Document:

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                                                                    EXHIBIT 10.6

                                    INDENTURE

                                     between

                        MEADOWBROOK INSURANCE GROUP, INC.

                                       and

                              JPMORGAN CHASE BANK,

                                   as Trustee

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

                           Dated as of April 29, 2004

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

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                                    ARTICLE I
             Definitions and Other Provisions of General Application

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<S>          <C>                                                        <C>

Section 1.1  Definitions...............................................  1

Section 1.2  Compliance Certificate and Opinions.......................  8

Section 1.3  Forms of Documents Delivered to Trustee...................  9

Section 1.4  Acts of Holders...........................................  9

Section 1.5  Notices, Etc. to Trustee and Company...................... 11

Section 1.6  Notice to Holders; Waiver................................. 11

Section 1.7  Effect of Headings and Table of Contents.................. 12

Section 1.8  Successors and Assigns.................................... 12

Section 1.9  Separability Clause....................................... 12

Section 1.10 Benefits of Indenture..................................... 12

Section 1.11 Governing Law............................................. 12

Section 1.12 Submission to Jurisdiction................................ 13

Section 1.13 Non-Business Days......................................... 13

                                   ARTICLE II
                                 Security Forms

Section 2.1  Form of Security.......................................... 14

</TABLE>

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<S>          <C>                                                        <C>

Section 2.2. Restricted Legend......................................... 17

Section 2.3  Form of Trustee's Certificate of Authentication........... 19

Section 2.4  Temporary Securities...................................... 20

Section 2.5  Definitive Securities..................................... 20

                                   ARTICLE III
                                 The Securities

Section 3.1  Payment of Principal and Interest......................... 20

Section 3.2  Denominations............................................. 22

Section 3.3  Execution, Authentication, Delivery and Dating............ 22

Section 3.4  Global Securities......................................... 23

Section 3.5  Registration, Transfer and Exchange Generally............. 25

Section 3.6  Mutilated, Destroyed, Lost and Stolen Securities.......... 26

Section 3.7  Persons Deemed Owners..................................... 27

Section 3.8  Cancellation.............................................. 27

Section 3.9  Agreed Tax Treatment...................................... 27

Section 3.10 CUSIP Numbers............................................. 27

                                   ARTICLE IV
                           Satisfaction and Discharge

</TABLE>

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<S>          <C>                                                        <C>

Section 4.1  Satisfaction and Discharge of Indenture................... 28

Section 4.2  Application of Trust Money................................ 29

                                    ARTICLE V
                                    Remedies

Section 5.1  Events of Default......................................... 29

Section 5.2  Acceleration of Maturity; Rescission and Annulment........ 30

Section 5.3  Collection of Indebtedness and Suits for Enforcement
               by Trustee.............................................. 31

Section 5.4  Trustee May File Proofs of Claim.......................... 31

Section 5.5  Trustee May Enforce Claim Without Possession of
               Securities.............................................. 32

Section 5.6  Limitation on Suits....................................... 32

Section 5.7  Application of Money Collected............................ 32

Section 5.8  Unconditional Right of Holders to Receive Principal,
               Premium, if any, and Interest........................... 33

Section 5.9  Restoration of Rights and Remedies........................ 33

Section 5.10 Rights and Remedies Cumulative............................ 33

Section 5.11 Delay or Omission Not Waiver.............................. 33

Section 5.12 Control by Holders........................................ 34

Section 5.13 Waiver of Past Defaults................................... 34

Section 5.14 Undertaking for Costs..................................... 34

</TABLE>

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<TABLE>
<S>          <C>                                                        <C>
Section 5.15  Waiver of Usury, Stay or Extension Laws.................. 35

                                   ARTICLE VI
                                   The Trustee

Section 6.1  Corporate Trustee Required................................ 35

Section 6.2  Certain Duties and Responsibilities....................... 35

Section 6.3  Notice of Defaults........................................ 37

Section 6.4  Certain Rights of Trustee................................. 37

Section 6.5  May Hold Securities....................................... 39

Section 6.6  Compensation; Reimbursement; Indemnity.................... 39

Section 6.7  Resignation and Removal; Appointment of Successor......... 40

Section 6.8  Acceptance of Appointment by Successor.................... 41

Section 6.9  Merger, Conversion, Consolidation or Succession to
               Business................................................ 41

Section 6.10 Not Responsible for Recitals or Issuance of Securities.... 41

Section 6.11 Appointment of Authenticating Agent....................... 42

                                   ARTICLE VII
                Holder's Lists and Reports By Trustee and Company

Section 7.1  Company to Furnish Trustee Names and Addresses of
               Holders................................................. 43

Section 7.2  Preservation of Information; Communications to Holders.... 43

Section 7.3  Reports by the Company.................................... 44

                                  ARTICLE VIII
              Consolidation, Merger, Conveyance, Transfer or Lease
</TABLE>

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<TABLE>
<S>          <C>                                                        <C>
Section 8.1  Company May Consolidate, Etc., Only on Certain Terms...... 45

Section 8.2  Successor Company Substituted............................. 45

                                   ARTICLE IX
                             Supplemental Indentures

Section 9.1  Supplemental Indentures without Consent of Holders........ 46

Section 9.2  Supplemental Indentures with Consent of Holders........... 46

Section 9.3  Execution of Supplemental Indentures...................... 47

Section 9.4  Effect of Supplemental Indentures......................... 47

Section 9.5  Reference in Securities to Supplemental Indentures........ 48

                                    ARTICLE X
                                    Covenants

Section 10.1 Payment of Principal, Premium, if any, and Interest....... 48

Section 10.2 Money for Security Payments to be Held in Trust........... 48

Section 10.3 Statement as to Compliance................................ 49

Section 10.4 Calculation Agent......................................... 49

Section 10.5 Additional Tax Sums....................................... 50

Section 10.6 No Dividends, Distributions, Etc. Following an Event
               of Default.............................................. 50

Section 10.7 Waiver of Covenants....................................... 51

Section 10.8 Treatment of Securities................................... 51
</TABLE>

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<TABLE>
<S>          <C>                                                        <C>

                                   ARTICLE XI
                            Redemption of Securities

Section 11.1 Optional Redemption....................................... 51

Section 11.2 Tax Redemption............................................ 52

Section 11.3 Election to Redeem; Notice to Trustee..................... 52

Section 11.4 Selection of Securities to be Redeemed.................... 52

Section 11.5 Notice of Redemption...................................... 52

Section 11.6 Deposit of Redemption Price............................... 53

Section 11.7 Payment of Securities Called for Redemption............... 53

</TABLE>

SCHEDULES

Schedule A       --          Determination of LIBOR

Exhibit A        --          Form of Officer's Financial Certificate

Exhibit B        --          Financial Definitions Insurance Company

<PAGE>

         INDENTURE, dated as of April 29, 2004, between MEADOWBROOK INSURANCE
GROUP, INC., a Michigan corporation (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 senior 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 GAAP;

                  (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

<PAGE>

                  (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.

         "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.

         "Additional Tax Sums" has the meaning specified in Section 10.5.

         "Additional TaxeS" means taxes, duties or other governmental charges
imposed on interest payments as a result of a Tax Event (including, without
limitation, amounts required to be deducted or withheld by the Company from
payments made by the Company to or for the benefit of the holder of, or any
Person that acquires a beneficial interest in, the Securities).

         "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 accounting practices
prescribed or permitted by the National Association of Insurance Commissioners
and, with respect to the Company's subsidiary insurance companies, the
applicable insurance department of the state of domicile of such insurance
subsidiary, and in each case, applied consistently throughout the periods
involved.

         "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 Regulatory Authority" means Michigan Insurance
Bureau or, if at any time after the execution of this Indenture any such entity
is not existing and performing the duties now assigned to it, any successor body
performing similar duties or functions.

         "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.

<PAGE>

         "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.

         "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--Meadowbrook
Insurance Group, Inc.

         "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

<PAGE>

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(c).

         "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, or
any successor thereto.

         "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).

         "GAAP" means United States generally accepted accounting principles,
consistently applied, from time to time in effect.

         "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

<PAGE>

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 February 15, May 15, August 15, and
November 15 of each year, commencing on August 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).

         "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.

         "Optional Redemption Price" has the meaning set forth in Section 11.1.

         "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;

<PAGE>

                  (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.

         "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.

         "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).

<PAGE>

         "Purchase Agreement" means the agreement, dated as of the date hereof,
between the Company and Dekania CDO II, 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 Special Redemption Price or the Optional
Redemption Price, as applicable, 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.

         "Rights Plan" means a plan of the Company providing for the issuance by
the Company to all holders of its Common Stock of rights entitling the holders
thereof to subscribe for or purchase shares of any class or series of capital
stock of the Company which rights (i) are deemed to be transferred with such
shares of such Common Stock and (ii) are also issued in respect of future
issuances of such Common Stock, in each case until the occurrence of a specified
event or events.

         "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.

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

         "Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 3.1(c).

         "Special Redemption Price" has the meaning set forth in Section 11.2.

         "Stated Maturity" means April 29, 2034.

         "Statutory Financial Statements" means all financial statements of the
Company's subsidiary insurance companies for each relevant period, each prepared
in accordance with Applicable Accounting Principles.

<PAGE>

         "Subsidiary" means a Person more than fifty percent (50%) of the
outstanding voting stock or other voting interests of which is owned, directly
or indirectly, by the Company or by one or more other Subsidiaries, or by the
Company and one or more other Subsidiaries. For purposes of this definition,
"voting stock" means stock that ordinarily has voting power for the election of
directors, whether at all times or only so long as no senior class of stock has
such voting power by reason of any contingency.

         "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.

         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:

<PAGE>

                  (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.

         (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

<PAGE>

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.

         (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.

<PAGE>

         (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 date as
the

<PAGE>

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 26600 Telegraph Road, Southfield, Michigan
48034 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.

<PAGE>

Except in connection with a transaction involving the Company that is permitted
under Article VIII and pursuant to 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 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

<PAGE>

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.

                                   ARTICLE II

                                 SECURITY FORMS

         SECTION 2.1.  Form of Security.

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

                                                               Cusip No. [____]

                        MEADOWBROOK INSURANCE GROUP, INC.

                              SENIOR NOTE DUE 2034.

No. _____________                                               $ ____________

        Meadowbrook Insurance Group, Inc., a Michigan corporation organized
and existing under the laws of Michigan (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 Thirteen Million Dollars ($13,000,000) [IF THE
SECURITY IS A GLOBAL SECURITY, THEN INSERT-- 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 April 29,
2034. The Company further promises to pay interest on said principal sum from
April 29, 2004, or from the most recent Interest Payment Date to which interest
has been paid or duly provided for, quarterly in arrears on February 15, May 15,
August 15 and November 15 of each year, commencing August 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 4.0% per annum together
with Additional Tax Sums, if any, as provided in Section 10.5 of the Indenture,
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 4.0% per annum (to the extent that the payment of such Additional
Interest shall be

<PAGE>

legally enforceable), compounded quarterly from the dates such amounts are due
until they are paid or made available for payment, and such interest shall be
payable on demand.

         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 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. 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.

         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 April 29,
2004 (the "Indenture"), between the Company and JPMorgan Chase Bank, as Trustee
(in such capacity, the "Trustee," 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 and the
Holders of the Securities and of the terms upon which the Securities are, and
are to be, authenticated and delivered.

<PAGE>

         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 April 29, 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, through
but excluding the date fixed as the Redemption Date.

         In addition, upon the occurrence and during the continuation of a Tax
Event, the Company may, 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), redeem
this Security, in whole but not in part, subject to the terms and conditions of
Article XI of the Indenture at a Redemption Price equal to one hundred seven and
one half percent (107.5%) of the principal amount hereof, together, in the case
of any such redemption, with accrued interest, including any Additional
Interest, and Additional Tax Sums, if any, through but excluding the date fixed
as the Redemption Date.

         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 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 nor any 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

<PAGE>

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 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.

                                       Meadowbrook Insurance Group, Inc.

                                       By:______________________________________

                                          Name:
                                          Title:

         SECTION 2.2.  Restricted Legend.

<PAGE>

         (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 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

<PAGE>
         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 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

<PAGE>

         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.

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

         The Trustee's certificate 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

<PAGE>

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.

                                   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 4.0% 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 4.0% 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.

         (b) 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.

         (c) 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 by virtue of having been
such Holder, and such Defaulted Interest

<PAGE>

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.

         (d) 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.

         (e) 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

<PAGE>

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.

         (f) 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 Thirteen
Million Dollars ($13,000,000) 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

<PAGE>

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 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

<PAGE>

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
Trustee 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 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

<PAGE>

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.

         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

<PAGE>

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.

         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

<PAGE>

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 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. 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 3.10. CUSIP Numbers.

<PAGE>

         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 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

<PAGE>

         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 of 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 have been deposited with or received by the
Trustee.

                                    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):

<PAGE>

         (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) 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 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.

         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.

<PAGE>

         (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 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

<PAGE>

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,
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 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;

<PAGE>

         (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: 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

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

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

         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

<PAGE>

(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

         (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

<PAGE>

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.

<PAGE>

         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 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

<PAGE>

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 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.

<PAGE>

         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;

         (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

<PAGE>

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
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

<PAGE>
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);

                  (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.

<PAGE>

         (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 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

<PAGE>

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 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.

<PAGE>

         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 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

<PAGE>

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 referred to in the within mentioned Indenture.

         Dated:

                                    JPMORGAN CHASE BANK, not in its
                                    individual capacity, but solely as Trustee

                                    By:______________________________________
                                         Authenticating Agent

                                    By:______________________________________
                                         Authorized 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:

         (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,

<PAGE>

         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 Dekania CDO II, Ltd. holds any of
the Securities, the Company shall furnish to Dekania CDO II, Ltd. or its
designee, Statutory Financial Statements promptly following their filing with
the Applicable Insurance Regulatory Authority.

         (b) The Company shall furnish to each of (i) the Trustee, (ii) the
Holders and to subsequent holders of Securities, (iii) Dekania Capital
Management, LLC (at 1818 Market Street 28th Floor, Philadelphia, PA 19103, Attn:
Matthew Mueller or such other address from time to time designated by Dekania
Capital 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 Dekania Capital 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.

         (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

<PAGE>

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 Consolidate, Etc., Only on Certain Terms.

         The Company shall not 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 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 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 consolidation, merger,
conveyance, transfer or lease and, if a supplemental indenture is required in
connection with such transaction, any such supplemental indenture comply with
this Article VIII and that all conditions precedent herein provided for relating
to such transaction have been complied with; and

<PAGE>

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 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 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 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 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

<PAGE>

         (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.

<PAGE>

         (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.

         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.

<PAGE>

         (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.

         (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

<PAGE>

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, 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

<PAGE>

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. Additional Tax Sums. If a Tax Event has occurred and is
continuing, the Company shall pay to the Holders for so long as the Purchaser
(or its designated nominee) is a registered holder of the Outstanding
Securities, such amounts as may be necessary in order that the amount of
interest then due and payable on the Securities shall not be reduced as a result
of any Additional Taxes arising from such Tax Event (such additional amounts
payable by the Company to the Purchaser the "Additional Tax Sums"). Whenever in
this Indenture or the Securities there is a reference in any context to the
payment of principal of or interest on the Securities, such mention shall be
deemed to include mention of the payment of the Additional Tax Sums provided for
in this Section 10.5 to the extent that, in such context, Additional Tax Sums,
are, were or would be payable in respect thereof pursuant to the provisions of
this Section10.5 and express mention of the payment of Additional Tax Sums (if
applicable) in any provisions hereof shall not be construed as excluding
Additional Tax Sum in those provisions hereof where such express mention is not
made

         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, it shall not (i)
declare or pay any dividends or distributions on, or redeem, purchase, acquire
or make a liquidation payment with respect to, any shares of the Company's
capital stock, or (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 junior in interest to the Securities (other than (A) repurchases,
redemptions or other acquisitions of shares of capital stock of the Company in
connection with any employment contract, benefit plan or other similar
arrangement with or for the benefit of any one or more employees, officers,
directors or consultants, in connection with a dividend reinvestment or
stockholder stock purchase plan or in connection with the issuance of capital
stock of the Company (or securities convertible into or exercisable for such
capital stock) as consideration in an acquisition transaction entered into prior
to the occurrence of such Event of Default, (B) as a result of an exchange or
conversion of any class or series of the Company's capital stock (or any capital
stock of a Subsidiary of the Company) for any class or series of the Company's
capital stock or of any class or series of the Company's indebtedness for any
class or series of the Company's capital stock, (C) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged, (D) any declaration of a dividend in connection with any Rights Plan,
the issuance of rights, stock or other property under any Rights Plan or the
redemption or repurchase of rights pursuant thereto or (E) any dividend in the
form of stock, warrants, options or other rights where the dividend stock or the
stock issuable upon exercise of such warrants, options or other rights is the
same stock as that on which the dividend is being paid or ranks pari passu with
or junior to such stock).

         SECTION 10.7.  Waiver of Covenants.

<PAGE>

         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 April 29, 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, through but excluding the date fixed for as the
Redemption Date (the "Optional Redemption Price").

         SECTION 11.2.  Tax Redemption

         Prior to April 29, 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").

         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 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
<PAGE>

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.

         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.

         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 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.

<PAGE>

         (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.

         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.

                                     * * * *

         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.

                                     * * * *

<PAGE>

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

                                              MEADOWBROOK INSURANCE GROUP, INC.

                                              By:_______________________________
                                                 Name:
                                                 Title:

                                              JPMORGAN CHASE BANK, as Trustee

                                              By:_______________________________
                                                 Name:
                                                 Title:

<PAGE>

                                                                      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 April 27, 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.

<PAGE>

                                                                       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 April 29, 2004, between Meadowbrook Insurance
Group, Inc. (the "Company") and JPMorgan Chase Bank, as trustee, that, as of
[date], [20__], the Company, if applicable, and its Subsidiary Insurance
Companies (as defined below) had the following ratios and balances:

[For the Company, if applicable and each Subsidiary Insurance Company provide:]

[INSURANCE COMPANY]

As of [Quarterly/Annual Financial Dates], 20__

<TABLE>
<S>                                                                                          <C>
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                                         _____%
</TABLE>

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

<PAGE>

The following is a complete list as of [Quarterly/Annual Financial Date] of the
Company's subsidiaries which are authorized to write insurance business or
otherwise conduct insurance or reinsurance business (the "Subsidiary Insurance
Companies"):

[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 Company and its consolidated subsidiaries for the
three years ended [DATE], 20__ and all required Statutory Financial Statements
(as defined in the Purchase Agreement) 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) 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 [___
QUARTER INTERIM] [ANNUAL] period ended [DATE], 20__, 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__

                                        MEADOWBROOK INSURANCE GROUP, INC.

                                        By:_____________________________________
                                        Name:___________________________________
                                        Its:

                                        MEADOWBROOK INSURANCE GROUP, INC.
                                        [ADDRESS]
                                        [ADDRESS]
                                        [TELEPHONE NUMBER]

<PAGE>

                              FINANCIAL DEFINITIONS

                                INSURANCE COMPANY

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                           REPORT ITEM                                             DESCRIPTION OF CALCULATION
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>
   NAIC RISK BASED CAPITAL RATIO-P&C                              (Total Adjusted Capital/Authorized Control Level Risk-Based
                                                                  Capital)/2
------------------------------------------------------------------------------------------------------------------------------------
   NAIC RISK BASED CAPITAL RATIO-LIFE                             ((Total Adjusted Capital-Asset Valuation
                                                                  Reserve)/Authorized Control Level Risk-Based Capital)/2
------------------------------------------------------------------------------------------------------------------------------------
   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      (Total Class 1 + Total Class 2 Rated Investments)/Total
   INVESTMENTS                                                    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
------------------------------------------------------------------------------------------------------------------------------------
</TABLE><PAGE>
                                                                               .
                                                                               .
                                                                               .
                                                                    EXHIBIT 10.7

[COMERICA LOGO]                AMENDED AND RESTATED

                          LOAN AND SECURITY AGREEMENT
                                   (ACCOUNTS)

<TABLE>
<S>                            <C>                                    <C>
------------------------------------------------------------------------------------------------------------
OBLIGOR: # 4629454937          OBLIGATION #:                          AGREEMENT DATE: MAY 7, 2004
------------------------------------------------------------------------------------------------------------
CREDIT LIMIT: $8,000,000       INTEREST RATE: BASE RATE MINUS         OFFICE NO./INITIALS: 49541 / M. TAYLOR
                               0.5% OR LIBOR OPTION
------------------------------------------------------------------------------------------------------------
</Table>

         THIS AGREEMENT is entered into on May 14, 2002, between COMERICA BANK,
a Michigan banking corporation ("Bank") as secured party, successor by merger to
Comerica Bank-California, whose headquarters office is 333 West Santa Clara
Street, San Jose, California 95113 and LIBERTY PREMIUM FINANCE, INC. a
California corporation ("Borrower"), whose sole place of business (if it has
only one), chief executive office (if it has more than one place of business) is
located at the address set forth below its name on the signature page to this
Agreement. The parties agree as follows:

         Borrower and Bank have entered into that Loan and Security Agreement
dated as of May 14, 2002 ("2002 Agreement").

         Borrower and Bank hereby agree that the 2002 Agreement is hereby
amended and restated in full to read as follows:

1.       DEFINITIONS.

         1.1 "Accounts" shall mean and includes all presently existing and
hereafter arising accounts resulting from net amounts owing from insureds on
finance contracts, including without limitation all accounts receivable,
contract rights and other forms of right to payment for monetary obligations or
receivables owing to Borrower, and any supporting obligations, credit insurance,
guaranties or security therefor, irrespective of whether earned by performance.

         1.2 "Agreement" shall mean and includes this Amended and Restated Loan
and Security Agreement (Accounts), any concurrent or subsequent rider to this
Loan and Security Agreement (Accounts) and any extensions, supplements,
amendments or modifications to this Loan and Security Agreement (Accounts)
and/or to any such rider.

         1.3 "Bank Expenses" shall mean and includes: all costs or expenses
required to be paid by Borrower under this Agreement which are paid or advanced
by Bank; taxes and insurance premiums of every nature and kind of Borrower paid
by Bank; filing, recording, publication and search fees, appraiser fees, auditor
fees and costs, and title insurance premiums paid or incurred by Bank in
connection with Bank's transactions with Borrower; costs and expenses incurred
by Bank in collecting the Accounts (with or without suit) to correct any default
or enforce any provision of this Agreement, or in gaining possession of,
maintaining, handling, preserving, storing, shipping, selling, disposing of,
preparing for sale and/or advertising to sell the Collateral, whether or not a
sale is consummated; costs and expenses of suit incurred by Bank in enforcing or
defending this Agreement or any portion hereof, including, but not limited to,
expenses incurred by Bank in attempting to obtain relief from any stay,
restraining order, injunction or similar process which prohibits Bank from
exercising any of its rights or remedies; and reasonable attorneys' fees and
expenses incurred by Bank in advising, structuring, drafting, reviewing,
amending, terminating, enforcing, defending or concerning this Agreement, or any
portion hereof or any agreement related hereto, whether or not suit is brought.
Bank Expenses shall include Bank's in-house legal charges at reasonable rates.

         1.4 "Base Rate" shall mean that variable rate of interest so announced
by Bank at its headquarters office in Detroit Michigan as its "Base Rate" from
time to time and which serves as the basis upon which effective rates of
interest are calculated for those loans making reference thereto.

         1.5 "Borrower's Books" shall mean and includes all of Borrower's books
and records including but not limited to minute books; ledgers; records
indicating, summarizing or evidencing Borrower's assets (including, without
limitation, the Accounts), liabilities, business operations or financial
condition, and all information relating thereto, computer programs; computer
disk or tape files; computer printouts; computer runs; and other computer
prepared information and equipment of any kind.

         1.6 "Borrowing Base" shall mean the sum of: (1) seventy-five percent
(75%) of the net amount of Eligible Accounts after deducting therefrom all
payments, adjustments and credits applicable thereto.

         1.7 "Cash Flow" shall mean, for any applicable period of determination,
the Net Income (after deduction for income taxes and other taxes of such Person,
or its subsidiaries, determined by reference to income or profits of such
Person, or its subsidiaries) for such period, plus, to the extent deducted in
computation of such Net Income, the amount of depreciation and amortization
expense and the amount of deferred tax liability during such period, all as
determined in accordance with GAAP.

         1.8 "Collateral" shall mean and includes all personal property of
Borrower, including without limitation each and all of the following: the
Accounts; the General Intangibles; the Negotiable Collateral; Borrower's Books;
all Borrower's deposit accounts; all Borrower's investment property (including
without limitation securities and securities entitlements); all goods,
instruments, documents, policies and certificates of insurance, deposits, money
or other personal property of Borrower in which Bank receives a security
interest and which now or later come into the possession, custody or control of
Bank; all Borrower's equipment and fixtures; all additions, accessions,
attachments, parts, replacements, substitutions, renewals, interest, dividends,
distributions or rights of any kind for or with respect to any of the foregoing
(including without limitation any stock splits, stock rights, voting rights and
preferential rights); any supporting obligations for any of the foregoing; and
the products and proceeds of any of the foregoing, including, but not limited
to, proceeds of insurance covering the Collateral, and any and all Accounts,
General Intangibles,

                                       1
<PAGE>

Negotiable Collateral, equipment, money, deposit accounts, investment property,
equipment, fixtures or other tangible and intangible property of Borrower
resulting from the sale or other disposition of the Collateral and the proceeds
thereof and any supporting obligations or security therefor and any right to
payment thereunder, and including, without limitation, cash or other property
which were proceeds and are recovered by a bankruptcy trustee or otherwise as a
preferential transfer by Borrower. Notwithstanding anything to the contrary
contained herein, Collateral shall not include any waste or other materials
which have been or may be designated as toxic or hazardous by Bank.

         1.9 "Credit" shall mean all Indebtedness, except that Indebtedness
arising pursuant to any other separate contract, instrument, note, or other
separate agreement which, by its terms, provides for a specified interest rate
and term.

         1.10 "Credit Limit" shall mean Eight  Million Dollars ($8,000,000).

         1.11 "Current Assets" shall mean, in respect of a Person and as of any
applicable date of determination; all current assets of such Person determined
in accordance with GAPP.

         1.12 "Current Liabilities" shall mean, in respect of a Person and as of
any applicable date of determination, all liabilities of such Person that should
be classified as current in accordance with GAAP.

         1.13 "Daily Balance" shall mean the amount determined by taking the
amount of the Credit owed at the beginning of a given day, adding any new Credit
advanced or incurred on such date, and subtracting any payments or collections
which are deemed to be paid and are applied by Bank in reduction of the Credit
on that date under the provisions of this Agreement.

         1.14 "Debt" shall mean, as of any applicable date of determination, all
items of indebtedness, obligation or liability of a Person, whether matured or
unmatured, liquidated or unliquidated, direct or indirect, absolute or
contingent, joint or several, that should be classified as liabilities in
accordance with GAAP. In the case of Borrower, the term "Debt" shall include,
without limitation, the Indebtedness.

         1.15 "Debt-to-Worth Ratio" shall mean, in respect of a Person and as of
any applicable date of determination, the ratio of (a) the total Debt of such
Person at such time, to (b) the Tangible Effective Net Worth of such Person at
such time.

         1.16 "Eligible Accounts" shall mean and includes those Accounts of
Borrower which have been validly assigned to Bank and strictly comply with all
of Borrower's warranties and representations to Bank; but Eligible Accounts
shall not include the following: (a) Accounts with respect to which the account
debtor is an officer, employee, partner, joint venturer or agent of Borrower;
(b) Accounts with respect to which the payment by the account debtor may be
conditional; (c) Accounts with respect to which the account debtor is not a
resident of the United States; (d) Accounts with respect to which the account
debtor is the United States or any department, agency or instrumentality of the
United States; (e) Accounts with respect to which the account debtor is any
State of the United States or any city, county, town, municipality or division
thereof; (f) Accounts with respect to which the account debtor is a subsidiary
of, related to, affiliated or has common shareholders, officers or directors
with Borrower; (g) Accounts with respect to which Borrower is or may become
liable to the account debtor; (h) Accounts not paid by an account debtor within
ninety (90) days from the due date of any payment; (i) Accounts with respect to
which account debtors dispute liability or make any claim, or have any defense,
crossclaim, counterclaim, or offset; (j) Accounts with respect to which any
Insolvency Proceeding is filed by or against the account debtor, or if an
account debtor becomes insolvent, fails or goes out of business; and (k)
Accounts owed by any single account debtor which exceed twenty percent (20%) of
all of the Eligible Accounts; (l) Accounts with a particular account debtor on
which over twenty-five percent (25%) of the aggregate amount owing is greater
than ninety (90) days from the date of the invoice; and (m) (1) Accounts payable
owed to insurance carriers;(2) Accounts relating to insurance issued by
admitted insurance carriers rated B or less by A M Best; and (3)Accounts
relating to insurance issued by non-admitted insurance carriers rated B+ or less
by AM Best shall all be deemed ineligible.

         1.17 "Event of Default" shall mean one or more of those events
described in Section 7 contained herein below.

         1.18 "GAAP" shall mean, as of any applicable period, generally accepted
accounting principles in effect during such period.

         1.19 "General Intangibles" shall mean and includes all of Borrower's
present and future general intangibles and other personal property (including
without limitation all payment intangibles, electronic chattel paper, contract
rights, rights arising under common law, statutes, or regulations, choses or
things in action, goodwill, patents, trade names, trademarks, servicemarks,
copyrights, blueprints, drawings, plans, diagrams, schematics, purchase orders,
customer lists, monies due or recoverable from pension funds, route lists,
rights to payment (including without limitation, rights to payment evidenced by
chattel paper, documents or instruments) and other rights under any royalty or
licensing agreements, infringement claims, software (including without
limitation any computer program that is embedded in goods that consist solely of
the medium in which the program is embedded), information contained on computer
disks or tapes, literature, reports, catalogs, insurance premium rebates, tax
refunds, and tax refund claims), other than goods, Accounts, Negotiable
Collateral, and Borrowers Books.

         1.20 "Indebtedness" shall mean and includes any and all loans,
advances, Letter of Credit Obligations, overdrafts, debts, liabilities
(including, without limitation, any and all amounts charged to Borrower's loan
account pursuant to any agreement authorizing Bank to charge Borrower's loan
account), obligations, lease payments, guaranties, covenants and duties owing by
Borrower to Bank of any kind and description whether advanced pursuant to or
evidenced by this Agreement; by any note or other Instrument; or by any other
agreement between Bank and Borrower and whether or not for the payment of money,
whether direct or indirect, absolute or contingent, due or to become due now
existing or hereafter arising, including, without limitation, any interest,
fees, expenses, costs and other amounts owed to Bank that but for the provisions
of the United States Bankruptcy Code would have accrued after the commencement
of any Insolvency Proceeding, and including, without limitation, any debt,
liability, or

                                       2
<PAGE>

obligations owing from Borrower to others which Bank may have obtained by
assignment, participation, purchase or otherwise, and further including, without
limitation, all interest not paid when due and all Bank Expenses which Borrower
is required to pay or reimburse by this Agreement, by law, or otherwise.

         1.21 "Insolvency Proceeding" shall mean and includes any proceeding or
case commenced by or against Borrower, or any guarantor of Borrower's
Indebtedness, or any of Borrower's account debtors, under any provisions of the
Bankruptcy Code, as amended, or any other bankruptcy or insolvency law,
including, but not limited to assignments for the benefit of creditors, formal
or informal moratoriums, composition or extensions with some or all creditors,
any proceeding seeking a reorganization, arrangement or any other relief under
the Bankruptcy Code, as amended, or any other bankruptcy or insolvency law.

         1.22 "Intentionally Omitted".

         1.23 "Letter of Credit Obligations" shall mean, as of any applicable
date of determination, the sum of the undrawn amount of any letter(s) of credit
issued by Bank upon the application of and/or for the account of Borrower, plus
any unpaid reimbursement obligations owing by Borrower to Bank in respect of any
such letter(s) of credit.

         1.24 "Net Income" shall mean the net income (or loss) of a person for
any period of determination, determined in accordance with GAAP but excluding in
any event:

                   a. any gains or losses on the sale or other disposition, not
         in the ordinary course of business, of investments or fixed or capital
         assets, and any taxes on the excluded gains and any tax deductions or
         credits on account on any excluded losses; and

                   b. in the case of Borrower, net earnings of any Person in
         which Borrower has an ownership interest, unless such net earnings
         shall have actually been received by Borrower in the form of cash
         distributions.

         1.25 "Negotiable Collateral" shall mean and include all of Borrower's
present and future letters of credit, advises of credit, letter-of-credit
rights, certificates of deposit, notes, drafts, money, documents (including
without limitation all negotiable documents), instruments (including without
limitation all promissory notes), tangible chattel paper or any other similar
property.

         1.26 "Judicial Officer or Assignee" shall mean and includes any
trustee, receiver, controller, custodian, assignee for the benefit of creditors
or any other person or entity having powers or duties like or similar to the
powers and duties of trustee, receiver, controller, custodian or assignee for
the benefit of creditors.

         1.27 "Person" or "person" shall mean and includes any individual,
corporation, partnership, joint venture, firm, association, trust,
unincorporated association, joint stock company, government, municipality,
political subdivision or agency or other entity.

         1.28 "Quick Assets" shall mean, as of any applicable date of
determination, unrestricted cash, certificates of deposit or marketable
securities and net accounts receivable arising from the sale of goods and
services, and United States government securities and/or claims against the
United States government of Borrower and its subsidiaries.

         1.29 "Subordinated Debt" shall mean indebtedness of Borrower to third
parties which has been subordinated to the Indebtedness pursuant to a
subordination agreement in form and content satisfactory to Bank.

         1.30 "Subordination Agreement" shall mean a subordination agreement in
form satisfactory to Bank making all present and future indebtedness of Borrower
to Crest Financial Corporation subordinate to the Indebtedness, and any other
person who has entered into a Subordination Agreement in favor of Bank from time
to time subordinated to the Indebtedness.

         1.31 "Tangible Effective Net Worth" shall mean, with respect to any
Person and as of any applicable date of determination, Tangible Net Worth plus
Subordinated Debt.

         1.32 "Tangible Net Worth" shall mean, with respect to any Person and as
of any applicable date of determination, the excess of:

                   a. the net book value of all assets of such Person (excluding
         affiliate receivables, patents, patent rights, trademarks, trade names,
         franchises, copyrights, licenses, goodwill, and all other intangible
         assets of such Person) after all appropriate deductions in accordance
         with GAAP (including, without limitation, reserves for doubtful
         receivables, obsolescence, depreciation and amortization), over

                   b. all Debt of such Person at such time.

         1.33 "Working Capital" shall mean, as of any applicable date of
determination, Current Assets less Current Liabilities.

Any and all terms used in the foregoing definitions and elsewhere in this
Agreement shall be construed and defined in accordance with the meaning and
definition of such terms under and pursuant to the California Uniform Commercial
Code (hereinafter referred to as the "Uniform Commercial Code") as amended,
revised or replaced from time to time. Notwithstanding the foregoing, the
parties intend that the terms used herein which are defined in the Uniform
Commercial Code have, at all times, the broadest and most inclusive meanings
possible. Accordingly, if the Uniform Commercial Code shall in the future be
amended or held by a court to define any term used herein more broadly or
inclusively than the Uniform Commercial Code in effect on the date of this
Agreement, then such term, as used herein, shall be given such broadened
meaning. If the Uniform Commercial Code shall in the future be amended or held
by a court to define any term used herein more narrowly, or less inclusively,
than the Uniform Commercial Code

                                       3
<PAGE>

in effect on the date of this Agreement, such amendment or holding shall be
disregarded in defining terms used in this Agreement.

2.       LOAN AND TERMS OF PAYMENT.

For value received, Borrower promises to pay to the order of Bank such amount,
as provided for below, together with interest, as provided for below.

         2.1 Upon the request of Borrower, made at any time and from time to
time during the term hereof, and so long as no Event of Default has occurred,
Bank shall lend to Borrower an amount equal to the Borrowing Base; provided,
however, that the Daily Balance shall not exceed the lesser of either the Credit
Limit or the Borrowing Base, minus all Letter of Credit Obligations. If at any
time for any reason, the amount of Indebtedness owed by Borrower to Bank
pursuant to this Section 2.1 of this Agreement is greater than the aggregate
amount available to be drawn under this Section 2.1, Borrower shall immediately
pay to Bank, in cash, the amount of such excess.

         2.2 Except as hereinbelow provided, the Credit shall bear interest, on
the Daily Balance owing, at a at a fluctuating rate of interest equal to the
Base Rate minus one half of one percent (-0.50%) percentage points per annum or
at the LIBOR Option in accordance with the LIBOR Addendum attached hereto. All
interest chargeable under this Agreement that is based upon a per annum
calculation shall be computed on the basis of a three hundred sixty (360) day
year for actual days elapsed. The Base Rate as of the date of this Agreement is
four percent (4.00%) per annum. In the event that the Base Rate announced is,
from time to time hereafter, changed, adjustment in the Base Rate shall be made
and based on the Base Rate in effect on the date of such change. The Base Rate,
as adjusted, shall apply to the Credit until the Base Rate is adjusted again.

                   a. All interest payable by Borrower under the Credit shall be
         due and payable on the first day of each calendar month during the term
         of this Agreement. A late payment charge equal to five percent (5%) of
         each late payment may be charged on any payment not received by Bank
         within ten (10) calendar days after the payment due date, but
         acceptance of payment of this charge shall not waive any Event of
         Default under this Agreement. Upon the occurrence of an Event of
         Default hereunder, and without constituting a waiver of any such Event
         of Default, then during the continuation thereof, at Bank's option, the
         Credit shall bear interest, on the Daily Balance owing, at a rate equal
         to three percent (3%) per year in excess of the rate applicable
         immediately prior to the occurrence of the Event of Default, and such
         rate of interest shall fluctuate thereafter from time to time at the
         same time and in the same amount as any fluctuation in the rate of
         interest applicable immediately prior to any such occurrence.

3.       TERM.

         3.1 This Agreement shall remain in full force and effect until:

                   a. May 14, 2005, or until terminated by notice by Borrower.
         Notice of such termination by Borrower shall be effectuated by mailing
         of a registered or certified letter not less than thirty (30) days
         prior to the effective date of such termination, addressed to Bank at
         the address set forth herein and the termination shall be effective as
         of the date so fixed in such notice.

                   b. Notwithstanding the foregoing, should Borrower be in
         default of one or more of the provisions of this Agreement, Bank may
         terminate this Agreement at any time without notice. Notwithstanding
         the foregoing, should either Bank or Borrower become insolvent or
         unable to meet its debts as they mature, or fail, suspend, or go out of
         business, the other party shall have the right to terminate this
         Agreement at any time without notice. On the date of termination all
         Indebtedness shall become immediately due and payable without notice or
         demand; no notice of termination by Borrower shall be effective until
         Borrower shall have paid all Indebtedness to Bank in full in cash No
         section of this Agreement or type of loan available hereunder may be
         terminated singly.

         3.2 All undertakings, agreements, covenants, warranties, and
representations of Borrower contained in this Agreement or any other document,
instrument or agreement entered into with or in favor of Bank in connection
herewith shall survive any such termination, and Bank shall retain its security
interest in and to all existing Collateral and Collateral arising thereafter,
any and all liens thereon, and all of its rights and remedies under this
Agreement or any other document, instrument or agreement entered into with or in
favor of Bank in connection herewith notwithstanding such termination until the
payment in full in cash of all Indebtedness to Bank. Notwithstanding the
satisfaction in full of the Indebtedness, Bank shall not be required to
terminate its security interests in the Collateral unless, with respect to any
loss or damage Bank may incur as a result of dishonored checks or other items of
payment received by Bank and applied to the Indebtedness, Bank shall, at its
option, (a) have received a written agreement, executed by Borrower and by any
Person whose loans or other advances to Borrower are used in whole or in part to
satisfy the Indebtedness, indemnifying Bank from any such loss or damage, or (b)
have retained such monetary reserves and liens on the Collateral for such period
of time as Bank, in its reasonable discretion, may deem necessary to protect
Bank from any such loss or damage.

         3.3 After termination and when Bank has received payment in full of
Borrower's Indebtedness to Bank, Bank shall reassign to Borrower all Collateral
held by Bank, and shall execute a termination of all security agreements and
security interests given by Borrower to Bank.

4.       CREATION OF SECURITY INTEREST.

         4.1 Borrower hereby grants to Bank a continuing security interest in
all presently existing and hereafter arising Collateral in order to secure
prompt repayment of any and all Indebtedness owed by Borrower to Bank and in
order to secure prompt performance by Borrower of each and all of its covenants
and obligations under this Agreement and otherwise created. Bank's security
interest in the Collateral shall attach to all Collateral without further act on
the part of Bank or Borrower. In the event that any Collateral, including
proceeds, is evidenced by or consists

                                       4
<PAGE>

of Negotiable Collateral, Borrower, immediately upon the request of Bank, shall
(a) endorse or assign such Negotiable Collateral to Bank, (b) deliver actual
physical possession of such Negotiable Collateral to Bank, and (c) mark
conspicuously all of its records pertaining to such Negotiable Collateral with a
legend, in form and substance satisfactory to Bank (and in the case of
Negotiable Collateral consisting of tangible chattel paper, immediately mark all
such tangible chattel paper with a conspicuous legend in form and substance
satisfactory to Bank), indicating that the Negotiable Collateral is subject to
the security interest granted to Bank hereunder.

         4.2 Bank's security interest in the Accounts shall attach to all
Accounts without further act on the part of Bank or Borrower. Upon request from
Bank, Borrower shall provide Bank with schedules describing all Accounts created
or acquired by Borrower (including without limitation agings listing the names
and addresses of, and amounts owing by date by account debtors), and shall
execute and deliver written assignments of all Accounts to Bank all in a form
acceptable to Bank; provided, however, Borrower's failure to execute and deliver
such schedules and/or assignments shall not affect or limit Bank's security
interest and other rights in and to the Accounts. Together with each schedule,
Borrower shall furnish Bank, upon request, with copies of Borrower's finance
contracts or the or the equivalent, and Borrower warrants the genuineness
thereof. Upon the occurrence of an Event of Default, Bank or Bank's designee may
notify customers or account debtors of Bank's security interest in the
Collateral and direct such customers or account debtors to make payments
directly to Bank, but unless and until Bank does so or gives Borrower other
written instructions, Borrower shall collect all Accounts for Bank, receive in
trust all payments thereon as Bank's trustee, and, if so requested to do so from
Bank, Borrower shall immediately deliver said payments to Bank in their original
form as received from the account debtor and all letters of credit, advices of
credit, instruments, documents, chattel paper or any similar property evidencing
or constituting Collateral. The receipt of any check or other item of payment by
Bank shall not be considered a payment on account until such check or other item
of payment is honored when presented for payment, in which event, said check or
other item of payment shall be deemed to have been paid to Bank two (2) calendar
days after the date Bank actually receives such check or other item of payment.

         4.3 "Intentionally Omitted".

         4.4 Concurrently with Borrower's execution of this Agreement, and at
any time or times hereafter at the request of Bank, Borrower shall (a) execute
and deliver to Bank security agreements, mortgages, assignments, certificates of
title, affidavits, reports, notices, schedules of accounts, letters of authority
and all other documents that Bank may reasonably request, in form satisfactory
to Bank, to perfect and maintain perfected Bank's security interest in the
Collateral and in order to fully consummate all of the transactions contemplated
under this Agreement, (b) cooperate with Bank in obtaining a control agreement
in form and substance satisfactory to Bank with respect to all deposit accounts,
electronic chattel paper, investment property, and letter-of-credit rights, and
(c) in the event that any Collateral is in the possession of a third party,
Borrower shall join with Bank in notifying such third party of Bank's security
interest and obtaining an acknowledgment from such third party that it is
holding such Collateral for the benefit of Bank. By authenticating or becoming
bound by this Agreement, Borrower authorizes the filing of initial financing
statement(s), and any amendment(s) covering the Collateral to perfect and
maintain perfected Bank's security interest in the Collateral. Upon the
occurrence of an Event of Default, Borrower hereby irrevocably makes,
constitutes and appoints Bank (and any of Bank's officers, employees or agents
designated by Bank) as Borrower's true and lawful attorney-in-fact with power to
sign the name of Borrower on any security agreement, mortgage, assignment,
certificate of title, affidavit, letter of authority, notice of other similar
documents which must be executed and/or filed in order to perfect or continue
perfected Bank's security interest in the Collateral, and to take such actions
in its own name or in Borrower's name as Bank, in its sole discretion, deems
necessary or appropriate to establish exclusive possession or control (as
defined in the Uniform Commercial Code) over any Collateral of such nature that
perfection of Bank's security interest may be accomplished by possession or
control.

         4.5 Borrower shall make appropriate entries in Borrower's Books
disclosing Bank's security interest in the Accounts. Bank (through any of its
officers, employees or agents) shall have the right at any time or times
hereafter, provided that reasonable notice is provided, during Borrower's usual
business hours, or during the usual business hours of any third party having
control over the records of Borrower, to inspect and verify Borrower's Books in
order to verify the amount or condition of, or any other matter, relating to,
said Collateral and Borrower's financial condition.

         4.6 Effective only upon the occurrence of an Event of Default, Borrower
appoints Bank or any other person whom Bank may designate as Borrower's
attorney-in-fact, with power: to endorse Borrower's name on any checks, notes,
acceptances, money order, drafts or other forms of payment or security that may
come into Bank's possession; to sign Borrower's name on any invoice or bill of
lading relating to any Accounts, on drafts against account debtors, on schedules
and assignments of Accounts, on verifications of Accounts and on notices to
account debtors; to establish a lock box arrangement and/or to notify the post
office authorities to change the address for delivery of Borrower's mail
addressed to Borrower to an address designated by Bank, to receive and open all
mail addressed to Borrower, and to retain all mail relating to the Collateral
and forward all other mail to Borrower; to send, whether in writing or by
telephone, requests for verification of Accounts; and to do all things necessary
to carry out this Agreement. Borrower ratifies and approves all acts of the
attorney-in-fact. Neither Bank nor its attorney-in-fact will be liable for any
acts or omissions or for any error of judgement or mistake of fact or law. This
power being coupled with an interest, is irrevocable so long as any Accounts in
which Bank has a security interest remain unpaid and until the Indebtedness has
been fully satisfied.

         4.7 In order to protect or perfect any security interest which Bank is
granted hereunder, Bank may, in its sole discretion, discharge any lien or
encumbrance or bond the same, pay any insurance, maintain guards, warehousemen,
or any personnel to protect the Collateral, pay any service bureau, or, obtain
any records, and all costs for the same shall be added to the Indebtedness and
shall be payable on demand.

         4.8 Borrower agrees that Bank may provide information relating to this
Agreement or relating to Borrower to Bank's parent, affiliates, subsidiaries and
service providers.

                                       5
<PAGE>

5.       CONDITIONS PRECEDENT.

         5.1 Conditions precedent to the making of the loans and the extension
of the financial accommodations hereunder, Borrower shall execute, or cause to
be executed, and deliver to Bank, in form and substance satisfactory to Bank and
its counsel, the following:

                   a. This Agreement and other documents, instruments and
         agreements required by Bank;

                   b. If Borrower is a corporation, limited liability company,
         limited partnership or other such entity, certified copies of all
         actions taken by Borrower, any grantor of a security interest to Bank
         to secure the Indebtedness, and any guarantor of the Indebtedness,
         authorizing the execution, delivery and performance of this Agreement
         and any other documents, instruments or agreements entered into in
         connection herewith, and authorizing specific officers to execute and
         deliver any such documents, instruments and agreements;

                   c. If Borrower is a corporation, limited liability company,
         limited partnership or other such entity, then a certificate of good
         standing showing that Borrower is in good standing under the laws of
         the state of its incorporation or formation and certificates indicating
         that Borrower is qualified to transact business and is in good standing
         in any other state in which it conducts business;

                   d. If Borrower is a partnership, then a copy of Borrower's
         partnership agreement certified by each general partner of Borrower;

                   e. UCC searches and financing statements, tax lien and
         litigation searches, fictitious business statement filings, insurance
         certificates, notices or other similar documents which Bank may require
         and in such form as Bank may require, in order to reflect, perfect or
         protect Bank's first priority security interest in the Collateral and
         in order to fully consummate all of the transactions contemplated under
         this Agreement;

                   f. Evidence that Borrower has obtained insurance and
         acceptable endorsements;

                   g. Limited guarantee duly executed by Crest Financial
         Corporation in the amount of Two Million Five Hundred Thousand Dollars
         ($2,500,000);

                   h. Subordinations Agreement duly executed by Crest Financial
         Corporation in the amount of Two Hundred Thirty-One Thousand Dollars
         ($231,000);

                   i. Such control agreements from each Person as Bank may
         require;

                   j. Duly executed certificates of title with respect to that
         portion of the Collateral that is subject to certificates of title;

                   k. Such collateral access agreements from each lessor,
         warehouseman, bailee, and other Person as Bank may require, duly
         executed by each such Person; and

                   l. Warranties and representations of officers.

6.       WARRANTIES, REPRESENTATIONS AND COVENANTS.

         6.1 If so requested by Bank, Borrower shall, at such intervals
designated by Bank, during the term hereof execute and deliver a Report of
Accounts Receivable or similar report, in form customarily used by Bank. The
aggregate amount of the Borrowing Base at all times during the effectiveness of
this Agreement shall not be less than the advances made hereunder. Bank shall
have the right to recompute the Borrowing Base in conformity with this
Agreement.

         6.2 If any warranty is breached as to any Account, or any Account is
not paid in full by an account debtor within ninety (90) days from the date of
cancellation or an account debtor disputes liability or makes any claim with
respect thereto, or a petition in bankruptcy or other application for relief
under the Bankruptcy Code or any other insolvency law is filed by or against an
account debtor, or an account debtor makes an assignment for the benefit of
creditors, becomes insolvent, fails or goes out of business, then Bank may deem
ineligible any and all Accounts owing by that account debtor, and reduce the
Borrowing Base by the amount thereof. Bank shall retain its security interest in
all Accounts, whether eligible or ineligible, until all Indebtedness has been
fully paid and satisfied. Returns and allowances, if any, as between Borrower
and its customers, will be on the same basis and in accordance with the usual
customary practices of Borrower, as they exist at this time. Any merchandise
which is returned by an account debtor or otherwise recovered shall be set
aside, marked with Bank's name, and Bank shall retain a security interest
therein. Borrower shall promptly notify Bank of all disputes and claims and
settle or adjust them on terms approved by Bank. After default by Borrower
hereunder, no discount, credit or allowance shall be granted to any account
debtor by Borrower and no return of merchandise shall be accepted by Borrower
without Bank's consent. Bank may, after default by Borrower, settle or adjust
disputes and claims directly with account debtors for amounts and upon terms
which Bank considers advisable, and in such cases Bank will credit Borrower's
loan account with only the net amounts received by Bank in payment of the
Accounts, after deducting all Bank Expenses in connection therewith.

         6.3 Borrower warrants, represents, covenants and agrees that:

                                       6
<PAGE>

                   a. Borrower has good and marketable title to the Collateral.
         Bank has and shall continue to have a first priority perfected security
         interest in and to the Collateral. The Collateral shall at all times
         remain free and clear of all liens, encumbrances and security interests
         (except those in favor of Bank);

                   b. All Accounts are and will, at all times pertinent hereto,
         be bona fide existing obligations created by the sale and delivery of
         merchandise or the rendition of services to account debtors in the
         ordinary course of business, free of liens, claims, encumbrances and
         security interests (except as held by Bank and except as may be
         consented to, in writing, by Bank) and are unconditionally owed to
         Borrower without defenses, disputes, offsets counterclaims, rights of
         return or cancellation, and Borrower shall have received no notice of
         actual or imminent bankruptcy or insolvency of any account debtor at
         the time an Account due from such account debtor is assigned to Bank;
         and

                   c. At the time each Account is assigned to Bank, all property
         giving rise to such Account shall have been delivered to the account
         debtor or to the agent for the account debtor for immediate shipment
         to, and unconditional acceptance by, the account debtor. Borrower shall
         deliver to Bank, as Bank may from time to time require, delivery
         receipts, customer's purchase orders, shipping instructions, bills of
         lading and any other evidence of shipping arrangements. Absent such a
         request by Bank, copies of all such documentation shall be held by
         Borrower as custodian for Bank.

         6.4 At the time each eligible Account is assigned to Bank, all such
Eligible Accounts will be due and payable on terms set forth in Section 1.16, or
on such other terms approved in writing by Bank in advance of the creation of
such Accounts, and no such Eligible Account will then be past due.

                   a. Borrower shall permit representatives of Bank to conduct
         semi-annual audits of Borrower's books and records relating to the
         Accounts and other Collateral and make extracts therefrom, with results
         satisfactory to Bank, provided that Bank shall use its best efforts to
         not interfere with the conduct of Borrower's business, and to the
         extent possible to arrange for verification of the Accounts directly
         with the account debtors obligated thereon or otherwise, all under
         reasonable procedures acceptable to Bank and at Borrower's sole
         expense; provided, further, that, prior to an Event of Default,
         Borrower shall not be responsible for the expense of more than two (2)
         such audits, in any fiscal year. Notwithstanding any of the provisions
         contained in Section 1.6 hereof, Borrower hereby acknowledges and
         agrees that upon completion of any such audit Bank shall have the right
         to adjust any Borrowing Base percentage, in its sole and reasonable
         discretion, based on its review of the results of such collateral
         audit.

         6.5 Borrower represents, warrants and covenants with Bank that Borrower
will not, without Bank's prior written consent:

                   a. Grant a security interest in or permit a lien, claim or
         encumbrance upon any of the Collateral to any person, association,
         firm, corporation, entity or governmental agency or instrumentality;

                   b. Permit any levy, attachment or restraint to be made
         affecting any of Borrower's assets;

                   c. Permit any Judicial Officer or Assignee to be appointed or
         to take possession of any or all of Borrower's assets;

                   d. Sell, lease, or otherwise dispose of, move, or transfer,
         whether by sale or otherwise, any of Borrower's assets;

                   e. Change its name, the location of its sole place of
         business, chief executive office or residence, business structure,
         corporate identity or structure, form of organization or the state in
         which it has been formed or organized; add any new fictitious names,
         liquidate, merge or consolidate with or into any other business
         organization;

                   f. Move or relocate any Collateral;

                   g. Acquire any other business organization;

                   h. Enter into any transaction not in the usual course of
         Borrower's business;

                   i. Make any change in Borrower's financial structure or in
         any of its business objectives, purposes or operations which would
         materially adversely affect the ability of Borrower to repay Borrower's
         Indebtedness;

                   j. Incur any debts outside the ordinary course of Borrower's
         business except renewals or extensions of existing debts and interest
         thereon;

                   k. Make loans, advances or extensions of credit to any
         Person, except in the ordinary course of business;

                   l. Guarantee or otherwise, directly or indirectly, in any way
         be or become responsible for obligations of any other Person, whether
         by agreement to purchase the indebtedness of any other Person,
         agreement for the furnishing of funds to any other Person through the
         furnishing of goods, supplies or services, by way of stock purchase,
         capital contribution, advance or loan, for the purpose of paying or
         discharging (or causing the payment or discharge of) the indebtedness
         of any other Person, or otherwise, except for the endorsement of
         negotiable instruments by Borrower in the ordinary course of business
         for deposit or collection;

                                       7
<PAGE>

                   m. Make any payment on account of any Subordinated Debt
         except for regularly scheduled payments of interest and principal in
         accordance with the provisions of any Subordination Agreement executed
         by Bank and the subordinated debt holder, or amend any provision
         contained in any documentation relating to any such Subordinated Debt
         without Bank's prior written consent;

                   n. (a) Sell, lease, transfer or otherwise dispose of
         properties and assets (whether in one transaction or in a series of
         transactions); (b) change its name, consolidate with or merge into any
         other corporation, permit another corporation to merge into it, acquire
         all or substantially all the properties or assets of any other Person,
         enter into any reorganization or recapitalization or reclassify its
         capital stock, or (c) enter into any sale-leaseback transaction;

                   o. Purchase or hold beneficially any stock or other
         securities of, or make any investment or acquire any securities or
         other interest whatsoever in, any other Person, except for the common
         stock of the Subsidiaries owned by Borrower on the date of this
         Agreement and except for certificates of deposit with maturities of one
         year or less of United States commercial banks with capital, surplus
         and undivided profits in excess of One Hundred Million Dollars
         ($100,000,000) and the securities or other direct obligations of the
         United States Government maturing within one year from the date of
         acquisition thereof; and

                   p. Allow any fact, condition or event to occur or exist with
         respect to any employee pension or profit sharing plans established or
         maintained by it which might constitute grounds for termination of any
         such plan or for the court appointment of a trustee to administer any
         such plan.

         6.6      Intentionally Omitted.

         6.7      Borrower represents, warrants, covenants and agrees that:

                   a. Borrower's true and correct legal name is that set forth
         on the signature page to this Agreement. Except as disclosed in writing
         to Bank on or before the date of this Agreement, Borrower has not done
         business under any name other than that set forth on the signature page
         to this Agreement;

                   b. If Borrower is an individual, the location (as determined
         pursuant to the Uniform Commercial Code) of Borrower's principal
         residence is that set forth following Borrower's name on the signature
         page to this Agreement;

                   c. If Borrower is a registered organization that is organized
         under the laws of any one of the states comprising the United States
         (e.g. corporation, limited partnership, registered limited liability
         partnership or limited liability company), and is located (as
         determined pursuant to the Uniform Commercial Code) in the state under
         the laws of which it was organized, Borrower's form of organization and
         the state in which it has been organized are those set forth
         immediately following Borrower's name on the signature page to this
         Agreement;

                   d. If Borrower is a registered organization organized under
         the laws of the United States, and Borrower is located in the state
         that United States law designates as its location or, if United States
         law authorizes Borrower to designate the state for its location, the
         state designated by Borrower, or if neither of the foregoing are
         applicable, at the District of Columbia (in each case as determined in
         accordance with the Uniform Commercial Code), Borrower's form of
         organization and the state or district in which it is located are those
         set forth immediately following Borrower's name on the signature page
         to this Agreement;

                   e. If Borrower is a domestic organization that is not a
         registered organization under the laws of the United States or any
         state thereof (e.g. general partnership, joint venture, trust, estate
         or association), and Borrower is located (as determined pursuant to the
         Uniform Commercial Code) at its sole place of business or, if it has
         more than one place of business, at its chief executive office,
         Borrower's form of organization and the address of that location are
         those set forth on the signature page to this Agreement; and

                   f. If Borrower is a foreign individual or foreign
         organization or a branch or agency of a bank that is not organized
         under the laws of the United States or a state thereof, Borrower is
         located (as determined pursuant to the Uniform Commercial Code) at the
         address set forth following Borrower's name on the signature page to
         this Agreement.

                   g. If there is a change in ownership or control of 50% or
         more of the ownership of Borrower or Crest Financial Corporation
         Borrower shall repay in full all Indebtedness owed by Borrower to Bank

         6.8       If Borrower is a corporation, Borrower represents, warrants
and covenants as follows:

                   a. Borrower will not make any distribution or declare or pay
         any dividend (in stock or in cash) to any shareholder or on any of its
         capital stock, of any class, whether now or hereafter outstanding, or
         purchase, acquire, repurchase, or redeem or retire any such capital
         stock; provided, however, to the extent that and so long as Borrower is
         an entity that is not directly subject to Federal income taxation and
         with respect to which any earnings are attributable ratably to each
         Person with an ownership interest in Borrower, Borrower may make
         distributions to each such Person in an amount necessary to pay each
         such Person's income tax resulting from such ownership interest in
         Borrower per year, provided, further, that, promptly upon request of
         Bank, Borrower shall cause each such Person to provide Bank with copies
         of its tax return to substantiate any such distribution;

                   b. Borrower is and shall at all times hereafter be a
         corporation duly organized and existing in good standing under the laws
         of the state of its incorporation and qualified and licensed to do
         business in California or any other state in which it conducts its
         business;

                                       8
<PAGE>

                   c. Borrower has the right and power and is duly authorized to
         enter into this Agreement; and

                   d. The execution by Borrower of this Agreement shall not
         constitute a breach of any provision contained in Borrower's articles
         of incorporation or by-laws.

         6.9 The execution of and performance by Borrower of all of the terms
and provisions contained in this Agreement shall not result in a breach of or
constitute an event of default under any agreement to which Borrower is now or
hereafter becomes a party.

         6.10 Borrower shall promptly notify Bank in writing of its acquisition
by purchase, lease or otherwise of any after acquired property of the type
included in the Collateral.

         6.11 All assessments and taxes, whether real, personal or otherwise,
due or payable by, or imposed, levied or assessed against, Borrower or any of
its property have been paid, and shall hereafter be paid in full, before
delinquency. Borrower shall make due and timely payment or deposit of all
federal, state and local taxes, assessments or contributions required of it by
law, and will execute and deliver to Bank, on demand, appropriate certificates
attesting to the payment or deposit thereof. Borrower will make timely payment
or deposit of all F.I.C.A. payments and withholding taxes required of it by
applicable laws, and will upon request furnish Bank with proof satisfactory to
it that Borrower has made such payments or deposit. If Borrower fails to pay any
such assessment, tax, contribution, or make such deposit, or furnish the
required proof, Bank may, in its sole and absolute discretion and without notice
to Borrower, (I) make payment of the same or any part thereof, or (ii) set up
such reserves in Borrower's loan account as Bank deems necessary to satisfy the
liability therefor, or both. Bank may conclusively rely on the usual statements
of the amount owing or other official statements issued by the appropriate
governmental agency. Each amount so paid or deposited by Bank shall constitute a
Bank Expense and an additional advance to Borrower.

         6.12 There are no actions or proceedings pending by or against Borrower
or any guarantor of Borrower before any court or administrative agency and
Borrower has no knowledge of any pending, threatened or imminent litigation,
governmental investigations or claims, complaints, actions or prosecutions
involving Borrower or any guarantor of Borrower, except as heretofore
specifically disclosed in writing to Bank. If any of the foregoing arise during
the term of the Agreement, Borrower shall immediately notify Bank in writing.

         6.13 Insurance.

                   a. Borrower, at its expense, shall keep and maintain its
         assets insured against loss or damage by fire, theft, explosion,
         sprinklers and all other hazards and risks ordinarily insured against
         by other owners who use such properties in similar businesses for the
         full insurable value thereof. Borrower shall also keep and maintain
         business interruption insurance and public liability and property
         damage insurance relating to Borrower's ownership and use of the
         Collateral and its other assets. All such policies of insurance shall
         be in such form, with such companies, and in such amounts as may be
         satisfactory to Bank. Borrower shall deliver to Bank certified copies
         of such policies of insurance and evidence of the payments of all
         premiums therefor. All such policies of insurance (except those of
         public liability and property damage) shall contain an endorsement in a
         form satisfactory to Bank showing Bank as a loss payee thereof, with a
         waiver of warranties satisfactory to Bank, and all proceeds payable
         thereunder shall be payable to Bank and, upon receipt by Bank, shall be
         applied on account of the Indebtedness owing to Bank. To secure the
         payment of the Indebtedness, Borrower grants Bank a security interest
         in and to all such policies of insurance (except those of public
         liability and property damage) and the proceeds thereof, and Borrower
         shall direct all insurers under such policies of insurance to pay all
         proceeds thereof directly to Bank.

                   b. Borrower hereby irrevocably appoints Bank (and any of
         Bank's officers, employees or agents designated by Bank) as Borrower's
         attorney for the purpose of making, selling and adjusting claims under
         such policies of insurance, endorsing the name of Borrower on any
         check, draft, instrument or other item of payment for the proceeds of
         such policies of insurance and for making all determinations and
         decisions with respect to such policies of insurance. Borrower will not
         cancel any of such policies without Bank's prior written consent. Each
         such insurer shall agree by endorsement upon the policy or policies of
         insurance issued by it to Borrower as required above, or by independent
         instruments furnished to Bank, that it will give Bank at least ten (10)
         days written notice before any such policy or policies of insurance
         shall be altered or canceled, and that no act or default of Borrower,
         or any other person, shall affect the right of Bank to recover under
         such policy or policies of insurance required above or to pay any
         premium in whole or in part relating thereto. Bank, without waiving or
         releasing any Indebtedness or any Event of Default, may, but shall have
         no obligation to do so, obtain and maintain such policies of insurance
         and pay such premiums and take any other action with respect to such
         policies which Bank deems advisable. All sums so disbursed by Bank, as
         well as reasonable attorneys' fees incurred by Bank, whether in-house
         or outside counsel is used, court costs, expenses and other charges
         relating thereto, shall constitute Bank Expenses and are payable on
         demand.

         6.14 All financial statements and information relating to Borrower
which have been or may hereafter be delivered by Borrower to Bank are true and
correct and have been prepared in accordance with GAAP consistently applied and
there has been no material adverse change in the financial condition of Borrower
since the submission of such financial information to Bank.

         6.15 Financial Reporting.

                   a. Borrower at all times hereafter shall maintain a standard
         and modern system of accounting in accordance with GAAP consistently
         applied with ledger and account cards and/or computer tapes and
         computer disks, computer printouts and computer records pertaining to
         the Collateral which contain information as may from time to time be
         requested by Bank, not modify or change its method of accounting or
         enter into, modify or terminate any agreement presently existing, or at
         any time hereafter entered into with any third party accounting firm
         and/or service bureau for the preparation and/or storage of Borrower's
         accounting records without the written consent of Bank first obtained
         and without said accounting

                                       9
<PAGE>

         firm and/or service bureau agreeing to provide information regarding
         the Accounts and Borrower's financial condition to Bank; permit Bank
         and any of its employees, officers or agents, upon demand, during
         Borrower's usual business hours, or the usual business hour of third
         persons having control thereof, to have access to and examine all of
         Borrower's Books relating to the Collateral, Borrower's Indebtedness to
         Bank, Borrower's financial condition and the results of Borrower's
         operations and in connection therewith, permit Bank or any of its
         agents, employees or officers to copy and make extracts therefrom.

                   b. Borrower shall deliver to Bank: (1) within thirty (30)
         days after the end of each month, a company prepared balance sheet and
         profit and loss statement covering Borrower's operations; 2) within
         ninety (90) days after the end of each of Borrower's fiscal years a
         certified public accountants audited statements of the financial
         condition of Borrower for each such fiscal year, including but not
         limited to, a balance sheet and profit and loss statement and any other
         report requested by Bank relating to the Collateral and the financial
         condition of Borrower; and (3) and a certificate signed by an
         authorized employee of Borrower to the effect that all reports,
         statements, computer disk or tape files, computer printouts, computer
         runs, or other computer prepared information of any kind or nature
         relating to the foregoing or documents delivered or caused to be
         delivered to Bank under this subparagraph are complete, correct and
         thoroughly present the financial condition of Borrower and that there
         exists on the date of delivery to Bank no condition or event which
         constitutes a breach or Event of Default under this Agreement.

                   c. Cause each Guarantor to submit to Bank such Guarantor's
         financial statement, confirmed as to its correctness by Guarantor's
         signature, either on Bank's form or internally prepared within 120 days
         of the end of each fiscal year of Borrower.

                   d. In addition to the financial statements requested above,
         Borrower agrees to provide Bank with the following schedules:

                           (1) Accounts Receivable and Accounts Payable Agings
                   within 10 days of each month-end;

                           (2) Borrowing Base Certificate on a monthly basis;

                           (3) Compliance Certification within 30 days of each
                   month-end;

                           (4) Transaction reports, together with payments in
                  kind, including Collateral activity and appropriate loan
                  activity, certified by an authorized signer of Borrower within
                  10 days of each month -end; and

                           (5) a Customer Listing on a quarterly basis.

                           (6) Cancellation Reports on a monthly basis;

                           (7) Insurance Company concentration report on a
                   monthly basis.

                           (8) Account Receivable Reconciliation report within
                   10 days of the end of each month.

                           (9) Computation of ineligible Accounts within 10 days
                   of the end of each month.

         6.16 Borrower shall maintain the following financial ratios and
covenants, which shall be monitored on a monthly basis, except as noted below:

                   a. Working Capital in an amount not less than  $2,750,000.

                   b. Tangible Effective Net Worth in an amount not less than
         $3,000,000.

                   c. a ratio of Current Assets to Current Liabilities of not
         less than 1.25:1.00.

                   d.  a Debt-to-Worth Ratio of greater than 2.50:1.00.

                   e. Borrower shall not without Bank's prior written consent
         acquire or expend for or commit itself to acquire or expend for fixed
         assets by lease, purchase or otherwise in an aggregate amount that
         exceeds Fifty Thousand Dollars ($50,000) in any fiscal year; and

         All financial covenants shall be computed in accordance with GAAP
consistently applied except as otherwise specifically set forth in this
Agreement. All monies due from affiliates (including officers, directors and
shareholders) shall be excluded from Borrower's assets for all purposes
hereunder.

         6.17 Borrower shall promptly supply Bank (and cause any guarantor to
supply Bank) with such other information (including tax returns) concerning its
financial affairs (or that of any guarantor) as Bank may request from time to
time hereafter, and shall promptly notify Bank of any material adverse change in
Borrower's financial condition and of any condition or event which constitutes a
breach of or an event which constitutes an Event of Default under this
Agreement.

         6.18 Borrower is now and shall be at all times hereafter solvent and
able to pay its debts (including trade debts) as they mature.

         6.19 Borrower shall immediately and without demand reimburse Bank for
all sums expended by Bank in connection with any action brought by Bank to
correct any default or enforce any provision of this Agreement,

                                       10
<PAGE>

including all Bank Expenses; Borrower authorizes and approves all advances and
payments by Bank for items described in this Agreement as Bank Expenses.

         6.20 Each warranty, representation and agreement contained in this
Agreement shall be automatically deemed repeated with each advance and shall be
conclusively presumed to have been relied on by Bank regardless of any
investigation made or information possessed by Bank. The warranties,
representations and agreements set forth herein shall be cumulative and in
addition to any and all other warranties, representations and agreements which
Borrower shall give, or cause to be given, to Bank, either now or hereafter.

         6.21 Borrower shall keep all of its principal bank accounts with Bank
and shall notify Bank immediately in writing of the existence of any other bank
account, deposit account, or any other account into which money can be
deposited.

         6.22 Borrower shall furnish to Bank: (a) as soon as possible, but in no
event later than thirty (30) days after Borrower knows or has reason to know
that any reportable event with respect to any deferred compensation plan has
occurred, a statement of the chief financial officer of Borrower setting forth
the details concerning such reportable event and the action which Borrower
proposes to take with respect thereto, together with a copy of the notice of
such reportable event given to the Pension Benefit Guaranty Corporation, if a
copy of such notice is available to Borrower; (b) promptly after the filing
thereof with the United States Secretary of Labor or the Pension Benefit
Guaranty Corporation, copies of each annual report with respect to each deferred
compensation plan; (c) promptly after receipt thereof, a copy of any notice
Borrower may receive from the Pension Benefit Guaranty Corporation or the
Internal Revenue Service with respect to any deferred compensation plan;
provided, however, this subparagraph shall not apply to notice of general
application issued by the Pension Benefit Guaranty Corporation or the Internal
Revenue Service; and (d) when the same is made available to participants in the
deferred compensation plan, all notices and other forms of information from time
to time disseminated to the participants by the administrator of the deferred
compensation plan.

         6.23 Borrower is now and shall at all times hereafter remain in
compliance with all federal, state and municipal laws, regulations and
ordinances relating to the handling, treatment and disposal of toxic substances,
wastes and hazardous material and shall maintain all necessary authorizations
and permits.

 7.      EVENTS OF DEFAULT.

Any one or more of the following events shall constitute an Event of Default by
Borrower under this Agreement:

                   a. If Borrower fails or neglects to perform, keep or observe
         any term, provision, condition, covenant, agreement, warranty or
         representation contained in this Agreement, or any other present or
         future document, instrument or agreement between Borrower and Bank;

                   b. If any representation, statement, report or certificate
         made or delivered by Borrower, or any of its officers, employees or
         agents to Bank is not true and correct;

                   c. If Borrower fails to pay when due and payable or declared
         due and payable, all or any portion of Borrower's Indebtedness (whether
         of principal, interest, taxes, reimbursement of Bank Expenses, or
         otherwise);

                   d. If there is a material impairment of the prospect of
         repayment of all or any portion of Borrower's Indebtedness or a
         material impairment of the value or priority of Bank's security
         interest in the Collateral;

                   e. If all or any of Borrower's assets are attached, seized,
         subject to a writ or distress warrant, or are levied upon, or come into
         the possession of any Judicial Officer or Assignee and the same are not
         released, discharged or bonded against within ten (10) days thereafter;

                   f. If any Insolvency Proceeding is filed or commenced by or
         against Borrower without being dismissed within ten (10) days
         thereafter;

                   g. If any proceeding is filed or commenced by or against
         Borrower for its dissolution or liquidation;

                   h. If Borrower is enjoined, restrained or in any way
         prevented by court order from continuing to conduct all or any material
         part of its business affairs;

                   i. If a notice of lien, levy or assessment is filed of record
         with respect to any or all of Borrower's assets by the United States
         Government, or any department, agency or instrumentality thereof, or by
         any state, county, municipal or other government agency, or if any
         taxes or debts owing at any time hereafter to any one or more of such
         entities becomes a lien, whether inchoate or otherwise, upon any or all
         of Borrower's assets and the same is not paid on the payment date
         thereof;

                   j. If a judgment or other claim becomes a lien or encumbrance
         upon any or all of Borrower's assets and the same is not satisfied,
         dismissed or bonded against within ten (10) days thereafter;

                   k. If Borrower's records are prepared and kept by an outside
         computer service bureau at the time this Agreement is entered into or
         during the term of this Agreement such an agreement with an outside
         service bureau is entered into, and at any time thereafter, without
         first obtaining the written consent of Bank, Borrower terminates,
         modifies, amends or changes its contractual relationship with said
         computer service bureau or said computer service bureau fails to
         provide Bank with any requested information or financial data
         pertaining to Bank's Collateral, Borrower's financial condition or the
         results of Borrower's operations;

                                       11
<PAGE>

                   l. If Borrower permits a default in any material agreement to
         which Borrower is a party with third parties so as to result in an
         acceleration of the maturity of Borrower's indebtedness to others,
         whether under any indenture, agreement or otherwise;

                   m. If Borrower makes any payment on account of indebtedness
         which has been subordinated to Borrower's Indebtedness to Bank except
         as otherwise permitted under the terms of this Agreement;

                   n. If any misrepresentation exists now or thereafter in any
         warranty or representation made to Bank by any officer or director of
         Borrower, or if any such warranty or representation is withdrawn by any
         officer or director;

                   o. If any party subordinating its claims to that of Bank's or
         any guarantor of Borrower's Indebtedness dies, terminates its
         subordination or guaranty, violates the terms of the subordination or
         guaranty, becomes insolvent, or an Insolvency Proceeding is commenced
         by or against any such subordinating party or guarantor;

                   p. If Borrower is an individual and Borrower dies;

                   q. If any reportable event, which Bank determines constitutes
         grounds for the termination of any deferred compensation plan by the
         Pension Benefit Guaranty Corporation or for the appointment by the
         appropriate United States District Court of a trustee to administer any
         such plan, shall have occurred and be continuing thirty (30) days after
         written notice of such determination shall have been given to Borrower
         by Bank, or any such Plan shall be terminated within the meaning of
         Title IV of the Employment Retirement Income Security Act ("ERISA"), or
         a trustee shall be appointed by the appropriate United States District
         Court to administer any such plan, or the Pension Benefit Guaranty
         Corporation shall institute proceedings to terminate any plan and in
         case of any event described in this Section 7, the aggregate amount of
         Borrower's liability to the Pension Benefit Guaranty Corporation under
         Sections 4062, 4063 or 4064 of ERISA shall exceed five percent (5%) of
         Borrower's Tangible Effective Net Worth.

                   Notwithstanding anything contained in Section 7 to the
         contrary, Bank shall refrain from exercising its rights and remedies
         and Event of Default shall thereafter not be deemed to have occurred by
         reason of the occurrence of any of the events set forth in Sections
         7.e, 7.f or 7.j of this Agreement if, within ten (10) days from the
         date thereof, the same is released, discharged, dismissed, bonded
         against or satisfied; provided, however, if the event is the
         institution of Insolvency Proceedings against Borrower, Bank shall not
         be obligated to make advances to Borrower during such cure period.

 8.      BANK'S RIGHTS AND REMEDIES.

         8.1 Upon the occurrence of an Event of Default by Borrower under this
Agreement, Bank may, at its election, without notice of its election and without
demand, do any one or more of the following, all of which are authorized by
Borrower:

                   a. Declare Borrower's Indebtedness, whether evidenced by this
         Agreement, installment notes, demand notes or otherwise, immediately
         due and payable to Bank;

                   b. Cease advancing money or extending credit to or for the
         benefit of Borrower under this Agreement, or any other agreement
         between Borrower and Bank;

                   c. Terminate this Agreement as to any future liability or
         obligation of Bank, but without affecting Bank's rights and security
         interests in the Collateral, and the Indebtedness of Borrower to Bank;

                   d. Without notice to or demand upon Borrower or any
         guarantor, make such payments and do such acts as Bank considers
         necessary or reasonable to protect its security interest in the
         Collateral. Borrower agrees to assemble the Collateral if Bank so
         requires and to make the Collateral available to Bank as Bank may
         designate. Borrower authorizes Bank to enter the premises where the
         Collateral is located, take and maintain possession of the Collateral
         and the premises (at no charge to Bank), or any part thereof, and to
         pay, purchase, contest or compromise any encumbrance, charge or lien
         which in the opinion of Bank appears to be prior or superior to its
         security interest and to pay all expenses incurred in connection
         therewith;

                   e. Without limiting Bank's rights under any security
         interest, Bank is hereby granted a license or other right to use,
         without charge, Borrower's labels, patents, copyrights, rights of use
         of any name, trade secrets, trade names, trademarks and advertising
         matter, or any property or a similar nature as it pertains to the
         Collateral, in completing production of, advertising for sale and
         selling any Collateral and Borrower's rights under all licenses and all
         franchise agreement shall inure to Bank's benefit, and Bank shall have
         the right and power to enter into sublicense agreements with respect to
         all such rights with third parties on terms acceptable to Bank;

                   f. Intentionally Omitted ;

                   g. Sell or dispose the Collateral at either a public or
         private sale, or both, by way of one or more contracts or transactions,
         for cash or on terms, in such manner and at such places (including
         Borrower's premises) as is commercially reasonable in the opinion of
         Bank. It is not necessary that the Collateral be present at any such
         sale. At any sale or other disposition of the Collateral pursuant to
         this Section, Bank disclaims all warranties which would otherwise be
         given under the Uniform Commercial Code, including without limitation a
         disclaimer of any warranty relating to title, possession, quiet
         enjoyment or the like, and Bank may communicate these disclaimers to a
         purchaser at such disposition. This disclaimer of warranties will not
         render the sale commercially unreasonable;

                                       12
<PAGE>

                   h. Bank shall give notice of the disposition of the
         Collateral as follows:

                           (1) Bank shall give Borrower and each holder of a
                   security interest in the Collateral who has filed with Bank a
                   written request for notice, a notice in writing of the time
                   and place of public sale, or, if the sale is a private sale
                   or some disposition other than a public sale is to be made of
                   the Collateral, the time on or after which the private sale
                   or other disposition is to be made;

                           (2) The notice shall be personally delivered or
                   mailed, postage prepaid, to Borrower's address appearing in
                   this Agreement, at least ten (10) calendar days before the
                   date fixed for the sale, or at least ten (10) calendar days
                   before the date on or after which the private sale or other
                   disposition is to be made, unless the Collateral is
                   perishable or threatens to decline speedily in value. Notice
                   to persons other than Borrower claiming an interest in the
                   Collateral shall be sent to such addresses as have been
                   furnished to Bank or as otherwise determined in accordance
                   with Section 9611 of the Uniform Commercial Code; and

                           (3) If the sale is to be a public sale, Bank shall
                   also give notice of the time and place by publishing a notice
                   one time at least ten (10) calendar days before the date of
                   the sale in a newspaper of general circulation in the county
                   in which the sale is to be held; and

                           (4) Bank may credit bid and purchase at any public
                   sale.

                   i. Borrower shall pay all Bank Expenses incurred in
         connection with Bank's enforcement and exercise of any of its rights
         and remedies as herein provided, whether or not suit is commenced by
         Bank;

                   j. Any deficiency which exists after disposition of the
         Collateral as provided above will be paid immediately by Borrower. Any
         excess will be returned, without interest and subject to the rights of
         third parties, to Borrower by Bank, or, in Bank's discretion, to any
         party who Bank believes, in good faith, is entitled to the excess;

                   k. Without constituting a retention of Collateral in
         satisfaction of an obligation within the meaning of 9620 of the Uniform
         Commercial Code or an action under California Code of Civil Procedure
         726, apply any and all amounts maintained by Borrower as deposit
         accounts (as that term is defined under 9102 of the Uniform Commercial
         Code) or other accounts that Borrower maintains with Bank against the
         Indebtedness;

                   l. The proceeds of any sale or other disposition of
         Collateral authorized by this Agreement shall be applied by Bank first
         upon all expenses authorized by the Uniform Commercial Code and all
         reasonable attorney fees and legal expenses incurred by Bank, whether
         in-house or outside counsel is used, the balance of the proceeds of the
         sale or other disposition shall be applied in the payment of the
         Indebtedness, first to interest, then to principal, then to remaining
         Indebtedness and the surplus, if any, shall be paid over to Borrower or
         to such other person(s) as may be entitled to it under applicable law.
         Borrower shall remain liable for any deficiency, which it shall pay to
         Bank immediately upon demand. Borrower agrees that Bank shall be under
         no obligation to accept any noncash proceeds in connection with any
         sale or disposition of Collateral unless failure to do so would be
         commercially unreasonable. If Bank agrees in its sole discretion to
         accept noncash proceeds (unless the failure to do so would be
         commercially unreasonable), Bank may ascribe any commercially
         reasonable value to such proceeds. Without limiting the foregoing, Bank
         may apply any discount factor in determining the present value of
         proceeds to be received in the future or may elect to apply proceeds to
         be received in the future only as and when such proceeds are actually
         received in cash by Bank; and

                   m. The following shall be the basis for any finder of fact's
         determination of the value of any Collateral which is the subject
         matter of a disposition giving rise to a calculation of any surplus or
         deficiency under Section 9615(f) of the Uniform Commercial Code: (i)
         The Collateral which is the subject matter of the disposition shall be
         valued in an "as is" condition as of the date of the disposition,
         without any assumption or expectation that such Collateral will be
         repaired or improved in any manner; (ii) the valuation shall be based
         upon an assumption that the transferee of such Collateral desires a
         resale of the Collateral for cash promptly (but no later than 30 days)
         following the disposition; (iii) all reasonable closing costs
         customarily borne by the seller in commercial sales transactions
         relating to property similar to such Collateral shall be deducted
         including, without limitation, brokerage commissions, tax prorations,
         attorney's fees, whether in-house or outside counsel is used, and
         marketing costs; (iv) the value of the Collateral which is the subject
         matter of the disposition shall be further discounted to account for
         any estimated holding costs associated with maintaining such Collateral
         pending sale (to the extent not accounted for in (iii) above), and
         other maintenance, operational and ownership expenses; and (v) any
         expert opinion testimony given or considered in connection with a
         determination of the value of such Collateral must be given by persons
         having at least 5 years experience in appraising property similar to
         the Collateral and who have conducted and prepared a complete written
         appraisal of such Collateral taking into consideration the factors set
         forth above. The "value" of any such Collateral shall be a factor in
         determining the amount of proceeds which would have been realized in a
         disposition to a transferee other than a secured party, a person
         related to a secured party or a secondary obligor under Section 9615(f)
         of the Uniform Commercial Code.

         8.2 In addition to any and all other rights and remedies available to
Bank under or pursuant to this Agreement or any other documents, instrument or
agreement contemplated hereby, Borrower acknowledges and agrees that (i) at any
time following the occurrence and during the continuance of any Event of
Default, and/or (ii) termination of Bank's commitment or obligation to make
loans or advances or otherwise extent credit to or in favor of Borrower
hereunder, in the event that and to the extent that there are any Letter of
Credit Obligations outstanding at such time, upon demand of Bank, Borrower shall
deliver to Bank, or cause to be delivered to Bank, cash collateral in an amount
not less than such Letter of Credit Obligations, which cash collateral shall be
held and retained by Bank as cash collateral for the repayment of such Letter of
Credit Obligations, together with any and all other Indebtedness of Borrower to
Bank remaining unpaid, and Borrower pledges to Bank and grants to Bank a
continuing first priority security interest in such cash collateral so delivered
to Bank. Alternatively, Borrower shall cause to be delivered to

                                       13
<PAGE>

Bank an irrevocable standby letter of credit issued in favor of Bank by a bank
acceptable to Bank, in its sole discretion, in an amount not less than such
Letter of Credit Obligations, and upon terms acceptable to Bank, in its sole
discretion.

         8.3 Bank's rights and remedies under this Agreement and all other
agreements shall be cumulative. Bank shall have all other rights and remedies
not inconsistent herewith as provided by law or in equity. No exercise by Bank
of one right or remedy shall be deemed an election, and no waiver by Bank of any
default on Borrower's part shall be deemed a continuing waiver. No delay by Bank
shall constitute a waiver, election or acquiescence by Bank.

9.       TAXES AND EXPENSES REGARDING BORROWER'S PROPERTY. If Borrower fails to
pay promptly when due to another person or entity, monies which Borrower is
required to pay by reason of any provision in this Agreement, Bank may, but need
not, pay the same and charge Borrower's loan account therefor, and Borrower
shall promptly reimburse Bank. All such sums shall become additional
indebtedness owing to Bank, shall bear interest at the rate hereinabove
provided, and shall be secured by all Collateral. Any payments made by Bank
shall not constitute (I) an agreement by it to make similar payments in the
future, or (ii) a waiver by Bank of any default under this Agreement. Bank need
not inquire as to, or contest the validity of, any such expense, tax, security
interest, encumbrance or lien and the receipt of the usual official notice of
the payment thereof shall be conclusive evidence that the same was validly due
and owing. Such payments shall constitute Bank Expenses and additional advances
to Borrower.

10.      WAIVERS.

         10.1 Borrower agrees that checks and other instruments received by Bank
in payment or on account of Borrower's Indebtedness constitute only conditional
payment until such items are actually paid to Bank and Borrower waives the right
to direct the application of any and all payments at any time or times hereafter
received by Bank on account of Borrower's Indebtedness and Borrower agrees that
Bank shall have the continuing exclusive right to apply and reapply such
payments in any manner as Bank may deem advisable, notwithstanding any entry by
Bank upon its books.

         10.2 Borrower waives demand, protest, notice of protest, notice of
default or dishonor, notice of payment and nonpayment, notice of any default,
nonpayment at maturity, release, compromise, settlement, extension or renewal of
any or all commercial paper, accounts, documents, instruments, chattel paper,
and guarantees at any time held by Bank on which Borrower may in any way be
liable.

         10.3 Bank shall not in any way or manner be liable or responsible for
(a) the safekeeping of the Collateral; (b) any loss or damage thereto occurring
or arising in any manner or fashion from any cause; (c) any diminution in the
value thereof; or (d) any act or default of any carrier, warehouseman, bailee,
forwarding agency or other person whomsoever.

         10.4 Borrower waives the right and the right to assert a confidential
relationship, if any, it may have with any accountant, accounting firm and/or
service bureau or consultant in connection with any information requested by
Bank pursuant to or in accordance with this Agreement, and agrees that a Bank
may contact directly any such accountants, accounting firm and/or service bureau
or consultant in order to obtain such information.

         10.5 THE UNDERSIGNED AND THE BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL
BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER
CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR
CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY
RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR
ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT OR THE INDEBTEDNESS.

         10.6 In the event that Bank elects to waive any rights or remedies
hereunder, or compliance with any of the terms hereof, or delays or fails to
pursue or enforce any term, such waiver, delay or failure to pursue or enforce
shall only be effective with respect to that single act and shall not be
construed to affect any subsequent transactions or Bank's right to later pursue
such rights and remedies.

11.      ONE CONTINUING LOAN TRANSACTION. All loans and advances heretofore, now
or at any time or times hereafter made by Bank to Borrower under this Agreement
or any other agreement between Bank and Borrower, shall constitute one loan
secured by Bank's security interests in the Collateral and by all other security
interests, liens, encumbrances heretofore, now or from time to time hereafter
granted by Borrower to Bank.

Notwithstanding the above, (i) to the extent that any portion of the
Indebtedness is a consumer loan, that portion shall not be secured by any deed
of trust or mortgage on or other security interest in Borrower's principal
dwelling which is not a purchase money security interest as to that portion,
unless expressly provided to the contrary in another place, or (ii) if Borrower
(or any of them) has (have) given or give(s) Bank a deed of trust or mortgage
covering real property, that deed of trust or mortgage shall not secure the loan
and any other Indebtedness of Borrower (or any of them), unless expressly
provided to the contrary in another place.

12.      NOTICES. Unless otherwise provided in this Agreement, all notices or
demands by either party on the other relating to this Agreement shall be in
writing and sent by regular United States mail, postage prepaid, properly
addressed to Borrower or to Bank at the addresses stated in this Agreement, or
to such other addresses as Borrower or Bank may from time to time specify to the
other in writing. Requests to Borrower for information made by Bank from time to
time hereunder may be made orally or in writing at Bank's discretion.

13.      AUTHORIZATION TO DISBURSE. Bank is hereby authorized to make loans and
advances hereunder upon telephonic or other instructions received from anyone
purporting to be an officer, employee, or representative of Borrower, or at the
discretion of Bank if said loans and advances are necessary to meet any
Indebtedness of Borrower to Bank. Bank shall have no duty to make inquiry or
verify the authority of any such party, and Borrower shall hold Bank harmless
from any damage, claims or liability by reason of Bank's honor of, or failure to
honor, any such instructions.

                                       14
<PAGE>

14.      PAYMENTS.  Borrower hereby authorizes Bank to deduct the full amount of
any interest, fees, costs, or Bank Expenses due under this Agreement and not
paid or collected when due in accordance with the terms and conditions hereof
from any account maintained by Borrower with Bank. Should there be insufficient
funds in any such account to pay all such sums when due, the full amount of such
deficiency shall be immediately due and payable by Borrower; provided, however,
that Bank shall not be obligated to advance funds to cover any such payment.

15.      DESTRUCTION OF BORROWER'S DOCUMENTS. Any documents, schedules, invoices
or other papers delivered to Bank, may be destroyed or otherwise disposed of by
Bank six (6) months after they are delivered to or received by Bank, unless
Borrower requests, in writing, the return of the said documents, schedules,
invoices or other papers and makes arrangements, at Borrower's expense, for
their return.

16.      CHOICE OF LAW. The validity of this Agreement, its construction,
interpretation and enforcement, and the rights of the parties hereunder and
concerning the Collateral, shall be determined according to the laws of the
State of California. The parties agree that all actions or proceedings arising
in connection with this Agreement shall be tried and litigated only in the state
and federal courts in the Northern District of California or the County of Santa
Clara.

17.      GENERAL PROVISIONS.

         17.1 This Agreement shall be binding and deemed effective when executed
by Borrower and accepted and executed by Bank at its Western Division
headquarters office.

         17.2 This Agreement shall bind and inure to the benefit of the
respective successors and assigns of each of the parties; provided, however,
that Borrower may not assign this Agreement or any rights hereunder without
Bank's prior written consent and any prohibited assignment shall be absolutely
void. No consent to an assignment by Bank shall release Borrower or any
guarantor from their obligations to Bank. Bank may assign this Agreement and its
rights and duties hereunder. Bank reserves the right to sell, assign, transfer,
negotiate or grant participations in all or any part of, or any interest in
Bank's rights and benefits hereunder. In connection therewith, Bank may disclose
all documents and information which Bank now or hereafter may have relating to
Borrower or Borrower's business.

         17.3 Paragraph headings and paragraph numbers have been set forth
herein for convenience only; unless the contrary is compelled by the context,
everything contained in each paragraph applies equally to this entire Agreement.
Unless the context of this Agreement clearly requires otherwise, references to
the plural include the singular, references to the singular include the plural,
and the term "including" is not limiting. The words "hereof," "herein,"
"hereby," "hereunder," and similar terms in this Agreement refer to this
Agreement as a whole and not to any particular provision of this Agreement.

         17.4 Neither this Agreement nor any uncertainty or ambiguity herein
shall be construed or resolved against Bank or Borrower, whether under any rule
of construction or otherwise; on the contrary, this Agreement has been reviewed
by all parties and shall be construed and interpreted according to the ordinary
meaning of the words used so as to fairly accomplish the purposes and intentions
of all parties hereto.

         17.5 Each provision of this Agreement shall be severable from every
other provision of this Agreement for the purpose of determining the legal
enforceability of any specific provision.

         17.6 This Agreement cannot be changed or terminated orally. This
Agreement contains the entire agreement of the parties hereto and supersedes all
prior agreements, understandings, representations, warranties and negotiations,
if any, related to the subject matter hereof, and none of the parties shall be
bound by anything not expressed in writing.

         17.7 The parties intend and agree that their respective rights, duties,
powers, liabilities, obligations and discretions shall be performed, carried
out, discharged and exercised reasonably and in good faith.

         17.8 In addition, if this Agreement is secured by a deed of trust or
mortgage covering real property, then the trustor or mortgagor shall not
mortgage or pledge the mortgaged premises as security for any other indebtedness
or obligations. This Agreement, together with all other indebtedness secured by
said deed of trust or mortgage, shall become due and payable immediately,
without notice, at the option of Bank, (a) if said trustor or mortgagor shall
mortgage or pledge the mortgaged premises for any other indebtedness or
obligations or shall convey, assign or transfer the mortgaged premises by deed,
installment sale contract or other instrument; (b) if the title to the mortgaged
premises shall become vested in any other person or party in any manner
whatsoever, or (c) if there is any disposition (through one or more
transactions) of legal or beneficial title to a controlling interest of said
trustor or mortgagor.

         17.9 Each undersigned Borrower hereby agrees that it is jointly and
severally, directly, and primarily liable to Bank for payment and performance in
full of all duties, obligations and liabilities under this Agreement and each
other document, instrument and agreement entered into by Borrower with or in
favor of Bank in connection herewith, and that such liability is independent of
the duties, obligations and liabilities of any other Borrower or any other
guarantor of the Indebtedness, as applicable. Each reference herein to Borrower
shall mean each and every Borrower party hereto, individually and collectively,
jointly and severally.

         17.10 This Agreement may be executed by the parties hereto in several
counterparts, each of which shall be deemed to be an original and all of which
shall constitute together but one and the same agreement. This Agreement,
together with each other document, instrument and agreement entered into with or
in favor of Bank in connection herewith and in connection with the Prior
Agreement, to the extent not amended and restated hereby, constitute the entire
understanding among the parties hereto with respect to the subject matter hereof
and, as applicable amends and restates in full the Prior Agreement and any other
agreement, written or oral, with respect thereto. Borrower ratifies and
reaffirms the continuing effectiveness of all promissory notes, guaranties,
security agreements, mortgages, deeds of trust, environmental agreements, and
all other instruments, documents and agreements entered into in connection with
the Prior Agreement that are not amended and restated in connection with this
Agreement.

                                       15
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Loan and Security
Agreement (Accounts ) to be executed as of the date first hereinabove written.

Accepted and effective as of: May      , 2004
at Bank's Western Division Headquarters Office    BORROWER:

                                                  LIBERTY PREMIUM FINANCE, INC.,
                                                  a California corporation

COMERICA   BANK,
a Michigan banking corporation

                                                  By: /s/ Susan C. Scurti
                                                  ------------------------------
                                                        Susan C. Scurti
                                                        Vice President

By: /s/ Matthew Taylor
   -------------------------------
   Matthew Taylor
   Vice President Western Division

Address for Notices:                              Address for Notices:

                                                  12641 166th Street
75 East Trimble Road                              Cerritos, CA 90703
San Jose, California 95131
Attn:    Credit Manager
Fax number:(408) 556-5097

                                       16

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