Document:

<PAGE>

                                                                    Exhibit 10.d

                                                                  Execution Copy

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                                 $175,000,000

                          LETTER OF CREDIT AGREEMENT

                                     AMONG

                                 TMK RE, LTD.,

                            TORCHMARK CORPORATION,
                                 as Guarantor

                        THE PARTICIPANTS NAMED HEREIN,

                                 BANK ONE, NA,
                             as Agent and Issuer,

                                      and

                             FLEET NATIONAL BANK,
                                  as Co-Agent

                                  Dated as of

                               October 24, 2000

================================================================================

                        BANC ONE CAPITAL MARKETS, INC.,
                     as Lead Arranger and Sole Book Runner
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                               TABLE OF CONTENTS
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ARTICLE I

DEFINITIONS..........................................................................................................     1

ARTICLE II

THE LETTER OF CREDIT FACILITY........................................................................................    12
     2.1.      Issuance of Facility Letters of Credit................................................................    12
     2.2.      Participating Interests...............................................................................    13
     2.3.      Facility Letter of Credit Reimbursement Obligations...................................................    13
     2.4.      Procedure for Issuance................................................................................    15
     2.5.      Nature of the Obligations of the Issuer and the Participants..........................................    17
     2.6.      Facility Letter of Credit Fees........................................................................    17
     2.7.      Facility and Utilization Fees; Reduction in Aggregate Facility Letter of Credit Commitment............    18
     2.8.      Method of Payment.....................................................................................    18
     2.9.      Additional Fees.......................................................................................    19

ARTICLE III

CHANGE IN CIRCUMSTANCES..............................................................................................    19
     3.1.      Yield Protection......................................................................................    19
     3.2.      Changes in Capital Adequacy Regulations...............................................................    19
     3.3.      Taxes.................................................................................................    20
     3.4.      Participant Statements................................................................................    22
     3.5.      Substitution of Facility Letter of Credit Provider....................................................    22
     3.6.      Survival..............................................................................................    22

ARTICLE IV

CONDITIONS PRECEDENT.................................................................................................    23
     4.1.      Initial Facility Letter of Credit.....................................................................    23
     4.2.      Each Facility Letter of Credit........................................................................    24

ARTICLE V

REPRESENTATIONS AND WARRANTIES.......................................................................................    25
     5.1.      Corporate Existence and Standing......................................................................    25
     5.2.      Authorization and Validity............................................................................    25
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     5.3.      No Conflict; Government Consent.......................................................................    25
     5.4.      Governmental Consents.................................................................................    26
     5.5.      Financial Statements..................................................................................    26
     5.6.      Material Adverse Change...............................................................................    26
     5.7.      Taxes.................................................................................................    26
     5.8.      Litigation and Contingent Obligations.................................................................    26
     5.9.      Subsidiaries..........................................................................................    27
     5.10.     ERISA.................................................................................................    27
     5.11.     Defaults..............................................................................................    27
     5.12.     Accuracy of Information...............................................................................    27
     5.13.     Regulation U..........................................................................................    27
     5.14.     Material Agreements...................................................................................    27
     5.15.     Solvency..............................................................................................    27
     5.16.     Compliance With Laws..................................................................................    27
     5.17.     Indebtedness..........................................................................................    28
     5.18.     Ownership of Properties...............................................................................    28
     5.19.     Investment Company Act................................................................................    28
     5.20.     Public Utility Holding Company Act....................................................................    28
     5.21.     Insurance Licenses....................................................................................    28
     5.22.     Reserves..............................................................................................    28

ARTICLE VI

COVENANTS............................................................................................................    29
     6.1.      Financial Reporting...................................................................................    29
     6.2.      Use of Facility Letters of Credit.....................................................................    31
     6.3.      Certain Notices.......................................................................................    31
     6.4.      Conduct of Business...................................................................................    31
     6.5.      Taxes.................................................................................................    32
     6.6.      Insurance.............................................................................................    32
     6.7.      Compliance with Laws..................................................................................    32
     6.8.      Maintenance of Properties.............................................................................    32
     6.9.      Inspection............................................................................................    32
     6.10.     Merger................................................................................................    32
     6.11.     Sale of Assets........................................................................................    33
     6.12.     Sale and Leaseback....................................................................................    33
     6.13.     Acquisitions..........................................................................................    33
     6.14.     Liens.................................................................................................    33
     6.15.     Consolidated Net Worth................................................................................    33
     6.16.     Ratio of Consolidated Indebtedness to Consolidated Capitalization.....................................    33
     6.17.     Ratio of Consolidated Adjusted Net Income to Consolidated Interest Expense............................    33
     6.18.     Affiliates............................................................................................    33
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     6.19.     Series A Preferred Securities.........................................................................    33
     6.20.     Contingent Obligations................................................................................    34
     6.21.     Inconsistent Agreements...............................................................................    34

ARTICLE VII

DEFAULTS.............................................................................................................    34

ARTICLE VIII

ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES.......................................................................    37
     8.1.      Acceleration..........................................................................................    37
     8.2.      Amendments............................................................................................    37
     8.3.      Preservation of Rights................................................................................    38

ARTICLE IX

GENERAL PROVISIONS...................................................................................................    38
     9.1.      Survival of Representations...........................................................................    38
     9.2.      Governmental Regulation; Interest Limitation..........................................................    39
     9.3.      Taxes.................................................................................................    39
     9.4.      Headings..............................................................................................    39
     9.5.      Entire Agreement......................................................................................    39
     9.6.      Several Obligations; Benefits of this Agreement.......................................................    39
     9.7.      Expenses; Indemnification.............................................................................    39
     9.8.      Numbers of Documents..................................................................................    40
     9.9.      Accounting............................................................................................    40
     9.10.     Severability of Provisions............................................................................    40
     9.11.     Nonliability of Facility Letter of Credit Providers...................................................    40
     9.12.     CHOICE OF LAW.........................................................................................    41
     9.13.     CONSENT TO JURISDICTION...............................................................................    41
     9.14.     WAIVER OF JURY TRIAL..................................................................................    41
     9.15.     Disclosure............................................................................................    41
     9.16.     Counterparts..........................................................................................    42
     9.17.     Confidentiality.......................................................................................    42

ARTICLE X

THE AGENT............................................................................................................    42
     10.1.     Appointment...........................................................................................    42
     10.2.     Powers................................................................................................    43
     10.3.     General Immunity......................................................................................    43
     10.4.     No Responsibility.....................................................................................    43
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     10.5.     Action on Instructions of Facility Letter of Credit Providers.........................................    43
     10.6.     Employment of Agents and Counsel......................................................................    44
     10.7.     Reliance on Documents; Counsel........................................................................    44
     10.8.     Agent's Reimbursement and Indemnification.............................................................    44
     10.9.     Notice of Default.....................................................................................    44
     10.10.    Facility Letter of Credit Provider Credit Decision....................................................    44
     10.11.    Successor Agent.......................................................................................    45

ARTICLE XI

SETOFF; RATABLE PAYMENTS.............................................................................................    45
     11.1.     Setoff................................................................................................    45
     11.2.     Ratable Payments......................................................................................    46

ARTICLE XII

BENEFIT OF AGREEMENT; ASSIGNMENTS; SUBPARTICIPATIONS.................................................................    46
     12.1.     Successors and Assigns................................................................................    46
     12.2.     Subparticipations.....................................................................................    46
     12.3.     Assignments...........................................................................................    47
     12.4.     Dissemination of Information..........................................................................    48
     12.5.     Tax Treatment.........................................................................................    48

ARTICLE XIII

GUARANTY.............................................................................................................    48
     13.1.     Guaranty of Payment...................................................................................    48
     13.2.     Acceptance of Guaranty; No Setoffs....................................................................    48
     13.3.     Nature of Guaranty; Continuing, Absolute and Unconditional............................................    49
     13.4.     Dealings with the Company.............................................................................    50
     13.5.     Subrogation...........................................................................................    50
     13.6.     Collateral............................................................................................    50
     13.7.     Rights to Payments, Etc...............................................................................    51
     13.8.     No Waiver.............................................................................................    51
     13.9.     Setoff................................................................................................    52
     13.10.    Severability..........................................................................................    52
     13.11.    Miscellaneous.........................................................................................    52

ARTICLE XIV

NOTICES..............................................................................................................    52
     14.1.     Giving Notice.........................................................................................    52
     14.2.     Change of Address.....................................................................................    52
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                                   EXHIBITS
                                   --------

Exhibit A (Section 2.4)      -     Form of Facility Letter of Credit
Exhibit B (Section 6.1(f))   -     Form of Compliance Certificate
Exhibit C (Section 12.3.1)   -     Form of Assignment Agreement

                                   SCHEDULES
                                   ---------

Pricing Schedule
Schedule I    -        Commitments
Schedule 5.9  -        Significant Subsidiaries
Schedule 5.21 -        Insurance Licenses

                                      -v-
<PAGE>

                          LETTER OF CREDIT AGREEMENT

     This Letter of Credit Agreement, dated as of October 24, 2000, is among TMK
RE, LTD., a Bermuda reinsurance corporation, TORCHMARK CORPORATION, a Delaware
corporation, the Participants named herein (the "Participants") and BANK ONE,
                                                 ------------
NA, a national banking association having its principal office in Chicago,
Illinois, as the Agent and as the Issuer.

                               R E C I T A L S:
                                - - - - - - - -

     WHEREAS, the Issuer has agreed to make available to the Company a standby
letter of credit issuance facility upon the terms and conditions set forth in
this Agreement and the Participants have agreed to assume a Risk Participation
in the letters of credit issued thereunder to the extent set forth herein; and

     WHEREAS, the Guarantor owns all of the outstanding capital stock of the
Company and will receive substantial and direct benefits from the extensions of
credit contemplated by this Agreement and is entering into this Agreement to
induce the Agent, the Issuer and the Participants to enter into this Agreement
and provide Facility Letters of Credit to the Company hereunder.

     NOW, THEREFORE, in consideration of the mutual covenants and undertakings
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company, the Guarantor, the
Participants, the Agent and the Issuer hereby agree as follows:

                                   ARTICLE I

                                  DEFINITIONS
                                  -----------

     As used in this Agreement:

     "Acquisition" means any transaction, or any series of related transactions,
consummated on or after the date of this Agreement, by which any Credit Party or
any of its Subsidiaries (i) acquires any going business or all or substantially
all of the assets of any firm, corporation or division thereof, whether through
purchase of assets, merger or otherwise or (ii) directly or indirectly acquires
(in one transaction or as the most recent transaction in a series of
transactions) at least a majority (in number of votes) of the securities of a
corporation which have ordinary voting power for the election of directors
(other than securities having such power only by reason of the happening of a
contingency) or a majority (by percentage or voting power) of the outstanding
partnership interests of a partnership.

     "Affected Participant" is defined in Section 3.5.
                                          -----------
<PAGE>

     "Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person owns 10% or
more of any class of voting securities (or other ownership interests) of the
controlled Person or possesses, directly or indirectly, the power to direct or
cause the direction of the management or policies of the controlled Person,
whether through ownership of stock, by contract or otherwise.

     "Agent" means Bank One, NA in its capacity as contractual representative of
the Facility Letter of Credit Providers pursuant to Article X, and not in its
individual capacity as the Issuer, and any successor Agent appointed pursuant to
Article X.

     "Agent Balance Transaction" means one or more receivables sales
transactions with respect to receivables arising out of advances made by AIL to
insurance agents in connection with life insurance policies underwritten by AIL.

     "Aggregate Facility Letter of Credit Commitment" means the commitment of
the Issuer to issue, and the commitment of the Participants to participate in,
Facility Letters of Credit from time to time issued or outstanding under Article
                                                                         -------
II, in an aggregate amount not to exceed $175,000,000, as such amount may be
--
decreased in accordance with Section 2.7.
                             -----------

     "Agreement" means this Letter of Credit Agreement, as it may be amended,
modified or restated and in effect from time to time.

     "Agreement Accounting Principles" means generally accepted accounting
principles as in effect from time to time, applied in a manner consistent with
those used in preparing the financial statements referred to in Section 5.5.
                                                                -----------

     "AIL" means American Income Life Insurance Company, an Indiana insurance
company.

     "Alternate Base Rate" means, for any day, a rate of interest per annum
equal to the higher of (a) the Prime Rate for such day, and (b) the sum of the
Federal Funds Effective Rate for such day plus 1/2% per annum.

     "Annual Statement" means the annual statutory financial statement of any
Insurance Subsidiary required to be filed with the insurance commissioner (or
similar authority) of its jurisdiction of incorporation, which statement shall
be in the form required by such Insurance Subsidiary's jurisdiction of
incorporation or, if no specific form is so required, in the form of financial
statements recommended by the NAIC to be used for filing annual statutory
financial statements and shall contain the type of information recommended by
the NAIC to be disclosed therein, together with all exhibits or schedules filed
therewith.

     "Applicable Facility Fee Rate" means, at any time, the percentage
determined in accordance with the Pricing Schedule at such time. The Applicable
Facility Fee Rate shall change as and when the Guarantor Debt Rating changes.

                                      -2-
<PAGE>

     "Applicable Letter of Credit Fee Rate" means, at any time, the percentage
determined in accordance with the Pricing Schedule at such time. The Applicable
Letter of Credit Fee Rate shall change as and when the Guarantor Debt Rating
changes.

     "Applicable Utilization Fee Rate" means, at any time, the percentage
determined in accordance with the Pricing Schedule at such time. The Applicable
Utilization Fee Rate shall change as and when the Guarantor Debt Rating changes.

     "Arranger" means Banc One Capital Markets, Inc., a Delaware corporation,
and its successors, in its capacity as Lead Arranger and Sole Book Runner.

     "Article" means an article of this Agreement unless another document is
specifically referenced.

     "Authorized Officer" means any of the Chairman, Vice Chairman, President,
Chief Financial Officer, Chief Accounting Officer, Treasurer, any Vice President
or any Assistant Treasurer of any Credit Party, acting singly.

     "Bank One" means Bank One, NA, a national banking association formerly
known as The First National Bank of Chicago and having its principal place of
business in Chicago, Illinois, in its individual capacity, and its successors.

     "Business Day" means a day (other than a Saturday or Sunday) on which banks
generally are open in Chicago and Bermuda for the conduct of substantially all
of their commercial lending activities.

     "Capitalized Lease" of a Person means any lease of Property by such Person
as lessee which would be capitalized on a balance sheet of such Person prepared
in accordance with Agreement Accounting Principles.

     "Capitalized Lease Obligations" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with
Agreement Accounting Principles.

     "Ceding Company" means an insurance or reinsurance Wholly-Owned Subsidiary
of the Guarantor that has, pursuant to an Insurance Contract or a Reinsurance
Contract with the Company, agreed with the Company that the Company, as
reinsurer, shall assume certain liabilities of such insurance or reinsurance
company under an Insurance Contract.

     "Change" is defined in Section 3.2.
                            -----------

     "Change in Control" means the acquisition by any Person, or two or more
Persons acting in concert, of beneficial ownership (within the meaning of Rule
13d-3 of the Securities and Exchange Commission under the Securities Exchange
Act of 1934) of 20% or more of the outstanding shares of voting stock of the
Guarantor.

                                      -3-
<PAGE>

     "Closing Transactions" is defined in Section 4.1(e).
                                          --------------

     "Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.

     "Commitment" means, (a) for each Participant, the obligation of such
Participant to participate in Facility Letters of Credit in an aggregate amount
not exceeding the amount set forth opposite its name on Schedule I hereto or as
set forth in any Notice of Assignment relating to any assignment which has
become effective pursuant to Section 12.3.2, as such amount may be modified from
                             --------------
time to time pursuant to the terms hereof, and (b) for the Issuer, the
obligation to issue Facility Letters of Credit in accordance with the terms
hereof and the Issuer's retained interest therein in the amount equal to the
difference between the Aggregate Facility Letter of Credit Commitment and the
sum of the Commitments of the Participants.

     "Company" means TMK Re, Ltd., a Bermuda reinsurance corporation, and its
successors and assigns.

     "Condemnation" is defined in Section 7.8.
                                  -----------

     "Consolidated Adjusted Net Income" means, for any period of calculation,
Consolidated Net Income plus (to the extent deducted in determining Consolidated
Net Income) (i) the provision for taxes in respect of, or measured by, income or
excess profits and (ii) Consolidated Interest Expense, in each case calculated
for such period for the Guarantor and its Subsidiaries on a consolidated basis
in accordance with Agreement Accounting Principles.

     "Consolidated Capitalization" means, at any date of determination, the sum
of (i) Consolidated Net Worth as at such date plus (ii) Consolidated
Indebtedness as at such date.

     "Consolidated Indebtedness" means the Indebtedness of the Guarantor and its
Subsidiaries determined on a consolidated basis in accordance with Agreement
Accounting Principles.

     "Consolidated Interest Expense" means, for any period of calculation,
interest expense, whether paid or accrued, of the Guarantor and its Subsidiaries
calculated on a consolidated basis in accordance with Agreement Accounting
Principles.

     "Consolidated Net Income" means, for any period of calculation, the net
income of the Guarantor and its Subsidiaries calculated on a consolidated basis
in accordance with Agreement Accounting Principles consistently applied.

     "Consolidated Net Worth" means, at any date of determination, the amount of
consolidated common and preferred shareholders' equity of the Guarantor and its
Subsidiaries (including, without limitation, the Series A Preferred Securities),
determined as at such date in accordance with Agreement Accounting Principles;
provided, however, that the effect of the application of FAS 115 shall be
--------  -------
excluded when computing Consolidated Net Worth.

                                      -4-
<PAGE>

     "Contingent Obligation" of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person, or
agrees to maintain the net worth or working capital or other financial condition
of any other Person, or otherwise assures any creditor of such other Person
against loss, including, without limitation, any comfort letter, operating
agreement, take-or-pay contract or application for a Facility Letter of Credit
or other Letter of Credit, but excluding (i) the endorsement of instruments for
deposit or collection in the ordinary course of business, (ii) the Payment and
Guarantee Agreement and (iii) obligations of the Guarantor arising in connection
with the Agent Balance Transaction.

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

     "Credit Party" means each and either of the Company and the Guarantor.

     "Default" means an event described in Article VII.
                                           -----------

     "Dollars," "dollars" and "$" each mean lawful money of the United States.

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

     "Excluded Taxes" means in the case of each Facility Letter of Credit
Provider or applicable Installation and the Agent, taxes imposed on its overall
net income, and franchise taxes imposed on it, by (a) the jurisdiction under the
laws of which such Facility Letter of Credit Provider or the Agent is
incorporated or organized or (b) the jurisdiction in which the Agent's or such
Facility Letter of Credit Provider's principal executive office or such Facility
Letter of Credit Provider's applicable Installation is located.

     "Existing Credit Agreement" means that certain Credit Agreement dated as of
October 22, 1997 among the Guarantor, Bank One, as agent, and the lenders named
therein, as amended, restated, supplemented or otherwise modified from time to
time.

     "Facility Letter of Credit" means a standby Letter of Credit issued
pursuant to Section 2.1, as amended, modified or supplemented from time to time.
            -----------

     "Facility Letter of Credit Obligations" means as at the time of
determination thereof, the sum of (a) the Reimbursement Obligations then
outstanding and (b) the aggregate undrawn face amount of the then outstanding
Facility Letters of Credit.

     "Facility Letter of Credit Providers" means the Issuer and the
Participants.

                                      -5-
<PAGE>

     "Facility Termination Date" means October 23, 2001 or any earlier date on
which the Aggregate Facility Letter of Credit Commitment shall terminate and/or
the Obligations shall become due and payable in accordance with the provisions
of this Agreement.

     "Federal Funds Effective Rate" means, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 10:00 a.m. (Chicago
time) on such day on such transactions received by the Agent from three Federal
funds brokers of recognized standing selected by the Agent in its sole
discretion.

     "Financial Statements" is defined in Section 5.5.
                                          -----------

     "Fitch" means Fitch IBCA, Inc., together with any Person succeeding thereto
by merger, consolidation or acquisition of all or substantially all of its
assets, including substantially all of its business of rating securities.

     "Floating Rate" means, for any day, a rate per annum equal to (a) the
Alternate Base Rate for such day, plus (b) two percent (2.0%) per annum, in each
                                  ----
case changing when and as the Alternate Base Rate changes.

     "Governmental Authority" means the federal government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government
including, without limitation, any board of insurance, insurance department or
insurance commissioner.

     "Guarantor" means Torchmark Corporation, a Delaware corporation, and its
successors and assigns.

     "Guarantor Debt Rating" means the senior unsecured long term debt (without
credit enhancement) rating of the Guarantor as determined by a rating agency
identified on the Pricing Schedule.

     "Guaranty" means the provisions of Article XIII hereof and the rights and
                                        ------------
obligations of the Guarantor thereunder.

     "Indebtedness" of a Person means, without duplication, such Person's (i)
obligations for borrowed money, (ii) obligations representing the deferred
purchase price of Property or services (excluding accounts payable arising in
the ordinary course of such Person's business payable on terms customary in the
trade and obligations of Insurance Subsidiaries arising under insurance or
annuity products), (iii) obligations, whether or not assumed, secured by Liens
or payable out of the proceeds or production from Property now or hereafter
owned or acquired by such Person, (iv) obligations which are evidenced by notes,
acceptances, or similar instruments, (v)

                                      -6-
<PAGE>

Capitalized Lease Obligations, (vi) net liabilities under interest rate swap,
exchange or cap agreements, (vii) obligations for which such Person is obligated
pursuant to or in respect of a Facility Letter of Credit and the face amount of
any unreimbursed amount owing in respect of any other Letter of Credit and
(viii) Contingent Obligations, but excluding any indebtedness of the Guarantor
arising under or in connection with the Series A Preferred Securities Loan
Agreement.

     "Installation" means, with respect to a Participant, the Issuer or the
Agent, any office, branch, subsidiary or affiliate of such Participant, the
Issuer or the Agent.

     "Insurance Subsidiary" means any Subsidiary of the Guarantor which is
engaged in the life, health or accident insurance or reinsurance business,
including the Company.

     "Insurance Contract" means an insurance contract or reinsurance contract
entered into by a Ceding Company.

     "Investment" of a Person means any loan, advance (other than commission,
travel and similar advances to officers and employees made in the ordinary
course of business), extension of credit (other than accounts receivable arising
in the ordinary course of business on terms customary in the trade), deposit
account or contribution of capital by such Person to any other Person or any
investment in, or purchase or other acquisition of, the stock, partnership
interests, notes, debentures or other securities of any other Person made by
such Person.

     "Issuance Request" is defined in Section 2.4.
                                      -----------

     "Issuer" means Bank One.

     "Issuance Date" means a date on which a Facility Letter of Credit is
issued, renewed or amended hereunder.

     "L/C Documents" means this Agreement, the Reimbursement Agreements, the
Facility Letters of Credit and the other documents and agreements contemplated
hereby and executed by the Company or the Guarantor in favor of the Agent, the
Issuer or any Participant, as amended, modified or supplemented from time to
time.

     "Letter of Credit" of a Person means a letter of credit or similar
instrument which is issued upon the application of such Person or upon which
such Person is an account party or for which such Person is in any way liable.

     "Letter of Credit Cash Collateral Account" is defined in Section 8.1. Such
                                                              -----------
account and the related cash collateralization shall be subject to documentation
satisfactory to the Agent.

     "License" means any license, certificate of authority, permit or other
authorization which is required to be obtained from a Governmental Authority in
connection with the operation, ownership or transaction of insurance or
reinsurance business.

                                      -7-
<PAGE>

     "Lien" means any lien (statutory or other), security interest, mortgage,
pledge, hypothecation, assignment, deposit arrangement, encumbrance or
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever (including, without limitation, the interest of a
vendor or lessor under any conditional sale, Capitalized Lease or other title
retention agreement but excluding rights in agent balances which are sold in an
Agent Balance Transaction).

     "Margin Stock" has the meaning assigned to that term under Regulation U.

     "Material Adverse Effect" means a material adverse effect on (i) the
business, Property, condition (financial or otherwise), results of operations,
or prospects of the Company or of the Guarantor and its Subsidiaries taken as a
whole, (ii) the ability of any Credit Party to perform its obligations under the
L/C Documents, or (iii) the validity or enforceability of any of the L/C
Documents or the rights or remedies of the Agent, the Issuer or the Participants
thereunder.

     "Modified Required Providers" means the Facility Letter of Credit Providers
in the aggregate having at least 75% of the Aggregate Facility Letter of Credit
Commitment or, if the Aggregate Facility Letter of Credit Commitment has been
terminated, having at least 75% of the aggregate amount of the outstanding
Facility Letter of Credit Obligations.

     "Moody's" means Moody's Investors Service, Inc., a Delaware corporation,
together with any Person succeeding thereto by merger, consolidation or
acquisition of all or substantially all of its assets, including substantially
all of its business of rating securities.

     "NAIC" means the National Association of Insurance Commissioners or any
successor thereto, or in lieu thereof, any other association, agency or other
organization performing advisory, coordination or other like functions among
insurance departments, insurance commissions and similar Governmental
Authorities of the various states of the United States of America toward the
promotion of uniformity in the practices of such Governmental Authorities.

     "Obligations" means the Facility Letter of Credit Obligations and all other
liabilities (if any), whether actual or contingent, of the Company with respect
to Facility Letters of Credit, all accrued and unpaid fees and all expenses,
reimbursements, indemnities and other obligations of the Company to the
Participants or to any Participant, the Issuer, the Agent, the Arranger or any
indemnified party hereunder arising under any of the L/C Documents.

     "Other Taxes" is defined in Section 3.3(b).
                                 --------------

     "Participants" means the financial institutions listed on the signature
pages of this Agreement and their respective successors and assigns.

     "Payment and Guarantee Agreement" means the Payment and Guarantee Agreement
dated October 11, 1994, issued by the Guarantor for the benefit of the holders
of the Series A Preferred Securities, without giving effect to any amendments
thereto.

                                      -8-
<PAGE>

     "Payment Date" means the last day of each March, June, September and
December.

     "PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.

     "Permitted Acquisition" means the Acquisition of any Person which has been
approved and recommended by the board of directors (or the functional equivalent
thereof) of the Person being acquired.

     "Person" means any natural person, corporation, limited liability company,
firm, joint venture, partnership, association, enterprise, trust or other entity
or organization, or any government or political subdivision or any agency,
department or instrumentality thereof.

     "Plan" means an employee pension benefit plan which is covered by Title IV
of ERISA or subject to the minimum funding standards under Section 412 of the
Code as to which any Credit Party or any member of the Controlled Group may have
any liability.

     "Prime Rate" means a rate per annum equal to the corporate base rate or
prime rate of interest announced by Bank One or by its parent, Bank One
Corporation, from time to time (which is not necessarily the lowest rate charged
to any customer), changing when and as said corporate base rate or prime rate
changes.

     "Pricing Schedule" means the pricing schedule attached hereto.

     "Property" of a Person means any and all property, whether real, personal,
tangible, intangible, or mixed, of such Person, or other assets owned, leased or
operated by such Person.

     "pro-rata" means, when used with respect to any Facility Letter of Credit
Provider and any described aggregate or total amount, an amount equal to such
Facility Letter of Credit Provider's pro-rata share or portion based on its
percentage of the Aggregate Facility Letter of Credit Commitment or if the
Aggregate Facility Letter of Credit Commitment has been terminated, based on its
percentage of the aggregate principal amount of outstanding Facility Letter of
Credit Obligations.

     "Purchasers" is defined in Section 12.3.1.
                                --------------

     "Regulation U" means Regulation U of the Board of Governors of the U.S.
Federal Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or carrying margin
stocks applicable to such Persons.

     "Reimbursement Agreement" means a letter of credit application and
reimbursement agreement in such form as the Issuer may from time to time employ
in the ordinary course of business which is reasonably acceptable to the
Company, as amended, modified or supplemented from time to time.

                                      -9-
<PAGE>

     "Reimbursement Obligations" means, at any time, the aggregate (without
duplication) of the Obligations of the Company to the Facility Letter of Credit
Providers in respect of all unreimbursed payments or disbursements made by the
Facility Letter of Credit Providers under or in respect of draws made under the
Facility Letters of Credit.

     "Reinsurance Contract" means a reinsurance contract between the Company, as
reinsurer, and a Ceding Company pursuant to which the Company, as reinsurer,
assumes certain liabilities of the Ceding Company with respect to one or more
Insurance Contracts.

     "Release" is defined in the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, 42 U.S.C. 39601 et seq.

     "Replacement Participant" is defined in Section 3.5.
                                             -----------

     "Reportable Event" means a reportable event as defined in Section 4043 of
ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC has by regulation waived
the requirement of Section 4043(a) of ERISA that it be notified within 30 days
of the occurrence of such event; provided, however, that a failure to meet the
                                 --------  -------
minimum funding standard of Section 412 of the Code and of Section 302 of ERISA
shall be a Reportable Event regardless of the issuance of any such waiver of the
notice requirement in accordance with either Section 4043(a) of ERISA or Section
412(d) of the Code.

     "Required Providers" means the Facility Letter of Credit Providers in the
aggregate having at least 66-2/3% of the Aggregate Facility Letter of Credit
Commitment or, if the Aggregate Facility Letter of Credit Commitment has been
terminated, of the aggregate amount of the outstanding Facility Letter of Credit
Obligations.

     "Risk-Based Capital Guidelines" is defined in Section 3.2.
                                                   -----------

     "Risk Participation" is defined in Section 2.2.
                                        -----------

     "S&P" means Standard & Poor's Ratings Group, a division of McGraw-Hill,
Inc., together with any Person succeeding thereto by merger, consolidation or
acquisition of all or substantially all of its assets, including substantially
all of its business of rating securities.

     "SAP" means, with respect to any Insurance Subsidiary, the statutory
accounting practices prescribed or permitted by the insurance commissioner (or
other similar authority) as of the Closing Date in the jurisdiction of
incorporation of such Insurance Subsidiary for the preparation of annual
statements and other financial reports by insurance companies of the same type
as such Insurance Subsidiary.

     "Section" means a numbered section of this Agreement, unless another
document is specifically referenced.

                                      -10-
<PAGE>

         "Series A Preferred Securities" means the 9.18% Preferred Securities,
Series A, issued by Torchmark Capital L.L.C. on October 11, 1994.

         "Series A Preferred Securities Loan Agreement" means the Loan Agreement
dated as of October 11, 1994 between the Guarantor and Torchmark Capital L.L.C.
entered into in connection with the Series A Preferred Securities, as in effect
on October 11, 1994.

         "Significant Insurance Subsidiary" means any Significant Subsidiary
which is an Insurance Subsidiary.

         "Significant Subsidiary" of a Person means a "significant subsidiary"
as defined in Rule 1-02(v) of Regulation S-X of the Securities and Exchange
Commission (17 CFR Part 210). Unless otherwise expressly provided, all
references herein to a "Significant Subsidiary" shall mean a Significant
Subsidiary of the Guarantor.

         "Single Employer Plan" means a Plan maintained by any Credit Party or
any member of the Controlled Group for employees of such Credit Party or any
member of the Controlled Group.

         "Solvent" means, when used with respect to a Person, that (a) the fair
saleable value of the assets of such Person is in excess of the total amount of
the present value of its liabilities (including for purposes of this definition
all liabilities (including loss reserves as determined by such Person), whether
or not reflected on a balance sheet prepared in accordance with Agreement
Accounting Principles and whether direct or indirect, fixed or contingent,
secured or unsecured, disputed or undisputed), (b) such Person is able to pay
its debts or obligations in the ordinary course as they mature and (c) such
Person does not have unreasonably small capital to carry out its business as
conducted and as proposed to be conducted. "Solvency" shall have a correlative
meaning.

         "Subparticipants" is defined in Section 12.2.1.
                                         --------------

         "Subsidiary" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(ii) any partnership, association, joint venture, limited liability company or
similar business organization more than 50% of the ownership interests having
ordinary voting power of which shall at the time be so owned or controlled.
Unless otherwise expressly provided, all references herein to a "Subsidiary"
shall mean a Subsidiary of the Guarantor.

         "Substantial Portion" means, with respect to the Property of any Credit
Party and its Subsidiaries, Property which (i) represents more than 10% of the
consolidated assets of such Credit Party and its Subsidiaries as would be shown
in the consolidated financial statements of such Credit Party and its
Subsidiaries as at the beginning of the twelve-month period ending with

                                      -11-
<PAGE>

the month in which such determination is made, or (ii) is responsible for more
than 10% of the consolidated net sales or of the consolidated net income of such
Credit Party and its Subsidiaries as reflected in the financial statements
referred to in clause (i) above.

         "Taxes" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings, and any and all liabilities with
respect to the foregoing, but excluding Excluded Taxes and Other Taxes.

         "Transferee" is defined in Section 12.4.
                                    ------------

         "Unfunded Liabilities" means the amount (if any) by which the present
value of all vested nonforfeitable benefits under all Single Employer Plans
exceeds the fair market value of all such Plan assets allocable to such
benefits, all determined as of the then most recent valuation date for such
Plans.

         "Unmatured Default" means an event which but for the lapse of time or
the giving of notice, or both, would constitute a Default.

         "Wholly-Owned Subsidiary" of a Person means (i) any Subsidiary all of
the outstanding voting securities of which shall at the time be owned or
controlled, directly or indirectly, by such Person or one or more Wholly-Owned
Subsidiaries of such Person, or by such Person and one or more Wholly-Owned
Subsidiaries of such Person, or (ii) any partnership, association, joint
venture, limited liability company or similar business organization 100% of the
ownership interests having ordinary voting power of which shall at the time be
so owned or controlled. Unless otherwise expressly provided, all references
herein to a "Wholly-Owned Subsidiary" shall mean a Wholly-Owned Subsidiary of
the Guarantor.

         The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms.

                                  ARTICLE II

                         THE LETTER OF CREDIT FACILITY
                         -----------------------------

         2.1.  Issuance of Facility Letters of Credit. (a) From and after the
               --------------------------------------
date hereof until the Facility Termination Date, the Issuer agrees, upon the
terms and conditions set forth in this Agreement, to issue at the request and
for the account of the Company, one or more Facility Letters of Credit;
provided, however, that in no event shall: (i) the aggregate amount of the
--------  -------
Facility Letter of Credit Obligations at any time exceed the Aggregate Facility
Letter of Credit Commitment; (ii) the initial face amount of any Facility Letter
of Credit be less than $5,000,000; (iii) there be more than eight (8) Facility
Letters of Credit outstanding at any time; or (iv) the expiration date of any
Facility Letter of Credit, or the date for payment of any draft presented
thereunder and accepted by the Issuer, be later than the earlier to occur of (A)
the one year

                                      -12-
<PAGE>

anniversary of the date of issuance of such Facility Letter of Credit and (B)
the one year anniversary of the Facility Termination Date.

               (b)   The Issuer shall not be under any obligation to issue any
Facility Letter of Credit if (i) any order, judgment or decree of any
Governmental Authority or other regulatory body with jurisdiction over any
Facility Letter of Credit Provider shall purport by its terms to enjoin or
restrain the Issuer from issuing or any Participant from participating in such
Facility Letter of Credit, or any law or governmental rule, regulation, policy,
guideline or directive (whether or not having the force of law) from any
Governmental Authority or other regulatory body with jurisdiction over any
Facility Letter of Credit Provider shall prohibit, or request that any Facility
Letter of Credit Provider refrain from, the issuance of or participation in
Facility Letters of Credit in particular or shall impose upon any Facility
Letter of Credit Provider with respect to any Facility Letter of Credit any
restriction or reserve or capital requirement (for which such Facility Letter of
Credit Provider is not otherwise compensated) or any unreimbursed loss, cost or
expense which was not applicable, in effect and known to such Facility Letter of
Credit Provider as of the date of this Agreement and which such Facility Letter
of Credit Provider in good faith deems material to it, unless, to the extent
applicable, there has been a substitution of each affected Participant in
accordance with Section 3.5; (ii) one or more of the conditions to such issuance
                -----------
contained in Section 4.2 is not then satisfied; or (iii) after giving effect to
             -----------
such issuance (by calculating the amount of the Facility Letter of Credit
proposed to be issued), the aggregate outstanding amount of the Facility Letter
of Credit Obligations would exceed the Aggregate Facility Letter of Credit
Commitment.

               (c)   If, at any time, the aggregate outstanding amount of the
Facility Letter of Credit Obligations exceeds the Aggregate Facility Letter of
Credit Commitment, then the Company shall immediately deposit an amount equal to
such excess in the Letter of Credit Cash Collateral Account in accordance with
Section 8.1.
-----------

         2.2. Participating Interests. Immediately upon the issuance by the
              -----------------------
Issuer of a Facility Letter of Credit in accordance with Section 2.4, each
                                                         -----------
Participant shall be deemed to have irrevocably and unconditionally purchased
and received from the Issuer, without recourse, representation or warranty, an
undivided participation interest (a "Risk Participation") equal to its pro-rata
                                     ------------------
share of the face amount of such Facility Letter of Credit and each draw paid by
the Issuer thereunder. Each Participant's obligation to pay its proportionate
share of all draws under the Facility Letters of Credit, absent gross negligence
or willful misconduct by the Issuer in honoring any such draw, shall be
absolute, unconditional and irrevocable and in each case shall be made without
counterclaim or set-off by such Participant.

         2.3. Facility Letter of Credit Reimbursement Obligations. (a) The
              ---------------------------------------------------
Company agrees to pay to the Agent for the account of the Issuer (i) on each
date that any amount is drawn under any Facility Letter of Credit a sum (and
interest on such sum as provided in clause (ii) below) equal to the amount so
drawn, plus all other charges and expenses with respect thereto specified in
Section 2.6 or in the applicable Reimbursement Agreement and (ii) interest at
-----------
the Floating Rate on any and all amounts remaining unpaid under this Section 2.3
                                                                     -----------
until payment in full.

                                      -13-
<PAGE>

Payments shall be made to the Issuer in accordance with Section 2.8. The Company
                                                        -----------
agrees to pay to the Agent for the account of the Issuer the amount of all
Facility Letter of Credit Obligations owing in respect of any Facility Letter of
Credit immediately when due under all circumstances, including, without
limitation, any of the following circumstances: (w) any lack of validity or
enforceability of this Agreement or any of the other L/C Documents; (x) the
existence of any claim, set-off, defense or other right which the Company may
have at any time against a beneficiary named in a Facility Letter of Credit, any
transferee of any Facility Letter of Credit (or any Person for whom any such
transferee may be acting), any Facility Letter of Credit Provider or any other
Person, whether in connection with this Agreement, any Facility Letter of
Credit, the transactions contemplated herein or any unrelated transactions
(including any underlying transaction between the Company and the beneficiary
named in any Facility Letter of Credit); (y) the validity, sufficiency or
genuineness of any document which the Issuer has determined in good faith
complies on its face with the terms of the applicable Facility Letter of Credit,
even if such document should later prove to have been forged, fraudulent,
invalid or insufficient in any respect or any statement therein shall have been
untrue or inaccurate in any respect; or (z) the surrender or impairment of any
security for the performance or observance of any of the terms hereof.

               (b)   Notwithstanding any provisions to the contrary in any
Reimbursement Agreement or other L/C Document, the Company agrees to reimburse
the Issuer for amounts which the Issuer pays under each Facility Letter of
Credit no later than (i) 2:00 p.m. (Chicago time) on the date of such payment by
the Issuer, if the Issuer notifies the Company of such payment by 10:00 a.m.
(Chicago time) or (ii) 12:00 noon (Chicago time) on the Business Day following
such payment, if otherwise (together with interest thereon at the Floating
Rate).

               (c)   Upon receipt from the beneficiary of any Facility Letter of
Credit of any demand under such Facility Letter of Credit, the Issuer shall
notify the Company and the Agent, and the Agent shall notify each Participant as
to the amount to be paid by the Issuer as a result of such demand and the
proposed payment date. Upon receipt of such notice, as promptly as practical
during normal banking hours on the date of its receipt of such notice or, if not
practicable on such date, not later than noon (Chicago time) on the Business Day
immediately succeeding such date of notification, each Participant shall deliver
to the Agent for the account of the Issuer, in immediately available funds, the
purchase price for such Participant's interest in such Facility Letter of Credit
Obligations to the extent such amount is not reimbursed by the Company pursuant
to paragraph (b) above, which shall be an amount equal to such Participant's
pro-rata share of such Facility Letter of Credit Obligations. Each Participant
shall, upon demand by the Issuer, pay the Agent for the account of the Issuer
interest on such Participant's pro-rata share of such draw from the date of
payment by the Issuer on account of such Facility Letter of Credit until the
date of delivery of such funds to the Agent by such Participant at a rate per
annum, computed for actual days elapsed based on a 360-day year, equal to the
Federal Funds Effective Rate for such period; provided, that such payments shall
                                              --------
be made by the Participants only in the event and to the extent that the Issuer
is not reimbursed in full by the Company for interest on the amount of any draw
on the Facility Letters of Credit.

                                      -14-
<PAGE>

               (d)   At any time after the Issuer has made a payment on account
of any Facility Letter of Credit and has received from any other Participant
such Participant's pro-rata share of such payment, the Issuer shall, forthwith
upon its receipt of any reimbursement (in whole or in part) by the Company for
such payment, or of any other amount from the Company or any other Person in
respect of such payment (including, without limitation, any payment of interest
or penalty fees and any payment under any collateral account agreement of the
Company or any other L/C Document), transfer to such other Participant such
other Participant's ratable share of such reimbursement or other amount;
provided, that interest shall accrue for the benefit of such Participant from
--------
the time such Issuer has made a payment on account of any Facility Letter of
Credit; provided, further, that in the event that the receipt by the Issuer of
        --------  -------
such reimbursement or other amount is found to have been a transfer in fraud of
creditors or a preferential payment under any bankruptcy code or is otherwise
required to be returned, such Participant shall promptly return to the Issuer
any portion thereof previously transferred by the Issuer to such Participant,
but without interest to the extent that interest is not payable by the Issuer in
connection therewith.

         2.4. Procedure for Issuance. (a) Prior to the issuance of each Facility
              ----------------------
Letter of Credit, and as a condition of such issuance, the Company shall deliver
to the Issuer a Reimbursement Agreement signed by the Company, together with
such other documents or items as may be required pursuant to the terms thereof,
and the proposed form and content of such Facility Letter of Credit shall be
reasonably satisfactory to the Issuer. It is understood that the form of
Facility Letter of Credit attached hereto as Exhibit A is satisfactory to the
                                             ---------
Issuer. In the event of any conflict between the terms of any Reimbursement
Agreement and the terms of this Agreement or any other L/C Document, the terms
of this Agreement or such L/C Document shall control. Upon receipt of a
Reimbursement Agreement, the Issuer shall promptly notify the Agent, and the
Agent shall promptly notify each Participant, of the contents thereof and of the
amount of such Participant's participation in such proposed Facility Letter of
Credit. Each Facility Letter of Credit shall be issued no earlier than five (5)
Business Days after delivery of the foregoing documents, which delivery may be
by the Company to the Issuer by telecopy or other electronic means followed by
delivery of executed originals within five (5) days thereafter. The documents so
delivered shall be in compliance with the requirements set forth in Section
                                                                    -------
2.1(b), and shall specify therein (i) the stated amount of the Facility Letter
------
of Credit requested, which shall not be less than $5,000,000, (ii) the effective
date of issuance of such requested Facility Letter of Credit, which shall be a
Business Day, (iii) the date on which such requested Facility Letter of Credit
is to expire, which shall be a Business Day prior to the earlier to occur of (A)
the one year anniversary of the date of issuance of such Facility Letter of
Credit and (B) the one year anniversary of the Facility Termination Date, (iv)
the entity for whose account the requested Facility Letter of Credit is to be
issued, which shall be the Company, (v) the beneficiary to be named in the
Facility Letter of Credit, and (vi) a list of outstanding Facility Letters of
Credit (including the maturity and stated amount of each thereof), together with
a statement of an Authorized Officer of the Company that, to the Company's
knowledge, the aggregate amount of Facility Letter of Credit Obligations which
would be outstanding after giving effect to the requested Facility Letter of
Credit issuance would not exceed the Aggregate Facility Letter of Credit
Commitment. The delivery of the foregoing documents and information shall
constitute

                                      -15-
<PAGE>

an "Issuance Request" for purposes of this Agreement. Subject to the terms and
    ----------------
conditions of Section 2.1 and provided that the applicable conditions set forth
              -----------
in Sections 4.1 and 4.2 hereof have been satisfied, the Issuer shall, on the
   --------------------
requested date, issue a Facility Letter of Credit on behalf of the Company in
accordance with the Issuer's usual and customary business practices.

               (b)   From time to time while a Facility Letter of Credit is
outstanding and prior to the Facility Termination Date, the Issuer will, upon
the written request of the Company received by the Issuer at least five days (or
such shorter time as the Issuer may agree in a particular instance) prior to the
proposed date of amendment, amend any Facility Letter of Credit issued by it.
Each such request for amendment of a Facility Letter of Credit shall be in
writing and shall specify: (i) the Facility Letter of Credit to be amended; (ii)
the proposed date of amendment of the Facility Letter of Credit (which shall be
a Business Day); (iii) the nature of the proposed amendment; and (iv) such other
matters as the Issuer may require. The Issuer shall be under no obligation to
amend any Facility Letter of Credit if: (x) the Issuer would have no obligation
at such time to issue such Facility Letter of Credit in its amended form under
the terms of this Agreement; or (y) the beneficiary of any such Facility Letter
of Credit does not accept the proposed amendment to the Facility Letter of
Credit.

               (c)   The Issuer and the Participants agree that, while a
Facility Letter of Credit is outstanding and prior to the Facility Termination
Date, at the option of the Company and upon the written request of the Company
received by the Issuer at least forty-five days (or such shorter time as the
Issuer may agree in a particular instance) prior to the termination date
thereof, the Issuer shall be entitled to authorize the automatic renewal of any
Facility Letter of Credit issued by it. Each such request for renewal of a
Facility Letter of Credit shall be in writing and shall specify: (i) the
Facility Letter of Credit to be renewed; (ii) the proposed date of notification
of renewal of the Facility Letter of Credit (which shall be a Business Day);
(iii) the revised expiry date of the Facility Letter of Credit (which shall not
be more than 365 days after the earlier of the date of renewal and the Facility
Termination Date); and (iv) such other matters as the Issuer may require. The
Issuer shall be under no obligation so to renew any Facility Letter of Credit
if: (x) the Issuer would have no obligation at such time to issue or amend such
Facility Letter of Credit in its renewed form under the terms of this Agreement
or (y) the beneficiary of any such Facility Letter of Credit does not accept the
proposed renewal of the Facility Letter of Credit and, in any such case, the
Issuer shall provide timely notice of nonrenewal to the beneficiary in
accordance with the terms of such Facility Letter of Credit. If any outstanding
Facility Letter of Credit shall provide that it shall be automatically renewed
unless the beneficiary thereof receives notice from the Issuer that such
Facility Letter of Credit shall not be renewed, and if at the time of renewal
the Issuer would be entitled to authorize the renewal of such Facility Letter of
Credit in accordance with this Section 2.4(c) upon the request of the Company
                               --------------
but the Issuer shall not have received a request from the Company with respect
to such renewal or other written direction by the Company with respect thereto,
the Issuer shall nonetheless be permitted (but not required) to allow such
Facility Letter of Credit to renew unless the revised expiry date of the
Facility Letter of Credit would be more than 365 days after the earlier of the
date of renewal and the Facility Termination Date, and the Company and the
Participants hereby authorize such renewal; provided that in the event the
                                            --------
Issuer shall not have received a request from the

                                      -16-
<PAGE>

Company with respect to such renewal, the Issuer shall give a notice of
nonrenewal with respect to any Facility Letter of Credit which has an expiry
date later than the Facility Termination Date. In no event shall any Facility
Letter of Credit have an expiry date (whether by amendment, renewal or other
modification) which is more than 365 days from the Facility Termination Date.

          2.5. Nature of the Obligations of the Issuer and the Participants.
               ------------------------------------------------------------
(a) As between the Company and the Issuer and the Participants, the Company
assumes all risks of the acts and omissions of, or misuse of the Facility
Letters of Credit by, the respective beneficiaries of the Facility Letters of
Credit. In furtherance and not in limitation of the foregoing, neither the
Agent, the Issuer nor the Participants shall be responsible for (i) the form,
validity, sufficiency, accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application for the issuance of a
Facility Letter of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign a Facility Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason; (iii) the failure of the beneficiary
of a Facility Letter of Credit to comply fully with conditions required to be
satisfied by any Person other than the Issuer in order to draw upon such
Facility Letter of Credit; (iv) errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph, telex,
facsimile or otherwise; (v) errors in the interpretation of technical terms;
(vi) the misapplication by the beneficiary of a Facility Letter of Credit of the
proceeds of any drawing under such Facility Letter of Credit; or (vii) any
consequences arising from causes beyond control of the Issuer.

               (b)   In furtherance and extension and not in limitation of the
specific provisions hereinabove set forth, any action taken or omitted by the
Issuer under or in connection with the Facility Letters of Credit or any related
certificates, if taken or omitted in good faith, shall not put the Issuer or any
Participant under any resulting liability to the Company or relieve the Company
of any of its obligations hereunder to the Issuer or any Participant.

          2.6. Facility Letter of Credit Fees. The Company hereby agrees to pay
               ------------------------------
to the Agent, for the ratable (based on Commitment amounts) account of the
Facility Letter of Credit Providers, letter of credit fees with respect to each
Facility Letter of Credit for each day from and including the date of issuance
thereof until the date such Facility Letter of Credit is fully drawn, cancelled
or expired equal to the Applicable Letter of Credit Fee Rate for such day
multiplied by the aggregate outstanding face amount of all Facility Letters of
Credit at the close of business on such day, payable (in arrears) on each
Payment Date and upon the expiration, cancellation or utilization in full of
such Facility Letter of Credit. Notwithstanding anything contained in this
Section 2.6 to the contrary, during the continuance of a Default, the Applicable
-----------
Letter of Credit Fee Rate shall be increased by 2.0% per annum. In addition to
the foregoing, the Company agrees to pay the Issuer, for its own account, any
other fees customarily charged by it to issue, service and amend the Facility
Letters of Credit.

                                      -17-
<PAGE>

         2.7.  Facility and Utilization Fees; Reduction in Aggregate Facility
               --------------------------------------------------------------
Letter of Credit Commitment. (a) The Company agrees to pay to the Agent, for the
---------------------------
ratable (based on Commitment amounts) account of the Facility Letter of Credit
Providers, a facility fee for each day from the date hereof to and including the
later of the Facility Termination Date and the date no Facility Letters of
Credit are outstanding and all Obligations are paid in full equal to the
Applicable Facility Fee Rate for such day multiplied by the Aggregate Facility
Letter of Credit Commitment (regardless of usage, except after the Facility
Termination Date such rate shall be multiplied by the aggregate outstanding
amount of all Facility Letter of Credit Obligations) at the close of business
(if applicable) on such day, payable (in arrears) on each Payment Date, on the
Facility Termination Date and on the date no Facility Letters of Credit are
outstanding and all Obligations are paid in full. The Company also agrees to pay
to the Agent, for the ratable (based on Commitment amounts) account of the
Facility Letter of Credit Providers, a utilization fee for each day from the
date hereof to and including the later of the Facility Termination Date and the
date no Facility Letters of Credit are outstanding and all Obligations are paid
in full equal to the Applicable Utilization Fee Rate for such day multiplied by
the aggregate outstanding amount of all Facility Letter of Credit Obligations at
the close of business on such day, payable (in arrears) on each Payment Date, on
the Facility Termination Date and on the date no Facility Letters of Credit are
outstanding and all Obligations are paid in full. All accrued facility and
utilization fees shall be payable on the effective date of any termination of
the obligations of the Issuer to issue Facility Letters of Credit hereunder.

               (b)   The Company may permanently reduce the Aggregate Facility
Letter of Credit Commitment in whole, or in part ratably among the Issuer and
the Participants, in a minimum aggregate amount of $10,000,000 or any integral
multiple of $1,000,000 in excess thereof, upon at least three (3) Business Days'
written notice to the Agent, which notice shall specify the amount of any such
reduction; provided, however, that the amount of the Aggregate Facility Letter
           --------  -------
of Credit Commitment may not be reduced below the aggregate amount of the
outstanding Facility Letter of Credit Obligations.

         2.8.  Method of Payment. All payments of the Obligations hereunder
               -----------------
shall be made, without setoff, deduction or counterclaim, in Dollars in
immediately available funds to the Issuer or the Agent, as applicable, at such
Person's address specified pursuant to Article XIV, or at any other Installation
                                       -----------
of the Issuer or the Agent specified in writing by the Issuer or the Agent to
the Company, by noon (Chicago time) on the date when due and shall (except in
the case of Reimbursement Obligations for which the Issuer or the Agent, as
applicable, has not been fully indemnified by the Participants, or as otherwise
specifically required hereunder) be applied ratably by the Agent among the
Facility Letter of Credit Providers. Each payment delivered to the Agent for the
account of any Facility Letter of Credit Provider shall be delivered promptly by
the Agent to such Facility Letter of Credit Provider at its address specified
pursuant to Article XIV or at any Installation specified in a notice received by
            -----------
the Agent from such Facility Letter of Credit Provider.

                                      -18-
<PAGE>

         2.9.  Additional Fees. In addition to the fees otherwise described
               ---------------
herein, the Company shall pay to the Issuer and the Arranger fees in the amounts
and at the times separately agreed to among the Issuer, the Arranger and the
Company.

                                  ARTICLE III

                            CHANGE IN CIRCUMSTANCES
                            -----------------------

         3.1.  Yield Protection. If, on or after the Closing Date, the adoption
               ----------------
of or any change in any law or any governmental or quasi-governmental rule,
regulation, policy, guideline or directive (whether or not having the force of
law), or any change in the interpretation or administration thereof by any
governmental or quasi-governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or compliance by the
Issuer or any Participant or applicable Installation with any request or
directive (whether or not having the force of law) of any such authority,
central bank or comparable agency:

               (a)   subjects the Issuer or any Participant or any applicable
Installation to any Taxes, or changes the basis of taxation of payments (other
than with respect to Excluded Taxes) to any Letter of Credit Provider in respect
of its interest in the Facility Letters of Credit or other amounts due it
hereunder, or

               (b)   imposes or increases or deems applicable any reserve,
assessment, insurance charge, special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended by, the
Issuer, any Participant or any applicable Installation, or

               (c)   imposes any other condition the result of which is to
increase the cost to the Issuer, any Participant or any applicable Installation
issuing or participating in Facility Letters of Credit or reduces any amount
receivable by the Issuer, any Participant or any applicable Installation in
connection with any Facility Letters of Credit, or requires the Issuer, any
Participant or any applicable Installation to make any payment calculated by
reference to the amount of Facility Letters of Credit issued or participated in
or interest received by it, in each case, by an amount reasonably deemed
material by the Issuer or such Participant, and the result of any of the
foregoing is to increase the cost to the Issuer or such Participant or
applicable Installation of funding and maintaining its interest in the Facility
Letters of Credit and its pro rata share of the Aggregate Facility Letter of
Credit Commitment or to reduce the return received by the Issuer or such
Participant or applicable Installation in connection with funding and
maintaining its interest in the Facility Letters of Credit and its pro rata
share of the Aggregate Facility Letter of Credit Commitment, then, within 15
days of demand by the Issuer or such Participant, the Company shall pay the
Issuer or such Participant such additional amount or amounts as will compensate
the Issuer or such Participant for such increased cost or reduction in amount
received.

         3.2.  Changes in Capital Adequacy Regulations. If the Issuer or a
               ---------------------------------------
Participant reasonably determines the amount of capital required or expected to
be maintained by the Issuer

                                      -19-
<PAGE>

or such Participant, any applicable Installation or any corporation controlling
the Issuer or such Participant is increased as a result of a Change, then,
within 15 days of demand by the Issuer or such Participant, the Company shall
pay the Issuer or such Participant the amount necessary to compensate for any
material shortfall in the rate of return on the portion of such increased
capital which the Issuer or such Participant reasonably determines is
attributable to this Agreement, its interest in the Facility Letters of Credit
or its obligation to participate in or issue Facility Letters of Credit
hereunder (after taking into account the Issuer's or such Participant's policies
as to capital adequacy). "Change" means (a) any change after the date of this
                          ------
Agreement in the Risk-Based Capital Guidelines, or (b) any adoption of or change
in any other law, governmental or quasi-governmental rule, regulation, policy,
guideline, interpretation, or directive (whether or not having the force of law)
after the date of this Agreement which affects the amount of capital required or
expected to be maintained by the Issuer or any Participant or any applicable
Installation or any corporation controlling the Issuer or any Participant.
"Risk-Based Capital Guidelines" means (a) the risk-based capital guidelines in
 -----------------------------
effect in the United States on the date of this Agreement, including transition
rules, and (b) the corresponding capital regulations promulgated by regulatory
authorities outside the United States implementing the July 1988 report of the
Basle Committee on Banking Regulation and Supervisory Practices entitled
"International Convergence of Capital Measurements and Capital Standards",
including transition rules, and any amendments to such regulations adopted prior
to the date of this Agreement.

         3.3.  Taxes. (a) All payments by any Credit Party to or for the account
               -----
of any Participant, the Issuer or the Agent hereunder shall be made free and
clear of and without deduction for any and all Taxes. If any Credit Party shall
be required by law to deduct any Taxes from or in respect of any sum payable
hereunder to any Participant, the Issuer or the Agent, (i) the sum payable shall
be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
                                                                       -------
3.3) such Participant, the Issuer or the Agent (as the case may be) receives an
----
amount equal to the sum it would have received had no such deductions been made,
(ii) such Credit Party shall make such deductions, (iii) such Credit Party shall
pay the full amount deducted to the relevant authority in accordance with
applicable law and (iv) such Credit Party shall furnish to the Agent the
original copy of a receipt evidencing payment thereof within 30 days after such
payment is made.

               (b)   In addition, the Company hereby agrees to pay any present
or future stamp or documentary taxes and any other excise or property taxes,
charges or similar levies which arise from any payment made hereunder or from
the execution or delivery of, or otherwise with respect to, this Agreement
("Other Taxes").

               (c)   The Company hereby agrees to indemnify the Issuer, the
Agent and each Participant for the full amount of Taxes or Other Taxes
(including, without limitation, any Taxes or Other Taxes imposed on amounts
payable under this Section 3.3) paid by the Issuer, the Agent or such
                   -----------
Participant and any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto. Payments due under this
indemnification shall be made within 30 days

                                      -20-
<PAGE>

of the date the Issuer, the Agent or such Participant makes demand therefor
pursuant to Section 3.4.
            -----------

               (d)   Each Facility Letter of Credit Provider that is not
incorporated under the laws of the United States of America or a state thereof
(each a "Non-U.S. Participant") agrees that it will, not more than ten Business
Days after the date of this Agreement, (i) deliver to each of the Company and
the Agent two duly completed copies of United States Internal Revenue Service
Form W-8BEN or W-8ECI, certifying in either case that such Facility Letter of
Credit Provider is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income taxes, and (ii)
deliver to each of the Company and the Agent a United States Internal Revenue
Form W-8 or W-9, as the case may be, and certify that it is entitled to an
exemption from United States backup withholding tax. Each Non-U.S. Participant
further undertakes to deliver to each of the Company and the Agent (x) renewals
or additional copies of such form (or any successor form) on or before the date
that such form expires or becomes obsolete, and (y) after the occurrence of any
event requiring a change in the most recent forms so delivered by it, such
additional forms or amendments thereto as may be reasonably requested by the
Company or the Agent. All forms or amendments described in the preceding
sentence shall certify that such Facility Letter of Credit Provider is entitled
to receive payments under this Agreement without deduction or withholding of any
United States federal income taxes, unless an event (including without
limitation any change in treaty, law or regulation) has occurred prior to the
date on which any such delivery would otherwise be required which renders all
such forms inapplicable or which would prevent such Facility Letter of Credit
Provider from duly completing and delivering any such form or amendment with
respect to it and such Facility Letter of Credit Provider advises the Company
and the Agent that it is not capable of receiving payments without any deduction
or withholding of United States federal income tax.

               (e)   For any period during which a Non-U.S. Participant has
failed to provide the Company with an appropriate form pursuant to clause (d)
                                                                   ---------
above (unless such failure is due to a change in treaty, law or regulation, or
any change in the interpretation or administration thereof by any Governmental
Authority, occurring subsequent to the date on which a form originally was
required to be provided), such Non-U.S. Participant shall not be entitled to
indemnification under this Section 3.3 with respect to Taxes imposed by the
                           -----------
United States; provided, that should a Non-U.S. Participant which is otherwise
               --------
exempt from or subject to a reduced rate of withholding tax become subject to
Taxes because of its failure to deliver a form required under clause (d) above,
                                                              ----------
the Company shall take such steps as such Non-U.S. Participant shall reasonably
request to assist such Non-U.S. Participant to recover such Taxes.

               (f)   Any Facility Letter of Credit Provider that is entitled to
an exemption from or reduction of withholding tax with respect to payments under
this Agreement pursuant to the law of any relevant jurisdiction or any treaty
shall deliver to the Company (with a copy to the Agent), at the time or times
prescribed by applicable law, such properly completed and executed documentation
prescribed by applicable law as will permit such payments to be made without
withholding or at a reduced rate.

                                      -21-
<PAGE>

               (g)   If the U.S. Internal Revenue Service or any other
Governmental Authority of the United States or any other country or any
political subdivision thereof asserts a claim that the Agent did not properly
withhold tax from amounts paid to or for the account of any Facility Letter of
Credit Provider (because the appropriate form was not delivered or properly
completed, because such Facility Letter of Credit Provider failed to notify the
Agent of a change in circumstances which rendered its exemption from withholding
ineffective, or for any other reason), such Facility Letter of Credit Provider
shall indemnify the Agent fully for all amounts paid, directly or indirectly, by
the Agent as tax, withholding therefor, or otherwise, including penalties and
interest, and including taxes imposed by any jurisdiction on amounts payable to
the Agent under this subsection, together with all costs and expenses related
thereto (including attorneys fees and time charges of attorneys for the Agent,
which attorneys may be employees of the Agent). The obligations of the Facility
Letter of Credit Providers under this Section 3.4(g) shall survive the payment
                                      --------------
of the Obligations and termination of this Agreement.

         3.4.  Participant Statements. To the extent reasonably possible, the
               ----------------------
Issuer and each Participant shall designate an alternate Installation to reduce
any liability of the Company to the Issuer or such Participant under Sections
                                                                     --------
3.1, 3.2 and 3.3(a) so long as such designation is not, in the judgment of the
--------     ------
Issuer or such Participant, as applicable, disadvantageous to the Issuer or such
Participant. The Issuer or such Participant shall deliver a written statement to
the Company (with a copy to the Agent of any such statement) as to the amount
due, if any, under Section 3.1, 3.2 or 3.3(a). Such written statement shall set
                   ----------------    ------
forth in reasonable detail the calculations upon which the Issuer or such
Participant determined such amount and shall be final, conclusive and binding on
the Company in the absence of manifest error. Unless otherwise provided herein,
the amount specified in the written statement of the Issuer or any Participant
shall be payable on demand after receipt by the Company of the written
statement.

         3.5.  Substitution of Facility Letter of Credit Provider. Upon the
               --------------------------------------------------
receipt by the Company from any Facility Letter of Credit Provider (an "Affected
                                                                        --------
Participant") of a claim for compensation under Section 3.1, 3.2 or 3.3(a), the
-----------                                     ----------------    ------
Company may: (a) request the Affected Participant to use its best efforts to
obtain a replacement Facility Letter of Credit Provider or financial institution
satisfactory to the Company to acquire and assume all or a ratable part of all
of such Affected Participant's interest in the outstanding Facility Letters of
Credit and Commitment at the face amount thereof (a "Replacement Participant");
                                                     -----------------------
(b) request the Issuer or one or more of the other Participants to acquire and
assume all or part of such Affected Participant's interest in the outstanding
Facility Letters of Credit and Commitment (which request the Issuer and each
such other Participant may decline or agree to in its sole discretion); or (c)
designate a Replacement Participant. Any such designation of a Replacement
Participant under clause (a) or (c) shall be subject to the prior written
consent of the Agent and the Issuer (which consent shall not unreasonably be
withheld). Any transfer of a participation interest or Commitment pursuant to
this Section shall be made in accordance with Section 12.3.
                                              ------------

         3.6.  Survival. The agreements and obligations of the Credit Parties in
               --------
this Article III shall survive the payment of the Obligations and termination of
     -----------
this Agreement.

                                      -22-
<PAGE>

                                  ARTICLE IV

                             CONDITIONS PRECEDENT
                             --------------------

         4.1.  Initial Facility Letter of Credit. The Issuer shall not be
               ---------------------------------
required to issue any Facility Letter of Credit hereunder unless the Company has
furnished the following to the Agent and the other conditions set forth below
have been satisfied:

               (a)   Charter Documents; Good Standing Certificates. Copies of
                     ---------------------------------------------
the articles or certificate of incorporation of each Credit Party, together with
all amendments thereto, certified by the Registrar of Companies of Bermuda and
Secretary of State of Delaware, as applicable, together with a good standing
certificate issued by the Registrar of Companies of Bermuda (with respect to the
Company) and the Secretaries of State of Delaware and Alabama (with respect to
the Guarantor).

               (b)   By-Laws and Resolutions. Copies, certified by the Secretary
                     -----------------------
or Assistant Secretary of each Credit Party, of its by-laws and of its Board of
Directors' resolutions (and resolutions of other bodies, if any are deemed
necessary by counsel for the Issuer or the Agent) authorizing the execution,
delivery and performance of the L/C Documents to which such Credit Party is a
party.

               (c)   Secretary's Certificate. An incumbency certificate,
                     -----------------------
executed by the Secretary or Assistant Secretary of each Credit Party, which
shall identify by name and title and bear the signature of the officers of such
Credit Party authorized to sign the L/C Documents to which it is a party and to
request the issuance of Facility Letters of Credit hereunder, upon which
certificate the Agent, the Issuer and the Participants shall be entitled to rely
until informed of any change in writing by such Credit Party.

               (d)   License. A copy of the Company's license under The
                     -------
Insurance Act 1978, certified by an Authorize Officer of the Company.

               (e)   Officer's Certificate. A certificate, dated the date of
                     ---------------------
this Agreement, signed by an Authorized Officer of the Company, in form and
substance satisfactory to the Issuer, to the effect that: (i) on the date of
this Agreement (both before and after giving effect to the issuance of any
Facility Letters of Credit hereunder and the consummation of the other
transactions contemplated hereby (collectively, the "Closing Transactions")) no
                                                     --------------------
Default or Unmatured Default has occurred and is continuing; (ii) no injunction
or temporary restraining order which would prohibit the issuance of the Facility
Letters of Credit or the consummation of any of the Closing Transactions, or
other litigation which could reasonably be expected to have a Material Adverse
Effect is pending or, to the best of such Person's knowledge, threatened; (iii)
all orders, consents, approvals, licenses, authorizations, or validations of, or
filings, recordings or registrations with, or exemptions by, any governmental or
public body or authority, or any subdivision thereof, required to make or
consummate the Closing Transactions have been or, prior to the time required,
will have been, obtained, given, filed or taken and are or will be in full

                                      -23-
<PAGE>

force and effect (or the Company has obtained effective judicial relief with
respect to the application thereof) and all applicable waiting periods have
expired; (iv) the Company has not failed to perform any material obligation or
covenant required in connection with any Closing Transaction to be performed or
complied with by it on or before the date of this Agreement; (v) each of the
representations and warranties set forth in Article V of this Agreement is true
                                            ---------
and correct on and as of the date of the Agreement; and (vi) since December 31,
1999, no event or change has occurred that has caused or evidences a Material
Adverse Effect.

               (f)   Legal Opinions. (i) A written opinion of Larry M.
                     --------------
Hutchison, Vice President and General Counsel of the Guarantor, and (ii) a
written opinion of Appelby, Spurling & Kempe, special Bermuda counsel to the
Credit Parties, addressed to the Agent, the Issuer and the Participants in form
and substance acceptable to the Agent and its counsel.

               (g)   L/C Documents. Executed originals of this Agreement and
                     -------------
each of the other L/C Documents, which shall be in full force and effect,
together with all schedules, exhibits, certificates, instruments, opinions,
documents and financial statements required to be delivered pursuant hereto and
thereto.

               (h)   Solvency Certificate. A written solvency certificate from
                     --------------------
the chief financial officer of each Credit Party in form and content
satisfactory to the Agent, dated the date of this Agreement, with respect to the
value, Solvency and other factual information of, or relating to, as the case
may be, the Company and the Guarantor, after giving effect to the Closing
Transactions.

               (i)  Regulatory Matters. Receipt of any required regulatory
                    ------------------
approvals from any Governmental Authority with respect to the transactions
contemplated by the L/C Documents, including all hearing orders issued by
insurance regulatory authorities.

               (j)   Other. Such other documents as the Agent or its counsel may
                     -----
have reasonably requested.

         4.2.  Each Facility Letter of Credit. The Issuer shall not be obligated
               ------------------------------
to issue any Facility Letter of Credit unless on the applicable Issuance Date:

               (a)   There exists no Default or Unmatured Default and none would
result from such issuance of such Facility Letter of Credit;

               (b)   The representations and warranties contained in Article V
                                                                     ---------
(other than Section 5.5) are true and correct in all material respects as of
            -----------
such Issuance Date except to the extent any such representation or warranty is
stated to relate solely to an earlier date, in which case such representation or
warranty shall be true and correct on and as of such earlier date;

               (c)   An Issuance Request shall have been properly submitted; and

                                      -24-
<PAGE>

               (d)   All legal matters incident to the issuance of such Facility
Letter of Credit shall be reasonably satisfactory to the Agent, the Issuer, the
Participants and their counsel.

         Each Issuance Request with respect to each such Facility Letter of
Credit shall constitute a representation and warranty by the Company that the
conditions contained in Section 4.2 have been satisfied. The Issuer or any
                        -----------
Participant may require a duly completed compliance certificate in substantially
the form of Exhibit B hereto as a condition to issuing a Facility Letter of
            ---------
Credit.

                                   ARTICLE V

                        REPRESENTATIONS AND WARRANTIES
                        ------------------------------

         Each Credit Party, jointly and severally, represents and warrants to
the Agent, the Issuer and the Participants that:

         5.1.  Corporate Existence and Standing. Each of the Guarantor, its
               --------------------------------
Significant Subsidiaries and the Company is a corporation duly incorporated,
validly existing and in good standing under the laws of its jurisdiction of
incorporation and has all requisite authority to conduct its business in each
jurisdiction in which its business is conducted.

         5.2.  Authorization and Validity. Each Credit Party has all requisite
               --------------------------
power and authority and legal right to execute and deliver each of the L/C
Documents to which it is a party and to perform its obligations thereunder. The
execution and delivery by each Credit Party of the L/C Documents to which it is
a party and the performance of its respective obligations thereunder have been
duly authorized by proper corporate proceedings and the L/C Documents constitute
legal, valid and binding obligations of each Credit Party, enforceable against
such Credit Party in accordance with their terms, except as enforceability may
be limited by bankruptcy, insolvency or similar laws affecting the enforcement
of creditors' rights generally.

         5.3.  No Conflict; Government Consent. Neither the execution and
               -------------------------------
delivery by any Credit Party of the L/C Documents, nor the consummation of the
transactions therein contemplated, nor compliance with the provisions of the L/C
Documents, including in the case of the Company, the application of the proceeds
of the Facility Letters of Credit, will violate any law, rule, regulation,
order, writ, judgment, injunction, decree or award binding on either Credit
Party or any of its Subsidiaries or any Credit Party's or any of its
Subsidiaries' articles or certificate of incorporation or by-laws or the
provisions of any indenture, instrument or agreement to which any Credit Party
or any of its Subsidiaries is a party or is subject, or by which it, or its
Property, is bound, or conflict with or constitute a default thereunder, or
result in the creation or imposition of any Lien in, of or on the Property of
any Credit Party or any of its Subsidiaries pursuant to the terms of any such
indenture, instrument or agreement, other than such violations, conflicts or
defaults which, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.

                                      -25-
<PAGE>

         5.4.  Governmental Consents. No order, consent, approval, license,
               ---------------------
authorization, or validation of, or filing, recording or registration with, or
exemption by, any governmental or public body or authority, or any subdivision
thereof, is required to authorize, or is required in connection with the
execution, delivery and performance of, or the legality, validity, binding
effect or enforceability of, any of the L/C Documents, the application of the
proceeds of the Facility Letters of Credit or the consummation of any other
transaction contemplated by the L/C Documents except for those which have been
obtained and are in full force and effect.

         5.5. Financial Statements. The December 31, 1999 audited consolidated
              --------------------
financial statements of the Guarantor and its Subsidiaries and the June 30, 2000
unaudited consolidated financial statements of the Guarantor and its
Subsidiaries heretofore delivered to the Agent (the "Financial Statements") were
prepared in accordance with generally accepted accounting principles in effect
on the date such statements were prepared and fairly present the consolidated
financial condition and operations of the Guarantor and its Subsidiaries at such
dates and the consolidated results of their operations for the periods then
ended.

          5.6. Material Adverse Change. Since December 31, 1999, there has been
               -----------------------
no change in the business, Property, prospects, condition (financial or
otherwise) or results of operations of the Guarantor and its Subsidiaries which
could reasonably be expected to have a Material Adverse Effect.

          5.7. Taxes. Each Credit Party and its respective Subsidiaries have
               -----
filed all United States federal tax returns and all other tax returns (domestic
or foreign) which are required to be filed and have paid all taxes due pursuant
to said returns or pursuant to any assessment received by any Credit Party or
any of its Subsidiaries, except such taxes, if any, as are being contested in
good faith and as to which, in the good faith judgment of such Credit Party,
adequate reserves have been provided. The United States income tax returns of
the Guarantor and its Subsidiaries have been audited by the Internal Revenue
Service through the fiscal year ended December 31, 1993. No tax liens have been
filed and no claims against the Guarantor or its Subsidiaries are being asserted
with respect to any such taxes except claims being contested in good faith and
as to which, in the good faith judgment of the Guarantor, adequate reserves have
been provided. The charges, accruals and reserves on the books of each Credit
Party and its Subsidiaries in respect of any taxes or other governmental charges
are adequate in the good faith judgment of such Credit Party.

         5.8.  Litigation and Contingent Obligations. There is no litigation,
               -------------------------------------
arbitration, governmental investigation, proceeding or inquiry pending or, to
the knowledge of any of their officers, threatened against or affecting any
Credit Party or any of its Subsidiaries which could reasonably be expected to
have a Material Adverse Effect (after giving effect to reserves which have been
provided with respect thereto on the books of such Credit Party and its
Subsidiaries) or to prevent, enjoin or unduly delay the issuance of Facility
Letters of Credit under this Agreement or the consummation of any other Closing
Transaction. As of the date hereof, the Guarantor has no material Contingent
Obligations not provided for or disclosed in the Financial Statements.

                                      -26-
<PAGE>

         5.9.  Subsidiaries. Schedule 5.9 hereto contains an accurate list of
               ------------
all of the Significant Subsidiaries of the Guarantor in existence on the date of
this Agreement, setting forth their respective jurisdictions of incorporation
and the percentage of their respective capital stock owned by the Guarantor or
other Subsidiaries. All of the issued and outstanding shares of capital stock of
such Subsidiaries have been duly authorized and issued and are fully paid and
non-assessable. As of the date hereof, the Company does not have any
Subsidiaries.

         5.10. ERISA. The Unfunded Liabilities of all Single Employer Plans do
               -----
not in the aggregate exceed $10,000,000. Each Plan complies in all material
respects with all applicable requirements of law and regulations. No Reportable
Event has occurred with respect to any Plan and no Credit Party nor any other
members of the Controlled Group has withdrawn from any Plan or initiated steps
to do so, which occurrence or withdrawal could result in a Material Adverse
Effect. No steps have been taken to terminate any Plan which has Unfunded
Liabilities.

         5.11. Defaults. No Default or Unmatured Default has occurred and is
               --------
continuing.

         5.12. Accuracy of Information. No information, exhibit or report
               -----------------------
furnished by any Credit Party or any of its Subsidiaries to the Agent, the
Issuer or to any Participant in connection with the negotiation of, or
compliance with, the L/C Documents contained any material misstatement of fact,
omitted to state a material fact or omitted to state any fact necessary to make
the statements contained therein not misleading in any material respect.

         5.13. Regulation U. Margin Stock constitutes less than 25% of those
               ------------
assets of each Credit Party and its Subsidiaries which are subject to any
limitation on sale, pledge or other restriction hereunder.

         5.14. Material Agreements. No Credit Party nor any Subsidiary is a
               -------------------
party to any agreement or instrument or subject to any charter or other
corporate restriction which could reasonably be expected to have a Material
Adverse Effect. No Credit Party nor any Subsidiary is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any agreement to which it is a party, which default
could reasonably be expected to have a Material Adverse Effect. No Credit Party
nor any Significant Subsidiary is in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
agreement or instrument evidencing or governing Indebtedness.

         5.15. Solvency. As of the date hereof, after giving effect to the
               --------
consummation of the transactions contemplated by the L/C Documents and the
payment of all fees, costs and expenses payable by the Credit Parties with
respect to the transactions contemplated by the L/C Documents, each Credit Party
is Solvent.

         5.16. Compliance With Laws. Each Credit Party and each of its
               --------------------
Subsidiaries have complied with all applicable statutes, rules, regulations,
orders and restrictions of any domestic or foreign government or any
instrumentality or agency thereof, having jurisdiction over the conduct of their
respective businesses or the ownership of their respective Property, except

                                      -27-
<PAGE>

where the failure to so comply could not reasonably be expected to have a
Material Adverse Effect. No Credit Party nor any Subsidiary has received any
notice to the effect that its operations are not in material compliance with any
of the requirements of applicable federal, state and local environmental, health
and safety statutes and regulations or the subject of any federal or state
investigation evaluating whether any remedial action is needed to respond to a
release of any toxic or hazardous waste or substance into the environment, which
non-compliance or remedial action could reasonably be expected to have a
Material Adverse Effect.

         5.17. Indebtedness. The Company has no Indebtedness outstanding on the
               ------------
date of this Agreement other than the Obligations.

         5.18. Ownership of Properties. Except for Liens permitted by Section
               -----------------------
6.16, on the date of this Agreement each Credit Party and each of its
Subsidiaries have good title to all of the Property and assets reflected in the
Financial Statements as owned by it, free of all Liens other than those
permitted by this Agreement, except for assets sold, transferred or otherwise
disposed of in the ordinary course of business since the date of such Financial
Statements.

         5.19. Investment Company Act. No Credit Party nor any of its
               ----------------------
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.

         5.20. Public Utility Holding Company Act. No Credit Party nor any of
               ----------------------------------
its Subsidiaries is a "holding company" or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935, as amended.

         5.21. Insurance Licenses. Schedule 5.21 attached hereto (as said
               ------------------
Schedule 5.21 shall be revised or supplemented from time to time to reflect
withdrawals or changes in jurisdictions permitted by Section 6.4 or additional
jurisdictions set forth in the Annual Statements furnished pursuant to Section
6.1(vii)) lists all of the jurisdictions in which any Significant Insurance
Subsidiary holds active Licenses and is authorized to transact insurance
business. No such License is the subject of a proceeding for suspension or
revocation, there is no sustainable basis for such suspension or revocation, and
to each Credit Party's best knowledge, no such suspension or revocation has been
threatened by any Governmental Authority. Schedule 5.21 also indicates the type
or types of insurance in which each such Insurance Subsidiary is permitted to
engage with respect to each License therein listed. None of the Insurance
Subsidiaries transacts any insurance business, directly or indirectly, in any
jurisdiction other than those enumerated in Schedule 5.21.

         5.22. Reserves. The Company owns assets that qualify as admitted assets
               --------
under applicable law in an amount at least equal to the sum of all such reserves
and liability amounts and its minimum statutory capital and surplus as required
by the insurance laws, rules and regulations of its jurisdiction of domicile.

                                      -28-
<PAGE>

                                  ARTICLE VI

                                   COVENANTS
                                   ---------

         While the Aggregate Facility Letter of Credit Commitment remains
outstanding and until the payment in full of any outstanding Obligations, unless
the Required Providers shall otherwise consent in writing:

         6.1.  Financial Reporting. Each Credit Party will maintain, for itself
               -------------------
and each of its Subsidiaries, a system of accounting established and
administered in accordance with generally accepted accounting principles, and
the Guarantor or the Company, as applicable, will furnish to the Agent, the
Issuer and the Participants:

                       (i)   Within 90 days after the close of each of its
         fiscal years, an unqualified audit report certified by independent
         certified public accountants, acceptable to the Agent, the Issuer and
         the Participants, prepared in accordance with Agreement Accounting
         Principles on a consolidated and consolidating basis (consolidating
         statements need not be certified by such accountants) for each of the
         Guarantor and the Company and its respective Subsidiaries, including
         balance sheets as of the end of such period, related profit and loss
         and reconciliation of surplus statements, and a statement of cash
         flows, accompanied by a certificate of said accountants that, in the
         course of their examination necessary for their certification of the
         foregoing, they have obtained no knowledge of any Default or Unmatured
         Default, or if, in the opinion of such accountants, any Default or
         Unmatured Default shall exist, stating the nature and status thereof.

                       (ii)  Within 45 days after the close of the first three
         quarterly periods of each of its fiscal years, for each of the
         Guarantor and the Company and its respective Subsidiaries, consolidated
         and consolidating unaudited balance sheets as at the close of each such
         period and consolidated and consolidating profit and loss statements
         and a statement of cash flows for the period from the beginning of such
         fiscal year to the end of such quarter, all certified by the Chief
         Financial Officer, Chief Accounting Officer or Treasurer of the
         Guarantor or the Company, as applicable.

                       (iii) Together with the financial statements required
         hereunder, a compliance certificate in substantially the form of
         Exhibit B hereto signed by the Chief Financial Officer, Chief
         ---------
         Accounting Officer or Treasurer of the Guarantor showing the
         calculations necessary to determine compliance with this Agreement and
         stating that no Default or Unmatured Default exists, or if any Default
         or Unmatured Default exists, stating the nature and status thereof.

                       (iv)  Within 330 days after the close of each fiscal
         year, a statement of the Unfunded Liabilities of each Single Employer
         Plan, certified as correct by an actuary enrolled under ERISA.

                                      -29-
<PAGE>

                       (v)    As soon as possible and in any event within 10
         days after any Credit Party knows that any Reportable Event has
         occurred with respect to any Plan, a statement, signed by the Chief
         Financial Officer, Chief Accounting Officer, Treasurer or Vice
         President of the Guarantor, describing said Reportable Event and the
         action which the Guarantor proposes to take with respect thereto.

                       (vi)   As soon as possible and in any event within 10
         days after receipt by any Credit Party, a copy of (a) any notice or
         claim to the effect that such Credit Party or any of its Subsidiaries
         is or may be liable to any Person as a result of the release by such
         Credit Party, any of its Subsidiaries or any other Person of any toxic
         or hazardous waste or substance into the environment, and (b) any
         notice alleging any violation of any federal, state or local
         environmental, health or safety law or regulation by any Credit Party
         or any of its Subsidiaries, which, in the case of either (a) or (b)
         above, could reasonably be expected to have a Material Adverse Effect.

                       (vii)  Within 75 days after the close of each fiscal year
         of each Insurance Subsidiary, copies of the Annual Statement of each of
         the Insurance Subsidiaries, as certified by the president, secretary
         and treasurer of and the actuary for each such Insurance Subsidiary and
         prepared on the NAIC annual statement blanks (or such other form as
         shall be required by the jurisdiction of incorporation of each such
         Insurance Subsidiary), all such statements to be prepared in accordance
         with SAP consistently applied throughout the periods reflected therein
         and to be certified by independent certified public accountants
         reasonably acceptable to the Agent if so required by any Governmental
         Authority.

                       (viii) Promptly upon the filing thereof, copies of
         all Forms 10-Q, 10-K and 8-K which any Credit Party or any of its
         Subsidiaries files with the Securities and Exchange Commission and,
         together with copies of each Form 10-K so furnished, a list of such
         revisions to Schedule 5.9, if any, as shall be necessary to cause
         Schedule 5.9 to accurately set forth all then existing Significant
         Subsidiaries of the Guarantor, their respective jurisdictions of
         incorporation and the percentage of their respective capital stock
         owned by the Guarantor or other Subsidiaries.

                       (ix)   Promptly upon any Credit Party's receipt thereof,
         copies of reports or valuations prepared by any Governmental Authority
         or actuary in respect of any action or event which has resulted in the
         reduction by 5% or more in the capital and surplus of any Insurance
         Subsidiary.

                       (x)    Promptly and in any event within ten days after
         learning thereof, notification of any decrease after the Closing Date
         in the rating given by A.M. Best & Co. in respect of any Insurance
         Subsidiary.

                                      -30-
<PAGE>

                       (xi)   Such other information (including, without
         limitation, non-financial information) as the Agent, the Issuer or any
         Participant may from time to time reasonably request.

         6.2.  Use of Facility Letters of Credit. The Company will use the
               ---------------------------------
Facility Letters of Credit to secure its obligations to Ceding Companies. The
Company will not request the issuance of any Facility Letters of Credit, the
proceeds of which are, to the Company's knowledge, to be used to purchase or
carry any Margin Stock.

         6.3.  Certain Notices. Each Credit Party will give prompt notice in
               ---------------
writing to the Agent, the Issuer and the Participants of (i) the occurrence of
any Default or Unmatured Default and of any other development, financial or
otherwise, relating specifically to the Credit Parties which could reasonably be
expected to have a Material Adverse Effect, (ii) the receipt of any notice from
any Governmental Authority of the expiration without renewal, revocation or
suspension of, or the institution of any proceedings to revoke or suspend, any
License now or hereafter held by any Insurance Subsidiary which is required to
conduct insurance business in compliance with all applicable laws and
regulations, other than such expiration, revocation or suspension which,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect, (iii) the receipt of any notice from any Governmental
Authority of the institution of any disciplinary proceedings against or in
respect of any Insurance Subsidiary, or the issuance of any order, the taking of
any action or any request for an extraordinary audit for cause by any
Governmental Authority which, if adversely determined, could reasonably be
expected to have a Material Adverse Effect or (iv) any judicial or
administrative order limiting or controlling the insurance business of any
Insurance Subsidiary (and not the insurance industry generally) which has been
issued or adopted and which could reasonably be expected to have a Material
Adverse Effect. Any such notice shall state that it is given pursuant to this
Section 6.3.
-----------

         6.4.  Conduct of Business. The Company will (a) only provide
               -------------------
reinsurance to Ceding Companies, (b) only engage in the insurance business in
which it is engaged or licensed as of the date hereof, (c) do all things
necessary to remain duly incorporated, validly existing and in good standing in
its jurisdiction of formation, and (d) do all things necessary to renew, extend
and continue in effect all Licenses which may at any time and from time to time
be necessary for the Company to operate its insurance business in compliance
with all applicable laws and regulations. The Company will not change its
jurisdiction of domicile without the prior written consent of the Required
Providers. The Guarantor will cause the Company to be and remain a Wholly-Owned
Subsidiary and to be at all times Solvent. The Guarantor will, and will cause
each Significant Subsidiary and the Company to, do all things necessary to
remain duly incorporated, validly existing and in good standing as a corporation
in its jurisdiction of incorporation and maintain all requisite authority to
conduct its business in each jurisdiction in which its business is conducted.
The Guarantor will cause each Significant Insurance Subsidiary and the Company
to (i) carry on or otherwise be associated with the business of a licensed
insurance carrier and (ii) do all things necessary to renew, extend and continue
in effect all Licenses which may at any time and from time to time be necessary
for such Significant Insurance Subsidiary and the Company to operate their
respective insurance business in

                                      -31-
<PAGE>

compliance with all applicable laws and regulations; provided, however, that any
                                                     --------  -------
such Significant Insurance Subsidiary may withdraw from one or more states as an
admitted insurer or change the state of its domicile, if such withdrawal or
change is in the best interests of the Guarantor and such Significant Insurance
Subsidiary and could not reasonably be expected to have a Material Adverse
Effect.

         6.5.  Taxes. Each Credit Party will, and will cause each of its
               -----
Subsidiaries to, pay when due all taxes, assessments and governmental charges
and levies upon it or its income, profits or Property, except those which are
being contested in good faith by appropriate proceedings and with respect to
which adequate reserves have been set aside.

         6.6.  Insurance. Each Credit Party will, and will cause each of its
               ---------
Subsidiaries to, maintain with financially sound and reputable insurance
companies insurance on all or substantially all of its Property, or shall
maintain self-insurance, in such amounts and covering such risks as is
consistent with sound business practice for Persons in substantially the same
industry as such Credit Party or such Subsidiary, and each Credit Party will
furnish to the Agent, the Issuer or any Participant upon request full
information as to the insurance carried.

         6.7.  Compliance with Laws. Each Credit Party will, and will cause each
               --------------------
of its Subsidiaries to, comply with all laws, rules, regulations, orders, writs,
judgments, injunctions, decrees or awards to which it may be subject (including,
without limitation, ERISA and the rules and regulations thereunder), except
where the failure to so comply could not reasonably be expected to have a
Material Adverse Effect.

         6.8.  Maintenance of Properties. Each Credit Party will, and will cause
               -------------------------
each of its Subsidiaries to, do all things necessary to maintain, preserve,
protect and keep its Property in good repair, working order and condition, and
make all necessary and proper repairs, renewals and replacements so that its
business carried on in connection therewith may be properly conducted at all
times, except where the failure to so maintain, preserve, protect and repair
could not reasonably be expected to have a Material Adverse Effect.

         6.9.  Inspection. Each Credit Party will, and will cause each of its
               ----------
Subsidiaries to, permit the Agent, the Issuer and the Participants, by their
respective representatives and agents, to inspect any of the Property, corporate
books and financial records of such Credit Party and each of its Subsidiaries,
to examine and make copies of the books of accounts and other financial records
of such Credit Party and each of its Subsidiaries, and to discuss the affairs,
finances and accounts of such Credit Party and each of its Subsidiaries with,
and to be advised as to the same by, their respective officers upon reasonable
notice and at such reasonable times and intervals as the Agent, the Issuer and
the Participants may designate.

         6.10. Merger. The Company will not merge or consolidate with or into
               ------
any other Person. The Guarantor will not, nor will it permit any Subsidiary to,
merge or consolidate with or into any other Person, except that (i) a Subsidiary
(other than the Company) may merge with the Guarantor or a Wholly-Owned
Subsidiary and (ii) the Guarantor and any Subsidiary (other

                                      -32-
<PAGE>

than the Company) may merge or consolidate with or into any other Person
provided that the Guarantor or such Subsidiary shall be the continuing or
surviving corporation and, after giving effect to such merger or consolidation,
no Default or Unmatured Default shall exist.

         6.11. Sale of Assets. No Credit Party will, nor will it permit any of
               --------------
its Subsidiaries to, lease, sell or otherwise dispose of all or a Substantial
Portion of its Property (exclusive of Investments sold in the ordinary course of
business) to any other Person(s) in any calendar year.

         6.12. Sale and Leaseback. No Credit Party will, nor will it permit any
               ------------------
of its Subsidiaries to, sell or transfer a Substantial Portion of its Property
in order to concurrently or subsequently lease as lessee such or similar
Property.

         6.13. Acquisitions. No Credit Party will make, and nor will it permit
               ------------
any of its Subsidiaries to make, any Acquisitions except Permitted Acquisitions.

         6.14. Liens. No Credit Party will, nor will it permit any of its
               -----
Subsidiaries to, create, incur, or suffer to exist any Lien in, of or on its
Property other than Liens securing in the aggregate not more than $100,000,000
of Indebtedness.

         6.15. Consolidated Net Worth. The Guarantor will maintain at all times
               ----------------------
Consolidated Net Worth equal to not less than the sum of (i) $1,575,000,000 plus
(ii) 25% of the Guarantor's Consolidated Net Income, if positive, for each
fiscal quarter ending after June 30, 1997.

         6.16. Ratio of Consolidated Indebtedness to Consolidated
               --------------------------------------------------
Capitalization. The Guarantor will maintain at all times a ratio of Consolidated
--------------
Indebtedness to Consolidated Capitalization of not greater than .5 to 1.0.

         6.17. Ratio of Consolidated Adjusted Net Income to Consolidated
               ---------------------------------------------------------
Interest Expense. The Guarantor will maintain, as at the last day of each fiscal
----------------
quarter, a ratio of (i) Consolidated Adjusted Net Income to (ii) Consolidated
Interest Expense, in each case calculated for the four fiscal quarters then
ending, of not less than 2.5 to 1.0.

         6.18. Affiliates. No Credit Party will, nor will it permit any of its
               ----------
Subsidiaries to, enter into any transaction (including, without limitation, the
purchase or sale of any Property or service) with, or make any payment or
transfer to, any Affiliate (other than a Wholly-Owned Subsidiary of such Credit
Party) except (i) any such transactions, payments or transfers with or to such
Affiliates as are made in the ordinary course of business and pursuant to the
reasonable requirements of such Credit Party's or such Subsidiary's business and
upon fair and reasonable terms no less favorable to such Credit Party or such
Subsidiary than such Credit Party or such Subsidiary would obtain in a
comparable arms-length transaction and (ii) any such other transactions,
payments or transfers with or to such Affiliates as could not reasonably be
expected to have a Material Adverse Effect.

         6.19. Series A Preferred Securities. The Guarantor will not, and will
               -----------------------------
not permit Torchmark Capital L.L.C. to, declare or pay dividends or
distributions on, or redeem, purchase

                                      -33-
<PAGE>

or otherwise acquire, the Series A Preferred Securities or any portion thereof
if, after giving effect thereto, a Default or Unmatured Default would exist.

     6.20. Contingent Obligations. The Company will not make or suffer to exist
           ----------------------
any Contingent Obligation, except (a) Contingent Obligations in respect of
Insurance Contracts and Reinsurance Contracts issued in the ordinary course of
business, (b) Contingent Obligations in respect of the extension of guaranties
in the ordinary course of business to insureds of the obligations of insurers
under Insurance Contracts and Reinsurance Contracts and (c) Contingent
Obligations in respect of the endorsement of instruments for deposit or
collection in the ordinary course of business.

     6.21. Inconsistent Agreements. No Credit Party nor any of their
           -----------------------
Subsidiaries shall enter into any indenture, agreement, instrument (or amendment
thereto) or other arrangement which, (a) directly or indirectly prohibits or
restrains, or has the effect of prohibiting or restraining, or imposes
materially adverse conditions upon, the incurrence or repayment of the
Obligations, the amendment of the L/C Documents, or the ability of any
Subsidiary to pay dividends or make other distributions on its capital stock, or
(b) contains any provision which would be violated or breached by the issuance
of Facility Letters of Credit or by the performance by such Credit Party of any
of its obligations under any L/C Document.

                                  ARTICLE VII

                                   DEFAULTS
                                   --------

     The occurrence of any one or more of the following events shall constitute
a Default:

     7.1.  Any representation or warranty made or deemed made by or on behalf of
any Credit Party to the Participants, the Agent or the Issuer under or in
connection with this Agreement, any other L/C Document, any Facility Letter of
Credit or any certificate or information delivered in connection with this
Agreement or any other L/C Document shall be materially false or misleading on
the date as of which made or deemed made.

     7.2.  Nonpayment of (a) any Reimbursement Obligation when due, or (b) any
other fee or obligations owing by any Credit Party under any of the L/C
Documents within five days after the same becomes due.

     7.3.  The breach by any Credit Party of any of the terms or provisions of
Section 6.2, 6.3, 6.10, 6.11, 6.12, 6.13, 6.15, 6.16, 6.17, 6.20 or 6.21, or
-----------  ---  ----  ----  ----  ----  ----  ----  ----  ----    ----
Article XIII hereof; or the breach by any Credit Party of any of the terms or
------------
provisions of Section 6.14 or 6.18 which is not remedied within ten days after
              ------------    ----
any Credit Party learns thereof.

     7.4.  The breach by any Credit Party (other than a breach which constitutes
a Default under Section 7.1, 7.2 or 7.3) of any of the terms or provisions of
                -----------  ---    ---
this Agreement which is not

                                      -34-
<PAGE>

remedied within twenty (20) days after written notice from the Agent, the Issuer
or any Participant.

     7.5. Failure of any Credit Party or any of its Subsidiaries to pay when due
any Indebtedness in excess of, singly or in the aggregate for all such
Subsidiaries, $10,000,000; or the default by any Credit Party or any of its
Subsidiaries in the performance of any term, provision or condition contained in
any agreement under which any such Indebtedness was created or is governed, or
any other event shall occur or condition exist, the effect of which is to cause,
or to permit the holder or holders of such Indebtedness to cause, such
Indebtedness to become due prior to its stated maturity; or any such
Indebtedness of any Credit Party or any of its Subsidiaries shall be declared to
be due and payable or required to be prepaid (other than by a regularly
scheduled payment) prior to the stated maturity thereof.

     7.6. Any Credit Party or any of its Subsidiaries shall (i) have an order
for relief entered with respect to it under any state, federal or foreign
bankruptcy or similar laws as now or hereafter in effect, (ii) make an
assignment for the benefit of creditors, (iii) apply for, seek, consent to, or
acquiesce in, the appointment of a receiver, custodian, trustee, examiner,
liquidator or similar official for it or any Substantial Portion of its
Property, (iv) institute any proceeding seeking an order for relief under any
state, federal or foreign bankruptcy or similar laws as now or hereafter in
effect or seeking to adjudicate it a bankrupt or insolvent, or seeking
dissolution, winding up, liquidation, reorganization, arrangement, adjustment or
composition of it or its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors or fail to file an answer or other
pleading denying the material allegations of any such proceeding filed against
it, (v) take any corporate action to authorize or effect any of the foregoing
actions set forth in this Section 7.6, (vi) fail to contest in good faith any
                          -----------
appointment or proceeding described in Section 7.7 or not pay, or admit in
                                       -----------
writing its inability to pay, its debts generally as they become due.

     7.7. Without the application, approval or consent of any Credit Party or
any of its Subsidiaries, a receiver, trustee, examiner, liquidator or similar
official shall be appointed for such Credit Party or any of its Subsidiaries or
any Substantial Portion of its Property, or a proceeding described in Section
                                                                      -------
7.6(iv) shall be instituted against such Credit Party or any of its Subsidiaries
-------
and such appointment continues undischarged or such proceeding continues
undismissed or unstayed for a period of 30 consecutive days.

     7.8. Any court, government or governmental agency shall condemn, seize or
otherwise appropriate, or take custody or control of (each a "Condemnation"),
                                                              ------------
all or any portion of the Property of any Credit Party or any of its
Subsidiaries which, when taken together with all other Property of such Credit
Party and its Subsidiaries so condemned, seized, appropriated, or taken custody
or control of, during the twelve-month period ending with the month in which any
such Condemnation occurs, constitutes a Substantial Portion of its Property.

     7.9. Any Credit Party or any of its Subsidiaries shall fail within 45 days
to pay, bond or otherwise discharge any judgment or order for the payment of
money, either singly or in the

                                      -35-
<PAGE>

aggregate, in excess of $10,000,000, which is not stayed on appeal or otherwise
being appropriately contested in good faith.

     7.10. Any Change in Control shall occur or the Guarantor shall cease to own
100% of the outstanding shares of capital stock of the Company.

     7.11. The occurrence of any "default", as defined in any L/C Document
(other than this Agreement), which default or breach continues beyond any period
of grace therein provided.

     7.12. The Unfunded Liabilities of all Single Employer Plans shall exceed in
the aggregate $10,000,000 or any Reportable Event shall occur in connection with
any Plan.

     7.13. Any Credit Party or any other member of the Controlled Group shall
have been notified by the sponsor of a Multiemployer Plan that it has incurred
withdrawal liability to such Multiemployer Plan in an amount which, when
aggregated with all other amounts required to be paid to Multiemployer Plans by
such Credit Party or any other member of the Controlled Group as withdrawal
liability (determined as of the date of such notification), exceeds $5,000,000
or requires payments exceeding $500,000 per annum.

     7.14. Any Credit Party or any of its Subsidiaries shall be the subject of
any proceeding or investigation pertaining to the release by such Credit Party
or any of its Subsidiaries or any other person of any toxic or hazardous waste
or substance into the environment, or any violation of any federal, state or
local environmental, health or safety law or regulation, which, in either case,
could reasonably be expected to have a Material Adverse Effect.

     7.15. The Company shall cease to be duly licensed as an insurance company
under Bermuda law.

     7.16. Any License of any Insurance Subsidiary held by such Insurance
Subsidiary on the Closing Date or acquired by such Insurance Subsidiary
thereafter, the loss of which would have, in the reasonable judgment of the
Agent, the Issuer and the Participants, a Material Adverse Effect, (i) shall be
revoked by a final non-appealable order by the jurisdiction which shall have
issued such License, or any action (whether administrative or judicial) to
revoke such License shall have been commenced against such Insurance Subsidiary
which shall not have been dismissed or contested in good faith within 30 days of
the commencement thereof, (ii) shall be suspended by such state for a period in
excess of 30 days or (iii) shall not be reissued or renewed by such jurisdiction
upon the expiration thereof following application for such reissuance or renewal
by such Insurance Subsidiary.

     7.17. The Guaranty shall fail to remain in full force or effect or any
action shall be taken by the Guarantor, any of its Subsidiaries or any
Governmental Authority to discontinue or to assert the invalidity or
unenforceability thereof, or the Guarantor denies that it has any further
liability hereunder, or gives notice to such effect.

     7.18. The Company shall fail at any time to remain Solvent.

                                      -36-
<PAGE>

                                 ARTICLE VIII

                ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
                ----------------------------------------------

     8.1. Acceleration. If any Default described in Section 7.6 or 7.7 occurs,
          ------------                              -----------    ---
the obligations of the Issuer to issue Facility Letters of Credit hereunder
shall automatically terminate and the Obligations shall immediately become due
and payable without any election or action on the part of the Agent, the Issuer
or any Participant. If any other Default occurs, the Required Providers (or the
Agent with the consent of the Required Providers) may terminate or suspend the
obligations of the Issuer to issue Facility Letters of Credit hereunder, or
declare the Obligations to be due and payable, or both, whereupon the
Obligations shall become immediately due and payable, without presentment,
demand, protest or notice of any kind, all of which the Company hereby expressly
waives. In addition to the foregoing, following the occurrence and during the
continuance of a Default, so long as any Facility Letter of Credit has not been
fully drawn and has not been cancelled or expired by its terms, upon demand by
the Agent (such demand may be made in the judgment of the Agent and shall be
made at the direction of the Required Providers), the Company shall deposit, or
cause to be deposited, in an account (the "Letter of Credit Cash Collateral
                                           --------------------------------
Account") maintained with Bank One in the name of the Agent, for the ratable
-------
benefit of the Facility Letter of Credit Providers, cash in an amount equal to
the aggregate undrawn face amount of all outstanding Facility Letters of Credit
and all fees and other amounts due or which may become due in connection with
the L/C Documents. The Company shall have no control over funds in the Letter of
Credit Cash Collateral Account, which funds shall be invested by the Agent from
time to time in its discretion in certificates of deposit of Bank One having a
maturity not exceeding thirty days. Such funds shall be promptly applied to
reimburse the Issuer for drafts drawn from time to time under the Facility
Letters of Credit. Such funds, if any, remaining in the Letter of Credit Cash
Collateral Account following the payment of all Obligations in full or the
earlier termination of all Defaults shall, unless the Agent is otherwise
directed by a court of competent jurisdiction, be promptly paid over to the
Company.

     If, before any judgment or decree for the payment of the Obligations due
shall have been obtained or entered, the Modified Required Providers (or, in the
case of an automatic termination upon the occurrence of a Default under Section
                                                                        -------
7.6 or 7.7, all the Letter of Credit Providers), in their sole discretion, shall
---    ---
so direct, the Agent shall, by notice to the Credit Parties, rescind and annul
such acceleration and/or termination.

     8.2. Amendments. Subject to the provisions of this Article VIII, the
          ----------                                    ------------
Required Providers (or the Agent with the consent in writing of the Required
Providers) and the Credit Parties may enter into agreements supplemental hereto
for the purpose of adding or modifying any provisions to the L/C Documents or
changing in any manner the rights of the Facility Letter of Credit Providers or
any Credit Party hereunder or waiving any Default hereunder; provided, however,
                                                             --------  -------
that no such supplemental agreement shall, without the consent of each Facility
Letter of Credit Provider:

                                      -37-
<PAGE>

          (a)  Extend the final maturity of any Obligations or reduce the
principal amount thereof, or reduce the rate or extend the time of payment of
interest or fees thereon;

          (b)  Reduce the percentage specified in the definition of Required
Providers or Modified Required Providers;

          (c)  Increase the amount of the Commitment of any Facility Letter of
Credit Provider hereunder;

          (d)  Extend the Facility Termination Date or permit any Facility
Letter of Credit to have an expiry date beyond 365 days after the Facility
Termination Date;

          (e)  Amend this Section 8.2;
                          -----------

          (f)  Release the Guarantor from its obligations under the Guaranty; or

          (g)  Permit any assignment by any Credit Party of its Obligations or
its rights hereunder.

No amendment of any provision of this Agreement relating to the Agent or the
Issuer shall be effective without the written consent of such Person. The Agent
may waive payment of the fee required under Section 12.3.2 without obtaining the
                                            --------------
consent of any other party to this Agreement.

     8.3. Preservation of Rights. No delay or omission of the Participants, the
          ----------------------
Agent or the Issuer to exercise any right under the L/C Documents shall impair
such right or be construed to be a waiver of any Default or an acquiescence
therein, and the issuance of a Facility Letter of Credit notwithstanding the
existence of a Default or the inability of the Company to satisfy the conditions
precedent to such issuance shall not constitute any waiver or acquiescence. Any
single or partial exercise of any such right shall not preclude other or further
exercise thereof or the exercise of any other right, and no waiver, amendment or
other variation of the terms, conditions or provisions of the L/C Documents
whatsoever shall be valid unless in writing signed by the Agent, the Issuer and
the Participants required pursuant to Section 8.2, and then only to the extent
                                      -----------
in such writing specifically set forth. All remedies contained in the L/C
Documents or by law afforded shall be cumulative and all shall be available to
the Agent, the Issuer and the Participants until the Obligations have been paid
in full.

                                  ARTICLE IX

                              GENERAL PROVISIONS
                              ------------------

     9.1. Survival of Representations. All representations and warranties of the
          ---------------------------
Credit Parties contained in this Agreement or in any other L/C Document shall
survive the issuance of the Facility Letters of Credit herein contemplated.

                                      -38-
<PAGE>

     9.2. Governmental Regulation; Interest Limitation. Anything contained in
          --------------------------------------------
this Agreement to the contrary notwithstanding, the Issuer shall not be
obligated to issue Facility Letters of Credit for the account of the Company in
violation of any limitation or prohibition provided by any applicable statute or
regulation. Anything in this Agreement or any other L/C Document to the contrary
notwithstanding, no Credit Party shall ever be required to pay interest at a
rate in excess of the highest lawful rate, and if the effective rate of interest
that would otherwise be payable under this Agreement or any other L/C Document
would exceed the highest lawful rate, or if any Facility Letter of Credit
Provider shall receive monies that are deemed to constitute interest which would
increase the effective rate of interest payable under this Agreement or any
other L/C Document to a rate in excess of the highest lawful rate, then (a) the
amount of interest that would otherwise be payable under this Agreement and the
other L/C Documents shall be reduced to the amount allowed under applicable law,
and (b) any interest paid in excess of the highest lawful rate shall, at the
option of the Facility Letter of Credit Providers, be either refunded to the
payor or credited to the payment of the Obligations.

     9.3. Taxes. Any taxes (excluding federal income taxes on the overall net
          -----
income of any Facility Letter of Credit Provider) or other similar assessments
or charges payable or ruled payable by any governmental or revenue authority in
respect of the L/C Documents shall be paid by the Company, together with
interest and penalties, if any.

     9.4. Headings. Section headings in the L/C Documents are for convenience
          --------
of reference only, and shall not govern the interpretation of any of the
provisions of the L/C Documents.

     9.5. Entire Agreement. The L/C Documents embody the entire agreement and
          ----------------
understanding among the Credit Parties, the Agent, the Issuer and the
Participants and supersede all prior agreements and understandings among the
Credit Parties, the Agent, the Issuer and the Participants relating to the
subject matter thereof other than the fee letter dated August 16, 2000 among the
Guarantor, Bank One and the Arranger.

     9.6. Several Obligations; Benefits of this Agreement. The respective
          -----------------------------------------------
obligations of the Agent, the Issuer and the Participants hereunder are several
and not joint and neither the Issuer nor any Participant shall be the partner or
agent of any other (except to the extent to which the Issuer is authorized to
act as such). The failure of any Participant to perform any of its obligations
hereunder shall not relieve any other Participant from any of its obligations
hereunder. This Agreement shall not be construed so as to confer any right or
benefit upon any Person other than the parties to this Agreement, the Arranger
and their respective successors and assigns.

     9.7. Expenses; Indemnification. Each Credit Party shall reimburse the Agent
          -------------------------
and the Arranger for any costs, internal charges and out-of-pocket expenses
(including attorneys' fees and time charges of attorneys for the Agent and the
Arranger, which attorneys may be employees of the Agent or the Arranger) paid or
incurred by the Agent or the Arranger in connection with the preparation,
negotiation, execution, delivery, review, amendment, modification, and

                                      -39-
<PAGE>

administration of the L/C Documents. Each Credit Party also agrees to reimburse
the Agent, the Issuer, the Arranger and the Participants for any costs, internal
charges and out-of-pocket expenses (including attorneys' fees and time charges
of attorneys for the Agent, the Issuer, the Arranger and the Participants, which
attorneys may be employees of the Agent, the Issuer, the Arranger or the
Participants) paid or incurred by the Agent, the Issuer, the Arranger or any
Participant in connection with the collection of the Obligations or the
enforcement of the L/C Documents. Each Credit Party further agrees to indemnify
the Agent, the Issuer, the Arranger and each Participant, its directors,
officers and employees against all losses, claims, damages, penalties,
judgments, liabilities and expenses (collectively, the "indemnified
obligations") (including, without limitation, all reasonable expenses of
litigation or preparation therefor whether or not the Agent, the Issuer, the
Arranger or any Participant is a party thereto, but excluding those indemnified
obligations arising solely from the Agent's, the Issuer's or any Participant's
failure to perform its obligations under this Agreement) which any of them may
pay or incur arising out of or relating to this Agreement or the other L/C
Documents, the transactions contemplated hereby or thereby or the use or
intended use of any Facility Letter of Credit, except that no indemnified party
shall be indemnified for any indemnified obligations arising from its own gross
negligence or willful misconduct as finally determined by a court of competent
jurisdiction. The obligations of each Credit Party under this Section 9.7 shall
                                                              -----------
survive the termination of this Agreement.

     9.8.  Numbers of Documents. All statements, notices, closing documents, and
           --------------------
requests hereunder shall be furnished to the Agent with sufficient counterparts
so that the Agent may furnish one to the Issuer and each of the Participants.
The Agent shall promptly remit the same to the Issuer and the Participants.

     9.9.  Accounting. Except as provided to the contrary or otherwise defined
           ----------
herein, all accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with Agreement Accounting
Principles.

     9.10. Severability of Provisions. Any provision in any L/C Document that is
           --------------------------
held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as
to that jurisdiction, be inoperative, unenforceable, or invalid without
affecting the remaining provisions in that jurisdiction or the operation,
enforceability, or validity of that provision in any other jurisdiction, and to
this end the provisions of all L/C Documents are declared to be severable.

     9.11. Nonliability of Facility Letter of Credit Providers. Neither the
           ---------------------------------------------------
Agent, the Issuer nor any Participant shall have any fiduciary responsibilities
to any Credit Party. Neither the Agent, the Issuer nor any Participant
undertakes any responsibility to any Credit Party to review or inform any Credit
Party of any matter in connection with any phase of any Credit Party's business
or operations. Each Credit Party shall rely entirely upon its own judgment with
respect to its business, and any review, inspection or supervision of, or
information supplied to any Credit Party by the Agent, the Issuer or the
Participants is for the protection of the Agent, the Issuer and the Participants
and no Credit Party nor any other Person is entitled to rely thereon. Each
Credit Party agrees that neither the Agent, the Issuer nor any Participant shall
have any

                                      -40-
<PAGE>

liability with respect to, and each Credit Party hereby waives, releases and
agrees not to sue for, any punitive or consequential damages in connection with,
arising out of, or in any way related to the L/C Documents or the transactions
contemplated thereby or the relationship established by the L/C Documents, or
any act, omission or event occurring in connection therewith.

     9.12. CHOICE OF LAW. THE L/C DOCUMENTS (OTHER THAN THOSE CONTAINING A
           -------------
CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS (INCLUDING, WITHOUT LIMITATION, 735 ILCS SECTION 105/5-1 ET
SEQ, BUT OTHERWISE WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS) OF THE
STATE OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL
BANKS.

     9.13. CONSENT TO JURISDICTION. EACH CREDIT PARTY HEREBY IRREVOCABLY SUBMITS
           -----------------------
TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE
COURT SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO ANY L/C DOCUMENT AND EACH CREDIT PARTY HEREBY IRREVOCABLY AGREES THAT ALL
CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN
ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE
AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT
OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE
RIGHT OF THE AGENT, THE ISSUER OR ANY PARTICIPANT TO BRING PROCEEDINGS AGAINST
ANY CREDIT PARTY IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL
PROCEEDING BY ANY CREDIT PARTY AGAINST THE AGENT, THE ISSUER OR ANY PARTICIPANT
OR ANY AFFILIATE OF THE AGENT, THE ISSUER OR ANY PARTICIPANT INVOLVING, DIRECTLY
OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED
WITH ANY L/C DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS;
PROVIDED, THAT SUCH PROCEEDINGS MAY BE BROUGHT IN OTHER COURTS IF JURISDICTION
MAY NOT BE OBTAINED IN A COURT IN CHICAGO, ILLINOIS.

     9.14. WAIVER OF JURY TRIAL. EACH CREDIT PARTY, THE AGENT, THE ISSUER AND
           --------------------
EACH PARTICIPANT HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH
ANY L/C DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.

     9.15. Disclosure. The Credit Parties and each Participant hereby (a)
           ----------
acknowledge and agree that (i) Bank One is a lender and the "Agent" under the
Existing Credit Agreement and (ii) Bank One and/or its Affiliates from time to
time may hold other investments in, make loans to or have other relationships
with any Credit Party, including, without limitation, acting as

                                      -41-
<PAGE>

commercial paper dealer or in connection with any securitization, interest rate
hedging instruments or agreements or swap transactions, and (b) waive any
liability of Bank One or such Affiliate to any Credit Party or any Participant,
respectively, arising out of or resulting from a conflict of interest arising
from such investments, loans or relationships other than liabilities arising out
of the gross negligence or willful misconduct of Bank One or its Affiliates.

     9.16. Counterparts. This Agreement may be executed in any number of
           ------------
counterparts, all of which taken together shall constitute one agreement, and
any of the parties hereto may execute this Agreement by signing any such
counterpart. This Agreement shall be effective when it has been executed by the
Credit Parties, the Agent, the Issuer and the Participants and each party has
notified the Agent that it has taken such action.

     9.17. Confidentiality. Each of the Agent, the Issuer and each Participant
           ---------------
agrees to use its best efforts to hold any confidential information which it may
receive from any Credit Party pursuant to this Agreement in confidence and for
use in connection with this Agreement, including without limitation, for use in
connection with its rights and remedies hereunder, except for disclosure of such
information (i) to other Participants and their respective Affiliates, (ii) to
legal counsel, accountants, and other professional advisors to, and Affiliates
of, that Participant, (iii) to regulatory officials, (iv) as requested pursuant
to or as required by law, regulation, or legal process, (v) in connection with
any legal proceeding to which that Participant is a party, (vi) permitted by
Section 12.4 and (vii) which is otherwise made publicly available through no
------------
fault of the Agent, the Issuer or any Participant.

                                   ARTICLE X

                                   THE AGENT
                                   ---------

     10.1. Appointment. Bank One, NA is hereby appointed by each of the Facility
           -----------
Letter of Credit Providers as its contractual representative (herein referred to
as the "Agent") hereunder and under each other L/C Document, and each of the
Facility Letter of Credit Providers irrevocably authorizes the Agent to act as
the contractual representative of such Facility Letter of Credit Provider with
the rights and duties expressly set forth herein and in the other L/C Documents.
The Agent agrees to act as such contractual representative upon the express
conditions contained in this Article X. Notwithstanding the use of the defined
                             ---------
term "Agent," it is expressly understood and agreed that the Agent shall not
have any fiduciary responsibilities to any Facility Letter of Credit Provider by
reason of this Agreement, any other L/C Document or any transaction contemplated
hereby or thereby, and that the Agent is merely acting as the contractual
representative of the Facility Letter of Credit Providers with only those duties
as are expressly set forth in this Agreement and the other L/C Documents. Each
of the Facility Letter of Credit Providers hereby agrees to assert no claim
against the Agent on any agency theory or any other theory of liability for
breach of fiduciary duty, all of which claims each Facility Letter of Credit
Provider hereby waives.

                                      -42-
<PAGE>

The Agent, the Issuer and each Participant acknowledge that Fleet National Bank,
in its capacity as Co-Agent, shall have no duties or responsibilities, and shall
incur no liabilities or obligations, under this Agreement or the other L/C
Documents in its capacity as such.

     10.2. Powers. The Agent shall have and may exercise such powers under the
           ------
L/C Documents as are specifically delegated to the Agent by the terms of each
thereof, together with such powers as are reasonably incidental thereto. The
Agent shall have no implied duties to the Facility Letter of Credit Providers,
or any obligation to the Facility Letter of Credit Providers to take any action
thereunder, except any action specifically provided by the L/C Documents to be
taken by the Agent.

     10.3. General Immunity. Neither the Agent nor any of its directors,
           ----------------
officers, agents or employees shall be liable to any Credit Party or any
Facility Letter of Credit Provider for any action taken or omitted to be taken
by it or them hereunder or under any other L/C Document or in connection
herewith or therewith except for its or their own gross negligence or willful
misconduct.

     10.4. No Responsibility. Neither the Agent nor any of its directors,
           -----------------
officers, agents or employees shall be responsible for or have any duty to
ascertain, inquire into, or verify (a) any statement, warranty or representation
made in connection with any L/C Document or any issuance of a Facility Letter of
Credit hereunder, (b) the performance or observance of any of the covenants or
agreements of any obligor under any L/C Document, including, without limitation,
any agreement by an obligor to furnish information directly to each Facility
Letter of Credit Provider, (c) the satisfaction of any condition specified in
Article IV, except receipt of items required to be delivered to the Agent and
----------
not waived at closing, or (d) the validity, effectiveness, sufficiency,
enforceability or genuineness of any L/C Document or any other instrument or
writing furnished in connection therewith. Except for notices or reports which
the Agent is expressly hereby required to provide to the Facility Letter of
Credit Providers, the Agent shall have no duty to disclose to the Facility
Letter of Credit Providers information that is not required to be furnished by
the Company to the Agent at such time, but is voluntarily furnished by the
Company to the Agent (either in its capacity as Agent or in its individual
capacity).

     10.5. Action on Instructions of Facility Letter of Credit Providers. The
           -------------------------------------------------------------
Agent shall in all cases be fully protected in acting, or in refraining from
acting, hereunder and under any other L/C Document in accordance with written
instructions signed by the Required Providers (or, to the extent required by
Section 8.2, all Facility Letter of Credit Providers), and such instructions and
-----------
any action taken or failure to act pursuant thereto shall be binding on all of
the Facility Letter of Credit Providers. The Agent shall be fully justified in
failing or refusing to take any action hereunder and under any other L/C
Document unless it shall first be indemnified to its satisfaction by the
Facility Letter of Credit Providers pro rata against any and all liability, cost
and expense that it may incur by reason of taking or continuing to take any such
action. The Facility Letter of Credit Providers hereby acknowledge that the
Agent shall be under no duty to take any discretionary action permitted to be
taken by it pursuant to the provisions of this Agreement unless it shall be
requested in writing to do so by the Required Providers.

                                      -43-
<PAGE>

     10.6.  Employment of Agents and Counsel. The Agent may execute any of its
            --------------------------------
duties as Agent hereunder and under any other L/C Document by or through
employees, agents and attorneys-in-fact and shall not be answerable to the
Facility Letter of Credit Providers, except as to money or securities received
by it or its authorized agents, for the default or misconduct of any such agents
or attorneys-in-fact selected by it with reasonable care. The Agent shall be
entitled to advice of counsel concerning the contractual arrangement between the
Agent and the Facility Letter of Credit Providers and all matters pertaining to
the Agent's duties hereunder and under any other L/C Document.

     10.7.  Reliance on Documents; Counsel. The Agent shall be entitled to rely
            ------------------------------
upon any notice, consent, certificate, affidavit, letter, telegram, statement,
paper or document believed by it to be genuine and correct and to have been
signed or sent by the proper Person or Persons, and, in respect to legal
matters, upon the opinion of counsel selected by the Agent, which counsel may be
employees of the Agent.

     10.8.  Agent's Reimbursement and Indemnification. The Facility Letter of
            -----------------------------------------
Credit Providers agree to reimburse and indemnify the Agent ratably in
proportion to their respective Commitments (or, if the Commitments have been
terminated, in proportion to their Commitments immediately prior to such
termination) (a) for any amounts not reimbursed by the Credit Parties for which
the Agent is entitled to reimbursement by the Credit Parties under the L/C
Documents, (b) for any other expenses incurred by the Agent on behalf of the
Facility Letter of Credit Providers, in connection with the preparation,
execution, delivery, administration and enforcement of the L/C Documents, and
(c) for any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind and nature
whatsoever which may be imposed on, incurred by or asserted against the Agent in
any way relating to or arising out of the L/C Documents or any other document
delivered in connection therewith or the transactions contemplated thereby, or
the enforcement of any of the terms thereof or of any such other documents;
provided, that no Facility Letter of Credit Provider shall be liable for any of
--------
the foregoing to the extent they arise from the gross negligence or willful
misconduct of the Agent. The obligations of the Facility Letter of Credit
Providers under this Section 10.8 shall survive the payment of the Obligations
                     ------------
and termination of this Agreement.

     10.9.  Notice of Default. The Agent shall not be deemed to have knowledge
            -----------------
or notice of the occurrence of any Default or Unmatured Default (other than any
such event consisting of the failure of any Credit Party to make a payment
required by the terms hereof to be made to the Agent) unless the Agent has
received written notice from a Facility Letter of Credit Provider or any Credit
Party referring to this Agreement describing such Default or Unmatured Default
and stating that such notice is a "notice of default". In the event that the
Agent receives such a notice, the Agent shall give prompt notice thereof to the
Facility Letter of Credit Providers.

     10.10. Facility Letter of Credit Provider Credit Decision. Each Facility
            --------------------------------------------------
Letter of Credit Provider acknowledges that it has, independently and without
reliance upon the Agent or any other Facility Letter of Credit Provider and
based on the financial statements prepared by the Credit Parties and such other
documents and information as it has deemed appropriate, made its

                                      -44-
<PAGE>

own credit analysis and decision to enter into this Agreement and the other L/C
Documents. Each Facility Letter of Credit Provider also acknowledges that it
will, independently and without reliance upon the Agent or any other Facility
Letter of Credit Provider and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement and the other L/C Documents.

     10.11. Successor Agent. The Agent may resign at any time by giving written
            ---------------
notice thereof to the Facility Letter of Credit Providers and the Company, such
resignation to be effective upon the appointment of a successor Agent and, if no
Default or Unmatured Default has occurred and is continuing, the Company's prior
written consent, or, if no successor Agent has been appointed, forty-five days
after the retiring Agent gives notice of its intention to resign. Upon any such
resignation, the Required Providers shall have the right to appoint, on behalf
of the Facility Letter of Credit Providers, a successor Agent. If no successor
Agent shall have been so appointed by the Required Providers and shall have
accepted such appointment within thirty days after the resigning Agent's giving
notice of resignation, then the resigning Agent may appoint, on behalf of the
Company and the Facility Letter of Credit Providers, a successor Agent. If the
Agent has resigned and no successor Agent has been appointed, the Facility
Letter of Credit Providers may perform all the duties of the Agent hereunder and
the Company shall make all payments in respect of the Obligations to the
applicable Facility Letter of Credit Provider and for all other purposes shall
deal directly with the Facility Letter of Credit Providers. Any successor Agent
shall be a commercial bank having capital and retained earnings of at least
$50,000,000. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the resigning
Agent, and the resigning Agent shall be discharged from its duties and
obligations hereunder and under the other L/C Documents. After the effectiveness
of the resignation of an Agent, the provisions of this Article X shall continue
                                                       ---------
in effect for its benefit in respect of any actions taken or omitted to be taken
by it while it was acting as the Agent hereunder and under the other L/C
Documents.

                                  ARTICLE XI

                           SETOFF; RATABLE PAYMENTS
                           ------------------------

     11.1.  Setoff. In addition to, and without limitation of, any rights of the
            ------
Agent, the Issuer and the Participants under applicable law, if the Company
becomes insolvent, however evidenced, or any Default or Unmatured Default
occurs, any and all deposits (including all account balances, whether
provisional or final and whether or not collected or available), in any
currency, and any other Indebtedness at any time held or owing by the Agent, the
Issuer or any Participant to or for the credit or account of the Company may be
offset and applied toward the payment of the Obligations owing to the Agent, the
Issuer or such Participant, whether or not the Obligations, or any part hereof,
shall then be due. Such right of setoff shall be without notice or demand to the
Company and be without liability to the Agent, the Issuer or any Participant.

                                      -45-
<PAGE>

     11.2. Ratable Payments. If any Facility Letter of Credit Provider, whether
           ----------------
by setoff or otherwise, has payment made to it in respect of the Facility Letter
of Credit Obligations (other than payments received pursuant to Section 3.1,
                                                                -----------
3.2, 3.3(a) or 3.4) in a greater proportion than its pro-rata share of the
---  ------    ---
Facility Letter of Credit Obligations, such Facility Letter of Credit Provider
agrees, promptly upon demand, to purchase a portion of the Facility Letter of
Credit Obligations held by the other Facility Letter of Credit Providers so that
after such purchase each Facility Letter of Credit Provider will hold its
ratable proportion of the Facility Letter of Credit Obligations. If any Facility
Letter of Credit Provider, whether in connection with setoff or amounts which
might be subject to setoff or otherwise, receives collateral or other protection
for its Obligations or such amounts which may be subject to setoff, such
Facility Letter of Credit Provider agrees, promptly upon demand, to take such
action necessary such that all Facility Letter of Credit Providers share in the
benefits of such collateral ratably in proportion to the Facility Letter of
Credit Obligations held by them. In case any such payment is disturbed by legal
process, or otherwise, appropriate further adjustments shall be made. If an
amount to be setoff is to be applied to Indebtedness of the Company to a
Facility Letter of Credit Provider, other than the Facility Letter of Credit
Obligations held by such Facility Letter of Credit Provider, such amount shall
be applied ratably to such other Indebtedness and to the Facility Letter of
Credit Obligations.

                                  ARTICLE XII

             BENEFIT OF AGREEMENT; ASSIGNMENTS; SUBPARTICIPATIONS
             ----------------------------------------------------

     12.1. Successors and Assigns. The terms and provisions of the L/C Documents
           ----------------------
shall be binding upon and inure to the benefit of the Credit Parties, the Agent,
the Issuer and the Participants and their respective successors and assigns,
except that (a) no Credit Party shall have the right to assign its rights or
obligations under the L/C Documents, and (b) any assignment by any Facility
Letter of Credit Provider must be made in compliance with Section 12.3.
                                                          ------------
Notwithstanding clause (b) of this Section, any Facility Letter of Credit
                ----------
Provider may at any time, without the consent of any Credit Party, the Agent or
the Issuer, assign all or any portion of its rights under this Agreement to a
Federal Reserve Bank; provided, however, that no such assignment to a Federal
                      --------  -------
Reserve Bank shall release the transferor Facility Letter of Credit Provider
from its obligations hereunder.

     12.2. Subparticipations.
           -----------------

           12.2.1. Permitted Subparticipants; Effect. Any Facility Letter of
                   -------------------------
     Credit Provider may, in the ordinary course of its business and in
     accordance with applicable law, at any time sell to one or more banks or
     other entities ("Subparticipants") participating interests in the Facility
                      ---------------
     Letter of Credit Obligations (ratably among all outstanding Facility Letter
     of Credit Obligations) owing to such Facility Letter of Credit Provider,
     the Commitment of such Facility Letter of Credit Provider or any other
     interest of such Facility Letter of Credit Provider under the L/C
     Documents. In the event of any such sale by a Facility Letter of Credit
     Provider of participating interests to a Subparticipant, such Facility
     Letter

                                      -46-
<PAGE>

     of Credit Provider's obligations under the L/C Documents shall remain
     unchanged, such Facility Letter of Credit Provider shall remain solely
     responsible to the other parties hereto for the performance of such
     obligations, all amounts payable by the Company under this Agreement shall
     be determined as if such Facility Letter of Credit Provider had not sold
     such participating interests, and the Company, the Agent and the Issuer
     shall continue to deal solely and directly with such Facility Letter of
     Credit Provider in connection with such Facility Letter of Credit
     Provider's rights and obligations under the L/C Documents.

           12.2.2.  Voting Rights. Each Facility Letter of Credit Provider shall
                    -------------
     retain the sole right to approve, without the consent of any
     Subparticipant, any amendment, modification or waiver of any provision of
     the L/C Documents other than any amendment, modification or waiver which
     effects any of the modifications referenced in clauses (a) through (f) of
     Section 8.2.
     -----------

           12.2.3.  Benefit of Setoff. The Company agrees that each
                    -----------------
     Subparticipant shall be deemed to have the right of setoff provided in
     Section 11.1 in respect of its participating interest in amounts owing
     ------------
     under the L/C Documents to the same extent as if the amount of its
     participating interest were owing directly to it as a Facility Letter of
     Credit Provider under the L/C Documents; provided, that each Facility
                                              --------
     Letter of Credit Provider shall retain the right of setoff provided in
     Section 11.1 with respect to the amount of participating interests sold to
     ------------
     each Subparticipant. The Facility Letter of Credit Providers agree to share
     with each Subparticipant, and each Subparticipant, by exercising the right
     of setoff provided in Section 11.1, agrees to share with each Facility
                           ------------
     Letter of Credit Provider any amount received pursuant to the exercise of
     its right of setoff, such amounts to be shared in accordance with Section
                                                                       -------
     11.2 as if each Subparticipant was a Facility Letter of Credit Provider.
     ----

     12.3. Assignments.
           -----------

           12.3.1. Permitted Assignments. Any Facility Letter of Credit Provider
                   ---------------------
     may, in the ordinary course of its business and in accordance with
     applicable law, at any time assign to one or more banks or other entities
     ("Purchasers") all or any part of its rights and obligations under the L/C
       ----------
     Documents (if in part, ratably among all outstanding Facility Letter of
     Credit Obligations); provided, however, that in the case of an assignment
                          --------  -------
     to an entity which is not a Facility Letter of Credit Provider or an
     Affiliate of a Facility Letter of Credit Provider, such assignment shall be
     in a minimum amount of $5,000,000 or, if less, the entire amount of its
     Commitment. Such assignment shall be substantially in the form of Exhibit C
                                                                       ---------
     hereto or in such other form as may be agreed to by the parties thereto.
     Except with respect to assignments to a Federal Reserve Bank, the consent
     of Agent, the Issuer and, so long as no Default is continuing, the Company
     shall be required prior to an assignment becoming effective with respect to
     a Purchaser which is not a Facility Letter of Credit Provider or an
     Affiliate thereof. Such consent shall not be unreasonably withheld or
     delayed.

                                      -47-
<PAGE>

          12.3.2. Effect; Effective Date. Upon (a) delivery to the Agent of an
                  ----------------------
     assignment, together with any consents required by Section 12.3.1 and (b)
                                                        --------------
     payment of a $3,500 fee to the Agent for processing such assignment, such
     assignment shall become effective on the effective date specified in such
     Notice of Assignment. On and after the effective date of such assignment,
     (a) such Purchaser shall for all purposes be a Participant party to this
     Agreement and any other L/C Document executed by the participation
     interests and shall have all the rights and obligations of a Participant
     under the L/C Documents, to the same extent as if it were an original party
     hereto, and (b) the transferor Facility Letter of Credit Provider shall be
     released with respect to the percentage of the Aggregate Facility Letter of
     Credit Commitment and the Facility Letter of Credit Obligations assigned to
     such Purchaser without any further consent or action by the Credit Parties,
     the Participants, the Agent or the Issuer.

     12.4. Dissemination of Information. Each Credit Party authorizes each
           ----------------------------
Participant to disclose to any Subparticipant or Purchaser or any other Person
acquiring an interest in the L/C Documents by operation of law (each a
"Transferee") and any prospective Transferee any and all information in such
 ----------
Participant's possession concerning the creditworthiness of the Credit Parties;
provided that each Transferee and prospective Transferee agrees to be bound by
Section 9.17 of this Agreement.
------------

     12.5. Tax Treatment. If any interest in any L/C Document is transferred to
           -------------
any Transferee which is organized under the laws of any jurisdiction other than
the United States or any State thereof, the transferor Facility Letter of Credit
Provider shall cause such Transferee, concurrently with the effectiveness of
such transfer, to comply with the provisions of Section 3.3.
                                                -----------

                                 ARTICLE XIII

                                   GUARANTY

     13.1. Guaranty of Payment. The Guarantor hereby absolutely, irrevocably and
           -------------------
unconditionally guarantees prompt, full and complete payment when due, whether
at stated maturity, upon acceleration or otherwise, and at all times thereafter,
of all Obligations (the "Guaranteed Debt"). This is a guaranty of payment, not a
                         ---------------
guaranty of collection.

     13.2. Acceptance of Guaranty; No Setoffs. The Guarantor waives notice of
           ----------------------------------
the acceptance of this Guaranty and of the extension or incurrence of the
Guaranteed Debt or any part thereof. The Guarantor further waives all setoffs
and counterclaims and presentment, protest, notice, filing of claims with a
court in the event of receivership, bankruptcy or reorganization of the Company,
demand or action on delinquency in respect of the Guaranteed Debt or any part
thereof, including any right to require the Agent, the Issuer or the
Participants to sue the Company, any other guarantor or any other Person
obligated with respect to the Guaranteed Debt or any part thereof, or otherwise
to enforce payment thereof against any collateral securing the Guaranteed Debt
or any part thereof.

                                      -48-
<PAGE>

     13.3. Nature of Guaranty; Continuing, Absolute and Unconditional. The
           ----------------------------------------------------------
Guarantor hereby agrees that, to the fullest extent permitted by law, its
obligations hereunder shall be continuing, absolute and unconditional under any
and all circumstances and not subject to any reduction, limitation, impairment,
termination, defense (other than indefeasible payment in full), setoff,
counterclaim or recoupment whatsoever (all of which are hereby expressly waived
by it to the fullest extent permitted by law), whether by reason of any claim of
any character whatsoever, including, without limitation, any claim of waiver,
release, surrender, alteration or compromise. The validity and enforceability of
this Guaranty shall not be impaired or affected by any of the following: (a) any
extension, modification or renewal of, or indulgence with respect to, or
substitution for, the Guaranteed Debt or any part thereof or any agreement
relating thereto at any time; (b) any failure or omission to perfect or maintain
any lien on, or preserve rights to, any security or collateral or to enforce any
right, power or remedy with respect to the Guaranteed Debt or any part thereof
or any agreement relating thereto, or any collateral securing the Guaranteed
Debt or any part thereof; (c) any waiver of any right, power or remedy or of any
default with respect to the Guaranteed Debt or any part thereof or any agreement
relating thereto or with respect to any collateral securing the Guaranteed Debt
or any part thereof; (d) any release, surrender, compromise, settlement, waiver,
subordination or modification, with or without consideration, of any collateral
securing the Guaranteed Debt or any part thereof, any other guaranties with
respect to the Guaranteed Debt or any part thereof, or any other obligations of
any person or entity with respect to the Guaranteed Debt or any part thereof;
(e) the enforceability or validity of the Guaranteed Debt or any part thereof or
the genuineness, enforceability or validity of any agreement relating thereto or
with respect to any collateral securing the Guaranteed Debt or any part thereof;
(f) the application of payments received from any source to the payment of
indebtedness other than the Guaranteed Debt, any part thereof or amounts which
are not covered by this Guaranty even though the Facility Letter of Credit
Providers might lawfully have elected to apply such payments to any part or all
of the Guaranteed Debt or to amounts which are not covered by this Guaranty; (g)
any change of ownership of the Company or the insolvency, bankruptcy or any
other change in the legal status of the Company; (h) any change in, or the
imposition of, any law, decree, regulation or other governmental act which does
or might impair, delay or in any way affect the validity, enforceability or the
payment when due of the Guaranteed Debt; (i) the failure of the Company to
maintain in full force, validity or effect or to obtain or renew when required
all governmental, insurance and other approvals, licenses or consents required
in connection with the Guaranteed Debt or this Guaranty, or to take any other
action required in connection with the performance of all obligations pursuant
to the Guaranteed Debt or this Guaranty; (j) the existence of any claim, setoff
or other rights which the Guarantor may have at any time against the Company or
any other guarantor or any other Person in connection herewith or with any
unrelated transaction; (k) the Facility Letter of Credit Providers' election, in
any case or proceeding instituted under chapter 11 of the United States
Bankruptcy Code or any applicable federal, state or foreign bankruptcy or other
similar law, of the application of Section 1111(b)(2) of the United States
Bankruptcy Code or other similar provision under any applicable federal, state
or foreign bankruptcy or other similar law; (l) any borrowing, use of cash
collateral, or grant of a security interest by the Company, as debtor in
possession, under Section 363 or 364 of the United States

                                      -49-
<PAGE>

Bankruptcy Code or any applicable federal, state or foreign bankruptcy or other
similar law; (m) the disallowance of all or any portion of any of the Facility
Letter of Credit Providers' claims for repayment of the Guaranteed Debt under
Section 502 or 506 of the United States Bankruptcy Code or any applicable
federal, state or foreign bankruptcy or other similar law; or (n) any other fact
or circumstance which might otherwise constitute grounds at law or equity for
the discharge or release of the Guarantor from its obligations hereunder, all
whether or not the Guarantor shall have had notice or knowledge of any act or
omission referred to in the foregoing clauses (a) through (n) of this paragraph.
It is agreed that the Guarantor's liability hereunder is independent of any
other guaranties or other obligations at any time in effect with respect to the
Guaranteed Debt or any part thereof, and that the Guarantor's liability
hereunder may be enforced regardless of the existence, validity, enforcement or
non-enforcement of any such other guaranties or other obligations or any
provision of any applicable law or regulation purporting to prohibit payment by
the Company of the Guaranteed Debt in the manner agreed upon among the Agent,
the Issuer, the Participants and the Company.

     13.4. Dealings with the Company. Credit may be granted or continued from
           -------------------------
time to time by the Issuer or the Participants to the Company without notice to
or authorization from the Guarantor regardless of the Company's financial or
other condition at the time of any such grant or continuation. Neither the
Agent, the Issuer nor any Participant shall have an obligation to disclose or
discuss with the Guarantor its assessment of the financial condition of the
Company.

     13.5. Subrogation. Until the irrevocable payment in full of the Obligations
           -----------
and termination of all commitments which could give rise to any Obligation, the
Guarantor shall have no right of subrogation with respect to the Guaranteed Debt
and hereby waives any right to enforce any remedy which the Agent, the Issuer or
the Participants now have or may hereafter have against the Company, any
endorser or any other guarantor of all or any part of the Guaranteed Debt, and
the Guarantor hereby waives any benefit of, and any right to participate in, any
security or collateral given to the Agent, the Issuer or the Participants to
secure payment of the Guaranteed Debt or any part thereof or any other liability
of the Company to the Agent, the Issuer or the Participants. Upon such
irrevocable payment and termination, the Company shall indemnify the Guarantor
for the full amount of any payment made by the Guarantor under this Guaranty and
the Guarantor shall be subrogated to the rights of the Person to whom such
payment shall have been made to the extent of such payment.

     13.6. Collateral. The Guarantor authorizes the Agent, the Issuer and the
           ----------
Participants to take any action or exercise any remedy with respect to any
collateral from time to time securing the Guaranteed Debt, which the Agent, the
Issuer and the Participants in their sole discretion shall determine, without
notice to the Guarantor. In the event the Agent, the Issuer and the Participants
in their sole discretion elect to give notice of any action with respect to any
collateral securing the Guaranteed Debt or any part thereof, ten (10) days'
written notice mailed to the Guarantor by ordinary mail at the address set forth
on the signature pages hereto shall be deemed reasonable notice of any matters
contained in such notice. The Guarantor consents and agrees that neither the
Agent, the Issuer nor the Participants shall be under any obligation to marshall

                                      -50-
<PAGE>

any assets in favor of the Guarantor or against or in payment of any or all of
the Guaranteed Debt.

     13.7. Rights to Payments, Etc. In the event that acceleration of the time
           -----------------------
for payment of any of the Guaranteed Debt is stayed upon the insolvency,
bankruptcy or reorganization of the Company, or otherwise, all such amounts
shall nonetheless be payable by the Guarantor forthwith upon demand by the
Agent, the Issuer or the Participants. The Guarantor further agrees that, to the
extent that the Company makes a payment or payments to any of the Facility
Letter of Credit Providers on the Guaranteed Debt, or the Agent, the Issuer or
the Participants receive any proceeds of collateral securing the Guaranteed
Debt, which payment or receipt of proceeds or any part thereof is subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be returned or repaid to the Company, its estate, trustee, receiver, debtor in
possession or any other party, including, without limitation, the Guarantor,
under any insolvency or bankruptcy law, state or federal law, common law or
equitable cause, then to the extent of such payment, return or repayment, the
obligation or part thereof which has been paid, reduced or satisfied by such
amount shall be reinstated and continued in full force and effect as of the date
when such initial payment, reduction or satisfaction occurred.

     13.8. No Waiver. No delay on the part of the Agent, the Issuer or the
           ---------
Participants in the exercise of any right, power or remedy shall operate as a
waiver thereof, and no single or partial exercise by the Agent, the Issuer or
the Participants of any right, power or remedy shall preclude any further
exercise thereof; nor shall any amendment, supplement, modification or waiver of
any of the terms or provisions of this Guaranty be binding upon the Agent, the
Issuer or the Participants, except as expressly set forth in a writing duly
signed and delivered on the Facility Letter of Credit Providers' behalf by the
Agent. The failure by the Agent, the Issuer or the Participants at any time or
times hereafter to require strict performance by the Company or the Guarantor of
any of the provisions, warranties, terms and conditions contained in any
promissory note, security agreement, agreement, guaranty, instrument or document
now or at any time or times hereafter executed pursuant to the terms of, or in
connection with, this Agreement by the Company or the Guarantor and delivered to
the Agent, the Issuer or the Participants shall not waive, affect or diminish
any right of the Agent, the Issuer or the Participants at any time or times
hereafter to demand strict performance thereof, and such right shall not be
deemed to have been waived by any act or knowledge of the Agent, the Issuer or
the Participants, their agents, officers or employees, unless such waiver is
contained in an instrument in writing duly signed and delivered on the Facility
Letter of Credit Providers' behalf by the Agent. No waiver by the Agent, the
Issuer or the Participants of any default shall operate as a waiver of any other
default or the same default on a future occasion, and no action by the Agent,
the Issuer or the Participants permitted hereunder shall in any way affect or
impair the Agent's, the Issuer's or the Participants' rights or powers, or the
obligations of the Guarantor under this Guaranty. Any determination by a court
of competent jurisdiction of the amount of any Guaranteed Debt owing by the
Company to the Facility Letter of Credit Providers shall be conclusive and
binding on the Guarantor irrespective of whether the Guarantor was a party to
the suit or action in which such determination was made.

                                      -51-
<PAGE>

     13.9.  Setoff. In addition to and without limitation of any rights, powers
            ------
or remedies of the Agent, the Issuer or the Participants under applicable law,
any time after maturity of the Guaranteed Debt, whether by acceleration or
otherwise, the Agent, the Issuer or the Participants may, in their sole
discretion, with notice after the fact to the Guarantor and regardless of the
acceptance of any security or collateral for the payment hereof, appropriate and
apply toward the payment of the Guaranteed Debt (a) any indebtedness due or to
become due from any of the Facility Letter of Credit Providers to the Guarantor,
and (b) any moneys, credits or other property belonging to the Guarantor
(including all account balances, whether provisional or final and whether or not
collected or available) at any time held by or coming into the possession of any
of the Agent, the Issuer or any Participant whether for deposit or otherwise.

     13.10. Severability. Wherever possible, each provision of this Article XIII
            ------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.

     13.11. Miscellaneous. It is understood that while the amount of the
            -------------
Guaranteed Debt guaranteed hereby is not limited, if in any action or proceeding
involving any state, federal or foreign bankruptcy, insolvency or other law
affecting the rights of creditors generally, this Guaranty would be held or
determined to be void, invalid or unenforceable on account of the amount of the
aggregate liability under this Guaranty with respect to the Guarantor, then,
notwithstanding any other provision of this Guaranty to the contrary, the
aggregate amount of such liability shall, with respect to the Guarantor, without
any further action of the Agent, the Issuer, the Participants or any other
Person, be automatically limited and reduced with respect to the Guarantor to
the highest amount which is valid and enforceable as determined in such action
or proceeding. The obligations of the Guarantor under this Article XIII shall
survive the termination of this Agreement.

                                  ARTICLE XIV

                                    NOTICES
                                    -------

     14.1.  Giving Notice. All notices and other communications provided to any
            -------------
party hereto under this Agreement or any other L/C Document shall be in writing,
by facsimile or overnight courier and addressed or delivered to such party at
its address set forth below its signature hereto or at such other address as may
be designated by such party in a notice to the other parties. Any notice, if
transmitted by facsimile, shall be deemed given when transmitted, and any notice
given by overnight courier shall be deemed given when received by the addressee.

     14.2.  Change of Address. Any Credit Party, the Agent, the Issuer and any
            -----------------
Participant may each change the address for service of notice upon it by a
notice in writing to the other parties hereto.

                                      -52-
<PAGE>

                           [signature pages follow]

                                      -53-
<PAGE>

IN WITNESS WHEREOF, the Company, the Guarantor, the Participants, the Agent and
the Issuer have executed this Agreement as of the date first above written.

                              TMK RE, LTD.

                              By: ___________________________________
                              Name:__________________________________
                              Title:_________________________________

                              Address:   2001 Third Avenue South
                                         Birmingham, Alabama  35233
                                         Attention:  Mr. Michael J. Klyce
                                                     Assistant Treasurer

                              Telecopy: (205) 325-4157
                              Telephone: (205) 325-2051

                              TORCHMARK CORPORATION

                              By:____________________________________
                              Name:__________________________________
                              Title:_________________________________

                              Address:   2001 Third Avenue South
                                         Birmingham, Alabama  35233
                                         Attention:  Mr. Michael J. Klyce
                                                     Vice President & Treasurer

                              Telecopy: (205) 325-4157
                              Telephone: (205) 325-2051

                         Signature Page to Letter of
                               Credit Agreement

                                      -54-
<PAGE>

                                   BANK ONE, NA,
                                   as Agent and as Issuer

                                   By:____________________________________
                                   Name:__________________________________
                                   Title:_________________________________

                                   Address:       1 Bank One Plaza
                                                  Chicago, Illinois  60670
                                                  Attn: Joseph M. Manzella

                                   Telecopy: (312) 732-4033
                                   Telephone: (312) 732-4880

                          Signature Page to Letter of
                               Credit Agreement

                                      -55-
<PAGE>

                                 AMSOUTH BANK

                                 By:_______________________________
                                 Name: ____________________________
                                 Title:____________________________

                                 Address: 1900 5th Avenue South
                                          Birmingham, Alabama 35203
                                          Attn: David Simmons

                                 Telecopy: (205) 801-0157
                                 Telephone: (205) 326-5924

                         Signature Page to Letter of
                               Credit Agreement
<PAGE>

                                 COMPASS BANK

                                 By:__________________________________
                                 Name:________________________________
                                 Title:_______________________________

                                 Address: 15 South 20th Street
                                          Birmingham, Alabama 35233
                                          Attn: Alex Morton

                                 Telecopy: (205) 715-7602
                                 Telephone: (205) 933-3294

                         Signature Page to Letter of
                               Credit Agreement
<PAGE>

                              FLEET NATIONAL BANK

                              By:________________________________
                              Name:______________________________
                              Title:_____________________________

                              Address: 100 Federal Street
                                       Mail Stop MA DE 1001 OH
                                       Boston, Massachusetts 02211
                                       Attn: David Bosselait

                              Telecopy: (617) 434-1096
                              Telephone: (617) 434-3778

                         Signature Page to Letter of
                               Credit Agreement
<PAGE>

                             SOUTHTRUST BANK, N.A.

                             By:_________________________________
                             Name:_______________________________
                             Title:______________________________

                             Address: 420 North 20th Street
                                      Birmingham, Alabama 35203
                                      Attn: Spencer Ragland

                             Telecopy: (205) 254-6600
                             Telephone: (205) 254-4521

                         Signature Page to Letter of
                               Credit Agreement
<PAGE>

                           FIRST UNION NATIONAL BANK

                           By:___________________________________
                           Name:_________________________________
                           Title:________________________________

                           Address: 201 South College Street
                                    13th Floor
                                    Charlotte, North Carolina 28288-0169
                                    Attn: Lance Black

                           Telecopy: (704) 383-7236
                           Telephone: (704) 374-6628

                         Signature Page to Letter of
                               Credit Agreement
<PAGE>

                              WACHOVIA BANK, N.A.

                              By:________________________________
                              Name:______________________________
                              Title:_____________________________

                              Address: 191 Peachtree Street
                                       Atlanta, Georgia 30303
                                       Attn: Holger Ebert

                              Telecopy: (404) 332-5905
                              Telephone: (404) 332-4332

                         Signature Page to Letter of
                               Credit Agreement
<PAGE>

                                  SCHEDULE I

                                  COMMITMENTS

--------------------------------------------------------------------------------
 Participant                                                 Commitment
 -----------                                                 ----------
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
AmSouth Bank                                                 $25,000,000
--------------------------------------------------------------------------------
Compass Bank                                                 $10,000,000
--------------------------------------------------------------------------------
Fleet National Bank                                          $35,000,000
--------------------------------------------------------------------------------
Southtrust Bank, N.A.                                        $10,000,000
--------------------------------------------------------------------------------
First Union National Bank                                    $25,000,000
--------------------------------------------------------------------------------
Wachovia Bank, N.A.                                          $25,000,000
--------------------------------------------------------------------------------

 *Bank One, NA has a retained interest commitment of $45,000,000
<PAGE>

                                PRICING SCHEDULE

================================================================================
 APPLICABLE             LEVEL I    LEVEL II   LEVEL III    LEVEL IV     LEVEL V
  FEE RATE              STATUS      STATUS      STATUS      STATUS      STATUS
================================================================================
 Letter of Credit Fee    .13%        .145%       .16%        .20%        .275%
--------------------------------------------------------------------------------
     Facility Fee        .07%        .08%        .09%        .10%        .125%
--------------------------------------------------------------------------------
   Utilization Fee*      .05%        .05%        .075%       .10%        .125%
       (**33%)
--------------------------------------------------------------------------------
   Utilization Fee       .15%        .15%        .225%       .30%        .375%
       (**66%)
================================================================================

         For the purposes of this Pricing Schedule, the following terms have the
following meanings, subject to the subsequent paragraphs of this Pricing
Schedule:

         "Level I Status" exists at any date if, on such date, the Guarantor's
Debt Rating is equal to or better than A+ (if S&P or Fitch is the Relevant
Rating Agency) or A1 (if Moody's is the Relevant Rating Agency).

         "Level II Status" exists at any date if, on such date, (i) the
Guarantor has not qualified for Level I Status and (ii) the Guarantor's Debt
Rating is equal to or better than A (if S&P or Fitch is the Relevant Rating
Agency) or A2 (if Moody's is the Relevant Rating Agency).

         "Level III Status" exists at any date if, on such date, (i) the
Guarantor has not qualified for Level I Status or Level II Status and (ii) the
Guarantor's Debt Rating is equal to or better than A- (if S&P or Fitch is the
Relevant Rating Agency) or A3 (if Moody's is the Relevant Rating Agency).

         "Level IV Status" exists at any date if, on such date, (i) the
Guarantor has not qualified for Level I Status, Level II Status or Level III
Status and (ii) the Guarantor's Debt Rating is equal to or better than BBB+ (if
S&P or Fitch is the Relevant Rating Agency) or Baa1 (if Moody's is the Relevant
Rating Agency).

         "Level V Status" exists at any date if, on such date, the Guarantor has
not qualified for Level I Status, Level II Status, Level III Status or Level IV
Status.

____________________________
*   "Utilization" means, for any day, a percentage equal to the aggregate
    outstanding amount of Facility Letter of Credit Obligations at the close of
    business (if a Business Day) on such day divided by the Aggregate Facility
    Letter of Credit Commitment (or, if the Aggregate Facility Letter of Credit
    Commitment has been terminated, the Aggregate Facility Letter of Credit
    Commitment in effect immediately prior to the Facility Termination Date).

**  More than or equal to

<PAGE>

         "Fitch Rating" means, at any time, the rating issued by Fitch and then
in effect with respect to the Guarantor's senior unsecured long-term debt
securities without third-party credit enhancement.

         "Guarantor's Debt Rating" means, at any time, the rating issued by the
Relevant Rating Agency and then in effect with respect to the Guarantor's senior
unsecured long-term debt securities without third-party credit enhancement.

         "Moody's Rating" means, at any time, the rating issued by Moody's and
then in effect with respect to the Guarantor's senior unsecured long-term debt
securities without third-party credit enhancement.

         "S&P Rating" means, at any time, the rating issued by S&P and then in
effect with respect to the Guarantor's senior unsecured long-term debt
securities without third-party credit enhancement.

         "Status" means Level I Status, Level II Status, Level III Status, Level
IV Status or Level V Status.

         If at any time, each of S&P, Fitch and Moody's rates the Guarantor's
senior unsecured long-term debt, then the two rating agencies with the highest
of such ratings shall be the "Relevant Rating Agencies". If the Guarantor's
senior unsecured long-term debt is rated by only two of such rating agencies,
then the rating agency with the higher rating shall be the "Relevant Rating
Agency". If the Guarantor's senior unsecured long term debt is rated by only one
of such rating agencies, then such rating agency shall be the "Relevant Rating
Agency". Notwithstanding the foregoing, if the Guarantor's senior unsecured
long-term debt is split-rated by the two rating agencies with the highest
ratings, then: (a) if there is a one level ratings differential, the Relevant
Rating Agency shall be the rating agency with the higher of the two ratings; (b)
if such differential is two levels, Status shall be based on the rating at the
mid-point and; (c) if the differential is more than two levels, Status shall be
determined by reference to the pricing level one level higher than the lower of
the two ratings.

         The Applicable Fee Rate shall be determined in accordance with the
foregoing table based on the Guarantor's Status as determined from its
then-current Moody's Rating, Fitch Rating, and/or S&P Rating, as applicable. The
credit rating in effect on any date for the purposes of this Schedule is that in
effect at the close of business on such date. If at any time the Guarantor has
no Moody's Rating, no S&P Rating and no Fitch Rating, then Level V Status shall
exist.
<PAGE>

                                   EXHIBIT A

                       FORM OF FACILITY LETTER OF CREDIT

                          ******************************************
                          FOR INTERNAL IDENTIFICATION PURPOSES ONLY:
                          OUR NO.
                          APPLICANT:

                          ******************************************

                                         ISSUE DATE:

IRREVOCABLE LETTER OF CREDIT NO.

TO:

WE HEREBY ESTABLISHED THIS IRREVOCABLE LETTER OF CREDIT IN FAVOR OF THE
AFORESAID ADDRESSEE ("BENEFICIARY") FOR DRAWINGS UP TO UNITED STATES $
(                   AND 00/100 U.S. DOLLARS) EFFECTIVE IMMEDIATELY. THIS LETTER
OF CREDIT IS ISSUED, PRESENTABLE AND PAYABLE AT OUR OFFICE AT 1 BANK ONE PLAZA,
SUITE 0236, CHICAGO, IL. 60670-0236, ATTN: STANDBY LETTERS OF CREDIT AND EXPIRES
WITH OUR CLOSE OF BUSINESS ON

THE TERM "BENEFICIARY" INCLUDES ANY SUCCESSOR BY OPERATION OF LAW OF THE NAMED
BENEFICIARY INCLUDING, WITHOUT LIMITATION, ANY LIQUIDATOR, REHABILITATOR,
RECEIVER OR CONSERVATOR. IN SUCH CASE, DRAWING MUST BE ACCOMPANIED BY A COPY OF
SATISFACTORY LEGAL DOCUMENTATION EVIDENCING THE APPOINTMENT OF THE SUCCESSOR,
LIQUIDATOR, REHABILITATOR, RECEIVER OR CONSERVATOR.

WE HEREBY UNDERTAKE TO PROMPTLY HONOR YOUR SIGHT DRAFT(S) DRAWN ON US,
INDICATING OUR CREDIT NO.     , FOR ALL OR ANY PART OF THIS CREDIT IF PRESENTED
AT OUR OFFICE SPECIFIED IN PARAGRAPH ONE ON OR BEFORE THE EXPIRY DATE OR ANY
AUTOMATICALLY EXTENDED EXPIRY DATE.

EXCEPT AS EXPRESSLY STATED HEREIN, THIS UNDERTAKING IS NOT SUBJECT TO ANY
AGREEMENT, CONDITION OR QUALIFICATION. THE OBLIGATION OF BANK ONE, NA, CHICAGO,
UNDER THIS LETTER OF CREDIT IS THE INDIVIDUAL
<PAGE>

OBLIGATION OF BANK ONE, NA AND IS IN NO WAY CONTINGENT UPON REIMBURSEMENT WITH
RESPECT THERETO.

IT IS A CONDITION OF THIS LETTER OF CREDIT THAT IT IS DEEMED TO BE AUTOMATICALLY
EXTENDED WITHOUT AMENDMENT FOR ONE YEAR FROM THE EXPIRY DATE HEREOF, OR ANY
FUTURE EXPIRATION DATE, UNLESS 30 DAYS PRIOR TO ANY EXPIRATION DATE WE NOTIFY
YOU BY REGISTERED MAIL THAT WE ELECT NOT TO CONSIDER THIS LETTER OF CREDIT
RENEWED FOR ANY SUCH ADDITIONAL PERIOD.

THIS LETTER OF CREDIT IS SUBJECT TO AND GOVERNED BY THE LAWS OF THE STATE OF
DELAWARE AND THE 1993 REVISION OF THE UNIFORM CUSTOMS AND PRACTICE FOR
DOCUMENTARY CREDITS OF THE INTERNATIONAL CHAMBER OF COMMERCE (PUBLICATION 500)
AND, IN THE EVENT OF ANY CONFLICT, THE LAWS OF THE STATE OF DELAWARE WILL
CONTROL. IF THIS CREDIT EXPIRES DURING AN INTERRUPTION OF BUSINESS AS DESCRIBED
IN ARTICLE 17 OF SAID PUBLICATION 500, THE BANK HEREBY SPECIFICALLY AGREES TO
EFFECT PAYMENT IF THIS CREDIT IS DRAWN AGAINST WITHIN 30 DAYS AFTER THE
RESUMPTION OF BUSINESS.

                                  VERY TRULY YOURS

                                  BANK ONE, NA

                                  ________________________________
                                  PREPARER/AUTHORIZED SIGNER

                                  ________________________________
                                  AUTHORIZED SIGNER
<PAGE>

                                   EXHIBIT B

                        FORM OF COMPLIANCE CERTIFICATE

To:      The Agent and the Facility Letter of Credit Providers party to the
         Letter of Credit Agreement described below

                  This Compliance Certificate is furnished pursuant to that
certain Letter of Credit Agreement dated as of October 24, 2000 (as amended,
modified, renewed or extended from time to time, the "Agreement") among TMK Re,
Ltd., Torchmark Corporation (the "Guarantor"), the participants party thereto
and Bank One, NA, as Issuer. Unless otherwise defined herein, capitalized terms
used in this Compliance Certificate have the meanings ascribed thereto in the
Agreement.

                    THE UNDERSIGNED HEREBY CERTIFIES THAT:

                    1. I am the duly elected _______________ of the Guarantor;

                    2. I have reviewed the terms of the Agreement and I have
made, or have caused to be made under my supervision, a detailed review of the
transactions and conditions of the Guarantor and its Subsidiaries during the
accounting period covered by the attached financial statements;

                    3. The examinations described in paragraph 2 did not
disclose, and I have no knowledge of, the existence of any condition or event
which constitutes a Default or Unmatured Default during or at the end of the
accounting period covered by the attached financial statements or as of the date
of this Certificate, except as set forth below; and

                    4. Schedule I attached hereto sets forth financial data and
computations evidencing the Guarantor's compliance with certain covenants of the
Agreement, all of which data and computations are true, complete and correct.

                    Described below are the exceptions, if any, to paragraph 3
by listing, in detail, the nature of the condition or event, the period during
which it has existed and the action which the Guarantor has taken, is taking, or
proposes to take with respect to each such condition or event:

                    ______________________________________________

                    ______________________________________________

                    ______________________________________________

<PAGE>

                    ______________________________________________

                  The foregoing certifications, together with the computations
set forth in Schedule I hereto and the financial statements delivered with this
Certificate in support hereof, are made and delivered this ___ day of
____________, _____.

                                          TORCHMARK CORPORATION

                                          By:_________________________________
                                          Name:_______________________________
                                          Title:______________________________
<PAGE>

                     SCHEDULE I TO COMPLIANCE CERTIFICATE

            Schedule of Compliance as of ______________, ____ with
                     Provisions of 6.15, 6.16 and 6.17 of
                                 the Agreement

1.       Section 6.15 - Consolidated Net Worth
         -------------------------------------

         A.  Consolidated Net Worth (consolidated
             shareholders' equity excluding the
             effect of the application of FAS 115)                $ ____________

         B.  $1,575,000,000

         C.  Positive Consolidated Net Income for
             each fiscal quarter ending after June 30, 1997 X .25 $ ____________

         D.  B plus C                                             $ ____________

         E.  A minus D (must be greater than
             or equal to 0)                                       $ ____________

                 Complies _______    Does Not Comply _______

2.       Section 6.16 - Ratio of Consolidated Indebtedness to Consolidated
         -----------------------------------------------------------------
         Capitalization
         --------------

         A.  Consolidated Indebtedness                            $ ____________

         B.  Consolidated Capitalization

             (i)      Consolidated Net
                       Worth (1A)                                 $ ____________

             (ii)     Consolidated Indebtedness
                       (2A)                                       $ ____________

             (iii)    Sum of (i) and (ii)                         $ ____________

         C.  Ratio of A to B(iii)                                 ____ :1.0

         D.  Permitted Ratio               Less than or equal to 0.5 to 1.0

             Complies ________     Does Not Comply _______
<PAGE>

3.       Section 6.17 - Ratio of Consolidated Adjusted Net Income to
         -----------------------------------------------------------
         Consolidated Interest Expense
         -----------------------------

         A.      Consolidated Adjusted Net Income (for four fiscal
                 quarters ended _________, ____)

                 (i)       Consolidated Net Income            $ _______________

                 (ii)      Taxes                              $ _______________

                 (iii)     Consolidated Interest Expense      $ _______________

                 (iv)      Sum of (i), (ii) and (iii)         $ _______________

         B.      Consolidated Interest Expense
                            (3A(iii))                         $ _______________

         C.      Ratio of A(iv) to B                          ____  to 1.0

         D.      Permitted Ratio           Greater than or equal to 2.50 to 1.0

                 Complies ________    Does Not Comply ________
<PAGE>

                                   EXHIBIT C

                         FORM OF ASSIGNMENT AGREEMENT

         This Assignment Agreement (this "Assignment Agreement") between
____________________________ (the "Assignor") and _____________________________
(the "Assignee") is dated as of ____________________, 200_. The parties hereto
agree as follows:

         1. PRELIMINARY STATEMENT. The Assignor is a party to a Letter of Credit
            ---------------------
Agreement (which, as it may be amended, supplemented, modified, renewed or
extended from time to time is herein called the "Letter of Credit Agreement")
described in Item 1 of Schedule 1 attached hereto. Capitalized terms used but
                       ----------
not otherwise defined herein shall have the meanings ascribed thereto in the
Letter of Credit Agreement.

         2. ASSIGNMENT AND ASSUMPTION. The Assignor hereby sells and assigns to
            -------------------------
the Assignee, and the Assignee hereby purchases and assumes from the Assignor,
an interest in and to the Assignor's rights and obligations under the Letter of
Credit Agreement and the other L/C Documents such that after giving effect to
such assignment the Assignee shall have purchased pursuant to this Assignment
Agreement the percentage interest specified in Item 3 of Schedule 1 of all
                                                         ----------
outstanding rights and obligations under the Letter of Credit Agreement relating
to the Facility Letters of Credit and the other L/C Documents. The aggregate
Commitment (or Facility Letter of Credit Obligations, if the applicable
Commitment has been terminated) purchased by the Assignee hereunder is set forth
in Item 4 of Schedule 1.
             ----------

         3. EFFECTIVE DATE. The effective date of this Assignment Agreement (the
            --------------
"Effective Date") shall be the later of the date specified in Item 5 of Schedule
                                                                        --------
1 or two Business Days (or such shorter period agreed to by the Agent) after
-
this Assignment Agreement, together with any consents required under the Letter
of Credit Agreement, are delivered to the Agent. In no event will the Effective
Date occur if the payments required to be made by the Assignee to the Assignor
on the Effective Date under Section 4 hereof are not made on the proposed
                            ---------
Effective Date. As of the Effective Date, (a) the Assignee shall have the rights
and obligations of a Participant under the L/C Documents with respect to the
rights and obligations assigned to the Assignee hereunder, and (b) the Assignor
shall relinquish its rights and be released from its corresponding obligations
under the L/C Documents with respect to the rights and obligations assigned to
the Assignee hereunder.

         4. PAYMENT OBLIGATIONS. In consideration for the sale and assignment of
            -------------------
the Facility Letter of Credit Obligations hereunder, the Assignee shall pay the
Assignor, on the Effective Date, the amount agreed to by the Assignor and the
Assignee. On and after the Effective Date, the Assignee shall be entitled to
receive from the Agent all payments with respect to the interest assigned
hereby. The Assignee shall advance funds directly to the Agent, in accordance
with the terms of the Letter of Credit Agreement, with respect to all Facility
Letter of Credit Obligations arising on or after the Effective Date with respect
to the interest assigned hereby. In the event that either party hereto receives
any payment to which the other party hereto
<PAGE>

is entitled under this Assignment Agreement, then the party receiving such
amount shall promptly remit it to the other party hereto.

         5. RECORDATION FEE. The Assignor and Assignee each agree to pay one-
            ---------------
half of the recordation fee required to be paid to the Agent in connection with
this Assignment Agreement unless otherwise specified in Item 6 of Schedule 1.
                                                                  ----------

         6. REPRESENTATIONS OF THE ASSIGNOR; LIMITATIONS ON THE ASSIGNOR'S
            --------------------------------------------------------------
LIABILITY. The Assignor represents and warrants that (a) it is the legal and
---------
beneficial owner of the interest being assigned by it hereunder, (b) such
interest is free and clear of any adverse claim created by the Assignor and (c)
the execution and delivery of this Assignment Agreement by the Assignor is duly
authorized. It is understood and agreed that the assignment and assumption
hereunder are made without recourse to the Assignor and that the Assignor makes
no other representation or warranty of any kind to the Assignee. Neither the
Assignor nor any of its officers, directors, employees, agents or attorneys
shall be responsible for (a) the due execution, legality, validity,
enforceability, genuineness, sufficiency or collectibility of any Loan Document,
including, without limitation, documents granting the Assignor and the other
Participants a security interest in assets of the Company or any guarantor, (b)
any representation, warranty or statement made in or in connection with any of
the L/C Documents, (c) the financial condition or creditworthiness of the
Company or any guarantor, (d) the performance of or compliance with any of the
terms or provisions of any of the L/C Documents, (e) inspecting any of the
Property, books or records of the Company, (f) the validity, enforceability,
perfection, priority, condition, value or sufficiency of any collateral securing
or purporting to secure the Facility Letter of Credit Obligations, or (g) any
mistake, error of judgment, or action taken or omitted to be taken in connection
with the Facility Letter of Credit Obligations or the L/C Documents.

         7. REPRESENTATIONS OF THE ASSIGNEE. The Assignee (a) confirms that it
            -------------------------------
has received a copy of the Letter of Credit Agreement, together with copies of
the financial statements requested by the Assignee and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment Agreement, (b) agrees that it will,
independently and without reliance upon the Issuer, the Agent, the Assignor or
any other Participant and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the L/C Documents, (c) appoints and authorizes
the Agent to take such action as Agent on its behalf and to exercise such powers
under the L/C Documents as are delegated to the Agent by the terms thereof,
together with such powers as are reasonably incidental thereto, (d) confirms
that the execution and delivery of this Assignment Agreement by the Assignee is
duly authorized, (e) agrees that it will perform in accordance with their terms
all of the obligations which by the terms of the L/C Documents are required to
be performed by it as a Participant, (f) agrees that its payment instructions
and notice instructions are as set forth in the attachment to Schedule 1, (g)
                                                              ----------
confirms that none of the funds, monies, assets or other consideration being
used to make the purchase and assumption hereunder are "plan assets" as defined
under ERISA and that its rights, benefits and interests in and under the L/C
Documents will not be "plan assets" under ERISA, (h) agrees to indemnify and
hold the Assignor harmless against all losses, costs
<PAGE>

and expenses (including, without limitation, reasonable attorneys' fees) and
liabilities incurred by the Assignor in connection with or arising in any manner
from the Assignee's non-performance of the obligations assumed under this
Assignment Agreement, and (i) if applicable, attaches the forms prescribed by
the Internal Revenue Service of the United States certifying that the Assignee
is entitled to receive payments under the L/C Documents without deduction or
withholding of any United States federal income taxes.

         8.  GOVERNING LAW. THIS ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY THE
             -------------
INTERNAL LAWS, WITHOUT REGARD TO CONFLICT OF LAWS PROVISIONS, OF THE STATE OF
ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.

         9.  NOTICES. Notices shall be given under this Assignment Agreement in
             -------
the manner set forth in the Letter of Credit Agreement. For the purpose hereof,
the addresses of the parties hereto (until notice of a change is delivered)
shall be the address set forth in the attachment to Schedule 1.
                                                    ----------
         10. COUNTERPARTS; DELIVERY BY FACSIMILE. This Assignment Agreement may
             -----------------------------------
be executed in counterparts. Transmission by facsimile of an executed
counterpart of this Assignment Agreement shall be deemed to constitute due and
sufficient delivery of such counterpart and such facsimile shall be deemed to be
an original counterpart of this Assignment Agreement.

                           [signature page follows]
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have executed this Assignment
Agreement by their duly authorized officers as of the date first above written.

                                              [NAME OF ASSIGNOR]

                                              By: __________________________

                                              Title: _______________________
                                                     _______________________
                                                     _______________________

                                              [NAME OF ASSIGNEE]

                                              By: __________________________

                                              Title: _______________________
                                                     _______________________
                                                     _______________________

<PAGE>

                                  SCHEDULE 1

                            TO ASSIGNMENT AGREEMENT

1.    Description and Date of Letter of Credit Agreement:

               That certain Letter of Credit Agreement dated as of October
               24, 2000 among TMK Re, Ltd., Torchmark Corporation, as
               Guarantor, the Participants named therein and Bank One, NA, as
               Issuer and Agent.

2.    Date of Assignment Agreement:               , 200_
                                    ______________

3.    Amounts (As of Date of Item 2 above):

      (a)      Total of Aggregate Facility Letter of Credit
               Commitment (Facility Letter of Credit
               Obligations)* under Letter of Credit
               Agreement                                   $
                                                             _______________

      (b)      Assignee's percentage of the
               (Facility Letter of Credit Obligations)*
               Aggregate Facility Letter of Credit
               Commitment purchased under the Assignment
               Agreement**                                                  %
                                                           ________________

4.    Assignee's aggregate (Facility Letter of Credit
      Obligations amount)* Commitment amount purchased
      hereunder:                                           $
                                                            ________________
5.    Proposed Effective Date:
                                                            ________________

6.    Non-standard Recordation Fee Arrangement             N/A***

                                                           [Assignor/Assignee
                                                           to pay 100% of fee]
                                                           [Fee waived by Agent]
Accepted and Agreed:

[NAME OF ASSIGNOR]                                   [NAME OF ASSIGNEE]

By:                                                  By:
    ______________________________________               _______________________

Title:                                               Title:
       ___________________________________                  ____________________
<PAGE>

ACCEPTED AND CONSENTED TO ****              ACCEPTED AND CONSENTED TO ****
[NAME OF COMPANY]                           BANK ONE, NA, as Agent

By:__________________________________       By:________________________________

Title:_______________________________       Title:_____________________________

*        If the Aggregate Facility Letter of Credit Commitment has been
         terminated, insert outstanding Facility Letter of Credit Obligations in
         place of Commitment

**       Percentage taken to 10 decimal places

***      If fee is split 50-50, pick N/A as option

****     Delete if not required by Letter of Credit Agreement
<PAGE>

               Attachment to SCHEDULE 1 to ASSIGNMENT AGREEMENT

                       ADMINISTRATIVE INFORMATION SHEET
                       --------------------------------

        Attach Assignor's Administrative Information Sheet,which must
          include notice addresses for the Assignor and the Assignee
                           (Sample form shown below)

                             ASSIGNOR INFORMATION
                             --------------------

Contact:
-------

Name:____________________________       Telephone No.:__________________________

Fax No.:_________________________       Telex No.:______________________________

                                        Answerback:_____________________________

Payment Information:
-------------------

Name & ABA # of Destination Bank: ______________________________________________

Account Name & Number for Wire Transfer: _______________________________________

                                         _______________________________________

Other Instructions:_____________________________________________________________

________________________________________________________________________________

Address for Notices for Assignor:   ____________________________________________
--------------------------------
                                    ____________________________________________

                                    ____________________________________________

                             ASSIGNEE INFORMATION
                             --------------------
Credit Contact:
--------------

Name:_________________________________     Telephone No.: ______________________

Fax No.: _____________________________     Telex No.: __________________________

                                           Answerback:__________________________

Key Operations Contacts:
-----------------------

Booking Installation:_________________     Booking Installation:________________

Name:_________________________________     Name:________________________________

Telephone No.:________________________     Telephone No.:_______________________

Fax No.:______________________________     Fax No.:_____________________________

Telex No.:____________________________     Telex No.:___________________________

Answerback:___________________________     Answerback:__________________________

<PAGE>

Payment Information:
-------------------

Name & ABA # of Destination Bank:  _____________________________________________

                                   _____________________________________________

Account Name & Number for Wire Transfer: _______________________________________

                                         _______________________________________

Other Instructions:_____________________________________________________________

________________________________________________________________________________

Address for Notices for Assignee:______________________________________________
--------------------------------
                                 ______________________________________________

                                 ______________________________________________
<PAGE>

         BANK ONE INFORMATION
         --------------------

         Assignee will be called promptly upon receipt of the signed agreement.

Initial Funding Contact:                 Subsequent Operations Contact:
-----------------------                  -----------------------------

Name: _______________________________    Name:__________________________________

Telephone No.:  (312)                    Telephone No.:  (312)
               ----------------------                  -------------------------
Fax No.:  (312)                          Fax No.: (312)
         ----------------------------             ------------------------------
                              Bank One Telex No.: 190201  (Answerback: FNBC UT)
                                                  -----------------------------

Initial Funding Standards:
-------------------------

Libor - Fund 2 days after rates are set.

Bank One Wire Instructions:         Bank One, NA, ABA # 071000013
--------------------------
                                    LS2 Incoming Account # 481152860000
                                    Ref:________________

Address for Notices for Bank One:   1 Bank One Plaza, Chicago, IL  60670
--------------------------------
                                    Attn: Agency Compliance Division,
                                          Suite IL1-0353
                                    Fax No. (312) 732-2038 or (312) 732-4339
<PAGE>

                                 SCHEDULE 5.9

                           SIGNIFICANT SUBSIDIARIES

                                                          Percentage of
                                                          Voting Stock
Name of Significant                 State of              Owned by Guarantor
    Subsidiary                      Incorporation         or Subsidiaries
    ----------                      -------------         ---------------

Globe Life And Accident

Insurance Company                   Delaware              100%

Liberty National Life

Insurance Company                   Alabama               100%

United American

Insurance Company                   Delaware              100%

United Investors Life

Insurance Company                   Missouri              100%

American Income Life

Insurance Company                   Indiana               100%
<PAGE>

                                  SCHEDULE 5.21

                               INSURANCE LICENSES

<TABLE>
<CAPTION>
                                                Jurisdictions
Significant                                      in which
Insurance                                        company holds                               Type of
Subsidiary                                       active Licenses                             Insurance
----------                                       ---------------                             ---------
<S>                                             <C>                                          <C>
Globe Life And Accident Insurance Company        All states except New York plus Guam        Life and Accident and
                                                 and the District of Columbia                Health

Liberty National Life Insurance Company          All states except New York plus Guam        Life and Accident and
                                                 and the District of Columbia                Health

United American Insurance Company                All states except New York plus the         Life and Accident and
                                                 District of Columbia, Puerto Rico and       Health
                                                 Canada

United Investors                                 All states except New York plus the         Life and Accident and
Life Insurance Company                           District of Columbia                        Health

American Income Life Insurance Company           All states except New York plus New         Life and Accident and
                                                 Zealand, Puerto Rico, the U.S. Virgin       Health
                                                 Islands, Canada, and the District of
                                                 Columbia

TMK Re, Ltd.                                     Bermuda                                     Reinsurance
</TABLE><PAGE>

                                                                    EXHIBIT 10.Q

                                                                  EXECUTION COPY

                                 $600,000,000

                               CREDIT AGREEMENT

                         Dated as of October 22, 1997

                                     among

                            TORCHMARK CORPORATION,

                           THE LENDERS NAMED HEREIN

                                      and

                      THE FIRST NATIONAL BANK OF CHICAGO,
                                   as Agent

                                  Arranged By

                      FIRST CHICAGO CAPITAL MARKETS, INC.
<PAGE>

                               TABLE OF CONTENTS
                               -----------------

<TABLE>
<CAPTION>
                                                                                                         Page
<S>                                                                                                      <C>
TABLE OF CONTENTS....................................................................................     2
-----------------
EXHIBITS.............................................................................................     4
--------
SCHEDULES............................................................................................     4
---------
CREDIT AGREEMENT.....................................................................................     7
RECITALS:............................................................................................     7
--------
ARTICLE I............................................................................................     7
DEFINITIONS..........................................................................................     7
-----------
ARTICLE II...........................................................................................    19
THE FACILITY.........................................................................................    19
------------
 2.1.  The Facility..................................................................................    19
       ------------
 2.2.  Ratable Advances..............................................................................    20
       ----------------
 2.3.  Competitive Bid Advances......................................................................    22
       ------------------------
   2.3.4.  Submission and Contents of Competitive Bid Quotes.........................................    23
           --------------------------------------------------
ARTICLE III..........................................................................................    29
CHANGE IN CIRCUMSTANCES..............................................................................    29
-----------------------
CONDITIONS PRECEDENT.................................................................................    31
--------------------
ARTICLE V............................................................................................    32
REPRESENTATIONS AND WARRANTIES.......................................................................    32
------------------------------
ARTICLE VI...........................................................................................    36
COVENANTS............................................................................................    36
---------
ARTICLE VII..........................................................................................    40
DEFAULTS.............................................................................................    40
--------
ARTICLE VIII.........................................................................................    43
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES.......................................................    43
----------------------------------------------
ARTICLE IX...........................................................................................    44
GENERAL PROVISIONS...................................................................................    44
------------------
ARTICLE X............................................................................................    47
THE AGENT............................................................................................    47
---------
ARTICLE XI...........................................................................................    50
SETOFF; RATABLE PAYMENTS.............................................................................    50
------------------------
ARTICLE XII..........................................................................................    51
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS....................................................    51
-------------------------------------------------
 12.2.  Participations...............................................................................    51
        --------------
 12.3.  Assignments..................................................................................    52
        -----------
ARTICLE XIII.........................................................................................    53
NOTICES..............................................................................................    53
-------
ARTICLE XIV..........................................................................................    53
COUNTERPARTS.........................................................................................    53
------------
OF ASSIGNMENT........................................................................................    80
-------------
CONSENT AND RELEASE..................................................................................    83
-------------------
</TABLE>

                                      -2-
<PAGE>

                                   EXHIBITS
                                   --------

Exhibit "A" -  Note (Ratable Loan)
Exhibit "B" -  Note (Competitive Bid Loan)
Exhibit "C" -  Competitive Bid Quote Request
Exhibit "D" -  Invitation for Competitive Bid Quotes
Exhibit "E" -  Competitive Bid Quote
Exhibit "F" -  Opinion of Borrower's Counsel
Exhibit "G" -  Compliance Certificate
Exhibit "H" -  Assignment Agreement
Exhibit "I" -  Transfer Instructions

                                   SCHEDULES
                                   ---------

Schedule "1" - Lender Commitments and Addresses
Schedule "2" - Significant Subsidiaries
Schedule "3" - Insurance Licenses
Schedule "4" - Pricing Grid

                                      -3-
<PAGE>

                               CREDIT AGREEMENT

     This Credit Agreement, dated as of October 22, 1997, is among TORCHMARK
CORPORATION, a Delaware corporation, the Lenders (as hereinafter defined) and
The First National Bank of Chicago, individually and as Agent.

                                   RECITALS:
                                   ---------

     A.   The Borrower has requested the Lenders to make financial
accommodations to it in the aggregate principal amount of $600,000,000, the
proceeds of which will be used for the general corporate purposes of the
Borrower and its Subsidiaries (including repayment of maturing commercial paper
Indebtedness); and

     B.   The Lenders are willing to extend such financial accommodations on the
terms and conditions set forth herein.

     NOW, THEREFORE, in consideration of the mutual covenants and undertakings
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower, the Lenders and the
Agent hereby agree as follows:

                                   ARTICLE I

                                  DEFINITIONS
                                  -----------

     As used in this Agreement:

     "Absolute Rate" means, with respect to an Absolute Rate Loan made by a
given Lender for the relevant Absolute Rate Interest Period, the rate of
interest per annum (rounded to the nearest 1/100 of 1%) offered by such Lender
and accepted by the Borrower.

     "Absolute Rate Advance" means a borrowing hereunder consisting of the
aggregate amount of the several Absolute Rate Loans made by some or all of the
Lenders to the Borrower at the same time and for the same Interest Period.

     "Absolute Rate Auction" means a solicitation of Competitive Bid Quotes
setting forth Absolute Rates pursuant to Section 2.3.

     "Absolute Rate Interest Period" means, with respect to an Absolute Rate
Advance, a period of not less than 30 and not more than 180 days commencing on a
Business Day selected by the Borrower pursuant to this Agreement.  If such
Absolute Rate Interest Period would end on a day which is not a Business Day,
such Absolute Rate Interest Period shall end on the next succeeding Business
Day.

                                      -7-
<PAGE>

     "Absolute Rate Loan" means a Loan which bears interest at the Absolute
Rate.

     "Acquisition" means any transaction, or any series of related transactions,
consummated on or after the date of this Agreement, by which the Borrower or any
of its Subsidiaries (i) acquires any going business or all or substantially all
of the assets of any firm, corporation or division thereof, whether through
purchase of assets, merger or otherwise or (ii) directly or indirectly acquires
(in one transaction or as the most recent transaction in a series of
transactions) at least a majority (in number of votes) of the securities of a
corporation which have ordinary voting power for the election of directors
(other than securities having such power only by reason of the happening of a
contingency) or a majority (by percentage or voting power) of the outstanding
partnership interests of a partnership.

     "Advance" means a borrowing hereunder consisting of the aggregate amount of
the several Loans made by some or all of the Lenders to the Borrower on the same
Borrowing Date, of the same Type (or on the same interest basis in the case of
Competitive Bid Advances) and, when applicable, for the same Interest Period and
includes a Competitive Bid Advance.

     "Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person.  A Person
shall be deemed to control another Person if the controlling Person owns 10% or
more of any class of voting securities (or other ownership interests) of the
controlled Person or possesses, directly or indirectly, the power to direct or
cause the direction of the management or policies of the controlled Person,
whether through ownership of stock, by contract or otherwise.

     "Agent" means The First National Bank of Chicago in its capacity as agent
for the Lenders pursuant to Article X, and not in its individual capacity as a
Lender, and any successor Agent appointed pursuant to Article X.

     "Agent Balance Transaction" means one or more receivables sales
transactions with respect to receivables arising out of advances made by AIL to
insurance agents in connection with life insurance policies underwritten by AIL.

     "Aggregate Commitment" means the aggregate of the Commitments of all the
Lenders, as reduced from time to time pursuant to the terms hereof.

     "Agreement" means this credit agreement, as it may be amended, modified or
restated and in effect from time to time.

     "Agreement Accounting Principles" means generally accepted accounting
principles as in effect from time to time, applied in a manner consistent with
those used in preparing the financial statements referred to in Section 5.4.

     "AIL" means American Income Life Insurance Company, an Indiana insurance
company.

                                      -8-
<PAGE>

     "Alternate Base Rate" means, for any day, a rate of interest per annum
equal to the higher of (i) the Corporate Base Rate for such day and (ii) the sum
of Federal Funds Effective Rate for such day plus 1/2% per annum.

     "Annual Statement" means the annual statutory financial statement of any
Insurance Subsidiary required to be filed with the insurance commissioner (or
similar authority) of its jurisdiction of incorporation, which statement shall
be in the form required by such Insurance Subsidiary's jurisdiction of
incorporation or, if no specific form is so required, in the form of financial
statements recommended by the NAIC to be used for filing annual statutory
financial statements and shall contain the type of information recommended by
the NAIC to be disclosed therein, together with all exhibits or schedules filed
therewith.

     "Applicable Eurodollar Margin" means, at any time, the percentage
determined in accordance with the Pricing Grid at such time.  The Applicable
Eurodollar Margin shall change as and when the Borrower Debt Rating changes.
The initial Applicable Eurodollar Margin shall be .145%.

     "Applicable Facility Fee Percentage" means, at any time, the percentage
determined in accordance with the Pricing Grid at such time.  The Applicable
Facility Fee Percentage shall change as and when the Borrower Debt Rating
changes.  The initial Applicable Facility Fee Percentage shall be .08%.

     "Article" means an article of this Agreement unless another document is
specifically referenced.

     "Authorized Officer" means any of the Chairman, Vice Chairman, President,
Chief Financial Officer, Chief Accounting Officer, Treasurer, any Vice President
or any Assistant Treasurer of the Borrower, acting singly.

     "Borrower" means Torchmark Corporation, a Delaware corporation, and its
successors and assigns.

     "Borrower Debt Rating" means the senior unsecured long term debt (without
credit enhancement) rating of the Borrower as determined by a rating agency
identified on the Pricing Grid.

     "Borrowing Date" means a date on which an Advance is made hereunder.

     "Business Day" means (i) with respect to any borrowing, payment or rate
selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on
which banks generally are open in Chicago and New York for the conduct of
substantially all of their commercial lending activities and on which dealings
in United States dollars are carried on in the London interbank market and (ii)
for all other purposes, a day (other than a Saturday or Sunday) on which banks
generally are open in Chicago and New York for the conduct of substantially all
of their commercial lending activities.

                                      -9-
<PAGE>

     "Capitalized Lease" of a Person means any lease of Property by such Person
as lessee which would be capitalized on a balance sheet of such Person prepared
in accordance with Agreement Accounting Principles.

     "Capitalized Lease Obligations" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with
Agreement Accounting Principles.

     "Change" means (i) any change after the date of this Agreement in the Risk-
Based Capital Guidelines for banks or (ii) any adoption of or change in any
other law, governmental or quasi-governmental rule, regulation, policy,
guideline, interpretation, or directive (whether or not having the force of law)
after the date of this Agreement which affects the amount of capital required or
expected to be maintained by any Lender or any Lending Installation or any
corporation controlling any Lender.

     "Change in Control" means the acquisition by any Person, or two or more
Persons acting in concert, of beneficial ownership (within the meaning of Rule
13d-3 of the Securities and Exchange Commission under the Securities Exchange
Act of 1934) of 20% or more of the outstanding shares of voting stock of the
Borrower.

     "Closing Date" means October 22, 1997.

     "Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.

     "Commitment" means, for each Lender, the obligation of such Lender to make
Loans not exceeding the amount set forth on Schedule "1" hereto or as set forth
in any Notice of Assignment relating to any assignment that has become effective
pursuant to Section 12.3.2, as such amount may be modified from time to time
pursuant to the terms hereof.

     "Competitive Bid Advance" means a borrowing hereunder consisting of the
aggregate amount of the several Competitive Bid Loans made by some or all of the
Lenders to the Borrower at the same time and for the same Interest Period.

     "Competitive Bid Borrowing Notice" is defined in Section 2.3.6.

     "Competitive Bid Loan" means a Eurodollar Bid Rate Loan or an Absolute Rate
Loan, or both, as the case may be.

     "Competitive Bid Margin" means the margin above or below the applicable
Eurodollar Base Rate offered for a Eurodollar Bid Rate Loan, expressed as a
percentage (rounded to the nearest 1/100 of 1%) to be added or subtracted from
such Eurodollar Base Rate.

     "Competitive Bid Note" means a promissory note in substantially the form of
Exhibit "B" hereto, with appropriate insertions, duly executed and delivered to
the Agent by the

                                     -10-
<PAGE>

Borrower for the account of a Lender and payable to the order of such Lender,
including any amendment, modification, renewal or replacement of such promissory
note.

     "Competitive Bid Quote" means a Competitive Bid Quote substantially in the
form of Exhibit "E" hereto completed and delivered by a Lender to the Agent in
accordance with Section 2.3.4.

     "Competitive Bid Quote Request" means a Competitive Bid Quote Request
substantially in the form of Exhibit "C" hereto completed and delivered by the
Borrower to the Agent in accordance with Section 2.3.2.

     "Condemnation" is defined in Section 7.8.

     "Consolidated Adjusted Net Income" means, for any period of calculation,
Consolidated Net Income plus (to the extent deducted in determining Consolidated
Net Income) (i) the provision for taxes in respect of, or measured by, income or
excess profits and (ii) Consolidated Interest Expense, in each case calculated
for such period for the Borrower and its Subsidiaries on a consolidated basis in
accordance with Agreement Accounting Principles.

     "Consolidated Capitalization" means, at any date of determination, the sum
of (i) Consolidated Net Worth as at such date plus (ii) Consolidated
Indebtedness as at such date.

     "Consolidated Indebtedness" means the Indebtedness of the Borrower and its
Subsidiaries determined on a consolidated basis in accordance with Agreement
Accounting Principles.

     "Consolidated Interest Expense" means, for any period of calculation,
interest expense, whether paid or accrued, of the Borrower and its Subsidiaries
calculated on a consolidated basis in accordance with Agreement Accounting
Principles.

     "Consolidated Net Income" means, for any period of calculation, the net
income of the Borrower and its Subsidiaries calculated on a consolidated basis
in accordance with Agreement Accounting Principles consistently applied.

     "Consolidated Net Worth" means, at any date of determination, the amount of
consolidated common and preferred shareholders' equity of the Borrower and its
Subsidiaries (including, without limitation, the Series A Preferred Securities),
determined as at such date in accordance with Agreement Accounting Principles;
provided, however, that the effect of the application of FAS 115 shall be
--------  -------
excluded when computing Consolidated Net Worth.

     "Contingent Obligation" of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person, or
agrees to maintain the net worth or working capital or other financial condition
of any other Person, or otherwise assures any creditor of such other Person
against loss, including, without limitation, any comfort letter, operating
agreement, take-or-pay

                                     -11-
<PAGE>

contract or application for a Letter of Credit, but excluding (i) the
endorsement of instruments for deposit or collection in the ordinary course of
business, (ii) the Payment and Guarantee Agreement and (iii) obligations arising
in connection with the Agent Balance Transaction.

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

     "Conversion/Continuation Notice" is defined in Section 2.2.4.

     "Corporate Base Rate" means a rate per annum equal to the corporate base
rate of interest announced by First Chicago from time to time, changing when and
as said corporate base rate changes.  The Corporate Base Rate is a reference
rate and does not necessarily represent the lowest or best rate of interest
actually charged to any customer.  First Chicago may make commercial loans or
other loans at rates of interest at, above or below the Corporate Base Rate.

     "Default" means an event described in Article VII.

     "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any rule or regulation issued thereunder.

     "Eurodollar Advance" means a Eurodollar Bid Rate Advance or a Eurodollar
Ratable Advance, or both, as the case may be.

     "Eurodollar Auction" means a solicitation of Competitive Bid Quotes setting
forth Eurodollar Bid Rates pursuant to Section 2.3.

     "Eurodollar Base Rate" means, with respect to a Eurodollar Advance for the
relevant Eurodollar Interest Period, the rate determined by the Agent to be the
rate at which deposits in U.S. dollars are offered by First Chicago to first-
class banks in the London interbank market at approximately 11 a.m. (London
time) two Business Days prior to the first day of such Eurodollar Interest
Period, in the approximate amount of First Chicago's relevant Eurodollar Ratable
Loan (or in the case of a Eurodollar Bid Rate Advance, in an amount comparable
to the amount of such Advance) and having a maturity approximately equal to such
Eurodollar Interest Period.

     "Eurodollar Bid Rate" means, with respect to a Eurodollar Bid Rate Loan
made by a given Lender for the relevant Eurodollar Interest Period, the sum of
(i) the Eurodollar Base Rate and (ii) the Competitive Bid Margin offered by such
Lender and accepted by the Borrower.

     "Eurodollar Bid Rate Advance" means a Competitive Bid Advance which bears
interest at a Eurodollar Bid Rate.

     "Eurodollar Bid Rate Loan" means a Loan which bears interest at the
Eurodollar Bid Rate.

                                     -12-
<PAGE>

     "Eurodollar Interest Period" means, with respect to a Eurodollar Ratable
Advance or a Eurodollar Bid Rate Advance, a period of one, two, three or six
months commencing on a Business Day selected by the Borrower pursuant to this
Agreement.  Such Eurodollar Interest Period shall end on (but exclude) the day
which corresponds numerically to such date one, two, three or six months
thereafter; provided, however, that if there is no such numerically
            --------  -------
corresponding day in such next, second, third or sixth succeeding month, such
Eurodollar Interest Period shall end on the last Business Day of such next,
second, third or sixth succeeding month.  If a Eurodollar Interest Period would
otherwise end on a day which is not a Business Day, such Eurodollar Interest
Period shall end on the next succeeding Business Day; provided, however, that if
                                                      --------  -------
said next succeeding Business Day falls in a new month, such Eurodollar Interest
Period shall end on the immediately preceding Business Day.

     "Eurodollar Loan" means a Eurodollar Ratable Loan or Eurodollar Bid Rate
Loan, or both, as the case may be.

     "Eurodollar Ratable Advance" means an Advance which bears interest at a
Eurodollar Rate requested by the Borrower pursuant to Section 2.2.3.

     "Eurodollar Ratable Loan" means a Loan which bears interest at a Eurodollar
Rate requested by the Borrower pursuant to Section 2.2.3.

     "Eurodollar Rate" means, with respect to a Eurodollar Ratable Advance for
the relevant Eurodollar Interest Period, the sum of (i) the quotient of (a) the
Eurodollar Base Rate applicable to such Eurodollar Interest Period, divided by
(b) one minus the Reserve Requirement (expressed as a decimal) applicable to
such Eurodollar Interest Period, plus (ii) the Applicable Eurodollar Margin.
The Eurodollar Rate shall be rounded to the next higher multiple of 1/16 of 1%
if the rate is not such a multiple.

     "Existing Credit Agreements" means (i) that certain 364-Day, $200,000,000
Credit Agreement dated as of October 24, 1996 among the Borrower, First Chicago,
as agent, and the lenders party thereto, and (ii) that certain 5-Year,
$400,000,000 Credit Agreement dated as of October 24, 1996 among the Borrower,
First Chicago, as agent, and the lenders party thereto.

     "Federal Funds Effective Rate" means, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 10 a.m. (Chicago
time) on such day on such transactions received by the Agent from three Federal
funds brokers of recognized standing selected by the Agent in its sole
discretion.

     "Financial Statements" is defined in Section 5.4.

     "First Chicago" means The First National Bank of Chicago in its individual
capacity, and its successors.

                                     -13-
<PAGE>

     "Floating Rate Advance" means an Advance which bears interest at the
Alternate Base Rate.

     "Floating Rate Loan" means a Ratable Loan which bears interest at the
Alternate Base Rate.

     "Governmental Authority" means the federal government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government
including, without limitation, any board of insurance, insurance department or
insurance commissioner.

     "Indebtedness" of a Person means, without duplication, such Person's (i)
obligations for borrowed money, (ii) obligations representing the deferred
purchase price of Property or services (excluding accounts payable arising in
the ordinary course of such Person's business payable on terms customary in the
trade and obligations of Insurance Subsidiaries arising under insurance or
annuity products), (iii) obligations, whether or not assumed, secured by Liens
or payable out of the proceeds or production from property now or hereafter
owned or acquired by such Person, (iv) obligations which are evidenced by notes,
acceptances, or similar instruments, (v) Capitalized Lease Obligations, (vi) net
liabilities under interest rate swap, exchange or cap agreements, and (vii)
Contingent Obligations, but excluding any indebtedness of the Borrower arising
under or in connection with the Series A Preferred Securities Loan Agreement.

     "Insurance Subsidiary" means any Subsidiary of the Borrower which is
engaged in the life, health or accident insurance business.

     "Interest Period" means a Eurodollar Interest Period or an Absolute Rate
Interest Period.

     "Investment" of a Person means any loan, advance (other than commission,
travel and similar advances to officers and employees  made in the ordinary
course of business), extension of credit (other than accounts receivable arising
in the ordinary course of business on terms customary in the trade), deposit
account or contribution of capital by such Person to any other Person or any
investment in, or purchase or other acquisition of, the stock, partnership
interests, notes, debentures or other securities of any other Person made by
such Person.

     "Invitation for Competitive Bid Quotes" means an Invitation for Competitive
Bid Quotes substantially in the form of Exhibit "D" hereto, completed and
delivered by the Agent to the Lenders in accordance with Section 2.3.3.

     "Lenders" means the lending institutions listed on the signature pages of
this Agreement and their respective successors and assigns.

     "Lending Installation" means, with respect to a Lender or the Agent, any
office, branch, subsidiary or affiliate of such Lender or the Agent.

                                     -14-
<PAGE>

     "Letter of Credit" of a Person means a letter of credit or similar
instrument which is issued upon the application of such Person or upon which
such Person is an account party or for which such Person is in any way liable.

     "License" means any license, certificate of authority, permit or other
authorization which is required to be obtained from a Governmental Authority in
connection with the operation, ownership or transaction of insurance business.

     "Lien" means any lien (statutory or other), security interest, mortgage,
pledge, hypothecation, assignment, deposit arrangement, encumbrance or
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever (including, without limitation, the interest of a
vendor or lessor under any conditional sale, Capitalized Lease or other title
retention agreement but excluding rights in agent balances which are sold in an
Agent Balance Transaction).

     "Loan" means, with respect to a Lender, such Lender's portion of any
Advance and "Loans" means, with respect to the Lenders, the aggregate of all
Advances.

     "Loan Documents" means this Agreement, the Notes and the other documents,
certificates  and agreements contemplated hereby and executed by the Borrower in
favor of the Agent or any Lender.

     "Material Adverse Effect" means a material adverse effect on (i) the
business, Property, condition (financial or otherwise), results of operations,
or prospects of the Borrower and its Subsidiaries taken as a whole, (ii) the
ability of the Borrower to perform its obligations under the Loan Documents, or
(iii) the validity or enforceability of any of the Loan Documents or the rights
or remedies of the Agent or the Lenders thereunder.

     "Modified Required Lenders" means Lenders in the aggregate having at least
75% of the Aggregate Commitment or, if the Aggregate Commitment has been
terminated, Lenders in the aggregate holding at least 75% of the aggregate
unpaid principal amount of the outstanding Advances.

     "Multiemployer Plan" means a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which the Borrower or any
member of the Controlled Group is a party to which more than one employer is
obligated to make contributions.

     "NAIC" means the National Association of Insurance Commissioners or any
successor thereto, or in lieu thereof, any other association, agency or other
organization performing advisory, coordination or other like functions among
insurance departments, insurance commissions and similar Governmental
Authorities of the various states of the United States of America toward the
promotion of uniformity in the practices of such Governmental Authorities.

     "Notes" means, collectively, the Competitive Bid Notes and the Ratable
Notes; and "Note" means any one of the Notes.

                                     -15-
<PAGE>

     "Notice of Assignment" is defined in Section 12.3.2.

     "Obligations" means all unpaid principal of and accrued and unpaid interest
on the Notes, all accrued and unpaid fees, and all expenses, reimbursements,
indemnities and other obligations of the Borrower to the Lenders or to any
Lender, the Agent or any indemnified party hereunder arising under the Loan
Documents.

     "Participants" is defined in Section 12.2.1.

     "Payment and Guarantee Agreement" means the Payment and Guarantee Agreement
dated October 11, 1994, issued by the Borrower for the benefit of the holders of
the Series A Preferred Securities, without giving effect to any amendments
thereto.

     "Payment Date" means the last day of each March, June, September and
December.

     "PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.

     "Permitted Acquisition" means the Acquisition of any Person which has been
approved and recommended by the board of directors (or the functional equivalent
thereof) of the Person being acquired.

     "Person" means any natural person, corporation, firm, joint venture,
partnership, association, enterprise, trust or other entity or organization, or
any government or political subdivision or any agency, department or
instrumentality thereof.

     "Plan" means an employee pension benefit plan which is covered by Title IV
of ERISA or subject to the minimum funding standards under Section 412 of the
Code as to which the Borrower or any member of the Controlled Group may have any
liability.

     "Pricing Grid" means the pricing grid attached hereto as Schedule "4".

     "Property" of a Person means any and all property, whether real, personal,
tangible, intangible, or mixed, of such Person, or other assets owned, leased or
operated by such Person.

     "Purchasers" is defined in Section 12.3.1.

     "Ratable Advance" means a borrowing hereunder consisting of the aggregate
amount of the several Ratable Loans made by the Lenders to the Borrower at the
same time, of the same Type and for the same Interest Period.

     "Ratable Borrowing Notice" is defined in Section 2.2.3.

     "Ratable Loan" means a Loan made by a Lender pursuant to Section 2.2
hereof.

     "Ratable Note" means a promissory note in substantially the form of Exhibit
"A" hereto, duly executed and delivered to the Agent by the Borrower for the
account of each Lender and

                                     -16-
<PAGE>

payable to the order of a Lender in the amount of its Commitment, including any
amendment, modification, renewal or replacement of such promissory note.

     "Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor thereto or other
regulation or official interpretation of said Board of Governors relating to
reserve requirements applicable to member banks of the Federal Reserve System.

     "Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or carrying margin
stocks applicable to member banks of the Federal Reserve System.

     "Reportable Event" means a reportable event as defined in Section 4043 of
ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC has by regulation waived
the requirement of Section 4043(a) of ERISA that it be notified within 30 days
of the occurrence of such event; provided, however, that a failure to meet the
                                 --------  -------
minimum funding standard of Section 412 of the Code and of Section 302 of ERISA
shall be a Reportable Event regardless of the issuance of any such waiver of the
notice requirement in accordance with either Section 4043(a) of ERISA or Section
412(d) of the Code.

     "Required Lenders" means Lenders in the aggregate having at least 66 2/3%
of the Aggregate Commitment or, if the Aggregate Commitment has been terminated,
Lenders in the aggregate holding at least 66 2/3% of the aggregate unpaid
principal amount of the outstanding Advances.

     "Reserve Requirement" means, with respect to Eurodollar Interest Period,
the maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D on Eurocurrency
liabilities.

     "Risk-Based Capital Guidelines" means (i) the risk-based capital guidelines
in effect in the United States on the date of this Agreement, and (ii) the
corresponding capital regulations promulgated by regulatory authorities outside
the United States implementing the July 1988 report of the Basle Committee on
Banking Regulation and Supervisory Practices Entitled "International Convergence
of Capital Measurements and Capital Standards," and any amendments to such
regulations adopted prior to the date of this Agreement.

     "SAP" means, with respect to any Insurance Subsidiary, the statutory
accounting practices prescribed or permitted by the insurance commissioner (or
other similar authority) as of the Closing Date in the jurisdiction of
incorporation of such Insurance Subsidiary for the preparation of annual
statements and other financial reports by insurance companies of the same type
as such Insurance Subsidiary.

     "Section" means a numbered section of this Agreement, unless another
document is specifically referenced.

                                     -17-
<PAGE>

     "Series A Preferred Securities" means the 9.18% Preferred Securities,
Series A, issued by Torchmark Capital L.L.C. on October 11, 1994.

     "Series A Preferred Securities Loan Agreement" means the Loan Agreement
dated as of October 11, 1994 between the Borrower and Torchmark Capital L.L.C.
entered into in connection with the Series A Preferred Securities, as in effect
on October 11, 1994.

     "Significant Insurance Subsidiary" means any Significant Subsidiary which
is an Insurance Subsidiary.

     "Significant Subsidiary" of a Person means a "significant subsidiary" as
defined in Rule 1-02(v) of Regulation S-X of the Securities and Exchange
Commission (17 CFR Part 210).  Unless otherwise expressly provided, all
references herein to a "Significant Subsidiary" shall mean a Significant
Subsidiary of the Borrower.

     "Single Employer Plan" means a Plan maintained by the Borrower or any
member of the Controlled Group for employees of the Borrower or any member of
the Controlled Group.

     "Subsidiary" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(ii) any partnership, association, joint venture, limited liability company or
similar business organization more than 50% of the ownership interests having
ordinary voting power of which shall at the time be so owned or controlled.
Unless otherwise expressly provided, all references herein to a "Subsidiary"
shall mean a Subsidiary of the Borrower.

     "Substantial Portion" means, with respect to the Property of the Borrower
and its Subsidiaries, Property which (i) represents more than 10% of the
consolidated assets of the Borrower and its Subsidiaries as would be shown in
the consolidated financial statements of the Borrower and its Subsidiaries as at
the beginning of the twelve-month period ending with the month in which such
determination is made, or (ii) is responsible for more than 10% of the
consolidated net sales or of the consolidated net income of the Borrower and its
Subsidiaries as reflected in the financial statements referred to in clause (i)
above.

     "Termination Date" means (i) October 22, 2002, or (ii) such earlier date on
which the obligations of the Lenders to make Loans hereunder are terminated
pursuant to the terms of this Agreement.

     "Transferee" is defined in Section 12.4.

     "Type" means, with respect to any Advance, its nature as a Floating Rate
Advance, Eurodollar Advance or Absolute Rate Advance.

     "Unfunded Liabilities" means the amount (if any) by which the present value
of all vested nonforfeitable benefits under all Single Employer Plans exceeds
the fair market value of

                                     -18-
<PAGE>

all such Plan assets allocable to such benefits, all determined as of the then
most recent valuation date for such Plans.

     "Unmatured Default" means an event which but for the lapse of time or the
giving of notice, or both, would constitute a Default.

     "Wholly-Owned Subsidiary" of a Person means (i) any Subsidiary all of the
outstanding voting securities of which shall at the time be owned or controlled,
directly or indirectly, by such Person or one or more Wholly-Owned Subsidiaries
of such Person, or by such Person and one or more Wholly-Owned Subsidiaries of
such Person, or (ii) any partnership, association, joint venture, limited
liability company or similar business organization 100% of the ownership
interests having ordinary voting power of which shall at the time be so owned or
controlled.  Unless otherwise expressly provided, all references herein to a
"Wholly-Owned Subsidiary" shall mean a Wholly-Owned Subsidiary of the Borrower.

     The foregoing definitions shall be equally applicable to both the singular
and plural forms of the defined terms.

                                  ARTICLE II

                                 THE FACILITY
                                 ------------

     2.1. The Facility.
          ------------

          2.1.1.  Description of Facility.  The Lenders hereby establish in
                  -----------------------
favor of the Borrower a revolving credit facility pursuant to which, and upon
the terms and subject to the conditions herein set out:

                  (i)  each Lender severally agrees to make Ratable Loans to the
     Borrower in accordance with Section 2.2 in amounts not to exceed in the
     aggregate at any one time outstanding the amount of its Commitment less the
     amount of such Lender's pro rata (relative to its Commitment amount) share
     of the outstanding principal amount of all Competitive Bid Advances
     (regardless of which Lender or Lenders made such Competitive Bid Advances)
     exclusive of Competitive Bid Advances being repaid substantially
     contemporaneously with the making of any such Ratable Loans; and

                  (ii) each Lender may, in its sole discretion, make bids to
     make Competitive Bid Loans to the Borrower, and make such Loans, in
     accordance with Section 2.3.

          2.1.2.  Facility Amount.  In no event may the aggregate principal
                  ---------------
amount of all outstanding Advances (including both the Ratable Advances and the
Competitive Bid Advances) at any time exceed the Aggregate Commitment.

                                     -19-
<PAGE>

          2.1.3.  Availability of Facility.  Subject to the terms hereof, such
                  ------------------------
facility is available from the date hereof to the Termination Date.  Subject to
the terms of this Agreement, the Borrower may borrow, repay and reborrow
Advances at any time prior to the Termination Date.  Any outstanding Advances
and all other unpaid Obligations shall be paid in full by the Borrower on the
Termination Date.

     2.2. Ratable Advances.
          ----------------

          2.2.1.  Ratable Advances.  Each Ratable Advance hereunder shall
                  ----------------
consist of borrowings made from the several Lenders ratably in proportion to the
amounts of their respective Commitments.  The Borrower's obligation to pay the
principal of, and interest on, the Ratable Advances shall be evidenced by the
Ratable Notes.  Although the Ratable Notes shall be dated the Closing Date,
interest in respect thereof shall be payable only for the periods during which
the Loans evidenced thereby are outstanding and, although the stated amount of
each Ratable Note shall be equal to the applicable Lender's Commitment, each
Ratable Note shall be enforceable, with respect to the Borrower's obligation to
pay the principal amount thereof, only to the extent of the unpaid principal
amount of the Ratable Loans at the time evidenced thereby.

          2.2.2.  Ratable Advance Rate Options.  The Ratable Advances may be
                  ----------------------------
Floating Rate Advances or Eurodollar Ratable Advances, or a combination thereof,
selected by the Borrower in accordance with Section 2.2.3 or 2.2.4.  No Ratable
Advance may mature after, or have an Interest Period which extends beyond, the
Termination Date.

          2.2.3.  Method of Selecting Types and Interest Periods for Ratable
                  ----------------------------------------------------------
Advances.  The Borrower shall select the Type of each Ratable Advance and, in
--------
the case of each Eurodollar Ratable Advance, the Eurodollar Interest Period
applicable to such Ratable Advance from time to time; provided, however, that
for a period of at least three Business Days after the initial Advances the
Borrower shall maintain all Ratable Advances as Floating Rate Advances.  The
Borrower shall give the Agent irrevocable notice (a "Ratable Borrowing Notice")
not later than 10:00 a.m. (Chicago time) on the Borrowing Date of each Floating
Rate Advance and three Business Days before the Borrowing Date for each
Eurodollar Ratable Advance.  Notwithstanding the foregoing, a Ratable Borrowing
Notice for a Floating Rate Advance may be given not later than 15 minutes after
the time which the Borrower is required to reject one or more bids offered in
connection with an Absolute Rate Auction pursuant to Section 2.3.6 and a Ratable
Borrowing Notice for a Eurodollar Ratable Advance may be given not later than 15
minutes after the time the Borrower is required to reject one or more bids
offered in connection with a Eurodollar Auction pursuant to Section 2.3.6.  A
Ratable Borrowing Notice shall specify:

                  (i)  the Borrowing Date, which shall be a Business Day, of
     such Ratable Advance;

                  (ii) the aggregate amount of such Ratable Advance, which, when
     added to all outstanding Ratable Advances and Competitive Bid Advances and
     after giving effect to the repayment of any such outstanding Advances out
     of the proceeds of the requested Ratable Advance, shall not exceed the
     Aggregate Commitment;

                                     -20-
<PAGE>

                  (iii)  the Type of Advance selected; and

                  (iv)   in the case of each Eurodollar Ratable Advance, the
     Eurodollar Interest Period applicable thereto (which may not end after the
     Termination Date).

          2.2.4.  Conversion and Continuation of Outstanding Ratable Advances.
                  -----------------------------------------------------------
Floating Rate Advances shall continue as Floating Rate Advances unless and until
such Floating Rate  Advances are converted into Eurodollar Ratable Advances.
Each Eurodollar Ratable Advance shall continue as a Eurodollar Ratable Advance
until the end of the then applicable Eurodollar Interest Period therefor, at
which time such Eurodollar Ratable Advance shall be automatically converted into
a Floating Rate Advance unless the Borrower shall have given the Agent a
Conversion/Continuation Notice requesting that, at the end of such Eurodollar
Interest Period, such Eurodollar Ratable Advance continue as a Eurodollar
Ratable Advance for the same or another Eurodollar Interest Period.  Subject to
the terms of Section 2.6, the Borrower may elect from time to time to convert
all or any part of a Ratable Advance of any Type into any other Type or Types of
Ratable Advances; provided that any conversion of any Eurodollar Ratable Advance
shall be made on, and only on, the last day of the Eurodollar Interest Period
applicable thereto.  The Borrower shall give the Agent irrevocable notice (a
"Conversion/Continuation Notice") of each conversion of a Ratable Advance or
continuation of a Eurodollar Ratable Advance not later than 10:00 a.m. (Chicago
time) at least three Business Days, in the case of a conversion into or
continuation of a Eurodollar Ratable Advance, prior to the date of the requested
conversion or continuation, specifying:

                  (i)    the requested date, which shall be a Business Day, of
     such conversion or continuation;

                  (ii)   the aggregate amount and Type of Ratable Advance which
     is to be converted or continued; and

                  (iii)  the amount and Type(s) of Ratable Advance(s) into which
     such Ratable Advance is to be converted or continued and, in the case of a
     conversion into or continuation of an Eurodollar Ratable Advance, the
     duration of the Eurodollar Interest Period applicable thereto.

     2.3. Competitive Bid Advances.
          ------------------------

          2.3.1.  Competitive Bid Option.  In addition to Ratable Advances
                  ----------------------
pursuant to Section 2.2, but subject to the terms and conditions of this
Agreement (including, without limitation, the limitation set forth in Section
2.1.2 as to the maximum aggregate principal amount of all outstanding Advances
hereunder), the Borrower may, as set forth in this Section 2.3, request the
Lenders, prior to the Termination Date, to make offers to make Competitive Bid
Advances to the Borrower.  Each Lender may, but shall have no obligation to,
make such offers and the Borrower may, but shall have no obligation to, accept
any such offers in the manner set forth in this Section 2.3.  The Borrower's
obligation to pay the principal of, and interest on, the Competitive Bid
Advances shall be evidenced by the Competitive Bid Notes.  Although the

                                     -21-
<PAGE>

Competitive Bid Notes shall be dated the Closing Date, interest in respect
thereof shall be payable only for the periods during which the Loans evidenced
thereby are outstanding.

          2.3.2.  Competitive Bid Quote Request.  When the Borrower wishes to
                  -----------------------------
request offers to make Competitive Bid Loans under this Section 2.3, it shall
transmit to the Agent by telex or telecopy a Competitive Bid Quote Request
substantially in the form of Exhibit "C" hereto so as to be received no later
than (i) 10:00 a.m. (Chicago time) at least four Business Days prior to the
Borrowing Date proposed therein, in the case of a Eurodollar Auction or (ii)
9:00 a.m. (Chicago time) at least one Business Day prior to the Borrowing Date
proposed therein, in the case of an Absolute Rate Auction specifying:

                  (i)   the proposed Borrowing Date, which shall be a Business
     Day, for the proposed Competitive Bid Advance;

                  (ii)  the aggregate principal amount of such Competitive Bid
     Advance;

                  (iii) whether the Competitive Bid Quotes requested are to set
     forth a Eurodollar Bid Rate, an Absolute Rate, or both; and

                  (iv)  the Interest Period applicable thereto (which may not
     end after the Termination Date).

The Borrower may request offers to make Competitive Bid Loans for more than one
Interest Period in a single Competitive Bid Quote Request.  No Competitive Bid
Quote Request shall be given within 5 Business Days (or such other number of
days as the Borrower and the Agent may agree) of any other Competitive Bid Quote
Request.  A Competitive Bid Quote Request that does not conform substantially to
the format of Exhibit "C" hereto shall be rejected, and the Agent shall promptly
notify the Borrower of such rejection by telex or telecopy.

          2.3.3.  Invitation for Competitive Bid Quotes.  Promptly and in any
                  -------------------------------------
event before the close of business on the same Business Day of receipt of a
Competitive Bid Quote Request that is not rejected pursuant to Section 2.3.2,
the Agent shall send to each of the Lenders by telex or telecopy an Invitation
for Competitive Bid Quotes substantially in the form of Exhibit "D" hereto,
which shall constitute an invitation by the Borrower to each Lender to submit
Competitive Bid Quotes offering to make the Competitive Bid Loans to which such
Competitive Bid Quote Request relates in accordance with this Section 2.3.

          2.3.4.  Submission and Contents of Competitive Bid Quotes.
                  -------------------------------------------------

                  (i)   Each Lender may, in its sole discretion, submit a
     Competitive Bid Quote containing an offer or offers to make Competitive Bid
     Loans in response to any Invitation for Competitive Bid Quotes. Each
     Competitive Bid Quote must comply with the requirements of this Section
     2.3.4 and must be submitted to the Agent by telex or telecopy at its
     offices specified in or pursuant to Article XIII not later than (a) 9:00
     a.m. (Chicago time) at least three Business Days prior to the proposed
     Borrowing Date, in the case of a Eurodollar Auction or (b) 9:00 a.m.
     (Chicago time) on the proposed Borrowing

                                     -22-
<PAGE>

     Date, in the case of an Absolute Rate Auction (or, in either case upon
     reasonable prior notice to the Lenders, such other time and date as the
     Borrower and the Agent may agree); provided that Competitive Bid Quotes
                                        --------
     submitted by First Chicago may only be submitted if the Agent or First
     Chicago notifies the Borrower of the terms of the offer or offers contained
     therein not later than 15 minutes prior to the latest time at which the
     relevant Competitive Bid Quotes must be submitted by the other Lenders.
     Subject to Articles IV and VIII, any Competitive Bid Quote so made shall be
     irrevocable except with the written consent of the Agent given on the
     instructions of the Borrower.

                  (ii)  Each Competitive Bid Quote shall be in substantially the
     form of Exhibit "E" hereto and shall in any case specify:

                        (a)  the proposed Borrowing Date, which shall be the
          same as that set forth in the applicable Invitation for Competitive
          Bid Quotes;

                        (b)  the principal amount of the Competitive Bid Loan
          for which each such offer is being made, which principal amount (1)
          may be greater than, less than or equal to the Commitment of the
          quoting Lender, (2) must be at least $10,000,000 and an integral
          multiple of $1,000,000, and (3) may not exceed the principal amount of
          Competitive Bid Loans for which offers were requested;

                        (c)  in the case of a Eurodollar Auction, the
          Competitive Bid Margin offered for each such Competitive Bid Loan;

                        (d)  the minimum amount, if any, of the Competitive Bid
          Loan which may be accepted by the Borrower;

                        (e)  in the case of an Absolute Rate Auction, the
          Absolute Rate offered for each such Competitive Bid Loan; and

                        (f)  the identity of the quoting Lender.

                  (iii) The Agent shall reject any Competitive Bid Quote that:

                        (a)  is not substantially in the form of Exhibit "E"
          hereto or does not specify all of the information required by Section
          2.3.4(ii);

                        (b)  contains qualifying, conditional or similar
          language, other than any such language contained in Exhibit "E"
          hereto;

                        (c)  proposes terms other than or in addition to those
          set forth in the applicable Invitation for Competitive Bid Quotes; or

                        (d)  arrives after the time set forth in Section
          2.3.4(i).

                                     -23-
<PAGE>

If any Competitive Bid Quote shall be rejected pursuant to this Section
2.3.4(iii), then the Agent shall notify the relevant Lender of such rejection
promptly.

          2.3.5.  Notice to Borrower.  The Agent shall promptly notify the
                  ------------------
Borrower of the terms (i) of any Competitive Bid Quote submitted by a Lender
that is in accordance with Section 2.3.4 and (ii) of any Competitive Bid Quote
that amends, modifies or is otherwise inconsistent with a previous Competitive
Bid Quote submitted by such Lender with respect to the same Competitive Bid
Quote Request.  Any such subsequent Competitive Bid Quote shall be disregarded
by the Agent unless such subsequent Competitive Bid Quote specifically states
that it is submitted solely to correct a manifest error in such former
Competitive Bid Quote.  The Agent's notice to the Borrower shall specify the
aggregate principal amount of Competitive Bid Loans for which offers have been
received for each Interest Period specified in the related Competitive Bid Quote
Request and the respective principal amounts and Eurodollar Bid Rates or
Absolute Rates, as the case may be, so offered.

          2.3.6.  Acceptance and Notice by Borrower.  Not later than (i) 10:00
                  ---------------------------------
a.m. (Chicago time) at least three Business Days prior to the proposed Borrowing
Date, in the case of a Eurodollar Auction or (ii) 10:00 a.m. (Chicago time) on
the proposed Borrowing Date, in the case of an Absolute Rate Auction (or, in
either case upon reasonable prior notice to the Lenders, such other time and
date as the Borrower and the Agent may agree), the Borrower shall notify the
Agent of its acceptance or rejection of the offers so notified to it pursuant to
Section 2.3.5; provided, however, that the failure by the Borrower to give such
               --------  -------
notice to the Agent shall be deemed to be a rejection of all such offers.  In
the case of acceptance, such notice (a "Competitive Bid Borrowing Notice") shall
specify the aggregate principal amount of offers for each Interest Period that
are accepted.  The Borrower may accept any Competitive Bid Quote in whole or in
part (subject to the terms of Section 2.3.4(ii)(d)); provided that:
                                                     --------

                  (i)   the aggregate principal amount of each Competitive Bid
     Advance may not exceed the applicable amount set forth in the related
     Competitive Bid Quote Request,

                  (ii)  acceptance of offers may only be made on the basis of
     ascending Eurodollar Bid Rates or Absolute Rates, as the case may be, and

                  (iii) the Borrower may not accept any offer that is described
     in Section 2.3.4(iii) or that otherwise fails to comply with the
     requirements of this Agreement.

          2.3.7.  Allocation by Agent.  If offers are made by two or more
                  -------------------
Lenders with the same Eurodollar Bid Rates or Absolute Rates, as the case may
be, for a greater aggregate principal amount than the amount in respect of which
offers are accepted for the related Interest Period, the principal amount of
Competitive Bid Loans in respect of which such offers are accepted shall be
allocated by the Agent among such Lenders as nearly as possible (in such
multiples, not greater than $1,000,000, as the Agent may deem appropriate) in
proportion to the aggregate principal amount of such offers; provided, however,
                                                             --------  -------
that no Lender shall be allocated a portion of any Competitive Bid Advance which
is less than the minimum amount which such

                                     -24-
<PAGE>

Lender has indicated that it is willing to accept. Allocations by the Agent of
the amounts of Competitive Bid Loans shall be conclusive in the absence of
manifest error. The Agent shall promptly, but in any event on the same Business
Day, notify each Lender of its receipt of a Competitive Bid Borrowing Notice and
<PAGE>

rate determined as applicable to such Eurodollar Advance or Absolute Rate
Advance. No Interest Period may end after the Termination Date.

     2.9.  Rates Applicable After Default.  Notwithstanding anything to the
           ------------------------------
contrary contained in Section 2.2.3 or 2.2.4, no Advance may be made as,
converted into or continued as a Eurodollar Ratable Advance (except with the
consent of the Required Lenders) when any Default or Unmatured Default has
occurred and is continuing.  During the continuance of a Default, the Required
Lenders may, at their option, by notice to the Borrower (which notice may be
revoked at the option of the Required Lenders notwithstanding any provision of
Section 8.2 requiring unanimous consent of the Lenders to changes in interest
rates), declare that (i) each Eurodollar Advance and Absolute Rate Advance shall
bear interest for the remainder of the applicable Interest Period at the
Eurodollar Rate or Absolute Rate otherwise applicable to such Interest Period
plus 2% per annum and (ii) each Floating Rate Advance shall bear interest at a
rate per annum equal to the Alternate Base Rate plus 2% per annum.

     2.10. Method of Payment.  All payments of the Obligations hereunder shall
           -----------------
be made, without setoff, deduction, or counterclaim, in immediately available
funds to the Agent at the Agent's address specified pursuant to Article XIII, or
at any other Lending Installation of the Agent specified in writing by the Agent
to the Borrower, by 12:00 noon (local time) on the date when due and shall be
applied ratably by the Agent (i) first, ratably among the Lenders with respect
to any principal and interest due in connection with Ratable Advances, (ii)
second, after all amounts described in clause (i) have been satisfied, ratably
among those Lenders for whom any payment of principal and interest is due in
connection with any Competitive Bid Advances and (iii) third, after all amounts
described in clauses (i) and (ii) have been satisfied, ratably to any other
Obligations then due.  Each payment delivered to the Agent for the account of
any Lender shall be delivered by the Agent to such Lender in the same type of
funds that the Agent received at its address specified pursuant to Article XIII
or at any Lending Installation specified in a notice received by the Agent from
such Lender.  If such payment is received by the Agent by 1:00 p.m. (Chicago
time), such delivery to the Lenders shall be made on the same day and if
received thereafter shall be made on the next succeeding Business Day.  The
Agent is hereby authorized to charge the account of the Borrower maintained with
First Chicago for each payment of principal, interest and fees as it becomes due
hereunder.

     2.11. Notes; Telephonic Notices.  Each Lender is hereby authorized to
           -------------------------
record the principal amount of each of its Loans and each repayment on the
schedule attached to its Note; provided, however, that neither the failure to so
                               --------  -------
record nor any error in such recordation shall affect the Borrower's obligations
under such Note.  The Borrower hereby authorizes the Lenders and the Agent to
extend, convert or continue Advances, effect selections of Types of Advances,
submit Competitive Bid Quotes and to transfer funds based on telephonic notices
made by any one of the Chairman, Vice Chairman, Treasurer, the Chief Accounting
Officer, any Vice-President or any Assistant Treasurer of the Borrower or any
person who identifies himself or herself to be any such officer; provided that,
                                                                 --------
without written notice from the Borrower, no proceeds of any Advance shall be
transferred based upon telephonic notice to any bank account other than a bank
account maintained by the Borrower.  The Borrower agrees to deliver promptly to
the Agent a written confirmation, if such confirmation is requested by the Agent
or any

                                     -26-
<PAGE>

Lender, of each telephonic notice signed by an Authorized Officer.  If
the written confirmation differs in any material respect from the action taken
by the Agent and the Lenders, the records of the Agent and the Lenders shall
govern absent manifest error.

     2.12.  Interest Payment Dates; Interest and Fee Basis.  Interest accrued on
            ----------------------------------------------
each Floating Rate Advance shall be payable on each Payment Date, commencing
with the first such date to occur after the date hereof, on any date on which
such  Floating Rate Advance is prepaid, whether due to acceleration or
otherwise, and at maturity.  Interest accrued on that portion of the outstanding
principal amount of any Floating Rate Advance converted into a Eurodollar
Ratable Advance on a day other than a Payment Date shall be payable on the date
of conversion.  Interest accrued on each Eurodollar Advance or Absolute Rate
Advance shall be payable on the last day of its applicable Interest Period, on
any date on which the Eurodollar Advance or Absolute Rate Advance is prepaid,
whether by acceleration or otherwise, and at maturity.  Interest accrued on each
Eurodollar Advance or Absolute Rate Advance having an Interest Period longer
than three months shall also be payable on the last day of each three-month
interval during such Interest Period.  Interest and facility fees shall be
calculated for actual days elapsed on the basis of a 360-day year.  Interest
shall be payable for the day an Advance is made but not for the day of any
payment on the amount paid if payment is received prior to 12:00 noon (local
time) at the place of payment.  If any payment of principal of or interest on an
Advance shall become due on a day which is not a Business Day, such payment
shall be made on the next succeeding Business Day and, in the case of a
principal payment, such extension of time shall be included in computing
interest in connection with such payment.

     2.13.  Notification of Advances, Interest Rates, Prepayments and Commitment
            --------------------------------------------------------------------
Reductions.  Promptly after receipt thereof, the Agent will notify each Lender
----------
of the contents of each Aggregate Commitment reduction notice, Ratable Borrowing
Notice, Conversion/Continuation Notice, Invitation for Competitive Quotes and
repayment notice received by it hereunder.  The Agent will notify each Lender of
the interest rate applicable to each Eurodollar Advance promptly upon
determination of such interest rate and will give each Lender prompt notice of
each change in the Alternate Base Rate.

     2.14.  Lending Installations.  Each Lender may book its Loans at any
            ---------------------
Lending Installation selected by such Lender and may change its Lending
Installation from time to time.  All terms of this Agreement shall apply to any
such Lending Installation and the Notes shall be deemed held by each Lender for
the benefit of such Lending Installation.  Each Lender may, by written or telex
notice to the Agent and the Borrower, designate a Lending Installation through
which Loans will be made by it and for whose account Loan payments are to be
made.

     2.15.  Non-Receipt of Funds by the Agent.  Unless the Borrower or a Lender,
            ---------------------------------
as the case may be, notifies the Agent prior to the date on which it is
scheduled to make payment to the Agent of (i) in the case of a Lender, the
proceeds of a Loan or (ii) in the case of the Borrower, a payment of principal,
interest or fees to the Agent for the account of the Lenders, that it does not
intend to make such payment, the Agent may assume that such payment has been
made.  The Agent may, but shall not be obligated to, make the amount of such
payment available to the intended recipient in reliance upon such assumption.
If such Lender or the Borrower, as the case

                                     -27-
<PAGE>

may be, has not in fact made such payment to the Agent, the recipient of such
payment shall, on demand by the Agent, repay to the Agent the amount so made
available together with interest thereon in respect of each day during the
period commencing on the date such amount was so made available by the Agent
until the date the Agent recovers such amount at a rate per annum equal to (i)
in the case of payment by a Lender, the Federal Funds Effective Rate for such
day or (ii) in the case of payment by the Borrower, the interest rate applicable
to the relevant Loan.

     2.16.  Withholding Tax Exemption.  At least five Business Days prior to the
            -------------------------
first date on which interest or fees are payable hereunder for the account of
any Lender, each Lender that is not incorporated under the laws of the United
States of America, or a state thereof, agrees that it will deliver to each of
the Borrower and the Agent two duly completed copies of United States Internal
Revenue Service Form 1001 or 4224, certifying in either case that such Lender is
entitled to receive payments under this Agreement and the Notes without
deduction or withholding of any United States federal income taxes.  Each Lender
which so delivers a Form 1001 or 4224 further undertakes to deliver to each of
the Borrower and the Agent two additional copies of such form (or a successor
form) on or before the date that such form expires (currently, three successive
calendar years for Form 1001 and one calendar year for Form 4224) or becomes
obsolete or after the occurrence of any event requiring a change in the most
recent forms so delivered by it, and such amendments thereto or extensions or
renewals thereof as may be reasonably requested by the Borrower or the Agent, in
each case certifying that such Lender is entitled to receive payments under this
Agreement and the Notes without deduction or withholding of any United States
federal income taxes, unless an event (including without limitation any change
in treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form with respect to it and such Lender advises the Borrower and the Agent that
it is not capable of receiving payments without any deduction or withholding of
United States federal income tax.

                                  ARTICLE III

                            CHANGE IN CIRCUMSTANCES
                            -----------------------

     3.1.  Yield Protection.  If, after the date hereof, in connection with a
           ----------------
Eurodollar Loan the adoption of or any change in any law or any governmental or
quasi-governmental rule, regulation, policy, guideline or directive (whether or
not having the force of law), or any change in the interpretation or
administration thereof, or the compliance of any Lender therewith,

               (i) subjects any Lender or any applicable Lending Installation to
     any tax, duty, charge or withholding on or from payments due from the
     Borrower (excluding federal taxation of the overall net income of any
     Lender or applicable Lending Installation imposed by the jurisdiction in
     which such Lender or Lending Installation is incorporated or has its
     principal place of business), or changes the basis of taxation of payments
     to any Lender or Lending Installation in respect of its Loans or other
     amounts due it hereunder, or

                                     -28-
<PAGE>

               (ii)   imposes or increases or deems applicable any reserve,
     assessment, insurance charge, special deposit or similar requirement
     against assets of, deposits with or for the account of, or credit extended
     by, any Lender or any applicable Lending Installation (other than reserves
     and assessments taken into account in determining the interest rate
     applicable to Eurodollar Advances), or

               (iii)  imposes any other condition the result of which is to
     increase the cost to any Lender or any applicable Lending Installation of
     making, funding or maintaining Loans or reduces any amount receivable by
     any Lender or any applicable Lending Installation in connection with Loans,
     or requires any Lender or any applicable Lending Installation to make any
     payment calculated by reference to the amount of Loans held or interest
     received by it, by an amount deemed material by such Lender,

then, within 15 days of demand by such Lender, the Borrower shall pay such
Lender that portion of such increased expense incurred or reduction in an amount
received which such Lender determines is attributable to making, funding and
maintaining its Loans and its Commitment.

     3.2.  Changes in Capital Adequacy Regulations.  If a Lender determines the
           ---------------------------------------
amount of capital required or expected to be maintained by such Lender, any
Lending Installation of such Lender or any corporation controlling such Lender
is increased as a result of a Change, then, within 15 days of demand by such
Lender, the Borrower shall pay such Lender the amount necessary to compensate
for any shortfall in the rate of return on the portion of such increased capital
which such Lender determines is attributable to this Agreement, its Loans or its
obligation to make Loans hereunder (after taking into account such Lender's
policies as to capital adequacy).

     3.3.  Availability of Types of Advances.  If any Lender determines that
           ---------------------------------
maintenance of any of its Eurodollar Loans at a suitable Lending Installation
would violate any applicable law, rule, regulation or directive, whether or not
having the force of law, the Agent shall suspend the availability of the
affected Type of Advance and require any Eurodollar Advances to be repaid or
converted into a Floating Rate Advance within five days after Borrower's receipt
of notice by such Lender; or if the Required Lenders determine that (i) deposits
of a type or maturity appropriate to match fund Eurodollar Advances are not
available, or (ii) an interest rate applicable to an Eurodollar Advance does not
accurately reflect the cost of making a Eurodollar Advance of such Type, then
the Agent shall suspend the availability of Eurodollar Advances with respect to
any Eurodollar Advances made after the date of any such determination.

     3.4.  Funding Indemnification.  If any payment of a Eurodollar Advance
           -----------------------
occurs on a date which is not the last day of the applicable Eurodollar Interest
Period, whether because of acceleration, prepayment or otherwise, or a
Eurodollar  Advance is not made on the date specified by the Borrower for any
reason other than default by the Lenders, the Borrower will indemnify each
Lender for any loss or cost incurred by it resulting therefrom, including,
without limitation, any loss or cost in liquidating or employing deposits
acquired to fund or maintain the Eurodollar Advance.

                                     -29-
<PAGE>

     3.5.  Lender Statements; Survival of Indemnity. To the extent reasonably
           ----------------------------------------
possible, each Lender shall designate an alternate Lending Installation with
respect to its Eurodollar Loans to reduce any liability of the Borrower to such
Lender under Sections 3.1 and 3.2 or to avoid the unavailability of a Type of
Advance under Section 3.3, so long as such designation is not disadvantageous to
such Lender.  Each Lender shall deliver a written statement of such Lender to
the Borrower (with a copy to the Agent) as to the amount due, if any, under
Sections 3.1, 3.2 or 3.4.  Such written statement shall set forth in reasonable
detail the calculations upon which such Lender determined such amount and shall
be final, conclusive and binding on the Borrower in the absence of manifest
error.  Determination of amounts payable under such Sections in connection with
a Eurodollar Loan shall be calculated as though each Lender funded its
Eurodollar Loan through the purchase of a deposit of the type and maturity
corresponding to the deposit used as a reference in determining the Eurodollar
Rate applicable to such Loan, whether in fact that is the case or not.  Unless
otherwise provided herein, the amount specified in the written statement of any
Lender shall be payable on demand after receipt by the Borrower of the written
statement.  The obligations of the Borrower under Sections 3.1, 3.2 and 3.4
shall survive payment of the Obligations and termination of this Agreement.

     3.6.  Right to Substitute Lender.  Any Lender claiming any additional
           --------------------------
amounts payable pursuant to Section 3.1 or 3.2 materially in excess of those
being charged by other Lenders or unable to make a Eurodollar Advance available
in accordance with Section 3.3, shall, so long as no Default or Unmatured
Default has occurred and is continuing, upon the written request of the Borrower
delivered to such Lender and the Agent, assign, pursuant to and in accordance
with the provisions of Section 12.3, all of its rights and obligations under
this Agreement and under the Loan Documents to another Lender or to a commercial
bank, other financial institution, commercial finance company or other business
lender selected by the Borrower and reasonably acceptable to the Agent in
consideration for (a) the payment by such assignee to such assigning Lender of
the principal of, and interest accrued and unpaid to the date of such assignment
on, the Notes held by such assigning Lender, (b) the payment by the Borrower to
such assigning Lender of any and all other amounts owing to such assigning
Lender under any provision of this Agreement accrued and unpaid to the date of
such assignment, and (c) the Borrower's release of such assigning Lender from
any further obligation or liability under this Agreement and the Loan Documents.
Notwithstanding anything to the contrary contained in this Section 3.6, in no
event shall the replacement of any Lender result in a decrease or reallocation
of the aggregate Commitments without the prior written consent of the remaining
Lenders.

ARTICLE IV

                                     -30-
<PAGE>

                              CONDITIONS PRECEDENT
                              --------------------

     4.1.  Initial Advance.  The Lenders shall not be required to make the
           ---------------
initial Advance hereunder unless on the Closing Date the Borrower has furnished
to the Agent with sufficient copies for the Lenders:

               (i)    Copies of the restated certificate of incorporation of the
     Borrower certified by the Secretary or an Assistant Secretary of the
     Borrower, together with good standing certificates issued as of a recent
     date by the Secretaries of State of Delaware and Alabama.

               (ii)   Copies, certified by the Secretary or an Assistant
     Secretary of the Borrower, of its by-laws and Board of Directors'
     resolutions authorizing the execution of the Loan Documents.

               (iii)  An incumbency certificate, executed by the Secretary or an
     Assistant Secretary of the Borrower, which shall identify by name and title
     and bear the signature of the officers of the Borrower authorized to sign
     the Loan Documents and to make borrowings hereunder, upon which certificate
     the Agent and the Lenders shall be entitled to rely until informed of any
     change in writing by the Borrower.

               (iv)   A certificate, signed by the Chief Financial Officer or
     the Treasurer of the Borrower, stating that on the date hereof (a) no
     Default or Unmatured Default has occurred and is continuing and (b) each of
     the representations and warranties set forth in Article V of this Agreement
     is true and correct as of such date.

               (v)    A written opinion of Larry M. Hutchison, Vice President
     and General Counsel of the Borrower, addressed to the Lenders in
     substantially the form of Exhibit "F" hereto.

               (vi)   Notes payable to the order of each of the Lenders.

               (vii)  Written money transfer instructions, in substantially the
     form of Exhibit "I" hereto, addressed to the Agent and signed by an
     Authorized Officer, together with such other related money transfer
     authorizations as the Agent may have reasonably requested.

               (viii) The Existing Credit Agreements shall have been terminated
     and all amounts owing thereunder shall have been paid (or shall
     contemporaneously be paid) in full, and the Borrower shall have paid to the
     Agent and the Lenders all accrued fees and expenses payable on or prior to
     the Closing Date.

               (ix) Such other documents as any Lender or its counsel may have
     reasonably requested.

                                     -31-
<PAGE>

     4.2.  Each Advance.  The Lenders shall not be required to make any Advance,
           ------------
unless on the applicable Borrowing Date:

               (i)  There exists no Default or Unmatured Default.

               (ii) The representations and warranties contained in Article V
     (other than Section 5.4 and 5.5) are true and correct as of such Borrowing
     Date except for changes in the Schedules hereto reflecting transactions
     permitted by this Agreement.

     Each Ratable Borrowing Notice and Competitive Bid Quote Request with
respect to each such Advance shall constitute a representation and warranty by
the Borrower that the conditions contained in Sections 4.2(i) and (ii) have been
satisfied.  Any Lender may require a duly completed compliance certificate in
substantially the form of Exhibit "G" hereto as a condition to making an
Advance.

                                   ARTICLE V

                         REPRESENTATIONS AND WARRANTIES
                         ------------------------------

     The Borrower represents and warrants to the Lenders that:

     5.1.  Corporate Existence and Standing.  Each of the Borrower and its
           --------------------------------
Significant Subsidiaries is a corporation duly incorporated, validly existing
and in good standing under the laws of its jurisdiction of incorporation and has
all requisite authority to conduct its business in each jurisdiction in which
its business is conducted.

     5.2.  Authorization and Validity.  The Borrower has the corporate power and
           --------------------------
authority and legal right to execute and deliver the Loan Documents and to
perform its obligations thereunder.  The execution and delivery by the Borrower
of the Loan Documents and the performance of its obligations thereunder have
been duly authorized by proper corporate proceedings, and the Loan Documents
constitute legal, valid and binding obligations of the Borrower enforceable
against the Borrower in accordance with their terms, except as enforceability
may be limited by bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally.

     5.3.  No Conflict; Government Consent.  Neither the execution and delivery
           -------------------------------
by the Borrower of the Loan Documents, nor the consummation of the transactions
therein contemplated, nor compliance with the provisions thereof will violate
any law, rule, regulation, order, writ, judgment, injunction, decree or award
binding on the Borrower or any of its Subsidiaries or the Borrower's or any of
its Subsidiaries' articles of incorporation or by-laws or the provisions of any
indenture, instrument or agreement to which the Borrower or any of its
Subsidiaries is a party or is subject, or by which it, or its Property, is
bound, or conflict with or constitute a default thereunder, or result in the
creation or imposition of any Lien in, of or on the Property of the Borrower or
any of its Subsidiaries pursuant to the terms of any such indenture, instrument
or agreement, other than such violations, conflicts or defaults which,
individually or

                                     -32-
<PAGE>

in the aggregate, could not reasonably be expected to have a Material Adverse
Effect. No order, consent, approval, license, authorization, or validation of,
or filing, recording or registration with, or exemption by, any governmental or
public body or authority, or any subdivision thereof, is required to authorize,
or is required in connection with the execution, delivery and performance of, or
the legality, validity, binding effect or enforceability of, any of the Loan
Documents.

     5.4.  Financial Statements.  The December 31, 1996 audited consolidated
           --------------------
financial statements of the Borrower and its Subsidiaries and the June 30, 1997
unaudited  consolidated financial statements of the Borrower and its
Subsidiaries heretofore delivered to the Lenders (the "Financial Statements")
were prepared in accordance with generally accepted accounting principles in
effect on the date such statements were prepared and fairly present the
consolidated financial condition and operations of the Borrower and its
Subsidiaries at such dates and the consolidated results of their operations for
the periods then ended.

     5.5.  Material Adverse Change.  Since December 31, 1996, there has been no
           -----------------------
change in the business, Property, prospects, condition (financial or otherwise)
or results of operations of the Borrower and its Subsidiaries which could
reasonably be expected to have a Material Adverse Effect.

     5.6.  Taxes.  The Borrower and its Subsidiaries have filed all United
           -----
States federal tax returns and all other tax returns which are required to be
filed and have paid all taxes due pursuant to said returns or pursuant to any
assessment received by the Borrower or any of its Subsidiaries, except such
taxes, if any, as are being contested in good faith and as to which, in the good
faith judgment of the Borrower, adequate reserves have been provided.  The
United States income tax returns of the Borrower and its Subsidiaries have been
audited by the Internal Revenue Service through the fiscal year ended December
31, 1993.  No tax liens have been filed and no claims against the Borrower or
its Subsidiaries are being asserted with respect to any such taxes except claims
being contested in good faith and as to which, in the good faith judgment of the
Borrower, adequate reserves have been provided.  The charges, accruals and
reserves on the books of the Borrower and its Subsidiaries in respect of any
taxes or other governmental charges are adequate in the good faith judgment of
the Borrower.

     5.7.  Litigation and Contingent Obligations.  There is no litigation,
           -------------------------------------
arbitration, governmental investigation, proceeding or inquiry pending or, to
the knowledge of any of their officers, threatened against or affecting the
Borrower or any of its Subsidiaries which could reasonably be expected to have a
Material Adverse Effect (after giving effect to reserves which have been
provided with respect thereto on the books of the Borrower and its
Subsidiaries).  As of the date hereof, the Borrower has no material Contingent
Obligations not provided for or disclosed in the Financial Statements.  Solely
for purposes of any reaffirmation of the foregoing representations pursuant to
Section 4.2(ii) in connection with any Loans the proceeds of which are used to
repay maturing commercial paper, such representations shall not extend to any
proceeding in which a punitive damages judgment has been entered against the
Borrower or any Subsidiary, such judgment has been stayed on appeal or the time
for appeal from such judgment

                                     -33-
<PAGE>

has not expired and such judgment could not reasonably be expected to have a
material adverse effect on the ability of the Borrower to perform its
obligations under the Loan Documents.

     5.8.   Subsidiaries.  Schedule "2" hereto contains an accurate list of all
            ------------
of the Significant Subsidiaries of the Borrower in existence on the date of this
Agreement, setting forth their respective jurisdictions of incorporation and the
percentage of their respective capital stock owned by the Borrower or other
Subsidiaries.  All of the issued and outstanding shares of capital stock of such
Subsidiaries have been duly authorized and issued and are fully paid and non-
assessable.

     5.9.   ERISA.  The Unfunded Liabilities of all Single Employer Plans do not
            -----
in the aggregate exceed $10,000,000.  Each Plan complies in all material
respects with all applicable requirements of law and regulations.  No Reportable
Event has occurred with respect to any Plan and neither the Borrower nor any
other members of the Controlled Group has withdrawn from any Plan or initiated
steps to do so, which occurrence or withdrawal could result in a Material
Adverse Effect.  No steps have been taken to terminate any Plan which has
Unfunded Liabilities.

     5.10.  Accuracy of Information.  No information, exhibit or report
            -----------------------
furnished by the Borrower or any of its Subsidiaries to the Agent or to any
Lender in connection with the negotiation of, or compliance with, the Loan
Documents contained any material misstatement of fact, omitted to state a
material fact or omitted to state any fact necessary to make the statements
contained therein not misleading in any material respect.

     5.11.  Regulation U.  Margin stock (as defined in Regulation U) constitutes
            ------------
less than 25% of those assets of the Borrower and its Subsidiaries which are
subject to any limitation on sale, pledge or other restriction hereunder.

     5.12.  Material Agreements.  Neither the Borrower nor any Subsidiary is a
            -------------------
party to any agreement or instrument or subject to any charter or other
corporate restriction which could reasonably be expected to have a Material
Adverse Effect.  Neither the Borrower nor any Subsidiary is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any agreement to which it is a party, which default
could reasonably be expected to have a Material Adverse Effect.  Neither the
Borrower nor any Significant Subsidiary is in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any agreement or instrument evidencing or governing Indebtedness.

     5.13.  Compliance With Laws.  The Borrower and its Subsidiaries have
            --------------------
complied with all applicable statutes, rules, regulations, orders and
restrictions of any domestic or foreign government or any instrumentality or
agency thereof, having jurisdiction over the conduct of their respective
businesses or the ownership of their respective Property, except where the
failure to so comply could not reasonably be expected to have a Material Adverse
Effect.  Neither the Borrower nor any Subsidiary has received any notice to the
effect that its operations are not in material compliance with any of the
requirements of applicable federal, state and local environmental, health and
safety statutes and regulations or the subject of any federal or state

                                     -34-
<PAGE>

investigation evaluating whether any remedial action is needed to respond to a
release of any toxic or hazardous waste or substance into the environment, which
non-compliance or remedial action could reasonably be expected to have a
Material Adverse Effect.

     5.14.  Ownership of Properties.  Except for Liens permitted by Section
            -----------------------
6.14, on the date of this Agreement the Borrower and its Subsidiaries  have good
title to all of the Property and assets reflected in the Financial Statements as
owned by it, free of all Liens other than those permitted by this Agreement,
except for assets sold, transferred or otherwise disposed of in the ordinary
course of business since the date of such Financial Statements.

     5.15.  Investment Company Act.  Neither the Borrower nor any Subsidiary
            ----------------------
thereof is an "investment company" or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as amended.

     5.16.  Public Utility Holding Company Act.  Neither the Borrower nor any
            ----------------------------------
Subsidiary is a "holding company" or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935, as amended.

     5.17.  Insurance Licenses.  Schedule "3" attached hereto (as said Schedule
            ------------------
"3" shall be revised or supplemented from time to time to reflect withdrawals or
changes in jurisdictions permitted by Section 6.4 or additional jurisdictions
set forth in the Annual Statements furnished pursuant to Section 6.1(vii)) lists
all of the jurisdictions in which any Significant Insurance Subsidiary holds
active Licenses and is authorized to transact insurance business.  No such
License is the subject of a proceeding for suspension or revocation, there is no
sustainable basis for such suspension or revocation, and to the Borrower's best
knowledge, no such suspension or revocation has been threatened by any
Governmental Authority.  Schedule "3" also indicates the type or types of
insurance in which each such Insurance Subsidiary is permitted to engage with
respect to each License therein listed.  None of the Insurance Subsidiaries
transacts any insurance business, directly or indirectly, in any state other
than those enumerated in Schedule "3".

                                   ARTICLE VI

                                   COVENANTS
                                   ---------

     During the term of this Agreement, unless the Required Lenders shall
otherwise consent in writing:

     6.1.   Financial Reporting. The Borrower will maintain, for itself and each
            -------------------
Subsidiary, a system of accounting established and administered in accordance
with generally accepted accounting principles, and furnish to the Lenders:

               (i) Within 90 days after the close of each of its fiscal years,
     an unqualified audit report certified by independent certified public
     accountants, acceptable

                                     -35-
<PAGE>

     to the Lenders, prepared in accordance with Agreement Accounting Principles
     on a consolidated and consolidating basis (consolidating statements need
     not be certified by such accountants) for itself and its Subsidiaries,
     including balance sheets as of the end of such period, related profit and
     loss and reconciliation of surplus statements, and a statement of cash
     flows, accompanied by a certificate of said accountants that, in the course
     of their examination necessary for their certification of the foregoing,
     they have obtained no knowledge of any Default or Unmatured Default, or if,
     in the opinion of such accountants, any Default or Unmatured Default shall
     exist, stating the nature and status thereof.

               (ii)   Within 45 days after the close of the first three
     quarterly periods of each of its fiscal years, for itself and its
     Subsidiaries, consolidated and consolidating unaudited balance sheets as at
     the close of each such period and consolidated and consolidating profit and
     loss statements and a statement of cash flows for the period from the
     beginning of such fiscal year to the end of such quarter, all certified by
     its Chief Financial Officer, Chief Accounting Officer or Treasurer.

               (iii)  Together with the financial statements required hereunder,
     a compliance certificate in substantially the form of Exhibit "G" hereto
     signed by the Chief Financial Officer, Chief Accounting Officer or
     Treasurer of the Borrower showing the calculations necessary to determine
     compliance with this Agreement and stating that no Default or Unmatured
     Default exists, or if any Default or Unmatured Default exists, stating the
     nature and status thereof.

               (iv)   Within 330 days after the close of each fiscal year, a
     statement of the Unfunded Liabilities of each Single Employer Plan,
     certified as correct by an actuary enrolled under ERISA.

               (v)    As soon as possible and in any event within 10 days after
     the Borrower knows that any Reportable Event has occurred with respect to
     any Plan, a statement, signed by the Chief Financial Officer, Chief
     Accounting Officer, Treasurer or Vice President of the Borrower, describing
     said Reportable Event and the action which the Borrower proposes to take
     with respect thereto.

               (vi)   As soon as possible and in any event within 10 days after
     receipt by the Borrower, a copy of (a) any notice or claim to the effect
     that the Borrower or any of its Subsidiaries is or may be liable to any
     Person as a result of the release by the Borrower, any of its Subsidiaries,
     or any other Person of any toxic or hazardous waste or substance into the
     environment, and (b) any notice alleging any violation of any federal,
     state or local environmental, health or safety law or regulation by the
     Borrower or any of its Subsidiaries, which, in the case of either (a) or
     (b) above, could reasonably be expected to have a Material Adverse Effect.

               (vii)  Within 75 days after the close of each fiscal year of each
     Insurance Subsidiary, copies of the Annual Statement of each of the
     Insurance Subsidiaries, as

                                     -36-
<PAGE>

     certified by the president, secretary and treasurer of and the actuary for
     each such Insurance Subsidiary and prepared on the NAIC annual statement
     blanks (or such other form as shall be required by the jurisdiction of
     incorporation of each such Insurance Subsidiary), all such statements to be
     prepared in accordance with SAP consistently applied throughout the periods
     reflected therein and to be certified by independent certified public
     accountants reasonably acceptable to the Agent if so required by any
     Governmental Authority.

               (viii) Promptly upon the filing thereof, copies of all Forms 10-
     Q, 10-K and 8-K which the Borrower or any Subsidiary files with the
     Securities and Exchange Commission and, together with copies of each Form
     10-K so furnished, a list of such revisions to Schedule "2", if any, as
     shall be necessary to cause Schedule "2" to accurately set forth all then
     existing Significant Subsidiaries of the Borrower, their respective
     jurisdictions of incorporation and the percentage of their respective
     capital stock owned by the Borrower or other Subsidiaries.

               (ix)   Promptly upon the Borrower's receipt thereof, copies of
     reports or valuations prepared by any Governmental Authority or actuary in
     respect of any action or event which has resulted in the reduction by 5% or
     more in the capital and surplus of any Insurance Subsidiary.

               (x)    Promptly and in any event within ten days after learning
     thereof, notification of any decrease after the Closing Date in the rating
     given by A.M. Best & Co. in respect of any Insurance Subsidiary.

               (xi)   Such other information (including, without limitation,
     non-financial information) as the Agent or any Lender may from time to time
     reasonably request.

     6.2.  Use of Proceeds.  The Borrower will, and will cause each Subsidiary
           ---------------
to, use the proceeds of the Advances (i) for general corporate purposes,
including, without limitation, the repayment of Indebtedness and (ii) to finance
Permitted Acquisitions.  The Borrower will not, nor will it permit any
Subsidiary to, use any of the proceeds of the Advances to purchase or carry any
"margin stock" (as defined in Regulation U).

     6.3.  Certain Notices.  The Borrower will give prompt notice in writing to
           ---------------
the Agent and the Lenders of (i) the occurrence of any Default or Unmatured
Default and of any other development, financial or otherwise, relating
specifically to the Borrower which could reasonably be expected to have a
Material Adverse Effect, (ii) the receipt of any notice from any Governmental
Authority of the expiration without renewal, revocation or suspension of, or the
institution of any proceedings to revoke or suspend, any License now or
hereafter held by any Insurance Subsidiary which is required to conduct
insurance business in compliance with all applicable laws and regulations, other
than such expiration, revocation or suspension which, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect,
(iii) the receipt of any notice from any Governmental Authority of the
institution of any

                                     -37-
<PAGE>

disciplinary proceedings against or in respect of any Insurance Subsidiary, or
the issuance of any order, the taking of any action or any request for an
extraordinary audit for cause by any Governmental Authority which, if adversely
determined, could reasonably be expected to have a Material Adverse Effect or
(iv) any judicial or administrative order limiting or controlling the insurance
business of any Insurance Subsidiary (and not the insurance industry generally)
which has been issued or adopted and which could reasonably be expected to have
a Material Adverse Effect. Any such notice shall state that it is given pursuant
to this Section 6.3.

     6.4.  Conduct of Business.  The Borrower will, and will cause each
           -------------------
Significant Subsidiary to, do all things necessary to remain duly incorporated,
validly existing and in good standing as a domestic corporation in its
jurisdiction of incorporation and maintain all requisite authority to conduct
its business in each jurisdiction in which its business is conducted.  The
Borrower will cause each Significant Insurance Subsidiary to (i) carry on or
otherwise be associated with the business of a licensed insurance carrier and
(ii) do all things necessary to renew, extend and continue in effect all
Licenses which may at any time and from time to time be necessary for such
Significant Insurance Subsidiary to operate its insurance business in compliance
with all applicable laws and regulations; provided, however, that any such
                                          --------  -------
Significant Insurance Subsidiary may withdraw from one or more states as an
admitted insurer or change the state of its domicile, if such withdrawal or
change is in the best interests of the Borrower and such Significant Insurance
Subsidiary and could not reasonably be expected to have a Material Adverse
Effect.

     6.5.  Taxes.  The Borrower will, and will cause each Subsidiary to, pay
           -----
when due all taxes, assessments and governmental charges and levies upon it or
its income, profits or Property, except those which are being contested in good
faith by appropriate proceedings and with respect to which adequate reserves
have been set aside.

     6.6.  Insurance.  The Borrower will, and will cause each Subsidiary to,
           ---------
maintain with financially sound and reputable insurance companies insurance on
all or substantially all of its Property, or shall maintain self-insurance, in
such amounts and covering such risks as is consistent with sound business
practice for Persons in substantially the same industry as the Borrower or such
Subsidiary, and the Borrower will furnish to any Lender upon request full
information as to the insurance carried.

     6.7.  Compliance with Laws.  The Borrower will, and will cause each
           --------------------
Subsidiary to, comply with all laws, rules, regulations, orders, writs,
judgments, injunctions, decrees or awards to which it may be subject, except
where the failure to so comply could not reasonably be expected to have a
Material Adverse Effect.

     6.8.  Maintenance of Properties.  The Borrower will, and will cause each
           -------------------------
Subsidiary to, do all things necessary to maintain, preserve, protect and keep
its Property in good repair, working order and condition, and make all necessary
and proper repairs, renewals and replacements so that its business carried on in
connection therewith may be properly conducted at all times, except where the
failure to so maintain, preserve, protect and repair could not reasonably be
expected to have a Material Adverse Effect.

                                     -38-
<PAGE>

     6.9.  Inspection.  The Borrower will, and will cause each Subsidiary to,
           ----------
permit the Agent and the Lenders, by their respective representatives and
agents, to inspect any of the Property, corporate books and financial records of
the Borrower and each Subsidiary, to examine and make copies of the books of
accounts and other financial records of the Borrower and each Subsidiary, and to
discuss the affairs, finances and accounts of the Borrower and each Subsidiary
with, and to be advised as to the same by, their respective officers upon
reasonable notice and at such reasonable times and intervals as the Lenders may
designate.

     6.10.  Merger.  The Borrower will not, nor will it permit any Subsidiary
            ------
to, merge or consolidate with or into any other Person, except that (i) a
Subsidiary may merge with the Borrower or a Wholly-Owned Subsidiary and (ii) the
Borrower and any Subsidiary may merge or consolidate with or into any other
Person provided that the Borrower or such Subsidiary shall be the continuing or
surviving corporation and, after giving effect to such merger or consolidation,
no Default or Unmatured Default shall exist.

     6.11.  Sale of Assets.  The Borrower will not, nor will it permit any
            --------------
Subsidiary to, lease, sell or otherwise dispose of all or a Substantial Portion
of its Property (exclusive of Investments sold in the ordinary course of
business) to any other Person(s) in any calendar year.

     6.12.  Sale and Leaseback.  The Borrower will not, nor will it permit any
            ------------------
Subsidiary to, sell or transfer a Substantial Portion of its Property in order
to concurrently or subsequently lease as lessee such or similar Property.

     6.13.  Investments and Acquisitions.  The Borrower will not make, and will
            ----------------------------
not permit any Subsidiary to make, any Acquisitions except Permitted
Acquisitions.

     6.14.  Liens.  The Borrower will not, nor will it permit any Subsidiary to,
            -----
create, incur, or suffer to exist any Lien in, of or on its Property other than
Liens securing in the aggregate not more than $100,000,000 of Indebtedness.

     6.15.  Consolidated Net Worth.  The Borrower will maintain at all times
            ----------------------
Consolidated Net Worth equal to not less than the sum of (i) $1,575,000,000 plus
(ii) 25% of the Borrower's Consolidated Net Income, if positive, for each fiscal
quarter ending after June 30, 1997.

     6.16.  Ratio of Consolidated Indebtedness to Consolidated Capitalization.
            -----------------------------------------------------------------
The Borrower will maintain at all times a ratio of Consolidated Indebtedness to
Consolidated Capitalization of not greater than .5 to 1.0.

     6.17.  Ratio of Consolidated Adjusted Net Income to Consolidated Interest
            ------------------------------------------------------------------
Expense.  The Borrower will maintain, as at the last day of each fiscal quarter,
-------
a ratio of (i) Consolidated Adjusted Net Income to (ii) Consolidated Interest
Expense, in each case calculated for the four fiscal quarters then ending, of
not less than 2.5 to 1.0.

     6.18.  Affiliates.  The Borrower will not, and will not permit any
            ----------
Subsidiary to, enter into any transaction (including, without limitation, the
purchase or sale of any Property or service) with, or make any payment or
transfer to, any Affiliate (other than a Wholly-Owned

                                     -39-
<PAGE>

Subsidiary) except (i) any such transactions, payments or transfers with or to
such Affiliates as are made in the ordinary course of business and pursuant to
the reasonable requirements of the Borrower's or such Subsidiary's business and
upon fair and reasonable terms no less favorable to the Borrower or such
Subsidiary than the Borrower or such Subsidiary would obtain in a comparable
arms-length transaction and (ii) any such other transactions, payments or
transfers with or to such Affiliates as could not reasonably be expected to have
a Material Adverse Effect.

     6.19  Series A Preferred Securities.  The Borrower will not, and will not
           -----------------------------
permit Torchmark Capital L.L.C. to, declare or pay dividends or distributions
on, or redeem, purchase or otherwise acquire, the Series A Preferred Securities
or any portion thereof if, after giving effect thereto, a Default or Unmatured
Default would exist.

                                  ARTICLE VII

                                    DEFAULTS
                                    --------

     The occurrence of any one or more of the following events shall constitute
a Default:

     7.1.  Any representation or warranty made or deemed made by or on behalf of
the Borrower or any of its Subsidiaries to the Lenders or the Agent under or in
connection with this Agreement, any Loan, or any certificate or information
delivered in connection with this Agreement or any other Loan Document shall be
materially false or misleading on the date as of which made.

     7.2.  Nonpayment of any principal of any Note when due, or nonpayment of
any interest upon any Note or of any facility fee or other obligations under any
of the Loan Documents within five days after the same becomes due.

     7.3.  The breach by the Borrower of any of the terms or provisions of
Section 6.2, 6.3, 6.10, 6.11, 6.12, 6.13, 6.15, 6.16 or 6.17; or the breach by
the Borrower of any of the terms or provisions of Section 6.14 or 6.18 which is
not remedied within ten days after the Borrower learns thereof.

     7.4.  The breach by the Borrower (other than a breach which constitutes a
Default under Section 7.1, 7.2 or 7.3) of any of the terms or provisions of this
Agreement which is not remedied within twenty days after written notice from the
Agent or any Lender.

     7.5.  Failure of the Borrower or any of its Subsidiaries to pay when due
any Indebtedness in excess of, singly or in the aggregate for all such
Subsidiaries, $10,000,000; or the default by the Borrower or any of its
Subsidiaries in the performance of any term, provision or condition contained in
any agreement under which any such Indebtedness was created or is governed, or
any other event shall occur or condition exist, the effect of which is to cause,
or to permit the holder or holders of such Indebtedness to cause, such
Indebtedness to become due prior to its stated maturity; or any such
Indebtedness of the Borrower or any Subsidiary shall be

                                     -40-
<PAGE>

declared to be due and payable or required to be prepaid (other than by a
regularly scheduled payment) prior to the stated maturity thereof.

     7.6.    The Borrower or any of its Subsidiaries shall (i) have an order for
relief entered with respect to it under the Federal bankruptcy laws as now or
hereafter in effect, (ii) make an assignment for the benefit of creditors, (iii)
apply for, seek, consent to, or acquiesce in, the appointment of a receiver,
custodian, trustee, examiner, liquidator or similar official for it or any
Substantial Portion of its Property, (iv) institute any proceeding seeking an
order for relief under the Federal bankruptcy laws as now or hereafter in effect
or seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution,
winding up, liquidation, reorganization, arrangement, adjustment or composition
of it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors or fail to file an answer or other pleading
denying the material allegations of any such proceeding filed against it, (v)
take any corporate action to authorize or effect any of the foregoing actions
set forth in this Section 7.6, (vi) fail to contest in good faith any
appointment or proceeding described in Section 7.7 or not pay, or admit in
writing its inability to pay, its debts generally as they become due.

     7.7.  Without the application, approval or consent of the Borrower or any
of its Subsidiaries, a receiver, trustee, examiner, liquidator or similar
official shall be appointed for the Borrower or any of its Subsidiaries or any
Substantial Portion of its Property, or a proceeding described in Section
7.6(iv) shall be instituted against the Borrower or any of its Subsidiaries and
such appointment continues undischarged or such proceeding continues undismissed
or unstayed for a period of 30 consecutive days.

     7.8.  Any court, government or governmental agency shall condemn, seize or
otherwise appropriate, or take custody or control of (each a "Condemnation"),
all or any portion of the Property of the Borrower or any of its Subsidiaries
which, when taken together with all other Property of the Borrower and its
Subsidiaries so condemned, seized, appropriated, or taken custody or control of,
during the twelve-month period ending with the month in which any such
Condemnation occurs, constitutes a Substantial Portion of its Property.

     7.9.  The Borrower or any of its Subsidiaries shall fail within 45 days to
pay, bond or otherwise discharge any judgment or order for the payment of money,
either singly or in the aggregate, in excess of $10,000,000, which is not stayed
on appeal or otherwise being appropriately contested in good faith.

     7.10. The Unfunded Liabilities of all Single Employer Plans shall exceed
in the aggregate $10,000,000 or any Reportable Event shall occur in connection
with any Plan.

     7.11. The Borrower or any other member of the Controlled Group shall have
been notified by the sponsor of a Multiemployer Plan that it has incurred
withdrawal liability to such Multiemployer Plan in an amount which, when
aggregated with all other amounts required to be paid to Multiemployer Plans by
the Borrower or any other member of the Controlled Group as withdrawal liability
(determined as of the date of such notification), exceeds $5,000,000 or requires
payments exceeding $500,000 per annum.

                                     -41-
<PAGE>

     7.12.  The Borrower or any of its Subsidiaries shall be the subject of any
proceeding or investigation pertaining to the release by the Borrower or any of
its Subsidiaries or any other person of any toxic or hazardous waste or
substance into the environment, or any violation of any federal, state or local
environmental, health or safety law or regulation, which, in either case, could
reasonably be expected to have a Material Adverse Effect.

     7.13.  Any Change in Control shall occur.

     7.14.  Any License of any Insurance Subsidiary held by such Insurance
Subsidiary on the Closing Date or acquired by such Insurance Subsidiary
thereafter, the loss of which would have, in the reasonable judgment of the
Lenders, a Material Adverse Effect, (i) shall be revoked by a final non-
appealable order by the state which shall have issued such License, or any
action (whether administrative or judicial) to revoke such License shall have
been commenced against such Insurance Subsidiary which shall not have been
dismissed or contested in good faith within 30 days of the commencement thereof,
(ii) shall be suspended by such state for a period in excess of 30 days or (iii)
shall not be reissued or renewed by such state upon the expiration thereof
following application for such reissuance or renewal by such Insurance
Subsidiary.

                                 ARTICLE VIII

                ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
                ----------------------------------------------

     8.1.   Acceleration.  If any Default described in Section 7.6 or 7.7 occurs
            ------------
with respect to the Borrower, the obligations of the Lenders to make Loans
hereunder shall automatically terminate and the Obligations shall immediately
become due and payable without any election or action on the part of the Agent
or any Lender. If any other Default occurs, the Required Lenders (or the Agent
with the consent of the Required Lenders) may terminate or suspend the
obligations of the Lenders to make Loans hereunder, or declare the Obligations
to be due and payable, or both, whereupon the Obligations shall become
immediately due and payable, without presentment, demand, protest or notice of
any kind, all of which the Borrower hereby expressly waives.

     If, before any judgment or decree for the payment of the Obligations due
shall have been obtained or entered, the Modified Required Lenders (or, in the
case of an automatic termination upon the occurrence of a Default under Section
7.6 or 7.7, all the Lenders), in their sole discretion, shall so direct, the
Agent shall, by notice to the Borrower, rescind and annul such acceleration
and/or termination.

     8.2.   Amendments.  Subject to the provisions of this Article VIII, the
            ----------
Required Lenders (or the Agent with the consent in writing of the Required
Lenders) and the Borrower may enter into agreements supplemental hereto for the
purpose of adding or modifying any provisions to the Loan Documents or changing
in any manner the rights of the Lenders or the Borrower hereunder or thereunder
or waiving any Default hereunder or thereunder; provided, however, that no such
                                                --------  -------
supplemental agreement shall, without the consent of each Lender:

                                     -42-
<PAGE>

               (i)    Extend the Termination Date or compromise or forgive the
     principal amount of any Loan, or reduce the rate of interest or compromise
     or forgive payment of interest on any Loan, or reduce the amount of any fee
     payable hereunder.

               (ii)   Reduce the percentage specified in the definition of
     Required Lenders or Modified Required Lenders.

               (iii)  Increase the amount of the Commitment of any Lender
     hereunder, or permit the Borrower to assign its rights under this
     Agreement.

               (iv)   Amend this Section 8.2.

No amendment of any provision of this Agreement relating to the Agent shall be
effective without the written consent of the Agent. The Agent may waive payment
of the fee required under Section 12.3.2 without obtaining the consent of any
other party to this Agreement.

     8.3.  Preservation of Rights.  No delay or omission of the Lenders or the
           ----------------------
Agent to exercise any right under the Loan Documents shall impair such right or
be construed to be a waiver of any Default or an acquiescence therein, and the
making of a Loan notwithstanding the existence of a Default or the inability of
the Borrower to satisfy the conditions precedent to such Loan shall not
constitute any waiver or acquiescence.  Any single or partial exercise of any
such right shall not preclude other or further exercise thereof or the exercise
of any other right, and no waiver, amendment or other variation of the terms,
conditions or provisions of the Loan Documents whatsoever shall be valid unless
in writing signed by the Lenders required pursuant to Section 8.2, and then only
to the extent in such writing specifically set forth.  All remedies contained in
the Loan Documents or by law afforded shall be cumulative and all shall be
available to the Agent and the Lenders until the Obligations have been paid in
full.

                                  ARTICLE IX

                              GENERAL PROVISIONS
                              ------------------

     9.1.  Survival of Representations.  All representations and warranties of
           ---------------------------
the Borrower contained in this Agreement shall survive delivery of the Notes and
the making of the Loans herein contemplated.

     9.2.  Governmental Regulation.  Anything contained in this Agreement to the
           -----------------------
contrary notwithstanding, no Lender shall be obligated to extend credit to the
Borrower in violation of any limitation or prohibition provided by any
applicable statute or regulation.

     9.3.  Taxes.  Any taxes (excluding federal income taxes on the overall net
           -----
income of any Lender) or other similar assessments or charges payable or ruled
payable by any governmental or revenue authority in respect of the Loan
Documents shall be paid by the Borrower, together with interest and penalties,
if any.

                                     -43-
<PAGE>

     9.4.  Headings.  Section headings in the Loan Documents are for convenience
           --------
of reference only, and shall not govern the interpretation of any of the
provisions of the Loan Documents.

     9.5.  Entire Agreement.  The Loan Documents embody the entire agreement and
           ----------------
understanding among the Borrower, the Agent and the Lenders and supersede all
prior agreements and understandings among the Borrower, the Agent and the
Lenders relating to the subject matter thereof other than the Commitment Letter
dated October 2, 1997 and that certain fee letter agreement dated October 2,
1997, in each case by and between the Borrower and First Chicago.

     9.6.  Several Obligations; Benefits of this Agreement.  The respective
           -----------------------------------------------
obligations of the Lenders hereunder are several and not joint and no Lender
shall be the partner or agent of any other (except to the extent to which the
Agent is authorized to act as such).  The failure of any Lender to perform any
of its obligations hereunder shall not relieve any other Lender from any of its
obligations hereunder.  This Agreement shall not be construed so as to confer
any right or benefit upon any Person other than the parties to this Agreement
and their respective successors and assigns.

     9.7.  Expenses; Indemnification.  The Borrower shall reimburse the Agent
           -------------------------
for any costs, internal charges and out-of-pocket expenses (including reasonable
attorneys' fees and time charges of attorneys for the Agent, which attorneys may
be employees of the Agent) paid or incurred by the Agent in connection with the
preparation, negotiation, execution, delivery, review, amendment, modification,
and administration of the Loan Documents. The Borrower also agrees to reimburse
the Agent and the Lenders for any costs, internal charges and out-of-pocket
expenses (including attorneys' fees and time charges of attorneys for the Agent
and the Lenders, which attorneys may be employees of the Agent or the Lenders)
paid or incurred by the Agent or any Lender in connection with the collection of
the Obligations or the enforcement of the Loan Documents. The Borrower further
agrees to indemnify the Agent and each Lender, its directors, officers and
employees against all losses, claims, damages, penalties, judgments, liabilities
and expenses (collectively, the "indemnified obligations") (including, without
limitation, all expenses of litigation or preparation therefor whether or not
the Agent or any Lender is a party thereto, but excluding those indemnified
obligations arising solely from any Lender's failure to perform its obligations
under this Agreement) which any of them may pay or incur arising out of or
relating to this Agreement, the other Loan Documents, the transactions
contemplated hereby or the direct or indirect application or proposed
application of the proceeds of any Loan hereunder, except that no indemnified
party shall be indemnified for any indemnified obligations arising from its own
gross negligence or willful misconduct as finally determined by a court of
competent jurisdiction. The obligations of the Borrower under this Section 9.7
shall survive the termination of this Agreement.

     9.8.  Numbers of Documents.  All statements, notices, closing documents,
           --------------------
and requests hereunder shall be furnished to the Agent with sufficient
counterparts so that the Agent may furnish one to each of the Lenders.  The
Agent shall promptly remit same to the Lenders.

                                     -44-
<PAGE>

     9.9.   Accounting.  Except as provided to the contrary herein, all
            ----------
accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with Agreement Accounting
Principles.

     9.10.  Severability of Provisions.  Any provision in any Loan Document that
            --------------------------
is held to be inoperative, unenforceable, or invalid in any jurisdiction shall,
as to that jurisdiction, be inoperative, unenforceable, or invalid without
affecting the remaining provisions in that jurisdiction or the operation,
enforceability, or validity of that provision in any other jurisdiction, and to
this end the provisions of all Loan Documents are declared to be severable.

     9.11.  Nonliability of Lenders.  The relationship between the Borrower and
            -----------------------
the Lenders and the Agent shall be solely that of borrower and lender.  Neither
the Agent nor any Lender shall have any fiduciary responsibilities to the
Borrower.  Neither the Agent nor any Lender undertakes any responsibility to the
Borrower to review or inform the Borrower of any matter in connection with any
phase of the Borrower's business or operations.  The Borrower shall rely
entirely upon its own judgment with respect to its business, and any review,
inspection or supervision of, or information supplied to the Borrower by the
Agent or the Lenders is for the protection of the Agent and the Lenders and
neither the Borrower nor any other Person is entitled to rely thereon.  The
Borrower agrees that neither the Agent nor any Lender shall have any liability
with respect to, and the Borrower hereby waives, releases and agrees not to sue
for, any punitive damages in connection with, arising out of, or in any way
related to the Loan Documents or the transactions contemplated thereby or the
relationship established by the Loan Documents, or any act, omission or event
occurring in connection therewith.

     9.12.  CHOICE OF LAW.  THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A
            -------------
CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS, BUT
GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.

     9.13.  CONSENT TO JURISDICTION.  THE BORROWER HEREBY IRREVOCABLY SUBMITS TO
            -----------------------
THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE
COURT SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO ANY LOAN DOCUMENTS AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS
IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO
THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT
SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE
AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF
ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER AGAINST THE
AGENT OR ANY LENDER OR ANY AFFILIATE OF THE AGENT OR ANY LENDER INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER

                                     -45-
<PAGE>

IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL
BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS.

     9.14.  Confidentiality.  Each Lender agrees to hold any confidential
            ---------------
information which it may receive from the Borrower pursuant to this Agreement in
confidence and for use in connection with this Agreement, including without
limitation, for use in connection with its rights and remedies hereunder, except
for disclosure (i) to other Lenders and their respective Affiliates, (ii) to
legal counsel, accountants, and other professional advisors to, and Affiliates
of, that Lender, (iii) to regulatory officials, (iv) as requested pursuant to or
as required by law, regulation, or legal process, (v) in connection with any
legal proceeding to which that Lender is a party, and (vi) permitted by Section
12.4.

     9.15.  Nonreliance.  Each Lender hereby represents that it is not relying
            -----------
on or looking to any margin stock (as defined in Regulation U of the Board of
Governors of the Federal Reserve System) for the repayment of the Loans provided
for herein.

     9.16.  WAIVER OF JURY TRIAL.  THE BORROWER, THE AGENT AND EACH LENDER
            --------------------
HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE
RELATIONSHIP ESTABLISHED THEREUNDER.

     9.17.  Disclosure.  The Borrower and each Lender hereby (a) acknowledge and
            ----------
agree that First Chicago and/or its Affiliates from time to time may hold other
investments in, make other loans to or have other relationships with the
Borrower and its Subsidiaries, including, without limitation, acting as
commercial paper dealer or in connection with any securitizations, interest rate
hedging instruments or agreements or swap transactions, and (b) waive any
liability of First Chicago or such Affiliate to the Borrower or any Lender,
respectively, arising out of or resulting from such investments, loans or other
relationships other than liabilities arising out of the gross negligence or
willful misconduct of First Chicago or its Affiliates.

                                   ARTICLE X

                                   THE AGENT
                                   ---------

     10.1.  Appointment.  The First National Bank of Chicago is hereby appointed
            -----------
Agent hereunder and under each other Loan Document, and each of the Lenders
irrevocably authorizes the Agent to act as the agent of such Lender.  The Agent
agrees to act as such upon the express conditions contained in this Article X.
The Agent shall not have a fiduciary relationship in respect of the Borrower or
any Lender by reason of this Agreement or any other Loan Document.

     10.2.  Powers.  The Agent shall have and may exercise such powers under the
            ------
Loan Documents as are specifically delegated to the Agent by the terms of each
thereof, together with such powers as are reasonably incidental thereto.  The
Agent shall have no implied duties to the

                                     -46-
<PAGE>

Lenders, or any obligation to the Lenders to take any action thereunder, except
any action specifically provided by the Loan Documents to be taken by the Agent.

     10.3.  General Immunity.  Neither the Agent nor any of its directors,
            ----------------
officers, agents or employees shall be liable to the Borrower, the Lenders or
any Lender for any action taken or omitted to be taken by it or them hereunder
or under any other Loan Document or in connection herewith or therewith except
for its or their own gross negligence or willful misconduct.

     10.4.  No Responsibility for Loans, Recitals, etc.  Neither the Agent nor
            -------------------------------------------
any of its directors, officers, agents or employees shall be responsible for or
have any duty to ascertain, inquire into, or verify (i) any statement, warranty
or representation made in connection with any Loan Document or any borrowing
hereunder; (ii) the performance or observance of any of the covenants or
agreements of any obligor under any Loan Document, including, without
limitation, any agreement by an obligor to furnish information directly to each
Lender; (iii) the satisfaction of any condition specified in Article IV, except
receipt of items required to be delivered to the Agent; or (iv) the validity,
enforceability, effectiveness, sufficiency or genuineness of any Loan Document
or any other instrument or writing furnished in connection therewith.  Except
for notices or reports which the Agent is expressly hereby required to provide
to the Lenders, the Agent shall have no duty to disclose to the Lenders
information that is not required to be furnished by the Borrower to the Agent at
such time, but is voluntarily furnished by the Borrower to the Agent (either in
its capacity as Agent or in its individual capacity).

     10.5.  Action on Instructions of Lenders.  The Agent shall in all cases be
            ---------------------------------
fully protected in acting, or in refraining from acting, hereunder and under any
other Loan Document in accordance with written instructions signed by the
Required Lenders, and such instructions and any action taken or failure to act
pursuant thereto shall be binding on all of the Lenders and on all holders of
Notes.  The Agent shall be fully justified in failing or refusing to take any
action hereunder and under any other Loan Document unless it shall first be
indemnified to its satisfaction by the Lenders pro rata against any and all
liability, cost and expense that it may incur by reason of taking or continuing
to take any such action.  The Lenders hereby acknowledge that the Agent shall be
under no duty to take any discretionary action permitted to be taken by it
pursuant to the provisions of this Agreement unless it shall be requested in
writing to do so by the Required Lenders.

     10.6.  Employment of Agents and Counsel.  The Agent may execute any of its
            --------------------------------
duties as Agent hereunder and under any other Loan Document by or through
employees, agents, and attorneys-in-fact and shall not be answerable to the
Lenders, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care.  The Agent shall be entitled to advice of
counsel concerning all matters pertaining to the agency hereby created and its
duties hereunder and under any other Loan Document.

     10.7.  Reliance on Documents; Counsel.  The Agent shall be entitled to rely
            ------------------------------
upon any Note, notice, consent, certificate, affidavit, letter, telegram,
statement, paper or document believed by it to be genuine and correct and to
have been signed or sent by the proper person or

                                     -47-
<PAGE>

persons, and, in respect to legal matters, upon the opinion of counsel selected
by the Agent, which counsel may be employees of the Agent.

     10.8.   Agent's Reimbursement and Indemnification.  The Lenders agree to
             -----------------------------------------
reimburse and indemnify the Agent ratably in proportion to their respective
Commitments (or, if the Commitments have been terminated, in proportion to their
Commitments immediately prior to such termination) (i) for any amounts not
reimbursed by the Borrower for which the Agent is entitled to reimbursement by
the Borrower under the Loan Documents, (ii) for any other expenses not
reimbursed by the Borrower under the Loan Documents and incurred by the Agent on
behalf of the Lenders in connection with the preparation, execution, delivery,
administration and enforcement of the Loan Documents and (iii) for any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind and nature whatsoever which may be
imposed on, incurred by or asserted against the Agent in any way relating to or
arising out of the Loan Documents or any other document delivered in connection
therewith or the transactions contemplated thereby, or the enforcement of any of
the terms thereof or of any such other documents, provided that no Lender shall
be liable for any of the foregoing to the extent they arise from the gross
negligence or willful misconduct of the Agent. The obligations of the Lenders
under this Section 10.8 shall survive payment of the Obligations and termination
of this Agreement.

     10.9.   Notice of Default.  The Agent shall not be deemed to have knowledge
             -----------------
or notice of the occurrence of any Default or Unmatured Default hereunder unless
the Agent has received written notice from a Lender or the Borrower referring to
this Agreement describing such Default or Unmatured Default and stating that
such notice is a "notice of default".  In the event that the Agent receives such
a notice, the Agent shall give prompt notice thereof to the Lenders stating that
such notice is a "notice of default".

     10.10.  Rights as a Lender.  In the event the Agent is a Lender, the Agent
             ------------------
shall have the same rights and powers hereunder and under any other Loan
Document as any Lender and may exercise the same as though it were not the
Agent, and the term "Lender" or "Lenders" shall, at any time when the Agent is a
Lender, unless the context otherwise indicates, include the Agent in its
individual capacity. The Agent may accept deposits from, lend money to, and
generally engage in any kind of trust, debt, equity or other transaction, in
addition to those contemplated by this Agreement or any other Loan Document,
with the Borrower or any of its Subsidiaries in which the Borrower or such
Subsidiary is not restricted hereby from engaging with any other Person. The
Agent, in its individual capacity, is not obligated to remain a Lender.

     10.11.  Lender Credit Decision.  Each Lender acknowledges that it has,
             ----------------------
independently and without reliance upon the Agent or any other Lender and based
on the financial statements prepared by the Borrower and such other documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and the other Loan Documents. Each Lender
also acknowledges that it will, independently and without reliance upon the
Agent or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement and the other Loan Documents.

                                     -48-
<PAGE>

     10.12.  Successor Agent.  The Agent may resign at any time by giving
             ---------------
written notice thereof to the Lenders and the Borrower, such resignation to be
effective upon the appointment of a successor Agent or, if no successor Agent
has been appointed, forty-five days after the retiring Agent gives notice of its
intention to resign. The Agent may be removed at any time with or without cause
by written notice received by the Agent from the Required Lenders, such removal
to be effective on the date specified by the Required Lenders. Upon any such
resignation or removal, the Required Lenders shall have the right to appoint, on
behalf of the Borrower and the Lenders, a successor Agent. If no successor Agent
shall have been so appointed by the Required Lenders within thirty days after
the resigning Agent's giving notice of its intent to resign, then the resigning
Agent may appoint, on behalf of the Borrower and the Lenders, a successor Agent.
If the Agent has resigned or been removed and no successor Agent has been
appointed, the Lenders may perform all the duties of the Agent hereunder and the
Borrower shall make all payments in respect of the Obligations to the applicable
Lenders and for all other purposes shall deal directly with the Lenders. No
successor Agent shall be deemed to be appointed hereunder until such successor
Agent has accepted the appointment. Any such successor Agent shall be a Lender
or another commercial bank having capital and retained earnings of at least
$200,000,000. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the resigning or
removed Agent, and the resigning or removed Agent shall be discharged from its
duties and obligations hereunder and under the other Loan Documents. After the
effectiveness of the resignation or removal of an Agent, the provisions of this
Article X shall continue in effect for the benefit of such Agent in respect of
any actions taken or omitted to be taken by it while it was acting as the Agent
hereunder and under the other Loan Documents.

     10.13.  Agent's Fee.  The Borrower agrees to pay to the Agent, for its own
             -----------
account, the fees agreed to by the Borrower and the Agent pursuant to that
certain letter agreement dated October 2, 1997, or as otherwise agreed from time
to time.

                                  ARTICLE XI

                           SETOFF; RATABLE PAYMENTS
                           ------------------------

     11.1.   Setoff.  In addition to, and without limitation of, any rights of
             ------
the Lenders under applicable law, if the Borrower becomes insolvent, however
evidenced, or any Default or Unmatured Default occurs, any and all deposits
(including all account balances, whether provisional or final and whether or not
collected or available) and any other Indebtedness at any time held or owing by
any Lender to or for the credit or account of the Borrower may be offset and
applied toward the payment of the Obligations owing to such Lender, whether or
not the Obligations, or any part hereof, shall then be due.

     11.2.   Ratable Payments.  Except for payments received from the Agent
             ----------------
pursuant to Section 2.10, if any Lender, whether by setoff or otherwise, has
payment made to it upon its Loans (other than payments received pursuant to
Sections 3.1, 3.2 or 3.4) in a proportion greater than that received by any
other Lender, such Lender agrees, promptly upon demand, to purchase

                                     -49-
<PAGE>

a portion of the Loans held by the other Lenders so that after such purchase
each Lender will hold its ratable proportion of Loans. If any Lender, whether in
connection with setoff or amounts which might be subject to setoff or otherwise,
receives collateral or other protection for its Obligations or such amounts
which may be subject to setoff, such Lender agrees, promptly upon demand, to
take such action necessary such that all Lenders share in the benefits of such
collateral ratably in proportion to their Loans. In case any such payment is
disturbed by legal process, or otherwise, appropriate further adjustments shall
be made.

                                  ARTICLE XII

               BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
               -------------------------------------------------

     12.1.  Successors and Assigns.  The terms and provisions of the Loan
            ----------------------
Documents shall be binding upon and inure to the benefit of the Borrower and the
Lenders and their respective successors and assigns, except that (i) the
Borrower shall not have the right to assign its rights or obligations under the
Loan Documents and (ii) any assignment by any Lender must be made in compliance
with Section 12.3.  Notwithstanding clause (ii) of the immediately preceding
sentence, any Lender may at any time, without the consent of the Borrower or the
Agent, assign all or any portion of its rights under this Agreement and its
Notes to a Federal Reserve Bank; provided, however, that no such assignment to a
                                 --------  -------
Federal Reserve Bank shall release the transferor Lender from its obligations
hereunder.  The Agent may treat the payee of any Note as the owner thereof for
all purposes hereof unless and until such payee complies with Section 12.3 in
the case of an assignment thereof or, in the case of any other transfer, a
written notice of the transfer is filed with the Agent.  Any assignee or
transferee of a Note agrees by acceptance thereof to be bound by all the terms
and provisions of the Loan Documents.  Any request, authority or consent of any
Person, who at the time of making such request or giving such authority or
consent is the holder of any Note, shall be conclusive and binding on any
subsequent holder, transferee or assignee of such Note or of any Note or Notes
issued in exchange therefor.

     12.2.  Participations.
            --------------

            12.2.1.  Permitted Participants; Effect.  Any Lender may, in the
                     ------------------------------
ordinary course of its business and in accordance with applicable law, at any
time sell to one or more banks or other entities ("Participants") participating
interests in any Loan owing to such Lender, any Note held by such Lender, any
Commitment of such Lender or any other interest of such Lender under the Loan
Documents.  In the event of any such sale by a Lender of participating interests
to a Participant, such Lender's obligations under the Loan Documents shall
remain unchanged, such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, such Lender shall remain
the holder of any such Note for all purposes under the Loan Documents, all
amounts payable by the Borrower under this Agreement shall be determined as if
such Lender had not sold such participating interests, and the Borrower and the
Agent shall continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations under the Loan Documents.

                                     -50-
<PAGE>

           12.2.2. Voting Rights.  Each Lender shall retain the sole right to
                   -------------
approve, without the consent of any Participant, any amendment, modification or
waiver of any provision of the Loan Documents other than any amendment,
modification or waiver with respect to any Loan or Commitment in which such
Participant has an interest which forgives principal, interest or fees or
reduces the interest rate or fees payable with respect to any such Loan or
Commitment, postpones any date fixed for any regularly-scheduled payment of
principal of, or interest or fees on, any such Loan or Commitment, or extends
the Termination Date.

           12.2.3. Benefit of Setoff.  The Borrower agrees that each Participant
                   -----------------
shall be deemed to have the right of setoff provided in Section 11.1 in respect
of its participating interest in amounts owing under the Loan Documents to the
same extent as if the amount of its participating interest were owing directly
to it as a Lender under the Loan Documents, provided that each Lender shall
                                            --------
retain the right of setoff provided in Section 11.1 with respect to the amount
of participating interests sold to each Participant. Each Participant, by
exercising the right of setoff provided in Section 11.1, agrees to share with
each Lender, any amount received pursuant to the exercise of its right of
setoff, such amounts to be shared in accordance with Section 11.2 as if each
Participant were a Lender.

     12.3. Assignments.
           -----------

           12.3.1. Permitted Assignments.  Any Lender may, in the ordinary
                   ---------------------
course of its business and in accordance with applicable law, at any time assign
to one or more banks or other entities ("Purchasers") all or any part of its
rights and obligations under the Loan Documents; provided, however, that in the
                                                 --------  -------
case of an assignment to an entity which is not a Lender or an Affiliate of a
Lender, such assignment shall be in a minimum amount of $5,000,000 or, if less,
the entire amount of its Commitment and Loans.  Such assignment shall be
substantially in the form of Exhibit "H" hereto or in such other form as may be
agreed to by the parties thereto.  The consent of the Borrower and the Agent
shall be required prior to an assignment becoming effective with respect to a
Purchaser which is not a Lender or an Affiliate thereof; provided, however, that
                                                         --------  -------
the consent of the Borrower shall not be required if, on the date of such
assignment, a Default shall have occurred and be continuing.  Such consent shall
not be unreasonably withheld or delayed.

           12.3.2. Effect; Effective Date.  Upon (i) delivery to the Agent of a
                   ----------------------
notice of assignment, substantially in the form attached as Exhibit "I" to
Exhibit "H" hereto (a "Notice of Assignment"), together with any consents
required by Section 12.3.1, and (ii) payment of a $3,500 fee to the Agent for
processing such assignment, such assignment shall become effective on the
effective date specified in such Notice of Assignment.  On and after the
effective date of such assignment, such Purchaser shall for all purposes be a
Lender party to this Agreement and any other Loan Document executed by the
Lenders and shall have all the rights and obligations of a Lender under the Loan
Documents, to the same extent as if it were an original party hereto, and no
further consent or action by the Borrower, the Lenders or the Agent shall be
required to release the transferor Lender with respect to the percentage of the
Aggregate Commitment and Loans assigned to such Purchaser.  Upon the
consummation of any assignment to a Purchaser pursuant to this Section 12.3.2,
the transferor Lender, the Agent and the Borrower shall make

                                     -51-
<PAGE>

appropriate arrangements so that a replacement Note is issued to such transferor
Lender and a new Note or, as appropriate, replacement Note, is issued to such
Purchaser, in each case in principal amounts reflecting their respective
Commitments, as adjusted pursuant to such assignment.

     12.4.  Dissemination of Information.  The Borrower authorizes each Lender
            ----------------------------
to disclose to any Participant or Purchaser or any other Person acquiring an
interest in the Loan Documents by operation of law (each a "Transferee") and any
prospective Transferee any and all information in such Lender's possession
concerning the creditworthiness of the Borrower and its Subsidiaries; provided
                                                                      --------
that each Transferee and prospective Transferee agrees to be bound by Section
9.14 of this Agreement.

     12.5.  Tax Treatment.  If any interest in any Loan Document is transferred
            -------------
to any Transferee which is organized under the laws of any jurisdiction other
than the United States or any State thereof, the transferor Lender shall cause
such Transferee, concurrently with the effectiveness of such transfer, to comply
with the provisions of Section 2.16.

                                 ARTICLE XIII

                                    NOTICES
                                    -------

     13.1.  Giving Notice.  Except as otherwise permitted by Section 2.11 with
            -------------
respect to borrowing notices, all notices and other communications provided to
any party hereto under this Agreement or any other Loan Document shall be in
writing and shall be delivered or mailed (or in the case of telegraphic
communication, delivered by telecopy or telex) addressed to (i) the Borrower at
its address set forth below its signature hereto or (ii) the Agent or any Lender
at its address set forth on Schedule "1" hereto or at such other address as may
be designated by any such party in a notice to the other parties.  Any notice,
if personally delivered or mailed (properly addressed with postage prepaid),
shall be deemed given when received; any notice, if transmitted by telecopy or
telex, shall be deemed given when transmitted (receipt confirmed by telephone in
the case of telecopies and answerback confirmed in the case of telexes).

     13.2.  Change of Address.  The Borrower, the Agent and any Lender may each
            -----------------
change the address for service of notice upon it by a notice in writing to the
other parties hereto.

                                  ARTICLE XIV

                                 COUNTERPARTS
                                 ------------

     This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one agreement, and any of the parties hereto may
execute this Agreement by signing any such counterpart.  This Agreement shall be
effective when it has been executed by the Borrower, the Agent and the Lenders
and each party has delivered such counterpart to the Agent.

                                     -52-
<PAGE>

                          [signature pages to follow]

                                     -53-
<PAGE>

     IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have executed
this Agreement as of the date first above written.

                             TORCHMARK CORPORATION

     By:________________________________________________________________________

     Print Name:________________________________________________________________

     Title:_____________________________________________________________________

                                    2001 Third Avenue South
                                    Birmingham, Alabama 35233

                        Attention:  Mr. Michael J. Klyce,
                                    Vice President & Treasurer
                        Telephone  No.: (205) 325-2051
                        Telecopier No.: (205) 325-4157

                        THE FIRST NATIONAL BANK OF CHICAGO,
                        Individually and as Agent

     By:________________________________________________________________________

     Print Name:________________________________________________________________

     Title:_____________________________________________________________________

                        AMSOUTH BANK OF ALABAMA

                        By:___________

                        Print Name:___

                        Title:________

                        BANK OF AMERICA NATIONAL TRUST AND
                        SAVINGS ASSOCIATION

                        By:___________

                                     -54-
<PAGE>

Print Name:________

Title:_____________

BANK OF MONTREAL

By:________________

Print Name:________

Title:_____________

THE BANK OF NEW YORK

By:________________

Print Name:________

Title:_____________

THE CHASE MANHATTAN BANK

By:________________

Print Name:________

Title:_____________

REGIONS BANK                 Print Name:_________

                             Title:______________

By:________________

                             FLEET NATIONAL BANK

                             By:_________________

                             Print Name:_________

                             Title:______________

                                     -55-

<PAGE>

                             SOUTHTRUST BANK OF ALABAMA

                             By:_________________

                             Print Name:_________

                             Title:______________

                             COMPASS BANK

                             By:_________________

                             Print Name:_________

                             Title:______________

                             NATIONSBANK OF TEXAS, N.A.

                             By:_________________

                             Print Name:_________

                             Title:______________

                             DEUTSCHE BANK AG, NEW YORK BRANCH AND/OR CAYMAN
                             ISLANDS BRANCH

                             By:_________________

                             Print Name:_________

                             Title:______________

                             By:_________________

                             Print Name:_________

                             Title:______________

                                     -56-
<PAGE>

DRESDNER BANK AG,
NEW YORK BRANCH AND
GRAND CAYMAN BRANCH

By:________________

Print Name:________

Title:_____________

By:________________

Print Name:________

Title:_____________

MELLON BANK, N.A.

By:________________

Print Name:________

Title:_____________

UMB BANK, N.A.                Print Name:________

                              Title:_____________

By:________________

                                     -57-
<PAGE>

                                  EXHIBIT "A"

                                      NOTE
                                 (RATABLE LOAN)

$_______________                                               ___________, 19__

          Torchmark Corporation, a Delaware corporation (the "Borrower"),
promises to pay to the order of ______________________________________ (the
"Lender") the lesser of the principal sum of __________________________ Dollars
or the aggregate unpaid principal amount of all Loans made by the Lender to the
Borrower pursuant to Sections 2.1.1(i) and 2.2 of the Agreement (as hereinafter
defined), in immediately available funds at the main office of The First
National Bank of Chicago in Chicago, Illinois, as Agent, together with interest
on the unpaid principal amount hereof at the rates and on the dates set forth in
the Agreement. The Borrower shall pay the principal of and accrued and unpaid
interest on the Ratable Loans evidenced hereby in full on the Termination Date.

          The Lender shall, and is hereby authorized to, record on the schedule
attached hereto, or to otherwise record in accordance with its usual practice,
the date, amount, applicable interest rate or margin and Interest Period, if
applicable, of each Ratable Loan and the date and amount of each principal
payment hereunder; provided, however, that neither the failure to so record nor
                   --------  -------
any error in this recordation shall affect the Borrower's obligations under this
Note.

          This Note (Ratable Loan) is one of the Notes issued pursuant to, and
is entitled to the benefits of, the Credit Agreement dated as of October 22,
1997 (as the same may be amended or modified and in effect from time to time,
the "Agreement") among the Borrower, the lenders named therein, including the
Lender, and The First National Bank of Chicago, as Agent, to which Agreement
reference is hereby made for a statement of the terms and conditions governing
this Note, including the terms and conditions under which this Note may be
prepaid or its maturity date accelerated.  Capitalized terms used herein and not
otherwise defined herein are used with the meanings attributed to them in the
Agreement.

                                 TORCHMARK CORPORATION

                                                   By:__________________________

                                                   Title:_______________________

                                     -58-
<PAGE>

                  SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
                                       TO
                 NOTE (RATABLE LOAN) OF TORCHMARK CORPORATION,
                           DATED ______________, 19__

<TABLE>
<CAPTION>
 <S>       <C>               <C>                  <C>                     <C>                   <C>
           Principal           Maturity           Interest Rate            Principal             Unpaid
           Amount of         of Interest           (or Margin)            Amount Paid           Balance
Date         Loan               Period        ----------------------  -------------------  ------------------
-----  -----------------  ------------------
</TABLE>

                                     -59-
<PAGE>

                                  EXHIBIT "B"

                                      NOTE
                             (COMPETITIVE BID LOAN)

                                                              ____________, 19__

          Torchmark Corporation, a Delaware corporation (the "Borrower"),
promises to pay to the order of ______________________________________ (the
"Lender") the aggregate unpaid principal amount of all Loans made by the Lender
to the Borrower pursuant to Section 2.3 of the Agreement (as hereinafter
defined), in immediately available funds at the main office of The First
National Bank of Chicago in Chicago, Illinois, as Agent, together with interest
on the unpaid principal amount hereof at the rates and on the dates determined
pursuant to Section 2.3 of the Agreement. The Borrower shall pay the principal
of and accrued and unpaid interest on the Competitive Bid Loans evidenced hereby
in full on the maturity date thereof.

          The Lender shall, and is hereby authorized to, record on the schedule
attached hereto, or to otherwise record in accordance with its usual practice,
the date, amount, applicable interest rate or margin and Interest Period of each
Competitive Bid Loan and the date and amount of each principal payment
hereunder; provided, however, that neither the failure to so record nor any
           --------  -------
error in this recordation shall affect the Borrower's obligations under this
Note.

          This Note (Competitive Bid Loan) is one of the Notes issued pursuant
to, and is entitled to the benefits of, the Credit Agreement dated as of October
22, 1997 (as the same may be amended or modified and in effect from time to
time, the "Agreement") among the Borrower, the lenders named therein, including
the Lender, and The First National Bank of Chicago, as Agent, to which Agreement
reference is hereby made for a statement of the terms and conditions governing
this Note, including the terms and conditions under which this Note may be
prepaid or its maturity date accelerated.  Capitalized terms used herein and not
otherwise defined herein are used with the meanings attributed to them in the
Agreement.

                                       TORCHMARK CORPORATION

                                                      By:_______________________

                                                      Title:____________________

                                     -60-
<PAGE>

                  SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
                                       TO
             NOTE (COMPETITIVE BID LOAN) OF TORCHMARK CORPORATION,
                           DATED _____________, 19__

<TABLE>
<CAPTION>
<S>             <C>                <C>                <C>                     <C>                <C>
                Principal            Maturity         Interest Rate (or       Principal
   Date         Amount of          of Interest             Margin)             Amount            Unpaid
-----------        Loan               Period         -------------------        Paid             Balance
             ----------------  --------------------                       -----------------  ---------------
</TABLE>

                                     -61-
<PAGE>

                                  EXHIBIT "C"

                         COMPETITIVE BID QUOTE REQUEST
                                (Section 2.3.2)
                                                          ________________, 19__

To:      The First National Bank of Chicago,
           as agent (the "Agent")

From:    Torchmark Corporation ("Borrower")

Re:      Credit Agreement dated as of October 22, 1997 among the Borrower,
         The First National Bank of Chicago, individually and as Agent, and the
         Lenders party thereto (the "Agreement")

     We hereby give notice pursuant to Section 2.3.2 of the Agreement that we
request Competitive Bid Quotes for the following proposed Competitive Bid
Advance(s):

Borrowing Date:  ____________, 19

Principal Amount: $       [1]
                   ----------

Interest Period:     [2]
                 -------

     Such Competitive Bid Quotes should offer a [Competitive Bid Margin]
[Absolute Rate].

     Upon acceptance by the undersigned of any or all of the Competitive Bid
Advances offered by Lenders in response to this request, the undersigned shall
be deemed to affirm as of such date the representations and warranties made in
the Agreement to the extent specified in Section 4.2(ii) thereof.  Capitalized
terms used herein have the meanings assigned to them in the Agreement.

                                        TORCHMARK CORPORATION

                                        By:_____________________________

     Title:

1    Amount must be at least $10,000,000 and an integral multiple of $1,000,000.

2    One, two, three or six months (Eurodollar Auction) or at least 30 and up to
     180 days (Absolute Rate Auction), subject to the provisions of the
     definitions of Eurodollar Interest Period and Absolute Rate Interest
     Period.

                                     -62-
<PAGE>

                                  EXHIBIT "D"

                     INVITATION FOR COMPETITIVE BID QUOTES
                                (Section 2.3.3)

                                                    ___________________, 19_____

To:       [Name of Lender]

Re:       Invitation for Competitive Bid Quotes to
          Torchmark Corporation (the "Borrower")

     Pursuant to Section 2.3.3 of the Credit Agreement dated as of October 22,
1997 (the "Agreement") among the Borrower, the Lenders parties thereto and the
undersigned, as Agent, we are pleased on behalf of the Borrower to invite you to
submit Competitive Bid Quotes to the Borrower for the following proposed
Competitive Bid Advance(s):

Borrowing Date:  ____________, 19

Principal Amount: $________

Interest Period: _______

     Such Competitive Bid Quotes should offer a [Competitive Bid Margin]
[Absolute Rate].  Your Competitive Bid Quote must comply with Section 2.3.4 of
the Agreement and the foregoing terms in which the Competitive Bid Quote Request
was made.  Capitalized terms used herein have the meanings assigned to them in
the Agreement.

     Please respond to this invitation by no later than 9:00 a.m. Chicago time
on ____________, 19__.

                                                     THE FIRST NATIONAL BANK OF
                                                     CHICAGO, as Agent

     By:__________________________________
                                                         Authorized Officer

                                     -63-
<PAGE>

                                  EXHIBIT "E"
                             COMPETITIVE BID QUOTE
                                (Section 2.3.4)

                                                         ________________, 19___

To:  The First National Bank of Chicago, as Agent
     Attn:   Lilian Arroyo
             Financial Services Department
             Fax No.: (312) 732-4033

Re:  Competitive Bid Quote to Torchmark Corporation (the "Borrower")

     In response to your invitation on behalf of the Borrower dated
________________, 19__, we hereby make the following Competitive Bid Quote
pursuant to Section 2.3.4 of the Credit Agreement hereinafter referred to and on
the following terms:

     1.  Quoting Lender: ________________

     2.  Person to contact at Quoting Lender: ________

     3.  Borrowing Date: _____________, 19_1

     4.  We hereby offer to make Competitive Bid Loan(s) in the following
         principal amounts, for the following Interest Periods and at the
         following rates:

     Principal    Interest  [Competitive  [Absolute  Minimum
     Amount2      Period3   Bid Margin4]   Rate5]    Amount6
     -----------  --------  ------------  ---------  -------
     $

_________________
1   As specified in the related Invitation.
2   Principal amount bid for each Interest Period may not exceed principal
    amount requested.  Bids must be made for $10,000,000 and an integral
    multiple of $1,000,000.
3   One, two, three or six months or at least 30 and up to 180 days, as
    specified in the related Invitation.
4   Competitive Bid Margin over or under the Eurodollar Base Rate determined for
    the applicable Interest Period.  Specify percentage (rounded to the nearest
    1/100 of 1%) and specify whether "PLUS" or "MINUS".
5   Specify rate of interest per annum (rounded to the nearest 1/100 of 1%).
6   Specify minimum amount which the Borrower may accept (see Section
    2.3.4(ii)(d)).

                                     -64-
<PAGE>

     We understand and agree that the offer(s) set forth above, subject to the
satisfaction of the applicable conditions set forth in the Credit Agreement
dated as of October 22, 1997 among the Borrower, the Lenders party thereto and
yourselves, as Agent, irrevocably obligates us to make the Competitive Bid
Loan(s) for which any offer(s) are accepted, in whole or in part.

                                             Very truly yours,

                                             [NAME OF LENDER]

Dated: ____________, 19__                    By: __________________________
                                                     Authorized Officer

                                     -65-
<PAGE>

                                  EXHIBIT "F"

                         OPINION OF BORROWER'S COUNSEL

                                                                October 22, 1997

The Agent and the Lenders who are parties to the
Credit Agreement described below.

Gentlemen/Ladies:

          I am Vice President and General Counsel of Torchmark Corporation (the
"Borrower") and have represented the Borrower in connection with its execution
and delivery of that certain Credit Agreement dated as of October 22, 1997 (the
"Agreement") among the Borrower, the Lenders named therein and The First
National Bank of Chicago, as Agent for the Lenders, which provides for Advances
in an aggregate principal amount not exceeding $600,000,000 at any one time
outstanding.  All capitalized terms used in this opinion and not otherwise
defined shall have the meanings attributed to them in the Agreement.

          I have examined the Borrower's restated certificate of incorporation,
by-laws, resolutions, the Loan Documents and such other matters of fact and law
which I deem necessary in order to render this opinion.  Based upon the
foregoing, it is my opinion that:

          1.  The Borrower and each Significant Subsidiary are corporations duly
incorporated, validly existing and in good standing under the laws of their
states of incorporation and have all requisite authority to conduct their
business in each jurisdiction in which their business is conducted.

          2.  The execution and delivery of the Loan Documents by the Borrower
and the performance by the Borrower of the Obligations have been duly authorized
by all necessary corporate action and proceedings on the part of the Borrower
and will not:

          (a) require any consent of the Borrower's shareholders;

          (b) violate any law, rule, regulation, order, writ, judgment,
     injunction, decree or award binding on the Borrower or any of its
     Significant Subsidiaries or the Borrower's or any Significant Subsidiary's
     articles of incorporation or by-laws or any indenture, instrument or
     agreement binding upon the Borrower or any of its Significant Subsidiaries;
     or

          (c) result in, or require, the creation or imposition of any Lien
     pursuant to the provisions of any indenture, instrument or agreement
     binding upon the Borrower or any of its Significant Subsidiaries.

                                     -66-
<PAGE>

          3.  The Loan Documents have been duly executed and delivered by the
Borrower and constitute legal, valid and binding obligations of the Borrower
enforceable in accordance with their terms except to the extent the enforcement
thereof may be limited by bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally and subject also to the availability
of equitable remedies if equitable remedies are sought.

          4.  To my knowledge after due inquiry, there is no litigation or
proceeding pending or threatened against the Borrower or any of its Subsidiaries
which may reasonably be expected to have a Material Adverse Effect (after giving
effect to reserves which have been provided with respect thereto on the books of
the Borrower and its Subsidiaries) except as has been previously disclosed in
filings with the Securities and Exchange Commission.  The foregoing opinion is
subject to the inherent unpredictability of punitive damage awards, particularly
in the State of Alabama.

          5.  No approval, authorization, consent, adjudication or order of any
governmental authority, which has not been obtained by the Borrower or any of
its Significant Subsidiaries, is required to be obtained by the Borrower or any
of its Significant Subsidiaries in connection with the execution and delivery of
the Loan Documents, the borrowings under the Agreement or in connection with the
payment by the Borrower of the Obligations.

          I am licensed to practice law only in the State of Iowa, and,
accordingly, I offer no opinion as to the application of decisions or statutory
law (including conflict of law rules) of any jurisdiction other than the States
of Iowa and Delaware and the United States of America.  I have assumed for
purposes of this opinion that the laws of the State of Illinois are the same as
the laws of the State of Iowa in all pertinent respects.

          This opinion may be relied upon by the Agent, the Lenders and their
participants, assignees and other transferees.

                                    Very truly yours,

                                    Larry M. Hutchison
                                    Vice President and General Counsel

                                     -67-
<PAGE>

                                  EXHIBIT "G"

                            COMPLIANCE CERTIFICATE

To:  The Lenders parties to the
     Credit Agreement Described Below

          This Compliance Certificate is furnished pursuant to that certain
Credit Agreement dated as of October 22, 1997 (as amended, modified, renewed or
extended from time to time, the "Agreement") among the Borrower, the lenders
party thereto and The First National Bank of Chicago, as Agent for the Lenders.
Unless otherwise defined herein, capitalized terms used in this Compliance
Certificate have the meanings ascribed thereto in the Agreement.

          THE UNDERSIGNED HEREBY CERTIFIES THAT:

          1.  I am the duly elected _____________________ of the Borrower;

          2.  I have reviewed the terms of the Agreement and I have made, or
have caused to be made under my supervision, a detailed review of the
transactions and conditions of the Borrower and its Subsidiaries during the
accounting period covered by the attached financial statements;

          3.  The examinations described in paragraph 2 did not disclose, and I
have no knowledge of, the existence of any condition or event which constitutes
a Default or Unmatured Default during or at the end of the accounting period
covered by the attached financial statements or as of the date of this
Certificate, except as set forth below; and

          4.  Schedule I attached hereto sets forth financial data and
computations evidencing the Borrower's compliance with certain covenants of the
Agreement, all of which data and computations are true, complete and correct.

          Described below are the exceptions, if any, to paragraph 3 by listing,
in detail, the nature of the condition or event, the period during which it has
existed and the action which the Borrower has taken, is taking, or proposes to
take with respect to each such condition or event:

                                     -68-
<PAGE>

            _______________________________________________________

            _______________________________________________________

            _______________________________________________________

            _______________________________________________________

          The foregoing certifications, together with the computations set forth
in Schedule I hereto and the financial statements delivered with this
Certificate in support hereof, are made and delivered this ____ day of
____________, 19___.

                                     -69-
<PAGE>

                     SCHEDULE I TO COMPLIANCE CERTIFICATE

            Schedule of Compliance as of ______________, 19__ with
                     Provisions of 6.15, 6.16 and 6.17 of
                                 the Agreement

1.   Section 6.15 - Consolidated Net Worth
     -------------------------------------

     A.   Consolidated Net Worth (consolidated
          shareholders' equity excluding the
          effect of the application of FAS 115)                  $__

     B.   $1,575,000,000

     C.   Positive Consolidated Net Income for
          each fiscal quarter ending after June 30, 1997 X .25   $__

     D.   B plus C                                               $__

     E.   A minus D (must be greater than
          or equal to 0)                                         $__

          Complies _____________  Does Not Comply_____

2.   Section 6.16 - Ratio of Consolidated Total Indebtedness to Consolidated
     ---------------------------------------------------------- ------------
     Total Capitalization
     --------------------

     A.   Consolidated Total Indebtedness         $__

     B.   Consolidated Capitalization

          (i)   Consolidated Net
                  Worth (1A)                      $__

          (ii)  Consolidated Total Indebtedness
                  (2A(v))                         $__

          (iii) Sum of (i) and (ii)               $__

    C.    Ratio of A to B                     ___:1.0

    D.    Permitted Ratio        Less than 0.5 to 1.0

          Complies_______     Does Not Comply______

                                     -70-
<PAGE>

3.   Section 6.17 - Ratio of Consolidated Adjusted Net Income to Consolidated
     ------------------------------------------------------------------------
     Interest Expense
     ----------------

     A.   Consolidated Adjusted Net Income (for four fiscal
          quarters ended __________________, 19__)

          (i)      Consolidated Net Income        $__

          (ii)     Taxes                          $__

          (iii)    Consolidated Interest Expense  $__

          (iv)     Sum of (i), (ii) and (iii)     $__

     B.   Consolidated Interest Expense
               (3A(iii))                          $__

     C.   Ratio of A to B                 _____to 1.0

     D.   Permitted Ratio    Greater than 2.50 to 1.0

          Complies______ Does Not Comply______

                                     -71-
<PAGE>

                                  EXHIBIT "H"

                             ASSIGNMENT AGREEMENT

     This Assignment Agreement (this "Assignment Agreement") between___________
(the "Assignor") and (the "Assignee") is dated as of _____________, 19__. The
parties hereto agree as follows:

     1.  PRELIMINARY STATEMENT. The Assignor is a party to a Credit Agreement
         ---------------------
(which, as it may be amended, modified, renewed or extended from time to time is
herein called the "Credit Agreement") described in Item 1 of Schedule 1 attached
hereto ("Schedule 1").  Capitalized terms used herein and not otherwise defined
herein shall have the meanings attributed to them in the Credit Agreement.

     2.  ASSIGNMENT AND ASSUMPTION. The Assignor hereby sells and assigns to the
         -------------------------
Assignee, and the Assignee hereby purchases and assumes from the Assignor, an
interest in and to the Assignor's rights and obligations under the Credit
Agreement such that after giving effect to such assignment the Assignee shall
have the percentage interest specified in Item 3 of Schedule 1 of all
outstanding rights and obligations under the Credit Agreement relating to the
facilities listed in Item 3 of Schedule 1 and the other Loan Documents. The
aggregate Commitment (or Loans, if the applicable Commitment has been
terminated) purchased by the Assignee hereunder is set forth in Item 4 of
Schedule 1.

     3.  EFFECTIVE DATE. The effective date of this Assignment Agreement (the
         --------------
"Effective Date") shall be the later of the date specified in Item 5 of Schedule
1 or two Business Days (or such shorter period agreed to by the Agent) after a
Notice of Assignment substantially in the form of Exhibit "I" attached hereto
has been delivered to the Agent.  Such Notice of Assignment must include any
consents required to be delivered to the Agent by Section 12.3.1 of the Credit
Agreement.  In no event will the Effective Date occur if the payments required
to be made by the Assignee to the Assignor on the Effective Date under Sections
4 and 5 hereof are not made on the proposed Effective Date.  The Assignor will
notify the Assignee of the proposed Effective Date no later than the Business
Day prior to the proposed Effective Date.  As of the Effective Date, (i) the
Assignee shall have the rights and obligations of a Lender under the Loan
Documents with respect to the rights and obligations assigned to the Assignee
hereunder and (ii) the Assignor shall relinquish its rights and be released from
its corresponding obligations under the Loan Documents with respect to the
rights and obligations assigned to the Assignee hereunder.

     4.  PAYMENTS OBLIGATIONS. On and after the Effective Date, the Assignee
         --------------------
shall be entitled to receive from the Agent all payments of principal, interest
and fees with respect to the interest assigned hereby.  The Assignee shall
advance funds directly to the Agent with respect to all Loans and reimbursement
payments made on or after the Effective Date with respect to the interest
assigned hereby.  [In consideration for the sale and assignment of Loans
hereunder, (i) the Assignee shall pay the Assignor, on the Effective Date, an
amount equal to the principal amount of the portion of all Floating Rate Loans
assigned to the Assignee hereunder

                                     -72-
<PAGE>

and (ii) with respect to each Eurodollar Loan or Absolute Rate Loan made by the
Assignor and assigned to the Assignee hereunder which is outstanding on the
Effective Date, (a) on the last day of the Interest Period therefor or (b) on
such earlier date agreed to by the Assignor and the Assignee or (c) on the date
on which any such Loan either becomes due (by acceleration or otherwise) or is
prepaid (the date as described in the foregoing clauses (a), (b) or (c) being
hereinafter referred to as the "Payment Date"), the Assignee shall pay the
Assignor an amount equal to the principal amount of the portion of such
Eurodollar Loan or Absolute Rate Loan assigned to the Assignee which is
outstanding on the Payment Date. If the Assignor and the Assignee agree that the
Payment Date for such Eurodollar Loan or Absolute Rate Loan shall be the
Effective Date, they shall agree to the interest rate applicable to the portion
of such Loan assigned hereunder for the period from the Effective Date to the
end of the existing Interest Period applicable to such Loan (the "Agreed
Interest Rate") and any interest received by the Assignee in excess of the
Agreed Interest Rate shall be remitted to the Assignor. In the event interest
for the period from the Effective Date to but not including the Payment Date is
not paid by the Borrower with respect to any Eurodollar Loan or Absolute Rate
Loan sold by the Assignor to the Assignee hereunder, the Assignee shall pay to
the Assignor interest for such period on the portion of such Eurodollar Loan or
Absolute Rate Loan sold by the Assignor to the Assignee hereunder at the
applicable rate provided by the Credit Agreement. In the event a prepayment of
any Eurodollar Loan or Absolute Rate Loan which is existing on the Payment Date
and assigned by the Assignor to the Assignee hereunder occurs after the Payment
Date but before the end of the Interest Period applicable to such Loan, the
Assignee shall remit to the Assignor the excess of the prepayment penalty paid
with respect to the portion of such Eurodollar Loan or Absolute Rate Loan
assigned to the Assignee hereunder over the amount which would have been paid if
such prepayment penalty was calculated based on the Agreed Interest Rate. The
Assignee will also promptly remit to the Assignor (i) any principal payments
received from the Agent with respect to Eurodollar Loans and Absolute Rate Loans
prior to the Payment Date and (ii) any amounts of interest on Loans and fees
received from the Agent which relate to the portion of the Loans assigned to the
Assignee hereunder for periods prior to the Effective Date, in the case of
Floating Rate Loans, or the Payment Date, in the case of Eurodollar Loans and
Absolute Rate Loans, and not previously paid by the Assignee to the Assignor.]*
In the event that either party hereto receives any payment to which the other
party hereto is entitled under this Assignment Agreement, then the party
receiving such amount shall promptly remit it to the other party hereto.

     5.  FEES PAYABLE BY THE ASSIGNEE. [The Assignee shall pay to the Assignor a
         ----------------------------
fee on each day on which a payment of interest or facility fees is made under
the Credit Agreement with respect to the amounts assigned to the Assignee
hereunder (other than a payment of interest or facility fees for the period
prior to the Effective Date or, in the case of Eurodollar Loans and Absolute
Rate Loans, the Payment Date, which the Assignee is obligated to deliver to the
Assignor pursuant to Section 4 hereof).  The amount of such fee shall be the
difference between (i) the interest or fee, as applicable, paid with respect to
the amounts assigned to the Assignee hereunder and (ii) the interest or fee, as
applicable, which would have been paid

_______________

*Each Assignor may insert its standard payment provisions in lieu of the payment
terms included in this Exhibit.

                                     -73-
<PAGE>

with respect to the amounts assigned to the Assignee hereunder if each interest
rate was ___ of 1% less than the interest rate paid by the Borrower or if the
facility fee was ___ of 1% less than the facility fee paid by the Borrower, as
applicable. In addition, the Assignee agrees to pay ___% of the recordation fee
required to be paid to the Agent in connection with this Assignment Agreement.]*

     6.  REPRESENTATIONS OF THE ASSIGNOR; LIMITATIONS ON THE ASSIGNOR'S
         --------------------------------------------------------------
LIABILITY. The Assignor represents and warrants that it is the legal and
---------
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim.  It is understood and agreed
that the assignment and assumption hereunder are made without recourse to the
Assignor and that the Assignor makes no other representation or warranty of any
kind to the Assignee.  Neither the Assignor nor any of its officers, directors,
employees, agents or attorneys shall be responsible for (i) the due execution,
legality, validity, enforceability, genuineness, sufficiency or collectability
of the Obligations or the enforcement of any Loan Document, including without
limitation, documents granting the Assignor and the other Lenders a security
interest in assets of the Borrower or any guarantor, (ii) any representation,
warranty or statement made in or in connection with any of the Loan Documents,
(iii) the financial condition or creditworthiness of the Borrower or any
guarantor, (iv) the performance of or compliance with any of the terms or
provisions of any of the Loan Documents, (v) inspecting any of the Property,
books or records of the Borrower, (vi) the validity, enforceability, perfection,
priority, condition, value or sufficiency of any collateral securing or
purporting to secure the Loans or (vii) any mistake, error of judgment, or
action taken or omitted to be taken in connection with the Loans or the Loan
Documents.

     7.  REPRESENTATIONS OF THE ASSIGNEE. The Assignee (i) confirms that it has
         -------------------------------
received a copy of the Credit Agreement, together with copies of the financial
statements requested by the Assignee and such other documents and information as
it has deemed appropriate to make its own credit analysis and decision to enter
into this Assignment Agreement, (ii) agrees that it will, independently and
without reliance upon the Agent, the Assignor or any other Lender and based on
such documents and information at it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Loan Documents, (iii) appoints and authorizes the Agent to take such action
as agent on its behalf and to exercise such powers under the Loan Documents as
are delegated to the Agent by the terms thereof, together with such powers as
are reasonably incidental thereto, (iv) agrees that it will perform in
accordance with their terms all of the obligations which by the terms of the
Loan Documents are required to be performed by it as a Lender, (v) agrees that
its payment instructions and notice instructions are as set forth in the
attachment to Schedule 1, [and (vi) attaches the forms prescribed by the
Internal Revenue Service of the United States certifying that the Assignee is
entitled to receive payments under the Loan Documents without deduction or
withholding of any United States federal income taxes].**

_______________________

**to be inserted if the Assignee is not incorporated under the laws of the
United States, or a state thereof.

                                     -74-
<PAGE>

     8.   INDEMNITY. The Assignee agrees to indemnify and hold the Assignor
          ---------
harmless against any and all damages, losses, costs and expenses (including,
without limitation, reasonable attorneys' fees) and liabilities incurred by the
Assignor in connection with or arising in any manner from the Assignee's non-
performance of the obligations assumed under this Assignment Agreement.

     9.   SUBSEQUENT ASSIGNMENTS. After the Effective Date, the Assignee shall
          ----------------------
have the right pursuant to Section 12.3.1 of the Credit Agreement to assign the
rights which are assigned to the Assignee hereunder to any entity or Person,
provided that (i) any such subsequent assignment does not violate any of the
terms and conditions of the Loan Documents or any law, rule, regulation, order,
writ, judgment, injunction or decree and that any consent required under the
terms of the Loan Documents has been obtained and (ii) unless the prior written
consent of the Assignor is obtained, the Assignee is not thereby released from
its obligations to the Assignor hereunder, if any remain unsatisfied, including,
without limitation, its obligations under Sections 4, 5 and 8 hereof.

     10.  REDUCTIONS OF AGGREGATE COMMITMENT. If any reduction in the Aggregate
          ----------------------------------
Commitment occurs between the date of this Assignment Agreement and the
Effective Date, the percentage interest specified in Item 3 of Schedule 1 shall
remain the same, but the dollar amount purchased shall be recalculated based on
the reduced Aggregate Commitment.

     11.  ENTIRE AGREEMENT. This Assignment Agreement and the attached Notice of
          ----------------
Assignment embody the entire agreement and understanding between the parties
hereto and supersede all prior agreements and understandings between the parties
hereto relating to the subject matter hereof.

     12.  GOVERNING LAW. This Assignment Agreement shall be governed by the
          -------------
internal law, and not the law of conflicts, of the State of Illinois.

     13.  NOTICES.  Notices shall be given under this Assignment Agreement in
          -------
the manner set forth in the Credit Agreement.  For the purpose hereof, the
addresses of the parties hereto (until notice of a change is delivered) shall be
the address set forth in the attachment to Schedule 1.

                                     -75-
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have executed this Assignment
Agreement by their duly authorized officers as of the date first above written.

                              [NAME OF ASSIGNOR]

                                                   By:_______________________

                                                   Title:____________________

                              [NAME OF ASSIGNEE]

                                                   By:_______________________

                                                   Title:____________________

                                     -76-
<PAGE>

                                  SCHEDULE 1
                            to Assignment Agreement

1.   Description and Date of Credit Agreement:  Credit Agreement dated as of
October 22, 1997 among Torchmark Corporation, The First National Bank of
Chicago, individually and as agent, and the lenders party thereto, as from time
to time amended.

2.   Date of Assignment Agreement:  _____________, 19

3.   Amounts (As of Date of Item 2 above):

                                   Ratable             Competitive
                                   Loan Facility       Bid Loan Facility
                                   -------------       -----------------
  a. Total of
        Commitments (Loans)*
        under Credit
        Agreement                  $_______            $_______

  b. Assignee's
        Percentage
        of each Facility
        purchased under
        the Assignment
        Agreement**                ______%             ______%

  c. Amount of
        Assigned Share
        in each Facility
        purchased under
        the Assignment
        Agreement                  $_______            $_______

4.   Assignee's Aggregate
  (Loan Amount)* Commitment
  Amount Purchased Hereunder:      $_______

5.   Proposed Effective Date:                          _________

Accepted and Agreed:

____________________

*   If a Commitment has been terminated, insert outstanding Loans in place of
    Commitment.

**  Percentage taken to 10 decimal places.

                                     -77-
<PAGE>

[NAME OF ASSIGNOR]                                 [NAME OF ASSIGNEE]

By:_________________________________________________________________________

Title:______________________________________________________________________

                                     -78-
<PAGE>

               Attachment to SCHEDULE 1 to ASSIGNMENT AGREEMENT

        Attach Assignor's Administrative Information Sheet, which must
           include notice address for the Assignor and the Assignee

                                     -79-
<PAGE>

                                  EXHIBIT "I"
                            to Assignment Agreement

                                    NOTICE

                                 OF ASSIGNMENT
                                 -------------

                                                                  ___________,19

To:     Torchmark Corporation*
        2001 Third Avenue South
        Birmingham, Alabama  35233

        The First National Bank of Chicago
        One First National Plaza
        Chicago, Illinois  60670

From:   [NAME OF ASSIGNOR] (the "Assignor")

        [NAME OF ASSIGNEE] (the "Assignee")

        1.  We refer to that Credit Agreement (the "Credit Agreement")
described in Item 1 of Schedule 1 attached hereto ("Schedule 1").  Capitalized
terms used herein and not otherwise defined herein or in such consent shall have
the meanings attributed to them in the Credit Agreement.

        2.  This Notice of Assignment (this "Notice") is given and delivered
to [the Borrower and]* the Agent pursuant to Section 12.3.2 of the Credit
Agreement.

        3.  The Assignor and the Assignee have entered into an Assignment
Agreement, dated as of ___________, 19__ (the "Assignment"), pursuant to which,
among other things, the Assignor has sold, assigned, delegated and transferred
to the Assignee, and the Assignee has purchased, accepted and assumed from the
Assignor the percentage interest specified in Item 3 of Schedule 1 of all
outstandings, rights and obligations under the Credit Agreement relating to the
facilities listed in Item 3 of Schedule 1, including, without limitation, such
interest in the Assignor's Commitment (if applicable) and the Loans owing to the
Assignor relating to such facilities.  The Effective Date of the Assignment
shall be the later of the date specified in Item 5 of Schedule 1 to the
Assignment ("Schedule 1") or two Business Days (or such shorter period as agreed
to by the Agent) after this Notice of Assignment and any consents and fees
required by Sections [12.3.1 and 12.3.2] of the Credit Agreement have been
delivered to the Agent, provided

_________________________________
*    To be included only if consent must be obtained from the Borrower pursuant
     to Section 12.3.1 of the Credit Agreement.

                                     -80-
<PAGE>

that the Effective Date shall not occur if any condition precedent agreed to by
the Assignor and the Assignee has not been satisfied.

          4.  The Assignor and the Assignee hereby give to the Borrower and the
Agent notice of the assignment and delegation referred to herein.  The Assignor
will confer with the Agent before the date specified in Item 5 of Schedule 1 to
determine if the Assignment Agreement will become effective on such date
pursuant to Section 3 hereof, and will confer with the Agent to determine the
Effective Date pursuant to Section 3 hereof if it occurs thereafter.  The
Assignor shall notify the Agent if the Assignment Agreement does not become
effective on any proposed Effective Date as a result of the failure to satisfy
the conditions precedent agreed to by the Assignor and the Assignee.   At the
request of the Agent, the Assignor will give the Agent written confirmation of
the satisfaction of the conditions precedent.

          5.  The Assignor or the Assignee shall pay to the Agent on or before
the Effective Date the processing fee of $3,500 required by Section 12.3.2 of
the Credit Agreement.

          6.  If Notes are outstanding on the Effective Date, the Assignor and
the Assignee request and direct that the Agent prepare and cause the Borrower to
execute and deliver new Notes or, as appropriate, replacements notes, to the
Assignor and the Assignee.  The Assignor and, if applicable, the Assignee each
agree to deliver to the Agent the original Note received by it from the Borrower
upon its receipt of a new Note in the appropriate amount.

          7.  The Assignee advises the Agent that notice and payment
instructions are set forth in the attachment to Schedule 1.

          8.  Each party consenting to the Assignment in the space indicated
below hereby releases the Assignor from any obligations to it which have been
assigned to the Assignee.

[NAME OF ASSIGNOR]                        [NAME OF ASSIGNEE]

By:_____________________________________________________________________________

Title:__________________________________________________________________________

                                     -81-
<PAGE>

ACKNOWLEDGED AND CONSENTED                   ACKNOWLEDGED [AND CONSENTED
TO BY THE FIRST NATIONAL BANK                TO] BY TORCHMARK CORPORATION
OF CHICAGO, as Agent

By:_____________________________________________________________________________

Title:__________________________________________________________________________

                [Attach photocopy of Schedule 1 to Assignment]

                                     -82-
<PAGE>

                                 EXHIBIT "II"

                              CONSENT AND RELEASE
                              -------------------

TO:       [NAME OF ASSIGNOR]

          [NAME OF ASSIGNEE]

                                                            ________________, 19

     1.  We acknowledge receipt from  ___________________ (the "Assignor") and
_______________________ (the "Assignee") of the Notice of Assignment, dated as
of ______________, 19__ (the "Notice").  Capitalized terms used herein and not
otherwise defined herein shall have the meanings attributed to them in the
Notice.

     2.  In consideration of the assumption by the Assignee of the obligations
of the Assignor as referred to in the Notice, the Borrower hereby (i)
irrevocably consents, as required by Section 12.3.1 of the Credit Agreement, to
the assignment and delegation referred to in the Notice and (ii) as of the
Effective Date, irrevocably reduces the percentage of the Assignor in the
Aggregate Commitment by the percentage of the Aggregate Commitment assigned to
the Assignee and releases the Assignor from all of its obligations to the
Borrower under the Loan Documents to the extent that such obligations have been
assumed by the Assignee.

     3.  The Borrower directs the Agent to prepare for issuance by the Borrower
new Notes as requested by the Assignor and the Assignee in the Notice.

     4.  In consideration of the assumption by the Assignee of the obligations
of the Assignor as referred to in the Notice, the Agent hereby (i) irrevocably
consents, as required by Section 12.3.1     of the Credit Agreement, to the
assignment and delegation referred to in the Notice, (ii) as of the Effective
Date, irrevocably releases the Assignor from its obligations to the Agent under
the Loan Documents to the extent that such obligations have been assumed by the
Assignee, and (iii) agrees that, as of the Effective Date, the Agent shall
consider the Assignee as a "Lender" for all purposes under the Loan Documents to
the extent of the assignment and delegation referred to in the Notice.

                                     -83-
<PAGE>

TORCHMARK CORPORATION                             THE FIRST NATIONAL BANK OF
                                                  CHICAGO, as Agent

By:_____________________________                  By:_________

Title:__________________________                  Title:______

                                     -84-
<PAGE>

                                  EXHIBIT "I"
                LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION

To The First National Bank of Chicago,
as Agent (the "Agent") under the Credit Agreement
Described Below.

Re:  Credit Agreement dated as of October 22, 1997 (as the same may be amended
     or modified, the "Credit Agreement") among Torchmark Corporation (the
     "Borrower"), the Lenders named therein and the Agent

     Terms used herein and not otherwise defined shall have the meanings
assigned thereto in the Credit Agreement.

     The Agent is specifically authorized and directed to act upon the following
standing money transfer instructions with respect to the proceeds of Advances or
other extensions of credit from time to time until receipt by the Agent of a
specific written revocation of such instructions by the Borrower; provided,
                                                                  --------
however, that the Agent may otherwise transfer funds as hereafter directed in
-------
writing by the Borrower in accordance with Section 13.1 of the Credit Agreement
or based on any telephonic notice made in accordance with Section 2.11 of the
Credit Agreement.

Facility Identification Number(s)_______________________________________________

Customer/Account Name___________________________________________________________
Transfer Funds To

For Account No._________________________________________________________________
Reference/Attention To__________________________________________________________

Authorized Officer (Customer
Representative)

(Please Print)                               Signature

Bank Officer Name

(Please Print)                               Signature

(Deliver Completed Form to Credit Support Staff For Immediate Processing)

                                     -85-
<PAGE>

                                  SCHEDULE "1"

                       LENDER COMMITMENTS AND ADDRESSES

Commitment   Address
----------   -------

$73,000,000  THE FIRST NATIONAL BANK OF CHICAGO,
                           Individually and as Agent
                           One First National Plaza
                           Chicago, Illinois  60670
                           Attention: Financial Services Division
                           Telephone No.: (312) 732-7074
                           Telecopier No.: (312) 732-4033
                           Telex No.: 4330253

$48,000,000  AMSOUTH BANK
                           1900 5th Avenue North - 7th Floor
                           Birmingham, AL  35203
                           Attention:  John M. Kettig, Senior Vice President
                           Telephone No.:  (205) 326-5240
                           Telecopier No.:  (205) 801-0157

$48,000,000                BANK OF AMERICA NATIONAL TRUST AND
                           SAVINGS ASSOCIATION
                           231 South LaSalle Street
                           Chicago, IL  60697
                           Attention:  Dana L. Ragiel, Vice President
                           Telephone No.:  (312) 828-6723
                           Telecopier No.:  (312) 987-0889

$48,000,000                BANK OF MONTREAL
                           115 South LaSalle Street
                           Chicago, IL  60697
                           Attention:  Dan Streiff, Director
                           Telephone No.:  (312) 750-3775
                           Telecopier No.:  (312) 750-3783

$48,000,000                THE CHASE MANHATTAN BANK
                           270 Park Avenue, 20th Floor
                           New York, NY  10017
                           Attention:  Peter Platten, Vice President
                           Telephone No.:  (212) 270-7527
                           Telecopier No.:  (212) 270-1511

$48,000,000                FLEET NATIONAL BANK
                           777 Main Street, MSN 250
                           Hartford, CT  06115
                           Attention:  Jeffrey Simpson, Vice President

                                     -86-
<PAGE>

                           Telephone No.:  (860) 986-2688
                           Telecopier No.:  (860) 986-1264

$48,000,000                REGIONS BANK
                           417 North 20th Street, 2nd Floor
                           Birmingham, AL  35203
                           Attention:  Robert Kuhn, Vice President
                           Telephone No.:  (205) 326-7104
                           Telecopier No.:  (205) 326-7739

$48,000,000                SOUTHTRUST BANK, N.A.
                           420 North 20th Street
                           Birmingham, AL  35203
                           Attention:  Curtis J. Perry, Vice President
                           Telephone No.:  (205) 254-5799
                           Telecopier No.:  (205) 254-5022

$39,000,000                THE BANK OF NEW YORK
                           One Wall Street, 17th Floor
                           New York, NY  10286
                           Attention:  Melanie L. Shorofsky, Vice President
                           Telephone No.:  (212) 635-6482
                           Telecopier No.:  (212) 809-9520

$30,000,000                COMPASS BANK
                           15 South 20th Street, 2nd Floor
                           Birmingham, AL  35233
                           Attention:  Eric Cates
                           Telephone No.:  (205) 933-3238
                           Telecopier No.:  (205) 933-3926

$30,000,000                DRESDNER BANK AG, NEW YORK BRANCH AND GRAND
                           CAYMAN BRANCH
                           75 Wall Street
                           New York, NY  10005-2889
                           Attention:  Lloyd C. Stevens
                           Telephone No.:  (212) 429-2229
                           Telecopier No.:  (212) 429-2524

$24,000,000                DEUTSCHE BANK AG, NEW YORK BRANCH AND/OR
                           CAYMAN ISLANDS BRANCH
                           31 West 52nd Street
                           New York, NY  10019
                           Attention:  Susan A. Maros, Vice President
                           Telephone No.:  (212) 474-8104
                           Telecopier No.:  (212) 474-8108

$24,000,000                MELLON BANK, N.A.
                           One Mellon Bank Center
                           Pittsburgh, PA  15258

                                     -87-
<PAGE>

                           Attention:  Euclid Noble
                           Telephone No.:  (412) 234-7922
                           Telecopier No.:  (412) 234-8087

$24,000,000                NATIONSBANK OF TEXAS, N.A.
                           901 Main Street, 66th Floor
                           Dallas, Texas  75202-3748
                           Attention:  D. Keith Thompson, Vice President
                           Telephone No.:  (214) 508-0611
                           Telecopier No.:  (214) 508-0604

$20,000,000                UMB BANK, N.A.
                           1010 Grand Avenue
                           Kansas City, MO  64103
                           Attention:  David A. Proffitt, Senior Vice President
                           Telephone No.:  (816) 860-7919
                           Telecopier No.:  (816) 860-7143

$600,000,000  Aggregate Commitment
============

                                     -88-
<PAGE>

                                  SCHEDULE "2"

                            SIGNIFICANT SUBSIDIARIES

                                                        Percentage of
                                                        Voting Stock
Name of Significant                State of             Owned by Borrower
 Subsidiary                        Incorporation        or Subsidiaries
---------------------------        -------------        -----------------
Globe Life And Accident
Insurance Company                  Delaware                100%

Liberty National Life
Insurance Company                  Alabama                 100%

United American
Insurance Company                  Delaware                100%

United Investors Life
Insurance Company                  Missouri                100%

Waddell & Reed Investment
Management Company                 Kansas             100%

American Income Life
Insurance Company                  Indiana            100%

                                     -89-
<PAGE>

                                 SCHEDULE "3"

                              INSURANCE LICENSES

<TABLE>
<CAPTION>

Significant                       Jurisdictions                            Type of
Insurance                         in which                                 Insurance
Subsidiary                        company holds                            ---------
----------                        active Licenses
                                  ---------------
<S>                               <C>                                      <C>

Globe Life And Accident           All states except New York plus Guam     Life and Accident and
Insurance Company                 and the District of Columbia             Health

Liberty National Life Insurance   All states except New York plus Guam     Life and Accident and
Company                           and the District of Columbia             Health

United American Insurance         All states except New York plus the      Life and Accident and
Company                           District of Columbia, Puerto Rico and    Health
                                  Canada

United Investors                  All states except New York plus the      Life and Accident and
Life Insurance Company            District of Columbia                     Health

American Income Life Insurance    All states except New York plus New      Life and Accident and
Company                           Zealand, Puerto Rico, the U.S. Virgin    Health
                                  Islands, Canada, and the District of
                                  Columbia
</TABLE>
<PAGE>

                                 SCHEDULE "4"

                                 PRICING GRID

                          (in basis points per annum)

----------------------------------------------------------------------------
                                  Level II  Level III   Level IV    Level V
                         Level I
----------------------------------------------------------------------------
Borrower Debt
Rating*                X A + /A1  X A/A2   X A - /A3 X BBB + /Baa1  aBB/Baa2
----------------------------------------------------------------------------
Applicable Facility
Fee Percentage:              7.0     8.0         9.0          10.0      12.5
----------------------------------------------------------------------------
Applicable Euro-dollar
Margin:                     13.0    14.5        16.0          20.0      27.5
----------------------------------------------------------------------------

*    If a Borrower Debt Rating is assigned by each of Standard & Poor's Ratings
     Group, a division of the McGraw Hill Companies, Duff & Phelps Credit Rating
     Co. and Moody's Investor Services, Inc., then the applicable pricing level
     will be based on the two highest of such ratings.  If a Borrower Debt
     Rating is assigned by only two of such rating agencies, then the applicable
     pricing level will be based on the higher of the two ratings.  However, if
     in such case the ratings differential is two levels, the applicable pricing
     level will be based on the level between such ratings.  If the ratings
     differential is more than two levels, then the applicable pricing level
     will be one level higher than the lower of the two ratings.  If a Borrower
     Debt Rating is assigned by only one of such rating agencies, then the
     applicable pricing level will be based on such rating.  For any time a
     Borrower Debt Rating is not assigned by any of such rating agencies, Level
     V pricing shall be applicable.  If more than one of the above percentages
     applies at any time, the Applicable Facility Fee Percentage or Applicable
     Eurodollar Margin, as applicable, shall be the lowest of such applicable
     percentages.
<PAGE>

                      AMENDMENT NO. 1 TO CREDIT AGREEMENT
                      -----------------------------------

     This Amendment No. 1 to Credit Agreement is dated as of January 16, 1998 by
and among TORCHMARK CORPORATION, a Delaware corporation (the "Borrower"), the
Lenders named in the Credit Agreement referred to below (the "Lenders"), and THE
FIRST NATIONAL BANK OF CHICAGO, individually and as Agent for the Lenders.

                             W I T N E S S E T H:

     WHEREAS, the Borrower, the Lenders and the Agent are parties to that
certain Credit Agreement dated as of October 22, 1997 (the "Agreement");

     WHEREAS, the Borrower contemplates divesting its equity interest in its
subsidiary Waddell & Reed Financial, Inc. ("WRFI") by means of a special
dividend to the Borrower's stockholders subsequent to an initial public offering
of WRFI's Class A Common Stock (as such transactions are more fully described in
that certain Form S-1 Registration Statement No. 333-43687 (the "Registration
Statement") filed by WRFI with the Securities and Exchange Commission (the
"SEC") on January 2, 1998; and

     WHEREAS, the Borrower and the Lenders desire to amend the Agreement to
permit the Borrower to effect such divestiture and disposition.

     NOW, THEREFORE, in consideration of the premises herein contained, and for
other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto hereby agree as follows:

I.   Defined Terms.
     -------------

     Each capitalized term used herein but not otherwise defined herein shall
have the meaning ascribed to such term in the Agreement.

II.  Amendment of Agreement.
     ----------------------

     Section 6.11 of the Agreement is hereby amended in its entirety to read as
follows:

     6.11.  Sale of Assets.  The Borrower will not, nor will it permit any
            --------------
     Subsidiary to, lease, sell or otherwise dispose of all or a Substantial
     Portion of its Property (exclusive of (i) Investments sold in the ordinary
     course of business and (ii) the disposition of any or all of the Borrower's
     equity interest in Waddell & Reed Financial, Inc.) to any other Person(s)
     in any calendar year.

III. Representations.
     ---------------

     In order to induce the Lenders and the Agent to enter into this Amendment
No. 1, the Borrower represents and warrants that:

     1.   There exists no Default or Unmatured Default on the date hereof.
<PAGE>

       2.   The execution and delivery by the Borrower of this Amendment No. 1
has been duly authorized by all requisite corporate proceedings, and this
Amendment No. 1 and the Agreement, as amended by this Amendment No. 1,
constitute the legal, valid and binding obligations of the Borrower.

IV.    Effectiveness.
       -------------

       This Amendment No. 1 shall become effective as of the date first above
written (the "Effective Date") upon the receipt by the Agent of the following:

       1.   Counterparts of this Amendment No. 1 duly executed by the Borrower
and the Required Lenders; and

       2.   Evidence that the SEC has declared the Registration Statement
effective and that the initial public offering and sale of WRFI's Class A Common
Stock as contemplated therein has been consummated.

V.     Ratification.
       ------------

       Except as specifically set forth above, the Agreement shall remain
unaltered and in full force and effect and the respective terms, conditions and
covenants thereof are hereby ratified and confirmed in all respects.

VI.    Reference to Agreement.
       ----------------------

       Upon the effectiveness of this Amendment No. 1, each reference in the
Agreement to "this Agreement", "hereof", "herein" or "hereunder" or words of
like import, and all references to the Agreement in any of the other Loan
Documents, shall mean and be a reference to the Agreement as amended hereby.

VII.   Execution in Counterparts.
       -------------------------

       This Amendment No. 1 may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

VIII.  Governing Law.
       -------------

       This Amendment No. 1 shall be governed by, enforced and construed in
accordance with the internal laws, without regard to conflicts of law
provisions, of the State of Illinois, but giving effect to Federal laws
applicable to national banks.

       IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have executed
this Amendment No. 1 as of the date first above written.

                                             TORCHMARK CORPORATION

                                      -2-
<PAGE>

By:_____________________________________________________________________________

Title:__________________________________________________________________________

                                        THE FIRST NATIONAL BANK OF CHICAGO,
                                        Individually and as Agent

By:_____________________________________________________________________________

Title:__________________________________________________________________________

                                        AMSOUTH BANK

                                        By:_________

                                        Title:__

                                        BANK OF AMERICA NATIONAL TRUST AND
                                        SAVINGS ASSOCIATION

                                        By:_________

                                        Title:__

                                        BANK OF MONTREAL

                                        By:_________

                                        Title:__

THE BANK OF NEW YORK

By:_____

Title:__

THE CHASE MANHATTAN                     By:_____
BANK

                                      -3-
<PAGE>

Title:__

REGIONS BANK

By:_____

Title:__

FLEET NATIONAL BANK

By:_____

Title:__

SOUTHTRUST BANK OF ALABAMA

By:_____

Title:__

COMPASS BANK                            NATIONSBANK OF TEXAS, N.A.

By:_____                                By:_____

Title:__                                Title:__

                                        DEUTSCHE BANK AG, NEW YORK BRANCH
                                        AND/OR CAYMAN ISLANDS BRANCH

                                        By:_____

                                        Title:__

                                        By:_____

                                        Title:__

                                      -4-
<PAGE>

DRESDNER BANK AG,
NEW YORK BRANCH AND
GRAND CAYMAN
BRANCH

By:_____

Title:__

By:_____

Title:__

MELLON BANK, N.A.

By:_____

Title:__

UMB BANK, N.A.

By:_____

Title:__

                                      -5-

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