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                                                            Exhibit 4 (iii)




                        AMENDED AND RESTATED DECLARATION
                                    OF TRUST

                                  by and among

                         U.S. BANK NATIONAL ASSOCIATION,
                            as Institutional Trustee,

                            PENN-AMERICA GROUP, INC.,
                                   as Sponsor,

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

                            Dated as of May 15, 2003



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<PAGE>


<TABLE>
<CAPTION>

                                                       TABLE OF CONTENTS
                                                       ------------------                                      Page
                                                                                                               ----
<S>                                                                                                             <C>
ARTICLE I.           INTERPRETATION AND DEFINITIONS..............................................................1
         Section 1.1.      Definitions...........................................................................1

ARTICLE II.          ORGANIZATION................................................................................8
         Section 2.1.      Name..................................................................................8
         Section 2.2.      Office................................................................................8
         Section 2.3.      Purpose...............................................................................8
         Section 2.4.      Authority.............................................................................9
         Section 2.5.      Title to Property of the Trust........................................................9
         Section 2.6.      Powers and Duties of the Institutional Trustee and the Administrators.................9
         Section 2.7.      Prohibition of Actions by the Trust and the Institutional Trustee....................13
         Section 2.8.      Powers and Duties of the Institutional Trustee.......................................14
         Section 2.9.      Certain  Duties  and   Responsibilities   of  the  Institutional   Trustee  and
                           Administrators.......................................................................15
         Section 2.10.     Certain Rights of Institutional Trustee..............................................17
         Section 2.11.     Execution of Documents...............................................................19
         Section 2.12.     Not Responsible for Recitals or Issuance of Securities...............................19
         Section 2.13.     Duration of Trust....................................................................19
         Section 2.14.     Mergers..............................................................................19

ARTICLE III.         SPONSOR....................................................................................21
         Section 3.1.      Sponsor's Purchase of Common Securities..............................................21
         Section 3.2.      Responsibilities of the Sponsor......................................................21
         Section 3.3.      Expenses.............................................................................21
         Section 3.4.      Right to Proceed.....................................................................22

ARTICLE IV.          INSTITUTIONAL TRUSTEE AND ADMINISTRATORS...................................................22
         Section 4.1.      Institutional Trustee; Eligibility...................................................22
         Section 4.2.      Administrators.......................................................................23
         Section 4.3.      Appointment,   Removal   and   Resignation   of   Institutional   Trustee   and
                           Administrators.......................................................................23
         Section 4.4.      Institutional Trustee Vacancies......................................................24
         Section 4.5.      Effect of Vacancies..................................................................25
         Section 4.6.      Meetings of the Institutional Trustee and the Administrators.........................25
         Section 4.7.      Delegation of Power..................................................................25
         Section 4.8.      Conversion, Consolidation or Succession to Business..................................25

ARTICLE V.           DISTRIBUTIONS..............................................................................26
         Section 5.1.      Distributions........................................................................26

ARTICLE VI.          ISSUANCE OF SECURITIES.....................................................................26
         Section 6.1.      General Provisions Regarding Securities..............................................26
         Section 6.2.      Paying Agent, Transfer Agent and Registrar...........................................27
         Section 6.3.      Form and Dating......................................................................27
         Section 6.4.      Mutilated, Destroyed, Lost or Stolen Certificates....................................28
         Section 6.5.      Temporary Securities.................................................................28
         Section 6.6.      Cancellation.........................................................................28
         Section 6.7.      Rights of Holders; Waivers of Past Defaults..........................................29

ARTICLE VII.         DISSOLUTION AND TERMINATION OF TRUST.......................................................30
         Section 7.1.      Dissolution and Termination of Trust.................................................30


<PAGE>


ARTICLE VIII.        TRANSFER OF INTERESTS......................................................................31
         Section 8.1.      General..............................................................................31
         Section 8.2.      Transfer Procedures and Restrictions.................................................32
         Section 8.3.      Deemed Security Holders..............................................................35

ARTICLE IX.          LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, INSTITUTIONAL TRUSTEE OR OTHERS..........35
         Section 9.1.      Liability............................................................................35
         Section 9.2.      Exculpation..........................................................................36
         Section 9.3.      Fiduciary Duty.......................................................................36
         Section 9.4.      Indemnification......................................................................37
         Section 9.5.      Outside Businesses...................................................................39
         Section 9.6.      Compensation; Fee....................................................................39

ARTICLE X.           tax and ACCOUNTING.........................................................................40
         Section 10.1.     Fiscal Year..........................................................................40
         Section 10.2.     Certain Accounting Matters...........................................................40
         Section 10.3.     Banking..............................................................................40
         Section 10.4.     Withholding..........................................................................41
         Section 10.5.     Intention of the Parties.............................................................41

ARTICLE XI.          AMENDMENTS AND MEETINGS....................................................................41
         Section 11.1.     Amendments...........................................................................41
         Section 11.2.     Meetings of the Holders of Securities; Action by Written Consent.....................43

ARTICLE XII.         REPRESENTATIONS OF INSTITUTIONAL TRUSTEE...................................................44
         Section 12.1.     Representations and Warranties of Institutional Trustee..............................44

ARTICLE XIII.        MISCELLANEOUS..............................................................................45
         Section 13.1.     Notices..............................................................................45
         Section 13.2.     Governing Law........................................................................46
         Section 13.3.     Intention of the Parties.............................................................46
         Section 13.4.     Headings.............................................................................46
         Section 13.5.     Successors and Assigns...............................................................46
         Section 13.6.     Partial Enforceability...............................................................46
         Section 13.7.     Counterparts.........................................................................46
</TABLE>

                                       ii


<PAGE>

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






                                      iii

<PAGE>

                              AMENDED AND RESTATED
                              DECLARATION OF TRUST
                                       OF
                         Penn-America STATUTORY TRUST II
                                  May 15, 2003

      AMENDED  AND  RESTATED  DECLARATION  OF TRUST  ("Declaration")  dated  and
effective as of May 15, 2003, by the Institutional  Trustee (as defined herein),
the Administrators  (as defined herein),  the Sponsor (as defined herein) and by
the holders,  from time to time, of undivided  beneficial interests in the Trust
(as defined herein) to be issued pursuant to this Declaration;

      WHEREAS,  the Institutional  Trustee,  the  Administrators and the Sponsor
established  Penn-America  Statutory  Trust II (the "Trust"),  a statutory trust
under the Statutory Trust Act (as defined  herein)  pursuant to a Declaration of
Trust dated as of April 17, 2003 (the "Original Declaration"), and a Certificate
of Trust filed with the  Secretary of the State of the State of  Connecticut  on
April 17, 2003, for the sole purpose of issuing and selling  certain  securities
representing  undivided  beneficial  interests  in the  assets  of the Trust and
investing the proceeds thereof in certain debentures of the Debenture Issuer (as
defined herein);

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

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

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

                                   ARTICLE I

                         INTERPRETATION AND DEFINITIONS

Section 1.1  Definitions.  Unless the context otherwise requires:

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

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

<PAGE>


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

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

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

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

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

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

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

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

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

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

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

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

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

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


                                       2
<PAGE>


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

      "Certificate" means any certificate evidencing Securities.

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

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

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

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

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

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

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

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

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

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

      "Debenture Trustee" means U.S. Bank National Association, as trustee under
the Indenture until a successor is appointed  thereunder,  and thereafter  means
such successor trustee.

      "Debentures"  means  the  Floating  Rate  Junior  Subordinated  Deferrable
Interest  Debentures  due 2033 to be issued by the  Debenture  Issuer  under the
Indenture.

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

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

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


                                       3
<PAGE>


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

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

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

      "Distribution Rate" means, for the period beginning on (and including) the
date of original  issuance and ending on (but  excluding)  August 15, 2003,  the
rate per annum of  5.41125%,  and for the period  beginning  on (and  including)
August 15, 2003, and thereafter, the Coupon Rate.

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

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

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

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

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

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

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

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

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

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



                                       4
<PAGE>


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

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

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

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

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

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

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

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

      "Investment  Company Event" has the meaning set forth in paragraph 4(a) of
Annex I. "Liquidation" has the meaning set forth in paragraph 3 of Annex I.

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

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

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

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

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



                                       5
<PAGE>


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


                                       6
<PAGE>


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

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

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

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

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

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

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

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

      "Subsidiary"  means with  respect to any Person,  (a) any  corporation  at
least a majority of the outstanding voting stock of which is owned,  directly or
indirectly,  by such  Person or by one or more of its  Subsidiaries,  or by such
Person and one or more of its Subsidiaries,  (b) any general partnership,  joint
venture or similar entity, at least a majority of the outstanding partnership or
similar  interests of which shall at the time be owned by such Person, or by one
or  more  of  its  Subsidiaries,  or by  such  Person  and  one or  more  of its
Subsidiaries, and (c) any limited partnership of which such Person or any of its
Subsidiaries is a general partner. For the purposes of this definition,  "voting
stock" means  shares,  interests,  participations  or other  equivalents  in the
equity interest (however designated) in such Person having ordinary voting power
for the  election of a majority of the  directors  (or the  equivalent)  of such
Person, other than shares, interests, participations or other equivalents having
such power only by reason of the occurrence of a contingency.

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

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

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

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

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

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



                                       7
<PAGE>

Distributions  to the date upon which the voting  percentages are determined) of
all outstanding Securities of the relevant class.

      "3-Month LIBOR" has the meaning set forth in paragraph 2(a) of Annex I.

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

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

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

      "Trust Securities" has the meaning set forth in the Indenture.

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

                                   ARTICLE II.

                                  ORGANIZATION

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

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

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


                                       8
<PAGE>


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

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

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

            (a) The Institutional  Trustee and the Administrators  shall conduct
the  affairs  of the Trust in  accordance  with the  terms of this  Declaration.
Subject to the  limitations  set forth in paragraph (b) of this Section,  and in
accordance with the following provisions (i) and (ii), the Institutional Trustee
and the  Administrators  shall have the authority to enter into all transactions
and  agreements  determined by the  Institutional  Trustee to be  appropriate in
exercising  the  authority,   express  or  implied,  otherwise  granted  to  the
Institutional  Trustee  or the  Administrators,  as the case may be,  under this
Declaration,  and to perform all acts in furtherance thereof,  including without
limitation, the following:

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

            (A) the issuance and sale of the Securities;

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

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

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



                                       9
<PAGE>


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

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

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

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

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

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

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

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

            (A) the establishment of the Property Account;

            (B) the receipt of the Debentures;

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

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

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


                                       10
<PAGE>


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

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

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

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

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

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

            (b) So long as this Declaration remains in effect, the Trust (or the
Institutional Trustee or Administrators acting on behalf of the Trust) shall not
undertake any business,  activities or transaction  except as expressly provided
herein or contemplated hereby. In particular,  neither the Institutional Trustee
nor the  Administrators  may cause the Trust to (i) acquire any  investments  or
engage in any activities not authorized by this Declaration,  (ii) sell, assign,
transfer, exchange, mortgage, pledge, set-off or otherwise dispose of any of the
Trust Property or interests therein,  including to Holders,  except as expressly
provided herein,  (iii) take any action that would reasonably be expected (A) to
cause the Trust to fail or cease to  qualify  as a  "grantor  trust"  for United
States federal income tax purposes or (B) to require the trust to register as an
Investment Company under the Investment Company Act, (iv) incur any indebtedness
for borrowed money or issue any other debt, or (v) take or consent to any action
that would result in the placement of a lien on any of the Trust  Property.  The
Institutional


                                       11
<PAGE>


Trustee shall, at the sole cost and expense of the Trust,  defend all claims and
demands  of all  Persons  at any  time  claiming  any  lien on any of the  Trust
Property  adverse to the interest of the Trust or the Holders in their  capacity
as Holders.

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

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

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

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

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

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

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

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


                                       12
<PAGE>


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

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

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

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

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

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

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

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

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

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

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

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


                                       13
<PAGE>


      Section 2.8. Powers and Duties of the Institutional Trustee.

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

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

            (c) The Institutional Trustee shall:

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

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

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

            (d) The  Institutional  Trustee may bring or defend,  pay,  collect,
compromise,  arbitrate,  resort to legal  action with  respect to, or  otherwise
adjust  claims or  demands  of or  against,  the Trust  that  arise out of or in
connection  with an  Event of  Default  of which a  Responsible  Officer  of the
Institutional  Trustee has actual  knowledge or arises out of the  Institutional
Trustee's duties and obligations under this Declaration; provided, however, that
if an Event  of  Default  has  occurred  and is  continuing  and  such  event is
attributable to the failure of the Debenture Issuer to pay interest or principal
on the  Debentures on the date such  interest or principal is otherwise  payable
(or in the case of  redemption,  on the redemption  date),  then a Holder of the
Capital  Securities  may directly  institute a  proceeding  for  enforcement  of
payment to such Holder of


                                       14
<PAGE>


the principal of or interest on the Debentures  having a principal  amount equal
to the aggregate  liquidation amount of the Capital Securities of such Holder (a
"Direct  Action")  on  or  after  the  respective  due  date  specified  in  the
Debentures.  In connection with such Direct Action, the rights of the Holders of
the Common  Securities  will be  subrogated  to the rights of such Holder of the
Capital  Securities to the extent of any payment made by the Debenture Issuer to
such Holder of the Capital Securities in such Direct Action; provided,  however,
that no Holder of the Common  Securities  may exercise such right of subrogation
so long as an Event of  Default  with  respect  to the  Capital  Securities  has
occurred and is continuing.

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

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

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

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

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

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

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

            (b) The duties and responsibilities of the Institutional Trustee and
the Administrators shall be as provided by this Declaration. Notwithstanding the
foregoing,  no provision of this  Declaration  shall  require the  Institutional
Trustee or  Administrators  to expend or risk their own funds or otherwise incur
any financial liability in the performance of any of their duties hereunder,  or
in the exercise of any of their rights or powers if the Institutional Trustee or
such  Administrator  shall have reasonable  grounds to believe that repayment of
such  funds  or  adequate  protection  against  such  risk of  liability  is not
reasonably assured to the Institutional  Trustee or such Administrator.  Whether
or not therein  expressly  so  provided,  every  provision  of this  Declaration
relating to the conduct or affecting the liability of or affording protection to
the Institutional  Trustee or Administrators  shall be subject to the provisions
of this Article.  Nothing in this  Declaration  shall be construed to relieve an
Administrator or the Institutional Trustee from


                                       15
<PAGE>


liability for the Institutional  Trustee's or such Administrator's own negligent
act, the Institutional  Trustee's or such  Administrator's own negligent failure
to act,  or the  Institutional  Trustee's  or such  Administrator's  own willful
misconduct.  To the extent that, at law or in equity, the Institutional  Trustee
or an Administrator  has duties and liabilities  relating to the Trust or to the
Holders, the Institutional  Trustee or such Administrator shall not be liable to
the  Trust  or  to  any  Holder  for  the   Institutional   Trustee's   or  such
Administrator's  good faith reliance on the provisions of this Declaration.  The
provisions of this Declaration,  to the extent that they restrict the duties and
liabilities  of  the  Administrators  or  the  Institutional  Trustee  otherwise
existing  at law or in equity,  are  agreed by the  Sponsor  and the  Holders to
replace  such  other  duties  and  liabilities  of  the  Administrators  or  the
Institutional Trustee.

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

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

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

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

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

      (iv)  the  Institutional  Trustee  shall not be liable for any interest on
            any money received by it except as it may otherwise agree in writing
            with the Sponsor; and




                                       16
<PAGE>

             money held by the Institutional Trustee need not be segregated from
             other funds held by it except in relation to the  Property  Account
             maintained  by  the  Institutional   Trustee  pursuant  to  Section
             2.8(c)(i) and except to the extent otherwise required by law; and

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

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

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

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

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

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

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

            (f) the  Institutional  Trustee  may  consult  with  counsel  of its
selection (which counsel may be counsel to the Sponsor or any of its Affiliates)
and the advice of such  counsel  shall be


                                       17
<PAGE>


full and complete  authorization  and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance thereon and in
accordance with such advice;  the Institutional  Trustee shall have the right at
any time to seek instructions  concerning the administration of this Declaration
from any court of competent jurisdiction;

            (g) the  Institutional  Trustee  shall  be under  no  obligation  to
exercise  any of the rights or powers  vested in it by this  Declaration  at the
request or direction of any of the Holders pursuant to this Declaration,  unless
such  Holders  shall  have  offered to the  Institutional  Trustee  security  or
indemnity  reasonably  satisfactory  to  it  against  the  costs,  expenses  and
liabilities  which might be incurred by it in  compliance  with such  request or
direction;  provided,  that nothing  contained in this Section  2.10(g) shall be
taken to relieve the Institutional Trustee,  subject to Section 2.9(b), upon the
occurrence of an Event of Default (that has not been cured or waived pursuant to
Section  6.7),  to exercise  such of the rights and powers  vested in it by this
Declaration,  and use the same degree of care and skill in their exercise,  as a
prudent person would exercise or use under the  circumstances  in the conduct of
his or her own affairs;

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

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

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

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

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



                                       18
<PAGE>

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

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

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

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

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

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

Section 2.14.     Mergers.

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

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


                                       19
<PAGE>


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

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

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

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

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

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

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

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

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

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

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

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



                                       20
<PAGE>


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

      (ix)  prior to such merger,  consolidation,  amalgamation  or replacement,
            the   Institutional   Trustee   shall  have  received  an  Officers'
            Certificate of the Administrators and an opinion of counsel, each to
            the effect that all conditions  precedent under this Section 2.14(b)
            to such transaction have been satisfied.

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

                                  ARTICLE III.

                                     SPONSOR

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

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

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

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

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

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

            (b) be  responsible  for and shall  pay all  debts  and  obligations
(other than with  respect to the  Securities)  and all costs and expenses of the
Trust  (including,  but not  limited  to,  costs and  expenses  relating  to the
organization,  maintenance and dissolution of the Trust), the offering, sale and
issuance of the Securities (including fees to the placement agents in connection


                                       21
<PAGE>


therewith),  the  fees  and  expenses  (including  reasonable  counsel  fees and
expenses) of the  Institutional  Trustee and the  Administrators,  the costs and
expenses relating to the operation of the Trust, including,  without limitation,
costs  and  expenses  of  accountants,  attorneys,  statistical  or  bookkeeping
services,  expenses for  printing  and  engraving  and  computing or  accounting
equipment, Paying Agents, Registrars,  Transfer Agents, duplicating,  travel and
telephone and other telecommunications  expenses and costs and expenses incurred
in connection with the acquisition,  financing,  and disposition of Trust assets
and the enforcement by the  Institutional  Trustee of the rights of the Holders;
and

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

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

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

                                  ARTICLE IV.

                    INSTITUTIONAL TRUSTEE AND ADMINISTRATORS

Section 4.1.      Institutional Trustee; Eligibility.

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

      (i)   not be an Affiliate of the Sponsor;

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

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


                                       22
<PAGE>


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

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

            (d) The initial  Institutional  Trustee  shall be U.S. Bank National
Association.

            Section  4.2.  Administrators.  Each  Administrator  shall be a U.S.
Person, 21 years of age or older and authorized to bind the Sponsor. The initial
Administrators shall be Jon S. Saltzman, Joseph F. Morris and Brian Riley. There
shall at all times be at least one Administrator. Except where a requirement for
action by a specific  number of  Administrators  is expressly  set forth in this
Declaration  and  except  with  respect to any action the taking of which is the
subject of a meeting of the Administrators,  any action required or permitted to
be  taken  by  the  Administrators  may  be  taken  by,  and  any  power  of the
Administrators  may be  exercised  by,  or with  the  consent  of,  any one such
Administrator.

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

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

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

            The  Institutional  Trustee may be removed by the act of the Holders
of a Majority in liquidation amount of the Capital Securities,  delivered to the
Institutional Trustee (in its


                                       23
<PAGE>

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

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

            (b)  In  case  of  the   appointment   hereunder   of  a   Successor
Institutional  Trustee,  the retiring  Institutional  Trustee and the  Successor
Institutional  Trustee shall execute and deliver an amendment hereto wherein the
Successor  Institutional  Trustee  shall accept such  appointment  and which (i)
shall contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, the Successor  Institutional Trustee all the rights,
powers, trusts and duties of the retiring  Institutional Trustee with respect to
the  Securities  and the  Trust  and  (ii)  shall  add to or  change  any of the
provisions  of  this  Declaration  as  shall  be  necessary  to  provide  for or
facilitate  the  administration  of the  Trust by more  than  one  Institutional
Trustee,  it being  understood  that nothing herein or in such  amendment  shall
constitute such  Institutional  Trustees  co-trustees and upon the execution and
delivery  of  such  amendment  the   resignation  or  removal  of  the  retiring
Institutional  Trustee shall become effective to the extent provided therein and
each  Successor  Institutional  Trustee,   without  any  further  act,  deed  or
conveyance,  shall become vested with all the rights,  powers, trusts and duties
of the  retiring  Institutional  Trustee;  but,  on  request of the Trust or any
Successor  Institutional Trustee such retiring  Institutional Trustee shall duly
assign,  transfer and deliver to such Successor  Institutional Trustee all Trust
Property,  all proceeds  thereof and money held by such  retiring  Institutional
Trustee hereunder with respect to the Securities and the Trust.

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

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

            Section 4.4.  Institutional Trustee Vacancies.  If the Institutional
Trustee ceases to hold office for any reason a vacancy shall occur. A resolution
certifying the existence of such vacancy by the  Institutional  Trustee shall be
conclusive  evidence of the  existence  of such


                                       24
<PAGE>


vacancy. The vacancy shall be filled with a trustee appointed in accordance with
Section 4.3.

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

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

Section 4.7.      Delegation of Power.

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

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

            Section 4.8.  Conversion,  Consolidation  or Succession to Business.
Any Person into which the  Institutional  Trustee may be merged or  converted or
with which it may be  consolidated,  or any Person  resulting  from any  merger,
conversion or consolidation to which the


                                       25
<PAGE>


Institutional  Trustee  shall be a party,  or any  Person  succeeding  to all or
substantially  all the corporate  trust  business of the  Institutional  Trustee
shall be the successor of the  Institutional  Trustee  hereunder,  provided such
Person shall be otherwise qualified and eligible under this Article, without the
execution  or filing of any paper or any  further  act on the part of any of the
parties hereto.

                                   ARTICLE V.

                                  DISTRIBUTIONS

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

                                  ARTICLE VI.

                             ISSUANCE OF SECURITIES

            Section 6.1. General Provisions Regarding Securities.

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

            (b) The  Certificates  shall be signed on behalf of the Trust by one
or  more  Administrators.  Such  signature  shall  be the  facsimile  or  manual
signature of any Administrator. In case any Administrator of the Trust who shall
have signed any of the Securities  shall cease to be such  Administrator  before
the  Certificates so signed shall be delivered by the Trust,  such  Certificates
nevertheless may be delivered as though the person who signed such  Certificates
had not ceased to be such  Administrator,  and any  Certificate may be signed on
behalf of the Trust by such persons who, at the actual date of execution of such
Security,  shall be an Administrator  of the Trust,  although at the date of the
execution  and  delivery  of the  Declaration  any such  person  was not such an
Administrator.  A Capital Security shall not be valid until authenticated by the
facsimile or manual  signature  of an  Authorized  Officer of the  Institutional
Trustee.  Such signature shall be conclusive  evidence that the Capital Security
has been authenticated  under this


                                       26
<PAGE>


Declaration.  Upon written order of the Trust signed by one  Administrator,  the
Institutional  Trustee shall  authenticate  the Capital  Securities for original
issue. The Institutional  Trustee may appoint an authenticating  agent that is a
U.S. Person  acceptable to the Trust to authenticate the Capital  Securities.  A
Common Security need not be so authenticated.

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

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

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

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

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


                                       27
<PAGE>


Annex I and the forms of  Securities  set forth in Exhibits A-1 and A-2 are part
of the terms of this Declaration and to the extent applicable, the Institutional
Trustee,  the Administrators and the Sponsor, by their execution and delivery of
this  Declaration,  expressly agree to such terms and provisions and to be bound
thereby.  Capital  Securities  will be  issued  only in  blocks  having a stated
liquidation amount of not less than $100,000.00 and any multiple of $1,000.00 in
excess thereof.

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

            Section 6.4. Mutilated, Destroyed, Lost or Stolen Certificates.

         If:

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

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

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

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

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


                                       28
<PAGE>


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

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

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

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

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

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

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

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

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

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

            The  Holders of at least a  Majority  in  liquidation  amount of the
Capital Securities may, on behalf of the Holders of all the Capital  Securities,
waive any past default under the  Indenture or any  Indenture  Event of Default,
except a default or  Indenture  Event of Default in the payment of


                                       29
<PAGE>


principal or interest  (unless  such  default or Indenture  Event of Default has
been cured and a sum sufficient to pay all matured  installments of interest and
principal  due  otherwise  than by  acceleration  has  been  deposited  with the
Debenture  Trustee) or a default  under the  Indenture or an Indenture  Event of
Default in respect of a covenant or provision that under the Indenture cannot be
modified  or amended  without  the  consent  of the  holder of each  outstanding
Debenture.  No such rescission shall affect any subsequent default or impair any
right consequent thereon.

            Upon  receipt  by  the  Institutional   Trustee  of  written  notice
declaring such an acceleration,  or rescission and annulment thereof, by Holders
of any part of the Capital  Securities,  a record date shall be established  for
determining  Holders of outstanding  Capital Securities entitled to join in such
notice,  which  record  date  shall be at the close of  business  on the day the
Institutional  Trustee receives such notice. The Holders on such record date, or
their duly designated proxies, and only such Persons,  shall be entitled to join
in such notice,  whether or not such Holders  remain  Holders  after such record
date; provided, that unless such declaration of acceleration,  or rescission and
annulment,  as the case may be,  shall have  become  effective  by virtue of the
requisite  percentage  having  joined in such notice prior to the day that is 90
days after such record date,  such notice of  declaration  of  acceleration,  or
rescission and annulment,  as the case may be, shall  automatically  and without
further  action by any Holder be canceled and of no further  effect.  Nothing in
this  paragraph  shall  prevent a Holder,  or a proxy of a Holder,  from giving,
after  expiration of such 90-day period,  a new written notice of declaration of
acceleration,  or rescission and annulment thereof,  as the case may be, that is
identical to a written notice that has been canceled  pursuant to the proviso to
the preceding  sentence,  in which event a new record date shall be  established
pursuant to the provisions of this Section 6.7.

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

                                  ARTICLE VII.

                      DISSOLUTION AND TERMINATION OF TRUST

Section 7.1.      Dissolution and Termination of Trust.

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

      (i)   unless  earlier  dissolved,  on May 15, 2038,  the expiration of the
            term of the Trust;

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

      (iii) (other than in connection  with a merger,  consolidation  or similar
            transaction not prohibited by the Indenture, this Declaration or the
            Guarantee,  as the case


                                       30
<PAGE>


             may be) upon (A) the filing of a certificate  of dissolution or its
             equivalent with respect to the Sponsor, and (B)(I) upon the consent
             of Holders of a Majority in  liquidation  amount of the  Securities
             voting  together  as a  single  class  to  file  a  certificate  of
             cancellation  with respect to the Trust or (II) upon the revocation
             of the charter of the Sponsor and the  expiration  of 90 days after
             the date of revocation without a reinstatement thereof;

      (iv)  upon  the  distribution  of the  Debentures  to the  Holders  of the
            Securities,  upon  exercise of the right of the Holder of all of the
            outstanding  Common  Securities to dissolve the Trust as provided in
            Annex I hereto;

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

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

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

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

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

                                 ARTICLE VIII.

                              TRANSFER OF INTERESTS

Section 8.1.      General.

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

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


                                       31
<PAGE>


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

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

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

Section 8.2.      Transfer Procedures and Restrictions.

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

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



                                       32
<PAGE>


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

            THE HOLDER OF THIS  SECURITY BY ITS  ACCEPTANCE  HEREOF ALSO AGREES,
REPRESENTS  AND  WARRANTS  THAT  IT  IS  NOT  AN  EMPLOYEE  BENEFIT,  INDIVIDUAL
RETIREMENT  ACCOUNT  OR  OTHER  PLAN OR  ARRANGEMENT  SUBJECT  TO TITLE I OF THE
EMPLOYEE  RETIREMENT  INCOME  SECURITY  ACT OF 1974,  AS AMENDED  ("ERISA"),  OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH
A "PLAN"),  OR AN


                                       33
<PAGE>


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

            THIS SECURITY WILL BE ISSUED AND MAY BE  TRANSFERRED  ONLY IN BLOCKS
HAVING A LIQUIDATION  AMOUNT OF NOT LESS THAN  $100,000.00  (100 SECURITIES) AND
MULTIPLES OF $1,000.00 IN EXCESS THEREOF.  ANY ATTEMPTED  TRANSFER OF SECURITIES
IN A BLOCK HAVING A LIQUIDATION  AMOUNT OF LESS THAN $100,000.00 SHALL BE DEEMED
TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.

            THE HOLDER OF THIS  SECURITY  AGREES  THAT IT WILL  COMPLY  WITH THE
FOREGOING  RESTRICTIONS.  THIS SECURITY IS IN REGISTERED FORM WITHIN THE MEANING
OF TREASURY  REGULATIONS SECTION  1.871-14(c)(1)(i)  FOR U.S. FEDERAL INCOME AND
WITHHOLDING TAX PURPOSES.

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

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


                                       34
<PAGE>


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

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

            Section 8.3. Deemed Security Holders. The Trust, the Administrators,
the Institutional Trustee, the Paying Agent, the Transfer Agent or the Registrar
may treat the Person in whose name any  Certificate  shall be  registered on the
books and records of the Trust as the sole holder of such Certificate and of the
Securities   represented   by  such   Certificate   for  purposes  of  receiving
Distributions and for all other purposes whatsoever and, accordingly,  shall not
be bound to  recognize  any  equitable  or other  claim to or  interest  in such
Certificate or in the Securities  represented by such Certificate on the part of
any Person,  whether or not the Trust,  the  Administrators,  the  Institutional
Trustee, the Paying Agent, the Transfer Agent or the Registrar shall have actual
or other notice thereof

                                  ARTICLE IX.

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

Section 9.1.      Liability.

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

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

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

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

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

Section 9.2.      Exculpation.

            (a)  No   Indemnified   Person  shall  be  liable,   responsible  or
accountable  in damages or otherwise to the Trust or any Covered  Person for any
loss,  damage or claim  incurred by reason of


                                       35
<PAGE>


any act or  omission  performed  or omitted by such  Indemnified  Person in good
faith on behalf of the Trust and in a manner such Indemnified  Person reasonably
believed to be within the scope of the authority  conferred on such  Indemnified
Person by this Declaration or by law, except that an Indemnified Person shall be
liable for any such loss, damage or claim incurred by reason of such Indemnified
Person's  negligence  or  willful  misconduct  with  respect  to  such  acts  or
omissions.

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

Section 9.3.      Fiduciary Duty.

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

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

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

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

Section 9.4.      Indemnification.

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


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<PAGE>


any criminal  action or  proceeding,  had  reasonable  cause to believe that his
conduct was unlawful.

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

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

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

            (e) To the fullest  extent  permitted  by law,  expenses  (including
reasonable  attorneys' fees and expenses)  incurred by an Indemnified  Person in
defending a civil,  criminal,  administrative or investigative  action,  suit or
proceeding  referred to in  paragraphs  (a) and (b) of this Section 9.4 shall be
paid by the Sponsor in advance of the final disposition of such action,  suit or
proceeding  upon receipt of an undertaking  by or on behalf of such  Indemnified
Person to repay such amount if it shall  ultimately be determined that he is not
entitled to be  indemnified  by the Sponsor as  authorized  in this Section 9.4.
Notwithstanding  the  foregoing,  no advance  shall be made by the  Sponsor if a
determination  is reasonably  and promptly made (i) by the


                                       37
<PAGE>


Administrators  by a majority vote of a Quorum of disinterested  Administrators,
(ii) if such a Quorum is not obtainable,  or, even if obtainable, if a quorum of
disinterested  Administrators  so directs,  by  independent  legal  counsel in a
written  opinion,  or (iii) by the Common  Security  Holder of the Trust,  that,
based upon the facts known to the Administrators, counsel or the Common Security
Holder at the time such  determination is made, such Indemnified Person acted in
bad faith or in a manner that such  Indemnified  Person did not believe to be in
the best  interests of the Trust,  or, with respect to any criminal  proceeding,
that such  Indemnified  Person  believed or had reasonable  cause to believe his
conduct was unlawful.  In no event shall any advance be made in instances  where
the  Administrators,  independent  legal counsel or the Common  Security  Holder
reasonably determine that such Indemnified Person deliberately breached his duty
to the Trust or its Common or Capital Security Holders.

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

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

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

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

      (j) The  indemnification  and  advancement  of  expenses  provided  by, or
granted  pursuant to, this Section 9.4 shall,  unless  otherwise  provided  when
authorized  or  ratified,  (i)  continue  as to a Person who has ceased to be an
Indemnified  Person and shall inure to the


                                       38
<PAGE>

benefit of the heirs,  executors and  administrators of such a Person,  and (ii)
survive the termination or expiration of this Declaration or the earlier removal
or resignation of an Indemnified Person.

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

Section 9.6.      Compensation; Fee.  The Sponsor agrees:

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

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

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

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

                                   ARTICLE X.

                               tax and ACCOUNTING

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


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<PAGE>


Section 10.2.     Certain Accounting Matters.

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

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

            (c) The Administrators,  at the Sponsor's expense, shall cause to be
duly prepared at the principal  office of the Sponsor in the United  States,  as
`United  States'  is  defined  in  Section  7701(a)(9)  of the  Code  (or at the
principal office of the Trust if the Sponsor has no such principal office in the
United States), and filed an annual United States federal income tax return on a
Form 1041 or such other form required by United States  federal  income tax law,
if any,  and any other  annual  income tax  returns  required to be filed by the
Administrators on behalf of the Trust with any state or local taxing authority.

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

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


                                       40
<PAGE>


any authority with respect to  distributions  or allocations to any Holder,  the
amount  withheld  shall be  deemed  to be a  Distribution  in the  amount of the
withholding to the Holder. In the event of any claimed overwithholding,  Holders
shall be limited to an action against the applicable jurisdiction. If the amount
required to be withheld was not withheld  from actual  Distributions  made,  the
Institutional Trustee or any Paying Agent may reduce subsequent Distributions by
the amount of such withholding.

            Section 10.5.  Intention of the Parties.  It is the intention of the
parties hereto that the Trust be classified for United States federal income tax
purposes  as a  grantor  trust.  The  provisions  of this  Declaration  shall be
interpreted to further this intention of the parties.

                                   ARTICLE XI.

                             AMENDMENTS AND MEETINGS

Section 11.1.     Amendments.

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

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

      (i)   the Institutional Trustee shall have first received:

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

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

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

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

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

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


                                       41
<PAGE>


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

            (e)  Sections  9.1(b) and 9.1(c) and this  Section 11.1 shall not be
amended without the consent of all of the Holders of the Securities.

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

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

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

      (i)   cure any ambiguity;

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

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

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

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

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

            (a) Meetings of the Holders of any class of Securities may be called
at any  time  by  the  Administrators  (or  as  provided  in  the  terms  of the
Securities)  to consider and act on any matter on which Holders of such class of
Securities are entitled to act under the terms of this  Declaration or the terms
of the  Securities.  The  Administrators  shall call a meeting of the Holders


                                       42
<PAGE>


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

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

      (i)   notice of any such meeting  shall be given to all the Holders of the
            Securities  having a right to vote  thereat  at least 7 days and not
            more than 60 days before the date of such meeting.  Whenever a vote,
            consent or approval of the Holders of the Securities is permitted or
            required under this Declaration,  such vote, consent or approval may
            be given at a meeting of the Holders of the  Securities.  Any action
            that may be taken at a meeting of the Holders of the  Securities may
            be taken without a meeting if a consent in writing setting forth the
            action so taken is signed by the  Holders of the  Securities  owning
            not less than the minimum amount of Securities in liquidation amount
            that  would be  necessary  to  authorize  or take  such  action at a
            meeting  at which all  Holders of the  Securities  having a right to
            vote thereon were present and voting. Prompt notice of the taking of
            action  without  a  meeting  shall be given  to the  Holders  of the
            Securities  entitled to vote who have not consented in writing.  The
            Administrators  may specify that any written ballot submitted to the
            Holders  of the  Securities  for the  purpose  of taking  any action
            without a meeting  shall be  returned  to the Trust  within the time
            specified by the Administrators;

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

      (iii) unless the Statutory  Trust Act, this  Declaration,  or the terms of
            the Securities otherwise provides, the Administrators, in their sole
            discretion,   shall  establish  all  other  provisions  relating  to
            meetings  of Holders of  Securities,  including  notice of the time,
            place or purpose  of any  meeting at which any matter is to be voted
            on by any  Holders  of the  Securities,  waiver of any such  notice,
            action by consent without a meeting,  the  establishment of a record
            date, quorum requirements, voting in person or


                                       43
<PAGE>


            by proxy or any other  matter  with  respect to the  exercise of any
            such right to vote;  provided,  however,  that each meeting shall be
            conducted in the United  States (as that term is defined in Treasury
            Regulations section 301.7701-7).

                                  ARTICLE XII.

                    REPRESENTATIONS OF INSTITUTIONAL TRUSTEE

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

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

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

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

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

                                 ARTICLE XIII.

                                  MISCELLANEOUS

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

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


                                       44
<PAGE>


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

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

                  U.S. Bank National Association
                  225 Asylum Street, Goodwin Square
                  Hartford, Connecticut  06103
                  Attention:  Vice President, Corporate Trust Services
                  Telecopy:  860-244-1889

                  With a copy to:

                  U.S. Bank National Association
                  1 Federal Street
                  Boston, Massachusetts  02110
                  Attention:  Paul D. Allen, Corporate Trust Services
                  Telecopy:  617-603-6665

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

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

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

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

            Section 13.2.  Governing Law. This Declaration and the rights of the
parties  hereunder  shall be governed by and  interpreted in accordance with the
law of the State of Connecticut and all rights and remedies shall be governed by
such laws without  regard to the  principles of conflict of laws of the State of
Connecticut or any other jurisdiction that would call for the application of the


                                       45
<PAGE>



law of any jurisdiction other than the State of Connecticut;  provided, however,
that there shall not be applicable to the Trust,  the  Institutional  Trustee or
this Declaration any provision of the laws (statutory or common) of the State of
Connecticut  pertaining  to  trusts  that  relate  to or  regulate,  in a manner
inconsistent with the terms hereof (a) the filing with any court or governmental
body or agency of trustee accounts or schedules of trustee fees and charges, (b)
affirmative  requirements  to post  bonds  for  trustees,  officers,  agents  or
employees  of  a  trust,   (c)  the  necessity  for  obtaining  court  or  other
governmental approval concerning the acquisition, holding or disposition of real
or personal  property,  (d) fees or other sums  payable to  trustees,  officers,
agents or employees of a trust,  (e) the allocation of receipts and expenditures
to income or principal,  or (f)  restrictions  or limitations on the permissible
nature, amount or concentration of trust investments or requirements relating to
the titling, storage or other manner of holding or investing trust assets.

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

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

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

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

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

                     Signatures appear on the following page


                                       46
<PAGE>


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

                        U.S. BANK NATIONAL
                        ASSOCIATION, as
                        Institutional Trustee


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


                        PENN-AMERICA GROUP, INC. , as Sponsor


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


                        Penn-America STATUTORY TRUST II


                        By:
                           -----------------------------------
                                 Jon S. Saltzman, as Administrator


                        By:
                           -----------------------------------
                                 Joseph F. Morris, as Administrator


                        By:
                          -----------------------------------
                                 Brian Riley, as Administrator



                                       47
<PAGE>




                                     ANNEX I

                               TERMS OF SECURITIES

            Pursuant to Section 6.1 of the Amended and Restated  Declaration  of
Trust,   dated  as  of  May  15,  2003  (as  amended  from  time  to  time,  the
"Declaration"), the designation, rights, privileges,  restrictions,  preferences
and  other  terms  and  provisions  of the  Capital  Securities  and the  Common
Securities are set out below (each  capitalized term used but not defined herein
has the meaning set forth in the Declaration):

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

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

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

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

            (a)  Distributions  will be payable on each  Security for the period
beginning on (and  including)  the date of original  issuance and ending on (but
excluding)  August  15,  2003 at a rate per annum of  5.41125%  and  shall  bear
interest for each  successive  period  beginning on (and  including)  August 15,
2003,  and  each  succeeding  Distribution  Payment  Date,  and  ending  on (but
excluding) the next succeeding  Distribution Payment Date (each, a "Distribution
Period") at a rate per annum equal to the 3-Month LIBOR, determined as described
below, plus 4.10% (the "Coupon Rate"); provided,  however, that prior to May 15,
2008, the Coupon Rate shall not exceed 12.50%, applied to the stated liquidation
amount thereof,  such rate being the rate of interest  payable on the Debentures
to be held by the  Institutional  Trustee.  Distributions  in arrears  will bear
interest thereon  compounded  quarterly at the applicable  Distribution Rate (to
the extent  permitted  by law).  Distributions,  as used  herein,  include  cash
distributions, any such compounded distributions and any Additional Sums payable
on the Debentures  unless otherwise noted. A Distribution is payable only to the
extent  that  payments  are  made  in  respect  of the  Debentures  held  by the
Institutional  Trustee  and to the extent the  Institutional  Trustee  has funds
available  therefor.  In the  event  that any date on  which a  Distribution  is
payable  on  the  Securities  is  not  a  Business  Day,  then  payment  of  the
Distribution payable on such date shall be made on the next succeeding day which
is a Business Day (and  without any interest or other  payment in respect of any
such  delay),  except  that,  if such  Business  Day is in the  next  succeeding
calendar year, such payment shall be made on the immediately  preceding Business
Day,  in each  case

                                      I-1

<PAGE>


with  the  same  force  and  effect  as if made on the  date  such  payment  was
originally payable.  The amount of the Distribution payable for any Distribution
Period  will be  calculated  by  applying  the  Distribution  Rate to the stated
liquidation  amount  outstanding at the commencement of the Distribution  Period
and  multiplying  each  such  amount  by  the  actual  number  of  days  in  the
Distribution Period concerned divided by 360. All percentages resulting from any
calculations  on the Capital  Securities will be rounded,  if necessary,  to the
nearest one  hundred-thousandth  of a percentage point, with five one-millionths
of a percentage  point rounded  upward (e.g.,  9.876545%  (or  .09876545)  being
rounded to 9.87655% (or  .0987655),  and all dollar amounts used in or resulting
from such  calculation  will be rounded to the nearest cent (with  one-half cent
being rounded upward)).

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

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

                  (2) if such rate cannot be identified on the related
         Determination Date, the Debenture Trustee will request the principal
         London offices of four leading banks in the London interbank market to
         provide such banks' offered quotations (expressed as percentages per
         annum) to prime banks in the London interbank market for U.S. dollar
         deposits having a three-month maturity as of 11:00 a.m. (London time)
         on such Determination Date. If at least two quotations are provided,
         3-Month LIBOR will be the arithmetic mean of such quotations;

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

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

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

                                      I-2

<PAGE>


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

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

         "Interest Rate" means for the period beginning on (and including) the
date of original issuance and ending on (but excluding) August 15, 2003 the rate
per annum of 5.41125% and for each Distribution Period thereafter, the Coupon
Rate.

         "Maturity Date" means May 15, 2033.

            (b) Distributions on the Securities will be cumulative,  will accrue
from the date of original issuance, and will be payable, subject to extension of
distribution payment periods as described herein, quarterly in arrears on August
15, November 15,  February 15 and May 15 of each year,  commencing on August 15,
2003 (each a "Distribution Payment Date") when, as and if available for payment.
The  Debenture  Issuer has the right under the  Indenture  to defer  payments of
interest  on the  Debentures,  so long as no  Indenture  Event  of  Default  has
occurred  and is  continuing,  by  deferring  the  payment  of  interest  on the
Debentures  for up to 20  consecutive  quarterly  periods  (each  an  "Extension
Period") at any time and from time to time, subject to the conditions  described
below,  during  which  Extension  Period no interest  shall be due and  payable.
During any Extension Period, interest will continue to accrue on the Debentures,
and interest on such accrued interest will accrue at an annual rate equal to the
Distribution Rate in effect for each such Extension Period, compounded quarterly
(from  the date  such  interest  would  have  been  payable  were it not for the
Extension  Period,  to the extent  permitted by law (such  interest  referred to
herein as  "Additional  Interest")  during any  Extension  Period.  No Extension
Period may end on a date other than a  Distribution  Payment Date. At the end of
any such  Extension  Period the  Debenture  Issuer shall pay all  interest  then
accrued  and  unpaid  on  the  Debentures  (together  with  Additional  Interest
thereon);  provided,  however,  that no Extension  Period may extend  beyond the
Maturity  Date and provided  further,  however,  that during any such  Extension
Period,  the  Debenture  Issuer shall not, and shall not permit any Affiliate of
the Debenture  Issuer  controlled by the Debenture Issuer to, (i) declare or pay
any  dividends or  distributions  on, or redeem,  purchase,  acquire,  or make a
liquidation  payment  with  respect  to, any of the  Debenture  Issuer's or such
Affiliates'  capital stock (other than payments of dividends or distributions to
the  Debenture  Issuer or a  Subsidiary  of the  Debenture  Issuer)  or make any
guarantee  payments with respect to the  foregoing,  or (ii) make any payment of
principal of or interest or premium,  if any, on or repay,  repurchase or redeem
any debt  securities of the  Debenture  Issuer or any Affiliate of the Debenture
Issuer  controlled by the Debenture  Issuer that rank pari passu in all respects
with or junior in  interest  to the  Debentures  (other  than,  with  respect to
clauses (i) and (ii) above, (a) repurchases,  redemptions or other  acquisitions
of shares of capital  stock of the  Debenture  Issuer or any  Subsidiary  of the
Debenture  Issuer in connection  with any employment  contract,  benefit plan or
other  similar  arrangement  with or for the  benefit of one or more  employees,
officers,  directors or consultants,  in connection with a dividend reinvestment
or stockholder stock purchase plan or in connection with the issuance of capital
stock of the Debenture  Issuer or of such Subsidiary (or securities  convertible
into or exercisable for such capital stock) as  consideration  in an acquisition
transaction  entered into prior to the

                                      I-3


<PAGE>


applicable  Extension  Period,  (b) as a result of any exchange or conversion of
any class or series of the  Debenture  Issuer's  capital  stock (or any  capital
stock of a Subsidiary  of the  Debenture  Issuer) for any class or series of the
Debenture  Issuer's  capital  stock  (or  in the  case  of a  Subsidiary  of the
Debenture Issuer, any class or series of such Subsidiary's  capital stock) or of
any class or  series of the  Debenture  Issuer's  indebtedness  for any class or
series of the Debenture  Issuer's  capital stock (or in the case of indebtedness
of a  Subsidiary  of the  Debenture  Issuer,  of any  class  or  series  of such
Subsidiary's  indebtedness for any class or series of such Subsidiary's  capital
stock),  (c) the purchase of  fractional  interests  in shares of the  Debenture
Issuer's  capital  stock (or the capital  stock of a Subsidiary  of the Company)
pursuant to the  conversion or exchange  provisions of such capital stock or the
security  being  converted or exchanged,  (d) any  declaration  of a dividend in
connection with any stockholders'  rights plan, or the issuance of rights, stock
or other  property  under any  stockholders'  rights plan, or the  redemption or
repurchase of rights  pursuant  thereto,  (e) any dividend in the form of stock,
warrants, options or other rights where the dividend stock or the stock issuable
upon  exercise of such  warrants,  options or other  rights is the same stock as
that on which the  dividend  is being paid or ranks pari passu with or junior to
such  stock  and any  cash  payments  in lieu of  fractional  shares  issued  in
connection therewith,  or (f) payments under the Capital Securities  Guarantee).
Prior to the  termination  of any Extension  Period,  the  Debenture  Issuer may
further  extend such period,  provided  that such period  together with all such
previous  and  further  consecutive  extensions  thereof  shall  not  exceed  20
consecutive  quarterly  periods,  or extend beyond the Maturity  Date.  Upon the
termination  of any  Extension  Period and upon the  payment of all  accrued and
unpaid interest and Additional Interest, the Debenture Issuer may commence a new
Extension  Period,  subject  to  the  foregoing  requirements.  No  interest  or
Additional Interest shall be due and payable during an Extension Period,  except
at the end thereof,  but each  installment of interest that would otherwise have
been  due and  payable  during  such  Extension  Period  shall  bear  Additional
Interest. During any Extension Period,  Distributions on the Securities shall be
deferred  for a period  equal to the  Extension  Period.  If  Distributions  are
deferred,  the  Distributions  due  shall be paid on the date  that the  related
Extension Period terminates,  to Holders of the Securities as they appear on the
books and records of the Trust on the record  date  immediately  preceding  such
date.  Distributions  on the Securities must be paid on the dates payable (after
giving  effect to any  Extension  Period) to the extent that the Trust has funds
available for the payment of such  distributions  in the Property Account of the
Trust.  The  Trust's  funds  available  for  Distribution  to the Holders of the
Securities will be limited to payments received from the Debenture  Issuer.  The
payment of  Distributions  out of moneys held by the Trust is  guaranteed by the
Guarantor pursuant to the Guarantee.

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


                                      I-4

<PAGE>

calendar year, such payment shall be made on the immediately  preceding Business
Day,  in each case with the same  force  and  effect as if made on such  payment
date.

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

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

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

         If a Liquidation of the Trust occurs as described in clause (i), (ii),
(iii) or (v) in Section 7.1(a) of the Declaration, the Trust shall be liquidated
by the Institutional Trustee as expeditiously as it determines to be possible by
distributing, after satisfaction of liabilities to creditors of the Trust, to
the Holders of the Securities, the Debentures on a Pro Rata basis to the extent
not satisfied by the Debenture Issuer, unless such distribution is determined by
the Institutional Trustee not to be practical, in which event such Holders will
be entitled to receive out of the assets of the Trust available for distribution
to the Holders, after satisfaction of liabilities of creditors of the Trust to
the extent not satisfied by the Debenture Issuer, an amount equal to the
Liquidation Distribution. An early Liquidation of the Trust pursuant to clause
(iv) of Section 7.1(a) of the Declaration shall occur if the Institutional
Trustee determines that such Liquidation is possible by distributing, after
satisfaction of liabilities to creditors of the Trust, to the Holders of the
Securities on a Pro Rata basis, the Debentures, and such distribution occurs.

                                      I-5

<PAGE>


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

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

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

            (a) The  Debentures  will mature on May 15, 2033. The Debentures may
be redeemed by the  Debenture  Issuer,  in whole or in part at any time and from
time to time on or after May 15, 2008,  at the  Optional  Redemption  Price.  In
addition,  the Debentures may be redeemed by the Debenture Issuer at the Special
Redemption  Price, in whole but not in part, at any  Distribution  Payment Date,
upon  the  occurrence  and  continuation  of a  Special  Event  within  120 days
following the occurrence of such Special Event at the Special  Redemption Price,
upon  not  less  than 30 nor  more  than 60  days'  notice  to  holders  of such
Debentures so long as such Special Event is continuing.

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

         "Optional Redemption Date" shall mean the date fixed for the redemption
of Capital Securities, which shall be August 15, November 15, February 15 or May
15 on or after May 15, 2008.

                                       I-6


<PAGE>


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

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

         "Special Redemption Date" means a date on which a Special Event
redemption occurs, which shall be any August 15, November 15, February 15 or May
15 .

         "Special Redemption Price" means (i) 107.5% of the principal amount of
the Debentures being redeemed on a Special Redemption Date that occurs before
May 15, 2008, and (ii) 100% of the principal amount of the Debentures being
redeemed on a Special Redemption Date that occurs on May 15, 2008 or after,
plus, in each case, accrued and unpaid interest on such Debentures to the
Special Redemption Date.

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

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

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

                                      I-7


<PAGE>


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

            (e) Redemption or Distribution Procedures.

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

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


                                      I-8

<PAGE>


            payment date will be considered  the date fixed for  redemption  for
            purposes of  calculating  the Optional  Redemption  Price or Special
            Redemption  Price.  In the event of any  redemption  of the  Capital
            Securities  issued  by the  Trust in part,  the  Trust  shall not be
            required to (i) issue,  register  the  transfer  of or exchange  any
            Security  during a period  beginning  at the  opening of business 15
            days before any selection for  redemption of the Capital  Securities
            and ending at the close of  business on the  earliest  date on which
            the relevant  notice of  redemption  is deemed to have been given to
            all Holders of the Capital  Securities  to be so  redeemed,  or (ii)
            register  the  transfer of or exchange  any  Capital  Securities  so
            selected  for  redemption,  in  whole  or in  part,  except  for the
            unredeemed portion of any Capital Securities being redeemed in part.

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

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

5.       Voting Rights - Capital Securities.

            (a) Except as provided under  paragraphs 5(b) and 7 and as otherwise
required by law and the Declaration,  the Holders of the Capital Securities will
have no voting rights.  The Administrators are required to call a meeting of the
Holders of the  Capital  Securities  if directed to do so by Holders of at least
10% in liquidation amount of the Capital Securities.

            (b) Subject to the  requirements  of  obtaining a tax opinion by the
Institutional Trustee in certain circumstances set forth in the last sentence of
this paragraph,  the Holders of a Majority in liquidation  amount of the Capital
Securities,  voting  separately  as a class,  have the right to direct the time,
method,  and place of conducting any proceeding for any remedy  available to the
Institutional  Trustee,  or  exercising  any trust or power  conferred  upon the
Institutional  Trustee under the Declaration,  including the right to direct the
Institutional Trustee, as holder of the Debentures, to (i) exercise the remedies
available  under the Indenture as the holder of the  Debentures,  (ii) waive any
past default that is waivable under the  Indenture,  (iii) exercise any right to
rescind or annul a declaration that the principal of all the Debentures shall be
due and  payable,  or (iv)  consent on behalf of all the  Holders of the Capital
Securities to any amendment, modification or termination of the Indenture or the
Debentures where such consent shall be required;  provided, however, that, where
a consent or action under the Indenture  would require the consent or act of the
holders of greater  than a simple  majority  in  aggregate  principal  amount of
Debentures (a "Super Majority") affected thereby, the Institutional  Trustee may
only give such  consent  or take such  action at the  written  direction  of the
Holders  of at  least  the  proportion  in  liquidation  amount  of the  Capital
Securities  outstanding  which the relevant  Super  Majority  represents  of the
aggregate principal amount of the Debentures  outstanding.  If the Institutional
Trustee fails to enforce its rights under the Debentures  after the Holders of a
Majority in liquidation  amount of such Capital  Securities have so directed the

                                      I-9

<PAGE>


Institutional  Trustee,  to the fullest extent permitted by law, a Holder of the
Capital  Securities  may  institute  a legal  proceeding  directly  against  the
Debenture  Issuer  to  enforce  the  Institutional  Trustee's  rights  under the
Debentures   without  first   instituting  any  legal  proceeding   against  the
Institutional  Trustee  or any  other  person  or  entity.  Notwithstanding  the
foregoing,  if an Event of Default has occurred and is continuing and such event
is  attributable  to the  failure of the  Debenture  Issuer to pay  interest  or
principal on the Debentures on the date the interest or principal is payable (or
in the  case  of  redemption,  the  Optional  Redemption  Date  or  the  Special
Redemption  Date,  as  applicable),  then a  Holder  of  record  of the  Capital
Securities may directly  institute a proceeding for enforcement of payment on or
after the  respective  due dates  specified  in the  Debentures,  to such Holder
directly of the principal of or interest on the  Debentures  having an aggregate
principal  amount  equal to the  aggregate  liquidation  amount  of the  Capital
Securities of such Holder. The Institutional Trustee shall notify all Holders of
the  Capital  Securities  of any  default  actually  known to the  Institutional
Trustee  with respect to the  Debentures  unless (x) such default has been cured
prior to the giving of such notice, or (y) the Institutional  Trustee determines
in good faith that the  withholding  of such  notice is in the  interest  of the
Holders of such  Capital  Securities,  except  where the default  relates to the
payment of principal of or interest on any of the Debentures.  Such notice shall
state that such Indenture Event of Default also  constitutes an Event of Default
hereunder.  Except  with  respect  to  directing  the time,  method and place of
conducting a proceeding for a remedy,  the Institutional  Trustee shall not take
any of the actions  described  in clauses  (i),  (ii) or (iii) above  unless the
Institutional Trustee has obtained an opinion of tax counsel to the effect that,
as a result of such  action,  the Trust will not be  classified  as other than a
grantor trust for United States federal income tax purposes.

            In the event the consent of the Institutional Trustee, as the holder
of the Debentures is required under the Indenture with respect to any amendment,
modification or termination of the Indenture,  the  Institutional  Trustee shall
request the  direction  of the Holders of the  Securities  with  respect to such
amendment  modification  or  termination  and shall  vote with  respect  to such
amendment,  modification or termination as directed by a Majority in liquidation
amount of the Securities voting together as a single class;  provided,  however,
that  where a  consent  under the  Indenture  would  require  the  consent  of a
Super-Majority,  the  Institutional  Trustee  may only give such  consent at the
direction of the Holders of at least the proportion in liquidation amount of the
Securities  outstanding  which the  relevant  Super-Majority  represents  of the
aggregate  principal  amount of the Debentures  outstanding.  The  Institutional
Trustee shall not take any such action in accordance  with the directions of the
Holders of the  Securities  unless the  Institutional  Trustee  has  obtained an
opinion of tax counsel to the effect that, as a result of such action, the Trust
will not be classified  as other than a grantor trust for United States  federal
income tax purposes.

            A waiver of an Indenture  Event of Default will  constitute a waiver
of the  corresponding  Event of Default  hereunder.  Any  required  approval  or
direction  of  Holders  of the  Capital  Securities  may be given at a  separate
meeting of Holders of the Capital  Securities  convened for such  purpose,  at a
meeting of all of the  Holders of the  Securities  in the Trust or  pursuant  to
written consent. The Institutional Trustee will cause a notice of any meeting at
which Holders of the Capital  Securities  are entitled to vote, or of any matter
upon which  action by  written  consent  of such  Holders is to be taken,  to be
mailed to each Holder of record of the Capital Securities. Each such notice will
include a statement setting forth the following information (i) the date of such
meeting or the date by which such action is to be taken,  (ii) a description  of
any  resolution  proposed for adoption at such meeting on which such Holders are
entitled  to vote or of such

                                      I-10

<PAGE>


matter upon which  written  consent is sought,  and (iii)  instructions  for the
delivery  of proxies  or  consents.  No vote or  consent  of the  Holders of the
Capital  Securities  will be required for the Trust to redeem and cancel Capital
Securities or to distribute  the Debentures in accordance  with the  Declaration
and the terms of the Securities.

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

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

6. Voting Rights - Common Securities.

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

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

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


                                      I-11


<PAGE>



under the Declaration to the fullest extent  permitted by law, any Holder of the
Common  Securities may institute a legal proceeding  directly against any Person
to enforce the  Institutional  Trustee's rights under the  Declaration,  without
first instituting a legal proceeding  against the  Institutional  Trustee or any
other Person.

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

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

7. Amendments to Declaration and Indenture.

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

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


                                      I-12

<PAGE>

            (c) Notwithstanding the foregoing,  no amendment or modification may
be made to the Declaration if such amendment or modification would (i) cause the
Trust to be classified for purposes of United States federal income  taxation as
other than a grantor trust, (ii) reduce or otherwise adversely affect the powers
of the  Institutional  Trustee,  or  (iii)  cause  the  Trust  to be  deemed  an
Investment  Company  which is required  to be  registered  under the  Investment
Company Act.

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

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

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

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

                                      I-13

<PAGE>


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

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



                                      I-14

<PAGE>


                                   EXHIBIT A-1

                      FORM OF CAPITAL SECURITY CERTIFICATE

                           [FORM OF FACE OF SECURITY]

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

            THE HOLDER OF THIS  SECURITY BY ITS  ACCEPTANCE  HEREOF ALSO AGREES,
REPRESENTS  AND  WARRANTS  THAT  IT  IS  NOT  AN  EMPLOYEE  BENEFIT,  INDIVIDUAL
RETIREMENT  ACCOUNT  OR  OTHER  PLAN OR  ARRANGEMENT  SUBJECT  TO TITLE I OF THE
EMPLOYEE  RETIREMENT  INCOME  SECURITY  ACT OF 1974,  AS AMENDED  ("ERISA"),  OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH
A "PLAN"),  OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON
OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF
ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH
PURCHASER  OR HOLDER IS  ELIGIBLE  FOR

                                     A-1-1

<PAGE>


EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION
CLASS  EXEMPTION  96-23,  95-60,  91-38,  90-1 OR  84-14 OR  ANOTHER  APPLICABLE
EXEMPTION  OR ITS  PURCHASE AND HOLDING OF THIS  SECURITY IS NOT  PROHIBITED  BY
SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH  RESPECT TO SUCH  PURCHASE
OR HOLDING.  ANY PURCHASER OR HOLDER OF THE  SECURITIES OR ANY INTEREST  THEREIN
WILL BE DEEMED TO HAVE  REPRESENTED  BY ITS  PURCHASE  AND HOLDING  THEREOF THAT
EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3)
OF ERISA,  OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE,  A TRUSTEE
OR OTHER PERSON  ACTING ON BEHALF OF AN EMPLOYEE  BENEFIT  PLAN OR PLAN,  OR ANY
OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE  BENEFIT PLAN OR PLAN TO
FINANCE SUCH  PURCHASE,  OR (ii) SUCH  PURCHASE  WILL NOT RESULT IN A PROHIBITED
TRANSACTION  UNDER  SECTION  406 OF ERISA OR SECTION  4975 OF THE CODE FOR WHICH
THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.

            THIS SECURITY WILL BE ISSUED AND MAY BE  TRANSFERRED  ONLY IN BLOCKS
HAVING A LIQUIDATION  AMOUNT OF NOT LESS THAN  $100,000.00  (100 SECURITIES) AND
MULTIPLES OF $1,000.00 IN EXCESS THEREOF.  ANY ATTEMPTED  TRANSFER OF SECURITIES
IN A BLOCK HAVING A LIQUIDATION  AMOUNT OF LESS THAN $100,000.00 SHALL BE DEEMED
TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.

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

            THIS SECURITY IS IN  REGISTERED  FORM WITHIN THE MEANING OF TREASURY
REGULATIONS  SECTION  1.871-14(c)(1)(i)  FOR U.S. FEDERAL INCOME AND WITHHOLDING
TAX PURPOSES.

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

       Certificate Number P-1                     15,000 Capital Securities

                                  May 15, 2003

             Certificate Evidencing Floating Rate Capital Securities

                                       of

                         Penn-America Statutory Trust II

               (liquidation amount $1,000.00 per Capital Security)

            Penn-America Statutory Trust II, a statutory trust created under the
laws of the State of Connecticut (the "Trust"), hereby certifies that Hare & Co.
(the "Holder"),  as the nominee of The Bank of New York, indenture trustee under
the Indenture dated as of May 15, 2003,  among  I-Preferred  Term Securities II,
Ltd.,  I-Preferred  Term  Securities  II, Inc. and The Bank of New

                                     A-1-2

<PAGE>


York, is the registered  owner of capital  securities of the Trust  representing
undivided beneficial  interests in the assets of the Trust,  (liquidation amount
$1,000.00  per capital  security)  (the  "Capital  Securities").  Subject to the
Declaration (as defined below),  the Capital  Securities are transferable on the
books and records of the Trust in person or by a duly authorized attorney,  upon
surrender of this Certificate duly endorsed and in proper form for transfer. The
Capital   Securities   represented  hereby  are  issued  pursuant  to,  and  the
designation, rights, privileges,  restrictions,  preferences and other terms and
provisions  of the Capital  Securities  shall in all respects be subject to, the
provisions of the Amended and Restated  Declaration  of Trust of the Trust dated
as of May 15, 2003, among Jon S. Saltzman,  Joseph F. Morris and Brian Riley, as
Administrators,  U.S.  Bank  National  Association,  as  Institutional  Trustee,
Penn-America  Group,  Inc.,  as Sponsor,  and the  holders  from time to time of
undivided  beneficial  interests  in the  assets  of the  Trust,  including  the
designation  of the terms of the Capital  Securities  as set forth in Annex I to
such  amended and restated  declaration  as the same may be amended from time to
time (the  "Declaration").  Capitalized  terms used herein but not defined shall
have the meaning  given them in the  Declaration.  The Holder is entitled to the
benefits of the  Guarantee  to the extent  provided  therein.  The Sponsor  will
provide a copy of the  Declaration,  the  Guarantee,  and the  Indenture  to the
Holder without charge upon written request to the Sponsor at its principal place
of business.

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

            By acceptance  of this  Security,  the Holder  agrees to treat,  for
United States federal income tax purposes,  the Debentures as  indebtedness  and
the Capital Securities as evidence of beneficial ownership in the Debentures.

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

                       Signatures appear on following page


                                     A-1-3

<PAGE>



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

                                       PENN-AMERICA STATUTORY TRUST II



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


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

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


                                       U.S. BANK NATIONAL
                                       ASSOCIATION, as the
                                       Institutional Trustee


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



                                     A-1-4

<PAGE>



                          [FORM OF REVERSE OF SECURITY]

            Distributions payable on each Capital Security will be payable at an
annual rate equal to 5.41125%  beginning on (and including) the date of original
issuance and ending on (but excluding) August 15, 2003 and at an annual rate for
each successive  period  beginning on (and including)  August 15, 2003, and each
succeeding  Distribution  Payment Date,  and ending on (but  excluding) the next
succeeding  Distribution Payment Date (each a "Distribution  Period"),  equal to
3-Month LIBOR,  determined as described  below,  plus 4.10% (the "Coupon Rate");
provided,  however, that prior to May 15, 2008, the Coupon Rate shall not exceed
12.50%,  applied to the  stated  liquidation  amount of  $1,000.00  per  Capital
Security,  such rate being the rate of interest  payable on the Debentures to be
held by the Institutional  Trustee.  Distributions in arrears will bear interest
thereon  compounded  quarterly at the Distribution Rate (to the extent permitted
by applicable law). The term "Distributions" as used herein includes payments of
cash distributions and any such compounded distributions and any Additional Sums
payable on the Debentures unless otherwise noted. A Distribution is payable only
to the extent that  payments are made in respect of the  Debentures  held by the
Institutional  Trustee  and to the extent the  Institutional  Trustee  has funds
available therefor. As used herein,  "Determination Date" means the date that is
two London  Banking Days (i.e.,  a business day in which dealings in deposits in
U.S.  dollars are  transacted  in the London  interbank  market)  preceding  the
commencement of the relevant  Distribution Period. In the event that any date on
which a Distribution is payable on this Capital  Security is not a Business Day,
then a payment of the Distribution payable on such date will be made on the next
succeeding  day which is a  Business  Day (and  without  any  interest  or other
payment in respect of any such delay),  except that,  if such Business Day is in
the next succeeding calendar year, such payment shall be made on the immediately
preceding  Business  Day, in each case with the same force and effect as if made
on the date the payment was originally  payable.  The amount of the Distribution
payable  for  any  Distribution  Period  will  be  calculated  by  applying  the
Distribution  Rate  to  the  stated   liquidation   amount  outstanding  at  the
commencement of the Distribution  Period and multiplying each such amount by the
actual number of days in the Distribution Period concerned divided by 360.

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

                                     A-1-5

<PAGE>

quotations  are provided as requested in clause (iii) above,  3-Month LIBOR will
be  a  3-Month  LIBOR  determined  with  respect  to  the  Distribution   Period
immediately  preceding such current  Distribution  Period.  If the rate for U.S.
dollar deposits having a three-month maturity that initially appears on Telerate
Page 3750 as of 11:00 a.m.  (London time) on the related  Determination  Date is
superseded on the Telerate  Page 3750 by a corrected  rate by 12:00 noon (London
time) on such  Determination  Date, then the corrected rate as so substituted on
the applicable page will be the applicable  3-Month LIBOR for such Determination
Date.

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

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

            Except as otherwise  described  below,  Distributions on the Capital
Securities  will be cumulative,  will accrue from the date of original  issuance
and will be payable  quarterly in arrears on August 15, November 15, February 15
and May 15 of each year, commencing on August 15, 2003. The Debenture Issuer has
the right under the Indenture to defer  payments of interest on the  Debentures,
so long as no  Indenture  Event of Default has occurred  and is  continuing,  by
extending the interest payment period for up to 20 consecutive quarterly periods
(each  an  "Extension  Period")  at any  time  and  from  time  to  time  on the
Debentures,  subject to the conditions  described below,  during which Extension
Period no  interest  shall be due and  payable.  During  any  Extension  Period,
interest will continue to accrue on the Debentures, and interest on such accrued
interest will accrue at an annual rate equal to the Distribution  Rate in effect
for each such Extension Period, compounded quarterly from the date such interest
would have been  payable  were it not for the  Extension  Period,  to the extent
permitted by law (such interest referred to herein as "Additional Interest"). No
Extension  Period may end on a date other than a  Distribution  Payment Date. At
the end of any such Extension Period the Debenture Issuer shall pay all interest
then accrued and unpaid on the  Debentures  (together with  Additional  Interest
thereon);  provided,  however,  that no Extension  Period may extend  beyond the
Maturity Date. Prior to the termination of any Extension  Period,  the Debenture
Issuer may further extend such period,  provided that such period  together with
all such previous and further consecutive extensions thereof shall not exceed 20
consecutive  quarterly  periods,  or extend beyond the Maturity  Date.  Upon the
termination  of any  Extension  Period and upon the  payment of all  accrued and
unpaid interest and Additional Interest, the Debenture Issuer may commence a new
Extension  Period,  subject  to  the  foregoing  requirements.  No  interest  or
Additional Interest shall be due and payable during an Extension Period,  except
at the end thereof,  but each  installment of interest that would otherwise have
been  due and  payable  during  such  Extension  Period  shall  bear  Additional
Interest.  During any Extension Period,  Distributions on the Capital Securities
shall be deferred for a period equal to the Extension  Period.  If Distributions
are deferred,  the  Distributions due shall be paid on the date that the related
Extension Period terminates,  to Holders of the Securities as they appear on the
books and records of the Trust on the record  date  immediately  preceding  such
date.  Distributions  on the Securities must be paid on the dates payable (after
giving  effect to any  Extension  Period) to the extent that the Trust has funds
available for the payment of such  distributions  in the Property Account of the
Trust.  The  Trust's  funds  available  for  Distribution  to the Holders of the
Securities will be limited to payments

                                     A-1-6

<PAGE>


received from the Debenture  Issuer.  The payment of Distributions out of moneys
held by the Trust is guaranteed by the Guarantor pursuant to the Guarantee.

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





                                     A-1-7

<PAGE>


                                   ASSIGNMENT

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



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







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





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

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

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

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

         Signature Guarantee:1



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



                                     A-1-8

<PAGE>


                                   EXHIBIT A-2

                       FORM OF COMMON SECURITY CERTIFICATE

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

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

            THIS  COMMON  SECURITY IS IN  REGISTERED  FORM WITHIN THE MEANING OF
TREASURY  REGULATIONS  SECTION  1.871-14(c)(1)(i)  FOR U.S.  FEDERAL  INCOME AND
WITHHOLDING TAX PURPOSES.

                  Certificate Number C-1 464 Common Securities

                                  May 15, 2003

             Certificate Evidencing Floating Rate Common Securities

                                       of

                         Penn-America Statutory Trust II

            Penn-America Statutory Trust II, a statutory trust created under the
laws  of  the  State  of  Connecticut  (the  "Trust"),   hereby  certifies  that
Penn-America  Group,  Inc.  (the  "Holder")  is the  registered  owner of common
securities  of the Trust  representing  undivided  beneficial  interests  in the
assets of the Trust (the "Common  Securities").  Subject to the  Declaration (as
defined below),  the Common Securities are transferable on the books and records
of the Trust in person or by a duly authorized attorney,  upon surrender of this
Certificate duly endorsed and in proper form for transfer. The Common Securities
represented  hereby  are  issued  pursuant  to,  and  the  designation,  rights,
privileges,  restrictions,  preferences  and other terms and  provisions  of the
Common  Securities  shall in all respects be subject to, the  provisions  of the
Amended and Restated Declaration of Trust of the Trust dated as of May 15, 2003,
among Jon S. Saltzman, Joseph F. Morris and Brian Riley, as Administrators, U.S.
Bank National Association, as Institutional Trustee, Penn-America Group, Inc. as
Sponsor,  and the holders from time to time of undivided  beneficial interest in
the assets of the Trust  including  the  designation  of the terms of the Common
Securities as set forth in Annex I to such amended and restated declaration,  as
the same may be amended from time to time (the "Declaration"). Capitalized terms
used  herein  but  not  defined  shall  have  the  meaning  given  them  in  the
Declaration.  The Holder is entitled to the  benefits  of the  Guarantee  to the
extent provided therein. The Sponsor will provide a copy of the Declaration, the
Guarantee and the Indenture to the Holder without charge upon written request to
the Sponsor at its principal place of business.

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

                                     A-2-1

<PAGE>


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

            By acceptance of this  Certificate,  the Holder agrees to treat, for
United States federal income tax purposes,  the Debentures as  indebtedness  and
the Common  Securities  as evidence of  undivided  beneficial  ownership  in the
Debentures.

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

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

                                       Penn-America STATUTORY TRUST II


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


                                     A-2-2

<PAGE>


                      [FORM OF REVERSE OF COMMON SECURITY]

            Distributions  payable on each Common Security will be payable at an
annual rate equal to 5.41125%  beginning on (and including) the date of original
issuance and ending on (but excluding) August 15, 2003 and at an annual rate for
each successive  period  beginning on (and including)  August 15, 2003, and each
succeeding  Distribution  Payment Date,  and ending on (but  excluding) the next
succeeding  Distribution Payment Date (each a "Distribution  Period"),  equal to
3-Month LIBOR,  determined as described  below,  plus 4.10% (the "Coupon Rate");
provided,  however, that prior to May 15, 2008, the Coupon Rate shall not exceed
12.50%,  applied  to the  stated  liquidation  amount of  $1,000.00  per  Common
Security,  such rate being the rate of interest  payable on the Debentures to be
held by the Institutional  Trustee.  Distributions in arrears will bear interest
thereon  compounded  quarterly at the Distribution Rate (to the extent permitted
by  applicable  law).  The term  "Distributions"  as used herein  includes  cash
distributions  and any such  compounded  distributions  and any Additional  Sums
payable on the Debentures unless otherwise noted. A Distribution is payable only
to the extent that  payments are made in respect of the  Debentures  held by the
Institutional  Trustee  and to the extent the  Institutional  Trustee  has funds
available therefor. As used herein,  "Determination Date" means the date that is
two London  Banking Days (i.e.,  a business day in which dealings in deposits in
U.S.  dollars are  transacted  in the London  interbank  market)  preceding  the
commencement of the relevant  Distribution Period. In the event that any date on
which a Distribution  is payable on this Common  Security is not a Business Day,
then a payment of the Distribution payable on such date will be made on the next
succeeding  day which is a  Business  Day (and  without  any  interest  or other
payment in respect of any such delay),  except that,  if such Business Day is in
the next succeeding calendar year, such payment shall be made on the immediately
preceding  Business  Day, in each case with the same force and effect as if made
on the date the payment was originally  payable.  The amount of the Distribution
payable  for  any  Distribution  Period  will  be  calculated  by  applying  the
Distribution  Rate  to  the  stated   liquidation   amount  outstanding  at  the
commencement of the Distribution  Period and multiplying each such amount by the
actual number of days in the Distribution Period concerned divided by 360.

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

                                     A-2-3

<PAGE>


quotations  are provided as requested in clause (iii) above,  3-Month LIBOR will
be  a  3-Month  LIBOR  determined  with  respect  to  the  Distribution   Period
immediately  preceding such current  Distribution  Period.  If the rate for U.S.
dollar deposits having a three-month maturity that initially appears on Telerate
Page 3750 as of 11:00 a.m.  (London time) on the related  Determination  Date is
superseded on the Telerate  Page 3750 by a corrected  rate by 12:00 noon (London
time) on such  Determination  Date, then the corrected rate as so substituted on
the applicable page will be the applicable  3-Month LIBOR for such Determination
Date.

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

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

            Except as otherwise  described  below,  Distributions  on the Common
Securities  will be cumulative,  will accrue from the date of original  issuance
and will be payable  quarterly in arrears on August 15, November 15, February 15
and May 15 of each year, commencing on August 15, 2003. The Debenture Issuer has
the right under the Indenture to defer  payments of interest on the  Debentures,
so long as no  Indenture  Event of Default has occurred  and is  continuing,  by
extending the interest payment period for up to 20 consecutive quarterly periods
(each  an  "Extension  Period")  at any  time  and  from  time  to  time  on the
Debentures,  subject to the conditions  described below,  during which Extension
Period no  interest  shall be due and  payable.  During  any  Extension  Period,
interest will continue to accrue on the Debentures, and interest on such accrued
interest will accrue at an annual rate equal to the Distribution  Rate in effect
for each such Extension Period, compounded quarterly from the date such interest
would have been  payable  were it not for the  Extension  Period,  to the extent
permitted by law (such interest referred to herein as "Additional Interest"). No
Extension  Period may end on a date other than a  Distribution  Payment Date. At
the end of any such Extension Period the Debenture Issuer shall pay all interest
then accrued and unpaid on the  Debentures  (together with  Additional  Interest
thereon);  provided,  however,  that no Extension  Period may extend  beyond the
Maturity Date. Prior to the termination of any Extension  Period,  the Debenture
Issuer may further extend such period,  provided that such period  together with
all such previous and further consecutive extensions thereof shall not exceed 20
consecutive  quarterly  periods,  or extend beyond the Maturity  Date.  Upon the
termination  of any  Extension  Period and upon the  payment of all  accrued and
unpaid interest and Additional Interest, the Debenture Issuer may commence a new
Extension  Period,  subject  to  the  foregoing  requirements.  No  interest  or
Additional Interest shall be due and payable during an Extension Period,  except
at the end thereof,  but each  installment of interest that would otherwise have
been  due and  payable  during  such  Extension  Period  shall  bear  Additional
Interest.  During any Extension  Period,  Distributions on the Common Securities
shall be deferred for a period equal to the Extension  Period.  If Distributions
are deferred,  the  Distributions due shall be paid on the date that the related
Extension Period terminates,  to Holders of the Common Securities as they appear
on the books and records of the Trust on the record date  immediately  preceding
such  date.  Distributions  on the Common  Securities  must be paid on the dates
payable  (after giving  effect to any  Extension  Period) to the extent that the
Trust has funds available for the payment of such  distributions in the Property
Account of the Trust.

                                     A-2-4

<PAGE>


The  Trust's  funds  available  for  Distribution  to the  Holders of the Common
Securities will be limited to payments received from the Debenture Issuer.

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




                                     A-2-5

<PAGE>


                                   ASSIGNMENT

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

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

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

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

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


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


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

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

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

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

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

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

         Signature Guarantee2

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

                                     A-2-6

<PAGE>


                                    EXHIBIT B

                          SPECIMEN OF INITIAL DEBENTURE


<PAGE>


                                    EXHIBIT C

                               PLACEMENT AGREEMENT