Document:

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                                                                   EXHIBIT 10.20

                                  PLUMAS BANK

                             SPLIT DOLLAR AGREEMENT

THIS AGREEMENT is made and entered into this 15th day of September, 2004, by and
between PLUMAS BANK, a corporation organized under the laws of the State of
California located in Quincy, California (the "Employer"), and ROBERT T. HERR
(the "Executive"). This Agreement shall append the Split Dollar Endorsement
entered into on even date herewith, or as subsequently amended, by and between
the aforementioned parties.

                                  INTRODUCTION

To encourage the Executive to remain an employee of the Employer, the Employer
is willing to divide the Net Death Proceeds of a life insurance policy(ies) on
the Executive's life. The Employer will pay life insurance premiums from its
general assets.

                                    ARTICLE 1

                               GENERAL DEFINITIONS

The following terms shall have the meanings specified:

1.1 "Accrual Balance" means the liability that should be accrued by the
Employer, under Generally Accepted Accounting Principles ("GAAP"), for the
Employer's obligation to the Executive under the Salary Continuation Agreement,
dated June 4, 2002, and any amendments thereto, by applying Accounting
Principles Board Opinion Number 12 ("APB 12") as amended by Statement of
Financial Accounting Standards Number 106 ("FAS 106") and the Discount Rate. Any
one of a variety of amortization methods may be used to determine the Accrual
Balance. However, once chosen, the method must be consistently applied.

1.2 "Insurer(s)" means Jefferson Pilot Life Insurance Company and Union Central
Life Insurance Company.

1.3 "Net Death Proceeds" means the total death proceeds of the Policy minus the
cash surrender value.

1.4 "Policy(ies)" means insurance policies JP5242577, issued by the Jefferson
Pilot Life Insurance Company, and U200002247, issued by Union Central Life
Insurance Company. 1.5 "Insured" means the Executive.

1.6 "Normal Retirement Age" means the Executive's 65th birthday.

1.7 "Termination of Employment" means the Executive ceasing to be employed by
the Employer for any reason whatsoever, voluntarily or involuntarily, other than
by reason of an approved leave of absence. For purposes of this Agreement, if
there is a dispute over the employment status of the Executive or the date of
the Executive's Termination of Employment, the Employer shall have the sole and
absolute right to determine the termination date.
<PAGE>
                                    ARTICLE 2

                           POLICY OWNERSHIP/INTERESTS

2.1 Employer Ownership. The Employer is the sole owner of the Policy(ies) and
shall have the right to exercise all incidents of ownership. The Employer shall
be the beneficiary of the Net Death Proceeds remaining after the Executive's
interest has been paid pursuant to Article 2.2 and 2.3 below. This Agreement may
be amended or terminated only by a written agreement signed by the Employer and
the Executive.

2.2 Executive's Interest - Prior to Normal Retirement Age. Prior to Normal
Retirement Age, and subject to Sections 2.5 and 2.6 herein, Executive's
designated beneficiary shall have the right to an amount equal to the greater of
(i) Executive's vested Accrual Balance under the Salary Continuation Agreement,
dated June 4, 2002, calculated as of the date of Executive's death or (ii) the
present value as of the date of Executive's death of the stream of payments
equal to the Annual Benefit (with the Applicable Percentage based on the
Executive's years of service as of the time of Executive's death) as defined in
Executive's Salary Continuation Agreement being paid for fifteen years on a
monthly basis beginning with the month after the Executive's death, provided
that in no event shall such amount exceed the greater of (i) Net Death Proceeds
or (ii) premiums paid by the Employer. The aforementioned present value shall be
computed using the long term monthly Applicable Federal Rate at the time of the
Executive's death. The Executive shall also have the right to elect and change
settlement options that may be permitted.

2.3 Executive's Interest - After Reaching Normal Retirement Age. Upon reaching
Normal Retirement Age, and subject to Sections 2.5 and 2.6 herein, Executive's
designated beneficiary shall have the right to an amount equal to the greater of
(i) Executive's Accrual Balance under the Salary Continuation Agreement, dated
June 4, 2002, calculated as of the date of Executive's death or (ii) the present
value as of the date of Executive death of the stream of payments remaining to
be paid to Executive pursuant to Section 3.1 of Executive's Salary Continuation
Agreement assuming Executive had survived to the date of the last salary
continuation payment pursuant to Section 3.1 of Executive's Salary Continuation
Agreement, provided that in no event shall such amount, exceed the greater of
(i) Net Death Proceeds or (ii) premiums paid by the Employer. The aforementioned
present value shall be computed using the long term monthly Applicable Federal
Rate at the time of the Executive's death Executive shall continue to have the
right to elect and change settlement options that may be permitted.

2.4 Option to Purchase. The Employer shall not sell, surrender or transfer
ownership of the Policy(ies) while this Agreement is in effect without first
giving the Executive or the Executive's transferee the option to purchase the
Policy(ies) for a period of 60 days from written notice of such intention. The
purchase price shall be an amount equal to the cash surrender value of the
Policy(ies). This provision shall not impair the right of the Employer to
terminate this Agreement.

2.5 Termination of Participation In Event of Corporate Change of Control. If
Executive elects to receive payments under Section 5.2 of Salary Continuation
Agreement (Termination of Employment in Event of Change of Control) all
Executive rights under this agreement shall automatically cease and his
participation in this agreement shall automatically terminate.

2.6 Termination of Participation. Notwithstanding the provisions of Sections 2.2
and 2.3, the Executive's rights under this Agreement shall automatically cease,
and his or her participation in this Agreement shall automatically terminate, if
the Executive's employment with the Employer is terminated prior to Normal
Retirement Age for reasons other than:
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      (1) Disability (as defined in the Executive Salary Continuation Agreement,
dated June 4, 2002) provided Executive remains disabled until Early Retirement
or returns to active employment with Plumas Bank or its successor;

      (2) Executive's Early Retirement (as defined in the Executive Salary
Continuation Agreement, dated June 4, 2002);

    (3) a leave of absence approved by the Employer; or

    (4) Executive's involuntary Termination of Employment without cause.

                                    ARTICLE 3

                                    PREMIUMS

3.1 Premium Payment. The Employer shall pay any premiums due on the Policy(ies).

3.2 Imputed Income. The Employer shall impute income to the Executive in an
amount equal to the current term rate for the Executive's age multiplied by the
aggregate death benefit payable to the Executive's beneficiary. The "current
term rate" is the minimum amount required to be imputed under Revenue Rulings
64-328 and 66-110, or any subsequent applicable authority.

3.3 Cash Payment. The Employer shall annually pay to the Executive an amount
necessary to pay the federal and state income taxes attributable to the imputed
income and to the additional cash payments under this section. In calculating
the cash payments due from the Employer, the Employer shall use the Executive's
actual marginal income tax bracket for the calendar year immediately preceding
the payment to the Executive. In the event the Executive retires prior to the
Normal Retirement Age or ceases to be employed by the Employer prior to such
age, the cash payments shall cease as of the date of such occurrence.

                                    ARTICLE 4

                                   ASSIGNMENT

The Executive may assign without consideration all interests in the Policy(ies)
and in this Agreement to any person, entity or trust. In the event the Executive
transfers all of the Executive's interest in the Policy(ies), then all of the
Executive's interest in the Policy(ies) and in the Agreement shall be vested in
the Executive's transferee, who shall be substituted as a party hereunder and
the Executive shall have no further interest in the Policy(ies) or in this
Agreement.

                                    ARTICLE 5

                                     INSURER

The Insurer shall be bound only by the terms of the Policy(ies). Any payments
the Insurer makes or actions it takes in accordance with the Policy(ies) shall
fully discharge it from all claims, suits and demands of all entities or
persons. The Insurer shall not be bound by or be deemed to have notice of the
provisions of this Agreement.
<PAGE>
                                    ARTICLE 6

                                CLAIMS PROCEDURE

6.1 Claims Procedure. The Employer shall notify any person or entity that makes
a claim under this Agreement (the "Claimant') in writing, within 90 days of
Claimant's written application for benefits, of his or her eligibility or
ineligibility for benefits under this Agreement. If the Employer determines that
the Claimant is not eligible for benefits or full benefits, the notice shall set
forth (1) the specific reasons for such denial, (2) a specific reference to the
provisions of this Agreement on which the denial is based, (3) a description of
any additional information or material necessary for the Claimant to perfect his
or her claim, and a description of why it is needed, and (4) an explanation of
this Agreement's claims review procedure and other appropriate information as to
the steps to be taken if the Claimant wishes to have the claim reviewed. If the
Employer determines that there are special circumstances requiring additional
time to make a decision, the Employer shall notify the Claimant of the special
circumstances and the date by which a decision is expected to be made, and may
extend the time for up to an additional 90 days.

6.2 Review Procedure. If the Claimant is determined by the Employer not to be
eligible for benefits, or if the Claimant believes that he or she is entitled to
greater or different benefits, the Claimant shall have the opportunity to have
such claim reviewed by the Employer by filing a petition for review with the
Employer within 60 days after receipt of the notice issued by the Employer. Said
petition shall state the specific reasons which the Claimant believes entitle
him or her to benefits or to greater or different benefits. Within 60 days after
receipt by the Employer of the petition, the Employer shall afford the Claimant
(and counsel, if any) an opportunity to present his or her position to the
Employer verbally or in writing, and the Claimant (or counsel) shall have the
right to review the pertinent documents. The Employer shall notify the Claimant
of its decision in writing within the sixty-day period, stating specifically the
basis of its decision, written in a manner to be understood by the Claimant and
the specific provisions of this Agreement on which the decision is based. If,
because of the need for a hearing, the 60-day period is not sufficient, the
decision may be deferred for up to another 60-day period at the election of the
Employer, but notice of this deferral shall be given to the Claimant.

                                    ARTICLE 7

                           AMENDMENTS AND TERMINATION

This Agreement may be amended or terminated only by a written agreement signed
by the Employer and the Executive.

                                    ARTICLE 8
                                  MISCELLANEOUS

8.1 Binding Effect. This Agreement shall bind the Executive and the Employer and
their beneficiaries, survivors, executors, administrators and transferees, and
any Policy(ies) beneficiary.

8.2 No Guarantee of Employment. This Agreement is not an employment policy or
contract. It does not give the Executive the right to remain an employee of the
Employer, nor does it interfere with the Employer's right to discharge the
Executive. It also does not require the Executive to remain an employee nor
interfere with the Executive's right to terminate employment at any time.

8.3 Applicable Law. The Agreement and all rights hereunder shall be governed by
and construed according to the laws of California, except to the extent
preempted by the laws of the United States of America.
<PAGE>
8.4 Reorganization. The Employer shall not merge or consolidate into or with
another company, or reorganize, or sell substantially all of its assets to
another company, firm or person unless such succeeding or continuing company,
firm or person agrees to assume and discharge the obligations of the Employer.

8.5 Notice. Any notice, consent or demand required or permitted to be given
under the provisions of this Split Dollar Agreement by one party to another
shall be in writing, shall be signed by the party giving or making the same, and
may be given either by delivering the same to such other party personally, or by
mailing the same, by United States certified mail, postage prepaid, to such
party, addressed to his or her last known address as shown on the records of the
Employer. The date of such mailing shall be deemed the date of such mailed
notice, consent or demand.

8.6 Entire Agreement. This Agreement constitutes the entire agreement between
the Employer and the Executive as to the subject matter hereof. No rights are
granted to the Executive by virtue of this Agreement other than those
specifically set forth herein.

8.7 Administration. The Employer shall have powers which are necessary to
administer this Agreement, including but not limited to:

      (a) Interpreting the provisions of the Agreement;

      (b) Establishing and revising the method of accounting for the Agreement;

      (c) Maintaining a record of benefit payments; and

      (d) Establishing rules and prescribing any forms necessary or desirable to
administer the Agreement.

8.8 Named Fiduciary. The Employer shall be the named fiduciary and plan
administrator under the Agreement. The named fiduciary may delegate to others
certain aspects of the management and operation responsibilities of the plan
including the employment of advisors and the delegation of ministerial duties to
qualified individuals.

IN WITNESS WHEREOF, the parties have executed this Agreement the day and year
first above written.

EXECUTIVE:                            EMPLOYER:
                                      PLUMAS BANK

/s/ Robert T. Herr                    By  /s/ Jerry V. Kehr
---------------------------               -------------------------------
  Robert T. Herr                      Title  Chairman of Board<PAGE>

                                                                     EXHIBIT 4.2

                                                SEABRIGHT SURPLUS NOTE INDENTURE

                                    INDENTURE

                                     BETWEEN

                           SEABRIGHT INSURANCE COMPANY
                                       AND
                            WILMINGTON TRUST COMPANY
                                   AS TRUSTEE

                            DATED AS OF MAY 26, 2004

                      FLOATING RATE SURPLUS NOTES DUE 2034

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                                              <C>
ARTICLE I DEFINITIONS..............................................................................................1

         SECTION 1.01  Definitions.................................................................................1

ARTICLE II SECURITIES..............................................................................................7

         SECTION 2.01  Principal Amount; Maturity..................................................................8

         SECTION 2.02  Form of Surplus Notes.......................................................................8

         SECTION 2.03  Form of Trustee's Certificate of Authentication.............................................8

         SECTION 2.04  Authentication and Dating...................................................................8

         SECTION 2.05  Date and Denomination of Surplus Notes......................................................9

         SECTION 2.06  Execution of Surplus Notes.................................................................10

         SECTION 2.07  Exchange and Registration of Transfer of Surplus Notes.....................................11

         SECTION 2.08  Mutilated, Destroyed, Lost or Stolen Surplus Notes.........................................14

         SECTION 2.09  Temporary Surplus Notes....................................................................15

         SECTION 2.10  Cancellation of Surplus Notes Paid, etc....................................................15

         SECTION 2.11  Interest...................................................................................16

         SECTION 2.12  Regulatory Interest Limitations and Adjustments............................................17

         SECTION 2.13  CUSIP Number...............................................................................17

ARTICLE III PARTICULAR COVENANTS OF THE COMPANY...................................................................17

         SECTION 3.01  Payment of Principal, Premium, if any, and Interest........................................17

         SECTION 3.02  Payment Restrictions.......................................................................18

         SECTION 3.03  Offices for Notices and Payments, etc......................................................19

         SECTION 3.04  Appointments to Fill Vacancies in Trustee's Office.........................................19

         SECTION 3.05  Provisions as to Paying Agent..............................................................19

         SECTION 3.06  Certificate to Trustee.....................................................................20
</TABLE>
<PAGE>

<TABLE>
<S>                                                                                                              <C>
         SECTION 3.07  Compliance with Consolidation Provisions...................................................20

         SECTION 3.08  Limitations on Dividends; Etc..............................................................21

         SECTION 3.09  Notice of Default..........................................................................21

ARTICLE IV SECURITYHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE......................................21

         SECTION 4.01  Securityholders' Lists.....................................................................21

         SECTION 4.02  Preservation and Disclosure of Lists.......................................................22

         SECTION 4.03  Reports by Company.........................................................................23

ARTICLE V REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON EVENT OF DEFAULT.........................................24

         SECTION 5.01  Events of Default..........................................................................24

         SECTION 5.02  Payment of Surplus Notes on Default; Suit Therefor.........................................26

         SECTION 5.03  Application of Moneys Collected by Trustee.................................................27

         SECTION 5.04  Proceedings by Securityholders.............................................................27

         SECTION 5.05  Proceedings by Trustee.....................................................................28

         SECTION 5.06  Remedies Cumulative and Continuing.........................................................28

         SECTION 5.07  Direction of Proceedings and Waiver of Defaults by Majority of Securityholders.............29

         SECTION 5.08  Notice of Defaults.........................................................................29

         SECTION 5.09  Undertaking to Pay Costs...................................................................30

ARTICLE VI CONCERNING THE TRUSTEE.................................................................................30

         SECTION 6.01  Duties and Responsibilities of Trustee.....................................................30

         SECTION 6.02  Reliance on Documents, Opinions, etc.......................................................31

         SECTION 6.03  No Responsibility for Recitals, etc........................................................33

         SECTION 6.04  Trustee, Authenticating Agent, Paying Agents, Transfer Agents or Registrar May
                              Own Surplus Notes...................................................................33

         SECTION 6.05  Moneys to be Held in Trust.................................................................33
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                                              <C>
         SECTION 6.06  Compensation and Expenses of Trustee.......................................................33

         SECTION 6.07  Officers' Certificate as Evidence..........................................................34

         SECTION 6.08  Conflicting Interest of Trustee............................................................34

         SECTION 6.09  Eligibility of Trustee.....................................................................34

         SECTION 6.10  Resignation or Removal of Trustee..........................................................35

         SECTION 6.11  Acceptance by Successor Trustee............................................................36

         SECTION 6.12  Succession by Merger, etc..................................................................37

         SECTION 6.13  Authenticating Agents......................................................................37

ARTICLE VII CONCERNING THE SECURITYHOLDERS........................................................................38

         SECTION 7.01  Action by Securityholders..................................................................38

         SECTION 7.02  Proof of Execution by Securityholders......................................................39

         SECTION 7.03  Who Are Deemed Absolute Owners.............................................................39

         SECTION 7.04  Surplus Notes Owned by Company Deemed Not Outstanding......................................39

         SECTION 7.05  Revocation of Consents; Future Holders Bound...............................................40

ARTICLE VIII SECURITYHOLDERS' MEETINGS............................................................................40

         SECTION 8.01  Purposes of Meetings.......................................................................40

         SECTION 8.02  Call of Meetings by Trustee................................................................40

         SECTION 8.03  Call of Meetings by Company or Securityholders.............................................41

         SECTION 8.04  Qualifications for Voting..................................................................41

         SECTION 8.05  Regulations................................................................................41

         SECTION 8.06  Voting.....................................................................................42

ARTICLE IX SUPPLEMENTAL INDENTURES................................................................................42

         SECTION 9.01  Supplemental Indentures without Consent of Securityholders.................................42

         SECTION 9.02  Supplemental Indentures with Consent of Securityholders....................................43

         SECTION 9.03  Notation on Surplus Notes..................................................................44
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                                              <C>
         SECTION 9.04  Evidence of Compliance of Supplemental Indenture to be Furnished to Trustee................45

ARTICLE X CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE.......................................................45

         SECTION 10.01  Company May Consolidate, etc., on Certain Terms...........................................45

         SECTION 10.02  Successor Entity to be Substituted for Company............................................45

         SECTION 10.03  Opinion of Counsel to be Given to Trustee.................................................46

ARTICLE XI SATISFACTION AND DISCHARGE OF INDENTURE................................................................46

         SECTION 11.01  Discharge of Indenture....................................................................46

         SECTION 11.02  Deposited Moneys to be Held in Trust by Trustee...........................................47

         SECTION 11.03  Paying Agent to Repay Moneys Held.........................................................47

         SECTION 11.04  Return of Unclaimed Moneys................................................................47

ARTICLE XII IMMUNITY OF INCORPORATORS, STOCKHOLDERS, MEMBERS, PARTNERS, OFFICERS AND DIRECTORS....................47

         SECTION 12.01  Indenture and Surplus Notes Solely Entity Obligations.....................................47

ARTICLE XIII MISCELLANEOUS PROVISIONS.............................................................................48

         SECTION 13.01  Successors................................................................................48

         SECTION 13.02  Official Acts by Successor Entity.........................................................48

         SECTION 13.03  Surrender of Company Powers...............................................................48

         SECTION 13.04  Addresses for Notices, etc................................................................48

         SECTION 13.05  Governing Law.............................................................................48

         SECTION 13.06  Submission to Jurisdiction................................................................49

         SECTION 13.07  Evidence of Compliance with Conditions Precedent..........................................49

         SECTION 13.08  Table of Contents, Headings, etc..........................................................49

         SECTION 13.09  Execution in Counterparts.................................................................50

         SECTION 13.10  Separability..............................................................................50

ARTICLE XIV REDEMPTION OF SECURITIES..............................................................................50
</TABLE>
<PAGE>

<TABLE>
<S>                                                                                                              <C>
         SECTION 14.01  Optional Redemption.......................................................................50

         SECTION 14.02  Notice of Redemption; Selection of Surplus Notes..........................................51

         SECTION 14.03  Payment of Surplus Notes Called for Redemption............................................51

ARTICLE XV SUBORDINATION OF SECURITIES............................................................................52

         SECTION 15.01  Agreement to Subordinate..................................................................52

         SECTION 15.02  Default on Senior Indebtedness............................................................52

         SECTION 15.03  Liquidation; Dissolution; Rehabilitation, Conservation....................................53

         SECTION 15.04  Subrogation of Securityholders............................................................54

         SECTION 15.05  Trustee to Effectuate Subordination.......................................................55

         SECTION 15.06  Notice by the Company.....................................................................55

         SECTION 15.07  Rights of the Trustee; Holders of Senior Indebtedness.....................................56

         SECTION 15.08  Subordination May Not Be Impaired.........................................................56

Exhibit A             Form of Surplus Note
Exhibit B             Form of Quarterly Financial Report
</TABLE>

<PAGE>

         THIS INDENTURE, dated as of May 26, 2004, between SeaBright Insurance
Company, a stock insurance company domiciled in Illinois (hereinafter sometimes
called the "Company"), and Wilmington Trust Company, a Delaware banking
corporation, as trustee (hereinafter sometimes called the "Trustee").

                              W I T N E S S E T H :

         WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the issuance of its Floating Rate Surplus Notes due 2034 (the
"Surplus Notes") in the aggregate principal amount of $12,000,000 and, to
provide the terms and conditions upon which the Surplus Notes are to be
authenticated, issued and delivered, the Company has duly authorized the
execution, delivery and performance of this Indenture; and

         WHEREAS, all acts and things necessary to make this Indenture a valid
and legally binding agreement according to its terms, have been done and
performed;

         NOW, THEREFORE, This Indenture Witnesseth:

         In consideration of the premises, and the purchase of the Surplus Notes
by the Securityholders (as defined below) thereof, the Company covenants and
agrees with the Trustee for the benefit of the respective Securityholders from
time to time, as follows:

                                   ARTICLE I
                                   DEFINITIONS

         SECTION 1.01 Definitions.

         The terms defined in this Section 1.01 (except as herein otherwise
expressly provided or unless the context otherwise requires) for all purposes of
this Indenture and any indenture supplemental hereto shall have the respective
meanings specified in this Section 1.01. All accounting terms used but not
expressly defined herein shall have the meanings assigned to such terms in
accordance with accounting principles generally accepted in the United States,
and the term "generally accepted accounting principles" means such accounting
principles as are generally accepted in the United States at the time of any
computation. Notwithstanding the foregoing, to the extent applicable to the
Company, all accounting terms used herein and not expressly defined shall have
the meanings assigned to such terms in accordance with statutory accounting
principles, and the term "statutory accounting principles" means such accounting
principles as are prescribed or permitted by Applicable Insurance Laws or the
Applicable Regulatory Authority at the time of any computation. The words
"herein", "hereof" and "hereunder" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or other
subdivision. Any reference to the singular includes the plural and vice versa
(unless the context otherwise requires).

         "Affiliate" means, with respect to a specified Person, (a) any Person
directly or indirectly owning, controlling or holding with power to vote, 10% or
more of the outstanding Voting Securities or other ownership interests of the
specified Person, (b) any Person 10% or more of whose outstanding Voting
Securities or other ownership interests are directly or indirectly owned,
controlled or held with power to vote by the specified Person, (c) any Person
directly or

                                       1
<PAGE>

indirectly controlling, controlled by, or under common control with
the specified Person, (d) a partnership in which the specified Person is a
general partner, (e) any officer or director of the specified Person, and (f) if
the specified Person is an individual, any entity of which the specified Person
is an officer, director or general partner.

         "Applicable Insurance Laws" means (a) the insurance code and statutes
of the Company's state of domicile, including but not limited to 215 ILCS 5/34.1
and 50 Ill. Adm. Code 201, (b) all published regulations, bulletins and rulings
thereunder, and (c) that certain approval letter of the Applicable Regulatory
Authority dated May 25, 2004 authorizing the initial issuance by the Company of
a Surplus Note hereunder.

         "Applicable Regulatory Authority" means Illinois Department of
Insurance or such other insurance regulatory authority of the state of domicile
of the Company.

         "Authenticating Agent" shall mean any agent or agents of the Trustee
which at the time shall be appointed and acting pursuant to Section 6.13.

         "Available Amount" means the funds and other assets of the Company
legally available to make payments with respect to the Surplus Notes under the
Applicable Insurance Laws, in order for the outstanding principal under such
Surplus Notes to constitute part of the Company's policyholders' surplus in
accordance with statutory accounting principles, applied on a consistent basis
throughout the periods involved.

         "Board of Directors" shall mean the Board of Directors or any other
duly authorized committee thereof of the Company.

         "Board Resolution" shall mean a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification.

         "Business Day" shall mean any day other than a Saturday, Sunday or
other day on which commercial banking institutions in The City of New York or
Wilmington, Delaware are authorized or obligated by law, executive order or
regulation to close.

         "Calculation Agent" means the Trustee.

         "Certificate of Authentication" shall mean the certificate issued by
the Trustee or the Authenticating Agent authenticating a Surplus Note issued
under the Indenture.

         "Code" has the meaning set forth in Section 2.07.

         "Commission" shall mean the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or, if at any time
after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.

                                       2
<PAGE>

         "Company" shall mean SeaBright Insurance Company, a stock insurance
company domiciled in Illinois, and, subject to the provisions of Article X
hereof, shall include its successors and assigns.

         "Conversion" has the meaning set forth in Section 10.01.

         "Default" means any event, act or condition that, with notice or lapse
of time, or both, would constitute an Event of Default.

         "Defaulted Interest" means any overdue installment of interest other
than an installment of interest that is not made when due as a result of a
Payment Restriction.

         "Determination Date" means two London Banking Days next preceding the
applicable Interest Payment Date.

         "Event of Default" shall mean any event, act or condition specified in
Section 5.01, continued for the period of time, if any, and after the giving of
the notice, if any, therein designated.

         "Excess Interest" means the cumulative amount of interest on a Surplus
Note, if any, that is not paid as a result of any Regulatory Interest
Limitation, minus the amount of interest paid on such Surplus Note as a result
of adjustments to the Interest Rate to account for Excess Interest in accordance
with Section 2.12.

         "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

         "ICONS" shall mean ICONS, Ltd., a limited liability company formed
pursuant to the laws of the Cayman Islands.

         "Indenture" shall mean this instrument as originally executed or, if
amended or supplemented as herein provided, as so amended or supplemented, or
both.

         "Insolvency Law" means the provisions of the insurance insolvency,
rehabilitation and liquidation statutes of the Company's state of domicile and
all published regulations, bulletins and rulings thereunder.

         "Interest Payment Date" has the meaning set forth in Section 2.11(a).

         "Interest Payment Period" means the period from and including an
Interest Payment Date, or in the case of the first Interest Payment Period, the
original date of issuance of the Surplus Notes, to, but excluding the next
succeeding Interest Payment Date or, in the case of the last Interest Payment
Period, the Stated Maturity or date of redemption.

         "Interest Rate" shall mean, with respect to any Interest Payment
Period, a per annum rate of interest equal to LIBOR, as determined on the
Determination Date for such Interest Payment Period, plus 4.00% (provided, that,
(i) pursuant to Applicable Insurance Laws, in no event shall the Interest Rate
exceed the Interest Rate for the first Interest Payment Period hereunder by more
than 10% per annum, (ii) pursuant to the Applicable Insurance Laws, the Interest
Rate for any

                                       3
<PAGE>

Interest Payment Period may not exceed the corporate base rate determined on the
first Business Day of each month during the term of the Surplus Note plus 2% per
annum and (iii) the Interest Rate for any Interest Payment Period may not exceed
the highest rate permitted by New York law, as the same may be modified by
United States law of general applicability). The Interest Rate for any Interest
Payment Period shall be subject to the limitations and adjustments set forth in
Section 2.12 hereof.

         "LIBOR" means, with respect to an Interest Payment Period commencing on
an Interest Payment Date (in the following order of priority):

         (a) the rate (expressed as a percentage per annum) for Eurodollar
deposits having a three-month maturity that appears on Telerate page 3750 as of
11:00 a.m. (London time) on the Determination Date;

         (b) if such rate does not appear on Telerate page 3750 as of 11:00 a.m.
(London time) on the Determination Date, the Calculation Agent will request the
principal London offices of four leading banks in the London interbank market as
selected by the Calculation Agent to provide such banks' offered quotations
(expressed as percentages per annum) to prime banks in the London interbank
market for Eurodollar deposits having a three-month maturity as of 11:00 a.m.
(London time) on such Determination Date, and if at least two quotations are
provided, LIBOR will be the arithmetic mean of such quotations;

         (c) if fewer than two such quotations are provided as requested in
clause (b) above, the Calculation Agent will request four major New York City
banks selected by the Calculation Agent to provide such banks' offered
quotations (expressed as percentages per annum) to leading European banks for
loans in Eurodollars as of 11:00 a.m. (New York City time) on such Determination
Date, and if at least two quotations are provided, LIBOR will be the arithmetic
mean of such quotations, and

         (d) if fewer than two such quotations are provided as requested in
clause (c) above, LIBOR will be LIBOR as in effect during the preceding Interest
Payment Period.

         "London Banking Day" means any day, other than a Saturday or Sunday, on
which banks are open for business (including dealings in deposits in U.S.
dollars) in London.

         "Officers' Certificate" shall mean a certificate signed by the Chairman
of the Board (if an executive officer), the President or any Vice President, and
by the Treasurer, an Assistant Treasurer, the Controller, an Assistant
Controller, the Secretary or an Assistant Secretary of the Company and delivered
to the Trustee. Each such certificate shall include the statements provided for
in Section 13.07 if and to the extent provided by the provisions of such
Section.

         "Opinion of Counsel" shall mean an opinion signed by legal counsel
experienced in the matters as to which such opinion is being delivered, who may
be an employee of or counsel to the Company, or may be other counsel reasonably
satisfactory to the Trustee. Each such opinion shall include the statements
provided for in Section 13.07 if and to the extent required by the provisions of
such Section.

                                       4
<PAGE>

         The term "outstanding" (except as otherwise provided in Section 7.01),
when used with reference to Surplus Notes, shall, subject to the provisions of
Section 7.04, mean, as of any particular time, all Surplus Notes authenticated
and delivered by the Trustee or the Authenticating Agent under this Indenture,
except

         (a) Surplus Notes theretofore cancelled by the Trustee or the
Authenticating Agent or delivered to the Trustee for cancellation;

         (b) Surplus Notes, or portions thereof, for the payment or redemption
of which moneys in the necessary amount shall have been deposited in trust with
the Trustee or with any paying agent (other than the Company) or shall have been
set aside and segregated in trust by the Company (if the Company shall act as
its own paying agent); provided that, if such Surplus Notes, or portions
thereof, are to be redeemed prior to maturity thereof, notice of such redemption
shall have been given in accordance with Article XIV or provision satisfactory
to the Trustee shall have been made for giving such notice; and

         (c) Surplus Notes paid pursuant to Section 2.08 or Surplus Notes in
lieu of or in substitution for which other Surplus Notes shall have been
authenticated and delivered pursuant to the terms of Section 2.08 unless proof
satisfactory to the Company and the Trustee is presented that any such Surplus
Notes are held by bona fide holders in due course.

         "Payment Restriction" has the meaning set forth in Section 3.02.

         "Person" shall mean any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.

         "Predecessor Surplus Note" of any particular Surplus Note means every
previous Surplus Note evidencing all or a portion of the same debt and as that
evidenced by such particular Surplus Note; and, for the purposes of this
definition, any Surplus Note authenticated and delivered under Section 2.08 in
lieu of a lost, destroyed or stolen Surplus Note shall be deemed to evidence the
same debt as the lost, destroyed or stolen Surplus Note.

         "Principal Office of the Trustee", or other similar term, shall mean
the principal office of the Trustee at which, at any particular time, its
corporate trust business is administered.

         "Redemption Price" has the meaning set forth in Section 14.01.

         "Regulatory Interest Limitation" means any cap or other limitation on
the rate or amount of interest that may be paid on the Surplus Notes pursuant to
Applicable Insurance Laws, including but not limited to 215 ILCS 5/34.1, or any
order or approval letter relating to the initial issuance by the Company of a
Surplus Note hereunder.

         "Resale Restriction Termination Date" means, with respect to any
Surplus Note, the date which is the later of (i) two years (or such shorter
period of time as permitted by Rule 144(k) under the Securities Act) after the
later of (y) the date of original issuance of such Surplus Note and (z) the last
date on which the Company or any Affiliate (as defined in Rule 405 under the

                                       5
<PAGE>

Securities Act) of the Company was the holder of such Surplus Note (or any
predecessor thereto) and (ii) such later date, if any, as may be required by any
subsequent change in applicable law.

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

         "Securities Act" means the Securities Act of 1933, as amended.

         "Securityholder", "Holder of Surplus Notes", or other similar terms,
shall mean any person in whose name at the time a Surplus Note is registered in
the Surplus Note Register.

         "Senior Claim Holders" has the meaning set forth in Section 15.04.

         "Senior Claims" means all existing or future claims that, pursuant to
the Insolvency Laws, are senior to and would be paid prior to the Surplus Notes
in the event of rehabilitation, liquidation, conservation, dissolution,
reorganization or supervision of the Company.

         "Senior Indebtedness" shall mean, with respect to the Company, (i) the
principal, premium, if any, and interest in respect of (x) indebtedness of the
Company for money borrowed and (y) indebtedness evidenced by securities,
debentures, notes, bonds or other similar instruments issued by the Company,
(ii) all capital lease obligations of the Company, (iii) all obligations of the
Company issued or assumed as the deferred purchase price of property, all
conditional sale obligations of the Company and all obligations of the Company
under any title retention agreement (but excluding trade accounts payable or
accrued liabilities arising in the ordinary course of business), (iv) all
obligations of the Company for the reimbursement of any letter of credit, any
banker's acceptance, any security purchase facility, any repurchase agreement or
similar arrangement, any interest rate swap, any other hedging arrangement, any
obligation under options or any similar credit or other transaction, (v) all
obligations of the type referred to in clauses (i) through (iv) above of other
Persons for the payment of which the Company is responsible or liable as
obligor, guarantor or otherwise, and (vi) all obligations of the type referred
to in clauses (i) through (v) above of other Persons secured by any lien on any
property or asset of the Company (whether or not such obligation is assumed by
the Company), whether incurred on or prior to the date of this Indenture or
thereafter incurred, unless it is provided in the instrument creating or
evidencing the same or pursuant to which the same is outstanding that such
obligations are not superior or are pari passu in right of payment to the
Surplus Notes.

         "Stated Maturity" means the date on which the Surplus Notes mature and
on which the principal shall be due and payable, together with all accrued and
unpaid interest, if any, thereon, which date shall be May 24, 2034, unless
accelerated to an earlier date as provided in Article XIV.

                                       6

<PAGE>

         "Subsidiary" shall mean with respect to any Person, (i) any corporation
a majority of the outstanding Voting Securities of which are 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, (ii) any general partnership, joint
venture or similar entity a majority of whose outstanding partnership or similar
ownership interests 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
(iii) any limited partnership of which such Person or any of its Subsidiaries is
a general partner.

         "Surplus Note" or "Surplus Notes" shall have the meaning stated in the
first recital of this Indenture and, more particularly, means the surplus notes
authenticated and delivered under this Indenture.

         "Surplus Note Register" shall have the meaning given to such term in
Section 2.07.

         "Tax Event" means that the Company shall have received an opinion of a
nationally recognized independent tax counsel experienced in such matters to the
effect that, as a result of (a) any amendment to, or change (including any
announced prospective change) in, the laws or any regulations thereunder of the
United States or any political subdivision or taxing authority thereof or
therein, or (b) any official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective or which pronouncement or decision is announced on or after the date
of the original issuance of the Surplus Notes, there is more than an
insubstantial risk that, if the Company is organized and existing under the laws
of the United States or any state thereof or the District of Columbia, interest
payable by the Company on the Surplus Notes is not, or within 90 days of the
date of such opinion will not be, deductible by the Company, in whole or in
part, for United States federal income tax purposes.

         "Trust Indenture Act" shall mean the Trust Indenture Act of 1939, as
amended.

         "Trustee" shall mean the Person identified as "Trustee" in the first
paragraph hereof, and, subject to the provisions of Article VI hereof, shall
also include its successors and assigns as Trustee hereunder.

         "Unpaid Interest" shall have the meaning set forth in Section 2.05.

         "Voting Securities" mean shares, interests, participations or other
equivalents in the equity (however designated) in such Person having ordinary
voting power for the election of a majority of the directors (or their
equivalent) of such Person, other than shares, interests, participations or
other equivalents having such power only by reason of the occurrence of a
contingency.

                                   ARTICLE II
                                   SECURITIES

                                       7
<PAGE>

         SECTION 2.01 Principal Amount; Maturity.

         The Company may issue up to $12,000,000 aggregate principal amount of
the Surplus Notes. The Surplus Notes shall mature on May 24, 2034; provided that
the Company may redeem the Surplus Notes prior to their Stated Maturity in
accordance with Article XIV.

         SECTION 2.02 Form of Surplus Notes.

         The Surplus Notes shall be substantially in the form of Exhibit A
hereto. Definitive Surplus Notes shall be typed, printed, lithographed or
engraved on steel engraved borders or may be produced in any other manner, all
as determined by the officers of the Company executing such Surplus Notes, as
conclusively evidenced by their execution of such Surplus Notes. The Surplus
Notes shall be issued in registered form only. Principal of, premium, if any,
and interest on the Surplus Notes issued in registered form will be payable, the
transfer of such Surplus Notes will be registrable and such Surplus Notes will
be exchangeable for Surplus Notes bearing identical terms and provisions at the
office or agency of the Trustee in Wilmington, Delaware; provided, however, that
payment of interest on an Interest Payment Date may be made at the option of the
Company by check mailed to the Holder entitled thereto at such address as shall
appear in the Surplus Note Register or by wire transfer to an account
appropriately designated by the Holder entitled thereto, while payments due at
Stated Maturity or earlier redemption will be made by the Company in same-day
funds against presentation and surrender of the related Surplus Notes.
Notwithstanding the foregoing, so long as the Holder of this Surplus Note is
ICONS or a trustee of ICONS, the payment of the principal of, premium, if any,
and interest on this Surplus Note will be made by the Company in same-day funds
at such place and to such account as may be designated by ICONS or a trustee of
ICONS.

         SECTION 2.03 Form of Trustee's Certificate of Authentication.

         The Trustee's Certificate of Authentication on all Surplus Notes shall
be in substantially the following form:

         This is one of the Surplus Notes referred to in the within-mentioned
Indenture.

         Wilmington Trust Company, as Trustee

         By:
            ---------------------------------
         Authorized Signatory

         SECTION 2.04 Authentication and Dating.

         At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Surplus Notes not in excess of
$12,000,000 to the Trustee for authentication, and the Trustee shall thereupon
authenticate and deliver said Surplus Notes to or upon the written order of the
Company, signed by its Chairman of the Board of Directors (if an executive
officer), President or one of its Vice Presidents and by its Treasurer, any
Assistant Treasurer, Secretary or any Assistant Secretary, without any further
action by the Company hereunder. In authenticating such Surplus Notes, and
accepting the additional responsibilities under this Indenture in relation to
such Surplus Notes, the Trustee shall be entitled to receive,

                                       8
<PAGE>

and (subject to Section 6.01) shall be fully protected in relying upon a copy of
any Board Resolution or Resolutions relating thereto and, if applicable, an
appropriate record of any action taken pursuant to such resolution, in each case
certified by the Secretary or an Assistant Secretary of the Company.

         SECTION 2.05 Date and Denomination of Surplus Notes.

         The Surplus Notes shall be issuable in fully registered form without
coupons and in minimum denominations of $100,000 and any multiple of $1,000 in
excess thereof and any multiple thereof. The Surplus Notes shall be numbered,
lettered, or otherwise distinguished in such manner or in accordance with such
plans as the officers of the Company executing the same may determine with the
approval of the Trustee, as conclusively evidenced by the execution and
authentication thereof.

         Every Surplus Note shall be dated the date of its authentication and
shall bear interest, if any, from such date. The interest installment on any
Surplus Note that is payable, and is punctually paid or duly provided for, on
any Interest Payment Date shall be paid to the Person in whose name said Surplus
Note (or one or more Predecessor Surplus Notes) is registered at the close of
business on the regular record date for such interest installment. In the event
that any Surplus Note or portion thereof is called for redemption and the
redemption date (i) falls after an Interest Payment Date, then interest on such
Surplus Note payable on such Interest Payment Date shall be paid to the Holder
on the related regular record date or (ii) is subsequent to a regular record
date with respect to any Interest Payment Date and prior to such Interest
Payment Date, then interest on such Surplus Note payable on such redemption date
shall be paid upon presentation and surrender of such Surplus Note as provided
in Section 3.01.

         Any Defaulted Interest and any installment of interest that is not paid
when due as a result of a Payment Restriction ("Unpaid Interest") shall
forthwith cease to be payable to the Holder on the relevant regular record date
by virtue of having been such Holder, and such Unpaid Interest shall be paid by
the Company, at its election, as provided in clause (a) or clause (b) below:

         (a) The Company may make payment of any Unpaid Interest on Surplus
Notes to the Persons in whose names such Surplus Notes (or their respective
Predecessor Surplus Notes) are registered at the close of business on a special
record date for the payment of such Unpaid Interest, which shall be fixed in the
following manner: the Company shall notify the Trustee in writing of the amount
of Unpaid Interest proposed to be paid on each such Surplus Note and the date of
the proposed payment, and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to be paid in
respect of such Unpaid Interest or shall make arrangements satisfactory to the
Trustee for such deposit prior to the date of the proposed payment, such money
when deposited to be held in trust for the benefit of the Persons entitled to
such Unpaid Interest as in this clause provided. Thereupon the Trustee shall fix
a special record date for the payment of such Unpaid Interest which shall not be
more than 15 nor less than 10 days prior to the date of the proposed payment and
not less than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company of such special
record date and, in the name and at the expense of the Company, shall cause
notice of the proposed payment of such Unpaid Interest and the special

                                       9
<PAGE>

record date therefor to be mailed, first class postage prepaid, to each
Securityholder at his or her address as it appears in the Surplus Note Register,
not less than 10 days prior to such special record date. Notice of the proposed
payment of such Unpaid Interest and the special record date therefor having been
mailed as aforesaid, such Unpaid Interest shall be paid to the Persons in whose
names such Surplus Notes (or their respective Predecessor Surplus Notes) are
registered on such special record date and shall be no longer payable pursuant
to the following clause (b).

         (b) The Company may make payment of any Unpaid Interest on any Surplus
Notes in any other lawful manner not inconsistent with the requirements of any
securities exchange on which such Surplus Notes may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause, such
manner of payment shall be deemed practicable by the Trustee.

         The term "regular record date" shall mean the fifteenth calendar day
(whether or not a Business Day) preceding an Interest Payment Date.

         Subject to the foregoing provisions of this Section, each Surplus Note
delivered under this Indenture upon transfer of or in exchange for or in lieu of
any other Surplus Note shall carry the rights to interest accrued and unpaid,
and to accrue, that were carried by such other Surplus Note.

         Notwithstanding anything to the contrary set forth in this Indenture,
any payment of interest on or principal and premium, if any, of the Surplus
Notes may be made only subject to the Payment Restrictions. The Company
covenants and agrees that it will (x) use its best efforts to obtain the
approval of the Applicable Regulatory Authority to make payments of principal of
or premium, if any, or interest on the Surplus Notes and (y) subject to the
Payment Restrictions, duly and punctually pay or cause to be paid the principal
of and premium, if any, and interest on such Surplus Notes at the place, at the
respective times and in the manner provided in this Indenture and such Surplus
Notes. To the extent that a payment of all or a portion of the principal of or
premium, if any, or interest on a Surplus Note is prohibited by the Payment
Restrictions, such prohibition shall not be considered to be a forgiveness of
such payment, and interest shall continue to accrue on any such unpaid principal
or premium, if any, at the rate provided in the Surplus Note, and promptly (and
in no event later than thirty (30) days) after the removal of any such
prohibition the Company shall make payment of all amounts (including unpaid
interest) then past due and owing under the Surplus Note. FOR THE AVOIDANCE OF
DOUBT, NO INTEREST SHALL ACCRUE OR BE PAYABLE ON ANY PAYMENT OF INTEREST THAT IS
NOT MADE WHEN DUE AS A RESULT OF A PAYMENT RESTRICTION.

         SECTION 2.06 Execution of Surplus Notes.

         The Surplus Notes shall be signed in the name and on behalf of the
Company by the manual or facsimile signature of its Chairman of the Board of
Directors (if an executive officer), President or one of its Vice Presidents and
by the manual or facsimile signature of its Treasurer, one of its Assistant
Treasurers, Secretary or one of its Assistant Secretaries, by facsimile or
otherwise, and which need not be attested. Only such Surplus Notes as shall bear
thereon a Certificate of Authentication substantially in the form hereinbefore
recited, executed by the

                                       10
<PAGE>

Trustee or the Authenticating Agent, shall be entitled to the benefits of
this Indenture or be valid or obligatory for any purpose. Such certificate by
the Trustee or the Authenticating Agent upon any Surplus Note executed by the
Company shall be conclusive evidence that the Surplus Note so authenticated has
been duly authenticated and delivered hereunder and that the Holder is entitled
to the benefits of this Indenture.

         In case any officer of the Company who shall have signed any of the
Surplus Notes shall cease to be such officer before the Surplus Notes so signed
shall have been authenticated and delivered by the Trustee or the Authenticating
Agent, or disposed of by the Company, such Surplus Notes nevertheless may be
authenticated and delivered or disposed of as though the person who signed such
Surplus Notes had not ceased to be such officer of the Company; and any Surplus
Note may be signed on behalf of the Company by such persons as, at the actual
date of the execution of such Surplus Note, shall be the proper officers of the
Company, although at the date of the execution of this Indenture any such person
was not such an officer.

         SECTION 2.07 Exchange and Registration of Transfer of Surplus Notes.

         Surplus Notes may be exchanged for a like aggregate principal amount of
Surplus Notes of other authorized denominations. Surplus Notes to be exchanged
may be surrendered at the Principal Office of the Trustee or at any office or
agency to be maintained by the Company for such purpose as provided in Section
3.03, and the Company or the Trustee shall execute and register and the Trustee
or the Authenticating Agent shall authenticate and deliver in exchange therefor
the Surplus Note or Surplus Notes which the Securityholder making the exchange
shall be entitled to receive. Upon due presentment for registration of transfer
of any Surplus Note at the Principal Office of the Trustee or at any office or
agency of the Company maintained for such purpose as provided in Section 3.03,
the Company or the Trustee shall execute and register and the Trustee or the
Authenticating Agent shall authenticate and deliver in the name of the
transferee or transferees a new Surplus Note or Surplus Notes for a like
aggregate principal amount. Registration or registration of transfer of any
Surplus Note by the Trustee or by any agent of the Company appointed pursuant to
Section 3.03, and delivery of such Surplus Note, shall be deemed to complete the
registration or registration of transfer of such Surplus Note.

         The Company or the Trustee shall keep, at the designated corporate
trust office of the Trustee, a register for the Surplus Notes issued hereunder
(the "Surplus Note Register") in which, subject to such reasonable regulations
as it may prescribe, the Company or the Trustee shall register ownership and
transfer of ownership of all Surplus Notes and shall register the transfer of
all Surplus Notes as in this Article II provided. The Surplus Note Register
shall be in written form or in any other form capable of being converted into
written form within a reasonable time.

         All Surplus Notes presented for registration of transfer or for
exchange shall (if so required by the Company, the Trustee or the Authenticating
Agent) be duly endorsed, or be accompanied, by a written instrument or
instruments of transfer in form satisfactory to the Company and either the
Trustee or the Authenticating Agent duly executed by, the Holder of such Surplus
Note or his attorney duly authorized in writing.

                                       11
<PAGE>

         No service charge shall be made for any exchange or registration of
transfer of Surplus Notes, but the Company or the Trustee may require payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection therewith.

         Neither the Company nor the Trustee shall be required to exchange or
register a transfer of (a) any Surplus Note for a period of 15 days immediately
preceding the date of mailing of a notice of redemption of Surplus Notes, or (b)
any Surplus Notes selected, called or being called for redemption in whole or in
part, except in the case of any Surplus Notes to be redeemed in part, the
portion thereof not to be so redeemed.

         Notwithstanding the foregoing, Surplus Notes may not be transferred
prior to the Resale Restriction Termination Date except in compliance with the
legend set forth below, unless otherwise determined by the Company in accordance
with applicable law, which legend shall be placed on each Surplus Note:

         THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS OR ANY OTHER
APPLICABLE SECURITIES LAWS. 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. THE HOLDER OF THIS SECURITY OR ANY INTEREST
OR PARTICIPATION HEREIN, BY ITS ACCEPTANCE HEREOF OR THEREOF, AS THE CASE MAY
BE, AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY OR ANY INTEREST OR
PARTICIPATION HEREIN PRIOR TO THE DATE WHICH IS THE LATER OF (I) TWO YEARS (OR
SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(K) UNDER THE SECURITIES
ACT) AFTER THE LATER OF (Y) THE DATE OF ORIGINAL ISSUANCE HEREOF AND (Z) THE
LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE (AS DEFINED IN RULE 405 UNDER
THE SECURITIES ACT) OF THE COMPANY WAS THE HOLDER OF THIS SECURITY OR SUCH
INTEREST OR PARTICIPATION (OR ANY PREDECESSOR THERETO) AND (II) SUCH LATER DATE,
IF ANY, AS MAY BE REQUIRED BY ANY SUBSEQUENT CHANGE IN APPLICABLE LAW, ONLY (A)
TO THE COMPANY, (B) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE
144A"), TO A PERSON THE HOLDER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER", AS DEFINED IN RULE 144A, THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) PURSUANT TO AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT TO AN "ACCREDITED
INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A) (1), (2), (3), (7) OR (8) OF
RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS SECURITY OR SUCH
INTEREST OR PARTICIPATION FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR

                                       12
<PAGE>

SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT,
(D) PURSUANT TO OFFERS AND SALES TO NON-US PERSONS THAT OCCUR OUTSIDE THE UNITED
STATES PURSUANT TO REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, SUBJECT TO THE COMPANY'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSE (C) OR (E) ABOVE TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT IN ACCORDANCE
WITH THE INDENTURE, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY. THE HOLDER
OF THIS SECURITY OR ANY INTEREST OR PARTICIPATION HEREIN, BY ITS ACCEPTANCE
HEREOF OR THEREOF, AS THE CASE MAY BE, AGREES THAT IT WILL COMPLY WITH THE
FOREGOING RESTRICTIONS.

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

         IN CONNECTION WITH ANY TRANSFER, THE HOLDER OF THIS SECURITY WILL
DELIVER TO THE TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE
REQUIRED BY THE INDENTURE TO

                                       13
<PAGE>

CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.

         THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN MINIMUM
DENOMINATIONS OF $100,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF. ANY
ATTEMPTED TRANSFER OF THIS SECURITY IN DENOMINATIONS OF LESS THAN $100,000 SHALL
BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH PURPORTED
TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF THIS SECURITY OR ANY INTEREST
OR PARTICIPATION HEREIN FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE
RECEIPT OF DISTRIBUTIONS ON THIS SECURITY OR SUCH INTEREST OR PARTICIPATION, AND
SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN THIS
SECURITY OR ANY INTEREST OR PARTICIPATION HEREIN.

         ALL PAYMENTS OF INTEREST ON AND REPAYMENT OF PRINCIPAL AND PREMIUM, IF
ANY, OF THIS SURPLUS NOTE, TO THE EXTENT REQUIRED UNDER APPLICABLE LAW, MAY BE
MADE ONLY WITH THE PRIOR APPROVAL OF THE APPLICABLE REGULATORY AUTHORITY (AS
DEFINED IN THE INDENTURE). THERE ARE NO SPECIFIC LIMITATIONS ON THE EXTENT OF
THE APPLICABLE REGULATORY AUTHORITY'S DISCRETION IN DETERMINING WHETHER THE
FINANCIAL CONDITION OF THE COMPANY WARRANTS THE PAYMENT OF SUCH PAYMENTS.

         SECTION 2.08 Mutilated, Destroyed, Lost or Stolen Surplus Notes.

         In case any temporary or definitive Surplus Note shall become mutilated
or be destroyed, lost or stolen, the Company shall execute, and upon its request
the Trustee shall authenticate and deliver, a new Surplus Note bearing a number
not contemporaneously outstanding, in exchange and substitution for the
mutilated Surplus Note, or in lieu of and in substitution for the Surplus Note
so destroyed, lost or stolen. In every case, the applicant for a substituted
Surplus Note shall furnish to the Company and the Trustee such security or
indemnity as may be reasonably required by them to save each of them harmless,
and, in every case of destruction, loss or theft, the applicant shall also
furnish to the Company and the Trustee evidence to their satisfaction of the
destruction, loss or theft of such Surplus Note and of the ownership thereof.

         The Trustee may authenticate any such substituted Surplus Note and
deliver the same upon the written request or authorization of any officer of the
Company. Upon the issuance of any substituted Surplus Note, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses connected
therewith. In case any Surplus Note which has matured or is about to mature or
has been called for redemption in full shall become mutilated or be destroyed,
lost or stolen, the Company may, instead of issuing a substitute Surplus Note,
pay or authorize the payment of the same (without surrender thereof except in
the case of a mutilated Surplus Note) if the applicant for such payment shall
furnish to the Company and the Trustee such security or indemnity as may be
reasonably required by them to save each of them harmless and, in case of

                                       14
<PAGE>

destruction, loss or theft, evidence satisfactory to the Company and to the
Trustee of the destruction, loss or theft of such Surplus Note and of the
ownership thereof.

         Every substituted Surplus Note issued pursuant to the provisions of
this Section 2.08 by virtue of the fact that any such Surplus Note is destroyed,
lost or stolen shall constitute an additional contractual obligation of the
Company, whether or not the destroyed, lost or stolen Surplus Note shall be
found at any time, and shall be entitled to all the benefits of this Indenture
equally and proportionately with any and all other Surplus Notes duly issued
hereunder. All Surplus Notes shall be held and owned upon the express condition
that, to the extent permitted by applicable law, the foregoing provisions are
exclusive with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Surplus Notes and shall preclude any and all other rights or
remedies notwithstanding any law or statute existing or hereafter enacted to the
contrary with respect to the replacement or payment of negotiable instruments or
other securities without their surrender.

         SECTION 2.09 Temporary Surplus Notes.

         Pending the preparation of definitive Surplus Notes, the Company may
execute and the Trustee shall authenticate and deliver temporary Surplus Notes
(typed, printed or lithographed). Temporary Surplus Notes shall be issuable in
any authorized denomination, and substantially in the form of the definitive
Surplus Notes but with such omissions, insertions and variations as may be
appropriate for temporary Surplus Notes, all as may be determined by the
Company. Every such temporary Surplus Note shall be executed by the Company and
be authenticated by the Trustee upon the same conditions and in substantially
the same manner, and with the same effect, as the definitive Surplus Notes.
Without unreasonable delay the Company will execute and deliver to the Trustee
or the Authenticating Agent definitive Surplus Notes and thereupon any or all
temporary Surplus Notes may be surrendered in exchange therefor, at the
Principal Office of the Trustee or at any office or agency maintained by the
Company for such purpose as provided in Section 3.03, and the Trustee or the
Authenticating Agent shall authenticate and deliver in exchange for such
temporary Surplus Notes a like aggregate principal amount of such definitive
Surplus Notes. Such exchange shall be made by the Company at its own expense and
without any charge therefor except that in case of any such exchange involving a
registration of transfer the Company may require payment of a sum sufficient to
cover any tax, fee or other governmental charge that may be imposed in relation
thereto. Until so exchanged, the temporary Surplus Notes shall in all respects
be entitled to the same benefits under this Indenture as definitive Surplus
Notes authenticated and delivered hereunder.

         SECTION 2.10 Cancellation of Surplus Notes Paid, etc.

         All Surplus Notes surrendered for the purpose of payment, redemption,
exchange or registration of transfer, shall, if surrendered to the Company or
any paying agent, be surrendered to the Trustee and promptly cancelled by it,
or, if surrendered to the Trustee or any Authenticating Agent, shall be promptly
cancelled by it, and no Surplus Notes shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Indenture. All Surplus
Notes cancelled by any Authenticating Agent shall be delivered to the Trustee.
The Trustee shall dispose of cancelled Surplus Notes in accordance with its
customary procedures. If the Company shall acquire any of the Surplus Notes,
however, such acquisition shall not operate as a

                                       15
<PAGE>

redemption or satisfaction of the indebtedness represented by such Surplus Notes
unless and until the same are surrendered to the Trustee for cancellation.

         SECTION 2.11 Interest.

         (a) Each Surplus Note will bear interest at the then applicable
Interest Rate for each Interest Payment Period until the principal thereof
becomes due and payable, and on any overdue principal and, to the extent that
payment of such interest is enforceable under applicable law, on any Defaulted
Interest at the then applicable Interest Rate, compounded quarterly, payable
quarterly in arrears on February 24, May 24, August 24 and November 24 of each
year, commencing on August 24, 2004 (each, an "Interest Payment Date"), to the
Person in whose name such Surplus Note or any Predecessor Surplus Note is
registered at the close of business on the relevant record date, which will be
the fifteenth calendar day (whether or not a Business Day) preceding the
relevant Interest Payment Date. FOR THE AVOIDANCE OF DOUBT, NO INTEREST SHALL
ACCRUE OR BE PAYABLE ON ANY PAYMENT OF INTEREST THAT IS NOT MADE WHEN DUE AS A
RESULT OF A PAYMENT RESTRICTION.

         (b) The amount of interest payable for any Interest Payment Period will
be computed on the basis of a 360-day year and the actual number of days elapsed
in such Interest Payment Period.

         (c) In the event that any Interest Payment Date is not a Business Day,
then any interest payable on such date will be paid on, and such Interest
Payment Date will be moved to, the next succeeding Business Day, and additional
interest will accrue for each day that such payment is delayed as a result
thereof, except that, if such next Business Day is in the next succeeding
calendar month, such payment shall be made on the preceding Business Day, in
each case with the same force and effect as if made on the date such payment
otherwise would have been payable; provided, however, that in the event that the
Stated Maturity date or earlier redemption date is not a Business Day, then
payment of principal, premium, if any, and interest payable on such date will be
made on the next Business Day (and without any additional accrual of interest or
other payment in respect of any such delay).

         (d) All percentages resulting from any calculations on the Surplus
Notes 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., 7.553455% (or .07553455) being rounded to 7.55346% (or .0755346)), 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).

         (e) On each Determination Date, the Calculation Agent will calculate,
and will give notice in writing to the Company and the paying agent, of the
applicable Interest Rate for the related Interest Payment Period and shall give
such notice in writing to any Holder of Surplus Notes that so requests. Absent
manifest error, the Calculation Agent's determination of LIBOR and its
calculation of the applicable Interest Rate for any Interest Payment Period will
be final and binding. The Company shall, from time to time, provide any
necessary information to the paying agent relating to any original issue
discount and interest on the Surplus Notes that is included in any payment and
reportable for taxable income calculation purposes.

                                       16
<PAGE>

         SECTION 2.12 Regulatory Interest Limitations and Adjustments.

         Notwithstanding any other provision contained herein, the Company shall
not be required to make any payment of interest on the Surplus Notes for any
Interest Payment Period that is in excess of the Regulatory Interest Limitation,
if any, applicable to such Interest Payment Period. In calculating the Interest
Rate for any Interest Payment Period, in the event that there is any Excess
Interest as of such Interest Payment Period, the Interest Rate shall be
increased, to the extent necessary, but subject to any Regulatory Interest
Limitation applicable to such Interest Payment Period, such that the amount of
interest payable for such Interest Payment Period is increased by the amount of
Excess Interest. FOR THE AVOIDANCE OF DOUBT, NO INTEREST SHALL ACCRUE OR BE
PAYABLE ON ANY PAYMENT OF INTEREST OR PORTION THEREOF THAT IS NOT MADE AS A
RESULT OF A REGULATORY INTEREST LIMITATION.

         (a) In the event that a Regulatory Interest Limitation becomes
applicable to an interest payment payable on an Interest Payment Date, or an
adjustment is required to be made to the rate of interest payable on an Interest
Payment Date as a result of Excess Interest, the Company shall provide the
Holders and the Trustee with an Officers' Certificate giving notice of such
Regulatory Interest Limitation or adjustment to the rate of interest, as the
case may be, as soon as practicable prior to such Interest Payment Date.

         SECTION 2.13 CUSIP Number.

         The Company in issuing the Surplus Notes may use a "CUSIP" number (if
then generally in use), and, if so, the Trustee shall use such "CUSIP" number in
notices of redemption as a convenience to Holders; provided that any such notice
may state that no representation is made as to the correctness of such number
either as printed on the Surplus Notes or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Surplus Notes, and any such redemption shall not be
affected by any defect in or omission of such numbers. The Company will promptly
notify the Trustee of any change in the "CUSIP" number.

                                  ARTICLE III
                       PARTICULAR COVENANTS OF THE COMPANY

         SECTION 3.01 Payment of Principal, Premium, if any, and Interest.

         (a) Subject to Section 3.02, the Company covenants and agrees for the
benefit of the Holders of the Surplus Notes that it will duly and punctually pay
or cause to be paid the principal of, and premium, if any, and interest on, the
Surplus Notes at the place, at the times and in the manner provided in the
Surplus Notes. Each installment of interest on the Surplus Notes may be paid at
the option of the Company by check mailed to the Holder entitled thereto at such
address as shall appear in the Surplus Note Register or by wire transfer to an
account appropriately designated by the Holders of Surplus Notes entitled
thereto. Payments of principal of, and premium, if any, and interest on, the
Surplus Notes due at Stated Maturity or earlier redemption shall be made by the
Company in same-day funds against presentation and surrender of the Surplus
Note. Notwithstanding the foregoing, so long as the Holder of a Surplus Note is
ICONS

                                       17
<PAGE>

or a trustee of ICONS, the payment of the principal of, premium, if any, and
interest on the Surplus Note will be made by the Company in same-day funds at
such place and to such account as may be designated by ICONS or a trustee of
ICONS.

         (b) In the event that the Company is prohibited from making any payment
of principal and premium, if any, of and/or interest on the Surplus Notes
because of a Payment Restriction, the Company shall, not later than three (3)
Business Days prior to the applicable Interest Payment Date or redemption date,
provide the Trustee with an Officer's Certificate giving notice of such
prohibition. Promptly (and in no event later than thirty (30) days) after the
removal of any prohibition on the payment of all or a portion of the principal
and premium, if any, of a Surplus Note or interest thereon as a result of a
Payment Restriction, the Company shall (i) provide the Trustee with an Officer's
Certificate giving the Trustee notice of the removal of any such prohibition and
(ii) make payment of all amounts then past due and owing under the Surplus Note
(including any Unpaid Interest) that are no longer prohibited by a Payment
Restriction. Upon receipt of any such Officer's Certificate, the Trustee shall
give notice to the Securityholders of the removal of any prohibition relating to
the payment of the principal of and interest on the Surplus Notes; provided,
however, that no interest shall accrue or be payable on any payment of interest
that is not paid when due as a result of a Payment Restriction.

         (c) Subject to Section 3.02 or as provided for in Section 15.03, the
obligation of the Company to pay the principal and premium, if any, of and
interest on the Surplus Notes at the times, place and rate, and in the coin or
currency, prescribed in this Indenture shall be absolute and unconditional. No
provision of this Indenture or the Surplus Notes shall extinguish the Company's
liability for the payment of principal and interest.

         (d) If the Applicable Regulatory Authority approves a payment of
principal and premium, if any, or interest in any amount that is less than the
full amount of the principal and premium, if any, or interest, as applicable,
then scheduled to be paid in respect of the Surplus Notes, payment of such
partial amount shall be made pro rata among Securityholders based on the
relative outstanding principal amount of Surplus Notes held by each
Securityholder.

         (e) The Company will treat the Surplus Notes as indebtedness, and the
interest payable in respect of such Surplus Notes as interest, for all U.S.
federal income tax purposes. All payments in respect of such Surplus Notes will
be made free and clear of U.S. withholding tax to any beneficial owner thereof
that has provided an Internal Revenue Service Form W-8 BEN (or any substitute or
successor form) establishing its non-U.S. status for U.S. federal income tax
purposes.

         (f) Until such time as the Company shall receive the approval of the
Applicable Regulatory Authority for a payment under the Surplus Notes, the
obligation of the Company to make such payment shall not form a part of the
Company's legal liabilities and shall not be a basis of any set off. Until
repaid, all statements published or filed with the Applicable Regulatory
Authority by the Company shall show all outstanding principal amounts under the
Surplus Notes in accordance with the Applicable Insurance Laws.

         SECTION 3.02 Payment Restrictions.

                                       18
<PAGE>

         Notwithstanding anything to the contrary set forth herein, if and to
the extent required under Applicable Insurance Laws for the Company to be
permitted to report in its statutory financial statements filed with the
Applicable Regulatory Authority the outstanding amounts under the Surplus Notes
as constituting part of the Company's policyholders' surplus, any payment of
interest on and/or principal and premium, if any, of the Surplus Notes, may be
made only from the Available Amount of the Company (a) with the prior approval
of the Applicable Regulatory Authority or (b) to the extent that such payment is
otherwise permitted under the Applicable Insurance Laws (the foregoing
conditions are referred to herein as the "Payment Restrictions"). The obligation
of the Company under the Surplus Notes shall not be offset or be subject to
recoupment with respect to any liability or obligation owed to the Company and
no agreement or interest securing the Surplus Notes, whether existing on the
date of authentication of the Surplus Note or subsequently entered into, shall
apply to the obligation of the Company under the Surplus Notes.

         SECTION 3.03 Offices for Notices and Payments, etc.

         So long as any of the Surplus Notes remain outstanding, the Company
will maintain in Wilmington, Delaware or Chicago, Illinois, an office or agency
where the Surplus Notes may be presented for payment, where the Surplus Notes
may be presented for registration of transfer and for exchange as in this
Indenture provided and where notices and demands to or upon the Company in
respect of the Surplus Notes or this Indenture may be served. The Company will
give to the Trustee written notice of the location of any such office or agency
and of any change of location thereof. Until otherwise designated from time to
time by the Company in a notice to the Trustee, any such office or agency for
all of the above purposes shall be the Principal Office of the Trustee. In case
the Company shall fail to maintain any such office or agency in Wilmington,
Delaware or Chicago, Illinois, or shall fail to give such notice of the location
or of any change in the location thereof, presentations and demands may be made
and notices may be served at the designated corporate trust office of the
Trustee.

         In addition to any such office or agency, the Company may from time to
time designate one or more offices or agencies outside Wilmington, Delaware or
Chicago, Illinois, where the Surplus Notes may be presented for registration of
transfer and for exchange in the manner provided in this Indenture, and the
Company may from time to time rescind such designation, as the Company may deem
desirable or expedient; provided, however, that no such designation or
rescission shall in any manner relieve the Company of its obligation to maintain
any such office or agency in Wilmington, Delaware or Chicago, Illinois, for the
purposes above mentioned. The Company will give to the Trustee prompt written
notice of any such designation or rescission thereof.

         SECTION 3.04 Appointments to Fill Vacancies in Trustee's Office.

         The Company, whenever necessary to avoid or fill a vacancy in the
office of Trustee, will appoint, in the manner provided in Section 6.10, a
Trustee, so that there shall at all times be a Trustee hereunder.

         SECTION 3.05 Provisions as to Paying Agent.

                                       19
<PAGE>

         (a) If the Company shall appoint a paying agent other than the Trustee
with respect to the Surplus Notes, it will cause such paying agent to execute
and deliver to the Trustee an instrument in which such agent shall agree with
the Trustee, subject to the provisions of this Section 3.05:

                  (1) that it will hold all sums held by it as such agent for
         the payment of the principal of, and premium, if any, or interest, if
         any, on, the Surplus Notes (whether such sums have been paid to it by
         the Company or by any other obligor on the Surplus Notes) in trust for
         the benefit of the Holders of the Surplus Notes; and

                  (2) that it will give the Trustee notice of any failure by the
         Company (or by any other obligor on the Surplus Notes) to make any
         payment of the principal of, and premium, if any, or interest, if any,
         on, the Surplus Notes when the same shall be due and payable.

         (b) If the Company shall act as its own paying agent, it will, on or
before each due date of the principal of and premium, if any, or interest, if
any, on the Surplus Notes, set aside, segregate and hold in trust for the
benefit of the Holders of the Surplus Notes a sum sufficient to pay such
principal, premium or interest so becoming due and will notify the Trustee of
any failure to take such action and of any failure by the Company (or by any
other obligor under the Surplus Notes) to make any payment of the principal of,
and premium, if any, or interest, if any, on, the Surplus Notes when the same
shall become due and payable.

         (c) Anything in this Section 3.05 to the contrary notwithstanding, the
Company may, at any time, for the purpose of obtaining a satisfaction and
discharge with respect to the Surplus Notes hereunder, or for any other reason,
pay or cause to be paid to the Trustee all sums held in trust by the Company or
any paying agent hereunder, as required by this Section 3.05, such sums to be
held by the Trustee upon the trusts herein contained.

         (d) Anything in this Section 3.05 to the contrary notwithstanding, the
agreement to hold sums in trust as provided in this Section 3.05 is subject to
Sections 11.03 and 11.04.

         (e) The Company hereby appoints the Trustee as the initial paying agent
for the Surplus Notes.

         SECTION 3.06 Certificate to Trustee.

         The Company will deliver to the Trustee, within 120 days after the end
of each fiscal year, so long as Surplus Notes are outstanding hereunder, a
certificate from the principal executive, financial or accounting officer of the
Company stating that in the course of the performance by the signers of their
duties as officers of the Company they would normally have knowledge of any
default by the Company in the performance of any covenants contained herein,
stating whether or not they have knowledge of any such default and, if so,
specifying each such default of which the signers have knowledge and the nature
thereof, all without regard to periods of grace or notice requirements.

         SECTION 3.07 Compliance with Consolidation Provisions.

                                       20
<PAGE>

         The Company will not, while any of the Surplus Notes remain
outstanding, undergo a Conversion, consolidate with, or merge into, or merge
into itself, or sell, convey, transfer or otherwise dispose of all or
substantially all of its property to any other entity unless the provisions of
Article X hereof are complied with.

         SECTION 3.08 Limitations on Dividends; Etc.

         If there shall have occurred a Default or an Event of Default, or if
there is a failure to make a payment of principal, premium, if any, or interest
as a result of a Payment Restriction, then the Company shall not (a) declare or
pay any dividend on, make any distribution or other payment with respect to, or
redeem, purchase, acquire or make a liquidation payment with respect to, any of
its capital stock or make any guarantee payment with respect thereto (other than
(i) repurchases, redemptions or other acquisitions of shares of capital stock in
connection with the satisfaction by the Company of its obligations under any
employee benefit plans, (ii) as a result of an exchange or conversion of one
class or series of the Company's capital stock for another class or series of
the Company's capital stock, (iii) the purchase of fractional interests in
shares of the Company's capital stock pursuant to the conversion or exchange
provisions of such Company capital stock or the security being converted or
exchanged, (iv) any declaration of a dividend in connection with any
shareholders' rights plan or the redemption or repurchase of rights pursuant
thereto, or (v) any dividend or distribution in the form of capital stock where
the rights of the capital stock being issued, or issuable pursuant to such
rights, rank pari passu or junior to the capital stock as to which such dividend
or distribution is paid), or (b) make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt securities issued by
the Company that rank pari passu with or junior to the Surplus Notes, in each
case, other than as may be required under Applicable Insurance Laws; provided,
however, nothing herein shall restrict payments the Company is obligated to make
directly related to the Company's estimated tax liabilities and related expenses
(including tax preparation fees, accounting and audit fees and expenses)
pursuant to that certain Tax and Expense Sharing Agreement dated March 12, 2004
by and between the Company, SeaBright Insurance Holdings, Inc. and PointSure
Insurance Services, Inc.

         SECTION 3.09 Notice of Default.

         The Company shall file with the Trustee written notice of the
occurrence of any Event of Default within 5 Business Days of its becoming aware
of any such Event of Default.

                                   ARTICLE IV
                SECURITYHOLDERS' LISTS AND REPORTS BY THE COMPANY
                                 AND THE TRUSTEE

         SECTION 4.01 Securityholders' Lists.

         The Company covenants and agrees that it will furnish or cause to be
furnished to the Trustee:

         (a) on each regular record date for the Surplus Notes, a list, in such
form as the Trustee may reasonably require, of the names and addresses of the
Holders of the Surplus Notes as of such record date; and

                                       21
<PAGE>

         (b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company, of any such request, a list of similar
form and content as of a date not more than 15 days prior to the time such list
is furnished;

except that no such lists need be furnished so long as the Trustee is in
possession thereof by reason of its acting as Surplus Note registrar for the
Surplus Notes.

         SECTION 4.02 Preservation and Disclosure of Lists.

         (a) The Trustee shall preserve, in as current a form as is reasonably
practicable, all information as to the names and addresses of the Holders of
Surplus Notes (1) contained in the most recent list furnished to it as provided
in Section 4.01 or (2) received by it in the capacity of Surplus Notes registrar
(if so acting) hereunder. The Trustee may destroy any list furnished to it as
provided in Section 4.01 upon receipt of a new list so furnished.

         (b) In case three or more Holders of Surplus Notes (hereinafter
referred to as "applicants") apply in writing to the Trustee and furnish to the
Trustee reasonable proof that each such applicant has owned a Surplus Note for a
period of at least 6 months preceding the date of such application, and such
application states that the applicants desire to communicate with other Holders
of Surplus Notes with respect to their rights under this Indenture or under such
Surplus Notes and is accompanied by a copy of the form of proxy or other
communication which such applicants propose to transmit, then the Trustee shall
within 5 Business Days after the receipt of such application, at its election,
either:

                  (1) afford such applicants access to the information preserved
         at the time by the Trustee in accordance with the provisions of
         subsection (a) of this Section 4.02; or

                  (2) inform such applicants as to the approximate number of
         Holders of Surplus Notes, as the case may be, whose names and addresses
         appear in the information preserved at the time by the Trustee in
         accordance with the provisions of subsection (a) of this Section 4.02,
         and as to the approximate cost of mailing to such Securityholders the
         form of proxy or other communication, if any, specified in such
         application.

                  If the Trustee shall elect not to afford such applicants
         access to such information, the Trustee shall, upon the written request
         of such applicants, mail to each Securityholder whose name and address
         appear in the information preserved at the time by the Trustee in
         accordance with the provisions of subsection (a) of this Section 4.02 a
         copy of the form of proxy or other communication which is specified in
         such request with reasonable promptness after a tender to the Trustee
         of the material to be mailed and of payment, or provision for the
         payment, of the reasonable expenses of mailing, unless within 5 days
         after such tender, the Trustee shall mail to such applicants (and file
         with the Commission, if permitted or required under applicable law,
         together with a copy of the material to be mailed) a written statement
         to the effect that, in the opinion of the Trustee, such mailing would
         be contrary to the best interests of the Holders of Surplus Notes or
         would be in violation of applicable law. Such written statement shall
         specify the basis of such opinion. If the Commission, if permitted or
         required under applicable law, after

                                       22
<PAGE>

         opportunity for a hearing upon the objections specified in the written
         statement so filed, shall enter an order refusing to sustain any of
         such objections or if, after the entry of an order sustaining one or
         more of such objections, the Commission shall find, after notice and
         opportunity for hearing, that all the objections so sustained have been
         met and shall enter an order so declaring, the Trustee shall mail
         copies of such material to all such Securityholders with reasonable
         promptness after the entry of such order and the renewal of such
         tender; otherwise the Trustee shall be relieved of any obligation or
         duty to such applicants respecting their application.

         (c) Each and every Holder of Surplus Notes, by receiving and holding
the same, agrees with the Company and the Trustee that neither the Company nor
the Trustee nor any paying agent shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the Holders
of Surplus Notes in accordance with the provisions of subsection (b) of this
Section 4.02, regardless of the source from which such information was derived,
and that the Trustee shall not be held accountable by reason of mailing any
material pursuant to a request made under said subsection (b).

         SECTION 4.03 Reports by Company.

         (a) If and for so long as ICONS or a trustee of ICONS is the Holder of
the Surplus Notes, the Company covenants and agrees to file with ICONS and the
Trustee, (i) within 45 days after the end of each quarterly calendar period, (A)
unaudited statutory financial statements of the Company (including balance sheet
and income statement) covering such period, as filed with the Applicable
Regulatory Authority and (B) an Officer's Certificate of the Company to the
effect specified in Exhibit B hereto; (ii) within 60 days after the end of each
calendar year, the unaudited statutory Annual Statement of the Company
(including balance sheet and income statement) covering such fiscal year, as
filed with the Applicable Regulatory Authority; (iii) upon the date of the
filing with the Applicable Regulatory Authority of the report of the independent
accountants with respect to the Company's audited financial statements for each
calendar year, but in no event later than June 1 following the end of such
calendar year, (A) audited financial statements of the Company (including
balance sheet and income statement) covering such period and the corresponding
report of the independent accountants and (B) an Officer's Certificate of the
Company detailing any material differences between the unaudited statutory
Annual Statements for such calendar year delivered pursuant to clause (ii) above
and the audited financial statements delivered pursuant to this clause; (iv)
within 30 days after the end of the calendar year of the Company, Form 1099 or
such other annual U.S. federal income tax information statement required by the
Internal Revenue Code of 1986, as amended (the "Code"), containing such
information with regard to the Surplus Notes as is required by the Code and the
income tax regulations of the U.S. Treasury thereunder; and (v) each report on
Form 10-K and Form 10-Q prepared by the Company and filed with the Commission in
accordance with the Exchange Act within 5 Business Days after the filing
thereof.

         (b) If at any time ICONS ceases to exist for whatever reason or is no
longer the holder of the Surplus Notes, the Company shall deliver to each Holder
(i) within 30 days after the end of the calendar year of the Company, Form 1099
or such other annual U.S. federal income tax information statement required by
the Code, containing such information with regard to the Surplus Notes held by
such Securityholder as is required by the Code and the income tax

                                       23
<PAGE>

regulations of the U.S. Treasury thereunder, (ii) each report on Form 10-K and
Form 10-Q prepared by the Company and filed with the Commission in accordance
with the Exchange Act within 15 days after the filing thereof and (iii) if the
Company is at any time neither subject to Section 13 or 15(d) of the Exchange
Act nor exempt from reporting pursuant to Rule 12g3-2(b) thereunder, the
information required to be provided by Rule 144A(d)(4) under the Securities Act.

         (c) The Company covenants and agrees to file with the Trustee and the
Commission, in accordance with the rules and regulations prescribed from time to
time by the Commission, such additional information, documents and reports with
respect to compliance by the Company with the conditions and covenants provided
for in this Indenture as may be required from time to time by such rules and
regulations.

         (d) Delivery of such reports, information and documents to the Trustee
is for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).

                                   ARTICLE V
                   REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
                               ON EVENT OF DEFAULT

         SECTION 5.01 Events of Default.

         If one or more of the following events shall have occurred and be
continuing, such event shall constitute an event of default hereunder (each, an
"Event of Default"):

         (a) default in the payment of any interest upon any Surplus Notes when
it becomes due and payable, and continuance of such default for a period of 30
days (it being understood that the failure to make a payment of interest as a
result of a Payment Restriction shall not constitute a default in the payment of
interest for this purpose or an Event of Default); or

         (b) default in the payment of all or any part of the principal of, or
premium, if any, on, any Surplus Notes as and when the same shall become due and
payable, whether at maturity, upon redemption, by declaration or otherwise (it
being understood that the failure to make a payment of principal or premium, if
any, as a result of a Payment Restriction shall not constitute a default in the
payment of principal or premium, if any, for this purpose or an Event of
Default); or

         (c) default in the performance, or breach, of any covenant or warranty
of the Company in this Indenture (other than a covenant or warranty a default in
whose performance or whose breach is elsewhere in this Section 5.01 specifically
dealt with), and continuance of such default or breach for a period of 90 days
after there has been given, by registered or certified mail, to the Company by
the Trustee or to the Company and the Trustee by the Holders of at least 25% in
principal amount of the outstanding Surplus Notes, 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

                                       24
<PAGE>

         (d) a state or federal regulator or agency having jurisdiction over the
Company shall obtain or issue an order for its rehabilitation, liquidation,
conservation, supervision or dissolution and such order shall remain unstayed
and in effect for a period of 90 consecutive days; or

         (e) the Company shall volunteer with respect to, or consent or agree to
an order for, its rehabilitation, liquidation, conservation, supervision or
dissolution.

                  If an Event of Default occurs and is continuing, and in each
and every such case, unless the principal of all of the Surplus Notes shall have
already become due and payable, either the Trustee or the Holders of not less
than 25% in aggregate principal amount of the Surplus Notes then outstanding
hereunder, by notice in writing to the Company (and to the Trustee if given by
Securityholders), may declare the entire principal of, premium, if any, and
accrued, but unpaid, interest on the Surplus Notes, to be due and payable
immediately, and upon any such declaration the same shall become immediately due
and payable, subject to any Payment Restrictions. If an Event of Default
referenced under clause (d) or (e) of this Section 5.01 shall have occurred, the
principal of, premium, if any, and accrued, but unpaid, interest on the Surplus
Notes will automatically become immediately due and payable without further
action, subject to any Payment Restrictions.

         The foregoing provisions, however, are subject to the condition that
if, at any time after the principal of the Surplus Notes shall have been so
declared due and payable, and before any judgment or decree for the payment of
the moneys due shall have been obtained or entered as hereinafter provided, the
Company shall pay or shall deposit with the Trustee a sum sufficient to pay all
matured installments of interest upon all the Surplus Notes and the principal of
and premium, if any, on any and all Surplus Notes which shall have become due
otherwise than by acceleration (with interest upon such principal and premium,
if any, and, to the extent that payment of such interest is enforceable under
applicable law, on overdue installments of interest, at the same rate as the
rate of interest then borne by the Surplus Notes, to the date of such payment or
deposit) and such amount as shall be sufficient to cover compensation to the
Trustee and each predecessor Trustee, their respective agents, attorneys and
counsel, and all other expenses and liabilities incurred, and all advances made,
by the Trustee and each predecessor Trustee except as a result of negligence or
bad faith, and if any and all Events of Default under the Indenture, other than
the non-payment of the principal of or premium, if any, on Surplus Notes which
shall have become due by acceleration, shall have been cured, waived or
otherwise remedied as provided in this Indenture, then and in every such case
the Holders of a majority in aggregate principal amount of the Surplus Notes
then outstanding, by written notice to the Company and to the Trustee, may waive
all defaults and rescind and annul such declaration and its consequences, but no
such waiver or rescission and annulment shall extend to or shall affect any
subsequent default or shall impair any right consequent thereon.

         In case the Trustee shall have proceeded to enforce any right under
this Indenture and such proceedings shall have been discontinued or abandoned
because of such rescission or annulment or for any other reason or shall have
been determined adversely to the Trustee, then and in every such case the
Company, the Trustee and the Holders of the Surplus Notes shall be restored
respectively to their several positions and rights hereunder, and all rights,
remedies and powers of the Company, the Trustee and the Holders of the Surplus
Notes shall continue as though no such proceeding had been taken.

                                       25
<PAGE>

         SECTION 5.02 Payment of Surplus Notes on Default; Suit Therefor.

         The Company covenants that in case an Event of Default under Section
5.01(a), (b) or (c) shall have occurred and be continuing, then, upon demand of
the Trustee, the Company, subject to Section 3.02 hereof, will pay to the
Trustee, for the benefit of the Holders of the Surplus Notes, the whole amount
that then shall have become due and payable on all Surplus Notes for principal
and premium, if any, or interest, or both, as the case may be, with interest
upon the overdue principal and premium, if any, and (to the extent that payment
of such interest is enforceable under applicable law) upon any Defaulted
Interest at the rate borne by the Surplus Notes; and, in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of
collection, including a reasonable compensation to the Trustee, its agents,
attorneys and counsel, and any expenses or liabilities incurred by the Trustee
hereunder other than through its negligence or bad faith.

         In case the Company shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or any other obligor on the Surplus
Notes and collect in the manner provided by law out of the property of the
Company or any other obligor on the Surplus Notes wherever situated the moneys
adjudged or decreed to be payable.

         In case an Event of Default under Section 5.01(d) or (e) shall have
occurred, the Trustee, irrespective of whether the principal of the Surplus
Notes shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand
pursuant to the provisions of this Section 5.02, shall be entitled and
empowered, by intervention in such proceedings or otherwise, (a) to file and
prove a claim or claims for the whole amount of principal and interest owing and
unpaid in respect of the Surplus Notes and, in case of any judicial proceedings,
to file such proofs of claim and other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee (including any claim for
reasonable compensation to the Trustee and each predecessor Trustee, and their
respective agents, attorneys and counsel, and for reimbursement of all expenses
and liabilities incurred, and all advances made, by the Trustee and each
predecessor Trustee, except as a result of negligence or bad faith) and of the
Securityholders allowed in such judicial proceedings relative to the Company or
any other obligor on the Surplus Notes, or to the creditors or property of the
Company or such other obligor, unless prohibited by applicable law and
regulations, (b) to vote on behalf of the Holders of the Surplus Notes in any
election of a trustee or standby trustee in any rehabilitation, liquidation,
conservation or supervision proceedings (or of a Person performing similar
functions in comparable proceedings), and (c) to collect and receive any moneys
or other property payable or deliverable on any such claims, and to distribute
the same after the deduction of its charges and expenses; and any receiver,
assignee or trustee in any rehabilitation, liquidation, conservation,
supervision or liquidation proceeding is hereby authorized by each of the
Securityholders to make such payments to the Trustee, and, in the event that the
Trustee shall consent to the making of such payments directly to the
Securityholders, to pay to the Trustee such amounts as shall be sufficient to
cover reasonable compensation to the Trustee, each predecessor Trustee and their
respective agents, attorneys and

                                       26
<PAGE>

counsel, and all other expenses and liabilities incurred, and all advances made
by the Trustee and each predecessor Trustee except as a result of negligence or
bad faith.

         Nothing herein contained shall be construed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Securityholder any
plan of rehabilitation, arrangement, adjustment or composition affecting the
Surplus Notes or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Securityholder in any such proceeding.

         All rights of action and of asserting claims under this Indenture, or
under any of the Surplus Notes, may be enforced by the Trustee without the
possession of any of the Surplus Notes, or the production thereof on any trial
or other proceeding relative thereto, and any such suit or proceeding instituted
by the Trustee shall be brought in its own name as trustee of an express trust,
and any recovery of judgment shall be for the ratable benefit of the Holders of
the Surplus Notes.

         In any proceedings brought by the Trustee (and also any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party) the Trustee shall be held to represent all the Holders
of the Surplus Notes, and it shall not be necessary to make any Holders of the
Surplus Notes parties to any such proceedings.

         SECTION 5.03 Application of Moneys Collected by Trustee.

         Any moneys collected by the Trustee pursuant to this Article V shall be
applied in the following order, at the date or dates fixed by the Trustee for
the distribution of such moneys, upon presentation of the several Surplus Notes
in respect of which moneys have been collected, and stamping thereon the
payment, if only partially paid, and upon surrender thereof if fully paid:

         First: To the payment of costs and expenses of collection applicable to
the Surplus Notes and compensation to the Trustee, its agents, attorneys and
counsel, and of all other expenses and liabilities incurred, and all advances
made, by the Trustee except as a result of its negligence or bad faith;

         Second: To the payment of all Senior Claims and Senior Indebtedness of
the Company if and to the extent required by Article XV hereof;

         Third: To the payment of the amounts then due and unpaid upon Surplus
Notes for principal of (and premium, if any) and interest on the Surplus Notes,
in respect of which or for the benefit of which money has been collected,
ratably, without preference or priority of any kind, according to the amounts
due on Surplus Notes for principal (and premium, if any) and interest,
respectively; and

         Fourth:  The balance, if any, to the Company.

         SECTION 5.04 Proceedings by Securityholders.

                                       27
<PAGE>

         No Holder of any Surplus Note shall have any right by virtue of or by
availing of any provision of this Indenture to institute any suit, action or
proceeding in equity or at law upon or under or with respect to this Indenture
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless such Holder previously shall have given to the Trustee written
notice of an Event of Default and of the continuance thereof with respect to the
Surplus Notes specifying such Event of Default, as hereinbefore provided, and
unless also the Holders of not less than 25% in aggregate principal amount of
the Surplus Notes then outstanding shall have made written request upon the
Trustee to institute such action, suit or proceeding in its own name as Trustee
hereunder and shall have offered to the Trustee security or indemnity reasonably
satisfactory to the Trustee as it may require against the costs, expenses and
liabilities to be incurred therein or thereby, and the Trustee for 60 days after
its receipt of such notice, request and offer of indemnity shall have failed to
institute any such action, suit or proceeding, it being understood and intended,
and being expressly covenanted by the taker and Holder of every Surplus Note
with every other taker and Holder and the Trustee, that no one or more Holders
of Surplus Notes shall have any right in any manner whatever by virtue of or by
availing of any provision of this Indenture to affect, disturb or prejudice the
rights of any other Holder of Surplus Notes, or to obtain or seek to obtain
priority over or preference to any other such Holder, or to enforce any right
under this Indenture, except in the manner herein provided and for the equal,
ratable and common benefit of all Holders of Surplus Notes.

         Notwithstanding any other provisions in this Indenture, however, the
right of any Holder of any Surplus Note to receive payment of the principal of
(and premium, if any) and interest, if any, on such Surplus Note, on or after
the same shall have become due and payable, or to institute suit for the
enforcement of any such payment, shall not be impaired or affected without the
consent of such Holder. For the protection and enforcement of the provisions of
this Section, each and every Securityholder and the Trustee shall be entitled to
such relief as can be given either at law or in equity.

         SECTION 5.05 Proceedings by Trustee.

         In case of an Event of Default, the Trustee may in its discretion
proceed to protect and enforce the rights vested in it by this Indenture by such
appropriate judicial proceedings as the Trustee shall deem most effectual to
protect and enforce any of such rights, either by suit in equity or by action at
law or by proceeding in insolvency or otherwise, whether for the specific
enforcement of any covenant or agreement contained in this Indenture or in aid
of the exercise of any power granted in this Indenture, or to enforce any other
legal or equitable right vested in the Trustee by this Indenture or by law.

         SECTION 5.06 Remedies Cumulative and Continuing.

         Except as otherwise provided in the last paragraph of Section 2.08 with
respect to the replacement or payment of mutilated, lost or stolen Surplus
Notes, all powers and remedies given by this Article V to the Trustee or to the
Securityholders shall, to the extent permitted by law, be deemed cumulative and
not exclusive of any other powers and remedies available to the Trustee or the
Holders of the Surplus Notes by judicial proceedings or otherwise, to enforce
the performance or observance of the covenants and agreements contained in this
Indenture, and no delay or omission of the Trustee or any Holder of any of the
Surplus Notes to exercise any right

                                       28
<PAGE>

or power accruing upon any Event of Default occurring and continuing as
aforesaid shall impair any such right or power, or shall be construed to be a
waiver of any such default or an acquiescence therein; and, subject to the
provisions of Section 5.04, every power and remedy given by this Article V or by
law to the Trustee or to the Securityholders may be exercised from time to time,
and as often as shall be deemed expedient, by the Trustee or by the
Securityholders.

         SECTION 5.07 Direction of Proceedings and Waiver of Defaults by
                      Majority of Securityholders.

         The Holders of a majority in aggregate principal amount of the Surplus
Notes at the time outstanding shall have the right to direct the time, method,
and place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred on the Trustee, in respect of the
Surplus Notes; provided, however, that (subject to the provisions of Section
6.01) the Trustee shall have the right to decline to follow any such direction
if the Trustee shall determine that the action so directed would be unjustly
prejudicial to the Holders that are entitled but fail to take part in such
direction or if the Trustee being advised by counsel determines that the action
or proceeding so directed may not lawfully be taken or if the Trustee in good
faith by its board of directors or trustees, executive committee, or a trust
committee of directors or trustees and/or Responsible Officers shall determine
that the action or proceedings so directed would involve the Trustee in personal
liability. Prior to any declaration accelerating the maturity of the Surplus
Notes, the Holders of a majority in aggregate principal amount of the Surplus
Notes at the time outstanding may on behalf of the Holders of all of the Surplus
Notes waive any past default or Event of Default, and its consequences, except a
default (a) in the payment of principal of, or premium, if any, or interest on
any of the Surplus Notes, (b) in respect of covenants or provisions hereof which
cannot be modified or amended without the consent of the Holder of each Surplus
Note affected, or (c) a default of the covenants contained in Section 3.07. Upon
any such waiver, the default covered thereby shall be deemed to be cured for all
purposes of this Indenture and the Company, the Trustee and the Holders of
Surplus Notes shall be restored to their former positions and rights hereunder,
respectively; but no such waiver shall extend to any subsequent or other default
or impair any right consequent thereon. Whenever any default or Event of Default
hereunder shall have been waived as permitted by this Section 5.07, said default
or Event of Default shall for all purposes of the Surplus Notes and this
Indenture be deemed to have been cured and to be not continuing.

         SECTION 5.08 Notice of Defaults.

         The Trustee shall, within 60 days after the occurrence of a default
with respect to the Surplus Notes, mail to all Securityholders, as the names and
addresses of such Holders appear upon the Surplus Note Register, notice of all
defaults known to the Trustee, unless such defaults shall have been cured before
the giving of such notice (the term "defaults" for the purpose of this Section
5.08 being hereby defined to be the events specified in clauses (a), (b), (c),
(d) and (e) of Section 5.01, not including periods of grace, if any, provided
for therein, and irrespective of the giving of any written notice provided for
therein); and provided that, except in the case of default in the payment of the
principal of, or premium, if any, or interest on any of the Surplus Notes, the
Trustee shall be protected in withholding such notice if and so long as the
board of directors, the executive committee, or a trust committee of directors
and/or Responsible Officers of the Trustee in good faith determines that the
withholding of such notice is in the interests of the

                                       29
<PAGE>

Securityholders, and provided further, that in the case of any default of the
character specified in Section 5.01(c), no such notice to Securityholders shall
be given until at least 60 days after the Trustee has notified the Company of
such occurrence but shall be given within 90 days after such occurrence.

         SECTION 5.09 Undertaking to Pay Costs.

         All parties to this Indenture agree, and each Holder of any Surplus
Note by such Holder's acceptance thereof shall be deemed to have agreed, that
any court may in its discretion require, in any suit for the enforcement of any
right or remedy under this Indenture, or in any suit against the Trustee for any
action taken or omitted by it as Trustee, the filing by any party litigant in
such suit of an undertaking to pay the costs of such suit, and that such court
may in its discretion assess reasonable costs, including reasonable attorneys'
fees and expenses, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party litigant;
but the provisions of this Section 5.09 shall not apply to any suit instituted
by the Trustee, to any suit instituted by any Securityholder, or group of
Securityholders, holding in the aggregate 10% or more in aggregate principal
amount of the Surplus Notes outstanding, or to any suit instituted by any
Securityholder for the enforcement of the payment of the principal of (or
premium, if any) or interest on any Surplus Note against the Company on or after
the same shall have become due and payable.

                                   ARTICLE VI
                             CONCERNING THE TRUSTEE

         SECTION 6.01 Duties and Responsibilities of Trustee.

         With respect to the Holders of Surplus Notes issued hereunder, the
Trustee, prior to the occurrence of an Event of Default and after the curing or
waiving of all Events of Default which may have occurred, undertakes to perform
such duties and only such duties as are specifically set forth in this
Indenture. In case an Event of Default has occurred (which has not been cured or
waived) the Trustee shall exercise such of the rights and powers vested in it by
this Indenture, 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
such person's affairs.

         No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct, except that:

         (a) prior to the occurrence of an Event of Default and after the curing
or waiving of all Events of Default which may have occurred

                  (1) the duties and obligations of the Trustee with respect to
         the Surplus Notes shall be determined solely by the express provisions
         of this Indenture, and the Trustee shall not be liable except for the
         performance of such duties and obligations with respect to the Surplus
         Notes as are specifically set forth in this Indenture, and no implied
         covenants or obligations shall be read into this Indenture against the
         Trustee; and

                                       30
<PAGE>

                  (2) in the absence of bad faith on the part of the Trustee,
         the Trustee may conclusively rely, as to the truth of the statements
         and the correctness of the opinions expressed therein, upon any
         certificates or opinions furnished to the Trustee and conforming to the
         requirements of this Indenture; but, in the case of any such
         certificates or opinions which by any provision hereof are specifically
         required to be furnished to the Trustee, the Trustee shall be under a
         duty to examine the same to determine whether or not they conform to
         the requirements of this Indenture;

         (b) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer of the Trustee, unless it shall be proved
that the Trustee was negligent in ascertaining the pertinent facts; and

         (c) the Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith, in accordance with the direction of the
Securityholders pursuant to Section 5.07, relating to the time, method and place
of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this Indenture.

         None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if there is reasonable ground for believing that the
repayment of such funds or liability is not reasonably assured to it under the
terms of this Indenture or adequate indemnity against such risk is not
reasonably assured to it. Whether or not therein expressly so provided, every
provision of this Indenture relating to the conduct or affecting the eligibility
of affording protection to the Trustee shall be subject to the provisions of
this Section 6.01.

         SECTION 6.02 Reliance on Documents, Opinions, etc.

         Except as otherwise provided in Section 6.01:

         (a) the Trustee may conclusively rely and shall be protected in acting
or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond, note,
debenture or other paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties;

         (b) any request, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by an Officers' Certificate (unless other
evidence in respect thereof be herein specifically prescribed); and any Board
Resolution may be evidenced to the Trustee by a copy thereof certified by the
Secretary or an Assistant Secretary of the Company;

         (c) the Trustee may consult with counsel of its selection and any
advice or Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with such advice or Opinion of Counsel;

         (d) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Securityholders,

                                       31
<PAGE>

pursuant to the provisions of this Indenture, unless such Securityholders shall
have offered to the Trustee security or indemnity satisfactory to the Trustee
against the costs, expenses and liabilities which may be incurred therein or
thereby;

         (e) the Trustee shall not be liable for any action taken or omitted by
it in good faith and believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Indenture; nothing contained herein
shall, however, relieve the Trustee of the obligation, upon the occurrence of an
Event of Default (that has not been cured or waived) to exercise with respect to
Surplus Notes such of the rights and powers vested in it by this Indenture, and
to 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 such person's
own affairs;

         (f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond, debenture,
coupon or other paper or document, unless requested in writing to do so by the
Holders of not less than a majority in principal amount of the outstanding
Surplus Notes; provided, however, that if the payment within a reasonable time
to the Trustee of the costs, expenses or liabilities likely to be incurred by it
in the making of such investigation is, in the opinion of the Trustee, not
reasonably assured to the Trustee by the security afforded to it by the terms of
this Indenture, the Trustee may require indemnity satisfactory to the Trustee
against such expense or liability as a condition to so proceeding;

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

         (h) the Trustee shall not be liable for any action taken, suffered, or
omitted to be taken by it in good faith and reasonably believed by it to be
authorized or within the discretion or rights or powers conferred upon it by
this Indenture;

         (i) the Trustee shall not be deemed to have notice of any Default or
Event of Default unless a Responsible Officer of the Trustee has actual
knowledge thereof or unless written notice of any event which is in fact such a
default is received by the Trustee at the designated corporate trust office of
the Trustee, and such notice references the Surplus Notes and this Indenture;

         (j) the Trustee shall not be deemed to have notice of any Regulatory
Interest Limitation, Payment Restriction or Applicable Insurance Laws unless a
Responsible Officer of the Trustee has actual knowledge thereof or unless
written notice thereof is received by the Trustee at the designated corporate
trust office of the Trustee, and such notice references the Surplus Notes and
this Indenture;

         (k) the rights, privileges, protections, immunities and benefits given
to the Trustee, including, without limitation, its right to be indemnified, are
extended to, and shall be enforceable by, the Trustee in each of its capacities
hereunder, and to each agent, custodian and other Person employed to act
hereunder;

                                       32
<PAGE>

         (l) the Trustee may request that the Company deliver an Officers'
Certificate setting forth the names of individuals and/or titles of officers
authorized at such time to take specified actions pursuant to this Indenture,
which Officers' Certificate may be signed by any person authorized to sign an
Officers' Certificate, including any person specified as so authorized in any
such certificate previously delivered and not superseded; and

         (m) the Trustee shall be under no obligation to institute any suit, or
to take any remedial proceeding under this Indenture, or to enter any appearance
or in any way defend in any suit in which it may be made defendant, or in the
enforcement of any rights and powers hereunder, if the Trustee reasonably
believes that it will not be adequately indemnified as provided in this
Indenture.

         SECTION 6.03 No Responsibility for Recitals, etc.

         The recitals contained herein and in the Surplus Notes (except in the
Certificate of Authentication of the Trustee or the Authenticating Agent) shall
be taken as the statements of the Company and the Trustee and the Authenticating
Agent assume no responsibility for the correctness of the same. The Trustee and
the Authenticating Agent make no representations as to the validity or
sufficiency of this Indenture or of the Surplus Notes. The Trustee and the
Authenticating Agent shall not be accountable for the use or application by the
Company of the proceeds of any Surplus Notes authenticated and delivered by the
Trustee or the Authenticating Agent in conformity with the provisions of this
Indenture.

         SECTION 6.04 Trustee, Authenticating Agent, Paying Agents, Transfer
                      Agents or Registrar May Own Surplus Notes.

         The Trustee or any Authenticating Agent or any paying agent or any
transfer agent or any Surplus Note registrar, in its individual or any other
capacity, may become the owner or pledgee of Surplus Notes with the same rights
it would have if it were not Trustee, Authenticating Agent, paying agent,
transfer agent or Surplus Note registrar.

         SECTION 6.05 Moneys to be Held in Trust.

         Subject to the provisions of Section 11.04, all moneys received by the
Trustee or any paying agent shall, until used or applied as herein provided, be
held in trust for the purpose for which they were received, but need not be
segregated from other funds except to the extent required by law. The Trustee
and any paying agent shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed in writing with the Company.
So long as no Event of Default shall have occurred and be continuing, all
interest allowed on any such moneys shall be paid from time to time to the
Company or its order upon the written order of the Company, signed by the
Chairman of the Board of Directors (if an executive officer), the President, any
Vice President, the Treasurer or any Assistant Treasurer of the Company.

         SECTION 6.06 Compensation and Expenses of Trustee.

         The Company covenants and agrees to pay to the Trustee from time to
time, and the Trustee shall be entitled to, such compensation as shall be agreed
in writing between the Company and the Trustee (which shall not be limited by
any provision of law in regard to the

                                       33
<PAGE>

compensation of a trustee of an express trust), and the Company will pay or
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any of the provisions of this Indenture (including the reasonable compensation
and the expenses and disbursements of its counsel and of all persons not
regularly in its employ and any amounts paid by the Trustee to any
Authenticating Agent pursuant to Section 6.14) except any such expense,
disbursement or advance as may arise from its negligence or bad faith. The
Company also covenants to indemnify each of the Trustee and any predecessor
Trustee (and its officers, agents, directors and employees) for, and to hold it
harmless against, any and all loss, liability, damages, claim, action, suit,
cost or expense, including taxes (other than taxes based on the income of the
Trustee) of any kind and nature whatsoever incurred without negligence or bad
faith on the part of the Trustee and arising out of or in connection with the
acceptance or administration of this trust, including the costs and expenses of
defending itself against any claim (whether asserted by the Company, a Holder of
Surplus Notes or any other Person) of liability in the premises. The obligations
of the Company under this Section 6.06 to compensate and indemnify the Trustee
and to pay or reimburse the Trustee for expenses, disbursements and advances
shall constitute additional indebtedness hereunder, and shall survive the
resignation or removal of the Trustee and the termination of this Indenture.
Such additional indebtedness shall be secured by a lien prior to that of the
Surplus Notes upon all property and funds held or collected by the Trustee as
such, except funds held in trust for the benefit of the Holders of particular
Surplus Notes.

         When the Trustee incurs expenses or renders services in connection with
an Event of Default specified in Section 5.01(d) or Section 5.01(e), the
expenses (including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable Federal or State insolvency or other similar
law.

         The provisions of this Section shall survive the termination of this
Indenture.

         SECTION 6.07 Officers' Certificate as Evidence.

         Except as otherwise provided in Sections 6.01 and 6.02, whenever in the
administration of the provisions of this Indenture the Trustee shall deem it
necessary or desirable that a matter be proved or established prior to taking or
omitting any action hereunder, such matter (unless other evidence in respect
thereof be herein specifically prescribed) may, in the absence of negligence or
bad faith on the part of the Trustee, be deemed to be conclusively proved and
established by an Officers' Certificate delivered to the Trustee, and such
certificate, in the absence of negligence or bad faith on the part of the
Trustee, shall be full warrant to the Trustee for any action taken or omitted by
it under the provisions of this Indenture upon the faith thereof.

         SECTION 6.08 Conflicting Interest of Trustee.

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

                                       34
<PAGE>

         SECTION 6.09 Eligibility of Trustee.

         The Trustee hereunder shall at all times be a corporation organized and
doing business under the laws of the United States of America or any State or
territory thereof or of the District of Columbia or a corporation or other
Person permitted to act as trustee by the Commission authorized under such laws
to exercise corporate trust powers, having a combined capital and surplus of at
least $50,000,000 and subject to supervision or examination by federal, State,
territorial, or District of Columbia authority. If such corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of the aforesaid supervising or examining authority, then for the purposes of
this Section 6.09 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.

         The Company may not, nor may any Person directly or indirectly
controlling, controlled by, or under common control with the Company, serve as
Trustee.

         In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 6.09, the Trustee shall resign
immediately in the manner and with the effect specified in Section 6.10.

         SECTION 6.10 Resignation or Removal of Trustee.

(a) The Trustee, or any trustee or trustees hereafter appointed, may at any time
resign by giving written notice of such resignation to the Company and by
mailing notice thereof to the Holders of Surplus Notes at their addresses as
they shall appear on the Surplus Note Register. Upon receiving such notice of
resignation, the Company shall promptly appoint a successor trustee or trustees
by written instrument, in duplicate, executed by order of its Board of
Directors, one copy of which instrument shall be delivered to the resigning
Trustee and one copy to the successor trustee. If no successor trustee shall
have been so appointed and have accepted appointment within 30 days after the
mailing of such notice of resignation to the Securityholders, the resigning
Trustee may petition, at the expense of the Company, any court of competent
jurisdiction for the appointment of a successor trustee, or any Securityholder
who has been a bona fide Holder of a Surplus Note or Surplus Notes for at least
six months may, subject to the provisions of Section 5.09, on behalf of himself
or herself and all others similarly situated, petition any such court for the
appointment of a successor trustee. Such court may thereupon, after such notice,
if any, as it may deem proper and prescribe, appoint a successor Trustee.

         (b) In case at any time any of the following shall occur:

                  (i) the Trustee shall fail to comply with the provisions of
         Section 6.08 after written request therefor by the Company or by any
         Securityholder who has been a bona fide Holder of a Surplus Note or
         Surplus Notes for at least six months, or

                  (ii) the Trustee shall cease to be eligible in accordance with
         the provisions of Section 6.09 and shall fail to resign after written
         request therefor by the Company or by any such Securityholder, or

                  (iii) the Trustee shall become incapable of acting, or shall
         be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of
         its property shall be appointed, or

                                       35
<PAGE>

         any public officer shall take charge or control of the Trustee or of
         its property or affairs for the purpose of rehabilitation, conservation
         or liquidation,

then, in any such case, the Company may remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, executed by order of the
Board of Directors, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor trustee, or, subject to the
provisions of Section 5.09, any Securityholder who has been a bona fide Holder
of a Surplus Note or Surplus Notes for at least six months may, on behalf of
himself or herself and all others similarly situated, petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor trustee. Such court may thereupon, after such notice, if any, as it
may deem proper and prescribe, remove the Trustee and appoint a successor
trustee.

         (c) The Holders of a majority in aggregate principal amount of the
Surplus Notes at the time outstanding may at any time remove the Trustee and
nominate a successor trustee which shall be deemed appointed as successor
trustee unless within 10 days after such nomination the Company objects thereto,
in which case the Trustee so removed or any Securityholder, upon the terms and
conditions and otherwise as provided in subsection (a) of this Section 6.10, may
petition, at the expense of the Company, any court of competent jurisdiction for
an appointment of a successor trustee.

         (d) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 6.10 shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 6.11.

         SECTION 6.11 Acceptance by Successor Trustee.

         Any successor trustee appointed as provided in Section 6.10 shall
execute, acknowledge and deliver to the Company and to its predecessor trustee
an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the retiring trustee shall become effective and such
successor trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, duties and obligations with respect to the
Surplus Notes of its predecessor hereunder, with like effect as if originally
named as trustee herein; but, nevertheless, on the written request of the
Company or of the successor trustee, the trustee ceasing to act shall, upon
payment of any amounts then due it pursuant to the provisions of Section 6.06,
execute and deliver an instrument transferring to such successor trustee all the
rights and powers of the trustee so ceasing to act and shall duly assign,
transfer and deliver to such successor trustee all property and money held by
such retiring trustee thereunder. Upon request of any such successor trustee,
the Company shall execute any and all instruments in writing for more fully and
certainly vesting in and confirming to such successor trustee all such rights
and powers. Any trustee ceasing to act shall, nevertheless, retain a lien upon
all property or funds held or collected by such trustee to secure any amounts
then due it pursuant to the provisions of Section 6.06.

         No successor trustee shall accept appointment as provided in this
Section 6.11 unless at the time of such acceptance such successor trustee shall
be qualified under the provisions of Section 6.08 and eligible under the
provisions of Section 6.09.

                                       36
<PAGE>

         Upon acceptance of appointment by a successor trustee as provided in
this Section 6.11, the Company shall mail notice of the succession of such
trustee hereunder to the Holders of Surplus Notes at their addresses as they
shall appear on the Surplus Note Register. If the Company fails to mail such
notice within 10 days after the acceptance of appointment by the successor
trustee, the successor trustee shall cause such notice to be mailed at the
expense of the Company.

         SECTION 6.12 Succession by Merger, etc.

         Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder without
the execution or filing of any paper or any further act on the part of any of
the parties hereto.

         In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any of the Surplus Notes shall have been
authenticated but not delivered, any such successor to the Trustee may adopt the
certificate of authentication of any predecessor trustee, and deliver such
Surplus Notes so authenticated; and in case at that time any of the Surplus
Notes shall not have been authenticated, any successor to the Trustee may
authenticate such Surplus Notes either in the name of any predecessor hereunder
or in the name of the successor trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Surplus Notes or in this
Indenture provided that the certificate of the Trustee shall have; provided,
however, that the right to adopt the certificate of authentication of any
predecessor Trustee or authenticate Surplus Notes in the name of any predecessor
Trustee shall apply only to its successor or successors by merger, conversion or
consolidation.

         SECTION 6.13 Authenticating Agents.

         There may be one or more Authenticating Agents appointed by the Trustee
upon the request of the Company with power to act on its behalf and subject to
its direction in the authentication and delivery of Surplus Notes issued upon
exchange or transfer thereof as fully to all intents and purposes as though any
such Authenticating Agent had been expressly authorized to authenticate and
deliver Surplus Notes; provided, that the Trustee shall have no liability to the
Company for any acts or omissions of the Authenticating Agent with respect to
the authentication and delivery of Surplus Notes. Any such Authenticating Agent
shall at all times be a corporation organized and doing business under the laws
of the United States or of any State or territory thereof or of the District of
Columbia authorized under such laws to act as Authenticating Agent, having a
combined capital and surplus of at least $5,000,000 and being subject to
supervision or examination by Federal, State, territorial or District of
Columbia authority. If such corporation publishes reports of condition at least
annually pursuant to law or the requirements of such authority, then for the
purposes of this Section 6.13 the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect herein specified in this Section.

                                       37
<PAGE>

         Any corporation into which any Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any Authenticating Agent
shall be a party, or any corporation succeeding to all or substantially all of
the corporate trust business of any Authenticating Agent, shall be the successor
of such Authenticating Agent hereunder, if such successor corporation is
otherwise eligible under this Section 6.13 without the execution or filing of
any paper or any further act on the part of the parties hereto or such
Authenticating Agent.

         Any Authenticating Agent may at any time resign by giving written
notice of resignation to the Trustee and to the Company. The Trustee may at any
time terminate the agency of any Authenticating Agent by giving written notice
of termination to such Authenticating Agent and to the Company. Upon receiving
such a notice of resignation or upon such a termination, or in case at any time
any Authenticating Agent shall cease to be eligible under this Section 6.13, the
Trustee may, and upon the request of the Company shall, promptly appoint a
successor Authenticating Agent eligible under this Section 6.13, shall give
written notice of such appointment to the Company and shall mail notice of such
appointment to all Holders of the Surplus Notes as the names and addresses of
such Holders appear on the Surplus Note Register. Any successor Authenticating
Agent upon acceptance of its appointment hereunder shall become vested with all
rights, powers, duties and responsibilities of its predecessor hereunder, with
like effect as if originally named as Authenticating Agent herein.

         The Company agrees to pay to any Authenticating Agent from time to time
reasonable compensation for its services. Any Authenticating Agent shall have no
responsibility or liability for any action taken by it as such in accordance
with the directions of the Trustee.

                                  ARTICLE VII
                         CONCERNING THE SECURITYHOLDERS

         SECTION 7.01 Action by Securityholders.

         Whenever in this Indenture it is provided that the Holders of a
specified percentage in aggregate principal amount of the Surplus Notes may take
any action (including the making of any demand or request, the giving of any
notice, consent or waiver or the taking of any other action) the fact that at
the time of taking any such action the Holders of such specified percentage have
joined therein may be evidenced (a) by any instrument or any number of
instruments of similar tenor executed by such Securityholders in person or by
agent or proxy appointed in writing, or (b) by the record of such Holders of
Surplus Notes voting in favor thereof at any meeting of such Securityholders
duly called and held in accordance with the provisions of Article VIII hereof,
or (c) by a combination of such instrument or instruments and any such record of
such a meeting of such Securityholders.

         If the Company shall solicit from the Securityholders any request,
demand, authorization, direction, notice, consent, waiver or other action, the
Company may, at its option, as evidenced by an Officers' Certificate, fix in
advance a record date for the determination of Securityholders entitled to give
such request, demand, authorization, direction, notice, consent, waiver or other
action, but the Company shall have no obligation to do so. If such a record date
is fixed, such request, demand, authorization, direction, notice, consent,
waiver or other action may be given

                                       38
<PAGE>

before or after the record date, but only the Securityholders of record at the
close of business on the record date shall be deemed to be Securityholders for
the purposes of determining whether Securityholders of the requisite proportion
of outstanding Surplus Notes have authorized or agreed or consented to such
request, demand, authorization, direction, notice, consent, waiver or other
action, and for that purpose the outstanding Surplus Notes shall be computed as
of the record date; provided, however, that no such authorization, agreement or
consent by such Securityholders on the record date shall be deemed effective
unless it shall become effective pursuant to the provisions of this Indenture
not later than six months after the record date.

         SECTION 7.02 Proof of Execution by Securityholders.

         Subject to the provisions of Sections 6.01, 6.02 and 8.05, proof of the
execution of any instrument by a Securityholder or his agent or proxy shall be
sufficient if made in accordance with such reasonable rules and regulations as
may be prescribed by the Trustee or in such manner as shall be satisfactory to
the Trustee. The ownership of Surplus Notes shall be proved by the Surplus Note
Register or by a certificate of the Surplus Note registrar. The Trustee may
require such additional proof of any matter referred to in this Section as it
shall deem necessary.

         The record of any Securityholders' meeting shall be proved in the
manner provided in Section 8.06.

         SECTION 7.03 Who Are Deemed Absolute Owners.

         Prior to due presentment for registration of transfer of any Surplus
Note, the Company, the Trustee, any Authenticating Agent, any paying agent, any
transfer agent and any Surplus Note registrar may deem the person in whose name
such Surplus Note shall be registered upon the Surplus Note Register to be, and
may treat such person as, the absolute owner of such Surplus Note (whether or
not such Surplus Note shall be overdue) for the purpose of receiving payment of
or on account of the principal of, and premium, if any, and interest on such
Surplus Note and for all other purposes; and neither the Company nor the Trustee
nor any Authenticating Agent nor any paying agent nor any transfer agent nor any
Surplus Note registrar shall be affected by any notice to the contrary.

         SECTION 7.04 Surplus Notes Owned by Company Deemed Not Outstanding.

         In determining whether the Holders of the requisite aggregate principal
amount of Surplus Notes have concurred in any direction, consent or waiver under
this Indenture, Surplus Notes which are owned by the Company or any other
obligor on the Surplus Notes or by any person directly or indirectly controlling
or controlled by or under direct or indirect common control with the Company or
any other obligor on the Surplus Notes shall be disregarded and deemed not to be
outstanding for the purpose of any such determination; provided that for the
purposes of determining whether the Trustee shall be protected in relying on any
such direction, consent or waiver, only Surplus Notes which a Responsible
Officer of the Trustee actually knows are so owned shall be so disregarded.
Surplus Notes so owned which have been pledged in good faith may be regarded as
outstanding for the purposes of this Section 7.04 if the pledgee shall establish
to the satisfaction of the Trustee the pledgee's right to vote such Surplus
Notes and that the pledgee is not the Company or any such other obligor or
person directly or indirectly

                                       39
<PAGE>

controlling or controlled by or under direct or indirect common control with the
Company or any such other obligor. In the case of a dispute as to such right,
any decision by the Trustee taken upon the advice of counsel shall be full
protection to the Trustee.

         SECTION 7.05 Revocation of Consents; Future Holders Bound.

         At any time prior to (but not after) the evidencing to the Trustee, as
provided in Section 7.01, of the taking of any action by the Holders of the
percentage in aggregate principal amount of the Surplus Note specified in this
Indenture in connection with such action, any Holder of a Surplus Note (or any
Surplus Note issued in whole or in part in exchange or substitution therefor)
the serial number of which is shown by the evidence to be included in the
Surplus Notes the Holders of which have consented to such action may, by filing
written notice with the Trustee at its Principal Office and upon proof of
holding as provided in Section 7.02, revoke such action so far as concerns such
Surplus Note (or so far as concerns the principal amount represented by any
exchanged or substituted Surplus Note). Except as aforesaid any such action
taken by the Holder of any Surplus Note shall be conclusive and binding upon
such Holder and upon all future Holders and owners of such Surplus Note, and of
any Surplus Note issued in exchange or substitution therefor, irrespective of
whether or not any notation in regard thereto is made upon such Surplus Note or
any Surplus Note issued in exchange or substitution therefor.

                                  ARTICLE VIII
                            SECURITYHOLDERS' MEETINGS

         SECTION 8.01 Purposes of Meetings.

         A meeting of Securityholders may be called at any time and from time to
time pursuant to the provisions of this Article VIII for any of the following
purposes:

         (a) to give any notice to the Company or to the Trustee, or to give any
directions to the Trustee, or to consent to the waiving of any default hereunder
and its consequences, or to take any other action authorized to be taken by
Securityholders pursuant to any of the provisions of Article V hereof;

         (b) to remove the Trustee and nominate a successor trustee pursuant to
the provisions of Article VI hereof;

         (c) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 9.02; or

         (d) to take any other action authorized to be taken by or on behalf of
the Holders of any specified aggregate principal amount of the Surplus Notes
under any other provision of this Indenture or under applicable law.

         SECTION 8.02 Call of Meetings by Trustee.

         The Trustee may at any time call a meeting of Securityholders to take
any action specified in Section 8.01, to be held at such time and at such place
in the Borough of Manhattan, The City of New York, or in Wilmington, Delaware,
as the Trustee shall determine. Notice of

                                       40
<PAGE>

every meeting of the Securityholders, setting forth the time and the place of
such meeting and in general terms the action proposed to be taken at such
meeting, shall be mailed to Holders of Surplus Notes at their addresses as they
shall appear on the Surplus Notes Register. Such notice shall be mailed not less
than 20 nor more than 180 days prior to the date fixed for the meeting.

         SECTION 8.03 Call of Meetings by Company or Securityholders.

         In case at any time the Company pursuant to a resolution of the Board
of Directors, or the Holders of at least 10% in aggregate principal amount of
the Surplus Notes then outstanding, shall have requested the Trustee to call a
meeting of Securityholders, by written request setting forth in reasonable
detail the action proposed to be taken at the meeting, and the Trustee shall not
have mailed the notice of such meeting within 20 days after receipt of such
request, then the Company or such Securityholders may determine the time and the
place in said Borough of Manhattan, The City of New York, or Wilmington,
Delaware for such meeting and may call such meeting to take any action
authorized in Section 8.01, by mailing notice thereof as provided in Section
8.02.

         SECTION 8.04 Qualifications for Voting.

         To be entitled to vote at any meeting of Securityholders a person shall
(a) be a Holder of one or more Surplus Notes or (b) a person appointed by an
instrument in writing as proxy by a Holder of one or more such Surplus Notes.
The only persons who shall be entitled to be present or to speak at any meeting
of Securityholders shall be the persons entitled to vote at such meeting and
their counsel and any representatives of the Trustee and its counsel and any
representatives of the Company and its counsel.

         SECTION 8.05 Regulations.

         Notwithstanding any other provisions of this Indenture, the Trustee may
make such reasonable regulations as it may deem advisable for any meeting of
Securityholders, in regard to proof of the holding of Surplus Notes and of the
appointment of proxies, and in regard to the appointment and duties of
inspectors of votes, the submission and examination of proxies, certificates and
other evidence of the right to vote, and such other matters concerning the
conduct of the meeting as it shall think fit.

         The Trustee shall, by an instrument in writing, appoint a temporary
chair of the meeting, unless the meeting shall have been called by the Company
or by Securityholders as provided in Section 8.03, in which case the Company or
the Securityholders calling the meeting, as the case may be, shall in like
manner appoint a temporary chair. A permanent chair and a permanent secretary of
the meeting shall be elected by majority vote of the meeting.

         Subject to the provisions of Section 7.04, at any meeting of
Securityholders, each Holder of Surplus Notes with respect to which such meeting
is being held or proxy therefor shall be entitled to one vote for each $1,000
principal amount of Surplus Notes held or represented by such Holder; provided,
however, that no vote shall be cast or counted at any meeting in respect of any
Surplus Note challenged as not outstanding and ruled by the chair of the meeting
to be not outstanding. The chair of the meeting shall have no right to vote
other than by virtue of Surplus Notes held by him or her or instruments in
writing as aforesaid duly designating him or her as the

                                       41
<PAGE>

person to vote on behalf of other Securityholders. Any meeting of
Securityholders duly called pursuant to the provisions of Section 8.02 or 8.03
may be adjourned from time to time by a majority of those present, whether or
not constituting a quorum, and the meeting may be held as so adjourned without
further notice.

         SECTION 8.06 Voting.

         The vote upon any resolution submitted to any meeting of Holders of
Surplus Notes shall be by written ballots on which shall be subscribed the
signatures of such Holders or of their representatives by proxy and the serial
number or numbers of the Surplus Notes held or represented by them. The
permanent chair of the meeting shall appoint two inspectors of votes who shall
count all votes cast at the meeting for or against any resolution and who shall
make and file with the secretary of the meeting their verified written reports
in triplicate of all votes cast at the meeting. A record in duplicate of the
proceedings of each meeting of Securityholders shall be prepared by the
secretary of the meeting and there shall be attached to said record the original
reports of the inspectors of votes on any vote by ballot taken thereat and
affidavits by one or more persons having knowledge of the facts setting forth a
copy of the notice of the meeting and showing that said notice was mailed as
provided in Section 8.02. The record shall show the serial numbers of the
Surplus Notes voting in favor of or against any resolution. The record shall be
signed and verified by the affidavits of the permanent chair and secretary of
the meeting and one of the duplicates shall be delivered to the Company and the
other to the Trustee to be preserved by the Trustee, the latter to have attached
thereto the ballots voted at the meeting.

         Any record so signed and verified shall be conclusive evidence of the
matters therein stated.

                                   ARTICLE IX
                             SUPPLEMENTAL INDENTURES

         SECTION 9.01 Supplemental Indentures without Consent of
                      Securityholders.

         The Company and the Trustee may from time to time and at any time,
subject to applicable regulatory compliance, including obtaining any required
approvals or consents of the Applicable Regulatory Authority, enter into an
indenture or indentures supplemental hereto (which shall conform to the
provisions of the Trust Indenture Act as then in effect applicable to indentures
qualified thereunder), without the consent of the Securityholders, for one or
more of the following purposes:

         (a) to evidence the succession of another entity to the Company, or
successive successions, and the assumption by the successor entity of the
covenants, agreements and obligations of the Company pursuant to Article X
hereof;

         (b) to add to the covenants of the Company such further covenants,
restrictions or conditions for the protection of the Holders of Surplus Notes as
the Board of Directors and the Trustee shall consider to be for the protection
of the Holders of Surplus Notes, and to make the occurrence, or the occurrence
and continuance, of a default in any of such additional covenants, restrictions
or conditions a default or an Event of Default permitting the enforcement of all
or any of the several remedies provided in this Indenture as herein set forth;
provided, however, that

                                       42

<PAGE>

in respect of any such additional covenant, restriction or
condition such supplemental indenture may provide for a particular period of
grace after default (which period may be shorter or longer than that allowed in
the case of other defaults) or may provide for an immediate enforcement upon
such default or may limit the remedies available to the Trustee upon such
default;

         (c) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be defective or
inconsistent with any other provision contained herein or in any supplemental
indenture, or to make such other provisions in regard to matters or questions
arising under this Indenture; provided that any such action shall not adversely
affect the interests of the Holders of the Surplus Notes in any material
respect;

         (d) to add to, delete from, or revise the terms of Surplus Notes,
including, without limitation, any terms relating to the issuance, exchange,
registration or transfer of Surplus Notes; provided, that no such action shall
adversely affect the interests of Holders of outstanding Surplus Notes;

         (e) to evidence and provide for the acceptance of appointment hereunder
by a successor trustee with respect to the Surplus Notes and to add to or change
any of the provisions of this Indenture as shall be necessary to provide for or
facilitate the administration of the trusts hereunder by more than one trustee,
pursuant to the requirements of Section 6.11;

         (f) to make any change that does not adversely affect the rights of any
Securityholder in any material respect; or

         (g) to provide for the issuance of and establish the form and terms and
conditions of the Surplus Notes, to establish the form of any certifications
required to be furnished pursuant to the terms of this Indenture, or to add to
the rights of the Holders of Surplus Notes.

         The Trustee is hereby authorized to join with the Company in the
execution of any such supplemental indenture, to make any further appropriate
agreements and stipulations which may be therein contained and to accept the
conveyance, transfer and assignment of any property thereunder, but the Trustee
shall not be obligated to, but may in its discretion, enter into any such
supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.

         Any supplemental indenture authorized by the provisions of this Section
9.01 may be executed by the Company and the Trustee without the consent of the
Holders of any of the Surplus Notes at the time outstanding, notwithstanding any
of the provisions of Section 9.02.

         SECTION 9.02 Supplemental Indentures with Consent of Securityholders.

         With the consent (evidenced as provided in Section 7.01) of the Holders
of a majority in aggregate principal amount of the Surplus Notes at the time
outstanding, the Company, when authorized by a Board Resolution, and the Trustee
may from time to time and at any time, subject to applicable regulatory
compliance, including obtaining any required approvals or consents of the
Applicable Regulatory Authority, enter into an indenture or indentures
supplemental hereto (which shall conform to the provisions of the Trust
Indenture Act then in effect applicable to indentures qualified thereunder) for
the purpose of adding any provisions to

                                       43
<PAGE>

or changing in any manner or eliminating any of the provisions of this Indenture
or of any supplemental indenture or of modifying in any manner the rights of the
Holders of the Surplus Notes; provided, however, that no such supplemental
indenture shall, without the consent of the Holders of each Surplus Note, (i)
change the Stated Maturity of any such Surplus Note, or reduce the rate (or
change the manner of calculation of the rate) or change any date on which
interest thereon is payable, or reduce the principal amount thereof or any
premium thereon, or change any redemption or repayment date or period or price,
or make the principal thereof or any interest or premium thereon payable in any
coin or currency other than that provided in the Surplus Notes, or impair or
affect the right of any Securityholder to institute suit for payment thereof,
(ii) reduce the aforesaid percentage of Surplus Notes the Holders of which are
required to consent to any such supplemental indenture or (iii) otherwise
materially and adversely affect the interests of the Holders of any such Surplus
Note.

         Upon the request of the Company accompanied by a copy of a resolution
of the Board of Directors certified by its Secretary or Assistant Secretary
authorizing the execution of any such supplemental indenture, and upon the
filing with the Trustee of evidence of the consent of Securityholders as
aforesaid, the Trustee shall join with the Company in the execution of such
supplemental indenture unless such supplemental indenture affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise, in which
case the Trustee may in its discretion, but shall not be obligated to, enter
into such supplemental indenture. The Trustee may receive an Opinion of Counsel
as conclusive evidence that any supplemental indenture executed pursuant to this
Article is authorized or permitted by, and conforms to, the terms of this
Article and that it is proper for the Trustee under the provisions of this
Article to join in the execution thereof.

         Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of this Section, the Trustee
shall transmit by mail, first class postage prepaid, a notice, to be prepared by
the Company, setting forth in general terms the substance of such supplemental
indenture, to the Securityholders as their names and addresses appear upon the
Surplus Note Register. Any failure of the Trustee to mail such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any such supplemental indenture.

         It shall not be necessary for the consent of the Securityholders under
this Section 9.02 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.

         SECTION 9.03 Notation on Surplus Notes.

         Surplus Notes authenticated and delivered after the execution of any
supplemental indenture affecting the Surplus Notes pursuant to the provisions of
this Article IX may bear a notation in form approved by the Trustee as to any
matter provided for in such supplemental indenture. If the Company or the
Trustee shall so determine, new Surplus Notes so modified as to conform, in the
opinion of the Trustee and the Board of Directors, to any modification of this
Indenture contained in any such supplemental indenture may be prepared and
executed by the Company, authenticated by the Trustee or the Authenticating
Agent and delivered in exchange for the Surplus Notes then outstanding.

                                       44
<PAGE>

         SECTION 9.04 Evidence of Compliance of Supplemental Indenture to be
                      Furnished to Trustee.

         The Trustee, subject to the provisions of Sections 6.01 and 6.02, may
receive an Officers' Certificate and an Opinion of Counsel as conclusive
evidence that any supplemental indenture executed pursuant hereto complies with
the requirements of this Article IX.

                                   ARTICLE X
                CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE

         SECTION 10.01 Company May Consolidate, etc., on Certain Terms.

         Nothing contained in this Indenture or in any of the Surplus Notes
shall prevent any consolidation or merger of the Company with or into any other
Person (whether or not affiliated with the Company, as the case may be), or
successive consolidations or mergers in which the Company or its successor or
successors, as the case may be, shall be a party or parties, or shall prevent
any sale, conveyance, transfer or lease of the property of the Company, or its
successor or successors, as the case may be, as an entirety, or substantially as
an entirety, to any other Person (whether or not affiliated with the Company or
its successor or successors, as the case may be) authorized to acquire and
operate the same or prevent any conversion of the Company from a stock insurance
company to any other form of entity (any such action a "Conversion"); provided,
that (a) the Company is the surviving entity, or the entity formed by or
surviving any such consolidation, merger or Conversion (if other than the
Company) or to which such sale, conveyance, transfer or lease of property is
made is a corporation, partnership, trust or other entity organized and existing
under the laws of the United States or any State thereof or the District of
Columbia, (b) if the Company is not the surviving entity, upon any such
consolidation, merger, Conversion, sale, conveyance, transfer or lease, the due
and punctual payment of the principal of and interest on the Surplus Notes
according to their tenor, and the due and punctual performance and observance of
all the covenants and conditions of this Indenture to be kept or performed by
the Company shall be expressly assumed by the surviving entity, by supplemental
indenture (which shall conform to the provisions of the Trust Indenture Act as
then in effect applicable to indentures qualified thereunder) satisfactory in
form to the Trustee executed and delivered to the Trustee by the entity formed
by such consolidation or Conversion, or into which the Company shall have been
merged, or by the entity which shall have acquired such property, as the case
may be, (c) after giving effect to such consolidation, merger, Conversion, sale,
conveyance, transfer or lease, no Default or Event of Default shall have
occurred and be continuing, (d) immediately after such transaction, the
successor entity, as applicable, shall have an A.M. Best financial strength
rating equal to or higher than the rating assigned to the Company immediately
prior to the transaction; and (e) the Payment Restrictions to which the
successor entity, as applicable, is subject following such transaction, based on
its jurisdiction of domicile or otherwise, shall not be materially more
restrictive than those to which the Company was subject upon original issuance
of the Surplus Notes.

         SECTION 10.02 Successor Entity to be Substituted for Company.

         In case of any such consolidation, merger, Conversion, conveyance or
transfer and upon the assumption by the successor entity, by supplemental
indenture, executed and delivered to the

                                       45
<PAGE>

Trustee and satisfactory in form to the Trustee, of the due and punctual payment
of the principal of and premium, if any, and interest on all of the Surplus
Notes and the due and punctual performance and observance of all of the
covenants and conditions of this Indenture to be performed or observed by the
Company, such successor entity shall succeed to and be substituted for the
Company, with the same effect as if it had been named herein as the party of the
first part, and the Company thereupon shall be relieved of any further liability
or obligation hereunder or upon the Surplus Notes. Such successor entity
thereupon may cause to be signed, and may issue either in its own name or in the
name of the Company, any or all of the Surplus Notes issuable hereunder which
theretofore shall not have been signed by the Company and delivered to the
Trustee or the Authenticating Agent; and, upon the order of such successor
entity instead of the Company and subject to all the terms, conditions and
limitations in this Indenture prescribed, the Trustee or the Authenticating
Agent shall authenticate and deliver any Surplus Notes which previously shall
have been signed and delivered by the officers of the Company to the Trustee or
the Authenticating Agent for authentication, and any Surplus Notes which such
successor entity thereafter shall cause to be signed and delivered to the
Trustee or the Authenticating Agent for that purpose. All the Surplus Notes so
issued shall in all respects have the same legal rank and benefit under this
Indenture as the Surplus Notes theretofore or thereafter issued in accordance
with the terms of this Indenture as though all of such Indentures had been
issued at the date of the execution hereof.

         SECTION 10.03 Opinion of Counsel to be Given to Trustee.

         The Trustee, subject to the provisions of Sections 6.01 and 6.02, may
receive an Opinion of Counsel as conclusive evidence that any consolidation,
merger, Conversion, conveyance or transfer, and any assumption, permitted or
required by the terms of this Article X complies with the provisions of this
Article X.

                                   ARTICLE XI
                     SATISFACTION AND DISCHARGE OF INDENTURE

         SECTION 11.01 Discharge of Indenture.

         When (a) the Company shall deliver to the Trustee for cancellation all
Surplus Notes theretofore authenticated (other than any Surplus Notes which
shall have been destroyed, lost or stolen and which shall have been replaced or
paid as provided in Section 2.08) and not theretofore cancelled or (b) all the
Surplus Notes not theretofore cancelled or delivered to the Trustee for
cancellation shall have become due and payable, or are by their terms to become
due and payable within one year or are to be called for redemption within one
year under arrangements satisfactory to the Trustee for the giving of notice of
redemption, and the Company shall deposit with the Trustee, in trust,
immediately available funds sufficient to pay at maturity or upon redemption all
of the Surplus Notes (other than any Surplus Notes which shall have been
destroyed, lost or stolen and which shall have been replaced or paid as provided
in Section 2.08) not theretofore cancelled or delivered to the Trustee for
cancellation, including principal of, premium, if any, and interest due or to
become due to such date of maturity or redemption date, as the case may be, but
excluding, however, the amount of any moneys for the payment of principal of,
and premium, if any, or interest on the Surplus Notes (1) theretofore repaid to
the Company in accordance with the provisions of Section 11.04, or (2) paid to
any State or to the

                                       46
<PAGE>

District of Columbia pursuant to its unclaimed property or similar laws, and if,
in either case, the Company shall also pay or cause to be paid all other sums
payable hereunder by the Company, then this Indenture shall cease to be of
further effect, except that the provisions of Sections 2.05, 2.07, 2.08, 3.01,
3.02, 3.03, 3.05, 6.06, 6.10 and 11.04 hereof shall survive until such Surplus
Notes shall mature and be paid. Thereafter, Sections 6.06 and 11.04 shall
survive, and the Trustee, on demand of the Company accompanied by any Officers'
Certificate and an Opinion of Counsel and at the cost and expense of the
Company, shall execute proper instruments acknowledging satisfaction of and
discharging this Indenture, the Company, however, hereby agreeing to reimburse
the Trustee for any costs or expenses thereafter reasonably and properly
incurred by the Trustee in connection with this Indenture or the Surplus Notes.

         SECTION 11.02 Deposited Moneys to be Held in Trust by Trustee.

         Subject to the provisions of Section 11.04, all moneys deposited with
the Trustee pursuant to Section 11.01 shall be held in trust and applied by it
to the payment, either directly or through any paying agent (including the
Company if acting as its own paying agent), to the Holders of the particular
Surplus Notes for the payment of which such moneys have been deposited with the
Trustee, of all sums due and to become due thereon for principal, premium, if
any, and interest.

         SECTION 11.03 Paying Agent to Repay Moneys Held.

         Upon the satisfaction and discharge of this Indenture all moneys then
held by any paying agent of the Surplus Notes (other than the Trustee) shall,
upon written demand of the Company, be repaid to it or paid to the Trustee, and
thereupon such paying agent shall be released from all further liability with
respect to such moneys.

         SECTION 11.04 Return of Unclaimed Moneys.

         Any moneys deposited with or paid to the Trustee or any paying agent
for payment of the principal of, and premium, if any, or interest on Surplus
Notes and not applied but remaining unclaimed by the Holders of Surplus Notes
for two years after the date upon which the principal of, and premium, if any,
or interest on such Surplus Notes, as the case may be, shall have become due and
payable, shall be repaid to the Company by the Trustee or such paying agent on
written demand; and the Holder of any of the Surplus Notes shall thereafter look
only to the Company for any payment which such Holder may be entitled to collect
and all liability of the Trustee or such paying agent with respect to such
moneys shall thereupon cease.

                                  ARTICLE XII
                    IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
                    MEMBERS, PARTNERS, OFFICERS AND DIRECTORS

         SECTION 12.01 Indenture and Surplus Notes Solely Entity Obligations.

         No recourse for the payment of the principal of or premium, if any, or
interest on any Surplus Note, or for any claim based thereon or otherwise in
respect thereof, and no recourse under or upon any obligation, covenant or
agreement of the Company in this Indenture or in any supplemental indenture, or
in any Surplus Note, or because of the creation of any indebtedness

                                       47
<PAGE>

represented thereby, shall be had against any incorporator, stockholder, member,
partner, officer or director, as such, past, present or future, of the Company
or of any successor entity of the Company, either directly or through the
Company or any successor entity of the Company, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise; it being expressly understood that all such liability is
hereby expressly waived and released as a condition of, and as a consideration
for, the execution of this Indenture and the issue of the Surplus Notes.

                                  ARTICLE XIII
                            MISCELLANEOUS PROVISIONS

         SECTION 13.01 Successors.

         All the covenants, stipulations, promises and agreements in this
Indenture made by the Company shall bind its successors and assigns whether so
expressed or not.

         SECTION 13.02 Official Acts by Successor Entity.

         Any act or proceeding by any provision of this Indenture authorized or
required to be done or performed by any board, committee or officer of the
Company shall and may be done and performed with like force and effect by the
like board, committee or officer of any entity that shall at the time be the
lawful sole successor of the Company.

         SECTION 13.03 Surrender of Company Powers.

         The Company by instrument in writing executed by authority of at least
2/3 (two-thirds) of its Board of Directors and delivered to the Trustee may
surrender any of the powers reserved to the Company, and thereupon such power so
surrendered shall terminate both as to the Company and as to any successor
entity.

         SECTION 13.04 Addresses for Notices, etc.

         Any notice or demand which by any provision of this Indenture is
required or permitted to be given or served by the Trustee or by the Holders of
Surplus Notes on the Company may be given or served by being deposited postage
prepaid by first class mail in a post office letter box addressed (until another
address is filed by the Company with the Trustee for the purpose) to the
Company, SeaBright Insurance Company, 1 South Wacker Drive, Suite 2700, Chicago,
Illinois, 60606, Attention: Joseph De Vita. Any notice, direction, request or
demand by any Securityholder to or upon the Trustee shall be deemed to have been
sufficiently given or made, for all purposes, if given or made in writing at the
office of the Trustee, addressed to the Trustee, Wilmington Trust Company,
Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001,
Attention: Corporate Trust Administration.

         SECTION 13.05 Governing Law.

         THIS INDENTURE AND EACH SURPLUS NOTE SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES THEREOF (OTHER

                                       48
<PAGE>

THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW); PROVIDED, HOWEVER,
THAT THE APPLICABLE REGULATORY AUTHORITY'S EXERCISE OF REGULATORY AUTHORITY WITH
RESPECT TO THE COMPANY AND THE SURPLUS NOTES, INCLUDING APPROVAL OF THE FORM OF
AND PAYMENTS UNDER THE SURPLUS NOTES, SHALL BE GOVERNED BY AND IN ACCORDANCE
WITH THE LAWS OF THE JURISDICTION OF THE APPLICABLE REGULATORY AUTHORITY, AND
THE PARTIES SHALL SUBMIT ANY DISPUTES RELATED TO THE EXERCISE OF SUCH REGULATORY
AUTHORITY TO A COURT OF COMPETENT JURISDICTION IN SUCH JURISDICTION.

         SECTION 13.06 Submission to Jurisdiction.

         The Company and the Trustee each irrevocably and unconditionally
submits to the nonexclusive jurisdiction of the courts of the State of New York
and the federal courts of the United States located in the Borough of Manhattan,
The City of New York (and any courts having jurisdiction over appeals therefrom)
in respect of any action, suit or proceeding arising out of this Indenture or
the Surplus Notes or any of the transactions contemplated thereby and waives to
the extent permitted by law any objection to venue in respect thereof (based on
inconvenient forum or otherwise). Unless the Company or the Trustee, as the case
may be, maintains a registered agent in the State of New York, each such party
agrees that process in any such suit may be served by mailing the relevant
process, by registered or certified mail, return receipt requested, to the
address of such party then specified pursuant to Section 13.04.

         SECTION 13.07 Evidence of Compliance with Conditions Precedent.

         Upon any application or demand by the Company to the Trustee to take
any action under any of the provisions of this Indenture, the Company shall
furnish to the Trustee an Officers' Certificate stating that in the opinion of
the signers all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with and an Opinion of
Counsel stating that, in the opinion of such counsel, all such conditions
precedent have been complied with.

         Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
provided for in this Indenture shall include (1) a statement that the person
making such certificate or opinion has read such covenant or condition; (2) a
brief statement as to the nature and scope of the examination or investigation
upon which the statements or opinions contained in such certificate or opinion
are based; (3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and (4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.

         SECTION 13.08 Table of Contents, Headings, etc.

         The table of contents and the titles and headings of the articles and
sections of this Indenture have been inserted for convenience of reference only,
are not to be considered a part hereof, and shall in no way modify or restrict
any of the terms or provisions hereof.

                                       49
<PAGE>

         SECTION 13.09 Execution in Counterparts.

         This Indenture may be executed in any number of counterparts, each of
which shall be an original, but such counterparts shall together constitute but
one and the same instrument.

         SECTION 13.10 Separability.

         In case any one or more of the provisions contained in this Indenture
or in the Surplus Notes shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Indenture or of such Surplus
Notes, but this Indenture and such Surplus Notes shall be construed as if such
invalid or illegal or unenforceable provision had never been contained herein or
therein.

                                  ARTICLE XIV
                            REDEMPTION OF SECURITIES

         SECTION 14.01 Optional Redemption.

         The Surplus Notes are redeemable prior to their Stated Maturity at the
option of the Company (i) in whole or in part, from time to time, on or after
May 24, 2009 on an Interest Payment Date or (ii) at any time prior to May 24,
2009, in whole but not in part, upon the occurrence and continuation of a Tax
Event, in either case at a redemption price (the "Redemption Price") equal to
100% of the principal amount thereof, plus any interest thereon accrued to the
date of redemption (including any Unpaid Interest); provided (A) that any
Payment Restrictions applicable to any such redemption under (i) or (ii) above
have been satisfied, (B) that the Company may not exercise its option to redeem
with respect to a Tax Event unless it fixes, not later than 90 days after the
occurrence of such Tax Event, a date for such redemption and mails a notice
thereof to Holders pursuant to Section 14.02, and (C) that the Company may not
exercise its option to redeem with respect to a Tax Event unless it pays a
premium, in addition to the Redemption Price, in cash equal to the product of
(y) 100% of the outstanding principal amount of such Surplus Note, and (z) the
percentage specified below for the applicable date of redemption:

         Redemption During the 12-Month         Percentage of Principal Amount
            Period Beginning May 24,

                   2004                                     5%

                   2005                                     4%

                   2006                                     3%

                   2007                                     2%

                   2008                                     1%

             2009 and thereafter                            0%

                                       50
<PAGE>

         SECTION 14.02 Notice of Redemption; Selection of Surplus Notes.

         In case the Company shall desire to exercise the right to redeem all,
or, as the case may be, any part of the Surplus Notes in accordance with their
terms, it shall fix a date for redemption and shall mail a notice of such
redemption at least 30 and not more than 60 days prior to the date fixed for
redemption to the Holders of Surplus Notes so to be redeemed as a whole or in
part at their last addresses as the same appear on the Surplus Note Register,
with a copy to the Trustee. Such mailing shall be by first class mail. The
notice if mailed in the manner herein provided shall be conclusively presumed to
have been duly given, whether or not the Holder receives such notice. In any
case, failure to give such notice by mail or any defect in the notice to the
Holder of any Surplus Note designated for redemption as a whole or in part shall
not affect the validity of the proceedings for the redemption of any other
Surplus Note.

         Each such notice of redemption shall identify the Surplus Notes to be
redeemed (including CUSIP number), specify the date fixed for redemption, the
redemption price and premium, if any, at which Surplus Notes are to be redeemed,
the place or places of payment, that payment will be made upon presentation and
surrender of such Surplus Notes, that interest accrued to the date fixed for
redemption will be paid as specified in said notice and that on and after said
date interest thereon or on the portions thereof to be redeemed will cease to
accrue. If less than all the Surplus Notes are to be redeemed the notice of
redemption shall specify the numbers of the Surplus Notes to be redeemed. In
case any Surplus Note is to be redeemed in part only, the notice of redemption
shall state the portion of the principal amount thereof to be redeemed and shall
state that on and after the date fixed for redemption, upon surrender of such
Surplus Note, a new Surplus Note or Surplus Notes in principal amount equal to
the unredeemed portion thereof will be issued.

         Prior to 10:00 a.m. New York City time on the redemption date specified
in the notice of redemption given as provided in this Section, the Company will
deposit with the Trustee or with one or more paying agents an amount of money
sufficient to redeem on the redemption date all the Surplus Notes so called for
redemption at the appropriate redemption price and premium, if any, together
with accrued interest to the date fixed for redemption.

         If the Surplus Notes are to be redeemed, the Company will give the
Trustee notice not less than 60 days prior to the redemption date as to the
aggregate principal amount of Surplus Notes to be redeemed and, in the case of a
partial redemption, the Trustee shall select, in such manner as in its sole
discretion it shall deem appropriate and fair, the Surplus Notes or portions
thereof (in integral multiples of $1,000) to be redeemed.

         SECTION 14.03 Payment of Surplus Notes Called for Redemption.

         If notice of redemption has been given as provided in Section 14.02,
the Surplus Notes or portions of Surplus Notes with respect to which such notice
has been given shall become due and payable on the date and at the place or
places stated in such notice at the applicable redemption price and premium, if
any, together with interest accrued to the date fixed for redemption, and on

                                       51
<PAGE>

and after said date (unless the Company shall default in the payment of such
Surplus Notes at the redemption price and premium, if any, together with
interest accrued to said date) interest on the Surplus Notes or portions of
Surplus Notes so called for redemption shall cease to accrue. On presentation
and surrender of such Surplus Notes at a place of payment specified in said
notice, the said Surplus Notes or the specified portions thereof shall be paid
and redeemed by the Company at the applicable redemption price and premium, if
any, together with interest accrued thereon to the date fixed for redemption.

         Upon presentation of any Surplus Note redeemed in part only, the
Company shall execute and the Trustee shall authenticate and deliver to the
Holder thereof, at the expense of the Company, a new Surplus Note or Surplus
Notes of authorized denominations, in principal amount equal to the unredeemed
portion of the Surplus Note so presented.

                                   ARTICLE XV
                           SUBORDINATION OF SECURITIES

         SECTION 15.01 Agreement to Subordinate.

         The Company covenants and agrees, and each Holder of Surplus Notes
issued hereunder, by such Securityholder's acceptance thereof, likewise
covenants and agrees, that all Surplus Notes shall be issued subject to the
provisions of this Article XV; and each Holder of a Surplus Note, whether upon
original issue or upon transfer or assignment thereof, accepts and agrees to be
bound by such provisions.

         The payment by the Company of the principal of, premium, if any, and
interest on all Surplus Notes issued hereunder shall, to the extent and in the
manner hereinafter set forth, be subordinated and junior in right of payment to
the prior payment in full of all Senior Indebtedness and Senior Claims of the
Company, whether outstanding at the date of this Indenture or thereafter
incurred.

         No provision of this Article XV shall prevent the occurrence of any
Default or Event of Default hereunder.

         SECTION 15.02 Default on Senior Indebtedness.

         No payment may be made of the principal of, premium, if any, or
interest on the Surplus Notes, or in respect of any redemption, retirement,
purchase or other acquisition of any of the Surplus Notes, at any time when (i)
there is a default, after giving effect to any applicable grace period, in the
payment of the principal of, premium, if any, interest on or otherwise in
respect of any Senior Indebtedness, whether at maturity or at a date fixed for
prepayment or by declaration or otherwise, or (ii) the maturity of any Senior
Indebtedness of the Company has been accelerated because of a default and such
acceleration has not been rescinded or canceled and such Senior Indebtedness has
not been paid in full.

         In the event that, notwithstanding the foregoing, any payment shall be
received by the Trustee when such payment is prohibited by the preceding
paragraph of this Section 15.02, such payment shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of Senior
Indebtedness or their respective representatives, or to the trustee or trustees

                                       52
<PAGE>

under any indenture pursuant to which any of such Senior Indebtedness may have
been issued, as their respective interests may appear, but only to the extent
that the holders of the Senior Indebtedness (or their representative or
representatives or a trustee) notify the Trustee in writing within 90 days of
such payment of the amounts then due and owing on the Senior Indebtedness and
only the amounts specified in such notice to the Trustee shall be paid to the
holders of Senior Indebtedness.

         SECTION 15.03 Liquidation; Dissolution; Rehabilitation, Conservation.

         Subject to the provisions and requirements of the Insolvency Laws, upon
any payment by the Company or distribution of assets of the Company of any kind
or character, whether in cash, property or securities, to creditors upon any
dissolution, liquidation, rehabilitation or conservation of the Company, whether
voluntary or involuntary or in insolvency, receivership or other proceedings,
all amounts due upon all Senior Indebtedness and Senior Claims of the Company
shall first be paid in full, or payment thereof provided for in money in
accordance with their terms, before any payment is made by the Company on
account of the principal or interest on the Surplus Notes; and upon any such
dissolution, liquidation, rehabilitation or conservation, any payment by the
Company, or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, which the Securityholders or the
Trustee would be entitled to receive from the Company, except under the
provisions of this Article XV, shall subject to the provisions and requirements
of the Insolvency Laws be paid by the Company or by any receiver, liquidating
trustee, agent or other Person making such payment or distribution, or by the
Securityholders or by the Trustee under the Indenture if received by them or it,
directly to the holders of Senior Indebtedness of the Company (pro rata to such
holders on the basis of the respective amounts of Senior Indebtedness held by
such holders, as calculated by the Company) or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing such Senior Indebtedness may have been issued,
as their respective interests may appear, to the extent necessary to pay such
Senior Indebtedness in full, in money or money's worth, after giving effect to
any concurrent payment or distribution to or for the holders of such Senior
Indebtedness, before any payment or distribution is made to the Securityholders
or to the Trustee.

         In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, prohibited by the foregoing, shall be received by the
Trustee before all Senior Indebtedness of the Company is paid in full, or
provision is made for such payment in money in accordance with its terms, such
payment or distribution shall be held in trust for the benefit of and shall be
paid over or delivered to the holders of such Senior Indebtedness or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Senior Indebtedness
may have been issued, as their respective interests may appear, as calculated by
the Company, in each case, for application to the payment of all Senior
Indebtedness of the Company remaining unpaid to the extent necessary to pay such
Senior Indebtedness in full in money in accordance with its terms, after giving
effect to any concurrent payment or distribution to or for the benefit of the
holders of such Senior Indebtedness.

         For purposes of this Article XV, the words "cash, property or
securities" shall not be deemed to include (a) shares of stock of the Company as
reorganized or readjusted, or (b)

                                       53
<PAGE>

securities of the Company or any other entity provided for by a plan of
reorganization or readjustment, the payment of which is subordinated at least to
the extent provided in this Article XV with respect to the Surplus Notes to the
payment of all Senior Indebtedness of the Company that may at the time be
outstanding, provided, in each case, that (i) all Senior Indebtedness of the
Company is assumed by the new entity, if any, resulting from any such
reorganization or readjustment, and (ii) the rights of the holders of such
Senior Indebtedness are not, without the consent of such holders, altered by
such reorganization or readjustment. The Conversion of the Company, the
consolidation of the Company with, or the merger of the Company into, another
entity or the liquidation or dissolution of the Company following the conveyance
or transfer of its property as an entirety, or substantially as an entirety, to
another Person upon the terms and conditions provided for in Article X of this
Indenture shall not be deemed a dissolution, liquidation, rehabilitation or
conservation for the purposes of this Section 15.03 if such other Person shall,
as a part of such Conversion, consolidation, merger, conveyance or transfer,
comply with the conditions stated in Article X of this Indenture. Nothing in
Section 15.02 or in this Section 15.03 shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 6.06 of this Indenture.

         SECTION 15.04 Subrogation of Securityholders.

         Subject to the payment in full of all Senior Claims and Senior
Indebtedness of the Company, the Securityholders shall be subrogated to the
rights of the Persons to whom the Company is obligated under the Senior Claims
(the "Senior Claim Holders") and to the holders of the Senior Indebtedness to
receive payments or distributions of cash, property or securities of the
Company, as the case may be, applicable to such Senior Claims or Senior
Indebtedness, as applicable, until all amounts owing on the Surplus Notes shall
be paid in full; and, for the purposes of such subrogation, no payments or
distributions to the Senior Claim Holders and the holders of such Senior
Indebtedness of any cash, property or securities to which the Securityholders or
the Trustee would be entitled except under the provisions of this Article XV,
and no payment over pursuant to the provisions of this Article XV to or for the
benefit of the Senior Claim Holders and the holders of such Senior Indebtedness
by Securityholders or the Trustee, shall, as between the Company, its creditors
(other than Senior Claim Holders and the holders of Senior Indebtedness of the
Company), and the Holders of the Surplus Notes, be deemed to be a payment by the
Company to or on account of such Senior Claims or Senior Indebtedness, as
applicable. It is understood that the provisions of this Article XV are and are
intended solely for the purposes of defining the relative rights of the Holders
of the Surplus Notes, on the one hand, and the holders of such Senior Claims and
Senior Indebtedness, on the other hand.

         Nothing contained in this Article XV or elsewhere in this Indenture or
in the Surplus Notes is intended to or shall impair, as between the Company, its
creditors (other than the Senior Claim Holders and the holders of Senior
Indebtedness of the Company), and the Holders of the Surplus Notes, the
obligation of the Company, which is absolute and unconditional, to pay to the
Holders of the Surplus Notes the principal of, premium, if any, and interest on,
the Surplus Notes as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the Holders of the Surplus Notes and creditors of the Company, as the
case may be, other than the Senior Claim Holders and the holders of Senior
Indebtedness of the Company, as the case may be, nor shall anything herein or
therein prevent

                                       54
<PAGE>

the Trustee or the Holder of any Surplus Note from exercising
all remedies otherwise permitted by applicable law upon default under the
Indenture, subject to the rights, if any, under this Article XV of the Senior
Claim Holders and the holders of such Senior Indebtedness in respect of cash,
property or securities of the Company, as the case may be, received upon the
exercise of any such remedy.

         Upon any payment or distribution of assets of the Company referred to
in this Article XV, the Trustee, subject to the provisions of Article VI of this
Indenture, and the Securityholders shall be entitled to conclusively rely upon
any order or decree made by any Applicable Regulatory Authority or court of
competent jurisdiction in which such dissolution, liquidation, rehabilitation or
conservation proceedings are pending, or a certificate of the receiver,
liquidation trustee, agent or other Person making such payment or distribution,
delivered to the Trustee or to the Securityholders, for the purposes of
ascertaining (i) the Persons entitled to participate in such payment or
distribution, (ii) the Senior Claim Holders and the holders of Senior
Indebtedness and other indebtedness of the Company, (iii) the amount of any
payment or distribution made or payable to any such Persons, and (iv) all other
facts pertinent thereto or to this Article XV in connection therewith.

         Notwithstanding any other provision herein, the subrogation rights,
obligations and agreements set forth in this Article XV shall at all times be
subject to the provisions and requirements of the Insolvency Laws.

SECTION 15.05     Trustee to Effectuate Subordination.

         Each Securityholder by such Securityholder's acceptance thereof
authorizes and directs the Trustee on such Securityholder's behalf to take such
action as may be necessary or appropriate to effectuate the subordination
provided in this Article XV and appoints the Trustee such Securityholder's
attorney-in-fact for any and all such purposes.

SECTION 15.06     Notice by the Company.

         The Company shall give prompt written notice to a Responsible Officer
of any fact known to the Company that would prohibit the making of any payment
of monies to or by the Trustee in respect of the Surplus Notes pursuant to the
provisions of this Article XV. Notwithstanding the provisions of this Article XV
or any other provision of this Indenture, the Trustee shall not be charged with
knowledge of the existence of any facts that would prohibit the making of any
payment of monies to or by the Trustee in respect of the Surplus Notes pursuant
to the provisions of this Article XV, unless and until a Responsible Officer
shall have received written notice thereof from the Company or a holder or
holders of Senior Indebtedness or from any trustee therefor or the Applicable
Regulatory Authority; and before the receipt of any such written notice, the
Trustee, subject to the provisions of Article VI of this Indenture, shall be
entitled in all respects to assume that no such facts exist; provided, however,
that if the Trustee shall not have received the notice provided for in this
Section 15.06 at least two Business Days prior to the date upon which by the
terms hereof any money may become payable for any purpose (including, without
limitation, the payment of the principal of or interest on any Surplus Note),
then, anything herein contained to the contrary notwithstanding, the Trustee
shall have full power and authority to receive such money and to apply the same
to the purposes for which

                                       55

<PAGE>

they were received, and shall not be affected by any notice to the contrary that
may be received by it within two Business Days prior to such date.

         The Trustee, subject to the provisions of Article VI of this Indenture,
shall be entitled to conclusively rely on the delivery to it of a written notice
by a Person representing himself or herself to be a holder of Senior
Indebtedness of the Company, as the case may be (or a trustee on behalf of such
holder), to establish that such notice has been given by a holder of such Senior
Indebtedness or a trustee on behalf of any such holder or holders. In the event
that the Trustee determines in good faith that further evidence is required with
respect to the right of any Person as a holder of such Senior Indebtedness to
participate in any payment or distribution pursuant to this Article XV, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of such Senior Indebtedness held by
such Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article XV, and, if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.

SECTION 15.07 Rights of the Trustee; Holders of Senior Indebtedness.

         The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article XV in respect of any Senior Indebtedness or
Senior Claim at any time held by it, to the same extent as any other holder of
Senior Indebtedness or Senior Claim Holder and nothing in this Indenture shall
deprive the Trustee of any of its rights as such holder.

         Nothing in this Article XV shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 6.06.

         With respect to the Senior Claim Holders and the holders of Senior
Indebtedness of the Company, the Trustee undertakes to perform or to observe
only such of its covenants and obligations as are specifically set forth in this
Article XV, and no implied covenants or obligations with respect to the Senior
Claim Holders and the holders of such Senior Indebtedness shall be read into
this Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the Senior Claim Holders and the holders of such Senior
Indebtedness and, subject to the provisions of Article VI of this Indenture, the
Trustee shall not be liable to any Senior Claim Holder or any holder of such
Senior Indebtedness if it shall pay over or deliver to Securityholders, the
Company or any other Person money or assets to which any Senior Claim Holder or
any holder of such Senior Indebtedness shall be entitled by virtue of this
Article XV or otherwise.

SECTION 15.08     Subordination May Not Be Impaired.

         No right of any present or future Senior Claim Holder or holder of any
Senior Indebtedness of the Company to enforce subordination as herein provided
shall at any time in any way be prejudiced or impaired by any act or failure to
act on the part of the Company or by any act or failure to act, in good faith,
by any such holder, or by any noncompliance by the Company with the terms,
provisions and covenants of this Indenture, regardless of any knowledge thereof
that any such holder may have or otherwise be charged with.

                                       56

<PAGE>

         Without in any way limiting the generality of the foregoing paragraph,
the Senior Claim Holders and the holders of Senior Indebtedness of the Company
may, at any time and from time to time, without the consent of or notice to the
Trustee or the Securityholders, without incurring responsibility to the
Securityholders and without impairing or releasing the subordination provided in
this Article XV or the obligations hereunder of the Holders of the Surplus Notes
to the Senior Claim Holders and the holders of such Senior Indebtedness do any
one or more of the following: (i) change the manner, place or terms of payment
or extend the time of payment of, or renew or alter, such Senior Indebtedness,
or otherwise amend or supplement in any manner such Senior Indebtedness or any
instrument evidencing the same or any agreement under which such Senior
Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with
any property pledged, mortgaged or otherwise securing such Senior Indebtedness;
(iii) release any Person liable in any manner for the collection of such Senior
Indebtedness; and (iv) exercise or refrain from exercising any rights against
the Company or any other Person.

         Wilmington Trust Company hereby accepts the trusts in this Indenture
declared and provided, upon the terms and conditions hereinabove set forth.

                                       57

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed by their respective officers or agents thereunto duly authorized,
all as of the day and year first above written.

                                    SEABRIGHT INSURANCE COMPANY
Attest:

/s/ Joseph De Vita                  By:    /s/ Richard J. Gergasko
---------------------                      -------------------------------------
Name:  Joseph De Vita                      Name:  Richard J. Gergasko
Title: Secretary                           Title: Executive Vice President

                                    WILMINGTON TRUST COMPANY,
                                    as Trustee

                                    By:    /s/ W. Chris Sponenberger
                                           -------------------------------------
                                           Name:  W. Chris Sponenberger
                                           Title:

                                       58

<PAGE>

                                                                      EXHIBIT A

                             [FORM OF SURPLUS NOTE]

                                 (FORM OF FACE)

         THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS OR ANY OTHER
APPLICABLE SECURITIES LAWS. 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. THE HOLDER OF THIS SECURITY OR ANY INTEREST
OR PARTICIPATION HEREIN, BY ITS ACCEPTANCE HEREOF OR THEREOF, AS THE CASE MAY
BE, AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY OR ANY INTEREST OR
PARTICIPATION HEREIN PRIOR TO THE DATE WHICH IS THE LATER OF (I) TWO YEARS (OR
SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(K) UNDER THE SECURITIES
ACT) AFTER THE LATER OF (Y) THE DATE OF ORIGINAL ISSUANCE HEREOF AND (Z) THE
LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE (AS DEFINED IN RULE 405 UNDER
THE SECURITIES ACT) OF THE COMPANY WAS THE HOLDER OF THIS SECURITY OR SUCH
INTEREST OR PARTICIPATION (OR ANY PREDECESSOR THERETO) AND (II) SUCH LATER DATE,
IF ANY, AS MAY BE REQUIRED BY ANY SUBSEQUENT CHANGE IN APPLICABLE LAW, ONLY (A)
TO THE COMPANY, (B) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE
144A"), TO A PERSON THE HOLDER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER", AS DEFINED IN RULE 144A, THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) PURSUANT TO AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT TO AN "ACCREDITED
INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A) (1), (2), (3), (7) OR (8) OF
RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS SECURITY OR SUCH
INTEREST OR PARTICIPATION FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, (D) PURSUANT TO OFFERS AND SALES TO NON-US PERSONS THAT OCCUR
OUTSIDE THE UNITED STATES PURSUANT TO REGULATION S UNDER THE SECURITIES ACT OR
(E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S RIGHT PRIOR TO ANY SUCH OFFER,
SALE OR TRANSFER PURSUANT TO CLAUSE (C) OR (E) ABOVE TO REQUIRE THE DELIVERY OF
AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT
IN ACCORDANCE WITH THE

<PAGE>

INDENTURE, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY. THE HOLDER OF THIS
SECURITY OR ANY INTEREST OR PARTICIPATION HEREIN, BY ITS ACCEPTANCE HEREOF OR
THEREOF, AS THE CASE MAY BE, AGREES THAT IT WILL COMPLY WITH THE FOREGOING
RESTRICTIONS.

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

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

         THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN MINIMUM
DENOMINATIONS OF $100,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF. ANY
ATTEMPTED TRANSFER OF THIS SECURITY IN DENOMINATIONS OF LESS THAN $100,000 SHALL
BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH PURPORTED
TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF THIS SECURITY OR ANY

<PAGE>

INTEREST OR PARTICIPATION HEREIN FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO,
THE RECEIPT OF DISTRIBUTIONS ON THIS SECURITY OR SUCH INTEREST OR PARTICIPATION,
AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN
THIS SECURITY OR ANY INTEREST OR PARTICIPATION HEREIN.

         ALL PAYMENTS OF INTEREST ON AND REPAYMENT OF PRINCIPAL AND PREMIUM, IF
ANY, OF THIS SURPLUS NOTE, TO THE EXTENT REQUIRED UNDER APPLICABLE LAW, MAY BE
MADE ONLY WITH THE PRIOR APPROVAL OF THE APPLICABLE REGULATORY AUTHORITY (AS
DEFINED IN THE INDENTURE). THERE ARE NO SPECIFIC LIMITATIONS ON THE EXTENT OF
THE APPLICABLE REGULATORY AUTHORITY'S DISCRETION IN DETERMINING WHETHER THE
FINANCIAL CONDITION OF THE COMPANY WARRANTS THE PAYMENT OF SUCH PAYMENTS.

No. 1

                           SEABRIGHT INSURANCE COMPANY
                       FLOATING RATE SURPLUS NOTE DUE 2034

$12,000,000

         SeaBright Insurance Company, a stock insurance company domiciled in
Illinois (the "Company", which term includes any successor entity under the
Indenture hereinafter referred to), for value received, hereby promises to pay
to JPMorgan Chase Bank as Trustee for the benefit of ICONS, Ltd. or registered
assigns, the principal sum of twelve million dollars ($12,000,000) on May 24,
2034, unless redeemed by the Company prior to the Stated Maturity in accordance
with the terms specified herein and in the Indenture. Capitalized terms used
herein and not otherwise defined shall have the meanings assigned to such terms
in the Indenture. The Company further promises to pay interest on said principal
sum from May 26, 2004, or from the most recent Interest Payment Date (as defined
below) to which interest has been paid or duly provided for, quarterly in
arrears on February 24, May 24, August 24 and November 24 of each year
commencing August 24, 2004 (each, an "Interest Payment Date"), at a rate per
annum with respect to such Interest Payment Period (the "Interest Rate") equal
to LIBOR as determined on the Determination Date with respect to such Interest
Payment Period, plus 4.00% (provided, that, (i) pursuant to Applicable Insurance
Laws, in no event shall the Interest Rate exceed the Interest Rate for the first
Interest Payment Period hereunder by more than 10% per annum, (ii) pursuant to
the Applicable Insurance Laws, the Interest Rate for any Interest Payment Period
may not exceed the corporate base rate determined on the first Business Day of
each month during the term of the Surplus Note plus 2% per annum, and (iii) the
Interest Rate for any Interest Payment Period shall not exceed the highest rate
permitted by New York law, as the same may be modified by United States law of
general applicability) until the principal hereof shall have become due and
payable, and on any overdue principal and (to the extent enforceable under
applicable law) on any overdue interest (other than interest that is not paid as
a result of a Payment Restriction) at the then applicable Interest Rate,
compounded quarterly. FOR THE AVOIDANCE OF DOUBT, NO INTEREST SHALL ACCRUE OR BE
PAYABLE ON ANY

                                       3

<PAGE>

PAYMENT OF INTEREST THAT IS NOT MADE WHEN DUE AS A RESULT OF A PAYMENT
RESTRICTION.

         The amount of interest payable on any Interest Payment Date shall be
computed on the basis of a 360-day year and the actual number of days elapsed in
such Interest Payment Period.

         In the event that any Interest Payment Date is not a Business Day, then
any interest payable on such date will be paid on, and such Interest Payment
Date will be moved to, the next succeeding Business Day, and additional interest
will accrue for each day that such payment is delayed as a result thereof,
except that, if such next Business Day is in the next succeeding calendar month,
such payment shall be made on the preceding Business Day, in each case with the
same force and effect as if made on the date such payment otherwise would have
been payable; provided, however, that in the event that the Stated Maturity date
or earlier redemption date is not a Business Day, then payment of principal,
premium, if any, and interest payable on such date will be made on the next
Business Day (and without any additional accrual of interest or other payment in
respect of any such delay).

         The interest installment so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in the Indenture,
be paid to the Person in whose name this Surplus Note (or one or more
Predecessor Surplus Notes) is registered at the close of business on the
relevant record dates, which will be the fifteenth calendar day preceding the
relevant Interest Payment Date. Any such interest installment not punctually
paid or duly provided for shall forthwith cease to be payable to the Holders on
such regular record date and may be paid to the Person in whose name this
Surplus Note (or one or more Predecessor Surplus Notes) is registered at the
close of business on a special record date to be fixed by the Trustee for the
payment of such unpaid interest, notice whereof shall be given to the Holders of
Surplus Notes not less than 10 days prior to such special record date, or may be
paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which such Surplus Notes may be
listed, and upon such notice as may be required by such exchange, all as more
fully provided in the Indenture.

         The principal of and the interest on this Surplus Note shall be payable
at the office or agency of the Trustee maintained for that purpose in
Wilmington, Delaware in any coin or currency of the United States of America
that at the time of payment is legal tender for payment of public and private
debts; provided, however, that payment of interest on an Interest Payment Date
may be made at the option of the Company by check mailed to the Holder at such
address as shall appear in the Surplus Note Register or by wire transfer to an
account appropriately designated by the Holder entitled thereto, while payments
due at Stated Maturity or earlier redemption will be made by the Company in
same-day funds against presentation and surrender of this Surplus Note.
Notwithstanding the foregoing, so long as the Holder of this Surplus Note is
ICONS or a trustee of ICONS, the payment of the principal of, premium, if any,
and interest on this Surplus Note will be made by the Company in same-day funds
at such place and to such account as may be designated by ICONS or a trustee of
ICONS.

         The indebtedness evidenced by this Surplus Note is, to the extent
provided in the Indenture, subordinate and junior in right of payment to the
prior payment in full of all Senior Claims and Senior Indebtedness and this
Surplus Note is issued subject to the provisions of the

                                       4

<PAGE>

Indenture with respect thereto. Each Holder of this Surplus Note, by accepting
the same, (a) agrees to and shall be bound by such provisions, (b) authorizes
and directs the Trustee on his or her behalf to take such action as may be
necessary or appropriate to acknowledge or effectuate the subordination so
provided and (c) appoints the Trustee his or her attorney-in-fact for any and
all such purposes. Each Holder hereof, by his or her acceptance hereof, hereby
waives all notice of the acceptance of the subordination provisions contained
herein and in the Indenture by each holder of Senior Claims or Senior
Indebtedness, whether now outstanding or hereafter incurred, and waives reliance
by each such holder upon said provisions.

         Each Holder hereof, by his or her acceptance hereof, hereby agrees to
treat this Surplus Note as indebtedness for all United States federal income tax
purposes.

         Payments under this Surplus Note shall be subject to the following
terms and conditions:

         (a) If and to the extent required under Applicable Insurance Laws for
the Company to be permitted to report in its financial statements filed with the
Applicable Regulatory Authority the outstanding amounts under the Surplus Notes
as constituting part of the Company's policyholders' surplus, any payment of
interest on and/or principal and premium, if any, of this Surplus Note, may be
made only from the Available Amount of the Company (i) with the prior approval
of the Applicable Regulatory Authority or (ii) to the extent that such payment
is otherwise permitted under the Applicable Insurance Laws (the foregoing
conditions are referred to herein as the "Payment Restrictions"). The obligation
of the Company under this Surplus Note shall not be offset or be subject to
recoupment with respect to any liability or obligation owed to the Company and
no agreement or interest securing this Surplus Note, whether existing on the
date of authentication of the Surplus Note or subsequently entered into, shall
apply to the obligation of the Company under this Surplus Note. The Company
covenants that it shall use its best efforts to obtain the approval of the
Applicable Regulatory Authority to make payments under this Surplus Note on or
prior to the date on which any such payment shall otherwise become due and
payable.

         (b) To the extent that a payment of all or a portion of the principal
and premium, if any, of this Surplus Note or interest thereon is prohibited by
any Payment Restriction, interest shall continue to be accrued on such unpaid
principal amount and premium, if any, and shall be paid at the rate provided in
this Surplus Note.

         (c) Except as provided in (a) and (b) above, no provision of this
Surplus Note shall impair the obligations of the Company, which are absolute and
unconditional, to pay the principal and premium, if any, of and interest on this
Surplus Note at the times, place and rate, and in the coin or currency,
prescribed in this Surplus Note. No provision of this Surplus Note or the
Indenture shall extinguish the Company's liability for the payment of principal
and interest.

         (d) If the Applicable Regulatory Authority approves a payment of
principal and premium, if any, or interest in any amount that is less than the
full amount of the principal and premium, if any, or interest, as applicable,
then scheduled to be paid in respect of the Surplus Notes, payment of such
partial amount shall be made pro rata among Securityholders based on the
relative outstanding principal amount of Surplus Notes held by each
Securityholder.

                                       5

<PAGE>

        (e) Until such time as the Company shall receive the approval of the
Applicable Regulatory Authority for a payment under this Surplus Note, the
obligation of the Company to make such payment shall not form a part of the
Company's legal liabilities and shall not be a basis of any set off. Until
repaid, all statements published or filed with the Applicable Regulatory
Authority by the Company shall show all outstanding principal amounts under the
Surplus Notes in accordance with the Applicable Insurance Laws.

        (f) Notwithstanding any other provision contained herein, the Company
shall not be required to make any payment of interest on the Surplus Note for
any Interest Payment Period that is in excess of the Regulatory Interest
Limitation, if any, applicable to such Interest Payment Period. In calculating
the Interest Rate for any Interest Payment Period, in the event that there is
any Excess Interest as of such Interest Payment Period, the Interest Rate shall
be increased, to the extent necessary, but subject to any Regulatory Interest
Limitation applicable to such Interest Payment Period, such that the amount of
interest payable for such Interest Payment Period is increased by the amount of
Excess Interest.

         "Excess Interest" means the cumulative amount of interest on the
Surplus Note, if any, that is not paid as a result of any Regulatory Interest
Limitations, minus the amount of interest paid on the Surplus Note as a result
of adjustments to the Interest Rate to account for Excess Interest.

         "Regulatory Interest Limitation" means any cap or other limitation on
the rate or amount of interest that may be paid on the Surplus Notes pursuant to
Applicable Insurance Laws, including but not limited to 215 ILCS 5/34.1, or any
order or approval letter relating to the initial issuance by the Company of a
Surplus Note hereunder.

         (g) In the event of the rehabilitation, liquidation, conservation or
dissolution of the Company, the claims under this Surplus Note shall be paid out
of any assets remaining after the payment of all Senior Claims and all Senior
Indebtedness.

         (h) In the event that the Company undergoes a Conversion, consolidates
or merges into another entity or transfers substantially all of its assets or
capital stock to another entity, the entity into which the Company converts,
merges or consolidates or into which the assets of the Company are transferred
shall assume the liability of the Company hereunder.

         The Company waives diligence, presentment (other than presentment upon
Stated Maturity), demand for payment, notice of nonpayment, notice of protest,
and all other demands and notices.

         This Surplus Note shall not be entitled to any benefit under the
Indenture or be valid or become obligatory for any purpose until the Certificate
of Authentication hereon shall have been signed by or on behalf of the Trustee.

         The provisions of this Surplus Note are continued on the reverse side
hereof and such continued provisions shall for all purposes have the same effect
as though fully set forth at this place.

                                       6

<PAGE>

         IN WITNESS WHEREOF, the Company has caused this instrument to be
executed.

                                                   SEABRIGHT INSURANCE COMPANY

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

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

                                       7

<PAGE>

                     (FORM OF CERTIFICATE OF AUTHENTICATION)
                          CERTIFICATE OF AUTHENTICATION

Dated:  [o], 2004

         This is one of the Surplus Notes referred to in the within-mentioned
Indenture.

WILMINGTON TRUST COMPANY,
as Trustee

By:
          -----------------------------------------------------
                    Authorized Signatory

<PAGE>

                        (FORM OF REVERSE OF SURPLUS NOTE)

         This Surplus Note is issued under and pursuant to an indenture, dated
as of May 26, 2004, duly executed and delivered between the Company and
Wilmington Trust Company, as trustee (the "Trustee") (such indenture as amended
or supplemented from time to time, the "Indenture"). The Surplus Notes of which
this Surplus Note is a part are entitled the "Floating Rate Surplus Notes due
2034" (the "Surplus Notes"). These Surplus Notes are limited in aggregate
principal amount to $12,000,000, as specified in said Indenture. Reference is
hereby made to the Indenture and all indentures supplemental thereto for a
description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Trustee, the Company and the Holders of the Surplus
Notes.

         This Surplus Note is redeemable prior to its Stated Maturity by the
Company (i) in whole or in part, from time to time, on or after May 24, 2009 on
an Interest Payment Date or (ii) at any time prior to May 24, 2009, in whole but
not in part, upon the occurrence and continuation of a Tax Event. Any redemption
pursuant to this paragraph will be made, upon not less than 30 days nor more
than 60 days' prior written notice, at a redemption price (the "Redemption
Price") equal to 100% of the principal amount thereof, plus any interest thereon
accrued to the date of redemption (including any Unpaid Interest); provided (A)
that any Payment Restrictions applicable to any such redemption under (i) or
(ii) above have been satisfied, (B) that the Company may not exercise its option
to redeem with respect to a Tax Event unless it fixes, not later than 90 days
after the occurrence of such Tax Event, a date for such redemption and mails a
notice thereof to Holders, and (C) that the Company may not exercise its option
to redeem with respect to a Tax Event unless it pays a premium, in addition to
the Redemption Price, in cash equal to the product of (y) 100% of the
outstanding principal amount of such Surplus Note, and (z) the percentage
specified below for the applicable date of redemption:

  Redemption During the 12-Month         Percentage of Principal Amount
     Period Beginning May 24,

               2004                                5%

               2005                                4%

               2006                                3%

               2007                                2%

               2008                                1%

        2009 and thereafter                        0%

         The Redemption Price and premium, if any, shall be paid prior to 10:00
a.m., New York City time, on the date of such redemption or at such earlier time
as the Company determines. If

                                       2

<PAGE>

the Surplus Notes are only partially redeemed by the Company, the Surplus Notes
will be redeemed pro rata or by lot or by any other method utilized by the
Trustee (in integral multiples of $1,000).

         In the event of redemption of this Surplus Note in part only, a new
Surplus Note or Surplus Notes for the unredeemed portion hereof will be issued
in the name of the Holder hereof upon the cancellation hereof.

         In case an Event of Default shall have occurred and be continuing, the
principal of all of the Surplus Notes may be declared, and upon such declaration
shall become, due and payable, in the manner, with the effect and subject to the
conditions provided in the Indenture.

         The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the Holders of a majority in aggregate principal
amount of the Surplus Notes at the time outstanding, to execute supplemental
indentures for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of the Indenture or of any supplemental
indenture or of modifying in any manner the rights of the Holders; provided,
however, that no such supplemental indenture shall, without the consent of the
Holders of each Surplus Note, (i) change the Stated Maturity of any such Surplus
Note, or reduce the rate (or change the manner of calculation of the rate) or
change any date on which interest thereon is payable, or reduce the principal
amount thereof or any premium thereon, or change any redemption or repayment
date or period or price, or make the principal thereof or any interest or
premium thereon payable in any coin or currency other than that provided in the
Surplus Notes, or impair or affect the right of any Securityholder to institute
suit for payment thereof, (ii) reduce the aforesaid percentage of Surplus Notes
the Holders of which are required to consent to any such supplemental indenture
or (iii) otherwise materially and adversely affect the interests of the Holders
of any such Surplus Note. The Indenture also contains provisions permitting the
Holders of a majority in aggregate principal amount of the Surplus Notes at the
time outstanding affected thereby, on behalf of all of the Holders of the
Surplus Notes, to waive any past default in the performance of any of the
covenants contained in the Indenture, or established pursuant to the Indenture,
and its consequences, except a default in the payment of the principal of or
premium, if any, or interest on any of the Surplus Notes. Any such consent or
waiver by the Holder of this Surplus Note (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such Holder and upon all future
Holders and owners of this Surplus Note and of any Surplus Note issued in
exchange herefor or in place hereof (whether by registration of transfer or
otherwise), irrespective of whether or not any notation of such consent or
waiver is made upon this Surplus Note.

         No reference herein to the Indenture and no provision of this Surplus
Note or of the Indenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of, premium, if any,
and interest on this Surplus Note at the time and place and at the rate and in
the money herein prescribed.

         As provided in the Indenture and subject to certain limitations therein
set forth, this Surplus Note is transferable by the Holder hereof on the Surplus
Note Register, upon surrender of this Surplus Note for registration of transfer
at the office or agency of the Trustee, accompanied by a written instrument or
instruments of transfer in form satisfactory to the

                                       3
<PAGE>

Company or the Trustee duly executed by the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Surplus Notes
of authorized denominations and for the same aggregate principal amount will be
issued to the designated transferee or transferees. No service charge will be
made for any such transfer, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in relation
thereto.

         The Surplus Notes are issuable only in fully registered form without
interest coupons in denominations of $100,000 and any integral multiple of
$1,000 in excess thereof. As provided in the Indenture and subject to certain
limitations herein and therein set forth, Surplus Notes so issued are
exchangeable for a like aggregate principal amount of Surplus Notes of a
different authorized denomination, as requested by the Holder surrendering the
same.

         Prior to due presentment for registration of transfer of this Surplus
Note, the Company, the Trustee, any paying agent, any transfer agent and any
Surplus Note registrar may deem and treat the Holder hereof as the absolute
owner hereof (whether or not this Surplus Note shall be overdue and
notwithstanding any notice of ownership or writing hereon made by anyone other
than a Surplus Note registrar) for the purpose of receiving payment of or on
account of the principal hereof and interest hereon and for all other purposes,
and none of the Company, the Trustee, any paying agent, any transfer agent or
any Surplus Note registrar shall be affected by any notice to the contrary.

         THIS SURPLUS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL
OBLIGATIONS LAW); PROVIDED, HOWEVER, THAT THE APPLICABLE REGULATORY AUTHORITY'S
EXERCISE OF REGULATORY AUTHORITY WITH RESPECT TO THE COMPANY AND THE SURPLUS
NOTES, INCLUDING APPROVAL OF THE FORM OF AND PAYMENTS UNDER THE SURPLUS NOTES,
SHALL BE GOVERNED BY AND IN ACCORDANCE WITH THE LAWS OF THE JURISDICTION OF THE
APPLICABLE REGULATORY AUTHORITY, AND THE PARTIES SHALL SUBMIT ANY DISPUTES
RELATED TO THE EXERCISE OF SUCH REGULATORY AUTHORITY TO A COURT OF COMPETENT
JURISDICTION IN SUCH JURISDICTION.

                                       4
<PAGE>

                                                                       EXHIBIT B
                       FORM OF QUARTERLY FINANCIAL REPORT
                                  Surplus Note

TO:        Wilmington Trust Company
           Rodney Square North
           1100 North Market Street
           Wilmington, DE  19890-0001

           Attention:  Corporate Trust Administration

                  PLEASE COMPLETE FOR THE SURPLUS NOTE ISSUER
All financial information provided herein should be provided in accordance with
 Statutory Accounting Principles. Please provide the following information for
                    the most recent quarterly period ended.

 Quarter: / / March 31 / / June 30 / / September 30 / / December 31, Year: 20__

Part I - To be completed by all surplus note issuers
<TABLE>
<S>                                                           <C>
Name of Surplus Note Issuer:                                                                        Date:

A.M. Best Insurer's Financial Strength Rating:                Most Recently Reported NAIC RBC Ratio:  %

Total Admitted Assets  $                                      Total Policyholders' Surplus  $

Return on Policyholders' Surplus                              Ratio of Consolidated Debt and Preferred Stock to
for Trailing Twelve Month Period  %                           Total Policyholders' Surplus  %

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

Part II - To be completed by property & casualty companies only

Expense Ratio  %                    Loss and LAE Ratio  %                   Combined Ratio  %

Ratio of Net Premiums Written (Trailing Twelve Month Period) to Policyholders' Surplus %
</TABLE>

                                       5
<PAGE>

                                  CERTIFICATION

                  The undersigned certifies and states that the undersigned has
duly executed the attached Quarterly Financial Report, dated _______________,
20_____, for and on behalf of ________________________, that the undersigned is
the _______________ of such Company, and that the undersigned has authority to
execute and deliver such instrument. The undersigned further says that the
undersigned is familiar with such instrument and that the facts therein set
forth are true to the best of the undersigned's knowledge, information and
belief.

                                     Signed:
                                             ---------------------------

                                      Name:
                                             ---------------------------

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

                                       6
<PAGE>

                             LEGEND - LIFE INSURERS

NAIC RBC Ratio:                           (Total Adjusted Capital (as defined in
                                          the NAIC RBC Instructions for Life
                                          Insurers)/Authorized Control Level
                                          Risk-Based Capital)

Total Admitted Assets:                    Total Admitted Assets as Determined in
                                          accordance with Statutory Accounting
                                          Principles

Total Capital and Surplus:                Common Capital Stock + Preferred
                                          Capital Stock + Aggregate Write-Ins
                                          for Special Surplus Funds + Aggregate
                                          Write-Ins for Other than Special
                                          Surplus Funds + Surplus Notes + Gross
                                          Paid-In and Contributed Surplus +
                                          Unassigned Funds (Surplus) Asset
                                          Valuation Reserve - Treasury Stock

Return on Policyholders' Surplus          Net Income/Policyholders' Surplus for
for the Trailing Twelve Month Period:     the Trailing Twelve Month Period

                      LEGEND - PROPERTY & CASUALTY INSURERS

NAIC RBC Ratio:                           (Total Adjusted Capital (as defined in
                                          the NAIC RBC Instructions for Life
                                          Insurers)/Authorized Control Level
                                          Risk-Based Capital)

Total Admitted Assets:                    Total Admitted Assets as Determined in
                                          accordance with Statutory Accounting
                                          Principles

Total Capital and Surplus:                Common Capital Stock + Preferred
                                          Capital Stock + Aggregate Write-Ins
                                          for Special Surplus Funds + Aggregate
                                          Write-Ins for Other than Special
                                          Surplus Funds + Surplus Notes + Gross
                                          Paid-In and Contributed Surplus +
                                          Unassigned Funds (Surplus) Asset
                                          Valuation Reserve - Treasury Stock

Return on Policyholders' Surplus          Net Income/Policyholders' Surplus for
for the Trailing Twelve Month Period:     the Trailing Twelve Month Period

Expense Ratio:                            Other Underwriting Expenses
                                          Incurred/Net Premiums Earned

Loss and LAE Ratio:                       (Losses Incurred + Loss Expenses
                                          Incurred)/Net Premiums Earned

Combined Ratio:                           Expense Ratio + Loss and LAE Ratio

Net Premiums Written                      Net Premiums Written of the Trailing
(Trailing Twelve Month Period)            Twelve Month Period/Policyholders'
to Policyholders' Surplus:                Surplus

                                       7

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