Exhibit 4

                            PENN-AMERICA GROUP, INC.

                            15,000 Capital Securities

                        Floating Rate Capital Securities

               (Liquidation Amount $1,000.00 per Capital Security)

                               PLACEMENT AGREEMENT

                              ____________________

                                                                April 25, 2003

FTN Financial Capital Markets
845 Crossover Lane, Suite 150
Memphis, Tennessee  38117

Keefe, Bruyette & Woods, Inc.
787 7th Avenue, 4th Floor
New York, New York  10019


Ladies and Gentlemen:

         Penn-America Group, Inc., a Pennsylvania corporation (the "Company"),
and its financing subsidiary, Penn-America Statutory Trust II, a Connecticut
statutory trust (the "Trust," and hereinafter together with the Company, the
"Offerors"), hereby confirm their agreement (this "Agreement") with you as
placement agents (the "Placement Agents"), as follows:

Section 1.        Issuance and Sale of Securities.

      1.1  Introduction.  The Offerors  propose to issue and sell at the Closing
(as defined in Section 2.3.1 hereof) 15,000 of the Trust's Floating Rate Capital
Securities,  with a liquidation  amount of $1,000.00  per capital  security (the
"Capital  Securities"),  to I-Preferred Term Securities II, Ltd., a company with
limited  liability  established  under  the  laws  of the  Cayman  Islands  (the
"Purchaser") pursuant to the terms of a Subscription  Agreement entered into, or
to be entered into on or prior to the Closing Date (as defined in Section  2.3.1
hereof), between the Offerors and the Purchaser (the "Subscription  Agreement"),
the form of which is  attached  hereto as Exhibit A and  incorporated  herein by
this reference.

      1.2  Operative  Agreements.  The  Capital  Securities  shall be fully  and
unconditionally  guaranteed on a subordinated  basis by the Company with respect
to distributions and amounts payable upon  liquidation,  redemption or repayment
(the  "Guarantee")   pursuant  and  subject  to  the  Guarantee  Agreement  (the
"Guarantee  Agreement"),  to be dated as of the Closing  Date and  executed  and
delivered by the Company and U.S. Bank National  Association  ("U.S.  Bank"), as


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trustee  (the  "Guarantee  Trustee"),  for the benefit  from time to time of the
holders of the  Capital  Securities.  The entire  proceeds  from the sale by the
Trust to the holders of the Capital Securities shall be combined with the entire
proceeds from the sale by the Trust to the Company of its common securities (the
"Common Securities"),  and shall be used by the Trust to purchase $15,464,000.00
in principal amount of the Floating Rate Junior Subordinated Deferrable Interest
Debentures (the  "Debentures")  of the Company.  The Capital  Securities and the
Common  Securities  for the Trust  shall be issued  pursuant  to an Amended  and
Restated  Declaration  of Trust among U.S. Bank, as  institutional  trustee (the
"Institutional  Trustee"), the Administrators named therein, and the Company, to
be  dated  as of the  Closing  Date and in  substantially  the  form  heretofore
delivered to the Placement Agents (the "Trust Agreement").  The Debentures shall
be issued  pursuant to an  Indenture  (the  "Indenture"),  to be dated as of the
Closing  Date,  between the Company and U.S.  Bank,  as  indenture  trustee (the
"Indenture  Trustee").  The  documents  identified  in this  Section  1.2 and in
Section 1.1 are referred to herein as the "Operative Documents."

      1.3 Rights of Purchaser.  The Capital Securities shall be offered and sold
by the  Trust  directly  to the  Purchaser  without  registration  of any of the
Capital Securities,  the Debentures or the Guarantee under the Securities Act of
1933, as amended (the "Securities Act"), or any other applicable securities laws
in reliance upon exemptions from the registration requirements of the Securities
Act and other applicable securities laws. The Offerors agree that this Agreement
shall be  incorporated  by reference  into the  Subscription  Agreement  and the
Purchaser shall be entitled to each of the benefits of the Placement  Agents and
the Purchaser under this Agreement and shall be entitled to enforce  obligations
of the Offerors  under this  Agreement as fully as if the Purchaser were a party
to this Agreement.  The Offerors and the Placement Agents have entered into this
Agreement to set forth their  understanding  as to their  relationship and their
respective rights, duties and obligations.

      1.4 Legends.  Upon original issuance  thereof,  and until such time as the
same is no longer  required under the applicable  requirements of the Securities
Act, the Capital  Securities  and Debentures  certificates  shall each contain a
legend as required pursuant to any of the Operative Documents.

Section 2.        Purchase of Capital Securities.

      2.1  Exclusive  Rights;  Purchase  Price.  From the date hereof  until the
Closing Date (which date may be extended by mutual agreement of the Offerors and
the Placement  Agents),  the Offerors  hereby grant to the Placement  Agents the
exclusive  right  to  arrange  for the  sale of the  Capital  Securities  to the
Purchaser at a purchase price of $1,000.00 per Capital Security.

      2.2  Subscription  Agreement.  The Offerors hereby agree to evidence their
acceptance of the  subscription  by  countersigning  a copy of the  Subscription
Agreement and returning the same to the Placement Agents.

2.3      Closing and Delivery of Payment.

      2.3.1  Closing;  Closing  Date.  The  sale  and  purchase  of the  Capital
Securities by the Offerors to the  Purchaser  shall take place at a closing (the
"Closing") at the offices


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of LeBoeuf, Lamb, Greene & MacRae, L.L.P., at 10:00 a.m. (New York City time) on
May 15, 2003,  or such other  business day as may be agreed upon by the Offerors
and the Placement Agents (the "Closing  Date");  provided,  however,  that in no
event shall the Closing  Date occur later than May 15, 2003 unless  consented to
by the  Purchaser.  Payment by the Purchaser  shall be payable in the manner set
forth in the Subscription Agreement and shall be made prior to or on the Closing
Date.

      2.3.2 Delivery.  The certificate  for the Capital  Securities  shall be in
definitive  form,  registered  in the name of the Purchaser and in the aggregate
amount of the Capital Securities purchased by the Purchaser.

      2.3.3  Transfer   Agent.   The  Offerors  shall  deposit  the  certificate
representing  the Capital  Securities  with the  Institutional  Trustee or other
appropriate party prior to the Closing Date.

2.4      Placement Agents' Fees and Expenses.

      2.4.1 Placement Agents'  Compensation.  Because the proceeds from the sale
of the Capital  Securities  shall be used to purchase  the  Debentures  from the
Company,  the Company  shall pay an  aggregate  of $30.00 for each  $1,000.00 of
principal  amount of  Debentures  sold to the Trust  (excluding  the  Debentures
related to the Common  Securities  purchased  by the  Company).  Of this amount,
$15.00 for each $1,000.00 of principal  amount of Debentures shall be payable to
FTN Financial  Capital Markets and $15.00 for each $1,000.00 of principal amount
of  Debentures  shall be payable to Keefe,  Bruyette & Woods,  Inc.  Such amount
shall be  delivered  to the  Trustee  or such  other  person  designated  by the
Placement Agents on the Closing Date and shall be allocated  between and paid to
the respective Placement Agents as directed by the Placement Agents.

      2.4.2 Costs and Expenses.  Whether or not this  Agreement is terminated or
the sale of the Capital Securities is consummated,  the Company hereby covenants
and agrees that it shall pay or cause to be paid (directly or by  reimbursement)
all reasonable costs and expenses incident to the performance of the obligations
of  the  Offerors  under  this  Agreement,  including  all  fees,  expenses  and
disbursements of counsel and accountants for the Offerors;  the reasonable costs
and  charges  of any  trustee,  transfer  agent  or  registrar  and the fees and
disbursements  of counsel to any  trustee,  transfer  agent or registrar in each
case  only  to  the  extent  attributable  to the  Debentures  and  the  Capital
Securities;  all reasonable  expenses  incurred by the Offerors  incident to the
preparation,  execution and delivery of the Trust Agreement,  the Indenture, and
the  Guarantee;  and all other  reasonable  costs and  expenses  incident to the
performance  of the  obligations  of the Company  hereunder  and under the Trust
Agreement.

      2.5 Failure to Close. If any of the conditions to the Closing specified in
this  Agreement  shall  not  have  been  fulfilled  to the  satisfaction  of the
Placement  Agents or if the Closing  shall not have  occurred on or before 10:00
a.m.   (New  York  City  time)  on  May  15,  2003,   then  each  party  hereto,
notwithstanding anything to the contrary in this Agreement, shall be relieved of
all further  obligations under this Agreement without thereby waiving any rights
it may have by reason of such nonfulfillment or failure; provided, however, that
the obligations of


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 the parties under Sections  2.4.2,  7.5 and 9 shall not be so relieved and
shall continue in full force and effect.

Section  3.  Closing  Conditions.  The  obligations  of the  Purchaser  and  the
Placement Agents on the Closing Date shall be subject to the accuracy, at and as
of the Closing  Date,  of the  representations  and  warranties  of the Offerors
contained in this Agreement,  to the accuracy, at and as of the Closing Date, of
the  statements  of the  Offerors  made  in any  certificates  pursuant  to this
Agreement,  to the performance by the Offerors of their  respective  obligations
under this  Agreement,  to  compliance,  at and as of the Closing  Date,  by the
Offerors with their respective agreements herein contained, and to the following
further conditions:

      3.1 Opinions of Counsel.  On the Closing Date, the Placement  Agents shall
have received the  following  favorable  opinions,  each dated as of the Closing
Date:  (a) from Reed  Smith,  counsel  for the  Offerors  and  addressed  to the
Purchaser  and the  Placement  Agents  in  substantially  the form set  forth on
Exhibit B-1 attached hereto and incorporated herein by this reference,  (b) from
Bingham McCutchen LLP, special Connecticut counsel to the Offerors and addressed
to the Purchaser,  the Placement Agents and the Offerors,  in substantially  the
form set forth on Exhibit B-2 attached  hereto and  incorporated  herein by this
reference,  and (c) from LeBoeuf,  Lamb,  Greene & MacRae,  L.L.P.,  special tax
counsel to the Offerors, and addressed to the Placement Agents and the Offerors,
in  substantially  the form  set  forth  on  Exhibit  B-3  attached  hereto  and
incorporated herein by this reference,  subject to the receipt by LeBoeuf, Lamb,
Greene & MacRae,  L.L.P. of a representation letter from the Company in the form
set forth in  Exhibit  B-3  completed  in a manner  reasonably  satisfactory  to
LeBoeuf,  Lamb, Greene & MacRae,  L.L.P.  (collectively,  the "Offerors' Counsel
Opinions"). In rendering the Offerors' Counsel Opinions, counsel to the Offerors
may rely as to factual matters upon certificates or other documents furnished by
officers,  directors  and  trustees  of the  Offerors  (copies of which shall be
delivered  to  the  Placement  Agents  and  the  Purchaser)  and  by  government
officials,  and upon such other  documents  as counsel to the  Offerors  may, in
their reasonable opinion,  deem appropriate as a basis for the Offerors' Counsel
Opinions.  Counsel to the Offerors may specify the  jurisdictions  in which they
are admitted to practice and that they are not admitted to practice in any other
jurisdiction  and are not experts in the law of any other  jurisdiction.  If the
Offerors'  counsel is not  admitted to  practice  in the State of New York,  the
opinion of Offerors' counsel may assume,  for purposes of the opinion,  that the
laws of the  State of New  York are  substantively  identical,  in all  respects
material to the opinion, to the internal laws of the state in which such counsel
is admitted to practice.  Such Offerors'  Counsel  Opinions shall not state that
they are to be governed or qualified by, or that they are otherwise  subject to,
any  treatise,  written  policy or other  document  relating to legal  opinions,
including,  without  limitation,  the Legal Opinion Accord of the ABA Section of
Business Law (1991).

      3.2  Officer's  Certificate.  At the Closing  Date,  the Purchaser and the
Placement  Agents  shall have  received  certificates  from the Chief  Executive
Officer of the  Company,  dated as of the  Closing  Date,  stating  that (a) the
representations and warranties of the Offerors set forth in Section 5 hereof are
true and correct as of the Closing Date and that the Offerors have complied with
all  agreements  and satisfied  all  conditions on their part to be performed or
satisfied at or prior to the Closing Date,  (b) since the date of this Agreement
the  Offerors  have  not  incurred  any  liability  or  obligation,   direct  or
contingent,  or  entered  into  any  material


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transactions,  other than in the ordinary course of business,  which is material
to the Offerors, and (c) covering such other matters as the Placement Agents may
reasonably request.

      3.3  Administrator's  Certificate.  At the Closing Date, the Purchaser and
the  Placement  Agents  shall  have  received  a  certificate  of  one  or  more
Administrators  of the Trust,  dated as of the Closing  Date,  stating  that the
representations  and warranties of the Trust set forth in Section 5 are true and
correct  as of the  Closing  Date and  that  the  Trust  has  complied  with all
agreements and satisfied all conditions on its part to be performed or satisfied
at or prior to the Closing Date.

      3.4 Purchase Permitted by Applicable Laws; Legal Investment.  The purchase
of and payment for the Capital  Securities  as described in this  Agreement  and
pursuant  to the  Subscription  Agreement  shall  (a) not be  prohibited  by any
applicable law or governmental regulation,  (b) not subject the Purchaser or the
Placement Agents to any penalty or, in the reasonable  judgment of the Purchaser
and the  Placement  Agents,  other onerous  conditions  under or pursuant to any
applicable law or governmental regulation,  and (c) be permitted by the laws and
regulations of the jurisdictions to which the Purchaser and the Placement Agents
are subject.

      3.5 Consents and  Permits.  The Company and the Trust shall have  received
all consents,  permits and other  authorizations,  and made all such filings and
declarations,  as may be required from any person or entity pursuant to any law,
statute,  regulation or rule (federal, state, local and foreign), or pursuant to
any  agreement,  order or decree to which the Company or the Trust is a party or
to which either is subject, in connection with the transactions  contemplated by
this Agreement.

      3.6 Sale of Purchaser Securities. The Purchaser shall have sold securities
issued by the  Purchaser  in an amount  such that the net  proceeds of such sale
shall be (i)  available on the Closing Date and (ii) in an amount  sufficient to
purchase  the Capital  Securities  and all other  capital or similar  securities
contemplated  in  agreements  similar  to this  Agreement  and the  Subscription
Agreement.

      3.7 Information.  Prior to or on the Closing Date, the Offerors shall have
furnished  to the  Placement  Agents  such  further  information,  certificates,
opinions and documents  addressed to the  Purchaser  and the  Placement  Agents,
which  the  Placement  Agents  may  reasonably   request,   including,   without
limitation,  a complete set of the Operative Documents or any other documents or
certificates  required  by this  Section  3;  and all  proceedings  taken by the
Offerors  in  connection  with  the  issuance,  offer  and  sale of the  Capital
Securities as herein  contemplated shall be reasonably  satisfactory in form and
substance to the Placement Agents.

         If any condition specified in this Section 3 shall not have been
fulfilled when and as required in this Agreement, or if any of the opinions or
certificates mentioned above or elsewhere in this Agreement shall not be
reasonably satisfactory in form and substance to the Placement Agents, this
Agreement may be terminated by the Placement Agents by notice to the Offerors at
any time at or prior to the Closing Date. Notice of such termination shall be
given to the Offerors in writing or by telephone or facsimile confirmed in
writing.


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Section 4. Conditions to the Offerors' Obligations. The obligations of the
Offerors to sell the Capital Securities to the Purchaser and consummate the
transactions contemplated by this Agreement shall be subject to the accuracy, at
and as of the Closing Date, of the representations and warranties of the
Placement Agents contained in this Agreement and to the following further
conditions:

      4.1  Executed  Agreement.  The  Offerors  shall  have  received  from  the
Placement Agents an executed copy of this Agreement.

      4.2  Fulfillment  of Other  Obligations.  The Placement  Agents shall have
fulfilled  all of their other  obligations  and duties  required to be fulfilled
under this Agreement prior to or at the Closing.

Section 5. Representations and Warranties of the Offerors. Except as set forth
on the Disclosure Schedule (as defined in Section 11.1) attached hereto, if any,
the Offerors jointly and severally represent and warrant to the Placement Agents
and the Purchaser as of the date hereof and as of the Closing Date as follows:

      5.1 Securities Law Matters; Authorizations.

      (a) Neither the Company nor the Trust,  nor any of their  "Affiliates" (as
defined in Rule 501(b) of  Regulation D under the  Securities  Act  ("Regulation
D")), nor any person acting on any of their behalf has,  directly or indirectly,
made offers or sales of any security,  or solicited  offers to buy any security,
under circumstances that would require the registration under the Securities Act
of any of the Capital Securities, the Guarantee or the Debentures (collectively,
the  "Securities") or any other securities to be issued, or which may be issued,
by the Purchaser.

      (b) Neither the Company nor the Trust,  nor any of their  Affiliates,  nor
any  person  acting  on its or their  behalf  has (i) other  than the  Placement
Agents,  offered for sale or solicited  offers to purchase the Securities,  (ii)
engaged or will engage,  in any "directed selling efforts" within the meaning of
Regulation  S under the  Securities  Act  ("Regulation  S") with  respect to the
Securities,  or (iii) engaged in any form of offering,  general  solicitation or
general  advertising (within the meaning of Regulation D) in connection with any
offer or sale of any of the Securities.

      (c) The Securities satisfy the eligibility requirements of Rule 144A(d)(3)
under the Securities Act.

      (d) Neither the Company nor the Trust is or,  after  giving  effect to the
offering  and  sale  of the  Capital  Securities  and  the  consummation  of the
transactions described in this Agreement,  will be an "investment company" or an
entity "controlled" by an "investment  company," in each case within the meaning
of  Section  3(a)  of the  Investment  Company  Act of  1940,  as  amended  (the
"Investment  Company  Act"),  without  regard to Section 3(c) of the  Investment
Company Act.



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      (e)  Neither  the  Company  nor the Trust has paid or agreed to pay to any
person  or  entity  (other  than the  Placement  Agents)  any  compensation  for
soliciting another to purchase any of the Securities.

      (f)  No  authorization,   approval,   consent,   order,   registration  or
qualification  of  or  with  any  court  or  governmental  authority  or  agency
(including,  without  limitation,  any insurance  regulatory  agency or body) is
required in  connection  with the  offering  and sale of the  Securities  or the
Guarantee  hereunder,  or the  consummation  by the  Company or the Trust of any
other  transaction  contemplated  hereby,  except such as have been obtained and
made under the federal  securities  laws or state insurance laws and such as may
be required under state or foreign securities or Blue Sky laws.

      5.2  Organization,  Standing and Qualification of the Trust. The Trust has
been duly created and is validly  existing in good standing as a statutory trust
under the Connecticut  Statutory Trust Act (the "Statutory  Trust Act") with the
power and authority to own property and to conduct the business it transacts and
proposes to transact  and to enter into and  perform its  obligations  under the
Operative  Documents.  The Trust is duly  qualified  to  transact  business as a
foreign  entity  and is in good  standing  in each  jurisdiction  in which  such
qualification is necessary, except where the failure to so qualify or be in good
standing would not have a material adverse effect on the Trust. The Trust is not
a party  to or  otherwise  bound  by any  agreement  other  than  the  Operative
Documents.  The Trust is and will,  under current law, be classified for federal
income tax purposes as a grantor  trust and not as an  association  taxable as a
corporation.

      5.3 Trust  Agreement.  The Trust Agreement has been duly authorized by the
Company and, on the Closing Date,  will have been duly executed and delivered by
the  Company  and  the   Administrators   of  the  Trust,   and,   assuming  due
authorization,  execution and delivery by the Institutional  Trustee,  will be a
valid and binding obligation of the Company and such Administrators, enforceable
against them in accordance with its terms, subject to (a) applicable bankruptcy,
insolvency, moratorium, receivership, reorganization, liquidation and other laws
relating to or affecting creditors' rights generally, and (b) general principles
of equity  (regardless  of whether  considered  and applied in a  proceeding  in
equity or at law) ("Bankruptcy and Equity").  Each of the  Administrators of the
Trust is an  employee or a director  of the  Company or of a  subsidiary  of the
Company and has been duly  authorized  by the Company to execute and deliver the
Trust Agreement.

      5.4 Guarantee  Agreement and the Indenture.  Each of the Guarantee and the
Indenture has been duly  authorized by the Company and, on the Closing Date will
have  been duly  executed  and  delivered  by the  Company,  and,  assuming  due
authorization,  execution and delivery by the Guarantee Trustee,  in the case of
the Guarantee, and by the Indenture Trustee, in the case of the Indenture,  will
be a valid and  binding  obligation  of the  Company  enforceable  against it in
accordance with its terms, subject to Bankruptcy and Equity.

      5.5 Capital Securities and Common  Securities.  The Capital Securities and
the Common Securities have been duly authorized by the Trust Agreement and, when
issued  and  delivered  against  payment  therefor  on the  Closing  Date to the
Purchaser,  in the case of the Capital  Securities,  and to the Company,  in the
case of the Common  Securities,  will be validly


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issued and represent undivided  beneficial interests in the assets of the Trust.
None of the Capital Securities or the Common Securities is subject to preemptive
or other similar rights.  On the Closing Date, all of the issued and outstanding
Common  Securities  will be directly  owned by the Company free and clear of any
pledge, security interest, claim, lien or other encumbrance.

      5.6  Debentures.  The Debentures  have been duly authorized by the Company
and, at the Closing  Date,  will have been duly  executed  and  delivered to the
Indenture Trustee for authentication in accordance with the Indenture, and, when
authenticated in the manner provided for in the Indenture and delivered  against
payment therefor by the Trust, will constitute valid and binding  obligations of
the Company  entitled to the benefits of the Indenture  enforceable  against the
Company in accordance with their terms, subject to Bankruptcy and Equity.

      5.7 Power and Authority. This Agreement has been duly authorized, executed
and delivered by the Company and the Trust and constitutes the valid and binding
obligation of the Company and the Trust, enforceable against the Company and the
Trust in accordance with its terms, subject to Bankruptcy and Equity.

      5.8 No Defaults.  The Trust is not in violation of the Trust Agreement or,
to the knowledge of the  Administrators,  any  provision of the Statutory  Trust
Act. The execution, delivery and performance by the Company or the Trust of this
Agreement  or  the  Operative  Documents  to  which  it  is  a  party,  and  the
consummation of the transactions  contemplated  herein or therein and the use of
the proceeds  therefrom,  will not conflict with or constitute a breach of, or a
default  under,  or result in the creation or imposition of any lien,  charge or
other  encumbrance  upon any property or assets of the Trust, the Company or any
of the Company's  Significant  Subsidiaries  (as defined in Section 5.10 hereof)
pursuant to any contract,  indenture,  mortgage, loan agreement,  note, lease or
other  instrument  to which the Trust,  the  Company  or any of its  Significant
Subsidiaries  is a party or by which it or any of them may be bound, or to which
any of the property or assets of any of them is subject,  except for a conflict,
breach,  default,  lien, charge or encumbrance which could not, singly or in the
aggregate,  reasonably  be expected to have a Material  Adverse  Effect nor will
such action  result in any  violation of the Trust  Agreement  or the  Statutory
Trust Act or require the consent, approval,  authorization or order of any court
or  governmental  agency or body.  As used herein,  the term  "Material  Adverse
Effect" means any one or more effects that  individually or in the aggregate are
material and adverse to the  Offeror's  ability to consummate  the  transactions
contemplated  herein or in the  Operative  Documents  or any one or more effects
that  individually or in the aggregate are material and adverse to the condition
(financial or otherwise),  earnings,  affairs,  business prospects or results of
operations  of the  Company  and its  Significant  Subsidiaries  taken as whole,
whether or not occurring in the ordinary course of business.

      5.9 Organization,  Standing and Qualification of the Company.  The Company
has been duly  incorporated  and is validly  existing as a  corporation  in good
standing under the laws of the Commonwealth of Pennsylvania,  with all requisite
corporate  power and authority to own its properties and conduct the business it
transacts and proposes to transact,  and is duly qualified to transact  business
and is in good standing as a foreign  corporation in each jurisdiction where the
nature of its activities requires such  qualification,  except where the failure
of the Company to be so qualified would not, singly or in the aggregate,  have a
Material Adverse Effect.


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      5.10  Subsidiaries  of the  Company.  Each  of the  Company's  significant
subsidiaries  (as defined in Section 1-02(w) of Regulation S-X to the Securities
Act (the "Significant Subsidiaries")) is listed in Exhibit C attached hereto and
incorporated herein by this reference. Each Significant Subsidiary has been duly
organized  and is validly  existing and in good  standing  under the laws of the
jurisdiction in which it is chartered or organized, with all requisite power and
authority  to own its  properties  and conduct the  business  it  transacts  and
proposes to transact,  and is duly qualified to transact business and is in good
standing  as a foreign  entity  in each  jurisdiction  where  the  nature of its
activities  requires  such  qualification,  except where the failure of any such
Significant  Subsidiaries  to  be so  qualified  would  not,  singly  or in  the
aggregate,  have a Material  Adverse  Effect.  All of the issued and outstanding
shares  of  capital  stock of the  Significant  Subsidiaries  (a) have been duly
authorized and are validly issued, (b) are fully paid and nonassessable, and (c)
are wholly owned,  directly or indirectly,  by the Company free and clear of any
security interest, mortgage, pledge, lien, encumbrance,  restriction upon voting
or transfer, preemptive rights, claim, equity or other defect.

      5.11 Permits.  The Company and each of its Significant  Subsidiaries  have
all requisite power and authority, and all necessary authorizations,  approvals,
orders,  licenses  (including,  without limitation,  insurance licenses from the
insurance  departments of the various states where the Significant  Subsidiaries
write insurance business (the "Insurance Licenses")),  certificates and permits,
including those that are necessary to own or lease their  respective  properties
(collectively,  "Permits"),  of and from regulatory or  governmental  officials,
bodies and  tribunals  that are  material  to the  Company  and its  Significant
Subsidiaries  taken as a whole and are  necessary  to conduct the  business  now
operated by them; the Company and its Significant Subsidiaries are in compliance
with the terms and conditions of all such Insurance Licenses and Permits, except
where the failure so to comply would not, singly or in the aggregate,  result in
a Material Adverse Effect;  all of the Insurance  Licenses and Permits are valid
and in full force and effect,  except  where the  invalidity  of such  Insurance
Licenses and Permits or the failure of such Insurance Licenses and Permits to be
in full force and effect  would not result in a  Material  Adverse  Effect;  and
neither the Company nor any of its  Significant  Subsidiaries  has  received any
notice of  proceedings  relating to the revocation or  modification  of any such
Insurance Licenses and Permits which, singly or in the aggregate, may reasonably
be expected to result in a Material Adverse Effect.

      5.12 Conflicts,  Authorizations and Approvals. Neither the Company nor any
of its Significant  Subsidiaries  is in violation of its respective  articles or
certificate  of  incorporation,  charter or  by-laws  or similar  organizational
documents or in default in the  performance  or  observance  of any  obligation,
agreement, covenant or condition contained in any contract, indenture, mortgage,
loan agreement, note, lease or other agreement or instrument to which either the
Company or any of its Significant Subsidiaries is a party, or by which it or any
of them may be bound or to which any of the property or assets of the Company or
any of its Significant Subsidiaries is subject, the effect of which violation or
default in performance or observance would have,  singly or in the aggregate,  a
Material Adverse Effect.

5.13     Financial Statements.

(a) The consolidated balance sheets of the Company and all of its Significant
Subsidiaries as of December 31, 2001 and December 31, 2002, and related
consolidated income


                                       9
<PAGE>


statements  and  statements of changes in  shareholders'  equity for the 3 years
ended  December  31,  2002  together  with the  notes  thereto  (the  "Financial
Statements"),  copies  of each of which  have  been  provided  to the  Placement
Agents,  have been prepared in accordance  with  generally  accepted  accounting
principles  applied on a consistent  basis (except as may be disclosed  therein)
and fairly  present in all  material  respects  the  financial  position and the
results of operations and changes in shareholders' equity of the Company and all
of its Significant  Subsidiaries  as of the dates and for the periods  indicated
(subject,  in the case of  interim  financial  statements,  to normal  recurring
year-end adjustments, none of which shall be material). The books and records of
the Company and all of its  Significant  Subsidiaries  have been, and are being,
maintained  in all  material  respects in  accordance  with  generally  accepted
accounting principles and any other applicable legal and accounting requirements
and reflect only actual transactions.

      (b) The  statutory  financial  statements  as of  December  31,  2001  and
December  31,  2002  (the  "Statutory  Financial  Statements")  of  each  of the
Company's insurance  subsidiaries have for each relevant period been prepared in
accordance  with  accounting  practices  prescribed or permitted by the National
Association  of  Insurance  Commissioners,  and with  respect to each  insurance
subsidiary,  the  appropriate  Insurance  Department of the state of domicile of
such insurance subsidiary,  and such accounting practices have been applied on a
consistent basis throughout the periods involved.

      (c) Since the respective dates of the most recent Financial Statements and
the Statutory Financial Statements, there has been no material adverse change or
development  with respect to the financial  condition or earnings of the Company
and all of its Significant Subsidiaries, taken as a whole.

      (d) The accountants of the Company who certified the Financial  Statements
are  independent   public   accountants  of  the  Company  and  its  Significant
Subsidiaries  within  the  meaning  of the  Securities  Act  and the  rules  and
regulations thereunder.

      5.14 Regulatory  Enforcement  Matters.  Neither the Company nor any of its
Significant  Subsidiaries  is subject or is party to, or has received any notice
or advice  that any of them may become  subject  or party to, any  investigation
with  respect to, any  cease-and-desist  order,  agreement,  consent  agreement,
memorandum of understanding or other regulatory  enforcement action,  proceeding
or  order  with  or by,  or is a  party  to any  commitment  letter  or  similar
undertaking  to, or is subject to any directive by, or has been since January 1,
2001, a recipient of any supervisory  letter from, or since January 1, 2001, has
adopted any board  resolutions  at the request of, any agency  charged  with the
supervision or regulation of insurance  companies (a  "Regulatory  Agency") that
currently  restricts  in any material  respect the conduct of their  business or
that in any material manner relates to their capital adequacy,  their ability or
authority to pay dividends or make  distributions to their  shareholders or make
payments of principal or interest on their debt obligations, their management or
their business (each, a "Regulatory  Agreement"),  nor has the Company or any of
its  Significant  Subsidiaries  been  advised  since  January  1,  2001,  by any
Regulatory  Agency  that  it is  considering  issuing  or  requesting  any  such
Regulatory Agreement.  There is no material unresolved  violation,  criticism or
exception  by any  Regulatory  Agency  with  respect to any report or  statement
relating  to  any  examinations  of  the  Company  or  any  of  its  Significant
Subsidiaries.


                                       10
<PAGE>


      5.15 No  Material  Change.  Since  December  31,  2002,  there has been no
material adverse change or development with respect to the condition  (financial
or otherwise), earnings, affairs, business prospects or results of operations of
the Company or its Significant  Subsidiaries on a consolidated basis, whether or
not arising in the ordinary course of business.

      5.16  No  Undisclosed  Liabilities.  Neither  the  Company  nor any of its
Significant  Subsidiaries has any material liability,  whether known or unknown,
whether asserted or unasserted,  whether absolute or contingent, whether accrued
or unaccrued,  whether liquidated or unliquidated,  and whether due or to become
due,  including  any  liability for taxes (and there is no past or present fact,
situation,  circumstance,  condition  or other  basis for any  present or future
action, suit, proceeding,  hearing, charge,  complaint,  claim or demand against
the Company or its Significant  Subsidiaries giving rise to any such liability),
except (i) for liabilities  set forth in the Financial  Statements and Statutory
Financial Statements, respectively, (ii) normal fluctuation in the amount of the
liabilities  referred to in clause (i) above occurring in the ordinary course of
business of the Company and all of its Significant  Subsidiaries  since the date
of the most recent  balance  sheet  included  in the  Financial  Statements  and
Statutory Financial Statements,  respectively,  and (iii) as may be specifically
disclosed in writing to the Placement Agents.

      5.17  Litigation.  No charge,  investigation,  action,  suit or proceeding
(including,  without limitation, any proceeding to revoke or deny renewal of any
Insurance Licenses) is pending or, to the knowledge of the Offerors, threatened,
against or affecting the Company or its Significant Subsidiaries or any of their
respective  properties  before  or by  (i)  any  court  wherein  an  unfavorable
decision,  ruling or finding could reasonably be expected to have,  singly or in
the aggregate, a Material Adverse Effect, or (ii) any regulatory, administrative
or governmental official,  commission, board, agency or other authority or body,
or any  arbitrator,  wherein an  unfavorable  decision,  ruling or finding could
have, singly or in the aggregate, a Material Adverse Effect.

      5.18  Deferral of  Interest  Payments  on  Debentures.  The Company has no
present  intention to exercise  its option to defer  payments of interest on the
Debentures  as  provided  in  the  Indenture.  The  Company  believes  that  the
likelihood that it would exercise its right to defer payments of interest on the
Debentures as provided in the Indenture at any time during which the  Debentures
are outstanding is remote because of the  restrictions  that would be imposed on
the  Company's  ability to declare or pay dividends or  distributions  on, or to
redeem, purchase,  acquire or make a liquidation payment with respect to, any of
the Company's capital stock and on the Company's ability to make any payments of
principal,  interest or premium on, or repay,  repurchase or redeem,  any of its
debt securities that rank pari passu in all respects with, or junior in interest
to, the Debentures.

Section 6. Representations and Warranties of the Placement Agents. Each
Placement Agent represents and warrants to the Offerors as to itself (but not as
to the other Placement Agent) as follows:

6.1      Organization, Standing and Qualification.

      (a) FTN Financial  Capital  Markets is a division of First Tennessee Bank,
N.A., a national  banking  association  duly organized,  validly existing and in
good standing under


                                       11
<PAGE>


the laws of the United  States,  with full power and authority to own, lease and
operate its  properties and conduct its business as currently  being  conducted.
FTN  Financial  Capital  Markets is duly  qualified  to  transact  business as a
foreign  corporation and is in good standing in each other jurisdiction in which
it owns or leases  property  or  conducts  its  business  so as to require  such
qualification  and in which the failure to so qualify would,  individually or in
the aggregate,  have a material  adverse  effect on the condition  (financial or
otherwise),  earnings,  business,  prospects  or  results of  operations  of FTN
Financial Capital Markets.

      (b) Keefe, Bruyette & Woods, Inc. is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York, with full
power and  authority to own,  lease and operate its  properties  and conduct its
business as currently being  conducted.  Keefe,  Bruyette & Woods,  Inc. is duly
qualified to transact business as a foreign  corporation and is in good standing
in each other  jurisdiction  in which it owns or leases property or conducts its
business  so as to require  such  qualification  and in which the  failure to so
qualify would,  individually or in the aggregate, have a material adverse effect
on the condition  (financial or  otherwise),  earnings,  business,  prospects or
results of operations of Keefe, Bruyette & Woods, Inc.

      6.2 Power and Authority.  The Placement  Agent has all requisite power and
authority to enter into this  Agreement,  and this  Agreement  has been duly and
validly   authorized,   executed  and  delivered  by  the  Placement  Agent  and
constitutes  the legal,  valid and binding  agreement  of the  Placement  Agent,
enforceable against the Placement Agent in accordance with its terms, subject to
Bankruptcy  and  Equity  and  except  as  any  indemnification  or  contribution
provisions thereof may be limited under applicable securities laws.

      6.3 General Solicitation. In the case of the offer and sale of the Capital
Securities,  no form of general  solicitation or general advertising was used by
the  Placement  Agent or its  representatives  including,  but not  limited  to,
advertisements,  articles,  notices  or other  communications  published  in any
newspaper,  magazine or similar medium or broadcast over  television or radio or
any  seminar  or  meeting  whose  attendees  have been  invited  by any  general
solicitation  or  general  advertising.  Neither  the  Placement  Agent  nor its
representatives  have engaged or will engage in any "directed  selling  efforts"
within the meaning of Regulation S with respect to the Capital Securities.

      6.4 Purchaser.  The Placement Agent has made such reasonable inquiry as is
necessary to determine  that the Purchaser is acquiring  the Capital  Securities
for its own  account,  that the  Purchaser  does not  intend to  distribute  the
Capital  Securities  in  contravention  of  the  Securities  Act  or  any  other
applicable  securities  laws,  and that the Purchaser is not a "U.S.  person" as
that term is defined under Rule 902 of the Securities Act.

      6.5 Qualified Purchasers.  The Placement Agent has not offered or sold and
will not arrange for the offer or sale of the Capital  Securities  except (i) in
an offshore  transaction  complying  with Rule 903 of  Regulation  S, or (ii) to
those the Placement Agent  reasonably  believes are  "accredited  investors" (as
defined in Rule 501 of Regulation D), or (iii) in any other manner that does not
require  registration  of the Capital  Securities  under the Securities  Act. In
connection  with  each such  sale,  the  Placement  Agent has taken or will take
reasonable  steps to ensure  that the  Purchaser  is aware that (a) such sale is
being made in reliance on an exemption



                                       12
<PAGE>


under the  Securities  Act, and (b) future  transfers of the Capital  Securities
will not be made except in compliance with applicable securities laws.

      6.6.   Offering   Circulars.   Neither   the   Placement   Agent  nor  its
representatives  will include any non-public  information about the Company, the
Trust or any of their  affiliates  in any  registration  statement,  prospectus,
offering  circular or private  placement  memorandum used in connection with any
purchase of Capital  Securities  without the prior written  consent of the Trust
and the Company.

      Section 7. Covenants of the Offerors. The Offerors covenant and agree with
the Placement Agents and the Purchaser as follows:

      7.1 Compliance with Representations and Warranties. During the period from
the date of this  Agreement to the Closing  Date,  the Offerors  shall use their
best  efforts  and take all  action  necessary  or  appropriate  to cause  their
representations  and  warranties  contained in Section 5 hereof to be true as of
the Closing Date, after giving effect to the  transactions  contemplated by this
Agreement, as if made on and as of the Closing Date.

      7.2 Sale and Registration of Securities. The Offerors and their Affiliates
shall not nor shall any of them permit any person  acting on their behalf (other
than the Placement  Agents),  to directly or indirectly (a) sell, offer for sale
or solicit  offers to buy or otherwise  negotiate in respect of any security (as
defined in the Securities  Act) that would or could be integrated  with the sale
of the Capital  Securities in a manner that would require the registration under
the  Securities Act of the  Securities,  or (b) make offers or sales of any such
Security,  or solicit offers to buy any such Security,  under circumstances that
would require the  registration of any of such  Securities  under the Securities
Act.

      7.3 Use of Proceeds. The Trust shall use the proceeds from the sale of the
Capital Securities to purchase the Debentures from the Company.

      7.4  Investment  Company.  The  Offerors  shall not engage,  or permit any
subsidiary to engage,  in any activity which would cause it or any subsidiary to
be an "investment company" under the provisions of the Investment Company Act.

      7.5  Reimbursement  of  Expenses.  If the sale of the  Capital  Securities
provided for herein is not  consummated  (a) because any  condition set forth in
Section 3 hereof is not satisfied,  or (b) because of any refusal,  inability or
failure on the part of the Company or the Trust to perform any agreement  herein
or comply  with any  provision  hereof  other  than by reason of a breach by the
Placement  Agents,  the Company shall reimburse the Placement Agents upon demand
for all of their pro rata share of out-of-pocket  expenses (including reasonable
fees and  disbursements  of counsel) in an amount not to exceed  $50,000.00 that
shall have been  incurred by them in connection  with the proposed  purchase and
sale of the Capital Securities. Notwithstanding the foregoing, the Company shall
have no obligation to reimburse  the  Placement  Agents for their  out-of-pocket
expenses  if the sale of the  Capital  Securities  fails to  occur  because  the
condition  set forth in Section 3.6 is not  satisfied  or because  either of the
Placement Agents fails to fulfill a condition set forth in Section 4.


                                       13
<PAGE>


      7.6 Directed Selling Efforts,  Solicitation and Advertising. In connection
with any offer or sale of any of the  Securities,  the  Offerors  shall not, nor
shall  either of them  permit any of their  Affiliates  or any person  acting on
their behalf,  other than the Placement Agents,  to, (a) engage in any "directed
selling  efforts"  within the meaning of Regulation S, or (b) engage in any form
of general solicitation or general advertising (as defined in Regulation D).

      7.7 Compliance with Rule  144A(d)(4)  under the Securities Act. So long as
any of the Securities are outstanding and are "restricted securities" within the
meaning of Rule 144(a)(3)  under the Securities  Act, the Offerors will,  during
any period in which they are not subject to and in compliance with Section 13 or
15(d) of the Securities  Exchange Act of 1934, as amended (the "Exchange  Act"),
or the Offerors are not exempt from such reporting  requirements pursuant to and
in compliance with Rule 12g3-2(b) under the Exchange Act, provide to each holder
of such restricted  securities and to each prospective  purchaser (as designated
by such holder) of such restricted  securities,  upon the request of such holder
or  prospective  purchaser  in  connection  with  any  proposed  transfer,   any
information required to be provided by Rule 144A(d)(4) under the Securities Act,
if  applicable.  This covenant is intended to be for the benefit of the holders,
and the prospective  purchasers designated by such holders, from time to time of
such restricted securities. The information provided by the Offerors pursuant to
this Section 7.7 will not, at the date thereof,  contain any untrue statement of
a  material  fact or omit to  state  any  material  fact  necessary  to make the
statements  therein,  in light of the circumstances  under which they were made,
not misleading.

      7.8  Quarterly  Reports.  Within  50 days of the end of each of the  first
three calendar year quarters and within 75 days of the end of each calendar year
during which the  Debentures  are issued and  outstanding,  the  Offerors  shall
submit to The Bank of New York a completed quarterly report in the form attached
hereto as Exhibit  D. The  Offerors  acknowledge  and agree that The Bank of New
York and its successors and assigns is a third party beneficiary of this Section
7.8.

      Section  8.  Covenants  of the  Placement  Agents.  The  Placement  Agents
covenant  and agree with the Offerors  that,  during the period from the date of
this  Agreement to the Closing Date,  the Placement  Agents shall use their best
efforts  and  take  all  action   necessary  or   appropriate   to  cause  their
representations  and warranties  contained in Section 6 to be true as of Closing
Date, after giving effect to the transactions contemplated by this Agreement, as
if made on and as of the Closing Date. The Placement Agents further covenant and
agree  not to  engage  in  hedging  transactions  with  respect  to the  Capital
Securities  unless  such  transactions  are  conducted  in  compliance  with the
Securities Act. Section 9. Indemnification.

      9.1 Indemnification  Obligation.  The Offerors shall jointly and severally
indemnify and hold  harmless the Placement  Agents and the Purchaser and each of
their respective agents, employees,  officers and directors and each person that
controls either of the Placement  Agents or the Purchaser  within the meaning of
Section 15 of the  Securities Act or Section 20 of the Exchange Act, and agents,
employees,  officers and directors or any such  controlling  person of either of
the  Placement  Agents  or  the  Purchaser  (each  such  person  or  entity,  an
"Indemnified  Party")  from and  against any and all  losses,  claims,  damages,
judgments,  liabilities or expenses,


                                       14
<PAGE>

joint or several,  to which such Indemnified  Party may become subject under the
Securities  Act,  the Exchange Act or other  federal or state  statutory  law or
regulation,  or at common  law or  otherwise  (including  in  settlement  of any
litigation,  if such  settlement  is effected  with the  written  consent of the
Offerors),  insofar as such losses, claims, damages,  judgments,  liabilities or
expenses  (or actions in respect  thereof)  arise out of, or are based upon,  or
relate to, in whole or in part,  (a) any  untrue  statement  or  alleged  untrue
statement of a material fact contained in any  information  (whether  written or
oral) or  documents  executed in favor of,  furnished  or made  available to the
Placement  Agents or the  Purchaser  by the  Offerors,  or (b) any  omission  or
alleged  omission  to  state in any  information  (whether  written  or oral) or
documents  executed in favor of,  furnished or made  available to the  Placement
Agents or the  Purchaser by the Offerors a material  fact  required to be stated
therein or necessary to make the statements  therein not  misleading,  and shall
reimburse  each  Indemnified  Party for any legal  and  other  expenses  as such
expenses are reasonably  incurred by such  Indemnified  Party in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, judgment, liability, expense or action described in this Section 9.1. In
addition to their other  obligations  under this Section 9, the Offerors  hereby
agree that,  as an interim  measure  during the  pendency of any claim,  action,
investigation,  inquiry or other  proceeding  arising out of, or based upon,  or
related to the matters described above in this Section 9.1, they shall reimburse
each  Indemnified  Party on a quarterly basis for all reasonable  legal or other
expenses incurred in connection with  investigating or defending any such claim,
action, investigation, inquiry or other proceeding,  notwithstanding the absence
of a  judicial  determination  as to the  propriety  and  enforceability  of the
possibility  that such  payments  might later be held to have been improper by a
court  of  competent   jurisdiction.   To  the  extent  that  any  such  interim
reimbursement  payment is so held to have been improper,  each Indemnified Party
shall  promptly  return such amounts to the  Offerors  together  with  interest,
determined on the basis of the prime rate (or other commercial  lending rate for
borrowers of the highest credit  standing)  announced from time to time by First
Tennessee Bank, N.A. (the "Prime Rate"). Any such interim reimbursement payments
that  are not made to an  Indemnified  Party  within  30 days of a  request  for
reimbursement  shall  bear  interest  at the  Prime  Rate  from the date of such
request.

      9.2 Conduct of Indemnification  Proceedings.  Promptly after receipt by an
Indemnified  Party  under this  Section 9 of notice of the  commencement  of any
action,  such  Indemnified  Party shall,  if a claim in respect thereof is to be
made against the  Offerors  under this Section 9, notify the Offerors in writing
of the  commencement  thereof;  but,  subject to Section 9.4, the omission to so
notify the  Offerors  shall not  relieve  them from any  liability  pursuant  to
Section 9.1 which the Offerors may have to any  Indemnified  Party unless and to
the extent that the  Offerors  did not  otherwise  learn of such action and such
failure by the  Indemnified  Party results in the  forfeiture by the Offerors of
substantial rights and defenses.  In case any such action is brought against any
Indemnified  Party and such Indemnified Party seeks or intends to seek indemnity
from the Offerors, the Offerors shall be entitled to participate in, and, to the
extent that they may wish, to assume the defense thereof with counsel reasonably
satisfactory to such Indemnified Party; provided,  however, if the defendants in
any such action  include  both the  Indemnified  Party and the  Offerors and the
Indemnified  Party shall have reasonably  concluded that there may be a conflict
between the  positions of the Offerors and the  Indemnified  Party in conducting
the defense of any such action or that there may be legal defenses  available to
it and/or other  Indemnified  Parties which are different  from or additional to
those available to the Offerors,  the Indemnified  Party shall have the right to
select  separate  counsel  to  assume  such


                                       15
<PAGE>


legal  defenses  and to otherwise  participate  in the defense of such action on
behalf of such  Indemnified  Party.  Upon receipt of notice from the Offerors to
such Indemnified Party of their election to so assume the defense of such action
and approval by the  Indemnified  Party of counsel,  the  Offerors  shall not be
liable to such  Indemnified  Party  under this  Section 9 for any legal or other
expenses  subsequently incurred by such Indemnified Party in connection with the
defense  thereof  unless (a) the  Indemnified  Party  shall have  employed  such
counsel in connection  with the assumption of legal defenses in accordance  with
the proviso in the preceding  sentence (it being understood,  however,  that the
Offerors shall not be liable for the expenses of more than one separate  counsel
representing the Indemnified Parties who are parties to such action), or (b) the
Offerors  shall  not  have  employed  counsel  reasonably  satisfactory  to  the
Indemnified  Party to represent the  Indemnified  Party within a reasonable time
after notice of commencement of the action,  in each of which cases the fees and
expenses  of counsel of such  Indemnified  Party  shall be at the expense of the
Offerors.

      9.3 Contribution. If the indemnification provided for in this Section 9 is
required  by its  terms,  but is for any  reason  held to be  unavailable  to or
otherwise  insufficient to hold harmless an Indemnified  Party under Section 9.1
in respect of any losses, claims,  damages,  judgments,  liabilities or expenses
referred to herein or therein,  then the Offerors shall contribute to the amount
paid or payable by such  Indemnified  Party as a result of any  losses,  claims,
damages,  judgments,  liabilities  or  expenses  referred  to herein (a) in such
proportion as is  appropriate to reflect the relative  benefits  received by the
Offerors,  on the one hand, and the  Indemnified  Party, on the other hand, from
the offering of such Capital  Securities,  or (b) if the allocation  provided by
clause (a) above is not  permitted by applicable  law, in such  proportion as is
appropriate to reflect not only the relative  benefits referred to in clause (a)
above but also the  relative  fault of the  Offerors,  on the one hand,  and the
Placement  Agents,  on the other hand,  in  connection  with the  statements  or
omissions or inaccuracies in the  representations and warranties herein or other
breaches which resulted in such losses, claims, damages, judgments,  liabilities
or  expenses,  as well  as any  other  relevant  equitable  considerations.  The
respective relative benefits received by the Offerors,  on the one hand, and the
Placement  Agents,  on the  other  hand,  shall  be  deemed  to be in  the  same
proportion, in the case of the Offerors, as the total price paid to the Offerors
for the Capital  Securities  sold by the Offerors to the  Purchaser  (net of the
compensation  paid to the  Placement  Agents  hereunder,  but  before  deducting
expenses), and in the case of the Placement Agents, as the compensation received
by them, bears to the total of such amounts paid to the Offerors and received by
the Placement Agents as compensation. The relative fault of the Offerors and the
Placement  Agents  shall be  determined  by reference  to,  among other  things,
whether the untrue  statement or alleged untrue  statement of a material fact or
the omission or alleged  omission of a material  fact or the  inaccurate  or the
alleged  inaccurate   representation  and/or  warranty  relates  to  information
supplied  by the  Offerors or the  Placement  Agents and the  parties'  relative
intent,  knowledge,  access to information and opportunity to correct or prevent
such statement or omission. The provisions set forth in Section 9.2 with respect
to notice of commencement of any action shall apply if a claim for  contribution
is made under this Section 9.3;  provided,  however,  that no additional  notice
shall be  required  with  respect to any action for which  notice has been given
under  Section  9.2  for  purposes  of  indemnification.  The  Offerors  and the
Placement  Agents agree that it would not be just and equitable if  contribution
pursuant to this Section 9.3 were  determined  by pro rata  allocation or by any
other  method  of  allocation  that  does  not  take  account  of the  equitable
considerations referred to in this Section 9.3. The amount paid or payable by an
Indemnified  Party  as a  result  of the  losses,



                                       16
<PAGE>


claims, damages, judgments,  liabilities or expenses referred to in this Section
9.3 shall be deemed to include,  subject to the limitations set forth above, any
legal  or  other  expenses  reasonably  incurred  by such  Indemnified  Party in
connection with investigating or defending any such action or claim. In no event
shall the liability of the Placement  Agents hereunder be greater in amount than
the dollar amount of the compensation (net of payment of all expenses)  received
by the Placement Agents upon the sale of the Capital  Securities  giving rise to
such obligation. No person found guilty of fraudulent  misrepresentation (within
the  meaning of  Section  11(f) of the  Securities  Act)  shall be  entitled  to
contribution  from  any  person  who was not  found  guilty  of such  fraudulent
misrepresentation.

      9.4  Additional  Remedies.  The  indemnity  and  contribution   agreements
contained in this Section 9 are in addition to any  liability  that the Offerors
may otherwise have to any Indemnified Party.

      9.5  Additional  Indemnification.  The Company  shall  indemnify  and hold
harmless  the Trust  against  all loss,  liability,  claim,  damage and  expense
whatsoever, as due from the Trust under Sections 9.1 through 9.4 hereof.

Section 10.       Rights and Responsibilities of Placement Agents.

      10.1  Reliance.  In  performing  their  duties under this  Agreement,  the
Placement Agents shall be entitled to rely upon any notice, signature or writing
which  they  shall in good  faith  believe  to be  genuine  and to be  signed or
presented by a proper party or parties.  The Placement  Agents may rely upon any
opinions or certificates  or other documents  delivered by the Offerors or their
counsel or designees to either the Placement Agents or the Purchaser.

      10.2 Rights of Placement  Agents.  In connection  with the  performance of
their duties under this Agreement,  the Placement Agents shall not be liable for
any error of  judgment  or any action  taken or  omitted to be taken  unless the
Placement  Agents were  grossly  negligent or engaged in willful  misconduct  in
connection  with such  performance  or  non-performance.  No  provision  of this
Agreement  shall require the Placement  Agents to expend or risk their own funds
or  otherwise  incur any  financial  liability  on behalf  of the  Purchaser  in
connection with the performance of any of their duties hereunder.  The Placement
Agents  shall be under no  obligation  to  exercise  any of the rights or powers
vested in them by this Agreement.

Section 11.       Miscellaneous.

      11.1 Disclosure Schedule.  The term "Disclosure Schedule," as used herein,
means the schedule, if any, attached to this Agreement that sets forth items the
disclosure of which is necessary or  appropriate  as an exception to one or more
representations or warranties contained in Section 5 hereof;  provided, that any
item set forth in the Disclosure Schedule as an exception to a representation or
warranty shall be deemed an admission by the Offerors that such item  represents
an exception, fact, event or circumstance that is reasonably likely to result in
a  Material  Adverse  Effect.  The  Disclosure  Schedule  shall be  arranged  in
paragraphs  corresponding to the section numbers contained in Section 5. Nothing
in the Disclosure  Schedule shall be deemed adequate to disclose an exception to
a  representation  or  warranty  made  herein  unless  the  Disclosure  Schedule
identifies  the  exception  with  reasonable  particularity  and



                                       17
<PAGE>

describes  the  relevant  facts  in  reasonable  detail.  Without  limiting  the
generality of the immediately preceding sentence, the mere listing (or inclusion
of a copy) of a document or other item in the  Disclosure  Schedule shall not be
deemed  adequate to disclose an exception to a  representation  or warranty made
herein unless the representation or warranty has to do with the existence of the
document or other item itself.  Information  provided by the Company in response
to any due diligence  questionnaire  shall not be deemed part of the  Disclosure
Schedule   and  shall  not  be  deemed  to  be  an  exception  to  one  or  more
representations  or  warranties  contained  in  Section  5  hereof  unless  such
information is  specifically  included on the Disclosure  Schedule in accordance
with the provisions of this Section 11.1.

      11.2 Notices. Prior to the Closing, and thereafter with respect to matters
pertaining to this Agreement only, all notices and other communications provided
for  or  permitted   hereunder  shall  be  made  in  writing  by  hand-delivery,
first-class mail, telex,  telecopier or overnight air courier  guaranteeing next
day delivery:

      if to the Placement Agents, to:

                                    FTN Financial Capital Markets
                                    845 Crossover Lane, Suite 150
                                    Memphis, Tennessee  38117
                                    Telecopier:  901-435-4706
                                    Telephone:  800-456-5460
                                    Attention:  James D. Wingett

                                            and

                                   Keefe, Bruyette & Woods, Inc.
                                   787 7th Avenue, 4th Floor
                                   New York, New York  10019
                                   Telecopier:  212-403-2000
                                   Telephone:  212-403-1004
                                   Attention:  Mitchell Kleinman,
                                   General Counsel

         with a copy to:

                                    LeBoeuf, Lamb, Greene & MacRae, L.L.P.
                                    125 West 55th Street
                                    New York, New York  10019
                                    Telecopier:  212-424-8500
                                    Telephone:  212-424-8000
                                    Attention:  Alexander M. Dye, Esq.

                                            and

                                    Sidley Austin Brown & Wood LLP
                                    787 7th Avenue
                                    New York, New York  10019
                                    Telecopier:  212-839-5599



                                       18

<PAGE>

                                    Telephone:  212-839-5300
                                    Attention:  Renwick Martin, Esq.

         if to the Offerors, to:

                                    Penn-America Group, Inc.
                                    420 South York Road
                                    Hatboro, Pennsylvania  19040
                                    Telecopier:  215-443-3603
                                    Telephone:  215-443-3649
                                    Attention:  Garland P. Pezzuolo

         with a copy to:

                                    Reed Smith
                                    2500 One Liberty Place
                                    Philadelphia, Pennsylvania  19103-7301
                                    Telecopier:  215-851-1420
                                    Telephone:  215-851-8182
                                    Attention:  Michael Pollack, Esq.

         All such notices and communications shall be deemed to have been duly
given (a) at the time delivered by hand, if personally delivered, (b) five
business days after being deposited in the mail, postage prepaid, if mailed, (c)
when answered back, if telexed, (d) the next business day after being
telecopied, or (e) the next business day after timely delivery to a courier, if
sent by overnight air courier guaranteeing next day delivery. From and after the
Closing, the foregoing notice provisions shall be superseded by any notice
provisions of the Operative Documents under which notice is given. The Placement
Agents, the Company, and their respective counsel, may change their respective
notice addresses from time to time by written notice to all of the foregoing
persons.

      11.3 Parties in Interest, Successors and Assigns. Except as expressly set
forth herein, this Agreement is made solely for the benefit of the Placement
Agents, the Purchaser and the Offerors and any person controlling the Placement
Agents, the Purchaser or the Offerors and their respective successors and
assigns; and no other person shall acquire or have any right under or by virtue
of this Agreement. This Agreement shall inure to the benefit of and be binding
upon the successors and assigns of each of the parties.

      11.4 Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.

      11.5 Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

      11.6 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAWS PERTAINING TO CONFLICTS OF
LAWS) OF THE STATE OF NEW YORK.


                                       19
<PAGE>


      11.7 Entire Agreement. This Agreement, together with the other Operative
Documents and the other documents delivered in connection with the transactions
contemplated by this Agreement, is intended by the parties as a final expression
of their agreement and intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. This Agreement, together with the other Operative Documents and the
other documents delivered in connection with the transaction contemplated by
this Agreement, supersedes all prior agreements and understandings between the
parties with respect to such subject matter.

      11.8 Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired or affected, it
being intended that all of the Placement Agents' and the Purchaser's rights and
privileges shall be enforceable to the fullest extent permitted by law.

      11.9 Survival. The Placement Agents and the Offerors, respectively, agree
that the representations, warranties and agreements made by each of them in this
Agreement and in any certificate or other instrument delivered pursuant hereto
shall remain in full force and effect and shall survive the delivery of, and
payment for, the Capital Securities.

                     Signatures appear on the following page






                                       20
<PAGE>



      If this Agreement is satisfactory to you, please so indicate by signing
the acceptance of this Agreement and deliver such counterpart to the Offerors
whereupon this Agreement will become binding between us in accordance with its
terms.

Very truly yours,

PENN-AMERICA GROUP, INC.


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


Penn-America STATUTORY TRUST II



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


CONFIRMED AND ACCEPTED,
as of the date first set forth above

FTN FINANCIAL CAPITAL MARKETS,
a division of First Tennessee Bank, N.A.,
as a Placement Agent


By:
-----------------------------
Name:  James D. Wingett
Title  Managing Director


KEEFE, BRUYETTE & WOODS, INC.
a New York corporation, as a Placement Agent


By:
-----------------------------
Name:  Peter J. Wirth
Title: Managing Director



                                       21
<PAGE>


                                    EXHIBIT A

                         FORM OF SUBSCRIPTION AGREEMENT

                        [TRUST NAME] STATUTORY TRUST [I]

                                 [COMPANY NAME]

                             SUBSCRIPTION AGREEMENT

                                 [CLOSING], 2003

      THIS SUBSCRIPTION AGREEMENT (this "Agreement") made among [TRUST NAME]
Statutory Trust [I] (the "Trust"), a statutory trust created under the
Connecticut Statutory Trust Act (Chapter 615 of Title 34 of the Connecticut
General Statutes, Section 500, et seq.), [COMPANY NAME], a [STATE] corporation,
with its principal offices located at [ADDRESS1], [ADDRESS2] (the "Company" and,
collectively with the Trust, the "Offerors"), and I-Preferred Term Securities
II, Ltd. (the "Purchaser").

                                    RECITALS:

      A. The Trust desires to issue [NUMBER OF CAPITAL SECURITIES] of its
Floating Rate Capital Securities (the "Capital Securities"), liquidation amount
$1,000.00 per Capital Security, representing an undivided beneficial interest in
the assets of the Trust (the "Offering"), to be issued pursuant to an Amended
and Restated Declaration of Trust (the "Declaration") by and among the Company,
U.S. Bank National Association ("U.S. Bank"), the administrators named therein,
and the holders (as defined therein), which Capital Securities are to be
guaranteed by the Company with respect to distributions and payments upon
liquidation, redemption and otherwise pursuant to the terms of a Guarantee
Agreement between the Company and U.S. Bank, as trustee (the "Guarantee"); and

      B. The proceeds from the sale of the Capital Securities will be combined
with the proceeds from the sale by the Trust to the Company of its common
securities, and will be used by the Trust to purchase an equivalent amount of
Floating Rate Junior Subordinated Deferrable Interest Debentures of the Company
(the "Debentures") to be issued by the Company pursuant to an indenture to be
executed by the Company and U.S. Bank, as trustee (the "Indenture"); and

      C. In consideration of the premises and the mutual representations and
covenants hereinafter set forth, the parties hereto agree as follows:

                                   ARTICLE I
                     PURCHASE AND SALE OF CAPITAL SECURITIES

      1.1. Upon the execution of this Agreement, the Purchaser hereby agrees to
purchase from the Trust [NUMBER OF CAPITAL SECURITIES] Capital Securities at a
price equal to $1,000.00 per Capital Security (the "Purchase Price") and the
Trust agrees to sell such Capital



<PAGE>


Securities to the Purchaser for said Purchase Price. The rights and preferences
of the Capital Securities are set forth in the Declaration. The Purchase Price
is payable in immediately available funds on [CLOSING], 2003, or such other
business day as may be designated by the Purchaser, but in no event later than
[LAST CLOSING], 2003 (the "Closing Date"). The Offerors shall provide the
Purchaser wire transfer instructions no later than 1 day following the date
hereof.

      1.2. The certificate for the Capital Securities shall be delivered by the
Trust on the Closing Date to the Purchaser or its designee.

      1.3. The Placement Agreement, dated [PRICING], 2003 (the "Placement
Agreement"), among the Offerors and the Placement Agents identified therein
includes certain representations and warranties, covenants and conditions to
closing and certain other matters governing the Offering. The Placement
Agreement is hereby incorporated by reference into this Agreement and the
Purchaser shall be entitled to each of the benefits of the Placement Agents and
the Purchaser under the Placement Agreement and shall be entitled to enforce the
obligations of the Offerors under such Placement Agreement as fully as if the
Purchaser were a party to such Placement Agreement.

                                   ARTICLE II
                   REPRESENTATIONS AND WARRANTIES OF PURCHASER

      2.1. The Purchaser understands and acknowledges that neither the Capital
Securities, the Debentures nor the Guarantee have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or any other
applicable securities law, are being offered for sale by the Trust in
transactions not requiring registration under the Securities Act, and may not be
offered, sold, pledged or otherwise transferred by the Purchaser except in
compliance with the registration requirements of the Securities Act or any other
applicable securities laws, pursuant to an exemption therefrom or in a
transaction not subject thereto.

      2.2. The Purchaser represents, warrants and certifies that (i) it is not a
"U.S. person" as such term is defined in Rule 902 under the Securities Act, (ii)
it is not acquiring the Capital Securities for the account or benefit of any
such U.S. person, (iii) the offer and sale of Capital Securities to the
Purchaser constitutes an "offshore transaction" under Regulation S of the
Securities Act, and (iv) it will not engage in hedging transactions with regard
to the Capital Securities unless such transactions are conducted in compliance
with the Securities Act and the Purchaser agrees to the legends and transfer
restrictions set forth on the Capital Securities certificate.

      2.3. The Purchaser represents and warrants that it is purchasing the
Capital Securities for its own account, for investment, and not with a view to,
or for offer or sale in connection with, any distribution thereof in violation
of the Securities Act or other applicable securities laws, subject to any
requirement of law that the disposition of its property be at all times within
its control and subject to its ability to resell such Capital Securities
pursuant to an effective registration statement under the Securities Act or
under Rule 144A or any other exemption from registration available under the
Securities Act or any other applicable Securities law.


                                      A-2

<PAGE>


      2.4. The Purchaser represents and warrants that it has full power and
authority to execute and deliver this Agreement, to make the representations and
warranties specified herein, and to consummate the transactions contemplated
herein and it has full right and power to subscribe for Capital Securities and
perform its obligations pursuant to this Agreement.

      2.5. The Purchaser, a Cayman Islands Company whose business includes
issuance of certain notes and acquiring the Capital Securities and other similar
securities, represents and warrants that it has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of purchasing the Capital Securities, has had the opportunity to ask
questions of, and receive answers and request additional information from, the
Offerors and is aware that it may be required to bear the economic risk of an
investment in the Capital Securities.

      2.6. The Purchaser represents and warrants that no filing with, or
authorization, approval, consent, license, order, registration, qualification or
decree of, any governmental body, agency or court having jurisdiction over the
Purchaser, other than those that have been made or obtained, is necessary or
required for the performance by the Purchaser of its obligations under this
Agreement or to consummate the transactions contemplated herein.

      2.7. The Purchaser represents and warrants that this Agreement has been
duly authorized, executed and delivered by the Purchaser.

      2.8. The Purchaser represents and warrants that (i) the Purchaser is not
in violation or default of any term of its Memorandum of Association or Articles
of Association, of any provision of any mortgage, indenture, contract,
agreement, instrument or contract to which it is a party or by which it is bound
or of any judgment, decree, order, writ or, to its knowledge, any statute, rule
or regulation applicable to the Purchaser which would prevent the Purchaser from
performing any material obligation set forth in this Agreement; and (ii) the
execution, delivery and performance of and compliance with this Agreement, and
the consummation of the transactions contemplated herein, will not, with or
without the passage of time or giving of notice, result in any such material
violation, or be in conflict with or constitute a default under any such term,
or the suspension, revocation, impairment, forfeiture or non-renewal of any
permit, license, authorization or approval applicable to the Purchaser, its
business or operations or any of its assets or properties which would prevent
the Purchaser from performing any material obligations set forth in this
Agreement.

      2.9. The Purchaser represents and warrants that the Purchaser is an
exempted company with limited liability duly incorporated, validly existing and
in good standing under the laws of the jurisdiction where it is organized, with
full power and authority to perform its obligations under this Agreement.

      2.10. The Purchaser understands and acknowledges that the Company will
rely upon the truth and accuracy of the foregoing acknowledgments,
representations, warranties and agreements and agrees that, if any of the
acknowledgments, representations, warranties or agreements deemed to have been
made by it by its purchase of the Capital Securities are no longer accurate, it
shall promptly notify the Company.

                                      A-3

<PAGE>


      2.11. The Purchaser understands that no public market exists for any of
the Capital Securities, and that it is unlikely that a public market will ever
exist for the Capital Securities.

                                  ARTICLE III
                                  MISCELLANEOUS

      3.1. Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by registered or certified mail, return
receipt requested, international courier or delivered by hand against written
receipt therefor, or by facsimile transmission and confirmed by telephone, to
the following addresses, or such other address as may be furnished to the other
parties as herein provided:

         To the Offerors:           [COMPANY NAME]
                                    [ADDRESS1]
                                    [ADDRESS2]
                                    Attention:  [CONTACT]
                                    Fax:  [FAX]

         To the Purchaser:          I-Preferred Term Securities II, Ltd.
                                    c/o Maples Finance Limited
                                    P.O. Box 1093 GT
                                    Queensgate House
                                    South Church Street
                                    George Town, Grand Cayman
                                    Cayman Islands
                                    Attention:  The Directors
                                    Fax:  345-945-7100

         Unless otherwise expressly provided herein, notices shall be deemed to
have been given on the date of mailing, except notice of change of address,
which shall be deemed to have been given when received.

      3.2. This Agreement shall not be changed, modified or amended except by a
writing signed by the parties to be charged, and this Agreement may not be
discharged except by performance in accordance with its terms or by a writing
signed by the party to be charged.

      3.3. Upon the execution and delivery of this Agreement by the Purchaser,
this Agreement shall become a binding obligation of the Purchaser with respect
to the purchase of Capital Securities as herein provided.

      3.4. NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY
OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND
PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

                                      A-4

<PAGE>


      3.5. The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as may be
necessary or appropriate to carry out the purposes and intent of this Agreement.

      3.6. This Agreement may be executed in one or more counterparts each of
which shall be deemed an original, but all of which shall together constitute
one and the same instrument.

      3.7. In the event that any one or more of the provisions contained herein,
or the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired or affected, it being
intended that all of the Offerors' and the Purchaser's rights and privileges
shall be enforceable to the fullest extent permitted by law.

                     Signatures appear on the following page




                                      A-5

<PAGE>


         IN WITNESS WHEREOF, I have set my hand the day and year first written
above.

I-PREFERRED TERM SECURITIES II, LTD.

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


         IN WITNESS WHEREOF, this Agreement is agreed to and accepted as of the
day and year first written above.

                                   [COMPANY NAME]


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


                                   [TRUST NAME] STATUTORY TRUST [I]


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





                                      A-6

<PAGE>



                                   EXHIBIT B-1
                                   -----------

                         FORM OF COMPANY COUNSEL OPINION
                         -------------------------------

                                 [CLOSING], 2003

I-Preferred Term Securities II, Ltd.      FTN Financial Capital Markets
c/o Maples Finance Limited                845 Crossover Lane, Suite 150
P. O. Box 1093 GT                         Memphis, Tennessee  38117
Queensgate House
South Church Street                       Keefe, Bruyette & Woods, Inc.
George Town, Grand Cayman                 787 7th Avenue, 4th Floor
Cayman Islands                            New York, New York  10019


Ladies and Gentlemen:

         We have acted as counsel to [COMPANY NAME] (the "Company"), a [STATE]
corporation in connection with a certain Placement Agreement, dated [PRICING],
2003, (the "Placement Agreement"), between the Company and [TRUST NAME]
Statutory Trust [I] (the "Trust"), on one hand, and FTN Financial Capital
Markets and Keefe, Bruyette & Woods, Inc. (the "Placement Agents"), on the other
hand. Pursuant to the Placement Agreement, and subject to the terms and
conditions stated therein, the Trust will issue and sell to I-Preferred Term
Securities II, Ltd. (the "Purchaser"), $[____________] aggregate principal
amount of Floating Rate Capital Securities (liquidation amount $1,000.00 per
capital security) (the "Capital Securities").

         Capitalized terms used herein and not otherwise defined shall have the
same meanings ascribed to them in the Placement Agreement.

         The law covered by the opinions expressed herein is limited to the law
of the United States of America and of the State[s] of [STATE OF INCORPORATION
AND STATE WHERE COMPANY'S PRINCIPAL BUSINESS IS LOCATED].

         We have made such investigations of law as, in our judgment, were
necessary to render the following opinions. We have also reviewed (a) the
Company's Articles of Incorporation, as amended, and its By-Laws, as amended,
and (b) such corporate documents, records, information and certificates of the
Company and its Significant Subsidiaries, certificates of public officials or
government authorities and other documents as we have deemed necessary or
appropriate as a basis for the opinions hereinafter expressed. As to certain
facts material to our opinions, we have relied, with your permission, upon
statements, certificates or representations, including those delivered or made
in connection with the above-referenced transaction, of officers and other
representatives of the Company and its Significant Subsidiaries and the Trust.


                                     B-1-1

<PAGE>


         As used herein, the phrase "to our knowledge" or "to the best of our
knowledge" or other similar phrase means the actual knowledge of the attorneys
who have had active involvement in the transactions described above or who have
prepared or signed this opinion letter, or who otherwise have devoted
substantial attention to legal matters for the Company.

         Based upon and subject to the foregoing and the further qualifications
set forth below, we are of the opinion as of the date hereof that:

      1. The Company is validly existing and in good standing under the laws of
the State of [STATE]. Each of the Significant Subsidiaries is validly existing
and in good standing under the laws of its jurisdiction of organization. Each of
the Company and the Significant Subsidiaries has full corporate power and
authority to own or lease its properties and to conduct its business as such
business is currently conducted in all material respects. To the best of our
knowledge, all outstanding shares of capital stock of the Significant
Subsidiaries have been duly authorized and validly issued, and are fully paid
and nonassessable and owned of record and beneficially, directly or indirectly
by the Company.

      2. The issuance, sale and delivery of the Debentures in accordance with
the terms and conditions of the Placement Agreement and the Operative Documents
have been duly authorized by all necessary actions of the Company. The issuance,
sale and delivery of the Debentures by the Company and the issuance, sale and
delivery of the Trust Securities by the Trust do not give rise to any preemptive
or other rights to subscribe for or to purchase any shares of capital stock or
equity securities of the Company or the Significant Subsidiaries pursuant to the
corporate Articles of Incorporation or Charter, By-Laws or other governing
documents of the Company or the Significant Subsidiaries, or, to the best of our
knowledge, any agreement or other instrument to which either Company or the
Significant Subsidiaries is a party or by which the Company or the Significant
Subsidiaries may be bound.

      3. The Company has all requisite corporate power to enter into and perform
its obligations under the Placement Agreement and the Subscription Agreement,
and the Placement Agreement and the Subscription Agreement have been duly and
validly authorized, executed and delivered by the Company and constitute the
legal, valid and binding obligations of the Company enforceable in accordance
with their terms, except as the enforcement thereof may be limited by general
principles of equity and by bankruptcy or other laws affecting creditors' rights
generally, and except as the indemnification and contribution provisions thereof
may be limited under applicable laws and certain remedies may not be available
in the case of a non-material breach.

      4. Each of the Indenture, the Trust Agreement and the Guarantee Agreement
has been duly authorized, executed and delivered by the Company, and is a valid
and legally binding obligation of the Company enforceable in accordance with its
terms, subject to the effect of bankruptcy, insolvency, reorganization,
receivership, moratorium and other laws affecting the rights and remedies of
creditors generally and of general principles of equity.

      5. The Debentures have been duly authorized, executed and delivered by the
Company, are entitled to the benefits of the Indenture and are legal, valid and
binding obligations

                                     B-1-2


<PAGE>


of the Company enforceable against the Company in accordance with their terms,
subject to the effect of bankruptcy, insolvency, reorganization, receivership,
moratorium and other laws affecting the rights and remedies of creditors
generally and of general principles of equity.

      6. To the best of our knowledge, neither the Company, the Trust, nor any
other Significant Subsidiaries of the Company is in breach or violation of, or
default under, with or without notice or lapse of time or both, its Articles of
Incorporation or Charter, By-Laws or other governing documents (including
without limitation, the Trust Agreement). The execution, delivery and
performance of the Placement Agreement and the Operative Documents and the
consummation of the transactions contemplated by the Placement Agreement and the
Operative Documents do not and will not (i) result in the creation or imposition
of any material lien, claim, charge, encumbrance or restriction upon any
property or assets of the Company or its Significant Subsidiaries, or (ii)
conflict with, constitute a material breach or violation of, or constitute a
material default under, with or without notice or lapse of time or both, any of
the terms, provisions or conditions of (A) the Articles of Incorporation or
Charter, By-Laws or other governing documents of the Company or its Significant
Subsidiaries, or (B) to the best of our knowledge, any material contract,
indenture, mortgage, deed of trust, loan or credit agreement, note, lease,
franchise, license or any other agreement or instrument to which the Company or
its Significant Subsidiaries is a party or by which any of them or any of their
respective properties may be bound or (C) any order, decree, judgment,
franchise, license, permit, rule or regulation of any court, arbitrator,
government, or governmental agency or instrumentality, domestic or foreign,
known to us having jurisdiction over the Company or its Significant Subsidiaries
or any of their respective properties which, in the case of each of (i) or (ii)
above, is material to the Company and its Significant Subsidiaries on a
consolidated basis.

      7. Except for filings, registrations or qualifications that may be
required by applicable securities laws, no authorization, approval, consent or
order of, or filing, registration or qualification with, any person (including,
without limitation, any court, governmental body or authority) is required under
the laws of the State of [STATE WHERE COMPANY'S PRINCIPAL BUSINESS IS LOCATED]
in connection with the transactions contemplated by the Placement Agreement and
the Operative Documents in connection with the offer and sale of the Capital
Securities as contemplated by the Placement Agreement and the Operative
Documents.

      8. To the best of our knowledge (i) no action, suit or proceeding at law
or in equity is pending or threatened to which the Offerors or their Significant
Subsidiaries are or may be a party, and (ii) no action, suit or proceeding is
pending or threatened against or affecting the Offerors or their Significant
Subsidiaries or any of their properties, before or by any court or governmental
official, commission, board or other administrative agency, authority or body,
or any arbitrator, wherein an unfavorable decision, ruling or finding could
reasonably be expected to have a material adverse effect on the consummation of
the transactions contemplated by the Placement Agreement and the Operative
Documents or the issuance and sale of the Capital Securities as contemplated
therein or the condition (financial or otherwise), earnings, affairs, business,
or results of operations of the Offerors and their Significant Subsidiaries on a
consolidated basis.


                                     B-1-3

<PAGE>


      9. Assuming the truth and accuracy of the representations and warranties
of the Placement Agents in the Placement Agreement and the Purchaser in the
Subscription Agreement, it is not necessary in connection with the offering,
sale and delivery of the Capital Securities, the Debentures and the Guarantee
Agreement (or the Guarantee) to register the same under the Securities Act of
1933, as amended, under the circumstances contemplated in the Placement
Agreement and the Subscription Agreement.

      10. Neither the Company nor the Trust is or after giving effect to the
offering and sale of the Capital Securities and the consummation of the
transactions described in the Placement Agreement will be, an "investment
company" or an entity "controlled" by an "investment company," in each case
within the meaning of the Investment Company Act of 1940, as amended, without
regard to Section 3(c) of such Act .

         The opinion expressed in the first two sentences of numbered paragraph
1 of this Opinion Letter is based solely upon certain certificates and
confirmations issued by the applicable governmental officer or authority with
respect to each of the Company and the Significant Subsidiaries.

         With respect to the foregoing opinions, since no member of this firm is
actively engaged in the practice of law in the States of Connecticut or New
York, we do not express any opinions as to the laws of such states and have (i)
relied, with your approval, upon the opinion of Bingham McCutchen LLP with
respect to matters of Connecticut law, and (ii) assumed, with your approval and
without rendering any opinion to such effect, that the laws of the State of New
York, in all respects material to this opinion, are substantively identical to
the laws of the State of [STATE WHERE COMPANY'S PRINCIPAL BUSINESS IS LOCATED],
without regard to conflict of law provisions.

         This opinion is rendered to you solely pursuant to Section 3.1(a) of
the Placement Agreement. As such, it may be relied upon by you only and may not
be used or relied upon by any other person for any purpose whatsoever without
our prior written consent.

                                             Very truly yours,




                                     B-1-4


<PAGE>


                                   EXHIBIT B-2
                                   -----------

                       FORM OF CONNECTICUT COUNSEL OPINION
                       -----------------------------------

TO THE PARTIES LISTED
ON SCHEDULE I HERETO

Ladies and Gentlemen:

         We have acted as special counsel in the State of Connecticut (the
"State") for [TRUST NAME] Statutory Trust [I] (the "Trust"), a Connecticut
statutory trust formed pursuant to the Amended and Restated Declaration of Trust
(the "Trust Agreement") dated as of the date hereof, among [COMPANY NAME], a
[STATE] corporation (the "Sponsor"), U.S. Bank National Association, a national
banking association ("U.S. Bank"), in its capacity as Institutional Trustee (the
"Institutional Trustee"), and [NAMES OF ADMINISTRATORS], each, an individual,
(each, an "Administrator") in connection with the issuance by the Trust to the
Holders (as defined in the Trust Agreement) of its capital securities (the
"Capital Securities") pursuant to the Placement Agreement dated as of [PRICING],
2003 (the "Placement Agreement"), the issuance by the Trust to the Sponsor of
its Common Securities, pursuant to the Trust Agreement and the acquisition by
the Trust from the Sponsor of Debentures, issued pursuant to the Indenture dated
as of the date hereof (the "Indenture").

         The Institutional Trustee has requested that we deliver this opinion to
you in accordance with Section 3.1(b) of the Placement Agreement. Capitalized
terms not otherwise defined herein shall have the meanings specified in, or
defined by reference in or set forth in the Operative Documents (as defined
below).

         Our representation of the Trust has been as special counsel for the
limited purposes stated above. As to all matters of fact (including factual
conclusions and characterizations and descriptions of purpose, intention or
other state of mind), we have relied, with your permission, entirely upon (i)
the representations and warranties of the parties set forth in the Operative
Documents, and (ii) certificates delivered to us by the management of U.S. Bank,
and have assumed, with your permission, without independent inquiry, the
accuracy of those representations, warranties and certificates.

         We have examined the following documents to which the Trust is a party,
each of which is dated the date hereof, unless otherwise noted:

                           (i)      the Trust Agreement;

                           (ii)     the Placement Agreement;

                           (iii)    the Subscription Agreement;

                           (iv)     the Certificate of Common Securities;


                                     B-2-1

<PAGE>


                           (v)      the Certificate of Capital Securities;

                           (vi)     the Guarantee Agreement;

                           (vii)    the Certificate of Trust filed with the
                                    Secretary of State of the State of
                                    Connecticut dated [FILE DATE], 2003; and

                           (viii)   a Certificate of Legal Existence for the
                                    Trust obtained from the Secretary of State
                                    of the State of Connecticut dated
                                    [CERTIFICATE DATE], 2003 (the "Certificate
                                    of Legal Existence").

         The documents referenced in subparagraphs (i) through (vii) above are
hereinafter referred to collectively as the "Operative Documents."

         We have also examined originals, or copies, certified or otherwise
identified to our satisfaction, of such other corporate and public records and
agreements, instruments, certificates and other documents as we have deemed
necessary or appropriate for the purposes of rendering this opinion. For
purposes of our opinion rendered in paragraph 1 below, with respect to the legal
existence of the Trust, our opinion relies entirely upon and is limited by the
Certificate of Legal Existence, which is attached hereto as Exhibit A.

         We have assumed, with your permission, the genuineness of all
signatures (other than those on behalf of U.S. Bank, the Guarantee Trustee,
Indenture Trustee, Institutional Trustee and the Trust), the conformity of the
originals of all documents reviewed by us as copies, the authenticity and
completeness of all original documents reviewed by us in original or copy form
and the legal competence of each individual executing any document (other than
those individuals executing documents on behalf of U.S. Bank, the Guarantee
Trustee, Indenture Trustee, Institutional Trustee and the Trust).

         When an opinion set forth below is given to the best of our knowledge,
or to our knowledge, or with reference to matters of which we are aware or which
are known to us, or with another similar qualification, the relevant knowledge
or awareness is limited to the actual knowledge or awareness of the individual
lawyers in the firm who have participated directly and substantively in the
specific transactions to which this opinion relates and without any special or
additional investigation undertaken for the purposes of this opinion except as
indicated herein.

         For the purposes of this opinion we have made such examination of law
as we have deemed necessary. The opinions expressed below are limited solely to
the internal substantive laws of the State (as applied by courts located in the
State without regard to choice of law) and we express no opinion as to the laws
of any other jurisdiction. To the extent to which this opinion deals with
matters governed by or relating to the laws of any other state or jurisdiction,
we have assumed, with your permission, that the Operative Documents are governed
by the internal substantive laws of the State.


                                     B-2-2

<PAGE>


         We express no opinion as to (i) the effect of suretyship defenses, or
defenses in the nature thereof, with respect to the obligations of any
applicable guarantor, joint obligor, surety, accommodation party, or other
secondary obligor or any provisions of the Trust Agreement with respect to
indemnification or contribution, and (ii) the accuracy or completeness of any
exhibits or schedules to the Operative Documents. No opinion is given herein as
to the choice of law or internal substantive rules of law that any court or
other tribunal may apply to the transactions contemplated by the Operative
Documents. No opinion is expressed herein as to the application or effect of
federal securities laws or as to the securities or so-called "Blue Sky" laws of
Connecticut or of any other state or other jurisdiction.

         Our opinion, with your permission, is further subject to the following
exceptions, qualifications and assumptions:

            (a) We have assumed without any independent investigation that (i)
      each party to the Operative Documents, other than U.S. Bank, the Guarantee
      Trustee, Indenture Trustee, Institutional Trustee and the Trust, as
      applicable, at all times relevant thereto, is validly existing and in good
      standing under the laws of the jurisdiction in which it is organized, and
      is qualified to do business and in good standing under the laws of each
      jurisdiction where such qualification is required generally or necessary
      in order for such party to enforce its rights under such Operative
      Documents, (ii) each party to the Operative Documents, at all times
      relevant thereto, had and has the full power, authority and legal right
      under its certificate of incorporation, partnership agreement, by-laws,
      and other governing organizational documents, and the applicable
      corporate, partnership, or other enterprise legislation and other
      applicable laws, as the case may be (other than U.S. Bank, the Guarantee
      Trustee, Indenture Trustee, Institutional Trustee or the Trust) to
      execute, deliver and to perform its obligations under, the Operative
      Documents, and (iii) each party to the Operative Documents other than U.S.
      Bank, the Guarantee Trustee, Indenture Trustee, Institutional Trustee or
      the Trust has duly executed and delivered each of such agreements and
      instruments to which it is a party and that the execution and delivery of
      such agreements and instruments and the transactions contemplated thereby
      have been duly authorized by proper corporate or other organizational
      proceedings as to each such party.

            (b) We have assumed without any independent investigation (i) that
      the Institutional Trustee, the Sponsor and the Administrators have
      received the agreed to and stated consideration for the incurrence of the
      obligations applicable to it under the Trust Agreement and each of the
      other Operative Documents, (ii) that each of the Operative Documents
      (other than the Trust Agreement) is a valid, binding and enforceable
      obligation of each party thereto other than the Trust, U.S. Bank and the
      Institutional Trustee, as applicable, and (iii) for the purposes of this
      opinion letter, we herein also assume that each of the Operative Documents
      (other than the Trust Agreement) constitutes a valid, binding and
      enforceable obligation of U.S. Bank, the Guarantee Trustee and the
      Indenture Trustee, as applicable under Connecticut and federal law (as to
      which such matters we are delivering to you a separate opinion letter on
      this date, which is subject to the assumptions, qualifications and
      limitations set forth therein).


                                     B-2-3

<PAGE>


            (c) The enforcement of any obligations of U.S. Bank, the Sponsor and
      the Administrators, as applicable, under the Trust Agreement and the
      obligations of the Trust under the other Operative Documents may be
      limited by the receivership, conservatorship and supervisory powers of
      depository institution regulatory agencies generally, as well as by
      bankruptcy, insolvency, reorganization, moratorium, marshaling or other
      laws and rules of law affecting the enforcement generally of creditors'
      rights and remedies (including such as may deny giving effect to waivers
      of debtors' or guarantors' rights); and we express no opinion as to the
      status under any fraudulent conveyance laws or fraudulent transfer laws of
      any of the obligations of U.S. Bank, the Sponsor, the Administrators or
      the Trust under any of the Operative Documents.

            (d) We express no opinion as to the enforceability of any particular
      provision of the Trust Agreement or the other Operative Documents relating
      to remedies after default.

            (e) We express no opinion as the availability of any specific or
      equitable relief of any kind.

            (f) The enforcement of any rights may in all cases be subject to an
      implied duty of good faith and fair dealing and to general principles of
      equity (regardless of whether such enforceability is considered in a
      proceeding at law or in equity).

            (g) We express no opinion as to the enforceability of any particular
      provision of any of the Operative Documents relating to (i) waivers of
      rights to object to jurisdiction or venue, or consents to jurisdiction or
      venue, (ii) waivers of rights to (or methods of) service of process, or
      rights to trial by jury, or other rights or benefits bestowed by operation
      of law, (iii) waivers of any applicable defenses, setoffs, recoupments, or
      counterclaims, (iv) waivers or variations of provisions which are not
      capable of waiver or variation under Sections 1-102(3), 9-501(3) or other
      provisions of the Uniform Commercial Code ("UCC") of the State, (v) the
      grant of powers of attorney to any person or entity, or (vi) exculpation
      or exoneration clauses, indemnity clauses, and clauses relating to
      releases or waivers of unmatured claims or rights.

            (h) We express no opinion as to the effect of events occurring,
      circumstances arising, or changes of law becoming effective or occurring,
      after the date hereof on the matters addressed in this opinion letter, and
      we assume no responsibility to inform you of additional or changed facts,
      or changes in law, of which we may become aware.

            (i) We express no opinion as to any requirement that any party to
      the Operative Documents (or any other persons or entities purportedly
      entitled to the benefits thereof) qualify or register to do business in
      any jurisdiction in order to be able to enforce its rights thereunder or
      obtain the benefits thereof.

         Based upon the foregoing and subject to the limitations and
qualifications set forth herein, we are of the opinion that:


                                     B-2-4

<PAGE>


      1. The Trust has been duly formed and is validly existing as a statutory
trust under the Connecticut Statutory Trust Act, Chapter 615 of Title 34 of the
Connecticut General Statutes, Section 500, et seq. (the "Act").

      2. The Trust Agreement constitutes a valid and binding obligation of U.S.
Bank and the Institutional Trustee enforceable against U.S. Bank and the
Institutional Trustee in accordance with the terms thereof.

      3. The Trust Agreement constitutes a valid and binding obligation of the
Sponsor and the Administrators, enforceable against the Sponsor and the
Administrators in accordance with its terms.

      4. The Trust has the requisite trust power and authority to (a) execute
and deliver, and to perform its obligations under, the Operative Documents, and
(b) perform its obligations under such Operative Documents.

      5. Each of the Operative Documents to which the Trust is a party
constitutes a valid and binding obligation of the Trust, enforceable against the
Trust in accordance with the terms thereof.

      6. The Capital Securities have been duly authorized by the Trust under the
Trust Agreement, and the Capital Securities, when duly executed and delivered to
the Holders in accordance with the Trust Agreement, the Placement Agreement and
the Subscription Agreement, will be validly issued, fully paid and nonassessable
and will evidence undivided beneficial interests in the assets of the Trust and
will be entitled to the benefits of the Trust Agreement.

      7. The Common Securities have been duly authorized by the Trust Agreement,
and the Common Securities, when duly executed and delivered to the Company in
accordance with the Trust Agreement, the Placement Agreement and the
Subscription Agreement and delivered and paid for in accordance therewith, will
be validly issued, fully paid and nonassessable (subject to Section 9.1(b) of
the Trust Agreement which provides that the Holders of Common Securities are
liable for debts and obligations of the Trust to the extent such debts and
obligations are not satisfied out of the Trust's assets) and will evidence
undivided beneficial interests in the assets of the Trust and will be entitled
to the benefits of the Trust Agreement.

      8. Neither the execution, delivery or performance by the Trust of the
Operative Documents, the consummation by the Trust of the transactions
contemplated thereby, nor compliance by the Trust with any of the terms and
provisions thereof, (a) violates the Trust Agreement, or, to the best of our
knowledge, contravenes or will contravene any provision of, or constitutes a
default under, or results in any breach of, or results in the creation of any
lien (other than as permitted under the Operative Documents) upon property of
the Trust under, any indenture, mortgage, chattel mortgage, deed of trust,
conditional sales contract, bank loan or credit agreement, license or other
agreement or instrument, in each case known to us, to which it is a party or by
which it is bound, or (b) violates any applicable Connecticut law governing the



                                     B-2-5
<PAGE>


Trust, or, to the best of our knowledge, any judgment or order of any court or
other tribunal, in each case known to us, applicable to or binding on it.

      9. No consent, approval, order or authorization of, giving of notice to,
or registration with, or taking of any other action in respect of, any
Connecticut governmental authority regulating the Trust is required for the
execution, delivery, validity or performance of, or the carrying out by, the
Trust of any of the transactions contemplated by the Operative Documents, other
than any such consent, approval, order, authorization, registration, notice or
action as has been duly obtained, given or taken.

      10. The Holders, as the beneficial holders of the Capital Securities, will
be entitled to the same limitation of personal liability extended to
shareholders of domestic corporations organized under the laws of the State.

      11. Under the Trust Agreement, the issuance of the Capital Securities is
not subject to preemptive rights.

      12. Assuming that the Trust will not be taxable as a corporation for
federal income tax purposes, but rather will be classified for such purposes as
a grantor trust, the Trust will not be subject to any tax, fee or other
government charge under the laws of the State of Connecticut or any political
subdivision thereof.

         This opinion is rendered solely for the benefit of those institutions
listed on Schedule I hereto and their successors and assigns in connection with
the transactions contemplated by the Operative Documents and may not be used or
relied upon by any other person or for any other purpose.

                                                     Very truly yours,


                                     B-2-6

<PAGE>


                                   SCHEDULE I
                                   ----------

         U.S. Bank National Association

         FTN Financial Capital Markets

         Keefe, Bruyette & Woods, Inc.

         I-Preferred Term Securities II, Ltd.

         I-Preferred Term Securities II, Inc.

         LeBoeuf, Lamb, Greene & MacRae, L.L.P.

         [COMPANY NAME]

         [NAME OF COUNSEL]





<PAGE>




                            EXHIBIT A TO EXHIBIT B-2
                            ------------------------
                         CERTIFICATE OF LEGAL EXISTENCE
                         ------------------------------
                                  See attached






<PAGE>




                                   EXHIBIT B-3
                                   -----------
                           FORM OF TAX COUNSEL OPINION
                           ---------------------------





                                                           [CLOSING], 2003



[COMPANY NAME]
[ADDRESS 1]
[ADDRESS 2]

[TRUST NAME] Statutory Trust [I]
c/o [COMPANY NAME]
[ADDRESS 1]
[ADDRESS 2]

FTN Financial Capital Markets
845 Crossover Lane, Suite 150
Memphis, Tennessee 38117

Keefe, Bruyette & Woods, Inc.
787 7th Avenue, 4th Floor
New York, New York 10019

Dear Sirs:

         We are acting as special United States tax counsel to [COMPANY NAME], a
corporation organized and existing under the laws of [STATE] (the "Company"),
and to [TRUST NAME] Statutory Trust [I], a statutory trust created under the
laws of Connecticut (the "Trust"), in connection with the proposed issuance of
(i) Floating Rate Capital Securities, liquidation amount $1,000.00 per Capital
Security (the "Capital Securities") of the Trust, pursuant to the terms of the
Amended and Restated Declaration of Trust dated as of the date hereof by and
among the Company, U.S. Bank National Association, as institutional trustee, and
[ADMINISTRATORS], as Administrators (the "Trust Agreement"), (ii) Floating Rate
Common Securities, liquidation amount $1,000 per common security (the "Common
Securities") of the Trust, pursuant to the terms of the Trust Agreement, (iii)
Floating Rate Junior Subordinated Deferrable Interest Debentures (the
"Corresponding Debentures") of the Company issued pursuant to the terms of an
Indenture dated as of the date hereof from the Company to U.S. Bank National
Association, as trustee (the "Indenture"), which Corresponding Debentures are to
be sold by the Company to the Trust, and (iv) the Guarantee Agreement of the
Company with respect to the Capital Securities dated as of the date hereof (the
"Guarantee") between the Company and U.S. Bank National Association, as
guarantee trustee. The Capital Securities, the Common Securities and the
Corresponding Debentures are to be issued as contemplated by the Offering
Circular (the

                                     B-3-1

<PAGE>


 "Offering Circular") dated [_______], 2003 prepared by I-Preferred
Term Securities II, Ltd., an entity formed under the Companies Law of the Cayman
Islands, and I-Preferred Term Securities II, Inc., a Delaware corporation.

         In formulating our opinions, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of documents, corporate
records and other instruments as we have deemed necessary or appropriate for
purposes of this opinion including (i) the Offering Circular, (ii) the
Indenture, (iii) the form of the Corresponding Debentures attached as an exhibit
to the Indenture, (iv) the Trust Agreement, (v) the Guarantee, and (vi) the
forms of Capital Securities Certificate and Common Securities Certificate
attached as exhibits to the Trust Agreement (collectively the "Documents").
Furthermore, we have relied upon certain representations made by the Company and
upon the opinion of Bingham McCutchen LLP as to certain matters of Connecticut
law.

         In such examination, we have assumed the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified photostatic copies, the authenticity of
the originals of such latter documents, the genuineness of all signatures and
the correctness of all representations made therein. We have further assumed
that there are no agreements or understandings contemplated therein other than
those contained in the Documents.

         In rendering our opinions, we have assumed that the transactions
described in or contemplated by the Documents have been or will be carried out
strictly in accordance with the Documents, and that such Documents accurately
reflect the material facts of such transactions. Any variance in the facts may
result in United States federal income tax consequences that differ from those
reflected in the opinions set forth herein. Our opinion is also based on the
Internal Revenue Code of 1986, as amended, (the "Code"), Treasury regulations,
administrative rulings, judicial decisions, and other applicable authorities.
The statutory provisions, regulations and interpretations on which our opinion
is based are subject to change, possibly retroactively. In addition, there can
be no assurance that the Internal Revenue Service will not take positions
contrary to those stated in our opinion.

         Subject to the foregoing, under current law and based upon the facts,
assumptions and qualifications contained herein, it is our opinion that:

         The Corresponding Debentures will be classified as indebtedness of the
         Company for United States federal income tax purposes.

         The Trust will be characterized as a grantor trust and not as an
         association taxable as a corporation for United States federal income
         tax purposes.

         The opinions we express herein are limited solely to matters governed
by the federal income tax laws of the United States. Our opinion is provided
solely to you as a legal opinion only, and not as a guaranty or warranty, and is
limited to the specific transactions, documents, and matters described above. No
opinion may be implied or inferred beyond that which is expressly stated in this
letter.

                                     B-3-2


<PAGE>



         We express no opinion with respect to any matter not specifically
addressed by the foregoing opinions, including state or local tax consequences,
or any federal, state, or local issue not specifically referred to and discussed
above including, without limitation, the effect on the matters covered by this
opinion of the laws of any other jurisdiction.

         We are furnishing this opinion letter to you solely for your benefit in
connection with the issuance of the Capital Securities, the Common Securities
and the Corresponding Debentures. Copies of this opinion letter may be provided
for the benefit of [RATING AGENCY]. No other person may rely upon this opinion
letter or the opinions set forth herein. We disclaim any obligation to update
this opinion for events occurring or coming to our attention after the date
hereof.



                                                    Very truly yours,



                                     B-3-3


<PAGE>



                                 [COMPANY NAME]





                                                             [CLOSING], 2003



LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, New York 10019
Attention: Robert A.N. Cudd

            Re:         Representations Concerning the Issuance of Floating Rate
                        Junior Subordinated Deferrable Interest Debentures (the
                        "Corresponding Debentures") to [TRUST NAME] Statutory
                        Trust [I] (the "Trust") and Sale of Trust Securities
                        (the "Trust Securities") of the Trust

Dear Sirs:

         In accordance with your request, [COMPANY NAME] (the "Company") hereby
makes the following representations in connection with the preparation of your
opinion letter as to the United States federal income tax consequences of the
issuance by the Company of the Corresponding Debentures to the Trust and the
sale of the Trust Securities.

         The Company hereby represents that:

(1)      The sole assets of the Trust will be the Corresponding Debentures, any
         interest paid on the Corresponding Debentures to the extent not
         distributed, proceeds of the Corresponding Debentures, or any of the
         foregoing.

(2)      The Company intends to use the net proceeds from the sale of the
         Corresponding Debentures for general corporate purposes.

(3)      The Trust was not formed to conduct any trade or business and is not
         authorized to conduct any trade or business. The Trust exists for the
         exclusive purposes of (i) issuing and selling the Trust Securities,
         (ii) using the proceeds from the sale of Trust Securities to acquire
         the Corresponding Debentures, and (iii) engaging only in activities
         necessary or incidental thereto.

(4)      The Trust was formed to facilitate direct investment in the assets of
         the Trust, and the existence of multiple classes of ownership is
         incidental to that purpose. There is no intent to provide holders of
         such interests in the Trust with diverse interests in the assets of the
         Trust.

(5)      The Company intends to create a debtor-creditor relationship between
         the Company, as debtor, and the Trust, as a creditor, upon the issuance
         and sale of the

                                     B-3-4

<PAGE>



         Corresponding Debentures to the Trust by the Company.
         The Company will (i) record and at all times continue to reflect the
         Corresponding Debentures as indebtedness on its separate books and
         records for financial accounting purposes, and (ii) treat the
         Corresponding Debentures as indebtedness for all United States federal,
         state and local income tax purposes.

(6)      During each year, the Trust's income will consist solely of payments
         made by the Company with respect to the Corresponding Debentures. Such
         payments will not be derived from the active conduct of a financial
         business by the Trust. Both the Company's obligation to make such
         payments and the measurement of the amounts payable by the Company are
         defined by the terms of the Corresponding Debentures. Neither the
         Company's obligation to make such payments nor the measurement of the
         amounts payable by the Company is dependent on income or profits of the
         Company or any affiliate of the Company.

(7)      The Company has reviewed projections of earnings, cash flow, capital
         and surplus and other relevant financial and economic data relating to
         the Company and its affiliates. Based on the current and estimated net
         cash flow and the projections of earnings, cash flow, capital and
         surplus of the Company and its affiliates, the Company believes its net
         cash flow will be in excess of the amount of principal and interest
         required to be paid in accordance with the terms of the Corresponding
         Debentures and the Company expects that it will be able to make, and
         will make, timely payment of principal and interest in accordance with
         the terms of the Corresponding Debentures with available capital or
         accumulated net cash flow.

(8)      The principal insurance operating subsidiary of the Company has
         received either a financial strength rating of at least B+ with a
         neutral or positive outlook from A.M. Best Company, Inc., or an
         investment grade financial strength rating from either Standard &
         Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc.
         or Fitch Ratings.

(9)      The terms and conditions of the Corresponding Debentures, including the
         interest rate, were determined on an arm's length basis.

(10)     The Company presently has no intention to defer interest payments on
         the Corresponding Debentures, and it considers the likelihood of such a
         deferral to be remote because, if it were to exercise its right to
         defer payments of interest with respect to the Corresponding
         Debentures, it would not be permitted to declare or pay any dividends
         or distributions on, or redeem, purchase, acquire, or make a
         liquidation payment with respect to, any capital stock of the Company
         or any affiliate of the Company (other than payments of dividends or
         distributions to the Company) or make any payment of principal of or
         interest or premium, if any, on or repay, repurchase, or redeem any
         debt securities of the Company or any affiliate of the Company that
         rank pari passu in all respects with or junior in interest to the
         Corresponding Debentures, in each case subject to limited exceptions
         stated in Section 2.11 of the Indenture to be entered into in
         connection with the issuance of the Corresponding Debentures.

                                     B-3-5


<PAGE>



(11)     Immediately after the issuance of the Corresponding Debentures, the
         debt-to-equity ratio of the Company (as determined for financial
         accounting purposes) will be no higher than three to one (3 : 1). The
         Company has no plan or intention to issue debt that would cause such
         ratio to exceed three to one (3 : 1). For purposes of this paragraph
         11, (i) the Corresponding Debentures will be treated as debt and
         payments thereon will be treated as interest, (ii) other debt (as
         determined for financial accounting purposes) shall include both
         short-term and long-term indebtedness of the Company, and (iii) equity
         (as determined for financial accounting purposes) shall include capital
         stock, preferred stock, if any, paid in surplus and retained earnings
         of the Company.

(12)     To the best of our knowledge, the Company's subsidiaries are currently
         in compliance with all applicable federal, state, and local capital
         requirements, except to the extent that failure to comply with any such
         requirements would not have a material adverse effect on the Company
         and its subsidiaries.

(13)     For purposes hereof, you may rely on the representations made by the
         Company in Sections 5.16 and 5.17 of the Placement Agreement dated as
         of [PRICING], 2003, by and among FTN Financial Capital Markets, Keefe,
         Bruyette & Woods, Inc., the Trust and the Company.

(14)     The Company will not issue any class of common stock or preferred stock
         senior in rights (such as payment rights and liquidation preference) to
         the Corresponding Debentures during their term.

(15)     The Internal Revenue Service has not challenged the interest deduction
         on any class of the Company's subordinated debt in the last ten (10)
         years on the basis that such debt constitutes equity for federal income
         tax purposes.

         The above representations are accurate as of the date hereof and will
continue to be accurate through the issuance of the Trust Securities, unless you
are otherwise notified by us in writing. The undersigned understands that you
will rely on the foregoing in connection with rendering certain legal opinions,
and possesses the authority to make the representations set forth in this letter
on behalf of the Company.


                                        Very truly yours,





                                        [COMPANY NAME]



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


                                     B-3-6


<PAGE>



                                    EXHIBIT C
                                    ---------
                            SIGNIFICANT SUBSIDIARIES
                            ------------------------

Penn-America Insurance Company (Pennsylvania)
Penn  Star Insurance Company (Pennsylvania)







<PAGE>




                                    EXHIBIT D

                            FORM OF QUARTERLY REPORT


I-Preferred Term Securities II, Ltd.
c/o The Bank of New York
101 Barclay Street, Floor 8-East
CDO Unit
New York, New York  10286
Attention:  Franco Talavera
CDO Relationship Manager

PLEASE COMPLETE FOR THE PRINCIPAL INSURANCE OPERATING SUBSIDIARY

<TABLE>
<CAPTION>


As of Year End _______, 20__

<S>                                                                                          <C>
NAIC Risk Based Capital Ratio (authorized control level)                                 _________ %

As of [March 31, June 30, September 30, or December 31,] 20___

Total Policyholders' Surplus                                                             $__________

Consolidated Debt to Total Policyholders' Surplus                                        ___________%

Total Assets                                                                             $__________

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

NAIC Class 1 & 2 Rated Investments to Total Investments                                  ___________%

Return on Policyholders' Surplus                                                         ___________%

For Property & Casualty Companies

Expense Ratio                                                                            ___________%

Loss and LAE Ratio                                                                       ___________%

Combined Ratio                                                                           ___________%

Net Premiums Written (annualized) to Policyholders' Surplus                              ___________%

</TABLE>


<PAGE>



<TABLE>
<CAPTION>

----------------------------------------------------------------- ---------------------------------------------------------------
<S>                                                                <C>
NAIC Risk Based Capital Ratio-P&C                                 (Total Adjusted  Capital/Authorized  Control Level  Risk-Based
                                                                  Capita/)/2
----------------------------------------------------------------- ---------------------------------------------------------------
NAIC Risk Based Capital Ratio-Life                                ((Total Adjusted Capital-Asset  Valuation  Reserve)/Authorized
                                                                  Control Level Risk-Based Capita/)/2
----------------------------------------------------------------- ---------------------------------------------------------------
Total Capital and Surplus-Life                                     Common Capital Stock + Preferred Capital Stock + Aggregate
                                                                   Write-Ins for other than special surplus funds + Surplus Notes
                                                                   +Gross Paid-In and Contributed Surplus + Aggregate Write-Ins for
                                                                   Special Surplus Funds + Unassigned Funds (Surplus) - Treasury
                                                                   Stock
----------------------------------------------------------------- ---------------------------------------------------------------
Total Capital and Surplus-P&C
                                                                   Aggregate Write-Ins for Special Surplus Funds + Common Capital
                                                                   Stock + Preferred Capital Stock + Aggregate Write-Ins for other
                                                                   than special surplus funds + Surplus Notes +Gross Paid-In and
                                                                   Contributed Surplus + Unassigned Funds (Surplus) - Treasury Stock
----------------------------------------------------------------- ---------------------------------------------------------------
Total  Class 1 & 2  Rated  Investments  to  Total  Fixed  Income  (Total Class 1 + Total Class 2 Rated  Investments)/Total Fixed
Investments                                                       Income Investments
----------------------------------------------------------------- ---------------------------------------------------------------
Total Class 1 & 2 Rated Investments to Total Investments          (Total  Class  1 +  Total  Class  2  Rated  Investments)/Total
                                                                  Investments
----------------------------------------------------------------- ---------------------------------------------------------------
Total Assets                                                      Total Assets
----------------------------------------------------------------- ---------------------------------------------------------------
Return on Policyholders' Surplus                                  Net Income/Policyholders' Surplus
----------------------------------------------------------------- ---------------------------------------------------------------
Expense Ratio                                                     Other Underwriting Expenses Incurred/Net premiums Earned
----------------------------------------------------------------- ---------------------------------------------------------------
Loss and LAE Ratio                                                (Losses Incurred + Loss Expenses Incurred)/Net Premiums Earned
----------------------------------------------------------------- ---------------------------------------------------------------
Combined Ratio                                                    Expense Ratio + Loss and LAE Ratio
----------------------------------------------------------------- ---------------------------------------------------------------
Net Premiums Written (annualized) to Policyholders' Surplus       Net Premiums Written/Policyholders' Surplus
----------------------------------------------------------------- ---------------------------------------------------------------


</TABLE>