Document:

Exhibit 4.4

 

EXECUTION COPY

 

 

 

INDENTURE

between

AMCOMP PREFERRED INSURANCE COMPANY

and

JPMORGAN CHASE BANK,

 

as Trustee

 

 

Dated as of September 14, 2004

 

 

 

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I

  	
  DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 1.1.

  	
   

  	
  Definitions

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 1.2.

  	
   

  	
  Compliance Certificate and Opinions

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 1.3.

  	
   

  	
  Forms of Documents Delivered to Trustee

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 1.4.

  	
   

  	
  Acts of Holders

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 1.5.

  	
   

  	
  Notices, Etc. to Trustee and Company

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 1.6.

  	
   

  	
  Notice to Holders; Waiver

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 1.7.

  	
   

  	
  Effect of Headings and Table of Contents

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 1.8.

  	
   

  	
  Successors and Assigns

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 1.9.

  	
   

  	
  Separability Clause

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 1.10.

  	
   

  	
  Benefits of Indenture

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 1.11.

  	
   

  	
  Governing Law

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 1.12.

  	
   

  	
  Submission to Jurisdiction

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 1.13.

  	
   

  	
  Non-Business Days

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  SECURITY FORMS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.1.

  	
   

  	
  Form of Security

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.2.

  	
   

  	
  Restricted Legend

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.3.

  	
   

  	
  Form of Trustee’s Certificate of Authentication

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.4.

  	
   

  	
  Temporary Securities

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.5.

  	
   

  	
  Definitive Securities

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  THE SECURITIES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.1.

  	
   

  	
  Payment of Principal and Interest

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.2.

  	
   

  	
  Denominations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.3.

  	
   

  	
  Execution, Authentication, Delivery and
  Dating

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.4.

  	
   

  	
  Global Securities

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.5.

  	
   

  	
  Registration, Transfer and Exchange
  Generally

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.6.

  	
   

  	
  Mutilated, Destroyed, Lost and Stolen
  Securities

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.7.

  	
   

  	
  Persons Deemed Owners

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.8.

  	
   

  	
  Cancellation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.9.

  	
   

  	
  [Intentionally Omitted]

  	
   

  

 

i

 

	
  Section 3.10.

  	
   

  	
  Agreed Tax Treatment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.11.

  	
   

  	
  CUSIP Numbers

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  SATISFACTION AND DISCHARGE

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.1.

  	
   

  	
  Satisfaction and Discharge of Indenture

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.2.

  	
   

  	
  Application of Trust Money

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  REMEDIES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.1.

  	
   

  	
  Events of Default

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.2.

  	
   

  	
  Acceleration of Maturity; Rescission and
  Annulment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.3.

  	
   

  	
  Collection of Indebtedness and Suits for
  Enforcement by Trustee

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.4.

  	
   

  	
  Trustee May File Proofs of Claim

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.5.

  	
   

  	
  Trustee May Enforce Claim Without
  Possession of Securities

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.6.

  	
   

  	
  Limitation on Suits

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.7.

  	
   

  	
  Application of Money Collected

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.8.

  	
   

  	
  Unconditional Right of Holders to Receive
  Principal, Premium, if any, and Interest

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.9.

  	
   

  	
  Restoration of Rights and Remedies

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.10.

  	
   

  	
  Rights and Remedies Cumulative

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.11.

  	
   

  	
  Delay or Omission Not Waiver

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.12.

  	
   

  	
  Control by Holders

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.13.

  	
   

  	
  Waiver of Past Defaults

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.14.

  	
   

  	
  Undertaking for Costs

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.15.

  	
   

  	
  Waiver of Usury, Stay or Extension Laws

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  THE TRUSTEE

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.1.

  	
   

  	
  Corporate Trustee Required

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.2.

  	
   

  	
  Certain Duties and Responsibilities

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.3.

  	
   

  	
  Notice of Defaults

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.4.

  	
   

  	
  Certain Rights of Trustee

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.5.

  	
   

  	
  May Hold Securities

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.6.

  	
   

  	
  Compensation; Reimbursement; Indemnity

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.7.

  	
   

  	
  Resignation and Removal; Appointment of
  Successor

  	
   

  

 

ii

 

	
  Section 6.8.

  	
   

  	
  Acceptance of Appointment by Successor

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.9.

  	
   

  	
  Merger, Conversion, Consolidation or
  Succession to Business

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.10.

  	
   

  	
  Not Responsible for Recitals or Issuance of
  Securities

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.11.

  	
   

  	
  Appointment of Authenticating Agent

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  HOLDER’S LISTS AND REPORTS BY TRUSTEE AND
  COMPANY

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.1.

  	
   

  	
  Company to Furnish Trustee Names and
  Addresses of Holders

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.2.

  	
   

  	
  Preservation of Information; Communications
  to Holders

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.3.

  	
   

  	
  Reports by the Company

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER
  OR LEASE

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 8.1.

  	
   

  	
  Company May Demutualize, Consolidate,
  Etc., Only on Certain Terms

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 8.2.

  	
   

  	
  Successor Company Substituted

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
  SUPPLEMENTAL INDENTURES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 9.1.

  	
   

  	
  Supplemental Indentures without Consent of
  Holders

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 9.2.

  	
   

  	
  Supplemental Indentures with Consent of
  Holders

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 9.3.

  	
   

  	
  Execution of Supplemental Indentures

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 9.4.

  	
   

  	
  Effect of Supplemental Indentures

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 9.5.

  	
   

  	
  Reference in Securities to Supplemental
  Indentures

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
  COVENANTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 10.1.

  	
   

  	
  Payment of Principal, Premium, if any, and
  Interest

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 10.2.

  	
   

  	
  Money for Security Payments to be Held in
  Trust

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 10.3.

  	
   

  	
  Statement as to Compliance

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 10.4.

  	
   

  	
  Calculation Agent

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 10.5.

  	
   

  	
  [Reserved]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 10.6.

  	
   

  	
  No Dividends, Distributions, Etc. Following
  an Event of Default

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 10.7.

  	
   

  	
  Waiver of Covenants

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 10.8.

  	
   

  	
  Treatment of Securities

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XI

  	
  REDEMPTION OF SECURITIES

  	
   

  

 

iii

 

	
  Section 11.1.

  	
   

  	
  Optional Redemption

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 11.2.

  	
   

  	
  Tax Redemption

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 11.3.

  	
   

  	
  Election to Redeem; Notice to Trustee

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 11.4.

  	
   

  	
  Selection of Securities to be Redeemed

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 11.5.

  	
   

  	
  Notice of Redemption

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 11.6.

  	
   

  	
  Deposit of Redemption Price

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 11.7.

  	
   

  	
  Payment of Securities Called for Redemption

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XII

  	
  SUBORDINATION OF SECURITIES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 12.1.

  	
   

  	
  Securities Subordinate to Senior
  Obligations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 12.2.

  	
   

  	
  No Payment When Senior Obligations in
  Default; Payment Over of Proceeds Upon Dissolution, Etc.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 12.3.

  	
   

  	
  Payment Permitted If No Default

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 12.4.

  	
   

  	
  Subrogation to Rights of Holders of Senior
  Obligations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 12.5.

  	
   

  	
  Provisions Solely to Define Relative Rights

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 12.6.

  	
   

  	
  Trustee to Effectuate Subordination

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 12.7.

  	
   

  	
  No Waiver of Subordination Provisions

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 12.8.

  	
   

  	
  Notice to Trustee

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 12.9.

  	
   

  	
  Reliance on Judicial Order or Certificate
  of Liquidating Agent

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 12.10.

  	
   

  	
  Trustee Not Fiduciary for Holders of Senior
  Obligations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 12.11.

  	
   

  	
  Rights of Trustee as Holder of Senior
  Obligation; Preservation of Trustee’s Rights

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 12.12.

  	
   

  	
  Article Applicable to Paying Agents

  	
   

  

 

iv

 

SCHEDULES

 

	
  Schedule A

  	
   

  	
  –

  	
   

  	
  Determination
  of LIBOR

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibit A

  	
   

  	
  –

  	
   

  	
  Form of
  Officer’s Financial Certificate

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibit B

  	
   

  	
  –

  	
   

  	
  Financial
  Definitions Insurance Company

  

 

v

 

INDENTURE, dated as of September 14, 2004, between AMCOMP PREFERRED INSURANCE COMPANY, a stock insurance
company (the “Company”), and JPMORGAN
CHASE BANK, a New York banking corporation, as Trustee (in such capacity, the “Trustee”).

 

RECITALS OF THE COMPANY

 

WHEREAS, the Company has duly authorized the execution
and delivery of this Indenture to provide for the issuance of its unsecured
surplus notes (the “Securities”)
and to provide the terms and conditions upon which the Securities are to be
authenticated, issued and delivered; and

 

WHEREAS, all things necessary to make this Indenture a
valid agreement of the Company, in accordance with its terms, have been done.

 

NOW, THEREFORE, this Indenture Witnesseth:

 

For and in consideration of the premises and the
purchase of the Securities by the Holders thereof, it is mutually covenanted
and agreed, for the equal and proportionate benefit of all Holders of the
Securities, as follows:

 

ARTICLE I

 

Definitions and Other Provisions of
General Application

 

SECTION 1.1.  Definitions.

 

For all purposes of this Indenture, except as
otherwise expressly provided or unless the context otherwise requires:

 

(a)  the
terms defined in this Article I have the meanings assigned to them
in this Article I;

 

(b)  the
words “include,” “includes” and “including” shall be deemed to be followed by
the phrase “without limitation;”

 

(c)  all
accounting terms not otherwise defined herein have the meanings assigned to
them in accordance with Applicable Accounting Principles;

 

(d) 
unless the context otherwise requires, any reference to an “Article” or a “Section”
refers to an Article or a Section, as the case may be, of this Indenture;

 

(e)  the
words “hereby,” “herein,” “hereof” and “hereunder” and other words of similar
import refer to this Indenture as a whole and not to any particular Article, Section or
other subdivision;

 

(f)  a
reference to the singular includes the plural and vice versa; and

 

(g)  the
masculine, feminine or neuter genders used herein shall include the masculine,
feminine and neuter genders.

 

“Act,”  when
used with respect to any Holder, has the meaning specified in Section 1.4.

 

1

 

“Additional
Interest”  means
the interest, if any, that shall accrue on any amounts payable on the
Securities, the payment of which has not been made on the applicable Interest
Payment Date and which shall accrue at the rate per annum specified or
determined as specified in such Security, in each case to the extent legally
enforceable.

 

“Affiliate”  of any
specified Person means any other Person directly or indirectly controlling or
controlled by, or under direct or indirect common control with, such specified
Person.  For the purposes of this
definition, “control,” when used with respect to any specified Person, means
the power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms “controlling” and “controlled” have meanings
correlative to the foregoing.

 

“Applicable
Accounting Principles” means statutory accounting principles permitted or proscribed by the Applicable
Insurance Regulatory Authority, including Statement of
Statutory Accounting Principles number 41 (“SSAP
41”).

 

“Applicable
Depositary Procedures”
means, with respect to any transfer or transaction involving a Global Security
or beneficial interest therein, the rules and procedures of the Depositary
for such Security, in each case to the extent applicable to such transaction
and as in effect from time to time.

 

“Applicable
Insurance Law” means Title XXXVII of
the Florida Statutes.

 

“Applicable
Insurance Regulatory Authority” means Florida Office of Insurance
Regulation.

 

“Authenticating
Agent” means
any Person authorized by the Trustee pursuant to Section 6.11 to
act on behalf of the Trustee to authenticate the Securities.

 

“Available Surplus” means
available surplus determined in accordance with the Applicable Accounting
Principles and the Applicable Insurance Law.

 

 “Bankruptcy Code” means
Title 11 of the United States Code or any successor statute thereto,  or any similar federal or state law for the
relief of debtors, in each case as amended from time to time.

 

“Board
of Directors”
means the board of directors of the Company or any duly authorized
committee of that board.

 

“Board
Resolution”  means
a copy of a resolution certified by the Secretary or an Assistant Secretary of
the Company to have been duly adopted by the Board of Directors and to be in
full force and effect on the date of such certification.

 

“Business
Day” means
any day other than (i) a Saturday or Sunday, (ii) a day on which
banking institutions in the City of New York are authorized or required by law
or executive order to remain closed or (iii) a day on which the Corporate
Trust Office of the Trustee is closed for business.

 

“Calculation Agent”
has the meaning specified in Section 10.4.

 

2

 

“Company”  means
the Person named as the “Company”
in the first paragraph of this Indenture until a successor corporation shall
have become such pursuant to the applicable provisions of this Indenture and,
thereafter, “Company” shall
mean such successor corporation.

 

“Company
Request”  and “Company Order”  mean,
respectively, the written request or order signed in the name of the Company by
its Chairman of the Board of Directors, its Vice Chairman of the Board of
Directors, its Chief Executive Officer, President or a Vice President, and by
its Chief Financial Officer, its Treasurer, an Assistant Treasurer, its
Secretary or an Assistant Secretary, and delivered to the Trustee.

 

“Corporate
Trust Office”
means the principal office of the Trustee at which at any particular
time its corporate trust business shall be administered, which office at the
date of this Indenture is located at 600 Travis, 50th Floor,
Houston, Texas 77002, Attention: 
Institutional Trust Services – AmCOMP Preferred Insurance Company.

 

“Debt” means,
with respect to any Person, whether recourse is to all or a portion of the
assets of such Person, whether currently existing or hereafter incurred and
whether or not contingent and without duplication, (i) every obligation of
such Person for money borrowed; (ii) every obligation of such Person
evidenced by bonds, debentures, notes or other similar instruments, including
obligations incurred in connection with the acquisition of property, assets or
businesses; (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers’ acceptances or similar facilities issued
for the account of such Person; (iv) every obligation of such Person
issued or assumed as the deferred purchase price of property or services (but
excluding trade accounts payable or other accrued liabilities arising in the
ordinary course of business); (v) every capital lease obligation of such
Person; (vi) all indebtedness of such Person, whether incurred on or prior
to the date of this Indenture or thereafter incurred, for claims in respect of
derivative products, including interest rate, foreign exchange rate and
commodity forward contracts, options and swaps and similar arrangements; (vii) every
obligation of the type referred to in clauses (i) through (vi) of
another Person and all dividends of another Person the payment of which, in
either case, such Person has guaranteed or is responsible or liable for,
directly or indirectly, as obligor or otherwise; and (viii) any renewals,
extensions, refundings, amendments or modifications of any obligation of the
type referred to in clauses (i) through (vii).

 

“Defaulted
Interest” has
the meaning specified in Section 3.1(d).

 

“Depositary”  means
an organization registered as a clearing agency under the Exchange Act that is
designated as Depositary by the Company or any successor thereto.  DTC will be the initial Depositary.

 

“Depositary
Participant” means
a broker, dealer, bank, other financial institution or other Person for whom
from time to time a Depositary effects book-entry transfers and pledges of
securities deposited with the Depositary.

 

“Dollar” or  “$” means the currency of the United States
of America that, as at the time of payment, is legal tender for the payment of
public and private debts.

 

“DTC” means
The Depository Trust Company, a New York corporation.

 

3

 

“Event
of Default”  has
the meaning specified in Section 5.1.

 

“Exchange
Act” means
the Securities Exchange Act of 1934 or any statute successor thereto, in each
case as amended from time to time.

 

“Expiration Date”
has the meaning specified in Section 1.4(h).

 

“Global
Security”  means
a Security that evidences all or part of the Securities, the ownership and
transfers of which shall be made through book entries by a Depositary.

 

“Government
Obligation” means (a) any security that is (i) a
direct obligation of the United States of America of which the full faith and
credit of the United States of America is pledged or (ii) an obligation of
a Person controlled or supervised by and acting as an agency or instrumentality
of the United States of America or the payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States of
America, which, in either case (i) or (ii), is not callable or redeemable
at the option of the issuer thereof, and (b) any depositary receipt issued
by a bank (as defined in Section 3(a)(2) of the Securities Act) as
custodian with respect to any Government Obligation that is specified in clause
(a) above and held by such bank for the account of the holder of such
depositary receipt, or with respect to any specific payment of principal of or
interest on any Government Obligation that is so specified and held, provided,
that (except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depositary receipt from
any amount received by the custodian in respect of the Government Obligation or
the specific payment of principal or interest evidenced by such depositary
receipt.

 

“Holder”  means
a Person in whose name a Security is registered in the Securities Register.

 

“Indenture”  means
this instrument as originally executed or as it may from time to time be
amended or supplemented by one or more amendments or indentures supplemental
hereto entered into pursuant to the applicable provisions hereof.

 

“Interest
Payment Date” means March 15, June 15, September
15 and December 15 of each year, commencing on December 15, 2004, during
the term of this Indenture.

 

“LIBOR” has
the meaning specified in Schedule A.

 

“LIBOR
Business Day”
has the meaning specified in Schedule A.

 

“LIBOR
Determination Date”
has the meaning specified in Schedule A.

 

“Maturity,”  when
used with respect to any Security, means the date on which the principal of
such Security or any installment of principal becomes due and payable as
therein or herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.

 

“Notice
of Default” means a written notice of the kind
specified in Section 5.1(c).

 

4

 

“Officers’
Certificate”  means
a certificate signed by the Chairman of the Board, a Vice Chairman of the
Board, the Chief Executive Officer, the President or a Vice President, and by
the Chief Financial Officer, the Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary, of the Company and delivered to the
Trustee.

 

“Operative
Documents”  means
the Indenture, the Purchase Agreement and the Securities.

 

“Opinion
of Counsel”  means
a written opinion of counsel, who may be counsel for or an employee of the
Company or any Affiliate of the Company.

 

“Original
Issue Date” means
the date of original issuance of each Security.

 

“Outstanding”  means,
when used in reference to any Securities, as of the date of determination, all
Securities theretofore authenticated and delivered under this Indenture,
except:

 

(i)  Securities
theretofore canceled by the Trustee or delivered to the Trustee for
cancellation;

 

(ii)  Securities for
whose payment or redemption money in the necessary amount has been theretofore
deposited with the Trustee or any Paying Agent (other than the Company) in
trust or set aside and segregated in trust by the Company (if the Company shall
act as its own Paying Agent) for the Holders of such Securities; provided,  that,
if such Securities are to be redeemed, notice of such redemption has been duly
given pursuant to this Indenture or provision therefor satisfactory to the
Trustee has been made; and

 

(iii)  Securities
that have been paid or in substitution for or in lieu of which other Securities
have been authenticated and delivered pursuant to the provisions of this
Indenture, unless proof satisfactory to the Trustee is presented that any such
Securities are held by Holders in whose hands such Securities are valid,
binding and legal obligations of the Company;

 

provided,  that,
in determining whether the Holders of the requisite principal amount of
Outstanding Securities have given any request, demand, authorization,
direction, notice, consent or waiver hereunder, Securities owned by the Company
or any other obligor upon the Securities or any Affiliate of the Company or
such other obligor shall be disregarded and deemed not to be Outstanding,
except that, in determining whether the Trustee shall be protected in relying
upon any such request, demand, authorization, direction, notice, consent or
waiver, only Securities that a Responsible Officer of the Trustee actually
knows to be so owned shall be so disregarded. 
Securities so owned that have been pledged in good faith may be regarded
as Outstanding if the pledgee establishes to the satisfaction of the Trustee
the pledgee’s right so to act with respect to such Securities and that the
pledgee is not the Company or any other obligor upon the Securities or any
Affiliate of the Company or such other obligor.

 

“Paying
Agent” means the Trustee or any Person
authorized by the Company to pay the principal of or any premium, if any, or
interest on, or other amounts in respect of, any Securities on behalf of the
Company.

 

“Payment Restrictions” has the meaning specified in Section 2.1.

 

5

 

“Person” means a legal person, including any
individual, corporation, estate, partnership, joint venture, association, joint
stock company, limited liability company, trust, unincorporated association,
government or any agency or political subdivision thereof, or any other entity
of whatever nature.

 

“Place
of Payment”  means,
with respect to the Securities, the Corporate Trust Office of the Trustee.

 

“Policy Claims”
means all existing or future claims of policyholders, claimants or
beneficiaries, as the case may be, under any and all existing or future
policies, endorsements, riders and other contracts of insurance, annuity
contracts (including guaranteed investment contracts) and funding agreements
issued, assumed or renewed by the Company on or prior to the date hereof or
hereafter created and all other claims which, pursuant to the Applicable
Accounting Principles or Applicable Insurance Laws, have priority over claims
with respect to the Securities.

 

“Predecessor
Security”  of any
particular Security means every previous Security evidencing all or a portion
of the same debt as that evidenced by such particular Security.  For the purposes of this definition, any
security authenticated and delivered under Section 3.6 in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.

 

“Proceeding”  has
the meaning specified in Section 12.2(b).

 

“Purchase
Agreement”  means
the agreement, dated as of September 14, 2004, between the Company and ALESCO
Preferred Funding V, Ltd.

 

“Redemption
Date” means,
when used with respect to any Security to be redeemed, the date fixed for such
redemption by or pursuant to this Indenture.

 

“Redemption
Price” means,
when used with respect to any Security to be redeemed, in whole or in part, the
price at which such security or portion thereof is to be redeemed as fixed by
or pursuant to this Indenture.

 

“Reference Banks”
has the meaning specified in Schedule A.

 

“Regular
Record Date”  for
the interest payable on any Interest Payment Date with respect to the
Securities means the date that is fifteen (15) days preceding such Interest
Payment Date (whether or not a Business Day).

 

“Responsible
Officer” means,
with respect to the Trustee, the officer in the Institutional Trust Services
department of the Trustee having direct responsibility for the administration
of this Indenture.

 

“Securities”  or “Security”  means
any debt securities or debt security, as the case may be, authenticated and
delivered under this Indenture.

 

“Securities
Act” means
the Securities Act of 1933 or any successor statute thereto, in each case as
amended from time to time.

 

6

 

“Securities
Register”  and “Securities Registrar”  have
the respective meanings specified in Section 3.5(a).

 

“Senior
Debt”  means (i) all
existing or future Debt of the Company, (ii) all existing or future Debt
of other Persons, the payment of which is guaranteed by the Company, (iii) all
existing or future obligations of the Company under any agreement obligating
the Company to cause another Person to maintain certain financial ratios, a
minimum level of net worth or otherwise to ensure the solvency of such person
and (iv) any expense or any claim or amount, to the extent that repayment
of principal of and payment of the interest on the Securities is required by
the Applicable Insurance Law to be subordinated to the prior payment thereof; provided, that any such indebtedness of
the Company which by its express terms is subordinated in right of payment to,
or ranks equally with, the Securities shall not constitute Senior Debt.  “Senior Debt” does not include (x) any future
surplus notes or similar obligations of the Company, which would rank pari passu with
the Securities, or (y) premium refunds, if any, on assessable policies of the
Company.

 

“Senior
Obligations” means, at any time, any and all Senior Debt and Policy
Claims then outstanding.

 

“Special
Record Date”  for
the payment of any Defaulted Interest means a date fixed by the Trustee
pursuant to Section 3.1(d)(i).

 

“Stated
Maturity” means December
15, 2034.

 

“Tax
Event” means
the receipt by the Company of an Opinion of Counsel experienced in such matters
to the effect that, as a result of (a) any amendment to or change
(including any announced prospective change) in the laws or any regulations
thereunder of the United States or any political subdivision or taxing
authority thereof or therein or (b) any judicial decision or any official
administrative pronouncement (including any private letter ruling, technical
advice memorandum or field service advice) or regulatory procedure, including
any notice or announcement of intent to adopt any such pronouncement or
procedure (an “Administrative Action”),
regardless of whether such judicial decision or Administrative Action is issued
to or in connection with a proceeding involving the Company and whether or not
subject to review or appeal, which amendment, change, judicial decision or
Administrative Action is enacted, promulgated or announced, in each case, on or
after the date of issuance of the Securities, there is more than an
insubstantial risk that interest payable by the Company on the Securities is
not, or within ninety (90) days of the date of such opinion, will not be,
deductible by the Company, in whole or in part, for United States federal income
tax purposes.

 

“Trustee”  means
the Person named as the “Trustee”
in the first paragraph of this instrument, solely in its capacity as such and
not in its individual capacity, until a successor Trustee shall have become
such pursuant to the applicable provisions of this Indenture, and, thereafter, “Trustee” shall
mean or include each Person who is then a Trustee hereunder.

 

“Trust Indenture Act” means
the Trust Indenture Act of 1939, as amended and as in effect on the date as of
this Indenture.

 

7

 

SECTION 1.2.  Compliance Certificate and Opinions.

 

(a) 
Upon any application or request by the Company to the Trustee to take any
action under any provision of this Indenture, the Company shall, if requested
by the Trustee,  furnish to the Trustee
an Officers’ Certificate stating that all conditions precedent (including
covenants compliance with which constitutes a condition precedent), if any,
provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent (including covenants compliance with
which constitutes a condition precedent), if any, have been complied with.

 

(b) 
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than the certificate provided
pursuant to Section 10.3) shall include:

 

(i)  a statement by
each individual signing such certificate or opinion that such individual has
read such covenant or condition and the definitions herein relating thereto;

 

(ii)  a brief
statement as to the nature and scope of the examination or investigation upon
which the statements or opinions of such individual contained in such certificate
or opinion are based;

 

(iii)  a statement
that, in the opinion of such individual, he or she has made such examination or
investigation as is necessary to enable him or her to express an informed
opinion as to whether or not such covenant or condition has been complied with;
and

 

(iv)  a statement as
to whether, in the opinion of such individual, such condition or covenant has
been complied with.

 

SECTION 1.3.  Forms of Documents Delivered to Trustee.

 

(a) 
In any case where several matters are required to be certified by, or covered
by an opinion of, any specified Person, it is not necessary that all such
matters be certified by, or covered by the opinion of, only one such Person, or
that they be so certified or covered by only one document, but one such Person
may certify or give an opinion with respect to some matters and one or more
other such Persons as to other matters, and any such Person may certify or give
an opinion as to such matters in one or several documents.

 

(b) 
Any certificate or opinion of an officer of the Company may be based, insofar
as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or after reasonable
inquiry should know, that the certificate or opinion or representations with
respect to matters upon which his or her certificate or opinion is based are
erroneous.  Any such certificate or
Opinion of Counsel may be based, insofar as it relates to factual matters, upon
a certificate or opinion of, or representations by, an officer or officers of
the Company stating that the information with respect to such factual matters
is in the possession of the Company, unless such counsel knows, or after
reasonable inquiry should know, that the certificate or opinion or
representations with respect to such matters are erroneous.

 

8

 

(c) 
Where any Person is required to make, give or execute two or more applications,
requests, consents, certificates, statements, opinions or other instruments
under this Indenture, they may, but need not, be consolidated and form one
instrument.

 

(d) 
Whenever, subsequent to the receipt by the Trustee of any Board Resolution,
Officers’ Certificate, Opinion of Counsel or other document or instrument, a
clerical, typographical or other inadvertent or unintentional error or omission
shall be discovered therein, a new document or instrument may be substituted
therefor in corrected form with the same force and effect as if originally
received in the corrected form and, irrespective of the date or dates of the
actual execution and/or delivery thereof, such substitute document or
instrument shall be deemed to have been executed and/or delivered as of the
date or dates required with respect to the document or instrument for which it
is substituted.  Without limiting the
generality of the foregoing, any Securities issued under the authority of such
defective document or instrument shall nevertheless be the valid obligations of
the Company entitled to the benefits of this Indenture equally and ratably with
all other Outstanding Securities.

 

SECTION 1.4.  Acts of Holders.

 

(a) 
Any request, demand, authorization, direction, notice, consent, waiver or other
action provided by this Indenture to be given to or taken by Holders may be
embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Holders in person or by an agent thereof duly appointed in
writing; and, except as herein otherwise expressly provided, such action shall
become effective when such instrument or instruments (including any appointment
of an agent) is or are delivered to the Trustee and, where it is hereby
expressly required, to the Company.  Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the “Act” of
the Holders signing such instrument or instruments.  Proof of execution of any such instrument or
of a writing appointing any such agent shall be sufficient for any purpose of
this Indenture and conclusive in favor of the Trustee and the Company, if made
in the manner provided in this Section 1.4.

 

(b) 
The fact and date of the execution by any Person of any such instrument or
writing may be proved by the affidavit of a witness of such execution or by the
certificate of any notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such
instrument or writing acknowledged to him or her the execution thereof. Where
such execution is by a Person acting in other than his or her individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his or her authority.  The fact and
date of the execution by any Person of any such instrument or writing, or the
authority of the Person executing the same, may also be proved in any other
manner that the Trustee deems sufficient and in accordance with such reasonable
rules as the Trustee may determine.

 

(c) 
The ownership of Securities shall be proved by the Securities Register.

 

(d) 
Any request, demand, authorization, direction, notice, consent, waiver or other
action by the Holder of any Security shall bind every future Holder of the same
Security and the Holder of every Security issued upon the registration of transfer
thereof or in exchange therefor or in lieu thereof in respect of anything done
or suffered to be done by the Trustee or the Company in reliance thereon,
whether or not notation of such action is made upon such Security.

 

9

 

(e) 
Without limiting the foregoing, a Holder entitled to take any action hereunder
with regard to any particular Security may do so with regard to all or any part
of the principal amount of such Security or by one or more duly appointed
agents each of which may do so pursuant to such appointment with regard to all
or any part of such principal amount.

 

(f) 
Except as set forth in paragraph (g) of this Section 1.4,
the Company may set any day as a record date for the purpose of determining the
Holders of Outstanding Securities entitled to give, make or take any request,
demand, authorization, direction, notice, consent, waiver or other action
provided or permitted by this Indenture to be given, made or taken by Holders
of Securities.  If any record date is set
pursuant to this paragraph, the Holders of Outstanding Securities on such
record date, and no other Holders, shall be entitled to take the relevant
action, whether or not such Holders remain Holders after such record date; provided,
that no such action shall be effective hereunder unless taken on or prior to
the applicable Expiration Date (as defined in Section 1.4(h))
by Holders of the requisite principal amount of Outstanding Securities on such
record date.  Nothing in this paragraph
shall be construed to prevent the Company from setting a new record date for
any action for which a record date has previously been set pursuant to this
paragraph (whereupon the record date previously set shall automatically and
with no action by any Person be canceled and of no effect).  Promptly after any record date is set
pursuant to this paragraph, the Company, at its own expense, shall cause notice
of such record date, the proposed action by Holders and the applicable
Expiration Date to be given to the Trustee in writing and to each Holder of
Securities in the manner set forth in Section 1.6.

 

(g) 
The Trustee may set any day as a record date for the purpose of determining the
Holders of Outstanding Securities entitled to join in the giving or making of (i) any
Notice of Default, (ii) any declaration of acceleration or rescission or
annulment thereof referred to in Section 5.2, (iii) any
request to institute proceedings referred to in Section 5.6(b) or
(iv) any direction referred to in Section 5.12.  If any record date is set pursuant to this
paragraph, the Holders of Outstanding Securities on such record date, and no
other Holders, shall be entitled to join in such notice, declaration, request
or direction, whether or not such Holders remain Holders after such record
date; provided, that
no such action shall be effective hereunder unless taken on or prior to the
applicable Expiration Date by Holders of the requisite principal amount of
Outstanding Securities on such record date. 
Nothing in this paragraph shall be construed to prevent the Trustee from
setting a new record date for any action for which a record date has previously
been set pursuant to this paragraph (whereupon the record date previously set
shall automatically and with no action by any Person be canceled and of no
effect).  Promptly after any record date
is set pursuant to this paragraph, the Trustee, at the Company’s expense, shall
cause notice of such record date, the proposed action by Holders and the
applicable Expiration Date to be given to the Company in writing and to each
Holder of Securities in the manner set forth in Section 1.6.

 

(h) 
With respect to any record date set pursuant to paragraph (f) or (g) of
this Section 1.4, the party hereto that sets such record date may
designate any day as the “Expiration Date” and
from time to time may change the Expiration Date to any earlier or later day; provided, that
no such change shall be effective unless notice of the proposed new Expiration
Date is given to the other party hereto in writing, and to each Holder of
Securities in the manner set forth in Section 1.6, on or prior to
the existing Expiration Date.  If an
Expiration Date is not designated with respect to any record date set pursuant
to this Section 1.4, the party hereto that set such record date
shall be deemed to have initially designated the ninetieth (90th)
day after such record

 

10

 

date as the Expiration Date with respect thereto,
subject to its right to change the Expiration Date as provided in this
paragraph.  Notwithstanding the
foregoing, no Expiration Date shall be later than the one hundred eightieth
(180th) day after the applicable record date.

 

SECTION 1.5.  Notices, Etc. to Trustee and Company.

 

Any request, demand, authorization, direction, notice,
consent, waiver, Act of Holders or other document provided or permitted by this
Indenture to be made upon, given or furnished to or filed with:

 

(a) 
the Trustee by any Holder or the Company shall be sufficient for every purpose
hereunder if made, given, furnished or filed in writing to or with and received
by the Trustee at its Corporate Trust Office, or

 

(b) 
the Company by the Trustee or any Holder shall be sufficient for every purpose
hereunder if in writing and mailed, first class, postage prepaid, to the
Company addressed to it at P.O. Box
88806, North Palm Beach, Florida 33408,  or at any other address previously furnished
in writing to the Trustee by the Company.

 

SECTION 1.6.  Notice to Holders; Waiver.

 

Where this Indenture provides for notice to Holders of
any event, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first class, postage prepaid, to
each Holder affected by such event to the address of such Holder as it appears
in the Securities Register, not later than the latest date, and not earlier
than the earliest date, prescribed for the giving of such notice.  If, by reason of the suspension of or
irregularities in regular mail service or for any other reason, it shall be
impossible or impracticable to mail notice of any event to Holders when said
notice is required to be given pursuant to any provision of this Indenture,
then any manner of giving such notice as shall be satisfactory to the Trustee
shall be deemed to be a sufficient giving of such notice.  In any case where notice to Holders is given
by mail, neither the failure to mail such notice, nor any defect in any notice
so mailed, to any particular Holder shall affect the sufficiency of such notice
with respect to other Holders. Where this Indenture provides for notice in any
manner, such notice may be waived in writing by the Person entitled to receive
such notice, either before or after the event, and such waiver shall be the
equivalent of such notice.  Waivers of
notice by Holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver.

 

SECTION 1.7.  Effect of Headings and Table of Contents.

 

The Article and Section headings herein and
the Table of Contents are for convenience only and shall not affect the
construction of this Indenture.

 

SECTION 1.8.  Successors and Assigns.

 

This Indenture shall be binding upon and shall inure
to the benefit of any successor to the Company and the Trustee, including any
successor by operation of law.  Except in
connection with a transaction involving the Company that is permitted under Article VIII
and pursuant to

 

11

 

which the assignee agrees in writing to perform the Company’s
obligations hereunder, the Company shall not assign its obligations hereunder.

 

SECTION 1.9.  Separability Clause.

 

If any provision in this Indenture or in the
Securities shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby, and there shall be deemed substituted for the provision at
issue a valid, legal and enforceable provision as similar as possible to the
provision at issue.

 

SECTION 1.10.  Benefits of Indenture.

 

Nothing in this Indenture or in the Securities,
express or implied, shall give to any Person, other than the parties hereto and
their permitted successors and assigns, the holders of Senior Debt and the
Holders of the Securities, any benefit or any legal or equitable right, remedy
or claim under this Indenture.

 

SECTION 1.11.  Governing Law.

 

This Indenture and the rights and obligations of each
of the Holders, the Company and the Trustee shall be construed and enforced in
accordance with and governed by the laws of the State of New York without
reference to its conflict of laws provisions (other than Section 5-1401 of
the General Obligations Law).

 

SECTION 1.12.  Submission
to Jurisdiction.

 

ANY LEGAL ACTION OR PROCEEDING BY OR AGAINST ANY PARTY
HERETO OR WITH RESPECT TO OR ARISING OUT OF THIS INDENTURE MAY BE BROUGHT
IN OR REMOVED TO THE COURTS OF THE STATE OF NEW YORK, IN AND FOR THE COUNTY OF
NEW YORK, OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW
YORK (IN EACH CASE SITTING IN THE BOROUGH OF MANHATTAN).  BY EXECUTION AND DELIVERY OF THIS INDENTURE,
EACH PARTY ACCEPTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS (AND COURTS OF
APPEALS THEREFROM) FOR LEGAL PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH
THIS INDENTURE.

 

SECTION 1.13.  Non-Business Days.

 

If any Interest Payment Date, Redemption Date or
Stated Maturity of any Security shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or the Securities)
payment of interest, premium, if any, principal or other amounts in respect of
such Security shall not be made on such date, but shall be made on the next
succeeding Business Day (and no interest shall accrue in respect of the amounts
whose payment is so delayed for the period from and after such Interest Payment
Date, Redemption Date or Stated Maturity, as the case may be, until such next
succeeding Business Day), except that, if such Business Day falls in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on the Interest Payment Date or Redemption Date or at the Stated Maturity.

 

12

 

ARTICLE II

 

Security Forms

 

SECTION 2.1.  Form of Security.

 

Any Security issued
hereunder shall be in substantially the following form:

 

AmCOMP
Preferred Insurance Company

 

Surplus Note due 2034

 

	
  No.

  	
  $10,000,000

  

 

AmCOMP Preferred Insurance Company, a stock insurance
company organized and existing under the laws of Florida (hereinafter called
the “Company,” which
term includes any successor Person under the Indenture hereinafter referred
to), for value received, hereby promises to pay to                     ,
or registered assigns, the principal sum of Ten Million Dollars ($10,000,000)
or such other principal amount represented hereby as may be set forth in the
records of the Securities Registrar hereinafter referred to in accordance with
the Indenture on December 15, 2034.  The
Company further promises to pay interest on said principal sum from September 14,
2004, or from the most recent Interest Payment Date to which interest has been
paid or duly provided for, quarterly in arrears on March 15, June 15, September
15, and December 15 of each year, commencing December 15, 2004, or if any such
day is not a Business Day, on the next succeeding Business Day (and no interest
shall accrue in respect of the amounts whose payment is so delayed for the
period from and after such Interest Payment Date until such next succeeding
Business Day), except that, if such Business Day falls in the next succeeding
calendar year, such payment shall be made on the immediately preceding Business
Day, in each case, with the same force and effect as if made on the Interest
Payment Date, at a variable rate equal to LIBOR plus 4.05% per annum, until the
principal hereof is paid or duly provided for or made available for payment; provided, that the Company shall have
received the prior approval of the Applicable Insurance Regulatory Authority
therefor if then required;
provided, further, that
any overdue principal, premium, if any, and any overdue installment of interest
shall bear Additional Interest at a variable rate equal to LIBOR plus 4.05% per
annum, (to the extent that the payment of such Additional Interest shall be
legally enforceable), compounded quarterly, from the latter of (a) the dates
such amounts are due and (b) the dates such amounts are approved by the
Applicable Insurance Regulatory Authority until they are paid or made available
for payment, and such interest shall be payable on demand.  Notwithstanding the foregoing or anything to
the contrary herein contained or implied, principal of and premium, if any, and
interest on the Securities shall be (i) payable solely from and to the
extent, if any, of Available Surplus, (ii) subject to the prior approval
of the Applicable Insurance Regulatory Authority therefor and (iii) subject
to any other restrictions set forth under Applicable Insurance Laws (the
foregoing, collectively, the “Payment Restrictions”).  If not so approved or if there is
insufficient Available Surplus therefor, such principal, premium, if any, or
interest shall not be due and payable.

 

13

 

The amount of interest payable shall be computed on
the basis of a 360-day year and the actual number of days elapsed in the
relevant interest period.  The interest
so payable, and punctually paid or duly provided for out of the Available
Surplus, on any Interest Payment Date shall, as provided in the Indenture, be
paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest installment; provided, that
the Company shall have received the prior approval of the Applicable Insurance
Regulatory Authority therefor if then required. 
Any such interest not so punctually paid or duly provided for on the
Interest Payment Date shall forthwith cease to be payable to the Holder on such
Regular Record Date and may either be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee, notice whereof shall be given to Holders of Securities
not less than ten (10) days prior to such Special Record Date, or be paid
at any time in any other lawful manner not inconsistent with the requirements
of any securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, all as more fully provided in the
Indenture.

 

Payment of principal of, premium, if any, and interest
on this Security shall be made in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts.  Payments of principal,
premium, if any, and interest due at the Maturity of this Security shall be
made at the Place of Payment
upon surrender of such Securities to the Paying Agent, and payments of interest
shall be made, subject to such surrender where applicable, by wire transfer at
such place and to such account at a banking institution in the United States as
may be designated in writing to the Paying Agent at least ten (10) Business
Days prior to the date for payment by the Person entitled thereto unless proper
written transfer instructions have not been received by the relevant record
date, in which case such payments shall be made by check mailed to the address
of such Person as such address shall appear in the Security Register.

 

The indebtedness evidenced by this Security is, to the
extent provided in the Indenture, subordinate and junior in right of payment to
the prior payment in full of all Senior Obligations, and this Security is
issued subject to the provisions of the Indenture with respect thereto.  Each Holder of this Security, by accepting
the same, (a) agrees to and shall be bound by such provisions, (b) authorizes
and directs the Trustee on his or her behalf to take such actions as may be
necessary or appropriate to effectuate the subordination so provided and (c) appoints
the Trustee his or her attorney-in-fact for any and all such purposes.  Each Holder hereof, by his or her acceptance
hereof, waives all notice of the acceptance of the subordination provisions
contained herein and in the Indenture by each holder of Senior Obligations,
whether now outstanding or hereafter incurred, and waives reliance by each such
holder upon said provisions.

 

Unless the certificate of authentication hereon has
been executed by the Trustee by manual signature, this Security shall not be
entitled to any benefit under the Indenture or be valid or obligatory for any
purpose.

 

[FORM OF
REVERSE OF SECURITY]

 

This Security is one of a duly authorized issue of
securities of the Company (the “Securities”)
issued under the Indenture, dated as of September 14, 2004 (the “Indenture”),
between the Company and JPMorgan Chase Bank, as Trustee (in such capacity, the “Trustee,”

 

14

 

which term includes any successor trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby
made for a statement of the respective rights, limitations of rights, duties
and immunities thereunder of the Company, the Trustee, the holders of Senior
Obligations and the Holders of the Securities and of the terms upon which the
Securities are, and are to be, authenticated and delivered.

 

All terms used in this Security that are defined in
the Indenture shall have the meanings assigned to them in the Indenture.

 

The Company may, on any Interest Payment Date, at its
option, upon not less than thirty (30) days’ nor more than sixty (60) days’
written notice to the Holders of the Securities (unless a shorter notice period
shall be satisfactory to the Trustee) on or after December 15, 2009 and
subject to the terms and conditions of Article XI of the Indenture,
redeem this Security in whole at any time or in part from time to time at a
Redemption Price equal to one hundred percent (100%) of the principal amount
hereof, together, in the case of any such redemption, with accrued interest,
including any Additional Interest, to but excluding the date fixed for
redemption; subject to there being no, or the satisfaction of any, Payment
Restrictions.

 

In the event of redemption of this Security in part
only, a new Security or Securities for the unredeemed portion hereof will be
issued in the name of the Holder hereof upon the cancellation hereof.  If less than all the Securities are to be
redeemed, the particular Securities to be redeemed shall be selected and
redeemed on a pro rata basis not more than sixty (60) days prior to the
Redemption Date by the Trustee from the Outstanding Securities not previously
called for redemption, by such method as the Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of a portion
of the principal amount of any Security.

 

The Indenture permits, with certain exceptions as
therein provided, the Company and the Trustee at any time to enter into a
supplemental indenture or indentures for the purpose of modifying in any manner
the rights and obligations of the Company and of the Holders of the Securities,
with the consent of the Holders of not less than a majority in principal amount
of the Outstanding Securities.  The
Indenture also contains provisions permitting Holders of specified percentages
in principal amount of the Securities, on behalf of the Holders of all
Securities, to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their
consequences.  Any such consent or waiver
by the Holder of this Security shall be conclusive and binding upon such Holder
and upon all future Holders of this Security and of any Security issued upon
the registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Security.

 

No reference herein to the Indenture and no provision
of this Security or of the Indenture shall alter or impair the obligation of
the Company, which is absolute and unconditional, to pay the principal of and
any premium, if any, and interest, including any Additional Interest (to the
extent legally enforceable), on this Security at the times, place and rate and
in the coin or currency herein prescribed.

 

As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Security is registrable in
the Securities Register upon surrender of this Security

 

15

 

for registration of transfer at the office or agency of the Company
maintained for such purpose, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Securities
Registrar and duly executed by, the Holder hereof or such Holder’s attorney
duly authorized in writing and, thereupon, one or more new Securities of like
tenor of authorized denominations and for the same aggregate principal amount
will be issued to the designated transferee or transferees.

 

The Securities are issuable only in registered form
without coupons in minimum denominations of $100,000 and any integral multiple
of $1,000 in excess thereof.  As provided
in the Indenture and subject to certain limitations therein set forth,
Securities are exchangeable for a like aggregate principal amount of Securities
and of like tenor of a different authorized denomination as requested by the
Holder surrendering the same.

 

No service charge shall be made for any such
registration of transfer or exchange, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.

 

The Company, the Trustee and any agent of the Company
or the Trustee may treat the Person in whose name this Security is registered
as the owner hereof for all purposes, whether or not this Security be overdue,
and neither the Company, the Trustee nor any such agent shall be affected by
notice to the contrary.

 

The Company and, by its acceptance of this Security or
a beneficial interest herein, the Holder of, and any Person that acquires a
beneficial interest in, this Security agree that, for United States federal,
state and local tax purposes, it is intended that this Security constitute
indebtedness.

 

This Security shall be construed and enforced in
accordance with and governed by the laws of the State of New York, without
reference to its conflict of laws provisions (other than Section 5-1401 of
the General Obligations Law).

 

IN WITNESS WHEREOF, the Company has caused this
instrument to be duly executed.

 

	
   

  	
  AmCOMP
  Preferred Insurance Company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

SECTION 2.2.  Restricted Legend.

 

(a) 
Any Security issued hereunder shall bear a legend in substantially the
following form:

 

[IF THIS
SECURITY IS A GLOBAL SECURITY INSERT]:

 

[“THIS SECURITY IS A GLOBAL SECURITY WITHIN THE
MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN

 

16

 

THE NAME OF THE DEPOSITORY TRUST COMPANY (“DTC”)
OR A NOMINEE OF DTC.  THIS SECURITY IS
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN DTC
OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE,
AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A
WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC TO DTC OR ANOTHER
NOMINEE OF DTC) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.]

 

UNLESS
THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC TO THE ISSUER
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

 

THE SECURITIES
REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND SUCH SECURITIES, AND ANY INTEREST THEREIN, MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM.  EACH
PURCHASER OF ANY SECURITIES IS HEREBY NOTIFIED THAT THE SELLER OF THE
SECURITIES MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5
OF THE SECURITIES ACT PROVIDED BY RULE 144A UNDER THE SECURITIES ACT.

 

THE
HOLDER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE AGREES FOR THE BENEFIT
OF THE COMPANY THAT (A) SUCH SECURITIES MAY BE OFFERED, RESOLD OR
OTHERWISE TRANSFERRED ONLY (I) TO THE COMPANY, (II) TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (III) TO AN INSTITUTIONAL “ACCREDITED INVESTOR” WITHIN THE MEANING
OF SUBPARAGRAPH (a) (1), (2), (3) OR (7) OF RULE 501 UNDER THE
SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF AN “ACCREDITED INVESTOR,” FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION
OF THE SECURITIES ACT, (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR (V) PURSUANT TO AN EXEMPTION FROM THE SECURITIES
ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY

 

17

 

STATE
OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND, IN THE CASE OF
(III) OR (V), SUBJECT TO THE RIGHT OF THE COMPANY TO REQUIRE AN OPINION OF
COUNSEL AND OTHER INFORMATION SATISFACTORY TO IT AND (B) THE HOLDER WILL
NOTIFY ANY PURCHASER OF ANY SECURITIES FROM IT OF THE RESALE RESTRICTIONS
REFERRED TO IN (A) ABOVE.

 

THE SECURITIES WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN
BLOCKS HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000.  TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
ATTEMPTED TRANSFER OF SECURITIES, OR ANY INTEREST THEREIN, IN A BLOCK HAVING AN
AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $100,000 AND MULTIPLES OF $1,000 IN
EXCESS THEREOF SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT
WHATSOEVER.  TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE
HOLDER OF SUCH SECURITIES FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE
RECEIPT OF PRINCIPAL OF OR INTEREST ON SUCH SECURITIES, OR ANY INTEREST
THEREIN, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST
WHATSOEVER IN SUCH SECURITIES.

 

THE HOLDER OF THIS SECURITY, OR ANY INTEREST THEREIN, BY ITS ACCEPTANCE
HEREOF OR THEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN
EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT
SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED (“ERISA”), OR SECTION 4975
OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”) (EACH A “PLAN”), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN
ASSETS” BY REASON OF ANY PLAN’S INVESTMENT IN THE ENTITY, AND NO PERSON
INVESTING “PLAN ASSETS” OF ANY PLAN MAY ACQUIRE OR HOLD THIS SECURITY OR
ANY INTEREST THEREIN.  ANY PURCHASER OR
HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE
REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT IT IS NOT AN EMPLOYEE
BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN
TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON
ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN OR ANY OTHER PERSON OR
ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH
PURCHASE.”

 

(b) 
The above legends shall not be removed from any Security unless there is
delivered to the Company satisfactory evidence, which may include an Opinion of
Counsel, as may be reasonably required to ensure that any future transfers
thereof may be made without restriction under or violation of the provisions of
the Securities Act and other applicable law. 
Upon provision of such satisfactory evidence, the Company shall execute
and deliver to the Trustee, and the Trustee shall deliver, upon receipt of a
Company Order directing it to do so, a Security that does not bear the legend.

 

18

 

SECTION 2.3.  Form of Trustee’s Certificate of
Authentication.

 

The Trustee’s certificates of authentication shall be
in substantially the following form:

 

This is one of the Securities referred to in the
within-mentioned Indenture.

 

Dated:

 

	
   

  	
  JPMORGAN
  CHASE BANK, not in its individual

  capacity, but solely as Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Authorized signatory

  

 

SECTION 2.4.  Temporary Securities.

 

(a) 
Pending the preparation of definitive Securities, the Company may execute, and
upon Company Order the Trustee shall authenticate and deliver, temporary
Securities that are printed, lithographed, typewritten, mimeographed or
otherwise produced, in any denomination, substantially of the tenor of the
definitive Securities in lieu of which they are issued and with such
appropriate insertions, omissions, substitutions and other variations as the
officers executing such Securities may determine, as evidenced by their execution
of such Securities.

 

(b) 
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay.  After the preparation of definitive
Securities, the temporary Securities shall be exchangeable for definitive
Securities upon surrender of the temporary Securities at the office or agency
of the Company designated for that purpose without charge to the Holder.  Upon surrender for cancellation of any one or
more temporary Securities, the Company shall execute, and the Trustee shall
authenticate and deliver in exchange therefor, one or more definitive
Securities of any authorized denominations having the same Original Issue Date
and Stated Maturity and having the same terms as such temporary Securities.  Until so exchanged, the temporary Securities
shall, in all respects, be entitled to the same benefits under this Indenture
as definitive Securities.

 

SECTION 2.5.  Definitive Securities.

 

The Securities issued on the Original Issue Date shall
be in definitive form.  The definitive
Securities shall be printed, lithographed or engraved, or produced by any
combination of these methods, if required by any securities exchange on which
the Securities may be listed, on a steel engraved border or steel engraved
borders or may be produced in any other manner permitted by the rules of
any securities exchange on which the Securities may be listed, all as
determined by the officers executing such Securities, as evidenced by their
execution of such Securities.

 

19

 

ARTICLE III

 

The Securities

 

SECTION 3.1.  Payment of Principal and Interest.

 

(a) 
The unpaid principal amount of the Securities shall bear interest at a variable
rate of LIBOR plus 4.05% per annum until paid or duly provided for, such
interest to accrue from the Original Issue Date or from the most recent
Interest Payment Date to which interest has been paid or duly provided for, and
any overdue principal, premium, if any, and any overdue installment of interest
shall bear Additional Interest at a variable rate equal to LIBOR plus 4.05% per
annum (to the extent that the payment of such interest shall be legally
enforceable), compounded quarterly from the dates such amounts are due until
they are paid or funds for the payment thereof are made available for
payment.  Notwithstanding the foregoing
or anything to the contrary herein contained or implied, principal of and
premium, if any, and interest on the Securities shall be (i) payable
solely from and to the extent, if any, of Available Surplus, (ii) subject
to the prior approval of the Applicable Insurance Regulatory Authority therefor
and (iii) subject to any other restrictions set forth under Applicable
Insurance Laws (the foregoing, collectively, the “Payment Restrictions”).  If not so approved or if there is
insufficient Available Surplus therefor, such principal, premium, if any, or
interest shall not be due and payable.

 

(b) 
The Company will use its best efforts to obtain the approval of the Applicable
Insurance Regulatory Authority for the payment by the Company of interest on
and principal of the Securities on each Interest Payment Date and the Maturity
Date and, in the event any such approval has not been obtained for such payment
at or prior to the applicable Interest Payment Date or the Maturity Date, as
the case may be, to continue to use its best efforts to obtain such approval
promptly thereafter.  Not less than 30
days prior to each Interest Payment Date and the Maturity Date, the Company
will seek the approval of the Applicable Insurance Regulatory Authority to make
each payment of interest on and principal of the Securities, respectively.  In addition, the Company will notify or cause
to be notified in writing each Holder and the Trustee no later than five
Business Days prior to each Interest Payment Date and the Maturity Date in the
event that the Applicable Insurance Regulatory Authority has not then approved
the making of any such payment on such date, and thereafter will promptly
notify in writing the Trustee in the event that the Company shall have failed
to make any such payment on any such date.

 

(c) 
Interest and Additional Interest on any Security that is payable, and is
punctually paid or duly provided for, on any Interest Payment Date shall be paid
to the Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest, except that interest and any Additional Interest payable on
the Stated Maturity (or any date of principal repayment upon early maturity) of
the principal of a Security or on a Redemption Date shall be paid to the Person
to whom principal is paid.  The initial
payment of interest on any Security that is issued between a Regular Record
Date and the related Interest Payment Date shall be payable as provided in such
Security.

 

(d) 
Any interest on any Security that is due and payable, but is not timely paid or
duly provided for, on any Interest Payment Date for Securities (such interest, “Defaulted Interest”) shall
forthwith cease to be payable to the registered Holder on the relevant Regular
Record Date

 

20

 

by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Company, at its election in each case, as
provided in paragraph (i) or (ii) below:

 

(i)  The Company may
elect to make payment of any Defaulted Interest to the Persons in whose names
the Securities (or their respective Predecessor Securities) are registered at
the close of business on a Special Record Date for the payment of such
Defaulted Interest (a “Special Record Date”), which shall be fixed in the following
manner:  At least thirty (30) days prior
to the date of the proposed payment, the Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on each
Security and the date of the proposed payment and, at the same time, the Company
shall deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date of
the proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest.  Thereupon, the Trustee shall fix a Special
Record Date for the payment of such Defaulted Interest, which shall be not more
than fifteen (15) days and not less than ten (10) days prior to the date
of the proposed payment and not less than ten (10) days after the receipt
by the Trustee of the notice of the proposed payment.  The Trustee shall promptly notify the Company
of such Special Record Date and, in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor to be mailed, first class, postage prepaid, to
each Holder of a Security at the address of such Holder as it appears in the
Securities Register not less than ten (10) days prior to such Special
Record Date.  Notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor having
been so mailed, such Defaulted Interest shall be paid to the Persons in whose
names the Securities (or their respective Predecessor Securities) are
registered on such Special Record Date; or

 

(ii)  The Company
may make payment of any Defaulted Interest in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Securities may be listed and, upon such notice as may be required by such
exchange (or by the Trustee if the Securities are not listed), if, after notice
given by the Company to the Trustee of the proposed payment pursuant to this
clause, such payment shall be deemed practicable by the Trustee.

 

(e) 
Payments of interest on the Securities shall include interest accrued to but
excluding the respective Interest Payment Dates.  Interest payments for the Securities shall be
computed and paid on the basis of a 360-day year and the actual number of days
elapsed in the relevant interest period.

 

(f) 
Payment of principal of and premium, if any, and interest on the Securities
shall be made in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private
debts.  Payments of principal, premium,
if any, and interest due at the Maturity of such Securities shall be made at
the Place of Payment upon surrender, of such Securities to the Paying Agent and
payments of interest shall be made subject to such surrender where applicable,
by wire transfer at such place and to such account at a banking institution in
the United States as may be designated in writing to the Paying Agent at least
ten (10) Business Days prior to the date for payment by the Person
entitled thereto, unless

 

21

 

proper written transfer instructions have not been
received by the relevant record date, in which case such payments shall be made
by check mailed to the address of such Person as such address shall appear in
the Security Register.

 

(g) 
Subject to the foregoing provisions of this Section 3.1, each
Security delivered under this Indenture upon transfer of, or in exchange for or
in lieu of any other Security shall carry the rights to interest accrued and
unpaid, and to accrue, that were carried by such other Security.

 

SECTION 3.2.  Denominations.

 

The Securities shall be in registered form without
coupons and shall be issuable in minimum denominations of $100,000 and any
integral multiple of $1,000 in excess thereof.

 

SECTION 3.3.  Execution, Authentication, Delivery and
Dating.

 

(a) 
At any time and from time to time after the execution and delivery of this
Indenture,  the Company may deliver
Securities in an aggregate principal amount (including all then Outstanding
Securities) not in excess of Ten Million Dollars ($10,000,000) executed by the
Company to the Trustee for authentication, together with a Company Order for
the authentication and delivery of such Securities, and the Trustee in
accordance with the Company Order shall authenticate and deliver such
Securities.  In authenticating such
Securities, and accepting the additional responsibilities under this Indenture
in relation to such Securities, the Trustee shall be entitled to receive, and
shall be fully protected in relying upon:

 

(i)  a copy of any
Board Resolution relating thereto; and

 

(ii)  an Opinion of
Counsel stating that (i) such Securities, when authenticated and delivered
by the Trustee and issued by the Company in the manner and subject to any
conditions specified in such Opinion of Counsel, will constitute, and the
Indenture constitutes, valid and legally binding obligations of the Company
each enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors’ rights and to general
equity principles; (2) the Securities have been duly authorized and
executed by the Company and have been delivered to the Trustee for
authentication in accordance with this Indenture; (3) the Securities are
not required to be registered under the Securities Act; and (4) the
Indenture is not required to be qualified under the Trust Indenture Act.

 

(b) 
The Securities shall be executed on behalf of the Company by its Chairman of
the Board, its Vice Chairman of the Board, its Chief Executive Officer, its
President or one of its Vice Presidents. 
The signature of any of these officers on the Securities may be manual
or facsimile.  Securities bearing the
manual or facsimile signatures of individuals who were at any time the proper
officers of the Company shall bind the Company, notwithstanding that such
individuals or any of them have ceased to hold such offices prior to the
authentication and delivery of such Securities or did not hold such offices at
the date of such Securities.

 

(c) 
No Security shall be entitled to any benefit under this Indenture or be valid
or obligatory for any purpose, unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by the manual signature of

 

22

 

one of its authorized signatories, and such
certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered
hereunder.  Notwithstanding the
foregoing, if any Security shall have been authenticated and delivered
hereunder but never issued and sold by the Company, and the Company shall
deliver such Security to the Trustee for cancellation as provided in Section 3.8,
for all purposes of this Indenture such Security shall be deemed never to have
been authenticated and delivered hereunder and shall never be entitled to the
benefits of this Indenture.

 

(d) 
Each Security shall be dated the date of its authentication.

 

SECTION 3.4.  Global Securities.

 

(a) 
Upon the election of the Holder after the Original Issue Date, which election
need not be in writing, the Securities owned by such Holder shall be issued in
the form of one or more Global Securities registered in the name of the
Depositary or its nominee.  Each Global
Security issued under this Indenture shall be registered in the name of the
Depositary designated by the Company for such Global Security or a nominee
thereof and delivered to such Depositary or a nominee thereof or custodian
therefor, and each such Global Security shall constitute a single Security for
all purposes of this Indenture.

 

(b) 
Notwithstanding any other provision in this Indenture, no Global Security may
be exchanged, in whole or in part, for registered Securities, and no transfer
of a Global Security, in whole or in part, may be registered in the name of any
Person other than the Depositary for such Global Security or a nominee thereof
unless (i) such Depositary advises the Trustee and the Company in writing
that such Depositary is no longer willing or able to properly discharge its
responsibilities as Depositary with respect to such Global Security and no
qualified successor is appointed by the Company within ninety (90) days of
receipt by the Company of such notice, (ii) such Depositary ceases to be a
clearing agency registered under the Exchange Act and no successor is appointed
by the Company within ninety (90) days after obtaining knowledge of such event,
(iii) the Company executes and delivers to the Trustee a Company Order
stating that the Company elects to terminate the book-entry system through the
Depositary or (iv) an Event of Default shall have occurred and be
continuing.  Upon the occurrence of any
event specified in clause (i), (ii), (iii) or (iv) above, the Trustee
shall notify the Depositary and instruct the Depositary to notify all owners of
beneficial interests in such Global Security of the occurrence of such event
and of the availability of Securities to such owners of beneficial interests
requesting the same.  The Trustee may
conclusively rely, and be protected in relying, upon the written identification
of the owners of the beneficial interests furnished by the Depositary and shall
not be liable for any delay resulting from a delay by the Depositary.  Upon the issuance of such Securities and the
registration in the Securities Register of such Securities in the names of the
Holders of the beneficial interests therein the Trustees shall recognize such
holders of beneficial interests as Holders.

 

(c) 
If any Global Security is to be exchanged for other Securities or canceled in
part, or if another Security is to be exchanged in whole or in part for a
beneficial interest in any Global Security, then either (i) such Global
Security shall be so surrendered for exchange or cancellation as provided in
this Article III or (ii) the principal amount thereof shall be
reduced or increased by an amount equal to (x) the portion thereof to be so
exchanged or canceled or (y) the principal amount of such other Security to be
so exchanged for a beneficial interest therein, as the case

 

23

 

may be, by means of an appropriate adjustment made on
the records of the Securities Registrar, whereupon the Trustee, in accordance
with the Applicable Depositary Procedures, shall instruct the Depositary or its
authorized representative to make a corresponding adjustment to its records.
Upon any such surrender or adjustment of a Global Security by the Depositary
accompanied by registration instructions, the Company shall execute, and the
Trustee shall authenticate and deliver, any Securities issuable in exchange for
such Global Security (or any portion thereof) in accordance with the
instructions of the Depositary.  The
Trustee shall not be liable for any delay in delivery of such instructions and
may conclusively rely on, and shall be fully protected in relying on, such
instructions.

 

(d) 
Every Security authenticated and delivered upon registration of transfer of, or
in exchange for or in lieu of, a Global Security or any portion thereof shall
be authenticated and delivered in the form of, and shall be, a Global Security,
unless such Security is registered in the name of a Person other than the
Depositary for such Global Security or a nominee thereof.

 

(e) 
The Depositary or its nominee, as the registered owner of a Global Security,
shall be the Holder of such Global Security for all purposes under this
Indenture and the Securities, and owners of beneficial interests in a Global Security
shall hold such interests pursuant to the Applicable Depositary
Procedures.  Accordingly, any such owner’s
beneficial interest in a Global Security shall be shown only on, and the
transfer of such interest shall be effected only through, records maintained by
the Depositary or its nominee or its Depositary Participants.  The Securities Registrar and the Trustee
shall be entitled to deal with the Depositary for all purposes of this
Indenture relating to a Global Security (including the payment of principal and
interest thereon and the giving of instructions or directions by owners of
beneficial interests therein and the giving of notices) as the sole Holder of
the Security and shall have no obligations to the owners of beneficial
interests therein.  Neither the Trustee
nor the Securities Registrar shall have any liability in respect of any
transfers effected by the Depositary.

 

(f) 
The rights of owners of beneficial interests in a Global Security shall be
exercised only through the Depositary and shall be limited to those established
by law and agreements between such owners and the Depositary and/or its
Depositary Participants.

 

(g) 
No holder of any beneficial interest in any Global Security held on its behalf
by a Depositary shall have any rights under this Indenture with respect to such
Global Security, and such Depositary may be treated by the Company, the Trustee
and any agent of the Company or the Trustee as the owner of such Global
Security for all purposes whatsoever. 
None of the Company, the Trustee nor any agent of the Company or the
Trustee will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests of a
Global Security or maintaining, supervising or reviewing any records relating
to such beneficial ownership interests. 
Notwithstanding the foregoing, nothing herein shall prevent the Company,
the Trustee or any agent of the Company or the Trustee from giving effect to
any written certification, proxy or other authorization furnished by a
Depositary or impair, as between a Depositary and such holders of beneficial
interests, the operation of customary practices governing the exercise of the
rights of the Depositary (or its nominee) as Holder of any Security.

 

24

 

SECTION 3.5.  Registration, Transfer and Exchange
Generally.

 

(a) 
The Trustee shall cause to be kept at the Corporate Trust Office a register
(the “Securities
Register”)
in which the registrar and transfer agent with respect to the Securities (the “Securities Registrar”),
subject to such reasonable regulations as it may prescribe, shall provide for
the registration of Securities and of transfers and exchanges of
Securities.  The Trustee shall, at all
times, also be the Securities Registrar. 
The provisions of Article VI shall apply to the Trustee in
its role as Securities Registrar.

 

(b) 
Subject to compliance with Section 2.2(b),
upon surrender for registration of transfer of any Security at the offices or
agencies of the Company designated for that purpose, the Company shall execute,
and the Trustee shall authenticate and deliver, in the name of the designated
transferee or transferees one or more new Securities of any authorized
denominations of like tenor and aggregate principal amount.

 

(c) 
At the option of the Holder, Securities may be exchanged for other Securities
of any authorized denominations of like tenor and aggregate principal amount
upon surrender of the Securities to be exchanged at such office or agency.  Whenever any Securities are so surrendered
for exchange, the Company shall execute, and the Trustee shall authenticate and
deliver, the Securities that the Holder making the exchange is entitled to receive.

 

(d) 
All Securities issued upon any transfer or exchange of Securities shall be the
valid obligations of the Company, evidencing the same debt and entitled to the
same benefits under this Indenture, as the Securities surrendered upon such
transfer or exchange.

 

(e) 
Every Security presented or surrendered for transfer or exchange shall (if so
required by the Company or the Trustee) be duly endorsed, or be accompanied by
a written instrument of transfer in form satisfactory to the Company and the
Securities Registrar, or duly executed by the Holder thereof or such Holder’s
attorney duly authorized in writing.

 

(f) 
No service charge shall be made to a Holder for any transfer or exchange of
Securities, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection with any
transfer or exchange of Securities.

 

(g) 
Neither the Company nor the Trustee shall be required pursuant to the
provisions of this Section 3.5(g): (i) to issue, register the
transfer of or exchange any Security during a period beginning at the opening
of business fifteen (15) days before the day of selection for redemption of
Securities pursuant to Article XI and ending at the close of
business on the day of mailing of the notice of redemption or (ii) to
register the transfer of or exchange any Security so selected for redemption in
whole or in part, except, in the case of any such Security to be redeemed in
part, any portion thereof not to be redeemed.

 

(h) 
The Company shall designate an office or offices or agency or agencies where
Securities may be surrendered for registration or transfer or exchange.  The Company initially designates the
Corporate Trust Office as its office and agency for such purposes.  The Company shall give prompt written notice to
the Trustee and to the Holders of any change in the location of any such office
or agency.

 

25

 

SECTION 3.6.  Mutilated, Destroyed, Lost and Stolen
Securities.

 

(a) 
If any mutilated Security is surrendered to the Trustee together with such
security or indemnity as may be required by the Company or the Trustee to save
each of them harmless, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a new Security of like tenor and
aggregate principal amount and bearing a number not contemporaneously
outstanding.

 

(b) 
If there shall be delivered to the Company and to the Trustee (i) evidence
to their satisfaction of the destruction, loss or theft of any Security and (ii) such
security or indemnity as may be required by it to save each of the Company and
the Trustee harmless, then, in the absence of notice to the Company or the
Trustee that such Security has been acquired by a bona fide purchaser, the Company
shall execute and upon its written request the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
of like tenor and aggregate principal amount as such destroyed, lost or stolen
Security, and bearing a number not contemporaneously outstanding.

 

(c) 
If any such mutilated, destroyed, lost or stolen Security has become or is
about to become due and payable, the Company, in its discretion, may, instead
of issuing a new Security, pay such Security.

 

(d) 
Upon the issuance of any new Security under this Section 3.6, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.

 

(e) 
Every new Security issued pursuant to this Section 3.6 in lieu of
any mutilated, destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the mutilated,
destroyed, lost or stolen Security shall be at any time enforceable by anyone,
and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Securities duly issued hereunder.

 

(f) 
The provisions of this Section 3.6 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities.

 

SECTION 3.7.  Persons Deemed Owners.

 

The Company, the Trustee and any agent of the Company
or the Trustee shall treat the Person in whose name any Security is registered
as the owner of such Security for the purpose of receiving payment of principal
of and any interest on such Security and for all other purposes whatsoever, and
neither the Company, the Trustee nor any agent of the Company or the Trustee
shall be affected by notice to the contrary.

 

SECTION 3.8.  Cancellation.

 

All Securities surrendered for payment, redemption,
transfer or exchange shall, if surrendered to any Person other than the
Trustee, be delivered to the Trustee, and any such Securities and Securities
surrendered directly to the Trustee for any such purpose shall be

 

26

 

promptly canceled by it.  The
Company may, at any time, deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder that the Company
may have acquired in any manner whatsoever, and all Securities so delivered
shall be promptly canceled by the Trustee. 
No Securities shall be authenticated in lieu of or in exchange for any
Securities canceled as provided in this Section 3.8, except as
expressly permitted by this Indenture. 
All canceled Securities shall be retained or disposed of by the Trustee
in accordance with its customary practices and the Trustee shall deliver to the
Company a certificate of such disposition.

 

SECTION 3.9.  [Intentionally Omitted]

 

SECTION 3.10.   Agreed Tax Treatment.

 

Each Security issued hereunder shall provide that the
Company and, by its acceptance or acquisition of a Security or a beneficial
interest therein, the Holder of, and any Person that acquires a direct or
indirect beneficial interest in, such Security intend and agree to treat such
Security as indebtedness of the Company for United States Federal, state and
local tax purposes.  The provisions of
this Indenture shall be interpreted to further this intention and agreement of
the parties.

 

SECTION 3.11.  CUSIP Numbers.

 

The Company in issuing the Securities may use “CUSIP”
numbers (if then generally in use) and,
if so, the Trustee shall use “CUSIP” numbers in notices of redemption and other
similar or related materials as a convenience to Holders; provided,
that any such notice or other materials may state that no representation is
made as to the correctness of such numbers either as printed on the Securities
or as contained in any notice of redemption or other materials and that
reliance may be placed only on the other identification numbers printed on the
Securities, and any such redemption shall not be affected by any defect in or
omission of such numbers.

 

ARTICLE IV

 

Satisfaction and Discharge

 

SECTION 4.1.  Satisfaction and Discharge of Indenture.

 

This Indenture shall, upon Company Request, cease to
be of further effect (except as to any surviving rights of registration of
transfer or exchange of Securities herein expressly provided for and as
otherwise provided in this Section 4.1) and the Trustee, on demand
of and at the expense of the Company, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture, when

 

(a) 
either

 

(i) all Securities
theretofore authenticated and delivered (other than (A) Securities that
have been mutilated, destroyed, lost or stolen and that have been replaced or
paid as provided in Section 3.6 and (B) Securities for whose
payment money has theretofore been deposited in trust or segregated and held in
trust by the Company and thereafter

 

27

 

repaid to the Company or discharged from such trust as
provided in Section 10.2) have been delivered to the Trustee for
cancellation; or

 

(ii) all such
Securities not theretofore delivered to the Trustee for cancellation

 

(A)                              have
become due and payable, or

 

(B)                                will
become due and payable at their Stated Maturity within one year of the date of
deposit, or

 

(C)                                are
to be called for redemption within one year under arrangements satisfactory to
the Trustee for the giving of notice of redemption by the Trustee in the name,
and at the expense, of the Company,

 

and the
Company, in the case of subclause (ii)(A), (B) or (C) above, has
deposited or caused to be deposited with the Trustee as trust funds in trust
for such purpose (x) an amount in the currency or currencies in which the
Securities are payable, (y) Government Obligations which through the scheduled
payment of principal and interest in respect thereof in accordance with their
terms will provide, not later than the due date of any payment, money in an
amount or (z) a combination thereof, in each case, sufficient, in the opinion
of a nationally recognized firm of independent public accountants expressed in
a written certification thereof delivered to the Trustee, to pay and discharge
the entire indebtedness on such Securities not theretofore delivered to the
Trustee for cancellation, for principal and any premium and interest (including
any Additional Interest) to the date of such deposit (in the case of Securities
that have become due and payable) or to the Stated Maturity (or any date of
principal repayment upon early maturity) or Redemption Date, as the case may
be;

 

(b) 
the Company has paid or caused to be paid all other sums payable hereunder by
the Company; and

 

(c) 
the Company has delivered to the Trustee an Officers’ Certificate and an
Opinion of Counsel each stating that all conditions precedent herein provided
for relating to the satisfaction and discharge of this Indenture have been
complied with.

 

Notwithstanding
the satisfaction and discharge of this Indenture, the obligations of the
Company to the Trustee under Section 6.6, the obligations of the
Company to any Authenticating Agent under Section 6.11 and, if
money shall have been deposited with the Trustee pursuant to subclause (a)(ii) of
this Section 4.1, the obligations of the Trustee under Section 4.2
and Section 10.2(e) shall survive.

 

SECTION 4.2.  Application of Trust Money.

 

Subject to the provisions Section 10.2(e),
all money deposited with the Trustee pursuant to Section 4.1 shall
be held in trust and applied by the Trustee, in accordance with the provisions
of the Securities and this Indenture, to the payment in accordance with Section 3.1,
either directly or through any Paying Agent (including the Company acting as
its own Paying Agent) as the Trustee may determine, to the Persons entitled
thereto, of the principal and any premium and interest (including any
Additional Interest) for the payment of which such money or obligations

 

28

 

have been deposited with or received by the Trustee.  Moneys held by the Trustee under this Section 4.2
shall not be subject to the claims of holders of Senior Debt under Article XII.

 

ARTICLE V

 

Remedies

 

SECTION 5.1.  Events of Default.

 

“Event
of Default” means,
wherever used herein with respect to the Securities, any one of the following
events (whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body):

 

(a) 
subject to Section 3.1(a), default in the payment of any interest
upon any Security, including any Additional Interest in respect thereof, when
it becomes due and payable, and continuance of such default for a period of
thirty (30) days; or

 

(b) 
subject to Section 3.1(a), default in the payment of the principal
of or any premium on any Security at its Maturity; or

 

(c) 
default in the performance, or breach, of any covenant or warranty of the
Company in this Indenture and continuance of such default or breach for a
period of thirty (30) days after there has been given, by registered or
certified mail, to the Company by the Trustee or to the Company and the Trustee
by the Holders of at least twenty five percent (25%) in aggregate principal
amount of the Outstanding Securities a written notice specifying such default
or breach and requiring it to be remedied and stating that such notice is a “Notice
of Default” hereunder;

 

(d) 
the entry by a court or an insurance regulatory agency having jurisdiction in
the premises of a decree or order adjudging the Company a bankrupt or
insolvent, or approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company under
any applicable Federal or state bankruptcy, insolvency, reorganization or other
similar law, or appointing a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the Company or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and the continuance of any such decree or order for relief or any
such other decree or order unstayed and in effect for a period of sixty (60)
consecutive days; or

 

(e) 
the institution by the Company of proceedings to be adjudicated a bankrupt or
insolvent, or the consent by the Company to the institution of bankruptcy or
insolvency proceedings against it, or the filing by the Company, or the consent
by the Company to the filing, of a petition or answer or consent seeking
reorganization or relief under any applicable Federal or state bankruptcy,
insolvency, reorganization or other similar law, or to the appointment of or
taking possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or of any substantial
part of its property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay its debts
generally as they become due and its willingness to be adjudicated a bankrupt
or insolvent, or the taking of corporate action by the Company in furtherance
of any such action.

 

29

 

SECTION 5.2.  Acceleration of Maturity; Rescission and
Annulment.

 

(a) 
If an Event of Default occurs and is continuing, then and in every such case,
the Trustee or the Holders of not less than twenty five percent (25%) in
aggregate principal amount of the Outstanding Securities may declare the
principal amount of all the Securities to be due and payable immediately by a
notice in writing to the Company (and to the Trustee if given by Holders) and,
upon any such declaration, the principal amount of and the accrued interest
(including any Additional Interest) on all the Securities shall become
immediately due and payable, subject to any Payment Restrictions.

 

(b) 
At any time after such a declaration of acceleration with respect to Securities
has been made and before a judgment or decree for payment of the money due has
been obtained by the Trustee as hereinafter provided in this Article V,
the Holders of a majority in aggregate principal amount of the Outstanding
Securities, by written notice to the Company and the Trustee, may rescind and
annul such declaration and its consequences if:

 

(i)  the Company has
paid or deposited with the Trustee a sum sufficient to pay:

 

(A)                              all
overdue installments of interest on all Securities,

 

(B)                                any
accrued Additional Interest on all Securities,

 

(C)                                the
principal of and any premium on any Securities that have become due otherwise
than by such declaration of acceleration and interest (including any Additional
Interest) thereon at the rate borne by the Securities, and

 

(D)                               all
sums paid or advanced by the Trustee hereunder and the reasonable compensation,
expenses, disbursements and advances of the Trustee and its agents and counsel;
and

 

all Events of Default
with respect to Securities, other than the non-payment of the principal of
Securities that has become due solely by such acceleration, have been cured or
waived as provided in Section 5.13.

 

SECTION 5.3.  Collection of Indebtedness and Suits for
Enforcement by Trustee.

 

(a) 
The Company covenants that if:

 

(i)  default is made
in the payment of any installment of interest (including any Additional
Interest) on any Security when such interest becomes due and payable and such
default continues for a period of thirty (30) days or

 

(ii)  default is
made in the payment of the principal of and any premium on any Security at the
Maturity thereof,

 

the Company will, upon demand of the Trustee, pay to
the Trustee, for the benefit of the Holders of such Securities, the whole
amount then due and payable on such Securities for

 

30

 

principal of, any premium
and interest (including any Additional Interest) on and, in addition thereto,
all amounts owing the Trustee under Section 6.6.

 

(b) 
If the Company fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree, may enforce the same against
the Company or any other obligor upon such Securities and may collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon the Securities wherever
situated.

 

(c) 
If an Event of Default with respect to Securities occurs and is continuing, the
Trustee may, in its discretion, proceed to protect and enforce its rights and
the rights of the Holders of Securities by such appropriate judicial
proceedings as the Trustee shall deem most effectual to protect and enforce any
such rights, whether for the specific enforcement of any covenant or agreement
in this Indenture, in aid of the exercise of any power granted herein or to
enforce any other proper remedy.

 

SECTION 5.4.  Trustee May File Proofs of Claim.

 

In case of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or similar
judicial proceeding relative to the Company (or any other obligor upon the
Securities), its property or its creditors, the Trustee shall be entitled and
empowered, by intervention in such proceeding or otherwise, to take any and all
actions authorized hereunder in order to have claims of the Holders and the
Trustee allowed in any such proceeding. 
In particular, the Trustee shall be authorized to collect and receive
any moneys or other property payable or deliverable on any such claims and to
distribute the same, and any custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee and, in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to first pay to the Trustee any amount due it
for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel and any other amounts owing the Trustee, any
predecessor Trustee and other Persons under Section 6.6.

 

SECTION 5.5.  Trustee May Enforce Claim Without
Possession of Securities.

 

All rights of action and claims under this Indenture
and/or the Securities may be prosecuted and enforced by the Trustee without the
possession of any of the Securities or the production thereof in any proceeding
relating thereto, and any such proceeding instituted by the Trustee shall be
brought in its own name as trustee of an express trust, and any recovery of
judgment shall, subject to Article XII and after provision for the
payment of all the amounts owing the Trustee, any predecessor Trustee and other
Persons under Section 6.6, be for the ratable benefit of the
Holders of the Securities in respect of which such judgment has been recovered.

 

SECTION 5.6.  Limitation on Suits.

 

Subject to Section 5.8, no Holder of any
Securities shall have any right to institute any proceeding, judicial or
otherwise, with respect to this Indenture or for the appointment of a

 

31

 

custodian, receiver, assignee, trustee, liquidator, sequestrator (or
other similar official) or for any other remedy hereunder, unless:

 

(a) 
such Holder has previously given written notice to the Trustee of a continuing
Event of Default with respect to the Securities;

 

(b) 
the Holders of not less than a majority in aggregate principal amount of the
Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name as
Trustee hereunder;

 

(c) 
such Holder or Holders have offered to the Trustee reasonable indemnity against
the costs, expenses and liabilities to be incurred in compliance with such
request;

 

(d) 
the Trustee after its receipt of such notice, request and offer of indemnity
has failed to institute any such proceeding for sixty (60) days; and

 

(e) 
no direction inconsistent with such written request has been given to the
Trustee during such sixty (60)-day period by the Holders of a majority in
aggregate principal amount of the Outstanding Securities;

 

it being understood and intended that no one or more
of such Holders shall have any right in any manner whatever by virtue of, or by
availing itself of, any provision of this Indenture to affect, disturb or
prejudice the rights of any other Holders of Securities, or to obtain or to
seek to obtain priority or preference over any other of such Holders or to
enforce any right under this Indenture, except in the manner herein provided
and for the equal and ratable benefit of all such Holders.

 

SECTION 5.7.  Application of Money Collected.

 

Any money or property collected or to be applied by
the Trustee with respect to the Securities pursuant to this Article V
shall be applied in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such money or property on account
of principal or any premium or interest (including any Additional Interest),
upon presentation of the Securities and the notation thereon of the payment if
only partially paid and upon surrender thereof if fully paid:

 

FIRST:  To the
payment of all amounts due the Trustee, any predecessor Trustee and other
Persons under Section 6.6;

 

SECOND:  To the
payment of all Senior Obligations of the Company if and to the extent required
by Article XII.

 

THIRD:  Subject
to Article XII, to the payment of the amounts then due and unpaid
upon the Securities for principal and any premium and interest (including any
Additional Interest) in respect of which, or for the benefit of which, such
money has been collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Securities for principal and
any premium and interest (including any Additional Interest), respectively; and

 

FOURTH:  The
balance, if any, to the Person or Persons entitled thereto.

 

32

 

SECTION 5.8.  Unconditional Right of Holders to Receive
Principal, Premium, if any, and Interest.

 

Subject to any Payment Restrictions, notwithstanding
any other provision in this Indenture, the Holder of any Security shall have
the right, which is absolute and unconditional, to receive payment of the
principal of and any premium on such Security at its Maturity and payment of
interest (including any Additional Interest) on such Security when due and
payable and to institute suit for the enforcement of any such payment, and such
right shall not be impaired without the consent of such Holder.

 

SECTION 5.9.  Restoration of Rights and Remedies.

 

If the Trustee or any Holder has instituted any
proceeding to enforce any right or remedy under this Indenture and such
proceeding has been discontinued or abandoned for any reason, then, and in
every such case, the Company, the Trustee and such Holders shall, subject to
any determination in such proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of the
Trustee, the Company and such Holders shall
continue as though no such proceeding had been instituted.

 

SECTION 5.10.  Rights and Remedies Cumulative.

 

Except as otherwise provided in Section 3.6(f),
no right or remedy herein conferred upon or reserved to the Trustee or the
Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. 
The assertion or employment of any right or remedy hereunder or
otherwise shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.

 

SECTION 5.11.  Delay or Omission Not Waiver.

 

No delay or omission of the Trustee or any Holder of
any Securities to exercise any right or remedy accruing upon any Event of
Default shall impair any such right or remedy or constitute a waiver of any
such Event of Default or an acquiescence therein.  Every right and remedy given by this Article V
or by law to the Trustee or to the Holders by Section 5.8 may be
exercised from time to time, and as often as may be deemed expedient, by the
Trustee or the Holders, as the case may be.

 

SECTION 5.12.  Control by Holders.

 

The Holders of not less than a majority in aggregate
principal amount of the Outstanding Securities shall have the right to direct
the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee; provided,
that:

 

(a) 
such direction shall not be in conflict with any rule of law or this
Indenture,

 

(b) 
the Trustee may take any other action deemed proper by the Trustee that is not
inconsistent with such direction and

 

33

 

(c) 
subject to the provisions of Section 6.2, the Trustee shall have
the right to decline to follow such direction if a Responsible Officer or
Officers of the Trustee shall, in good faith, reasonably determine that the
proceeding so directed would be unjustly prejudicial to the Holders not joining
in any such direction or would involve the Trustee in personal liability.

 

SECTION 5.13.  Waiver of Past Defaults.

 

(a) 
The Holders of not less than a majority in aggregate principal amount of the
Outstanding Securities may waive any past Event of Default hereunder and its
consequences except an Event of Default:

 

(i)  in the payment
of the principal of or any premium or interest (including any Additional
Interest) on any Security (unless such Event of Default has been cured and the
Company has paid to or deposited with the Trustee a sum sufficient to pay all
installments of interest (including any Additional Interest) due and past due
and all principal of and any premium on all Securities due otherwise than by
acceleration) or

 

(ii)  in respect of
a covenant or provision hereof that under Article IX cannot be
modified or amended without the consent of each Holder of any Outstanding
Security.

 

(b) 
Any such waiver shall be deemed to be on behalf of the Holders of all the
Securities.

 

(c) 
Upon any such waiver, such Event of Default shall cease to exist and any Event
of Default arising therefrom shall be deemed to have been cured for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Event of Default or impair any right consequent thereon.

 

SECTION 5.14.  Undertaking for Costs.

 

All parties to this Indenture agree, and each Holder
of any Security by his or her acceptance thereof shall be deemed to have
agreed, that any court may, in its discretion, require in any suit for the
enforcement of any right or remedy under this Indenture, or in any suit against
the Trustee for any action taken or omitted by it as Trustee the filing by any
party litigant in such suit of an undertaking to pay the costs of such suit,
and that such court may in its discretion assess reasonable costs, including
reasonable attorneys’ fees and expenses, against any party litigant in such
suit, having due regard to the merits and good faith of the claims or defenses
made by such party litigant; but the provisions of this Section 5.14
shall not apply (i) to any suit instituted by the Trustee, (ii) to
any suit instituted by any Holder or group of Holders holding in the aggregate
more than ten percent (10%) in aggregate principal amount of the Outstanding
Securities or (iii) to any suit instituted by any Holder for the
enforcement of the payment of the principal of or any premium on the Security
after the Stated Maturity or any interest (including any Additional Interest)
on any Security after it is due and payable.

 

SECTION 5.15.  Waiver of Usury, Stay or Extension Laws.

 

The Company covenants (to the extent that it may
lawfully do so) that it will not, at any time, insist upon, plead or in any
manner whatsoever claim or take the benefit or advantage of any usury, stay or
extension law wherever enacted, now or at any time hereafter in force, which
may affect the covenants or the performance of this Indenture; and the Company
(to the extent

 

34

 

that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will
suffer and permit the execution of every such power as though no such law had
been enacted.

 

ARTICLE VI

 

The Trustee

 

SECTION 6.1.  Corporate Trustee Required.

 

There shall at all times be a Trustee hereunder with
respect to the Securities.  The Trustee
shall be a corporation organized and doing business under the laws of the
United States or of any state thereof, authorized to exercise corporate trust
powers, having a combined capital and surplus of at least $50,000,000, subject
to supervision or examination by Federal or state authority and having an
office within the United States.  If such
corporation publishes reports of condition at least annually, pursuant to law
or to the requirements of such supervising or examining authority, then, for
the purposes of this Section 6.1, the combined capital and surplus
of such corporation shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published.  If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 6.1, it
shall resign immediately in the manner and with the effect hereinafter
specified in this Article VI.

 

SECTION 6.2.  Certain Duties and Responsibilities.

 

Except during the continuance of an Event of Default:

 

(i)  the Trustee
undertakes to perform such duties and only such duties as are specifically set
forth in this Indenture, and no implied covenants or obligations shall be read
into this Indenture against the Trustee; and

 

(ii)  in the absence
of bad faith on its part, the Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and conforming to the
requirements of this Indenture; provided,
that in the case of any such certificates or opinions that by any provision
hereof are specifically required to be furnished to the Trustee, the Trustee
shall be under a duty to examine the same to determine whether or not they
substantially conform on their face to the requirements of this Indenture.

 

(b) 
If an Event of Default known to the Trustee has occurred and is continuing, the
Trustee shall, prior to the receipt of directions, if any, from the Holders of
at least a majority in aggregate principal amount of the Outstanding
Securities, exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in its exercise as a
prudent person would exercise or use under the circumstances in the conduct of
such person’s own affairs.

 

(c) 
Notwithstanding the foregoing, no provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the exercise
of any of its rights or powers, if it

 

35

 

shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.  Whether or
not therein expressly so provided, every provision of this Indenture relating
to the conduct or affecting the liability of or affording protection to the
Trustee shall be subject to the provisions of this Section 6.2.  To the extent that, at law or in equity, the
Trustee has duties and liabilities relating to the Holders, the Trustee shall not
be liable to any Holder for the Trustee’s good faith reliance on the provisions
of this Indenture.  The provisions of
this Indenture, to the extent that they restrict the duties and liabilities of
the Trustee otherwise existing at law or in equity, are agreed by the Company
and the Holders to replace such other duties and liabilities of the Trustee.

 

(d) 
No provisions of this Indenture shall be construed to relieve the Trustee from
liability with respect to matters that are within the authority of the Trustee
under this Indenture for its own negligent action, negligent failure to act or
willful misconduct, except that:

 

(i)  the Trustee
shall not be liable for any error or judgment made in good faith by an
authorized officer of the Trustee, unless it shall be proved that the Trustee
was negligent in ascertaining the pertinent facts;

 

(ii)  the Trustee
shall not be liable with respect to any action taken or omitted to be taken by
it in good faith in accordance with the direction of the Holders of at least a
majority in aggregate principal amount of the Outstanding Securities relating
to the time, method and place of conducting any proceeding for any remedy
available to the Trustee under this Indenture; and

 

(iii)  the Trustee
shall be under no liability for interest on any money received by it hereunder
except as otherwise agreed with the Company and money held by the Trustee in
trust hereunder need not be segregated from other funds except to the extent
required by law.

 

SECTION 6.3.  Notice of Defaults.

 

Within ninety (90) days after the occurrence of any
default actually known to the Trustee, the Trustee shall give the Holders
notice of such default unless such default shall have been cured or waived;
provided, that in the case of any default of the character specified in Section 5.1(c),
no such notice to Holders shall be given until at least thirty (30) days after
the occurrence thereof.  For the purpose
of this Section 6.3, the term “default” means any event which is,
or after notice or lapse of time or both would become, an Event of Default.

 

SECTION 6.4.  Certain Rights of Trustee.

 

Subject to the provisions of Section 6.2:

 

(a) 
the Trustee may conclusively rely and shall be fully protected in acting or
refraining from acting in good faith and in accordance with the terms hereof
upon any resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note or other
paper or document believed by it to be genuine and to have been signed or presented
by the proper party or parties;

 

36

 

(b) 
if (i) in performing its duties under this Indenture the Trustee is
required to decide between alternative courses of action, (ii) in
construing any of the provisions of this Indenture the Trustee finds ambiguous
or inconsistent with any other provisions contained herein or (iii) the
Trustee is unsure of the application of any provision of this Indenture, then,
except as to any matter as to which the Holders are entitled to decide under
the terms of this Indenture, the Trustee shall deliver a notice to the Company
requesting the Company’s written instruction as to the course of action to be
taken and the Trustee shall take such action, or refrain from taking such action,
as the Trustee shall be instructed in writing to take, or to refrain from
taking, by the Company; provided, that if the Trustee does not receive such
instructions from the Company within ten (10) Business Days after it has
delivered such notice or such reasonably shorter period of time set forth in
such notice the Trustee may, but shall be under no duty to, take such action,
or refrain from taking such action, as the Trustee shall deem advisable and in
the best interests of the Holders, in which event the Trustee shall have no
liability except for its own negligence, bad faith or willful misconduct;

 

(c) 
any request or direction of the Company shall be sufficiently evidenced by a
Company Request or Company Order and any resolution of the Board of Directors
may be sufficiently evidenced by a Board Resolution;

 

(d) 
the Trustee may consult with counsel (which counsel may be counsel to the
Trustee, the Company or any of its Affiliates, and may include any of its
employees) and the advice of such counsel or any Opinion of Counsel shall be
full and complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance thereon;

 

(e) 
the Trustee shall be under no obligation to exercise any of the rights or
powers vested in it by this Indenture at the request or direction of any of the
Holders pursuant to this Indenture, unless such Holders shall have offered to
the Trustee security or indemnity reasonably satisfactory to it against the
costs, expenses (including reasonable attorneys’ fees and expenses) and
liabilities that might be incurred by it in compliance with such request or
direction, including reasonable advances as may be requested by the Trustee;

 

(f) 
the Trustee shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, indenture, note or
other paper or document, but the Trustee in its discretion may make such
inquiry or investigation into such facts or matters as it may see fit, and, if
the Trustee shall determine to make such inquiry or investigation, it shall be
entitled to examine the books, records and premises of the Company, personally
or by agent or attorney;

 

(g) 
the Trustee may execute any of the trusts or powers hereunder or perform any
duties hereunder either directly or by or through agents, attorneys, custodians
or nominees and the Trustee shall not be responsible for any misconduct or
negligence on the part of any such agent, attorney, custodian or nominee
appointed with due care by it hereunder;

 

(h) 
whenever in the administration of this Indenture the Trustee shall deem it
desirable to receive instructions with respect to enforcing any remedy or right
or taking any other action with respect to enforcing any remedy or right
hereunder, the Trustee (i) may request instructions from the Holders
(which instructions may only be given by the Holders of the same aggregate

 

37

 

principal amount of Outstanding Securities as would be
entitled to direct the Trustee under this Indenture in respect of such remedy,
right or action), (ii) may refrain from enforcing such remedy or right or
taking such action until such instructions are received and (iii) shall be
protected in acting in accordance with such instructions;

 

(i) 
except as otherwise expressly provided by this Indenture, the Trustee shall not
be under any obligation to take any action that is discretionary under the
provisions of this Indenture;

 

(j)  without prejudice to any other rights
available to the Trustee under applicable law, when the Trustee incurs expenses
or renders services in connection with any bankruptcy, insolvency or other proceeding
referred to in clauses (d) or (e) of the definition of
Event of Default, such expenses (including legal fees and expenses of its
agents and counsel) and the compensation for such services are intended to
constitute expenses of administration under any bankruptcy laws or law relating
to creditors rights generally;

 

(k)  whenever in the administration of this
Indenture the Trustee shall deem it desirable that a matter be proved or
established prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may, in the
absence of bad faith on its part, conclusively rely upon an Officers’
Certificate addressing such matter, which, upon receipt of such request, shall
be promptly delivered by the Company;

 

(l)  the Trustee shall not be charged with
knowledge of any Event of Default unless either (i) a Responsible Officer
of the Trustee shall have actual knowledge or (ii) the Trustee shall have
received notice thereof from the Company or a Holder; and

 

(m)  in the event that the Trustee is also acting
as Paying Agent, Authenticating Agent or Securities Registrar hereunder, the
rights and protections afforded to the Trustee pursuant to this Article VI
shall also be afforded such Paying Agent, Authenticating Agent,  or Securities Registrar.

 

SECTION 6.5.  May Hold Securities.

 

The Trustee, any Authenticating Agent, any Paying
Agent, any Securities Registrar or any other agent of the Company, in its
individual or any other capacity, may become the owner or pledgee of Securities
and may otherwise deal with the Company with the same rights it would have if
it were not Trustee, Authenticating Agent, Paying Agent, Securities Registrar
or such other agent.

 

SECTION 6.6.  Compensation; Reimbursement; Indemnity.

 

(a) 
The Company agrees:

 

(i)  to pay to the
Trustee from time to time reasonable compensation for all services rendered by
it hereunder in such amounts as the Company and the Trustee shall agree from
time to time (which compensation shall not be limited by any provision of law
in regard to the compensation of a trustee of an express trust);

 

38

 

(ii)  to reimburse
the Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision of
this Indenture (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to its negligence, bad faith or willful
misconduct; and

 

(iii)  to the
fullest extent permitted by applicable law, to indemnify the Trustee and its
Affiliates, and their officers, directors, shareholders, agents,
representatives and employees for, and to hold them harmless against, any loss,
damage, liability, tax (other than income, franchise or other taxes imposed on
amounts paid pursuant to (i) or (ii) hereof), penalty, expense or
claim of any kind or nature whatsoever incurred without negligence, bad faith
or willful misconduct on its part arising out of or in connection with the
acceptance or administration of this trust or the performance of the Trustee’s
duties hereunder, including the costs and expenses of defending itself against
any claim or liability in connection with the exercise or performance of any of
its powers or duties hereunder.

 

(b) 
To secure the Company’s payment obligations in this Section 6.6,
the Company hereby grants and pledges to the Trustee and the Trustee shall have
a lien prior to the Securities on all money or property held or collected by
the Trustee, other than money or property held in trust to pay principal and
interest on particular Securities.  Such
lien shall survive the satisfaction and discharge of this Indenture or the resignation
or removal of the Trustee.

 

(c) 
The obligations of the Company under this Section 6.6 shall survive
the satisfaction and discharge of this Indenture and the earlier resignation or
removal of the Trustee.

 

(d) 
In no event shall the Trustee be liable for any indirect, special, punitive or
consequential loss or damage of any kind whatsoever, including, but not limited
to, lost profits, even if the Trustee has been advised of the likelihood of
such loss or damage and regardless of the form of action.

 

(e) 
In no event shall the Trustee be liable for any failure or delay in the
performance of its obligations hereunder because of circumstances beyond its
control, including, but not limited to, acts of God, flood, war (whether
declared or undeclared), terrorism, fire, riot, embargo, government action,
including any laws, ordinances, regulations, governmental action or the like
which delay, restrict or prohibit the providing of the services contemplated by
this Indenture.

 

SECTION 6.7.  Resignation and Removal; Appointment of
Successor.

 

(a) 
No resignation or removal of the Trustee and no appointment of a successor
Trustee pursuant to this Article VI shall become effective until
the acceptance of appointment by the successor Trustee under Section 6.8.

 

(b) 
The Trustee may resign at any time by giving written notice thereof to the
Company.

 

(c) 
Unless an Event of Default shall have occurred and be continuing, the Trustee
may be removed at any time by the Company by a Board Resolution.  If an Event of Default shall have occurred
and be continuing, the Trustee may be removed by an Act of the Holders of a

 

39

 

majority in aggregate principal amount of the
Outstanding Securities, delivered to the Trustee and to the Company.

 

(d) 
If the Trustee shall resign, be removed or become incapable of acting, or if a
vacancy shall occur in the office of Trustee for any reason, at a time when no
Event of Default shall have occurred and be continuing, the Company, by a Board
Resolution, shall promptly appoint a successor Trustee, and such successor
Trustee and the retiring Trustee shall comply with the applicable requirements
of Section 6.8.  If the
Trustee shall resign, be removed or become incapable of acting, or if a vacancy
shall occur in the office of Trustee for any reason, at a time when an Event of
Default shall have occurred and be continuing, the Holders, by an Act of the
Holders of a majority in aggregate principal amount of the Outstanding
Securities, shall promptly appoint a successor Trustee, and such successor
Trustee and the retiring Trustee shall comply with the applicable requirements
of Section 6.8.  If no
successor Trustee shall have been so appointed by the Company or the Holders
and accepted appointment within sixty (60) days after the giving of a notice of
resignation by the Trustee or the removal of the Trustee in the manner required
by Section 6.8, any Holder who has been a bona fide Holder of a
Security for at least six months may, on behalf of such Holder and all others
similarly situated, and any resigning Trustee may, at the expense of the
Company, petition any court of competent jurisdiction for the appointment of a
successor Trustee.

 

(e) 
The Company shall give notice to all Holders in the manner provided in Section 1.6
of each resignation and each removal of the Trustee and each appointment of a
successor Trustee.  Each notice shall
include the name of the successor Trustee and the address of its Corporate
Trust Office.

 

SECTION 6.8.  Acceptance of Appointment by Successor.

 

(a) 
In case of the appointment hereunder of a successor Trustee, each successor
Trustee so appointed shall execute, acknowledge and deliver to the Company and
to the retiring Trustee an instrument accepting such appointment, and thereupon
the resignation or removal of the retiring Trustee shall become effective and
such successor Trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, trusts and duties of the retiring
Trustee; but, on the request of the Company or the successor Trustee, such
retiring Trustee shall, upon payment of its charges, execute and deliver an
instrument transferring to such successor Trustee all the rights, powers and
trusts of the retiring Trustee and shall duly assign, transfer and deliver to
such successor Trustee all property and money held by such retiring Trustee
hereunder.

 

(b) 
Upon request of any such successor Trustee, the Company shall execute any and
all instruments for more fully and certainly vesting in and confirming to such
successor Trustee all rights, powers and trusts referred to in paragraph (a) of
this Section 6.8.

 

(c) 
No successor Trustee shall accept its appointment unless at the time of such
acceptance such successor Trustee shall be qualified and eligible under this Article VI.

 

SECTION 6.9.  Merger, Conversion, Consolidation or
Succession to Business.

 

Any Person into which the Trustee may be merged or
converted or with which it may be consolidated, or any Person resulting from
any merger, conversion or consolidation to which the

 

40

 

Trustee shall be a party, or any Person succeeding to all or
substantially all of the corporate trust business of the Trustee, shall be the
successor of the Trustee hereunder, without the execution or filing of any
paper or any further act on the part of any of the parties hereto, provided,
that such Person shall be otherwise qualified and eligible under this Article VI.  In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation or as otherwise provided above in this Section 6.9
to such authenticating Trustee may adopt such authentication and deliver the
Securities so authenticated, and in case any Securities shall not have been
authenticated, any successor to the Trustee may authenticate such Securities
either in the name of any predecessor Trustee or in the name of such successor
Trustee, and in all cases the certificate of authentication shall have the full
force which it is provided anywhere in the Securities or in this Indenture that
the certificate of the Trustee shall have.

 

SECTION 6.10.  Not Responsible for Recitals or Issuance of
Securities.

 

The recitals contained herein and in the Securities,
except the Trustee’s certificates of authentication, shall be taken as the
statements of the Company, and neither the Trustee nor any Authenticating Agent
assumes any responsibility for their correctness.  The Trustee makes no representations as to
the validity or sufficiency of this Indenture or of the Securities.  Neither the Trustee nor any Authenticating
Agent shall be accountable for the use or application by the Company of the
Securities or the proceeds thereof.

 

SECTION 6.11.  Appointment of Authenticating Agent.

 

(a) 
The Trustee may appoint an Authenticating Agent or Agents with respect to the
Securities, which shall be authorized to act on behalf of the Trustee to
authenticate Securities issued upon original issue and upon exchange,
registration of transfer or partial redemption thereof or pursuant to Section 3.6,
and Securities so authenticated shall be entitled to the benefits of this
Indenture and shall be valid and obligatory for all purposes as if authenticated
by the Trustee hereunder.  Wherever
reference is made in this Indenture to the authentication and delivery of
Securities by the Trustee or the Trustee’s certificate of authentication, such
reference shall be deemed to include authentication and delivery on behalf of
the Trustee by an Authenticating Agent. 
Each Authenticating Agent shall be acceptable to the Company and shall
at all times be a corporation organized and doing business under the laws of
the United States of America, or of any State or Territory thereof or the
District of Columbia, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by Federal or state authority.  If such Authenticating Agent publishes
reports of condition at least annually pursuant to law or to the requirements
of said supervising or examining authority, then for the purposes of this Section 6.11
the combined capital and surplus of such Authenticating Agent shall be deemed
to be its combined capital and surplus as set forth in its most recent report
of condition so published.  If at any
time an Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 6.11, such Authenticating Agent shall
resign immediately in the manner and with the effect specified in this Section 6.11.

 

(b) 
Any Person into which an Authenticating Agent may be merged or converted or
with which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which such Authenticating Agent shall be a
party, or any Person succeeding to

 

41

 

all or substantially all of the corporate trust
business of an Authenticating Agent shall be the successor Authenticating Agent
hereunder, provided such Person shall be otherwise eligible under this Section 6.11,
without the execution or filing of any paper or any further act on the part of
the Trustee or the Authenticating Agent.

 

(c) 
An Authenticating Agent may resign at any time by giving written notice thereof
to the Trustee and to the Company.  The
Trustee may at any time terminate the agency of an Authenticating Agent by
giving written notice thereof to such Authenticating Agent and to the
Company.  Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 6.11, the Trustee may appoint a
successor Authenticating Agent eligible under the provisions of this Section 6.11,
which shall be acceptable to the Company, and shall give notice of such
appointment to all Holders.  Any
successor Authenticating Agent upon acceptance of its appointment hereunder shall
become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.

 

(d) 
The Company agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section 6.11 in
such amounts as the Company and the Authenticating Agent shall agree from time
to time.

 

(e) 
If an appointment of an Authenticating Agent is made pursuant to this Section 6.11,
the Securities may have endorsed thereon, in addition to the Trustee’s
certificate of authentication, an alternative certificate of authentication in
the following form:

 

This is one of the
Securities designated therein referred to in the within mentioned Indenture.

 

Dated:

 

	
   

  	
  JPMORGAN CHASE
  BANK,

  
	
   

  	
  not in its
  individual capacity, but solely as Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Authorized
  Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Authenticating Signatory

  

 

ARTICLE VII

 

Holder’s Lists and Reports By Trustee
and Company

 

SECTION 7.1.  Company to Furnish Trustee Names and
Addresses of Holders.

 

The Company will furnish or cause to be furnished to
the Trustee:

 

42

 

(a) 
semi-annually, on or before June 30 and December 31 of each year, a
list, in such form as the Trustee may reasonably require, of the names and
addresses of the Holders as of a date not more than fifteen (15) days prior to
the delivery thereof, and

 

(b) 
at such other times as the Trustee may request in writing, within thirty (30)
days after the receipt by the Company of any such request, a list of similar
form and content as of a date not more than fifteen (15) days prior to the time
such list is furnished, in each case to the extent such information is in the
possession or control of the Company and has not otherwise been received by the
Trustee in its capacity as Securities Registrar.

 

SECTION 7.2.  Preservation of Information; Communications
to Holders.

 

(a) 
The Trustee shall preserve, in as current a form as is reasonably practicable,
the names and addresses of Holders contained in the most recent list furnished
to the Trustee as provided in Section 7.1 and the names and
addresses of Holders received by the Trustee in its capacity as Securities
Registrar.  The Trustee may destroy any
list furnished to it as provided in Section 7.1 upon receipt of a
new list so furnished.

 

(b) 
The rights of Holders to communicate with other Holders with respect to their
rights under this Indenture or under the Securities and the corresponding
rights and privileges of the Trustee shall be as provided in the Trust
Indenture Act.

 

(c) 
Every Holder of Securities, by receiving and holding the same, agrees with the
Company and the Trustee that neither the Company nor the Trustee nor any agent
of either of them shall be held accountable by reason of the disclosure of
information as to the names and addresses of the Holders made pursuant to the
Trust Indenture Act.

 

SECTION 7.3.  Reports by the Company.

 

(a) 
The Company shall furnish to the Holders and to prospective purchasers of
Securities, upon their request, the information required to be furnished
pursuant to Rule 144A(d)(4) under the Securities Act.  The Company shall furnish to the Trustee and,
so long as ALESCO Preferred Funding V, Ltd. holds any of the Securities, the
Company shall furnish to ALESCO Preferred Funding V, Ltd. or its designee, the
statutory financial statements promptly following their filing with the
Applicable Insurance Regulatory Authority or otherwise required under the
Applicable Insurance Law.

 

(b) 
The Company shall furnish to each of (i) the Trustee, (ii) the
Holders and to subsequent holders of Securities, (iii) Cohen Bros.
Financial Management LLC (at  1818 Market
Street 28th Floor,  Philadelphia, PA
19103, Attn: Matthew Mueller or such other address from time to time designated
by Cohen Bros. Financial Management LLC.) and (iv) to any beneficial owner
of the Securities reasonably identified to the Company (which identification
may be made either by such beneficial owner or by Cohen Bros. Financial
Management LLC.), a duly completed and executed certificate in the form
attached hereto as Exhibit A, including the attachments referenced in such
Exhibit, which certificate and attachments shall be so furnished by the Company
not later than forty-five (45) days after the end of each of the first three
fiscal quarters of each fiscal year of the Company and not later than ninety
(90) days after the end of each fiscal year of the Company.

 

43

 

(c) 
If the Company intends to file its annual and quarterly information with the
Securities and Exchange Commission (the “Commission”)
in electronic form pursuant to Regulation S-T of the Commission using the
Commission’s Electronic Data Gathering, Analysis and Retrieval (“EDGAR”) system, the Company shall notify
the Trustee in the manner prescribed herein of each such annual and quarterly
filing.  The Trustee is hereby authorized
and directed to access the EDGAR system for purposes of retrieving the
financial information so filed.  Compliance
with the foregoing shall constitute delivery by the Company of its financial
statements to the Trustee in compliance with the provisions of Section 314(a) of
the Trust Indenture Act, if applicable. 
The Trustee shall have no duty to search for or obtain any electronic or
other filings that the Company makes with the Commission, regardless of whether
such filings are periodic, supplemental or otherwise.  Delivery of reports, information and
documents to the Trustee pursuant to this Section 7.3(c) shall
be solely for purposes of compliance with this Section 7.3(c) and,
if applicable, with Section 314(a) of the Trust Indenture Act.  The Trustee’s receipt of such reports,
information and documents shall not constitute notice to it of the content
thereof or any matter determinable from the content thereof, including the
Company’s compliance with any of its covenants hereunder, as to which the
Trustee is entitled to rely upon Officers’ Certificates.

 

ARTICLE VIII

 

Consolidation, Merger, Conveyance,
Transfer or Lease

 

SECTION 8.1.  Company May Demutualize, Consolidate,
Etc., Only on Certain Terms.

 

The Company shall not convert itself from a mutual
insurance company into a stock insurance company (such conversion, a “demutualization”
and, with correlative meaning, “demutualize”) consolidate with or merge into
any other Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, and no Person shall consolidate
with or merge into the Company or convey, transfer or lease its properties and
assets substantially as an entirety to the Company, unless:

 

(a) 
if the Company shall demutualize, consolidate with or merge into another Person
or convey, transfer or lease its properties and assets substantially as an
entirety to any Person, the entity formed by such demutualization,
consolidation or into which the Company is merged or the Person that acquires
by conveyance or transfer, or that leases, the properties and assets of the
Company substantially as an entirety shall be an entity organized and existing
under the laws of the United States of America or any State or Territory
thereof or the District of Columbia and shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Trustee, in form reasonably
satisfactory to the Trustee, the due and punctual payment of the principal of
and any premium and interest (including any Additional Interest) on all the
Securities and the performance of every covenant of this Indenture on the part
of the Company to be performed or observed;

 

(b) 
immediately after giving effect to such transaction, no Event of Default, and
no event that, after notice or lapse of time, or both, would constitute an
Event of Default, shall have happened and be continuing; and

 

(c) 
the Company has delivered to the Trustee an Officers’ Certificate and an
Opinion of Counsel, each stating that such demutualization, consolidation,
merger, conveyance, transfer or lease and, if a supplemental indenture is
required in connection with such transaction, any such

 

44

 

supplemental indenture comply
with this Article VIII and that all conditions precedent herein
provided for relating to such transaction have been complied with; and the
Trustee may rely upon such Officers’ Certificate and Opinion of Counsel as
conclusive evidence that such transaction complies with this Section 8.1.

 

SECTION 8.2. Successor Company
Substituted.

 

(a) 
Upon any demutualization, consolidation or merger by the Company with or into
any other Person, or any conveyance, transfer or lease by the Company of its
properties and assets substantially as an entirety to any Person in accordance
with Section 8.1 and the execution and delivery to the Trustee of
the supplemental indenture described in Section 8.1(a), the
successor entity formed by such demutualization, consolidation or into which
the Company is merged or to which such conveyance, transfer or lease is made
shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; and in the event of any
such demutualization, conveyance or transfer, following the execution and
delivery of such supplemental indenture, the Company shall be discharged from
all obligations and covenants under the Indenture and the Securities.

 

(b) 
Such successor Person may cause to be executed, and may issue either in its own
name or in the name of the Company, any or all of the Securities issuable
hereunder that theretofore shall not have been signed by the Company and
delivered to the Trustee; and, upon the order of such successor Person instead
of the Company and subject to all the terms, conditions and limitations in this
Indenture prescribed, the Trustee shall authenticate and shall deliver any
Securities that previously shall have been signed and delivered by the officers
of the Company to the Trustee for authentication, and any Securities that such
successor Person thereafter shall cause to be executed and delivered to the
Trustee on its behalf. All the Securities so issued shall in all respects have
the same legal rank and benefit under this Indenture as the Securities
theretofore or thereafter issued in accordance with the terms of this
Indenture.

 

(c) 
In case of any such demutualization, consolidation, merger, sale, conveyance or
lease, such changes in phraseology and form may be made in the Securities
thereafter to be issued as may be appropriate to reflect such occurrence.

 

ARTICLE IX

 

Supplemental Indentures

 

SECTION 9.1. Supplemental
Indentures without Consent of Holders.

 

Without the consent of any Holders, the Company, when
authorized by a Board Resolution, and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto, in form reasonably
satisfactory to the Trustee, for any of the following purposes:

 

(a) 
to evidence the succession of another Person to the Company, and the assumption
by any such successor of the covenants of the Company herein and in the
Securities; or

 

45

 

(b) 
to cure any ambiguity, to correct or supplement any provision herein that may
be defective or inconsistent with any other provision herein, or to make or
amend any other provisions with respect to matters or questions arising under
this Indenture, which shall not be inconsistent with the other provisions of
this Indenture; provided,
that such action pursuant to this clause (b) shall not adversely affect in
any material respect the interests of any Holders; or

 

(c) 
to add to the covenants, restrictions or obligations of the Company or to add
to the Events of Default; provided, that such action pursuant to this clause (c) shall
not adversely affect in any material respect the interests of any Holders; or

 

(d) 
to modify, eliminate or add to any provisions of the Indenture or the
Securities to such extent as shall be necessary to ensure that the Securities
are treated as indebtedness of the Company for United States Federal income tax
purposes; provided,
that such action pursuant to this clause (d) shall not adversely affect in
any material respect the interests of any Holders.

 

SECTION 9.2. Supplemental
Indentures with Consent of Holders.

 

(a) 
With the consent of the Holders of not less than a majority in aggregate
principal amount of the Outstanding Securities, by Act of said Holders
delivered to the Company and the Trustee, the Company, when authorized by a
Board Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders of Securities under this
Indenture; provided, that
no such supplemental indenture shall, without the consent of the Holder of each
Outstanding Security,

 

(i)  change the
Stated Maturity of the principal or any premium of any Security or change the
date of payment of any installment of interest (including any Additional
Interest) on any Security, or reduce the principal amount thereof or the rate
of interest thereon or any premium payable upon the redemption thereof or
change the place of payment where, or the coin or currency in which, any
Security or interest thereon is payable, or restrict or impair the right to
institute suit for the enforcement of any such payment on or after such date,
or

 

(ii)  reduce the
percentage in aggregate principal amount of the Outstanding Securities, the
consent of whose Holders is required for any such supplemental indenture, or
the consent of whose Holders is required for any waiver of compliance with any
provision of this Indenture or of defaults hereunder and their consequences
provided for in this Indenture, or

 

(iii)  modify any of
the provisions of this Section 9.2, Section 5.13 or Section 10.7,
except to increase any percentage in aggregate principal amount of the
Outstanding Securities, the consent of whose Holders is required for any
reason, or to provide that certain other provisions of this Indenture cannot be
modified or waived without the consent of the Holder of each Security.

 

(b) 
It shall not be necessary for any Act of Holders under this Section 9.2
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.

 

46

 

SECTION 9.3. Execution of
Supplemental Indentures.

 

In executing or accepting the additional trusts
created by any supplemental indenture permitted by this Article IX
or the modifications thereby of the trusts created by this Indenture, the
Trustee shall be entitled to receive, and shall be fully protected in
conclusively relying upon, an Officers’ Certificate and an Opinion of Counsel
stating that the execution of such supplemental indenture is authorized or
permitted by this Indenture, and that all conditions precedent herein provided
for relating to such action have been complied with. The Trustee may, but shall
not be obligated to, enter into any such supplemental indenture that affects
the Trustee’s own rights, duties, indemnities or immunities under this
Indenture or otherwise. Copies of the final form of each supplemental indenture
shall be delivered by the Trustee at the expense of the Company to each Holder
promptly after the execution thereof.

 

SECTION 9.4. Effect of
Supplemental Indentures.

 

Upon the execution of any supplemental indenture under
this Article IX, this Indenture shall be modified in accordance
therewith, and such supplemental indenture shall form a part of this Indenture
for all purposes, and every Holder of Securities theretofore or thereafter
authenticated and delivered hereunder shall be bound thereby.

 

SECTION 9.5. Reference in
Securities to Supplemental Indentures.

 

Securities authenticated and delivered after the
execution of any supplemental indenture pursuant to this Article IX
may, and shall if required by the Company, bear a notation in form approved by
the Company as to any matter provided for in such supplemental indenture. If
the Company shall so determine, new Securities so modified as to conform, in
the opinion of the Company, to any such supplemental indenture may be prepared
and executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Securities.

 

ARTICLE X

 

Covenants

 

SECTION 10.1.
Payment of
Principal, Premium, if any, and Interest.

 

The Company covenants and agrees for the benefit of
the Holders of the Securities that it will duly and punctually pay the
principal of and any premium, if any, and interest (including any Additional
Interest) on the Securities in accordance with the terms of the Securities and
this Indenture.

 

SECTION 10.2.
Money for
Security Payments to be Held in Trust.

 

(a) 
If the Company shall at any time act as its own Paying Agent with respect to
the Securities, it will, on or before each due date of the principal of and any
premium or interest (including any Additional Interest) on the Securities,
segregate and hold in trust for the benefit of the Persons entitled thereto a
sum sufficient to pay the principal and any premium or interest (including
Additional Interest) so becoming due until such sums shall be paid to such
Persons or otherwise disposed of as herein provided, and will promptly notify
the Trustee in writing of its failure so to act.

 

47

 

(b) 
Whenever the Company shall have one or more Paying Agents, it will, prior to
10:00 a.m., New York City time, on each due date of the principal of or
any premium or interest (including any Additional Interest) on any Securities,
deposit with a Paying Agent a sum sufficient to pay such amount, such sum to be
held as provided in the Trust Indenture Act and (unless such Paying Agent is
the Trustee) the Company will promptly notify the Trustee of its failure so to
act.

 

(c) 
The Company will cause each Paying Agent for the Securities other than the
Trustee to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee, subject to the provisions of this Section 10.2,
that such Paying Agent will (i) comply with the provisions of this
Indenture and the Trust Indenture Act applicable to it as a Paying Agent and (ii) during
the continuance of any default by the Company (or any other obligor upon the
Securities) in the making of any payment in respect of the Securities, upon the
written request of the Trustee, forthwith pay to the Trustee all sums held in
trust by such Paying Agent for payment in respect of the Securities.

 

(d) 
The Company may at any time, for the purpose of obtaining the satisfaction and
discharge of this Indenture or for any other purpose, pay, or by Company Order
direct any Paying Agent to pay, to the Trustee all sums held in trust by the
Company or such Paying Agent, such sums to be held by the Trustee upon the same
trusts as those upon which such sums were held by the Company or such Paying
Agent and, upon such payment by any Paying Agent to the Trustee, such Paying
Agent shall be released from all further liability with respect to such money.

 

(e) 
Any money deposited with the Trustee or any Paying Agent, or then held by the
Company in trust for the payment of the principal of and any premium or
interest (including any Additional Interest) on any Security and remaining
unclaimed for two years after such principal and any premium or interest has
become due and payable shall (unless otherwise required by mandatory provision
of applicable escheat or abandoned or unclaimed property law) be paid on
Company Request to the Company, or (if then held by the Company) shall (unless
otherwise required by mandatory provision of applicable escheat or abandoned or
unclaimed property law) be discharged from such trust; and the Holder of such
Security shall thereafter, as an unsecured general creditor, look only to the
Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease; provided,  that
the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be published once, in a
newspaper published in the English language, customarily published on each
Business Day and of general circulation in the Borough of Manhattan, The City
of New York, notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than thirty (30) days from the date
of such publication, any unclaimed balance of such money then remaining will be
repaid to the Company.

 

SECTION 10.3.
Statement as to
Compliance.

 

The Company shall deliver to the Trustee, within one
hundred and twenty (120) days after the end of each fiscal year of the Company
ending after the date hereof, an Officers’ Certificate covering the preceding
calendar year, stating whether or not to the knowledge of the signers thereof
the Company is in default in the performance or observance of any of the terms,

 

48

 

provisions and conditions of this Indenture (without regard to any
period of grace or requirement of notice provided hereunder), and if the
Company shall be in default, specifying all such defaults and the nature and
status thereof of which they may have knowledge.

 

SECTION 10.4.
Calculation Agent.

 

(a) 
The Company hereby agrees that for so long as any of the Securities remain
Outstanding, there will at all times be an agent appointed to calculate LIBOR
in respect of each Interest Payment Date in accordance with the terms of Schedule A
(the “Calculation Agent”). The
Company has initially appointed the Trustee as Calculation Agent for purposes
of determining LIBOR for each Interest Payment Date. The Calculation Agent may
be removed by the Company at any time. The initial Calculation Agent shall be
the Trustee. If the Calculation Agent is unable or unwilling to act as such or
is removed by the Company, the Company will promptly appoint as a replacement
Calculation Agent the London office of a leading bank which is engaged in
transactions in Eurodollar deposits in the international Eurodollar market and
which does not control or is not controlled by or under common control with the
Company or its Affiliates. The Calculation Agent may not resign its duties
without a successor having been duly appointed.

 

(b) 
The Calculation Agent shall be required to agree that, as soon as possible
after 11:00 a.m. (London time) on each LIBOR Determination Date (as
defined in Schedule A), but in no event later than 11:00 a.m.
(London time) on the Business Day immediately following each LIBOR
Determination Date, the Calculation Agent will calculate the interest rate (the
Interest Payment shall be rounded to the nearest cent, with half a cent being
rounded upwards) for the related Interest Payment Date, and will communicate
such rate and amount to the Company, the Trustee, each Paying Agent and the
Depositary. The Calculation Agent will also specify to the Company the
quotations upon which the foregoing rates and amounts are based and, in any
event, the Calculation Agent shall notify the Company before 5:00 p.m.
(London time) on each LIBOR Determination Date that either: (i) it has
determined or is in the process of determining the foregoing rates and amounts
or (ii) it has not determined and is not in the process of determining the
foregoing rates and amounts, together with its reasons therefor. The
Calculation Agent’s determination of the foregoing rates and amounts for any
Interest Payment Date will (in the absence of manifest error) be final and
binding upon all parties. For the sole purpose of calculating the interest rate
for the Securities, “Business Day” shall be defined as any day on which
dealings in deposits in Dollars are transacted in the London interbank market.

 

SECTION 10.5.
[Reserved]

 

SECTION 10.6.
No Dividends,
Distributions, Etc. Following an Event of Default.

 

The
Company covenants and agrees with each Holder of Securities that, if an Event
of Default shall have occurred and be continuing, or if a payment is not made
due to a Payment Restriction, it shall not (i) declare or pay any
dividends or distributions on, or refund or otherwise return surplus to the
Company’s policyholders, (ii) make
any payment of principal of or any interest or premium, if any, on or repay, repurchase
or redeem any debt securities of the Company that rank pari passu
in all respects with or junior in interest to the Securities as consideration
in an acquisition transaction entered into prior to the occurrence of such
Event of Default.

 

49

 

SECTION 10.7.
Waiver of
Covenants.

 

The Company may omit in any particular instance to
comply with any covenant or condition contained in Section 10.6 if,
before or after the time for such compliance, the Holders of at least a
majority in aggregate principal amount of the Outstanding Securities shall, by
Act of such Holders, either waive such compliance in such instance or generally
waive compliance with such covenant or condition, but no such waiver shall
extend to or affect such covenant or condition except to the extent so
expressly waived, and, until such waiver shall become effective, the
obligations of the Company in respect of any such covenant or condition shall
remain in full force and effect.

 

SECTION 10.8.
Treatment of
Securities.

 

The Company will treat the Securities as indebtedness,
and the amounts, other than payments of principal, payable in respect of the
principal amount of such Securities as interest, for all U.S. federal income
tax purposes. All payments in respect of the Securities will be made free and
clear of U.S. withholding tax to any beneficial owner thereof that has provided
an Internal Revenue Service Form W-9 or W-8BEN (or any substitute or
successor form) establishing its U.S. or non-U.S. status, respectively, for
U.S. federal income tax purposes, or any other applicable form establishing a
complete exemption from U.S. withholding tax.

 

ARTICLE XI

 

Redemption of Securities

 

SECTION 11.1.
Optional
Redemption.

 

The Company may, at its option, on any Interest
Payment Date, on or after December 15, 2009, redeem the Securities in whole at
any time or in part from time to time, at a Redemption Price equal to one
hundred percent (100%) of the principal amount thereof (or of the redeemed
portion thereof, as applicable), together, in the case of any such redemption,
with accrued interest, including any Additional Interest, to but excluding the
date fixed for redemption, subject to there being no, or the satisfaction of
any, Payment Restrictions applicable to such redemption.

 

SECTION 11.2. Tax Redemption

 

Prior to December 15, 2009, upon the occurrence and
during the continuation of a Tax Event, the Company may, at its option, redeem
the Securities, in whole but not in part, at a Redemption Price equal to one
hundred seven and one half percent (107.5%) of the principal amount thereof,
together, in the case of any such redemption, with accrued interest, including
any Additional Interest, through but excluding the date fixed as the Redemption
Date (the “Special Redemption Price”), provided, that the Company shall have
received the prior approval, if any , of any such Applicable Insurance
Regulatory Authority with respect to such redemption if then required.

 

SECTION 11.3.
Election to
Redeem; Notice to Trustee.

 

The election of the Company to redeem any Securities,
in whole or in part, shall be evidenced by or pursuant to a Board Resolution. In
case of any redemption at the election of the

 

50

 

Company, the Company shall, not less than forty-five (45) days and not
more than seventy-five (75) days prior to the Redemption Date (unless a shorter
notice shall be satisfactory to the Trustee), notify the Trustee in writing of
such date and of the principal amount of the Securities to be redeemed and
provide the additional information required to be included in the notice or
notices contemplated by Section 11.4. In the case of any redemption
of Securities, in whole or in part, (a) prior to the expiration of any
restriction on such redemption provided in this Indenture or the Securities or (b) pursuant
to an election of the Company which is subject to a condition specified in this
Indenture or the Securities, the Company shall furnish the Trustee with an
Officers’ Certificate and an Opinion of Counsel evidencing compliance with such
restriction or condition.

 

SECTION 11.4.
Selection of
Securities to be Redeemed.

 

(a) 
If less than all the Securities are to be redeemed, the particular Securities
to be redeemed shall be selected and redeemed on a pro rata basis not more than
sixty (60) days prior to the Redemption Date by the Trustee from the
Outstanding Securities not previously called for redemption, provided,
that the unredeemed portion of the principal amount of any Security shall be in
an authorized denomination (which shall not be less than the minimum authorized
denomination) for such Security.

 

(b) 
The Trustee shall promptly notify the Company in writing of the Securities
selected for redemption and, in the case of any Securities selected for partial
redemption, the principal amount thereof to be redeemed. For all purposes of
this Indenture, unless the context otherwise requires, all provisions relating
to the redemption of Securities shall relate, in the case of any Security
redeemed or to be redeemed only in part, to the portion of the principal amount
of such Security that has been or is to be redeemed.

 

(c) 
The provisions of paragraphs (a) and (b) of this Section 11.4
shall not apply with respect to any redemption affecting only a single
Security, whether such Security is to be redeemed in whole or in part. In the
case of any such redemption in part, the unredeemed portion of the principal
amount of the Security shall be in an authorized denomination (which shall not
be less than the minimum authorized denomination) for such Security.

 

SECTION 11.5.
Notice of
Redemption.

 

(a) 
Notice of redemption shall be given not later than the thirtieth (30th)
day, and not earlier than the sixtieth (60th) day, prior to the Redemption
Date to each Holder of Securities to be redeemed, in whole or in part.

 

(b) 
With respect to Securities to be redeemed, in whole or in part, each notice of
redemption shall state:

 

(i)  the Redemption
Date;

 

(ii)  the Redemption
Price or, if the Redemption Price cannot be calculated prior to the time the
notice is required to be sent, the estimate of the Redemption Price, as
calculated by the Company, together with a statement that it is an estimate and
that the actual Redemption Price will be calculated on the fifth Business Day
prior to the

 

51

 

Redemption Date (and if an estimate is provided, a
further notice shall be sent of the actual Redemption Price on the date that
such Redemption Price is calculated);

 

(iii)  if less than
all Outstanding Securities are to be redeemed, the identification (and, in the
case of partial redemption, the respective principal amounts) of the particular
Securities to be redeemed;

 

(iv)  that on the
Redemption Date, the Redemption Price will become due and payable upon each
such Security or portion thereof, and that any interest (including any
Additional Interest) on such Security or such portion, as the case may be,
shall cease to accrue on and after said date; and

 

(v)  the place or
places where such Securities are to be surrendered for payment of the
Redemption Price.

 

(c) 
Notice of redemption of Securities to be redeemed, in whole or in part, at the
election of the Company shall be given by the Company or, at the Company’s
request, by the Trustee in the name and at the expense of the Company and shall
be irrevocable. The notice, if mailed in the manner provided above, shall be
conclusively presumed to have been duly given, whether or not the Holder
receives such notice. In any case, a failure to give such notice by mail or any
defect in the notice to the Holder of any Security designated for redemption as
a whole or in part shall not affect the validity of the proceedings for the
redemption of any other Security.

 

SECTION 11.6.
Deposit of
Redemption Price.

 

Prior to 10:00 a.m., New York City time, on the
Redemption Date specified in the notice of redemption given as provided in Section 11.5,
the Company will deposit with the Trustee or with one or more Paying Agents (or
if the Company is acting as its own Paying Agent, the Company will segregate
and hold in trust as provided in Section 10.2) an amount of money
sufficient to pay the Redemption Price of, and any accrued interest (including
any Additional Interest) on, all the Securities (or portions thereof) that are
to be redeemed on that date.

 

SECTION 11.7.
Payment of
Securities Called for Redemption.

 

(a) 
If any notice of redemption has been given as provided in Section 11.5,
the Securities or portion of Securities with respect to which such notice has
been given shall become due and payable on the date and at the place or places
stated in such notice at the applicable Redemption Price, together with accrued
interest (including any Additional Interest) to the Redemption Date. On
presentation and surrender of such Securities at a Place of Payment specified
in such notice, the Securities or the specified portions thereof shall be paid
and redeemed by the Company at the applicable Redemption Price, together with
accrued interest (including any Additional Interest) to the Redemption Date.

 

(b) 
Upon presentation of any Security redeemed in part only, the Company shall
execute and the Trustee shall authenticate and deliver to the Holder thereof,
at the expense of the Company, a new Security or Securities, of authorized
denominations, in aggregate principal amount equal to the unredeemed portion of
the Security so presented and having the same Original Issue Date, Stated
Maturity and terms.

 

52

 

(c) 
If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal of and any premium on such Security
shall, until paid, bear interest from the Redemption Date at the rate
prescribed therefor in the Security.

 

ARTICLE XII

 

Subordination of Securities

 

SECTION 12.1.
Securities
Subordinate to Senior Obligations.

 

The Company covenants and agrees, and each Holder of a
Security, by its acceptance thereof, likewise covenants and agrees, that, to
the extent and in the manner hereinafter set forth in this Article XII,
the payment of the principal of and any premium and interest (including any
Additional Interest) on each and all of the Securities are hereby expressly
made subordinate and subject in right of payment to the prior payment in full
of all Senior Obligations.

 

SECTION 12.2.
No Payment When
Senior Obligations in Default; Payment Over of Proceeds Upon Dissolution, Etc.

 

(a) 
In the event and during the continuation of any default by the Company in the
payment of any principal of or any premium or interest on any Senior Obligation
(following any grace period, if applicable) when the same becomes due and
payable, whether at maturity or at a date fixed for prepayment or by
declaration of acceleration or otherwise, then, upon written notice of such
default to the Company by the holders of such Senior Obligation or any trustee
therefor, unless and until such default shall have been cured or waived or
shall have ceased to exist, no direct or indirect payment (in cash, property,
securities, by set-off or otherwise) shall be made or agreed to be made on
account of the principal of or any premium or interest (including any
Additional Interest) on any of the Securities, or in respect of any redemption,
repayment, retirement, purchase or other acquisition of any of the Securities.

 

(b) 
In the event of a bankruptcy, insolvency or other proceeding described in
clause (d) or (e) of the definition of Event of Default (each such
event, if any, herein sometimes referred to as a “Proceeding”), all
Senior Obligations (including any interest thereon accruing after the
commencement of any such proceedings) shall first be paid in full before any
payment or distribution, whether in cash, securities or other property, shall
be made to any Holder of any of the Securities on account thereof. Any payment
or distribution, whether in cash, securities or other property (other than
securities of the Company or any other entity provided for by a plan of
reorganization or readjustment the payment of which is subordinate, at least to
the extent provided in these subordination provisions with respect to the
indebtedness evidenced by the Securities, to the payment of all Senior
Obligations at the time outstanding and to any securities issued in respect
thereof under any such plan of reorganization or readjustment), which would
otherwise (but for these subordination provisions) be payable or deliverable in
respect of the Securities shall be paid or delivered directly to the holders of
Senior Obligations in accordance with the priorities then existing among such
holders until all Senior Obligations (including any interest thereon accruing
after the commencement of any Proceeding) shall have been paid in full.

 

53

 

(c) 
In the event of any Proceeding, after payment in full of all sums owing with
respect to Senior Obligations, the Holders of the Securities, together with the
holders of any obligations of the Company ranking on a parity with the Securities,
shall be entitled to be paid from the remaining assets of the Company the
amounts at the time due and owing on account of unpaid principal of and any
premium and interest (including any Additional Interest) on the Securities and
such other obligations before any payment or other distribution, whether in
cash, property or otherwise, shall be made on account of any capital stock or
any obligations of the Company ranking junior to the Securities and such other
obligations. If, notwithstanding the foregoing, any payment or distribution of
any character or any security, whether in cash, securities or other property
(other than securities of the Company or any other entity provided for by a
plan of reorganization or readjustment the payment of which is subordinate, at
least to the extent provided in these subordination provisions with respect to
the indebtedness evidenced by the Securities, to the payment of all Senior
Obligations at the time outstanding and to any securities issued in respect
thereof under any such plan of reorganization or readjustment) shall be
received by the Trustee or any Holder in contravention of any of the terms
hereof and before all Senior Obligations shall have been paid in full, such
payment or distribution or security shall be received in trust for the benefit
of, and shall be paid over or delivered and transferred to, the holders of the
Senior Obligations at the time outstanding in accordance with the priorities
then existing among such holders for application to the payment of all Senior
Obligations remaining unpaid, to the extent necessary to pay all such Senior
Obligations (including any interest thereon accruing after the commencement of
any Proceeding) in full. In the event of the failure of the Trustee or any
Holder to endorse or assign any such payment, distribution or security, each
holder of any Senior Obligation is hereby irrevocably authorized to endorse or
assign the same.

 

(d) 
The Trustee and the Holders, at the expense of the Company, shall take such
reasonable action (including the delivery of this Indenture to an agent for any
holders of Senior Obligations or consent to the filing of a financing statement
with respect hereto) as may, in the opinion of counsel designated by the
holders of a majority in principal amount of the Senior Obligations at the time
outstanding, be necessary or appropriate to assure the effectiveness of the
subordination effected by these provisions.

 

(e) 
The provisions of this Section 12.2 shall not impair any rights,
interests, remedies or powers of any secured creditor of the Company in respect
of any security interest the creation of which is not prohibited by the
provisions of this Indenture.

 

(f) 
The securing of any obligations of the Company, otherwise ranking on a parity
with the Securities or ranking junior to the Securities, shall not be deemed to
prevent such obligations from constituting, respectively, obligations ranking
on a parity with the Securities or ranking junior to the Securities.

 

SECTION 12.3.
Payment
Permitted If No Default.

 

Nothing contained in this Article XII or
elsewhere in this Indenture or in any of the Securities shall prevent (a) the
Company, at any time, except during the pendency of the conditions described in
paragraph (a) of Section 12.2 or of any Proceeding
referred to in Section 12.2, from making payments at any time of
principal of and any premium or interest (including any Additional Interest) on
the Securities or (b) the application by the Trustee of any moneys
deposited with it hereunder to the payment of or on account of the principal of
and any premium

 

54

 

or interest (including any Additional Interest) on the Securities or
the retention of such payment by the Holders, if, at the time of such application
by the Trustee, it did not have knowledge (in accordance with Section 12.8)
that such payment would have been prohibited by the provisions of this Article XII,
except as provided in Section 12.8.

 

SECTION 12.4.
Subrogation to
Rights of Holders of Senior Obligations.

 

Subject to the payment in full of all amounts due or
to become due on all Senior Obligations, or the provision for such payment in
cash or cash equivalents or otherwise in a manner satisfactory to the holders
of Senior Obligations, the Holders of the Securities shall be subrogated to the
extent of the payments or distributions made to the holders of such Senior
Obligations pursuant to the provisions of this Article XII (equally
and ratably with the holders of all indebtedness of the Company that by its
express terms is subordinated to Senior Obligations of the Company to
substantially the same extent as the Securities are subordinated to the Senior Obligations
and is entitled to like rights of subrogation by reason of any payments or
distributions made to holders of such Senior Obligations) to the rights of the
holders of such Senior Obligations to receive payments and distributions of
cash, property and securities applicable to the Senior Obligations until the
principal of and any premium and interest (including any Additional Interest)
on the Securities shall be paid in full. For purposes of such subrogation, no
payments or distributions to the holders of the Senior Obligations of any cash,
property or securities to which the Holders of the Securities or the Trustee
would be entitled except for the provisions of this Article XII,
and no payments made pursuant to the provisions of this Article XII
to the holders of Senior Obligations by Holders of the Securities or the
Trustee, shall, as among the Company, its creditors other than holders of
Senior Obligation, and the Holders of the Securities, be deemed to be a payment
or distribution by the Company to or on account of the Senior Obligations.

 

SECTION 12.5.
Provisions
Solely to Define Relative Rights.

 

The provisions of this Article XII are,
and are intended solely, for the purpose of defining the relative rights of the
Holders of the Securities on the one hand and the holders of Senior Obligations
on the other hand. Nothing contained in this Article XII or
elsewhere in this Indenture or in the Securities is intended to or shall (a) impair,
as between the Company and the Holders of the Securities, the obligations of
the Company, which are absolute and unconditional, to pay to the Holders of the
Securities the principal of and any premium and interest (including any
Additional Interest) on the Securities as and when the same shall become due
and payable in accordance with their terms, (b) affect the relative rights
against the Company of the Holders of the Securities and creditors of the
Company other than their rights in relation to the holders of Senior
Obligations or (c) prevent the Trustee or the Holder of any Security from
exercising all remedies otherwise permitted by applicable law upon default
under this Indenture, including filing and voting claims in any Proceeding,
subject to the rights, if any, under this Article XII of the
holders of Senior Obligations to receive cash, property and securities
otherwise payable or deliverable to the Trustee or such Holder.

 

SECTION 12.6.
Trustee to
Effectuate Subordination.

 

Each Holder of a Security by acceptance thereof
authorizes and directs the Trustee on his or her behalf to take such action as
may be necessary or appropriate to acknowledge or effectuate

 

55

 

the subordination provided in this Article XII and appoints
the Trustee his or her attorney-in-fact for any and all such purposes.

 

SECTION 12.7.
No Waiver of
Subordination Provisions.

 

(a) 
No right of any present or future holder of any Senior Obligation to enforce
subordination as herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any act
or failure to act, in good faith, by any such holder, or by any noncompliance
by the Company with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof that any such holder may have or be
otherwise charged with.

 

(b) 
Without in any way limiting the generality of paragraph (a) of this
Section 12.7, the holders of Senior Obligations may, at any time
and from to time, without the consent of or notice to the Trustee or the
Holders of the Securities, without incurring responsibility to such Holders of the
Securities and without impairing or releasing the subordination provided in
this Article XII or the obligations hereunder of such Holders of
the Securities to the holders of Senior Obligations, do any one or more of the
following: (i) change the manner, place or terms of payment or extend the
time of payment of, or renew or alter, Senior Obligations, or otherwise amend
or supplement in any manner Senior Obligations or any instrument evidencing the
same or any agreement under which such Senior Obligation is outstanding, (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing any Senior Obligation, (iii) release any Person liable
in any manner for the payment of any Senior Obligation and (iv) exercise
or refrain from exercising any rights against the Company and any other Person.

 

SECTION 12.8.
Notice to
Trustee.

 

(a) 
The Company shall give prompt written notice to a Responsible Officer of the
Trustee of any fact known to the Company that would prohibit the making of any
payment to or by the Trustee in respect of the Securities. Notwithstanding the
provisions of this Article XII or any other provision of this
Indenture, the Trustee shall not be charged with knowledge of the existence of
any facts that would prohibit the making of any payment to or by the Trustee in
respect of the Securities, unless and until a Responsible Officer of the
Trustee shall have received written notice thereof from the Company or a holder
of Senior Obligation or from any trustee, agent or representative therefor; provided,  that
if the Trustee shall not have received the notice provided for in this Section 12.8
at least two Business Days prior to the date upon which by the terms hereof any
monies may become payable for any purpose (including, the payment of the
principal of and any premium on or interest (including any Additional Interest)
on any Security), then, anything herein contained to the contrary
notwithstanding, the Trustee shall have full power and authority to receive
such monies and to apply the same to the purpose for which they were received
and shall not be affected by any notice to the contrary that may be received by
it within two Business Days prior to such date.

 

(b) 
The Trustee shall be entitled to rely on the delivery to it of a written notice
by a Person representing himself or herself to be a holder of any Senior
Obligation (or a trustee, agent, representative or attorney-in-fact therefor)
to establish that such notice has been given by a holder of any Senior Obligation
(or a trustee, agent, representative or attorney-in-fact therefor). In the
event that the Trustee determines in good faith that further evidence is
required with

 

56

 

respect to the right of any Person as a holder of any
Senior Obligation to participate in any payment or distribution pursuant to
this Article XII, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of the
Senior Obligation held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article XII, and
if such evidence is not furnished, the Trustee may defer any payment to such
Person pending judicial determination as to the right of such Person to receive
such payment.

 

SECTION 12.9.
Reliance on
Judicial Order or Certificate of Liquidating Agent.

 

Upon any payment or distribution of assets of the
Company referred to in this Article XII, the Trustee and the
Holders of the Securities shall be entitled to conclusively rely upon any order
or decree entered by any court of competent jurisdiction in which such
Proceeding is pending, or a certificate of the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee for the benefit of creditors, agent or
other Person making such payment or distribution, delivered to the Trustee or
to the Holders of Securities, for the purpose of ascertaining the Persons
entitled to participate in such payment or distribution, the holders of the
Senior Obligations and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all
other facts pertinent thereto or to this Article XII.

 

SECTION 12.10.
Trustee Not
Fiduciary for Holders of Senior Obligations.

 

The Trustee, in its capacity as trustee under this
Indenture, shall not be deemed to owe any fiduciary duty to the holders of
Senior Obligations and shall not be liable to any such holders if it shall in
good faith mistakenly pay over or distribute to Holders of Securities or to the
Company or to any other Person cash, property or securities to which any
holders of Senior Obligations shall be entitled by virtue of this Article XII
or otherwise.

 

SECTION 12.11.
Rights of
Trustee as Holder of Senior Obligation; Preservation of Trustee’s Rights.

 

The Trustee in its individual capacity shall be
entitled to all the rights set forth in this Article XII with respect
to any Senior Obligation that may at any time be held by it, to the same extent
as any other holder of Senior Obligations, and nothing in this Indenture shall
deprive the Trustee of any of its rights as such holder.

 

SECTION 12.12.
Article Applicable
to Paying Agents.

 

If at any time any Paying Agent other than the Trustee
shall have been appointed by the Company and be then acting hereunder, the term
“Trustee” as
used in this Article XII shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying
Agent within its meaning as fully for all intents and purposes as if such
Paying Agent were named in this Article XII in addition to or in
place of the Trustee; provided,
that Sections  12.8 and 12.11 shall not apply to the
Company or any Affiliate of the Company if the Company or such Affiliate acts
as Paying Agent.

 

* * * *

 

57

 

This instrument may be executed in any number
of counterparts, each of which so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
instrument.

 

* * *
*

 

58

 

IN WITNESS WHEREOF, the parties hereto have caused
this Indenture to be duly executed as of the day and year first above written.

 

 

	
   

  	
  AMCOMP
  PREFERRED INSURANCE COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Debra C.
  Ruedisili

  
	
   

  	
   

  	
  Name: Debra
  Cerre-Ruedisili

  
	
   

  	
   

  	
  Title:
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  JPMORGAN
  CHASE BANK, as Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Maria D.
  Calzado

  
	
   

  	
   

  	
  Name: Maria
  D. Calzado

  
	
   

  	
   

  	
  Title: Vice
  President

  

 

59

 

Schedule A

 

DETERMINATION
OF LIBOR

 

With respect to the Securities, the London interbank
offered rate (“LIBOR”) shall be
determined by the Calculation Agent in accordance with the following provisions
(in each case rounded to the nearest .000001%):

 

(1)           On the second LIBOR
Business Day (as defined below) prior to an Interest Payment Date (except with
respect to the first interest payment period, such date shall be September 10,
2004) (each such day, a “LIBOR Determination Date”), LIBOR for any
given security shall for the following interest payment period equal the rate,
as obtained by the Calculation Agent from Bloomberg Financial Markets
Commodities News, for three-month
Eurodollar deposits that appears on Dow Jones Telerate Page 3750 (as
defined in the International Swaps and Derivatives Association, Inc. 1991
Interest Rate and Currency Exchange Definitions), or such other page as
may replace such Page 3750, as of 11:00 a.m. (London time) on such
LIBOR Determination Date.

 

(2)           If, on any LIBOR
Determination Date, such rate does not appear on Dow Jones Telerate Page 3750
or such other page as may replace such Page 3750, the Calculation
Agent shall determine the arithmetic mean of the offered quotations of the
Reference Banks (as defined below) to leading banks in the London interbank
market for three-month Eurodollar
deposits in an amount determined by the Calculation Agent by reference to
requests for quotations as of approximately 11:00 a.m. (London time) on
the LIBOR Determination Date made by the Calculation Agent to the Reference
Banks. If, on any LIBOR Determination Date, at least two of the Reference Banks
provide such quotations, LIBOR shall equal such arithmetic mean of such
quotations. If, on any LIBOR Determination Date, only one or none of the
Reference Banks provide such quotations, LIBOR shall be deemed to be the
arithmetic mean of the offered quotations that leading banks in the City of New
York selected by the Calculation Agent are quoting on the relevant LIBOR
Determination Date for three-month
Eurodollar deposits in an amount determined by the Calculation Agent by
reference to the principal London offices of leading banks in the London interbank
market; provided that, if the
Calculation Agent is required but is unable to determine a rate in accordance
with at least one of the procedures provided above, LIBOR shall be LIBOR as
determined on the previous LIBOR Determination Date.

 

(3)           As used herein: “Reference Banks” means four major banks in
the London interbank market selected by the Calculation Agent; and “LIBOR Business Day” means a day on which
commercial banks are open for business (including dealings in foreign exchange
and foreign currency deposits) in London.

 

A-1

 

Exhibit A

 

Officer’s
Financial Certificate

 

The undersigned, the [Chief Financial Officer]  [Treasurer/Assistant Treasurer/Secretary/Assistant
Secretary]  [Chairman/Vice Chairman/Chief
Executive Officer/President/Vice President] hereby certifies,
pursuant to Section 7.3(b) of the Indenture, dated as of September 14,
2004, among AmCOMP Preferred Insurance Company (the “Company”) and JPMorgan
Chase Bank, as trustee, that, as of [date],
[20    ], the
Company had the following ratios and balances:

 

[For each subsidiary insurance company provide:]

 

[INSURANCE COMPANY]

As of [Quarterly/Annual
Financial Dates]

 

	
  NAIC Risk
  Based Capital Ratio (authorized control level)

  	
   

  	
   

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Total
  Policyholders’ Surplus

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Consolidated
  Debt to Total Policyholders’ Surplus

  	
   

  	
   

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Total Assets

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  NAIC
  Class 1 & 2 Rated Investments to Total Fixed Income Investments

  	
   

  	
   

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  NAIC
  Class 1 & 2 Rated Investments to Total Investments

  	
   

  	
   

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Return on
  Policyholders’ Surplus

  	
   

  	
   

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  [For Property & Casualty Companies
  also provide:]

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [Expense Ratio]

  	
   

  	
   

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Loss and LAE Ratio

  	
   

  	
   

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Combined Ratio

  	
   

  	
   

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Net Premiums Written (annualized) to Policyholders’ Surplus

  	
   

  	
   

  	
  %

  

 

* A table describing the
quarterly report calculation procedures is provided on page

 

[FOR FISCAL YEAR END: Attached hereto are
the audited consolidated financial statements (including the balance sheet,
income statement and statement of cash flows, and notes thereto, together with
the report of the independent accountants thereon) of the

 

A-1

 

Company and its consolidated subsidiaries for the three years ended September
[     ], 2004 and all required Statutory Financial
Statements (as defined in the Purchase Agreement) of the Company and its
subsidiaries for the year ended [date],
20   ].

 

[FOR FISCAL QUARTER
END: Attached hereto are the unaudited consolidated and
consolidating financial statements (including the balance sheet and income
statement) of the Company and its consolidated subsidiaries and all required
Statutory Financial Statements (as defined in the Purchase Agreement) of the
Company and its subsidiaries for the fiscal quarter ended [date], 20     ].

 

The financial statements
fairly present in all material respects, in accordance with U.S. generally
accepted accounting principles (“GAAP”), the financial position of the Company
and its consolidated subsidiaries, and the results of operations and changes in
financial condition as of the date, and for the annual period ended December 31,
2002, and such financial statements have been prepared in accordance with GAAP
consistently applied throughout the period involved (expect as otherwise noted
therein).

 

The Statutory Financial
Statements fairly present in all material respects in accordance with
Applicable Accounting Principles as defined in the Indenture) the financial
position of the subject insurance company and have been prepared in accordance
with Applicable Accounting Principles.

 

IN WITNESS WHEREOF, the
undersigned has executed this Officer’s Financial Certificate as of this          
day of                  ,
20

 

 

	
   

  	
  AmCOMP
  Preferred Insurance Company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Its:

  
	
   

  	
   

  
	
   

  	
  AmCOMP
  Preferred Insurance Company

  
	
   

  	
  P.O. Box  88806

  
	
   

  	
  North Palm Beach, Florida 33408

  
	
   

  	
  (561)
  863-2616

  
				

 

A-2

 

Exhibit B

 

Financial Definitions

 

INSURANCE COMPANY

 

	
  Report Item

  	
   

  	
  Description of Calculation

  
	
  NAIC Risk Based Capital
  Ratio-P&C

  	
   

  	
  Total Adjusted Capital/Authorized Control Level
  Risk-Based Capital

  
	
  NAIC Risk Based Capital Ratio-Life

  	
   

  	
  (Total Adjusted Capital-Asset Valuation
  Reserve)/Authorized Control Level Risk-Based Capital

  
	
  Total Capital and Surplus-Life

  	
   

  	
  Common Capital Stock + Preferred Capital Stock +
  Aggregate Write-Ins for other than special surplus funds + Surplus Notes
  +Gross Paid-In and Contributed Surplus + Aggregate Write-Ins for Special
  Surplus Funds + Unassigned Funds (Surplus) — Treasury Stock

  
	
  Total Capital and Surplus-P&C

  	
   

  	
  Aggregate Write-Ins for Special Surplus Funds +
  Common Capital Stock + Preferred Capital Stock + Aggregate Write Ins for
  other than special surplus funds + Surplus Notes +Gross Paid-In and
  Contributed Surplus + Unassigned Funds (Surplus) — Treasury Stock

  
	
  Total Class 1 & 2
  Rated Investments to Total Fixed Income Investments

  	
   

  	
  (Total Class 1 + Total Class 2 Rated
  Investments)/Total Fixed Income Investments

  
	
  Total Class 1 & 2
  Rated Investments to Total Investments

  	
   

  	
  (Total Class 1 + Total Class 2 Rated
  Investments)/Total Investments

  
	
  Total Assets

  	
   

  	
  Total Assets

  
	
  Return on Policyholders’ Surplus

  	
   

  	
  Net Income/Policyholders’ Surplus

  
	
  Expense Ratio

  	
   

  	
  Other Underwriting Expenses Incurred/Net premiums
  Earned

  
	
  Loss and LAE Ratio

  	
   

  	
  (Losses Incurred + Loss Expenses Incurred)/Net
  Premiums Earned

  
	
  Combined Ratio

  	
   

  	
  Expense Ratio + Loss and LAE Ratio

  
	
  Net Premiums Written (annualized)
  to Policyholders’ Surplus

  	
   

  	
  Net Premiums Written/Policyholders’ Surplus

  

 

B-1Exhibit 10.3

 

 

EXECUTION COPY

 

LOAN AGREEMENT

 

THIS LOAN AGREEMENT dated as of October 12, 2000 (the “Loan Agreement”), is by and between AMCOMP INCORPORATED, a Delaware corporation (the “Borrower”) and
AMSOUTH BANK (the “Bank”).

 

WITNESSETH:

 

WHEREAS, the Borrower has requested that the Bank
provide a  term loan in the amount of
$11,250,000 for the purposes hereinafter set forth;

 

WHEREAS, the Bank has agreed to make the requested
loan facility available to the Borrower on the terms and conditions hereinafter
set forth;

 

NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:

 

 

ARTICLE I

 

DEFINITIONS

 

SECTION 1.01.  Definitions. 
As used in this Loan Agreement, the following terms shall have the
meanings specified below unless the context otherwise requires:

 

“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 Bank), with respect to the
insurance business in force, and covering such other subjects as are customary
in actuarial reviews and reasonably requested by the Bank, prepared by an
independent actuarial firm reasonably acceptable to the Bank 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 opinion affirming the adequacy of
such loss reserves.

 

 

“Additional Credit Party”
means each Person
that becomes a Guarantor after the Closing Date by execution of a Guaranty
Agreement.

 

“Affiliate” means, with respect to any Person, any
other Person (i) directly or indirectly controlling or controlled by or under
direct or indirect common control with such Person or (ii) directly or
indirectly owning or holding five percent (5 %) or more of the equity interest
in such Person.  For purposes of this
definition, “control” when
used with respect to any Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms “controlling” and “controlled”
have meanings correlative to the foregoing.

 

                “AmComp Preferred”  means AmComp Preferred Insurance
Company.

 

“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.

 

“Applicable Prepayment Fee”
shall have the
meaning assigned to such term in Section 3.02.

 

                “Bank of America Credit Documents”
has the meaning given such term in Section 4.01(n).

 

“Bankruptcy Code” means the Bankruptcy Code in Title 11
of the United States Code, as amended, modified, succeeded or replaced from
time to time.

 

“Bankruptcy Event” means, with respect to any Person, the occurrence of
any of the following with respect to such Person: (i) a court or governmental
agency having jurisdiction in the premises shall enter a decree or order for
relief in respect of such Person in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) of such Person or for any substantial part of its
Property or ordering the winding up or liquidation of its affairs; or (ii)
there shall be commenced against such Person an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or any case, proceeding or other action for the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar official) of
such Person or for any substantial part of its Property or for the winding up
or liquidation of its affairs, and such involuntary case or other case,
proceeding or other action shall remain undismissed, undischarged or unbonded
for a period of sixty (60) consecutive days; or (iii) such Person shall
commence a voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter 

 

2

 

in effect, or
consent to the entry of an order for relief in an involuntary case under any
such law, or consent to the appointment or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar official) of
such Person or for any substantial part of its Property or make any general
assignment for the benefit of creditors; or (iv) such Person shall be unable
to, or shall admit in writing its inability to pay its debts generally as they
become due.

 

“Base
Rate” means,
for any day, the rate per annum (rounded upwards, if necessary, to the nearest
whole multiple of 1/100 of 1%) equal to the greater of (i) the Federal Funds
Rate in effect on such day plus 2.45% or (ii) the Prime Rate in effect on such day.  If for any reason the Bank shall have
determined (which determination shall be conclusive absent manifest error) that
it is unable after due inquiry to ascertain the Federal Funds Rate for any
reason, including the inability or failure of the Bank to obtain sufficient
quotations in accordance with the terms hereof, the Base Rate shall be
determined without regard to clause (i) of the first sentence of this
definition until the circumstances giving rise to such inability no longer
exist.  Any change in the Base Rate due
to a change in the Prime Rate or the Federal Funds Rate shall be effective on
the effective date of such change in the Prime Rate or the Federal Funds Rate,
respectively.

 

“Borrower” means the Person identified as such in
the heading hereof, together with any permitted successors and assigns.

 

“Borrower’s Obligations”
means, without
duplication, (i) all of the obligations of the Borrower to the Bank, whenever
arising, under this Loan Agreement, the Term Loan or any of the other Credit
Documents and (ii) all liabilities and obligations, whenever arising, owing
from the Borrower to the Bank, or any Affiliate of the Bank, arising under any
Hedging Agreement.

 

“Business Day” means a day other than a Saturday, Sunday
or other day on which commercial banks in West Palm Beach, Florida, or
Birmingham, Alabama, are authorized or required by law to close, except that, such day shall also be a day on which dealings
between banks are carried on in U.S. dollar deposits in London, England and New
York, New York.

 

“Capital Lease” means, as applied to any Person, any lease of any
Property (whether real, personal or mixed) by that Person as lessee which, in
accordance with GAAP, is or should be accounted for as a capital lease on the
balance sheet of that Person.

 

“Change of Control”
means the
occurrence of any of the following events: (i) Sam A. Stephens, The Sprout
Group, and Welsh, Carson, Anderson and Stowe and its affiliates, collectively,
shall fail to have beneficial ownership, directly or indirectly, of at least
65% of the combined voting power of all Voting Stock of the

 

 

3

 

Borrower, (ii) the shareholders of the Borrower shall approve any plan
or proposal for the liquidation or dissolution of the Borrower, or (iii) during
any period of up to 24 consecutive months, commencing after the Closing Date,
individuals who at the beginning of such 24 month period were directors of the
Borrower (together with any new director whose election by the Borrower’s Board
of Directors or whose nomination for election by the Borrower’s shareholders was
approved by a vote of at least two-thirds of the directors then still in office
who either were directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the directors of the Borrower then in office.  As used herein, “beneficial ownership” shall have the meaning
provided in Rule 13d-3 of the Securities and Exchange Commission under the
Securities Exchange Act of 1934.

 

“Closing
Date” means
the date hereof.

 

“Code” means the Internal Revenue Code of 1986,
as amended, and any successor thereto, as interpreted by the rules and
regulations issued thereunder, in each case as in effect from time to
time.  References to sections of the Code
shall be construed also to refer to any successor sections.

 

“Collateral” means (i) the Surplus Notes, and all
promissory notes of the Subsidiaries to the Borrower, now owned or hereafter
acquired by the Borrower and pledged to the Bank as security for the Term Loan
(the “Collateral Notes”),
(ii) 100% of the outstanding capital stock of AmComp Preferred (the “Collateral Stock”), and
(iii) the Payment Reserve Account.

 

“Collateral Notes”
shall have the
meaning assigned in the definition of Collateral.

 

“Collateral Stock”
shall have the
meaning assigned in the definition of Collateral.

 

“Commitment Fee”
shall have the
meaning assigned to such term in Section 3.03.

 

 

“Consolidated Scheduled
Funded Indebtedness Payments” means, as of the last day of any fiscal year of the
Borrower, the aggregate scheduled payments of principal on Funded Indebtedness
for the Borrower and its Non-Insurance Subsidiaries for such fiscal year.

 

“Consolidated Scheduled
Interest Expense Payments” means, as of the last day of any fiscal year of the
Borrower, the aggregate scheduled payments of 

 

 

4

 

interest on Funded Indebtedness for the Borrower and its Non-Insurance Subsidiaries for such
fiscal year.

 

“Credit Documents”
means a
collective reference to this Loan Agreement, the Note, the Pledge Agreement,
the Guaranties, the Payment Reserve Account Pledge Agreement, and all other
related agreements and documents issued or delivered hereunder or thereunder or
pursuant hereto or thereto.

 

“Credit Party” means any of the Borrower and the
Guarantors.

 

“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 Operating Subsidiaries for such fiscal year, plus (ii) interest received by the Borrower on the Surplus
Notes and any Collateral Note pledged to the Bank as security for the Term Loan
after the Closing Date for such fiscal year, plus
(iii) Tax Sharing Revenue, plus (iv)
Dividends Available Without Regulatory Approval during such fiscal year, plus (v) Dividends Available With Regulatory Approval during
such fiscal year, plus (vi) amounts in the Payment
Reserve Account, minus  (vii) Expenses of the Borrower and the
Non-Insurance Subsidiaries for such fiscal year to (b)(i) Consolidated
Scheduled Funded Indebtedness Payments for such fiscal year, excluding,
however, any payments of principal made during fiscal year 2000 to Bank of
America, N.A. under the Bank of America Credit Documents plus
(ii) Consolidated Scheduled Interest Expense Payments for such fiscal year,
excluding, however, any payments of interest made during fiscal year 2000 to
Bank of America, N.A. under the Bank of America Credit Documents.

 

“Default” means any event, act or condition which
with notice or lapse of time, or both, would constitute an Event of Default.

 

“Delivered Annual
Statements” means
with respect to the Borrower and its Subsidiaries, those Annual Statements, as
filed with the appropriate Governmental
Authorities of their respective states of domicile, for the fiscal year ending
December 31, 1999.

 

“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 FDOI.

 

“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 FDOI.

 

 

5

 

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

 

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

 

                “Environmental Properties” has the
meaning given such term in Section 5.15 hereof.

 

“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended, and any
successor statute thereto, as interpreted by the rules and regulations
thereunder, all as the same may be in effect from time to time.  References to sections of ERISA shall be
construed also to refer to any successor sections.

 

“ERISA Affiliate” means an entity which is under common
control with any Credit Party within the meaning of Section 4001(a)(14) of
ERISA, or is a member of a group which includes the Borrower and which is
treated as a single employer under Sections 414(b), (c), (m), or (o) of the
Code.

 

“Eurodollar Rate”
means a per annum
interest rate determined pursuant to the following formula:

 

 

Eurodollar Rate =    LIBOR plus 2.50%

 

“Event of Default” means such term as defined in Section 8.01.

 

“Existing Affiliate
Contracts” means those certain agreements identified on Schedule
1.01A attached hereto, as such agreements exist as of the
Closing Date.

 

“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.

 

 

6

 

“FDOI” means the Florida Department of Insurance.

 

“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 transactions 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; provided that if the Federal Funds rate is not published as provided
above by the Federal Reserve Bank of New York, the Federal Funds Rate for such
day shall be the average rate quoted to the Bank on such day on such
transactions as determined by the Bank.

 

“Florida Insurance Laws”
means all
statutes, regulations, and official interpretations of the FDOI of any nature
whatsoever applicable to any entity undertaking an insurance business in the
State of Florida, including AmComp Preferred.

 

“Funded Indebtedness”
means, with
respect to any Person, without duplication, (i) all Indebtedness of such Person
for borrowed money, (ii) all purchase money Indebtedness of such Person,
including without limitation the principal portion of all obligations of such
Person under Capital Leases, (iii) all Guaranty Obligations of such Person with
respect to Funded Indebtedness of another Person, (iv) the maximum available
amount of all standby letters of credit (excluding for purposes hereof standby
letters of credit issued for the account of the Borrower or any of its
Insurance Subsidiaries in connection with reinsurance agreements in the normal
course of business), trust
agreements (excluding for purposes hereof trust agreements entered into by the
Borrower or any of its Insurance Subsidiaries in connection with reinsurance
agreements in the normal course of business) or acceptances issued or created
for the account of such Person, (v) all Funded Indebtedness of another Person
secured by a Lien on any Property of such Person, whether or not such Funded
Indebtedness has been assumed, and (vi) the principal balance outstanding under
any synthetic lease, tax retention operating lease, off-balance sheet loan or
similar off-balance sheet financing product to which such Person is a party,
where such transaction is considered borrowed money indebtedness for tax
purposes but is classified as an operating lease in accordance with GAAP.  The Funded Indebtedness of any Person shall
include the Funded Indebtedness of any partnership or joint venture in which
such Person is a general partner or joint venturer.

 

“GAAP” means generally accepted accounting principles in the
United States applied on a consistent basis and subject to the terms of Section
1.03 hereof.

 

“Governmental Authority”
means any
Federal, state, local or foreign court or governmental agency, authority,
instrumentality or regulatory body.

 

 

7

 

“Guaranty
Agreements” means,
collectively, those certain Guaranty Agreements, each substantially in the form
of Schedule 6.12 hereto, executed and
delivered by the Guarantors and by each Additional Credit Party in accordance
with the provisions of Section 6.12, and “Guaranty Agreement” means any one of
such Guaranty Agreements.

 

“Guarantor” means, initially, Pinnacle Administrative
Company, Pinnacle Benefits, Inc. and AmServ, Inc., and, additionally, each
Additional Credit Party which may hereafter execute a Guaranty Agreement,
together with their successors and permitted assigns.

 

“Guaranty Obligations”
means, with
respect to any Person, without duplication, any obligations of such Person
(other than endorsements in the ordinary course of business of negotiable
instruments for deposit or collection) guarantying or intended to guaranty any
Indebtedness of any other Person in any manner, whether direct or indirect, and
including without limitation any obligation, whether or not contingent, (i) to
purchase any such Indebtedness or any Property constituting security therefor,
(ii) to advance or provide funds or other support for the payment or purchase
of any such Indebtedness or to maintain working capital, solvency or other
balance sheet condition of such other Person (including without limitation keep
well agreements, maintenance agreements, comfort letters or similar agreements
or arrangements) for the benefit of any holder of Indebtedness of such other
Person, (iii) to lease or purchase Property, securities or services primarily
for the purpose of assuring the holder of such Indebtedness, or (iv) to
otherwise assure or hold harmless the holder of such Indebtedness against loss
in respect thereof.  The amount of any
Guaranty Obligation hereunder shall (subject to any limitations set forth
therein) be deemed to be an amount equal to the outstanding principal amount
(or maximum principal amount, if larger) of the Indebtedness in respect of
which such Guaranty Obligation is made.

 

“Hedging Agreements”
means any
interest rate protection agreement between the Borrower and the Bank, or any
Affiliate of the Bank, entered into in order to manage existing or anticipated
interest rate risks associated with the obligations of the Borrower to the Bank
under this Loan Agreement, the Note or any of the other Credit Documents.

 

“Home Office Building”
means,
collectively, (i) the office building occupied by the Borrower and its
Subsidiaries, (ii) the realty upon which such building is located in North Palm
Beach, Florida, and (iii) the parking area dedicated to such office building.

 

“Indebtedness” of any Person means (i) all obligations
of such Person for borrowed money, (ii) all obligations of such Person
evidenced by bonds, debentures,

 

 

8

 

notes or similar instruments, or upon which interest payments are
customarily made, (iii) all obligations of such Person under conditional sale
or other title retention agreements relating to Property purchased by such
Person (other than customary reservations or retentions of title under
agreements with suppliers entered into in the ordinary course of business),
(iv) all obligations of such Person issued or assumed as the deferred purchase
price of Property or services purchased by such Person (other than trade debt
incurred in the ordinary course of business and due within six months of the
incurrence thereof) which would appear as liabilities on a balance sheet of
such Person, (v) all obligations of such Person under take-or-pay or similar
arrangements or under commodities agreements, (vi) all Indebtedness of others
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on, or payable out of the
proceeds of production from, Property owned or acquired by such Person, whether
or not the obligations secured thereby have been assumed, (vii) all Guaranty
Obligations of such Person, (viii) the principal portion of all obligations of
such Person under Capital Leases, (ix) all obligations of such Person in
respect of interest rate protection agreements, foreign currency exchange
agreements, commodity purchase or option agreements or other interest or
exchange rate or commodity price hedging agreements (including, but not limited
to, the Hedging Agreements) (it being understood that the amount of
Indebtedness under any agreement described in this subclause (ix), as of any
date, shall be deemed to be equal to the termination value payable by such
Person if such agreement were terminated on such date), (x) the maximum amount
of all standby letters of credit issued, trust agreements entered into or
bankers’ acceptances facilities created for the account of such Person and,
without duplication, all drafts drawn thereunder (to the extent unreimbursed),
and (xi) the principal balance outstanding under any synthetic lease, tax
retention operating lease, off-balance sheet loan or similar off-balance sheet
financing product to which such Person is a party, where such transaction is
considered borrowed money indebtedness for tax purposes but is classified as an
operating lease in accordance with GAAP; provided  that
Indebtedness shall not include (i) obligations with respect to insurance
policies, annuities, guaranteed investment contracts and similar products
underwritten by, or Reinsurance Agreements or Retrocession Agreements
(including, without limitation, cutthrough endorsements related thereto)
entered into by, any Insurance Subsidiary in the ordinary course of its
business and (ii) obligations with respect to Surplus Relief Reinsurance ceded
by the Borrower or any Insurance Subsidiary. 
The Indebtedness of any Person shall include the Indebtedness of any
partnership or joint venture in which such Person is a general partner or a
joint venturer.

 

“Insurance
Operating Expenses” means those expenses listed on page 4, lines 4 and 5, column 1, in
each Insurance Subsidiary’s SAP Statement.

 

 

9

 

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

 

“Intercompany Indebtedness”
means any
Indebtedness of a Credit Party which (i) is owing to any other Credit Party and
(ii) by its terms is, in writing, specifically subordinated in right of payment
to the prior payment of the obligations of the Credit Parties under this Loan
Agreement and the other Credit Documents on terms and conditions reasonably
satisfactory to the Bank.

 

“Interest Payment Date”
means the tenth
(10th) day of each calendar month during the term hereof.  If an Interest Payment Date falls on a date
which is not a Business Day, such Interest Payment Date shall be deemed to be
the next succeeding Business Day.

 

“Interest
Rate Determination Date” means the date which is two (2) Business Days prior
to the first calendar day of each calendar month during the term hereof.

 

“Investment”  in any Person, means any loan or advance
to such Person, any purchase or other acquisition of any capital stock,
warrants, rights, options, obligations or other securities of, or equity
interest in, such Person, any capital contribution to such Person or any other
investment in such Person, including, without limitation, any Guaranty
Obligation incurred for the benefit of such Person.

 

“Investment Grade Securities” means (i) U.S. Government Obligations; (ii) any
certificate of deposit, maturing not more than 365 days after the date of
acquisition, issued by, or time deposit of, a commercial banking institution
that has combined capital and surplus of not less than $100,000,000 or its
equivalent in foreign currency, whose debt is rated at the time as of which any
investment there is made, of A (or higher) according to Standard & Poor’s
Rating Services, a division of The McGraw-Hill Companies, Inc. (“S&P”) or Moody’s
Investors Services, Inc. (“Moody’s”),
or Al (or higher) by Fitch, Inc. (“Fitch”)  or if none of S&P, Moody’s and Fitch
shall then exist, the equivalent of such rating by any other nationally
recognized securities rating agency; (iii) commercial paper, maturing not more
than 270 days after the date of acquisition, issued by a corporation (other
than an Affiliate or Subsidiary of the Company) with a rating, at the time as
of which any investment therein is made, of A-1 (or higher) according to
S&P or “P-1” (or higher) according to Moody’s, or if neither of S&P and
Moody’s shall then exist, the equivalent of such rating by any other nationally
recognized securities rating agency; (iv) any bankers’ acceptances or any money
market deposit accounts, in each case, issued or offered by any commercial bank
having capital and surplus in excess of $100,000,000 or its equivalent in
foreign currency, whose debt is rated at the time as of which any investment
there is made, of “A” (or higher) according to 

 

 

10

 

S&P or Moody’s
or “Al” (or higher) by Fitch, or if none of S&P, Moody’s and Fitch shall
then exist, the equivalent of such rating by any other nationally recognized
securities rating agency; (v) any bankers’ acceptance, money market deposit
accounts or other depository accounts, in each case issued or offered by local
commercial banks having less than $100,000,000 in capital and surplus, not to
exceed $250,000 outstanding at any time, for the purpose of enabling the
Borrower or its Insurance Subsidiaries to comply with statutory or other legal
requirements relating to providing funds on demand to policyholders; (vi) any
fund investing exclusively in investments of the types described in clauses (i)
through (v) above.  For this purpose, “U.S. Government  Obligations” means securities that are (x) direct obligations of the
United States of America for the timely payment of which its full faith and
credit is pledged or (y) obligations of a Person controlled or supervised by
and acting as an agency or instrumentality of the United States of America the
timely payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act of 1933, as amended), as custodian with respect to any such
U.S. Government Obligation or a specific payment of principal of or interest on
any such U.S. Government Obligation held by such custodian for the account of
the holder of such depository receipt; provided that (except as required by law) such custodian is not
authorized to make any deduction from the amount payable to the holder of such
depository receipt from any amount received by the custodian in respect of the
U.S. Government Obligation evidenced by such depository receipt.

 

“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.

 

“Late
Charges”
shall have the meaning given such term in Section 3.10(b).

 

“LIBOR” means a per annum interest rate equal to
the one month London Interbank Offered Rate, as published in the “Money Rates”
column of The Wall Street Journal.  LIBOR shall be set on the Closing Date and
shall be reset on each Interest Rate Determination Date thereafter.

 

                “Lien” means
any mortgage, pledge, hypothecation, assignment, deposit arrangement, security
interest, encumbrance, lien (statutory or otherwise), preference, priority or
charge of any kind (including any agreement to give any of the foregoing, any
conditional sale or other title retention agreement, any financing or similar
statement or notice filed under the Uniform Commercial Code as adopted 

 

 

11

 

and in effect in the relevant jurisdiction or other similar recording
or notice statute, and any lease in the nature thereof).

 

“Material Adverse Effect” means a material adverse effect on (i)
the combined condition (financial or otherwise), operations, business, assets
or liabilities or prospects of the Borrower and its Subsidiaries, taken as a
whole, (ii) the ability of any Credit Party to perform any material
obligation under the Credit Documents to which it is a party or (iii) the
material rights and remedies of the Bank under the Credit Documents.

 

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

 

“Maturity
Date” means
October 30, 2007.

 

“Multi-employer Plan” means a Plan which is a multi-employer
plan as defined in Sections 3(37) or 4001 (a)(3) of ERISA.

 

“Multiple Employer Plan”
means a Plan with
respect to which the Borrower, any Subsidiary of the Borrower or any ERISA
Affiliate and at least one employer other than the Borrower, any Subsidiary of
the Borrower or any ERISA Affiliate are contributing sponsors.

 

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

 

“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 shown on line 32, column 4, Part
2B of page 9 of the Annual Statement for such date) by such Insurance
Subsidiary in accordance with SAP.

 

“Net Losses”  means, as of the last day of any fiscal year, with
respect to any Insurance Subsidiary loss and loss adjustment expenses net of
any salvage, subrogation, or deductibles after deducting reinsured losses as
shown as the total of line 2 & 3, column 1, page 3 of the Annual Statement
for such date.

 

“Non-Excluded Taxes” means such term as is defined in Section 3.08.

 

“Non-Guarantor Subsidiary” means any Non-Insurance Subsidiary which is not a
Guarantor.

 

 

12

 

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

 

“Note” means that certain promissory note of the
Borrower in favor of the Bank delivered pursuant to Section 2.04 and evidencing
the Term Loan, as such promissory note may be amended, modified, restated or
replaced from time to time.

 

“Operating Lease” means, as applied to any Person, any lease (including,
without limitation, leases which may be terminated by the lessee at any time)
of any Property (whether real, personal or mixed) which is not a Capital Lease
other than any such lease in which that Person is the lessor.

 

“Operating Subsidiaries”
means,
collectively, AmComp Preferred, Pinnacle Administrative, Inc., Pinnacle
Benefits, Inc., AmComp Assurance Corporation and AmServ, Inc.

 

“Payment Reserve Account”
shall have the meaning given to that term in Section 6.15 hereof.

 

“PBGC” means the Pension Benefit Guaranty
Corporation established pursuant to Subtitle A of Title IV of ERISA and any
successor thereof.

 

“Permitted Investments”
means any of the
following: (i) cash; (ii) Investment Grade Securities; (iii) Investments in non-Investment
Grade Securities so long as (a) the fair saleable value of all non-Investment
Grade Securities held by the Insurance Subsidiaries does not exceed 10% of the
consolidated Total Assets of the Insurance Subsidiaries and (b) the fair
saleable value of all non-Investment Grade Securities held by the Borrower and
its Subsidiaries does not exceed 10% of the aggregate fair saleable value of
all securities held by the Borrower and its Subsidiaries on a consolidated
basis; (iv) advances or loans to directors, officers, employees, agents,
customers or suppliers (A) made in the ordinary course of business and
consistent with the past practices of the Credit Parties or (B) to the extent
not permitted by the foregoing subclause (A), that do not exceed $250,000 in
the aggregate at any one time outstanding; (v) Investments in any Credit Party;
(vi) Intercompany Indebtedness permitted by Section 7.01(d); (vii) Investments
in a Non-Guarantor Subsidiary (which is not an Insurance Subsidiary), provided that
such Investments do not exceed $500,000 in the aggregate at any one time
outstanding; (viii) accounts receivable created, acquired or made by the
Borrower or any of its Subsidiaries in the ordinary course of business and
payable or dischargeable in accordance with customary trade terms; (ix)
Investments consisting of stock, obligations, securities or other property
received by the Borrower or any of its Subsidiaries in settlement of accounts
receivable (created in the ordinary course of business) from bankrupt obligors;
(x) repurchase agreements 

 

 

13

 

entered into by a Person with a commercial banking institution
(including the Bank) or recognized securities dealer having capital and surplus
in excess of $100,000,000 for direct obligations issued by or fully guaranteed
by the United States of America in which such Person shall have a perfected
first priority security interest (subject to no other Liens) and having, on the
date of purchase thereof, a fair market value of at least 100% of the amount of
the repurchase obligations; (xi) the Home Office Building; (xii) Investments of
the Borrower in any Insurance Subsidiary, provided that no Default or Event of Default exists hereunder or
would occur as a result thereof, (xiii) other Investments existing as of the
Closing Date and set forth in Schedule 1.01B;
(xiv) Guaranty Obligations permitted by Section 7.01; (xv) acquisitions
permitted by Section 7.04(d); and (xvi) transactions permitted by Section
7.08.  For purposes of subsection (iii)
of this definition, the term Investments in non-Investment Grade Securities
shall not include investments in Credit Parties, Non-Guarantor Subsidiaries or
Insurance Subsidiaries.

 

“Permitted Liens”
means:

 

(i)                                     Liens in favor of the Bank;

 

(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);

 

 

14

 

(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 use of the encumbered Property for its intended purposes;

 

(vii)         Liens on Property securing purchase
money Indebtedness to the extent permitted under Section 7.01, 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;

 

(xii)          Liens existing as of the Closing Date
and set forth on Schedule 1.01C;
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; and

 

(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.

 

 

15

 

“Person” means any individual, partnership, joint
venture, firm, corporation, limited liability company, association, trust or
other enterprise (whether or not incorporated) or any Governmental Authority.

 

“Plan” means
any employee benefit plan (as defined in Section 3(3) of ERISA) which is
covered by ERISA and with respect to which the Borrower, any Subsidiary of the
Borrower or any ERISA Affiliate is (or, if such plan were terminated at such
time, would under Section 4069 of ERISA be deemed to be) an “employer” within
the meaning of Section 3(5) of ERISA.

 

“Pledge Agreement”
means that Pledge
and Security Agreement dated as of the date hereof, pursuant to which the
Borrower grants to the Bank a security interest for the Borrower’s Obligations
in the Collateral Notes and the Collateral Stock.

 

“Preferred
Stock Conversion” has the meaning given such term in Section 4.01(m) hereof.

 

“Preferred
Stock Modification” has the meaning given such term in Section 4.01(m) hereof.

 

“Preferred
Stockholders” has
the meaning given such term in Section 4.01(m) hereof.

 

“Prime Rate” means the rate of interest per annum
publicly announced from time to time by AmSouth Bank 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 AmSouth Bank 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 AmSouth Bank to any debtor).

 

“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.

 

“Regulation T, U, or X”
means Regulation
T, U or X, respectively, of the Board of Governors of the Federal Reserve
System as from time to time in effect and any successor to all or a portion
thereof.

 

 

16

 

“Reinsurance Agreements”
means any
agreement, contract, treaty, certificate or other arrangement whereby an
Insurance Subsidiary agrees to transfer, cede or retrocede to another insurer
or reinsurer all or part of the liability assumed by such an Insurance
Subsidiary under a policy or policies of insurance issued by such an Insurance
Subsidiary.

 

“Release” means any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
dumping or disposing into the environment (including the abandonment or
discarding of barrels, containers and other closed receptacles containing any
Materials of Environmental Concern).

 

“Reportable Event”
means any of the
events set forth in Section 4043(c) of ERISA, other than those events as to
which the post-event notice requirement is waived under subsections .21, .22,
..23, .24,  .25, .26, .27, .28, .29, .30,
..31, .32, .34 or .35 of PBGC Reg. § 4043.

 

“Requirement of Law”
means, as to any
Person, the certificate of incorporation and by-laws or other organizational or
governing documents of such 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 upon such Person or any of its material
property is subject.

 

“Restricted Payment”
means (i) any
dividend or other distribution, direct or indirect, on account of any shares of
any class of stock of the Borrower or any of its Subsidiaries, now or hereafter
outstanding, (ii) any redemption, retirement, sinking fund or similar payment,
purchase or other acquisition for value, direct or indirect, of any shares of
any class of stock of the Borrower or any of its Subsidiaries, now or hereafter
outstanding and (iii) any payment made to retire, or to obtain the surrender
of, any outstanding warrants, options or other rights to acquire shares of any
class of stock of the Borrower or any of its Subsidiaries, now or hereafter
outstanding.

 

“Retrocession Agreement”
means any
agreement, contract, treaty or other arrangement (other than Surplus Relief
Reinsurance) whereby any insurer cedes or assumes reinsurance to or from other
insurers.

 

“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 corporations of the same type as such Insurance
Subsidiary, as applied on a consistent basis and subject to the terms of Section
1.03 hereof.

 

“SAP Statement” means an Annual Statement or a Quarterly
Statement.

 

 

17

 

“Service Contracts”
means those
contracts between the Non-Insurance Subsidiaries and the Insurance Subsidiaries
attached hereto as Schedule 1.01D.

 

“Service Fees from
Operating 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.

 

“Single Employer Plan”
means any Plan
which is covered by Title IV of ERISA, but which is not a Multi-employer Plan.

 

“Solvent” or “Solvency” means, with respect to any Person as of a particular
date, that on such date (i) such Person is able to generally pay its debts and
other liabilities, contingent obligations and other commitments as they mature
in the normal course of business, (ii) such Person does not intend to, and does
not believe that it will, incur debts or liabilities beyond such Person’s
ability to pay as such debts and liabilities mature in their ordinary course,
(iii) such Person is not engaged in a business or a transaction, and is not
about to engage in a business or a transaction, for which such Person’s
Property would constitute unreasonably small capital after giving due
consideration to the prevailing practice in the industry in which such Person
is engaged or is to engage, (iv) the fair value of the Property of such Person
is greater than the total amount of liabilities, including, without limitation,
contingent liabilities, of such Person and (v) the present fair saleable value
of the assets of such Person is not less than the amount that will be required
to pay the probable liability of such Person on its debts as they become
absolute and matured.  In computing the
amount of contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount which, in light of all the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability.

 

“Subsidiary” means, as to any Person, (i) any
corporation more than 50% of whose stock of any class or classes having by the
terms thereof ordinary voting power to elect a majority of the directors of
such corporation (irrespective of whether or not at the time, any class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency) is at the time owned by such Person directly
or indirectly through Subsidiaries, and (ii) any partnership, association, joint
venture or other entity in which such Person directly or indirectly through
Subsidiaries has more than 50% equity interest at any time.

 

“Surplus Notes” mean those certain promissory notes
issued by AmComp Preferred to the Borrower in the aggregate original principal
amount of $15,000,000.

 

 

18

 

“Surplus Relief Reinsurance”
means any
transaction in which any Insurance Subsidiary cedes business under a
Reinsurance Agreement that would be considered a “financing-type” Reinsurance
Agreement as determined by the independent certified public accountants of the
Borrower in accordance with principles published by the Financial Accounting
Standards Board (including, but not limited to FASB Statement No. 113, as
amended, and EITF #93-6).

 

“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 Operating Subsidiary
income or loss.

 

“Term
Loan” has the
meaning set forth in Section 2.01(a) hereof.

 

“Termination Event”
means (i) with
respect to any Plan, the occurrence of a Reportable Event or the substantial
cessation of operations (within the meaning of Section 4062(e) of ERISA); (ii)
the withdrawal by the Borrower, any Subsidiary of the Borrower or any ERISA
Affiliate from a Multiple Employer Plan during a plan year in which it was a
substantial employer (as such term is defined in Section 4001(a)(2) of ERISA),
or the termination of a Multiple Employer Plan; (iii) the distribution of a
notice of intent to terminate or the actual termination of a Plan pursuant to
Section 4041(a)(2) or 4041A of ERISA; (iv) the institution of proceedings to
terminate or the actual termination of a Plan by the PBGC under Section 4042 of
ERISA; (v) any event or condition which might constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan; or (vi) the complete or partial withdrawal of the
Borrower, any Subsidiary of the Borrower or any ERISA Affiliate from a
Multi-employer Plan.

 

“Total Invested Assets”
means, with
respect to any Insurance Subsidiary, the amount set forth on line 9 in column 4
on page 2 of such Insurance Subsidiary’s most recent SAP Statement.

 

“Voting Stock” means, with respect to any Person,
capital stock or similar equity interests issued by such Person the holders of
which are ordinarily, in the absence of contingencies, entitled to vote for the
election of directors (or persons performing similar functions) of such Person,
even though the right so to vote has been suspended by the happening of such a
contingency.

 

“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.

 

SECTION
1.02. Computation of Time Periods.  For purposes of computation of periods of
time hereunder, the word “from” means “from and including” and the words “to”
and “until” each mean “to but excluding.”

 

 

19

 

SECTION
1.03. Accounting Terms.

 

(a)           Except
as otherwise expressly provided herein, all accounting terms used herein shall
be interpreted, and all financial statements and certificates and reports as to
financial matters required to be delivered to the Bank shall be prepared, (i)
with respect to the Borrower and its consolidated Subsidiaries, in accordance
with GAAP applied on a consistent basis and (ii) with respect to the Insurance
Subsidiaries, in accordance with SAP applied on a consistent basis.  All calculations made for the purposes of
determining compliance with this Loan Agreement shall (except as otherwise
expressly provided herein) be made by application of GAAP or SAP, as
appropriate, applied on a basis consistent with the most recent annual or
quarterly financial statements delivered pursuant to Section 6.01 hereof (or,
prior to the delivery of the first financial statements pursuant to Section
6.01 hereof, consistent with the financial statements as at December 31, 1999; provided, however, if (a) the Borrower shall object to determining such
compliance on such basis at the time of delivery of such financial statements
due to any change in GAAP, SAP or the rules promulgated with respect thereto or
(b) the Bank shall so object in writing within 30 days after delivery of such
financial statements, then such calculations shall be made on a basis
consistent with the most recent financial statements delivered by the Borrower
to the Bank as to which no such objection shall have been made.

 

(b)           All
references to line items in any column and on any page of an Insurance
Subsidiary’s SAP Statement are deemed to be references to the equivalent item
in the event that the form of such Person’s SAP Statement is amended.

 

ARTICLE
II

THE TERM
LOAN

 

SECTION
2. 01.  Term Loan

 

(a)           The Term Loan.  Subject to and upon
the terms and conditions and relying upon the representations and warranties
herein set forth, the Bank agrees to make a term loan (the “Term Loan”) to the Borrower on the Closing Date
in an amount not to exceed $11,250,000.

 

(b)           Borrowing Procedure.  Upon fulfillment of
the conditions set forth in Section 4.01, the Bank shall make the entire amount
of the Term Loan available to the Borrower in one advance, in same day funds on
the Closing Date.

 

 

20

 

SECTION 2.02.  Interest. 
Subject to
the provisions of Section 3.01, the outstanding principal balance of the Term
Loan shall bear interest at a per annum rate equal to either (i) the Eurodollar
Rate or (ii) if the Bank is unable to determine the Eurodollar Rate as provided
below in this Section 2.02, the Base Rate. If on any Interest Rate
Determination Date, the Bank shall have determined (which determination shall
be conclusive and binding upon the Borrower) that, by reason of circumstances
affecting the relevant market, adequate and reasonable means do not exist for
ascertaining the Eurodollar Rate, the Bank shall give telecopy or telephonic
notice thereof to the Borrower as soon as practicable thereafter.  If such notice is given, the Term Loan shall
no longer bear interest at the Eurodollar Rate but shall bear interest at the
Base Rate, and shall continue to bear interest at the Base Rate until such
notice has been withdrawn by the Bank.

 

SECTION 2.03.  Repayment of Term Loan.

 

(a)           Principal.  The principal amount of the Term Loan shall
be repaid in twenty-three (23) equal and consecutive quarterly installments of
$468,750 each due and payable on the tenth (10th) day of each
January, April, July and October of each calendar year, commencing
October 10, 2001 and continuing thereafter through and including July 10,
2007.

 

(b)           Interest.  Accrued interest on the Term Loan shall be
payable in arrears on each Interest Payment Date (or at such other times as may
be specified herein) commencing November 10, 2000.

 

(c)           Final Payment.  A final payment of all outstanding principal
on the Term Loan, together with all accrued and unpaid interest, shall be due
and payable on the Maturity Date.

 

SECTION 2.04.    Note. 
The Term
Loan shall be evidenced by a duly executed promissory note of the Borrower to
the Bank in an original principal amount equal to $11,250,000 and in
substantially the form of Schedule 2.04.

 

ARTICLE III

 

OTHER PROVISIONS RELATING TO
CREDIT FACILITY

 

SECTION
3.01.  Default Rate. Upon the occurrence, and during the
continuance, of an Event of Default, the principal of and, to the extent
permitted by law, interest on the outstanding principal balance of the Term
Loan and any other amounts owing hereunder or under the other Credit Documents
shall bear interest, payable on demand, at a per annum rate equal to the
Eurodollar Rate plus 2.00% (or if the Bank is unable to maintain the Term Loan
at a rate based on LIBOR pursuant to the provisions of Section 3.06 hereof,
whether in respect of interest, fees or other amounts, then at the Base Rate
plus 2.00%); provided, however, that the 

 

 

21

 

default rate shall not exceed the maximum rate allowed by law (the “Maximum Legal Rate”).

 

SECTION 3.02.  Prepayments. 
The
Borrower shall have the right to prepay the Term Loan in whole or in part, provided, however, that (i) Borrower shall additionally pay (a) all accrued
and unpaid interest on such prepayment amount to the date of such prepayment
and, (b) in the event such prepayment occurs within 36 months of the Closing
Date, an amount equal to the Applicable Prepayment Fee (as set forth in the
table below) to compensate the Bank for any loss or expense (including any loss
or expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by the Bank to make, continue or extend any portion of the
principal amount of the Term Loan) as a result of such prepayment; (ii) the Term Loan may only be prepaid on three Business Days’
prior written notice to the Bank, which notice shall specify the amount to be
prepaid; and (iii) any prepayment of the Term Loan will be subject to Section
3.09.

 

	
  Period of Time After Closing
  Date

  	
   

  	
  Applicable Prepayment Fee

  (expressed as a percentage of the

  prepayment amount)

  	
   

  
	
  Prior to twelve (12) months

  	
   

  	
  1

  	
  %

  
	
  Twelve (12) to twenty-four (24) months

  	
   

  	
  3⁄4 of 1

  	
  %

  
	
  Twenty-four (24) to thirty-six (36) months

  	
   

  	
  1⁄2 of 1

  	
  %

  

 

SECTION
3.03.  Commitment Fee.  The Borrower
agrees to pay the Bank a commitment fee equal to three-fourths (3/4) of one
percent (1%) ($84,375.00) of the original principal amount of the Term Loan (the “Commitment Fee”), of
which the Bank acknowledges that $8,437.50 (or ten percent (10%)) has been
irrevocably paid prior to the date hereof and the balance of which shall be
paid in full on the Closing Date.

 

SECTION
3.04.  Capital Adequacy. 
If the
Bank 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 Bank 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 Bank could have achieved but 

 

 

22

 

for such adoption, effectiveness, change or compliance (taking into
consideration the Bank’s policies with respect to capital adequacy), then, upon
notice from the Bank to the Borrower, the Borrower shall be obligated to pay to
the Bank such additional amount or amounts as will compensate the Bank for such
reduction.  Each determination by the
Bank of amounts owing under this Section shall, absent manifest error, be
conclusive and binding on the parties hereto.

 

SECTION
3.05.  [Reserved.]

 

SECTION
3.06.  Illegality. 
Notwithstanding
any other provision herein, if the adoption of or any change in any Requirement
of Law or in the interpretation or application thereof occurring after the
Closing Date shall make it unlawful for the Bank to charge interest on the Term
Loan based on the Eurodollar Rate as contemplated by this Loan Agreement, (a)
the Bank 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 Bank hereunder to charge interest on the Term
Loan at the Eurodollar Rate shall forthwith be canceled and, until such time as
it shall no longer be unlawful for the Bank to charge interest at the
Eurodollar Rate, the Bank shall then have an obligation only to charge interest
on the Term Loan at the Base Rate and (c) the outstanding principal amount of
the Term Loan shall automatically bear interest at the Base Rate.

 

SECTION
3.07.  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 Bank, or compliance
by the Bank 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 Bank to any tax of any kind whatsoever with respect to the Term
Loan made by it or its obligation to make the Term Loan, or change the basis of
taxation of payments to the Banks in respect thereof (except for (i)
Non-Excluded Taxes covered by Section 3.08 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 Bank 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 Bank which is not otherwise
included in the determination of Eurodollar Rate hereunder;
or

 

 

23

 

(c)           shall
impose on the Bank 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 Bank, by an amount which the Bank deems to be
material, of making, continuing or maintaining Term Loan or to reduce any
amount receivable hereunder in respect thereof, then, in any such case, upon
notice to the Borrower from the Bank, in accordance herewith, the Borrower
shall be obligated to promptly pay the Bank, upon its demand, any additional
amounts necessary to compensate the Banks for such increased cost or reduced
amount receivable.  If the Bank 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 Bank 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 Bank,
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 Loan Agreement and the payment of the
Term Loan and all other amounts payable hereunder.

 

 

SECTION 3.08.  Taxes.

 

(a)           Except
as provided below in this subsection, all payments made by the Borrower under
this Loan 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 Bank 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 Bank 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 Bank, 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 Bank,
applicable lending office, branch or affiliate other than a connection arising
solely from the Bank having executed, delivered or performed its obligations,
or received payment under or enforced, this Loan 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 

 

 

24

 

Bank hereunder or under the Note, (A) the amounts so payable to the
Bank shall be increased to the extent necessary to yield to the Bank (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 Loan Agreement and
the Note, and (B) as promptly as possible thereafter the Borrower shall send to
the Bank 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
Bank the required receipts or other required documentary evidence, the Borrower
shall indemnify the Bank for any incremental taxes, interest or penalties that
may become payable by the Bank as a result of any such failure.  The agreements in this subsection shall
survive the termination of this Loan 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 Bank, its directors, officers,
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 Bank 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 Bank, or any of its directors,
officers, agents or employees.

 

SECTION
3.09.  Indemnity. 
The
Borrower promises to indemnify the Bank and to hold the Bank harmless from any
loss or expense which the Bank may sustain or incur (other than through the
Bank’s gross negligence, bad faith or willful misconduct) as a consequence of
(a) a default by the Borrower in making any prepayment on the Term Loan after
the Borrower has given a notice thereof in accordance with the provisions of
this Loan Agreement or, (b) the making of a prepayment of the Term Loan on a
day other than a scheduled principal payment date.  The covenants of the Borrower set forth in
this Section 3.09 shall survive the termination of this Loan Agreement and the
payment of the Term Loan and all other amounts payable hereunder.

 

SECTION
3.10.  Payments, Computations, Etc.

 

(a)           Except as otherwise specifically
provided herein, all payments hereunder shall be made to the Bank in Dollars in
immediately available funds, without offset, deduction, counterclaim or
withholding of any kind, at the Bank’s Birmingham, Alabama office at P.O. Box
11407, Birmingham, Alabama, 35246 not later than 2:00 P.M. (Birmingham,
Alabama time) on the date when due. 
Payments 

 

 

25

 

received
after such time shall be deemed to have been received on the next succeeding
Business Day.  The Bank may (but shall
not be obligated to) debit the amount of any such payment which is not made by
such time to any ordinary deposit account of the Borrower maintained with the
Bank (with notice to the Borrower).  The
Borrower shall, at the time it makes any payment under this Loan Agreement,
specify to the Bank the interest or other amounts payable by the Borrower
hereunder to which such payment is to be applied.  Whenever any payment hereunder shall be
stated to be due on a day which is not a Business Day, the due date thereof
shall be extended to the next succeeding Business Day (subject to accrual of
interest and fees or charges for the period of such extension), except that, if
the extension would cause the payment to be made in the next following calendar
month, then such payment shall instead be made on the next preceding Business
Day.  Except as expressly provided
otherwise herein, all computations of interest and fees shall be made on the
basis of actual number of days elapsed over a year of 360 days.  Interest shall accrue from and include the
Closing Date of borrowing, but exclude the date of any payment.

 

(b)           Late Charges.  The Borrower agrees to pay the
Bank late charges (“Late Charges”)
of five (5) percent of the scheduled payment amount for all payments
of principal and/or interest not made within fifteen (15) days following its
due date.

 

(c)           Allocation of Payments After Event of Default.  Notwithstanding any
other provisions of this Loan Agreement to the contrary, after the occurrence
and during the continuance of an Event of Default, all amounts collected or
received by the Bank on account of the Borrower’s Obligations or any other
amounts outstanding under any of the Credit Documents shall be paid over or
delivered as follows:

 

FIRST, to the
payment of all reasonable out-of-pocket costs and expenses (including without
limitation reasonable attorneys’ fees) of the Bank in connection with enforcing
its rights under the Credit Documents;

 

SECOND, to payment of any
Late Charges owed to the Bank;

 

THIRD, to the
payment of all of the Borrower’s Obligations consisting of interest;

 

FOURTH, to the
payment of the outstanding principal amount of the Borrower’s Obligations;

 

FIFTH, to all
other Borrower’s Obligations and other obligations which shall have become due
and payable under the Credit Documents or otherwise and not repaid pursuant to
clauses “FIRST” through “FOURTH” above; and

 

 

26

 

SIXTH, to the
payment of the surplus, if any, to whoever may be lawfully entitled to receive
such surplus.

 

In carrying out the foregoing, amounts received shall
be applied in the numerical order provided until exhausted prior to application
to the next succeeding category.

 

                SECTION 3.11.  Certain Payments without Penalty or
Premium.  Notwithstanding anything in this Article
III or in any other provisions of this Loan Agreement, if the Borrower is
liable for additional amounts under Section 3.04 or Section 3.07 hereof, the
Borrower shall have the right to prepay all of the Indebtedness under this Loan
Agreement and the related Credit Documents and terminate the Term Loan, without
penalty or premium, upon ten (10) days prior written notice to the Bank; provided, however, that the Borrower
will remain liable for any amounts due under Section 3.04, 3.07 or 3.08 to the
date of the termination and for any indemnification payments which may be due
under Section 3.09 hereof.

 

ARTICLE IV

 

CONDITIONS

 

SECTION
4.01.  Closing Conditions. 
The
obligation of the Bank to enter into this Loan Agreement and to make the Term
Loan on the Closing Date shall be subject to satisfaction or waiver by the Bank
of the following conditions (in form and substance acceptable to the Bank on or
prior to the Closing Date):

 

(a)           The
Bank shall have received original counterparts of this Loan Agreement executed
by each of the parties hereto;

 

(b)           The
Bank shall have received the original Note, executed by the Borrower;

 

(c)           The
Bank shall have received original counterparts of the Guaranty Agreements
executed by each of the initial Guarantors;

 

(d)           The
Bank shall have received all documents it may reasonably request relating to
the existence and good standing of each of the Credit Parties, the corporate or
other necessary authority for and the validity of the Credit Documents, and any
other matters relevant thereto, all in form and substance reasonably
satisfactory to the Bank;

 

 

27

 

(e)           The
Bank shall have received a certificate executed by the chief financial officer
of the Borrower as of the Closing Date stating that immediately after giving
effect to this Loan Agreement and the other Credit Documents (i) the Borrower
on a consolidated basis is Solvent, (ii) no Default or Event of Default exists,
and (iii) the representations and warranties set forth in Article V are true
and correct in all material respects;

 

(f)            The
Bank shall have received legal opinions of Olshan Grundman Frome Rosenzweig
& Wolosky LLP counsel for the Credit Parties, Foley & Lardner, special
Florida counsel for the Credit Parties, and Harris,
Kukey & Helgensen, as Florida counsel for the Credit Parties, dated as of
the Closing Date, acceptable to the Bank and its counsel, including, without
limitation, an opinion as to the effectiveness and perfection of the security
interests created by the Credit Documents;

 

(g)           The
Bank shall have received copies of insurance policies or certificates of
insurance of the Credit Parties evidencing liability and casualty insurance
meeting the requirements of the Credit Documents including, without limitation,
those set forth in Section 6.06(a);

 

(h)           The
Bank shall have received, for its own account, all fees and expenses required
by this Loan Agreement or any other Credit Document to be paid on or before the
Closing Date;

 

(i)            The
Bank shall have received evidence, satisfactory to the Bank, that the Borrower
is authorized by FDOI to receive annual gross premiums as established in
Article V, Subsection 1 of each of the Service Contracts between (i) Pinnacle
Administrative Company and AmComp Preferred and Pinnacle Administrative Company
and (ii) AmComp Assurance Corporation, respectively, each as in effect on the
Closing Date; and

 

(j)            The
Bank shall have received (i) original counterparts of the Pledge Agreement
substantially in the form of Schedule 6.12
granting the Bank a first priority security interest in the Collateral Note and
the Collateral Stock, (ii) the original Collateral Note, (iii) the certificates
representing the Collateral Stock, and blank stock powers, and (iv) financing
statements related to the foregoing.

 

(k)           The
Bank shall have received original counterparts of the Payment Reserve Account
Agreement granting the Bank a first priority security interest in the Payment
Reserve Account.

 

(1)           The
Bank shall have received all other documents, agreements, assignments, filings
and other security instruments and records, however described or denominated,
pledging or evidencing any pledge or any property or assets, 

 

 

28

 

however described, to
secure any or all of Borrower’s obligations as the Bank may require, together
with opinions of counsel to the Borrower as to the effectiveness and perfection
of the security interests contemplated herein.

 

(m)          The
Bank shall have received satisfactory evidence that all actions necessary, or
desirable, to effect either (i) the conversion of all of the outstanding
preferred shares of the Borrower held by The Sprout Group and Welsh, Carson,
Anderson and Stowe and its affiliates (collectively, the “Preferred
Stockholders”) into
common stock of the Borrower has occurred (a “Preferred
Stock Conversion”); or (ii) the irrevocable termination of the
Preferred Stockholders’ right to have their preferred shares redeemed by the
Borrower pursuant to the Borrower’s Certificate of Incorporation or any other
document or agreement relating to the preferred shares, as amended, has
occurred (a “Preferred Stock Modification”);

 

(n)           The
Bank shall have received satisfactory evidence that all amounts owed to Bank of
America (as successor in interest to NationsBank, N.A. (South)) under that
certain Loan Agreement dated as of December 30, 1996 among AmComp Incorporated,
as borrower, certain subsidiaries of AmComp Incorporated, as guarantors and
NationsBank, N.A. (South), and the related credit and hedging documents and agreements
(the “Bank of America Credit Documents”)
have been paid in full, that the Bank of America Credit Documents have been
cancelled and released, and that all liens, guarantees and encumbrances related
thereto have been released or terminated, as applicable;

 

(o)           The
Bank shall have received  evidence that
all actions necessary or, in the opinion of the Bank, desirable to perfect and
protect, the security interests created by the Pledge Agreement and the Payment
Reserve Account Pledge Agreement have been taken;

 

(p)           The
Bank shall have received such other documents, agreements or information which
may be reasonably requested by the Bank.

 

 

ARTICLE V

 

REPRESENTATIONS
AND WARRANTIES

 

The Credit Parties
hereby represent to the Bank that:

 

SECTION
5.01.  Financial Condition.

 

 (a)          The
audited consolidated balance sheets of the Subsidiaries as of December 31, 1999
and the audited statements of earnings and statements of cash 

 

 

29

 

flows for the years ended
December 31, 1999 and December 31, 1998 have heretofore been furnished to the
Bank.  Such financial statements
(including the notes thereto) (i) have been audited by Ernst & Young LLP,
(ii) have been prepared in accordance with GAAP consistently applied throughout
the periods covered thereby and (iii) present fairly (on the basis disclosed in
the footnotes to such financial statements) the financial condition, results of
operations and cash flows of the Subsidiaries as of such date and for such
periods. Such financial statements (including the notes thereto) (i) have been
prepared in accordance with GAAP consistently applied throughout the periods
covered thereby and (ii) present fairly (on the basis disclosed in the
footnotes to such financial statements) the consolidated financial condition,
results of operations and cash flows of the Borrower and its consolidated
Subsidiaries as of such date and for such periods.  The unaudited interim balance sheets of the
Borrower and its consolidated Subsidiaries as at the end of, and the related
unaudited interim statements of earnings and of cash flows for, each fiscal
quarterly period ended after December 31, 1999 and prior to the Closing Date
have heretofore been furnished to the Bank. 
Such interim financial statements for each such quarterly period, (i)
have been prepared in accordance with GAAP consistently applied throughout the
periods covered thereby and (ii) present fairly (on the basis disclosed in the
footnotes to such financial statements) the consolidated financial condition,
results of operations and cash flows of the Borrower and its consolidated
Subsidiaries as of such date and for such periods.  During the period from December 31, 1999 to
and including the Closing Date, except as disclosed on Schedule
5.01(a), there has been no sale, transfer or other disposition
by the Borrower or any of its Subsidiaries of any material part of the business
or property of the Borrower and its consolidated Subsidiaries, taken as a
whole, and no purchase or other acquisition by any of them of any business or
property (including any capital stock of any other person) material in relation
to the consolidated financial condition of the Borrower and its consolidated
Subsidiaries, taken as a whole, in each case, which, is not reflected in the
foregoing financial statements or in the notes thereto and has not otherwise
been disclosed in writing to the Bank on or prior to the Closing Date.

 

(b)           The
Delivered Annual Statements, including, without limitation, the provisions made
therein for reserves, policy and contract claims, copies of which have
heretofore been delivered to the Bank, have been prepared in accordance with
SAP applied on a consistent basis (except as otherwise disclosed to the
Bank).  The Quarterly Statements of each
of the Insurance Subsidiaries, including, without limitation, the provisions
made therein for reserves, policy and contract claims, as filed with the
appropriate Governmental Authorities of its state of domicile, for the fiscal
quarter ending June 30, 2000, a copy of which have heretofore been delivered to
the Bank, have been prepared in accordance with SAP applied on a consistent
basis (except as otherwise set forth in Schedule 5.01(b)).
All SAP Statements which have heretofore been delivered to the Bank fairly
present the financial condition, the results of operations, changes in equity
and changes in financial 

 

 

30

 

position of the Insurance Subsidiaries as of and for the respective
dates and period indicated therein.

 

SECTION
5.02.  No Change; Dividends. 
Since
December 31, 1999, (a) there has been no development or event relating to or
affecting the Borrower or any of its Subsidiaries which has had or would be
reasonably expected to have a Material Adverse Effect and (b) except as
permitted under this Loan Agreement, no dividends or other distributions have
been declared, paid or made upon the capital stock or other equity interest in
the Borrower or any of its Subsidiaries nor, except to the extent permitted
under this Loan Agreement, has any of the capital stock or other equity
interest in the Borrower or any of its Subsidiaries been redeemed, retired,
purchased or otherwise acquired for value by such Person.

 

SECTION
5.03.  Organization; Existence;
Compliance with Law.  Each of the Borrower and its Subsidiaries
(a) is a corporation duly organized, validly existing and is in good standing
under the laws of the jurisdiction of its incorporation or organization, (b)
has the corporate or other necessary power and authority, and the legal right,
to own and operate its property, to lease the property it operates as lessee
and to conduct the business in which it is currently engaged, (c) is duly
qualified as a foreign entity and in good standing under the laws of each
jurisdiction where its ownership, lease or operation of property or the conduct
of its business requires such qualification, and (d) is in compliance with all
material Requirements of Law.

 

SECTION
5.04.  Power; Authorization; Enforceable
Obligations.  Each of the Credit Parties has the
corporate or other necessary power and authority, and the legal right, to make,
deliver and perform the Credit Documents to which it is a party (in the case of
the Borrower, to borrow hereunder, and in the case of each Guarantor, to
guarantee the Borrower’s Obligations) and has taken all necessary corporate
action to authorize the borrowings and the guarantees on the terms and
conditions of the Credit Documents and to authorize the execution, delivery and
performance of the Credit Documents to which it is a party.  No consent or authorization of, filing with,
notice to or other similar act by or in respect of, any Governmental Authority
or any other Person is required to be obtained or made by or on behalf of any
Credit Party in connection with the borrowings or guarantees hereunder or with
the execution, delivery, performance, validity or enforceability of the Credit
Documents to which such Credit Party is a party, except for consents,
authorizations, notices and filings described in Schedule
5.04, all of which have been obtained or made or have the status
described in such Schedule 5.04. This Loan Agreement has been, and each other
Credit Document to which any Credit Party is a party will be, duly executed and
delivered on behalf of the Credit Parties. 
This Loan Agreement constitutes, and each other Credit Document to which
any Credit Party is a party when executed and delivered will constitute, a
legal, valid and binding obligation of such Credit Party enforceable against
such party in 

 

 

31

 

accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors’ rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law).

 

SECTION
5.05.  No Legal Bar. 
Except as
contemplated by the Credit Documents, the execution, delivery and performance
of the Credit Documents by the Credit Parties, the borrowings and guarantees
hereunder and the use of the proceeds thereof (a) will not violate any
Requirement of Law or contractual obligation of the Borrower or any of its
Subsidiaries in any respect that would reasonably be expected to have a
Material Adverse Effect, (b) will not result in, or require, the creation or
imposition of any Lien on any of the properties or revenues of any of the
Borrower or any of its Subsidiaries pursuant to any such Requirement of Law or
contractual obligation, and (c) will not violate or conflict with any provision
of any Credit Party’s articles of incorporation 
or by-laws.

 

SECTION
5.06.  No Material Litigation. 
Except as
disclosed and described in Schedule 5.06,
no litigation, investigation or proceeding of or before any arbitrator or
Governmental Authority is pending or, to the best knowledge of the Credit
Parties, threatened by or against the Borrower or any of its Subsidiaries or
against any of their respective properties or revenues which (a) relates to any
of the Credit Documents or any of the transactions contemplated hereby or
thereby or (b) would be reasonably expected to have a Material Adverse Effect.

 

SECTION
5.07.  No Default. 
Neither
the Borrower nor any of its Subsidiaries is in default under or with respect to
any of their contractual obligations in any respect which would be reasonably
expected to have a Material Adverse Effect.

 

SECTION
5.08.  Ownership of Property: Liens.  Each of the
Borrower and its Subsidiaries has good record and marketable title in fee
simple to, or a valid leasehold interest in, all its material real property,
and good title to, or a valid leasehold interest in, all its other material
property, and none of such property is subject to any Lien, except for
Permitted Liens.

 

SECTION
5.09.  No Burdensome Restrictions. 
Except as
previously disclosed in writing to the Bank on or prior to the Closing Date, no
Requirement of Law or contractual obligation of the Borrower or any of its
Subsidiaries would be reasonably expected to have a Material Adverse Effect.

 

SECTION
5.10.  Taxes. 
Each of
the Borrower and its Subsidiaries has filed or caused to be filed all United
States federal income tax returns and all other material tax returns which, to
the best knowledge of the Credit Parties, are required to be filed and has paid
(a) all taxes shown to be due and payable on said 

 

 

32

 

returns or (b) all taxes shown to be due and payable on any assessments
of which it has received notice made against it or any of its property and all
other taxes, fees or other charges imposed on it or any of its property by any
Governmental Authority (other than any (i) taxes, fees or other charges with
respect to which the failure to pay, in the aggregate, would not have a
Material Adverse Effect or (ii) taxes, fees or other charges the amount or
validity of which are currently being contested and with respect to which reserves
in conformity with GAAP have been provided on the books of such Person) , and
no tax Lien has been filed, and, to the best knowledge of the Credit Parties,
no claim is being asserted, with respect to any such tax, fee or other charge.

 

SECTION
5.11.  ERISA. 
Except as would not result in a Material Adverse Effect:

 

(a)           During
the five-year period prior to the date on which this representation is made or
deemed made: (i) no Termination Event has occurred, and, to the best knowledge
of the Credit Parties, no event or condition has occurred or exists as a result
of which any Termination Event could reasonably be expected to occur, with
respect to any Plan; (ii) no “accumulated funding deficiency,” as such term is
defined in Section 302 of ERISA and Section 412 of the Code, whether or not
waived, has occurred with respect to any Plan; (iii) each Plan has been
maintained, operated, and funded in compliance with its own terms and in
material compliance with the provisions of ERISA, the Code, and any other applicable
federal or state laws; and (iv) no lien in favor of the PBGC or a Plan has
arisen or is reasonably likely to arise on account of any Plan.

 

(b)           The
actuarial present value of all “benefit liabilities” under all Single Employer
Plans (determined within the meaning of Section 401(a) (2) of the Code,
utilizing the actuarial assumptions used to fund such Plans), whether or not
vested, did not, as of the last annual valuation date prior to the date on
which this representation is made or deemed made, exceed the current value of
the assets of all such Plans.

 

 

33

 

(c)           Neither
the Borrower, any of the Subsidiaries of the Borrower nor any ERISA Affiliate
has incurred, or, to the best knowledge of the Credit Parties, could be
reasonably expected to incur, any withdrawal liability under ERISA to any
Multi-employer Plan or Multiple Employer Plan. 
Neither the Borrower, any of the Subsidiaries of the Borrower nor any
ERISA Affiliate would become subject to any withdrawal liability under ERISA if
the Borrower, any of the Subsidiaries of the Borrower or any ERISA Affiliate
were to withdraw completely from all Multi-employer Plans and Multiple Employer
Plans as of the valuation date most closely preceding the date on which this
representation is made or deemed made. 
Neither the Borrower, any of the Subsidiaries of the Borrower nor any
ERISA Affiliate has received any notification that any Multi-employer Plan is
in reorganization (within the meaning of Section 4241 of ERISA) is insolvent
(within the meaning of Section 4245 of ERISA), or has been terminated (within
the meaning of Title IV of ERISA), and no Multi-employer Plan is, to the best
knowledge of the Credit Parties, reasonably expected to be in reorganization,
insolvent, or terminated.

 

(d)           No
prohibited transaction (within the meaning of Section 406 of ERISA or Section
4975 of the Code) or breach of fiduciary responsibility has occurred with
respect to a Plan which has subjected or may subject the Borrower, any of the
Subsidiaries of the Borrower or any ERISA Affiliate to any liability under
Sections 406, 409, 502(i), or 502(l) of ERISA or Section 4975 of the Code, or
under any agreement or other instrument pursuant to which the Borrower, any of
the Subsidiaries of the Borrower or any ERISA Affiliate has agreed or is
required to indemnify any person against any such liability.

 

(e)           The
present value (determined using actuarial and other assumptions which are
reasonable with respect to the benefits provided and the employees
participating) of the liability of the Borrower, each Subsidiary of the
Borrower and each ERISA Affiliate for post-retirement welfare benefits to be
provided to their current and former employees under Plans which are welfare
benefit plans (as defined in Section 3(l) of ERISA), net of all assets under
all such Plans allocable to such benefits, are reflected on the Financial
Statements in accordance with FASB Statement No. 106, as amended.

 

 

34

 

SECTION 5.12.  Governmental Regulations, Etc.

 

(a)           No
part of the proceeds of the Loans 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 Bank,
the Borrower will furnish to the Bank 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 Term
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 Loan Agreement (including, without
limitation, the direct or indirect use of the proceeds of the Term 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 regulations 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 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 principal shareholder of
the Bank.  For the purposes hereof the
terms “director”, “executive officer” and “principal shareholder” (when used
with reference to the Bank) have the respective meanings assigned thereto in
Regulation O issued by the Board of Governors of the Federal Reserve System.

 

 

35

 

(e)           Each
of the Borrower and its Subsidiaries has obtained all material licenses,
permits, franchises or other governmental authorizations necessary to the
ownership of its respective Property and to the conduct of its business.

 

(f)            Neither
the Borrower nor any of its Subsidiaries is in violation of any applicable
statute, regulation or ordinance of the United States of America, or of any
state, city, town, municipality, county or any other jurisdiction, or of any
agency thereof (including without limitation, environmental laws and regulations),
which violation could reasonably be expected to have a Material Adverse Effect.

 

(g)           Each of the Borrower and its
Subsidiaries is current with all material reports and documents, if any,
required to be filed with any state or federal securities commission or similar
agency and is in full compliance in all material respects with all applicable
rules and regulations of such commissions.

 

SECTION
5.13.  Subsidiaries. 
Schedule 5.13 sets forth all the Subsidiaries of the Borrower at the Closing Date,
the jurisdiction of their incorporation and the direct or indirect ownership
interest of the Borrower therein.

 

SECTION
5.14.  Purpose of Term Loan. 
The
proceeds of the Term Loan shall be used by the Borrower only: (i)  to refinance all amounts owed to Bank of
America (as successor in interest to NationsBank, N.A. (South)) under the Bank
of America Credit Documents and (ii) for general corporate purposes.

 

SECTION
5.15.  Environmental Matters.

 

(a)           Each
of the facilities and properties owned by the Borrower or any of its
Subsidiaries, and, to the best knowledge of the Borrower, the portions of the
facilities and properties leased or operated by the Borrower or any of its
Subsidiaries (collectively, the “Environmental
Properties”) and all operations of the Borrower and its
Subsidiaries at the Environmental Properties are in compliance with all
applicable Environmental Laws, and there is no violation of any Environmental
Law with respect to the Environmental Properties or the businesses operated by
the Borrower or any of its Subsidiaries (the “Businesses”), and there are no conditions
relating to the Businesses or Environmental Properties that could give rise to
liability under any applicable Environmental Laws.

 

(b)           None
of the Environmental Properties owned by the Borrower or any of its
Subsidiaries, and, to the best knowledge of the Borrower, none of the
Environmental Properties leased or operated by the Borrower or any of its
Subsidiaries contains, or has previously contained, any Materials of
Environmental Concern at, on or under the Environmental Properties in amounts
or concentrations that constitute or constituted a violation of, or could give
rise to liability under, Environmental Laws.

 

 

36

 

(c)           Neither the Borrower nor any of its
Subsidiaries has received any written or verbal notice of, or inquiry from any
Governmental Authority regarding, any violation, alleged violation,
non-compliance, liability or potential liability regarding environmental
matters or compliance with Environmental Laws with regard to any of the
Environmental Properties or the Businesses, nor does the Borrower or any of its
Subsidiaries have knowledge or reason to believe that any such notice will be
received or is being threatened.

 

(d)           Materials
of Environmental Concern have not been transported or disposed of from the
Environmental Properties owned by the Borrower or any of its Subsidiaries, or,
to the best knowledge of the Borrower, from any Environmental Property leased
or operated by the Borrower or any of its Subsidiaries, or generated, treated,
stored or disposed of at, on or under any of the Environmental Properties owned
by the Borrower or any of its Subsidiaries, or, to the best knowledge of the
Borrower, any Environmental Property leased or operated by the Borrower or any of
its Subsidiaries, or any other location, in each case by or on behalf of the
Borrower or any of its Subsidiaries in violation of, or in a manner that would
be reasonably likely to give rise to liability under, any applicable
Environmental Law.

 

(e)            No
judicial proceeding or governmental or administrative action is pending or, to
the best knowledge of any Credit Party, threatened, under any Environmental Law
to which the Borrower or any of its Subsidiaries is or will be named as a
party, nor are there any consent decrees or other decrees, consent orders,
administrative orders or other orders, or other administrative or judicial
requirements outstanding under any Environmental Law with respect to the
Borrower or any of its Subsidiaries, the Environmental Properties or the
Businesses.

 

(f)            There
has been no release or, threat of release of Materials of Environmental Concern
at or from the Environmental Properties owned by the Borrower or any of its
Subsidiaries, or, to the best knowledge of the Borrower, at or from any
Environmental Property leased or operated by the Borrower or any of its
Subsidiaries, or arising from or related to the operations (including, without
limitation, disposal) of the Borrower or any of its Subsidiaries in connection
with the Environmental Properties or otherwise in connection with the
Businesses, in violation of or in amounts or in a manner that could give rise
to liability under Environmental Laws.

 

SECTION
5.16.  Insurance Policies. 
All
insurance policies or contracts, including, without limitation, annuities
issued or assumed by the Insurance Subsidiaries and now in force, are, to the
extent required under applicable law, on forms approved by the insurance
regulatory authority of the state or jurisdiction where issued or have been
filed with and not objected to by such authority within 

 

 

37

 

the period provided for objection except where the issuance of such
policies or contracts without such approval or expiration of the period for
objection will not, individually or in the aggregate, have a Material Adverse
Effect.  All policy or annuity dividends
and benefits payable by the Insurance Subsidiaries have in all material
respects been paid in accordance with the terms of the policies and annuities
under which they arose, except for such dividends or other benefits for which
such Insurance Subsidiary reasonably believes there is a reasonable basis to
contest payment, or will not, individually or in the aggregate, have a Material
Adverse Effect.

 

SECTION
5.17.  Places of Business. 
The places
of business of the Borrower and each Subsidiary set forth in Schedule 5.17 are true and correct
and set forth, whenever applicable, whether said place of business is owned or
leased by the Borrower and each Subsidiary, as the case may be, and, if leased,
the name and address of the lessor.

 

SECTION
5.18.   Outstanding Stock. 
No shares of the Borrower’s Series B preferred stock are issued and
outstanding.

 

ARTICLE VI

 

AFFIRMATIVE
COVENANTS

 

Each Credit Party hereby covenants and agrees that so
long as this Loan Agreement is in effect or any amounts payable hereunder,
under the Note or under any other Credit Document shall remain outstanding:

 

SECTION
6.01.  Information Covenants. 
The
Borrower will furnish, or cause to be furnished, to the Bank:

 

(a)                                  Annual Financial Statements.

 

(i)            As soon as available, and in any
event within 150 days after the close of each fiscal year of the 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 Bank 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 

 

 

38

 

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 155 days (or, if later, as required by applicable law) 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 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.

 

(iii)          As soon as available, and in any event
within 30 days of the close of each fiscal year end of the Borrower and its
Subsidiaries, copies of annual budgets and projections for the following fiscal
period.

 

(b)                                 Quarterly Financial
Statements.

 

(i)            As soon as available, and in any
event within 60 days after the close of each fiscal quarter of the Borrower and
its Subsidiaries (other than the fourth fiscal quarter, in which case 120 days
after the end thereof) 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 and cash flows for such fiscal quarter in each case setting
forth in comparative form consolidated figures for the corresponding period of
the preceding fiscal year, all such financial information described above to be
in reasonable form and detail and reasonably acceptable to the Bank, 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 60 days after the close of each fiscal quarter of an Insurance
Subsidiary (other than the fourth fiscal quarter, in which case 120 days after
the end thereof), 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.

 

(c)           [Reserved.]

 

 

39

 

(d)           Officer’s Certificate.  At the time of
delivery of the financial statements provided for in Sections 6.01(a) and
6.01(b) above, a certificate of the chief financial officer of the Borrower,
substantially in the form of Schedule 6.01(d),
(i) demonstrating compliance with the financial covenants contained in Section
6.11 by calculation thereof as of the end of each such fiscal year and (ii)
stating that no Default or Event of Default exists, or if any Default or Event
of Default does exist, specifying the nature and extent thereof and what action
the Borrower proposes to take or has taken with respect thereto.

 

(e)           Actuarial Report.  Within thirty days of receipt, an
Actuarial Report prepared by Milliman & Robertson or such other independent
actuary reasonably acceptable to the Bank and certified as to such Insurance
Subsidiary’s (including AmComp Preferred’s) reserve position as of such fiscal
year end by such independent actuary.

 

(f)            IRIS Test Results.  As soon as received
after the end of each Fiscal Year of each Insurance Subsidiary, a copy of the
final report to such Insurance Subsidiary from the NAIC as to such Insurance
Subsidiary’s status under the IRIS Tests.

 

(g)           Auditor’s Reports.  Promptly upon
receipt thereof, a copy of any other report or “management letter” submitted by
independent accountants to the Borrower or any of its Subsidiaries in
connection with any annual, interim or special audit of the books of such
Person.

 

(h)           Reports.  Promptly after transmission or
receipt thereof, (a) copies of any filings and registrations with, and reports
to or from, the Securities and Exchange Commission, or any successor agency,
and copies of all financial statements, proxy statements, notices and reports
as the Borrower or any of its Subsidiaries shall send to its shareholders or to
a holder of any Indebtedness owed by the Borrower or any of its Subsidiaries in
its capacity as such a holder; (b) copies of any reports on examination or
similar reports, financial examination reports or market conduct examination
reports by a Governmental Authority with respect to any Insurance Subsidiary
relating to such Insurance Subsidiary’s insurance business, (c) copies of all
Insurance Holding Company Systems Act filings and (d) upon the request of the
Bank, all reports and written information to and from the United States Environmental
Protection Agency, or any state or local agency responsible for environmental
matters, the United States Occupational Health and Safety Administration, or
any state or local agency responsible for health and safety matters, or any
successor agencies or authorities concerning environmental, health or safety
matters.

 

 

40

 

(i)            Notices.  Promptly after obtaining knowledge
thereof, the Borrower will give written notice to the Bank immediately of (a)
the occurrence of an event or condition comprising a Default or Event of
Default, specifying the nature and existence thereof and what action the Credit
Parties propose to take with respect thereto, and (b) the occurrence of any of
the following with respect to the Borrower or any of its Subsidiaries (i) the
pendency or commencement of any litigation, arbitral or governmental proceeding
against such Person which if adversely determined is likely to have a Material
Adverse Effect, (ii) the institution of any proceedings against such  Person with respect to, or the receipt of
notice by such Person of potential liability or responsibility for violation,
or, alleged violation of any federal, state or local law, rule or regulation,
including but not limited to, Environmental Laws, the violation of which would
likely have a Material Adverse Effect, or (iii) any notice or determination
concerning the imposition of any withdrawal liability by a Multi-employer Plan
against such Person or any ERISA Affiliate, the determination that a
Multi-employer Plan is, or is expected to be, in reorganization within the
meaning of Title IV of ERISA or the termination of any Plan.

 

(j)            ERISA.  Upon obtaining
knowledge thereof, the Borrower will give written notice to the Bank promptly
(and in any event within five business days) of: (i) any event or condition,
including, but not limited to, any Reportable Event, that constitutes, or might
reasonably lead to, a Termination Event; (ii) with respect to any
Multi-employer Plan, the receipt of notice as prescribed in ERISA or otherwise
of any withdrawal liability assessed against the Borrower or any of its ERISA
Affiliates, or of a determination that any Multi-employer Plan is in
reorganization or insolvent (both within the meaning of Title IV of ERISA);
(iii) the failure to make full payment on or before the due date (including
extensions) thereof of all amounts which the Borrower, any of the Subsidiaries
of the Borrower or any ERISA Affiliate is required to contribute to each Plan
pursuant to its terms and as required to meet the minimum funding standard set
forth in ERISA and the Code with respect thereto; or (iv) any change in the
funding status of any Plan that could have a Material Adverse Effect; together,
with a description of any such event or condition or a copy of any such notice
and a statement by the chief financial officer of the Borrower briefly setting
forth the details regarding such event, condition, or notice, and the action,
if any, which has been or is being taken or is proposed to be taken by the
Credit Parties with respect thereto. 
Promptly upon request, the Borrower shall furnish the Bank with such
additional information concerning any Plan as may be reasonably requested,
including, but not limited to, copies of each annual report/return (Form 5500
series) , as well as all schedules and attachments thereto required to be filed
with the Department of Labor and/or the Internal Revenue Service pursuant to
ERISA and the Code, respectively, for each “plan year” (within the meaning of
Section 3 (39) of ERISA).

 

 

41

 

(k)           Other Information.  With reasonable promptness upon any such
request, such other information regarding the business, properties or financial
condition of the Borrower or any of its Subsidiaries as the Bank may reasonably
request.

 

SECTION
6.02.  Preservation of Existence and
Franchises.  The Borrower will, and will cause each of
its Subsidiaries to, do all things necessary to preserve and keep in full force and effect its existence, rights, franchises and
authority, except (i) as a result of or in connection with a dissolution,
merger or disposition of a Subsidiary permitted by Section 7.04(a), Section
7.04(b) or Section 7.04(c) or (ii) as would not, in the reasonable opinion of
the Bank, result in a Material Adverse Effect.

 

SECTION
6.03.  Books and Records. 
The
Borrower will, and will cause each of its Subsidiaries to, keep complete and
accurate books and records of its transactions in accordance with good
accounting practices on the basis of GAAP and, with respect to any Insurance
Subsidiary, SAP (including the establishment and maintenance of appropriate
reserves).

 

SECTION
6.04.  Compliance with Law. 
The
Borrower will, and will cause each of its Subsidiaries to, comply with all
laws, rules, regulations and orders, and all applicable restrictions imposed by
all Governmental Authorities, applicable to it and its property if
noncompliance with any such law, rule, regulation, order or restriction would
have a Material Adverse Effect.

 

SECTION
6.05.  Payment of Taxes and Other
Indebtedness.  Except as otherwise provided pursuant to
the terms of the definition of “Permitted Liens” set forth in Section 1.01, the
Borrower will, and will cause each of its Subsidiaries to, pay and discharge
(i) all taxes, assessments and governmental charges or levies imposed upon it, or
upon its income or profits, or upon any of its properties, before they shall
become delinquent, (ii) all lawful claims (including claims for labor,
materials and supplies) which, if unpaid, might give rise to a Lien upon any of
its properties, and (iii) except as prohibited hereunder, all of its other
Indebtedness as it shall become due.

 

 

42

 

SECTION 6.06.  Insurance/Reinsurance.

 

(a)           The
Borrower will, and will cause each of its Subsidiaries to, at all times
maintain in full force and effect insurance (including worker’s compensation
insurance, liability insurance, casualty insurance and, unless a business
interruption plan reasonably acceptable to the Bank is in full force and
effect, business interruption insurance) in such amounts, covering such risks
and liabilities and with such deductibles or self-insurance retentions as are
in accordance with normal industry practice.

 

(b)           Unless
otherwise agreed to in writing by the Bank, the Borrower will cause each of its
Insurance Subsidiaries to enter into Reinsurance Agreements, in accordance with
normal industry practice, that are with reinsurers rated “A-” or better by A.M.
Best & Company, Inc. at the time of entering into such Reinsurance
Agreements.  In addition, unless
otherwise agreed to in writing by the Bank, the Borrower shall not allow its
Insurance Subsidiaries to renew or extend Reinsurance Agreements with any
reinsurer whose rating has been down-graded below “A-” by A.M. Best &
Company, Inc.  Attached hereto as Schedule 6.06(b) is a list of all
reinsurers that are parties to Reinsurance Agreements with Insurance
Subsidiaries that have current A.M. Best & Company, Inc. rating’s below
“A-1”.  So long as Reinsurance Agreements
with the parties listed in Schedule 6.06(b) are not renewed or extended
after the expiration of such agreements, the Borrower shall not be deemed in
default of this covenant 6.06(b).

 

SECTION
6.07.  Maintenance of Property. 
The
Borrower will, and will cause each of its Subsidiaries to, maintain and
preserve its properties and equipment material to the conduct of its business
in good repair, working order and condition, normal wear and tear and casualty
and condemnation excepted, and will make, or cause to be made, in such
properties and equipment from time to time all repairs, renewals, replacements,
extensions, additions, betterments and improvements thereto as may be needed or
proper, to the extent and in the manner customary for companies in similar
businesses.

 

SECTION
6.08.  Performance of Obligations. 
The
Borrower will, and will cause each of its Subsidiaries to, perform in all
material respects all of its obligations under the terms of all material
agreements, indentures, mortgages security agreements or other debt instruments
to which it is a party or by which it is bound.

 

SECTION
6.09.  Use of Proceeds. 
The
Borrower will use the proceeds of the Term Loan solely for the purposes set
forth in Section 5.14.

 

SECTION
6.10.  Audit/Inspections. 
Upon
reasonable notice and during normal business hours, the Borrower will, and will
cause each of its Subsidiaries to, 

 

 

43

 

permit representatives appointed by the Bank, including, without
limitation, independent accountants, agents, attorneys, and appraisers to visit
and inspect its property, including its books and records, its accounts
receivable and inventory, its facilities and its other business assets, and to
make photocopies or photographs thereof and to write down and record any
information such representative obtains and shall permit the Bank or its
representatives to investigate and verify the accuracy of information provided
to the Bank and to discuss all such matters with the officers, employees and
representatives of such Person, all (unless an Event of Default shall have
occurred and be continuing) at the Bank’s sole cost and expense and so long as
Bank does not unreasonably interfere with the conduct or activities of the
Borrower and its Subsidiaries.

 

                The Bank agrees
that all nonpublic information provided to it by the Borrower or any of its
Subsidiaries or by any agent on behalf of the Borrower or any of its
Subsidiaries in connection with this Loan Agreement or any other Loan Document
or the transactions contemplated hereby or thereby will be held and treated by
the Bank, its agents, directors, Affiliates, officers and employees in
confidence and further agrees and undertakes that neither it nor any of its
Affiliates shall use any such information for any purpose or in any manner
other than pursuant to the terms contemplated by this Loan Agreement or
relating to other business transactions between the Borrower or any of its
Subsidiaries and the Bank.  The Bank may
disclose such information (a) at the request of any bank regulatory authority
or in connection with an examination of it by any such authority or examiner; (b)
pursuant to subpoena or other court process, provided, however, that the Bank
shall use its reasonable best efforts to give the Borrower three (3) days
written notice of a request to furnish information under this subparagraph (b);
(c) when required to do so in accordance with the provisions of any applicable
law; provided, however, that the Bank shall use its reasonable best efforts to
give the Borrower three (3) days written notice of a request to furnish
information under this subparagraph (c); (d) at the written request or the
express direction of any other agency of any state of the United States of
America or of any other jurisdiction in which the Bank conducts its business;
and (e) to such Bank’s independent auditors, counsel and other professional
advisors.  Notwithstanding the foregoing,
the Borrower or any of its Subsidiaries authorizes the Bank to disclose to any
assignee and any prospective assignee such financial and other information in
such Bank’s possession concerning the Borrower or any of its Subsidiaries which
has been delivered to the Bank pursuant to this Loan Agreement or any other
Loan Document or which has been delivered to the Bank by the Borrower or any of
its Subsidiaries in connection with the Bank’s credit evaluation of the Borrower
or any of and its Subsidiaries prior to entering into this Loan Agreement;
provided, that such assignee or prospective assignee agrees in writing to such
Bank to keep such information confidential to the same extent as required of
the Bank hereunder.

 

 

44

 

SECTION
6.11.  Financial Covenants.

 

(a)           Debt Service Coverage Ratio.  The Borrower shall
cause the Debt Service Coverage Ratio, as of the last day of each fiscal year,
to be at least 1.50 to 1.0.

 

(b) Net Written Premiums to
Statutory Surplus Ratio.  The Borrower shall cause the Net
Written Premiums to Statutory Surplus Ratio, as of the last day of each fiscal
year of its Insurance Subsidiaries, on a separate company basis, to be no
greater than 2.5 to 1.0.

 

(c)           Loss Ratio. The Combined Insurance Subsidiary
ratio of Net Losses to Net Premiums Written shall not exceed 70% for any one
year or 65% for two consecutive years based on AmComp Preferred’s Annual
Statement filed with the FDOI.

 

(d)           Combined Ratio.  The Combined Insurance Subsidiary ratio of
Net Losses plus Insurance Operating Expenses to Net Premiums Written shall not
exceed 104% for any one year or 99% for any two consecutive years based on
AmComp Preferred’s Annual Statement filed with the FDOI.

 

SECTION
6.12.  Additional Credit Parties. 
Except as
otherwise prevented by law (including with respect to an insurance company’s
ability to guaranty the obligations of an affiliate), upon the formation of any
new Subsidiary by the Borrower or any Subsidiary, such new subsidiary shall
promptly become a “Guarantor” hereunder by

 

(A)          execution
of a Guaranty Agreement in substantially the form of Schedule
6.12 attached hereto;

 

(B)           delivery
of such other documentation as the Bank may reasonably request, including,
without limitation, certified resolutions and other organizational and
authorizing documents of such Person and favorable opinions of counsel to such
Person (which shall cover, among other things, the legality, validity, binding
effect and enforceability of the documentation referred to above), all in form,
content and scope reasonably satisfactory to the Bank.

 

SECTION
6.13.  Ownership of Subsidiaries. 
Except to
the extent otherwise provided in Section 7.04(b) and Section 7.11, and except
for the 10% interest in AmComp Assurance Corporation which is currently, or may
prospectively be held, by the agents and employees of such Subsidiary, pursuant
to existing stock option plans, the Borrower shall, directly or indirectly, own
at all times 100% of the capital stock of each of its Subsidiaries.

 

 

45

 

SECTION
6.14.  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 amounts that, taken together, are
sufficient to permit the Borrower to (i) pay all principal of and any accrued
interest in respect of the Term Loan and all other indebtedness or obligations
of any and every kind owing by the Borrower to the Bank 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 the Service Contracts, 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.

 

SECTION
6.15.  Banking Accounts.  Within three
(3) months of the Closing Date, the Borrower shall maintain its primary
depository, investment and other accounts with the Bank.  In addition, on the Closing Date, the Borrower
shall establish an interest bearing depository account of the Borrower opened
with the Bank in the initial minimum amount of $1,000,000 (which minimum amount
on deposit shall be increased to $1,750,000 prior to January 1, 2002) as a
reserve for future debt service payments on the Term Loan until the Debt
Service Coverage Ratio exceeds 2.0 to 1.0 for two consecutive fiscal years (the
“Payment Reserve Account”).

 

SECTION
6.16.  Subordination of Other Loans, Etc. 
All loans
or fees owed to Affiliates of the Borrower shall, at all times, be subordinate
to the Term Loan and the Borrower shall cause its Affiliates from time to time,
to execute and deliver to the Bank written subordination agreements in form and
content satisfactory to the Bank; provided, however, so long as no Default exists or has occurred, the Borrower
may pay (but not prepay) current principal and interest on such loans to such
Affiliates.

 

SECTION
6.17.  Hedging Arrangements.  The Borrower will cause the obligations of the
Borrower under any Hedging Agreement to be secured by the Collateral.

 

 

46

 

ARTICLE
VII

 

NEGATIVE
COVENANTS

 

Each Credit Party hereby
covenants and agrees that, so long as this Loan Agreement is in effect or any
amounts payable hereunder, under the Note or under any other Credit Document
shall remain outstanding:

 

SECTION 7.01.  Indebtedness.  The
Borrower will not, nor will it permit any of its Subsidiaries to, contract,
create, incur, assume or permit to exist any Indebtedness, except:

 

(a)           Indebtedness arising under this Loan
Agreement and the other Credit Documents;

 

(b)           Indebtedness
of the Borrower and any of its Subsidiaries set forth in Schedule
7.01 (and renewals, refinancings and extensions thereof on terms
and conditions no less favorable to such Person than such existing
Indebtedness);

 

(c)           Indebtedness
of the Borrower and any of its Subsidiaries incurred in the ordinary course of
business and consistent with the past practices of the Credit Parties;

 

(d)           Intercompany
Indebtedness incurred in the ordinary course of business and consistent with
the past practices of the Credit Parties or for cash management purposes;

 

(e)         obligations of the Borrower in respect
of the Hedging Agreements;

 

(f)            unsecured Indebtedness which is (i)
subordinated in right and time of payment to the Term Loan in a manner
satisfactory to the Bank in its sole discretion and (ii) evidenced by a
promissory note in form and substance satisfactory to the Bank; and

 

(g)           purchase money Indebtedness secured
by Liens contemplated by clause (vii) of the definition of Permitted Liens, provided that the Borrower and its
Subsidiaries do not take any steps to increase the principal amount of
Indebtedness secured by the acquired Property over the amount secured thereby
at the time of acquisition.

 

SECTION
7.02. Liens.  The Borrower will not, nor will it permit
any of its Subsidiaries to, contract, create, incur, assume or permit to exist
any Lien with 

 

 

47

 

respect to any of their Property, whether now owned or after acquired,
including, without limitation, the Service Contracts, except for Permitted
Liens.

 

SECTION
7.03.  Nature of Business. 
The
Borrower will, and will cause its Subsidiaries to, remain principally engaged
in the property and casualty insurance business and such business activities
incidental or related thereto and will not engage in (i) writing lines of
insurance for which it does not currently hold all necessary licenses or (ii)
any line of business in which they are not currently engaged to such an extent
that the business of the Borrower and its Subsidiaries taken as a whole would
be fundamentally different in nature from the business of the Borrower and its
Subsidiaries on the Closing Date.

 

SECTION
7.04.  Consolidation, Merger, Sale or
Purchase of Assets, Etc.  The Borrower will not, nor will it permit
any of its Subsidiaries to:

 

(a)           except
in connection with a disposition of assets permitted by the terms of subsection
(c) below, dissolve, liquidate or wind up their affairs;

 

(b)           enter
into any transaction of merger or consolidation; provided,
however, that, so long
as no Default or Event of Default would be directly or indirectly caused as a
result thereof, (i) the Borrower may merge or consolidate with any of its
Subsidiaries provided that the Borrower is the surviving corporation; provided, however, that the Borrower
may not merge or consolidate with AmComp Preferred without the prior written
consent of the Bank; (ii) any Subsidiary of the Borrower may merge or
consolidate with any other Subsidiary of the Borrower; provided,
however, that no Subsidiary may merge or consolidate with AmComp
Preferred without the prior written consent of the Bank, and (iii) the Borrower
may merge with any other Person if (A) the Borrower is the surviving
corporation, (B) no Change of Control results from such merger, (C) the
combined tangible net worth of the resulting entity is at least as great as the
Borrower’s tangible net worth prior to such merger, and, (D) if a rating is
then maintained on the Borrower at the time of the proposed merger, there is no
reduction in the rating of the Borrower after giving effect to such merger.

 

(c)           sell,
lease, transfer or otherwise dispose of any Property other than  (i) the sale of assets pursuant to
Reinsurance Agreements entered into in the ordinary course of business,  (ii) the sale or disposition of machinery and equipment no longer used
or useful in the conduct of such Person’s business, and (iii) the
sale of assets to the Borrower or any Subsidiary of the Borrower, provided that
after giving effect to such sale or other disposition, no Default or Event of
Default would exist hereunder;

 

(d)           except
as otherwise permitted by Section 7.04(b), acquire all or any portion of the
capital stock or securities of any other Person or purchase, lease or 

 

 

48

 

otherwise acquire (in a
single transaction or a series of related transactions) all or any substantial
part of the Property of any other Person.

 

SECTION
7.05.  Advances, Investments, Loans, Etc. 
The
Borrower will not, nor will it permit any of its Subsidiaries to, acquire, make
or permit to exist any Investments other than Permitted Investments.

 

SECTION
7.06.  Restricted Payments. 
Except as
otherwise contemplated by Section 6.14, the Borrower will not, nor will it
permit any of its Subsidiaries to, directly or indirectly, declare, order, make
or set apart any sum for or pay any Restricted Payment, except (a) to make
dividends payable solely in the same class of capital stock of such Person, (b)
to make dividends or other distributions payable to the Borrower (directly or
indirectly through Subsidiaries of the Borrower) and (c) policyholder dividends
from the Insurance Subsidiaries.

 

SECTION
7.07.  Prepayments of Indebtedness, Etc. 
The
Borrower will not, nor will it permit any of its Subsidiaries to, (i) after the
issuance thereof, amend or modify (or permit the amendment or modification of)
any of the terms of any Indebtedness if such amendment or modification would
add or change any terms in a manner adverse to the issuer of such Indebtedness,
or shorten the final maturity or average life to maturity or require any
payment to be made sooner than originally scheduled or increase the interest
rate applicable thereto or change any subordination provision thereof, or (ii)
(A) if any Default or Event of Default has occurred and is continuing or would
be directly or indirectly caused as a result thereof, make (or give any notice
with respect thereto) any voluntary or optional payment, any prepayment or any
redemption or acquisition for value of (including without limitation, by way of
depositing money or securities with the trustee with respect thereto before due
for the purpose of paying when due), refund, refinance or exchange of any other
Indebtedness (other than Subordinated Indebtedness) or (B) make (or give any
notice with respect thereto) any voluntary or optional payment, any prepayment
or any redemption or acquisition for value of (including without limitation, by
way of depositing money or securities with the trustee with respect thereto
before due for the purpose of paying when due), refund, refinance or exchange
of any Subordinated Indebtedness or (C) amend, modify or change its articles of
incorporation (or corporate charter or other similar organizational document)
or bylaws (or other similar document) where such change would have a Material
Adverse Effect.

 

SECTION
7.08.  Transactions with Affiliates. 
Except as
contemplated under this Loan Agreement and by the Preferred Stock Conversion or
the Preferred Stock Modification, as applicable, the Borrower will not, nor
will it permit any of its Subsidiaries to, enter into any transaction (or
series of related transactions) directly or indirectly with or for the benefit of any Affiliate of the Borrower (other than a
Subsidiary) or any officer or director of any Affiliate unless (a) such
transaction (or 

 

 

49

 

series of related
transactions) is in the ordinary course of business on terms that are no less
favorable to the Borrower or such Subsidiary, as the case may be, than the
Borrower or any such Subsidiary would obtain in a comparable transaction (or
series of related transactions) with a Person not an Affiliate, (b) such
transaction (or series of related transactions) is approved by the Board of
Directors of the Borrower, and (c) with respect to any transaction (or series
of related transactions) involving aggregate payments or commitments in excess
of $10,000,000, the Borrower receives an opinion from a nationally recognized
investment banking firm, or other nationally or regionally recognized appraisal
firm, that such transaction (or series of related transactions) is fair to the
Borrower or such Subsidiary, as the case may be, from a financial point of
view.  The restrictions contained in the
foregoing sentence shall not apply to any payments made under the Existing
Affiliate Contracts.

 

SECTION
7.09.  Fiscal Year. 
The
Borrower will not, nor will it permit any of its Subsidiaries to, change its
fiscal year.

 

SECTION
7.10.  Limitation on Restrictions on
Subsidiary Dividends and Other Distributions, Etc. 
The
Borrower will not, nor will it permit any of its Subsidiaries to, directly or
indirectly, create or otherwise cause, incur, assume, suffer or permit to exist
or become effective any consensual encumbrance or restriction of any kind on
the ability of any such Person to (a) pay dividends or make any other
distribution on any of such Person’s capital stock, (b) subject to
subordination provisions, pay any Indebtedness owed to the Borrower or any
other Credit Party, (c) make loans or advances to any other Credit Party or (d)
transfer any of its Property to any other Credit Party, except for encumbrances
or restrictions existing under or by reason of (i) customary non-assignment
provisions in any lease governing a leasehold interest and (ii) this Loan
Agreement and the other Credit Documents.

 

SECTION
7.11.  Issuance of Stock of Subsidiaries. 
The
Borrower will not, nor will it permit any of its Subsidiaries to, issue, sell
or otherwise dispose of any shares of capital stock of any Subsidiary of the
Borrower (including by way of sales of treasury stock) or any options or
warrants to purchase, or securities convertible into, capital stock of any
Subsidiary of a Borrower (other than the shares in AmComp Assurance Corporation
which are subject to existing stock option plans, as amended from time to time,
for its agents and employees).

 

SECTION
7.12.  Sale-Leasebacks. 
The
Borrower will not, nor will it permit any of its Subsidiaries to, directly or
indirectly, become or remain liable as lessee or as guarantor or other surety with
respect to any lease, whether an Operating Lease or a Capital Lease, of any
Property (whether real or personal or mixed), whether now owned or hereafter
acquired, (i) which such Person has sold or transferred or is to sell or
transfer to any other Person other than a Credit Party or 

 

 

50

 

(ii) which such Person intends to use for substantially the same
purpose as any other Property which has been sold or is to be sold or
transferred by such Person to any other Person in connection with such lease.

 

SECTION
7.13.  Settlements. 
The
Borrower will not, nor will it permit any of its Subsidiaries to, enter into
any binding settlement agreement with respect to any litigation, unless after
giving pro forma effect to such settlement agreement no Default or Event of
Default would exist.

 

SECTION
7.14.  Issuance of Series B Preferred
Stock.  Notwithstanding anything herein to the
contrary, the Borrower will not issue any shares of its Series B preferred
stock without the prior written consent of the Bank if any such shares would
have a right of redemption which is exercisable prior to the date on which all
obligations of the Borrower under the Credit Documents have been paid in full.

 

 

ARTICLE
VIII

 

EVENTS OF
DEFAULT

 

SECTION
8.01. Events of Default.  An Event of Default shall exist upon the
occurrence of any of the following specified events (each an “Event of Default”):

 

(a) Payment.  Any Credit Party shall

 

(i)                                     default in the payment when due of any
principal of any of the Term Loan, or

 

(ii)           default, and such default shall
continue for seven (7) or more Business Days, in the payment when due of any
interest on the Term Loan or of any fees or charges or other amounts owing
hereunder, under any of the other Credit Documents or in connection herewith or
therewith; or

 

(b)           Representations.  Any representation, warranty or
statement made or deemed to be made by any Credit Party herein, in any of the
other Credit Documents, or in any statement or certificate delivered or
required to be delivered pursuant hereto or thereto shall prove untrue in any
material respect on the date as of which it was deemed to have been made; or

 

(c)           Covenants.  Any Credit Party shall

 

(i)            default in the due performance or
observance of any term, covenant or agreement contained in Sections 6.02, 6.09,
6.11, 6.13, 6.14, 7.03, 7.04, and 7.06 through 7.14, inclusive, or

 

 

51

 

(ii)           default in the due performance or
observance by it of any term, covenant or agreement (other than those referred
to in subsections (a), (b) or (c)(i) of this Section 8.01) contained in this
Loan Agreement and such default shall continue unremedied for a period of at
least thirty (30) days after the earlier of a responsible officer of a Credit
Party becoming aware of such default or notice thereof by the Bank; provided, however, that in the event
the Borrower can not complete the cure of any such default (excluding a default
under Section 7.05 hereof) within such thirty (30) day period, the Borrower
shall have an additional period, not to exceed thirty (30) days, to cure such
default, on the condition that the Borrower has commenced such cure during the
initial 30-day period and thereafter diligently pursues the cure of such
default to completion, or

 

(d)           Other Credit Documents.  Any Credit Party
shall default in the due performance or observance of any term, covenant or
agreement in any of the other Credit Documents (subject to applicable grace or
cure periods, if any), or (ii) except as the result of or in connection with a
dissolution, merger or disposition of a Subsidiary permitted by Section
7.04(a), Section 7.04(b) or Section 7.04(c), any Credit Document shall fail to
be in full force and effect or to give the Bank the Liens, rights, powers and
privileges purported to be created thereby; or

 

(e)           Guaranties.  Except as the result of or in
connection with a dissolution, merger or disposition of a Subsidiary permitted
by Section 7.04(a), Section 7.04(b) or Section 7.04(c), the guaranty given by
any Guarantor, as further evidenced by one or more Guaranty Agreements (including
any Additional Credit Party), or any provision thereof shall cease to be in
full force and effect, or any Guarantor (including any Additional Credit Party)
or any Person acting by or on behalf of such Guarantor shall deny or disaffirm
such Guarantor’s obligations under such guaranty, or any Guarantor shall
default in the due performance or observance of any term, covenant or agreement
on its part to be performed or observed pursuant to any guaranty; or

 

(f)            Bankruptcy, etc.  Any Bankruptcy Event shall occur
with respect to the Borrower or any of its Subsidiaries; or

 

(g)           Insurance Regulatory Orders.  There shall occur
any seizure, vesting, or intervention by or under the authority of any
Governmental Authority by which (i) the management of any Insurance Subsidiary
is displaced, or (ii) the authority of any Insurance Subsidiary is displaced,
or is curtailed, in any materially adverse manner; or

 

 

52

 

(h)                                 Defaults under Other
Agreements.

 

(i)            The Borrower or any of its
Subsidiaries shall default in the performance or observance (beyond the
applicable grace period with respect thereto, if any) of any material
obligation or condition of the Service Contracts; or

 

(ii)           The Borrower or any of its
Subsidiaries shall default, in any materially adverse manner, in the
performance or observance (beyond the applicable grace period with respect
thereto, if any) of any material obligation or condition of any material
contract or lease; or

 

(iii)          With respect to any Indebtedness
(other than Indebtedness outstanding under this Loan Agreement), (A) the
Borrower or any of its Subsidiaries shall (1) default in any payment (beyond
the applicable grace period with respect thereto, if any) with respect to any
such Indebtedness if the aggregate principal amount of all such Indebtedness
for which such failure to pay shall have occurred and be continuing exceeds
$500,000, or (2) the occurrence and continuance of a default in the observance
or performance relating to Indebtedness (other than Indebtedness outstanding
under this Loan Agreement) or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event or condition shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or permit, the holder or holders of such Indebtedness
(or trustee or agent on behalf of such holders) to cause (determined without
regard to whether any notice or lapse of time is required), any such
Indebtedness to become due prior to its stated maturity; or (B) any Indebtedness
(other than Indebtedness outstanding under this Loan Agreement) shall be
declared due and payable, or required to be paid or prepaid other than by a
regularly scheduled required prepayment, prior to the stated maturity thereof,
if the aggregate amount of all such Indebtedness that is or could be caused to
be due prior to its stated maturity exceeds $500,000; or

 

(i)            Judgments.  One or more
judgments or decrees shall be entered against the Borrower or any of its
Subsidiaries involving a liability of $500,000 or more in the aggregate (to the
extent not paid or fully covered by insurance provided by a carrier who has
acknowledged coverage) and any such judgments or decrees shall not have been
vacated, discharged or stayed or bonded pending appeal within 30 days from the
entry thereof; or

 

(j)            ERISA.  Any of the
following events or conditions, if such event or condition could have a
Material Adverse Effect: (1) any “accumulated funding deficiency,” as such term
is defined in Section 302 of ERISA and Section 412 of the Code, whether or not
waived, shall exist with respect to any Plan, or any lien shall

 

 

53

 

arise on the
assets of the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate
in favor of the PBGC or a Plan; (2) a Termination Event shall occur with
respect to a Single Employer Plan, which is, in the reasonable opinion of the
Bank, likely to result in the termination of such Plan for purposes of Title IV
of ERISA; (3) a Termination Event shall occur with respect to a Multi-employer
Plan or Multiple Employer Plan, which is, in the reasonable opinion of the
Bank, likely to result in (i) the termination of, such Plan for purposes of
Title IV of ERISA, or (ii) the Borrower, any Subsidiary of the Borrower or any
ERISA Affiliate incurring any liability in connection with a withdrawal from,
reorganization of (within the meaning of Section 4241 of ERISA), or insolvency
or (within the meaning of Section 4245 of ERISA) such Plan; or (4) any
prohibited transaction (within the meaning of Section 406 of ERISA or Section
4975 of the Code) or breach of fiduciary responsibility shall occur which may
subject the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate to
any liability under Sections 406, 409, 502(i), or 502(l) of ERISA or Section
4975 of the Code, or under any agreement or other instrument pursuant to which
the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate has agreed
or is required to indemnify any person against any such liability; or

 

(k)           Ownership.  There shall occur a
Change of Control.

 

SECTION             8.02.  Acceleration: Remedies. 
Upon the
occurrence of an Event of Default, and at any time thereafter unless and until
such Event of Default has been waived by the Bank or cured to the satisfaction
of the Bank, the Bank shall by written notice to the Credit Parties take any of
the following actions:

 

(i)         Acceleration.  Declare (i) the unpaid principal of, (ii) any
accrued interest in respect of and (iii) Applicable Prepayment Fee relating to,
amounts outstanding under the Note and any and all other indebtedness or
obligations of any and every kind owing by the Borrower to the Bank hereunder
to be due whereupon the same shall be immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower.

 

(ii)        Enforcement of Rights.  Enforce any and all rights and interests
created and existing under the Credit Documents and all rights of set-off.

 

Notwithstanding the foregoing, if an Event of Default
specified in Section 8.01(f) shall occur, then all the principal amount then
outstanding under the Note, all accrued interest in respect thereof, all
accrued and unpaid Late Charges and other indebtedness or obligations owing to
the Bank hereunder automatically shall immediately become due and payable
without the giving of any notice or other action by the Bank.

 

 

54

 

SECTION
8.03. Right of Set-Off.  In addition to any
rights now or hereafter granted under applicable law or otherwise, and not by
way of limitation of any such rights, upon the occurrence of an Event of
Default, the Bank is authorized at any time and from time to time, without
presentment, demand, protest or other notice of any kind (all of which rights
being hereby expressly waived), to set-off and to appropriate and apply any and
all deposits (general or special) and any other indebtedness at any time held
or owing by the Bank (including, without limitation branches, agencies or
Affiliates of the Bank wherever located) to or for the credit or the account of
any Credit Party against obligations and liabilities of such Person to the Bank
hereunder, under the Note, the other Credit Documents or otherwise,
irrespective of whether the Bank shall have made any demand hereunder and
although such obligations, liabilities or claims, or any of them, may be
contingent or unmatured, and any such set-off shall be deemed to have been made
immediately upon the occurrence of an Event of Default even though such charge
is made or entered on the books of the Bank subsequent thereto; provided, however,
that there shall be no right of set-off hereunder or under any of the other
Loan Documents against any Assets of any Insurance Subsidiary for so long as
any such set-off is prohibited pursuant to Florida Insurance Law or any other
applicable laws.

 

ARTICLE IX

MISCELLANEOUS

                SECTION
9.01.  Notices.  Except as otherwise expressly
provided herein, all notices and other communications shall have been duly
given and shall be effective (i) when delivered, (ii) when transmitted via
telecopy (or other facsimile device) to the number set out below, (iii) the day
following the day on which the same has been delivered prepaid to a reputable
national overnight air courier service, or (iv) the fifth (5th)
Business Day following the day on which the same is sent by certified or
registered mail, postage prepaid, in each case to the respective parties at the
address, in the case of the Borrower, Guarantors and the Bank, set forth below,
or at such other address as such party may specify by written notice to the
other parties hereto:

 

if
to the Borrower or the Guarantors:

 

AmComp
Incorporated

701
U.S. Highway 1, Suite 200

North
Palm Beach, Florida 33408

Attn:  Chief Executive Officer

Telephone:  (407) 840-7140

Telecopy:  (407) 840-7192

 

 

55

 

with
a copy to:

Olshan Grundman Frome Rosenzweig & Wolosky LLP

505 Park Avenue

New York, New York 10002

Attn:  David J. Adler

Telephone:  (212) 753-7200

Telecopy:  (212) 935-1787

 

if to the Bank:

AmSouth
Bank

Attention:
Michael R. Del Rocco

51
West Bay Street

Jacksonville,
Florida 32202

Telephone:  (904) 281-7642

Telecopy:
(904) 281-7646

 

                SECTION 9.02.  [Reserved.]

 

                SECTION 9.03.  Benefit of
Agreement.  This Loan Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective successors and assigns of the parties hereto; provided that none of the Credit Parties may assign or transfer any
of its interests without prior written consent of the Bank.

 

                SECTION 9.04.  No Waiver;
Remedies Cumulative.  No failure or delay
on the part of the Bank in exercising any right, power or privilege hereunder
or under any other Credit Document and no course of dealing between the Bank
and any of the Credit Parties shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege hereunder or under
any other Credit Document preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder or thereunder.  The rights and remedies provided herein are
cumulative and not exclusive of any rights or remedies which the Bank would
otherwise have.  No notice to or demand
on any Credit Party in any case shall entitle the Borrower or any other Credit
Party to any other or further notice or demand in similar or other circumstances
or constitute a waiver of the rights of the Bank to any other or further action
in any circumstances without notice or demand.

 

                SECTION 9.05.  Payment of
Expenses, Etc.  The Borrower agrees
to: (i) pay all reasonable out-of-pocket costs and expenses (A) of the Bank in
connection with the negotiation, preparation, execution and delivery and
administration of this Loan Agreement and the other Credit Documents and the
documents, agreements, certificates and instruments referred to therein
(including, without limitation, the reasonable fees and expenses of Holland
& Knight LLP, special counsel to the Bank (the “Closing Fees”), which
Closing Fees shall not exceed $30,000 exclusive of the Commitment Fee, (B) of
the Bank in connection with any amendment, waiver or 

 

 

56

 

consent relating hereto or to the other Credit
Documents or the other documents, agreements, certificates and instruments
contemplated hereby, including, but not limited to, any such amendments,
waivers or consents resulting from or related to any work-out, renegotiation or
restructure relating to the performance by the Credit Parties under this Loan
Agreement, and (C) of the Bank in connection with enforcement of the Credit
Documents and the documents and instruments referred to or contemplated herein
(including, without limitation, in connection with any such enforcement, the
reasonable fees and disbursements of counsel for the Bank); (ii) pay and hold
the Bank harmless from and against any and all present and future stamp and
other similar taxes with respect to the foregoing matters and save the Bank
harmless from and against any and all liabilities with respect to or resulting
from any delay or omission (other than to the extent attributable to the Bank)
to pay such taxes; and (iii) indemnify the Bank, its officers, directors,
employees, representatives and agents from and hold each of them harmless
against any and all losses, liabilities, claims, damages or expenses incurred
by any of them as a result of, or arising out of, or in any way related to, or
by reason of (A) any investigation, litigation or other proceeding (whether or
not the Bank is a party thereto) related to the entering into and/or
performance of any Credit Document or the use of proceeds of the Term Loan
(including other extensions of credit) hereunder or the consummation of any
other transactions contemplated in any Credit Document, including, without
limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation, litigation or other proceeding or (B)
the presence or Release of any Materials of Environmental Concern at, under or
from any Environmental Property owned, operated or leased by the Borrower or
any of its Subsidiaries, or the failure by the Borrower or any of its Subsidiaries
to comply with any Environmental Law (but excluding, in the case of either of
clause (A) or (B) above, any such losses, liabilities, claims, damages or
expenses to the extent incurred by reason of gross negligence or willful
misconduct on the part of the Person to be indemnified).

 

                SECTION 9.06.  Amendments,
Waivers and Consents.  Neither this Loan
Agreement nor any other Credit Document nor any of the terms hereof or thereof
may be amended, changed, waived, discharged or terminated unless such amendment,
change, waiver, discharge or termination is in writing entered into by, or
approved in writing by, the Bank and the Borrower.

 

                SECTION 9.07.  Counterparts.  This Loan Agreement may be
executed in any number of counterparts, each of which when so executed and
delivered shall be an original, but all of which shall constitute one and the
same instrument.  It shall not be
necessary in making proof of this Loan Agreement to produce or account for more
than one such counterpart.

 

                SECTION 9.08.  Headings.  The headings of the sections and
subsections hereof are provided for convenience only and shall not in any way
affect the meaning or construction of any provision of this Loan Agreement.

 

 

57

 

                SECTION 9.09.  Survival.  All indemnities set forth herein,
including, without limitation, in Section 3.07, 3.09, or 9.05 shall survive the
execution and delivery of this Loan Agreement, the making of the Term Loan, the
repayment of the Term Loan and other obligations under the Credit Documents,
and all representations and warranties made by the Credit Parties herein shall
survive delivery of the Note and the making of the Term Loan hereunder.

 

                                                          SECTION
9.10.  Governing Law; Arbitration; Waiver
of Jury Trial.

 

                (a)           THIS LOAN AGREEMENT AND THE OTHER
CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND
THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF FLORIDA (WITHOUT REGARD TO CONFLICT OF
LAW PRINCIPLES) EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO
THE EXTENT THAT THE VALIDITY AND PERFECTION OF THE BANK’S LIENS, ASSIGNMENTS
AND SECURITY INTERESTS IN THE COLLATERAL ARE GOVERNED BY THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF FLORIDA.

 

                (b)           ANY CONTROVERSY OR CLAIM BETWEEN OR
AMONG THE PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR
RELATING TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATED INSTRUMENTS,
AGREEMENTS OR DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED
TORT, SHALL BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL
ARBITRATION ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF
PRACTICE AND PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./
ENDISPUTE AND ANY SUCCESSOR THEREOF (“J.A.M.S.”), AND THE “ SPECIAL RULES “ SET
FORTH BELOW.  IN THE EVENT OF ANY
INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. 
JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING
JURISDICTION.  ANY PARTY TO THIS AGREEMENT
MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL
ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY
COURT HAVING JURISDICTION OVER SUCH ACTION.

 

                (c)           SPECIAL
RULES.  THE
ARBITRATION SHALL BE CONDUCTED IN THE CITY OF THE BORROWER’S DOMICILE AT TIME
OF THE EXECUTION OF THIS INSTRUMENT, AGREEMENT OR DOCUMENT AND ADMINISTERED BY
J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY
PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN 

 

 

58

 

THE AMERICAN ARBITRATION ASSOCIATION WILL
SERVE.  ALL ARBITRATION HEARINGS WILL BE
COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR
SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF
SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS.

 

                (d)
          Waiver
of Jury Trial.  In the
event that the arbitration provisions set forth in this Loan Agreement are not
applicable or enforceable and legal action is instituted to collect any amounts
due under, or to enforce any provision of, this Loan Agreement or any of the
other Credit Documents, Borrower hereby consents to, and by execution hereof
submits itself to, the jurisdiction of the courts of the State of Florida, and,
notwithstanding its place of business, such litigation may be brought in or
transferred to a court of competent jurisdiction in or for Broward County,
Florida.

 

                IN
SUCH EVENT, THE BORROWER AND THE BANK EACH ACKNOWLEDGE AND AGREE THAT NEITHER
THE BANK NOR THE BANK, NOR ANY ASSIGNEE, SUCCESSOR, HEIR, OR LEGAL
REPRESENTATIVE OF ANY OF THE SAME (ALL OF WHOM ARE HEREINAFTER REFERRED TO AS
“PARTIES”) WILL SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM, OR
ANY OTHER LITIGATION PROCEDURE BASED UPON OR ARISING OUT OF THIS LOAN AGREEMENT
OR THE OTHER CREDIT DOCUMENTS. 
FURTHERMORE, NONE OF THE PARTIES WILL SEEK TO CONSOLIDATE ANY SUCH
ACTION INTO ANY OTHER ACTION IN WHICH A JURY TRIAL HAS NOT BEEN WAIVED.  THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN
FULLY NEGOTIATED BY THE BANK AND THE BORROWER, ARE MADE KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY, AND CONSTITUTE A MATERIAL INDUCEMENT FOR THE BANK TO MAKE
THE LOAN TO BORROWER.

 

(e)           RESERVATION OF RIGHTS.  NOTHING IN THIS INSTRUMENT,
AGREEMENT OR DOCUMENT SHALL BE DEEMED TO (i) LIMIT THE APPLICABILITY OF ANY
OTHERWISE APPLICABLE STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED
IN THIS AGREEMENT; OR (ii) BE A WAIVER BY THE BANK OF THE PROTECTION AFFORDED
TO IT BY 12 U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (iii)
LIMIT THE RIGHT OF THE BANK HERETO (a) TO EXERCISE SELF HELP REMEDIES SUCH AS
(BUT NOT LIMITED TO) SETOFF, OR (b) TO FORECLOSE AGAINST ANY REAL OR PERSONAL
PROPERTY COLLATERAL, OR (c) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY
REMEDIES SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR
THE APPOINTMENT OF A RECEIVER.  THE BANK
MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR OBTAIN
SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF
ANY 

 

 

59

 

ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT. 
NEITHER THE EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR
MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES
SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN
ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM
OCCASIONING RESORT TO SUCH REMEDIES.

 

                SECTION 9.11.  Severability.  If any provision of any of the
Credit Documents is determined to be illegal, invalid or unenforceable, such
provision shall be fully severable and the remaining provisions shall remain in
full force and effect and shall be construed without giving effect to the
illegal, invalid or unenforceable provisions.

 

                SECTION 9.12.  Entirety.  This Loan Agreement together
with the other Credit Documents represent the entire agreement of the parties
hereto and thereto, and supersede all prior agreements and understandings, oral
or written, if any, including any commitment letters or correspondence relating
to the Credit Documents or the transactions contemplated herein and therein.

 

                SECTION 9.13.  Binding
Effect;  Termination.

 

                 (a)          This Loan Agreement shall become effective at such time on
or after the Closing Date when it shall have been executed by the Borrower and
the Bank, the conditions set forth in Section 4.01 hereof have been met and the
Bank shall have received copies hereof (telefaxed or otherwise) and thereafter
this Loan Agreement shall be binding upon and inure to the benefit of the
Borrower and the Bank and their respective successors and assigns.

 

                (b)           The term of this Loan Agreement shall
be until there are no amounts remaining outstanding under the Term Loan or any
other amounts payable hereunder or under any of the other Credit Documents
shall remain outstanding.

 

                SECTION 9.14.  Conflict.  To the extent that there is a
conflict or inconsistency between any provision hereof, on the one hand, and
any provision of any Credit Document, including but not limited to the
Commitment Letter dated July 12, 2000, as amended, on the other hand, this Loan
Agreement shall control.

 

[Signature Pages To
Follow.]

 

 

60

 

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

AMCOMP INCORPORATED,

as Borrower

 

By: /s/ Frederick R. Lowe

Frederick R. Lowe

Chief Executive Officer

 

 

[CORPORATE SEAL]

 

 

AMSOUTH BANK, as Bank

 

By: /s/ Michael R. Del Rocco

Michael R. Del Rocco

Vice President — Commercial Banking

 

 

61

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