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                        AMENDED AND RESTATED DECLARATION
                                    OF TRUST

                                  by and among

                       STATE STREET BANK AND TRUST COMPANY
                      OF CONNECTICUT, NATIONAL ASSOCIATION,
                            as Institutional Trustee,

                            PENN-AMERICA GROUP, INC.,
                                   as Sponsor,

                                       and
                JON S. SALTZMAN, JOSEPH F. MORRIS AND BRIAN RILEY
                               as Administrators,

                          Dated as of December 4, 2002



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

ARTICLE I INTERPRETATION AND DEFINITIONS....................................1
         Section 1.1.      Definitions......................................1

ARTICLE II ORGANIZATION.....................................................7
         Section 2.1.      Name.............................................7
         Section 2.2.      Office...........................................7
         Section 2.3.      Purpose..........................................7
         Section 2.4.      Authority........................................7
         Section 2.5.      Title to Property of the Trust...................8
         Section 2.6.      Powers and Duties of the Institutional
                           Trustee and the Administrators ..................8
         Section 2.7.      Prohibition of Actions by the Trust
                           and the Institutional Trustee ..................12
         Section 2.8.      Powers and Duties of the
                           Institutional Trustee ..........................13
         Section 2.9.      Certain Duties and  Responsibilities
                           of the  Institutional  Trustee and
                           Administrators..................................15
         Section 2.10.     Certain Rights of Institutional Trustee.........17
         Section 2.11.     Execution of Documents..........................19
         Section 2.12.     Not Responsible for Recitals or
                           Issuance of Securities .........................19
         Section 2.13.     Duration of Trust...............................19
         Section 2.14.     Mergers.........................................20

ARTICLE III SPONSOR........................................................22
         Section 3.1.      Sponsor's Purchase of Common Securities.........22
         Section 3.2.      Responsibilities of the Sponsor.................22
         Section 3.3.      Expenses........................................22
         Section 3.4.      Right to Proceed................................23

ARTICLE IV INSTITUTIONAL TRUSTEE AND ADMINISTRATORS........................23
         Section 4.1.      Institutional Trustee; Eligibility..............23
         Section 4.2.      Administrators..................................24
         Section 4.3.      Appointment,  Removal  and
                           Resignation  of  Institutional  Trustee
                           and Administrators..............................24
         Section 4.4.      Institutional Trustee Vacancies.................25
         Section 4.5.      Effect of Vacancies.............................25
         Section 4.6.      Meetings of the Institutional
                           Trustee and the Administrators .................26
         Section 4.7.      Delegation of Power.............................26
         Section 4.8.      Conversion, Consolidation
                           or Succession to Business ......................26

ARTICLE V DISTRIBUTIONS....................................................27
         Section 5.1.      Distributions...................................27

ARTICLE VI ISSUANCE OF SECURITIES..........................................27
         Section 6.1.      General Provisions Regarding
                           Securities .....................................27
         Section 6.2.      Paying Agent, Transfer Agent
                           and Registrar ..................................28
         Section 6.3.      Form and Dating.................................28
         Section 6.4.      Mutilated, Destroyed, Lost or
                           Stolen Certificates ............................29
         Section 6.5.      Temporary Securities............................29
         Section 6.6.      Cancellation....................................29

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         Section 6.7.      Rights of Holders; Waivers of Past Defaults.....29

ARTICLE VII DISSOLUTION AND TERMINATION OF TRUST...........................31
         Section 7.1.      Dissolution and Termination of Trust............31

ARTICLE VIII TRANSFER OF INTERESTS.........................................32
         Section 8.1.      General.........................................32
         Section 8.2.      Transfer Procedures and Restrictions............33
         Section 8.3.      Deemed Security Holders.........................36

ARTICLE IX LIMITATION OF LIABILITY OF HOLDERS OF
SECURITIES, INSTITUTIONAL TRUSTEE OR OTHERS ...............................36
         Section 9.1.      Liability.......................................36
         Section 9.2.      Exculpation.....................................36
         Section 9.3.      Fiduciary Duty..................................37
         Section 9.4.      Indemnification.................................37
         Section 9.5.      Outside Businesses..............................40
         Section 9.6.      Compensation; Fee...............................40

ARTICLE X ACCOUNTING.......................................................41
         Section 10.1.     Fiscal Year.....................................41
         Section 10.2.     Certain Accounting Matters......................41
         Section 10.3.     Banking.........................................41
         Section 10.4.     Withholding.....................................41

ARTICLE XI AMENDMENTS AND MEETINGS.........................................42
         Section 11.1.     Amendments......................................42
         Section 11.2.     Meetings of the Holders
                           of Securities; Action by Written Consent .......44

ARTICLE XII REPRESENTATIONS OF INSTITUTIONAL TRUSTEE.......................45
         Section 12.1.     Representations and
                           Warranties of Institutional Trustee ............45

ARTICLE XIII MISCELLANEOUS.................................................46
         Section 13.1.     Notices.........................................46
         Section 13.2.     Governing Law...................................47
         Section 13.3.     Intention of the Parties........................47
         Section 13.4.     Headings........................................47
         Section 13.5.     Successors and Assigns..........................48
         Section 13.6.     Partial Enforceability..........................48
         Section 13.7.     Counterparts....................................48

Annex I....................Terms of Securities
Exhibit A-1................Form of Capital Security Certificate
Exhibit A-2................Form of Common Security Certificate
Exhibit B..................Specimen of Initial Debenture
Exhibit C..................Placement Agreement


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                              AMENDED AND RESTATED

                              DECLARATION OF TRUST

                                       OF

                         PENN-AMERICA STATUTORY TRUST I

                                December 4, 2002

         AMENDED AND RESTATED  DECLARATION  OF TRUST  ("Declaration")  dated and
effective  as of  December  4, 2002,  by the  Institutional  Trustee (as defined
herein), the Administrators (as defined herein), the Sponsor (as defined herein)
and by the holders,  from time to time, of undivided beneficial interests in the
Trust (as defined herein) to be issued pursuant to this Declaration;

         WHEREAS, the Institutional  Trustee, the Administrators and the Sponsor
established  Penn-America  Statutory  Trust I (the "Trust"),  a statutory  trust
under the Statutory Trust Act (as defined  herein)  pursuant to a Declaration of
Trust  dated  as of  November  12,  2002  (the  "Original  Declaration"),  and a
Certificate  of Trust  filed  with the  Secretary  of the  State of the State of
Connecticut  on November 12,  2002,  for the sole purpose of issuing and selling
certain securities  representing undivided beneficial interests in the assets of
the Trust and  investing  the  proceeds  thereof  in certain  debentures  of the
Debenture Issuer (as defined herein);

         WHEREAS, as of the date hereof, no interests in the Trust have been
issued; and

         WHEREAS, the Institutional Trustee, the Administrators and the Sponsor,
by this Declaration,  amend and restate each and every term and provision of the
Original Declaration;

         NOW,  THEREFORE,  it being  the  intention  of the  parties  hereto  to
continue the Trust as a statutory  trust under the Statutory  Trust Act and that
this Declaration  constitutes the governing  instrument of such statutory trust,
the Institutional Trustee declares that all assets contributed to the Trust will
be held in trust for the  benefit  of the  holders,  from  time to time,  of the
securities  representing  undivided  beneficial  interests  in the assets of the
Trust issued  hereunder,  subject to the  provisions  of this  Declaration.  The
parties hereto hereby agree as follows:

                                   ARTICLE I

                         INTERPRETATION AND DEFINITIONS

     Section 1.1 Definitions. Unless the context otherwise requires:
                 -----------

     (a) Capitalized terms used in this Declaration but not defined in the
preamble above have the respective meanings assigned to them in this Section
1.1;

     (b) a term defined anywhere in this Declaration has the same meaning
throughout;

     (c) all references to "the Declaration" or "this Declaration" are to this
Declaration as modified, supplemented or amended from time to time;

     (d) all references in this Declaration to Articles and Sections and Annexes
and Exhibits are to Articles and Sections of and Annexes and Exhibits to this
Declaration unless otherwise specified; and

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     (e) a reference to the singular includes the plural and vice versa.

         "Additional Interest" has the meaning set forth in the Indenture.

         "Administrative  Action" has the meaning set forth in paragraph 4(a) of
Annex I.

         "Administrators"  means each of Jon S.  Saltzman,  Joseph F. Morris and
Brian Riley,  solely in such  Person's  capacity as  Administrator  of the Trust
created and continued hereunder and not in such Person's individual capacity, or
such  Administrator's  successor in interest in such capacity,  or any successor
appointed as herein provided.

         "Affiliate"  has the same  meaning as given to that term in Rule 405 of
the Securities Act or any successor rule thereunder.

         "Authorized Officer" of a Person means any Person that is authorized to
bind such Person.

         "Bankruptcy Event" means, with respect to any Person:

         (a) a  court having  jurisdiction  in the  premises  shall enter a
decree or order for  relief in  respect of such  Person in an  involuntary  case
under  any  applicable  bankruptcy,  insolvency  or  other  similar  law  now or
hereafter in effect, or appointing a receiver, liquidator,  assignee, custodian,
trustee,   sequestrator  (or  similar  official)  of  such  Person  or  for  any
substantial  part of its property,  or ordering the winding-up or liquidation of
its affairs and such decree or order shall  remain  unstayed and in effect for a
period of 90 consecutive days; or

         (b) such   Person  shall  commence  a  voluntary  case  under  any
applicable  bankruptcy,  insolvency  or other  similar law now or  hereafter  in
effect, shall consent to the entry of an order for relief in an involuntary case
under any such law, or shall consent to the appointment of or taking  possession
by a receiver, liquidator, assignee, trustee, custodian,  sequestrator (or other
similar  official) of such Person of any  substantial  part of its property,  or
shall make any general  assignment  for the benefit of creditors,  or shall fail
generally to pay its debts as they become due.

         "Business Day" means any day other than  Saturday,  Sunday or any other
day on which banking institutions in New York City or Hartford,  Connecticut are
permitted or required by any applicable law to close.

         "Capital  Securities"  has the meaning set forth in  paragraph  1(a) of
Annex I.

         "Capital Security Certificate" means a definitive  Certificate in fully
registered form  representing a Capital  Security  substantially  in the form of
Exhibit A-1.

         "Certificate" means any certificate evidencing Securities.

         "Closing Date" has the meaning set forth in the Placement Agreement.

         "Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor legislation.

         "Common  Securities"  has the  meaning set forth in  paragraph  1(b) of
Annex I.

         "Common Security  Certificate" means a definitive  Certificate in fully
registered  form  representing a Common  Security  substantially  in the form of
Exhibit A-2.

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<PAGE>


         "Company  Indemnified  Person"  means  (a) any  Administrator;  (b) any
Affiliate  of any  Administrator;  (c) any  officers,  directors,  shareholders,
members, partners, employees, representatives or agents of any Administrator; or
(d) any officer, employee or agent of the Trust or its Affiliates.

         "Corporate Trust Office" means the office of the Institutional  Trustee
at which the corporate trust business of the Institutional Trustee shall, at any
particular  time,  be  principally  administered,  which  office  at the date of
execution of this  Declaration is located at 225 Asylum Street,  Goodwin Square,
Hartford, Connecticut 06103.

         "Coupon Rate" has the meaning set forth in paragraph 2(a) of Annex I.

         "Covered  Person"  means:  (a) any  Administrator,  officer,  director,
shareholder, partner, member, representative, employee or agent of (i) the Trust
or (ii) any of the Trust's Affiliates; and (b) any Holder of Securities.

         "Creditor" has the meaning set forth in Section 3.3.

         "Debenture Issuer" means Penn-America Group, Inc., a Pennsylvania
corporation, in its capacity as issuer of the Debentures under the Indenture.

         "Debenture  Trustee"  means  State  Street  Bank and Trust  Company  of
Connecticut,  National  Association,  as  trustee  under the  Indenture  until a
successor is appointed thereunder, and thereafter means such successor trustee.

         "Debentures"  means the Floating  Rate Junior  Subordinated  Deferrable
Interest  Debentures  due 2032 to be issued by the  Debenture  Issuer  under the
Indenture.

         "Defaulted Interest" has the meaning set forth in the Indenture.

         "Determination  Date" has the  meaning set forth in  paragraph  4(a) of
Annex I.

         "Direct Action" has the meaning set forth in Section 2.8(d).

         "Distribution" means a distribution payable to Holders of Securities in
accordance with Section 5.1.

         "Distribution Payment Date" has the meaning set forth in paragraph 2(b)
of Annex I.

         "Distribution  Period" has the meaning set forth in  paragraph  2(a) of
Annex I.

         "Distribution  Rate" means, for the period beginning on (and including)
the date of  original  issuance  and  ending on (but  excluding)  March 4, 2003,
5.42375%,  and for the period  beginning  on (and  including)  March 4, 2003 and
thereafter, the Coupon Rate.

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

     (a) the occurrence of an Indenture Event of Default; or

     (b) default by the Trust in the payment of any Optional Redemption Price of
any Security when it becomes due and payable; or

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<PAGE>

     (c) default in the performance, or breach, in any material respect, of any
covenant or warranty of the Institutional Trustee in this Declaration (other
than those specified in clause (a) or (b) above) and continuation of such
default or breach for a period of 60 days after there has been given, by
registered or certified mail to the Institutional Trustee and to the Sponsor by
the Holders of at least 25% in aggregate liquidation amount of the outstanding
Capital Securities, a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice of
Default" hereunder; or

     (d) the occurrence of a Bankruptcy Event with respect to the Institutional
Trustee if a successor Institutional Trustee has not been appointed within 90
days thereof.

         "Extension Period" has the meaning set forth in paragraph 2(b) of Annex
I.

         "Fiduciary  Indemnified  Person" shall mean the Institutional  Trustee,
any  Affiliate  of  the  Institutional  Trustee  and  any  officers,  directors,
shareholders,   members,  partners,  employees,   representatives,   custodians,
nominees or agents of the Institutional Trustee.

         "Fiscal Year" has the meaning set forth in Section 10.1.

         "Guarantee" means the guarantee agreement to be dated as of the Closing
Date, of the Sponsor in respect of the Capital Securities.

         "Holder"  means a Person in whose  name a  Certificate  representing  a
Security is registered,  such Person being a beneficial owner within the meaning
of the Statutory Trust Act.

         "Indemnified  Person" means a Company Indemnified Person or a Fiduciary
Indemnified Person.

         "Indenture"  means the Indenture dated as of the Closing Date,  between
the Debenture Issuer and the Debenture Trustee,  and any indenture  supplemental
thereto pursuant to which the Debentures are to be issued, as such Indenture and
any supplemental  indenture may be amended,  supplemented or otherwise  modified
from time to time.

         "Indenture  Event of Default" means an "Event of Default" as defined in
the Indenture.

         "Institutional  Trustee"  means the  Trustee  meeting  the  eligibility
requirements set forth in Section 4.1.

         "Interest"  means any  interest  due on the  Debentures  including  any
Additional Interest and Defaulted Interest.

         "Investment  Company"  means an  investment  company  as defined in the
Investment Company Act.

         "Investment  Company Act" means the Investment  Company Act of 1940, as
amended from time to time, or any successor legislation.

         "Investment  Company Event" has the meaning set forth in paragraph 4(a)
of Annex I.

         "Liquidation" has the meaning set forth in paragraph 3 of Annex I.

         "Liquidation  Distribution" has the meaning set forth in paragraph 3 of
Annex I.


                                       4

<PAGE>


         "Majority in liquidation  amount of the Securities"  means Holder(s) of
outstanding  Securities voting together as a single class or, as the context may
require,  Holders of  outstanding  Capital  Securities or Holders of outstanding
Common  Securities  voting  separately as a class,  who are the record owners of
more than 50% of the aggregate  liquidation  amount (including the stated amount
that would be paid on  redemption,  liquidation  or otherwise,  plus accrued and
unpaid  Distributions  to  the  date  upon  which  the  voting  percentages  are
determined) of all outstanding Securities of the relevant class.

         "Maturity Date" has the meaning set forth in paragraph 4(a) of Annex I.

         "Officers'   Certificates"   means,  with  respect  to  any  Person,  a
certificate signed by two Authorized  Officers of such Person, and, with respect
to the Administrators, a certificate signed by at least two Administrators.  Any
Officers'  Certificate  delivered with respect to compliance with a condition or
covenant providing for it in this Declaration shall include:

     (a) a statement that each individual signing the Officers' Certificate has
read the covenant or condition and the definitions relating thereto;

     (b) a brief statement of the nature and scope of the examination or
investigation undertaken by each individual in rendering the Officers'
Certificate;

     (c) a statement that each such individual signing the Officers' Certificate
has made such examination or investigation as, in such individual's opinion, is
necessary to enable such individual to express an informed opinion as to whether
or not such covenant or condition has been complied with; and

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

         "Optional Redemption Price" has the meaning set forth in paragraph 4(a)
of Annex I.

         "Paying Agent" has the meaning specified in Section 6.2.

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

         "Placement  Agreement"  means the Placement  Agreement  relating to the
offering and sale of Capital Securities in the form of Exhibit C.

         "Property Account" has the meaning set forth in Section 2.8(c).

         "Pro Rata" has the meaning set forth in paragraph 8 of Annex I.

         "Quorum" means a majority of the  Administrators  or, if there are only
two Administrators, both of them.

         "Redemption  Date" has the meaning set forth in paragraph 4(a) of Annex
I.

         "Redemption/Distribution Notice" has the meaning set forth in paragraph
4(e) of Annex I.

         "Registrar" has the meaning set forth in Section 6.2.

         "Responsible Officer" means, with respect to the Institutional Trustee,
any officer  within the  Corporate  Trust Office of the  Institutional  Trustee,
including  any  vice-president,  any  assistant  vice-president,  any  assistant


                                       5
<PAGE>


secretary,  the treasurer,  any assistant treasurer,  any trust officer or other
officer of the Corporate Trust Office of the Institutional  Trustee  customarily
performing  functions  similar to those performed by any of the above designated
officers and also means,  with respect to a particular  corporate  trust matter,
any other  officer to whom such  matter is  referred  because of that  officer's
knowledge of and familiarity with the particular subject.

         "Restricted  Securities  Legend"  has the  meaning set forth in Section
8.2(b).

         "Rule 3a-5" means Rule 3a-5 under the Investment Company Act.

         "Rule 3a-7" means Rule 3a-7 under the Investment Company Act.

         "Securities" means the Common Securities and the Capital Securities.

         "Securities Act" means the Securities Act of 1933, as amended from time
to time, or any successor legislation.

         "Special Event" has the meaning set forth in paragraph 4(a) of Annex I.

         "Special  Redemption  Date" has the meaning set forth in paragraph 4(a)
of Annex I.

         "Special  Redemption Price" has the meaning set forth in paragraph 4(a)
of Annex I.

         "Sponsor" means Penn-America  Group, Inc., a Pennsylvania  corporation,
or any  successor  entity in a merger,  consolidation  or  amalgamation,  in its
capacity as sponsor of the Trust.

         "Statutory  Trust Act" means Chapter 615 of Title 34 of the Connecticut
General Statutes, Sections 500, et seq. as may be amended from time to time.

         "Successor Entity" has the meaning set forth in Section 2.14(b).

         "Successor  Institutional Trustee" has the meaning set forth in Section
4.3(a).

         "Successor Securities" has the meaning set forth in Section 2.14(b).

         "Super  Majority" has the meaning set forth in paragraph  5(b) of Annex
I.

         "Tax Event" has the meaning set forth in paragraph 4(a) of Annex I.

         "10% in  liquidation  amount  of the  Securities"  means  Holder(s)  of
outstanding  Securities voting together as a single class or, as the context may
require,  Holders of  outstanding  Capital  Securities or Holders of outstanding
Common Securities voting separately as a class, who are the record owners of 10%
or more of the aggregate  liquidation  amount  (including the stated amount that
would be paid on redemption,  liquidation or otherwise,  plus accrued and unpaid
Distributions  to the date upon which the voting  percentages are determined) of
all outstanding Securities of the relevant class.

         "3-Month LIBOR" has the meaning set forth in paragraph 4(a) of Annex I.

         "Transfer Agent" has the meaning set forth in Section 6.2.

         "Treasury  Regulations"  means the  income tax  regulations,  including
temporary  and proposed  regulations,  promulgated  under the Code by the United
States Treasury, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).


                                       6
<PAGE>


         "Trust Property" means (a) the Debentures,  (b) any cash on deposit in,
or owing to, the Property  Account and (c) all proceeds and rights in respect of
the  foregoing  and any other  property  and  assets  for the time being held or
deemed to be held by the  Institutional  Trustee  pursuant to the trusts of this
Declaration.

         "U.S.  Person"  means a United  States  Person as  defined  in  Section
7701(a)(30) of the Code.

                                   ARTICLE II

                                  ORGANIZATION

     Section 2.1 Name. The Trust is named "Penn-America Statutory Trust I," as
such name may be modified from time to time by the Administrators following
written notice to the Holders of the Securities. The Trust's activities may be
conducted under the name of the Trust or any other name deemed advisable by the
Administrators.

     Section 2.2 Office. The address of the principal office of the Trust is c/o
State Street Bank and Trust Company of Connecticut, National Association, 225
Asylum Street, Goodwin Square, Hartford, Connecticut 06103. On at least 10
Business Days written notice to the Holders of the Securities, the
Administrators may designate another principal office, which shall be in a state
of the United States or in the District of Columbia.

     Section 2.3 Purpose. The exclusive purposes and functions of the Trust are
(a) to issue and sell the Securities representing undivided beneficial interests
in the assets of the Trust, (b) to invest the gross proceeds from such sale to
acquire the Debentures, (c) to facilitate direct investment in the assets of the
Trust through issuance of the Common Securities and the Capital Securities and
(d) except as otherwise limited herein, to engage in only those other activities
necessary or incidental thereto. The Trust shall not borrow money, issue debt or
reinvest proceeds derived from investments, pledge any of its assets, or
otherwise undertake (or permit to be undertaken) any activity that would cause
the Trust not to be classified for United States federal income tax purposes as
a grantor trust.

     Section 2.4 Authority. Except as specifically provided in this Declaration,
the Institutional Trustee shall have exclusive and complete authority to carry
out the purposes of the Trust. An action taken by the Institutional Trustee in
accordance with its powers shall constitute the act of and serve to bind the
Trust. In dealing with the Institutional Trustee acting on behalf of the Trust,
no Person shall be required to inquire into the authority of the Institutional
Trustee to bind the Trust. Persons dealing with the Trust are entitled to rely
conclusively on the power and authority of the Institutional Trustee as set
forth in this Declaration. The Administrators shall have only those ministerial
duties set forth herein with respect to accomplishing the purposes of the Trust
and are not intended to be trustees or fiduciaries with respect to the Trust or
the Holders. The Institutional Trustee shall have the right, but shall not be
obligated except as provided in Section 2.6, to perform those duties assigned to
the Administrators.

     Section 2.5 Title to Property of the Trust. Except as provided in Section
2.8 with respect to the Debentures and the Property Account or as otherwise
provided in this Declaration, legal title to all assets of the Trust shall be
vested in the Trust. The Holders shall not have legal title to any part of the
assets of the Trust, but shall have an undivided beneficial interest in the
assets of the Trust.

     Section 2.6 Powers and Duties of the Institutional Trustee and the
Administrators.

     (a) The Institutional Trustee and the Administrators shall conduct the
affairs of the Trust in accordance with the terms of this Declaration. Subject
to the limitations set forth in paragraph (b) of this Section, and in accordance
with the following provisions (i) and (ii), the Institutional Trustee and the


                                       7
<PAGE>


Administrators shall have the authority to enter into all transactions and
agreements determined by the Institutional Trustee to be appropriate in
exercising the authority, express or implied, otherwise granted to the
Institutional Trustee or the Administrators, as the case may be, under this
Declaration, and to perform all acts in furtherance thereof, including without
limitation, the following:

         (i) Each Administrator shall have the power and authority to act on
behalf of the Trust with respect to the following matters:

               (A) the issuance and sale of the Securities;

               (B) to cause the Trust to enter into, and to execute and deliver
     on behalf of the Trust, such agreements as may be necessary or desirable in
     connection with the purposes and function of the Trust, including
     agreements with the Paying Agent;

               (C) ensuring compliance with the Securities Act and applicable
     state securities or blue sky laws;

               (D) the sending of notices (other than notices of default), and
     other information regarding the Securities and the Debentures to the
     Holders in accordance with this Declaration;

               (E) the consent to the appointment of a Paying Agent, Transfer
     Agent and Registrar in accordance with this Declaration, which consent
     shall not be unreasonably withheld or delayed;

               (F) execution and delivery of the Securities in accordance with
     this Declaration;

               (G) execution and delivery of closing certificates pursuant to
     the Placement Agreement and the application for a taxpayer identification
     number;

               (H) unless otherwise determined by the Holders of a Majority in
     liquidation amount of the Securities or as otherwise required by the
     Statutory Trust Act, to execute on behalf of the Trust (either acting alone
     or together with any or all of the Administrators) any documents that the
     Administrators have the power to execute pursuant to this Declaration;

               (I) the taking of any action incidental to the foregoing as the
     Institutional Trustee may from time to time determine is necessary or
     advisable to give effect to the terms of this Declaration for the benefit
     of the Holders (without consideration of the effect of any such action on
     any particular Holder);

               (J) to establish a record date with respect to all actions to be
     taken hereunder that require a record date be established, including
     Distributions, voting rights, redemptions and exchanges, and to issue
     relevant notices to the Holders of Capital Securities and Holders of Common
     Securities as to such actions and applicable record dates; and

               (K) to duly prepare and file all applicable tax returns and tax
     information reports that are required to be filed with respect to the Trust
     on behalf of the Trust.

         (ii) As among the Institutional Trustee and the Administrators, the
Institutional Trustee shall have the power, duty and authority to act on behalf
of the Trust with respect to the following matters:


                                       8
<PAGE>


         (A) the establishment of the Property Account;

         (B) the receipt of the Debentures;

         (C) the collection of interest, principal and any other payments made
in respect of the Debentures in the Property Account;

         (D) the distribution through the Paying Agent of amounts owed to the
Holders in respect of the Securities;

         (E) the exercise of all of the rights, powers and privileges of a
holder of the Debentures;

         (F) the sending of notices of default and other information regarding
the Securities and the Debentures to the Holders in accordance with this
Declaration;

         (G) the distribution of the Trust Property in accordance with the terms
of this Declaration;

         (H) to the extent provided in this Declaration, the winding up of the
affairs of and liquidation of the Trust and the preparation, execution and
filing of the certificate of cancellation with the Secretary of the State of the
State of Connecticut;

         (I) after any Event of Default (provided that such Event of Default is
not by or with respect to the Institutional Trustee) the taking of any action
incidental to the foregoing as the Institutional Trustee may from time to time
determine is necessary or advisable to give effect to the terms of this
Declaration and protect and conserve the Trust Property for the benefit of the
Holders (without consideration of the effect of any such action on any
particular Holder); and

         (J) to take all action that may be necessary for the preservation and
the continuation of the Trust's valid existence, rights, franchises and
privileges as a statutory trust under the laws of the State of Connecticut and
of each other jurisdiction in which such existence is necessary to protect the
limited liability of the Holders of the Capital Securities or to enable the
Trust to effect the purposes for which the Trust was created.

               (iii) The Institutional Trustee shall have the power and
     authority to act on behalf of the Trust with respect to any of the duties,
     liabilities, powers or the authority of the Administrators set forth in
     Section 2.6(a)(i)(D), (E) and (F) herein but shall not have a duty to do
     any such act unless specifically requested to do so in writing by the
     Sponsor, and shall then be fully protected in acting pursuant to such
     written request; and in the event of a conflict between the action of the
     Administrators and the action of the Institutional Trustee, the action of
     the Institutional Trustee shall prevail.

     (b) So long as this Declaration remains in effect, the Trust (or the
Institutional Trustee or Administrators acting on behalf of the Trust) shall not
undertake any business, activities or transaction except as expressly provided
herein or contemplated hereby. In particular, neither the Institutional Trustee
nor the Administrators may cause the Trust to (i) acquire any investments or
engage in any activities not authorized by this Declaration, (ii) sell, assign,
transfer, exchange, mortgage, pledge, set-off or otherwise dispose of any of the
Trust Property or interests therein, including to Holders, except as expressly
provided herein, (iii) take any action that would reasonably be expected (x) to
cause the Trust to fail or cease to qualify as a "grantor trust" for United
States federal income tax purposes or (y) to require



                                       9
<PAGE>

the trust to register as an Investment Company under the Investment Company Act,
(iv) incur any indebtedness for borrowed money or issue any other debt or (v)
take or consent to any action that would result in the placement of a lien on
any of the Trust Property. The Institutional Trustee shall, at the sole cost and
expense of the Trust, defend all claims and demands of all Persons at any time
claiming any lien on any of the Trust Property adverse to the interest of the
Trust or the Holders in their capacity as Holders.

     (c) In connection with the issuance and sale of the Capital Securities, the
Sponsor shall have the right and responsibility to assist the Trust with respect
to, or effect on behalf of the Trust, the following (and any actions taken by
the Sponsor in furtherance of the following prior to the date of this
Declaration are hereby ratified and confirmed in all respects):

               (i) the taking of any action necessary to obtain an exemption
     from the Securities Act;

               (ii) the determination of the States in which to take appropriate
     action to qualify or register for sale all or part of the Capital
     Securities and the determination of any and all such acts, other than
     actions which must be taken by or on behalf of the Trust, and the advice to
     the Administrators of actions they must take on behalf of the Trust, and
     the preparation for execution and filing of any documents to be executed
     and filed by the Trust or on behalf of the Trust, as the Sponsor deems
     necessary or advisable in order to comply with the applicable laws of any
     such States in connection with the sale of the Capital Securities;

               (iii) the negotiation of the terms of, and the execution and
     delivery of, the Placement Agreement providing for the sale of the Capital
     Securities; and

               (iv) the taking of any other actions necessary or desirable to
     carry out any of the foregoing activities.

     (d) Notwithstanding anything herein to the contrary, the Administrators and
the Holders of a Majority in liquidation amount of the Common Securities are
authorized and directed to conduct the affairs of the Trust and to operate the
Trust so that the Trust will not (i) be deemed to be an Investment Company
required to be registered under the Investment Company Act, and (ii) fail to be
classified as a "grantor trust" for United States federal income tax purposes.
The Administrators and the Holders of a Majority in liquidation amount of the
Common Securities shall not take any action inconsistent with the treatment of
the Debentures as indebtedness of the Debenture Issuer for United States federal
income tax purposes. In this connection, the Administrators and the Holders of a
Majority in liquidation amount of the Common Securities are authorized to take
any action, not inconsistent with applicable laws, the Certificate of Trust or
this Declaration, as amended from time to time, that each of the Administrators
and the Holders of a Majority in liquidation amount of the Common Securities
determines in their discretion to be necessary or desirable for such purposes.

     (e) All expenses incurred by the Administrators or the Institutional
Trustee pursuant to this Section 2.6 shall be reimbursed by the Sponsor, and the
Institutional Trustee and the Administrators shall have no obligations with
respect to such expenses.

     (f) The assets of the Trust shall consist of the Trust Property.

     (g) Legal title to all Trust Property shall be vested at all times in the
Institutional Trustee (in its capacity as such) and shall be held and
administered by the Institutional Trustee and the Administrators for the benefit
of the Trust in accordance with this Declaration.


                                       10
<PAGE>


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

     Section 2.7  Prohibition of Actions by the Trust and the Institutional
Trustee.

     (a) The Trust shall not, and the Institutional Trustee shall cause the
Trust not to, engage in any activity other than as required or authorized by
this Declaration. In particular, the Trust shall not and the Institutional
Trustee shall cause the Trust not to:

               (i) invest any proceeds received by the Trust from holding the
     Debentures, but shall distribute all such proceeds to Holders of the
     Securities pursuant to the terms of this Declaration and of the Securities;

               (ii) acquire any assets other than as expressly provided herein;

               (iii) possess Trust Property for other than a Trust purpose;

               (iv) make any loans or incur any indebtedness other than loans
     represented by the Debentures;

               (v) possess any power or otherwise act in such a way as to vary
     the Trust assets or the terms of the Securities in any way whatsoever other
     than as expressly provided herein;

               (vi) issue any securities or other evidences of beneficial
     ownership of, or beneficial interest in, the Trust other than the
     Securities;

               (vii) carry on any "trade or business" as that phrase is used in
     the Code; or

               (viii) other than as provided in this Declaration (including
     Annex I), (A) direct the time, method and place of exercising any trust or
     power conferred upon the Debenture Trustee with respect to the Debentures,
     (B) waive any past default that is waivable under the Indenture, (C)
     exercise any right to rescind or annul any declaration that the principal
     of all the Debentures shall be due and payable, or (D) consent to any
     amendment, modification or termination of the Indenture or the Debentures
     where such consent shall be required unless the Trust shall have received a
     written opinion of counsel to the effect that such modification will not
     cause the Trust to cease to be classified as a "grantor trust" for United
     States federal income tax purposes.

Section 2.8    Powers and Duties of the Institutional Trustee.

     (a) The legal title to the Debentures shall be owned by and held of record
in the name of the Institutional Trustee in trust for the benefit of the Trust
and the Holders of the Securities. The right, title and interest of the
Institutional Trustee to the Debentures shall vest automatically in each Person
who may hereafter be appointed as Institutional Trustee in accordance with
Section 4.3. Such vesting and cessation of title shall be effective whether or
not conveyancing documents with regard to the Debentures have been executed and
delivered.


                                       11
<PAGE>


     (b) The Institutional Trustee shall not transfer its right, title and
interest in the Debentures to the Administrators.

     (c) The Institutional Trustee shall:

               (i) establish and maintain a segregated non-interest bearing
     trust account (the "Property Account") in the name of and under the
     exclusive control of the Institutional Trustee, and maintained in the
     Institutional Trustee's trust department, on behalf of the Holders of the
     Securities and, upon the receipt of payments of funds made in respect of
     the Debentures held by the Institutional Trustee, deposit such funds into
     the Property Account and make payments, or cause the Paying Agent to make
     payments, to the Holders of the Capital Securities and Holders of the
     Common Securities from the Property Account in accordance with Section 5.1.
     Funds in the Property Account shall be held uninvested until disbursed in
     accordance with this Declaration;

               (ii) engage in such ministerial activities as shall be necessary
     or appropriate to effect the redemption of the Capital Securities and the
     Common Securities to the extent the Debentures are redeemed or mature; and

               (iii) upon written notice of distribution issued by the
     Administrators in accordance with the terms of the Securities, engage in
     such ministerial activities as shall be necessary or appropriate to effect
     the distribution of the Debentures to Holders of Securities upon the
     occurrence of certain circumstances pursuant to the terms of the
     Securities.

     (d) The Institutional Trustee may bring or defend, pay, collect,
compromise, arbitrate, resort to legal action with respect to, or otherwise
adjust claims or demands of or against, the Trust that arise out of or in
connection with an Event of Default of which a Responsible Officer of the
Institutional Trustee has actual knowledge or arises out of the Institutional
Trustee's duties and obligations under this Declaration; provided, however, that
if an Event of Default has occurred and is continuing and such event is
attributable to the failure of the Debenture Issuer to pay interest or principal
on the Debentures on the date such interest or principal is otherwise payable
(or in the case of redemption, on the redemption date), then a Holder of the
Capital Securities may directly institute a proceeding for enforcement of
payment to such Holder of the principal of or interest on the Debentures having
a principal amount equal to the aggregate liquidation amount of the Capital
Securities of such Holder (a "Direct Action") on or after the respective due
date specified in the Debentures. In connection with such Direct Action, the
rights of the Holders of the Common Securities will be subrogated to the rights
of such Holder of the Capital Securities to the extent of any payment made by
the Debenture Issuer to such Holder of the Capital Securities in such Direct
Action; provided, however, that no Holder of the Common Securities may exercise
such right of subrogation so long as an Event of Default with respect to the
Capital Securities has occurred and is continuing.

     (e) The Institutional Trustee shall continue to serve as a Trustee until
either:

               (i) the Trust has been completely liquidated and the proceeds of
     the liquidation distributed to the Holders of the Securities pursuant to
     the terms of the Securities and this Declaration; or

               (ii) a Successor Institutional Trustee has been appointed and has
     accepted that appointment in accordance with Section 4.3.

     (f) The Institutional Trustee shall have the legal power to exercise all of
the rights, powers and privileges of a Holder of the Debentures under the
Indenture and, if an Event of Default occurs and is continuing, the
Institutional Trustee may, for the benefit of Holders of the Securities, enforce
its rights as


                                       12
<PAGE>


holder of the Debentures subject to the rights of the Holders pursuant to this
Declaration (including Annex I) and the terms of the Securities.

         The  Institutional  Trustee must  exercise the powers set forth in this
Section 2.8 in a manner that is  consistent  with the purposes and  functions of
the Trust set out in Section 2.3, and the  Institutional  Trustee shall not take
any action that is inconsistent with the purposes and functions of the Trust set
out in Section 2.3.

     Section 2.9 Certain Duties and Responsibilities of the Institutional
Trustee and Administrators.

     (a) The Institutional Trustee, before the occurrence of any Event of
Default and after the curing or waiving of all such Events of Default that may
have occurred, shall undertake to perform only such duties as are specifically
set forth in this Declaration and no implied covenants shall be read into this
Declaration against the Institutional Trustee. In case an Event of Default has
occurred (that has not been cured or waived pursuant to Section 6.7), the
Institutional Trustee shall exercise such of the rights and powers vested in it
by this Declaration, and use the same degree of care and skill in their
exercise, as a prudent person would exercise or use under the circumstances in
the conduct of his or her own affairs.

     (b) The duties and responsibilities of the Institutional Trustee and the
Administrators shall be as provided by this Declaration. Notwithstanding the
foregoing, no provision of this Declaration shall require the Institutional
Trustee or Administrators to expend or risk their own funds or otherwise incur
any financial liability in the performance of any of their duties hereunder, or
in the exercise of any of their rights or powers if the Institutional Trustee or
such Administrator shall have reasonable grounds to believe that repayment of
such funds or adequate protection against such risk of liability is not
reasonably assured to the Institutional Trustee or such Administrator. Whether
or not therein expressly so provided, every provision of this Declaration
relating to the conduct or affecting the liability of or affording protection to
the Institutional Trustee or Administrators shall be subject to the provisions
of this Article. Nothing in this Declaration shall be construed to relieve an
Administrator or the Institutional Trustee from liability for the Institutional
Trustee's or such Administrator's own negligent act, the Institutional Trustee's
or such Administrator's own negligent failure to act, or the Institutional
Trustee's or such Administrator's own willful misconduct. To the extent that, at
law or in equity, the Institutional Trustee or an Administrator has duties and
liabilities relating to the Trust or to the Holders, the Institutional Trustee
or such Administrator shall not be liable to the Trust or to any Holder for the
Institutional Trustee's or such Administrator's good faith reliance on the
provisions of this Declaration. The provisions of this Declaration, to the
extent that they restrict the duties and liabilities of the Administrators or
the Institutional Trustee otherwise existing at law or in equity, are agreed by
the Sponsor and the Holders to replace such other duties and liabilities of the
Administrators or the Institutional Trustee.

     (c) All payments made by the Institutional Trustee or a Paying Agent in
respect of the Securities shall be made only from the revenue and proceeds from
the Trust Property and only to the extent that there shall be sufficient revenue
or proceeds from the Trust Property to enable the Institutional Trustee or a
Paying Agent to make payments in accordance with the terms hereof. Each Holder,
by its acceptance of a Security, agrees that it will look solely to the revenue
and proceeds from the Trust Property to the extent legally available for
distribution to it as herein provided and that the Institutional Trustee and the
Administrators are not personally liable to it for any amount distributable in
respect of any Security or for any other liability in respect of any Security.
This Section 2.9(c) does not limit the liability of the Institutional Trustee
expressly set forth elsewhere in this Declaration.


                                       13
<PAGE>


     (d) The Institutional Trustee shall not be liable for its own acts or
omissions hereunder except as a result of its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:

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

               (ii) the Institutional Trustee shall not be liable with respect
     to any action taken or omitted to be taken by it in good faith in
     accordance with the direction of the Holders of not less than a Majority in
     liquidation amount of the Capital Securities or the Common Securities, as
     applicable, relating to the time, method and place of conducting any
     proceeding for any remedy available to the Institutional Trustee, or
     exercising any trust or power conferred upon the Institutional Trustee
     under this Declaration;

               (iii) the Institutional Trustee's sole duty with respect to the
     custody, safekeeping and physical preservation of the Debentures and the
     Property Account shall be to deal with such property in a similar manner as
     the Institutional Trustee deals with similar property for its fiduciary
     accounts generally, subject to the protections and limitations on liability
     afforded to the Institutional Trustee under this Declaration;

               (iv) the Institutional Trustee shall not be liable for any
     interest on any money received by it except as it may otherwise agree in
     writing with the Sponsor; and money held by the Institutional Trustee need
     not be segregated from other funds held by it except in relation to the
     Property Account maintained by the Institutional Trustee pursuant to
     Section 2.8(c)(i) and except to the extent otherwise required by law; and

               (v) the Institutional Trustee shall not be responsible for
     monitoring the compliance by the Administrators or the Sponsor with their
     respective duties under this Declaration, nor shall the Institutional
     Trustee be liable for any default or misconduct of the Administrators or
     the Sponsor.

     Section  2.10  Certain  Rights of  Institutional Trustee. Subject  to the
provisions of Section 2.9:

     (a) the Institutional Trustee may conclusively rely and shall fully be
protected in acting, or refraining from acting, in good faith upon any
resolution, opinion of counsel, certificate, written representation of a Holder
or transferee, certificate of auditors or any other certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
appraisal, bond, debenture, note, other evidence of indebtedness or other paper
or document believed by it to be genuine and to have been signed, sent or
presented by the proper party or parties;

     (b) if (i) in performing its duties under this Declaration, the
Institutional Trustee is required to decide between alternative courses of
action, (ii) in construing any of the provisions of this Declaration, the
Institutional Trustee finds the same ambiguous or inconsistent with any other
provisions contained herein, or (iii) the Institutional Trustee is unsure of the
application of any provision of this Declaration, then, except as to any matter
as to which the Holders of Capital Securities are entitled to vote under the
terms of this Declaration, the Institutional Trustee may deliver a notice to the
Sponsor requesting the Sponsor's written instructions as to the course of action
to be taken and the Institutional Trustee shall take such action, or refrain
from taking such action, as the Institutional Trustee shall be instructed in
writing, in which event the Institutional Trustee shall have no liability except
for its own negligence or willful misconduct;


                                       14
<PAGE>


     (c) any direction or act of the Sponsor or the Administrators contemplated
by this Declaration shall be sufficiently evidenced by an Officers' Certificate;

     (d) whenever in the administration of this Declaration, the Institutional
Trustee shall deem it desirable that a matter be proved or established before
undertaking, suffering or omitting any action hereunder, the Institutional
Trustee (unless other evidence is herein specifically prescribed) may request
and conclusively rely upon an Officers' Certificate as to factual matters which,
upon receipt of such request, shall be promptly delivered by the Sponsor or the
Administrators;

     (e) the Institutional Trustee shall have no duty to see to any recording,
filing or registration of any instrument (including any financing or
continuation statement or any filing under tax or securities laws) or any
rerecording, refiling or reregistration thereof;

     (f) the Institutional Trustee may consult with counsel of its selection
(which counsel may be counsel to the Sponsor or any of its Affiliates) and the
advice of such counsel shall be full and complete authorization and protection
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon and in accordance with such advice; the
Institutional Trustee shall have the right at any time to seek instructions
concerning the administration of this Declaration from any court of competent
jurisdiction;

     (g) the Institutional Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Declaration at the request or
direction of any of the Holders pursuant to this Declaration, unless such
Holders shall have offered to the Institutional Trustee security or indemnity
reasonably satisfactory to it against the costs, expenses and liabilities which
might be incurred by it in compliance with such request or direction; provided,
that nothing contained in this Section 2.10(g) shall be taken to relieve the
Institutional Trustee, subject to Section 2.9(b), upon the occurrence of an
Event of Default, to exercise such of the rights and powers vested in it by this
Declaration, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs;

     (h) the Institutional Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond,
debenture, note or other evidence of indebtedness or other paper or document,
unless requested in writing to do so by one or more Holders, but the
Institutional Trustee may make such further inquiry or investigation into such
facts or matters as it may see fit;

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

     (j) whenever in the administration of this Declaration the Institutional
Trustee shall deem it desirable to receive instructions with respect to
enforcing any remedy or right or taking any other action hereunder the
Institutional Trustee (i) may request instructions from the Holders of the
Capital Securities which instructions may only be given by the Holders of the
same proportion in liquidation amount of the Capital Securities as would be
entitled to direct the Institutional Trustee under the terms of the Capital
Securities in respect of such remedy, right or action, (ii) may refrain from
enforcing such remedy or right or taking such other action until such
instructions are received, and (iii) shall be fully protected in acting in
accordance with such instructions;


                                       15
<PAGE>


     (k) except as otherwise expressly provided in this Declaration, the
Institutional Trustee shall not be under any obligation to take any action that
is discretionary under the provisions of this Declaration;

     (l) when the Institutional Trustee incurs expenses or renders services in
connection with a Bankruptcy Event, such expenses (including the fees and
expenses of its counsel) and the compensation for such services are intended to
constitute expenses of administration under any bankruptcy law or law relating
to creditors rights generally;

     (m) the Institutional Trustee shall not be charged with knowledge of an
Event of Default unless a Responsible Officer of the Institutional Trustee
obtains actual knowledge of such event or the Institutional Trustee receives
written notice of such event from any Holder, the Sponsor or the Debenture
Trustee;

     (n) any action taken by the Institutional Trustee or its agents hereunder
shall bind the Trust and the Holders of the Securities, and the signature of the
Institutional Trustee or its agents alone shall be sufficient and effective to
perform any such action and no third party shall be required to inquire as to
the authority of the Institutional Trustee to so act or as to its compliance
with any of the terms and provisions of this Declaration, both of which shall be
conclusively evidenced by the Institutional Trustee's or its agent's taking such
action; and

     (o) no provision of this Declaration shall be deemed to impose any duty or
obligation on the Institutional Trustee to perform any act or acts or exercise
any right, power, duty or obligation conferred or imposed on it, in any
jurisdiction in which it shall be illegal, or in which the Institutional Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts, or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Institutional
Trustee shall be construed to be a duty.

     Section 2.11 Execution of Documents. Unless otherwise determined in writing
by the Institutional Trustee, and except as otherwise required by the Statutory
Trust Act, the Institutional Trustee, or any one or more of the Administrators,
as the case may be, is authorized to execute on behalf of the Trust any
documents that the Institutional Trustee or the Administrators, as the case may
be, have the power and authority to execute pursuant to Section 2.6.

     Section 2.12 Not Responsible for Recitals or Issuance of Securities. The
recitals contained in this Declaration and the Securities shall be taken as the
statements of the Sponsor, and the Institutional Trustee does not assume any
responsibility for their correctness. The Institutional Trustee makes no
representations as to the value or condition of the property of the Trust or any
part thereof. The Institutional Trustee makes no representations as to the
validity or sufficiency of this Declaration, the Debentures or the Securities.

     Section 2.13 Duration of Trust. The Trust, unless earlier dissolved
pursuant to the provisions of Article VII hereof, shall be in existence for 35
years from the Closing Date.

     Section 2.14 Mergers.

     (a) The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other body, except as
described in Section 2.14(b) and (c) and except in connection with the
liquidation of the Trust and the distribution of the Debentures to Holders of
Securities pursuant to Section 7.1(a)(iv) of the Declaration or Section 4 of
Annex I.


                                       16
<PAGE>



     (b) The Trust may, with the consent of the Institutional Trustee and
without the consent of the Holders of the Capital Securities, consolidate,
amalgamate, merge with or into, or be replaced by a trust organized as such
under the laws of any state; provided that:

               (i) if the Trust is not the surviving entity, such successor
     entity (the "Successor Entity") either:

                   (A) expressly assumes all of the obligations of the Trust
               under the Securities; or

                   (B) substitutes for the Securities other securities having
               substantially the same terms as the Securities (the "Successor
               Securities") so that the Successor Securities rank the same as
               the Securities rank with respect to Distributions and payments
               upon Liquidation, redemption and otherwise;

               (ii) the Sponsor expressly appoints a trustee of the Successor
     Entity that possesses substantially the same powers and duties as the
     Institutional Trustee as the Holder of the Debentures;

               (iii) such merger, consolidation, amalgamation or replacement
     does not adversely affect the rights, preferences and privileges of the
     Holders of the Securities (including any Successor Securities) in any
     material respect;

               (iv) the Institutional Trustee receives written confirmation from
     a nationally recognized statistical rating organization that rates
     securities issued by the initial purchaser of the Capital Securities that
     it will not reduce or withdraw the rating of any such securities because of
     such merger, conversion, consolidation, amalgamation or replacement;

               (v) such Successor Entity has a purpose substantially identical
     to that of the Trust;

               (vi) prior to such merger, consolidation, amalgamation or
     replacement, the Trust has received an opinion of a nationally recognized
     independent counsel to the Trust experienced in such matters to the effect
     that:

                   (A) such merger, consolidation, amalgamation or replacement
               does not adversely affect the rights, preferences and privileges
               of the Holders of the Securities (including any Successor
               Securities) in any material respect;

                   (B) following such merger, consolidation, amalgamation or
               replacement, neither the Trust nor the Successor Entity will be
               required to register as an Investment Company; and

                   (C) following such merger, consolidation, amalgamation or
               replacement, the Trust (or the Successor Entity) will continue to
               be classified as a "grantor trust" for United States federal
               income tax purposes;

               (vii) the Sponsor guarantees the obligations of such Successor
     Entity under the Successor Securities at least to the extent provided by
     the Guarantee;

               (viii) the Sponsor owns 100% of the common securities of any
     Successor Entity; and

               (ix) prior to such merger, consolidation, amalgamation or
     replacement, the Institutional Trustee shall have received an Officers'
     Certificate of the Administrators and an


                                       17
<PAGE>


     opinion of counsel, each to the effect that all conditions precedent under
     this Section 2.14(b) to such transaction have been satisfied.

     (c) Notwithstanding Section 2.14(b), the Trust shall not, except with the
consent of Holders of 100% in aggregate liquidation amount of the Securities,
consolidate, amalgamate, merge with or into, or be replaced by any other entity
or permit any other entity to consolidate, amalgamate, merge with or into, or
replace it if such consolidation, amalgamation, merger or replacement would
cause the Trust or Successor Entity to be classified as other than a grantor
trust for United States federal income tax purposes.

                                  ARTICLE III

                                     SPONSOR

     Section 3.1 Sponsor's Purchase of Common Securities. On the Closing Date,
the Sponsor will purchase all of the Common Securities issued by the Trust in an
amount at least equal to 3% of the capital of the Trust, at the same time as the
Capital Securities are sold.

     Section 3.2 Responsibilities of the Sponsor. In connection with the issue
and sale of the Capital Securities, the Sponsor shall have the exclusive right
and responsibility to engage in, or direct the Administrators to engage in, the
following activities:

     (a) to determine the States in which to take appropriate action to qualify
or register for sale all or part of the Capital Securities and to do any and all
such acts, other than actions which must be taken by the Trust, and advise the
Trust of actions it must take, and prepare for execution and filing any
documents to be executed and filed by the Trust, as the Sponsor deems necessary
or advisable in order to comply with the applicable laws of any such States; and

     (b) to negotiate the terms of and/or execute on behalf of the Trust, the
Placement Agreement and other related agreements providing for the sale of the
Capital Securities.

     Section 3.3 Expenses. In connection with the offering, sale and issuance of
the Debentures to the Trust and in connection with the sale of the Securities by
the Trust, the Sponsor, in its capacity as Debenture Issuer, shall:

     (a) pay all reasonable costs and expenses relating to the offering, sale
and issuance of the Debentures, including compensation of the Debenture Trustee
under the Indenture in accordance with the provisions of the Indenture;

     (b) be responsible for and shall pay all debts and obligations (other than
with respect to the Securities) and all costs and expenses of the Trust
(including, but not limited to, costs and expenses relating to the organization,
maintenance and dissolution of the Trust), the offering, sale and issuance of
the Securities (including fees to the placement agents in connection therewith),
the fees and expenses (including reasonable counsel fees and expenses) of the
Institutional Trustee and the Administrators, the costs and expenses relating to
the operation of the Trust, including, without limitation, costs and expenses of
accountants, attorneys, statistical or bookkeeping services, expenses for
printing and engraving and computing or accounting equipment, Paying Agents,
Registrars, Transfer Agents, duplicating, travel and telephone and other
telecommunications expenses and costs and expenses incurred in connection with
the acquisition, financing, and disposition of Trust assets and the enforcement
by the Institutional Trustee of the rights of the Holders; and


                                       18
<PAGE>


     (c) pay any and all taxes (other than United States withholding taxes
attributable to the Trust or its assets) and all liabilities, costs and expenses
with respect to such taxes of the Trust.

         The  Sponsor's  obligations  under  this  Section  3.3 shall be for the
benefit  of,  and shall be  enforceable  by,  any  Person  to whom  such  debts,
obligations,  costs,  expenses and taxes are owed (a "Creditor")  whether or not
such  Creditor has received  notice  hereof.  Any such  Creditor may enforce the
Sponsor's  obligations  under this Section 3.3 directly  against the Sponsor and
the  Sponsor  irrevocably  waives any right or remedy to  require  that any such
Creditor take any action against the Trust or any other Person before proceeding
against the Sponsor. The Sponsor agrees to execute such additional agreements as
may be necessary or desirable in order to give full effect to the  provisions of
this Section 3.3.

     Section 3.4 Right to Proceed. The Sponsor acknowledges the rights of
Holders to institute a Direct Action as set forth in Section 2.8(d) hereto.

                                   ARTICLE IV

                    INSTITUTIONAL TRUSTEE AND ADMINISTRATORS

     Section 4.1 Institutional Trustee; Eligibility.

     (a) There shall at all times be one Institutional Trustee which shall:

               (i) not be an Affiliate of the Sponsor;

               (ii) not offer or provide credit or credit enhancement to the
     Trust; and

               (iii) be a banking corporation or trust company organized and
     doing business under the laws of the United States of America or any state
     thereof or the District of Columbia, authorized under such laws to exercise
     corporate trust powers, having a combined capital and surplus of at least
     50 million U.S. dollars ($50,000,000.00), and subject to supervision or
     examination by Federal, state, or District of Columbia authority. If such
     corporation publishes reports of condition at least annually, pursuant to
     law or to the requirements of the supervising or examining authority
     referred to above, then for the purposes of this Section 4.1(a)(iii), the
     combined capital and surplus of such corporation shall be deemed to be its
     combined capital and surplus as set forth in its most recent report of
     condition so published.

     (b) If at any time the Institutional Trustee shall cease to be eligible to
so act under Section 4.1(a), the Institutional Trustee shall immediately resign
in the manner and with the effect set forth in Section 4.3(a).

     (c) If the Institutional Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act of
1939, as amended, the Institutional Trustee shall either eliminate such interest
or resign, to the extent and in the manner provided by, and subject to this
Declaration.

     (d) The initial Institutional Trustee shall be State Street Bank and Trust
Company of Connecticut, National Association.

     Section 4.2 Administrators. Each Administrator shall be a U.S. Person, 21
years of age or older and authorized to bind the Sponsor. The initial
Administrators shall be Jon S. Saltzman, Joseph F. Morris and Brian Riley. There
shall at all times be at least one Administrator. Except where a requirement for
action by a specific number of Administrators is expressly set forth in this
Declaration


                                       19
<PAGE>


and except with respect to any action the taking of which is the subject of a
meeting of the Administrators, any action required or permitted to be taken by
the Administrators may be taken by, and any power of the Administrators may be
exercised by, or with the consent of, any one such Administrator.

     Section 4.3 Appointment, Removal and Resignation of Institutional Trustee
and Administrators.

     (a) Notwithstanding anything to the contrary in this Declaration, no
resignation or removal of the Institutional Trustee and no appointment of a
Successor Institutional Trustee pursuant to this Article shall become effective
until the acceptance of appointment by the Successor Institutional Trustee in
accordance with the applicable requirements of this Section 4.3.

         Subject  to the  immediately  preceding  paragraph,  the  Institutional
Trustee may resign at any time by giving  written  notice thereof to the Holders
of the Securities and by appointing a Successor  Institutional Trustee. Upon the
resignation  of the  Institutional  Trustee,  the  Institutional  Trustee  shall
appoint a  successor  by  requesting  from at least  three  Persons  meeting the
eligibility  requirements,  its expenses  and charges to serve as the  successor
Institutional  Trustee on a form provided by the  Administrators,  and selecting
the  Person  who  agrees to the  lowest  expense  and  charges  (the  "Successor
Institutional  Trustee").  If the  instrument  of  acceptance  by the  Successor
Institutional Trustee required by this Section 4.3 shall not have been delivered
to the  Institutional  Trustee within 60 days after the giving of such notice of
resignation or delivery of the instrument of removal, the Institutional  Trustee
may  petition,  at the expense of the Trust,  any Federal,  state or District of
Columbia  court of competent  jurisdiction  for the  appointment  of a Successor
Institutional Trustee. Such court may thereupon,  after prescribing such notice,
if any, as it may deem proper,  appoint a Successor  Institutional  Trustee. The
Institutional  Trustee  shall  have  no  liability  for  the  selection  of such
successor pursuant to this Section 4.3.

         The Institutional Trustee may be removed by the act of the Holders of a
Majority in  liquidation  amount of the  Capital  Securities,  delivered  to the
Institutional Trustee (in its individual capacity and on behalf of the Trust) if
an Event of Default shall have occurred and be continuing.  If the Institutional
Trustee shall be so removed,  the Holders of Capital  Securities,  by act of the
Holders of a Majority  in  liquidation  amount of the  Capital  Securities  then
outstanding  delivered to the  Institutional  Trustee,  shall promptly appoint a
Successor  Institutional Trustee, and such Successor Institutional Trustee shall
comply with the  applicable  requirements  of this  Section 4.3. If no Successor
Institutional  Trustee shall have been so appointed by the Holders of a Majority
in liquidation amount of the Capital Securities and accepted  appointment in the
manner  required  by this  Section  4.3,  within 30 days  after  delivery  of an
instrument of removal, any Holder who has been a Holder of the Securities for at
least 6 months  may,  on behalf of himself  and all others  similarly  situated,
petition  any  Federal,  state  or  District  of  Columbia  court  of  competent
jurisdiction for the appointment of the Successor  Institutional  Trustee.  Such
court may  thereupon,  after  prescribing  such  notice,  if any, as it may deem
proper, appoint a Successor Institutional Trustee.

         The  Institutional  Trustee  shall give notice of its  resignation  and
removal and each appointment of a Successor Institutional Trustee to all Holders
in the manner  provided in Section 13.1(d) and shall give notice to the Sponsor.
Each notice shall  include the name of the Successor  Institutional  Trustee and
the address of its Corporate Trust Office.

     (b) In case of the appointment hereunder of a Successor Institutional
Trustee, the retiring Institutional Trustee and the Successor Institutional
Trustee shall execute and deliver an amendment hereto wherein the Successor
Institutional Trustee shall accept such appointment and which (i) shall contain
such provisions as shall be necessary or desirable to transfer and confirm to,
and to vest in, the Successor Institutional Trustee all the rights, powers,
trusts and duties of the retiring Institutional Trustee with respect to the
Securities and the Trust and (ii) shall add to or change any of the provisions
of this


                                       20
<PAGE>


Declaration as shall be necessary to provide for or facilitate the
administration of the Trust by more than one Institutional Trustee, it being
understood that nothing herein or in such amendment shall constitute such
Institutional Trustees co-trustees and upon the execution and delivery of such
amendment the resignation or removal of the retiring Institutional Trustee shall
become effective to the extent provided therein and each Successor Institutional
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Institutional Trustee;
but, on request of the Trust or any Successor Institutional Trustee such
retiring Institutional Trustee shall duly assign, transfer and deliver to such
Successor Institutional Trustee all Trust Property, all proceeds thereof and
money held by such retiring Institutional Trustee hereunder with respect to the
Securities and the Trust.

     (c) No Institutional Trustee shall be liable for the acts or omissions to
act of any Successor Institutional Trustee.

     (d) The Holders of the Capital Securities will have no right to vote to
appoint, remove or replace the Administrators, which voting rights are vested
exclusively in the Holder of the Common Securities.

     Section 4.4 Institutional Trustee Vacancies. If the Institutional Trustee
ceases to hold office for any reason a vacancy shall occur. A resolution
certifying the existence of such vacancy by the Institutional Trustee shall be
conclusive evidence of the existence of such vacancy. The vacancy shall be
filled with a trustee appointed in accordance with Section 4.3.

     Section 4.5 Effect of Vacancies. The death, resignation, retirement,
removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to
perform the duties of the Institutional Trustee shall not operate to dissolve,
terminate or annul the Trust or terminate this Declaration.

     Section 4.6 Meetings of the Institutional Trustee and the Administrators.
Meetings of the Administrators shall be held from time to time upon the call of
an Administrator. Regular meetings of the Administrators may be held in person
in the United States or by telephone, at a place (if applicable) and time fixed
by resolution of the Administrators. Notice of any in-person meetings of the
Institutional Trustee with the Administrators or meetings of the Administrators
shall be hand delivered or otherwise delivered in writing (including by
facsimile, with a hard copy by overnight courier) not less than 48 hours before
such meeting. Notice of any telephonic meetings of the Institutional Trustee
with the Administrators or meetings of the Administrators or any committee
thereof shall be hand delivered or otherwise delivered in writing (including by
facsimile, with a hard copy by overnight courier) not less than 24 hours before
a meeting. Notices shall contain a brief statement of the time, place and
anticipated purposes of the meeting. The presence (whether in person or by
telephone) of the Institutional Trustee or an Administrator, as the case may be,
at a meeting shall constitute a waiver of notice of such meeting except where
the Institutional Trustee or an Administrator, as the case may be, attends a
meeting for the express purpose of objecting to the transaction of any activity
on the grounds that the meeting has not been lawfully called or convened. Unless
provided otherwise in this Declaration, any action of the Institutional Trustee
or the Administrators, as the case may be, may be taken at a meeting by vote of
the Institutional Trustee or a majority vote of the Administrators present
(whether in person or by telephone) and eligible to vote with respect to such
matter, provided that a Quorum is present, or without a meeting by the unanimous
written consent of the Institutional Trustee or the Administrators. Meetings of
the Institutional Trustee and the Administrators together shall be held from
time to time upon the call of the Institutional Trustee or an Administrator.



                                       21
<PAGE>


     Section 4.7 Delegation of Power.

     (a) Any Administrator may, by power of attorney consistent with applicable
law, delegate to any other natural person over the age of 21 that is a U.S.
Person his or her power for the purpose of executing any documents contemplated
in Section 2.6; and

     (b) the Administrators shall have power to delegate from time to time to
such of their number the doing of such things and the execution of such
instruments either in the name of the Trust or the names of the Administrators
or otherwise as the Administrators may deem expedient, to the extent such
delegation is not prohibited by applicable law or contrary to the provisions of
the Trust, as set forth herein.

     Section 4.8 Conversion, Consolidation or Succession to Business. Any Person
into which the Institutional Trustee may be merged or converted or with which it
may be consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Institutional Trustee shall be a party, or any Person
succeeding to all or substantially all the corporate trust business of the
Institutional Trustee shall be the successor of the Institutional Trustee
hereunder, provided such Person shall be otherwise qualified and eligible under
this Article, without the execution or filing of any paper or any further act on
the part of any of the parties hereto.

                                    ARTICLE V

                                  DISTRIBUTIONS

     Section 5.1 Distributions. Holders shall receive Distributions in
accordance with the applicable terms of the relevant Holder's Securities.
Distributions shall be made on the Capital Securities and the Common Securities
in accordance with the preferences set forth in their respective terms. If and
to the extent that the Debenture Issuer makes a payment of Interest or any
principal on the Debentures held by the Institutional Trustee, the Institutional
Trustee shall and is directed, to the extent funds are available for that
purpose, to make a distribution (a "Distribution") of such amounts to Holders.

                                   ARTICLE VI

                             ISSUANCE OF SECURITIES

     Section 6.1 General Provisions Regarding Securities.

     (a) The Administrators shall, on behalf of the Trust, issue one series of
capital securities substantially in the form of Exhibit A-1 representing
undivided beneficial interests in the assets of the Trust having such terms as
are set forth in Annex I and one series of common securities representing
undivided beneficial interests in the assets of the Trust having such terms as
are set forth in Annex I. The Trust shall issue no securities or other interests
in the assets of the Trust other than the Capital Securities and the Common
Securities. The Capital Securities rank pari passu to, and payment thereon shall
be made Pro Rata with, the Common Securities except that, where an Event of
Default has occurred and is continuing, the rights of Holders of the Common
Securities to payment in respect of Distributions and payments upon liquidation,
redemption and otherwise are subordinated to the rights to payment of the
Holders of the Capital Securities as set forth in Annex I.

     (b) The Certificates shall be signed on behalf of the Trust by one or more
Administrators. Such signature shall be the facsimile or manual signature of any
Administrator. In case any Administrator of the Trust who shall have signed any
of the Securities shall cease to be such Administrator before the Certificates
so signed shall be delivered by the Trust, such Certificates


                                       22
<PAGE>


nevertheless may be delivered as though the person who signed such Certificates
had not ceased to be such Administrator, and any Certificate may be signed on
behalf of the Trust by such persons who, at the actual date of execution of such
Security, shall be an Administrator of the Trust, although at the date of the
execution and delivery of the Declaration any such person was not such an
Administrator. A Capital Security shall not be valid until authenticated by the
facsimile or manual signature of an Authorized Officer of the Institutional
Trustee. Such signature shall be conclusive evidence that the Capital Security
has been authenticated under this Declaration. Upon written order of the Trust
signed by one Administrator, the Institutional Trustee shall authenticate the
Capital Securities for original issue. The Institutional Trustee may appoint an
authenticating agent that is a U.S. Person acceptable to the Trust to
authenticate the Capital Securities. A Common Security need not be so
authenticated.

     (c) The consideration received by the Trust for the issuance of the
Securities shall constitute a contribution to the capital of the Trust and shall
not constitute a loan to the Trust.

     (d) Upon issuance of the Securities as provided in this Declaration, the
Securities so issued shall be deemed to be validly issued, fully paid and,
except as provided in Section 9.1(b) with respect to the Common Securities,
non-assessable.

     (e) Every Person, by virtue of having become a Holder in accordance with
the terms of this Declaration, shall be deemed to have expressly assented and
agreed to the terms of, and shall be bound by, this Declaration and the
Guarantee.

     Section 6.2 Paying Agent, Transfer Agent and Registrar. The Trust shall
maintain in Hartford, Connecticut, an office or agency where the Capital
Securities may be presented for payment ("Paying Agent"), and an office or
agency where Securities may be presented for registration of transfer or
exchange (the "Transfer Agent"). The Trust shall keep or cause to be kept at
such office or agency a register for the purpose of registering Securities,
transfers and exchanges of Securities, such register to be held by a registrar
(the "Registrar"). The Administrators may appoint the Paying Agent, the
Registrar and the Transfer Agent and may appoint one or more additional Paying
Agents or one or more co-Registrars, or one or more co-Transfer Agents in such
other locations as they shall determine. The term "Paying Agent" includes any
additional paying agent, the term "Registrar" includes any additional registrar
or co-Registrar and the term "Transfer Agent" includes any additional transfer
agent. The Administrators may change any Paying Agent, Transfer Agent or
Registrar at any time without prior notice to any Holder. The Administrators
shall notify the Institutional Trustee of the name and address of any Paying
Agent, Transfer Agent and Registrar not a party to this Declaration. The
Administrators hereby initially appoint the Institutional Trustee to act as
Paying Agent, Transfer Agent and Registrar for the Capital Securities and the
Common Securities. The Institutional Trustee or any of its Affiliates in the
United States may act as Paying Agent, Transfer Agent or Registrar.

     Section 6.3 Form and Dating. The Capital Securities and the Institutional
Trustee's certificate of authentication thereon shall be substantially in the
form of Exhibit A-1, and the Common Securities shall be substantially in the
form of Exhibit A-2, each of which is hereby incorporated in and expressly made
a part of this Declaration. Certificates may be typed, printed, lithographed or
engraved or may be produced in any other manner as is reasonably acceptable to
the Administrators, as conclusively evidenced by their execution thereof. The
Securities may have letters, numbers, notations or other marks of identification
or designation and such legends or endorsements required by law, stock exchange
rule, agreements to which the Trust is subject if any, or usage (provided that
any such notation, legend or endorsement is in a form acceptable to the
Sponsor). The Trust at the direction of the Sponsor shall furnish any such
legend not contained in Exhibit A-1 to the Institutional Trustee in writing.
Each Capital Security shall be dated on or before the date of its
authentication. The terms and provisions of the Securities set forth in Annex I
and the forms of Securities set forth in Exhibits A-1 and A-2 are part of the


                                       23
<PAGE>



terms of this Declaration and to the extent applicable, the Institutional
Trustee, the Administrators and the Sponsor, by their execution and delivery of
this Declaration, expressly agree to such terms and provisions and to be bound
thereby. Capital Securities will be issued only in blocks having a stated
liquidation amount of not less than $500,000.00 and any multiple of $1,000.00 in
excess thereof.

         The Capital Securities are being offered and sold by the Trust pursuant
to the Placement  Agreement in definitive,  registered  form without coupons and
with the Restricted Securities Legend.

     Section 6.4 Mutilated, Destroyed, Lost or Stolen Certificates.

         If:

     (a) any mutilated Certificates should be surrendered to the Registrar, or
if the Registrar shall receive evidence to its satisfaction of the destruction,
loss or theft of any Certificate; and

     (b) there shall be delivered to the Registrar, the Administrators and the
Institutional Trustee such security or indemnity as may be required by them to
keep each of them harmless;

then, in the absence of notice that such Certificate shall have been acquired by
a protected  purchaser,  an  Administrator  on behalf of the Trust shall execute
(and in the case of a Capital Security  Certificate,  the Institutional  Trustee
shall  authenticate)  and  deliver,  in  exchange  for or in  lieu  of any  such
mutilated,  destroyed,  lost or stolen  Certificate,  a new  Certificate of like
denomination.  In connection with the issuance of any new Certificate under this
Section 6.4, the  Registrar or the  Administrators  may require the payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection  therewith.  Any  duplicate  Certificate  issued  pursuant to this
Section shall  constitute  conclusive  evidence of an ownership  interest in the
relevant Securities, as if originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time.

     Section 6.5 Temporary Securities. Until definitive Securities are ready for
delivery, the Administrators may prepare and, in the case of the Capital
Securities, the Institutional Trustee shall authenticate, temporary Securities.
Temporary Securities shall be substantially in the form of definitive Securities
but may have variations that the Administrators consider appropriate for
temporary Securities. Without unreasonable delay, the Administrators shall
prepare and, in the case of the Capital Securities, the Institutional Trustee
shall authenticate, definitive Securities in exchange for temporary Securities.

     Section 6.6 Cancellation. The Administrators at any time may deliver
Securities to the Institutional Trustee for cancellation. The Registrar shall
forward to the Institutional Trustee any Securities surrendered to it for
registration of transfer, redemption or payment. The Institutional Trustee shall
promptly cancel all Securities surrendered for registration of transfer,
payment, replacement or cancellation and shall dispose of such canceled
Securities as the Administrators direct. The Administrators may not issue new
Securities to replace Securities that have been paid or that have been delivered
to the Institutional Trustee for cancellation.

     Section 6.7 Rights of Holders; Waivers of Past Defaults.

     (a) The legal title to the Trust Property is vested exclusively in the
Institutional Trustee (in its capacity as such) in accordance with Section 2.5,
and the Holders shall not have any right or title therein other than the
undivided beneficial interest in the assets of the Trust conferred by their
Securities and they shall have no right to call for any partition or division of
property, profits or rights of the Trust except as described below. The
Securities shall be personal property giving only the rights specifically set
forth therein and in this Declaration. The Securities shall have no preemptive
or similar rights.


                                       24
<PAGE>


     (b) For so long as any Capital Securities remain outstanding, if upon an
Indenture Event of Default, the Debenture Trustee fails or the holders of not
less than 25% in principal amount of the outstanding Debentures fail to declare
the principal of all of the Debentures to be immediately due and payable, the
Holders of a Majority in liquidation amount of the Capital Securities then
outstanding shall have the right to make such declaration by a notice in writing
to the Institutional Trustee, the Sponsor and the Debenture Trustee.

         At any time after a  declaration  of  acceleration  with respect to the
Debentures  has been made and  before a judgment  or decree  for  payment of the
money  due has  been  obtained  by the  Debenture  Trustee  as  provided  in the
Indenture,  if the Institutional Trustee fails to annul any such declaration and
waive such  default,  the  Holders of a Majority  in  liquidation  amount of the
Capital Securities,  by written notice to the Institutional Trustee, the Sponsor
and the  Debenture  Trustee,  may  rescind  and annul such  declaration  and its
consequences if:

               (i) the Debenture Issuer has paid or deposited with the Debenture
     Trustee a sum sufficient to pay

                   (A) all overdue installments of interest on all of the
Debentures,

                   (B) any accrued Additional Interest on all of the Debentures,

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

                   (D) all sums paid or advanced by the Debenture Trustee under
the Indenture and the reasonable compensation, expenses, disbursements and
advances of the Debenture Trustee and the Institutional Trustee, their agents
and counsel; and

               (ii) all Events of Default with respect to the Debentures, other
     than the non-payment of the principal of the Debentures that has become due
     solely by such acceleration, have been cured or waived as provided in
     Section 5.7 of the Indenture.

         The Holders of at least a Majority in liquidation amount of the Capital
Securities  may, on behalf of the Holders of all the Capital  Securities,  waive
any past  default or Event of  Default,  except a default or Event of Default in
the payment of  principal  or interest  (unless such default or Event of Default
has been cured and a sum sufficient to pay all matured  installments of interest
and principal due otherwise  than by  acceleration  has been  deposited with the
Debenture  Trustee) or a default or Event of Default in respect of a covenant or
provision  that under the  Indenture  cannot be modified or amended  without the
consent of the holder of each  outstanding  Debenture.  No such rescission shall
affect any subsequent default or impair any right consequent thereon.

         Upon receipt by the  Institutional  Trustee of written notice declaring
such an  acceleration,  or rescission and annulment  thereof,  by Holders of any
part  of the  Capital  Securities,  a  record  date  shall  be  established  for
determining  Holders of outstanding  Capital Securities entitled to join in such
notice,  which  record  date  shall be at the close of  business  on the day the
Institutional  Trustee receives such notice. The Holders on such record date, or
their duly designated proxies, and only such Persons,  shall be entitled to join
in such notice,  whether or not such Holders  remain  Holders  after such record
date; provided, that unless such declaration of acceleration,  or rescission and
annulment,  as the case may be,  shall have  become  effective  by virtue of the
requisite  percentage  having  joined in such notice prior to the day that is 90
days after such record date,  such notice of  declaration  of  acceleration,  or
rescission and annulment,  as the case may be, shall  automatically  and without
further  action by any Holder be canceled


                                       25
<PAGE>


and of no further effect. Nothing in this paragraph shall prevent a Holder, or a
proxy of a Holder, from giving, after expiration of such 90-day period, a new
written notice of declaration of acceleration, or rescission and annulment
thereof, as the case may be, that is identical to a written notice that has been
canceled pursuant to the proviso to the preceding sentence, in which event a new
record date shall be established pursuant to the provisions of this Section 6.7.

     (c) Except as otherwise provided in paragraphs (a) and (b) of this Section
6.7, the Holders of at least a Majority in liquidation amount of the Capital
Securities may, on behalf of the Holders of all the Capital Securities, waive
any past default or Event of Default and its consequences. Upon such waiver, any
such default or Event of Default shall cease to exist, and any default or Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Declaration, but no such waiver shall extend to any subsequent
or other default or Event of Default or impair any right consequent thereon.

                                  ARTICLE VII

                      DISSOLUTION AND TERMINATION OF TRUST

     Section 7.1 Dissolution and Termination of Trust.

     (a) The Trust shall dissolve on the first to occur of:

               (i) unless earlier dissolved, on December 4, 2037, the expiration
     of the term of the Trust;

               (ii) upon a Bankruptcy Event with respect to the Sponsor, the
     Trust or the Debenture Issuer;

               (iii) (other than in connection with a merger, consolidation or
     similar transaction not prohibited by the Indenture, this Declaration or
     the Guarantee, as the case may be) upon the filing of a certificate of
     dissolution or its equivalent with respect to the Sponsor, upon the consent
     of Holders of a Majority in liquidation amount of the Securities voting
     together as a single class to file a certificate of cancellation with
     respect to the Trust or upon the revocation of the charter of the Sponsor
     and the expiration of 90 days after the date of revocation without a
     reinstatement thereof;

               (iv) upon the distribution of the Debentures to the Holders of
     the Securities in accordance with Section 3 of Annex I;

               (v) upon exercise of the right of the Holder of all of the
     outstanding Common Securities to dissolve the Trust as provided in Annex I
     hereto;

               (vi) upon the entry of a decree of judicial dissolution of the
     Holder of the Common Securities, the Sponsor, the Trust or the Debenture
     Issuer;

               (vii) when all of the Securities shall have been called for
     redemption and the amounts necessary for redemption thereof shall have been
     paid to the Holders in accordance with the terms of the Securities; or

               (viii) before the issuance of any Securities, with the consent of
     the Institutional Trustee and the Sponsor.


                                       26
<PAGE>


     (b) As soon as is practicable after the occurrence of an event referred to
in Section 7.1(a), and after satisfaction of liabilities to creditors of the
Trust as required by applicable law, including of the Statutory Trust Act, and
subject to the terms set forth in Annex I, the Institutional Trustee shall
terminate the Trust by filing a certificate of cancellation with the Secretary
of the State of the State of Connecticut.

     (c) The provisions of Section 2.9 and Article IX shall survive the
termination of the Trust.

                                  ARTICLE VIII

                              TRANSFER OF INTERESTS

     Section 8.1 General.

     (a) Subject to Section 8.1(c), where Capital Securities are presented to
the Registrar or a co-registrar with a request to register a transfer or to
exchange them for an equal number of Capital Securities represented by different
certificates, the Registrar shall register the transfer or make the exchange if
its requirements for such transactions are met. To permit registrations of
transfer and exchanges, the Trust shall issue and the Institutional Trustee
shall authenticate Capital Securities at the Registrar's request.

     (b) Upon issuance of the Common Securities, the Sponsor shall acquire and
retain beneficial and record ownership of the Common Securities and for so long
as the Securities remain outstanding, the Sponsor shall maintain 100% ownership
of the Common Securities; provided, however, that any permitted successor of the
Sponsor, in its capacity as Debenture Issuer, under the Indenture that is a U.S.
Person may succeed to the Sponsor's ownership of the Common Securities.

     (c) Capital Securities may only be transferred, in whole or in part, in
accordance with the terms and conditions set forth in this Declaration and in
the terms of the Securities. To the fullest extent permitted by applicable law,
any transfer or purported transfer of any Security not made in accordance with
this Declaration shall be null and void and will be deemed to be of no legal
effect whatsoever and any such transferee shall be deemed not to be the holder
of such Capital Securities for any purpose, including but not limited to the
receipt of Distributions on such Capital Securities, and such transferee shall
be deemed to have no interest whatsoever in such Capital Securities.

     (d) The Registrar shall provide for the registration of Securities and of
transfers of Securities, which will be effected without charge but only upon
payment (with such indemnity as the Registrar may require) in respect of any tax
or other governmental charges that may be imposed in relation to it. Upon
surrender for registration of transfer of any Securities, the Registrar shall
cause one or more new Securities of the same tenor to be issued in the name of
the designated transferee or transferees. Every Security surrendered for
registration of transfer shall be accompanied by a written instrument of
transfer in form satisfactory to the Registrar duly executed by the Holder or
such Holder's attorney duly authorized in writing. Each Security surrendered for
registration of transfer shall be canceled by the Institutional Trustee pursuant
to Section 6.6. A transferee of a Security shall be entitled to the rights and
subject to the obligations of a Holder hereunder upon the receipt by such
transferee of a Security. By acceptance of a Security, each transferee shall be
deemed to have agreed to be bound by this Declaration.

     (e) The Trust shall not be required (i) to issue, register the transfer of,
or exchange any Securities during a period beginning at the opening of business
15 days before the day of any selection of Securities for redemption and ending
at the close of business on the earliest date on which the relevant notice of
redemption is deemed to have been given to all Holders of the Securities to be
redeemed, or (ii) to register the transfer or exchange of any Security so
selected for redemption in whole or in part, except the unredeemed portion of
any Security being redeemed in part.


                                       27
<PAGE>


     Section 8.2 Transfer Procedures and Restrictions.

     (a) The Capital Securities shall bear the Restricted Securities Legend,
which shall not be removed unless there is delivered to the Trust such
satisfactory evidence, which may include an opinion of counsel satisfactory to
the Institutional Trustee, as may be reasonably required by the Trust, that
neither the legend nor the restrictions on transfer set forth therein are
required to ensure that transfers thereof comply with the provisions of the
Securities Act. Upon provision of such satisfactory evidence, the Institutional
Trustee, at the written direction of the Trust, shall authenticate and deliver
Capital Securities that do not bear the legend.

     (b) Except as permitted by Section 8.2(a), each Capital Security shall bear
a legend (the "Restricted Securities Legend") in substantially the following
form and a Capital Security shall not be transferred except in compliance with
such legend, unless otherwise determined by the Sponsor, upon the advice of
counsel expert in securities law, in accordance with applicable law:

                  THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
         OF 1933, AS AMENDED (THE  "SECURITIES  ACT"), ANY STATE SECURITIES LAWS
         OR ANY OTHER  APPLICABLE  SECURITIES LAW. NEITHER THIS SECURITY NOR ANY
         INTEREST OR  PARTICIPATION  HEREIN MAY BE  REOFFERED,  SOLD,  ASSIGNED,
         TRANSFERRED,  PLEDGED,  ENCUMBERED  OR  OTHERWISE  DISPOSED  OF IN  THE
         ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM,
         OR NOT SUBJECT TO, THE REGISTRATION  REQUIREMENTS OF THE SECURITIES ACT
         AND ANY APPLICABLE  STATE  SECURITIES LAWS. THE HOLDER OF THIS SECURITY
         BY ITS ACCEPTANCE  HEREOF AGREES TO OFFER,  SELL OR OTHERWISE  TRANSFER
         THIS SECURITY  ONLY (A) TO THE SPONSOR OR THE TRUST,  (B) PURSUANT TO A
         REGISTRATION  STATEMENT  THAT HAS BEEN  DECLARED  EFFECTIVE  UNDER  THE
         SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY  BELIEVES IS
         A  QUALIFIED   INSTITUTIONAL   BUYER  IN  A  TRANSACTION   MEETING  THE
         REQUIREMENTS  OF RULE 144A SO LONG AS THIS  SECURITY  IS  ELIGIBLE  FOR
         RESALE  PURSUANT TO RULE 144A IN  ACCORDANCE  WITH RULE 144A,  (D) TO A
         NON-U.S.  PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903
         OR RULE 904 (AS  APPLICABLE) OF REGULATION S UNDER THE SECURITIES  ACT,
         (E) TO AN  INSTITUTIONAL  "ACCREDITED  INVESTOR"  WITHIN THE MEANING OF
         SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING
         THIS CAPITAL  SECURITY FOR ITS OWN ACCOUNT,  OR FOR THE ACCOUNT OF SUCH
         AN INSTITUTIONAL  ACCREDITED INVESTOR,  FOR INVESTMENT PURPOSES AND NOT
         WITH A  VIEW  TO,  OR  FOR  OFFER  OR  SALE  IN  CONNECTION  WITH,  ANY
         DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY
         OTHER  AVAILABLE  EXEMPTION FROM THE  REGISTRATION  REQUIREMENTS OF THE
         SECURITIES ACT, SUBJECT TO THE SPONSOR'S AND THE TRUST'S RIGHT PRIOR TO
         ANY SUCH OFFER,  SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION
         OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH
         OF THEM IN ACCORDANCE  WITH THE  DECLARATION  OF TRUST, A COPY OF WHICH
         MAY BE  OBTAINED  FROM THE SPONSOR OR THE TRUST.  HEDGING  TRANSACTIONS
         INVOLVING THIS SECURITY MAY NOT BE CONDUCTED  UNLESS IN COMPLIANCE WITH
         THE SECURITIES ACT.


                                       28
<PAGE>


                  THE HOLDER OF THIS  SECURITY  BY ITS  ACCEPTANCE  HEREOF  ALSO
         AGREES,  REPRESENTS  AND WARRANTS  THAT IT IS NOT AN EMPLOYEE  BENEFIT,
         INDIVIDUAL  RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT  SUBJECT TO
         TITLE I OF THE EMPLOYEE  RETIREMENT  INCOME  SECURITY  ACT OF 1974,  AS
         AMENDED  ("ERISA"),  OR SECTION  4975 OF THE  INTERNAL  REVENUE CODE OF
         1986,  AS AMENDED  (THE  "CODE")  (EACH A "PLAN"),  OR AN ENTITY  WHOSE
         UNDERLYING  ASSETS  INCLUDE  "PLAN  ASSETS"  BY  REASON  OF ANY  PLAN'S
         INVESTMENT IN THE ENTITY,  AND NO PERSON INVESTING "PLAN ASSETS" OF ANY
         PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS
         SUCH  PURCHASER OR HOLDER IS ELIGIBLE FOR  EXEMPTIVE  RELIEF  AVAILABLE
         UNDER U.S.  DEPARTMENT OF LABOR PROHIBITED  TRANSACTION CLASS EXEMPTION
         96-23, 95-60,  91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE  EXEMPTION OR
         ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT  PROHIBITED BY SECTION
         406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH  PURCHASE
         OR HOLDING.  ANY PURCHASER OR HOLDER OF THE  SECURITIES OR ANY INTEREST
         THEREIN WILL BE DEEMED TO HAVE  REPRESENTED BY ITS PURCHASE AND HOLDING
         THEREOF  THAT EITHER (i) IT IS NOT AN EMPLOYEE  BENEFIT PLAN WITHIN THE
         MEANING OF SECTION  3(3) OF ERISA,  OR A PLAN TO WHICH  SECTION 4975 OF
         THE CODE IS  APPLICABLE,  A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF
         AN EMPLOYEE  BENEFIT PLAN OR PLAN,  OR ANY OTHER PERSON OR ENTITY USING
         THE  ASSETS  OF ANY  EMPLOYEE  BENEFIT  PLAN OR PLAN  TO  FINANCE  SUCH
         PURCHASE,  OR (ii)  SUCH  PURCHASE  WILL  NOT  RESULT  IN A  PROHIBITED
         TRANSACTION  UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR
         WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.

                  THIS  SECURITY WILL BE ISSUED AND MAY BE  TRANSFERRED  ONLY IN
         BLOCKS HAVING A LIQUIDATION  AMOUNT OF NOT LESS THAN  $500,000.00  (500
         SECURITIES) AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED
         TRANSFER OF SECURITIES  IN A BLOCK HAVING A LIQUIDATION  AMOUNT OF LESS
         THAN  $500,000.00  SHALL BE  DEEMED  TO BE VOID AND OF NO LEGAL  EFFECT
         WHATSOEVER.

                  THE HOLDER OF THIS  SECURITY  AGREES  THAT IT WILL COMPLY WITH
         THE FOREGOING RESTRICTIONS.

     (c) To permit registrations of transfers and exchanges, the Trust shall
execute and the Institutional Trustee shall authenticate Capital Securities at
the Registrar's request.

     (d) Registrations of transfers or exchanges will be effected without
charge, but only upon payment (with such indemnity as the Registrar or the
Sponsor may require) in respect of any tax or other governmental charge that may
be imposed in relation to it.

     (e) All Capital Securities issued upon any registration of transfer or
exchange pursuant to the terms of this Declaration shall evidence the same
security and shall be entitled to the same benefits under this Declaration as
the Capital Securities surrendered upon such registration of transfer or
exchange.

     Section 8.3 Deemed Security Holders. The Trust, the Administrators, the
Institutional Trustee, the Paying Agent, the Transfer Agent or the Registrar may
treat the Person in whose name any


                                       29
<PAGE>


Certificate shall be registered on the books and records of the Trust as the
sole holder of such Certificate and of the Securities represented by such
Certificate for purposes of receiving Distributions and for all other purposes
whatsoever and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such Certificate or in the Securities represented
by such Certificate on the part of any Person, whether or not the Trust, the
Administrators, the Institutional Trustee, the Paying Agent, the Transfer Agent
or the Registrar shall have actual or other notice thereof.

                                   ARTICLE IX
                           LIMITATION OF LIABILITY OF
             HOLDERS OF SECURITIES, INSTITUTIONAL TRUSTEE OR OTHERS

     Section 9.1 Liability.

     (a) Except as expressly set forth in this Declaration, the Guarantee and
the terms of the Securities, the Sponsor shall not be:

               (i) personally liable for the return of any portion of the
     capital contributions (or any return thereon) of the Holders of the
     Securities which shall be made solely from assets of the Trust; or

               (ii) required to pay to the Trust or to any Holder of the
     Securities any deficit upon dissolution of the Trust or otherwise.

     (b) The Holder of the Common Securities shall be liable for all of the
debts and obligations of the Trust (other than with respect to the Securities)
to the extent not satisfied out of the Trust's assets.

     (c) Pursuant to the Statutory Trust Act, the Holders of the Capital
Securities shall be entitled to the same limitation of personal liability
extended to stockholders of private corporations for profit organized under the
General Corporation Law of the State of Connecticut.

     Section 9.2 Exculpation.

     (a) No Indemnified Person shall be liable, responsible or accountable in
damages or otherwise to the Trust or any Covered Person for any loss, damage or
claim incurred by reason of any act or omission performed or omitted by such
Indemnified Person in good faith on behalf of the Trust and in a manner such
Indemnified Person reasonably believed to be within the scope of the authority
conferred on such Indemnified Person by this Declaration or by law, except that
an Indemnified Person shall be liable for any such loss, damage or claim
incurred by reason of such Indemnified Person's negligence or willful misconduct
with respect to such acts or omissions.

     (b) An Indemnified Person shall be fully protected in relying in good faith
upon the records of the Trust and upon such information, opinions, reports or
statements presented to the Trust by any Person as to matters the Indemnified
Person reasonably believes are within such other Person's professional or expert
competence and, if selected by such Indemnified Person, has been selected by
such Indemnified Person with reasonable care by or on behalf of the Trust,
including information, opinions, reports or statements as to the value and
amount of the assets, liabilities, profits, losses, or any other facts pertinent
to the existence and amount of assets from which Distributions to Holders of
Securities might properly be paid.


                                       30
<PAGE>


     Section 9.3 Fiduciary Duty.

     (a) To the extent that, at law or in equity, an Indemnified Person has
duties (including fiduciary duties) and liabilities relating thereto to the
Trust or to any other Covered Person, an Indemnified Person acting under this
Declaration shall not be liable to the Trust or to any other Covered Person for
its good faith reliance on the provisions of this Declaration. The provisions of
this Declaration, to the extent that they restrict the duties and liabilities of
an Indemnified Person otherwise existing at law or in equity, are agreed by the
parties hereto to replace such other duties and liabilities of the Indemnified
Person.

     (b) Whenever in this Declaration an Indemnified Person is permitted or
required to make a decision:

               (i) in its "discretion" or under a grant of similar authority,
     the Indemnified Person shall be entitled to consider such interests and
     factors as it desires, including its own interests, and shall have no duty
     or obligation to give any consideration to any interest of or factors
     affecting the Trust or any other Person; or

               (ii) in its "good faith" or under another express standard, the
     Indemnified Person shall act under such express standard and shall not be
     subject to any other or different standard imposed by this Declaration or
     by applicable law.

     Section 9.4 Indemnification.

     (a) The Sponsor shall indemnify, to the full extent permitted by law, any
Indemnified Person who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Trust) arising out of or in connection with the acceptance or
administration of this Declaration by reason of the fact that he is or was an
Indemnified Person against expenses (including reasonable attorneys' fees and
expenses), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Trust, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the Indemnified Person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Trust, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that his conduct was
unlawful.

     (b) The Sponsor shall indemnify, to the full extent permitted by law, any
Indemnified Person who was or is a party or is threatened to be made a party to
any threatened, pending or completed action or suit by or in the right of the
Trust to procure a judgment in its favor arising out of or in connection with
the acceptance or administration of this Declaration by reason of the fact that
he is or was an Indemnified Person against expenses (including reasonable
attorneys' fees and expenses) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Trust; provided, however, that no such indemnification
shall be made in respect of any claim, issue or matter as to which such
Indemnified Person shall have been adjudged to be liable to the Trust unless and
only to the extent that the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court shall deem proper.


                                       31
<PAGE>


     (c) To the extent that an Indemnified Person shall be successful on the
merits or otherwise (including dismissal of an action without prejudice or the
settlement of an action without admission of liability) in defense of any
action, suit or proceeding referred to in paragraphs (a) and (b) of this Section
9.4, or in defense of any claim, issue or matter therein, he shall be
indemnified, to the full extent permitted by law, against expenses (including
attorneys' fees and expenses) actually and reasonably incurred by him in
connection therewith.

     (d) Any indemnification of an Administrator under paragraphs (a) and (b) of
this Section 9.4 (unless ordered by a court) shall be made by the Sponsor only
as authorized in the specific case upon a determination that indemnification of
the Indemnified Person is proper in the circumstances because he has met the
applicable standard of conduct set forth in paragraphs (a) and (b). Such
determination shall be made (i) by the Administrators by a majority vote of a
Quorum consisting of such Administrators who were not parties to such action,
suit or proceeding, (ii) if such a Quorum is not obtainable, or, even if
obtainable, if a Quorum of disinterested Administrators so directs, by
independent legal counsel in a written opinion, or (iii) by the Common Security
Holder of the Trust.

     (e) To the fullest extent permitted by law, expenses (including reasonable
attorneys' fees and expenses) incurred by an Indemnified Person in defending a
civil, criminal, administrative or investigative action, suit or proceeding
referred to in paragraphs (a) and (b) of this Section 9.4 shall be paid by the
Sponsor in advance of the final disposition of such action, suit or proceeding
upon receipt of an undertaking by or on behalf of such Indemnified Person to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the Sponsor as authorized in this Section 9.4.
Notwithstanding the foregoing, no advance shall be made by the Sponsor if a
determination is reasonably and promptly made (i) by the Administrators by a
majority vote of a Quorum of disinterested Administrators, (ii) if such a Quorum
is not obtainable, or, even if obtainable, if a quorum of disinterested
Administrators so directs, by independent legal counsel in a written opinion or
(iii) by the Common Security Holder of the Trust, that, based upon the facts
known to the Administrators, counsel or the Common Security Holder at the time
such determination is made, such Indemnified Person acted in bad faith or in a
manner that such Indemnified Person did not believe to be in the best interests
of the Trust, or, with respect to any criminal proceeding, that such Indemnified
Person believed or had reasonable cause to believe his conduct was unlawful. In
no event shall any advance be made in instances where the Administrators,
independent legal counsel or the Common Security Holder reasonably determine
that such Indemnified Person deliberately breached his duty to the Trust or its
Common or Capital Security Holders.

     (f) The Institutional Trustee, at the sole cost and expense of the Sponsor,
retains the right to representation by counsel of its own choosing in any
action, suit or any other proceeding for which it is indemnified under
paragraphs (a) and (b) of this Section 9.4, without affecting its right to
indemnification hereunder or waiving any rights afforded to it under this
Declaration or applicable law.

     (g) The indemnification and advancement of expenses provided by, or granted
pursuant to, the other paragraphs of this Section 9.4 shall not be deemed
exclusive of any other rights to which those seeking indemnification and
advancement of expenses may be entitled under any agreement, vote of
stockholders or disinterested directors of the Sponsor or Capital Security
Holders of the Trust or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office. All rights to
indemnification under this Section 9.4 shall be deemed to be provided by a
contract between the Sponsor and each Indemnified Person who serves in such
capacity at any time while this Section 9.4 is in effect. Any repeal or
modification of this Section 9.4 shall not affect any rights or obligations then
existing.


                                       32
<PAGE>


     (h) The Sponsor or the Trust may purchase and maintain insurance on behalf
of any Person who is or was an Indemnified Person against any liability asserted
against him and incurred by him in any such capacity, or arising out of his
status as such, whether or not the Sponsor would have the power to indemnify him
against such liability under the provisions of this Section 9.4.

     (i) For purposes of this Section 9.4, references to "the Trust" shall
include, in addition to the resulting or surviving entity, any constituent
entity (including any constituent of a constituent) absorbed in a consolidation
or merger, so that any Person who is or was a director, trustee, officer or
employee of such constituent entity, or is or was serving at the request of such
constituent entity as a director, trustee, officer, employee or agent of another
entity, shall stand in the same position under the provisions of this Section
9.4 with respect to the resulting or surviving entity as he would have with
respect to such constituent entity if its separate existence had continued.

     (j) The indemnification and advancement of expenses provided by, or granted
pursuant to, this Section 9.4 shall, unless otherwise provided when authorized
or ratified, (i) continue as to a Person who has ceased to be an Indemnified
Person and shall inure to the benefit of the heirs, executors and administrators
of such a Person; and (ii) survive the termination or expiration of this
Declaration or the earlier removal or resignation of an Indemnified Person.

     Section 9.5 Outside Businesses. Any Covered Person, the Sponsor and the
Institutional Trustee may engage in or possess an interest in other business
ventures of any nature or description, independently or with others, similar or
dissimilar to the business of the Trust, and the Trust and the Holders of
Securities shall have no rights by virtue of this Declaration in and to such
independent ventures or the income or profits derived therefrom, and the pursuit
of any such venture, even if competitive with the business of the Trust, shall
not be deemed wrongful or improper. None of any Covered Person, the Sponsor or
the Institutional Trustee shall be obligated to present any particular
investment or other opportunity to the Trust even if such opportunity is of a
character that, if presented to the Trust, could be taken by the Trust, and any
Covered Person, the Sponsor and the Institutional Trustee shall have the right
to take for its own account (individually or as a partner or fiduciary) or to
recommend to others any such particular investment or other opportunity. Any
Covered Person and the Institutional Trustee may engage or be interested in any
financial or other transaction with the Sponsor or any Affiliate of the Sponsor,
or may act as depositary for, trustee or agent for, or act on any committee or
body of holders of, securities or other obligations of the Sponsor or its
Affiliates.

     Section 9.6 Compensation; Fee. The Sponsor agrees:

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

     (b) except as otherwise expressly provided herein, to reimburse the
Institutional Trustee upon request for all reasonable expenses, disbursements
and advances incurred or made by the Institutional Trustee in accordance with
any provision of this Declaration (including the reasonable compensation and the
expenses and disbursements of their respective agents and counsel), except any
such expense, disbursement or advance as may be attributable to its negligence,
bad faith or willful misconduct.

         The provisions of this Section 9.6 shall survive the dissolution of the
Trust and the termination of this  Declaration and the removal or resignation of
the Institutional Trustee.

         No Trustee may claim any lien or charge on any property of the Trust as
a result of any amount due pursuant to this Section 9.6.


                                       33
<PAGE>


                                   ARTICLE X

                                   ACCOUNTING

     Section 10.1 Fiscal Year. The fiscal year ("Fiscal Year") of the Trust
shall be the calendar year, or such other year as is required by the Code.

     Section 10.2 Certain Accounting Matters.

     (a) At all times during the existence of the Trust, the Administrators
shall keep, or cause to be kept at the principal office of the Trust in the
United States, as defined for purposes of Treasury Regulations section
301.7701-7, full books of account, records and supporting documents, which shall
reflect in reasonable detail each transaction of the Trust. The books of account
shall be maintained, at the Sponsor's expense, in accordance with generally
accepted accounting principles, consistently applied. The books of account and
the records of the Trust shall be examined by and reported upon (either
separately or as part of the Sponsor's regularly prepared consolidated financial
report) as of the end of each Fiscal Year of the Trust by a firm of independent
certified public accountants selected by the Administrators.

     (b) The Administrators shall cause to be duly prepared and delivered to
each of the Holders of Securities Form 1099 or such other annual United States
federal income tax information statement required by the Code, containing such
information with regard to the Securities held by each Holder as is required by
the Code and the Treasury Regulations. Notwithstanding any right under the Code
to deliver any such statement at a later date, the Administrators shall endeavor
to deliver all such statements within 30 days after the end of each Fiscal Year
of the Trust.

     (c) The Administrators, at the Sponsor's expense, shall cause to be duly
prepared at the principal office of the Trust in the United States, as defined
for purposes of Treasury Regulations section 301.7701-7, and filed an annual
United States federal income tax return on a Form 1041 or such other form
required by United States federal income tax law, and any other annual income
tax returns required to be filed by the Administrators on behalf of the Trust
with any state or local taxing authority.

     Section 10.3 Banking. The Trust shall maintain in the United States, as
defined for purposes of Treasury Regulations section 301.7701-7, one or more
bank accounts in the name and for the sole benefit of the Trust; provided,
however, that all payments of funds in respect of the Debentures held by the
Institutional Trustee shall be made directly to the Property Account and no
other funds of the Trust shall be deposited in the Property Account. The sole
signatories for such accounts (including the Property Account) shall be
designated by the Institutional Trustee.

     Section 10.4 Withholding. The Institutional Trustee or any Paying Agent and
the Administrators shall comply with all withholding requirements under United
States federal, state and local law. The Institutional Trustee or any Paying
Agent shall request, and each Holder shall provide to the Institutional Trustee
or any Paying Agent, such forms or certificates as are necessary to establish an
exemption from withholding with respect to the Holder, and any representations
and forms as shall reasonably be requested by the Institutional Trustee or any
Paying Agent to assist it in determining the extent of, and in fulfilling, its
withholding obligations. The Administrators shall file required forms with
applicable jurisdictions and, unless an exemption from withholding is properly
established by a Holder, shall remit amounts withheld with respect to the Holder
to applicable jurisdictions. To the extent that the Institutional Trustee or any
Paying Agent is required to withhold and pay over any amounts to any authority
with respect to distributions or allocations to any Holder, the amount withheld
shall be deemed to be a Distribution in the amount of the withholding to the
Holder. In the event of any claimed overwithholding, Holders shall be limited to
an action against the applicable jurisdiction. If the amount


                                       34
<PAGE>


required to be withheld was not withheld from actual Distributions made, the
Institutional Trustee or any Paying Agent may reduce subsequent Distributions by
the amount of such withholding.

                                   ARTICLE XI

                             AMENDMENTS AND MEETINGS

     Section 11.1 Amendments.

     (a) Except as otherwise provided in this Declaration or by any applicable
terms of the Securities, this Declaration may only be amended by a written
instrument approved and executed by the Institutional Trustee.

     (b) Notwithstanding any other provision of this Article XI, an amendment
may be made, and any such purported amendment shall be valid and effective only
if:

               (i) the Institutional Trustee shall have first received

                   (A) an Officers' Certificate from each of the Trust and the
Sponsor that such amendment is permitted by, and conforms to, the terms of this
Declaration (including the terms of the Securities); and

                   (B) an opinion of counsel (who may be counsel to the Sponsor
or the Trust) that such amendment is permitted by, and conforms to, the terms of
this Declaration (including the terms of the Securities); and

               (ii) the result of such amendment would not be to

                   (A) cause the Trust to cease to be classified for purposes of
United States federal income taxation as a grantor trust; or

                   (B) cause the Trust to be deemed to be an Investment Company
required to be registered under the Investment Company Act.

     (c) Except as provided in Section 11.1(d), (e) or (h), no amendment shall
be made, and any such purported amendment shall be void and ineffective unless
the Holders of a Majority in liquidation amount of the Capital Securities shall
have consented to such amendment.

     (d) In addition to and notwithstanding any other provision in this
Declaration, without the consent of each affected Holder, this Declaration may
not be amended to (i) change the amount or timing of any Distribution on the
Securities or otherwise adversely affect the amount of any Distribution required
to be made in respect of the Securities as of a specified date or change any
conversion or exchange provisions or (ii) restrict the right of a Holder to
institute suit for the enforcement of any such payment on or after such date.

     (e) Section 8.1(b) and 8.1(c) and this Section 11.1 shall not be amended
without the consent of all of the Holders of the Securities.

     (f) Article III shall not be amended without the consent of the Holders of
a Majority in liquidation amount of the Common Securities.


                                       35
<PAGE>


     (g) The rights of the Holders of the Capital Securities under Article IV to
appoint and remove the Institutional Trustee shall not be amended without the
consent of the Holders of a Majority in liquidation amount of the Capital
Securities.

     (h) This Declaration may be amended by the Institutional Trustee and the
Holders of a Majority in liquidation amount of the Common Securities without the
consent of the Holders of the Capital Securities to:

               (i) cure any ambiguity;

               (ii) correct or supplement any provision in this Declaration that
     may be defective or inconsistent with any other provision of this
     Declaration;

               (iii) add to the covenants, restrictions or obligations of the
     Sponsor; or

               (iv) modify, eliminate or add to any provision of this
     Declaration to such extent as may be necessary to ensure that the Trust
     will be classified for United States federal income tax purposes at all
     times as a grantor trust and will not be required to register as an
     "investment company" under the Investment Company Act (including without
     limitation to conform to any change in Rule 3a-5, Rule 3a-7 or any other
     applicable rule under the Investment Company Act or written change in
     interpretation or application thereof by any legislative body, court,
     government agency or regulatory authority) which amendment does not have a
     material adverse effect on the rights, preferences or privileges of the
     Holders of Securities;

         provided,  however, that no such modification,  elimination or addition
referred to in clauses (i), (ii) or (iii) shall adversely affect in any material
respect  the  powers,  preferences  or  special  rights of  Holders  of  Capital
Securities.

     Section 11.2 Meetings of the Holders of Securities; Action by Written
Consent.

     (a) Meetings of the Holders of any class of Securities may be called at any
time by the Administrators (or as provided in the terms of the Securities) to
consider and act on any matter on which Holders of such class of Securities are
entitled to act under the terms of this Declaration or the terms of the
Securities. The Administrators shall call a meeting of the Holders of such class
if directed to do so by the Holders of at least 10% in liquidation amount of
such class of Securities. Such direction shall be given by delivering to the
Administrators one or more calls in a writing stating that the signing Holders
of the Securities wish to call a meeting and indicating the general or specific
purpose for which the meeting is to be called. Any Holders of the Securities
calling a meeting shall specify in writing the Certificates held by the Holders
of the Securities exercising the right to call a meeting and only those
Securities represented by such Certificates shall be counted for purposes of
determining whether the required percentage set forth in the second sentence of
this paragraph has been met.

     (b) Except to the extent otherwise provided in the terms of the Securities,
the following provisions shall apply to meetings of Holders of the Securities:

               (i) notice of any such meeting shall be given to all the Holders
     of the Securities having a right to vote thereat at least 7 days and not
     more than 60 days before the date of such meeting. Whenever a vote, consent
     or approval of the Holders of the Securities is permitted or required under
     this Declaration, such vote, consent or approval may be given at a meeting
     of the Holders of the Securities. Any action that may be taken at a meeting
     of the Holders of the Securities may be taken without a meeting if a
     consent in writing setting forth the action so taken is signed by the
     Holders of the Securities owning not less than the minimum amount of
     Securities


                                       36
<PAGE>


     in liquidation amount that would be necessary to authorize or
     take such action at a meeting at which all Holders of the Securities having
     a right to vote thereon were present and voting. Prompt notice of the
     taking of action without a meeting shall be given to the Holders of the
     Securities entitled to vote who have not consented in writing. The
     Administrators may specify that any written ballot submitted to the Holders
     of the Securities for the purpose of taking any action without a meeting
     shall be returned to the Trust within the time specified by the
     Administrators;

               (ii) each Holder of a Security may authorize any Person to act
     for it by proxy on all matters in which a Holder of Securities is entitled
     to participate, including waiving notice of any meeting, or voting or
     participating at a meeting. No proxy shall be valid after the expiration of
     11 months from the date thereof unless otherwise provided in the proxy.
     Every proxy shall be revocable at the pleasure of the Holder of the
     Securities executing it. Except as otherwise provided herein, all matters
     relating to the giving, voting or validity of proxies shall be governed by
     the General Corporation Law of the State of Connecticut relating to
     proxies, and judicial interpretations thereunder, as if the Trust were a
     Connecticut corporation and the Holders of the Securities were stockholders
     of a Connecticut corporation; each meeting of the Holders of the Securities
     shall be conducted by the Administrators or by such other Person that the
     Administrators may designate; and

               (iii) unless the Statutory Trust Act, this Declaration, or the
     terms of the Securities otherwise provides, the Administrators, in their
     sole discretion, shall establish all other provisions relating to meetings
     of Holders of Securities, including notice of the time, place or purpose of
     any meeting at which any matter is to be voted on by any Holders of the
     Securities, waiver of any such notice, action by consent without a meeting,
     the establishment of a record date, quorum requirements, voting in person
     or by proxy or any other matter with respect to the exercise of any such
     right to vote; provided, however, that each meeting shall be conducted in
     the United States (as that term is defined in Treasury Regulations section
     301.7701-7).

                                  ARTICLE XII

                    REPRESENTATIONS OF INSTITUTIONAL TRUSTEE

     Section 12.1 Representations and Warranties of Institutional Trustee. The
initial Institutional Trustee represents and warrants to the Trust and to the
Sponsor at the date of this Declaration, and each Successor Institutional
Trustee represents and warrants to the Trust and the Sponsor at the time of the
Successor Institutional Trustee's acceptance of its appointment as Institutional
Trustee, that:

     (a) the Institutional Trustee is a national banking association with trust
powers, duly organized and validly existing under the laws of the United States
of America with trust power and authority to execute and deliver, and to carry
out and perform its obligations under the terms of, this Declaration;

     (b) the execution, delivery and performance by the Institutional Trustee of
this Declaration has been duly authorized by all necessary corporate action on
the part of the Institutional Trustee. This Declaration has been duly executed
and delivered by the Institutional Trustee, and it constitutes a legal, valid
and binding obligation of the Institutional Trustee, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, reorganization,
moratorium, insolvency, and other similar laws affecting creditors' rights
generally and to general principles of equity (regardless of whether considered
in a proceeding in equity or at law);


                                       37
<PAGE>


     (c) the execution, delivery and performance of this Declaration by the
Institutional Trustee does not conflict with or constitute a breach of the
charter or by-laws of the Institutional Trustee; and

     (d) no consent, approval or authorization of, or registration with or
notice to, any state or federal banking authority is required for the execution,
delivery or performance by the Institutional Trustee of this Declaration.

                                  ARTICLE XIII

                                  MISCELLANEOUS

     Section 13.1 Notices. All notices provided for in this Declaration shall be
in writing, duly signed by the party giving such notice, and shall be delivered,
telecopied (which telecopy shall be followed by notice delivered or mailed by
first class mail) or mailed by first class mail, as follows:

     (a) if given to the Trust in care of the Administrators at the Trust's
mailing address set forth below (or such other address as the Trust may give
notice of to the Holders of the Securities):

                  Penn-America Statutory Trust I
                  c/o Penn-America Group, Inc.
                  420 South York Road
                  Hatboro, Pennsylvania 19040
                  Attention:  Garland P. Pezzuolo
                  Telecopy:  215-443-3603

     (b) if given to the Institutional Trustee, at the Institutional Trustee's
mailing address set forth below (or such other address as the Institutional
Trustee may give notice of to the Holders of the Securities):

                  State Street Bank and Trust Company of Connecticut,
                  National Association
                  225 Asylum Street, Goodwin Square
                  Hartford, Connecticut  06103
                  Attention:  Vice President, Corporate Trust Department
                  Telecopy:  860-244-1889

                  With a copy to:

                  State Street Bank and Trust Company
                  P.O. Box 778
                  Boston, Massachusetts  02102-0778
                  Attention:  Paul D. Allen, Corporate Trust Department
                  Telecopy:  617-662-1462

     (c) if given to the Holder of the Common Securities, at the mailing address
of the Sponsor set forth below (or such other address as the Holder of the
Common Securities may give notice of to the Trust):

                  Penn-America Group, Inc.
                  420 South York Road
                  Hatboro, Pennsylvania 19040
                  Attention:  Garland P. Pezzuolo
                  Telecopy:  215-443-3603


                                       38
<PAGE>


     (d) if given to any other Holder, at the address set forth on the books and
records of the Trust.

         All such  notices  shall be deemed to have been given when  received in
person,  telecopied  with  receipt  confirmed,  or mailed by first  class  mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered  because of a changed  address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.

     Section 13.2 Governing Law. This Declaration and the rights of the parties
hereunder shall be governed by and interpreted in accordance with the law of the
State of Connecticut and all rights and remedies shall be governed by such laws
without regard to the principles of conflict of laws of the State of Connecticut
or any other jurisdiction that would call for the application of the law of any
jurisdiction other than the State of Connecticut; provided, however, that there
shall not be applicable to the Trust, the Institutional Trustee or this
Declaration any provision of the laws (statutory or common) of the State of
Connecticut pertaining to trusts that relate to or regulate, in a manner
inconsistent with the terms hereof (a) the filing with any court or governmental
body or agency of trustee accounts or schedules of trustee fees and charges, (b)
affirmative requirements to post bonds for trustees, officers, agents or
employees of a trust, (c) the necessity for obtaining court or other
governmental approval concerning the acquisition, holding or disposition of real
or personal property, (d) fees or other sums payable to trustees, officers,
agents or employees of a trust, (e) the allocation of receipts and expenditures
to income or principal, or (f) restrictions or limitations on the permissible
nature, amount or concentration of trust investments or requirements relating to
the titling, storage or other manner of holding or investing trust assets.

     Section 13.3 Intention of the Parties. It is the intention of the parties
hereto that the Trust be classified for United States federal income tax
purposes as a grantor trust. The provisions of this Declaration shall be
interpreted to further this intention of the parties.

     Section 13.4 Headings. Headings contained in this Declaration are inserted
for convenience of reference only and do not affect the interpretation of this
Declaration or any provision hereof.

     Section 13.5 Successors and Assigns. Whenever in this Declaration any of
the parties hereto is named or referred to, the successors and assigns of such
party shall be deemed to be included, and all covenants and agreements in this
Declaration by the Sponsor and the Institutional Trustee shall bind and inure to
the benefit of their respective successors and assigns, whether or not so
expressed.

     Section 13.6 Partial Enforceability. If any provision of this Declaration,
or the application of such provision to any Person or circumstance, shall be
held invalid, the remainder of this Declaration, or the application of such
provision to persons or circumstances other than those to which it is held
invalid, shall not be affected thereby.

     Section 13.7 Counterparts. This Declaration may contain more than one
counterpart of the signature page and this Declaration may be executed by the
affixing of the signature of each of the Institutional Trustee and
Administrators to any of such counterpart signature pages. All of such
counterpart signature pages shall be read as though one, and they shall have the
same force and effect as though all of the signers had signed a single signature
page.

                     Signatures appear on the following page


                                       39
<PAGE>



         IN WITNESS  WHEREOF,  the undersigned  have caused these presents to be
executed as of the day and year first above written.

                       STATE  STREET  BANK AND TRUST  COMPANY OF  CONNECTICUT,
                       NATIONAL ASSOCIATION,
                       as Institutional Trustee


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


                       PENN-AMERICA GROUP, INC., as Sponsor


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


                       PENN-AMERICA STATUTORY TRUST I


                       By:
                         ----------------------------------
                                Administrator


                       By:
                         ----------------------------------
                                Administrator


                       By:
                         ----------------------------------
                                Administrator



                                       40
<PAGE>

                                     ANNEX I

                               TERMS OF SECURITIES

     Pursuant to Section 6.1 of the Amended and Restated Declaration of Trust,
dated as of December 4, 2002 (as amended from time to time, the "Declaration"),
the designation, rights, privileges, restrictions, preferences and other terms
and provisions of the Capital Securities and the Common Securities are set out
below (each capitalized term used but not defined herein has the meaning set
forth in the Declaration):

1. Designation and Number.
   ----------------------

     (a) 15,000 Floating Rate Capital Securities of Penn-America Statutory Trust
I (the "Trust"), with an aggregate stated liquidation amount with respect to the
assets of the Trust of fifteen million dollars ($15,000,000.00) and a stated
liquidation amount with respect to the assets of the Trust of $1,000.00 per
Capital Security, are hereby designated for the purposes of identification only
as the "Capital Securities". The Capital Security Certificates evidencing the
Capital Securities shall be substantially in the form of Exhibit A-1 to the
Declaration, with such changes and additions thereto or deletions therefrom as
may be required by ordinary usage, custom or practice.

     (b) 464 Floating Rate Common Securities of the Trust (the "Common
Securities") will be evidenced by Common Security Certificates substantially in
the form of Exhibit A-2 to the Declaration, with such changes and additions
thereto or deletions therefrom as may be required by ordinary usage, custom or
practice.

2. Distributions.
   -------------

     (a) Distributions will be payable on each Security for the period beginning
on (and including) the date of original issuance and ending on (but excluding)
March 4, 2003 at a rate per annum of 5.42375% and shall bear interest for each
successive period beginning on (and including) March 4, 2003, and each
succeeding Distribution Payment Date, and ending on (but excluding) the next
succeeding Distribution Payment Date (each, a "Distribution Period") at a rate
per annum equal to the 3-Month LIBOR, determined as described below, plus 4.00%
(the "Coupon Rate"); provided, however, that prior to December 4, 2007, the
Coupon Rate shall not exceed 12.50%, applied to the stated liquidation amount
thereof, such rate being the rate of interest payable on the Debentures to be
held by the Institutional Trustee. Distributions in arrears for more than one
quarterly period will bear interest thereon compounded quarterly at the
applicable Distribution Rate (to the extent permitted by law). A Distribution is
payable only to the extent that payments are made in respect of the Debentures
held by the Institutional Trustee and to the extent the Institutional Trustee
has funds available therefor. In the event that any date on which a Distribution
is payable on the Securities is not a Business Day, then payment of interest
payable on such date shall be made on the next succeeding day which is a
Business Day (and without any interest or other payment in respect of any such
delay), except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on the date such payment was
originally payable. The amount of interest payable for any Distribution Period
will be calculated by applying the Coupon Rate to the principal amount
outstanding at the commencement of the Distribution Period and multiplying each
such amount by the actual number of days in the Distribution Period concerned
divided by 360. All percentages resulting from any calculations on the Capital
Securities will be rounded, if necessary, to the nearest one hundred-thousandth
of a percentage point, with five one-millionths of a percentage point rounded
upward (e.g., 9.876545% or .09876545 being rounded to 9.87655% or .0987655, and
all dollar

                                      I-1

<PAGE>


amounts used in or resulting from such calculation will be rounded to
the nearest cent (with one-half cent being rounded upward)).

     (b) Distributions on the Securities will be cumulative, will accrue from
the date of original issuance, and will be payable, subject to extension of
distribution payment periods as described herein, quarterly in arrears on March
4, June 4, September 4 and December 4 of each year, commencing on March 4, 2003
(each a "Distribution Payment Date") when, as and if available for payment. The
Debenture Issuer has the right under the Indenture to defer payments of interest
on the Debentures, so long as no Indenture Event of Default has occurred and is
continuing, by deferring the payment of interest on the Debentures for up to 20
consecutive quarterly periods (each an "Extension Period") at any time and from
time to time, subject to the conditions described below, although such interest
would continue to accrue on the Debentures at the Distribution Rate compounded
quarterly (to the extent permitted by law) during any Extension Period. No
Extension Period may end on a date other than a Distribution Payment Date. At
the end of any such Extension Period the Debenture Issuer shall pay all interest
then accrued and unpaid on the Debentures (together with Additional Interest
thereon); provided, however, that no Extension Period may extend beyond the
Maturity Date and provided further, however, during any such Extension Period,
the Debenture Issuer and its Affiliates shall not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Debenture Issuer's or its
Affiliates' capital stock (other than payments of dividends or distributions to
the Debenture Issuer) or make any guarantee payments with respect to the
foregoing, or (ii) make any payment of principal of or interest or premium, if
any, on or repay, repurchase or redeem any debt securities of the Debenture
Issuer or any Affiliate that rank pari passu in all respects with or junior in
interest to the Debentures (other than, with respect to clauses (i) and (ii)
above, (a) repurchases, redemptions or other acquisitions of shares of capital
stock of the Debenture Issuer in connection with any employment contract,
benefit plan or other similar arrangement with or for the benefit of one or more
employees, officers, directors or consultants, in connection with a dividend
reinvestment or stockholder stock purchase plan or in connection with the
issuance of capital stock of the Debenture Issuer (or securities convertible
into or exercisable for such capital stock) as consideration in an acquisition
transaction entered into prior to the applicable Extension Period, (b) as a
result of any exchange or conversion of any class or series of the Debenture
Issuer's capital stock (or any capital stock of a subsidiary of the Debenture
Issuer) for any class or series of the Debenture Issuer's capital stock or of
any class or series of the Debenture Issuer's indebtedness for any class or
series of the Debenture Issuer's capital stock, (c) the purchase of fractional
interests in shares of the Debenture Issuer's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged, (d) any declaration of a dividend in connection with any
stockholders' rights plan, or the issuance of rights, stock or other property
under any stockholders' rights plan, or the redemption or repurchase of rights
pursuant thereto, (e) any dividend in the form of stock, warrants, options or
other rights where the dividend stock or the stock issuable upon exercise of
such warrants, options or other rights is the same stock as that on which the
dividend is being paid or ranks pari passu with or junior to such stock and any
cash payments in lieu of fractional shares issued in connection therewith, or
(f) payments under the Capital Securities Guarantee). Prior to the termination
of any Extension Period, the Debenture Issuer may further extend such period,
provided that such period together with all such previous and further
consecutive extensions thereof shall not exceed 20 consecutive quarterly
periods, or extend beyond the Maturity Date. Upon the termination of any
Extension Period and upon the payment of all accrued and unpaid interest and
Additional Interest, the Debenture Issuer may commence a new Extension Period,
subject to the foregoing requirements. No interest or Additional Interest shall
be due and payable during an Extension Period, except at the end thereof, but
each installment of interest that would otherwise have been due and payable
during such Extension Period shall bear Additional Interest. If Distributions
are deferred, the Distributions due shall be paid on the date that the related
Extension Period terminates, to Holders of the Securities as they appear on the
books and records of the Trust on the record date immediately preceding such
date. Distributions on the Securities must be paid on the dates

                                      I-2

<PAGE>

payable (after giving effect to any Extension Period) to the extent that the
Trust has funds available for the payment of such distributions in the Property
Account of the Trust. The Trust's funds available for Distribution to the
Holders of the Securities will be limited to payments received from the
Debenture Issuer. The payment of Distributions out of moneys held by the Trust
is guaranteed by the Guarantor pursuant to the Guarantee.

     (c) Distributions on the Securities will be payable to the Holders thereof
as they appear on the books and records of the Trust on the relevant record
dates. The relevant record dates shall be 15 days before the relevant
Distribution Payment Date. Distributions payable on any Securities that are not
punctually paid on any Distribution Payment Date, as a result of the Debenture
Issuer having failed to make a payment under the Debentures, as the case may be,
when due (taking into account any Extension Period), will cease to be payable to
the Person in whose name such Securities are registered on the relevant record
date, and such defaulted Distribution will instead be payable to the Person in
whose name such Securities are registered on the special record date or other
specified date determined in accordance with the Indenture. If any date on which
Distributions are payable on the Securities is not a Business Day, then payment
of the Distribution payable on such date will be made on the next succeeding day
that is a Business Day (and without any interest or other payment in respect of
any such delay) except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such payment
date.

     (d) In the event that there is any money or other property held by or for
the Trust that is not accounted for hereunder, such property shall be
distributed Pro Rata (as defined herein) among the Holders of the Securities.

3. Liquidation  Distribution Upon Dissolution.  In the event of the voluntary or
involuntary  liquidation,  dissolution,  winding-up or  termination of the Trust
(each  a  "Liquidation")  other  than in  connection  with a  redemption  of the
Debentures, the Holders of the Securities will be entitled to receive out of the
assets of the Trust  available for  distribution  to Holders of the  Securities,
after  satisfaction  of liabilities to creditors of the Trust (to the extent not
satisfied by the Debenture Issuer), distributions equal to the lesser of (i) the
aggregate  of the stated  liquidation  amount of  $1,000.00  per  Security  plus
accrued and unpaid  Distributions  thereon to the date of payment, to the extent
the Trust shall have funds available therefor,  and (ii) the amount of assets of
the Trust remaining  available for distribution to Holders in liquidation of the
Trust (such amount  being,  in either  case,  the  "Liquidation  Distribution"),
unless in connection with such  Liquidation,  the Debentures in aggregate stated
principal  amount  equal to the  aggregate  stated  liquidation  amount  of such
Securities, with an interest rate equal to the Distribution Rate of, and bearing
accrued  and  unpaid  interest  in an amount  equal to the  accrued  and  unpaid
Distributions  on, and having the same record date as,  such  Securities,  after
paying or making  reasonable  provision to pay all claims and obligations of the
Trust in accordance  with the Statutory Trust Act, shall be distributed on a Pro
Rata basis to the Holders of the Securities in exchange for such Securities.

         The  Sponsor,  as the Holder of all of the Common  Securities,  has the
right at any time to dissolve the Trust (including, without limitation, upon the
occurrence  of a Special  Event)  and,  after  satisfaction  of  liabilities  to
creditors of the Trust, cause the Debentures to be distributed to the Holders of
the  Securities  on a Pro Rata basis in  accordance  with the  aggregate  stated
liquidation amount thereof.

         If a Liquidation  of the Trust occurs as described in clause (i), (ii),
(iii) or (v) in Section 7.1(a) of the Declaration, the Trust shall be liquidated
by the Institutional Trustee as expeditiously as it determines to be possible by
distributing,  after  satisfaction  of liabilities to creditors of the Trust, to
the Holders of the Securities,  the Debentures on a Pro Rata basis to the extent
not satisfied by the Debenture Issuer, unless such distribution is determined by
the Institutional Trustee not to be practical,  in which event such

                                      I-3

<PAGE>


Holders will be entitled to receive out of the assets of the Trust available for
distribution to the Holders, after satisfaction of liabilities of creditors of
the Trust to the extent not satisfied by the Debenture Issuer, an amount equal
to the Liquidation Distribution. An early Liquidation of the Trust pursuant to
clause (iv) of Section 7.1(a) of the Declaration shall occur if the
Institutional Trustee determines that such Liquidation is possible by
distributing, after satisfaction of liabilities to creditors of the Trust, to
the Holders of the Securities on a Pro Rata basis, the Debentures, and such
distribution occurs.

         If, upon any such Liquidation the Liquidation  Distribution can be paid
only in part because the Trust has insufficient  assets available to pay in full
the aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on such  Capital  Securities  shall be paid to the  Holders  of the  Trust
Securities on a Pro Rata basis,  except that if an Event of Default has occurred
and is  continuing,  the Capital  Securities  shall have a  preference  over the
Common Securities with regard to such distributions.

         After the date for any  distribution of the Debentures upon dissolution
of the Trust  (i) the  Securities  of the  Trust  will be deemed to be no longer
outstanding,  (ii) upon  surrender of a Holder's  Securities  certificate,  such
Holder of the Securities will receive a certificate  representing the Debentures
to be delivered upon such distribution,  and (iii) any certificates representing
the  Securities  still  outstanding  will  be  deemed  to  represent   undivided
beneficial  interests in such of the  Debentures as have an aggregate  principal
amount equal to the aggregate  stated  liquidation  amount with an interest rate
identical to the  Distribution  Rate of, and bearing accrued and unpaid interest
equal to  accrued  and  unpaid  distributions  on,  the  Securities  until  such
certificates  are presented to the Debenture Issuer or its agent for transfer or
reissuance  (and until such  certificates  are so  surrendered,  no  payments of
interest or principal  shall be made to Holders of  Securities in respect of any
payments  due and payable  under the  Debentures;  provided,  however  that such
failure  to pay  shall not be  deemed  to be an Event of  Default  and shall not
entitle  the Holder to the  benefits of the  Guarantee),  and (iv) all rights of
Holders of Securities  under the  Declaration  shall cease,  except the right of
such Holders to receive  Debentures upon surrender of certificates  representing
such Securities.

4. Redemption and Distribution.
   ---------------------------

     (a) The Debentures will mature on December 4, 2032. The Debentures may be
redeemed by the Debenture Issuer, in whole or in part at any time and from time
to time on or after December 4, 2007, at the Optional Redemption Price. In
addition, the Debentures may be redeemed by the Debenture Issuer at the Special
Redemption Price, in whole but not in part, at any Distribution Payment Date,
upon the occurrence and continuation of a Special Event within 120 days
following the occurrence of such Special Event at the Special Redemption Price,
upon not less than 30 nor more than 60 days' notice to holders of such
Debentures so long as such Special Event is continuing.

         "3-Month LIBOR" means the London  interbank  offered  interest rate for
three-month,  U.S.  dollar deposits  determined by the Debenture  Trustee in the
following order of priority:

                  (1) the rate  (expressed  as a percentage  per annum) for U.S.
         dollar deposits having a three-month  maturity that appears on Telerate
         Page 3750 as of 11:00 a.m.  (London time) on the related  Determination
         Date (as  defined  below).  "Telerate  Page  3750"  means  the  display
         designated  as "Page  3750" on the Dow Jones  Telerate  Service or such
         other  page as may  replace  Page 3750 on that  service  or such  other
         service  or  services  as may be  nominated  by  the  British  Bankers'
         Association  as the  information  vendor for the purpose of  displaying
         London interbank offered rates for U.S. dollar deposits;

                  (2)  if  such  rate  cannot  be   identified  on  the  related
         Determination  Date,  the Debenture  Trustee will request the principal
         London offices of four leading banks in the London  interbank market to
         provide such banks' offered  quotations  (expressed as percentages  per
         annum) to prime

                                      I-4

<PAGE>


         banks in the London  interbank  market for U.S.  dollar
         deposits having a three-month  maturity as of 11:00 a.m.  (London time)
         on such  Determination  Date. If at least two  quotations are provided,
         3-Month LIBOR will be the arithmetic mean of such quotations;

                  (3)  if  fewer  than  two  such  quotations  are  provided  as
         requested in clause (2) above, the Debenture  Trustee will request four
         major New York City banks to provide  such  banks'  offered  quotations
         (expressed  as  percentages  per annum) to leading  European  banks for
         loans  in  U.S.  dollars  as  of  11:00  a.m.  (London  time)  on  such
         Determination  Date.  If at least  two such  quotations  are  provided,
         3-Month LIBOR will be the arithmetic mean of such quotations; and

                  (4)  if  fewer  than  two  such  quotations  are  provided  as
         requested in clause (3) above,  3-Month  LIBOR will be a 3-Month  LIBOR
         determined  with  respect  to  the  Distribution   Period   immediately
         preceding such current Distribution Period.

         If the rate for U.S. dollar deposits having a three-month maturity that
initially  appears on Telerate  Page 3750 as of 11:00 a.m.  (London time) on the
related  Determination  Date  is  superseded  on the  Telerate  Page  3750  by a
corrected rate by 12:00 noon (London time) on such Determination  Date, then the
corrected rate as so  substituted on the applicable  page will be the applicable
3-Month LIBOR for such Determination Date.

         The Coupon Rate for any  Distribution  Period will at no time be higher
than the maximum rate then permitted by New York law as the same may be modified
by United States law.

         "Determination  Date"  means the date that is two London  Banking  Days
(i.e.,  a  business  day in which  dealings  in  deposits  in U.S.  dollars  are
transacted in the London interbank market) preceding the particular Distribution
Period for which a Coupon Rate is being determined.

         "Investment  Company  Event" means the receipt by the Debenture  Issuer
and the Trust of an opinion of counsel experienced in such matters to the effect
that, as a result of the  occurrence of a change in law or regulation or written
change  (including  any  announced  prospective  change)  in  interpretation  or
application of law or regulation by any legislative  body,  court,  governmental
agency or regulatory  authority,  there is more than an insubstantial  risk that
the Trust is or, within 90 days of the date of such opinion,  will be considered
an  Investment  Company that is required to be registered  under the  Investment
Company Act which change or prospective change becomes effective or would become
effective,  as the case  may be,  on or after  the date of the  issuance  of the
Debentures.

         "Maturity Date" means December 4, 2032.

          "Optional  Redemption Price" means 100% of the principal amount of the
Debentures  being redeemed,  plus accrued and unpaid interest on such Debentures
to the Redemption Date.

         "Redemption  Date"  shall  mean the date  fixed for the  redemption  of
Capital  Securities,  which  shall be on any  March 4,  June 4,  September  4 or
December 4, on or after December 4, 2007.

         "Special Event" means a Tax Event or an Investment Company Event.

         "Special  Redemption  Date"  means a date  on  which  a  Special  Event
redemption  occurs,  which  shall be on any  March  4,  June 4,  September  4 or
December 4 within 120 days following the occurrence of a Special Event.

         "Special  Redemption Price" means (i) 107.5% of the principal amount of
the Debentures  being redeemed on a Special  Redemption  Date that occurs before
December 4, 2007 and (ii) 100% of the

                                      I-5

<PAGE>


principal amount of the Debentures being redeemed on a Special Redemption Date
that occurs on December 4, 2007 or after, plus, in each case, accrued and unpaid
interest on such Debentures to the Special Redemption Date.

         "Tax Event" means the receipt by the Debenture  Issuer and the Trust of
an opinion of  counsel  experienced  in such  matters to the effect  that,  as a
result  of any  amendment  to or change  (including  any  announced  prospective
change) in the laws or any  regulations  thereunder  of the United States or any
political  subdivision or taxing authority thereof or therein, or as a result of
any official administrative  pronouncement (including any private letter ruling,
technical advice memorandum,  field service advice, regulatory procedure, notice
or  announcement  including any notice or  announcement  of intent to adopt such
procedures or regulations  (an  "Administrative  Action")) or judicial  decision
interpreting  or applying such laws or  regulations,  regardless of whether such
Administrative  Action or judicial decision is issued to or in connection with a
proceeding  involving  the  Debenture  Issuer or the Trust  and  whether  or not
subject  to  review  or  appeal,   which   amendment,   clarification,   change,
Administrative Action or decision is enacted,  promulgated or announced, in each
case on or after the date of original issuance of the Debentures,  there is more
than an insubstantial  risk that: (i) the Trust is, or will be within 90 days of
the date of such  opinion,  subject  to United  States  federal  income tax with
respect to income received or accrued on the Debentures;  (ii) interest  payable
by the Debenture  Issuer on the Debentures is not, or within 90 days of the date
of such opinion, will not be, deductible by the Debenture Issuer, in whole or in
part, for United States  federal income tax purposes;  or (iii) the Trust is, or
will be within 90 days of the date of such  opinion,  subject  to more than a de
minimis amount of other taxes, duties or other governmental charges.

     (b) Upon the repayment in full at maturity or redemption in whole or in
part of the Debentures (other than following the distribution of the Debentures
to the Holders of the Securities), the proceeds from such repayment or payment
shall concurrently be applied to redeem Pro Rata at the applicable Optional
Redemption Price or Special Redemption Price, as applicable, Securities having
an aggregate liquidation amount equal to the aggregate principal amount of the
Debentures so repaid or redeemed; provided, however, that holders of such
Securities shall be given not less than 30 nor more than 60 days' notice of such
redemption (other than at the scheduled maturity of the Debentures).

     (c) If fewer than all the outstanding Securities are to be so redeemed, the
Common Securities and the Capital Securities will be redeemed Pro Rata and the
Capital Securities to be redeemed will be redeemed Pro Rata from each Holder of
Capital Securities.

     (d) The Trust may not redeem fewer than all the outstanding Capital
Securities unless all accrued and unpaid Distributions have been paid on all
Capital Securities for all quarterly Distribution periods terminating on or
before the date of redemption.

     (e) Redemption or Distribution Procedures.
         --------------------------------------

               (i) Notice of any redemption of or notice of distribution of the
     Debentures in exchange for, the Securities (a "Redemption/Distribution
     Notice") will be given by the Trust by mail to each Holder of Securities to
     be redeemed or exchanged not fewer than 30 nor more than 60 days before the
     date fixed for redemption or exchange thereof which, in the case of a
     redemption, will be the date fixed for redemption of the Debentures. For
     purposes of the calculation of the date of redemption or exchange and the
     dates on which notices are given pursuant to this paragraph 4(e)(i), a
     Redemption/Distribution Notice shall be deemed to be given on the day such
     notice is first mailed by first-class mail, postage prepaid, to Holders of
     such Securities. Each Redemption/Distribution Notice shall be addressed to
     the Holders of such Securities at the address of each such Holder appearing
     on the books and records of the Trust. No defect in the
     Redemption/Distribution Notice or in the mailing thereof with respect to
     any Holder

                                      I-6
<PAGE>


     shall affect the validity of the redemption or exchange
     proceedings with respect to any other Holder.

               (ii) If the Securities are to be redeemed and the Trust gives a
     Redemption/ Distribution Notice, which notice may only be issued if the
     Debentures are redeemed as set out in this paragraph 4 (which notice will
     be irrevocable), then, provided that the Institutional Trustee has a
     sufficient amount of cash in connection with the related redemption or
     maturity of the Debentures, the Institutional Trustee will pay the relevant
     Optional Redemption Price or Special Redemption Price, as applicable, to
     the Holders of such Securities by check mailed to the address of each such
     Holder appearing on the books and records of the Trust on the Redemption
     Date. If a Redemption/Distribution Notice shall have been given and funds
     deposited as required then immediately prior to the close of business on
     the date of such deposit Distributions will cease to accrue on the
     Securities so called for redemption and all rights of Holders of such
     Securities so called for redemption will cease, except the right of the
     Holders of such Securities to receive the applicable Optional Redemption
     Price or Special Redemption Price specified in paragraph 4(a), but without
     interest on such Optional Redemption Price or Special Redemption Price. If
     any date fixed for redemption of Securities is not a Business Day, then
     payment of any such Optional Redemption Price or Special Redemption Price
     payable on such date will be made on the next succeeding day that is a
     Business Day (and without any interest or other payment in respect of any
     such delay) except that, if such Business Day falls in the next calendar
     year, such payment will be made on the immediately preceding Business Day,
     in each case with the same force and effect as if made on such date fixed
     for redemption. If payment of the Optional Redemption Price or Special
     Redemption Price in respect of any Securities is improperly withheld or
     refused and not paid either by the Trust or by the Debenture Issuer as
     guarantor pursuant to the Guarantee, Distributions on such Securities will
     continue to accrue at the Distribution Rate from the original Redemption
     Date to the actual date of payment, in which case the actual payment date
     will be considered the date fixed for redemption for purposes of
     calculating the Optional Redemption Price or Special Redemption Price. In
     the event of any redemption of the Capital Securities issued by the Trust
     in part, the Trust shall not be required to (i) issue, register the
     transfer of or exchange any Security during a period beginning at the
     opening of business 15 days before any selection for redemption of the
     Capital Securities and ending at the close of business on the earliest date
     on which the relevant notice of redemption is deemed to have been given to
     all Holders of the Capital Securities to be so redeemed or (ii) register
     the transfer of or exchange any Capital Securities so selected for
     redemption, in whole or in part, except for the unredeemed portion of any
     Capital Securities being redeemed in part.

               (iii) Redemption/Distribution Notices shall be sent by the
     Administrators on behalf of the Trust to (A) in respect of the Capital
     Securities, the Holders thereof and (B) in respect of the Common
     Securities, the Holder thereof.

               (iv) Subject to the foregoing and applicable law (including,
     without limitation, United States federal securities laws), and provided
     that the acquiror is not the Holder of the Common Securities or the obligor
     under the Indenture, the Sponsor or any of its subsidiaries may at any time
     and from time to time purchase outstanding Capital Securities by tender, in
     the open market or by private agreement.

5.       Voting Rights - Capital Securities.
         -----------------------------------

     (a) Except as provided under paragraphs 5(b) and 7 and as otherwise
required by law and the Declaration, the Holders of the Capital Securities will
have no voting rights. The Administrators

                                      I-7

<PAGE>

are required to call a meeting of the Holders of the Capital Securities if
directed to do so by Holders of at least 10% in liquidation amount of the
Capital Securities.

     (b) Subject to the requirements of obtaining a tax opinion by the
Institutional Trustee in certain circumstances set forth in the last sentence of
this paragraph, the Holders of a Majority in liquidation amount of the Capital
Securities, voting separately as a class, have the right to direct the time,
method, and place of conducting any proceeding for any remedy available to the
Institutional Trustee, or exercising any trust or power conferred upon the
Institutional Trustee under the Declaration, including the right to direct the
Institutional Trustee, as holder of the Debentures, to (i) exercise the remedies
available under the Indenture as the holder of the Debentures, (ii) waive any
past default that is waivable under the Indenture, (iii) exercise any right to
rescind or annul a declaration that the principal of all the Debentures shall be
due and payable or (iv) consent on behalf of all the Holders of the Capital
Securities to any amendment, modification or termination of the Indenture or the
Debentures where such consent shall be required; provided, however, that, where
a consent or action under the Indenture would require the consent or act of the
holders of greater than a simple majority in aggregate principal amount of
Debentures (a "Super Majority") affected thereby, the Institutional Trustee may
only give such consent or take such action at the written direction of the
Holders of at least the proportion in liquidation amount of the Capital
Securities outstanding which the relevant Super Majority represents of the
aggregate principal amount of the Debentures outstanding. If the Institutional
Trustee fails to enforce its rights under the Debentures after the Holders of a
Majority in liquidation amount of such Capital Securities have so directed the
Institutional Trustee, to the fullest extent permitted by law, a Holder of the
Capital Securities may institute a legal proceeding directly against the
Debenture Issuer to enforce the Institutional Trustee's rights under the
Debentures without first instituting any legal proceeding against the
Institutional Trustee or any other person or entity. Notwithstanding the
foregoing, if an Event of Default has occurred and is continuing and such event
is attributable to the failure of the Debenture Issuer to pay interest or
principal on the Debentures on the date the interest or principal is payable (or
in the case of redemption, the Redemption Date or the Special Redemption Date,
as applicable), then a Holder of record of the Capital Securities may directly
institute a proceeding for enforcement of payment on or after the respective due
dates specified in the Debentures, to such Holder directly of the principal of
or interest on the Debentures having an aggregate principal amount equal to the
aggregate liquidation amount of the Capital Securities of such Holder. The
Institutional Trustee shall notify all Holders of the Capital Securities of any
default actually known to the Institutional Trustee with respect to the
Debentures unless (x) such default has been cured prior to the giving of such
notice or (y) the Institutional Trustee determines in good faith that the
withholding of such notice is in the interest of the Holders of such Capital
Securities, except where the default relates to the payment of principal of or
interest on any of the Debentures. Such notice shall state that such Indenture
Event of Default also constitutes an Event of Default hereunder. Except with
respect to directing the time, method and place of conducting a proceeding for a
remedy, the Institutional Trustee shall not take any of the actions described in
clauses (i), (ii) or (iii) above unless the Institutional Trustee has obtained
an opinion of tax counsel to the effect that, as a result of such action, the
Trust will not be classified as other than a grantor trust for United States
federal income tax purposes. In the event the consent of the Institutional
Trustee, as the holder of the Debentures is required under the Indenture with
respect to any amendment, modification or termination of the Indenture, the
Institutional Trustee shall request the direction of the Holders of the
Securities with respect to such amendment modification or termination and shall
vote with respect to such amendment, modification or termination as directed by
a Majority in liquidation amount of the Securities voting together as a single
class; provided, however, that where a consent under the Indenture would require
the consent of a Super-Majority, the Institutional Trustee may only give such
consent at the direction of the Holders of at least the proportion in
liquidation amount of the Securities outstanding which the relevant
Super-Majority represents of the aggregate principal amount of the Debentures
outstanding. The Institutional Trustee shall not take any such action in
accordance with the directions of the Holders of the Securities unless the

                                      I-8

<PAGE>


Institutional Trustee has obtained an opinion of tax counsel to the effect that,
as a result of such action, the Trust will not be classified as other than a
grantor trust for United States federal income tax purposes.

         A waiver of an Indenture  Event of Default will  constitute a waiver of
the corresponding Event of Default hereunder. Any required approval or direction
of  Holders of the  Capital  Securities  may be given at a  separate  meeting of
Holders of the Capital Securities convened for such purpose, at a meeting of all
of the Holders of the  Securities  in the Trust or pursuant to written  consent.
The Institutional Trustee will cause a notice of any meeting at which Holders of
the Capital  Securities are entitled to vote, or of any matter upon which action
by written  consent of such Holders is to be taken,  to be mailed to each Holder
of record of the Capital  Securities.  Each such notice will include a statement
setting forth the following information (i) the date of such meeting or the date
by which  such  action  is to be taken,  (ii) a  description  of any  resolution
proposed for adoption at such meeting on which such Holders are entitled to vote
or of such matter upon which  written  consent is sought and (iii)  instructions
for the  delivery of proxies or  consents.  No vote or consent of the Holders of
the  Capital  Securities  will be  required  for the Trust to redeem  and cancel
Capital  Securities or to  distribute  the  Debentures  in  accordance  with the
Declaration and the terms of the Securities.

         Notwithstanding  that Holders of the Capital Securities are entitled to
vote or  consent  under any of the  circumstances  described  above,  any of the
Capital Securities that are owned by the Sponsor or any Affiliate of the Sponsor
shall not entitle the Holder thereof to vote or consent and shall,  for purposes
of such vote or  consent,  be treated  as if such  Capital  Securities  were not
outstanding.

         In no event will  Holders of the Capital  Securities  have the right to
vote to appoint,  remove or replace the Administrators,  which voting rights are
vested  exclusively in the Sponsor as the Holder of all of the Common Securities
of the  Trust.  Under  certain  circumstances  as more  fully  described  in the
Declaration,  Holders of Capital  Securities  have the right to vote to appoint,
remove or replace the Institutional Trustee.

6. Voting Rights - Common Securities.
   ---------------------------------

     (a) Except as provided under paragraphs 6(b), 6(c) and 7 and as otherwise
required by law and the Declaration, the Common Securities will have no voting
rights.

     (b) The Holders of the Common Securities are entitled, in accordance with
Article IV of the Declaration, to vote to appoint, remove or replace any
Administrators.

     (c) Subject to Section 6.7 of the Declaration and only after each Event of
Default (if any) with respect to the Capital Securities has been cured, waived,
or otherwise eliminated and subject to the requirements of the second to last
sentence of this paragraph, the Holders of a Majority in liquidation amount of
the Common Securities, voting separately as a class, may direct the time,
method, and place of conducting any proceeding for any remedy available to the
Institutional Trustee, or exercising any trust or power conferred upon the
Institutional Trustee under the Declaration, including (i) directing the time,
method, place of conducting any proceeding for any remedy available to the
Debenture Trustee, or exercising any trust or power conferred on the Debenture
Trustee with respect to the Debentures, (ii) waive any past default and its
consequences that is waivable under the Indenture, or (iii) exercise any right
to rescind or annul a declaration that the principal of all the Debentures shall
be due and payable; provided, however, that, where a consent or action under the
Indenture would require a Super Majority, the Institutional Trustee may only
give such consent or take such action at the written direction of the Holders of
at least the proportion in liquidation amount of the Common Securities which the
relevant Super Majority represents of the aggregate principal amount of the
Debentures outstanding. Notwithstanding this paragraph 6(c), the Institutional
Trustee shall not revoke any action previously authorized or approved by a vote
or consent of the Holders of the Capital Securities. Other than with

                                      I-9
<PAGE>

respect to directing the time, method and place of conducting any proceeding for
any remedy available to the Institutional Trustee or the Debenture Trustee as
set forth above, the Institutional Trustee shall not take any action described
in (i), (ii) or (iii) above, unless the Institutional Trustee has obtained an
opinion of tax counsel to the effect that for the purposes of United States
federal income tax the Trust will not be classified as other than a grantor
trust on account of such action. If the Institutional Trustee fails to enforce
its rights under the Declaration to the fullest extent permitted by law, any
Holder of the Common Securities may institute a legal proceeding directly
against any Person to enforce the Institutional Trustee's rights under the
Declaration, without first instituting a legal proceeding against the
Institutional Trustee or any other Person.

         Any approval or direction  of Holders of the Common  Securities  may be
given at a separate  meeting of Holders of the Common  Securities  convened  for
such purpose,  at a meeting of all of the Holders of the Securities in the Trust
or pursuant to written consent.  The  Administrators  will cause a notice of any
meeting at which  Holders of the Common  Securities  are entitled to vote, or of
any matter upon which action by written  consent of such Holders is to be taken,
to be mailed to each  Holder of the Common  Securities.  Each such  notice  will
include a statement  setting  forth (i) the date of such  meeting or the date by
which such action is to be taken, (ii) a description of any resolution  proposed
for  adoption at such  meeting on which such  Holders are entitled to vote or of
such matter upon which written consent is sought and (iii)  instructions for the
delivery of proxies or consents.

         No vote or consent of the  Holders  of the  Common  Securities  will be
required for the Trust to redeem and cancel  Common  Securities or to distribute
the  Debentures  in  accordance  with  the  Declaration  and  the  terms  of the
Securities.

7. Amendments to Declaration and Indenture.
   ---------------------------------------

     (a) In addition to any requirements under Section 11.1 of the Declaration,
if any proposed amendment to the Declaration provides for, or the Institutional
Trustee, Sponsor or Administrators otherwise propose to effect, (i) any action
that would adversely affect the powers, preferences or special rights of the
Securities, whether by way of amendment to the Declaration or otherwise, or (ii)
the Liquidation of the Trust, other than as described in Section 7.1 of the
Declaration, then the Holders of outstanding Securities, voting together as a
single class, will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of the
Holders of at least a Majority in liquidation amount of the Securities, affected
thereby; provided, however, if any amendment or proposal referred to in clause
(i) above would adversely affect only the Capital Securities or only the Common
Securities, then only the affected class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of a Majority in liquidation amount of such class of
Securities.

     (b) In the event the consent of the Institutional Trustee as the holder of
the Debentures is required under the Indenture with respect to any amendment,
modification or termination of the Indenture or the Debentures, the
Institutional Trustee shall request the written direction of the Holders of the
Securities with respect to such amendment, modification or termination and shall
vote with respect to such amendment, modification, or termination as directed by
a Majority in liquidation amount of the Securities voting together as a single
class; provided, however, that where a consent under the Indenture would require
a Super Majority, the Institutional Trustee may only give such consent at the
direction of the Holders of at least the proportion in liquidation amount of the
Securities which the relevant Super Majority represents of the aggregate
principal amount of the Debentures outstanding.

     (c) Notwithstanding the foregoing, no amendment or modification may be made
to the Declaration if such amendment or modification would (i) cause the Trust
to be classified for purposes of United States federal income taxation as other
than a grantor trust, (ii) reduce or otherwise

                                      I-10

<PAGE>


adversely affect the powers of the Institutional Trustee or (iii) cause the
Trust to be deemed an Investment Company which is required to be registered
under the Investment Company Act.

     (d) Notwithstanding any provision of the Declaration, the right of any
Holder of the Capital Securities to receive payment of distributions and other
payments upon redemption or otherwise, on or after their respective due dates,
or to institute a suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of such
Holder. For the protection and enforcement of the foregoing provision, each and
every Holder of the Capital Securities shall be entitled to such relief as can
be given either at law or equity.

8. Pro Rata.  A  reference  in these  terms of the  Securities  to any  payment,
distribution or treatment as being "Pro Rata" shall mean pro rata to each Holder
of  the  Securities  according  to  the  aggregate  liquidation  amount  of  the
Securities held by the relevant Holder in relation to the aggregate  liquidation
amount of all Securities then outstanding  unless, in relation to a payment,  an
Event of  Default  has  occurred  and is  continuing,  in which  case any  funds
available to make such payment shall be paid first to each Holder of the Capital
Securities Pro Rata according to the aggregate liquidation amount of the Capital
Securities  held by the relevant  Holder  relative to the aggregate  liquidation
amount of all Capital Securities outstanding, and only after satisfaction of all
amounts  owed to the  Holders of the Capital  Securities,  to each Holder of the
Common Securities Pro Rata according to the aggregate  liquidation amount of the
Common  Securities  held  by the  relevant  Holder  relative  to  the  aggregate
liquidation amount of all Common Securities outstanding.

9.  Ranking.  The Capital  Securities  rank pari passu with and payment  thereon
shall be made Pro Rata with the Common Securities except that, where an Event of
Default  has  occurred  and is  continuing,  the rights of Holders of the Common
Securities to receive payment of  Distributions  and payments upon  liquidation,
redemption  and otherwise are  subordinated  to the rights of the Holders of the
Capital  Securities with the result that no payment of any  Distribution  on, or
Optional Redemption Price (or Special Redemption Price) of, any Common Security,
and no other payment on account of redemption,  liquidation or other acquisition
of  Common  Securities,  shall  be made  unless  payment  in full in cash of all
accumulated and unpaid  Distributions on all outstanding  Capital Securities for
all  distribution  periods  terminating on or prior  thereto,  or in the case of
payment of the Optional  Redemption Price (or Special Redemption Price) the full
amount of such Optional  Redemption Price (or Special  Redemption  Price) on all
outstanding Capital Securities then called for redemption,  shall have been made
or  provided  for,  and all funds  immediately  available  to the  Institutional
Trustee  shall  first  be  applied  to  the  payment  in  full  in  cash  of all
Distributions on, or the Optional Redemption Price (or Special Redemption Price)
of, the Capital Securities then due and payable.

10. Acceptance of Guarantee and Indenture. Each Holder of the Capital Securities
and the Common Securities,  by the acceptance of such Securities,  agrees to the
provisions of the Guarantee,  including the subordination provisions therein and
to the provisions of the Indenture.

11. No Preemptive Rights. The Holders of the Securities shall have no preemptive
or similar rights to subscribe for any additional securities.

12. Miscellaneous. These terms constitute a part of the Declaration. The Sponsor
will provide a copy of the  Declaration,  the Guarantee,  and the Indenture to a
Holder without charge on written  request to the Sponsor at its principal  place
of business.

                                      I-11

<PAGE>


                                   EXHIBIT A-1

                      FORM OF CAPITAL SECURITY CERTIFICATE

                           [FORM OF FACE OF SECURITY]

         THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS  AMENDED  (THE  "SECURITIES  ACT"),  ANY STATE  SECURITIES  LAWS OR ANY OTHER
APPLICABLE   SECURITIES   LAW.   NEITHER  THIS  SECURITY  NOR  ANY  INTEREST  OR
PARTICIPATION  HEREIN MAY BE REOFFERED,  SOLD, ASSIGNED,  TRANSFERRED,  PLEDGED,
ENCUMBERED  OR  OTHERWISE  DISPOSED  OF IN THE ABSENCE OF SUCH  REGISTRATION  OR
UNLESS SUCH  TRANSACTION  IS EXEMPT  FROM,  OR NOT SUBJECT TO, THE  REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE
HOLDER OF THIS  SECURITY  BY ITS  ACCEPTANCE  HEREOF  AGREES  TO OFFER,  SELL OR
OTHERWISE  TRANSFER  THIS  SECURITY  ONLY (A) TO THE  SPONSOR OR THE TRUST,  (B)
PURSUANT TO A REGISTRATION  STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES  ACT,  (C) TO A  PERSON  WHOM THE  SELLER  REASONABLY  BELIEVES  IS A
QUALIFIED  INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A SO LONG AS THIS  SECURITY IS ELIGIBLE  FOR RESALE  PURSUANT TO RULE 144A IN
ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S.  PERSON IN AN OFFSHORE  TRANSACTION
IN ACCORDANCE  WITH RULE 903 OR RULE 904 (AS  APPLICABLE)  OF REGULATION S UNDER
THE SECURITIES ACT, (E) TO AN  INSTITUTIONAL  "ACCREDITED  INVESTOR"  WITHIN THE
MEANING  OF  SUBPARAGRAPH  (A) OF RULE  501  UNDER  THE  SECURITIES  ACT THAT IS
ACQUIRING THIS CAPITAL SECURITY FOR ITS OWN ACCOUNT,  OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL  ACCREDITED  INVESTOR,  FOR INVESTMENT  PURPOSES AND NOT WITH A
VIEW TO, OR FOR OFFER OR SALE IN CONNECTION  WITH, ANY DISTRIBUTION IN VIOLATION
OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION  REQUIREMENTS OF THE SECURITIES  ACT,  SUBJECT TO THE SPONSOR'S AND
THE  TRUST'S  RIGHT  PRIOR TO ANY SUCH  OFFER,  SALE OR  TRANSFER TO REQUIRE THE
DELIVERY  OF AN OPINION  OF  COUNSEL,  CERTIFICATION  AND/OR  OTHER  INFORMATION
SATISFACTORY TO EACH OF THEM IN ACCORDANCE WITH THE DECLARATION OF TRUST, A COPY
OF WHICH MAY BE  OBTAINED  FROM THE SPONSOR OR THE TRUST.  HEDGING  TRANSACTIONS
INVOLVING  THIS  SECURITY MAY NOT BE  CONDUCTED  UNLESS IN  COMPLIANCE  WITH THE
SECURITIES ACT.

         THE HOLDER OF THIS  SECURITY  BY ITS  ACCEPTANCE  HEREOF  ALSO  AGREES,
REPRESENTS  AND  WARRANTS  THAT  IT  IS  NOT  AN  EMPLOYEE  BENEFIT,  INDIVIDUAL
RETIREMENT  ACCOUNT  OR  OTHER  PLAN OR  ARRANGEMENT  SUBJECT  TO TITLE I OF THE
EMPLOYEE  RETIREMENT  INCOME  SECURITY  ACT OF 1974,  AS AMENDED  ("ERISA"),  OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH
A "PLAN"),  OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON
OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF
ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH
PURCHASER  OR HOLDER IS  ELIGIBLE  FOR  EXEMPTIVE  RELIEF  AVAILABLE  UNDER U.S.
DEPARTMENT OF LABOR PROHIBITED  TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38,
90-1 OR 84-14 OR ANOTHER  APPLICABLE  EXEMPTION  OR ITS  PURCHASE AND HOLDING OF
THIS  SECURITY IS NOT  PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE
CODE WITH RESPECT TO SUCH  PURCHASE OR HOLDING.  ANY  PURCHASER OR HOLDER OF THE
SECURITIES  OR ANY INTEREST  THEREIN WILL BE DEEMED TO HAVE  REPRESENTED  BY ITS
PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE  BENEFIT PLAN
WITHIN THE

                                     A-1-1

<PAGE>


MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS
APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT
PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE
BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT
RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF
THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.

         THIS  SECURITY  WILL BE ISSUED  AND MAY BE  TRANSFERRED  ONLY IN BLOCKS
HAVING A LIQUIDATION  AMOUNT OF NOT LESS THAN  $500,000.00  (500 SECURITIES) AND
MULTIPLES OF $1,000.00 IN EXCESS THEREOF.  ANY ATTEMPTED  TRANSFER OF SECURITIES
IN A BLOCK HAVING A LIQUIDATION  AMOUNT OF LESS THAN $500,000.00 SHALL BE DEEMED
TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.

         THE  HOLDER  OF THIS  SECURITY  AGREES  THAT IT WILL  COMPLY  WITH  THE
FOREGOING RESTRICTIONS.

         IN  CONNECTION  WITH ANY  TRANSFER,  THE  HOLDER  WILL  DELIVER  TO THE
REGISTRAR AND TRANSFER AGENT SUCH  CERTIFICATES AND OTHER  INFORMATION AS MAY BE
REQUIRED BY THE  DECLARATION  TO CONFIRM  THAT THE  TRANSFER  COMPLIES  WITH THE
FOREGOING RESTRICTIONS.

        Certificate Number P-1                   15,000 Capital Securities

                                December 4, 2002

             CERTIFICATE EVIDENCING FLOATING RATE CAPITAL SECURITIES

                                       of

                         PENN-AMERICA STATUTORY TRUST I

               (liquidation amount $1,000.00 per Capital Security)

         Penn-America  Statutory  Trust I, a statutory  trust  created under the
laws of the State of Connecticut (the "Trust"), hereby certifies that Hare & Co.
(the "Holder"),  as the nominee of The Bank of New York, indenture trustee under
the Indenture dated as of December 4, 2002, among I-Preferred Term Securities I,
Ltd.,  I-Preferred  Term  Securities  I,  Inc.  and The  Bank of New York is the
registered owner of securities of the Trust  representing  undivided  beneficial
interests in the assets of the Trust,  (liquidation amount $1,000.00 per capital
security) (the "Capital  Securities").  Subject to the  Declaration  (as defined
below),  the Capital Securities are transferable on the books and records of the
Trust  in  person  or by a duly  authorized  attorney,  upon  surrender  of this
Certificate  duly  endorsed and in proper form for  transfer.  The  designation,
rights, privileges, restrictions,  preferences and other terms and provisions of
the Capital  Securities  represented hereby are issued pursuant to, and shall in
all  respects  be  subject  to,  the  provisions  of the  Amended  and  Restated
Declaration  of Trust of the Trust dated as of  December  4, 2002,  among Jon S.
Saltzman, Joseph F. Morris and Brian Riley, as Administrators, State Street Bank
and  Trust  Company  of  Connecticut,  National  Association,  as  Institutional
Trustee, Penn-America Group, Inc., as Sponsor, and the holders from time to time
of  undivided  beneficial  interests in the assets of the Trust,  including  the
designation  of the terms of the Capital  Securities  as set forth in Annex I to
such  amended and restated  declaration  as the same may be amended from time to
time (the  "Declaration").  Capitalized  terms used herein but not defined shall
have the meaning  given them in the  Declaration.  The Holder is entitled to the
benefits of the  Guarantee  to the extent  provided  therein.  The Sponsor  will
provide a copy of the  Declaration,  the  Guarantee,  and the  Indenture  to the
Holder without charge upon written  request to the Trust at its principal  place
of business.

                                     A-1-2
<PAGE>


         Upon receipt of this Security,  the Holder is bound by the  Declaration
and is entitled to the benefits thereunder.

         By acceptance of this Security,  the Holder agrees to treat, for United
States  federal  income tax  purposes,  the  Floating  Rate Junior  Subordinated
Deferrable  Interest  Debentures  (the  "Debentures")  as  indebtedness  and the
Capital Securities as evidence of beneficial ownership in the Debentures.

         This Capital Security is governed by, and construed in accordance with,
the laws of the State of  Connecticut,  without regard to principles of conflict
of laws.

                       Signatures appear on following page

                                     A-1-3

<PAGE>

     IN WITNESS WHEREOF, the Trust has duly executed this certificate.

                              PENN-AMERICA STATUTORY TRUST I



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


                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

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


                      STATE  STREET  BANK AND TRUST  COMPANY OF  CONNECTICUT,
                      NATIONAL ASSOCIATION,
                      as the Institutional Trustee


                      By:
                        ---------------------------------
                              Authorized Officer


                                     A-1-4

<PAGE>


                          [FORM OF REVERSE OF SECURITY]

         Distributions  payable on each Capital  Security  will be payable at an
annual rate equal to 5.42375%  beginning on (and including) the date of original
issuance and ending on (but  excluding)  March 4, 2003 and at an annual rate for
each  successive  period  beginning on (and  including)  March 4, 2003, and each
succeeding  Distribution  Payment Date,  and ending on (but  excluding) the next
succeeding  Distribution Payment Date (each a "Distribution  Period"),  equal to
3-Month LIBOR,  determined as described  below,  plus 4.00% (the "Coupon Rate");
provided,  however,  that prior to December  4, 2007,  the Coupon Rate shall not
exceed 12.50%, applied to the stated liquidation amount of $1,000.00 per Capital
Security,  such rate being the rate of interest  payable on the Debentures to be
held by the  Institutional  Trustee.  Distributions  in arrears  for more than a
quarterly  period  will  bear  interest  thereon  compounded  quarterly  at  the
Distribution  Rate  (to the  extent  permitted  by  applicable  law).  The  term
"Distributions"  as used herein includes  payments of Interest and any principal
on the Debentures held by the  Institutional  Trustee unless otherwise stated. A
Distribution  is payable only to the extent that payments are made in respect of
the  Debentures  held  by  the  Institutional  Trustee  and to  the  extent  the
Institutional   Trustee  has  funds   available   therefor.   As  used   herein,
"Determination  Date" means the date that is two London  Banking  Days (i.e.,  a
business day in which dealings in deposits in U.S. dollars are transacted in the
London interbank market) preceding the commencement of the relevant Distribution
Period.  In the event that any date on which a  Distribution  is payable on this
Capital  Security  is not a Business  Day,  then a payment  of the  Distribution
payable on such date will be made on the next succeeding day which is a Business
Day (and  without  any  Distribution  or other  payment  in  respect of any such
delay),  except that,  if such Business Day is in the next  succeeding  calendar
year, such payment shall be made on the immediately  preceding  Business Day, in
each case with the same force and effect as if made on the date the  payment was
originally  payable.  The amount of interest payable for any Distribution Period
will  be  calculated  by  applying  the  Coupon  Rate  to the  principal  amount
outstanding at the commencement of the Distribution  Period and multiplying each
such amount by the actual number of days in the  Distribution  Period  concerned
divided by 360.

         "3-Month  LIBOR" as used  herein,  means the London  interbank  offered
interest rate for three-month  U.S. dollar deposits  determined by the Debenture
Trustee  in the  following  order  of  priority:  (i) the rate  (expressed  as a
percentage per annum) for U.S.  dollar  deposits  having a three-month  maturity
that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related
Determination  Date ("Telerate Page 3750" means the display  designated as "Page
3750" on the Dow Jones  Telerate  Service or such other page as may replace Page
3750 on that  service or such other  service or services as may be  nominated by
the British  Bankers'  Association as the information  vendor for the purpose of
displaying  London interbank  offered rates for U.S. dollar  deposits);  (ii) if
such rate cannot be identified on the related  Determination Date, the Debenture
Trustee will request the principal  London  offices of four leading banks in the
London interbank market to provide such banks' offered quotations  (expressed as
percentages  per annum) to prime banks in the London  interbank  market for U.S.
dollar deposits having a three-month  maturity as of 11:00 a.m. (London time) on
such Determination Date. If at least two quotations are provided,  3-Month LIBOR
will be the  arithmetic  mean of such  quotations;  (iii) if fewer than two such
quotations are provided as requested in clause (ii) above, the Debenture Trustee
will  request  four  major New York City banks to provide  such  banks'  offered
quotations  (expressed as percentages  per annum) to leading  European banks for
loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date.
If at  least  two  such  quotations  are  provided,  3-Month  LIBOR  will be the
arithmetic mean of such  quotations;  and (iv) if fewer than two such quotations
are provided as requested in clause (iii) above, 3-Month LIBOR will be a 3-Month
LIBOR determined with respect to the Distribution  Period immediately  preceding
such current  Distribution Period. If the rate for U.S. dollar deposits having a
three-month  maturity that  initially  appears on Telerate Page 3750 as of 11:00
a.m.  (London  time) on the  related  Determination  Date is  superseded  on the
Telerate  Page 3750 by a  corrected  rate by 12:00  noon  (London  time) on such
Determination  Date, then the corrected rate as so substituted on the applicable
page will be the applicable 3-Month LIBOR for such Determination Date.

                                     A-1-5

<PAGE>


         The Coupon Rate for any  Distribution  Period will at no time be higher
than the maximum rate then permitted by New York law as the same may be modified
by United States law.

         All  percentages   resulting  from  any  calculations  on  the  Capital
Securities will be rounded, if necessary,  to the nearest one hundred-thousandth
of a percentage  point,  with five  one-millionths of a percentage point rounded
upward (e.g.,  9.876545% or .09876545 being rounded to 9.87655% or .0987655, and
all dollar amounts used in or resulting from such calculation will be rounded to
the nearest cent (with one-half cent being rounded upward)).

         Except as  otherwise  described  below,  Distributions  on the  Capital
Securities  will be cumulative,  will accrue from the date of original  issuance
and will be payable  quarterly  in arrears on March 4, June 4,  September  4 and
December 4 of each year,  commencing on March 4, 2003. The Debenture  Issuer has
the right under the Indenture to defer payments of interest on the Debentures by
extending the interest payment period for up to 20 consecutive quarterly periods
(each an  "Extension  Period")  on the  Debentures,  subject  to the  conditions
described  below,  although  such  interest  would  continue  to  accrue  on the
Debentures at an annual rate equal to the Distribution Rate compounded quarterly
to the extent permitted by law during any Extension  Period. No Extension Period
may end on a date other than a Distribution Payment Date. At the end of any such
Extension  Period the  Debenture  Issuer shall pay all interest then accrued and
unpaid on the Debentures (together with Additional Interest thereon);  provided,
however,  that no Extension Period may extend beyond the Maturity Date. Prior to
the termination of any Extension Period, the Debenture Issuer may further extend
such  period,  provided  that such period  together  with all such  previous and
further consecutive extensions thereof shall not exceed 20 consecutive quarterly
periods,  or extend  beyond  the  Maturity  Date.  Upon the  termination  of any
Extension  Period and upon the payment of all accrued  and unpaid  interest  and
Additional  Interest,  the Debenture Issuer may commence a new Extension Period,
subject to the foregoing requirements.  No interest or Additional Interest shall
be due and payable during an Extension  Period,  except at the end thereof,  but
each  installment  of interest  that would  otherwise  have been due and payable
during such Extension  Period shall bear Additional  Interest.  If Distributions
are deferred,  the  Distributions due shall be paid on the date that the related
Extension Period terminates,  to Holders of the Securities as they appear on the
books and records of the Trust on the record  date  immediately  preceding  such
date.  Distributions  on the Securities must be paid on the dates payable (after
giving  effect to any  Extension  Period) to the extent that the Trust has funds
available for the payment of such  distributions  in the Property Account of the
Trust.  The  Trust's  funds  available  for  Distribution  to the Holders of the
Securities will be limited to payments received from the Debenture  Issuer.  The
payment of  Distributions  out of moneys held by the Trust is  guaranteed by the
Guarantor pursuant to the Guarantee.

         The  Capital   Securities  shall  be  redeemable  as  provided  in  the
Declaration.


                                     A-1-6
<PAGE>


                                   ASSIGNMENT

         FOR VALUE RECEIVED,  the undersigned assigns and transfers this Capital
Security Certificate to:

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


         (Insert assignee's social security or tax identification number)

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

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


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


         (Insert address and zip code of assignee) and irrevocably appoints


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


     agent to transfer this Capital Security Certificate on the books of the
Trust. The agent may substitute another to act for him or her.

         Date:
             ----------------------------------------

         Signature:
             ----------------------------------------

     (Sign exactly as your name appears on the other side of this Capital
Security Certificate)

         Signature Guarantee:1






---------------------------------
1 Signature must be guaranteed by an "eligible guarantor  institution" that is a
bank,  stockbroker,  savings and loan  association  or credit union  meeting the
requirements of the Security registrar, which requirements include membership or
participation in the Securities  Transfer Agents Medallion  Program ("STAMP") or
such other  "signature  guarantee  program" as may be determined by the Security
registrar in addition to, or in substitution  for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.

                                     A-1-7

<PAGE>


                                   EXHIBIT A-2

                       FORM OF COMMON SECURITY CERTIFICATE

         THIS COMMON SECURITY HAS NOT BEEN  REGISTERED  UNDER THE SECURITIES ACT
OF  1933,  AS  AMENDED,  AND MAY NOT BE  OFFERED,  SOLD,  PLEDGED  OR  OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION.

         THIS CERTIFICATE IS NOT TRANSFERABLE  EXCEPT IN COMPLIANCE WITH SECTION
8.1 OF THE DECLARATION.

             Certificate Number C-1           464 Common Securities

                                December 4, 2002

             CERTIFICATE EVIDENCING FLOATING RATE COMMON SECURITIES

                                       of

                         PENN-AMERICA STATUTORY TRUST I

         Penn-America  Statutory  Trust I, a statutory  trust  created under the
laws  of  the  State  of  Connecticut  (the  "Trust"),   hereby  certifies  that
Penn-America  Group,  Inc.  (the  "Holder")  is the  registered  owner of common
securities  of the Trust  representing  undivided  beneficial  interests  in the
assets  of  the  Trust  (the  "Common  Securities").  The  designation,  rights,
privileges,  restrictions,  preferences  and other terms and  provisions  of the
Common  Securities  represented  hereby are issued pursuant to, and shall in all
respects be subject to, the  provisions of the Amended and Restated  Declaration
of Trust of the Trust  dated as of  December  4,  2002,  among Jon S.  Saltzman,
Joseph F. Morris and Brian Riley, as Administrators, State Street Bank and Trust
Company  of  Connecticut,   National  Association,   as  Institutional  Trustee,
Penn-America  Group,  Inc.,  as Sponsor,  and the  holders  from time to time of
undivided  beneficial  interest  in  the  assets  of  the  Trust  including  the
designation  of the terms of the  Common  Securities  as set forth in Annex I to
such amended and restated  declaration,  as the same may be amended from time to
time (the  "Declaration").  Capitalized  terms used herein but not defined shall
have the meaning  given them in the  Declaration.  The Holder is entitled to the
benefits of the  Guarantee  to the extent  provided  therein.  The Sponsor  will
provide a copy of the Declaration, the Guarantee and the Indenture to the Holder
without  charge upon written  request to the Sponsor at its  principal  place of
business.

         As set forth in the Declaration, where an Event of Default has occurred
and is  continuing,  the rights of Holders  of Common  Securities  to payment in
respect of Distributions and payments upon Liquidation,  redemption or otherwise
are subordinated to the rights of payment of Holders of the Capital Securities.

         Upon  receipt  of  this  Certificate,   the  Holder  is  bound  by  the
Declaration and is entitled to the benefits thereunder.

         By acceptance  of this  Certificate,  the Holder  agrees to treat,  for
United States federal income tax purposes, the Floating Rate Junior Subordinated
Deferrable Interest Debentures (the "Debentures") as indebtedness and the Common
Securities as evidence of undivided beneficial ownership in the Debentures.

         This Common Security is governed by, and construed in accordance  with,
the laws of the State of  Connecticut,  without regard to principles of conflict
of laws.

                                     A-2-1
<PAGE>


         IN WITNESS WHEREOF, the Trust has duly executed this certificate.

                                    PENN-AMERICA STATUTORY TRUST I


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



                                     A-2-2

<PAGE>


                          [FORM OF REVERSE OF SECURITY]

         Distributions  payable on each Common  Security  will be  identical  in
amount to the  Distributions  payable on each Capital  Security,  which is at an
annual rate equal to 5.42375%  beginning on (and including) the date of original
issuance and ending on (but  excluding)  March 4, 2003 and at an annual rate for
each  successive  period  beginning on (and  including)  March 4, 2003, and each
succeeding  Distribution  Payment Date,  and ending on (but  excluding) the next
succeeding  Distribution Payment Date (each a "Distribution  Period"),  equal to
3-Month LIBOR,  determined as described  below,  plus 4.00% (the "Coupon Rate");
provided,  however,  that prior to December  4, 2007,  the Coupon Rate shall not
exceed 12.50%,  applied to the stated liquidation amount of $1,000.00 per Common
Security,  such rate being the rate of interest  payable on the Debentures to be
held by the  Institutional  Trustee.  Distributions in arrears for more than one
quarterly period will bear interest thereon  compounded at the Distribution Rate
(to the extent  permitted by applicable law). The term  "Distributions"  as used
herein includes payments of Interest and any principal on the Debentures held by
the  Institutional  Trustee unless  otherwise  stated. A Distribution is payable
only to the extent that payments are made in respect of the  Debentures  held by
the Institutional  Trustee and to the extent the Institutional Trustee has funds
available therefor. As used herein,  "Determination Date" means the date that is
two London  Banking Days (i.e.,  a business day in which dealings in deposits in
U.S.  dollars are  transacted  in the London  interbank  market)  preceding  the
commencement of the relevant  Distribution Period. In the event that any date on
which a Distribution  is payable on this Common  Security is not a Business Day,
then a payment of the Distribution payable on such date will be made on the next
succeeding  day which is a Business Day (and without any  Distribution  or other
payment in respect of any such delay),  except that,  if such Business Day is in
the next succeeding calendar year, such payment shall be made on the immediately
preceding  Business  Day, in each case with the same force and effect as if made
on the date the payment was originally  payable.  The amount of interest payable
for the  Distribution  Period  commencing  March 4,  2003  and  each  succeeding
Distribution  Period  will be  calculated  by  applying  the Coupon  Rate to the
principal amount outstanding at the commencement of the Distribution  Period and
multiplying  each such amount by the actual  number of days in the  Distribution
Period concerned divided by 360.

         "3-Month  LIBOR" as used  herein,  means the London  interbank  offered
interest rate for three-month  U.S. dollar deposits  determined by the Debenture
Trustee  in the  following  order  of  priority:  (i) the rate  (expressed  as a
percentage per annum) for U.S.  dollar  deposits  having a three-month  maturity
that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related
Determination  Date ("Telerate Page 3750" means the display  designated as "Page
3750" on the Dow Jones  Telerate  Service or such other page as may replace Page
3750 on that  service or such other  service or services as may be  nominated by
the British  Bankers'  Association as the information  vendor for the purpose of
displaying  London interbank  offered rates for U.S. dollar  deposits);  (ii) if
such rate cannot be identified on the related  Determination Date, the Debenture
Trustee will request the principal  London  offices of four leading banks in the
London interbank market to provide such banks' offered quotations  (expressed as
percentages  per annum) to prime banks in the London  interbank  market for U.S.
dollar deposits having a three-month  maturity as of 11:00 a.m. (London time) on
such Determination Date. If at least two quotations are provided,  3-Month LIBOR
will be the  arithmetic  mean of such  quotations;  (iii) if fewer than two such
quotations are provided as requested in clause (ii) above, the Debenture Trustee
will  request  four  major New York City banks to provide  such  banks'  offered
quotations  (expressed as percentages  per annum) to leading  European banks for
loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date.
If at  least  two  such  quotations  are  provided,  3-Month  LIBOR  will be the
arithmetic mean of such  quotations;  and (iv) if fewer than two such quotations
are provided as requested in clause (iii) above, 3-Month LIBOR will be a 3-Month
LIBOR determined with respect to the Distribution  Period immediately  preceding
such current  Distribution Period. If the rate for U.S. dollar deposits having a
three-month  maturity that  initially  appears on Telerate Page 3750 as of 11:00
a.m.  (London  time) on the  related  Determination  Date is  superseded  on the
Telerate  Page 3750 by a  corrected  rate by 12:00  noon  (London  time) on such
Determination  Date, then the corrected rate as so substituted on the applicable
page will be the applicable 3-Month LIBOR for such Determination Date.


                                     A-2-3

<PAGE>


         The Coupon Rate for any  Distribution  Period will at no time be higher
than the maximum rate then permitted by New York law as the same may be modified
by United States law.

         All  percentages   resulting  from  any   calculations  on  the  Common
Securities will be rounded, if necessary,  to the nearest one hundred-thousandth
of a percentage  point,  with five  one-millionths of a percentage point rounded
upward (e.g.,  9.876545% or .09876545 being rounded to 9.87655% or .0987655, and
all dollar amounts used in or resulting from such calculation will be rounded to
the nearest cent (with one-half cent being rounded upward)).

         Except  as  otherwise  described  below,  Distributions  on the  Common
Securities  will be cumulative,  will accrue from the date of original  issuance
and will be payable  quarterly  in arrears on March 4, June 4,  September  4 and
December 4 of each year,  commencing on March 4, 2003. The Debenture  Issuer has
the right under the Indenture to defer payments of interest on the Debentures by
extending the interest payment period for up to 20 consecutive quarterly periods
(each an  "Extension  Period")  on the  Debentures,  subject  to the  conditions
described  below,  although  such  interest  would  continue  to  accrue  on the
Debentures at an annual rate equal to the Distribution Rate compounded quarterly
to the extent permitted by law during any Extension  Period. No Extension Period
may end on a date other than an Interest  Payment  Date.  At the end of any such
Extension  Period the Sponsor  shall pay all interest then accrued and unpaid on
the Debentures (together with Additional Interest thereon);  provided,  however,
that no  Extension  Period may extend  beyond the  Maturity  Date.  Prior to the
termination of any Extension Period, the Sponsor may further extend such period,
provided  that  such  period   together  with  all  such  previous  and  further
consecutive  extensions  thereof  shall  not  exceed  20  consecutive  quarterly
periods,  or extend  beyond  the  Maturity  Date.  Upon the  termination  of any
Extension  Period and upon the payment of all accrued  and unpaid  interest  and
Additional Interest, the Sponsor may commence a new Extension Period, subject to
the foregoing requirements.  No interest or Additional Interest shall be due and
payable  during  an  Extension  Period,  except  at the end  thereof,  but  each
installment  of interest that would  otherwise  have been due and payable during
such Extension  Period shall bear  Additional  Interest.  If  Distributions  are
deferred,  the  Distributions  due  shall be paid on the date  that the  related
Extension Period terminates,  to Holders of the Securities as they appear on the
books and records of the Trust on the record  date  immediately  preceding  such
date.  Distributions  on the Securities must be paid on the dates payable (after
giving  effect to any  Extension  Period) to the extent that the Trust has funds
available for the payment of such  distributions  in the Property Account of the
Trust.  The  Trust's  funds  available  for  Distribution  to the Holders of the
Securities will be limited to payments received from the Debenture  Issuer.  The
payment of  Distributions  out of moneys held by the Trust is  guaranteed by the
Guarantor pursuant to the Guarantee.

         The  Common   Securities   shall  be  redeemable  as  provided  in  the
Declaration.

                                     A-2-4

<PAGE>

                                   ASSIGNMENT

         FOR VALUE RECEIVED,  the undersigned  assigns and transfers this Common
Security Certificate to:



         (Insert assignee's social security or tax identification number)


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


         (Insert address and zip code of assignee) and irrevocably appoints


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

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

agent to transfer this Common Security Certificate on the books of the
Trust. The agent may substitute another to act for him or her.

    Date:
        ---------------------------------------------------

    Signature:

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

(Sign exactly as your name appears on the other side of this Common
Security Certificate)

    Signature:
             -----------------------------------------------

  (Sign  exactly as your name appears on the other side of this common Security
  Certificate)

         Signature Guarantee2

-----------------------------------
2 Signature must be guaranteed by an "eligible guarantor  institution" that is a
bank,  stockbroker,  savings and loan  association or credit union,  meeting the
requirements of the Security registrar, which requirements include membership or
participation in the Securities  Transfer Agents Medallion  Program ("STAMP") or
such other  "signature  guarantee  program" as may be determined by the Security
registrar in addition to, or in substitution  for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.

                                     A-2-5

<PAGE>

                                    EXHIBIT B

                          SPECIMEN OF INITIAL DEBENTURE

                                (See Tab No. 14)



<PAGE>




                                    EXHIBIT C

                               PLACEMENT AGREEMENT

                                 (See Tab No. 1)