditures...........................................................44
   6.12    Limitation on Negative Pledge Clauses; Payment Restrictions..................................44
   6.13    Limitation on Businesses.....................................................................44
   6.14    Limitation on Certain Prepayments and Amendments.............................................44

ARTICLE 7.  EVENTS OF DEFAULT...........................................................................45

   7.1     Events of Default............................................................................45

ARTICLE 8.  THE ADMINISTRATIVE AGENT....................................................................47

   8.1     Appointment..................................................................................47
   8.2     Delegation of Duties.........................................................................47
   8.3     Exculpatory Provisions.......................................................................48
   8.4     Reliance by Administrative Agent.............................................................48
   8.5     Notice of Default............................................................................48
   8.6     Non-Reliance on Administrative Agent  and Other Lenders......................................49
   8.7     Indemnification..............................................................................49
   8.8     Administrative Agent  in Its Individual Capacity.............................................50
   8.9     Successor Administrative Agent...............................................................50

ARTICLE 9.  MISCELLANEOUS...............................................................................50

   9.1     Amendments and Waivers.......................................................................50
   9.2     Notice.......................................................................................51
   9.3     No Waiver; Cumulative Remedies...............................................................52
   9.4     Survival of Representations and Warranties...................................................52
   9.5     Payment of Expenses and Taxes; Indemnification...............................................52
   9.6     Successors and Assigns; Participations and Assignments.......................................53
   9.7     Adjustments; Setoff..........................................................................55
   9.8     Confidentiality..............................................................................56
   9.9     Effectiveness................................................................................56
   9.10    Counterparts.................................................................................56
   9.11    Severability.................................................................................56
   9.12    Integration..................................................................................56
   9.13    GOVERNING LAW................................................................................56
   9.14    Submission To Jurisdiction; Waivers..........................................................57
   9.15    Acknowledgments..............................................................................57
   9.16    Waivers of Jury Trial........................................................................58
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                             EXHIBITS AND SCHEDULES


Schedule I          Lending Offices of Lender and Commitments
Exhibit A-1         Form of Note
Exhibit A-2         Form of PIK Interest Note
Exhibit B           Form of Notice of Borrowing
Exhibit C           Form of Closing Certificate
Exhibit D           Form of Commitment Transfer Supplement
Exhibit E           Form of Compliance Certificate
Exhibit F           Form of Pledge Agreement
Exhibit G           Minimum Statutory Surplus Requirements
Exhibit H           Reports and Other Information Required by Section 5.2(e)
Exhibit I           Form of Guaranty and Security Agreement
Schedule 1          Borrower Affiliates
Schedule 3.1(b)     Variances from Financial Statements
Schedule 3.1(c)     Identification of Projections Provided
Schedule 3.1(d)     Variances to Annual Statements
Schedule 3.2        Material Adverse Events
Schedule 3.3        Legal Non-Compliance
Schedule 3.4        Requisite Authorizations
Schedule 3.6(a)     Litigation
Schedule 3.6(b)     Restrictions on New Insurance Business
Schedule 3.7        Defaults/Events of Default
Schedule 3.8        Liens
Schedule 3.11       Taxes
Schedule 3.13       ERISA
Schedule 3.14       Regulations Limiting Indebtedness
Schedule 3.17(a)    Insurance Policies
Schedule 3.17(b)    Reinsurance Contracts
Schedule 3.20       Agreements Containing Restrictive Covenants
Schedule 3.22       Subsidiaries
Schedule 3.23       Credit Agreements
Schedule 6.3        Transactions with Affiliates
Schedule 6.6        Guaranties
Schedule 6.7        Permitted Tax Benefit Purchases and Capital Contributions
Schedule 6.11       Permitted Capital Expenditures





<PAGE>





     CREDIT  AGREEMENT,  dated as of April 17, 2001,  between ASCENT  ASSURANCE,
INC., a Delaware  corporation (the "Borrower"),  the several entities identified
on the signature  pages of this  Agreement as Lenders and each other person that
becomes a lender hereunder (collectively,  the "Lenders," and each individually,
a "Lender"),  CREDIT SUISSE FIRST BOSTON MANAGEMENT  CORPORATION  ("CSFBM"),  as
Administrative  Agent (in such  capacity  the  "Administrative  Agent "), and as
Arranger (in such capacity, the "Arranger").

                              PRELIMINARY STATEMENT

     The Borrower has  requested  that the Lenders make senior  secured loans to
the Borrower in an aggregate  principal amount not to exceed $11,000,000 for use
by the  Borrower to make  capital  contributions  to or purchase  surplus  notes
issued by a  Subsidiary  of the  Borrower  as  permitted  by the terms set forth
below. The Lenders, severally but not jointly, are willing to make loans, on the
terms and subject to the conditions set forth herein.

     Therefore, the parties hereto agree as follows:

                         ARTICLE 1. DEFINITIONS

1.1 Defined Terms. As used in this  Agreement,  the terms defined in the recital
of the parties  shall have the meanings  given to them  therein,  the  following
terms shall have the  meanings  indicated,  and the terms  defined in Schedule 1
setting  forth the names of certain  Affiliates  of the Borrower  shall have the
meanings given to them therein.

          "Affiliate"  means,  as to any Person,  any other  Person  directly or
     indirectly  controlling,  controlled  by or under common  control with that
     other Person. For purposes of this definition,  "control" of a Person means
     the power, directly or indirectly,  to direct or cause the direction of the
     management  and policies of that Person,  whether  through the ownership of
     voting  securities,   by  contract  or  otherwise,  and  "controlling"  and
     "controlled" have correlative meanings.

          "Annual Statement" means, in relation to any Insurance  Subsidiary for
     any  fiscal  year,  the  annual  financial  statements  of  that  Insurance
     Subsidiary as required to be filed with the Insurance  Regulatory Authority
     of its  jurisdiction  of domicile and in  accordance  with the laws of that
     jurisdiction,  together  with all  exhibits,  schedules,  certificates  and
     actuarial opinions required to be filed or delivered therewith.

          "Applicable Rate" means 12% per annum.

          "Assignee" shall have the meaning ascribed thereto in Section 9.6(c).

          "Borrowing  Date" means,  with respect to any Loan, the date specified
     as such in a notice given by the Borrower in accordance with Section 2.3.

          "Business Day" means a day other than a Saturday,  a Sunday or another
     day on which  commercial  banks in New York City or Fort  Worth,  Texas are
     authorized or required by law to close.

          "Capital  Expenditures"  means,  for any period,  the Dollar amount of
     gross  expenditures   (including  payments  in  respect  of  Capital  Lease
     Obligations) made for fixed assets, real property, plant and equipment, and
     all  renewals,  improvements  and  replacements  thereto  (but not  repairs
     thereof) incurred during such period,  all as determined in accordance with
     GAAP.

          "Capital Lease" means any lease under which the lessee has or may have
     obligations  that should,  in  accordance  with GAAP, be  capitalized  on a
     balance sheet of the lessee.

          "Capital  Lease  Obligation"  means,  in relation to any Person at any
     date,  the  amount of each  obligation  of that  Person  as lessee  under a
     Capital  Lease  which  should,  in  accordance  with GAAP,  be shown on its
     balance sheet as a liability at that date.

          "Capital  Stock"  means,  in  relation to a  corporation,  any and all
     shares, interests, participations or other equivalents (however designated)
     of capital stock of that corporation,  in relation to any Person other than
     a corporation,  any and all equivalent  ownership interests in that Person,
     and,  in  relation  to all  Persons,  any and all  warrants  or  options to
     purchase any of the foregoing.

          "Closing  Date"  means the date on or before the  Termination  Date on
     which the  conditions  precedent  set forth in Section 4.1 are satisfied or
     waived, as determined by the Administrative Agent.

          "Code" means the Internal  Revenue Code of 1986,  as amended from time
     to time.

          "Commitment"  means, as to each Lender,  the amount specified opposite
     the name of that Lender in Schedule I.

          "Commitment  Percentage"  means,  as to any Lender,  at any time,  the
     quotient  derived  by  dividing  the  Total  Commitment  by  that  Lender's
     Commitment at that time.

          "Common  Stock" means the common stock,  par value $.01 per share,  of
     the Borrower as it exists at the date of execution of this  Agreement or as
     it may be reconstituted  from time to time. The foregoing  reference to the
     Common Stock as it may be reconstituted  shall not be construed to derogate
     from any  restrictions  in this  Agreement  on the  borrower's  actions  in
     respect of the Common Stock.

          "Commonly   Controlled  Entity"  means  an  entity,   whether  or  not
     incorporated,  which is under common  control with the Borrower  within the
     meaning  of  Section  4001(a)(14)  of  ERISA  or is part  of a group  which
     includes  the  Borrower  and which is  treated as a single  employer  under
     Section 414 of the Code.

          "Compliance  Certificate"  shall have the meaning  ascribed thereto in
     Section 5.2(b).

          "Consolidated  GAAP Net Worth" means, for any date, the sum of (a) the
     Capital Stock (including  mandatorily  redeemable  preferred capital stock)
     and additional  paid-in  capital of the Borrower and its  Subsidiaries on a
     consolidated  basis plus (without  duplication)  (b) the amount of retained
     earnings,  inclusive  of deferred  revenues,  or, in the case of a deficit,
     minus the deficit,  minus (c) treasury  stock,  plus or minus (d) any other
     account which is customarily added or deducted in determining shareholders'
     equity  (without  giving effect to any increase or decrease to Consolidated
     GAAP Net Worth attributable to the application of SFAS No. 115, 130 and 133
     and related deferred tax effects),  all determined on a consolidated  basis
     in accordance with GAAP.

          "Contractual  Obligation"  means as to the Borrower or any Subsidiary,
     any provision of any security  issued by the Borrower or any  Subsidiary or
     of any agreement,  instrument or other undertaking to which the Borrower or
     any Subsidiary is a party or by which it or any of its property is bound.

          "Debt  for  Borrowed   Money"  means,   as  to  any  Person,   without
     duplication, (a) all obligations of such Person for borrowed money, (b) all
     obligations of such Person evidenced by bonds, debentures, notes or similar
     instruments, and (c) all Capital Lease obligations of such Person.

          "Default" means any of the events specified in Section 7.1, whether or
     not any requirement  for the giving of notice,  the lapse of time, or both,
     or any other condition, has been satisfied.

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

          "Environmental Laws" means any and all foreign,  Federal, state, local
     or municipal laws, rules, orders, regulations, statutes, ordinances, codes,
     decrees,  requirements of any Governmental  Authority or other Requirements
     of Law (including common law) regulating, relating to or imposing liability
     or standards of conduct  concerning  public  health,  public and  workplace
     safety  or  protection  of the  environment,  as  now  or  may at any  time
     hereafter be in effect.

          "ERISA" means the Employee  Retirement Income Security Act of 1974, as
     amended from time to time.

          "Event of Default"  means any of the events  specified in Section 7.1;
     provided that any requirement for the giving of notice,  the lapse of time,
     or both, or any other condition, has been satisfied.

          "Federal  Funds  Effective  Rate"  means,  for any day,  the  weighted
     average of the rates on overnight  Federal funds  transactions with members
     of the  Federal  Reserve  System  arranged  by Federal  funds  brokers,  as
     published on the next  succeeding  Business Day by the Federal Reserve Bank
     of New York,  or, if such rate is not so  published  for any day which is a
     Business  Day,  the  average  of  the   quotations  for  the  day  of  such
     transactions  received by the Administrative Agent from three Federal funds
     brokers of recognized standing selected by it.

          "Funded  Debt" means,  with respect to any Person as of any date,  all
     Indebtedness  of that Person that, by the terms of the agreement  governing
     or instrument evidencing the Indebtedness, matures more than one year from,
     or is directly or indirectly  renewable or extendable at the option of that
     Person under a revolving credit or similar agreement  obligating the lender
     or  lenders to extend  credit  over a period of more than one year from the
     date  of  creation  thereof,  including  current  maturities  of  long-term
     Indebtedness,  revolving  credit  and  short-term  Indebtedness  extendable
     beyond one year at the option of that Person.

          "Funded Debt Ratio" means, as at any date, the ratio of Funded Debt to
     Total  Capital,  in each case,  determined as of the end of the most recent
     fiscal  quarter  ending  on or  prior  to that  date  for  which  financial
     statements are available.

          "GAAP" means generally  accepted  accounting  principles in the United
     States of  America  as in effect  from time to time  consistent  with those
     utilized in  preparing  the  audited  financial  statements  referred to in
     Section 3.1.

          "Governmental  Authority" means any national government (United States
     or foreign),  any state or other political  subdivision thereof, any entity
     exercising executive,  legislative,  judicial, regulatory or administrative
     functions  of or  pertaining  to  government  and  any  agency,  authority,
     instrumentality, or regulatory body of any thereof.

          "Guaranty" means, as to any Person,  any direct or indirect  liability
     of that  Person  with  respect  to any  Indebtedness,  liability  or  other
     obligation,  whether  or not  contingent  (the  "primary  obligation"),  of
     another  Person (the  "primary  obligor")  in any manner,  (i) to purchase,
     repurchase  or  otherwise  acquire the primary  obligation  or any property
     constituting  direct or  indirect  security  therefor,  (ii) to  advance or
     supply funds (x) for the purchase or payment of any primary  obligation  or
     (y) to maintain working capital or equity capital of the primary obligor or
     otherwise to maintain  the net worth,  liquidity or solvency of the primary
     obligor,  (iii) to purchase property,  securities or services primarily for
     the purpose of assuring the owner of any primary  obligation of the ability
     of the primary  obligor to make payment of that primary  obligation or (iv)
     otherwise to assure or hold  harmless  the owner of any primary  obligation
     against loss in respect thereof.  "Guaranty" shall not include endorsements
     of  instruments  for  deposit  or  collection  in the  ordinary  course  of
     business.

          "Guaranty and Security  Agreement"  means an agreement in the form set
     forth in Exhibit I among the Administrative  Agent, as secured party on its
     own behalf and on behalf of the Lenders,  and each of the  Subsidiaries  of
     the Borrower identified therein as a Company, or debtor.

          "Hedging  Agreements"  means, as to any Person,  (a) any interest rate
     protection agreement,  interest rate future, interest rate option, interest
     rate swap, interest rate cap or other interest rate hedge or arrangement to
     which that  Person is a party and (b) any other  agreement  or  arrangement
     designed to limit or eliminate  the risk and/or  exposure of that Person to
     fluctuations in currency exchange rates,  credit risk or any other variable
     that is not within that Person's control.

          "Indebtedness" means, with respect to any Person at any date, (a) Debt
     for Borrowed Money of that Person,  (b) all indebtedness of that Person for
     the  deferred  purchase  price of property or services  (other than current
     trade  liabilities and accrued expenses  incurred in the ordinary course of
     that Person's business and payable in accordance with customary practices),
     (c) all outstanding  reimbursement obligations of that Person in respect of
     outstanding  letters of credit,  acceptances and similar obligations issued
     or created for the account of that Person,  (d) all liabilities  secured by
     any Lien on any  property  owned by that Person even if that Person has not
     assumed or otherwise become liable for the payment thereof, (e) liabilities
     arising under  Hedging  Agreements of that Person (other than interest rate
     caps  purchased  by it),  (f) all  Guaranties  of that  Person  and (g) all
     Capital Lease Obligations of that Person.

          "Insolvency"  means,  with  respect  to any  Multiemployer  Plan,  the
     condition that such Plan is insolvent within the meaning of Section 4245 of
     ERISA.

          "Insurance Regulatory Authority" means, in relation to any Subsidiary,
     the insurance  department or similar  Governmental  Authority  charged with
     regulating  insurance  companies  or  insurance  holding  companies  in the
     jurisdiction  of domicile of that Subsidiary and, to the extent that it has
     regulatory  authority over that Subsidiary,  in each other  jurisdiction in
     which that Subsidiary conducts business or is licensed to conduct business.

          "Insurance  Subsidiary"  means each Subsidiary the ability of which to
     pay dividends is regulated by an Insurance  Regulatory Authority or that is
     otherwise   required  to  be  regulated  thereby  in  accordance  with  the
     applicable  Requirements of Law of its jurisdiction of domicile,  and shall
     include each Subsidiary  identified as an Insurance  Subsidiary in Schedule
     3.22.

          "Intellectual  Property"  has the meaning given to the term in Section
     3.9.

          "Intercreditor  Agreement" means the  Intercreditor  and Subordination
     Agreement,  dated  as  of  April  17,  2001  among  LaSalle  Bank  National
     Association  and Credit  Suisse First  Boston  Management  Corporation,  as
     Administrative  Agent under this  Agreement on its own behalf and on behalf
     of the Lenders.

          "Interest  Payment Date" means, as to each Loan, the last Business Day
     of each month, beginning with the month in which the Borrowing Date occurs,
     and the Maturity  Date for that Loan or any earlier date on which that Loan
     becomes due and payable pursuant to this Agreement.

          "Lien" means any mortgage, pledge, hypothecation,  assignment, deposit
     arrangement,  encumbrance,  lien  (statutory  or  other),  charge  or other
     security interest or any preference,  priority or other security  agreement
     or preferential  arrangement of any kind or nature  whatsoever  (including,
     without limitation, any conditional sale or other title retention agreement
     and any financing  lease having  substantially  the same economic effect as
     any of the foregoing and the filing of any  financing  statement  under the
     Uniform  Commercial Code or comparable law of any jurisdiction,  other than
     any such filing in connection with any true lease or operating lease).

          "Loan Documents" means this Agreement, the Security Documents and each
     other  agreement,  instrument or certificate  executed and delivered to the
     Lenders or the  Administrative  Agent pursuant  hereto or to any other Loan
     Document including, without limitation, the Notes.

          "Loan" means the loans made by the Lenders to the Borrower pursuant to
     this Agreement, including increases to the principal amount thereof through
     conversion of PIK Interest pursuant to Section 2.6(d).

          "Material  Adverse Effect" means (a) a material  adverse effect on the
     business,  operations,  property,  condition  (financial  or  otherwise) or
     prospects  of the Borrower and its  consolidated  Subsidiaries  (taken as a
     whole) or (b)  either  singly or in the  aggregate,  any  material  adverse
     effect on the  validity or  enforceability  of this  Agreement,  any of the
     Notes,  the Pledge Agreement or the Lien created  thereunder,  or on any of
     the other Loan Documents,  or the rights or remedies of the  Administrative
     Agent or the Lenders hereunder or thereunder.

          "Materials of  Environmental  Concern" means any gasoline or petroleum
     (including crude oil or any fraction thereof) or petroleum  products or any
     hazardous or toxic substances, materials or wastes, defined or regulated as
     such in or under any  Environmental  Law,  including,  without  limitation,
     asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.

          "Maturity  Date"  means  the  third  anniversary  of the  date of this
     Agreement.

          "Minimum  Statutory  Surplus  Requirement"  means,  as of any day, the
     amount identified as such in Exhibit G.

          "Moody's" means Moody's Investors Service, Inc.
           -------

          "Multiemployer  Plan"  means a Plan which is a  multiemployer  plan as
     defined in Section 4001(a)(3) of ERISA.

          "Net  Income"  means,  for any period,  net income (or deficit) of the
     Borrower and its Subsidiaries for that period  determined on a consolidated
     basis in accordance with GAAP reduced by preferred stock dividends.

          "Note" means the notes  referred to in Section 2.2(a) and PIK Interest
     Notes.

          "Notice of  Borrowing"  has the  meaning  given to the term in Section
     2.3(a).

          "Obligations"  means the unpaid principal of and interest on the Loans
     (including, without limitation, interest accruing after the maturity of the
     Loans and interest accruing after the filing of any petition in bankruptcy,
     or the commencement of any insolvency,  reorganization  or like proceeding,
     relating to the Borrower or any Subsidiary, as applicable, whether or not a
     claim  for  post-filing  or  post-petition   interest  is  allowed  in  the
     proceeding  and whether the  Administrative  Agent,  for the benefit of the
     Lenders,  is oversecured or undersecured with respect to the Loans) and all
     other  obligations  and  liabilities of the Borrower to the  Administrative
     Agent and the Lenders, whether direct or indirect,  absolute or contingent,
     due or to become due, now existing or hereafter  incurred,  which may arise
     under, out of, or in connection with, this Agreement,  the Notes, the other
     Loan Documents or any other document made, delivered or given in connection
     therewith or herewith,  whether on account of  principal,  interest,  fees,
     indemnities,  costs, expenses (including,  without limitation, all fees and
     disbursements  of counsel to the  Administrative  Agent or the Lenders that
     are  required  to be paid by the  Borrower  pursuant  to the  terms of this
     Agreement or any other Loan Document) or otherwise.

          "Participant" has the meaning ascribed thereto in Section 9.6(b).

          "PBGC"  means the Pension  Benefit  Guaranty  Corporation  established
     pursuant to Subtitle A of Title IV of ERISA or any successor thereto.

          "Permitted Investment" means each of the following:

               (a)  investments  of the Borrower or any  Subsidiary in any other
          Subsidiary  (i) to the extent  existing on the date of this  Agreement
          and identified in Schedule 3.22 (it being  understood that a change in
          value of any such  investment  will not for this purpose be considered
          an  investment),  (ii)  consisting of surplus  notes  purchased by the
          Borrower  or  capital  contributions  made by the  Borrower  with  the
          proceeds  of any Loan or (iii)  consisting  of  investments  by Ascent
          Funding, Inc. in receivables generated by any other Subsidiary for the
          purposes  of  obtaining  financing  under  the  Receivables  Financing
          Agreements;

               (b) direct  obligations  of the  United  States of America or any
          agency thereof, or obligations guaranteed as to principal and interest
          by the United States of America or any agency thereof, in either case,
          if the  obligation  matures  not  more  than 90 days  from the date of
          acquisition;

               (c) certificates of deposit issued by or other overnight deposits
          with any commercial bank or trust company  organized under the laws of
          the United States of America or any state thereof and having  capital,
          surplus and undivided  profits of at least  $500,000,000 and long-term
          unsecured  and  unguaranteed  debt rated at least  "BBB+" or "Baa1" by
          Standard  &  Poor's  or  Moody's,  respectively,  in each  case if the
          deposit  obligation  matures  not more  than 90 days  from the date of
          acquisition;

               (d)  commercial  paper of any issuer rated at least A-1 or P-1 by
          Standard & Poor's or Moody's, respectively, and maturing not more than
          90 days from the date of acquisition;

               (e) repurchase  agreements and reverse repurchase agreements with
          any bank with combined  capital and surplus of at least  $500,000,000,
          or any primary dealer in United States government securities,  in each
          case,  if  (1)  the  bank  or  dealer  has  long-term   unsecured  and
          unguaranteed  debt rated at least "BBB" or "Baa1" by Standard & Poor's
          or Moody's,  respectively,  if the  repurchase  or reverse  repurchase
          agreement  relates to marketable  direct  obligations that, (w) at the
          time of execution of the  agreement,  mature  within 60 days,  (x) are
          issued or  unconditionally  guaranteed or insured by the United States
          of America or any agency  thereof and are backed by the full faith and
          credit of the United States of America, (y) provide for the payment of
          principal and interest (and not principal alone or interest alone) and
          (z) are not  subject  to any  contingency  regarding  the  payment  of
          principal or interest;

               (f) long-term  debt rated at least  "BBB" or "Baa1" by Standard &
          Poor's or Moody's, respectively; and

               (g) investments of Subsidiaries permitted under Section 6.8.

     "Permitted Lien" has the meaning given to the term in Section 6.4.

     "Person" means an individual,  partnership,  corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, Governmental Authority or other entity of whatever nature.

     "PIK Interest" has the meaning given to the term in Section 2.6(d).

     "PIK Interest Note" has the meaning given to the term in Section 2.6(d).

     "Plan" means, at any time, any employee benefit plan of a kind contemplated
in Section 3(2) of ERISA and in respect of which the Borrower or any  Subsidiary
at the time is, an "employer" as defined in Section 3(5) of ERISA,  other than a
Multiemployer Plan.

     "Pledge  Agreement"  means an  agreement in the form set forth in Exhibit F
between the Borrower and the  Administrative  Agent, as secured party on its own
behalf and on behalf of the Lenders.

     "Pledged  Collateral"  has the  meaning  given to that  term in the  Pledge
Agreement.

     "Prohibited  Transaction" means any transaction set forth in Section 406 of
ERISA or Section 4975 of the Code for which there is no applicable  statutory or
regulatory exemption (including a class exemption or an individual exemption).

     "QFL Note" has the meaning given to that term in Section 2.2(b).

     "Quarterly  Statement"  means, in relation to any Insurance  Subsidiary for
any  fiscal  quarter,  the  quarterly  financial  statements  of that  Insurance
Subsidiary  as required to be filed with the Insurance  Regulatory  Authority of
its   jurisdiction   of  domicile,   together  with  all  exhibits,   schedules,
certificates and actuarial opinions required to be filed or delivered therewith.

     "RBC  Ratio"  means,  in  relation  to any Person as at the last day of any
fiscal  year,  the ratio of "Total  Adjusted  Capital" of that Person as at that
date to  "Company  Action  Level RBC" of that  Person as at that date,  as those
terms are defined by either the NAIC Risk Based Capital (RBC) for Insurers Model
Act (the "Model Act") or the Insurance  Commissioner  of the State in which that
Person is  incorporated,  as amended from time to time.  To the extent the Model
Act  definition  is  used,  using  the  annual  SAP  Financial  Statements  form
prescribed by the Model Act for the year ended December 31, 2000 is equal to the
quotient of (a) the amount that appears on line 27, column (1) on page 22 of the
Convention  Blank,  divided by (b) two times the amount that appears on line 28,
column (1) on page 22 of the Convention Blank.

     "Receivables Financing Agreements" means the agreements identified as items
1 through 6 in  Schedule  3.23,  as in effect on the date of this  Agreement  or
hereafter  amended  with the prior  written  consent  of the  Lenders.  For this
purpose an increase in the maximum amount of financing  available under any such
agreement after the date of this Agreement shall be deemed made with the consent
of the Lenders to the extent the increase is identified as permitted in Schedule
3.23 (but this deemed consent shall not be treated as applicable to any increase
or change in the security or other credit support for any related obligations or
otherwise to derogate from the restrictions in Article 6).

     "Register" has the meaning given to the term in Section 9.6(d).

     "Regulation U" means  Regulation U of the Board of Governors of the Federal
Reserve System as in effect from time to time, or any successor regulation.

     "Reinsurance Agreement" means any agreement,  contract, treaty, certificate
or other  arrangement  whereby any Insurance  Subsidiary agrees or has agreed to
transfer,  cede or retrocede to another  insurer or reinsurer all or part of the
liability assumed or assets held by that Insurance  Subsidiary under a policy or
policies of insurance issued by that Insurance Subsidiary or under a reinsurance
agreement assumed by that Insurance Subsidiary.

     "Reorganization"  means,  with  respect  to  any  Multiemployer  Plan,  the
condition that such plan is in reorganization within the meaning of Section 4241
of ERISA.

     "Reportable  Event" means any of the events set forth in Section 4043(c) of
ERISA other than those events for which the notice  requirement  has been waived
under applicable regulations.

     "Required Lenders" means, at any time, Lenders whose Commitment Percentages
aggregate at least 51% of the Total Commitment in effect at the time.

     "Requirement  of Law" mean, as to any Person,  the articles of organization
and by-laws or other  organizational or governing  documents of that Person, and
any law, treaty, rule or regulation or determination of an arbitrator or a court
or other  Governmental  Authority  (including,  without  limitation,  any of the
foregoing  relating to employee  health and safety or public  utilities  and all
Environmental  Laws), in each case, as applicable to or binding upon that Person
or any of its  property  or to  which  that  Person  or any of its  property  is
subject.

     "Responsible  Officer" means, with respect to a Person, the chairman of the
board of directors,  the chief executive officer or the president of that Person
or, with  respect to  financial  matters,  the chief  financial  officer of that
Person in each case, acting in their capacity as such.

     "SEC" means the Securities and Exchange Commission.

     "SEC Reports"  means the reports filed by the Borrower with the SEC on Form
10-K, Form 10-Q or Form 8-K or any successor Form.

     "Security Document" means each of the Pledge Agreement and the Guaranty and
Security Agreement.

     "Single  Employer Plan" means any Plan that is covered by Title IV of ERISA
but is not a Multiemployer Plan.

     "Standard & Poor's" means Standard & Poor's Rating Group, a division of The
McGraw-Hill Companies, Inc.

     "Statutory Capital and Surplus" means, as to any Insurance Subsidiary as of
any date,  the  amount  shown on line 38,  column 1, page 3, of the 2000  Annual
Statement of that Insurance  Subsidiary,  or the sum of amounts  determined in a
manner consistent with that  contemplated  there, for any date other than one as
of which an Annual Statement is prepared.

     "Statutory  Accounting  Practices"  or  "SAP"  means,  in  relation  to  an
Insurance Subsidiary, the statutory accounting practices prescribed or permitted
by the relevant Insurance  Regulatory  Authority of that Insurance  Subsidiary's
state of domicile,  consistently  applied and maintained and in conformity  with
those used in the preparation of the most recent statutory financial  statements
delivered hereunder (except where changes are required by the relevant Insurance
Regulatory Authority) and the Annual Statement.

     "Subsidiary" means, in relation to any Person, any corporation,  company or
other  entity and any  partnership  or joint  venture,  whether now  existing or
hereafter organized or acquired, which is under the control of that Person; and,
except as otherwise expressly provided in this Agreement,  all references to any
Subsidiary  are to direct or indirect  subsidiaries  of the  Borrower.  For this
purpose, a Person will be deemed to have control of a second Person if the first
Person has the power to elect at least a majority of the board of  directors  or
other  managers of the second  Person  either by virtue of ownership  (direct or
indirect,  through one or more  intermediaries)  of the shares of stock or other
ownership  interests  with  ordinary  voting  power  of the  second  Person,  or
otherwise;  and a Person will be deemed to have  control over a  partnership  if
that Person or one of its  Subsidiaries is the general  partner.  Stock or other
ownership interests that have voting power only by reason of the occurrence of a
contingency will be disregarded for purposes of the preceding sentence.

     "Tax"  means any  present  or  future  tax,  levy,  impost,  duty,  charge,
assessment or fee of any nature that is imposed by any Governmental Authority or
taxing authority.

     "Termination Date" has the meaning given to that term in Section 2.1(b).

     "Total  Commitment"  at any time  means  the  aggregate  of the  respective
Commitments of individual Lenders at that time.

     "Total  Capital"  means,  on any date (a) Funded Debt on that date plus (b)
the Consolidated GAAP Net Worth.

     "Transferee" has the meaning given to the term in Section 9.6(f).

     "Wholly  Owned  Subsidiary"   means,  with  respect  to  any  Person,   any
corporation or other entity of which all of the  outstanding  shares of stock or
other ownership interests in which, other than directors'  qualifying shares (or
the  equivalent  thereof),  are at the  time  directly  or  indirectly  owned or
controlled by such Person or one or more of the Subsidiaries of such Person.

1.2  Interpretation

(a) . (a) As used in  this  Agreement,  (i) the  words  "hereof,"  "herein"  and
"hereunder"  and words of similar  import refer to this Agreement as a whole and
not to any  particular  provision  of  this  Agreement,  and  Article,  Section,
Schedule  and  Exhibit   references  are  to  this  Agreement  unless  otherwise
specified;  (ii) the words "include," "includes" and "including" shall be deemed
to be followed by the phrase "without limitation," (iii) the word "or" shall not
be  exclusive,  (iv) the word "will" shall be construed to have the same meaning
and effect as the word  "shall" and (v) the plural  form of any term  defined in
the singular in this Agreement  shall merely express the  grammatical  plural of
that defined term unless otherwise expressly provided herein.

(b) As used herein,  in the Notes and in any  certificate or other document made
or delivered  pursuant hereto,  accounting terms relating to the Borrower or any
Subsidiary  that are not  defined in Section 1.1 and  accounting  terms that are
partly  defined  in Section  1.1,  to the  extent  not  defined,  shall have the
respective  meanings  given to them under  GAAP or, to the extent  that any such
term applies solely to an Insurance Subsidiary,  the means given to that term in
SAP, where  applicable.  All financial  data or statements  that the Borrower is
required to deliver  hereunder  shall be prepared  in  accordance  with GAAP or,
insofar as the data relates  solely to an Insurance  Subsidiary,  in  accordance
with SAP, if applicable,  in each case, applied on a consistent basis, except as
otherwise expressly prescribed herein, subject to the following paragraph.

(c) If GAAP changes while any of the Obligations  remains  outstanding and, as a
result, the financial  covenants set forth in Section 6.1 would be calculated in
a manner or with components different from those applicable prior to the change,
(i) the  Borrower  and the Lenders  will enter into good faith  negotiations  to
amend  this  Agreement  in such  respects  as are  necessary  to  conform  those
covenants as criteria  for  evaluating  the  Borrower's  financial  condition to
substantially  the same criteria as were effective  prior to the relevant change
in GAAP and (ii) the  Borrower  shall be deemed to be in  compliance  with those
financial  covenants  during the prior of 60 days  beginning  with the effective
date of that  change in GAAP if and to the extent that the  Borrower  would have
been in  compliance  therewith  under GAAP if the change  had not  occurred  and
compliance were tested applying GAAP as in effect immediately before the change.
Where this Agreement or any other Loan Document refers,  directly or indirectly,
to amounts on particular  exhibits,  schedules,  lines,  pages or columns of any
Annual Statement or Quarterly Statement,  the references are based on the format
promulgated by the NAIC for the 2000 Annual Statements and Quarterly Statements.
If that  format is changed  for 2001 or any year  thereafter  so that  different
information  is  required  in the items  referred  to, or so that they no longer
exist, of if the Annual Statement or Quarterly Statement is replaced by the NAIC
or by any Insurance  Regulatory  Authority  after the date of this  Agreement so
that a different  form of financial  statement is required to be furnished by an
Insurance  Subsidiary in lieu thereof,  the relevant reference in this Agreement
or any other Loan Document shall be to information consistent with that reported
in the referenced item in the 2000 Annual Statements or Quarterly Statements, as
applicable.

(d) Unless the context requires  otherwise (i) any definition of or reference to
any  agreement,  instrument  or other  document  herein  shall be  construed  as
referring to that  agreement,  instrument or other document as from time to time
amended, supplemented or otherwise modified (subject to any restrictions on such
amendments,  supplements or modifications set forth herein),  (ii) any reference
herein to any Person shall be construed to include that Person's  successors and
assigns (without prejudice to any restrictions on transfer or other consequences
of a transfer  contemplated  herein), and (iii) the words "asset" and "property"
shall be  construed  to have the same meaning and effect and to refer to any and
all tangible and intangible assets and properties,  including cash,  securities,
accounts and contract rights.

(e) The terms defined in this  Agreement  shall have the meanings  given to them
herein when they are used in the Notes or any certificate or other document made
or delivered pursuant hereto, unless otherwise specified therein.


                   ARTICLE 2. AMOUNT AND TERMS OF COMMITMENTS

2.1  Commitments.

(a) On the terms and subject to the  conditions  hereof,  each Lender  severally
agrees to make one or more term loans to the Borrower in an aggregate amount not
to exceed that Lender's  Commitment in effect at the time. The aggregate  amount
of the Loans to be made  pursuant  to this  provision  on any day by the Lenders
shall be as determined by the Lenders.

(b) The Commitment of each Lender will automatically be reduced on any Borrowing
Date by the amount of the Loan made by that Lender pursuant to Section 2.1(a) on
that Borrowing Date. Unless previously terminated, the Commitment of each Lender
will  automatically be reduced to zero and terminate at 3:00 p.m., New York City
time, on April 30, 2001 (the "Termination Date").

2.2 Notes

(a) . (a) The  Loans  made by each  Lender on any  Borrowing  Date  pursuant  to
Section  2.1(a)  shall be  evidenced  by a  promissory  note of the  Borrower (a
"Note"),  substantially  in the form set forth in Exhibit A-1, with  appropriate
insertions as to payee,  date and the principal  amount of the Loan made by that
Lender,  payable to the order of that Lender, and, if applicable with such other
features as are specified in paragraph  (b) of this Section for a QFL Note.  The
Borrower hereby irrevocably authorizes each Lender to record the date and amount
of each Loan made by it and the date and amount of each payment or prepayment of
principal  thereof on the  schedule  annexed to and  constituting  a part of its
Note,  and any such  recordation  shall  constitute  prima facie evidence of the
accuracy of the  information so recorded  absent  manifest  error.  Failure by a
Lender to make any such recordation  shall not,  however,  affect the Borrower's
obligations  hereunder.  Each Note shall (i) be dated the Closing Date,  (ii) be
stated to mature on the  Maturity  Date and (iii)  provide  for the  payment  of
interest in accordance with Section 2.6.

(b) Any Lender that is not a "bank"  within the meaning of Section  881(c)(3)(A)
of the Code and that is not  incorporated or otherwise  organized under the laws
of the  Untied  States of America or any state  thereof  (a  "Qualified  Foreign
Lender") shall, upon receipt of the written request of the Administrative  Agent
or the  Borrower,  and may, upon its own written  request to the  Administrative
Agent,  exchange  any Note held by or  assigned  to it for a  qualified  foreign
lender Note ( a "QFL Note").  A QFL Note shall contain the following  legend but
otherwise be in the same form as other Notes:  "This Note is a QFL Note,  and as
such,  ownership  of  the  obligation  represented  by  such  QFL  Note  may  be
transferred only in accordance with Section 2.2(d) of the Credit Agreement." Any
QFL Note issued in  replacement  of any existing  Note  pursuant to this Section
shall be (i) dated the  Closing  Date,  (ii) issued in the name of the entity in
whose name that existing Note was issued and (iii) issued in the same  principal
amount as that existing Note.

(c) Upon the request of or delivery of a request to a Qualified  Foreign  Lender
pursuant to  paragraph  (b) of this  Section,  the  Borrower  shall  execute and
deliver  a QFL  Note to the  Administrative  Agent  in  replacement  of the Note
surrendered in connection  with the request  conforming to the  requirements  of
this  paragraph.  Each  Qualified  Foreign  Lender shall  surrender  its Note in
connection with any replacement pursuant to this Section. In connection with any
such replacement, upon receipt by the Administrative Agent of a QFL Note and the
existing Note to be replaced by that QFL Note in accordance with this paragraph,
the  Administrative  Agent shall  forward  the QFL Note to the Lender  which has
surrendered its Note for the replacement and shall forward the surrendered  Note
to the Borrower marked "canceled." Once issued, QFL Notes (i) shall be deemed to
and shall be "Notes" for all purposes under the Loan Documents,  (ii) may not be
exchanged  for Notes  which are not QFL Notes,  notwithstanding  anything to the
contrary in the Loan  Documents  and (iii) shall at all times  thereafter be QFL
Notes,  including,  without  limitation,  following  any transfer or  assignment
thereof.

(d)  Notwithstanding  anything to the  contrary in the Loan  Documents,  the QFL
Notes are  registered  obligations  as to both  principal  and interest with the
Borrower,  and  transfer  of the  obligations  underlying  such  QFL Note may be
effected only by surrender of the QFL Note to the Borrower and either reissuance
by the Borrower of that QFL Note to the  transferee  or issuance by the Borrower
of a new QFL Note to the transferee. A QFL Note shall only evidence the Lender's
or an assignee's right, title and interest in and to the related obligation, and
in no event is a QFL Note to be considered a bearer  instrument  or  obligation.
This Section shall be construed so that the obligations underlying the QFL Notes
are at all times maintained in "registered  form" within the meaning of Sections
871(h)(2) and 881(c)(3) of the Code.

2.3 Procedure for Borrowing

(a) . (a) The Borrower shall give the Administrative Agent notice of the date on
which it would like the  Lenders to make Loans  pursuant  to Section  2.1(a) not
later than  10:00  a.m.,  New York City time,  on the  proposed  Borrowing  Date
identified  in that notice.  Any such notice shall be  irrevocable  and shall be
substantially  in the form set forth in  Exhibit  B (a  "Notice  of  Borrowing")
specifying  (i) the amount to be borrowed and (ii) the requested  Borrowing Date
and shall be executed by a Responsible Officer of the Borrower.

(b)  However,  if the  Borrower  and the  Lenders  have  agreed  that any  Loans
hereunder may be made on any  floating-rate  interest rate basis,  the Notice of
Borrowing shall also contain all such additional  information as may be required
to implement and set forth the parties'  agreement on the subject (including all
relevant  modifications  to the terms of this  Agreement  as may be  required to
address  interest  periods,  relevant  business  day and other  conventions  and
related  modifications  to the Notes) and shall be given not later than the time
specified in that agreement.  Any such Notice of Borrowing  relating to proposed
floating-rate  Loans  shall be  effective  as such  only  when  executed  by the
Borrower and countersigned by the Lenders and the Administrative Agent and shall
automatically become a part of and amendment to this Agreement.

Upon  receipt of a Notice of Borrowing  from the  Borrower,  the  Administrative
Agent shall  promptly  notify each Lender  thereof and of that Lender's pro rata
share of the borrowing  contemplated  in that Notice of Borrowing  (the Lender's
Commitment Percentage of the amount of the proposed borrowing). Each Lender will
make  the  amount  of its pro  rata  share of each  borrowing  available  to the
Administrative  Agent  for the  account  of the  Borrower  at the  office of the
Administrative Agent specified in Section 9.2 prior to 11:00 a.m., New York City
time,  on the  relevant  Borrowing  Date in funds  immediately  available to the
Administrative  Agent. The  Administrative  Agent shall, on that Borrowing Date,
make  available to the Borrower the  aggregate of the amounts made  available to
the  Administrative  Agent by the  Lenders,  by wire  transfer  in like funds as
received by the  Administrative  Agent, to the Borrower's  account identified on
the signature  pages of this Agreement or such other account as the Borrower may
have identified by notice given to the  Administrative  Agent not later than the
Business Day preceding the Borrowing Date.

2.4 [Reserved.]

2.5 Optional  Prepayment and Repayment at  Maturity

(a) . (a) Each  prepayment of
-
any  portion of the Loans made  pursuant to this  Section 2.5 shall  permanently
reduce the  Commitments  and the Total  Commitment,  and no amount that has been
prepaid may be  reborrowed.  In  addition,  an  obligation  to make a prepayment
pursuant to this  Section 2.5 (by virtue of the  Borrower's  having given notice
electing to make the prepayment)  shall  permanently  reduce the Commitments and
the Total  Commitment with effect on the date the prepayment is due,  regardless
of whether it is made.  Each  prepayment  pursuant to this  Section 2.5 shall be
made  without  premium  or  penalty  but  together  with  payment in full of all
interest  on the  amount  being  prepaid  accrued to but  excluding  the date of
prepayment.  The  Administrative  Agent shall promptly notify the Lenders of any
notice of  prepayment,  and of the  amount of any  prepayment,  received  by the
Administrative Agent.

(b) The Borrower may at any time prepay all or,  subject to the  following,  any
portion of the Loans,  upon notice given to the  Administrative  Agent not later
than two hours before the payment. Each such notice shall be irrevocable.

(c) The Borrower shall repay the outstanding  principal  amount of the Loans and
the Notes on the Maturity Date  together  with interest  accrued and not paid to
but excluding the Maturity Date.

2.6 Interest Rate; Default Rate; Payment Dates

(a) . (a) Subject to paragraph (b),  interest on each Loan shall accrue from and
including  the Loan's  Borrowing  Date,  in the case of a Loan made  pursuant to
Section 2.1(a),  and from and including the date specified in Section 2.6(d), in
the case of a Loan made through  conversion of PIK Interest,  and, in all cases,
to but excluding the day on which the Loan is repaid in full, at the  Applicable
Rate, subject to the following. Until the Maturity Date, but only so long as the
Loans and other  Obligations  hereunder have not become or been declared due and
payable in  connection  with an Event of  Default,  interest on the Loans may be
paid,  at the option of the  Borrower,  in PIK  Interest  Notes,  as provided in
Section  2.6(d).  The  amount of PIK  Interest  Notes  shall be  treated as Loan
principal amounts.

(b) If any amount payable  hereunder by the Borrower is not paid as and when due
(or a PIK Interest Note is not delivered with respect  thereto),  interest shall
accrue thereon, to the extent permitted by applicable law (both before and after
judgment) at a rate per annum equal to the sum of the rate that would  otherwise
be applicable thereto pursuant to the foregoing  provisions of this Section plus
2% from the date of  occurrence  of such  Event of  Default  until the date such
Event of  Default  is cured or waived  (after as well as  before  judgment).  In
addition,  should any  interest  on such Loans or any other  amount  (other than
principal)  payable  hereunder  not be paid  when  due  (whether  at the  stated
maturity, by acceleration or otherwise), such overdue amount shall bear interest
(to the extent  permitted  by law in the case of interest on interest) at a rate
per annum as determined pursuant to the preceding  sentence,  in each case, from
the date of such non-payment until such amount is paid in full (after as well as
before judgment).

(c) Interest  accruing pursuant to Section 2.6(a) shall be payable in arrears on
each  Interest  Payment  Date,  subject to  Section  2.6(d).  Interest  accruing
pursuant to Section 2.6(b) shall be payable from time to time on demand.

(d) The  Borrower is  executing  and  delivering  to the  Administrative  Agent,
pursuant  to  Section  4.1(b),  for each  Lender a note in the form set forth in
Exhibit A-2 (a "PIK  Interest  Note").  The  Borrower,  may,  subject to Section
2.6(a)  and the last  sentence  of this  Section  2.6(d),  in lieu of  tendering
payment of interest  accruing  under  Section  2.6(a) in cash,  on the  Interest
Payment Date on which that interest is due, give the Administrative Agent notice
that the  Borrower  is  electing  to pay  each  Lender's  pro rata  share of the
relevant  interest payment through  conversion of the amount of that share (each
such amount "PIK Interest") to the principal of the Loans hereunder  outstanding
to that Lender. If the Borrower gives such a notice to the Administrative Agent,
it shall give each Lender notice of the Borrower's election. The Borrower hereby
irrevocably  authorizes  each  Lender to record the date and amount of each Loan
principal  increase pursuant to this provision,  and the date and amount of each
payment or  prepayment  of principal  thereof,  on the  schedule  annexed to and
constituting  part of its PIK  Interest  Note,  and any such  recordation  shall
constitute  prima facie evidence of the accuracy of the  information so recorded
absent manifest error.  Failure by a Lender to make any such  recordation  shall
not, however, affect the Borrower's obligations hereunder. Interest shall accrue
on the principal  amount of each PIK Interest Note at the Applicable  Rate, from
and including the Interest  Payment Date  corresponding to the due date for that
PIK Interest.  The Borrower's right to convert PIK Interest to Loan principal as
contemplated  in this Section 2.6(d) will  automatically  cease if the Loans and
other Obligations hereunder become or are declared due and payable in connection
with an Event of Default.

2.7      Computation of Interest; Making of Payments

(a) . All interest  accruing  hereunder  shall be calculated on the basis of the
actual number of days in the relevant period and a year of 360 days.

(b) All payments  (including  prepayments) to be made by the Borrower  hereunder
and  under the  Notes,  whether  on  account  of  principal,  interest,  fees or
otherwise,  shall be made without setoff or counterclaim and shall be made prior
to 12:00 noon, New York City time, on the due date thereof to the Administrative
Agent,  for the account of the  Lenders,  to the  account of the  Administrative
Agent at Citibank, N.A., ABA #021000089, Account no. 4080-4716, REF: Ascent Term
Loan, Attn:  Adair Young,  CSFB,  212-322-1365,  or to such other account as the
Administrative  Agent  may  specify  by  notice  to  the  Borrower  or,  if  the
Administrative  Agent  so  specifies,   at  the  Administrative  Agent's  office
specified in Section 9.2, in Dollars and in  immediately  available  funds.  The
Administrative Agent shall distribute such payments to the Lenders promptly upon
receipt in like funds as  received.  If any  payment  hereunder  becomes due and
payable on a day other than a Business  Day, the due date for such payment shall
be extended to the next  following  Business Day, and interest shall continue to
accrue thereon in respect of the extension.

2.8 Pro Rata Treatment and Payments; Funding Reliance

(a) . (a) Each  borrowing by the  Borrower  from the Lenders  hereunder  and any
reduction of the  Commitments of the Lenders shall be made pro rata according to
the respective  Commitment  Percentages of the Lenders.  Each payment (including
each  prepayment) by the Borrower on account of principal of and interest on the
Loans shall (except as may be required as a result of Section 2.9,  Section 2.10
or  Section  2.11) be made  pro rata  according  to the  respective  outstanding
principal amounts of the Loans then held by the Lenders.

(b) On each Borrowing Date, the Administrative Agent shall be entitled to assume
that each Lender (other than any Lender that has given the Administrative  Agent
notice to the contrary) has made funds available to the Administrative  Agent as
required by Section 2.3(c), and the  Administrative  Agent may (but shall not be
required to) credit funds to the Borrower in an amount equal to the aggregate of
the  principal  amount of the Loans to be made on that date by all Lenders  from
which no such  notice has been  received.  If any Lender that has not given that
notice  fails to make funds  available  as  required  by Section  2.3(c) and the
Administrative  Agent has  credited  to the  Borrower  an  amount  equal to that
aggregate,  the Administrative  Agent shall be entitled at its option to recover
from either that Lender or the Borrower (without  prejudice to the rights of the
Borrower against that Lender),  on demand,  an amount equal to the Loan that was
to have been made by that Lender on that date,  together  with  interest on that
amount accrued for each day from and including the applicable  Borrowing Date to
but  excluding  the date of that recovery at a rate per annum equal to the daily
average Federal Funds Rate for the period.  A certificate of the  Administrative
Agent  submitted  to any Lender  with  respect to any  amounts  owing under this
Section shall be conclusive in the absence of manifest  error.  If a Lender pays
an amount due from it under this Section to the Administrative  Agent, then that
amount shall  constitute  the Lender's Loan included in the relevant  borrowing.
The  obligations of the Lenders  hereunder are several,  and none of the Lenders
shall be responsible for any other Lender's failure to make any Loan as required
hereunder.

2.9  Illegality.

Notwithstanding any other provision herein, if any Lender determines at any time
that any  Requirement of Law or any change therein or in the  interpretation  or
application  thereof  makes or will make it unlawful  for that Lender to fulfill
its  commitment  to make  Loans  hereunder,  to  maintain  a Loan or to claim or
receive any amount payable to it hereunder, the Lender shall give notice of that
determination  to  the  Borrower,  with  a copy  to  the  Administrative  Agent,
whereupon the  obligations  of that Lender  hereunder  shall  terminate and that
Lender's Commitment shall be reduced to zero. The Borrower shall repay the Loans
of that Lender in full on the following Business Day. Repayment pursuant to this
Section shall be made without premium but together with interest  accrued on the
Loans being repaid to the date of repayment  and all other  amounts then payable
to the relevant Lender by the Borrower hereunder.

2.10  Requirements of Law.

If any Lender  determines  that the adoption of or any change in any Requirement
of Law  regarding  capital  adequacy  or in the  interpretation  or  application
thereof or compliance by that Lender or any  corporation  controlling the Lender
with any request or directive  regarding capital adequacy (whether or not having
the force of law) from any Governmental Authority made after the date hereof has
or will have the effect of reducing  the rate of return on that  Lender's or the
corporation's  capital as a consequence of its obligations  hereunder to a level
below that which the Lender or that corporation  could have achieved but for the
change or  compliance  (taking into  consideration  the policies with respect to
capital  adequacy  of that  Lender or  corporation)  by an amount  deemed by the
Lender to be  material,  the Borrower  shall pay to that Lender such  additional
amount or amounts as will compensate the Lender for the reduction,  in each case
promptly  after  submission  by the Lender to the  Borrower  (with a copy to the
Administrative  Agent  ) of a  written  request  for  the  payment.  A  Lender's
statements of  additional  amounts to be paid from time to time pursuant to this
Section  shall be  conclusive  in the absence of manifest  error.  This covenant
shall  survive  the  termination  of  this  Agreement  and  the  payment  of the
Obligations hereunder.

2.11     Taxes

(a) . (a) Each payment by the Borrower  under this  Agreement or the Notes shall
be made without  withholding on account of Taxes unless  withholding is required
by applicable  law. If applicable law requires  withholding,  the Borrower shall
give  notice to that  effect to the  Administrative  Agent,  make the  necessary
withholding  and make timely payment of the amount  withheld to the  appropriate
Governmental  Authority.  All Taxes so withheld  shall be paid before  penalties
attach thereto or interest  accrues  thereon.  If any such penalties or interest
nonetheless  become due, the Borrower shall make prompt  payment  thereof to the
appropriate  Governmental Authority. If any Lender pays any amount in respect of
a Tax that is not a franchise  tax or imposed on the  Lender's  net income or in
lieu of net  income  taxes (an  "Indemnifiable  Tax"),  which is  imposed on any
payment due from the Borrower  hereunder or penalties or interest  thereon,  the
Borrower shall  reimburse that Lender in Dollars for that payment on demand.  If
the Borrower pays any such Indemnifiable Taxes or penalties or interest thereon,
it shall  deliver  official  tax  receipts  evidencing  the payment or certified
copies  thereof to the  Administrative  Agent not later than the  thirtieth  day
after payment.

(b) If any  Lender is or becomes  entitled  to a reduced  withholding  rate or a
complete  exemption from  withholding with respect to Taxes on payments to it by
the Borrower under this  Agreement or the Notes,  including  backup  withholding
tax,  that Lender  shall  complete and deliver from time to time to the Borrower
such form as the  Borrower  is  required  to obtain from that Lender in order to
give  effect to the reduced  rate or  exemption  and certify  that the Lender is
entitled to the relevant  exemption  (whether the form relates to that Lender or
to any person to which it has sold a participation or other beneficial  interest
in any of  its  rights  hereunder).  In  particular,  each  Lender  that  is not
incorporated  or  otherwise  organized  under the laws of the  United  States of
America  or a state  thereof  shall  deliver to the  Borrower  two copies of the
following with the relevant  certification,  as and if applicable,  from time to
time:

(i)  Internal Revenue Service form W-8BEN,  W-8ECI, W-8 or W-9 (or any successor
     form) form, or,

(ii) if the Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of
     the Code and intends to claim exemption from U.S.  Federal  withholding tax
     under Section 871(h) or Section 881(c) of the Code with respect to payments
     of "portfolio  interest," a certificate (a "Non-Bank  Status  Certificate")
     executed by that Lender representing that (1) it is not a bank for purposes
     of Section 881(c) of the Code, is not a 10 percent  shareholder (within the
     meaning of Section 871  (h)(3)(B) of the Code) of the Borrower and is not a
     controlled foreign  corporation related to the Borrower (within the meaning
     of Section 864(d)(4) of the Code),  claiming  complete  exemption from U.S.
     Federal  withholding tax on payments of interest by the Borrower under this
     Agreement and the other Loan Documents and (2) that the Lender has received
     in replacement of any Note held by or assigned to it, a QFL Note.

Each  Person  that  becomes a Lender or a  Participant  pursuant  to Section 9.6
shall, upon the  effectiveness of the related  transfer,  be required to provide
all the forms and statements  required pursuant to this Section;  provided that,
in the case of a Participant,  such Participant  shall furnish all such required
forms  and  statements  to the  Lender  from  which  it  purchased  the  related
participation.

(c) If any Taxes  withheld  from a payment  due to a Lender in  accordance  with
Section 2.11(a) are  Indemnifiable  Taxes,  the Borrower shall promptly pay such
additional  amount  as is  necessary  to  ensure  that the net  amount  actually
received  by that  Lender  free and clear of those  Taxes is equal to the amount
that the Lender would have  received had those Taxes not been  withheld,  except
that  no  such  additional  amount  will  be  payable  to the  extent  that  the
withholding  would not have been due but for failure by the  relevant  Lender to
furnish in a timely fashion any form or Non-Bank Status  Certificate  that it is
required to deliver pursuant to Section 2.11(b).

2.12 Lending  Offices.

The Loans made by any  Lender  will be made and  maintained  by it at its office
identified in Schedule I or any other office  designated by it from time to time
as its lending office, by notice to the Administrative  Agent. If a Lender makes
a demand for a payment  pursuant to Section  2.10 or Section  2.11,  it will use
reasonable  efforts to designate a different  lending office,  if doing so would
eliminate  the need for the Borrower to make  further  additional  payments,  or
reduce the  amounts of the  additional  payments  it would be  required to make,
pursuant  to the  relevant  Section  to that  Lender,  but a Lender  will not be
required  to make any  efforts  or  change  in  lending  office  that it, in its
discretion,  determines would be  disadvantageous to it or inconsistent with its
internal policy or legal or regulatory restrictions.

                   ARTICLE 3. REPRESENTATIONS AND WARRANTIES

     To induce  the  Administrative  Agent and the  Lenders  to enter  into this
Agreement and to make the Loans, the Borrower hereby  represents and warrants to
the Administrative Agent and each Lender as follows.

3.1 Financial Condition

(a) . (a) The unaudited  consolidated  and  consolidating  balance sheets of the
Borrower  and  the  Subsidiaries  as  of  December  31,  2000  and  the  related
consolidated   and   consolidating   statements   of   operations,   changes  in
stockholder's  equity  and cash  flows for the  fiscal  year ended on that date,
copies  of  which  have  been  furnished  to the  Lenders,  fairly  present  the
consolidated  and  consolidating  financial  condition  of the  Borrower and the
Subsidiaries  as at such dates,  and the results of their  operations  and their
retained  earnings  and cash  flows for the  fiscal  year then  ended.  All such
financial statements, including the related schedules and notes thereto relating
to those  financial  statements,  have been  prepared  in  accordance  with GAAP
applied  consistently  throughout  the  periods  involved,  except as  disclosed
therein.

(b) Except as set forth in  Schedule  3.1(b),  during the  period  beginning  on
January 1, 2001 and ending  with the date of this  Agreement,  (i)  neither  the
Borrower  nor any of its  consolidated  Subsidiaries  has,  on the  date of this
Agreement,  any material Guaranty obligation,  contingent liability or liability
for taxes,  or any  long-term  lease or unusual  forward or  long-term  exchange
transaction or other Hedging Arrangement or other financial  derivative which is
not reflected in the financial statements referred to above in this Section; and
(ii) there has been no sale,  transfer or other  disposition  by the Borrower or
any of its  consolidated  Subsidiaries  of any material  part of its business or
property  and no  purchase or other  acquisition  of any  business or  property,
including Capital Stock of any other Person, that is material in relation to the
consolidated   financial   position  of  the  Borrower   and  its   consolidated
Subsidiaries at December 31, 2001.

(c) The  operating  forecast and cash flow  projections  of the Borrower and its
consolidated Subsidiaries, copies of which have been furnished to the Lenders as
set  forth in  Schedule  3.1(c),  have been  prepared  in good  faith  under the
direction of a Responsible Officer of the Borrower,  and in accordance with GAAP
or SAP, as applicable,  except that the forecast and  projections do not include
footnotes and other disclosures that may be required pursuant to GAAP or SAP, as
applicable.  This representation is subject to the further representation of the
Borrower and to the qualification as to projections in Section 3.18.

(d) Except as set forth in Schedule 3.1(d), the Annual Statements of each of the
Insurance  Subsidiaries  as of  December  31,  2000 and for the fiscal year then
ended, as delivered by the Borrower to the Administrative Agent and the Lenders,
are as  filed  with the  relevant  Insurance  Regulatory  Authority,  have  been
prepared in accordance  with SAP where  required,  except as may be reflected in
the notes thereto,  were in compliance with applicable  Requirements of Law when
filed, and based on the information available on the date of such filings fairly
presented in all material  respects the  financial  condition of the  respective
Insurance  Subsidiaries  covered thereby for the relevant period and the results
of operations,  changes in capital and surplus and cash flow of those  Insurance
Subsidiaries for the period ended on that date; provided that, to the extent any
matter  disclosed  in  Schedule  3.1(d) has been cured  directly  or  indirectly
through the  application of the proceeds of any Loan, that Schedule shall, as of
the date the cure occurs, be deemed to cease to refer to that matter.

3.2 No Change.

Except as set forth in Schedule 3.2,  since  December 31, 2000 there has been no
development or event which has had or could have a Material Adverse Effect,  and
during  the  period  beginning  on that  date  and  ending  on the  date of this
Agreement,  no dividends or other distributions have been declared, paid or made
upon the Capital  Stock of the Borrower or any  Subsidiary  (other than a Wholly
Owned  Subsidiary),  nor has any such  Capital  Stock  been  redeemed,  retired,
purchased  or otherwise  acquired  for value by the Borrower or any  Subsidiary;
provided that, to the extent any matter disclosed in Schedule 3.2 has been cured
directly or indirectly through the application of the proceeds of any Loan, that
Schedule shall,  as of the date the cure occurs,  be deemed to cease to refer to
that matter.

3.3 Corporate Existence; Compliance with Law.
    --------- ---------- ---------- ---- ----

Each  of the  Borrower  and its  Subsidiaries  (a) is  duly  organized,  validly
existing  and in  good  standing  under  the  laws  of the  jurisdiction  of its
organization,  (b) has the corporate power and authority, and the legal right to
own and operate its property, to lease the property it operates as lessee and to
conduct the business in which it is currently engaged,  (c) is duly qualified as
a foreign  corporation and in good standing under the laws of each  jurisdiction
where its  ownership,  lease or  operation  of  property  or the  conduct of its
business requires such a qualification  except to the extent that the failure to
comply  therewith could not, in the aggregate,  reasonably be expected to have a
Material  Adverse  Effect,  and (d) except as disclosed  in Schedule  3.3, is in
compliance  with all  Requirements of Law, except to the extent that the failure
to comply  therewith could not reasonably be expected to have a Material Adverse
Effect;  provided  that, to the extent any matter  disclosed in Schedule 3.3 has
been cured directly or indirectly through the application of the proceeds of any
Loan, that Schedule shall, as of the date the cure occurs, be deemed to cease to
refer to that matter.

3.4 Corporate Power; Authorization; Enforceable Obligations

(a) . (a) The  Borrower has the  corporate  power and  authority,  and the legal
right,  to execute and deliver the Loan  Documents  and perform its  obligations
thereunder,  to borrow  hereunder  and to create  the Lien  contemplated  in the
Pledge  Agreement.  The Borrower  has taken all  necessary  corporate  action to
authorize  and create that Lien and the  borrowings  contemplated  herein on the
terms and conditions set forth in this Agreement and in the Notes.

(b) Except as set forth in Schedule 3.4, no consent or authorization  of, filing
with, notice to or other act by or in respect of, any Governmental  Authority or
any other Person is required in connection  with the Borrower's  creation of the
Lien  contemplated in the Pledge  Agreement or any borrowings  hereunder or with
the execution and delivery of the Loan Documents, performance by the Borrower of
its  obligations  thereunder  or the  validity  or  enforceability  of the  Loan
Documents  other than any of the  foregoing  that,  if not  obtained,  could not
reasonably  be  expected to have a Material  Adverse  Effect.  No such  consent,
authorization or filing is conditioned upon or otherwise  imposes any materially
burdensome or adverse condition.  The documents  identified in Schedule 3.4 that
have been delivered by the Borrower to the Administrative  Agent and each Lender
are complete and current copies of all such documents.

(c) This  Agreement  has been,  and each other Loan  Document  delivered  by the
Borrower at the time of its delivery will have been, duly executed and delivered
on behalf of the  Borrower.  This  Agreement  constitutes,  and each  other Loan
Document when executed and delivered will constitute, a legal, valid and binding
obligation of the Borrower  enforceable  against the Borrower in accordance with
the terms of this  Agreement or, as applicable,  that Loan  Document,  except as
enforceability   may  be   limited   by   applicable   bankruptcy,   insolvency,
reorganization,   moratorium  or  similar  laws  affecting  the  enforcement  of
creditors'  rights  generally  and  by  general  equitable  principles  (whether
enforcement is sought by proceedings in equity or at law).

3.5 No Legal Bar.

The execution and delivery by the Borrower of the Loan Documents and performance
by it of its obligations thereunder, the borrowings hereunder and the use of the
proceeds  thereof,  and the  creation by the Borrower of the Lien created by the
Pledge  Agreement and delivery  thereunder of the Pledged  Collateral do not and
will  not  violate  any  Requirement  of Law or  Contractual  Obligation  of the
Borrower or any Subsidiary, will not accelerate or result in the acceleration of
any payment  obligations of the Borrower or any Subsidiary  and,  except for the
Lien  created by the Pledge  Agreement,  will not  result  in, or  require,  the
creation  or  imposition  of any  Lien on any of the  respective  properties  or
revenues of the Borrower or any Subsidiary pursuant to any Requirement of Law or
Contractual  Obligation,  except as specified in Schedule 3.4 in the case of any
Pledged Collateral issued by an Insurance  Subsidiary,  if creation of that Lien
or delivery of the  relevant  share  certificates  requires  the  approval of an
Insurance Regulatory Authority.

3.6 No Material Litigation.

(a) Except as set forth in Schedule  3.6(a),  no  litigation,  investigation  or
proceeding of or before any arbitrator or Governmental  Authority is pending or,
to the knowledge of the  Borrower,  threatened by or against the Borrower or any
Subsidiary  or against  any of the  respective  properties  or  revenues  of the
Borrower or any Subsidiary which could reasonably be expected to have a Material
Adverse Effect.

(b) No  litigation,  investigation  or, except as set forth in Schedule  3.6(b),
proceeding  of or  before  any  Governmental  Authority  is  pending  or, to the
knowledge of the Borrower,  is threatened (i) restricting or seeking to restrict
any  Subsidiary  from  engaging  in further  insurance  underwriting  or similar
business  or (ii)  seeking to obtain,  or having  resulted  in the entry of, any
judgment,  order or injunction  that could  reasonably be expected to affect the
ability  of the  Borrower  to  perform  its  obligations  hereunder  or would be
materially  inconsistent with the stated assumptions  underlying the projections
provided to the Administrative  Agent or the Lenders or otherwise,  singly or in
the aggregate, could reasonably be expected to have a Material Adverse Effect.

3.7 No Default.

Except as set forth in Schedule 3.7, No Default or Event of Default has occurred
and is continuing  and neither the Borrower nor any  Subsidiary is in default in
any material respect in the performance, observance or fulfillment of any of the
obligations,  covenants or  conditions  contained in any agreement or instrument
material to its business, including those identified in Schedule 3.23.

3.8 Ownership of Property; Liens.

Except as set forth in Schedule 3.8,  each of the Borrower and its  Subsidiaries
has good  record and  marketable  title in fee  simple to, or a valid  leasehold
interest  in,  all its  material  real  property,  and good title to, or a valid
leasehold interest in, all its other material property. None of that property is
subject to any Lien other than  Permitted  Liens.  Where  applicable,  the Liens
described in Schedule 3.8 correctly refer to the credit or other  agreements and
instruments identified in Schedule 3.23 that are secured by the relevant Liens.

3.9 Intellectual Property.

Each of the  Borrower  and its  Subsidiaries  owns,  or is licensed to use,  all
patents, trademarks, trade names, copyrights,  technology,  know-how, processes,
logos and insignia (the  "Intellectual  Property")  necessary for the conduct of
its business as currently  conducted except for any case in which the failure to
own or license  could not  reasonably  be  expected  to have a Material  Adverse
Effect.  There is no pending  claim  asserted by any Person that  challenges  or
questions the use of any Intellectual  Property or the validity or effectiveness
of any  Intellectual  Property,  which  could  reasonably  be expected to have a
Material Adverse Effect,  nor does the Borrower or any  consolidated  Subsidiary
know of any valid basis for any such claim. The use of Intellectual  Property by
the  Borrower or any  Subsidiary  does not infringe on the rights of any Person,
except for such  infringements  that, in the aggregate,  could not reasonably be
expected to have a Material Adverse Effect.

3.10 [Reserved.]

3.11 Taxes.

Except as set forth in Schedule 3.11, each of the Borrower and the  Subsidiaries
has  filed or  caused to be filed all  federal,  state  and other  material  tax
returns  which are  required  to be filed and has paid all taxes shown to be due
and payable on said returns or on any assessments  made against it or any of its
property and all other taxes,  fees or other charges imposed on it or any of its
property by any Governmental  Authority (other than any tax, fee or other charge
the amount or validity of which is  currently  being  contested in good faith by
appropriate  proceedings  and with respect to which reserves in conformity  with
GAAP have been  provided on the books of the  Borrower or that  Subsidiary  (or,
where applicable,  in conformity with SAP), as the case may be). No tax Lien has
been filed,  and, to the knowledge of the Borrower,  no claim is being asserted,
with respect to any such tax, fee or other charge.  Neither the Borrower nor any
Subsidiary  has waived or extended or has been  requested to waive or extend the
statute of limitations relating to the payment of any taxes.

3.12 Federal Margin Regulations

(a) . No part of the  proceeds  of any  Loan  will be used for  "purchasing"  or
"carrying"  or extending  credit for the purpose of  purchasing  or carrying any
"margin stock," as those terms are used under Regulation U, except in compliance
with applicable law and regulations.  If any Lender or the Administrative  Agent
so requests,  the Borrower will furnish to the Administrative Agent, for itself,
any relevant  Lenders and the Arranger a statement  to the  foregoing  effect in
conformity with the requirements of an applicable form referred to in Regulation
U.

3.13 ERISA.

Neither  the  Borrower  nor  any  Subsidiary  maintains,  contributes  to or has
material   obligation   with  respect  to,  any  welfare  plan  (as  defined  in
Section(3)(1) of ERISA) which provides  benefits to employees after  termination
of  employment  other than as  required by Part 6 of Title I of ERISA or similar
state laws regarding continuation of benefits.  Each Plan has complied and is in
compliance in all respects with the applicable  provisions of ERISA and the Code
except where  failure of compliance  could not  reasonably be expected to have a
Material  Adverse  Effect.  There has not been any breach by the Borrower or any
Subsidiary of any of the  responsibilities,  obligations or duties imposed on it
by ERISA, the Code, or regulations promulgated thereunder which could reasonably
be expected to have a Material  Adverse  Effect.  Neither the  Borrower  nor any
Subsidiary nor any fiduciary of any Plan who is an officer or an employee of the
Borrower or any  Subsidiary  has engaged in a nonexempt  prohibited  transaction
described  in  Section  406 of ERISA or 4975 of the Code with  respect to a Plan
which  could  reasonably  be expected to have a Material  Adverse  Effect.  With
respect to any  employee  benefit  plan (as  defined  in Section  3(3) of ERISA)
currently or formerly  maintained or contributed  to by any Commonly  Controlled
Entity,  no liability  exists and no event has occurred  which could subject the
Borrower or any Subsidiary to any liability  which could  reasonably be expected
to have a Material Adverse Effect. Except as disclosed in Schedule 3.13, none of
the Borrower or any Subsidiary has any liability, direct or indirect, contingent
or  otherwise,  under  Section  4201 or 4204 or  4212(c)  of ERISA  which  could
reasonably be expected to have a Material  Adverse Effect.  Neither the Borrower
nor any Subsidiary has any outstanding  liability in respect of (i) a failure to
make a  required  contribution  or  payment  to a  Multiemployer  Plan or (ii) a
complete or partial  withdrawal  under Section 4203 or 4205 of ERISA from such a
Plan,  which in either  case could  reasonably  be  expected  to have a Material
Adverse Effect.

3.14 Holding Company; Investment Company Act; Other Regulations.
     ------- -------- ---------- ------- ---- ----- ------------

Neither the Borrower nor any of the Subsidiaries is an "investment company" or a
company  "controlled"  by an  "investment  company,"  within the  meaning of the
Investment  Company Act of 1940, as amended,  or except as described in Schedule
3.14,  subject to  regulation  under any Federal or state  statute,  regulation,
decree or order which limits its ability to incur Indebtedness or conditions its
ability  to do so  upon  any  act,  approval  or  consent  of  any  Governmental
Authority.

3.15  Purpose of Loans.

The  proceeds  of the Loans  will be used  solely  (a) to  purchase  one or more
surplus notes,  in form and substance  acceptable to the Lenders,  from FLICA as
the issuer of the relevant  surplus note or notes,  in a transaction in form and
substance  acceptable to the Lenders at the time,  unless the Borrower is unable
at the time to make the purchase  without  approval of an  Insurance  Regulatory
Authority  and,  with the  consent  of the  Lenders,  has not sought or has been
unable to obtain that approval,  or (b) to make a capital contribution to FLICA,
if the Lenders are at the time satisfied with  arrangements  for use by FLICA in
compliance with the requirements of Section 5.16.

3.16     Environmental Matters

(a) . (a) The  facilities  and  properties  owned,  leased  or  operated  by the
Borrower and its Subsidiaries  (referred to in this Section as the "Properties")
and all operations at the Properties are in compliance in all material  respects
with all applicable  Environmental Laws, and there is no contamination at, under
or about the  Properties or violation of any  Environmental  Law with respect to
the  Properties  or the business  operated by the Borrower and its  Subsidiaries
(referred  to in this  Section as the  "Business")  which  could  reasonably  be
expected to have a Material Adverse Effect.

(b)  Neither  the  Borrower  nor any  Subsidiary  has  received  any  notice  of
violation, alleged violation,  non-compliance,  liability or potential liability
regarding  environmental  matters or  compliance  with  Environmental  Laws with
regard to any of the  Properties  or the  Business,  nor do the  Borrower or any
Subsidiary  have  knowledge  or reason to believe  that any such  notice will be
received or is being threatened, in each case which could reasonably be expected
to have a Material Adverse Effect.

(c) There has been no release or threat of release of Materials of Environmental
Concern  at or from any of the  Properties,  or  arising  from or related to the
operations  of the  Borrower or any  Subsidiary  in  connection  with any of the
Properties or otherwise in connection  with the Business,  in violation of or in
amounts or in a manner  that could  reasonably  be  expected  to have a Material
Adverse Effect.

3.17 Insurance; Reinsurance Agreements

(a) . (a) Except as set forth in Schedule 3.17(a),  all policies of insurance of
any kind or nature  maintained  by or issued to the Borrower or any  Subsidiary,
including, without limitation,  policies of life, fire, theft, public liability,
property  damage,  other casualty,  employee  fidelity,  worker's  compensation,
employee health and welfare,  title,  property and liability  insurance,  are in
full force and effect in all  material  respects and are of a nature and provide
such coverage as is  sufficient  and as is  customarily  carried by companies of
similar size and character.

(b)  Each  Reinsurance  Agreement  is in  full  force  and  effect.  None of the
Insurance  Subsidiaries  and no other party to any  Reinsurance  Agreement is in
breach of or default  under any  Reinsurance  Agreement,  other than breaches or
defaults that are being  contested in good faith and by proper  proceedings,  in
the case of any  alleged  breach or default  by any  Insurance  Subsidiary.  The
Borrower  and the  Insurance  Subsidiaries  have no reason to  believe  that the
financial  condition  of any party to any  Reinsurance  Agreement  other than an
Insurance  Subsidiary is impaired  such that a default  thereunder by that party
could reasonably be anticipated.  Each Reinsurance  Agreement is qualified under
all applicable  Requirements of Law to receive the statutory  credit assigned to
that  Reinsurance  Agreement  in the  relevant  Annual  Statement  or  Quarterly
Statement at the time prepared, except where the failure to receive the relevant
statutory  credit is not reasonably  likely to have a Material  Adverse  Effect.
There are no reinsurance  contracts or arrangements entered into by an Insurance
Subsidiary in which an Insurance  Subsidiary  has ceded risk to any other Person
which are material,  individually  or in the aggregate,  to the Borrower and the
Subsidiaries taken as a whole, except as identified in Schedule 3.17(b).

3.18 Accuracy and Completeness of Information.
     -------- --- ------------ -- ------------

All information, reports and other papers and data (other than projections) with
respect to the Borrower or any consolidated Subsidiary,  or, to the knowledge of
the Borrower,  any  Subsidiary  furnished to the Lenders by the Borrower,  or on
behalf of the  Borrower,  in connection  with the  negotiation,  preparation  or
execution of this Agreement or any of the other Loan Documents were, at the time
furnished,  complete  and  correct  in  all  material  respects,  or  have  been
subsequently supplemented by other information, reports or other papers or data,
to the extent  necessary to correct any material  misstatement or omission.  All
projections with respect to the Borrower or any consolidated Subsidiary,  or, to
the knowledge of the Borrower,  any  Subsidiary,  furnished by the Borrower,  in
connection with the  negotiation,  preparation or execution of this Agreement or
any of the other Loan Documents were prepared and presented in good faith by the
Borrower  based upon facts and  assumptions  that the  Borrower  believed  to be
reasonable in light of current and foreseeable  conditions,  it being understood
that  projections are subject to significant  uncertainties  and  contingencies,
many of which are beyond the control of the Borrower  and that no assurance  can
be given that the financial results set forth in those projections will actually
be realized.  There is no fact known to the Borrower or any of its  Subsidiaries
which  has a  Material  Adverse  Effect  and  has  not  been  disclosed  to  the
Administrative Agent and the Lenders.

3.19 Leaseholds, Permits, etc.

The  Borrower  possesses  or has the right to use,  all  leaseholds,  easements,
franchises  and  permits  and all  authorizations  and  other  rights  which are
material to and necessary for the conduct of its business. All the foregoing are
in full force and effect,  and each of the Borrower and the  Subsidiaries  is in
substantial  compliance  with the foregoing  without any known conflict with the
valid rights of others,  except for such  noncompliance with the foregoing which
could not reasonably be expected to have a Material Adverse Effect. No event has
occurred which  permits,  or after notice or lapse of time or both would permit,
the  revocation  or  termination  of any such  leasehold,  easement,  franchise,
license or other right  which,  when  considered  with any other  revocation  or
termination could reasonably be expected to have a Material Adverse Effect.

3.20 No Restrictive Covenants.

Excepts as disclosed in Schedule  3.20,  no  Subsidiary of the Borrower is party
to, or otherwise  bound by, and the  Borrower is not party to, any  agreement or
other  arrangement  that prohibits any  Subsidiary,  or requires the Borrower to
prevent a Subsidiary,  from making any payments,  directly or indirectly, to the
Borrower or to any other Subsidiary, by way of dividends, advances, repayment of
loans or advances,  reimbursements of management or other intercompany  charges,
expenses and accruals or other returns on investment,  or any other agreement or
arrangement  that restricts the ability of that  Subsidiary to make any payment,
directly  or  indirectly,  to the  Borrower  or another  Subsidiary,  other than
prohibitions  and  restrictions  proscribed  by law or  permitted to exist under
Section 6.12.

3.21 Solvency.

The Borrower is solvent,  is able to pay its debts as they mature, owns property
with fair saleable value greater than the amount  required to pay its debts and,
after giving  effect to the making of Loans in an aggregate  amount equal to the
Total  Commitment,  will have  capital  sufficient  to carry on its  business as
currently constituted and proposed.

3.22 Subsidiaries.

Schedule  3.22  correctly  sets  forth  the  names  of all  Subsidiaries  of the
Borrower,  identifies those that are Insurance Subsidiaries,  and sets forth all
outstanding  shares of Capital Stock or other units of equity or other ownership
interests of each  Subsidiary,  and the number of those shares or units owned by
the Borrower,  directly or indirectly.  All such shares and other units are duly
authorized,  validly  issued,  fully  paid,  nonassessable  and were  issued  in
compliance  with all  Requirements of Law. Except as disclosed in Schedule 3.22,
the Borrower is the owner of record and  beneficial  owner of all of the Capital
Stock and other such interests of the  Subsidiaries  either  directly or through
another  Subsidiary  indicated  in that  Schedule,  free and clear of Liens and,
except as disclosed in Schedule 3.22, free of all other  restrictions other than
those  imposed  upon  the  sale of stock  of the  Insurance  Subsidiaries  by an
applicable Insurance Regulatory Authority. Except as disclosed in Schedule 3.22,
there are no outstanding  options,  warrants or other rights to purchase Capital
Stock or other ownership interests of any Subsidiary.  Except for any Subsidiary
identified in Schedule  3.22,  each  Subsidiary  is a  corporation  or a limited
liability company and none of the Subsidiaries is a partner in any partnership.

3.23 Credit Arrangements.

Schedule 3.23 is a complete and correct list, as of the date of this  Agreement,
of all credit agreements,  indentures, Guaranties, Capital Leases, mortgages and
other  material  instruments,   agreements  and  arrangements  (including  those
contemplating  the  issuance of letters of credit or  acceptance  financing)  in
respect  of which  the  Borrower  or any of the  Subsidiaries  is in any  manner
directly or  contingently  obligated,  other than trade payables in the ordinary
course of  business.  Schedule  3.23  correctly  and  completely  sets forth the
maximum principal or face amounts of the credit that in each case is outstanding
and can be  outstanding,  as of the date of this  Agreement,  and  describes all
Liens created or given or agreed to be created or given as security therefor.

3.24 Pledge Agreement.

The  provisions of the Pledge  Agreement are effective to create in favor of the
Administrative  Agent for the ratable benefit of the Lenders and for the benefit
of the Administrative Agent itself, to the extent there provided, a legal, valid
and  enforceable  security  interest  in all right,  title and  interest  of the
Borrower  in the  "Pledged  Collateral"  described  therein.  When  certificates
representing  the Pledged Stock and Pledged Notes (each as defined in the Pledge
Agreement) are delivered to the Administrative Agent, together with stock powers
or another  instrument  of  assignment  endorsed  in blank by a duly  authorized
officer of the Borrower,  the Pledge Agreement will constitute a fully perfected
first priority Lien on, and security interest in, all right,  title and interest
of the  Borrower in that Pledged  Stock or Pledged  Note  pursuant to the Pledge
Agreement.


                        ARTICLE 4. CONDITIONS PRECEDENT

4.1 Conditions to Initial Loans.

The agreement of each Lender to make the Loan  requested to be made by it on the
Closing Date or, if no Loan is made on that date,  on the first  Borrowing  Date
thereafter, is subject to the satisfaction, immediately prior to or concurrently
with the making of those Loans, of the following conditions precedent:

     (a) Loan Documents.  The  Administrative  Agent shall have received each of
the following,  in form and substance  satisfactory to the Administrative Agent,
executed and delivered by a duly authorized  Responsible Officer of the Borrower
or, in the case of the items identified in subparagraphs (iv) and (v), by a duly
authorized Responsible Officer of each of the Borrower's Subsidiaries identified
in the Guaranty and Security Agreement as a Debtor:

     (i)  this Agreement (in sufficient counterparts for each of the Lenders and
          the Administrative Agent);

     (ii) the Pledge Agreement (in the same number of counterparts);

     (iii)the certificates representing the shares of the Pledged Stock referred
          to  therein  which  are  owned by the  Borrower  on the  Closing  Date
          (together with stock transfer powers endorsed in blank), to the extent
          no further  authorizations,  consents or  approvals  of any  Insurance
          Regulatory Authority are required for the pledge and delivery of those
          Shares on the Closing Date;

     (iv) the Guaranty and Security  Agreement (in sufficient  counterparts  for
          each of the Lenders and the Administrative Agent);

     (v)  each of the Financing  Statements and other  documents to be delivered
          to the Administrative  Agent pursuant to Section 5 of the Guaranty and
          Security Agreement; and

     (vi) the Note and PIK Interest Note for each Lender.

     (b) Corporate  Proceedings  of the Borrower and Certain  Subsidiaries.  The
     --- ---------  -----------  -- --- -------- --- -------  ------------
Administrative  Agent shall have received with a counterpart for each Lender,  a
copy of each of the following:

     (i)  the resolutions of the Board of Directors of the Borrower  authorizing
          (A) the execution,  delivery and  performance of this  Agreement,  the
          Notes,  the Pledge  Agreement and the other Loan Documents to which it
          is a party,  and (B) the  borrowings  contemplated  hereunder  and the
          creation  of  the  Lien  provided  for  in  the  Pledge  Agreement  in
          connection herewith and therewith; and

     (ii) the  resolutions of the respective  Boards of Directors of each of the
          Borrower's  Subsidiaries which is a party to the Guaranty and Security
          Agreement   authorizing   (A)  the  execution  and  delivery  by  that
          Subsidiary  of the Guaranty and Security  Agreement and the other Loan
          Documents  to  be  executed  and  delivered  by  it   thereunder   and
          performance of its Obligations thereunder, and (B) the creation of the
          Lien provided for in the Guaranty and Security Agreement in respect of
          the  property  and  assets of the  Subsidiary  identified  therein  as
          Collateral.

These  resolutions   shall  be  in  form  and  substance   satisfactory  to  the
Administrative  Agent and delivered  with a  certificate  of the Borrower or the
relevant Subsidiary,  executed by the Secretary or an Assistant Secretary of the
Borrower or the relevant Subsidiary, to the effect that, as of the Closing Date,
the  resolutions  have not been amended,  modified,  revoked or  rescinded.  The
Administrative  Agent also  shall have  received,  with a  counterpart  for each
Lender,  a  certificate  of the  Borrower  and each such  Subsidiary,  dated the
Closing Date,  executed by a Responsible Officer of the Borrower or the relevant
Subsidiary and satisfactory in form and substance to the  Administrative  Agent,
as to the  incumbency  and  signature  of the  officers  of the  Borrower or the
relevant Subsidiary executing any Loan Document.

     (c) Corporate Documents; Good Standing. The Administrative Agent shall have
received,  with a counterpart  for each Lender,  true and complete copies of (i)
the charter  documents  of the  Borrower,  certified  as of the Closing  Date as
complete and correct copies  thereof by the Secretary or an Assistant  Secretary
of the Borrower, (ii) a certificate as of a recent date of good standing of each
of the  Borrower  and its  Subsidiaries  under the laws of its  jurisdiction  of
organization, from the Secretary of State or a comparable Governmental Authority
of that  jurisdiction  and  (iii)  for  each of the  Insurance  Subsidiaries,  a
certificate  of  compliance  as of a recent date,  from the  relevant  Insurance
Regulatory  Authority of the  jurisdiction in which that Subsidiary is domiciled
and any other  jurisdiction in which that Subsidiary is reasonably  likely to be
commercially  domiciled,  as  defined  under  the laws and  regulations  of that
jurisdiction,  other than a  jurisdiction  identified in Section 3.6(b) in which
that Subsidiary is not permitted to engage in further insurance underwriting.

     (d) Consents,  Licenses and Approvals.  The Administrative Agent shall have
received,  with a counterpart  for each Lender,  a certificate  of a Responsible
Officer of the Borrower (i) attaching copies of all consents, authorizations and
filings  referred to in  Schedule  3.4,  and (ii)  stating  that such  consents,
licenses  and  filings  are in full  force and  effect,  and each such  consent,
authorization  and filing  shall be in form and  substance  satisfactory  to the
Administrative Agent, subject to the following.  If any consent or authorization
of the creation of the Lien contemplated in the Pledge Agreement is required and
has  not  yet  been  obtained  from  any  Insurance  Regulatory  Authority,  the
Administrative Agent shall have received,  with a counterpart for each Lender, a
certificate of a Responsible  Officer of the Borrower evidencing the steps taken
to obtain that consent or  authorization  and certifying as to the status of and
expected  completion  date for the approval  process,  along with any conditions
that may be imposed in connection therewith, as described to the Borrower by the
relevant Insurance Regulatory Authority.

     (e) Intercreditor  Agreement.  The Administrative Agent shall have received
the  Intercreditor   Agreement,  in  form  and  substance  satisfactory  to  the
Administrative  Agent,  executed and delivered by a duly authorized  Responsible
Officer of (i) the Borrower, (ii) the Borrower and each of its Subsidiaries that
is a party to the  Guaranty  and  Security  Agreement,  and (iii)  LaSalle  Bank
National Association.

     (f) Legal Opinions.  The Administrative  Agent shall have received,  with a
counterpart  for each Lender and the  Administrative  Agent,  the executed legal
opinions of counsel to the Borrower and each of its Subsidiaries that is a party
to the Guaranty and Security  Agreement,  in form and substance  satisfactory to
the Administrative Agent.

     (g) Closing Certificate. The Administrative Agent shall have received, with
a counterpart for each Lender, a closing certificate of each of the Borrower and
each of its Subsidiaries that is a party to the Guaranty and Security Agreement,
dated as of the Closing Date, substantially in the form of Exhibit C.

     (h) Insurance and Insurance  Subsidiary Matters.  The Administrative  Agent
     --- --------- --- ---------  ---------- -------
shall  have  received  evidence  satisfactory  to it of  the  existence  of  the
insurance required hereunder.

     (i) Financial  Information.  The Administrative  Agent shall have received,
with a copy  for  each  Lender,  a copy  of each  of the  financial  statements,
projections  and the like  referred  to in Section  3.1,  in form and  substance
satisfactory to the Administrative Agent.

     (j) Compliance  Certificate.  The Administrative Agent shall have received,
with a counterpart for each Lender, a Compliance  Certificate,  substantially in
the form set forth in  Exhibit  E,  executed  by a chief  financial  officer  or
treasurer of the Borrower, dated as of the Closing Date and satisfactory in form
and substance to the Administrative Agent.

     (k) No Material  Adverse Effect.  Since December 31, 2000, there shall have
been no development or event which, singly or in the aggregate, could reasonably
be expected to have a Material  Adverse  Effect other than those  identified  in
Schedule 3.2.

     (l)  Waivers.  The  Administrative  Agent  shall  have  received  evidence,
satisfactory  in form and substance to it, that any existing  defaults or events
of default or other breaches by the Borrower or any Subsidiary  under any of the
agreements  or  instruments  referred to in Schedule  3.23,  as described by the
Borrower in Schedule 3.7, have been waived, that the waivers remain in effect on
the  Closing  Date and that the  terms of the  waivers  are such  that they will
remain  in  effect  subject  only to  conditions  that are  satisfactory  to the
Lenders.

4.2      Conditions to Each Loan.
         -----------------------

The agreement of each Lender to make any Loan is subject to the  satisfaction of
the following additional conditions precedent:

     (a)  Representations  and  Warranties.  Each  of  the  representations  and
warranties  made by each of the  Borrower  and  each of its  Subsidiaries  in or
pursuant  to the  Loan  Documents  shall  be true and  correct  in all  material
respects on and as of the relevant  Borrowing  Date as if made on and as of such
date (both before and after giving effect to the proposed Loan).

     (b) No Default.  No Default or Event of Default  shall have occurred and be
     --- -- -------
continuing on the relevant Borrowing Date or after giving effect to the proposed
Loans.

     (c) No Material Adverse Effect.  Since the date of the last borrowing under
this  Agreement,  no event shall have  occurred and no  circumstance  shall have
arisen that could reasonably be expected to have a Material Adverse Effect.

     (d)  Aggregate  Amount.  Immediately  before and  immediately  after giving
     ---  ---------  ------
effect to the relevant Loans, the aggregate  outstanding principal amount of the
Loans will not exceed the Total Commitment.

     (e) Use of Proceeds.  The Lenders  shall be satisfied  that the proceeds of
the relevant  Loans are being applied  strictly in accordance  with Section 3.15
and Section 5.16.

     (f)  Additional  Matters.  All  corporate  and other  proceedings,  and all
documents,   instruments  and  other  legal  matters  in  connection  with  this
Agreement,  the  Security  Documents  and the  other  Loan  Documents  shall  be
reasonably  satisfactory in form and substance to the Administrative  Agent, and
the Administrative  Agent shall have received such other documents,  instruments
and  legal  opinions  in  respect  of any  aspect  or  consequence  of each such
agreement and document and the transactions contemplated hereby or thereby as it
shall reasonably request.

     (g) Statutory Surplus.
     --- --------- -------

     (h) In the case of each borrowing after the first, the statutory surplus of
the Insurance  Subsidiaries  shall be sufficient to enable each of the Insurance
Subsidiaries to continue  underwriting at least such further insurance  business
as it is permitted to underwrite after giving effect to the capital contribution
made with the proceeds of the Loans made on the initial Borrowing Date.

4.3 Representation.

Each borrowing by the Borrower  hereunder shall constitute a representation  and
warranty  by the  Borrower  as of the  relevant  Borrowing  Date  that  (a)  the
statements  in any document  delivered by the Borrower in  connection  with that
borrowing are true and correct in all material respects,  (b) after due inquiry,
it has no reason to believe that any of the statements made by any Subsidiary in
the Guaranty and Security  Agreement or any other Loan  Document is not true and
correct in all material respects, and (c) the applicable conditions contained in
this Article 4 have been satisfied.

                        ARTICLE 5. AFFIRMATIVE COVENANTS

So  long  as any  of  the  Commitments  remains  in  effect,  any  Note  remains
outstanding  and  unpaid  or  any  Obligation  is  owing  to any  Lender  or the
Administrative Agent hereunder, the Borrower shall:

5.1 Financial Statements.

     Furnish to each Lender:

     (a) as soon as available, but in any event within 120 days after the end of
each fiscal year of the Borrower (or such  earlier date as the  Borrower's  Form
10-K is filed with the SEC),  copies of (i) the consolidated  and  consolidating
balance sheets of the Borrower and its  Subsidiaries  as at the end of that year
and (ii) the related consolidated and consolidating statements of operations and
consolidated  statements of stockholders'  equity and cash flows of the Borrower
and the  Subsidiaries  for that year,  setting forth in each case in comparative
form  the  figures  as of the end of and for the  previous  year,  in each  case
prepared in accordance with GAAP, all in reasonable detail and accompanied by an
opinion  of   PricewaterhouseCoopers   or  other  independent  certified  public
accountants  of  nationally  recognized  standing  reasonably  acceptable to the
Lenders,  to the effect that the  consolidated  financial  statements  have been
prepared in  accordance  with GAAP (except for changes in  application  in which
those  accountants  concur)  and  present  fairly in all  material  respects  in
accordance   with  GAAP  the  financial   condition  of  the  Borrower  and  its
Subsidiaries as of the end of that fiscal year and the results of its operations
for the fiscal year then ended, and that the examination by those accountants in
connection  with these  financial  statements  has been made in accordance  with
generally accepted auditing standards and,  accordingly,  included such tests of
the  accounting  records and such other auditing  procedures as were  considered
necessary in the  circumstances;  provided that the submission of the Borrower's
report on Form 10-K shall satisfy the foregoing requirements;

     (b) as soon as available, but in any event within 150 days after the end of
each fiscal year of each  Insurance  Subsidiary  (or such  earlier date as filed
with the applicable Insurance Regulatory  Authority),  a copy of the audited SAP
financial statements for each Insurance  Subsidiary,  in each case setting forth
in  comparative  form the figures for the  preceding  fiscal  year,  prepared in
accordance  with SAP, all in reasonable  detail and accompanied by an opinion of
PricewaterhouseCoopers  or another firm of  independent  public  accountants  of
recognized national standing reasonably  acceptable to the Administrative Agent,
to the effect that the  financial  statements  have been  prepared in accordance
with SAP (except for changes in application in which those  accountants  concur)
and fairly present in all material respects in accordance with SAP the financial
condition of that Insurance Subsidiary as of the end of that fiscal year and the
results  of its  operations  for the  fiscal  year  then  ended,  and  that  the
examination by those  accountants in connection with those financial  statements
has been made in accordance  with  generally  accepted  auditing  standards and,
accordingly,  included  such  tests of the  accounting  records  and such  other
auditing procedures as were considered necessary in the circumstances;  provided
that the  submission of the Annual  Statement for that  Insurance  Subsidiary as
filed with the  applicable  Insurance  Regulatory  Authority  shall  satisfy the
foregoing requirements;

     (c) as soon as available, but in any event not later than 60 days after the
end of each fiscal  quarter of each fiscal year of the Borrower (or such earlier
date as the Borrower's Form 10-Q for that quarter is filed with the SEC), a copy
of the unaudited consolidated balance sheet of the Borrower and the Subsidiaries
as at the end of that quarter and the related unaudited consolidated  statements
of  operations  and  statements  of  shareholders'  equity and cash flows of the
Borrower  and the  Subsidiaries  for that  quarter and the portion of the fiscal
year  through the end of that quarter and setting  forth the actual  figures for
the  corresponding  date or period in the previous year,  certified by the chief
financial  officer or treasurer  of the  Borrower as being fairly  stated in all
material respects (subject to normal year-end audit adjustments);  provided that
the submission of the Borrower's report on Form 10-Q shall satisfy the foregoing
requirements;

     (d) as soon as available, but in any event not later than 60 days after the
end of each fiscal quarter of each fiscal year of each Insurance  Subsidiary (or
such earlier date as filed with the applicable Insurance Regulatory  Authority),
a copy of the unaudited balance sheet of that Insurance Subsidiary as at the end
of that  quarter  and the  related  unaudited  statements  of  income,  retained
earnings and cash flows of that  Insurance  Subsidiary  for that quarter and the
portion of the fiscal year through the end of that quarter and setting forth the
actual  figures for the  corresponding  date or period in the previous year, all
prepared in accordance with SAP and certified by the chief financial  officer or
treasurer of that  Insurance  Subsidiary  as being fairly stated in all material
respects  (subject to normal  year-end  audit  adjustments);  provided  that the
submission of the Quarterly  Statement  for that  Insurance  Subsidiary as filed
with the applicable  Insurance  Regulatory Authority shall satisfy the foregoing
requirements;

All such  financial  statements  shall be complete  and correct in all  material
respects and shall be prepared in accordance  with GAAP or, as applicable,  SAP,
applied  consistently  throughout the periods  reflected  therein and with prior
periods (except as approved by the relevant  accountants or officer, as the case
may be, and disclosed therein).

5.2 Certificates; Other Information.

     Furnish to each Lender:

     (a) concurrently with the delivery of the financial  statements referred to
in Section 5.1(a) or Section 5.1(b), a certificate of the independent  certified
public accountants reporting on such financial statements stating that in making
the examination  necessary  therefor no knowledge was obtained of any Default or
Event of Default, except as specified in such certificate;

     (b) concurrently with the delivery of the financial  statements referred to
in Section 5.1, a compliance certificate  substantially in the form set forth in
Exhibit E of the chief  financial  officer or  treasurer  of the  Borrower  (the
"Compliance   Certificate"),   in  form  and  substance   satisfactory   to  the
Administrative  Agent,  showing  compliance by the Borrower and the Subsidiaries
with the covenants contained in Section 6.1;

     (c) promptly after the sending or filing  thereof,  and in any event within
five days after the filing  thereof,  copies of all  reports  that the  Borrower
sends to any of its  stockholders,  and copies of all  registration  statements,
reports on Form 10-K,  Form 10-Q or Form 8-K (or,  in each case,  any  successor
form) and other material  reports that the Borrower or any Subsidiary files with
the SEC or any  successor  or  analogous  Governmental  Authority  or  that  any
Insurance  Subsidiary files with any Insurance  Regulatory Authority (other than
public  offerings  of  securities  under  employee  benefit  plans  or  dividend
reinvestment plans);

     (d) as soon as available  and, in any event by April 30 of each fiscal year
of each Insurance  Subsidiary (or such earlier date as filed with the applicable
Insurance  Regulatory  Authority),  statements  showing  the RBC  Ratio and IRIS
Ratios for each  Insurance  Subsidiary as of the  immediately  prior fiscal year
end;

     (e) at the times specified in Exhibit H, the reports and other  information
there specified (or reports of the Borrower  containing the same  information in
such  other  form  as at the  time  is  used  by  the  Borrower  and  reasonably
satisfactory to the Administrative Agent), certified by a Responsible Officer to
be true and correct as of the dates there specified, and promptly after request,
such additional  financial and other information as the Administrative  Agent or
any Lender may from time to time reasonably request;

     (f)  promptly  after  receipt,  a copy of any report or  management  letter
relating to internal financial controls and procedures delivered to the Borrower
or any Subsidiary by any  independent  firm of public  accountants in connection
with  the  examination  of  the  financial  statements  of the  Borrower  or any
Subsidiary;

     (g) promptly and in event within five days after any Responsible Officer of
the Borrower or, where applicable, any Insurance Subsidiary learns of the facts,
notice of the following, setting forth in reasonable detail the underlying facts
and  circumstances  and the  action  that the  Borrower  or, if  applicable,  an
Insurance  Subsidiary has taken or proposes to take in connection with the facts
and circumstances:

     (i)  the  receipt by the  Borrower  or any  Insurance  Subsidiary  from any
          Governmental  Authority or Insurance  Regulatory  Authority of written
          notice  asserting  any  failure  of  compliance  with  any  applicable
          Requirement of Law which is reasonably likely to have, individually or
          in the  aggregate,  a Material  Adverse  Effect or that  threatens the
          taking of any action  against the Borrower or any  Subsidiary  or sets
          forth circumstances that, if taken or adversely  determined,  would be
          reasonably likely to have a Material Adverse Effect; or

     (ii) the  receipt by the  Borrower  or any  Insurance  Subsidiary  from any
          Governmental  Authority or Insurance  Regulatory Authority of a notice
          of any actual or threatened  suspension,  limitation or revocation of,
          failure to renew,  or imposition of any restraining  order,  escrow or
          impoundment  of  funds  in  connection  with,  any  license,   permit,
          accreditation  or  authorization  of any  Subsidiary,  if the relevant
          action would be reasonably likely to have a Material Adverse Effect;

     (iii)the  occurrence  of any  actual  changes in any  insurance  statute or
          regulation  governing  the  investment  or dividend  practices  of any
          Insurance  Subsidiary  that  would  be  reasonably  likely  to  have a
          Material Adverse Effect;

     (iv) the occurrence of any material  amendment or modification  (other than
          expiration) of any Reinsurance  Agreement (whether entered into before
          or after the date of this  Agreement),  including any such  agreements
          that  are in a  runoff  mode on the  date of  this  Agreement,  if the
          amendment  or  modification  would  be  reasonably  likely  to  have a
          Material Adverse Effect;

     (v)  the  receipt by any  Insurance  Subsidiary  of any  written  notice of
          denial of coverage or claim, litigation or arbitration with respect to
          any  Reinsurance  Agreement  to  which it is a  ceding  party,  if the
          circumstances  would be reasonably  likely to have a Material  Adverse
          Effect;

     (vi) any other matter or event that has, or would be  reasonably  likely to
          have, a Material Adverse Effect.

5.3 Payment of Obligations.

Pay, discharge or otherwise satisfy, and cause each Subsidiary to pay, discharge
or otherwise satisfy, at or before maturity or before they become delinquent, as
the case may be, all taxes, fees or other charges imposed on it or on any of its
properties by any Governmental  Authority and all its other material obligations
of whatever nature,  except,  in each case, where the amount or validity thereof
is currently being diligently contested in good faith and reserves in conformity
with GAAP or, if applicable, SAP, with respect thereto have been provided on the
books of the Borrower or the relevant Subsidiary, as the case may be.

5.4 Maintenance of Existence.

Continue and cause each  Subsidiary  to continue to engage only in a business of
the same type as is conducted by it on the date of this Agreement; and renew and
keep in full force and effect,  and cause each  Subsidiary  to renew and keep in
full force and effect, its corporate  existence,  and take all reasonable action
to maintain all rights,  privileges and franchises necessary or desirable in the
normal  conduct of its  business  except to the extent such  failure to maintain
could not, in the aggregate,  reasonably be expected to have a Material  Adverse
Effect and comply  with all  Contractual  Obligations  and  Requirements  of Law
except  to the  extent  that  failure  to comply  therewith  could  not,  in the
aggregate, be reasonably expected to have a Material Adverse Effect.

5.5 Maintenance of Property; Insurance.

Keep and cause each  Subsidiary to keep all property useful and necessary in its
business  in good  working  order and  condition  (ordinary  wear and tear,  and
casualties,  excepted),  maintain 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 engaged in the same or a similar business, and furnish to each Lender,
upon request,  full information as to the insurance carried including  certified
copies of policies and  certificates  of insurance  from a recognized  insurance
broker.

5.6 Inspection of Property; Books and Records; Discussions.
    ---------- -- --------- ----- --- -------- ------------

Keep and cause each  Subsidiary to keep proper books of records and account,  in
which  full,  true and  correct  entries  in  conformity  with GAAP  (or,  where
applicable, in conformity with SAP) and all Requirements of Law shall be made of
all dealings and  transactions in relation to its business and  activities;  and
permit,   and  cause  each  Subsidiary  to  permit,   after  reasonable  notice,
representatives of the  Administrative  Agent or any Lender to visit and inspect
any of its  properties  and examine and make abstracts from any of its books and
records at any reasonable time and as often as may reasonably be desired, and to
discuss the business,  operations,  properties and financial and other condition
of the Borrower and each  Subsidiary with officers and employees of the Borrower
and that Subsidiary and with their independent  certified public  accountants so
long as such actions do not  materially  interfere  with the  operations  of the
Borrower or any of its Subsidiaries.

5.7      Other Notices

     (a) . (a) Promptly after the Borrower or any  Subsidiary  knows and, in any
event,  within 5 days after the Borrower or the relevant  Subsidiary  knows with
respect to any  notice  under  clause (i) or within 10 days with  respect to any
other notice under this Section 5.7(a), give notice to the Administrative  Agent
and each Lender of:

     (i)  the occurrence of any Default or Event of Default;

     (ii) any (A) default or event of default under any  Contractual  Obligation
          of the Borrower or any Subsidiary, or (B) litigation, investigation or
          proceeding  which may exist at any time  between  the  Borrower or any
          Subsidiary and any  Governmental  Authority,  which in either case, if
          not  cured or if  adversely  determined,  as the  case  may be,  could
          reasonably be expected to have a Material Adverse Effect;

     (iii)any  litigation,  investigation  or proceeding of the type referred to
          in Section 3.6(b);

     (iv) any material labor dispute to which the Borrower or any Subsidiary may
          become a party and which involves any group of employees,  any strikes
          or walkouts  relating to any of its  facilities  and the expiration or
          termination  of  any  labor  contract  to  which  the  Borrower  or  a
          Subsidiary  is a party or by which the  Borrower  or a  Subsidiary  is
          bound,  if the dispute  could  reasonably  be  expected to  materially
          disrupt the operations of the Borrower or a Subsidiary;

     (v)  any Reportable  Event or Prohibited  Transaction  that the Borrower or
          any  Subsidiary  knows or has reason to know has occurred with respect
          to any Plan,  or receipt by the Borrower or any  Subsidiary  of notice
          that the PBGC has instituted or will institute proceedings under Title
          IV of ERISA to terminate any Plan.

Each notice  pursuant to this Section shall be  accompanied  by a statement of a
Responsible  Officer setting forth details of the occurrence referred to therein
and stating  what action the Borrower or the  relevant  Subsidiary  has taken or
proposes to take with respect thereto.  For the purposes of this Section 5.7(a),
the Borrower  shall be deemed to have knowledge when any officer of the Borrower
charged  with  responsibility  for any matter that is the subject of such notice
requirement knows that such notice was required.

5.8 Environmental Laws

     (a) . (a)  Comply  and cause  the  Subsidiaries  to comply in all  material
respects with all applicable  Environmental Laws and obtain and comply and cause
the Subsidiaries to obtain and comply in all material respects with and maintain
and  cause  the  Subsidiaries  to  maintain  any  and all  licenses,  approvals,
notifications,  registrations  or permits  required by applicable  Environmental
Laws except to the extent that failure to do so could not be reasonably expected
to have a Material Adverse Effect.

     (b) Conduct and complete and cause the Subsidiaries to conduct and complete
all investigations, studies, sampling and testing, and all remedial, removal and
other  actions  required  under  Environmental  Laws and promptly  comply in all
material  respects  with all lawful orders and  directives  of all  Governmental
Authorities regarding  Environmental Laws except to the extent that the same are
being  contested in good faith by  appropriate  proceedings  and the pendency of
such  proceedings  could not be reasonably  expected to have a Material  Adverse
Effect.

     (c) Defend,  indemnify and hold  harmless,  and cause the  Subsidiaries  to
defend,  indemnify and hold harmless,  the Administrative Agent and the Lenders,
and their  respective  parents,  subsidiaries,  affiliates,  employees,  agents,
officers and directors, from and against any claims, demands,  penalties, fines,
liabilities, settlements, damages, costs and expenses of whatever kind or nature
known  or  unknown,  contingent  or  otherwise,  arising  out of,  or in any way
relating  to the  violation  of,  noncompliance  with  or  liability  under  any
Environmental  Laws  applicable  to  the  Business  of  any  Subsidiary  or  the
Properties (as defined in Section 3.16), or any orders,  requirements or demands
of Governmental  Authorities  related thereto,  including,  without  limitation,
reasonable attorney's and consultant's fees,  investigation and laboratory fees,
response costs, court costs and litigation  expenses,  except to the extent that
any of the foregoing arise out of the gross negligence or willful  misconduct of
the party seeking  indemnification  therefor.  This indemnity  shall continue in
full force and effect regardless of the termination of this Agreement.

5.9 ERISA.

Establish, maintain and operate and cause each Subsidiary to establish, maintain
and operate all Plans to comply in all  material  respects  with the  applicable
provisions  of  ERISA,  the  Code,  and  all  other  applicable  laws,  and  the
regulations and  interpretations  thereunder and the respective  requirements of
the  governing  documents for such Plans except to the extent that failure to do
so could not reasonably be expected to have a Material Adverse Effect.

5.10 Use of Proceeds.

Use the proceeds of each Loan solely for the purposes specified in Section 3.15.

5.11 Margin Stock.

Not permit the  aggregate  value of margin stock (as defined in Regulation U) at
any time owned or held by the  Borrower  or any  Subsidiary  to exceed an amount
equal to 25% of the value of all consolidated assets subject at such time to any
"arrangement" (as such term is used in the definition of "indirectly secured" in
Section 221.2 of Regulation U).

5.12 Maintain Ownership of Insurance Businesses.

Maintain  direct or  indirect  ownership  of all of the issued  and  outstanding
Capital Stock of each Insurance Subsidiary.

5.13 Fees.

(a) On the earlier of the Maturity Date and the date on which a Change
in Control occurs, pay to the Administrative  Agent for distribution by it among
the  Administrative  Agent and the  Lenders  in such  proportions  as they shall
separately have agreed a facility fee in the amount of $1,500,000.00.

For this  purpose,  "Change  in  Control"  means the  acquisition,  directly  or
indirectly,  beneficially  or of  record,  by any  Person or group  (within  the
meaning given to that term in the Securities  Exchange Act of 1934 and the rules
of the SEC  thereunder  as in effect on the date of this  Agreement)  other than
CSFBM or any of its  Affiliates  of  shares  representing  more  than 50% of the
aggregate  voting  power  for  the  election  of  directors  of the  issued  and
outstanding Capital Stock of the Borrower.

5.14 Pledge  Agreement.

Comply in a timely manner with all  obligations of the Borrower under the Pledge
Agreement,  and cause each  Subsidiary that issues a surplus note purchased with
the proceeds of any Loan or identified in the Pledge Agreement as a Company,  to
deliver to the  Administrative  Agent an  acknowledgment  of and  consent to the
Pledge Agreement, executed by a Responsible Officer of that Subsidiary.

5.15 Relief From Automatic Stay in Bankruptcy

     (a) . (a) Upon the  occurrence  of an Event of Default  under  subparagraph
(g)(i),  (ii),  (iii) or (iv) of  Section  7.1,  deliver,  and cause each of its
Subsidiaries, to immediately, upon request therefor by the Administrative Agent,
deliver to the Administrative Agent its written consent to the entry of an order
modifying  the  automatic  stay  provided  for  under 11 U.S.C.  Section  362(a)
(including  any  similar or  analogous  provision  under  applicable  state law,
whether  automatic  or imposed  by court  order at the  request of an  Insurance
Regulatory  Authority  or  otherwise  (the  "Stay")) to the extent  necessary to
permit the  Administrative  Agent to exercise and enforce any and all rights and
remedies  that  the  Administrative  Agent  has  under  the Loan  Documents  and
applicable law.

     (b) Not seek,  apply for or cause,  and not permit any  Subsidiary to seek,
apply for or  cause,  the entry of any order  enjoining,  staying  or  otherwise
interfering  with the  exercise  and  enforcement  of any of the  Administrative
Agent's rights or remedies under the Loan Documents and applicable law after the
Stay  shall  have been  modified  under  the  circumstances  contemplated  under
subparagraph (a) of this Section 5.15 or otherwise.

     (c)  Acknowledge  and cause each of its  Subsidiaries  to  acknowledge  the
exigent  circumstances  surrounding  the  execution  and  delivery  of the  Loan
Documents  and the making of the Loans,  that the inclusion of this Section 5.15
in this Agreement and provision of the relief  contemplated hereby is a material
inducement  to the  making of the Loans and that the  occurrence  of an Event of
Default under  subparagraph  (g)(i),  (ii), (iii) or (iv) of Section 7.1 of this
Agreement  would  constitute  "cause"  within the meaning of the Stay as imposed
under 11 U.S.C. Section 362(a).

5.16 Application of Capital Contributions.

Cause and permit FLICA or any other Insurance Subsidiary that receives a capital
contribution made with the proceeds of any Loan to use the capital  contribution
solely for the purpose of preventing  statutory surplus from ceasing to meet any
applicable  Requirements of Law which, if not met, could result in an event of a
kind specified in Section 7.1(g)(iii).

5.17     [Reserved](a)
         ----------

5.18     [Reserved](a)
         ----------

                         ARTICLE 6. NEGATIVE COVENANTS

So long as the Commitments  remain in effect,  any Note remains  outstanding and
unpaid or any  Obligation  is owing to any  Lender or the  Administrative  Agent
hereunder, the Borrower shall not:

6.1 Financial Covenants

     (a) . (a) Minimum Net Worth.  Permit  Consolidated GAAP Net Worth as of the
last day of any fiscal quarter to be less than an amount equal to the sum of (i)
$31,000,000 plus (ii) 50% of any cumulative  positive Net Income of the Borrower
and its Subsidiaries for each fiscal quarter  following the fiscal quarter ended
December  31, 2000 plus (c)  deferred  revenues as of the end of the most recent
fiscal quarter.

     (b) Funded  Debt.  Permit  the Funded  Debt Ratio as of the last day of any
fiscal  quarter  of  the  Borrower  to  exceed  0.65  to  1.0,  determined  on a
consolidated basis for the Borrower and its Subsidiaries.

     (c) RBC Ratio. Permit the RBC Ratio of any Insurance  Subsidiary other than
National  Financial  Insurance Company or Pacific Casualty  Company,  Inc. to be
less than 105% at any time. If, after the date of this  Agreement,  there is any
change that affects any State's  calculation or interpretation of the RBC Ratio,
(i) the  Borrower  and the Lenders  will enter into good faith  negotiations  to
amend this Agreement in such respects as are necessary to conform this paragraph
as a measurement of the sufficiency of the risk-based  capital of each Insurance
Subsidiary to  substantially  the same  measurement as was effective before that
change  and (ii) the  Borrower  will be  deemed  to be in  compliance  with this
paragraph during period of 60 days beginning on the effective date of the change
if and to the extent that it would have been in compliance  with this  paragraph
if the change had not occurred and the calculation and interpretation of the RBC
Ratio within the context of this paragraph were being determined on the basis of
its calculation and interpretation as in effect immediately prior to the change.

     (d)  Minimum  Statutory  Surplus  of  Insurance  Subsidiaries.  Permit  the
Statutory Capital and Surplus of any Insurance  Subsidiary as of the last day of
any fiscal quarter to be less than the Minimum Statutory Surplus Requirement for
that Insurance Subsidiary, as specified in Exhibit G.

6.2 Limitation on Fundamental Changes.

Enter into or permit any Subsidiary to enter into any merger,  consolidation  or
amalgamation,   or  liquidate,  wind  up  or  dissolve  itself  (or  suffer  any
liquidation  or  dissolution),  or convey,  sell,  lease,  assign,  transfer  or
otherwise dispose of, all or substantially all its property, business or assets,
except that any Wholly Owned  Subsidiary may be merged or  consolidated  with or
into, or make such a transfer to, another Wholly Owned Subsidiary, or with or to
the  Borrower,  if, as of the  consummation  of, and after giving effect to, the
merger or  consolidation,  no Event of Default would occur and, in the case of a
merger or consolidation or transfer involving the Borrower,  the Borrower is the
entity that survives the merger, consolidation or transfer.

6.3 Limitation on Transactions with Affiliates.

     Enter  into  or,  except  for any  transaction  provided  for in any of the
Receivables   Financing  Agreements  identified  in  Schedule  6.3,  permit  any
Subsidiary to enter into any transaction,  including,  without  limitation,  any
purchase,  sale,  lease or exchange of property or the rendering of any service,
with any  Affiliate or any other Person that owns 5% or more of the  outstanding
Capital  Stock of the first  Person,  unless the  transaction  is (a) between or
among the Borrower and one or more of its Wholly Owned  Subsidiaries  or between
or  among  Wholly  Owned  Subsidiaries  of the  Borrower  or (b) is on fair  and
reasonable  terms  that  are at  least  as  favorable  to the  Borrower  and its
Subsidiaries  as would be  obtained in a  comparable  arm's  length  transaction
between unrelated Persons of equal bargaining power.

6.4  Limitation on Liens

     (a) . Except as contemplated in this Agreement and the Security  Documents,
create,  incur,  assume or suffer to exist,  or permit any Subsidiary to create,
incur, assume or suffer to exist, any Lien upon any of its properties, assets or
revenues,  whether now owned or  hereafter  acquired,  except for the  following
(each of which is a "Permitted Lien"):

               (a) inchoate Liens for taxes,  assessments or other  governmental
          charges  or  levies  or Liens  for  taxes,  assessments,  governmental
          charges  or levies  not yet due or which are being  contested  in good
          faith by appropriate  proceedings,  but only if adequate reserves with
          respect  thereto are  maintained  on the books of the  Borrower or its
          Subsidiaries, as relevant, in conformity with GAAP;

               (b)  Liens   imposed   by  law  in  the   nature  of   carriers',
          warehousemen's,  mechanics',  materialmen's  or similar Liens arising,
          and securing obligations  incurred, in the ordinary course of business
          which  are not  overdue  for  more  than 45 days or  which  are  being
          contested in good faith by  appropriate  proceedings,  if  appropriate
          reserves with respect thereto are maintained in accordance with GAAP;

               (c) pledges or deposits under workers' compensation, unemployment
          insurance and other social security legislation (other than ERISA);

               (d) any  attachment or judgment  Lien arising in connection  with
          court proceedings,  but only if (1) the execution or other enforcement
          of the relevant Lien is effectively  stayed and claims secured thereby
          are  being  actively  contested  in  good  faith  and  by  appropriate
          proceedings and (2) the Lien (together with other Liens) has not given
          rise to an Event of Default under Section 7.1(h);

               (e)  easements,  rights-of-way,  restrictions  and other  similar
          encumbrances   incurred  in  the  ordinary   course  of  business  and
          landlords'  Liens which,  in the  aggregate and  individually,  do not
          materially  detract from the value of the property  subject thereto or
          materially  interfere  with the  occupation,  use and enjoyment by the
          Borrower or any of its Subsidiaries of the property subject thereto in
          the normal course of business;

               (f) Liens existing on the date hereof to the extent  disclosed in
          Schedule 3.8; and

               (g) the Liens created in and pursuant to the Security Documents.

6.5 Hedging Arrangements.

Enter into,  or permit any  Subsidiary  to enter into,  any Hedging  Arrangement
providing  for the transfer or  mitigation of interest rate risk relating to the
Loans either generally or under specific contingencies, except on terms that are
reasonably acceptable to the Lenders.

6.6 Limitation on Guaranties.

Create,  incur,  assume or suffer to exist,  or permit any Subsidiary to create,
incur, assume or suffer to exist, any Guaranty except:

     (a)  Guaranties  existing  on the  date of this  Agreement,  to the  extent
identified in Schedule 6.6; and

     (b) Guaranties by the Borrower of Indebtedness and other obligations of its
Subsidiaries, and by Subsidiaries of Indebtedness and other obligations of other
Subsidiaries and the Borrower,  in each case to the extent that  Indebtedness is
permitted under this Agreement.

6.7 Limitation on Sale of Assets.

Convey, sell, lease, assign,  transfer or otherwise dispose of, or, except for a
transaction  of a kind  described  in Schedule  6.7,  permit any  Subsidiary  to
convey,  sell,  lease,  assign,  transfer  or  otherwise  dispose of any of, its
property,  business or assets  (including,  without  limitation,  tax  benefits,
receivables and leasehold  interests),  whether now owned or hereafter  acquired
except  for (a) the sale or  other  disposition  of any  property  that,  in the
reasonable  judgment of the Borrower,  has become  uneconomic,  obsolete or worn
out,  and which is  disposed  of in the  ordinary  course of  business;  and (b)
reinsurance,  sales of inventory and receivables  made in the ordinary course of
business.

6.8 Limitation on Investments, Loans and Advances.

Make any advances or permit any Subsidiary to make any advance,  loan, extension
of credit or capital  contribution  to, or  purchase  any stock,  bonds,  notes,
debentures or other  securities of, or make any other  investment in, any Person
except for (a) the Permitted Investments,  (b) a transaction of a kind described
in Schedule  6.7, or (c) an  investment  permitted  by section 6.5  ("Investment
Grade Assets") of the Guaranty Agreement identified as item 1 of Schedule 6.6 as
amended through and including the date of this Agreement.

6.9  Limitations  Relating  to  Stock  of  Subsidiaries,   Dividends  and  Stock
Repurchases.

     Except as contemplated in this Agreement:

     (a) transfer,  convey,  sell or otherwise  dispose of any shares of Capital
Stock of any Insurance  Subsidiary  or permit any Insurance  Subsidiary to issue
any additional shares of its capital stock to any Person other than the Borrower
or any Subsidiary; or

     (b) permit any  Subsidiary  to declare any  dividends  on any shares of any
class of Capital Stock or to make any payment on account of, or set apart assets
for a sinking or other analogous fund for, the purchase, redemption,  retirement
or other acquisition of any shares of any class of Capital Stock, whether now or
hereafter outstanding, or make any other distribution in respect thereof, either
directly or  indirectly,  whether in cash or property or in  obligations  of the
Borrower or any of its  Subsidiaries  (all of the  foregoing  being  referred to
herein  as  "Restricted  Payments");  except  that:  (i)  Subsidiaries  may  pay
dividends directly or indirectly to the Borrower or to Wholly Owned Subsidiaries
of the Borrower;  (ii) Subsidiaries may pay dividends  directly or indirectly to
the Borrower or other Subsidiaries and each other owner of an equity interest in
such Subsidiary on a pro rata basis based on their relative ownership interests;
and (iii) the  Borrower may make  Restricted  Payments on or with respect to its
Capital Stock so long as, after giving effect to those Restricted  Payments,  no
Default  or Event of Default  shall have  occurred  and be  continuing  or shall
result therefrom.

     (c) Except for any shares of Capital  Stock of a Subsidiary  identified  in
Schedule 3.8 as subject to a Lien that exists on the date of this  Agreement and
is a Permitted Lien,  permit any Subsidiary to issue any shares of Capital Stock
that are not  "certificated  securities" (as defined in ss. 8-102 of the Uniform
Commercial  Code as in effect in the State of New York on the date  hereof)  and
are not pledged to the Administrative  Agent pursuant to the Pledge Agreement to
the extent  required  hereunder or  thereunder  or (B) permit any  Subsidiary to
issue any shares of preferred stock.

6.10 Limitation on Indebtedness.

Create,  incur,  issue,  assume or suffer to exist,  or permit any Subsidiary to
create,  incur,  issue,  assume  or  suffer  to  exist  or  permit  any  of  its
Subsidiaries  to  create,   incur,   issue,  assume  or  suffer  to  exist,  any
Indebtedness or any Mandatory  Redeemable  Stock (as defined below) or preferred
stock, except:

     (a) Indebtedness of the Borrower under this Agreement and under the Notes;

     (b)  Indebtedness  of the Borrower  under the  agreements  and  instruments
listed in Schedule 3.23 in a maximum  principal  amount equal to the commitments
of the lenders  thereunder  as in effect on the date of this  Agreement,  or (if
applicable) increased to the extent specified as permitted in Schedule 3.23;

     (c) Indebtedness and Mandatory  Redeemable Stock outstanding on the date of
this Agreement and any additional shares of Series A preferred stock issuable as
dividends in accordance with the terms of that Mandatory  Redeemable Stock as in
effect on the date of this Agreement; and

     (d) Surplus  notes of an Insurance  Subsidiary  which are  purchased by the
Borrower  with the proceeds of the Loans in accordance  with this  Agreement and
pledged pursuant to the Pledge Agreement.

For this  purpose,  "Mandatory  Redeemable  Stock"  means,  with  respect to any
Person,  any share of that Person's  Capital Stock, to the extent that it is (i)
redeemable,  payable  or  required  to be  purchased  or  otherwise  retired  or
extinguished,   or  convertible   into  any  Indebtedness  or  other  liability,
obligation,  covenant or duty of or binding upon, or any term or condition to be
observed by or binding upon such Person or any of its assets,  (A) at a fixed or
determinable date,  whether by operation of a sinking fund or otherwise,  (B) at
the option of any other  Person or (C) upon the  occurrence  of a condition  not
solely  within the control of that Person  such as a  redemption  required to be
made utilizing  future earnings or (ii) convertible into Capital Stock which has
the features set forth in clause (i).

6.11 Limitation on Capital Expenditures.

Make or  permit  any  Subsidiary  to make any  Capital  Expenditure,  except  as
contemplated in Schedule 6.11.

6.12 Limitation on Negative Pledge Clauses; Payment Restrictions.

Enter into or suffer to exist,  or permit any Subsidiary to enter into or suffer
to exist, any agreement or other consensual  encumbrance or restriction that (i)
prohibits  or limits the ability of the Borrower or any of its  Subsidiaries  to
create,  incur,  assume or  suffer  to exist any Lien upon any of its  property,
assets or revenues,  whether now owned or hereafter acquired,  or (ii) prohibits
or  limits  the  ability  of the  Borrower  or any of its  Subsidiaries  to make
payments  or  dividends  to or  investments  in  the  Borrower  or  any  of  its
Subsidiaries,  other than (a) this Agreement, (b) the agreements containing such
restrictions that exist on the date of this Agreement, as identified in Schedule
3.20 or Schedule 3.23, (c) purchase money mortgages or Capital Leases  permitted
by this Agreement (in which cases,  any prohibition or limitation  shall only be
effective  against the assets  financed  thereby)  or (d) any other  Contractual
Obligation which prohibits the assignment of that Contractual Obligation, or the
property that is the subject of that Contractual  Obligation (in which case, any
prohibition  or  limitation  shall only be effective  against  such  Contractual
Obligation or the property that is the subject of such Contractual Obligation).

6.13  Limitation on  Businesses.

Enter into or engage in any business, either directly or through any Subsidiary,
except for  businesses  of the same  general type as those in which the Borrower
and its Subsidiaries are engaged on the date hereof or other business activities
reasonably incidental or related to any of the foregoing.

6.14 Limitation on Certain Prepayments and Amendments.

Make or permit any Subsidiary to make, any optional  payment or prepayment on or
redemption,  defeasance  or purchase of any Debt for Borrowed  Money (other than
with respect to (i) Indebtedness hereunder or under the Notes, (ii) Indebtedness
under the Contractual  Obligations identified in items 1-6 of Schedule 3.23, and
(iii) any  Indebtedness  to the extent that  Indebtedness  by the terms  thereof
would otherwise have become due and payable within three months of such payment,
redemption,  defeasance or purchase);  or amend, modify or change, or consent to
any  amendment,  modification  or  change to any of the  terms  relating  to the
payment or  prepayment  of principal  of or interest on, any such  Indebtedness,
other than any amendment, modification or change which would extend the maturity
or reduce the amount of any payment or prepayment of principal  thereof or which
would  reduce the rate or extend the date for  payment  of  interest  thereon or
which would not be adverse to the Lenders.

                          ARTICLE 7. EVENTS OF DEFAULT

7.1 Events of Default.

     If any of the following events shall occur and be continuing:


     (a) The  Borrower  shall fail to pay any  principal  of any Loan or the fee
payable  pursuant to Section 5.13 when due in accordance  with the terms hereof;
or the Borrower  shall fail to pay any interest on any Loan, or any other amount
payable  hereunder or any other Loan  Document,  within five days after any such
interest or other amount  becomes due in  accordance  with the terms  thereof or
hereof; or

     (b) Any  representation  or warranty  made or deemed  made by the  Borrower
herein or in any other Loan  Document or which is contained in any  certificate,
document or financial or other statement furnished by it at any time under or in
connection  with this  Agreement or any such other Loan Document  shall prove to
have been incorrect in any material  respect on or as of the date made or deemed
made; or

     (c) The Borrower  shall  default in the  observance or  performance  of any
agreements  contained  in  Article 6 or in Section  5.4,  Section  5.6,  Section
5.7(a), Section 5.10, Section 5.12 or Section 5.16; or

     (d) The  Borrower or any  Subsidiary  shall  default in the  observance  or
performance of any of its agreements  contained any of the Security Documents or
any of the Security Documents shall cease or fail for any reason to constitute a
first priority Lien on any of the "Pledged Collateral" or "Collateral"  referred
to therein for any reason other than the  inability of the  Borrower,  using its
best efforts, to obtain any authorization from an Insurance Regulatory Authority
that is  required  to  enable  the  Borrower  to  create  or  perfect  the  Lien
contemplated in any of the Security Documents; or

     (e) The Borrower  shall  default in the  observance or  performance  of any
other  agreement  contained in this  Agreement and such default  shall  continue
unremedied for a period of 30 days; or

     (f) The  Borrower  or any  Subsidiary  shall  (i)  default  in any  payment
(regardless of amount) of principal of or interest on any Indebtedness having an
aggregate  principal  amount in excess of  $20,000,000  (other  than the  Notes)
beyond  the  period of grace (not to exceed 30 days),  if any,  provided  in the
instrument  or  agreement  under  which such  Indebtedness  is  incurred or (ii)
default in the  observance or  performance  of any other  agreement or condition
relating to any such  Indebtedness  or contained in any  instrument or agreement
evidencing,  securing  or  relating  thereto,  or any other event shall occur or
condition  exist,  the effect of which default or other event or condition is to
cause, or to permit the holder or holders of such  Indebtedness (or a trustee or
Administrative  Agent on behalf of such  holder or  holders  or  beneficiary  or
beneficiaries)  to  cause,  with  the  giving  of  notice,  if  required,   such
Indebtedness  to  become  due  prior  to  its  stated  maturity;  or  (iii)  any
combination of defaults referred to in clauses (i) and (ii) of this paragraph in
the aggregate involve Indebtedness in excess of $20,000,000; or

     (g) (i) The Borrower or any Subsidiary shall commence any case,  proceeding
or other  action  (A) under any  existing  or  future  law of any  jurisdiction,
domestic  or foreign,  relating to  bankruptcy,  insolvency,  reorganization  or
relief of debtors,  seeking to have an order for relief  entered with respect to
it,  or  seeking  to  adjudicate   it  a  bankrupt  or  insolvent,   or  seeking
reorganization,  arrangement, adjustment, winding-up, liquidation,  dissolution,
composition  or other  relief  with  respect to it or its debts,  or (B) seeking
appointment  of a receiver,  trustee,  custodian,  conservator  or other similar
official  for  it or for  all or any  substantial  part  of its  assets,  or the
Borrower or any  Subsidiary  shall make a general  assignment for the benefit of
its  creditors;  or (ii) there shall be  commenced  against the  Borrower or any
Subsidiary  any case,  proceeding  or other  action of a nature  referred  to in
clause  (i) above  which (A)  results in the entry of an order for relief or any
such  adjudication  or appointment or (B) remains  undismissed,  undischarged or
un-bonded for a period of 60 days; or (iii) any Insurance  Regulatory  Authority
applies for an order pursuant to any section of the applicable  insurance  code,
directing  the  rehabilitation,  conservation  or  liquidation  of any Insurance
Subsidiary,  and any  such  application  shall  not be  dismissed  or  otherwise
terminated  during  a period  of  sixty  (60)  consecutive  days,  or a court of
competent  jurisdiction shall enter an order granting the relief sought; or (iv)
any Insurance Regulatory Authority files a complaint or petition pursuant to any
applicable  insurance code seeking the dissolution of any Insurance  Subsidiary,
and any such complaint or petition is not dismissed or otherwise  terminated for
a period of sixty (60)  consecutive  days, or a court of competent  jurisdiction
shall order the dissolution of any Insurance Subsidiary;  or, (v) there shall be
commenced  against the Borrower or any Subsidiary any case,  proceeding or other
action  seeking  issuance  of a warrant of  attachment,  execution,  distrait or
similar process against all or any substantial  part of its assets which results
in the entry of an order for any such relief which shall not have been  vacated,
discharged,  or stayed or bonded  pending  appeal  within 60 days from the entry
thereof;  or (vi) the  Borrower  or any  Subsidiary  shall  take any  action  to
authorize or approve of, or in  furtherance  of, or  indicating  its consent to,
approval of, or acquiescence  in, any of the acts set forth in clause (i), (ii),
(iii),  (iv) or (v)  above;  or  (vii)  the  Borrower  or any  Subsidiary  shall
generally  not, or shall be unable to, or shall  admit in writing its  inability
to, pay its debts as they become due; or

     (h) (i) Any Person shall engage in any Prohibited Transaction involving any
Plan, (ii) any  "accumulated  funding  deficiency" (as defined in Section 302 of
ERISA),  whether or not waived,  shall exist with respect to any Single Employer
Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of the
Borrower,  any Subsidiary or any Commonly Controlled Entity,  (iii) a Reportable
Event  shall  occur with  respect to, or  proceedings  shall  commence to have a
trustee  appointed,  or a  trustee  shall  be  appointed,  to  administer  or to
terminate,  any Single Employer Plan,  which Reportable Event or commencement of
proceedings or  appointment  of a trustee is, in the  reasonable  opinion of the
Required Lenders,  likely to result in the termination of such Plan for purposes
of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes
of Title IV of ERISA, (v) the Borrower or any Commonly  Controlled Entity shall,
or in the  reasonable  opinion of the  Required  Lenders is likely to, incur any
liability  in  connection   with  a  withdrawal   from,  or  the  Insolvency  or
Reorganization  of, a  Multiemployer  Plan or (vi) any other event or  condition
shall  occur or exist with  respect to a Plan;  and in each case in clauses  (i)
through (vi) above, such event or condition, together with all other such events
or conditions,  if any, could  reasonably be expected to have a Material Adverse
Effect; or

     (i) One or more judgments or decrees shall be entered  against the Borrower
or any  Subsidiary  involving  in the  aggregate a liability  (to the extent not
covered  by  third-party  insurance  as to which the  insurer  has  acknowledged
coverage) of $5,000,000 or more and all such judgments or decrees shall not have
been vacated,  discharged,  stayed or bonded  pending appeal within 30 days from
the entry thereof;

then, and in any such event, (A) if such event is an Event of Default  specified
in clause (i),  (ii),  (iii) or (iv) of paragraph  (g) above with respect to the
Borrower or any Subsidiary,  the Commitment shall  automatically and immediately
terminate and the Loans hereunder (with accrued interest  thereon) and all other
amounts owing under this  Agreement and the Notes shall  immediately  become due
and payable, and (B) if such event is any other Event of Default, either or both
of the  following  actions may be taken:  (i) with the  consent of the  Required
Lenders,  the Administrative  Agent may, by notice to the Borrower,  declare the
Commitments  to  be  terminated  forthwith,   whereupon  the  Commitments  shall
immediately  terminate;  and (ii) with the consent of the Required Lenders,  the
Administrative  Agent may,  or upon the  request  of the  Required  Lenders  the
Administrative  Agent  shall,  by  notice  to the  Borrower,  declare  the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement  and the Notes to be due and  payable  forthwith,  whereupon  the same
shall immediately become due and payable.  Except as expressly provided above in
this Section, presentment, demand, protest and all other notices of any kind are
hereby expressly waived.

                      ARTICLE 8. THE ADMINISTRATIVE AGENT

8.1 Appointment.

Each Lender hereby  irrevocably  designates and appoints CSFBM as Administrative
Agent of such Lender under this  Agreement  and the other Loan  Documents.  Each
Lender  irrevocably  authorizes  CSFBM,  as the  Administrative  Agent  for such
Lender, to take such action on its behalf under the provisions of this Agreement
and the other Loan Documents and to exercise such powers and perform such duties
as are  expressly  delegated  to the  Administrative  Agent by the terms of this
Agreement and the other Loan  Documents,  together with such other powers as are
reasonably  incidental  thereto.  Notwithstanding  any provision to the contrary
elsewhere in this Agreement,  the Administrative Agent shall not have any duties
or  responsibilities  except those expressly set forth herein,  or any fiduciary
relationship   with  any   Lender,   and  no   implied   covenants,   functions,
responsibilities,  duties,  obligations or  liabilities  shall be read into this
Agreement  or  any  other  Loan   Document  or  otherwise   exist   against  the
Administrative Agent.

8.2 Delegation of Duties.

The Administrative  Agent may execute any of its duties under this Agreement and
the other Loan Documents by or through agents or attorneys-in-fact  and shall be
entitled to rely on the advice of counsel  concerning all matters  pertaining to
such  duties.  The  Administrative  Agent  shall  not  be  responsible  for  the
negligence or misconduct of any agents or attorneys-in-fact  selected by it with
reasonable care.

8.3  Exculpatory  Provisions.

Neither the Administrative Agent nor any of its officers, directors,  employees,
agents,  attorneys-in-fact  or  Affiliates  shall be (i)  liable  for any action
lawfully  taken  or  omitted  to be  taken  by it or  such  Person  under  or in
connection  with this  Agreement or any other Loan Document  (except for its own
gross negligence or willful misconduct) or (ii) responsible in any manner to any
of the Lenders for any recitals, statements, representations or warranties, made
by the Borrower or any officer or any of them contained in this Agreement or any
other Loan Document or in any certificate,  report,  statement or other document
referred to or provided for in, or received by the Administrative Agent under or
in connection  with, this Agreement or any other Loan Document or for the value,
validity,  effectiveness,  genuineness,  enforceability  or  sufficiency of this
Agreement  or the  Notes or any  other  Loan  Document  or for the  value of any
"Collateral" or "Pledged  Collateral" under (and as defined in) the Guaranty and
Security  Agreement  or the Pledge  Agreement  or any failure of the Borrower to
perform its obligations hereunder or thereunder.  The Administrative Agent shall
not be under any  obligation  to any Lender to ascertain or to inquire as to the
observance or performance  of any of the agreements  contained in, or conditions
of, this  Agreement or any other Loan  Document,  or to inspect the  properties,
books or records of the Borrower or any Subsidiary.

8.4 Reliance by Administrative Agent .

The Administrative Agent shall be entitled to rely, and shall be fully protected
in relying, upon any Note, writing,  resolution,  notice, consent,  certificate,
affidavit,  letter,  telecopy,  telex or teletype message,  statement,  order or
other document or  conversation  believed by it to be genuine and correct and to
have been signed,  sent or made by the proper  Person or Persons and upon advice
and statements of legal counsel (including,  without limitation,  counsel to the
Borrower),   independent   accountants   and  other  experts   selected  by  the
Administrative  Agent. The Administrative  Agent may deem and treat the payee of
any Note as the  owner  thereof  for all  purposes  unless a  written  notice of
assignment,  negotiation  or  transfer  thereof  shall  have been filed with the
Administrative  Agent.  The  Administrative  Agent shall be fully  justified  in
failing or refusing to take any action  under this  Agreement  or any other Loan
Document  unless  it shall  first  receive  such  advice or  concurrence  of the
Required Lenders as it deems appropriate or it shall first be indemnified to its
satisfaction  by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action. The
Administrative  Agent  shall in all cases be fully  protected  in acting,  or in
refraining  from acting,  under this  Agreement and the Notes and the other Loan
Documents in accordance with a request of the Required Lenders, and such request
and any action  taken or failure to act pursuant  thereto  shall be binding upon
all the Lenders and all future holders of the Notes.

8.5 Notice of Default.

The Administrative  Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default  unless the  Administrative  Agent
has received  notice from a Lender or the Borrower  referring to this Agreement,
describing  such  Default or Event of Default and stating  that such notice is a
"notice of default." In the event that the Administrative  Agent receives such a
notice, the Administrative  Agent shall give notice thereof to the Lenders.  The
Administrative  Agent  shall take such action  with  respect to such  Default or
Event of  Default  as shall be  reasonably  directed  by the  Required  Lenders;
provided that unless and until the Administrative Agent shall have received such
directions,  the  Administrative  Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default or
Event of  Default  as it shall  deem  advisable  in the  best  interests  of the
Lenders.

8.6 Non-Reliance on Administrative Agent and Other Lenders.

Each Lender expressly acknowledges that neither the Administrative Agent nor any
of its officers, directors,  employees, agents,  attorneys-in-fact or Affiliates
has  made  any  representations  or  warranties  to it  and  that  no act by the
Administrative Agent hereafter taken, including any review of the affairs of the
Borrower,  shall be deemed to constitute any  representation  or warranty by the
Administrative Agent to any Lender. Each Lender represents to the Administrative
Agent that it has,  independently  and without reliance upon the  Administrative
Agent or any other Lender, and based on such documents and information as it has
deemed  appropriate,  made  its own  appraisal  of and  investigation  into  the
business,   operations,    property,   financial   and   other   condition   and
creditworthiness  of the  Borrower  and made its own  decision to make its Loans
hereunder and enter into this  Agreement.  Each Lender also  represents  that it
will,  independently and without reliance upon the  Administrative  Agent or any
other  Lender,  and based on such  documents  and  information  as it shall deem
appropriate at the time,  continue to make its own credit  analysis,  appraisals
and decisions in taking or not taking action under this  Agreement and the other
Loan Documents,  and to make such  investigation as it deems necessary to inform
itself as to the business,  operations,  property, financial and other condition
and  creditworthiness of the Borrower and the Subsidiaries.  Except for notices,
reports and other documents expressly required to be furnished to the Lenders by
the Administrative  Agent hereunder or furnished to the Administrative Agent for
the  account  of,  or  with  a  counterpart  or  copy  for,  each  Lender,   the
Administrative  Agent shall not have any duty or  responsibility  to provide any
Lender with any credit or other information concerning the business, operations,
property,  condition (financial or otherwise),  prospects or creditworthiness of
the  Borrower  or any  Subsidiary  which  may come  into the  possession  of the
Administrative  Agent  or any of its  officers,  directors,  employees,  agents,
attorneys-in-fact or Affiliates.

8.7 Indemnification.

The Lenders agree to indemnify the Administrative  Agent in its capacity as such
(to the extent not reimbursed by the Borrower and without limiting the joint and
several  obligation  of the  Borrower  to do so),  ratably  according  to  their
respective Commitment Percentages in effect on the date on which indemnification
is sought under this Section  (or, if  indemnification  is sought after the date
upon which the  Commitments  shall have terminated and the Loans shall have been
paid  in  full,   ratably  in  accordance  with  their  Commitment   Percentages
immediately  prior to such  date),  from and  against  any and all  liabilities,
obligations,  losses,  damages,  penalties,  actions,  judgments,  suits, costs,
expenses  or  disbursements  of any  kind  whatsoever  which  may  at  any  time
(including,  without limitation, at any time following the payment of the Notes)
be imposed on, incurred by or asserted against the  Administrative  Agent in any
way  relating  to or  arising  out of  this  Agreement,  any of the  other  Loan
Documents or any documents  contemplated  by or referred to herein or therein or
the transactions  contemplated  hereby or thereby or any action taken or omitted
by the  Administrative  Agent under or in connection  with any of the foregoing;
provided  that no Lender  shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs,  expenses  or  disbursements  resulting  solely  from the  Administrative
Agent's gross negligence or willful  misconduct.  The agreements in this Section
shall survive the payment of the Obligations hereunder.

8.8 Administrative Agent in Its Individual Capacity.

The  Administrative  Agent and its Affiliates may make loans to, accept deposits
from and  generally  engage in any kind of business  with the  Borrower  and any
Subsidiary as though the Administrative  Agent were not an Administrative  Agent
hereunder and under the other Loan  Documents.  With respect to Loans made by it
and any Note issued to it, the  Administrative  Agent shall have the same rights
and powers under this  Agreement and the other Loan  Documents as any Lender and
may exercise the same as though it were not the  Administrative  Agent,  and the
terms  "Lender" and  "Lenders"  shall  include the  Administrative  Agent in its
individual capacity.

8.9 Successor Administrative Agent .

The Administrative Agent may resign as Administrative Agent upon 10 days' notice
to the  Lenders  and  the  Borrower.  If the  Administrative  Agent  resigns  as
Administrative Agent under this Agreement and the other Loan Documents, then the
Required  Lenders shall,  with the consent of the Borrower  (which consent shall
not be  unreasonably  withheld  and shall not be required if an Event of Default
shall have  occurred  that is  continuing)  appoint a  successor  administrative
agent, whereupon the successor administrative agent shall succeed to the rights,
powers  and duties of the  Administrative  Agent,  and the term  "Administrative
Agent"  shall  mean  that  successor  Administrative  Agent  effective  upon its
appointment  and  approval  as  provided  above,  and the former  Administrative
Agent's rights,  powers and duties as Administrative  Agent shall be terminated,
without  any  other  or  further  act  or  deed  on  the  part  of  that  former
Administrative  Agent or any of the parties to this  Agreement or any holders of
the Notes. After any retiring or terminated  Administrative  Agent's resignation
or termination,  as the case may be, as Administrative  Agent, the provisions of
this Section shall inure to its benefit as to any actions taken or omitted by it
while it was  Administrative  Agent  under  this  Agreement  and the other  Loan
Documents.

8.10 Intercreditor Agreement.

Each Lender hereby irrevocably  instructs the Administrative Agent to enter into
the  Intercreditor  Agreement  on behalf of that  Lender and to take and refrain
from taking all actions  provided  for therein in  accordance  with the terms of
that  agreement.  Each  Lender  confirms  that it is bound  by the  terms of the
Intercreditor  Agreement,  acknowledging that they provide for the subordination
of such Lender's claims  hereunder and under the other Loan Documents to certain
claims of LaSalle Bank  National  Association  identified  in the  Intercreditor
Agreement.

                            ARTICLE 9. MISCELLANEOUS

9.1 Amendments and Waivers.

This  Agreement,  the Notes and the other  Loan  Documents  may not be  amended,
supplemented  or  modified  except in  accordance  with the  provisions  of this
Section.  The Required Lenders may, or, with the written consent of the Required
Lenders, the Administrative Agent may, from time to time, (a) enter into written
amendments,  supplements  or  modifications  hereto  with the  Borrower  for the
purpose of adding any provisions to this Agreement or changing in any manner the
rights of the  Lenders or of the  Borrower  hereunder,  (b) enter  into  written
amendments,  supplements  or  modifications  to the  Notes  and the  other  Loan
Documents with the Borrower for the purpose of adding provisions to the Notes or
such other Loan Documents or changing in any manner the rights of the Lenders or
the  Borrower  thereunder  or (c)  waive,  on such terms and  conditions  as the
Required Lenders or the Administrative Agent, as the case may be, may specify in
such  instrument,  any of the  requirements of this Agreement,  the Notes or the
other Loan  Documents  or any Default or Event of Default and its  consequences;
provided that no such waiver and no such  amendment,  supplement or modification
(i) shall reduce the amount or extend the scheduled date of maturity of any Note
or of any installment  thereof, or reduce the stated rate of any interest or fee
payable  hereunder  or extend  the  scheduled  date of any  payment  thereof  or
increase the amount or extend the expiration  date of any Lender's  Commitments,
in each case,  without  the  consent of all the  Lenders,  or (ii) shall  amend,
modify or waive any  provision of this  Section,  or vary any  provision of this
Agreement or any other Loan Document  which  specifically  by its terms requires
the approval or consent of all the Lenders or reduce the percentage specified in
the definition of Required Lenders,  or consent to the assignment or transfer by
the  Borrower of any of its rights and  obligations  under this  Agreement,  the
Notes and the other Loan Documents, in each case, without the written consent of
all the Lenders,  or (iii) shall amend, modify or waive any provision of Article
8 without the written consent of the then Administrative  Agent. Any such waiver
and any such amendment,  supplement or modification  shall apply equally to each
of the  Lenders  and  shall be  binding  upon the  Borrower,  the  Lenders,  the
Administrative  Agent and all future  holders  of the Notes.  In the case of any
waiver, the Borrower, the Lenders and the Administrative Agent shall be restored
to their former position and rights  hereunder and under the  outstanding  Notes
and any other Loan  Documents,  and any Default or Event of Default waived shall
be deemed to be cured and not continuing, but no such waiver shall extend to any
subsequent or other  Default or Event of Default or impair any right  consequent
thereon.

9.2 Notice.

All notices, requests and demands to or upon the respective parties hereto to be
effective shall be in writing  (including by telecopy),  and,  unless  otherwise
expressly provided herein,  shall be deemed to have been duly given or made when
delivered by hand, or, in the case of notice by mail, when received,  or, in the
case of telecopy notice, when received, addressed as follows or, if addressed to
a Lender,  to its address specified in Schedule I or, in any case, to such other
address as may be hereafter  notified by the  respective  parties hereto and any
future holders of the Notes:

The Borrower:               Ascent Assurance, Inc.
                            110 W. 7th St., Suite 300
                            Fort Worth, TX 76102
                            Attention: President
                            Telecopy:  (817) 878-3672

The Administrative Agent:   Credit Suisse First Boston Management Corporation
                            277 Park Avenue, 11th Floor
                            New York, NY 10172
                            Attention: Mr. Alex Lagetko
                            Ms. Donna P. Alderman
                            Telecopy:  (212) 325-8290

provided that any notice,  request or demand to or upon the Administrative Agent
or the Lenders  pursuant to Section 2.3,  Section 2.5, Section 2.8, Section 2.9,
Section 2.10 or Section 2.15 shall not be effective until received.

9.3 No Waiver; Cumulative Remedies.

No  failure  to  exercise  and  no  delay  in  exercising,  on the  part  of the
Administrative  Agent or any  Lender,  any  right,  remedy,  power or  privilege
hereunder or under the other Loan Documents  shall operate as a waiver  thereof,
nor  shall  any  single or  partial  exercise  of any  right,  remedy,  power or
privilege  hereunder  preclude  any other or  further  exercise  thereof  or the
exercise of any other right, remedy, power or privilege.  The rights,  remedies,
powers and  privileges  herein  provided are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.

9.4 Survival of Representations and Warranties.

All representations  and warranties made hereunder,  in the other Loan Documents
and in any document,  certificate or statement  delivered  pursuant hereto or in
connection  herewith  shall survive the execution and delivery of this Agreement
and the Notes and the making of the Loans hereunder.

9.5 Payment of Expenses and Taxes; Indemnification.

The Borrower  shall (a)  promptly  upon written  request,  pay or reimburse  the
Administrative  Agent for all its  reasonable  out-of-pocket  costs and expenses
incurred in connection with the  development,  preparation and execution of, and
any amendment,  supplement or modification to, this Agreement, the Notes and the
other Loan Documents and any other documents prepared in connection  herewith or
therewith,   and  the  consummation  and   administration  of  the  transactions
contemplated hereby and thereby,  including,  without limitation, the reasonable
fees and  disbursements  of  counsel  to the  Administrative  Agent,  (b) pay or
reimburse  the  Administrative  Agent  and each  Lender  for all its  costs  and
expenses  incurred in connection  with the  enforcement or  preservation  of any
rights under this  Agreement,  the Notes,  the other Loan Documents and any such
other documents,  including,  without limitation,  the fees and disbursements of
counsel to the Administrative  Agent and each Lender, and (c) pay, indemnify and
hold  harmless  the  Administrative  Agent  and each  Lender  from,  any and all
recording  and  filing  fees and any and all  liabilities  with  respect  to, or
resulting from any delay in paying, stamp, excise and other taxes, if any, which
may be payable or determined to be payable in connection  with the execution and
delivery  of,  or  consummation  or  administration  of any of the  transactions
contemplated by, or any amendment,  supplement or modification of, or any waiver
or consent  under or in respect of, this  Agreement,  the Notes,  the other Loan
Documents  and any such other  documents,  and (d) pay, and  indemnify  and hold
harmless  the  Administrative  Agent and each  Lender  (including  each of their
respective parents,  subsidiaries,  officers,  directors,  employees, agents and
affiliates) from and against,  any and all other claims,  demands,  liabilities,
obligations,  losses,  damages,  penalties,  actions,  judgments,  suits, costs,
settlements,  expenses or disbursements of whatever kind or nature arising from,
in  connection  with or with respect to the  execution,  delivery,  enforcement,
performance  and  administration  of this Agreement,  the Notes,  the other Loan
Documents, or any other documents or the use of the proceeds of the Loans or any
other  purpose  (all  the  foregoing  in  this  clause  (d),  collectively,  the
"indemnified  liabilities");  provided  that  the  Borrower  shall  not have any
obligation  hereunder  to any Lender  with  respect to  indemnified  liabilities
arising from the gross  negligence or willful  misconduct of the  Administrative
Agent or that Lender. The agreements in this Section 9.5 shall survive repayment
of the Obligations hereunder.

9.6 Successors and Assigns; Participations and Assignments

     (a) . (a) This Agreement  shall be binding upon and inure to the benefit of
the Borrower,  the Lenders, the Administrative  Agent, the Arranger,  all future
holders of the Notes and their  respective  successors and assigns,  except that
the Borrower may not assign or transfer any of its rights or  obligations  under
this Agreement without the prior written consent of each Lender.

     (b) Any  Lender  may,  in the  ordinary  course of its  commercial  banking
business and in accordance  with applicable law, at any time sell to one or more
banks or other  entities  ("Participants")  participating  interests in any Loan
owing to such  Lender,  any Note held by such  Lender,  any  Commitment  of such
Lender or any other interest  hereunder and under the other Loan  Documents.  In
the  event  of any  such  sale by a  Lender  of a  participating  interest  to a
Participant, such Lender's obligations under this Agreement to the other parties
to this  Agreement  shall remain  unchanged,  such Lender  shall  remain  solely
responsible for the performance thereof,  such Lender shall remain the holder of
any  such  Note  for all  purposes  under  this  Agreement  and the  other  Loan
Documents,  and the Borrower and the Administrative Agent shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations  under  this  Agreement  and the other  Loan  Documents.  If amounts
outstanding  under this Agreement and the Notes are due or unpaid, or shall have
been  declared or shall have become due and payable  upon the  occurrence  of an
Event of Default,  each Participant  shall be deemed to have the right of setoff
in respect of its  participating  interest in amounts owing under this Agreement
and any Note to the same extent as if the amount of its  participating  interest
were owing directly to it as a Lender under this Agreement or any Note; provided
that, in purchasing  such  participating  interest,  such  Participant  shall be
deemed to have agreed to share with the Lenders the proceeds thereof as provided
in Section 9.7(a) as fully as if it were a Lender  hereunder.  Each  Participant
shall  be  entitled  to  the  benefits  of  Section  2.10  with  respect  to its
participation in the Commitments and the Loans  outstanding from time to time as
if it were a Lender; provided that such Participant shall have complied with the
requirements of said Section and provided, further, that no Participant shall be
entitled to receive any greater  amount  pursuant to any such  Section  than the
transferor  Lender would have been  entitled to receive in respect of the amount
of the  participation  transferred by such transferor Lender to such Participant
had no such transfer occurred.

     (c) Any Lender,  in the ordinary course of its commercial  banking business
and in  accordance  with  applicable  law, at any time and from time to time may
assign  to  any  Lender  or  any  affiliate  thereof  with  the  consent  of the
Administrative  Agent, or, with the consent of the Borrower (so long as no Event
of Default shall have occurred which is continuing) and the Administrative Agent
(which consent, in the case of either the Borrower or the Administrative  Agent,
shall not be  unreasonably  withheld),  to another Person (an "Assignee") all or
any part of its  rights  and  obligations  under  this  Agreement  and the Notes
pursuant to a supplement  substantially  in the form of Exhibit D (a "Commitment
Transfer  Supplement"),  executed by that Assignee, the assigning Lender and, in
the case of an Assignee  that is not then a Lender or an affiliate  thereof,  by
the Borrower and the  Administrative  Agent and delivered to the  Administrative
Agent for its  acceptance and recording in the Register;  provided  that,  after
giving effect to any such assignment, the assigning Lender shall have either (x)
sold all its  rights  and  obligations  hereunder  and  under  the  Notes or (y)
retained at least $1,000,000 of the aggregate  Commitment.  Upon such execution,
delivery, acceptance and recording, from and after the effective date determined
pursuant to such Commitment  Transfer  Supplement,  (1) the Assignee  thereunder
shall be a party hereto and, to the extent provided in such Commitment  Transfer
Supplement,  have  the  rights  and  obligations  of a Lender  hereunder  with a
Commitment as set forth therein and (2) the assigning Lender thereunder,  to the
extent provided in such Commitment Transfer  Supplement,  shall be released from
its obligations under this Agreement (and, in the case of a Commitment  Transfer
Supplement covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement,  such assigning Lender shall cease to be a
party  hereto;  provided that the  provisions of Section 2.10,  Section 2.11 and
Section  9.5 shall  continue  to  benefit  the  assigning  Lender to the  extent
required by such Sections).

     (d) The Administrative Agent shall maintain,  at its address referred to in
Section 9.2, a copy of each Commitment Transfer Supplement delivered to it and a
register (the  "Register") for the recordation of the names and addresses of any
Assignees and the Commitment of, and principal amount of the Loans owing to, any
Assignees from time to time. The entries in the Register shall be conclusive, in
the absence of manifest error, and the Borrower and the Administrative Agent may
treat each Person  whose name is  recorded  in the  Register as the owner of the
Loan recorded therein for all purposes of this Agreement.  The Register shall be
available for inspection by the Borrower at any reasonable time and from time to
time upon reasonable prior notice.

     (e) Upon its receipt of a Commitment  Transfer  Supplement  executed by the
assigning  Lender, an Assignee (and, in the case of an Assignee that is not then
a Lender or an affiliate thereof, by the Borrower and the Administrative Agent )
and the  Borrower  together  with  payment  by the  assigning  Lender  or by the
Assignee to the  Administrative  Agent of a  registration  and processing fee of
$3,500, the Administrative  Agent shall promptly accept such Commitment Transfer
Supplement and, on the effective date determined pursuant thereto,  shall record
the  information  contained  therein  in the  Register  and give  notice of such
acceptance and recordation to the Borrower.  On or prior to such effective date,
the   Borrower,   at  its  own  expense,   shall  execute  and  deliver  to  the
Administrative  Agent (in exchange for the Note of the  assigning  Lender) a new
Note to the order of such Assignee in an amount equal to the Commitment, assumed
by such Assignee  pursuant to such  Commitment  Transfer  Supplement and, if the
assigning  Lender  has  retained  a  Commitment,  a new Note to the order of the
assigning Lender in an amount equal to the Commitment  retained by it hereunder.
Such new Notes shall be dated the  Closing  Date and shall  otherwise  be in the
form of the Notes replaced thereby.

     (f) The Borrower  authorizes the Lenders to disclose to any  Participant or
Assignee (each, a  "Transferee")  and any  prospective  Transferee,  any and all
financial information in the Lenders' possession concerning the Borrower and its
Affiliates which has been delivered to the  Administrative  Agent or the Lenders
by or on behalf of the  Borrower  pursuant to this  Agreement  or which has been
delivered  to the  Administrative  Agent or the  Lenders  by or on behalf of the
Borrower in connection with the Lender's  credit  evaluation of the Borrower and
its Affiliates  prior to becoming a party to this Agreement;  provided that each
such Transferee and prospective  Transferee agrees in writing to be bound by the
provisions of Section 9.8.

     (g) Nothing herein shall prohibit any Lender from pledging or assigning any
Note to any Federal Reserve Bank in accordance with applicable law.

9.7 Adjustments; Setoff

     (a) . (a) If any Lender (a  "Benefited  Lender")  shall at any time receive
any  payment of all or part of its Loans,  or interest  thereon,  or receive any
collateral in respect thereof (whether voluntarily or involuntarily,  by setoff,
pursuant to events or proceedings of the nature  referred to in Section  7.1(f),
or otherwise),  in a greater  proportion  than any such payment to or collateral
received by any other Lender,  if any, in respect of such other Lender's  Loans,
or interest  thereon,  such  Benefited  Lender shall  purchase for cash from the
other  Lenders a  participating  interest  in such  portion  of each such  other
Lender's  Loans,  or shall  provide such other  Lenders with the benefits of any
such collateral,  or the proceeds  thereof,  as shall be necessary to cause such
Benefited  Lender to share the excess payment or benefits of such  collateral or
proceeds  ratably with each of the Lenders;  provided that if all or any portion
of such excess  payment or benefits is thereafter  recovered from such Benefited
Lender,  such purchase  shall be rescinded,  and the purchase price and benefits
returned, to the extent of such recovery, but without interest.

     (b) In addition to any rights and remedies of the Lenders  provided by law,
each Lender shall have the right (without prior notice to the Borrower, any such
notice  being  expressly  waived by the  Borrower  to the  extent  permitted  by
applicable  law),  upon any amount  becoming  due and  payable  by the  Borrower
hereunder or under the Notes (whether at the stated maturity, by acceleration or
otherwise),  to setoff and appropriate and apply against such amount any and all
deposits  (general or special,  time or demand,  provisional  or final),  in any
currency,  and any other credits,  indebtedness or claims,  in any currency,  in
each case  whether  direct or  indirect,  absolute  or  contingent,  matured  or
unmatured,  at any time  held or owing by such  Lender  or any  branch or agency
thereof to or for the credit or the account of the Borrower.  Each Lender agrees
promptly  to notify the  Borrower  and the  Administrative  Agent after any such
setoff and  application  made by such Lender;  provided that the failure to give
such notice shall not affect the validity of such setoff and application.

9.8 Confidentiality.

Each Lender  agrees to exercise  all  reasonable  efforts  (consistent  with its
customary methods for keeping information  confidential) to keep any information
delivered or made available by the Borrower  confidential from anyone other than
persons  employed or  retained by such Lender who are or are  expected to become
engaged  in  evaluating,  approving,  structuring  or  administering  the Loans;
provided  that nothing  herein  shall  prevent any Lender from  disclosing  such
information (a) to any Affiliate of such Lender or to any other Lender, (b) upon
the order of any court or administrative  agency, (c) upon the request or demand
of any regulatory agency or authority having  jurisdiction over such Lender, (d)
that has been publicly disclosed, (e) in connection with any litigation relating
to the Loans, this Agreement or any transaction contemplated hereby to which any
Lender or the Administrative  Agent may be a party, (f) to the extent reasonably
required in connection  with the exercise of any remedy  hereunder,  (g) to such
Lender's  legal  counsel  and  independent  auditors,  and (h) to any  actual or
proposed  participant or assignee of all or any part of its Loans hereunder,  if
such other Person, prior to such disclosure, agrees, in writing, for the benefit
of the Borrower to comply with the provisions of this Section 9.8.

9.9 Effectiveness.

This  Agreement  shall  become  effective on the date when  counterparts  hereof
executed on behalf of the  Borrower,  the  Administrative  Agent and each Lender
shall have been received by the  Administrative  Agent and notice  thereof shall
have been given by the Administrative Agent to the Borrower.

9.10 Counterparts.

This  Agreement may be executed by one or more of the parties to this  Agreement
on any number of separate  counterparts  (including by  telecopy),  and all said
counterparts  taken  together  shall be  deemed to  constitute  one and the same
instrument.  A set of the  copies of this  Agreement  signed by all the  parties
shall be lodged with each of the Borrower and the Administrative Agent.

9.11 Severability.

Any provision of this  Agreement  which is prohibited  or  unenforceable  in any
jurisdiction  shall,  as to such  jurisdiction,  be ineffective to the extent of
such  prohibition  or  unenforceability   without   invalidating  the  remaining
provisions  hereof,  and  any  such  prohibition  or   unenforceability  in  any
jurisdiction shall not invalidate or render  unenforceable such provision in any
other jurisdiction.

9.12 Integration.

This  Agreement  and the other Loan  Documents  represent  the  agreement of the
Borrower,  the Administrative  Agent and the Lenders with respect to the subject
matter hereof and thereof.

9.13 GOVERNING LAW.

THIS AGREEMENT AND THE NOTES AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER
THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN  ACCORDANCE  WITH,  THE LAW OF THE  STATE OF NEW YORK  WITHOUT  REGARD TO THE
PRINCIPLES OF CONFLICT OF LAWS THEREOF OTHER THAN SECTION  5-1401 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK.

9.14 Submission To Jurisdiction; Waivers.

     The Borrower hereby irrevocably and unconditionally:


          (a)  submits  for  itself  and its  property  in any  legal  action or
     proceeding relating to this Agreement and the other Loan Documents to which
     it is a party,  or for  recognition  and  enforcement  of any  judgment  in
     respect thereof, to the non-exclusive general jurisdiction of the courts of
     the State of New York,  the courts of the United  States of America for the
     Southern District of New York, and appellate courts from any thereof;

          (b) consents that any such action or proceeding may be brought in such
     courts and waives any  objection  that it may now or hereafter  have to the
     venue of any such  action  or  proceeding  in any such  court or that  such
     action or proceeding was brought in an inconvenient court and agrees not to
     plead or claim the same;

          (c) agrees that  service of process in any such  action or  proceeding
     may be effected by mailing a copy thereof by registered  or certified  mail
     (or any  substantially  similar  form of  mail),  postage  prepaid,  to the
     Borrower, as the case may be, at its address set forth in Section 9.2 or at
     such  other  address  of which the  Administrative  Agent  shall  have been
     notified pursuant thereto;

          (d) agrees that  nothing  contained  herein  shall affect the right to
     effect  service of process in any other  manner  permitted  by law or shall
     limit the right to sue in any other jurisdiction; and

          (e) waives,  to the maximum extent not prohibited by law, any right it
     may have to claim or recover in any legal action or proceeding  referred to
     in this Section any special, exemplary, punitive or consequential damages.

9.15 Acknowledgments.

          Each of the parties hereby acknowledges that:


          (a) Neither the Administrative  Agent nor any Lender has any fiduciary
     relationship  with or duty to the Borrower  arising out of or in connection
     with  this  Agreement  or  any  of  the  other  Loan  Documents,   and  the
     relationship  between the Administrative  Agent and the Lenders, on the one
     hand,  and the  Borrower,  on the other  hand,  in  connection  herewith or
     therewith is solely that of creditor and debtor;

          (b) the Arranger has no obligations under this Agreement or any of the
     other Loan Documents and has no fiduciary  relationship with or duty to the
     Borrower,  the  Lenders or the  Administrative  Agent  arising out of or in
     connection with this Agreement or any of the other Loan Documents;  and the
     Arranger  shall be entitled to the benefit of the  provisions  set forth in
     Section  8.3,  Section 8.6 and Section  8.7 as if  references  in each such
     Section  to the  Administrative  Agent  were  references  to the  Arranger;
     provided,  however,  that the  extension of those  benefits to the Arranger
     shall not be deemed to give rise to any  implication  that the Arranger has
     any obligations under this Agreement; and

          (c) no joint venture is created  hereby or by the other Loan Documents
     or  otherwise  exists  by virtue of the  transactions  contemplated  hereby
     between the Administrative Agent, the Lenders and the Borrower.

9.16 Waivers of Jury Trial.

THE BORROWER,  THE  ADMINISTRATIVE  AGENT AND THE LENDERS HEREBY IRREVOCABLY AND
UNCONDITIONALLY  WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING  RELATING
TO  THIS  AGREEMENT  OR THE  NOTES  OR ANY  OTHER  LOAN  DOCUMENT  AND  FOR  ANY
COUNTERCLAIM THEREIN.


<PAGE>





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

                        BORROWER:

                        ASCENT ASSURANCE, INC.

                        By: /s/Patrick J. Mitchell
                            Name: Patrick J. Mitchell
                            Title: Chairman



                        Account for Disbursement of Loans:




                        ADMINISTRATIVE AGENT AND ARRANGER:

                        CREDIT SUISSE FIRST BOSTON MANAGEMENT CORPORATION


                        By: /s/Donna P. Alderman

                              Name: Donna P. Alderman
                              Title: Director


                        By: /s/Donna P. Alderman

                              Name: Donna P. Alderman
                              Title: Director





<PAGE>



                        LENDERS:

                        CREDIT SUISSE FIRST BOSTON MANAGEMENT CORPORATION


                        By: /s/Donna P. Alderman

                              Name: Donna P. Alderman
                              Title: Director


<PAGE>



                                   SCHEDULE I

                    LENDING OFFICES OF LENDER AND COMMITMENTS









            Lenders and Addresses                             Commitments
                                                       Commitment     Commitment
                                                                      Percentage
Credit Suisse First Boston Management Corporation      $11,000,000       100%
277 Park Avenue, 11th Floor
New York, NY 10172









<PAGE>







                                                                     EXHIBIT A-1
                                                                       TO CREDIT
                                                                       AGREEMENT

                                  FORM OF NOTE

$                 *                                           New York, New York
 ------------------                                              April ( ), 2001

         FOR VALUE  RECEIVED,  the  undersigned  promises to pay to the order of
_________________ (the "Lender"),  the principal amount of _____________ DOLLARS
($____________)  or such lesser  aggregate  principal amount of the Loans of the
Lender  that may be  outstanding  from time to time under the  Credit  Agreement
referred to below, payable as hereinafter set forth. The undersigned promises to
pay interest on the principal  amount hereof  remaining unpaid from time to time
from the date hereof until the date of payment in full,  payable as  hereinafter
set forth.

         Reference  is made to the  Agreement  dated as of April 17, 2001 (as it
may be amended, restated,  supplemented or otherwise modified from time to time,
the "Credit Agreement") among Ascent Assurance, Inc., a Delaware corporation, as
borrower,  Credit Suisse First Boston Management Corporation,  as Administrative
Agent (in that  capacity,  the  "Administrative  Agent") and  Arranger,  and the
Lenders from time to time party thereto.  Terms defined in the Credit  Agreement
and not otherwise  defined  herein are used herein with the meanings given those
terms in the  Credit  Agreement.  This is one of the  Notes  referred  to in the
Credit  Agreement,  and any  holder  hereof is  entitled  to all of the  rights,
remedies,  benefits  and  privileges  provided  for in the Credit  Agreement  as
originally executed or as it may from time to time be supplemented,  modified or
amended.  The Credit  Agreement,  among other things,  contains  provisions  for
acceleration of the maturity hereof,  and the optional and mandatory  prepayment
in whole or in part hereof, upon the happening of certain stated events upon the
terms and conditions therein specified.

         This Note is secured by Collateral and Pledged Collateral as more fully
set forth in the Security Documents.

         The outstanding principal  indebtedness evidenced by this Note shall be
payable as provided  in the Credit  Agreement  and in any event on the  Maturity
Date.

         Interest  shall be payable  hereunder on the  outstanding  daily unpaid
principal  amount  of each Loan  hereunder,  and,  to the  extent  permitted  by
applicable law, on any unpaid interest  payable hereon,  from the date that Loan
is made or, in the case of interest, from the date it falls due, shall accrue at
the rate of 12% per  annum and  shall be  payable  on the dates set forth in the
Credit  Agreement  until each such amount of  principal  and interest is paid in
full (both before and after judgment).

         The  amount  of  each  payment  due  hereunder  shall  be  made  to the
Administrative Agent at the Administrative Agent's Office for the account of the
Lender in immediately  available  funds not later than 12:00 noon (New York City
time) on the day the payment is due. All payments received after 12:00 noon (New
York City time) on any particular  Business Day shall be deemed  received on the
next succeeding  Business Day. All payments shall be made in lawful money of the
United States of America,  provided however, that interest hereon may be paid in
the form of PIK  Interest  Notes in the  circumstances  permitted  in the Credit
Agreement.

         The holder of this Note is  authorized to record the date and amount of
each Loan of the Lender and the date and amount of each payment or prepayment of
principal  thereof on the schedules  annexed hereto and made a part hereof,  and
any such  recordation  shall  constitute prima facie evidence of the accuracy of
the information so recorded absent manifest error;  provided that the failure of
the holder to make such recordation (or any error in such recordation) shall not
affect the obligations of the Borrower hereunder or under the Credit Agreement.

         The  undersigned  hereby  promises  to pay  all  reasonable  costs  and
expenses of any rightful holder hereof incurred in collecting the  undersigned's
obligations  hereunder  or in  enforcing  or  attempting  to enforce any of such
holder's   rights   hereunder,   including   reasonable   attorneys'   fees  and
disbursements as contemplated in the Credit Agreement,  whether or not an action
is filed in connection therewith.

         Upon  the  occurrence  of any  one or  more of the  Events  of  Default
specified in the Credit  Agreement,  all amounts  remaining  unpaid on this Note
shall  become,  or may be  declared  to be,  immediately  due and payable all as
provided therein.

         All parties now and hereafter liable with respect to this Note, whether
maker,  principal,  surety,  guarantor,  endorser  or  otherwise,  hereby  waive
presentment,  demand for payment, dishonor, notice of dishonor,  protest, notice
of protest and (except to the extent expressly required in the Credit Agreement)
any other notice or  formality,  to the fullest  extent  permitted by applicable
laws.

         THIS NOTE  SHALL BE  GOVERNED  BY, AND  CONSTRUED  AND  INTERPRETED  IN
ACCORDANCE  WITH,  THE  LAWS OF THE  STATE  OF NEW YORK  WITHOUT  REGARD  TO THE
PRINCIPLES OF CONFLICT OF LAWS THEREOF (OTHER THAN SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK).

                                    ASCENT ASSURANCE, INC.


                                    By:
                                       -----------------------------------------
                                       Name:
                                       Title:


<PAGE>


                                                                        Schedule
                                                                         to Note


                                    LOANS AND
                                    PAYMENTS
<TABLE>
<CAPTION>


<S>                     <C>                          <C>                           <C>                          <C>
======================= ============================ ============================= ============================ ==============
         Date               Amount of Loan Made       Amount of Principal Repaid   Unpaid Amount of Principal     Notation
                                                              or Prepaid                                           Made by

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


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


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


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


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



======================= ============================ ============================= ============================ ==============
</TABLE>


<PAGE>


                                                                     EXHIBIT A-2
                                                                       TO CREDIT
                                                                       AGREEMENT



                            FORM OF PIK INTEREST NOTE


$*                                                            New York, New York
                                                                April [  ], 2001



         FOR VALUE  RECEIVED,  the  undersigned  promises to pay to the order of
_________________  (the "Lender"),  the principal  amount of ($ ) or such lesser
amount as equals the aggregate outstanding amount of PIK Interest (as defined in
the  Credit  Agreement  referred  to  below)  that has  been  paid  through  its
conversion to the principal  amount of a Loan of the Lender  pursuant to Section
2.6(d)  of  the  Credit  Agreement,   payable  as  hereinafter  set  forth.  The
undersigned promises to pay interest on each amount of PIK Interest that remains
unpaid  from  time to time from the date such  amount  of PIK  Interest  becomes
principal as provided in Section  2.6(d) of the Credit  Agreement (the "Increase
Date" for such PIK  Interest)  until the date of  payment  in full,  payable  as
hereinafter set forth.

         Reference  is made to the Credit  Agreement  dated as of April 17, 2001
(as it may be amended, restated, supplemented or otherwise modified from time to
time,  the  "Credit  Agreement")  among  Ascent  Assurance,   Inc.,  a  Delaware
corporation,  as borrower, Credit Suisse First Boston Management Corporation, as
Administrative  Agent  (in  that  capacity,  the  "Administrative   Agent")  and
Arranger,  and the Lenders from time to time party thereto. Terms defined in the
Credit  Agreement  and not  otherwise  defined  herein are used  herein with the
meanings given those terms in the Credit Agreement.  This Note is one of the PIK
Interest  Notes and Notes  referred to in the Credit  Agreement,  and any holder
hereof is entitled  to all of the  rights,  remedies,  benefits  and  privileges
provided for in the Credit  Agreement as  originally  executed or as it may from
time to time be supplemented,  modified or amended. The Credit Agreement,  among
other things,  contains  provisions for acceleration of the maturity hereof, and
the  optional and  mandatory  prepayment  in whole or in part  hereof,  upon the
happening  of  certain  stated  events  upon the  terms and  conditions  therein
specified.

         This Note has been issued to evidence  interest  paid in kind under the
Credit  Agreement,  and all amounts due hereunder shall be treated as additional
amounts of principal due in respect of the Loans of the Lender.

         This Note is secured by Collateral and Pledged Collateral as more fully
set forth in the Security Documents.

         The outstanding principal  indebtedness evidenced by this Note shall be
payable as provided  in the Credit  Agreement  and in any event on the  Maturity
Date.

         Interest  shall be payable  hereunder on the  outstanding  daily unpaid
principal amount hereof,  and, to the extent permitted by applicable law, on any
unpaid interest  payable  hereon,  from the Increase Date for such PIK Interest,
shall  accrue at the rate of 12% per annum and shall be payable  dates set forth
in the Credit Agreement until each such amount of principal and interest is paid
in full (both before and after judgment).

         The  amount  of  each  payment  due  hereunder  shall  be  made  to the
Administrative Agent at the Administrative Agent's Office for the account of the
Lender in immediately  available  funds not later than 12:00 noon (New York City
time) on the day the payment is due. All payments received after 12:00 noon (New
York City time) on any particular  Business Day shall be deemed  received on the
next succeeding  Business Day. All payments shall be made in lawful money of the
United States of America,  provided however, that interest hereon may be paid in
the form of PIK  Interest  Notes in the  circumstances  permitted  in the Credit
Agreement.

         The holder of this Note is  authorized to record the date and amount of
each of its Loans  consisting of PIK Interest added to the principal  hereof and
the date and amount of each payment or  prepayment  of principal  thereof on the
schedules annexed hereto and made a part hereof,  and any such recordation shall
constitute  prima facie evidence of the accuracy of the  information so recorded
absent  manifest  error;  provided  that the  failure of the holder to make such
recordation (or any error in such recordation)  shall not affect the obligations
of the Borrower hereunder or under the Credit Agreement.

         The  undersigned  hereby  promises  to pay  all  reasonable  costs  and
expenses of any rightful holder hereof incurred in collecting the  undersigned's
obligations  hereunder  or in  enforcing  or  attempting  to enforce any of such
holder's   rights   hereunder,   including   reasonable   attorneys'   fees  and
disbursements as contemplated in the Credit Agreement,  whether or not an action
is filed in connection therewith.

         Upon  the  occurrence  of any  one or  more of the  Events  of  Default
specified in the Credit  Agreement,  all amounts  remaining  unpaid on this Note
shall  become,  or may be  declared  to be,  immediately  due and payable all as
provided therein.

         All parties now and hereafter liable with respect to this Note, whether
maker,  principal,  surety,  guarantor,  endorser  or  otherwise,  hereby  waive
presentment,  demand for payment, dishonor, notice of dishonor,  protest, notice
of protest and (except to the extent expressly required in the Credit Agreement)
any other notice or  formality,  to the fullest  extent  permitted by applicable
laws.

         THIS NOTE  SHALL BE  GOVERNED  BY, AND  CONSTRUED  AND  INTERPRETED  IN
ACCORDANCE  WITH,  THE  LAWS OF THE  STATE  OF NEW YORK  WITHOUT  REGARD  TO THE
PRINCIPLES OF CONFLICT OF LAWS THEREOF (OTHER THAN SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK).

                                      ASCENT ASSURANCE, INC.


                                      By:
                                         ---------------------------------------
                                         Name:
                                         Title:


<PAGE>




                                                                        Schedule
                                                                         to Note


                                    LOANS AND
                                    PAYMENTS

<TABLE>
<CAPTION>

<S>               <C>                         <C>                         <C>                    <C>
================= =========================== =========================== ====================== ==============
Date*               Amount of PIK Interest
                   Increase to Outstanding       Amount of Principal         Unpaid Amount of      Notation
                        Note Principal            Repaid or Prepaid             Principal           Made by
----------------- --------------------------- --------------------------- ---------------------- --------------


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


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


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


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

================= =========================== =========================== ====================== ==============
</TABLE>






<PAGE>



                                                                       EXHIBIT B
                                                                       TO CREDIT
                                                                       AGREEMENT



                           FORM OF NOTICE OF BORROWING

To:  Credit Suisse First Boston Management Corporation,  as Administrative Agent
     under  the  Credit  Agreement  dated  as of April  17,  2001  among  Ascent
     Assurance, Inc., a Delaware corporation (the "Borrower"), the Lenders party
     thereto,  the Administrative  Agent and the Arranger thereunder (as amended
     from time to time, the "Credit Agreement").

     Pursuant to Section 2.3 of the Credit  Agreement,  this Notice of Borrowing
("Notice") represents the request of Borrower to borrow on [ , ] (the "Borrowing
Date")1  from the Lenders the  principal  amount of [$ ] in Loans to be used for
the Borrower's  [contribution  of capital to] [purchase of surplus notes of] its
Insurance   Subsidiary,   [name]  (the  "Subsidiary")  as  contemplated  in  the
arrangements  approved  by the  Lenders  and the  Administrative  Agent  on [ ].
Proceeds  of such  Loans  are to be  wire-transferred  in  accordance  with  the
following wire instructions, which is the account of the Subsidiary to which the
Borrower is required to deposit [that capital  contribution] [the purchase price
for those surplus notes]:




                  [The Commitment on the Borrowing Date is $ .]

     The  undersigned  hereby  certifies that, as of the Borrowing Date, all the
applicable conditions contained in [Sections 4.1 and 4.2]2 [Section 4.2]3 of the
Credit  Agreement have been satisfied (or waived  pursuant to Section 9.1 of the
Credit Agreement).

     Unless otherwise defined herein, terms defined in the Credit Agreement have
the same meanings in this Notice.



<PAGE>


Dated this ___ day of _______, ___.


                                        ASCENT ASSURANCE, INC.


                                        By:
                                           -------------------------------------
                                           Name:
                                           Title:


<PAGE>




                                                                       EXHIBIT C
                                                                       TO CREDIT
                                                                       AGREEMENT



                           FORM OF CLOSING CERTIFICATE

                            [ASCENT ASSURANCE, INC.]
                         [NAME OF RELEVANT SUBSIDIARY]*


     Pursuant to Section  4.1(g) of the Credit  Agreement  dated as of April 17,
2001 among Ascent Assurance,  Inc., a Delaware  corporation,  the several Lender
parties  thereto  from time to time  parties  thereto,  and Credit  Suisse First
Boston Management Corporation, as Administrative Agent and Arranger (the "Credit
Agreement"),  the undersigned (the "Company") hereby certifies as follows (using
capitalized  terms that are not otherwise defined herein with the meanings given
to them in the Credit Agreement):

     1. The  representations  and warranties of the Company set forth in each of
the  Loan  Documents  to which it is a party,  or  which  are  contained  in any
certificate,  document or financial or other statement  furnished by it pursuant
to or in connection therewith or any such other document are true and correct in
all  material  respects  on and as of the date hereof with the same effect as if
made on and as of the date hereof.

     2. The Company has received all  documents and  instruments,  including all
consents,   authorizations   and  filings,   required  or  advisable  under  any
Requirement of Law or Contractual  Obligation of the Company in connection  with
the execution,  delivery,  performance,  validity and enforceability of the Loan
Documents to which it is a party except as expressly set forth in each document.
Attached hereto are copies of all consents,  authorizations and filings referred
to in [ ]**, which  consents,  authorizations  and filings are in full force and
effect as of the date hereof.

     3. No Default or Event of Default has occurred and is  continuing as of the
date  hereof  or after  giving  effect  to the  making  of the Loans on the date
hereof.

     4. There are no liquidation or dissolution  proceedings  pending or, to the
Borrower's knowledge,  threatened against the Borrower,  nor has any other event
occurred affecting or threatening the existence of the Borrower.



<PAGE>


                  IN WITNESS WHEREOF, the undersigned has hereunto set his name.

                           [ASCENT ASSURANCE, INC.]

                           [NAME OF SUBSIDIARY]


                           By:
                                ---------------------------------------
                                Name:
                                Title:


Date:                      , 2001
      ---------------------




<PAGE>




                                                                       EXHIBIT D
                                                                       TO CREDIT
                                                                       AGREEMENT


                     FORM OF COMMITMENT TRANSFER SUPPLEMENT

     COMMITMENT TRANSFER SUPPLEMENT, dated as of the date set forth in Item 1 of
Schedule I hereto,  among the Transferor Lender identified in Item 2 of Schedule
I hereto (the "Transferor Lender"),  each Purchasing Lender identified in Item 3
of Schedule I hereto  (each,  a  "Purchasing  Lender"),  and Credit Suisse First
Boston Management Corporation, as Administrative Agent for the Lenders under the
Credit Agreement described below (in such capacity,  the  "Administrative  Agent
").

                              W I T N E S S E T H:
                              - - - - - - - - - -

     WHEREAS,   this  Commitment  Transfer  Supplement  is  being  executed  and
delivered in accordance with Section 9.6(c) of the Credit Agreement, dated as of
April 17,  2001,  among Ascent  Assurance,  Inc.,  a Delaware  corporation  (the
"Borrower"),  the Transferor Lender identified below and the other Lenders party
thereto,  Credit Suisse First Boston Management  Corporation,  as Administrative
Agent and  Arranger  (as from time to time  amended,  supplemented  or otherwise
modified in accordance with the terms thereof, the "Credit Agreement");

     WHEREAS, each Purchasing Lender (if it is not already a Lender party to the
Credit Agreement) wishes to become a Lender party to the Credit Agreement; and

     WHEREAS,  the Transferor Lender is selling and assigning to each Purchasing
Lender its rights, obligations and commitments under the Credit Agreement;

     NOW,  THEREFORE,   the  parties  hereto  hereby  agree  as  follows  (using
capitalized  terms that are not otherwise defined herein with the meanings given
to them in the Credit Agreement):

          1. Upon receipt by the  Administrative  Agent of (i) a counterpart  of
     this Commitment Transfer Supplement, to which is attached a fully completed
     Schedule I and Schedule II, and which has been  executed by the  Transferor
     Lender,  each Purchasing Lender and any other person required by the Credit
     Agreement to consent to the transfer evidenced by this Commitment  Transfer
     Supplement,  and (ii) the  processing  fee referred to in Section 9.6(e) of
     the  Credit  Agreement,  the  Administrative  Agent  will  transmit  to the
     Borrower,  the Transferor  Lender and each  Purchasing  Lender,  a Transfer
     Effective  Notice,  substantially  in the  form  of  Schedule  III to  this
     Commitment  Transfer  Supplement  (a  "Transfer  Effective  Notice").  That
     Transfer  Effective  Notice shall set forth,  inter alia, the date on which
     the transfer effected by this Commitment  Transfer  Supplement shall become
     effective (the "Transfer  Effective  Date"),  which date shall be the fifth
     Business Day following the date of such Transfer Effective Notice. From and
     after the Transfer Effective Date, each Purchasing Lender shall be a Lender
     party to the Credit Agreement for all purposes thereof.

          2. At or before 12:00 noon,  local time for the  Transferor  Lender on
     the  Transfer  Effective  Date,  each  Purchasing  Lender  shall pay to the
     Transferor  Lender, in immediately  available funds, an amount equal to the
     purchase price, as agreed between the Transferor Lender and that Purchasing
     Lender (the  "Purchase  Price"),  of the portion  being  purchased  by that
     Purchasing Lender (that Purchasing Lender's "Purchased  Percentage") of the
     outstanding  Loans and other amounts owing to the  Transferor  Lender under
     the  Credit  Agreement  and its  Note(s).  Effective  upon  receipt  by the
     Transferor  Lender of the  Purchase  Price from a  Purchasing  Lender,  the
     Transferor Lender hereby irrevocably  sells,  assigns and transfers to that
     Purchasing Lender,  without recourse,  representation or warranty, and each
     Purchasing Lender hereby irrevocably purchases,  takes and assumes from the
     Transferor Lender,  that Purchasing  Lender's  Purchased  Percentage of the
     Commitments and the presently  outstanding Loans and other amounts owing to
     the Transferor  Lender under the Credit  Agreement and its Note(s) together
     with all instruments, documents and collateral security pertaining thereto.

          3. The Transferor  Lender has made  arrangements  with each Purchasing
     Lender with respect to (i) the portion, if any, to be paid, and the date or
     dates for payment,  by the Transferor  Lender to that Purchasing  Lender of
     any fees  heretofore  received  by the  Transferor  Lender  pursuant to the
     Credit Agreement prior to the Transfer Effective Date and (ii) the portion,
     if any, to be paid, and the date or dates for payment,  by such  Purchasing
     Lender  to the  Transferor  Lender  of fees or  interest  received  by such
     Purchasing  Lender  pursuant  to the  Credit  Agreement  from and after the
     Transfer Effective Date.

          4. (a) All principal payments that would otherwise be payable from and
     after the Transfer  Effective  Date to or for the account of the Transferor
     Lender pursuant to the Credit Agreement and its Note(s) shall,  instead, be
     payable to or for the account of the  Transferor  Lender and the Purchasing
     Lenders, as the case may be, in accordance with their respective  interests
     as reflected in this Commitment Transfer Supplement.

          (b) All interest,  fees and other amounts that would otherwise  accrue
     for the  account  of the  Transferor  Lender  from and after  the  Transfer
     Effective  Date  pursuant to the Credit  Agreement  and its Note(s)  shall,
     instead,  accrue for the  account  of, and be  payable  to, the  Transferor
     Lender and the Purchasing  Lenders,  as the case may be, in accordance with
     their  respective  interests  as  reflected  in  this  Commitment  Transfer
     Supplement. In the event that any amount of interest, fees or other amounts
     accruing prior to the Transfer  Effective Date was included in the Purchase
     Price  paid by any  Purchasing  Lender,  the  Transferor  Lender  and  each
     Purchasing  Lender will make  appropriate  arrangements  for payment by the
     Transferor  Lender to that  Purchasing  Lender of the relevant  amount upon
     receipt thereof from the Borrower.

          5. On or prior to the Transfer  Effective Date, the Transferor  Lender
     will deliver to the  Administrative  Agent its Note(s).  On or prior to the
     Transfer  Effective  Date, the Borrower will deliver to the  Administrative
     Agent a new Note or Notes of the  Borrower for each  Purchasing  Lender and
     (if the  Transferor  Lender  shall,  after  giving  effect to the  transfer
     effected by this Commitment Transfer  Supplement,  remain a Lender party to
     the Credit  Agreement)  the  Transferor  Lender,  in each case in principal
     amounts  reflecting,  in  accordance  with  the  Credit  Agreement,   their
     Commitments as adjusted  pursuant to this Commitment  Transfer  Supplement.
     Each new Note shall be dated the Closing Date.  Promptly after the Transfer
     Effective  Date,  the  Administrative  Agent  will  send  to  each  of  the
     Transferor  Lender and the Purchasing  Lender its new Note(s) and will send
     to the Borrower the  superseded  Note(s) of the Transferor  Lender,  marked
     "cancelled."

          6. Concurrently with the execution and delivery hereof, the Transferor
     Lender  will  provide to each  Purchasing  Lender  (if it is not  already a
     Lender party to the Credit  Agreement)  conformed  copies of all  documents
     delivered  to that  Transferor  Lender  on the  Closing  Date or any  other
     Borrowing Date prior to the date of this Commitment  Transfer Supplement in
     satisfaction of the conditions precedent set forth in the Credit Agreement.

          7. Each of the parties to this Commitment  Transfer  Supplement agrees
     that at any time and from  time to time  upon the  written  request  of any
     other party, it will execute and deliver such further documents and do such
     further acts and things as that other party may reasonably request in order
     to effect the purposes of this Commitment Transfer Supplement.

          8. By executing and delivering  this Commitment  Transfer  Supplement,
     the Transferor  Lender and each Purchasing Lender confirm to and agree with
     each other and the  Administrative  Agent and the Lenders as  follows:  (i)
     other  than  the  representation  and  warranty  that it is the  legal  and
     beneficial  owner of the interest being  assigned  hereby free and clear of
     any  adverse  claim,  the  Transferor  Lender  makes no  representation  or
     warranty  and assumes no  responsibility  with  respect to any  statements,
     warranties  or  representations  made in or in  connection  with the Credit
     Agreement   or   the   execution,   legality,   validity,   enforceability,
     genuineness,  sufficiency or value of the Credit Agreement,  the Note(s) or
     any other  instrument  or document  furnished  pursuant  thereto;  (ii) the
     Transferor  Lender  makes no  representation  or  warranty  and  assumes no
     responsibility  with respect to the financial  condition of the Borrower or
     any of its Subsidiaries or the performance or observance by the Borrower of
     any of its obligations under the Credit Agreement,  the Note(s), the Pledge
     Agreement or any other  instrument or document  furnished  pursuant hereto;
     (iii) each  Purchasing  Lender  confirms that it has received a copy of the
     Credit Agreement, together with copies of the financial statements referred
     to in  Section  3.1 of  the  Credit  Agreement,  the  financial  statements
     delivered pursuant to Section 5.1 of the Credit Agreement, if any, and such
     other  documents and  information as it has deemed  appropriate to make its
     own credit  analysis  and decision to enter into this  Commitment  Transfer
     Supplement;  (iv) each Purchasing  Lender will,  independently  and without
     reliance upon the Administrative  Agent, the Transferor Lender or any other
     Lender  and  based on such  documents  and  information  as it  shall  deem
     appropriate  at the time,  continue  to make its own  credit  decisions  in
     taking or not taking action under the Credit Agreement; (v) each Purchasing
     Lender appoints and authorizes the Administrative Agent to take such action
     as Administrative Agent on its behalf and to exercise such powers under the
     Credit  Agreement  and the other Loan  Documents  as are  delegated  to the
     Administrative Agent by the terms thereof, together with such powers as are
     reasonably  incidental  thereto,  all in accordance with Section 9.6 of the
     Credit  Agreement;   and  (vi)  each  Purchasing  Lender  will  perform  in
     accordance with their terms all the obligations  which, by the terms of the
     Credit Agreement, are required to be performed by it as a Lender.

          9. Schedule II hereto sets forth the revised Commitment and Commitment
     Percentage of the Transferor  Lender and each Purchasing  Lender as well as
     administrative information with respect to each Purchasing Lender.

          10. By executing and delivering this Commitment  Transfer  Supplement,
     each Purchasing  Lender  acknowledges that its claims on account of amounts
     payable in respect of the Loans  under the Credit  Agreement  and the other
     Loan  Documents  are  subordinate  to  the  terms  and  conditions  of  the
     Intercreditor Agreement on the terms provided therein.

          11. THIS  COMMITMENT  TRANSFER  SUPPLEMENT  SHALL BE GOVERNED  BY, AND
     CONSTRUED  IN  ACCORDANCE  WITH,  THE LAWS OF THE STATE OF NEW YORK WITHOUT
     REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.



<PAGE>




     IN WITNESS WHEREOF, the parties hereto have caused this Commitment Transfer
Supplement  to be  executed  by their  respective  duly  authorized  officers on
Schedule I hereto as of the date set forth in Item 1 of Schedule I hereto.



<PAGE>


                                                                     SCHEDULE I
                                                                  TO COMMITMENT
                                                                       TRANSFER
                                                                     SUPPLEMENT
                          COMPLETION OF INFORMATION AND
                            SIGNATURES FOR COMMITMENT
                               TRANSFER SUPPLEMENT

Item 1            (Date of Commitment
                  Transfer Supplement):

Item 2            (Transferor Lender):

Item 3            (Purchasing Lender):

Item 4            (Signatures of Parties
                  to Commitment Transfer
                  Supplement):


                                                     ---------------------, as
                                                     Transferor Lender


                                                     By:
                                                        ---------------------
                                                        Name:
                                                        Title:



                                                     --------------------, as
                                                     Purchasing Lender


                                                     By:
                                                        ----------------------
                                                        Name:
                                                        Title:


<PAGE>


The  undersigned  consents to the transfer  hereunder in favor of the Purchasing
Lender(s) specified herein:

ASCENT ASSURANCE, INC.,
  as Borrower


By:
     ---------------------------------------
     Name:
     Title:


ACCEPTED FOR RECORDATION
  IN REGISTER:

CREDIT SUISSE FIRST BOSTON MANAGEMENT CORPORATION,
  as Administrative Agent


By:
     ---------------------------------------
     Name:
     Title:


<PAGE>




                                                                     SCHEDULE II
                                                                   TO COMMITMENT
                                                                        TRANSFER
                                                                      SUPPLEMENT

                       LIST OF LENDING OFFICES, ADDRESSES
                       FOR NOTICES AND COMMITMENT AMOUNTS

[Name of Transferor
Lender]

                  Revised Commitment Amount:               $
                                                           ---------------------

                  Revised Commitment Percentage:                               %
                                                           ---------------------
[Name of Purchasing Lender]

                  New Commitment Amount:                   $
                                                           ---------------------

                  New Commitment Percentage:                                   %
                                                            --------------------


Address for Notices:
-------------------


[Address]
Attention:
            ------------------------
Telephone:
            ------------------------
Telecopy:
           -------------------------
Telephone
Confirmation:
             -----------------------


Lending Office:

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

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

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







<PAGE>


                                                                    SCHEDULE III
                                                                   TO COMMITMENT
                                                                        TRANSFER
                                                                      SUPPLEMENT

                        Form of Transfer Effective Notice

To: Ascent Assurance, Inc., [Transferor Lender and each Purchasing Lender]


     The undersigned,  as Administrative Agent under the Credit Agreement, dated
as of April 17, 2001 among Ascent Assurance,  Inc., a Delaware  corporation (the
"Borrower"),  the Lenders  party  thereto from time to time,  and Credit  Suisse
First Boston  Management  Corporation,  as  Administrative  Agent and  Arranger,
acknowledges  receipt  of an  executed  counterpart  of a  completed  Commitment
Transfer  Supplement.  Terms defined in that Commitment  Transfer Supplement are
used herein as therein defined.

     1. Pursuant to such Commitment  Transfer  Supplement,  you are advised that
the Transfer Effective Date will be _____________, ______ [insert fifth Business
Day following date of Transfer Effective Notice].

     2. Pursuant to such Commitment Transfer  Supplement,  the Transferor Lender
is required  to deliver to the  Administrative  Agent on or before the  Transfer
Effective Date its Notes.

     3.  Pursuant  to such  Commitment  Transfer  Supplement,  the  Borrower  is
required  to  deliver  to the  Administrative  Agent on or before  the  Transfer
Effective Date the following Notes, each dated the Closing Date:

     [Describe each new Note for Transferor  Lender and Purchasing  Lender as to
principal amount and payee.]

     4. Pursuant to that Commitment Transfer Supplement,  each Purchasing Lender
is  required to pay its  Purchase  Price to the  Transferor  Lender at or before
12:00 noon on the Transfer Effective Date in immediately available funds.

                                                     Very truly yours,

                                                     CREDIT SUISSE FIRST BOSTON
                                                     MANAGEMENT CORPORATION, as
                                                     Administrative Agent

                                                     By:
                                                        ------------------------
                                                        Name:
                                                        Title:


<PAGE>




                                                                       EXHIBIT E
                                                                       TO CREDIT
                                                                       AGREEMENT


                         FORM OF COMPLIANCE CERTIFICATE

                             ASCENT ASSURANCE, INC.

     Pursuant to Section  4.1(j) of the Credit  Agreement  dated as of April 17,
2001 among Ascent Assurance, Inc., a Delaware corporation (the "Borrower"),  the
several  Lenders from time to time parties  thereto (the  "Lenders")  and Credit
Suisse First Boston Management Corporation, as Administrative Agent and Arranger
(the "Credit  Agreement"),  the undersigned  hereby certifies that [he/she] is a
Responsible  Officer of the  Borrower and further  certifies  as follows  (using
capitalized  terms that are not defined in this  Certificate  with the  meanings
given to them in the Credit Agreement):

          1. No Default or Event of Default has occurred and is continuing as of
     the date hereof[, except as set forth in this Certificate].

          2. As of ________ (the "Computation  Date"), the Consolidated GAAP Net
     Worth of the Borrower was $  ___________,  ----------------  as computed on
     Attachment 1 hereto.

          3.  The  consolidated  Funded  Debt  Ratio  of the  Borrower  and  its
     Subsidiaries  for  the  fiscal  quarter  ended  most  recently  before  the
     Computation Date was ______% as computed on Attachment 2 hereto.

          4. As of the  Computation  Date,  the  RBC  Ratio  of  each  Insurance
     Subsidiary  other  than  National  Financial  Insurance  Company or Pacific
     Casualty Company, Inc. is not less than 105%.

          5. As of the  Computation  Date, the Statutory  Capital and Surplus of
     each Insurance Subsidiary (shown on Attachment 5 hereto) as of the last day
     of the fiscal quarter ended most recently  before the  Computation  Date is
     not less than the Minimum Statutory Surplus  Requirement for that Insurance
     Subsidiary, as specified in Exhibit G (as shown on Attachment 5 hereto).

          IN WITNESS WHEREOF,  the undersigned has hereunto set his name on this
     ___ day of ________, ___.

                                               ASCENT ASSURANCE, INC.


                                               By:
                                                  ------------------------------
                                                  Name:
                                                  Title:


<PAGE>



                                                                    ATTACHMENT 1
                           CONSOLIDATED GAAP NET WORTH

1.       The Capital Stock and additional
         paid-in capital of the Borrower and its
         Subsidiaries on a consolidated basis plus              $
                                                                ----------------

2.       The amount of retained earnings, inclusive
         of deferred revenues, or, in the case of a
         deficit, minus the deficit, minus                      $
                                                                ----------------

3.       The treasury stock, plus or minus                      $
                                                                ----------------

4.       Any other account which is customarily
         added or deducted in determining shareholders'
         equity (without giving effect to any increase
         or decrease to Consolidated GAAP Net Worth
         attributable to the application of SFAS No.  115,
         130 or 133)                                           $
                                                               -----------------

5.       Consolidated GAAP Net Worth of the Borrower
         (The sum of Item 1, Item 2, Item 3 and Item 4)        $___________

6.       Covenant Requirement:  Consolidated GAAP Net Worth of the Borrower
         (line 5) shall be an amount greater than or equal to the amount shown
         in Item 6(v) below:

         (i)                                                   $31,000,000


         (ii)     Any cumulative positive Net Income
                  of the Borrower and its Subsidiaries
                  for each fiscal quarter following the
                  fiscal quarter ended December 31, 2000      $ ___________

         (iii)    50%  of Item 6(ii)                          $ ___________

         (iv)     Deferred revenues as of the end of the
                  most recent fiscal quarter                  $ ___________

         (v)      Required Consolidated GAAP Net Worth
                  of the Borrower (The sum of Item 6(i),
                  Item 6(iii), and Item 6(iv))                $ ___________



<PAGE>



                                                                    ATTACHMENT 2


                                FUNDED DEBT RATIO

1.       Funded Debt: (Item 8 column A of Attachment 4)       $
                                                               -----------------

2.       Total Capital (Item 4 of Attachment 3)               $
                                                               -----------------

3.       Funded Debt Ratio (Item 1 divided by Item 2)          _____%


4.       Covenant Requirement: Funded Debt Ratio shall not be greater than 0.65
         to 1




<PAGE>


                                                                    ATTACHMENT 3


                                  TOTAL CAPITAL

1.       Funded Debt (Item 4 of Attachment 3) plus            $
                                                               -----------------

2.       Stockholders' equity plus                            $
                                                               -----------------

3.       Preferred stock, preference stock and
         preferred securities of the Borrower
         and its Consolidated Subsidiaries                    $
                                                               -----------------

4.       Total Capital (sum of Item 1, Item 2 and Item 3)     $
                                                               -----------------


<PAGE>



                                                                    ATTACHMENT 4
                                 INDEBTEDNESS4
<TABLE>
<CAPTION>

<S>                                     <C>                    <C>                    <C>
--------------------------------------- ---------------------- ---------------------- --------------------
                                        A. Long-Term           B.  Short-Term         C.  Total
                                        Indebtedness5 ($)      Indebtedness ($)       Indebtedness ($)
--------------------------------------- ---------------------- ---------------------- --------------------
--------------------------------------- ---------------------- ---------------------- --------------------
1.       Indebtedness for borrowed
     money or for the deferred
     purchase price of property or
     services (other than current
     trade liabilities incurred in
     the ordinary course of business
     and payable in accordance with
     customary    practices)
--------------------------------------- ---------------------- ---------------------- --------------------
--------------------------------------- ---------------------- ---------------------- --------------------
2.       To the extent not included
     above, indebtedness evidenced by
     a note, bond, debenture or
     similar instrument
--------------------------------------- ---------------------- ---------------------- --------------------
--------------------------------------- ---------------------- ---------------------- --------------------
3.       Capital Lease Obligations
--------------------------------------- ---------------------- ---------------------- --------------------
--------------------------------------- ---------------------- ---------------------- --------------------
4.       Reimbursement obligations
     under outstanding letters of
     credit and other obligations
     under acceptances and similar
     obligations
--------------------------------------- ---------------------- ---------------------- --------------------
--------------------------------------- ---------------------- ---------------------- --------------------
5.       To the extent not included
     above, liabilities secured by
     any Lien on owned property even
     if not assumed or otherwise
     liable for payment
--------------------------------------- ---------------------- ---------------------- --------------------
--------------------------------------- ---------------------- ---------------------- --------------------
6.       To the extent not included
     above, liabilities arising under
     the Hedging Agreements (other
     than interest rate caps)
--------------------------------------- ---------------------- ---------------------- --------------------
--------------------------------------- ---------------------- ---------------------- --------------------
7.       To the extent not included
     above, Guaranties
--------------------------------------- ---------------------- ---------------------- --------------------
--------------------------------------- ---------------------- ---------------------- --------------------
8.       Total Indebtedness (sum of
     Item 1, Item 2, Item 3, Item 4,
     Item 5, Item 6, and Item 7)
--------------------------------------- ---------------------- ---------------------- --------------------
</TABLE>



<PAGE>


                                                                    ATTACHMENT 5

                MINIMUM STATUTORY CAPITAL AND SURPLUS REQUIREMENT
                -------------------------------------------------


<TABLE>
<CAPTION>

    <S>                                                            <C>
    -------------------------------------------------------------- -----------------------------------------
                                                                         B. Minimum Statutory Surplus
                                                                        Requirement for that Insurance
                                                                    Subsidiary, as specified in Exhibit G
                       A. Insurance Subsidiary                             to the Credit Agreement
    -------------------------------------------------------------- -----------------------------------------
    -------------------------------------------------------------- -----------------------------------------
    1.       National Foundation Life Insurance Company                          $5.2 million
    -------------------------------------------------------------- -----------------------------------------
    -------------------------------------------------------------- -----------------------------------------
    2.       National Financial Insurance Company                                $1.4 million
    -------------------------------------------------------------- -----------------------------------------
    -------------------------------------------------------------- -----------------------------------------
    3.       American Insurance Company of Texas, Inc.                           $1.4 million
    -------------------------------------------------------------- -----------------------------------------
    -------------------------------------------------------------- -----------------------------------------
    4.       Freedom Life Insurance Company of America                           $7.5 million
    -------------------------------------------------------------- -----------------------------------------
    -------------------------------------------------------------- -----------------------------------------
    5.
    -------------------------------------------------------------- -----------------------------------------
    -------------------------------------------------------------- -----------------------------------------
    6.
    -------------------------------------------------------------- -----------------------------------------
    -------------------------------------------------------------- -----------------------------------------
    7.
    -------------------------------------------------------------- -----------------------------------------
</TABLE>







<PAGE>


                                                                       EXHIBIT F
                                                                       TO CREDIT
                                                                       AGREEMENT


                            FORM OF PLEDGE AGREEMENT

                              [Following this page]





<PAGE>


                                                                       EXHIBIT G
                                                                       TO CREDIT
                                                                       AGREEMENT


                      MINIMUM STATUTORY SURPLUS REQUIREMENT


<TABLE>
<CAPTION>

    <S>                                                            <C>
    -------------------------------------------------------------- -----------------------------------------
                                                                         B. Minimum Statutory Surplus
                                                                        Requirement for that Insurance
                                                                    Subsidiary, as specified in Exhibit G
                       A. Insurance Subsidiary                             to the Credit Agreement

    -------------------------------------------------------------- -----------------------------------------
    1.   National Foundation Life Insurance Company                              $5.2 million

    -------------------------------------------------------------- -----------------------------------------
    2.   National Financial Insurance Company                                    $1.4 million

    -------------------------------------------------------------- -----------------------------------------
    3.   American Insurance Company of Texas, Inc.                               $1.4 million

    -------------------------------------------------------------- -----------------------------------------
    4.   Freedom Life Insurance Company of America                               $7.5 million

    -------------------------------------------------------------- -----------------------------------------
    5.

    -------------------------------------------------------------- -----------------------------------------
    6.

    -------------------------------------------------------------- -----------------------------------------
    7.
    -------------------------------------------------------------- -----------------------------------------
</TABLE>




<PAGE>


                                                                       EXHIBIT H
                                                                       TO CREDIT
                                                                       AGREEMENT



                          REPORTS AND OTHER INFORMATION
                           REQUIRED BY SECTION 5.2(e)


                       [Format attached behind this page]



<PAGE>







                            Monthly Management Report

                    Freedom Life Insurance Company of America



                                [Month and Year]



<PAGE>


                                                                       EXHIBIT I
                                                                       TO CREDIT
                                                                       AGREEMENT


                     FORM OF GUARANTY AND SECURITY AGREEMENT



                              [Following this page]