Document:

ex101to8k03581_06052008.htm

    Exhibit 10.1

     

     

    
      LOAN
AND SECURITY AGREEMENT

      

      THIS AGREEMENT dated as of May 23,
2008, by and between REGIONS BANK, an Alabama banking corporation, whose address
is 111 N. Orange Avenue, Suite 1585, Orlando, Florida 32801 (the "Lender"), and
AMCOMP INCORPORATED, a Delaware corporation, whose address is 701 U.S. Highway
1, Suite 200, North Palm Beach, Florida 33408 (the "Borrower").

      

      RECITALS:

      

      A.           The
Borrower has requested the Lender to lend the sum of up to THIRTY MILLION AND
NO/100 DOLLARS ($30,000,000.00) subject to the compliance by Borrower of all the
terms and conditions hereof; and

      

      B.           Each
Guarantor will derive a benefit from such loan and therefore has agreed to
guarantee the debt of Borrower to Lender and enter into this Agreement;
and

      

      C.           The
Lender is willing to make such loan on the terms and conditions and on the
security as set forth herein.

      

      NOW, THEREFORE, in
consideration of the mutual promises, conditions, representations and warranties
hereinafter set forth and for other good and valuable consideration, the parties
hereto have mutually agreed as follows:

      

      1.                      Defined
Terms.  As used in this Loan and Security Agreement, the
following terms shall have the following meanings:

      

      Actuarial
Report means the actuarial review and valuation statements of the
Insurance Subsidiaries’ loss and loss adjustment expense reserve positions as of
December 31 of any fiscal year (or such other date requested by the Lender),
with respect to the insurance business in force, and covering such other
subjects as are customary in actuarial reviews and reasonably requested by the
Lender, prepared by Milliman USA or other independent actuarial firm reasonably
acceptable to the Lender in accordance with reasonable actuarial assumptions and
procedures, not inconsistent with the assumptions and procedures previously
employed, and accompanied by a report prepared by such actuarial firm reviewing
the adequacy of loss reserves of each Insurance Subsidiary (which firm shall be
provided access to or copies of all reserves analyses and valuations relating to
the insurance business of each such Insurance Subsidiary) together with its
report, substantially in the form of the report currently provided by such firm
to the Borrower.

      

      Additive
Basis means
the financial information from each of the relevant companies is added together
when determining the amount(s) to be used in the calculations required in this
agreement.

      

      Affiliate
means any corporation or other entity that is controlled by, controls, or is
under common control with, Borrower.

      

      Agreement
means this Loan and Security Agreement.

      

      Alternative
Rate means the rate per annum to be used for the interest rate on the
Loan in the event the Base Rate is not available.  The Alternative
Rate will be determined by adding or subtracting a spread from either the
Federal Funds Rate or the Prime Rate (as reasonably selected by Lender) so that
the Alternative Rate on the first day it becomes effective is reasonably
equivalent to the Base Rate as of the last day the Base Rate was
available.  Thereafter the Alternative Rate will be adjusted up or
down based on changes to the Federal Funds Rate or Prime Rate (as initially
selected) adjusted on the same date the Base Rate would have been adjusted and
utilizing the same spread as utilized on the first day the Alternative Rate
became effective.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      AmComp
Assurance means AmComp Assurance Corporation, a Florida
corporation.

      

      AmComp
Preferred means AmComp Preferred Insurance Company, a Florida
corporation.

      

      Annual
Statement means, with respect to any Insurance Subsidiary, such Insurance
Subsidiary’s annual statement to the insurance regulatory authorities of its
domiciliary state, as the same may be amended from time to time.

      

      Base
Rate means the interest rate applied to the unpaid principal balance of
the Note.

      

      Borrower
means AMCOMP INCORPORATED, a Delaware corporation.

      

      Closing
Date means the date hereof.

      

      Code
means the Uniform Commercial Code, as in effect in Florida from time to
time.

      

      Collateral
means collectively: (a) all of the stock of AmComp Preferred; (b) all Surplus
Notes now or hereafter owned by Borrower or its Subsidiaries.

      

      Contingent
Obligations means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Debt of any other Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt of such Person (whether arising by virtue of agreements to keep-well, to
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for the
purpose of assuring in any other manner the obligee of such Debt of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part).

      

      Contractual
Obligation means any provision of any security issued by a Person or of
any agreement, instrument, or undertaking to which such Person is a party or by
which it or any of its property is bound.

      

      Debt
means any indebtedness or liability for borrowed money and any other
indebtedness or liability or similar obligations which must be characterized as
a Debt (whether long term or short term) for the purpose of an audited financial
statement prepared pursuant to the standards of the American Institute of
Certified Public Accountants.

      

      Debt
Service Coverage Ratio means, as of the last day of any fiscal year of
the Borrower, the ratio of (a) (i) Service Fees from Insurance Subsidiaries for
such fiscal year, plus (ii) interest received by the Borrower on the Surplus
Notes, plus (iii) Dividends Available Without Regulatory Approval during such
fiscal year, plus (iv) Dividends Available With Regulatory Approval during such
fiscal year, plus (v) depreciation expense, plus (vi) Tax Sharing Revenue, minus
(vii) Expenses of the Borrower and the Non-Insurance Subsidiaries for such
fiscal year, minus (viii) dividends paid, to (b) (i) scheduled interest payments
on Debt for such fiscal year, plus (ii) scheduled principal payments on Debt for
such fiscal year.

      

      Default
Rate means that default rate more specifically described in the
Note.

      

      Dividends
Available With Regulatory Approval means dividends payable with respect
to ownership of the capital stock of an Insurance Subsidiary that an Insurance
Subsidiary may pay stockholders only with the prior approval of the
FOIR.

      

      Dividends
Available Without Regulatory Approval means dividends payable with
respect to ownership of the capital stock of an Insurance Subsidiary that such
Insurance Subsidiary is able to pay stockholders without the prior approval of
the FOIR.

       

      
        
          
          

        

        
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      EIG
means Employers Holdings, Inc., a Nevada corporation, or any subsidiary of
Employers Holdings, Inc.

      

      Employers
Merger means the merger of Sapphire Acquisition Corp, a Delaware
corporation and a wholly owned subsidiary of Employers Holdings, Inc., a Nevada
corporation, with and into the Borrower with the Borrower continuing as the
continuing company under the merger, pursuant to the Merger Agreement made and
entered into as of January 10, 2008, as amended by the amendment thereto dated
April 28, 2008, and as the same may be further amended, restated or otherwise
modified.

      

      Expenses
of the Borrower and the Non-Insurance Subsidiaries means operating
expenses of the Borrower and each and every Subsidiary with the exception of the
Insurance Subsidiaries.

      

      ERISA
means the Employee Retirement Income Security Act of 1974 and all rules and
regulations promulgated thereunder.

      

      Event of
Default means any one of the events enumerated in Article 9 (“Events of
Default”).

      

      Federal
Funds Rate means, for any day, the rate of interest per annum (rounded
upwards, if necessary, to the nearest whole multiple of 1/100 of 1%) equal to
the weighted average of the rates on overnight Federal funds transaction with
members of the Federal Reserve System arranged by Federal funds brokers as
published by the Federal Reserve Bank of New York on the Interest Rate
Determination Date.

      

      FOIR
shall mean the Florida Office of Insurance Regulation.

      

      GAAP
means generally accepted accounting principles in the United States of America
as defined by the Financial Accounting Standards Board or its successor, as in
effect from time to time consistently applied.

      

      Governmental
Authority means any nation or government, any state or other political
subdivision thereof and any entity exercising executive, legislative, judicial,
regulatory or administrative functions pertaining to government.

      

      Guarantor means PINNACLE
ADMINISTRATIVE COMPANY, a Florida corporation, PINNACLE BENEFITS, INC., a
Florida corporation, and AMSERV, INC., a Florida corporation, jointly and
severally.

      

      Insurance
Operating Expenses means those expenses as evidenced on each Insurance
Subsidiary’s SAP Statement.

      

      Insurance
Subsidiary means AmComp Preferred, AmComp Assurance and all Wholly Owned
Subsidiaries of the Borrower licensed to engage in the business of property and
casualty insurance.

      

      Interest
Expense shall mean interest payable on Debt during the period in
question.

      

      IRIS
Tests means the ratios and other financial measurements developed by the
NAIC under its Insurance Regulatory Information System or, in lieu thereof, any
successor thereto, replacement thereof, substitute therefor or other
substantially similar guidelines intended to measure the financial performance
of companies in the property and casualty insurance industry, as the same shall
be in effect from time to time.

      

      Lender
means REGIONS BANK, an Alabama banking corporation.

      

      Lien
means any interest in property (real, personal, or mixed, and tangible or
intangible) securing an obligation owed to, or a claim by, a Person other than
the owner of the property, whether such interest is based on the common law,
statute or contract, and including a security interest, security title or Lien
arising from a security agreement, mortgage, deed of trust, deed to secure debt,
encumbrance, pledge, conditional sale or trust receipt or a lease, consignment
or bailment for security purposes. The term “Lien” shall include covenants,
conditions, restrictions, leases, and other encumbrances affecting any property.
For the purpose of this Agreement, Borrower shall be deemed to be the owner of
any property which it has acquired or holds subject to a conditional sale
agreement or other arrangement pursuant to which title to the Property has been
retained by or vested in some other Person for security purposes.

       

      
        
          
          

        

        
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      Loan
means the credit facility in the principal amount of THIRTY MILLION AND NO/100
DOLLARS ($30,000,000.00) advanced by Lender to Borrower from time to time
evidenced by the Note described in Section 2.1 (and any substitutions therefor,
extensions thereof, or renewal thereof).

      

      Loan
Account means the loan account established on the books of Lender
pursuant to Section 2.3 (“Loan Account”).

      

      Loan
Documents means this Agreement, the Note, and each and every security
agreement, financing statement or other instrument executed and delivered to
evidence the Loan, and any and all other agreements, instruments, and documents
heretofore, now or hereafter, executed by Borrower and delivered to Lender in
respect to the transactions contemplated by this Agreement.

      

      Material
Adverse Effect means with respect to a Person, a material adverse effect
on its business, assets, properties, prospects, results of operation, or
condition (financial or other). The Employers Merger shall not be considered a
Material Adverse Effect.

      

      NAIC
means the National Association of Insurance Commissioners and any successor
thereof.

      

      Net
Losses means, as of the last day of any fiscal year, with respect to any
Insurance Subsidiary, loss and loss adjustment expense net of any salvage,
subrogation, or deductibles after deducting reinsured losses as evidenced on the
Annual Statement by each Insurance Subsidiary in accordance with
SAP.

      

      Net
Written Premiums means, as of the last day of any fiscal year, with
respect to any Insurance Subsidiary, the sum of the total amount of premiums
written after deducting or adding premiums on business ceded to or assumed from
others as evidenced on the Annual Statement by each Insurance Subsidiary in
accordance with SAP.

      

      Non-Excluded
Taxes means such term as is defined in Section 2.12.

      

      Non-Insurance
Subsidiary means any Subsidiary of the Borrower which is not an Insurance
Subsidiary.

      

      Note
means the promissory note executed and delivered by Borrower to Lender
evidencing the Loan, as further described hereinafter, and any other promissory
note, credit agreement or letter of credit agreement now or hereafter executed
by Borrower in favor of Lender with respect to the Loan, including without
limitation those promissory notes, credit agreements and letter of credit
agreements described on any schedule or exhibit attached to this Agreement from
time to time, and any renewals of, extensions of, modifications of, refinancings
to, consolidations of, and substitutions for any of the foregoing.

      

      Obligations
means all Loans and all other advances, debts, liabilities, obligations,
covenants, and duties owing, arising, due or payable from Borrower to Lender of
any kind or nature, present or future whether or not evidenced by any note,
guaranty or other instrument, arising under this Agreement or any of the other
Loan Documents, including any swap, option or forward obligations. The term
includes, without limitation, all interest, charges, expenses, fees, attorneys'
fees and any other sums chargeable to Borrower under any of the Loan
Documents.   Unless the Borrower and any other party to this
Agreement shall have otherwise agreed in writing or received written notice
thereof, this Agreement shall not secure any obligation owing to Lender which
constitutes “consumer credit” subject to the disclosure requirements of the
Federal Truth in Lending Act and any regulations promulgated
thereunder.

       

      
        
          
          

        

        
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      Permitted
Liens means

      

      
        	
                 
      

              	
                (i)

              	
                Liens
      in favor of the Lender;

              

      

      

      
        	
                 
      

              	
                (ii)

              	
                Liens
      (other than Liens created or imposed under ERISA) for taxes, assessments
      or governmental charges or levies not yet due or Liens for taxes being
      contested in good faith by appropriate proceedings for which adequate
      reserves determined in accordance with GAAP have been established (and as
      to which the Property subject to any such Lien is not yet subject to
      foreclosure, sale or loss on account
thereof);

              

      

      

      
        	
                 
      

              	
                (iii)

              	
                statutory
      Liens of landlords and Liens of carriers, warehousemen, mechanics,
      materialmen and suppliers and other Liens imposed by law or pursuant to
      customary reservations or retentions of title arising in the ordinary
      course of business, provided
      that such Liens secure only amounts not yet due and payable or, if due and
      payable, are unfiled and no other action has been taken to enforce the
      same or are being contested in good faith by appropriate proceedings for
      which adequate reserves determined in accordance with GAAP have been
      established (and as to which the Property subject to any such Lien is not
      yet subject to foreclosure, sale or loss on account
    thereof);

              

      

      

      
        	
                 
      

              	
                (iv)

              	
                Liens
      (other than Liens created or imposed under ERISA) incurred or deposits
      made by the Borrower and its Subsidiaries in the ordinary course of
      business in connection with workers’ compensation, unemployment insurance
      and other types of social security, or to secure the performance of
      tenders, statutory obligations, bids, leases, government contracts,
      performance and return-of-money bonds and other similar obligations
      (exclusive of obligations for the payment of borrowed
    money);

              

      

      

      
        	
                 
      

              	
                (v)

              	
                Liens
      in connection with attachments or judgments (including judgment or appeal
      bonds) provided
      that the judgments secured shall, within 30 days after the entry thereof,
      have been discharged or execution thereof stayed pending appeal, or shall
      have been discharged within 30 days after the expiration of any such
      stay;

              

      

      

      
        	
                 
      

              	
                (vi)

              	
                easements,
      rights-of-way, restrictions (including zoning restrictions), minor defects
      or irregularities in title and other similar charges or encumbrances not,
      in any material respect, impairing the sue of the encumbered Property for
      its intended purposes;

              

      

      

      
        	
                 
      

              	
                (vii)

              	
                Liens
      on Property securing purchase money Indebtedness to the extent permitted
      under this Agreement, provided
      that (i) the Indebtedness secured by such Liens does not exceed the
      purchase price of the assets financed, and (ii) any such Lien attaches to
      such Property concurrently with or within 90 days after the acquisition
      thereof;

              

      

      

      
        	
                 
      

              	
                (viii)

              	
                Liens
      arising under escrows, trusts, custodianships, separate accounts, funds
      withheld procedures, and similar deposits, arrangements or agreements
      established with respect to insurance policies, annuities, guaranteed
      investment contracts and similar products underwritten by, or Reinsurance
      Agreements entered into by, the Borrower or any Insurance Subsidiary in
      the ordinary course of business;

              

      

      

      
        	
                 
      

              	
                (ix)

              	
                deposits
      with insurance regulatory
authorities;

              

      

      

      
        	
                 
      

              	
                (x)

              	
                Liens
      on assets at the time such assets are acquired by the Borrower or any
      Subsidiary; provided
      that such Liens are not created in contemplation of such
      acquisition;

              

      

      

      
        	
                 
      

              	
                (xi)

              	
                normal
      and customary rights of setoff upon deposits of cash in favor of banks or
      other depository institutions;

              

      

      
 

      
        
          
          

        

        
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                (xii)

              	
                Liens
      existing as of the Closing Date, provided
      that no such Lien shall at any time be extended to or cover any Property
      other than the Property subject thereto on the Closing
    Date;

              

      

      

      
        	
                 
      

              	
                (xiii)

              	
                Liens
      arising from the rendering of a final judgment against the Borrower or any
      Subsidiary; provided
      that such Liens do not give rise to an Event of Default
      hereunder;

              

      

      

      
        	
                 
      

              	
                (xiv)

              	
                Liens
      arising in the ordinary course of business not to exceed $100,000.00 in
      the aggregate without the prior written consent of Lender;
    and

              

      

       

      
        	
                 
      

              	
                (xv)

              	
                Liens
      in connection with the Restated Loan
Agreement.

              

      

      

      Person
means an individual, partnership, corporation, joint stock company, firm, land
trust, business trust, unincorporated organization, limited liability company,
or other business entity, or a government or agency or political subdivision
thereof.

      

      Plan
means an employee benefit plan now or hereafter maintained for employees of
Borrower that is covered by Title IV of ERISA.

      

      Prime
Rate means the rate of interest per annum publicly announced from time to
time by Lender as its prime rate in effect at its principal office in
Birmingham, Alabama, with each change in the Prime Rate being effective on the
date such change is publicly announced as effective (it being understood and
agreed that the Prime Rate is a reference rate used by Lender in determining
interest rates on certain loans and is not intended to be the lowest rate of
interest charged on any extension of credit by Lender to any
debtor.

      

      Prohibited
Transaction means any transaction set forth in Section 406 of ERISA or
Section 4975 of the Internal Revenue Code of 1986.   The
Employers Merger shall not be considered a Prohibited Transaction.

      

      Property
means any interest in any kind of property or asset, whether real, personal or
mixed, or tangible or intangible.

      

      Quarterly
Statement means, with respect to any Insurance Subsidiary, such Insurance
Subsidiary’s quarterly statement to the insurance regulatory authorities of its
domiciliary state, as the same may be amended from time to time.

      

      Reportable
Event means any of the events set forth in Section 4043(b) of
ERISA.

      

      Requirement
of Law means as to any Person, the articles of incorporation and bylaws
or other organizational or governing documents of the Person, and any law,
treaty, rule or regulation, or determination of an arbitrator or a court or
other Governmental Authority, in each case applicable to or binding on the
Person or any of its property or to which the Person or any of its property is
subject.

      

      Restated
Loan Agreement means the Restated Loan and Security Agreement dated as of
May 23, 2008 by and between the Lender and the Borrower, as the same may be
amended, restated or otherwise modified from time to time.

      

      SAP
means, with respect to any Insurance Subsidiary, the accounting practices
prescribed or permitted by the insurance commissioner (or other similar
authority) in the jurisdiction of domicile of such insurance company for the
preparation of Annual Statements, Quarterly Statements and other financial
reports by insurance corporation of the same type as such Insurance Subsidiary,
as applied on a consistent basis.

      

      SAP
Statement means an Annual Statement or a Quarterly
Statement.

       

      
        
          
          

        

        
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      Service
Fees from Insurance Subsidiaries means the service fees received by the
Non-Insurance Subsidiaries paid by the Insurance Subsidiaries each month, which
fees are based on the amount of earned premium.

      

      Solvent
means as to any Person, means such Person (i) owns property, real, personal, and
mixed, whose aggregate fair saleable value is greater than the amount required
to pay all of such Person's Debt and Contingent Obligations, and (ii) is able to
pay all of its Debt as such Debt matures, and (iii) has capital sufficient to
carry on its business and transactions and all business and transactions in
which it is about to engage.

      

      Subsidiary
or Subsidiaries means any corporate entity or partnership, or other
business entity, the controlling interest of which is owned directly or
indirectly by Borrower.

      

      Surplus
Notes shall mean those certain promissory notes issued by AmComp
Preferred or AmComp Assurance to the Borrower.

      

      Tax
Sharing Revenue means as of the last day of any fiscal year, the net tax
benefit/(expense) recognized by the Borrower without giving effect to any
Insurance Subsidiary income or loss.

      

      Wholly
Owned Subsidiary of any Person means any Subsidiary 100% of whose voting
stock or other equity interests is at the time owned by such Person directly or
indirectly through other Wholly Owned Subsidiaries.

      

      Certain
Other Words.   All
accounting terms used herein have the respective meanings attributed to them
under, and shall be construed in accordance with, GAAP, unless indicated to be
SAP. The terms “herein,” “hereof,” and “hereunder,” and other words of similar
import refer to this Agreement as a whole and not to any particular section,
paragraph or subdivision. Any pronouns used shall be deemed to cover all
genders.  As used in this Agreement, (a) the word “including” is
always without limitation; (b) words in the singular number include words of the
plural number and vice versa; (c) the word “costs” includes all internal
out-of-pocket expenses, fees, costs, and expenses of experts and collection
agents, supersedeas bonds, and all attorneys' fees, costs, and expenses, whether
incurred before, during, or after demand or litigation, and whether pursuant to
trial, appellate, arbitration, bankruptcy, or judgement-execution proceedings;
and (d) the word “property” includes both tangible and intangible property,
unless the context otherwise requires. All references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations. All references to any instruments or agreements, including
references to any of the Loan Documents, shall include any and all modifications
or amendments thereto and any and all extensions or renewals thereof. All other
terms contained in this Agreement shall, unless otherwise defined herein or
unless the context otherwise indicates, have the meanings provided for by the
Uniform Commercial Code of the State of Florida.

      

      Directly
and Indirectly.  When any
provision of this Agreement or any Loan Document requires or prohibits action to
be taken by a Person, the provision applies regardless of whether the action is
taken directly or indirectly by the Person.

      

      2.           The
Loan.

      

      2.1           Loan.

      

      (a)           In
the event Borrower is in compliance with the terms, provisions and conditions of
this Agreement, the Lender hereby covenants and agrees to make available to the
Borrower to be disbursed from the date of this Agreement through May 23, 2010
the sum of up to THIRTY MILLION AND NO/100 DOLLARS ($30,000,000.00) to be
disbursed in accordance with the terms, provisions and conditions of this
Agreement, provided, however, this is a term loan and once principal has been
repaid it may not be reborrowed.  Borrower shall execute and deliver
to Lender the Note in the face amount of the Loan, payable to the order of
Lender.  The Note shall evidence the Borrower's obligation to repay
the Loan and is not incorporated by reference.

      

      (b)           In
no event shall any advances be made under the Note after May 23,
2010.

       

      
        
          
          

        

        
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      (c)           All
requests for advances shall be evidenced by written request of Borrower
indicating the amount and purpose of such advance and shall be delivered to
Lender one (1) business day prior to the date of the requested
advance.

      

      2.2           Terms
Governing All Loans.

      

      (a)           All
payments of interest and principal under the Note shall be made without setoff
or counterclaim, and in such coin or currency of the United States of America
that at the time of payment is legal tender for the payment of public and
private debt.

      

      (b)           Any
payments not made as and when due with respect to the Loan (whether at stated
maturity, by acceleration, or otherwise) shall bear interest at the Default Rate
from the date due until paid, payable on demand.

      

      2.3           Loan
Account.  Amounts due under the Note and otherwise under this
Agreement and under the Loan Documents shall be reflected in the Loan Account.
Lender shall enter disbursements hereunder or under the Note as debits to the
Loan Account and shall also record in the Loan Account all payments made by
Borrower and all proceeds of Collateral which are finally paid to Lender, and
may record therein, in accordance with customary accounting practice, all
charges and expenses properly chargeable to Borrower hereunder.

      

      2.4           Use of
Proceeds.  Borrower shall use the proceeds of the Loan for the
following purposes and no other: (a) to provide funds for the loan of money to
AmComp Preferred and AmComp Assurance in return for Surplus Notes; (b) to make
capital contributions to AmComp Preferred and AmComp Assurance for the purpose
of providing funds for the acquisition and capitalization of an additional
underwriting insurance company; (c) to provide funds for Borrower to acquire and
capitalize an additional underwriting insurance company; and (d) to provide
funds approved by Lender in its sole discretion to EIG for the purpose of
acquiring an additional underwriting insurance entity or entities.

      

      2.5           Term.  This
Agreement shall remain in force and effect until the Loan, and any renewals or
extensions, and all interest thereon and costs provided for herein with regard
to either of them have been indefeasibly paid or satisfied in full and until
Lender has no further obligation to advance funds to Borrower
hereunder.  Borrower may terminate without prepayment penalties at any
time the Loan facilities and prepay the Obligations at any time before the
scheduled maturity date by paying the Loan.  The indemnities provided
for in this Agreement shall survive the payment in full of the Loan and the
other Obligations and  the termination of this Agreement.

      

      2.6           Payments.  All
sums paid to Lender by Borrower hereunder shall be paid directly to Lender in
immediately available funds. Lender shall send Borrower statements of all
amounts due hereunder, which statements shall be considered correct and
conclusively binding on Borrower absent manifest error or negligence of Lender
unless Borrower notifies Lender to the contrary within thirty (30) days of its
receipt of any statement which it deems to be incorrect.  Lender may,
in its sole discretion (a) charge against any deposit account of Borrower all or
any part of any amount due hereunder and (b) advance to Borrower, and charge to
the Loan, a sum sufficient each month to pay all interest accrued on the Loan
and fees due under this Agreement during or for the immediately preceding month.
Borrower shall be deemed to have requested an advance under the Loan upon the
occurrence of an overdraft in any of Borrower’s checking accounts maintained
with Lender.  Notwithstanding the foregoing, if the Borrower provides
reasonable evidence that any sums set off by Lender were funds being held by
Borrower for or on behalf of its Insurance Subsidiaries, Lender will disgorge
those funds and reverse the set off to the extent of those funds.

      

      2.7           Non-Usage
Fee.  The Borrower agrees to pay a fee on any difference
between the amount of the Loan and the amount of credit it actually uses,
determined by the average of the daily amount of credit outstanding during the
calendar year.  The fee will be calculated at 0.25% per year and shall
be due January 30, 2009 and on the same day of each following year until the
earlier of the termination of the Loan or Termination of Advance Date (as
defined in the Note) in which case such fee shall be due at the earlier of the
Termination of Advance Date or termination of the Loan.

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

      

      2.8           Limitation
on Interest Charges.  Lender and Borrower intend to comply
strictly with applicable law regulating the maximum allowable rate or amount of
interest that Lender may charge and collect on the Loan to Borrower pursuant to
this Agreement. Accordingly, and notwithstanding anything in any Note or in this
Agreement to the contrary, the maximum, aggregate amount of interest and other
charges constituting interest under applicable law that are payable, chargeable,
or receivable under any Note and this Agreement shall not exceed the maximum
amount of interest now allowed by applicable law or any greater amount of
interest allowed because of a future amendment to existing law. Borrower is not
liable for any interest in excess of the maximum lawful amount, and any excess
interest charged or collected by Lender will constitute an inadvertent mistake
and, if charged but not paid, will be cancelled automatically, or, if paid, will
be either refunded to Borrower or credited against the outstanding principal
balance of the applicable Note, at the election of Lender.

      

      2.9           Capital
Adequacy.  If the Lender has determined, after the date hereof,
that the adoption or the becoming effective of, or any change in, or any change
by any Governmental Authority, central bank or comparable agency charged with
the interpretation or administration thereof in the interpretation or
administration of, any applicable law, rule or regulation regarding capital
adequacy, or compliance by the Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on capital or assets as a consequence of its commitments or
obligations hereunder to a level below that which the Lender could have achieved
but for such adoption, effectiveness, change or compliance (taking into
consideration the Lender’s policies with respect to capital adequacy), then,
ninety (90) days after presentation by Lender to Borrower of a statement in the
amount and setting forth in reasonable detail such Lender’s calculation thereof
and the assumptions upon which such calculation was based, the Borrower shall be
obligated to pay to the Lender such additional amount or amounts as will
compensate the Lender for such reduction.  Each determination by the
Lender of amounts owing under this Section shall, absent manifest error, be
conclusive and binding on the parties hereto.

      

      2.10           Illegality.  Notwithstanding
any other provision herein, if the adoption of or any change in any Requirement
of Law of in the interpretation or application thereof occurring after the
Closing Date shall make it unlawful for the Lender to charge interest on the
Loan based on the Base Rate as contemplated by this Agreement, (a) the Lender
shall promptly give written notice of such circumstances to the Borrower (which
notice shall be withdrawn whenever such circumstances no longer exist), (b) the
obligation of the Lender hereunder to charge interest on the Loan at the Base
Rate shall be forthwith be canceled and, until such time as it shall no longer
be unlawful for the Lender to charge interest at the Base Rate, the Lender shall
then have an obligation only to charge interest on the Loan at the Alternative
Rate and (c) the outstanding principal amount of the Loan shall automatically
bear interest at the Alternative Rate.

      

      2.11           Requirements
of Law.  If, after the
date hereof, the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof applicable to the Lender, or compliance by
the Lender with any request or directive (whether or not having the force of
law) from any central bank or other Governmental Authority, in each case made
subsequent to the Closing Date:

      

      (a)  shall subject the Lender
to any tax of any kind whatsoever with respect to the Loan made by it or its
obligation to make the Loan, or change the basis of taxation of payments to the
Lenders in respect thereof (except for (i) Non-Excluded Taxes covered by Section
2.12 and (ii) changes in taxes measured by or imposed upon the overall net
income, or franchise tax (imposed in lieu of such net income tax), of the Lender
or its applicable lending office, branch, or any affiliate
thereof);

      

      (b) shall impose, modify or hold
applicable any reserve, special deposit, compulsory loan or similar requirement
against assets held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other acquisition of
funds by, any office of the Lender which is not otherwise included in the
determination of Base Rate hereunder; or

       

      
        
          
          

        

        
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      (c) shall impose on the Lender any
other condition (excluding any tax of any kind whatsoever);

      

      and the
result of any of the foregoing is to increase the cost to the Lender, by an
amount which the Lender deems to be material, of making, continuing or
maintaining Loan or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, upon notice to the Borrower from the Lender, in
accordance herewith, the Borrower shall be obligated to promptly pay the Lender,
upon its demand, any additional amounts necessary to compensate the Lenders for
such increased cost or reduced amount receivable.  If the Lender
becomes entitled to claim any additional amounts pursuant to this subsection, it
shall provide prompt notice thereof to the Borrower, certifying (x) that one of
the events described in this paragraph (a) has occurred and describing in
reasonable detail the nature of such event, (y) as to the increased cost or
reduced amount resulting from such event and (z) as to the additional amount
demanded by the Lender and a reasonably detailed explanation of the calculation
thereof.  Such a certificate as to any additional amounts payable
pursuant to this subsection submitted by the Lender, to the Borrower shall be
conclusive and binding on the parties hereto in the absence of manifest
error.  This covenant shall survive the termination of this Agreement
and the payment of the Loan and all other amounts payable
hereunder.

      

      2.12           Taxes.  (a) Except as
provided below in this subsection, all payments made by the Borrower under this
Agreement and the Note shall be made free and clear of, and without deduction or
withholding for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by any court, or
governmental body, agency or other official, excluding taxes measured by or
imposed upon the overall net income of the Lender or its applicable lending
office, or any branch or affiliate thereof, and all franchise taxes, branch
taxes, taxes on doing business or taxes on the overall capital or net worth of
the Lender or its applicable lending office, or any branch or affiliate thereof,
in each case imposed in lieu of net income taxes, imposed: (i) by the
jurisdiction under the laws of which the Lender, applicable lending office,
branch or affiliate is organized or is located, or in which its principal
executive office is located, or any nation within which such jurisdiction is
located or any political subdivision thereof; or (ii) by reason of any
connection between the jurisdiction imposing such tax and the Lender, applicable
lending office, branch or affiliate other than a connection arising solely from
the Lender having executed, delivered or performed its obligations, or received
payment under or enforced, this Agreement or the Note.  If any such
non-excluded taxes, levies, imposts, duties, charges, fees, deductions or
withholdings (“Non-Excluded
Taxes”) are required to be withheld from any amounts payable to the
Lender hereunder or under the Note, (A) the amounts so payable to the Lender
shall be increased to the extent necessary to yield to the Lender (after payment
of all Non-Excluded Taxes) interest or any such other amounts payable hereunder
at the rates or in the amounts specified in this Agreement and the Note, and (B)
as promptly as possible thereafter the Borrower shall send to the Lender for its
own account, a certified copy of an original official receipt received by the
Borrower showing payment thereof.  If the Borrower fails to pay any
Non-Excluded Taxes when due to the appropriate taxing authority or fails to
remit to the Lender the required receipts or other required documentary
evidence, the Borrower shall indemnify the Lender for any incremental taxes,
interest or penalties that may become payable by the Lender as a result of any
such failure.  The agreements in this subsection shall survive the
termination of this Agreement and the payment of the advances and all other
amounts payable hereunder.

      

      (b) In connection with this transaction
there may or may not be due certain documentary stamp taxes and/or intangible
taxes imposed by the State of Florida (the “Florida
Taxes”).  In addition to (and not in limitation of) the
indemnification with respect to tax liabilities set forth above, the Borrower
agrees to indemnify the Lender, its directors, officer, agents and employees
from and against any and all liability, damage, loss, cost, expense or
reasonable attorney fees which may accrue to or be sustained by the Lender or
its directors, officers, agents or employees on account of or arising from any
claim or action raised by, filed or brought by or in the name of any Florida
governmental or administrative department with respect to nonpayment of the
Florida Taxes against the Lender, or any of its directors, officers, agents or
employees.

      

      2.13           Termination
and No Prepayment Fee.  The Loan may be
prepaid in full or in part at any time without a prepayment fee or
penalty.

       

      
        
          
          

        

        
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      3.           Conditions
of Lending.  In addition to any other requirements set forth in
this Agreement, Lender shall not be obligated to make any advance under the Loan
unless at the time thereof the following conditions shall have been
met:

      

      3.1           Company
Proceedings.  All proper company proceedings shall have been
taken by Borrower to authorize this Agreement and the transactions contemplated
hereby.

      

      3.2           Documentation.  All
instruments and proceedings in connection with the transactions contemplated by
this Agreement shall be satisfactory in form and substance to Lender, and Lender
shall have received on the date of this Agreement copies of all documents
including records of company proceedings, which it may have requested in
connection therewith, including certified copies of resolutions adopted by the
board of directors of Borrower and Guarantor, certificates of good standing
issued within a recent date prior to Closing Date, and copies of the Articles of
Incorporation and Bylaws certified by the respective corporate secretaries, and
all amendments thereto, of Borrower and each Guarantor.

      

      3.3           Loan
Documents.  Lender shall have received executed copies of all
instruments evidencing security for the Loan and copies of the insurance
policies and related certificates of insurance as required by this
Agreement.

      

      3.4           Default.  No
event shall have occurred and be continuing which constitutes an Event of
Default or which would constitute an Event of Default with the giving of notice
or the lapse of time or both.

      

      3.5           Perfection
of Liens.  UCC-l financing statements and collateral
assignments covering the Collateral executed by Borrower shall have been duly
recorded or filed in the manner and places required by law to establish,
preserve, protect, and perfect the interests and rights created or intended to
be created by this Agreement and any other security agreement and Lender has
received possession of the stock and Surplus Notes pledged as
Collateral.

      

      3.6           Reports.  Lender
shall have received all reports and information from Borrower called for under
the Agreement as and when due.

      

      3.7           Incumbency
Certificate.  Lender shall have received an incumbency
certificate, dated as of the date of this Agreement, executed by an officer of
Borrower, which shall identify by name and title and bear the signature of the
officer of the Borrower authorized to sign this Agreement and the Note on behalf
of Borrower. Lender shall be entitled to rely upon such incumbency certificate
in completing the transactions contemplated herein or in any Loan
Document.

      

      3.8           Lien
Search.  Lender shall have received a report from the Florida
Department of State and any other jurisdiction in which any of the Collateral is
located or in which Borrower is located indicating that there are no Liens
against that portion of the Collateral constituting personal property, except
the Liens permitted by Section 5.9 (“Liens and Security
Interests”).

      

      3.9           No
Adverse Change.  There shall have been no material adverse
change in the condition, financial or other, of Borrower, from such condition as
it existed on the date of the most recent financial statements of Borrower
delivered before the date of this Agreement.

      

      3.10           Fees and
Expenses.  Lender shall have received all amounts required to
be paid by Borrower pursuant to the commitment letter delivered by Lender to
Borrower in connection with the Loan.

      

      3.11           Additional
Documents.  Lender shall have received such legal opinions,
certificates, proceedings, instruments, and other documents as Lender or its
counsel may reasonably request to evidence:

       

      
        
          
          

        

        
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                (i)

              	
                the
      valid and binding authorization execution and delivery of the Loan
      Documents;

              

      

       

      
        	
                 
      

              	
                (ii)

              	
                valid
      corporate existence of Borrower and compliance by Borrower with legal
      requirements;

              

      

       

      
        	
                 
      

              	
                (iii)

              	
                the
      valid authority of the Borrower to enter into this
    Agreement.

              

      

      

      4.           Guaranty
and Grant of Security Interest.

      

      4.1           Grant of Security
Interest.

      

      As security for the payment of the
Obligations, including any extensions or renewals or changes relating thereto,
and all costs and expenses of collection thereof, including, without limitation,
attorneys fees, Borrower hereby assigns to Lender and grants to Lender a
security interest in and Lien upon the following:

      

      (a)           All
of the Collateral;

      

      (b)           All
of proceeds, products, and profits as the case may be, of the
Collateral;

      

      (c)           All
accessions to, substitutions for and all replacements, products, profits,
income, and cash and non-cash proceeds of the items above.

      

      Borrower agrees to execute and deliver,
or cause the execution and delivery of, such security agreements, assignments,
guaranties, consents, and financing statements as may be required by Lender to
evidence such security, all in form satisfactory to Lender, all in form
satisfactory to Lender in furtherance of the intent of this
Agreement.

      

      4.2           Guaranty.

      

      The Borrower shall cause to be duly
executed and delivered to the Lender the guaranty of each Guarantor in form and
substance reasonably acceptable to Lender, whereby each Guarantor guarantees the
Borrower's obligations under the Note, this Agreement and the Loan Documents as
hereinafter defined.

      

      5.           Representations,
Warranties, and General Covenants.

      

      Borrower represents, warrants, and
covenants to and with Lender which representations, warranties, and covenants
shall survive until the Obligations are indefeasibly satisfied in full,
that:

      

      5.1           Organization
and Qualification of Borrower and Guarantor.  Borrower is a
Delaware corporation duly organized, validly existing and in good standing under
the laws of its state of incorporation; has the power to own its properties and
to carry on its business as now being conducted; and is duly qualified to do
business and is in good standing in every jurisdiction in which the character of
the properties owned by it or in which the transaction of its business makes its
qualification necessary, except where the failure to be so qualified would not
reasonably be expected to result in a Material Adverse Effect.

      

      Each Guarantor is a Florida corporation
duly organized, validly existing and in good standing under the laws of its
state of incorporation; has the power to own its properties and to carry on its
business as now being conducted; and is duly qualified to do business and is in
good standing in every jurisdiction in which the character of the properties
owned by it or in which the transaction of its business makes its qualification
necessary, except where the failure to be so qualified would not reasonably be
expected to result in a Material Adverse Effect.

      

      5.2           Corporate
Power and Authorization; Compliance with Law.  Borrower has
full power and authority to enter into this Agreement, to borrow hereunder, to
execute and deliver the Note and the other Loan Documents, and to incur the
obligations provided for herein, all of which have been authorized by all proper
and necessary corporate action. Borrower is in material compliance with all
Requirements of Law applicable to it and possesses all governmental franchises,
licenses, and permits that are necessary to own or lease its assets and to carry
on its business as now conducted.

       

      
        
          
          

        

        
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      5.3           Enforceability:
No legal Bar.  This Agreement has been, and each other Loan
Document to which it is a party will be, duly executed and delivered to Lender
on behalf of Borrower. This Agreement and each of the other Loan Documents
constitute, and each Note when executed and delivered for value received will
constitute, a valid and legally binding obligation of Borrower enforceable in
accordance with their respective terms. The execution, delivery, and performance
by Borrower of this Agreement and the other Loan Documents to which it is a
party, Borrower’s borrowings pursuant to this Agreement, and use of the loan
proceeds, will not violate any Requirement of Law applicable to Borrower or
constitute a breach or violation of, a default under, or require any consent
under, any of its Contractual Obligations except for any violation of any
Requirement of Law or breach, violation or default of any Contractual
Obligations that would not reasonably be expected to result in a Material
Adverse Effect, and will not result in a breach or violation of, or require the
creation or imposition of any Lien on any of its properties or revenues pursuant
to any Requirement of Law or Contractual Obligation.

      

      5.4           Pending
Actions.  No action or investigation is pending or, so far as
Borrower's officers and directors know, threatened before or by any court or
administrative agency against Borrower or against any of its businesses,
properties or revenues (a) with respect to any of the Loan Documents or any of
the transactions contemplated by them, or (b) that would reasonably be
anticipated to result in any Material Adverse Effect on Borrower.

      

      5.5           Financial
Statements.  All financial statements and reports furnished by
Borrower to Lender are complete and correct in all material respects and fairly
present the financial condition of Borrower and the results of its operations
and transactions as of the dates and for the periods referred to and have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved or if specified herein by SAP. There are no liabilities, direct
or indirect, fixed or contingent, of Borrower as of the date of such financial
statements which are not reflected therein or in the notes thereto. Neither said
financial statements nor any other financial statements, reports, and
information furnished by Borrower to Lender contains any untrue statement of a
material fact or omits a material fact necessary to make the statements
contained therein or herein not misleading. There is no fact which Borrower has
failed to disclose to Lender in writing which materially affects adversely or,
so far as Borrower can now foresee, will materially affect adversely the
Collateral, business, prospects, profits, or condition (financial or otherwise)
of Borrower or the ability of Borrower to perform this Agreement.

      

      5.6           No
Change.  Since the date of the last financial statements
submitted to Lender, there has not been: (i) any material adverse change in the
assets, liabilities, business, or condition (financial or other) of Borrower;
(ii) any loss, damage, or destruction, whether or not covered by insurance, that
materially adversely affected the assets or property of Borrower; (iii) any
change in any of Borrower's accounting methods, practices, or principles or
depreciation and amortization rates or policies, except as required by law or to
conform with GAAP; or (iv) except in the usual and ordinary course of business,
any of the following: (A) any breach or termination by Borrower of any
Contractual Obligation that would reasonably be anticipated to result in a
Material Adverse Effect; (B) except in the ordinary course of the Borrower’s
business, any disposition by Borrower of, or the imposition of a Lien on, any
asset of Borrower, except for Permitted Liens; (C) except in the ordinary course
of Borrower’s business, any cancellation of a debt owed to, or a claim held by,
Borrower; or (v) since the closing of the Loan, any Event of Default. No
Contractual Obligation of Borrower and no Requirement of Law materially
adversely affects, or to the extent that Borrower can reasonably anticipate
might have a Material Adverse Effect on Borrower.

      

      5.7           Title to
Properties.  Borrower has good title to all of its material
assets. Borrower enjoys peaceable and undisturbed possession under all real
property leases under which it is operating and none of such leases contain any
provisions which may reasonably be anticipated to materially and adversely
affect or impair the operations of Borrower, and all of such leases are valid
and subsisting and are in full force and effect.

      

      5.8           Taxes.  Borrower
has filed all federal, state, and local tax returns which are required to be
filed and has paid, or made adequate provision for the payment of, all taxes
which have or may become due pursuant to said returns or to assessments received
by Borrower, except for, in respect of all of the foregoing, those that are
being contested in good faith by appropriate proceedings. Borrower has paid all
withholding, FICA and other payments required by federal, state or local
governments with respect to any wages paid to employees.

       

      
        
          
          

        

        
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      5.9           Collateral.  The
security interests granted to Lender herein (a) constitute and, as to
subsequently acquired property included in the Collateral will constitute, a
security interest under the Code entitled to all of the rights, benefits and
priorities provided by the Code and (b) are, and as to such subsequently
acquired Collateral will be, fully perfected, superior, and prior to the rights
of all third persons, now existing or hereafter arising, subject only to
Permitted Liens. All of the Collateral is intended for use solely in
Borrower's or
its subsidiaries’ business. Borrower shall defend the Collateral against all
claims and demands of all other parties who at any time claim any interest in
the Collateral.

      

      5.10           Labor Law
Matters.  The Borrower is not in violation of any applicable
labor laws or regulations or any collective bargaining agreement or other labor
agreements or in violation of any minimum wage, wage-and-hour, or other similar
laws or regulations, except in each case for any violation that would not
reasonably be expected to result in a Material Adverse Effect. No collective
bargaining agreement concerning any of Borrower’s employees exists or is being
negotiated.

      

      5.11           Judgment
Liens.  Neither Borrower nor any of its assets is subject to
any unpaid judgments (whether or not stayed) or judgment liens in any
jurisdiction that would reasonably be anticipated to have a Material Adverse
Effect.

      

      5.12           Place of
Business.  Borrower's chief executive offices are located at
701 U.S. Highway 1, North Palm Beach, Florida 33408.

      

      5.13           Full
Disclosure.  All information furnished by Borrower to Lender
concerning Borrower, its financial condition, the Collateral, or otherwise for
the purpose of obtaining credit or an extension of credit, is, or will be at the
time the same is furnished, accurate and correct in all material respects and
complete insofar as completeness may be necessary to give Lender a true and
accurate knowledge of the subject matter. The books of account, minute books,
and stock record books of Borrower are complete and correct in all material
respects and have been maintained in accordance with good business practices,
and there have been no transactions adversely affecting the business of Borrower
that should have been set forth therein and have not been so set
forth.  The Lender has been advised of the Employers
Merger.

      

      5.14           Existing
Debt.  Borrower is not in default with respect to any of its
existing Debt or with respect to any Contractual Obligation to which Borrower is
a party which default would reasonably be anticipated to have a Material Adverse
Effect. Borrower is not subject to any federal, state or local tax Liens, nor
has such Person received any notice of deficiency or other official notice to
pay any taxes. Borrower has paid all sales and excise taxes payable by
it.

      

      5.15           Insolvency.  Borrower
is now Solvent.

      

      5.16           Representations
True.  No representation or warranty by Borrower contained
herein or in any certificate or other document furnished by Borrower pursuant
hereto contains any untrue statement of material fact or omits to state a
material fact necessary to make such representation or warranty not misleading
in light of the circumstances under which it was made.

      

      5.17           Compliance
with Loan Documents.  Borrower acknowledges and agrees that its
timely and complete compliance with all of the terms and conditions contained in
the documents evidencing and securing the loan obligation is material
consideration for the loan.  Lender shall at all times act reasonably
and in good faith.

      

      5.18           Financial
Statement.  Borrower acknowledges and agrees that Lender's
ability to monitor and evaluate the status of the loan is dependent upon
Borrower’s timely providing financial information required herein.

       

      
        
          
          

        

        
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      5.19.           Patriot
Act.  Neither Borrower,
any affiliate of the Borrower, nor any person owning an interest in either of
the foregoing is a "Specially Designated National" or a "Blocked Person" as
those terms are defined in the Office of Foreign Asset Control Regulations (31
CFR Section 500 et seq.) and/or any other list of terrorists or terrorist
organizations maintained pursuant to any of the rules and regulations of Office
of Foreign Asset Control, Department of the Treasury or pursuant to any other
applicable Executive Orders (such lists are collectively referred to as the
"OFAC Lists").

      

      5.20.           Governmental
Regulations, Etc.

      

      (a) No part of the proceeds of the Loan
will be used, directly or indirectly, for the purpose of purchasing or carrying
any “margin stock” within the meaning of Regulation U.  If requested
by the Lender, the Borrower will furnish to the Lender a statement to the
foregoing effect in conformity with the requirements of Form FR U-1 referred to
in said Regulation U.  No indebtedness being reduced or retired out of
the proceeds of the Loan was or will be incurred for the purpose of purchasing
or carrying any margin stock within the meaning of Regulation U or any “margin
security” within the meaning of Regulation T.  “Margin stock” within
the meanings of Regulation U does not constitute more than 25% of the value of
the consolidated assets of the Borrower and its Subsidiaries.  None of
the transactions contemplated by this Agreement (including, without limitation,
the direct or indirect use of the proceeds of the Loan) will violate or result
in a violation of the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, or regulation issued pursuant thereto, or
Regulation T, U or X.

      

      (b) Neither the Borrower nor any of its
Subsidiaries is subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act or the Investment Company Act of 1940, each
as amended.  In addition, neither the Borrower nor any of its
Subsidiaries is (i) an “investment company” registered or required to be
registered under the Investment Company Act of 1940, as amended, and is not
controlled by such a company, or (ii) a “holding company”, or a “subsidiary
company” of a “holding company” or an “affiliate” of a “holding company” or of a
“subsidiary” of a “holding company”, within the meaning of the Public Utility
Holding Company Act of 1935, as amended.

      

      (c) The Insurance Subsidiaries have
filed all reports, statements, documents, registrations, filings, or submissions
required to be filed with any Governmental Authority with respect to which the
failure to so file will individually or in the aggregate would reasonably be
anticipated to have a Material Adverse Effect, or except as otherwise agreed to
by the applicable Governmental Authority.  All such filings complied
with applicable law in all material respects when filed, and no material
deficiencies have been asserted by any Governmental Authority with respect to
such filings or submissions.

      

      (d) No director, executive officer or
principal shareholder of the Borrower or any of its Subsidiaries is a director,
executive officer or, to the actual knowledge of the Borrower, a principal
shareholder of the Lender.  For the purposes hereof the terms
“director”, “executive officer” and “principal shareholder” (when used with
reference to the Lender) have the respective meanings assigned thereto in
Regulation O issued by the Board of Governors of the Federal Reserve
System.

      

      5.21.           Insurance
Subsidiaries.  The following
entities are Insurance Subsidiaries:  AmComp Preferred and AmComp
Assurance.

      

      5.22.           Non-Insurance
Subsidiaries.  The following
entities are Non-Insurance Subsidiaries: Pinnacle Administrative Company,
Pinnacle Benefits, Inc. and AmServ, Inc.

      

      5.23.           Subsidiaries.  Other than the
Insurance Subsidiaries and Non-Insurance Subsidiaries, the Borrower has no
Subsidiaries.

      

      5.24           ERISA.
The Borrower maintains no Plan other than the 401(k) of Borrower currently in
effect.

       

      
        
          
          

        

        
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      6.           Affirmative
Covenants.  Borrower agrees and covenants that until the
Obligations have been indefeasibly paid in full and until Lender has no further
obligation to make advances under the Loan, Borrower shall:

      

      6.1           Insurance.  Maintain
insurance, including but not limited to casualty and business interruption, with
insurance companies reasonably satisfactory to Lender on such of its properties,
in such amounts and against such risks as is customarily maintained in similar
businesses operating in the same vicinity, in amounts not less than in effect as
of the date of this Agreement as long as such levels continue to be acceptable
to Lender in its reasonable discretion, and shall file with Lender upon request,
from time to time, a detailed list of the insurance then in effect, stating the
names of the insurance companies, the amounts and rates of the insurance, dates
of expiration thereof, and the properties and risks covered thereby, and, within
sixty (60) days after notice in writing from Lender, shall obtain such
additional insurance as Lender may reasonably request.

      

      6.2           Company
Existence: Qualification.  Maintain its corporate existence
and, in each jurisdiction in which the character of the property owned by it or
in which the transaction of its business makes its qualification necessary,
maintain good standing.

      

      6.3           Taxes.  During
its fiscal year, accrue all current tax liabilities of all kinds, all required
withholding of income taxes of employees, all required unemployment
contributions, all required payments to employee benefit plans, and pay the same
when they become due, except in each case, those that are being contested in
good faith by appropriate proceedings or where the failure to do so would not
reasonably be expected to result in a Material Adverse Effect.

      

      6.4           Compliance
with Laws.  Comply with all Requirements of Law, including
Environmental Regulations, and pay all taxes, assessments, charges, claims for
labor, supplies, rent, and other obligations which, if unpaid, might give rise
to a Lien against property of Borrower, except claims being contested in good
faith by appropriate proceedings (provided Borrower promptly notifies Lender in
writing of such contest), and against which reasonable reserves have been set up
or except where the failure to comply would not reasonably be expected to result
in a Material Adverse Effect. Specifically, Borrower shall pay when due all
taxes and assessments upon the Collateral, this Agreement, the Note, or any Loan
Document, including, without limitation, any stamp taxes or intangibles taxes
imposed by virtue of the transactions outlined herein.

      

      6.5           Financial
Statements/Tax Returns.  The Borrower will
keep its books of accounts in accordance with generally accepted accounting
practices and will furnish to the Lender:

      

      6.5(1)     Annual
Financial Statements.

      

      (i)           As
soon as available, and in any event within one hundred fifty (150) days after
the close of each fiscal year of Borrower and its Subsidiaries, a consolidated
and consolidating balance sheet and income statement of the Borrower and its
Subsidiaries, as of the end of such fiscal year, together with related
consolidated statements of operations, retained earnings, changes in
stockholders’ equity and cash flows for such fiscal year, setting forth in
comparative form consolidated figures for the preceding fiscal year, all such
financial information described above to be in reasonable form and detail and
audited by independent certified public accountants of recognized national
standing reasonably acceptable to the Lender and whose opinion shall be to the
effect that such financial statements have been prepared in accordance with GAAP
(except for changes with which such accountants concur) and shall not be limited
as to the scope of the audit or qualified as to the status of the Borrower and
its Subsidiaries as a going concern;

      

      (ii)           As
soon as available, and in any event within one hundred fifty (150) days after
the close of each fiscal year of an Insurance Subsidiary, the most recent SAP
Statement of such Insurance Subsidiary, as audited in accordance with applicable
law and accompanied by a certificate of knowledgeable officer of such Insurance
Subsidiary to the effect that such SAP Statement fairly presents in all material
respects the financial condition of such Insurance Subsidiary and has been
prepared in accordance with SAP;

       

      
        
          
          

        

        
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      6.5(2)     Quarterly
Financial Statements.

      

      (i)           As
soon as available, and in any event within sixty (60) days after the close of
each fiscal quarter of Borrower and its Subsidiaries a consolidated and
consolidating balance sheet and income statement of the Borrower and its
Subsidiaries, as of the end of such fiscal quarter, together with related
consolidated statements of operations, retained earnings, changes in
stockholders’ equity and cash flows for such fiscal quarter, setting forth in
comparative form consolidated figures for the preceding fiscal quarter, all such
financial information described above to be in reasonable form and detail and
reasonably acceptable to the Lender and accompanied by a certificate of the
chief financial officer of the Borrower to the effect that such quarterly
financial statements fairly present in all material respects the financial
condition of the Borrower and its Subsidiaries and have been prepared in
accordance with GAAP, subject to changes resulting from audit and normal
year-end audit adjustments;

      

      (ii)           As
soon as available, and in any event within sixty (60) days after the close of
each fiscal quarter (other than the fourth fiscal quarter, in which case one
hundred twenty (120) days after the end thereof) of an Insurance Subsidiary the
most recent SAP Statement of such Insurance Subsidiary, in each case accompanied
by a certificate of a knowledgeable officer of such Insurance Subsidiary to the
effect that such SAP Statement fairly presents in all material respects the
financial condition of such Insurance Subsidiary and has been prepared in
accordance with SAP;

      

      The Borrower also, with reasonable
promptness, will furnish to the Lender such other data as the Lender may
reasonably request.

      

      6.6           Officer’s
Certificate. 
At the time of delivery of the financial statements called for by Section
6.5(1)(i), Borrower shall deliver to Lender a certificate of the chief financial
officer of the Borrower, substantially in the form of Exhibit “A” attached
hereto demonstrating compliance with the financial covenants contained in this
Agreement by calculation thereof as of the end of each such fiscal
year.

      

      6.7           Visits
and Inspections.  Borrower shall keep true books, records, and
accounts that completely, accurately, and fairly reflect all dealings and
transactions relating to its assets, business, and activities and shall record
all transactions in such manner as is necessary to permit preparation of its
financial statements in accordance with GAAP.

      

      6.8           Payments
on Note.  Duly and punctually pay the principal and interest on
the Note, in accordance with the terms of this Agreement and of the Note, and
pay or otherwise satisfy or cancel all other Debt of Borrower reflected on the
financial statements delivered to Lender and referred to in this Agreement and
all other Debt incurred after the date hereof in accordance with the terms of
such Debt.

      

      6.9           Conduct
of Business.  Continue to engage in the insurance business, and
do all things necessary to preserve, renew, and keep in full force and effect
such rights, patents, permits, licenses, franchises, and trade names necessary
to continue its business. Borrower shall comply in all material respects with
all Contractual Obligations applicable to it and its business and properties
which are useful or necessary to the operation of its business.

      

      6.10           Maintenance
of Properties.  Keep these properties used in connection with,
or useful to, its business in good repair, working order and condition,
reasonable wear and tear excepted, and from time to time make all needed and
proper repairs, renewals, replacements, additions, and improvements thereto and
comply with the provisions of all leases to which it is a party or under which
it occupies property so as to prevent any loss or forfeiture thereof or
thereunder.

      

      6.11           Additional
Documents.  Join Lender in executing any security agreements,
assignments, consents, financing statements or other instruments, in form
satisfactory to Lender, as Lender may from time to time request in connection
with the Collateral and the other security for the Loan if consistent with the
intent of this Agreement.

       

      
        
          
          

        

        
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      6.12           Notice to
Lender.  Promptly notify Lender of: (a) any default or Event of
Default, (b) the acceleration of the maturity of any Debt or Contractual
Obligation; (c) a default in the performance of or compliance with any
Requirement of Law, Environmental Regulation, or Contractual Obligation of
Borrower, in each case which would reasonably be expected to result in a
Material Adverse Effect; (d) any litigation, dispute, or proceeding that is
pending or known by Borrower’s officers to be threatened against Borrower and
that might involve a claim for damages or a request for injunctive, enforcement,
or other relief that, if granted, might reasonably be expected to have a
Material Adverse Effect on Borrower, or (e) a change in either the name or the
principal place of business of Borrower or the office where its books and
records are kept; (f) any change in its accounting methods, policies, or
practices for financial reporting purposes or any material change in its
accounting methods, policies, or practices for tax reporting purposes; and (g) a
material adverse change in the business, operations, assets, property, or
condition (financial or other) of Borrower. Borrower shall provide with each
notice pursuant to this section details of the occurrence referred to in the
notice and stating what action Borrower proposes to take with respect to
it.

      

      6.13           Dividends.  Except as
otherwise provided by law, the Borrower shall (a) cause each of its Subsidiaries
from time to time to pay cash dividends or make other distributions or payments
in cash (directly or, through other Subsidiaries of the Borrower, indirectly) to
the Borrower in amount that, taken together, are sufficient to permit the
Borrower to (i) pay all principal of and any accrued interest in respect of the
Loan and all other indebtedness or obligations of any and every kind owing by
the Borrower to the Lender as the same shall become due and payable (whether at
stated maturity, by mandatory prepayment, by acceleration or otherwise) and (ii)
pay for all capital expenditures made by the Borrower, (b) cause each of its
Insurance Subsidiaries to make payments in accordance with the terms of any
service agreements with Borrower, and (c) cause each of its Insurance
Subsidiaries to request on a timely basis regulatory approval to the extent
necessary for such Subsidiary to pay such dividends or make such distributions
or payments.  Except as may be provided by applicable law, there are
no restrictions on the payment of dividends by Borrower, its
subsidiaries.

      

      6.14           Net
Written Premiums to Statutory Surplus Ratio.  The Borrower
shall cause the ratio of Net Written Premiums to policyholder’s surplus for all
Insurance Subsidiaries, on an Additive Basis, as of the last day of each fiscal
year of its Insurance Subsidiaries, to be no greater than 3.0:1.0.

      

      6.15           Combined
Ratio.  The ratio of Net
Losses plus Insurance Operating Expenses to Net Premiums Written for all
Insurance Subsidiaries, as of the last day of each fiscal year, on an Additive
Basis, shall not exceed 106% for any one year or 100% for any two consecutive
years based on the Annual Statements filed with the FOIR.

      

      6.16           Actuarial
Report.  Within one
hundred fifty (150) days of Borrower’s fiscal year end, an Actuarial Report
prepared by Milliman USA or such other independent actuary reasonably acceptable
to the Lender and certified as to such Insurance Subsidiary’s (including AmComp
Preferred’s) reserve position as of such fiscal year end by such independent
actuary.  To the extent an Actuarial Report contains confidential
information, the Lender agrees to abide to a mutually acceptable confidentiality
agreement.

      

      6.17           IRIS Test
Results.  Within one
hundred fifty (150) days of Borrower’s fiscal year end, a copy of the final
report to each Insurance Subsidiary from the NAIC as to such Insurance
Subsidiary’s status under the IRIS Tests.

      

      6.18           Debt
Service Coverage Ratio.  The Borrower shall maintain at all
times a minimum Debt Service Coverage Ratio of 1.5:1.0 to be measured on an
annual basis based on the annual financial statements submitted by Borrower to
Lender.

      

      6.19           Insolvency.  Borrower,
after giving effect to the transactions contemplated hereby, at all times during
the term of this Agreement will be Solvent.

       

      
        
          
          

        

        
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      7.           Negative
Covenants.  Until the Obligations have been indefeasibly repaid
in full and until Lender has no further obligation to make advances under the
Loan, without the prior written consent of Lender, Borrower shall
not:

      

      7.1           Financing
Statements.  Authorize any financing statement (except Lender's
financing statements) to be on file with respect to the
Collateral.  Financing statements will be permitted for any assets of
the Borrower not defined as Collateral in this Agreement.

      

      7.2           Liquidation,
Merger or Consolidation.  Liquidate, wind up, or dissolve
itself (or suffer any liquidation or dissolution), or enter into any merger or
consolidation, or acquire all or substantially all of the assets of any Person;
or sell, lease, transfer or otherwise dispose of any of its assets, except sales
in the ordinary course of its business.  Acquisitions by Borrower of
future subsidiaries will be permitted by Lender in accordance with the terms of
this Agreement. Notwithstanding the foregoing, the Employers Merger shall not
constitute a violation of this covenant.

      

      7.3           Loans or
Advances.  Make loans or advances to third parties except as
contemplated by this Agreement in excess of THREE HUNDRED THOUSAND AND NO/100
DOLLARS ($300,000.00) in the aggregate without Lender’s consent.  For
purposes of this paragraph, Subsidiaries of Borrower shall not be considered
third parties.

      7.4           Reserved.

      

      7.5           Change in
Business or Management.  Enter into any business which is
substantially different from an insurance related business, change the name,
identity, or corporate structure of Borrower, or dismiss Frederick R. Lowe or
Debra Cerre-Ruedisili from their managerial responsibilities without the written
consent of Lender which shall not be unreasonably withheld. Notwithstanding the
foregoing, the Employers Merger will not be a violation of the covenant, and in
the event of such merger, change in management involving Frederick R. Lowe or
Debra Cerre-Ruedisili shall not constitute a violation of this
covenant.

      

      7.6           Liquidate,
Dissolve or Suspend Business.  Liquidate, dissolve or
voluntarily suspend business for more than a specified number of days (as
determined by Lender).

      

      7.7           Guaranty.  In individual
transaction amount exceeding $1,000,000.00, guarantee or otherwise in any way
become responsible for the indebtedness or obligations of any other third party
entity or person without prior written consent of Lender. Subsidiaries of
Borrower shall not be considered third party entities.

      

      8.           Additional
Representations, Covenants, and Agreements Relating to
Collateral.

      

      8.1           Affirmation
of Representations.  Each request for a loan or advance made by
Borrower pursuant to this Agreement or any of the other Loan Documents shall
constitute (i) an automatic representation and warranty by Borrower to Lender
that there does not then exist any default or Event of Default and (ii) a
reaffirmation as of the date of said request that all of the representations and
warranties of Borrower contained in this Agreement and the other Loan Documents
are true in all material respects except to the extent if a particular
representation or warranty relates to a particular date or time it shall only be
required to be true in all material respects as of such date or time, except for
any changes in the nature of Borrower's business or operations that would render
the information contained in any exhibit attached hereto either inaccurate or
incomplete, so long as Lender has consented to such changes or such changes are
expressly permitted by this Agreement.

      

      8.2           Reserved.

      

      8.3           Discharge
of Taxes and Liens.  At its option and after prior written
notice to Borrower, Lender may discharge taxes, Liens, security interests, or
other encumbrances at any time levied or placed on the Collateral and may pay
for the maintenance and preservation of the Collateral. Borrower agrees to
reimburse Lender, on demand, for any payment made or expense incurred by Lender
pursuant to the foregoing authorization, including, without limitation,
attorneys' fees.

       

      
        
          
          

        

        
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      8.4           Complete
Records.  Borrower will at all times keep accurate and complete
records of the Collateral, and Lender or its agents shall have the right to call
at Borrower's place or places of business at intervals to be determined by
Lender (but no more than two times per year unless there is an Event of
Default), upon reasonable notice and during Borrower's regular business hours,
and without hindrance or delay, to inspect and examine the Inventory and to
inspect, audit, check, and make abstracts from the books, records, journals,
orders, receipts, computer printouts, correspondence, and other data relating to
the Collateral or to any other transactions between the parties hereto. Lender
will keep all records of Borrower confidential.

      

      8.5           Uniform
Commercial Code Financial Statement.  Borrower agrees that a
financial statement with respect to the Collateral may be filed by
Lender.

      

      9.           Events of
Default.   The occurrence of any one or more of the
following events shall constitute an Event of Default (unless and except to the
extent that the same is cured to the satisfaction of Lender within the
applicable cure period, if any, or, at the sole discretion of Lender, at any
time thereafter):

      

      9.1           Payment
Default.  If Borrower: (a) shall fail to make any payment of
any installment of principal on the Note when the same shall become due and
payable, whether at stated maturity, by declaration, upon acceleration in
accordance with the terms hereof or thereof, or otherwise, and such default
shall continue for fifteen (15) days; or (b) shall fail to make any payment of
any installment of interest on the Note or any fees or charges or other amounts
owing hereunder, under any of the other Loan Documents or in connection herewith
or therewith, when the same shall become due and payable, and such default shall
continue for fifteen (15) or more days; or

      

      9.2           Fees and
Expenses.  If Borrower shall fail to pay when due any expense,
fee or charge provided for in this Agreement or the Loan Documents when the same
shall become due and payable, and such default shall continue for fifteen (15)
or more days; or

      

      9.3           Other
Defaults.  If Borrower fails to perform, keep or observe any
other covenant, agreement or provision of the Note or of this Agreement or of
any other Obligation or if there is a default in any Loan Document, Note or
Obligation, and such default shall continue unremedied for a period of at least
thirty (30) days after the earlier of a responsible officer of the Borrower or
Guarantor becoming aware of such default or written notice thereof by the
Lender; provided, however, that in the event the Borrower can not complete the
cure of any such default within such thirty (30) day period, the Borrower shall
have an additional period, not to exceed sixty (60) days, to cure such default,
on the condition that the Borrower has commenced such cure during the initial
thirty (30) day period and thereafter diligently pursues the cure of such
default to completion; or

      

      9.4           Representations
False.  If any warranty, representation, or other statement
made or furnished to Lender by or on behalf of Borrower or in any of the Loan
Documents proves to be false or misleading in any material respect when made or
furnished; or

      

      9.5           Financial
Difficulties.  If Borrower shall be involved in financial
difficulties as evidenced.

      

      (a)           by
its admission in writing of its inability to pay its debts generally as they
become due or of its ceasing to be Solvent;

      

      (b)           by
its commencing a voluntary case under the United States Bankruptcy Code or any
similar law regarding debtor's rights and remedies or an admission seeking the
relief therein provided;

       

      
        
          
          

        

        
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      (c)           by
its making a general assignment for the benefit of its creditors;
or

      

      (d)           by
its voluntarily liquidating or terminating operations or applying for or
consenting to the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of such Person or of all or of a substantial
part of its assets; or

      

      9.6           Involuntary
Proceedings.  If without its application, approval, or consent,
a proceeding shall be commenced, in any court of competent jurisdiction, seeking
in respect of Borrower any remedy under the federal Bankruptcy Code, the
liquidation, reorganization, dissolution, winding-up, or composition or
readjustment of debt, the appointment of a trustee, receiver, liquidator or the
like of such Person, or of all or any substantial part of the assets of such
Person, or other like relief under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts, which results
in the entry of an order for relief or such adjudication or appointment remains
undismissed or undischarged for a period of sixty (60) days; or

      

      9.7           Reserved.

      

      9.8           Default
on Other Obligations.  If Borrower or any Affiliate of Borrower
defaults under the Restated Loan Agreement, as may be amended, modified or
restated from time to time, by and between Borrower and Lender; or

      

      9.9           Judgments.  If
a final judgment for the payment of money in an amount no less than $500,000.00
shall be rendered against Borrower and the same shall remain undischarged for a
period of 30 days during which execution shall not be effectively stayed, unless
such judgment is fully covered by collectible insurance or bond; or

      

      9.10           Actions.  If
Borrower shall be convicted under any law; or

      

      9.11           Collateral.  If
a creditor of Borrower shall obtain possession of any of the Collateral by any
legal means; or

      

      9.12           Priority
of Security Interest.  If any security interest or Lien of
Lender hereunder or under any other Security Agreement shall not constitute a
perfected security interest of first priority in the Collateral thereby
encumbered, subject only to Permitted Liens.

      

      On the occurrence of any Event of
Default, Lender or the holder of the Note may at its option proceed to protect
and enforce its rights by suit in equity, action at law and/or the appropriate
proceeding either for specific performance of any covenant or condition
contained in the Note or in any Loan Document, and/or declare the unpaid balance
of the Loan and Note together with all accrued interest to be forthwith due and
payable, and thereupon such balance shall become so due and payable without
presentation, protest or further demand or notice of any kind, all of which are
hereby expressly waived.

      

      Without limiting the foregoing, upon
the occurrence of any Event of Default, and at any time thereafter, Lender shall
have the rights and remedies of a secured party under the Code (and the Uniform
Commercial Code of any other applicable jurisdiction) in addition to the rights
and remedies provided herein or in any other instrument or document executed by
Borrower.

      

      In addition to any other remedy
available to it, Lender shall have the right to the extent provided by law, upon
the occurrence of an Event of Default, to seek and obtain the appointment of a
receiver to take possession of and operate and/or dispose of the Collateral and
any costs and expenses incurred by Lender in connection with such receivership
shall bear interest at the Default Rate.

       

      
        
          
          

        

        
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      10.           Indemnification.    Borrower
agrees to defend, indemnify and hold harmless Lender, its directors, officers,
employees, accountants, attorneys, and agents (the “Indemnitees”) from and
against any and all claims, demands, judgments, damages, actions, causes of
action, injuries, orders, penalties, costs and expenses (including attorneys'
fees and costs of court) of any kind whatsoever arising out of or relating to
any breach or default by Borrower or any other Person under this Agreement or
any Loan Document or the failure of Borrower to observe, perform or discharge
Borrower’s duties hereunder or thereunder. Without limiting the generality of
the foregoing, Borrower's obligation to indemnify Lender shall include indemnity
from any and all claims, demands, judgments, damages, actions, causes of action,
injuries, orders, penalties, costs, and expenses arising out of or in connection
with the activities of Borrower, its predecessors in interest, third parties who
have trespassed on Borrower’s property, or parties in a contractual relationship
with Borrower, whether or not occasioned wholly or in part by any condition,
accident or event caused by an act or omission of the Indemnitees, which: (a)
arise out of the actual, alleged or threatened discharge, dispersal, release,
storage, treatment, generation, disposal, or escape of radioactive materials,
radioactivity, pollutants or other toxic or hazardous substances, including any
solid, liquid, gaseous, or thermal irritant or contaminant, including smoke,
vapor, soot, fumes, acids, alkalis, chemicals, and waste (including materials to
be recycled, reconditioned or reclaimed); or (b) actually or allegedly arise out
of the use, specification, or inclusion of any product, material, or process
containing chemicals or radioactive material, the failure to detect the
existence or proportion of chemicals or radioactive material in the soil, air,
surface water or groundwater, or the performance or failure to perform the
abatement of any pollution source or the replacement or removal of any soil,
water, surface water, or groundwater containing chemicals or radioactive
material; or (c) arises out of or relates to breach by Borrower of any of the
provisions of the Environmental Matters section of this Agreement.

      

      11.           Miscellaneous.

      

      11.1           Costs and
Expenses.  Borrower shall bear all expenses of Lender
(including reasonable fees and expenses of its counsel, subject to the terms of
the letter regarding attorney fees dated of even date herewith by and between
Winderweedle, Haines, Ward & Woodman, P.A. and the Borrower) in connection
with the preparation of this Agreement and the Loan Documents, and the issuance
and delivery of the Note to Lender and also in connection with any amendment or
modification thereto. Borrower agrees to indemnify and save Lender harmless
against all broker's and finder's fees whose services have been retained or
utilized by or through Borrower, if any.  If at any time or times
hereafter, whether before or after the occurrence of an Event of Default, Lender
employs counsel to advise or provide other representation with respect to this
Agreement, or to collect the balance of the Loan, or to take any action in or
with respect to any suit or proceeding relating to this Agreement or any of the
Loan Documents, or to protect, collect, or liquidate the Collateral or to
attempt to enforce any security interest or Lien granted to Lender by Borrower
then in any such events, then the prevailing party in any such proceeding shall
be entitled to recover from the other, all of the reasonable attorneys' fees
arising from such services and any expenses, costs and charges relating thereto
shall constitute additional obligations of Borrower payable on demand of Lender.
Without limiting the foregoing, Borrower shall pay or reimburse Lender for all
recording and filing fees, intangibles taxes, documentary and revenue stamps,
other taxes or other expenses and charges payable in connection with this
Agreement, the Note or any Loan Document, or the filing of any Loan Document,
financing statements or other instruments required by Lender in connection with
the Loan.

       

      
        
          
          

        

        
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      11.2           Waivers
of Provisions.  All amendments of this Agreement and all
waivers and suspensions by Lender of any provision of this Agreement or of the
Loan Documents and all waivers and suspensions by Lender of any default or Event
of Default hereunder shall be effective only if (i) in writing and signed by a
duly authorized representative of Lender and (ii) accompanied by such fees and
charges as may be imposed by Lender in connection with the amendment. The fees
may include out-of-pocket expenses incurred by Lender in administration of the
Loan or in evaluation of the proposed waiver, amendment or suspension, as well
as additional facility fees and administrative fees that may be required by
Lender in connection with Borrower's request. The fees may include additional
compensation to Lender for the extension of the credit facilities represented by
the Loan. Any such amendment, waiver, or suspension may be granted only in the
sole discretion of Lender.

      

      11.3           Actions
Not Constituting a Waiver.  Neither (i) the failure at any time
or times hereafter to require strict performance by Borrower of any of its
provisions, warranties, terms and conditions contained in this Agreement or any
other agreement, document or instrument now or hereafter executed by Borrower,
and delivered to Lender, nor (ii) the failure of Lender to take action or to
exercise its remedies with respect to any default or Event of Default hereunder,
nor (iii) any delay or omission of Lender to exercise any right, remedy, power,
or privilege hereunder after the occurrence of a default or Event of Default,
shall act to waive, affect, or diminish any right of Lender to demand strict
compliance with the terms of this Agreement or to exercise remedies with respect
to any default or Event of Default.

      

      11.4           Headings:
Exhibits.  Except for the definitions set forth in this
Agreement, the headings of the articles, sections, paragraphs and subdivisions
of this Agreement are for convenience of reference only, are not to be
considered a pan hereof, and shall not limit or otherwise affect any of the
terms hereof. Unless otherwise expressly indicated, all references in this
Agreement to a section or an exhibit are to a section or an exhibit of this
Agreement. All exhibits referred to in this Agreement are an integral part of it
and are incorporated by reference in it.

      

      11.5           Right of
Setoff.  Upon and after the occurrence of any Event of Default,
Lender may, and is hereby authorized by Borrower, at any time and from time to
time, to the fullest extent permitted by applicable laws, and without advance
notice to Borrower (any such notice being expressly waived by Borrower), setoff
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and any other indebtedness at any time owing by
Lender to, or for the credit or the account of, Borrower against any or all of
the Obligations of Borrower now or hereafter existing whether or not such
Obligations have matured and irrespective of whether Lender has exercised any
other rights that it has or may have with respect to such Obligations,
including, without limitation, any acceleration rights. The aforesaid right of
setoff may be exercised by Lender against Borrower or against any trustee in
bankruptcy, debtor in possession, assignee for the benefit of the creditors,
receiver, or execution, judgment or attachment creditor of Borrower, or such
trustee in bankruptcy, debtor in possession, assignee for the benefit of
creditors, receiver, or execution, judgment or attachment creditor,
notwithstanding the fact that such right of setoff shall not have been exercised
by Lender prior to the making, filing or issuance, or service upon Lender of, or
of notice of, any such petition; assignment for the benefit of creditors;
appointment or application for the appointment of a receiver or issuance of
execution, subpoena, order or warrant. Lender agrees to notify Borrower after
any such setoff and application, provided that the failure to give such notice
shall not affect the validity of such setoff and application. The rights of
Lender under this Section are in addition to the other rights and remedies
(including, without limitation, other rights of setoff) which Lender may
have.  Notwithstanding the foregoing, if the Borrower provides
reasonable evidence that any sums set off by Lender were funds being held by
Borrower for or on behalf of its Insurance Subsidiaries, Lender will disgorge
those funds and reverse the set off to the extent of those funds.

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

      

      11.6           Survival
of Covenants.  All covenants, agreements, representations and
warranties made herein and in certificates or reports delivered pursuant hereto
shall be deemed to have been material and relied on by Lender, notwithstanding
any investigation made by or on behalf of Lender, and shall survive the
execution and delivery to Lender of any Note or Loan Document.

      

      11.7           Addresses.  Any
notice or demand which by any provision of this Agreement is required or
provided to be given shall be deemed to have been sufficiently given or served
for all purposes by being delivered in person or by facsimile to the party to
whom the notice or demand is directed or by being sent as first class mail,
postage prepaid, to the following address:

      

      
        	
                 
      

              	
                If
      to Borrower:

              	
                701
      U.S. Highway 1, Suite 200

                North Palm Beach, Florida
    33408

              

      

      

      
        	
                 
      

              	
                With
      a copy to:

              	
                Olshan
      Grundman Frome Rosenzweig & Wolosky LLP

                Park
      Avenue Tower
65
      East 55th
      Street

                New
      York, New York 10022

                Attention:
      David J. Adler

                Facsimile:
      (212) 451-2222

              

      

       

      or if any
other address shall at any time be designated by Borrower in writing to the
holders of record of the Note at the time of such designation to such other
address;

      

      
        	
                 
      

              	
                If
      to Lender:

              	
                111
      N. Orange Avenue, Suite 1585

                Orlando, Florida
  32801

              

      

       

      or if any
other address shall at any time be designated in writing to Borrower, to such
other address.

      

      11.8           Cross
Default.  The Borrower has executed and delivered to the Lender
that certain Restated Loan Agreement, certain related promissory notes, security
instruments and loan documents, all of which shall hereinafter be collectively
referred to as the “Other Obligations."  Any default in the payment of
principal or interest of this Agreement shall constitute a default in the terms
and conditions of all Other Obligations, entitling the Lender to the remedies
for default provided therein.  Any default in the payment of principal
or interest of any Other Obligations shall constitute a default under this
Agreement, entitling the Lender to the remedies for default provided
herein.

      

      11.9           Benefits.  All
of the terms and provisions of this Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns.
Borrower may not assign any of its rights or obligations hereunder without the
prior written consent of Lender.

      

      11.10           Controlling
Law and Venue.  This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida; provided,
however, that if any of the Collateral shall be located in any jurisdiction
other than Florida, the laws of such jurisdiction shall govern the method,
manner and procedure for foreclosure of Lender's lien upon such Collateral and
the enforcement of Lender’s other remedies in respect of such Collateral to the
extent that the laws of such jurisdiction are different from or inconsistent
with the laws of Florida.  Any legal action regarding this Agreement
may be brought in the Courts of the State of Florida in Palm Beach County,
Florida or of the United States for the Southern District of
Florida.

       

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

      

      11.11           Miscellaneous.  Time
is of the essence with respect to this Agreement.  This Agreement and
the instruments and agreements referred to herein or called for hereby supersede
and incorporate all representations, promises, and statements, oral or written,
made by Lender in connection with the Loan. This Agreement may be executed in
any number of counterparts, each of which, when executed and delivered, shall be
an original, but such counterparts shall together constitute one and the same
instrument. Any provision in this Agreement which may be unenforceable or
invalid under any law shall be ineffective to the extent of such
unenforceability or invalidity without affecting the enforceability or validity
of any other provisions hereof.

      

      11.12           Reserved.

      

      11.13           Limitation
of Grant.  Nothing in this Agreement, whether express or
implied, is intended or should be construed to confer upon, or to grant to, any
person, except Lender and Borrower, any right, remedy, or claim under or because
of either this Agreement or any provision of it. The rights, duties, and
obligations of Borrower under this Agreement are not assignable or
delegable.

      

      11.14           Confidentiality.  Lender
shall use reasonable efforts to maintain the confidentiality of trade secret
information furnished to Lender regarding Borrower's business operations, except
to the extent that disclosure of this information is required by law, by a court
of competent jurisdiction, or in the course of Lender's enforcement of its
remedies under this Agreement.

      

      11.15           Participation.  Borrower
acknowledges that Lender may, at its option, sell participation interests in the
Loan to participating banks. The amounts of any such participations shall be
determined solely by Lender. Borrower agrees with each present and future
participant in the Loan, the names and addresses of which will be furnished to
Borrower, that if an Event of Default should occur, each present and future
participant shall have all of the rights and remedies of Lender with respect to
any deposit due from any participant to Borrower but shall not have further
additional remedies independent from Lender which would subject Borrower to
multiple lawsuits. The execution by a participant of a participation agreement
with Lender, and the execution by Borrower of this Agreement, regardless of the
order of execution, shall evidence an agreement between Borrower and said
participant in accordance with the terms of this Section.

      

      11.16           Late Fee
for Financial Statements.  Borrower acknowledges and agrees
that if any of the financial information required by this Agreement is not
provided to Lender within the time limits provided in this Agreement, Lender
may, at its option, charge a late fee to the Borrower in an amount not to exceed
$500.00.  The imposition and payment of a late fee shall not
constitute a waiver of Lender’s rights with respect to the default.

      

      11.17           Reserved.

      

      11.18           Compliance
with Loan Documents.  Borrower acknowledges and agrees that its
timely and complete compliance with all of the terms and conditions contained in
the documents evidencing and securing the loan obligation is material
consideration for the loan.  Borrower’s failure to timely and
completely comply with any material term and condition contained in the
documents evidencing and securing the loan is, at Lender's option, an event of
default under the loan.  In addition to all other rights and remedies
Lender has, Lender may, in its sole discretion, elect to waive such default or
to forbear to exercise its rights and remedies for such default and may charge
Borrower a fee for agreeing to do so.

       

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

      

      11.19           Waiver of
Trial By Jury.  The Borrower and the Lender
knowingly, voluntarily and intentionally waive the right any of them may have to
a trial by jury in respect of any litigation based hereon, or arising out of,
under or in connection with the Loan Documents and any agreement contemplated to
be executed in conjunction therewith, or any course of conduct, course of
dealing, statements (whether verbal or written) or actions of any
party.  This provision is a material inducement for the Lender
entering into the loan evidenced by the Loan Documents.

      

      11.20           NOTICE OF
FINAL AGREEMENT.  THIS WRITTEN AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.

      

      IN WITNESS WHEREOF, each of Borrower
and Lender has caused this instrument to be executed by its duly authorized
officer.

      

      
        
          	
                  AMCOMP
      INCORPORATED,

                
	
                  a
      Delaware corporation

                
	 
      
	 
      
	
                  By:

                	/s/
      Kumar Gursahaney
	 
      	
                  Kumar
      Gursahaney,

                
	 
      	
                  Chief
      Financial Officer

                
	 
      
	 
      	
                  “Borrower”

                
	 
      
	 
      
	
                  REGIONS
      BANK,

                
	
                  an
      Alabama banking corporation

                
	 
      
	 
      
	
                  By:

                	/s/
      Hans C. Hurst
	
                  Name:

                	Hans
      C. Hurst 

        

        
          	
                  Title:

                	Senior
      Vice President
	 
      
	 
      	
                  “Lender”

                

        

         

        
          
            
            

          

          
            26ex102to8k03581_06052008.htm

    Exhibit
10.2

     

     

    RESTATED
LOAN AND SECURITY AGREEMENT

    

    THIS RESTATED LOAN AND SECURITY
AGREEMENT dated as of May 23, 2008 by and between REGIONS BANK, an Alabama
banking corporation, whose address is 111 N. Orange Avenue, Suite 1585, Orlando,
Florida 32801 (the "Lender"), and AMCOMP INCORPORATED, a Delaware corporation,
whose address is 701 U.S. Highway 1, Suite 200, North Palm Beach, Florida 33408
(the "Borrower").

    

    RECITALS:

    

    A.           This
Restated Loan and Security Agreement modifies and restates in its entirety that
certain Loan Agreement dated as of October 12, 2000, as amended by that certain
First Amendment to Loan Agreement dated April 25, 2003, as further amended by
that certain  Second Amendment to Loan Agreement dated April 23, 2004,
as further amended by that certain Third Amendment to Loan Amendment dated
August 23, 2005 and as further amended by that certain Fourth Amendment to Loan
Agreement dated July 1, 2007 (together herein referred to as the “Prior
Agreement”) executed by Borrower and Guarantor representing a term loan credit
facility extended by Lender to Borrower in the initial amount of TWELVE MILLION
FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($12,500,000.00) subject to the
compliance by Borrower of all the terms and conditions hereof which now has a
current outstanding principal amount of THREE MILLION FIVE HUNDRED SEVENTY-ONE
THOUSAND THREE HUNDRED EIGHTY-NINE AND 97/100 DOLLARS ($3,571,389.97);
and

    

    B.           Each
Guarantor will derive a benefit from such loan and therefore has agreed to
guarantee the debt of Borrower to Lender and enter into this Agreement;
and

    

    C.           The
Lender has made such loan on the terms and conditions and on the security as set
forth herein.

    

    NOW, THEREFORE, in
consideration of the mutual promises, conditions, representations and warranties
hereinafter set forth and for other good and valuable consideration, the parties
hereto have mutually agreed as follows:

    

    1.                      Defined
Terms.  As used in this Loan and Security Agreement, the
following terms shall have the following meanings:

    

    $30,000,000
Agreement means that certain Loan and Security Agreement dated the date
hereof by and between Lender and Borrower.

    

    $30,000,000
Note means that certain promissory note dated as of May 23, 2008 in the amount of THIRTY MILLION AND NO/100 DOLLARS
($30,000,000.00) executed by Borrower in favor of Lender.

    

    Actuarial
Report means the actuarial review and valuation statements of the
Insurance Subsidiaries’ loss and loss adjustment expense reserve positions as of
December 31 of any fiscal year (or such other date requested by the Lender),
with respect to the insurance business in force, and covering such other
subjects as are customary in actuarial reviews and reasonably requested by the
Lender, prepared by Milliman USA or other independent actuarial firm reasonably
acceptable to the Lender in accordance with reasonable actuarial assumptions and
procedures, not inconsistent with the assumptions and procedures previously
employed, and accompanied by a report prepared by such actuarial firm reviewing
the adequacy of loss reserves of each Insurance Subsidiary (which firm shall be
provided access to or copies of all reserves analyses and valuations relating to
the insurance business of each such Insurance Subsidiary) together with its
report, substantially in the form of the report currently provided by such firm
to the Borrower.

    

    Additive
Basis means
the financial information from each of the relevant companies is added together
when determining the amount(s) to be used in the calculations required in this
agreement.

    

    Affiliate
means any corporation or other entity that is controlled by, controls, or is
under common control with, Borrower.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    Agreement
means this Loan and Security Agreement.

    

    Alternative
Rate means the rate per annum to be used for the interest rate on the
Loan in the event the Base Rate is not available.  The Alternative
Rate will be determined by adding or subtracting a spread from either the
Federal Funds Rate or the Prime Rate (as reasonably selected by Lender) so that
the Alternative Rate on the first day it becomes effective is reasonably
equivalent to the Base Rate as of the last day the Base Rate was
available.  Thereafter the Alternative Rate will be adjusted up or
down based on changes to the Federal Funds Rate or Prime Rate (as initially
selected) adjusted on the same date the Base Rate would have been adjusted and
utilizing the same spread as utilized on the first day the Alternative Rate
became effective.

    

    AmComp
Assurance means AmComp Assurance Corporation, a Florida
corporation.

    

    AmComp
Preferred means AmComp Preferred Insurance Company, a Florida
corporation.

    

    Annual
Statement means, with respect to any Insurance Subsidiary, such Insurance
Subsidiary’s annual statement to the insurance regulatory authorities of its
domiciliary state, as the same may be amended from time to time.

    

    Base
Rate means the interest rate applied to the unpaid principal balance of
the Note.

    

    Borrower
means AMCOMP INCORPORATED, a Delaware corporation.

    

    Closing
Date means the date hereof.

    

    Code
means the Uniform Commercial Code, as in effect in Florida from time to
time.

    

    Collateral
means collectively: (a) all of the stock of AmComp Preferred; (b) all Surplus
Notes now or hereafter owned by Borrower or its Subsidiaries.

    

    Contingent
Obligations means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Debt of any other Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt of such Person (whether arising by virtue of agreements to keep-well, to
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for the
purpose of assuring in any other manner the obligee of such Debt of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part).

    

    Contractual
Obligation means any provision of any security issued by a Person or of
any agreement, instrument, or undertaking to which such Person is a party or by
which it or any of its property is bound.

    

    Debt
means any indebtedness or liability for borrowed money and any other
indebtedness or liability or similar obligations which must be characterized as
a Debt (whether long term or short term) for the purpose of an audited financial
statement prepared pursuant to the standards of the American Institute of
Certified Public Accountants.

    

    Debt
Service Coverage Ratio means, as of the last day of any fiscal year of
the Borrower, the ratio of (a) (i) Service Fees from Insurance Subsidiaries for
such fiscal year, plus (ii) interest received by the Borrower on the Surplus
Notes, plus (iii) Dividends Available Without Regulatory Approval during such
fiscal year, plus (iv) Dividends Available With Regulatory Approval during such
fiscal year, plus (v) depreciation expense, plus (vi) Tax Sharing Revenue, minus
(vii) Expenses of the Borrower and the Non-Insurance Subsidiaries for such
fiscal year, minus (viii) dividends paid, to (b) (i) scheduled interest payments
on Debt for such fiscal year, plus (ii) scheduled principal payments on Debt for
such fiscal year.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    

    Default
Rate means that default rate more specifically described in the
Note.

    

    Dividends
Available With Regulatory Approval means dividends payable with respect
to ownership of the capital stock of an Insurance Subsidiary that an Insurance
Subsidiary may pay stockholders only with the prior approval of the
FOIR.

    

    Dividends
Available Without Regulatory Approval means dividends payable with
respect to ownership of the capital stock of an Insurance Subsidiary that such
Insurance Subsidiary is able to pay stockholders without the prior approval of
the FOIR.

    

    EIG
means Employers Holdings, Inc., a Nevada corporation, or any subsidiary of
Employers Holdings, Inc.

    

    Employers
Merger means the merger of Sapphire Acquisition Corp, a Delaware
corporation and a wholly owned subsidiary of Employers Holdings, Inc., a Nevada
corporation, with and into the Borrower with the Borrower continuing as the
continuing company under the merger, pursuant to the Merger Agreement made and
entered into as of January 10, 2008, as amended by the amendment thereto dated
April 28, 2008, and as the same may be further amended, restated or otherwise
modified.

    

    Expenses
of the Borrower and the Non-Insurance Subsidiaries means operating
expenses of the Borrower and each and every Subsidiary with the exception of the
Insurance Subsidiaries.

    

    ERISA
means the Employee Retirement Income Security Act of 1974 and all rules and
regulations promulgated thereunder.

    

    Event of
Default means any one of the events enumerated in Article 9 (“Events of
Default”).

    

    Federal
Funds Rate means, for any day, the rate of interest per annum (rounded
upwards, if necessary, to the nearest whole multiple of 1/100 of 1%) equal to
the weighted average of the rates on overnight Federal funds transaction with
members of the Federal Reserve System arranged by Federal funds brokers as
published by the Federal Reserve Bank of New York on the Interest Rate
Determination Date.

    

    FOIR
shall mean the Florida Office of Insurance Regulation.

    

    GAAP
means generally accepted accounting principles in the United States of America
as defined by the Financial Accounting Standards Board or its successor, as in
effect from time to time consistently applied.

    

    Governmental
Authority means any nation or government, any state or other political
subdivision thereof and any entity exercising executive, legislative, judicial,
regulatory or administrative functions pertaining to government.

    

    Guarantor means PINNACLE
ADMINISTRATIVE COMPANY, a Florida corporation, PINNACLE BENEFITS, INC., a
Florida corporation, and AMSERV, INC., a Florida corporation, jointly and
severally.

    

    Insurance
Operating Expenses means those expenses as evidenced on each Insurance
Subsidiary’s SAP Statement.

    

    Insurance
Subsidiary means AmComp Preferred, AmComp Assurance and all Wholly Owned
Subsidiaries of the Borrower licensed to engage in the business of property and
casualty insurance.

    

    Interest
Expense shall mean interest payable on Debt during the period in
question.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    

    IRIS
Tests means the ratios and other financial measurements developed by the
NAIC under its Insurance Regulatory Information System or, in lieu thereof, any
successor thereto, replacement thereof, substitute therefor or other
substantially similar guidelines intended to measure the financial performance
of companies in the property and casualty insurance industry, as the same shall
be in effect from time to time.

    

    Lender
means REGIONS BANK, an Alabama banking corporation.

    

    Lien
means any interest in property (real, personal, or mixed, and tangible or
intangible) securing an obligation owed to, or a claim by, a Person other than
the owner of the property, whether such interest is based on the common law,
statute or contract, and including a security interest, security title or Lien
arising from a security agreement, mortgage, deed of trust, deed to secure debt,
encumbrance, pledge, conditional sale or trust receipt or a lease, consignment
or bailment for security purposes. The term “Lien” shall include covenants,
conditions, restrictions, leases, and other encumbrances affecting any property.
For the purpose of this Agreement, Borrower shall be deemed to be the owner of
any property which it has acquired or holds subject to a conditional sale
agreement or other arrangement pursuant to which title to the Property has been
retained by or vested in some other Person for security purposes.

    

    Loan
means the credit facility in the original principal amount of TWELVE MILLION
FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($12,500,000.00) advanced by Lender to
Borrower from time to time evidenced by the Note described in Section 2.1 which
now has a current outstanding principal amount of THREE MILLION FIVE HUNDRED
SEVENTY-ONE THOUSAND THREE HUNDRED EIGHTY-NINE AND 97/100 DOLLARS
($3,571,389.97) (and any substitutions therefor, extensions thereof, or renewal
thereof).

    

    Loan
Account means the loan account established on the books of Lender
pursuant to Section 2.3 (“Loan Account”).

    

    Loan
Documents means this Agreement, the Note, and each and every security
agreement, financing statement or other instrument executed and delivered to
evidence the Loan, and any and all other agreements, instruments, and documents
heretofore, now or hereafter, executed by Borrower and delivered to Lender in
respect to the transactions contemplated by this Agreement.

    

    Material
Adverse Effect means with respect to a Person, a material adverse effect
on its business, assets, properties, prospects, results of operation, or
condition (financial or other). The Employers Merger shall not be considered a
Material Adverse Effect.

    

    NAIC
means the National Association of Insurance Commissioners and any successor
thereof.

    

    Net
Losses means, as of the last day of any fiscal year, with respect to any
Insurance Subsidiary, loss and loss adjustment expense net of any salvage,
subrogation, or deductibles after deducting reinsured losses as evidenced on the
Annual Statement by each Insurance Subsidiary in accordance with
SAP.

    

    Net
Written Premiums means, as of the last day of any fiscal year, with
respect to any Insurance Subsidiary, the sum of the total amount of premiums
written after deducting or adding premiums on business ceded to or assumed from
others as evidenced on the Annual Statement by each Insurance Subsidiary in
accordance with SAP.

    

    Non-Excluded
Taxes means such term as is defined in Section 2.12.

    

    Non-Insurance
Subsidiary means any Subsidiary of the Borrower which is not an Insurance
Subsidiary.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    

    Note
means that certain restated promissory note dated the date hereof which was
executed and delivered by Borrower to Lender and evidencing the Loan, as further
described hereafter, together with and any other promissory note, credit
agreement or letter of credit agreement now or hereafter executed by Borrower in
favor of Lender with respect to the Loan, including without limitation those
promissory notes, credit agreements and letter of credit agreements described on
any schedule or exhibit attached to this Agreement from time to time, and any
renewals of, extensions of, modifications of, refinancings to, consolidations
of, and substitutions for any of the foregoing.

    

    Obligations
means all Loans and all other advances, debts, liabilities, obligations,
covenants, and duties owing, arising, due or payable from Borrower to Lender of
any kind or nature, present or future whether or not evidenced by any note,
guaranty or other instrument, arising under this Agreement or any of the other
Loan Documents, including any swap, option or forward obligations. The term
includes, without limitation, all interest, charges, expenses, fees, attorneys'
fees and any other sums chargeable to Borrower under any of the Loan
Documents.   Unless the Borrower and any other party to this
Agreement shall have otherwise agreed in writing or received written notice
thereof, this Agreement shall not secure any obligation owing to Lender which
constitutes “consumer credit” subject to the disclosure requirements of the
Federal Truth in Lending Act and any regulations promulgated
thereunder.

    

    Permitted
Liens means

    

    
      	
               
      

            	
              (i)

            	
              Liens
      in favor of the Lender;

            

    

    

    
      	
               
      

            	
              (ii)

            	
              Liens
      (other than Liens created or imposed under ERISA) for taxes, assessments
      or governmental charges or levies not yet due or Liens for taxes being
      contested in good faith by appropriate proceedings for which adequate
      reserves determined in accordance with GAAP have been established (and as
      to which the Property subject to any such Lien is not yet subject to
      foreclosure, sale or loss on account
thereof);

            

    

    

    
      	
               
      

            	
              (iii)

            	
              statutory
      Liens of landlords and Liens of carriers, warehousemen, mechanics,
      materialmen and suppliers and other Liens imposed by law or pursuant to
      customary reservations or retentions of title arising in the ordinary
      course of business, provided
      that such Liens secure only amounts not yet due and payable or, if due and
      payable, are unfiled and no other action has been taken to enforce the
      same or are being contested in good faith by appropriate proceedings for
      which adequate reserves determined in accordance with GAAP have been
      established (and as to which the Property subject to any such Lien is not
      yet subject to foreclosure, sale or loss on account
    thereof);

            

    

    

    
      	
               
      

            	
              (iv)

            	
              Liens
      (other than Liens created or imposed under ERISA) incurred or deposits
      made by the Borrower and its Subsidiaries in the ordinary course of
      business in connection with workers’ compensation, unemployment insurance
      and other types of social security, or to secure the performance of
      tenders, statutory obligations, bids, leases, government contracts,
      performance and return-of-money bonds and other similar obligations
      (exclusive of obligations for the payment of borrowed
    money);

            

    

    

    
      	
               
      

            	
              (v)

            	
              Liens
      in connection with attachments or judgments (including judgment or appeal
      bonds) provided
      that the judgments secured shall, within 30 days after the entry thereof,
      have been discharged or execution thereof stayed pending appeal, or shall
      have been discharged within 30 days after the expiration of any such
      stay;

            

    

    

    
      	
               
      

            	
              (vi)

            	
              easements,
      rights-of-way, restrictions (including zoning restrictions), minor defects
      or irregularities in title and other similar charges or encumbrances not,
      in any material respect, impairing the sue of the encumbered Property for
      its intended purposes;

            

    

    

    
      	
               
      

            	
              (vii)

            	
              Liens
      on Property securing purchase money Indebtedness to the extent permitted
      under this Agreement, provided
      that (i) the Indebtedness secured by such Liens does not exceed the
      purchase price of the assets financed, and (ii) any such Lien attaches to
      such Property concurrently with or within 90 days after the acquisition
      thereof;

            

    

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    

    
      	
               
      

            	
              (viii)

            	
              Liens
      arising under escrows, trusts, custodianships, separate accounts, funds
      withheld procedures, and similar deposits, arrangements or agreements
      established with respect to insurance policies, annuities, guaranteed
      investment contracts and similar products underwritten by, or Reinsurance
      Agreements entered into by, the Borrower or any Insurance Subsidiary in
      the ordinary course of business;

            

    

    

    
      	
               
      

            	
              (ix)

            	
              deposits
      with insurance regulatory
authorities;

            

    

    

    
      	
               
      

            	
              (x)

            	
              Liens
      on assets at the time such assets are acquired by the Borrower or any
      Subsidiary; provided
      that such Liens are not created in contemplation of such
      acquisition;

            

    

    

    
      	
               
      

            	
              (xi)

            	
              normal
      and customary rights of setoff upon deposits of cash in favor of banks or
      other depository institutions;

            

    

    

    
      	
               
      

            	
              (xii)

            	
              Liens
      existing as of the Closing Date, provided
      that no such Lien shall at any time be extended to or cover any Property
      other than the Property subject thereto on the Closing
    Date;

            

    

    

    
      	
               
      

            	
              (xiii)

            	
              Liens
      arising from the rendering of a final judgment against the Borrower or any
      Subsidiary; provided
      that such Liens do not give rise to an Event of Default
      hereunder;

            

    

    

    
      	
               
      

            	
              (xiv)

            	
              Liens
      arising in the ordinary course of business not to exceed $100,000.00 in
      the aggregate without the prior written consent of Lender;
    and

            

    

    

    
      	
               
      

            	
              (xv)

            	
              Liens
      in connection with the $30,000,000
Agreement.

            

    

    

    Person
means an individual, partnership, corporation, joint stock company, firm, land
trust, business trust, unincorporated organization, limited liability company,
or other business entity, or a government or agency or political subdivision
thereof.

    

    Plan
means an employee benefit plan now or hereafter maintained for employees of
Borrower that is covered by Title IV of ERISA.

    

    Prime
Rate means the rate of interest per annum publicly announced from time to
time by Lender as its prime rate in effect at its principal office in
Birmingham, Alabama, with each change in the Prime Rate being effective on the
date such change is publicly announced as effective (it being understood and
agreed that the Prime Rate is a reference rate used by Lender in determining
interest rates on certain loans and is not intended to be the lowest rate of
interest charged on any extension of credit by Lender to any
debtor.

    

    Prohibited
Transaction means any transaction set forth in Section 406 of ERISA or
Section 4975 of the Internal Revenue Code of 1986.  The Employers
Merger shall not be considered a Prohibited Transaction.

    

    Property
means any interest in any kind of property or asset, whether real, personal or
mixed, or tangible or intangible.

    

    Quarterly
Statement means, with respect to any Insurance Subsidiary, such Insurance
Subsidiary’s quarterly statement to the insurance regulatory authorities of its
domiciliary state, as the same may be amended from time to time.

    

    Reportable
Event means any of the events set forth in Section 4043(b) of
ERISA.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    

    Requirement
of Law means as to any Person, the articles of incorporation and bylaws
or other organizational or governing documents of the Person, and any law,
treaty, rule or regulation, or determination of an arbitrator or a court or
other Governmental Authority, in each case applicable to or binding on the
Person or any of its property or to which the Person or any of its property is
subject.

    

    SAP
means, with respect to any Insurance Subsidiary, the accounting practices
prescribed or permitted by the insurance commissioner (or other similar
authority) in the jurisdiction of domicile of such insurance company for the
preparation of Annual Statements, Quarterly Statements and other financial
reports by insurance corporation of the same type as such Insurance Subsidiary,
as applied on a consistent basis.

    

    SAP
Statement means an Annual Statement or a Quarterly
Statement.

    Service
Fees from Insurance Subsidiaries means the service fees received by the
Non-Insurance Subsidiaries paid by the Insurance Subsidiaries each month, which
fees are based on the amount of earned premium.

    

    Solvent
means as to any Person, means such Person (i) owns property, real, personal, and
mixed, whose aggregate fair saleable value is greater than the amount required
to pay all of such Person's Debt and Contingent Obligations, and (ii) is able to
pay all of its Debt as such Debt matures, and (iii) has capital sufficient to
carry on its business and transactions and all business and transactions in
which it is about to engage.

    

    Subsidiary
or Subsidiaries means any corporate entity or partnership, or other
business entity, the controlling interest of which is owned directly or
indirectly by Borrower.

    

    Surplus
Notes shall mean those certain promissory notes issued by AmComp
Preferred or AmComp Assurance to the Borrower.

    

    Tax
Sharing Revenue means as of the last day of any fiscal year, the net tax
benefit/(expense) recognized by the Borrower without giving effect to any
Insurance Subsidiary income or loss.

    

    Wholly
Owned Subsidiary of any Person means any Subsidiary 100% of whose voting
stock or other equity interests is at the time owned by such Person directly or
indirectly through other Wholly Owned Subsidiaries.

    

    Certain
Other Words.   All
accounting terms used herein have the respective meanings attributed to them
under, and shall be construed in accordance with, GAAP, unless indicated to be
SAP. The terms “herein,” “hereof,” and “hereunder,” and other words of similar
import refer to this Agreement as a whole and not to any particular section,
paragraph or subdivision. Any pronouns used shall be deemed to cover all
genders.  As used in this Agreement, (a) the word “including” is
always without limitation; (b) words in the singular number include words of the
plural number and vice versa; (c) the word “costs” includes all internal
out-of-pocket expenses, fees, costs, and expenses of experts and collection
agents, supersedeas bonds, and all attorneys' fees, costs, and expenses, whether
incurred before, during, or after demand or litigation, and whether pursuant to
trial, appellate, arbitration, bankruptcy, or judgement-execution proceedings;
and (d) the word “property” includes both tangible and intangible property,
unless the context otherwise requires. All references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations. All references to any instruments or agreements, including
references to any of the Loan Documents, shall include any and all modifications
or amendments thereto and any and all extensions or renewals thereof. All other
terms contained in this Agreement shall, unless otherwise defined herein or
unless the context otherwise indicates, have the meanings provided for by the
Uniform Commercial Code of the State of Florida.

    

    Directly
and Indirectly.  When any
provision of this Agreement or any Loan Document requires or prohibits action to
be taken by a Person, the provision applies regardless of whether the action is
taken directly or indirectly by the Person.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    

    2.           The
Loan.

    

    2.1           Loan.

    

    (a)           The
amount available under the Loan was previously disbursed to the Borrower in
accordance with the terms, provisions and conditions of this Agreement,
provided.  Borrower executed and delivered to Lender the Note in the
face amount of the Loan, payable to the order of Lender.  The Note
shall evidence the Borrower's obligation to repay the Loan and is not
incorporated by reference.

    

    (b)           Borrower
shall repay all outstanding principal and accrued interest with respect to the
Loan not previously repaid in accordance with the terms and conditions of the
Note.

    

    2.2           Terms
Governing All Loans.

     

    (a)           All
payments of interest and principal under the Note shall be made without setoff
or counterclaim, and in such coin or currency of the United States of America
that at the time of payment is legal tender for the payment of public and
private debt.

    

    (b)           Any
payments not made as and when due with respect to the Loan (whether at stated
maturity, by acceleration, or otherwise) shall bear interest at the Default Rate
from the date due until paid, payable on demand.

    

    2.3           Loan
Account.  Amounts due under the Note and otherwise under this
Agreement and under the Loan Documents shall be reflected in the Loan Account.
Lender shall enter disbursements hereunder or under the Note as debits to the
Loan Account and shall also record in the Loan Account all payments made by
Borrower and all proceeds of Collateral which are finally paid to Lender, and
may record therein, in accordance with customary accounting practice, all
charges and expenses properly chargeable to Borrower hereunder.

    

    2.4           Use of
Proceeds.  Borrower shall use the proceeds of the Loan for the
following purposes and no other: for working capital of Borrower.

    

    2.5           Term.  This
Agreement shall remain in force and effect until the Loan, and any renewals or
extensions, and all interest thereon and costs provided for herein with regard
to either of them have been indefeasibly paid or satisfied in full and until
Lender has no further obligation to advance funds to Borrower
hereunder.  Borrower may terminate without prepayment penalties at any
time the Loan facilities and prepay the Obligations at any time before the
scheduled maturity date by paying the Loan.  The indemnities provided
for in this Agreement shall survive the payment in full of the Loan and the
other Obligations and  the termination of this Agreement.

    

    2.6           Payments.  All
sums paid to Lender by Borrower hereunder shall be paid directly to Lender in
immediately available funds. Lender shall send Borrower statements of all
amounts due hereunder, which statements shall be considered correct and
conclusively binding on Borrower absent manifest error or negligence of Lender
unless Borrower notifies Lender to the contrary within thirty (30) days of its
receipt of any statement which it deems to be incorrect.  Lender may,
in its sole discretion (a) charge against any deposit account of Borrower all or
any part of any amount due hereunder and (b) advance to Borrower, and charge to
the Loan, a sum sufficient each month to pay all interest accrued on the Loan
and fees due under this Agreement during or for the immediately preceding month.
Borrower shall be deemed to have requested an advance under the Loan upon the
occurrence of an overdraft in any of Borrower’s checking accounts maintained
with Lender.  Notwithstanding the foregoing, if the Borrower provides
reasonable evidence that any sums set off by Lender were funds being held by
Borrower for or on behalf of its Insurance Subsidiaries, Lender will disgorge
those funds and reverse the set off to the extent of those funds.

    

    2.7           Reserved.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    

    2.8           Limitation
on Interest Charges.  Lender and Borrower intend to comply
strictly with applicable law regulating the maximum allowable rate or amount of
interest that Lender may charge and collect on the Loan to Borrower pursuant to
this Agreement. Accordingly, and notwithstanding anything in any Note or in this
Agreement to the contrary, the maximum, aggregate amount of interest and other
charges constituting interest under applicable law that are payable, chargeable,
or receivable under any Note and this Agreement shall not exceed the maximum
amount of interest now allowed by applicable law or any greater amount of
interest allowed because of a future amendment to existing law. Borrower is not
liable for any interest in excess of the maximum lawful amount, and any excess
interest charged or collected by Lender will constitute an inadvertent mistake
and, if charged but not paid, will be cancelled automatically, or, if paid, will
be either refunded to Borrower or credited against the outstanding principal
balance of the applicable Note, at the election of Lender.

    

    2.9           Capital
Adequacy.  If the Lender has determined, after the date hereof,
that the adoption or the becoming effective of, or any change in, or any change
by any Governmental Authority, central bank or comparable agency charged with
the interpretation or administration thereof in the interpretation or
administration of, any applicable law, rule or regulation regarding capital
adequacy, or compliance by the Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on capital or assets as a consequence of its commitments or
obligations hereunder to a level below that which the Lender could have achieved
but for such adoption, effectiveness, change or compliance (taking into
consideration the Lender’s policies with respect to capital adequacy), then,
ninety (90) days after presentation by Lender to Borrower of a statement in the
amount and setting forth in reasonable detail such Lender’s calculation thereof
and the assumptions upon which such calculation was based, the Borrower shall be
obligated to pay to the Lender such additional amount or amounts as will
compensate the Lender for such reduction.  Each determination by the
Lender of amounts owing under this Section shall, absent manifest error, be
conclusive and binding on the parties hereto.

    

    2.10           Illegality.  Notwithstanding
any other provision herein, if the adoption of or any change in any Requirement
of Law of in the interpretation or application thereof occurring after the
Closing Date shall make it unlawful for the Lender to charge interest on the
Loan based on the Base Rate as contemplated by this Agreement, (a) the Lender
shall promptly give written notice of such circumstances to the Borrower (which
notice shall be withdrawn whenever such circumstances no longer exist), (b) the
obligation of the Lender hereunder to charge interest on the Loan at the Base
Rate shall be forthwith be canceled and, until such time as it shall no longer
be unlawful for the Lender to charge interest at the Base Rate, the Lender shall
then have an obligation only to charge interest on the Loan at the Alternative
Rate and (c) the outstanding principal amount of the Loan shall automatically
bear interest at the Alternative Rate.

    

    2.11           Requirements
of Law.  If, after the
date hereof, the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof applicable to the Lender, or compliance by
the Lender with any request or directive (whether or not having the force of
law) from any central bank or other Governmental Authority, in each case made
subsequent to the Closing Date:

    

    (a)  shall subject the Lender
to any tax of any kind whatsoever with respect to the Loan made by it or its
obligation to make the Loan, or change the basis of taxation of payments to the
Lenders in respect thereof (except for (i) Non-Excluded Taxes covered by Section
2.12 and (ii) changes in taxes measured by or imposed upon the overall net
income, or franchise tax (imposed in lieu of such net income tax), of the Lender
or its applicable lending office, branch, or any affiliate
thereof);

    

    (b) shall impose, modify or hold
applicable any reserve, special deposit, compulsory loan or similar requirement
against assets held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other acquisition of
funds by, any office of the Lender which is not otherwise included in the
determination of Base Rate hereunder; or

    

    (c) shall impose on the Lender any
other condition (excluding any tax of any kind whatsoever);

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    

    and the
result of any of the foregoing is to increase the cost to the Lender, by an
amount which the Lender deems to be material, of making, continuing or
maintaining Loan or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, upon notice to the Borrower from the Lender, in
accordance herewith, the Borrower shall be obligated to promptly pay the Lender,
upon its demand, any additional amounts necessary to compensate the Lenders for
such increased cost or reduced amount receivable.  If the Lender
becomes entitled to claim any additional amounts pursuant to this subsection, it
shall provide prompt notice thereof to the Borrower, certifying (x) that one of
the events described in this paragraph (a) has occurred and describing in
reasonable detail the nature of such event, (y) as to the increased cost or
reduced amount resulting from such event and (z) as to the additional amount
demanded by the Lender and a reasonably detailed explanation of the calculation
thereof.  Such a certificate as to any additional amounts payable
pursuant to this subsection submitted by the Lender, to the Borrower shall be
conclusive and binding on the parties hereto in the absence of manifest
error.  This covenant shall survive the termination of this Agreement
and the payment of the Loan and all other amounts payable
hereunder.

    

    2.12           Taxes.

    

    (a) Except as provided below in this
subsection, all payments made by the Borrower under this Agreement and the Note
shall be made free and clear of, and without deduction or withholding for or on
account of, any present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or hereafter imposed,
levied, collected, withheld or assessed by any court, or governmental body,
agency or other official, excluding taxes measured by or imposed upon the
overall net income of the Lender or its applicable lending office, or any branch
or affiliate thereof, and all franchise taxes, branch taxes, taxes on doing
business or taxes on the overall capital or net worth of the Lender or its
applicable lending office, or any branch or affiliate thereof, in each case
imposed in lieu of net income taxes, imposed: (i) by the jurisdiction under the
laws of which the Lender, applicable lending office, branch or affiliate is
organized or is located, or in which its principal executive office is located,
or any nation within which such jurisdiction is located or any political
subdivision thereof; or (ii) by reason of any connection between the
jurisdiction imposing such tax and the Lender, applicable lending office, branch
or affiliate other than a connection arising solely from the Lender having
executed, delivered or performed its obligations, or received payment under or
enforced, this Agreement or the Note.  If any such non-excluded taxes,
levies, imposts, duties, charges, fees, deductions or withholdings (“Non-Excluded
Taxes”) are required to be withheld from any amounts payable to the
Lender hereunder or under the Note, (A) the amounts so payable to the Lender
shall be increased to the extent necessary to yield to the Lender (after payment
of all Non-Excluded Taxes) interest or any such other amounts payable hereunder
at the rates or in the amounts specified in this Agreement and the Note, and (B)
as promptly as possible thereafter the Borrower shall send to the Lender for its
own account, a certified copy of an original official receipt received by the
Borrower showing payment thereof.  If the Borrower fails to pay any
Non-Excluded Taxes when due to the appropriate taxing authority or fails to
remit to the Lender the required receipts or other required documentary
evidence, the Borrower shall indemnify the Lender for any incremental taxes,
interest or penalties that may become payable by the Lender as a result of any
such failure.  The agreements in this subsection shall survive the
termination of this Agreement and the payment of the advances and all other
amounts payable hereunder.

    

    (b) In connection with this transaction
there may or may not be due certain documentary stamp taxes and/or intangible
taxes imposed by the State of Florida (the “Florida
Taxes”).  In addition to (and not in limitation of) the
indemnification with respect to tax liabilities set forth above, the Borrower
agrees to indemnify the Lender, its directors, officer, agents and employees
from and against any and all liability, damage, loss, cost, expense or
reasonable attorney fees which may accrue to or be sustained by the Lender or
its directors, officers, agents or employees on account of or arising from any
claim or action raised by, filed or brought by or in the name of any Florida
governmental or administrative department with respect to nonpayment of the
Florida Taxes against the Lender, or any of its directors, officers, agents or
employees.

    

    2.13           Termination
and No Prepayment Fee.  The Loan may be
prepaid in full or in part at any time without a prepayment fee or
penalty.

    

    3.           Reserved.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    

    4.           Guaranty
and Grant of Security Interest.

    

    4.1           Grant of Security
Interest.

    

    As security for the payment of the
Obligations, including any extensions or renewals or changes relating thereto,
and all costs and expenses of collection thereof, including, without limitation,
attorneys fees, Borrower hereby assigns to Lender and grants to Lender a
security interest in and Lien upon the following:

    

    (a)           All
of the Collateral;

    

    (b)           All
of proceeds, products, and profits as the case may be, of the
Collateral;

    

    (c)           All
accessions to, substitutions for and all replacements, products, profits,
income, and cash and non-cash proceeds of the items above.

    

    Borrower agrees to execute and deliver,
or cause the execution and delivery of, such security agreements, assignments,
guaranties, consents, and financing statements as may be required by Lender to
evidence such security, all in form satisfactory to Lender, all in form
satisfactory to Lender in furtherance of the intent of this
Agreement.

    

    This Agreement shall modify, amend and
replace in their entirety all collateral documents entered into by the Borrower
under the Prior Agreement, including without limitation, the Pledge and Security
Agreement, the Payment Reserve Account Pledge Agreement and the Assignment of
Surplus Notes (as each of those terms are defined under the Prior
Agreement).

    

    4.2           Guaranty.

    

    The Borrower shall cause to be duly
executed and delivered to the Lender the guaranty of each Guarantor in form and
substance reasonably acceptable to Lender, whereby each Guarantor guarantees the
Borrower's obligations under the Note, this Agreement and the Loan Documents as
hereinafter defined.

    

    5.           Representations,
Warranties, and General Covenants.

    

    Borrower represents, warrants, and
covenants to and with Lender which representations, warranties, and covenants
shall survive until the Obligations are indefeasibly satisfied in full,
that:

    

    5.1           Organization
and Qualification of Borrower and Guarantor.  Borrower is a
Delaware corporation duly organized, validly existing and in good standing under
the laws of its state of incorporation; has the power to own its properties and
to carry on its business as now being conducted; and is duly qualified to do
business and is in good standing in every jurisdiction in which the character of
the properties owned by it or in which the transaction of its business makes its
qualification necessary, except where the failure to be so qualified would not
reasonably be expected to result in a Material Adverse Effect.

    

    Each Guarantor is a Florida corporation
duly organized, validly existing and in good standing under the laws of its
state of incorporation; has the power to own its properties and to carry on its
business as now being conducted; and is duly qualified to do business and is in
good standing in every jurisdiction in which the character of the properties
owned by it or in which the transaction of its business makes its qualification
necessary, except where the failure to be so qualified would not reasonably be
expected to result in a Material Adverse Effect.

    

    5.2           Corporate
Power and Authorization; Compliance with Law.  Borrower has
full power and authority to enter into this Agreement, to borrow hereunder, to
execute and deliver the Note and the other Loan Documents, and to incur the
obligations provided for herein, all of which have been authorized by all proper
and necessary corporate action. Borrower is in material compliance with all
Requirements of Law applicable to it and possesses all governmental franchises,
licenses, and permits that are necessary to own or lease its assets and to carry
on its business as now conducted.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    

    5.3           Enforceability:
No legal Bar.  This Agreement has been, and each other Loan
Document to which it is a party will be, duly executed and delivered to Lender
on behalf of Borrower. This Agreement and each of the other Loan Documents
constitute, and each Note when executed and delivered for value received will
constitute, a valid and legally binding obligation of Borrower enforceable in
accordance with their respective terms. The execution, delivery, and performance
by Borrower of this Agreement and the other Loan Documents to which it is a
party, Borrower’s borrowings pursuant to this Agreement, and use of the loan
proceeds, will not violate any Requirement of Law applicable to Borrower or
constitute a breach or violation of, a default under, or require any consent
under, any of its Contractual Obligations, except for any violation of any
Requirement of Law or breach, violation, or default of any Contractual
Obligations that would not reasonably be expected to result in a Material
Adverse Effect, and will not result in a breach or violation of, or require the
creation or imposition of any Lien on any of its properties or revenues pursuant
to any Requirement of Law or Contractual Obligation.

    

    5.4           Pending
Actions.  No action or investigation is pending or, so far as
Borrower's officers and directors know, threatened before or by any court or
administrative agency against Borrower or against any of its businesses,
properties or revenues (a) with respect to any of the Loan Documents or any of
the transactions contemplated by them, or (b) that would reasonably be
anticipated to result in any Material Adverse Effect on Borrower.

    

    5.5           Financial
Statements.  All financial statements and reports furnished by
Borrower to Lender are complete and correct in all material respects and fairly
present the financial condition of Borrower and the results of its operations
and transactions as of the dates and for the periods referred to and have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved or if specified herein by SAP. There are no liabilities, direct
or indirect, fixed or contingent, of Borrower as of the date of such financial
statements which are not reflected therein or in the notes thereto. Neither said
financial statements nor any other financial statements, reports, and
information furnished by Borrower to Lender contains any untrue statement of a
material fact or omits a material fact necessary to make the statements
contained therein or herein not misleading. There is no fact which Borrower has
failed to disclose to Lender in writing which materially affects adversely or,
so far as Borrower can now foresee, will materially affect adversely the
Collateral, business, prospects, profits, or condition (financial or otherwise)
of Borrower or the ability of Borrower to perform this Agreement.

    

    5.6           No
Change.  Since the date of the last financial statements
submitted to Lender, there has not been: (i) any material adverse change in the
assets, liabilities, business, or condition (financial or other) of Borrower;
(ii) any loss, damage, or destruction, whether or not covered by insurance, that
materially adversely affected the assets or property of Borrower; (iii) any
change in any of Borrower's accounting
methods, practices, or principles or depreciation and amortization rates or
policies, except as required by law or to conform with GAAP; or (iv) except in
the usual and ordinary course of business, any of the following: (A) any breach
or termination by Borrower of any Contractual Obligation that would reasonably
be anticipated to result in a Material Adverse Effect; (B) except in the
ordinary course of the Borrower’s business, any disposition by Borrower of, or
the imposition of a Lien on, any asset of Borrower, except for Permitted Liens;
(C) except in the ordinary course of Borrower’s business, any cancellation of a
debt owed to, or a claim held by, Borrower; or (v) since the closing of the
Loan, any Event of Default. No Contractual Obligation of Borrower and no
Requirement of Law materially adversely affects, or to the extent that Borrower
can reasonably anticipate might have a Material Adverse Effect on
Borrower.

    

    5.7           Title to
Properties.  Borrower has good title to all of its material
assets. Borrower enjoys peaceable and undisturbed possession under all real
property leases under which it is operating and none of such leases contain any
provisions which may reasonably be anticipated to materially and adversely
affect or impair the operations of Borrower, and all of such leases are valid
and subsisting and are in full force and effect.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    

    5.8           Taxes.  Borrower
has filed all federal, state, and local tax returns which are required to be
filed and has paid, or made adequate provision for the payment of, all taxes
which have or may become due pursuant to said returns or to assessments received
by Borrower, except for, in respect of all of the foregoing, those that are
being contested in good faith by appropriate proceedings. Borrower has paid all
withholding, FICA and other payments required by federal, state or local
governments with respect to any wages paid to employees.

    

    5.9           Collateral.  The
security interests granted to Lender herein (a) constitute and, as to
subsequently acquired property included in the Collateral will constitute, a
security interest under the Code entitled to all of the rights, benefits and
priorities provided by the Code and (b) are, and as to such subsequently
acquired Collateral will be, fully perfected, superior, and prior to the rights
of all third persons, now existing or hereafter arising, subject only to
Permitted Liens.  All of the Collateral is intended for use solely in
Borrower's or its subsidiaries’ business. Borrower shall defend the Collateral
against all claims and demands of all other parties who at any time claim any
interest in the Collateral.

    

    5.10           Labor Law
Matters.  The Borrower is not in violation of any applicable
labor laws or regulations or any collective bargaining agreement or other labor
agreements or in violation of any minimum wage, wage-and-hour, or other similar
laws or regulations, except in each case for any violation that would not
reasonably be expected to result in a Material Adverse Effect. No collective
bargaining agreement concerning any of Borrower’s employees exists or is being
negotiated.

    5.11           Judgment
Liens.  Neither Borrower nor any of its assets is subject to
any unpaid judgments (whether or not stayed) or judgment liens in any
jurisdiction that would reasonably be anticipated to have a Material Adverse
Effect.

    

    5.12           Place of
Business.  Borrower's chief executive offices are located at
701 U.S. Highway 1, North Palm Beach, Florida 33408.

    

    5.13           Full
Disclosure.  All information furnished by Borrower to Lender
concerning Borrower, its financial condition, the Collateral, or otherwise for
the purpose of obtaining credit or an extension of credit, is, or will be at the
time the same is furnished, accurate and correct in all material respects and
complete insofar as completeness may be necessary to give Lender a true and
accurate knowledge of the subject matter. The books of account, minute books,
and stock record books of Borrower are complete and correct in all material
respects and have been maintained in accordance with good business practices,
and there have been no transactions adversely affecting the business of Borrower
that should have been set forth therein and have not been so set
forth.  The Lender has been advised of the Employers
Merger.

    

    5.14           Existing
Debt.  Borrower is not in default with respect to any of its
existing Debt or with respect to any Contractual Obligation to which Borrower is
a party which default would reasonably be anticipated to have a Material Adverse
Effect. Borrower is not subject to any federal, state or local tax Liens, nor
has such Person received any notice of deficiency or other official notice to
pay any taxes. Borrower has paid all sales and excise taxes payable by
it.

    

    5.15           Insolvency.  Borrower
is now Solvent.

    

    5.16           Representations
True.  No representation or warranty by Borrower contained
herein or in any certificate or other document furnished by Borrower pursuant
hereto contains any untrue statement of material fact or omits to state a
material fact necessary to make such representation or warranty not misleading
in light of the circumstances under which it was made.

    

    5.17           Compliance
with Loan Documents.  Borrower acknowledges and agrees that its
timely and complete compliance with all of the terms and conditions contained in
the documents evidencing and securing the loan obligation is material
consideration for the loan.  Lender shall at all times act reasonably
and in good faith.

    

    5.18           Financial
Statement.  Borrower acknowledges and agrees that Lender's
ability to monitor and evaluate the status of the loan is dependent upon
Borrower’s timely providing financial information required herein.

     

    
      
        
        

      

      
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    5.19.           Patriot
Act.  Neither Borrower,
any affiliate of the Borrower, nor any person owning an interest in either of
the foregoing is a "Specially Designated National" or a "Blocked Person" as
those terms are defined in the Office of Foreign Asset Control Regulations (31
CFR Section 500 et seq.) and/or any other list of terrorists or terrorist
organizations maintained pursuant to any of the rules and regulations of Office
of Foreign Asset Control, Department of the Treasury or pursuant to any other
applicable Executive Orders (such lists are collectively referred to as the
"OFAC Lists").

    

    5.20.           Governmental
Regulations, Etc.

    

    (a) No part of the proceeds of the Loan
will be used, directly or indirectly, for the purpose of purchasing or carrying
any “margin stock” within the meaning of Regulation U.  If requested
by the Lender, the Borrower will furnish to the Lender a statement to the
foregoing effect in conformity with the requirements of Form FR U-1 referred to
in said Regulation U.  No indebtedness being reduced or retired out of
the proceeds of the Loan was or will be incurred for the purpose of purchasing
or carrying any margin stock within the meaning of Regulation U or any “margin
security” within the meaning of Regulation T.  “Margin stock” within
the meanings of Regulation U does not constitute more than 25% of the value of
the consolidated assets of the Borrower and its Subsidiaries.  None of
the transactions contemplated by this Agreement (including, without limitation,
the direct or indirect use of the proceeds of the Loan) will violate or result
in a violation of the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, or regulation issued pursuant thereto, or
Regulation T, U or X.

    

    (b) Neither the Borrower nor any of its
Subsidiaries is subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act or the Investment Company Act of 1940, each
as amended.  In addition, neither the Borrower nor any of its
Subsidiaries is (i) an “investment company” registered or required to be
registered under the Investment Company Act of 1940, as amended, and is not
controlled by such a company, or (ii) a “holding company”, or a “subsidiary
company” of a “holding company” or an “affiliate” of a “holding company” or of a
“subsidiary” of a “holding company”, within the meaning of the Public Utility
Holding Company Act of 1935, as amended.

    

    (c) The Insurance Subsidiaries have
filed all reports, statements, documents, registrations, filings, or submissions
required to be filed with any Governmental Authority with respect to which the
failure to so file will individually or in the aggregate would reasonably be
anticipated to have a Material Adverse Effect, or except as otherwise agreed to
by the applicable Governmental Authority.  All such filings complied
with applicable law in all material respects when filed, and no material
deficiencies have been asserted by any Governmental Authority with respect to
such filings or submissions.

    

    (d) No director, executive officer or
principal shareholder of the Borrower or any of its Subsidiaries is a director,
executive officer or, to the actual knowledge of the Borrower, a principal
shareholder of the Lender.  For the purposes hereof the terms
“director”, “executive officer” and “principal shareholder” (when used with
reference to the Lender) have the respective meanings assigned thereto in
Regulation O issued by the Board of Governors of the Federal Reserve
System.

    

    5.21.           Insurance
Subsidiaries.  The following
entities are Insurance Subsidiaries:  AmComp Preferred and AmComp
Assurance.

    

    5.22.           Non-Insurance
Subsidiaries.  The following
entities are Non-Insurance Subsidiaries: Pinnacle Administrative Company,
Pinnacle Benefits, Inc. and AmServ, Inc.

    

    5.23.           Subsidiaries.  Other than the
Insurance Subsidiaries and Non-Insurance Subsidiaries, the Borrower has no
Subsidiaries.

    

    5.24           ERISA.
The Borrower maintains no Plan other than the 401(k) of Borrower currently in
effect.

     

    
      
        
        

      

      
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    6.           Affirmative
Covenants.  Borrower agrees and covenants that until the
Obligations have been indefeasibly paid in full and until Lender has no further
obligation to make advances under the Loan, Borrower shall:

    

    6.1           Insurance.  Maintain
insurance, including but not limited to casualty and business interruption, with
insurance companies reasonably satisfactory to Lender on such of its properties,
in such amounts and against such risks as is customarily maintained in similar
businesses operating in the same vicinity, in amounts not less than in effect as
of the date of this Agreement as long as such levels continue to be acceptable
to Lender in its reasonable discretion, and shall file with Lender upon request,
from time to time, a detailed list of the insurance then in effect, stating the
names of the insurance companies, the amounts and rates of the insurance, dates
of expiration thereof, and the properties and risks covered thereby, and, within
sixty (60) days after notice in writing from Lender, shall obtain such
additional insurance as Lender may reasonably request.

    

    6.2           Company
Existence: Qualification.  Maintain its corporate existence
and, in each jurisdiction in which the character of the property owned by it or
in which the transaction of its business makes its qualification necessary,
maintain good standing.

    

    6.3           Taxes.  During
its fiscal year, accrue all current tax liabilities of all kinds, all required
withholding of income taxes of employees, all required unemployment
contributions, all required payments to employee benefit plans, and pay the same
when they become due, except in each case, those that are being contested in
good faith by appropriate proceedings or where the failure to do so would not
reasonably be expected to result in a Material Adverse Effect.

    

    6.4           Compliance
with Laws.  Comply with all Requirements of Law, including
Environmental Regulations, and pay all taxes, assessments, charges, claims for
labor, supplies, rent, and other obligations which, if unpaid, might give rise
to a Lien against property of Borrower, except claims being contested in good
faith by appropriate proceedings (provided Borrower promptly notifies Lender in
writing of such contest), and against which reasonable reserves have been set up
or except where the failure to comply would not reasonably be expected to result
in a Material Adverse Effect. Specifically, Borrower shall pay when due all
taxes and assessments upon the Collateral, this Agreement, the Note, or any Loan
Document, including, without limitation, any stamp taxes or intangibles taxes
imposed by virtue of the transactions outlined herein.

    

    6.5           Financial
Statements/Tax Returns.  The Borrower will
keep its books of accounts in accordance with generally accepted accounting
practices and will furnish to the Lender:

    

    6.5(1)     Annual
Financial Statements.

    

    (i)           As
soon as available, and in any event within one hundred fifty (150) days after
the close of each fiscal year of Borrower and its Subsidiaries, a consolidated
and consolidating balance sheet and income statement of the Borrower and its
Subsidiaries, as of the end of such fiscal year, together with related
consolidated statements of operations, retained earnings, changes in
stockholders’ equity and cash flows for such fiscal year, setting forth in
comparative form consolidated figures for the preceding fiscal year, all such
financial information described above to be in reasonable form and detail and
audited by independent certified public accountants of recognized national
standing reasonably acceptable to the Lender and whose opinion shall be to the
effect that such financial statements have been prepared in accordance with GAAP
(except for changes with which such accountants concur) and shall not be limited
as to the scope of the audit or qualified as to the status of the Borrower and
its Subsidiaries as a going concern;

    

    (ii)           As
soon as available, and in any event within one hundred fifty (150) days after
the close of each fiscal year of an Insurance Subsidiary, the most recent SAP
Statement of such Insurance Subsidiary, as audited in accordance with applicable
law and accompanied by a certificate of knowledgeable officer of such Insurance
Subsidiary to the effect that such SAP Statement fairly presents in all material
respects the financial condition of such Insurance Subsidiary and has been
prepared in accordance with SAP;

     

    
      
        
        

      

      
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    6.5(2)     Quarterly
Financial Statements.

    

    (i)           As
soon as available, and in any event within sixty (60) days after the close of
each fiscal quarter of Borrower and its Subsidiaries a consolidated and
consolidating balance sheet and income statement of the Borrower and its
Subsidiaries, as of the end of such fiscal quarter, together with related
consolidated statements of operations, retained earnings, changes in
stockholders’ equity and cash flows for such fiscal quarter, setting forth in
comparative form consolidated figures for the preceding fiscal quarter, all such
financial information described above to be in reasonable form and detail and
reasonably acceptable to the Lender and accompanied by a certificate of the
chief financial officer of the Borrower to the effect that such quarterly
financial statements fairly present in all material respects the financial
condition of the Borrower and its Subsidiaries and have been prepared in
accordance with GAAP, subject to changes resulting from audit and normal
year-end audit adjustments;

    

    (ii)           As
soon as available, and in any event within sixty (60) days after the close of
each fiscal quarter (other than the fourth fiscal quarter, in which case one
hundred twenty (120) days after the end thereof) of an Insurance Subsidiary the
most recent SAP Statement of such Insurance Subsidiary, in each case accompanied
by a certificate of a knowledgeable officer of such Insurance Subsidiary to the
effect that such SAP Statement fairly presents in all material respects the
financial condition of such Insurance Subsidiary and has been prepared in
accordance with SAP;

    

    The Borrower also, with reasonable
promptness, will furnish to the Lender such other data as the Lender may
reasonably request.

    

    6.6           Officer’s
Certificate. 
At the time of delivery of the financial statements called for by Section
6.5(1)(i), Borrower shall deliver to Lender a certificate of the chief financial
officer of the Borrower, substantially in the form of Exhibit “A” attached
hereto demonstrating compliance with the financial covenants contained in this
Agreement by calculation thereof as of the end of each such fiscal
year.

    

    6.7           Visits
and Inspections.  Borrower shall keep true books, records, and
accounts that completely, accurately, and fairly reflect all dealings and
transactions relating to its assets, business, and activities and shall record
all transactions in such manner as is necessary to permit preparation of its
financial statements in accordance with GAAP.

    

    6.8           Payments
on Note.  Duly and punctually pay the principal and interest on
the Note, in accordance with the terms of this Agreement and of the Note, and
pay or otherwise satisfy or cancel all other Debt of Borrower reflected on the
financial statements delivered to Lender and referred to in this Agreement and
all other Debt incurred after the date hereof in accordance with the terms of
such Debt.

    

    6.9           Conduct
of Business.  Continue to engage in the insurance business, and
do all things necessary to preserve, renew, and keep in full force and effect
such rights, patents, permits, licenses, franchises, and trade names necessary
to continue its business. Borrower shall comply in all material respects with
all Contractual Obligations applicable to it and its business and properties
which are useful or necessary to the operation of its business.

    

    6.10           Maintenance
of Properties.  Keep these properties used in connection with,
or useful to, its business in good repair, working order and condition,
reasonable wear and tear excepted, and from time to time make all needed and
proper repairs, renewals, replacements, additions, and improvements thereto and
comply with the provisions of all leases to which it is a party or under which
it occupies property so as to prevent any loss or forfeiture thereof or
thereunder.

    

    6.11           Additional
Documents.  Join Lender in executing any security agreements,
assignments, consents, financing statements or other instruments, in form
satisfactory to Lender, as Lender may from time to time request in connection
with the Collateral and the other security for the Loan if consistent with the
intent of this Agreement.

     

    
      
        
        

      

      
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    6.12           Notice to
Lender.  Promptly notify Lender of: (a) any default or Event of
Default, (b) the acceleration of the maturity of any Debt or Contractual
Obligation; (c) a default in the performance of or compliance with any
Requirement of Law, Environmental Regulation, or Contractual Obligation of
Borrower, in each case which would reasonably be expected to result in a
Material Adverse Effect; (d) any litigation, dispute, or proceeding that is
pending or known by Borrower’s officers to be threatened against Borrower and
that might involve a claim for damages or a request for injunctive, enforcement,
or other relief that, if granted, might reasonably be expected to have a
Material Adverse Effect on Borrower, or (e) a change in either the name or the
principal place of business of Borrower or the office where its books and
records are kept; (f) any change in its accounting methods, policies, or
practices for financial reporting purposes or any material change in its
accounting methods, policies, or practices for tax reporting purposes; and (g) a
material adverse change in the business, operations, assets, property, or
condition (financial or other) of Borrower. Borrower shall provide with each
notice pursuant to this section details of the occurrence referred to in the
notice and stating what action Borrower proposes to take with respect to
it.

    

    6.13           Dividends.  Except as
otherwise provided by law, the Borrower shall (a) cause each of its Subsidiaries
from time to time to pay cash dividends or make other distributions or payments
in cash (directly or, through other Subsidiaries of the Borrower, indirectly) to
the Borrower in amount that, taken together, are sufficient to permit the
Borrower to (i) pay all principal of and any accrued interest in respect of the
Loan and all other indebtedness or obligations of any and every kind owing by
the Borrower to the Lender as the same shall become due and payable (whether at
stated maturity, by mandatory prepayment, by acceleration or otherwise) and (ii)
pay for all capital expenditures made by the Borrower, (b) cause each of its
Insurance Subsidiaries to make payments in accordance with the terms of any
service agreements with Borrower, and (c) cause each of its Insurance
Subsidiaries to request on a timely basis regulatory approval to the extent
necessary for such Subsidiary to pay such dividends or make such distributions
or payments.  Except as may be provided by applicable law, there are
no restrictions on the payment of dividends by Borrower, its
subsidiaries.

    

    6.14           Net
Written Premiums to Statutory Surplus Ratio.  The Borrower
shall cause the ratio of Net Written Premiums to policyholder’s surplus for all
Insurance Subsidiaries, on an Additive Basis, as of the last day of each fiscal
year of its Insurance Subsidiaries, to be no greater than 3.0:1.0.

    

    6.15           Combined
Ratio.  The ratio of Net
Losses plus Insurance Operating Expenses to Net Premiums Written for all
Insurance Subsidiaries, as of the last day of each fiscal year, on an Additive
Basis, shall not exceed 106% for any one year or 100% for any two consecutive
years based on the Annual Statements filed with the FOIR.

    

    6.16           Actuarial
Report.  Within one
hundred fifty (150) days of Borrower’s fiscal year end, an Actuarial Report
prepared by Milliman USA or such other independent actuary reasonably acceptable
to the Lender and certified as to such Insurance Subsidiary’s (including AmComp
Preferred’s) reserve position as of such fiscal year end by such independent
actuary.  To the extent an Actuarial Report contains confidential
information, the Lender agrees to abide to a mutually acceptable confidentiality
agreement.

    

    6.17           IRIS Test
Results.  Within one
hundred fifty (150) days of Borrower’s fiscal year end, a copy of the final
report to each Insurance Subsidiary from the NAIC as to such Insurance
Subsidiary’s status under the IRIS Tests.

    

    6.18           Debt
Service Coverage Ratio.  The Borrower shall maintain at all
times a minimum Debt Service Coverage Ratio of 1.5:1.0 to be measured on an
annual basis based on the annual financial statements submitted by Borrower to
Lender.

    

    6.19           Insolvency.  Borrower,
after giving effect to the transactions contemplated hereby, at all times during
the term of this Agreement will be Solvent.

     

    
      
        
        

      

      
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    7.           Negative
Covenants.  Until the Obligations have been indefeasibly repaid
in full and until Lender has no further obligation to make advances under the
Loan, without the prior written consent of Lender, Borrower shall
not:

    

    7.1           Financing
Statements.  Authorize any financing statement (except Lender's
financing statements) to be on file with respect to the
Collateral.  Financing statements will be permitted for any assets of
the Borrower not defined as Collateral in this Agreement.

    

    7.2           Liquidation,
Merger or Consolidation.  Liquidate, wind up, or dissolve
itself (or suffer any liquidation or dissolution), or enter into any merger or
consolidation, or acquire all or substantially all of the assets of any Person;
or sell, lease, transfer or otherwise dispose of any of its assets, except sales
in the ordinary course of its business.  Acquisitions by Borrower of
future subsidiaries will be permitted by Lender in accordance with the terms of
this Agreement. Notwithstanding the foregoing, the Employers Merger shall not
constitute a violation of this covenant.

    

    7.3           Loans or
Advances.  Make loans or advances to third parties except as
contemplated by this Agreement in excess of THREE HUNDRED THOUSAND AND NO/100
DOLLARS ($300,000.00) in the aggregate without Lender’s consent.  For
purposes of this paragraph, Subsidiaries of Borrower shall not be considered
third parties.

    

    7.4           Reserved.

     

    7.5           Change in
Business or Management.  Enter into any business which is
substantially different from an insurance related business, change the name,
identity, or corporate structure of Borrower, or dismiss Frederick R. Lowe or
Debra Cerre-Ruedisili from their managerial responsibilities without the written
consent of Lender which shall not be unreasonably withheld. Notwithstanding the
foregoing, the Employers Merger will not be a violation of the covenant, and in
the event of such merger, change in management involving Frederick R. Lowe or
Debra Cerre-Ruedisili shall not constitute a violation of this
covenant.

    

    7.6           Liquidate,
Dissolve or Suspend Business.  Liquidate, dissolve or
voluntarily suspend business for more than a specified number of days (as
determined by Lender).

    

    7.7           Guaranty.  In individual
transaction amount exceeding $1,000,000.00, guarantee or otherwise in any way
become responsible for the indebtedness or obligations of any other third party
entity or person without prior written consent of
Lender.  Subsidiaries of Borrower shall not be considered third party
entities.

    

    8.           Additional
Representations, Covenants, and Agreements Relating to
Collateral.

    

    8.1           Reserved.

    

    8.2           Reserved.

    

    8.3           Discharge
of Taxes and Liens.  At its option and after prior written
notice to Borrower, Lender may discharge taxes, Liens, security interests, or
other encumbrances at any time levied or placed on the Collateral and may pay
for the maintenance and preservation of the Collateral. Borrower agrees to
reimburse Lender, on demand, for any payment made or expense incurred by Lender
pursuant to the foregoing authorization, including, without limitation,
attorneys' fees.

    

    8.4           Complete
Records.  Borrower will at all times keep accurate and complete
records of the Collateral, and Lender or its agents shall have the right to call
at Borrower's place or places of business at intervals to be determined by
Lender (but no more than two times per year unless there is an Event of
Default), upon reasonable notice and during Borrower's regular business hours,
and without hindrance or delay, to inspect and examine the Inventory and to
inspect, audit, check, and make abstracts from the books, records, journals,
orders, receipts, computer printouts, correspondence, and other data relating to
the Collateral or to any other transactions between the parties
hereto.  Lender will keep all records of Borrower
confidential.

     

    
      
        
        

      

      
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    8.5           Uniform
Commercial Code Financial Statement.  Borrower agrees that a
financial statement with respect to the Collateral may be filed by
Lender.

    

    9.           Events of
Default.   The occurrence of any one or more of the
following events shall constitute an Event of Default (unless and except to the
extent that the same is cured to the satisfaction of Lender within the
applicable cure period, if any, or, at the sole discretion of Lender, at any
time thereafter):

    

    9.1           Payment
Default.  If Borrower: (a) shall fail to make any payment of
any installment of principal on the Note when the same shall become due and
payable, whether at stated maturity, by declaration, upon acceleration in
accordance with the terms hereof or thereof, or otherwise, and such default
shall continue for fifteen (15) days; or (b) shall fail to make any payment of
any installment of interest on the Note or any fees or charges or other amounts
owing hereunder, under any of the other Loan Documents or in connection herewith
or therewith, when the same shall become due and payable, and such default shall
continue for fifteen (15) or more days; or

    

    9.2           Fees and
Expenses.  If Borrower shall fail to pay when due any expense,
fee or charge provided for in this Agreement or the Loan Documents when the same
shall become due and payable, and such default shall continue for fifteen (15)
or more days; or

    

    9.3           Other
Defaults.  If Borrower fails to perform, keep or observe any
other covenant, agreement or provision of the Note or of this Agreement or of
any other Obligation or if there is a default in any Loan Document, Note or
Obligation, and such default shall continue unremedied for a period of at least
thirty (30) days after the earlier of a responsible officer of the Borrower or
Guarantor becoming aware of such default or written notice thereof by the
Lender; provided, however, that in the event the Borrower can not complete the
cure of any such default within such thirty (30) day period, the Borrower shall
have an additional period, not to exceed sixty (60) days, to cure such default,
on the condition that the Borrower has commenced such cure during the initial
thirty (30) day period and thereafter diligently pursues the cure of such
default to completion; or

    

    9.4           Representations
False.  If any warranty, representation, or other statement
made or furnished to Lender by or on behalf of Borrower or in any of the Loan
Documents proves to be false or misleading in any material respect when made or
furnished; or

    

    9.5           Financial
Difficulties.  If Borrower shall be involved in financial
difficulties as evidenced.

    

    (a)           by
its admission in writing of its inability to pay its debts generally as they
become due or of its ceasing to be Solvent;

    

    (b)           by
its commencing a voluntary case under the United States Bankruptcy Code or any
similar law regarding debtor's rights and remedies or an admission seeking the
relief therein provided;

    

    (c)           by
its making a general assignment for the benefit of its creditors;
or

    

    (d)           by
its voluntarily liquidating or terminating operations or applying for or
consenting to the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of such Person or of all or of a substantial
part of its assets; or

    

    9.6           Involuntary
Proceedings.  If without its application, approval, or consent,
a proceeding shall be commenced, in any court of competent jurisdiction, seeking
in respect of Borrower any remedy under the federal Bankruptcy Code, the
liquidation, reorganization, dissolution, winding-up, or composition or
readjustment of debt, the appointment of a trustee, receiver, liquidator or the
like of such Person, or of all or any substantial part of the assets of such
Person, or other like relief under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts, which results
in the entry of an order for relief or such adjudication or appointment remains
undismissed or undischarged for a period of sixty (60) days; or

     

    
      
        
        

      

      
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    9.7           Reserved.

    

    9.8           Default
on Other Obligations.  If Borrower or any Affiliate of Borrower
defaults under the $30,000,000 Agreement, as may be amended, modified or
restated from time to time, by and between Borrower and Lender; or

    

    9.9           Judgments.  If
a final judgment for the payment of money in an amount no less than $500,000.00
shall be rendered against Borrower and the same shall remain undischarged for a
period of 30 days during which execution shall not be effectively stayed, unless
such judgment is fully covered by collectible insurance or bond; or

    

    9.10           Actions.  If
Borrower shall be convicted under any law; or

    

    9.11           Collateral.  If
a creditor of Borrower shall obtain possession of any of the Collateral by any
legal means; or

    

    9.12           Priority
of Security Interest.  If any security interest or Lien of
Lender hereunder or under any other Security Agreement shall not constitute a
perfected security interest of first priority in the Collateral thereby
encumbered, subject only to Permitted Liens.

    

    On the occurrence of any Event of
Default, Lender or the holder of the Note may at its option proceed to protect
and enforce its rights by suit in equity, action at law and/or the appropriate
proceeding either for specific performance of any covenant or condition
contained in the Note or in any Loan Document, and/or declare the unpaid balance
of the Loan and Note together with all accrued interest to be forthwith due and
payable, and thereupon such balance shall become so due and payable without
presentation, protest or further demand or notice of any kind, all of which are
hereby expressly waived.

    

    Without limiting the foregoing, upon
the occurrence of any Event of Default, and at any time thereafter, Lender shall
have the rights and remedies of a secured party under the Code (and the Uniform
Commercial Code of any other applicable jurisdiction) in addition to the rights
and remedies provided herein or in any other instrument or document executed by
Borrower.

    

    In addition to any other remedy
available to it, Lender shall have the right to the extent provided by law, upon
the occurrence of an Event of Default, to seek and obtain the appointment of a
receiver to take possession of and operate and/or dispose of the Collateral and
any costs and expenses incurred by Lender in connection with such receivership
shall bear interest at the Default Rate.

    

    10.           Indemnification.    Borrower
agrees to defend, indemnify and hold harmless Lender, its directors, officers,
employees, accountants, attorneys, and agents (the “Indemnitees”) from and
against any and all claims, demands, judgments, damages, actions, causes of
action, injuries, orders, penalties, costs and expenses (including attorneys'
fees and costs of court) of any kind whatsoever arising out of or relating to
any breach or default by Borrower or any other Person under this Agreement or
any Loan Document or the failure of Borrower to observe, perform or discharge
Borrower’s duties hereunder or thereunder. Without limiting the generality of
the foregoing, Borrower's obligation to indemnify Lender shall include indemnity
from any and all claims, demands, judgments, damages, actions, causes of action,
injuries, orders, penalties, costs, and expenses arising out of or in connection
with the activities of Borrower, its predecessors in interest, third parties who
have trespassed on Borrower’s property, or parties in a contractual relationship
with Borrower, whether or not occasioned wholly or in part by any condition,
accident or event caused by an act or omission of the Indemnitees, which: (a)
arise out of the actual, alleged or threatened discharge, 

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    dispersal,
release, storage, treatment, generation, disposal, or escape of radioactive
materials, radioactivity, pollutants or other toxic or hazardous substances,
including any solid, liquid, gaseous, or thermal irritant or contaminant,
including smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste
(including materials to be recycled, reconditioned or reclaimed); or (b)
actually or allegedly arise out of the use, specification, or inclusion of any
product, material, or process containing chemicals or radioactive material, the
failure to detect the existence or proportion of chemicals or radioactive
material in the soil, air, surface water or groundwater, or the performance or
failure to perform the abatement of any pollution source or the replacement or
removal of any soil, water, surface water, or groundwater containing chemicals
or radioactive material; or (c) arises out of or relates to breach by Borrower
of any of the provisions of the Environmental Matters section of this
Agreement.

    

    11.           Miscellaneous.

    

    11.1           Costs and
Expenses.  Borrower shall bear all expenses of Lender
(including reasonable fees and expenses of its counsel, subject to the terms of
the letter regarding attorney fees dated of even date herewith by and between
Winderweedle, Haines, Ward & Woodman, P.A. and the Borrower) in connection
with the preparation of this Agreement and the Loan Documents, and the issuance
and delivery of the Note to Lender and also in connection with any amendment or
modification thereto. Borrower agrees to indemnify and save Lender harmless
against all broker's and finder's fees whose services have been retained or
utilized by or through Borrower, if any.  If at any time or times
hereafter, whether before or after the occurrence of an Event of Default, Lender
employs counsel to advise or provide other representation with respect to this
Agreement, or to collect the balance of the Loan, or to take any action in or
with respect to any suit or proceeding relating to this Agreement or any of the
Loan Documents, or to protect, collect, or liquidate the Collateral or to
attempt to enforce any security interest or Lien granted to Lender by Borrower
then in any such events, then the prevailing party in any such proceeding shall
be entitled to recover from the other, all of the reasonable attorneys' fees
arising from such services and any expenses, costs and charges relating thereto
shall constitute additional obligations of Borrower payable on demand of Lender.
Without limiting the foregoing, Borrower shall pay or reimburse Lender for all
recording and filing fees, intangibles taxes, documentary and revenue stamps,
other taxes or other expenses and charges payable in connection with this
Agreement, the Note or any Loan Document, or the filing of any Loan Document,
financing statements or other instruments required by Lender in connection with
the Loan.

    

    11.2           Waivers
of Provisions.  All amendments of this Agreement and all
waivers and suspensions by Lender of any provision of this Agreement or of the
Loan Documents and all waivers and suspensions by Lender of any default or Event
of Default hereunder shall be effective only if (i) in writing and signed by a
duly authorized representative of Lender and (ii) accompanied by such fees and
charges as may be imposed by Lender in connection with the amendment. The fees
may include out-of-pocket expenses incurred by Lender in administration of the
Loan or in evaluation of the proposed waiver, amendment or suspension, as well
as additional facility fees and administrative fees that may be required by
Lender in connection with Borrower's request. The fees may include additional
compensation to Lender for the extension of the credit facilities represented by
the Loan. Any such amendment, waiver, or suspension may be granted only in the
sole discretion of Lender.

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    

    11.3           Actions
Not Constituting a Waiver.  Neither (i) the failure at any time
or times hereafter to require strict performance by Borrower of any of its
provisions, warranties, terms and conditions contained in this Agreement or any
other agreement, document or instrument now or hereafter executed by Borrower,
and delivered to Lender, nor (ii) the failure of Lender to take action or to
exercise its remedies with respect to any default or Event of Default hereunder,
nor (iii) any delay or omission of Lender to exercise any right, remedy, power,
or privilege hereunder after the occurrence of a default or Event of Default,
shall act to waive, affect, or diminish any right of Lender to demand strict
compliance with the terms of this Agreement or to exercise remedies with respect
to any default or Event of Default.

    

    11.4           Headings:
Exhibits.  Except for the definitions set forth in this
Agreement, the headings of the articles, sections, paragraphs and subdivisions
of this Agreement are for convenience of reference only, are not to be
considered a pan hereof, and shall not limit or otherwise affect any of the
terms hereof. Unless otherwise expressly indicated, all references in this
Agreement to a section or an exhibit are to a section or an exhibit of this
Agreement. All exhibits referred to in this Agreement are an integral part of it
and are incorporated by reference in it.

    

    11.5           Right of
Setoff.  Upon and after the occurrence of any Event of Default,
Lender may, and is hereby authorized by Borrower, at any time and from time to
time, to the fullest extent permitted by applicable laws, and without advance
notice to Borrower (any such notice being expressly waived by Borrower), setoff
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and any other indebtedness at any time owing by
Lender to, or for the credit or the account of, Borrower against any or all of
the Obligations of Borrower now or hereafter existing whether or not such
Obligations have matured and irrespective of whether Lender has exercised any
other rights that it has or may have with respect to such Obligations,
including, without limitation, any acceleration rights. The aforesaid right of
setoff may be exercised by Lender against Borrower or against any trustee in
bankruptcy, debtor in possession, assignee for the benefit of the creditors,
receiver, or execution, judgment or attachment creditor of Borrower, or such
trustee in bankruptcy, debtor in possession, assignee for the benefit of
creditors, receiver, or execution, judgment or attachment creditor,
notwithstanding the fact that such right of setoff shall not have been exercised
by Lender prior to the making, filing or issuance, or service upon Lender of, or
of notice of, any such petition; assignment for the benefit of creditors;
appointment or application for the appointment of a receiver or issuance of
execution, subpoena, order or warrant. Lender agrees to notify Borrower after
any such setoff and application, provided that the failure to give such notice
shall not affect the validity of such setoff and application. The rights of
Lender under this Section are in addition to the other rights and remedies
(including, without limitation, other rights of setoff) which Lender may
have.  Notwithstanding the foregoing, if the Borrower provides
reasonable evidence that any sums set off by Lender were funds being held by
Borrower for or on behalf of its Insurance Subsidiaries, Lender will disgorge
those funds and reverse the set off to the extent of those funds.

    

    11.6           Survival
of Covenants.  All covenants, agreements, representations and
warranties made herein and in certificates or reports delivered pursuant hereto
shall be deemed to have been material and relied on by Lender, notwithstanding
any investigation made by or on behalf of Lender, and shall survive the
execution and delivery to Lender of any Note or Loan Document.

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    

    11.7           Addresses.  Any
notice or demand which by any provision of this Agreement is required or
provided to be given shall be deemed to have been sufficiently given or served
for all purposes by being delivered in person or by facsimile to the party to
whom the notice or demand is directed or by being sent as first class mail,
postage prepaid, to the following address:

    

    
      	
               
      

            	
              If
      to Borrower:

            	
              701
      U.S. Highway 1, Suite 200

              North Palm Beach, Florida
    33408

            

    

     

    
      	
               
      

            	
              With
      a copy to:

            	
              Olshan
      Grundman Frome Rosenzweig & Wolosky LLP

              Park
      Avenue Tower

              65
      East 55th
      Street

              
                New
      York, New York 10022

                Attention:
      David J. Adler

                Facsimile:
      (212) 451-2222

              

            

    

     

    or if any
other address shall at any time be designated by Borrower in writing to the
holders of record of the Note at the time of such designation to such other
address;

    

    
      	
               
      

            	
              If
      to Lender:

            	
              111
      N. Orange Avenue, Suite 1585

              Orlando, Florida
  32801

            

    

     

    or if any
other address shall at any time be designated in writing to Borrower, to such
other address.

    

    11.8           Cross
Default.  The Borrower has executed and delivered to the Lender
that certain $30,000,000 Agreement, as may be amended from time to time, by and
between Borrower and Lender, certain related promissory notes, security
instruments and loan documents, all of which shall hereinafter be collectively
referred to as the “Other Obligations."  Any default in the payment of
principal or interest of this Agreement shall constitute a default in the terms
and conditions of all Other Obligations, entitling the Lender to the remedies
for default provided therein.  Any default in the payment of principal
or interest of any Other Obligations shall constitute a default under this
Agreement, entitling the Lender to the remedies for default provided
herein.

    

    11.9           Benefits.  All
of the terms and provisions of this Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns.
Borrower may not assign any of its rights or obligations hereunder without the
prior written consent of Lender.

    

    11.10           Controlling
Law and Venue.  This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida; provided,
however, that if any of the Collateral shall be located in any jurisdiction
other than Florida, the laws of such jurisdiction shall govern the method,
manner and procedure for foreclosure of Lender's lien upon such Collateral and
the enforcement of Lender’s other remedies in respect of such Collateral to the
extent that the laws of such jurisdiction are different from or inconsistent
with the laws of Florida.  Any legal action regarding this Agreement
may be brought in the Courts of the State of Florida in Palm Beach County,
Florida or of the United States for the Southern District of
Florida.

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

    

    11.11           Miscellaneous.  Time
is of the essence with respect to this Agreement.  This Agreement and
the instruments and agreements referred to herein or called for hereby supersede
and incorporate all representations, promises, and statements, oral or written,
made by Lender in connection with the Loan. This Agreement may be executed in
any number of counterparts, each of which, when executed and delivered, shall be
an original, but such counterparts shall together constitute one and the same
instrument. Any provision in this Agreement which may be unenforceable or
invalid under any law shall be ineffective to the extent of such
unenforceability or invalidity without affecting the enforceability or validity
of any other provisions hereof.

    

    11.12           Reserved.

    

    11.13           Limitation
of Grant.  Nothing in this Agreement, whether express or
implied, is intended or should be construed to confer upon, or to grant to, any
person, except Lender and Borrower, any right, remedy, or claim under or because
of either this Agreement or any provision of it. The rights, duties, and
obligations of Borrower under this Agreement are not assignable or
delegable.

    

    11.14           Confidentiality.  Lender
shall use reasonable efforts to maintain the confidentiality of trade secret
information furnished to Lender regarding Borrower's business operations, except
to the extent that disclosure of this information is required by law, by a court
of competent jurisdiction, or in the course of Lender's enforcement of its
remedies under this Agreement.

    

    11.15           Participation.  Borrower
acknowledges that Lender may, at its option, sell participation interests in the
Loan to participating banks. The amounts of any such participations shall be
determined solely by Lender. Borrower agrees with each present and future
participant in the Loan, the names and addresses of which will be furnished to
Borrower, that if an Event of Default should occur, each present and future
participant shall have all of the rights and remedies of Lender with respect to
any deposit due from any participant to Borrower but shall not have further
additional remedies independent from Lender which would subject Borrower to
multiple lawsuits. The execution by a participant of a participation agreement
with Lender, and the execution by Borrower of this Agreement, regardless of the
order of execution, shall evidence an agreement between Borrower and said
participant in accordance with the terms of this Section.

    

    11.16           Reserved.

     

    11.17           Reserved.

    

    11.18           Compliance
with Loan Documents.  Borrower acknowledges and agrees that its
timely and complete compliance with all of the terms and conditions contained in
the documents evidencing and securing the loan obligation is material
consideration for the loan.  Borrower’s failure to timely and
completely comply with any material term and condition contained in the
documents evidencing and securing the loan is, at Lender's option, an event of
default under the loan.  In addition to all other rights and remedies
Lender has, Lender may, in its sole discretion, elect to waive such default or
to forbear to exercise its rights and remedies for such default and may charge
Borrower a fee for agreeing to do so.

    

    11.19           Waiver of
Trial By Jury.  The Borrower and the Lender
knowingly, voluntarily and intentionally waive the right any of them may have to
a trial by jury in respect of any litigation based hereon, or arising out of,
under or in connection with the Loan Documents and any agreement contemplated to
be executed in conjunction therewith, or any course of conduct, course of
dealing, statements (whether verbal or written) or actions of any
party.  This provision is a material inducement for the Lender
entering into the loan evidenced by the Loan Documents.

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

    

    11.20           NOTICE OF
FINAL AGREEMENT.  THIS WRITTEN AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.

    

    IN WITNESS WHEREOF, each of Borrower
and Lender has caused this instrument to be executed by its duly authorized
officer.

     

    
      

      
        
          	
                  AMCOMP
      INCORPORATED,

                
	
                  a
      Delaware corporation

                
	 
      
	 
      
	
                  By:

                	/s/
      Kumar Gursahaney  
	 
      	
                  Kumar
      Gursahaney,

                
	 
      	
                  Chief
      Financial Officer

                
	 
      	
                  “Borrower”

                
	 
      
	 
      
	
                  REGIONS
      BANK,

                
	
                  an
      Alabama banking corporation

                
	 
      
	 
      
	
                  By:

                	/s/
      Hans C. Hurst

        

        
          	
                  Name:

                	Hans
      C. Hurst 

        

        
          	
                  Title:

                	Senior
      Vice President

        

        
          	 
      	
                  “Lender”

                

        

      

    

    

     

     

    
      
        
        

      

      
        25

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