Document:

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                                                                   EXHIBIT 10.5

                                 PXRE GROUP LTD.

                            17,500 Capital Securities

                     Fixed/Floating Rate Capital Securities

               (Liquidation Amount $1,000.00 per Capital Security)

                               PLACEMENT AGREEMENT

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

                                                                 April 25, 2003

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

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

Ladies and Gentlemen:

         PXRE Group Ltd., incorporated and existing under the laws of Bermuda
(the "Company"), and its financing subsidiary, PXRE Capital Statutory Trust II,
a Connecticut statutory trust (the "Trust," and hereinafter together with the
Company, the "Offerors"), hereby confirm their agreement (this "Agreement") with
you as placement agents (the "Placement Agents"), as follows:

Section 1. Issuance and Sale of Securities.

         1.1 Introduction. The Offerors propose to issue and sell at the Closing
(as defined in Section 2.3.1 hereof) 17,500 of the Trust's Fixed/Floating Rate
Capital Securities, with a liquidation amount of $1,000.00 per capital security
(the "Capital Securities"), to I-Preferred Term Securities II, Ltd., a company
with limited liability established under the laws of the Cayman Islands (the
"Purchaser") pursuant to the terms of a Subscription Agreement entered into, or
to be entered into on or prior to the Closing Date (as defined in Section 2.3.1
hereof), between the Offerors and the Purchaser (the "Subscription Agreement"),
the form of which is attached hereto as Exhibit A and incorporated herein by
this reference.

         1.2 Operative Agreements. The Capital Securities shall be fully and
unconditionally guaranteed on a subordinated basis by the Company with respect
to distributions and amounts payable upon liquidation, redemption or repayment
(the "Guarantee") pursuant and subject to the Guarantee Agreement (the
"Guarantee Agreement"), to be dated as of the Closing Date and executed and
delivered by the Company and U.S. Bank National Association ("U.S. Bank"), as
trustee (the "Guarantee Trustee"), for the benefit from time to time of the
holders of the Capital Securities. The entire proceeds from the sale by the
Trust to the holders of the Capital Securities shall be combined with the entire
proceeds from the sale by the Trust to the Company of its common securities (the
"Common Securities"), and shall be used by the Trust to purchase $18,042,000.00
in principal amount of the Fixed/Floating Rate Junior Subordinated Deferrable
Interest Debentures (the "Debentures") of the Company. The Capital Securities
and the Common Securities for the Trust shall be issued pursuant to an Amended
and Restated Declaration of Trust among U.S. Bank, as institutional trustee (the
"Institutional Trustee"), the Administrators named therein, and the Company, to
be dated as of the Closing Date and in substantially the form heretofore
delivered to the Placement Agents (the "Trust Agreement"). The Debentures shall
be issued pursuant to an Indenture (the "Indenture"), to be dated as of the
Closing Date, between the Company and U.S. Bank, as indenture trustee (the
"Indenture Trustee"). The documents identified in this Section 1.2 and in
Section 1.1 are referred to herein as the "Operative Documents."

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

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

Section 2. Purchase of Capital Securities.

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

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

         2.3 Closing and Delivery of Payment.

              2.3.1 Closing; Closing Date. The sale and purchase of the Capital
Securities by the Offerors to the Purchaser shall take place at a closing (the
"Closing") at the offices of LeBoeuf, Lamb, Greene & MacRae, L.L.P., at 10:00
a.m. (New York City time) on May 15, 2003, or such other business day as may be
agreed upon by the Offerors and the Placement Agents (the "Closing Date");
provided, however, that in no event shall the Closing Date occur later than May
22, 2003 unless consented to by the Purchaser. Payment by the Purchaser shall be
payable in the manner set forth in the Subscription Agreement and shall be made
prior to or on the Closing Date.

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

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

         2.4 Placement Agents' Fees and Expenses.

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

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

         2.5 Failure to Close. If any of the conditions to the Closing specified
in this Agreement shall not have been fulfilled to the satisfaction of the
Placement Agents or if the Closing shall not have occurred on or before 10:00
a.m. (New York City time) on May 22, 2003, then each party hereto,
notwithstanding anything to the contrary in this Agreement, shall be relieved of
all further obligations under this Agreement without thereby waiving any rights
it may have by reason of such nonfulfillment or failure; provided, however, that
the obligations of the parties under Sections 2.4.2, 7.5 and 9 shall not be so
relieved and shall continue in full force and effect.

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

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

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

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

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

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

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

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

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

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

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

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

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

         5.1 Securities Law Matters; Authorizations.

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

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

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

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

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

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

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

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

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

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         5.5 Capital Securities and Common Securities. The Capital Securities
and the Common Securities have been duly authorized by the Trust Agreement and,
when issued and delivered against payment therefor on the Closing Date to the
Purchaser, in the case of the Capital Securities, and to the Company, in the
case of the Common Securities, will be validly issued and represent undivided
beneficial interests in the assets of the Trust. None of the Capital Securities
or the Common Securities is subject to preemptive or other similar rights. On
the Closing Date, all of the issued and outstanding Common Securities will be
directly owned by the Company free and clear of any pledge, security interest,
claim, lien or other encumbrance.

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

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

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

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

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

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

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

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         5.13 Financial Statements.

              (a) The consolidated balance sheets of the Company and all of its
Significant Subsidiaries as of December 31, 2001 and December 31, 2002, and
related consolidated income statements and statements of changes in
shareholders' equity for the 3 years ended December 31, 2002 together with the
notes thereto (the "Financial Statements"), copies of each of which have been
provided to the Placement Agents, have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis (except
as may be disclosed therein) and fairly present in all material respects the
financial position and the results of operations and changes in shareholders'
equity of the Company and all of its Significant Subsidiaries as of December 31,
2002 and for the periods indicated (subject, in the case of interim financial
statements, to normal year-end adjustments, none of which shall be material).
The books and records of the Company and all of its Significant Subsidiaries
have been, and are being, maintained in all material respects in accordance with
generally accepted accounting principles and any other applicable legal and
accounting requirements and reflect only actual transactions.

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

              (c) Since December 31, 2002, there has been no material adverse
change or development with respect to the financial condition or earnings of the
Company and all of its Significant Subsidiaries, taken as a whole.

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

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

                                       10
<PAGE>

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

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

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

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

                                       11
<PAGE>

         5.19 Consent to Jurisdiction and Venue. The Company has validly and
irrevocably submitted to the nonexclusive jurisdiction of any New York Court (as
defined below) with respect to suits, actions or proceedings arising out of or
in connection with violations of United States federal securities laws relating
to offers and sales of the Capital Securities, has validly and irrevocably
waived, to the fullest extent permitted by law, any objections that it may now
or hereafter have to the laying of venue of any such suit, action or proceeding
brought in any New York Court based on or arising under this Agreement or any
claims that any such suit, action or proceeding brought in any New York Court
has been brought in an inconvenient forum, and has duly and irrevocably
appointed CT Corporation System in New York, New York as its agent to receive
service of process with respect to actions arising out of or in connection with
any such suit, action or proceeding; and service of process effected in the
manner set forth in Section 11 of this Agreement will be effective under the
laws of Bermuda to confer personal jurisdiction over the Company.

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

         6.1 Organization, Standing and Qualification.

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

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

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

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

                                       12
<PAGE>

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

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

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

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

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

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

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

                                       13
<PAGE>

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

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

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

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

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

                                       14
<PAGE>

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

Section 9. Indemnification.

         9.1 Indemnification Obligation. The Offerors shall jointly and
severally indemnify and hold harmless the Placement Agents and the Purchaser and
each of their respective agents, employees, officers and directors and each
person that controls either of the Placement Agents or the Purchaser within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
and agents, employees, officers and directors or any such controlling person of
either of the Placement Agents or the Purchaser (each such person or entity, an
"Indemnified Party") from and against any and all losses, claims, damages,
judgments, liabilities or expenses, joint or several, to which such Indemnified
Party may become subject under the Securities Act, the Exchange Act or other
federal or state statutory law or regulation, or at common law or otherwise
(including in settlement of any litigation, if such settlement is effected with
the written consent of the Offerors), insofar as such losses, claims, damages,
judgments, liabilities or expenses (or actions in respect thereof) arise out of,
or are based upon, or relate to, in whole or in part, (a) any untrue statement
or alleged untrue statement of a material fact contained in any information
(whether written or oral) or documents executed in favor of, furnished or made
available to the Placement Agents or the Purchaser by the Offerors, or (b) any
omission or alleged omission to state in any information (whether written or
oral) or documents executed in favor of, furnished or made available to the
Placement Agents or the Purchaser by the Offerors a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
shall reimburse each Indemnified Party for any legal and other expenses as such
expenses are reasonably incurred by such Indemnified Party in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, judgment, liability, expense or action described in this Section 9.1. In
addition to their other obligations under this Section 9, the Offerors hereby
agree that, as an interim measure during the pendency of any claim, action,
investigation, inquiry or other proceeding arising out of, or based upon, or
related to the matters described above in this Section 9.1, they shall reimburse
each Indemnified Party on a quarterly basis for all reasonable legal or other
expenses incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the absence
of a judicial determination as to the propriety and enforceability of the
possibility that such payments might later be held to have been improper by a
court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, each Indemnified Party
shall promptly return such amounts to the Offerors together with interest,
determined on the basis of the prime rate (or other commercial lending rate for
borrowers of the highest credit standing) announced from time to time by First
Tennessee Bank, N.A. (the "Prime Rate"). Any such interim reimbursement payments
that are not made to an Indemnified Party within 30 days of a request for
reimbursement shall bear interest at the Prime Rate from the date of such
request.

                                       15
<PAGE>

         9.2 Conduct of Indemnification Proceedings. Promptly after receipt by
an Indemnified Party under this Section 9 of notice of the commencement of any
action, such Indemnified Party shall, if a claim in respect thereof is to be
made against the Offerors under this Section 9, notify the Offerors in writing
of the commencement thereof; but, subject to Section 9.4, the omission to so
notify the Offerors shall not relieve them from any liability pursuant to
Section 9.1 which the Offerors may have to any Indemnified Party unless and to
the extent that the Offerors did not otherwise learn of such action and such
failure by the Indemnified Party results in the forfeiture by the Offerors of
substantial rights and defenses. In case any such action is brought against any
Indemnified Party and such Indemnified Party seeks or intends to seek indemnity
from the Offerors, the Offerors shall be entitled to participate in, and, to the
extent that they may wish, to assume the defense thereof with counsel reasonably
satisfactory to such Indemnified Party; provided, however, if the defendants in
any such action include both the Indemnified Party and the Offerors and the
Indemnified Party shall have reasonably concluded that there may be a conflict
between the positions of the Offerors and the Indemnified Party in conducting
the defense of any such action or that there may be legal defenses available to
it and/or other Indemnified Parties which are different from or additional to
those available to the Offerors, the Indemnified Party shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such Indemnified Party.
Upon receipt of notice from the Offerors to such Indemnified Party of their
election to so assume the defense of such action and approval by the Indemnified
Party of counsel, the Offerors shall not be liable to such Indemnified Party
under this Section 9 for any legal or other expenses subsequently incurred by
such Indemnified Party in connection with the defense thereof unless (a) the
Indemnified Party shall have employed such counsel in connection with the
assumption of legal defenses in accordance with the proviso in the preceding
sentence (it being understood, however, that the Offerors shall not be liable
for the expenses of more than one separate counsel representing the Indemnified
Parties who are parties to such action), or (b) the Offerors shall not have
employed counsel reasonably satisfactory to the Indemnified Party to represent
the Indemnified Party within a reasonable time after notice of commencement of
the action, in each of which cases the fees and expenses of counsel of such
Indemnified Party shall be at the expense of the Offerors.

         9.3 Contribution. If the indemnification provided for in this Section 9
is required by its terms, but is for any reason held to be unavailable to or
otherwise insufficient to hold harmless an Indemnified Party under Section 9.1
in respect of any losses, claims, damages, judgments, liabilities or expenses
referred to herein or therein, then the Offerors shall contribute to the amount
paid or payable by such Indemnified Party as a result of any losses, claims,
damages, judgments, liabilities or expenses referred to herein (a) in such
proportion as is appropriate to reflect the relative benefits received by the
Offerors, on the one hand, and the Indemnified Party, on the other hand, from
the offering of such Capital Securities, or (b) if the allocation provided by
clause (a) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (a)
above but also the relative fault of the Offerors, on the one hand, and the
Placement Agents, on the other hand, in connection with the statements or
omissions or inaccuracies in the representations and warranties herein or other
breaches which resulted in such losses, claims, damages, judgments, liabilities
or expenses, as well as any other relevant equitable considerations. The
respective relative benefits received by the Offerors, on the one hand, and the
Placement Agents, on the other hand, shall be deemed to be in the same
proportion, in the case of the Offerors, as the total price paid to the

                                       16
<PAGE>

Offerors for the Capital Securities sold by the Offerors to the Purchaser (net
of the compensation paid to the Placement Agents hereunder, but before deducting
expenses), and in the case of the Placement Agents, as the compensation received
by them, bears to the total of such amounts paid to the Offerors and received by
the Placement Agents as compensation. The relative fault of the Offerors and the
Placement Agents shall be determined by reference to, among other things,
whether the untrue statement or alleged untrue statement of a material fact or
the omission or alleged omission of a material fact or the inaccurate or the
alleged inaccurate representation and/or warranty relates to information
supplied by the Offerors or the Placement Agents and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The provisions set forth in Section 9.2 with respect
to notice of commencement of any action shall apply if a claim for contribution
is made under this Section 9.3; provided, however, that no additional notice
shall be required with respect to any action for which notice has been given
under Section 9.2 for purposes of indemnification. The Offerors and the
Placement Agents agree that it would not be just and equitable if contribution
pursuant to this Section 9.3 were determined by pro rata allocation or by any
other method of allocation that does not take account of the equitable
considerations referred to in this Section 9.3. The amount paid or payable by an
Indemnified Party as a result of the losses, claims, damages, judgments,
liabilities or expenses referred to in this Section 9.3 shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such Indemnified Party in connection with investigating
or defending any such action or claim. In no event shall the liability of the
Placement Agents hereunder be greater in amount than the dollar amount of the
compensation (net of payment of all expenses) received by the Placement Agents
upon the sale of the Capital Securities giving rise to such obligation. No
person found guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
person who was not found guilty of such fraudulent misrepresentation.

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

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

Section 10. Rights and Responsibilities of Placement Agents.

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

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

                                       17
<PAGE>

Section 11. Miscellaneous.

         11.1 Disclosure Schedule. The term "Disclosure Schedule," as used
herein, means the schedule, if any, attached to this Agreement that sets forth
items the disclosure of which is necessary or appropriate as an exception to one
or more representations or warranties contained in Section 5 hereof. The
Disclosure Schedule shall be arranged in paragraphs corresponding to the section
numbers contained in Section 5. Nothing in the Disclosure Schedule shall be
deemed adequate to disclose an exception to a representation or warranty made
herein unless the Disclosure Schedule identifies the exception with reasonable
particularity and describes the relevant facts in reasonable detail. Without
limiting the generality of the immediately preceding sentence, the mere listing
(or inclusion of a copy) of a document or other item in the Disclosure Schedule
shall not be deemed adequate to disclose an exception to a representation or
warranty made herein unless the representation or warranty has to do with the
existence of the document or other item itself. Information provided by the
Company in response to any due diligence questionnaire shall not be deemed part
of the Disclosure Schedule and shall not be deemed to be an exception to one or
more representations or warranties contained in Section 5 hereof unless such
information is specifically included on the Disclosure Schedule in accordance
with the provisions of this Section 11.1.

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

         if to the Placement Agents, to:

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

                                     and

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

                                       18
<PAGE>

         with a copy to:

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

                                     and

                             Sidley Austin Brown & Wood LLP
                             787 7th Avenue
                             New York, New York  10019
                             Telecopier: 212-839-5599
                             Telephone: 212-839-5300
                             Attention: Renwick Martin, Esq.

         if to the Offerors, to:

                             PXRE Group Ltd.
                             Swan Building
                             26 Victoria Street
                             Hamilton, HM12, Bermuda
                             Telecopier:  441-296-6162
                             Telephone:  411-278-3710
                             Attention:  Chief Financial Officer

         with a copy to:

                             Morgan, Lewis & Bockius LLP
                             101 Park Avenue
                             New York, New York  10178
                             Telecopier:  212-309-6273
                             Telephone:  212-309-6000
                             Attention: Richard S. Petretti

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

                                       19
<PAGE>

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

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

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

         11.6 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAWS PERTAINING TO CONFLICTS
OF LAWS) OF THE STATE OF NEW YORK, EXCEPT WITH RESPECT TO AUTHORIZATION AND
EXECUTION BY OR ON BEHALF OF THE COMPANY WHICH ARE REQUIRED TO BE GOVERNED BY
THE LAWS OF BERMUDA.

         11.7 Submission to Jurisdiction; Appointment of Agent for Service. In
further consideration of the agreement of the Placement Agents herein contained,
the Company agrees and covenants as follows:

         The Company irrevocably agrees that any legal suit, action or
proceeding against the Company brought by any Placement Agent arising out of or
based upon this Agreement or the transactions contemplated hereby may be
instituted in any United States Federal or state court in the Borough of
Manhattan, The City of New York, State of New York (a "New York Court"), and
irrevocably waives any objection which it may now or hereafter have to the
laying of venue of any such proceeding and irrevocably submits to the
non-exclusive jurisdiction of such courts in any such suit, action or
proceeding. The Company irrevocably waives any immunity to jurisdiction to which
it may otherwise be entitled or become entitled (including immunity to
pre-judgment attachment and execution) in any legal suit, action or proceeding
against it arising out of this Agreement or the transactions contemplated hereby
which is instituted in any New York Court or in any foreign court. To the extent
permitted by law, the Company hereby waives any objection to the enforcement by
any competent foreign court of any judgment validly obtained in any such
proceeding. The Company designates and appoints CT Corporation System, 111
Eighth Avenue, 13th Floor, New York, New York 10011 as its authorized agent (the
"Authorized Agent") upon which process may be served in any such action arising
out of or based on this Agreement or the transactions contemplated hereby which
may be instituted in any New York Court by any Placement Agent, expressly
consents to the non-exclusive jurisdiction of any such court in respect of any
such action, and waives any other requirements of or objections to personal
jurisdiction with respect thereto. The Company represents and warrants that its
Authorized Agent has agreed to act as said agent for service of process and the
Company agrees to take any and all action, including the filing of any and all
documents and instruments, that may be necessary to continue such appointment in
full force and effect as aforesaid. Service of process upon the Authorized Agent
and written notice of such service of process to it shall be

                                       20
<PAGE>

deemed, in every respect, effective service of process upon the Company.
Notwithstanding the foregoing, any action based on this Agreement or the
transactions contemplated hereby may be instituted by any Placement Agent in any
competent foreign court.

         The provisions of this Section 11.7 shall survive any termination of
this Agreement, in whole or in part.

         11.8 Judgment Currency. In respect of any judgment or order given or
made for any amount due hereunder that is expressed and paid in currency (the
"judgment currency") other than United States dollars, the party against whom
such judgment or order has been given or made will indemnify each party in whose
favor such judgment or order has been given or made (the "Indemnitee") against
any loss incurred by the Indemnitee as a result of any variation as between (i)
the rate of exchange at which the United States dollar amount is converted into
the judgment currency for the purpose of such judgment or order and (ii) the
rate of exchange at which the Indemnitee is able to purchase United States
dollars with the amount of the judgment currency actually received by such
Indemnitee. The foregoing indemnity shall constitute a separate and independent
obligation of the Company and the Placement Agents and shall continue in full
force and effect notwithstanding any such judgment or order as aforesaid. The
term "rate of exchange" shall include any reasonable premiums and costs of
exchange payable in connection with the purchase of or conversion into United
States dollars.

         11.9 Waiver of Immunity. To the extent that the Company has or
hereafter may acquire any immunity (sovereign or otherwise) from any legal
action, suit or proceeding, from jurisdiction of any court or from set-off or
any legal process (whether service or notice, attachment in aid or otherwise)
with respect to itself or any of its property, the Company hereby irrevocably
waives and agrees not to plead or claim such immunity in respect of its
obligations under this Agreement.

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

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

                                       21
<PAGE>

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

                     Signatures appear on the following page

                                       22
<PAGE>

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

Very truly yours,

PXRE GROUP LTD.

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

PXRE CAPITAL STATUTORY TRUST II

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

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

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

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

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

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

                                       23
<PAGE>

                                    EXHIBIT A

                         FORM OF SUBSCRIPTION AGREEMENT

                         PXRE CAPITAL STATUTORY TRUST II

                                 PXRE GROUP LTD.

                             SUBSCRIPTION AGREEMENT

                                 [CLOSING], 2003

         THIS SUBSCRIPTION AGREEMENT (this "Agreement") made among PXRE Capital
Statutory Trust II (the "Trust"), a statutory trust created under the
Connecticut Statutory Trust Act (Chapter 615 of Title 34 of the Connecticut
General Statutes, Section 500, et seq.), PXRE Group Ltd., a Bermuda company,
with its principal offices located at Swan Building, 26 Victoria Street,
Hamilton, HM12, Bermuda, (the "Company" and, collectively with the Trust, the
"Offerors"), and I-Preferred Term Securities II, Ltd. (the "Purchaser").

                                    RECITALS:

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

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

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

                                   ARTICLE I
                     PURCHASE AND SALE OF CAPITAL SECURITIES

         1.1. Upon the execution of this Agreement, the Purchaser hereby agrees
to purchase from the Trust [NUMBER OF CAPITAL SECURITIES] Capital Securities at
a price equal to $1,000.00 per Capital Security (the "Purchase Price") and the
Trust agrees to sell such Capital Securities to the Purchaser for said Purchase
Price. The rights and preferences of the Capital Securities are set forth in the
Declaration. The Purchase Price is payable in immediately available funds on
[CLOSING], 2003, or such other business day as may be designated by the
Purchaser, but in no event later than [LAST CLOSING], 2003 (the "Closing Date").
The Offerors shall provide the Purchaser wire transfer instructions no later
than 1 day following the date hereof.

                                       24
<PAGE>

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

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

                                   ARTICLE II
                   REPRESENTATIONS AND WARRANTIES OF PURCHASER

         2.1. The Purchaser understands and acknowledges that the Capital
Securities, the Debentures and the Guarantee have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or any other
applicable securities law, are being offered for sale by the Trust in
transactions not requiring registration under the Securities Act, and may not be
offered, sold, pledged or otherwise transferred by the Purchaser except in
compliance with the registration requirements of the Securities Act or any other
applicable securities laws, pursuant to an exemption therefrom or in a
transaction not subject thereto.

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

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

                                      A-2
<PAGE>

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

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

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

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

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

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

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

                                      A-3
<PAGE>

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

                                  ARTICLE III
                                  MISCELLANEOUS

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

To the Offerors:               PXRE Group Ltd.
                               Swan Building
                               26 Victoria Street
                               Hamilton, HM12, Bermuda
                               Attention:  Chief Financial Officer
                               Fax:  441-296-6162

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

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

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

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

                                      A-4
<PAGE>

         3.4. NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY
ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND
PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW,
EXCEPT WITH RESPECT TO AUTHORIZATION AND EXECUTION BY OR ON BEHALF OF THE
COMPANY WHICH ARE REQUIRED TO BE GOVERNED BY THE LAWS OF BERMUDA.

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

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

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

                     Signatures appear on the following page

                                      A-5
<PAGE>

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

I-PREFERRED TERM SECURITIES II, LTD.

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

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

                                    PXRE GROUP LTD.

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

                                    PXRE CAPITAL STATUTORY TRUST II

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

                                      A-6
<PAGE>

                                  EXHIBIT B-1-A

                         FORM OF COMPANY COUNSEL OPINION

                               [__________], 2003

I-Preferred Term Securities II, Ltd.
c/o Maples Finance Limited
P.O. Box 1093 GT
Queensgate House
South House
South Church Street
George Town, Grand Cayman
Grand Cayman Islands
British West Indies

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

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

Re:  Fixed/ Floating Rate Junior Subordinated Deferrable Interest Debentures
     due 2033 of PXRE Group, Ltd.

Ladies and Gentlemen:

We have acted as special United States counsel for PXRE Group, Ltd., a Bermuda
company (the "Company") and PXRE Capital Statutory Trust II, a Connecticut
statutory trust (the "Trust"), in connection with the issuance by the Company of
$[AMOUNT OF DEBENTURES] aggregate principal amount of its junior subordinated
deferrable interest debentures (the "Debentures") and the issuance by the Trust
of [NUMBER OF CAPITAL SECURITIES] Fixed/Floating Rate Capital Securities
(liquidation amount of $1,000 per security) of the Trust (the "Capital
Securities").

This opinion is furnished to you pursuant to Section 3.1(a) of the Placement
Agreement, dated [__________], 2003 (the "Placement Agreement"), among the
Trust, the Company, and FTN Financial Capital Markets and Keefe, Bruyette &
Woods, Inc. (the "Placement Agents"). Capitalized terms not otherwise defined
herein have the respective meanings given to them in the Placement Agreement.

                                    B-1-A-1
<PAGE>

I-Preferred Term Securities II, Ltd.
FTN Financial Capital Markets
Keefe, Bruyette & Woods, Inc.
_____________, 2003
Page 2

In connection with this opinion, we have examined originals, or copies certified
or otherwise identified to our satisfaction, of minutes of meetings of the
Company's Board of Directors; the Placement Agreement; the Amended and Restated
Declaration of Trust dated as of [__________], 2003 (the "Declaration"), among
the Institutional Trustee (as defined therein), the Administrators (as defined
therein), the Company, as sponsor, and the holders from time to time of
undivided beneficial interests in the Trust; the Indenture dated as of
[_________], 2003 (the "Indenture"), between the Company and U.S. Bank National
Association (the "Trustee"); the Debentures; the Capital Securities; the
Guarantee Agreement dated as of [____ ], 2003 (the "Guarantee"), between the
Company and U.S. Bank National Association as trustee for the benefit of the
Holders (as defined therein); and the Subscription Agreement dated [____ ], 2003
(the "Subscription Agreement" and together with the Placement Agreement, the
Declaration, the Indenture, the Debentures, the Capital Securities and the
Guarantee, sometimes referred to hereinafter as the "Transaction Documents"),
among the Company, the Trust and I-Preferred Term Securities II, Ltd. (the
"Purchaser"); and such certificates of public officials, certificates of
officers of the Company, corporate records, documents and other certificates,
opinions and instruments, and have made such other investigations, as we have
deemed relevant and necessary as a basis for the opinions hereinafter expressed.

For purposes of the opinions expressed herein, we have assumed the genuineness
of all signatures, the legal capacity of all natural persons executing
agreements, instruments or documents, the completeness and authenticity of all
records and documents submitted to us as originals and the conformity with the
originals of all records and documents submitted to us as copies. The opinions
are subject to the qualification that we have relied, as to matters of fact
(including determinations with respect to the question of materiality to the
Company and its subsidiaries including, without limitation, PXRE Corporation, a
Delaware corporation ("PXRE Corporation")), to the extent we deem proper, on the
representations and warranties in the Placement Agreement, certificates of
officers or other representatives of the Company, the Trust and PXRE Corporation
and certificates of public officials.

We have also assumed for purposes of this opinion that (i) each of the parties
to the Transaction Documents (a) is validly existing and in good standing in the
respective jurisdiction of its organization and has satisfied all applicable
governmental requirements and other laws and requirements, in each case to the
extent necessary for its execution, delivery and performance of the respective
Transaction Documents to which it is a party, (b) has the requisite corporate,
company or partnership power and authority, respectively, to act with respect to
the authorization, execution, delivery and performance of such documents and
agreements to which it is a party, and (c) has duly and validly authorized,
executed and delivered each of such documents and agreements to which it is a
party; and (ii) each of the Transaction Documents to which the Company is a
party constitutes a valid and binding agreement of the Company under the laws of
Bermuda.

                                    B-1-A-2
<PAGE>

I-Preferred Term Securities II, Ltd.
FTN Financial Capital Markets
Keefe, Bruyette & Woods, Inc.
_____________, 2003
Page 3

The opinions expressed below are limited to the laws of the State of New York,
the federal laws of the United States and the General Corporation Law of the
State of Delaware. The opinions expressed below in Paragraph 1 as to the due
qualification and good standing of PXRE Corporation are based solely upon our
review of certificates issued by public officials and by officers of PXRE
Corporation or the Company, and the opinions expressed below in Paragraph 1 as
to the ownership of stock are based solely upon our review of PXRE Corporation's
stock register. We call to your attention the fact that the Declaration
specifies in Section 13.2 that it is governed by the law of the State of
Connecticut and that our opinion in Paragraph 3 is given as if the Declaration
were instead governed by the internal laws of the State of New York. We express
no opinion as to the securities or "Blue Sky" laws of any jurisdiction other
than the federal securities laws of the United States. Whenever our opinion is
indicated to be "known to us" or "to the best of our knowledge", we are
referring only to the actual knowledge of those of our attorneys who have
represented the Company in connection with the transactions contemplated by the
Placement Agreement.

Based upon and subject to the foregoing, we are of the opinion that:

1. PXRE Corporation is validly existing as a corporation in good standing under
the laws of the State of Delaware, with full corporate power and authority to
own its properties and conduct its business as presently conducted in all
material respects. To the best of our knowledge, all outstanding shares of
capital stock of PXRE Corporation have been duly authorized and validly issued,
and are fully paid and non-assessable and owned of record by PXRE Reinsurance
(Barbados) Ltd.

2. The issuance, sale and delivery of the Debentures by the Company and the
issuance, sale and delivery of the Capital Securities by the Trust do not give
rise to any rights to subscribe for or to purchase any shares of capital stock
or equity securities of PXRE Corporation pursuant to the corporate Articles of
Incorporation, Charter or By-Laws of PXRE Corporation, or, to the best of our
knowledge, any agreement or other instrument to which PXRE Corporation is a
party.

3. Each of the Placement Agreement, the Indenture, the Subscription Agreement,
the Declaration and the Guarantee is a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms, except as
rights to indemnification and contribution thereunder may be limited by
applicable law or the public policy underlying such laws and except as the
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights and
remedies of creditors or by general equitable principles.

4. Assuming (a) the Debentures are authenticated in accordance with the terms of
the Indenture and (b) the Debentures are delivered to and paid for by the Trust
pursuant to the Placement Agreement, the Debentures constitute legally valid and
binding obligations of the Company, entitled to the benefits of the Indenture
and enforceable against the Company in accordance with their terms, except as
the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights and remedies of creditors or by general equitable principles.

                                    B-1-A-3
<PAGE>

I-Preferred Term Securities II, Ltd.
FTN Financial Capital Markets
Keefe, Bruyette & Woods, Inc.
_____________, 2003
Page 4

5. To the best of our knowledge, PXRE Corporation is not in breach or violation
of, or default under, with or without notice or lapse of time or both, its
Articles of Incorporation, Charter or By-Laws. The execution, delivery and
performance of the Transaction Documents and the consummation of the
transactions contemplated thereby do not and will not (i) conflict with,
constitute a material breach or violation of, or constitute a material default
under, with or without notice or lapse of time or both, any of the terms,
provisions or conditions of (A) the Articles of Incorporation, Charter or
By-Laws of PXRE Corporation, or (B) to the best of our knowledge, any material
contract, indenture, mortgage, deed of trust, loan or credit agreement, note,
lease, franchise, license or any other material agreement or instrument to which
PXRE Corporation is a party or by which it or any of its properties may be
bound, or (C) any judgment, order or decree of any court, regulatory body,
administrative agency, governmental body or arbitrator in jurisdictions covered
by this opinion and known to us and binding on PXRE Corporation which, in the
case of each of (A), (B) or (C) above, is material to the Company and its
subsidiaries on a consolidated basis or (ii) pursuant to any material contract,
indenture or other material agreement or instrument, result in the creation or
imposition of any material lien, claim, charge, encumbrance or restriction upon
any property or assets of PXRE Corporation.

6. Assuming the accuracy of the representations and warranties and compliance
with the agreements of the Placement Agents and the Purchaser contained in the
Placement Agreement, the Subscription Agreement, the Indenture and the
Declaration, as applicable, registration of the Capital Securities, the
Guarantee and the Debentures under the Securities Act of 1933, as amended, is
not required for the offer and sale of the Capital Securities by the Trust to
the Purchaser. No opinion is expressed with respect to any re-offer or resale of
the Capital Securities by the Purchaser or any sale by the Purchaser of its
securities.

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

The foregoing opinions are given as of the date hereof and we assume no
obligation to update or supplement them to reflect any facts or circumstances
which may hereafter come to our attention or any changes in laws which may
hereafter occur.

This letter is rendered at the request of the Company and is for the sole
benefit of, and may be relied upon only by, the Placement Agents and the
Purchaser.

                                                      Very truly yours,

                                    B-1-A-4
<PAGE>

                                  EXHIBIT B-1-B

                    FORM OF CONYERS, DILL AND PEARMAN OPINION

                                     B-1-B1

<PAGE>

April    , 2003

To the Persons listed in the Schedule                DIRECT LINE:
annexed hereto                                       E-MAIL:      jdoyle@cdp.bm
                                                     OUR REF:     DJD/aet/
                                                     YOUR REF:

Dear Sirs

PXRE Group Ltd. (the "Company")

We have acted as special legal counsel in Bermuda to the Company in connection
with a Private Placement Agreement dated April , 2003 (the "Placement
Agreement"), between the Company and PXRE Capital Statutory Trust II (the
"Trust"), and FTN Financial Capital Markets and Keefe, Bruyette & Woods, Inc.
(the "Placement Agents").

For the purposes of giving this opinion, we have examined the following
documents:

(i)      an electronic copy (with facsimile execution signature pages) of the
         Placement Agreement;

(ii)     an electronic copy (with facsimile execution signature pages) of the
         Subscription Agreement dated as of April , 2003, by and among the
         Company, the Trust and I-Preferred Term Securities I, Ltd. (the
         "Subscription Agreement");

(iii)    an electronic copy (with facsimile execution signature page) of the
         Junior Subordinated Debenture ("Debenture");

(iv)     an electronic copy (with facsimile execution signature pages) of an
         Indenture dated as of April , 2003 by and among the Company and State
         Street Bank & Trust Company of Connecticut, National Association,
         relating to the Floating Rate Junior Subordinated Deferrable Interest
         Debentures ("Indenture");

(v)      an electronic copy (with facsimile execution signature pages) of an
         Amended and Restated Declaration of Trust by and among the Trustee, the
         Company and, as Administrators ("Trust Agreement"); and

                                    B-1-B-2

<PAGE>

(vi)     an electronic copy (with facsimile execution signature pages) dated as
         of April , 2003, of a Guarantee Agreement by and among the Company and
         State Street Bank & Trust Company of Connecticut, National Association
         ("Guarantee Agreement").

The documents listed in items (i) through (vi) above are herein sometimes
collectively referred to as the "Documents" (which term does not include any
other instrument or agreement whether or not specifically referred to therein or
attached as an exhibit or schedule thereto).

We have also reviewed the memorandum of association and the bye-laws of the
Company, each certified by the Secretary of the Company on April , 2003,
resolutions adopted by the unanimous written consent of the board of directors
of the Company dated as of March 18, 2003, (the "Minutes"), and such other
documents and made such enquiries as to questions of law as we have deemed
necessary in order to render the opinion set forth below.

We have assumed (a) the genuineness and authenticity of all signatures and the
conformity to the originals of all copies (whether or not certified) examined by
us and the authenticity and completeness of the originals from which such copies
were taken, (b) that where a document has been examined by us in draft form, it
will be or has been executed in the form of that draft, and where a number of
drafts of a document have been examined by us all changes thereto have been
marked or otherwise drawn to our attention, (c) the capacity, power and
authority of each of the parties to the Documents, other than the Company, to
enter into and perform its respective obligations under the Documents, (d) the
due execution and delivery of the Documents by each of the parties thereto,
other than the Company, (e) the accuracy and completeness of all factual
representations made in the Documents and other documents reviewed by us, (f)
that the resolutions contained in the Minutes remain in full force and effect
and have not been rescinded or amended, (g) that the Company is entering into
the Documents pursuant to its business of a holding company, (h) that there is
no provision of the law of any jurisdiction, other than Bermuda, which would
have any implication in relation to the opinions expressed herein, (i) the
validity and binding effect under the laws of the State of New York, in the
United States of America (the "Foreign Laws") of the Documents which are
expressed to be governed by such Foreign Laws in accordance with their
respective terms, (j) the validity and binding effect under the Foreign Laws of
the submission by the Company pursuant to the Documents to the non-exclusive
jurisdiction of the courts of the State of New York, in the United States of
America (the "Foreign Courts"), (k) that none of the parties to the Documents
has carried on or will carry on activities, other than the performance of its
obligations under the Documents, which would constitute the carrying on of
investment business in or from within Bermuda and that none of the parties to
the Documents, other than the Company, will perform its obligations under the
Documents in or from within Bermuda, (l) that on the date of entering into the
Documents the Company is and after entering into the Documents will be able to
pay its liabilities as they become due.

                                    B-1-B-3

<PAGE>

The obligations of the Company under the Documents (a) will be subject to the
laws from time to time in effect relating to bankruptcy, insolvency,
liquidation, possessory liens, rights of set off, reorganisation, amalgamation,
moratorium or any other laws or legal procedures, whether of a similar nature or
otherwise, generally affecting the rights of creditors, (b) will be subject to
statutory limitation of the time within which proceedings may be brought, (c)
will be subject to general principles of equity and, as such, specific
performance and injunctive relief, being equitable remedies, may not be
available, (d) may not be given effect to by a Bermuda court, whether or not it
was applying the Foreign Laws, if and to the extent they constitute the payment
of an amount which is in the nature of a penalty and not in the nature of
liquidated damages. Notwithstanding any contractual submission to the
jurisdiction of specific courts, a Bermuda court has inherent discretion to stay
or allow proceedings in the Bermuda courts.

We express no opinion as to the enforceability of any provision of the Documents
which provides for the payment of a specified rate of interest on the amount of
a judgment after the date of judgment or which purports to fetter the statutory
powers of the Company.

We have made no investigation of and express no opinion in relation to the laws
of any jurisdiction other than Bermuda. This opinion is to be governed by and
construed in accordance with the laws of Bermuda and is limited to and is given
on the basis of the current law and practice in Bermuda. This opinion is issued
solely for your benefit and is not to be relied upon by any other person, firm
or entity or in respect of any other matter.

On the basis of and subject to the foregoing, we are of the opinion that:

1.       The Company is duly incorporated and existing under the laws of Bermuda
         and has full corporate power to own or lease its properties and to
         carry on business in Bermuda as a holding company.

2.       The Company has the necessary corporate power and authority to enter
         into and perform its obligations under the Documents. The execution and
         delivery of the Documents by the Company and the performance by the
         Company of its obligations thereunder will not violate the memorandum
         of association or bye-laws of the Company nor any applicable law,
         regulation, order or decree in Bermuda.

3.       The Company has taken all corporate action required to authorise its
         execution, delivery and performance of the Documents. The Documents
         have been duly executed and delivered by or on behalf of the Company,
         and constitute the valid and binding obligations of the Company in
         accordance with the terms thereof.

4.       The issuance, sale and delivery of the Debentures by the Company and
         the issuance, sale and delivery of the Capital Securities by the Trust
         do not give rise to any pre-emptive or other rights to subscribe for or
         to purchase any common shares of the Company pursuant to the Company's
         memorandum of association or bye-laws.

                                    B-1-B-4
<PAGE>

5.       No order, consent, approval, licence, authorisation, filing
         registration or qualification with, or validation of, or exemption by
         any government or public body or authority of Bermuda or any
         sub-division thereof is required to authorise or is required in
         connection with the execution, delivery, performance and enforcement of
         the Documents, except such as have been duly obtained in accordance
         with Bermuda law.

6.       The choice of the Foreign Laws as the governing law of the Documents is
         a valid choice of law and would be recognised and given effect to in
         any action brought before a court of competent jurisdiction in Bermuda,
         except for those laws (i) which such court considers to be procedural
         in nature, (ii) which are revenue or penal laws or (iii) the
         application of which would be inconsistent with public policy, as such
         term is interpreted under the laws of Bermuda. The submission in the
         Documents to the non-exclusive jurisdiction of the Foreign Courts is
         valid and binding upon the Company.

7.       The courts of Bermuda would recognise as a valid judgment, a final and
         conclusive judgment in personam obtained in the Foreign Courts against
         the Company based upon the Documents under which a sum of money is
         payable (other than a sum of money payable in respect of multiple
         damages, taxes or other charges of a like nature or in respect of a
         fine or other penalty) and would give a judgment based thereon provided
         that (a) such courts had proper jurisdiction over the parties subject
         to such judgment, (b) such courts did not contravene the rules of
         natural justice of Bermuda, (c) such judgment was not obtained by
         fraud, (d) the enforcement of the judgment would not be contrary to the
         public policy of Bermuda, (e) no new admissible evidence relevant to
         the action is submitted prior to the rendering of the judgment by the
         courts of Bermuda and (f) there is due compliance with the correct
         procedures under the laws of Bermuda.

8.       There is no income or other tax of Bermuda imposed by withholding or
         otherwise on any payment to be made to or by the Company pursuant to
         the Documents.

9.       The obligations of the Company under the Documents will rank at least
         pari passu in priority of payment with all other unsecured
         unsubordinated indebtedness of the Company, other than "Senior
         Indebtedness" (as that term is defined in the Indenture) and
         indebtedness which is preferred by virtue of any provision of the laws
         of Bermuda of general application.

10.      The Documents will not be subject to ad valorem stamp duty in Bermuda
         and no registration, documentary, recording, transfer or other similar
         tax, fee or charge is payable in Bermuda in connection with the
         execution, delivery, filing, registration or performance of the
         Documents.

11.      Based solely upon a search of the Cause Book of the Supreme Court of
         Bermuda conducted on [ ], 2003 (which would not reveal details of
         proceedings which have been filed but not actually entered in the Cause
         Book at the time of our search), there are no judgments against the
         Company, nor any legal or governmental proceedings pending in Bermuda
         to which the Company is subject.

                                    B-1-B-5

<PAGE>

12.      Based solely on a search of the public records in respect of the
         Company maintained at the offices of the Registrar of Companies on [ ],
         2003 (which would not reveal details of matters which have not been
         lodged for registration or have been lodged for registration but not
         actually registered at the time of our search) and a search of the
         Cause Book of the Supreme Court of Bermuda conducted at on [ ], 2003
         (which would not reveal details of proceedings which have been filed
         but not actually entered in the Cause Book at the time of our search),
         no steps have been, or are being, taken in Bermuda for the appointment
         of a receiver or liquidator to, or for the winding-up, dissolution,
         reconstruction or reorganisation of, the Company, though it should be
         noted that the public files maintained by the Registrar of Companies do
         not reveal whether a winding-up petition or application to the Court
         for the appointment of a receiver has been presented and entries in the
         Cause Book may not specify the nature of the relevant proceedings.

Yours faithfully

                                    B-1-B-6

<PAGE>

                                    SCHEDULE

PXRE Group Ltd.
Clarendon House
Church Street
Hamilton
Bermuda

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

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

I-Preferred Term Securities I, Ltd.
c/o QSPV Limited
P.O. Box 1093 GT
Queensgate House
South Church Street
George Town, Grand Cayman
Cayman Islands

                                    B-1-B-7

<PAGE>

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

                        FORM OF BARBADOS COUNSEL OPINION
                        --------------------------------

                                Chancery Chambers

                                ATTORNEYS-AT-LAW
                           CHANCERY HOUSE, HIGH STREET
                              BRIDGETOWN, BARBADOS
                                   WEST INDIES

<TABLE>

<S>                                                             <C>
TREVOR A. CARMICHAEL, B.Sc., (Econ.), M.A., Ph.D., Q.C.         TELEPHONE: (246) 431-0070
of the Middle Temple, Barrister-at-Law                          TELECOPIER: (246) 431-0076
ANDREW C. FERRPXRE BarbadosA, LL.B., (Hons.)
Associate
ELLA N. HOYOS, LL.B., (Hons.), LL.M.
Associate
EULALIE N. GREENAWAY, B.A., LL.B., M.Sc.
Associate
JACQUELINE R. CHACKO, B.A. (Hons.), LL.B., (Hons.)
Associate
KEISHA N. HYDE, LL.B., (Hons.)
Associate
BRYAN A.R. VOLNEY
Solicitor and Attorney-at-Law
</TABLE>

April [___], 2003
                                                             Matter No: 2030099

I-Preferred Term Securities II, Ltd.           FTN Financial Capital Markets
c/o Maples Finance Limited                     845 Crossover Lane, Suite 150
P. O. Box 1093 GT                              Memphis
Queensgate House                               Tennessee  38117
South Church Street                            U.S.A.
George Town, Grand Cayman
Cayman Islands

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

Ladies and Gentlemen:

                      Re: PXRE Reinsurance (Barbados) Ltd.
                      ------------------------------------
                      - Issue of Preferred Trust Securities
                      -------------------------------------

         We have been asked to provide this legal opinion in connection with the
offer, issue and sale by PXRE Group Ltd. ("PXRE Group") and PXRE Capital
Statutory Trust II, (the "Trust"), of $[____________] aggregate principal amount
of Fixed/Floating Rate Capital Securities (the "Capital Securities"), to
I-Preferred Term Securities II, Ltd., a company with limited liability
established under the laws of the Cayman Islands (the "Purchaser") pursuant to
the terms of a Placement Agreement (the "Placement Agreement"), dated as of
_________, 2003 between the PXRE Group and the Trust (together, the "Offerors"),
and FTN Financial Capital Markets and Keefe, Bruyette & Woods, Inc. (together,
the "Placement Agents").

                                    B-1-C-1

<PAGE>

April [___], 2003                                                        Page 2
                                                            Matter No:  2030099

         We have acted as special Barbados counsel to PXRE Reinsurance
(Barbados) Ltd. ("PXRE Barbados"), a wholly-owned subsidiary of PXRE Group, and
as such a Significant Subsidiary of PXRE Group under the Placement Agreement.
This legal opinion is given pursuant to section 3.1(c) of the Placement
Agreement. Capitalised terms used and not otherwise defined herein have the
meanings ascribed to such terms in the Placement Agreement.

         In connection therewith, and in respect of the issue of the Capital
Securities, we have examined originals or copies identified to our satisfaction
of the following documents:

         (i)      the Placement Agreement;

         (ii)     the officer's certificate (the "Officer's Certificate"),
                  issued on behalf of PXRE Group and PXRE Barbados by duly
                  authorised officers of each of PXRE Group and PXRE Barbados
                  confirming inter alia that PXRE Group has not entered into any
                  agreement or other arrangement by which the execution,
                  delivery and performance of the Placement Agreement and the
                  Operative Documents and the consummation of the transactions
                  contemplated by the Placement Agreement and the Operative
                  Documents results in the creation or imposition of any
                  material lien, claim, charge, encumbrance or restriction upon
                  any property or assets of PXRE Barbados;

         (iii)    (a) the certificate and articles of incorporation (the
                  "Corporate Instruments") of PXRE Barbados, (b) the By-Laws
                  (the "By-Laws"), of PXRE Barbados, (c) the insurance licence
                  issued by the Supervisor of Insurance (Barbados) and the
                  business plan, issued and adopted respectively, pursuant to
                  the Insurance Act of the laws of Barbados, and filed with the
                  Office of the Supervisor of Insurance (Barbados), (the
                  business plan together with the insurance licence the
                  "Insurance Licence"), and (d) the share register (the "Share
                  Registers") of PXRE Barbados; and

         (iv)     a certificate of Good Standing issued under the hand of the
                  Registrar of Corporate Affairs (Barbados).

         In our examination of the foregoing documents, we have assumed the
genuineness of all signatures, the authenticity and completeness of all
documents submitted to us as originals, and the conformity to original documents
of all documents submitted to us as notarial, true, certified, conformed,
photostatic or telecopied copies thereof; and the completeness and accuracy of
all facts set forth in official public records and certificates and other
documents issued by public officials.

                                    B-1-C-2

<PAGE>

April [___], 2003                                                        Page 3
                                                            Matter No:  2030099

         We have also assumed, as a basis for the opinions hereafter expressed,
that neither the Offerors nor the Placement Agents will sell or otherwise
distribute any Capital Securities in Barbados.

         In rendering the opinions set forth herein, we have relied (without
independent check or verification) as to certain matters of fact solely upon the
Officer's Certificate.

         We are qualified to practise law only in Barbados and have made no
investigation of laws of any jurisdiction other than the laws of Barbados. We
express no opinion as to the laws of any jurisdiction other than Barbados, and
the opinions hereinafter expressed are limited to the laws of Barbados in effect
on the date hereof.

         Based upon the foregoing and subject to the limitations, qualifications
and assumptions set forth herein, it is our opinion that:-

1.       PXRE Barbados is a body corporate duly organised, validly existing and
         in good standing under the laws of Barbados and has full corporate
         power and authority necessary to own or lease its properties and to
         conduct its business as now being conducted in all material respects.

2.       All issued and outstanding shares in the capital of PXRE Barbados have
         been duly and validly authorised and issued, are fully paid and
         non-assessable and are registered in the name of PXRE Group.

3.       The issuance, sale and delivery of the Debentures by PXRE Group and the
         issuance, sale and delivery of Capital Securities by the Trust do not
         give rise to any right of any person to subscribe for or purchase any
         shares in the capital of PXRE Barbados under the Corporate Instruments
         or By-Laws, or to the best of our knowledge under any agreement or
         other instrument by which PXRE Barbados is bound.

4.       To the best of our knowledge, PXRE Barbados is not in breach or
         violation of, or default under (with or without notice or the lapse of
         time, or both) its Corporate Instruments, By-Laws or Insurance Licence.

5.       The execution, delivery and performance of the Placement Agreement and
         the Operative Documents by PXRE Group, and the consummation of the
         transactions contemplated by the Placement Agreement and the Operative
         Documents do not and will not:

         (a)      result in the creation or imposition of any material lien,
                  claim, charge, encumbrance or restriction upon any property or
                  assets of PXRE Barbados;

                                    B-1-C-3

<PAGE>

April [___], 2003                                                        Page 4
                                                            Matter No:  2030099

         (b)      conflict with, constitute a material breach or violation of,
                  or constitute a material default under (with or without notice
                  or lapse of time or both), any of the terms provisions or
                  conditions of its Corporate Instruments, By-Laws or Insurance
                  Licence;

         (c)      to the best of our knowledge, conflict with, constitute a
                  material breach or violation of, or constitute a material
                  default under (with or without notice or lapse of time or
                  both), any of the terms provisions or conditions of any
                  material contract, indenture, mortgage, deed of trust, loan or
                  credit agreement, note, lease, franchise, license or any other
                  agreement or instrument to which PXRE Barbados is a party or
                  by which it or any of its properties may be bound and which is
                  material to PXRE Barbados; or

         (d)      to the best of our knowledge, conflict with, constitute a
                  material breach or violation of, or constitute a material
                  default under (with or without notice or lapse of time or
                  both), any order, decree, judgement, franchise, license,
                  permit, rule or regulation of any court, arbitrator,
                  government or governmental agency or instrumentality, in
                  Barbados or elsewhere as known to us having jurisdiction over
                  PXRE Barbados or any of its properties and which is material
                  to PXRE Barbados.

6.       To the best of our knowledge, there are no pending or threatened
         actions, suits, proceedings or investigations of any kind or any orders
         of any nature, including arbitration proceedings and actions or
         proceedings of or before any governmental authority of Barbados to
         which PXRE Barbados is a party or is subject, or by which PXRE Barbados
         or any of its properties is bound.

         For the purpose of our opinion, the terms "to the best of our
knowledge" means that, except for such investigations or inquiries of proper
executive officers of the Company, and in the public registers in Barbados, we
have not made any further investigations or inquiries, but we have not in the
course of acting for the Company, acquired any knowledge or received any
information to cause us to believe that the statements qualified by that
expression are not correct.

                                    B-1-C-4

<PAGE>

April [___], 2003                                                        Page 5
                                                            Matter No:  2030099

         This opinion is intended solely for the benefit of the persons to whom
it is addressed, in connection with certain aspects of the transactions
contemplated by the Placement Agreement and the Operative Documents. This
opinion may be relied upon, quoted and referred to by Morgan, Lewis & Bockius
LLP, for the purpose of their rendering legal opinions in connection with the
Placement Agreement and the Operative Documents and the transactions
contemplated thereby. Subject thereto, this opinion is not to be transmitted to
any other person, nor is it to be relied upon by any of the persons to whom it
is addressed or by any other person for any other purpose, or quoted or referred
to in any public document or filed with any governmental agency or other person
without prior written consent.

                                            Yours very truly,
                                            Chancery Chambers

                                        per:

ACF:est

                                    B-1-C-5

<PAGE>

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

                        FORM OF IN-HOUSE COUNSEL OPINION
                        --------------------------------

                                         [CLOSING], 2003

I-Preferred Term Securities II, Ltd.
c/o Maples Finance Limited
P.O. Box 1093 GT
Queensgate House
South Church Street
George Town, Grand Cayman
Grand Cayman Islands
British West Indies

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

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

         Re: Fixed/Floating Rate Junior Deferrable Interest Debentures due 2033
             of PXRE Group, Ltd.

Ladies and Gentlemen:

         I am the General Counsel of PXRE Reinsurance Company, a Connecticut
corporation ("PXRE Reinsurance") and have acted as counsel to PXRE Group, Ltd.,
a Bermuda company (the "Company"), and PXRE Reinsurance Ltd., a Bermuda company
("PXRE Bermuda"), and, in connection with the issuance by the Company of
$[AMOUNT OF DEBENTURES] aggregate principal amount of its junior subordinated
deferrable interest debentures (the "Debentures") and the issuance by PXRE
Capital Statutory Trust II, a Connecticut statutory trust (the "Trust"), of
[NUMBER OF CAPITAL SECURITIES] Fixed/Floating Rate Capital Securities
(liquidation amount of $1,000 per security) of the Trust (the "Capital
Securities").

         This opinion is furnished to you pursuant to Section 3.1(d) of the
Placement Agreement dated [_________], 2003 (the "Placement Agreement"), among
the Trust, the Company, and FTN Financial Capital Markets and Keefe, Bruyette &
Woods, Inc. (the "Placement Agents"). Capitalized terms used but not defined
herein shall have the respective meanings assigned to such terms in the
Placement Agreement.

                                    B-1-D-1

<PAGE>

April [___], 2003                                                        Page 2
                                                            Matter No:  2030099

         In my capacity as such counsel, I have examined originals or copies of
such records, agreements, certificates, documents and other instruments as in my
judgment are necessary or appropriate to render the opinions expressed herein.
These records, agreements, certificates, documents and instruments include the
following:

1. the Placement Agreement;

2. The Amended and Restated Declaration of Trust dated as of [______], 2003,
among the Institutional Trustee (as defined therein), the Administrators (as
defined therein), the Company, as sponsor, and the holders from time to time of
undivided beneficial interests in the Trust;

3. the Indenture dated as of [________], 2003, between the Company and U.S. Bank
National Association;

4. the Debentures;

5. the Capital Securities;

6. the Guarantee Agreement dated as of [_________], 2003, between the Company
and U.S. Bank National Association as trustee for the benefit of the holders (as
defined therein); and

7. the Subscription Agreement dated [_______], 2003 (the Subscription Agreement,
among the Company, the Trust and I-Preferred Term Securities II, Ltd. (the
"Purchaser").

         The documents described in subsections (i)-(viii) above are
individually referred to herein as a "Transaction Document" and collectively
referred to herein as the "Transaction Documents".

                  For purposes of the opinions expressed herein, I have assumed
the genuineness of all signatures, the legal capacity of all natural persons
executing agreements, instruments or documents, the completeness and
authenticity of all records and documents submitted to me as originals and the
conformity with the originals of all records and documents submitted to me as
copies. The opinions (other than the opinions expressed in paragraph 3) are
subject to the qualification that I have relied, as to matters of fact
(including determinations with respect to the question of materiality to the
Company and its subsidiaries), to the extent I deem proper, on the
representations and warranties in the Placement Agreement, certificates of
officers or other representatives of the Company, the Trust and PXRE Reinsurance
and certificates of public officials.

         Based on the foregoing, and subject to the limitations, qualifications,
assumptions and exceptions set forth herein, I am of the opinion that as of the
date hereof:

    (a) PXRE Reinsurance, is validly existing as a corporation in good standing
under the laws of the State of Connecticut, with full corporate power and
authority to own its properties and conduct its business as presently conducted
in all material respects. To the best of my knowledge, all outstanding shares of
capital stock of PXRE Reinsurance have been duly authorized and validly issued,
and are fully paid and non-assessable and owned of record by PXRE Corporation, a
Delaware corporation.

                                    B-1-D-2

<PAGE>

April [___], 2003                                                        Page 3
                                                            Matter No:  2030099

    (b) The issuance, sale and delivery of the Debentures by the Company and the
issuance, sale and delivery of the Capital Securities by the Trust do not give
rise to any rights to subscribe for or to purchase any shares of capital stock
or equity securities of PXRE Reinsurance pursuant to the corporate Articles of
Incorporation, Charter or By-Laws of PXRE Reinsurance, or, to the best of my
knowledge, any agreement or other instrument to which PXRE Reinsurance is a
party.

    (c) To the best of my knowledge, none of PXRE Reinsurance, the Trust, the
Company and PXRE Bermuda is in breach or violation of, or default under, with or
without notice or lapse of time or both, its Articles of Incorporation, Charter,
By-Laws or the Trust Agreement. The execution, delivery and performance of the
Transaction Documents and the consummation of the transactions contemplated
thereby do not and will not (i) conflict with, constitute a material breach or
violation of, or constitute a material default under, with or without notice or
lapse of time or both, any of the terms, provisions or conditions of (A) the
Articles of Incorporation, Charter or By-Laws of PXRE Reinsurance, or (B) to the
best of my knowledge, any material contract, indenture, mortgage, deed of trust,
loan or credit agreement, note, lease, franchise, license or any other material
agreement or instrument to which PXRE Reinsurance, the Company or PXRE Bermuda
is a party or by which any of them or any of their respective properties may be
bound, or (C) any judgment, order or decree of any court, regulatory body,
administrative agency, governmental body or arbitrator in jurisdictions covered
by this opinion and known to me and binding on PXRE Reinsurance, the Company or
PXRE Bermuda which, in the case of each of (A), (B) or (C) above, is material to
the Company and its subsidiaries on a consolidated basis or (ii) pursuant to any
material contract, indenture or other material agreement or instrument, result
in the creation or imposition of any material lien, claim, charge, encumbrance
or restriction upon any property or assets of PXRE Reinsurance, the Company or
PXRE Bermuda.

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

                                    B-1-D-3

<PAGE>

April [___], 2003                                                        Page 4
                                                            Matter No:  2030099

         This opinion is rendered only to the Placement Agents and the Purchaser
and is solely for their benefit in connection with the transactions pursuant to
the Placement Agreement. This opinion may not be relied upon by the Placement
Agents or the Purchaser for any other purpose without my prior written consent.
This opinion may not be relied upon, for any purpose, by any other person, firm
or corporation other than the Placement Agents and the Purchaser.

                                             Very truly yours,

                                    B-1-D-4

<PAGE>

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

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

TO THE PARTIES LISTED
ON SCHEDULE I HERETO

Ladies and Gentlemen:

         We have acted as special counsel in the State of Connecticut (the
"State") for PXRE Capital Statutory Trust II (the "Trust"), a Connecticut
statutory trust formed pursuant to the Amended and Restated Declaration of Trust
(the "Trust Agreement") dated as of the date hereof, among PXRE Group Ltd., a
Bermuda corporation (the "Sponsor"), U.S. Bank National Association, a national
banking association ("U.S. Bank"), in its capacity as Institutional Trustee (the
"Institutional Trustee"), and John Modin, Bruce Byrnes and Jeff Jeffreys, each,
an individual, (each, an "Administrator") in connection with the issuance by the
Trust to the Holders (as defined in the Trust Agreement) of its capital
securities (the "Capital Securities") pursuant to the Placement Agreement dated
as of [PRICING], 2003 (the "Placement Agreement"), the issuance by the Trust to
the Sponsor of its Common Securities, pursuant to the Trust Agreement and the
acquisition by the Trust from the Sponsor of Debentures, issued pursuant to the
Indenture dated as of the date hereof (the "Indenture").

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

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

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

                           (i)      the Trust Agreement;

                           (ii)     the Placement Agreement;

                           (iii)    the Subscription Agreement;

                           (iv)     the Certificate of Common Securities;

                                     B-2-1

<PAGE>

                           (v)      the Certificate of Capital Securities;

                           (vi)     the Guarantee Agreement;

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

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

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

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

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

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

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

                                     B-2-2

<PAGE>

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

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

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

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

                                     B-2-3

<PAGE>

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

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

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

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

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

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

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

                                     B-2-4

<PAGE>

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

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

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

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

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

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

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

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

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

                                     B-2-5

<PAGE>

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

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

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

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

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

                                           Very truly yours,

                                           BINGHAM MCCUTCHEN LLP

                                     B-2-6

<PAGE>

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

U.S. Bank National Association

FTN Financial Capital Markets

Keefe, Bruyette & Woods, Inc.

I-Preferred Term Securities II, Ltd.

I-Preferred Term Securities II, Inc.

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

PXRE Group Ltd.

Morgan, Lewis & Bockius LLP

<PAGE>

                            EXHIBIT A TO EXHIBIT B-2
                            ------------------------

                         CERTIFICATE OF LEGAL EXISTENCE
                         ------------------------------

                                  See attached
                                  ------------

<PAGE>

                                   EXHIBIT B-3
                                   -----------

                           FORM OF TAX COUNSEL OPINION
                           ---------------------------

                                                              [CLOSING], 2003

PXRE Group Ltd.
Swan Building
26 Victoria Street
Hamilton, HM12, Bermuda

PXRE Capital Statutory Trust II
c/o PXRE Group Ltd.
Swan Building
26 Victoria Street
Hamilton, HM12, Bermuda

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

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

Dear Sirs:

         We are acting as special United States tax counsel to PXRE Group Ltd.,
a corporation organized and existing under the laws of Bermuda (the "Company"),
and to PXRE Capital Statutory Trust II, a statutory trust created under the laws
of Connecticut (the "Trust"), in connection with the proposed issuance of (i)
Fixed/Floating Rate Capital Securities, liquidation amount $1,000.00 per Capital
Security (the "Capital Securities") of the Trust, pursuant to the terms of the
Amended and Restated Declaration of Trust dated as of the date hereof by and
among the Company, U.S. Bank National Association, as institutional trustee, and
John Modin, Bruce Byrnes and Jeff Jeffreys, as Administrators (the "Trust
Agreement"), (ii) Fixed/Floating Rate Common Securities, liquidation amount
$1,000 per common security (the "Common Securities") of the Trust, pursuant to
the terms of the Trust Agreement, (iii) Fixed/Floating Rate Junior Subordinated
Deferrable Interest Debentures (the "Corresponding Debentures") of the Company
issued pursuant to the terms of an Indenture dated as of the date hereof from
the Company to U.S. Bank National Association, as trustee (the "Indenture"),
which Corresponding Debentures are to be sold by the Company to the Trust, and
(iv) the Guarantee Agreement of the Company with respect to the Capital
Securities dated as of the date hereof (the "Guarantee") between the Company and
U.S. Bank National Association, as guarantee trustee. The Capital Securities,
the Common Securities and the Corresponding Debentures are to be issued as
contemplated by the Offering Circular (the "Offering Circular") dated [_______],
2003 prepared by I-Preferred Term Securities II, Ltd., an entity formed under
the Companies Law of the Cayman Islands, and I-Preferred Term Securities II,
Inc., a Delaware corporation.

                                     B-3-1

<PAGE>

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

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

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

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

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

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

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

                                     B-3-2

<PAGE>

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

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

                                              Very truly yours,

                                     B-3-3
<PAGE>

                                 PXRE GROUP LTD.

                                                               [CLOSING], 2003

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

         Re:   Representations Concerning the Issuance of Fixed/Floating Rate
               Junior Subordinated Deferrable Interest Debentures (the
               "Corresponding Debentures") to PXRE Capital Statutory Trust II
               (the "Trust") and Sale of the Trust Securities of the Trust

Dear Sirs:

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

         The Company hereby represents that:

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

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

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

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

         5)    The Company intends to create a debtor-creditor relationship
               between the Company, as debtor, and the Trust, as a creditor,
               upon the issuance and sale of the Corresponding Debentures to the
               Trust by the Company. The Company will (i) record and at all
               times continue to reflect the Corresponding Debentures as
               indebtedness on its separate books and records for financial
               accounting purposes, and (ii) treat the Corresponding Debentures
               as indebtedness for all United States federal, state and local
               income tax purposes.

                                     B-3-4

<PAGE>

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

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

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

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

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

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

                                     B-3-5

<PAGE>

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

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

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

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

         The above representations are accurate as of the date hereof and will
continue to be accurate through the issuance of the Trust Securities, unless you
are otherwise notified by us in writing. The undersigned understands that you
will rely on the foregoing in connection with rendering certain legal opinions,
and possesses the authority to make the representations set forth in this letter
on behalf of the Company. Capitalized terms used and not defined herein shall
have the meanings assigned in the Indenture dated as of [CLOSING], 2003 between
the Company and U.S. Bank National Association as debenture trustee.

                                    Very truly yours,

                                    PXRE Group Ltd.

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

                                     B-3-6

<PAGE>

                                    EXHIBIT C
                                    ---------

                            SIGNIFICANT SUBSIDIARIES
                            ------------------------

PXRE Reinsurance Ltd.
PXRE Reinsurance Company
PXRE Reinsurance (Barbados) Ltd.
PXRE Corporation

<PAGE>

                                    EXHIBIT D
                                    ---------

                            FORM OF QUARTERLY REPORT
                            ------------------------

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

PLEASE COMPLETE FOR THE PRINCIPAL INSURANCE OPERATING SUBSIDIARY

As of Year End _______, 20__

<TABLE>

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

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

Total Policyholders' Surplus                                                             $__________

Consolidated Debt to Total Policyholders' Surplus                                        ___________%

Total Assets                                                                             $__________

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

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

Return on Policyholders' Surplus                                                         ___________%

For Property & Casualty Companies

Expense Ratio                                                                            ___________%

Loss and LAE Ratio                                                                       ___________%

Combined Ratio                                                                           ___________%

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

</TABLE>

<PAGE>

<TABLE>

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

</TABLE><PAGE>

                                                                    EXHIBIT 10.6

                    AMENDED AND RESTATED DECLARATION OF TRUST

                                       OF

                             PXRE CAPITAL TRUST III

                            Dated as of May 22, 2003

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                        Page
                                                                                                        ----
<S>            <C>                                                                                        <C>

                                                  ARTICLE I
                                        INTERPRETATION AND DEFINITIONS

SECTION 1.1.   Definitions.................................................................................1

                                                  ARTICLE II
                                                 ORGANIZATION

SECTION 2.1.   Name........................................................................................9
SECTION 2.2.   Office......................................................................................9
SECTION 2.3.   Purpose.....................................................................................9
SECTION 2.4.   Authority...................................................................................9
SECTION 2.5.   Title to Property of the Trust..............................................................9
SECTION 2.6.   Powers and Duties of the Trustees and the Administrators....................................9
SECTION 2.7.   Prohibition of Actions by the Trust and the Trustees.......................................14
SECTION 2.8.   Powers and Duties of the Institutional Trustee.............................................15
SECTION 2.9.   Certain Duties and Responsibilities of the Trustees and the Administrators.................16
SECTION 2.10.  Certain Rights of Institutional Trustee....................................................18
SECTION 2.11.  Delaware Trustee...........................................................................21
SECTION 2.12.  Execution of Documents.....................................................................21
SECTION 2.13.  Not Responsible for Recitals or Issuance of Securities.....................................21
SECTION 2.14.  Duration of Trust..........................................................................21
SECTION 2.15.  Mergers....................................................................................21

                                                 ARTICLE III
                                                   SPONSOR

SECTION 3.1.   Sponsor's Purchase of Common Securities....................................................23
SECTION 3.2.   Responsibilities of the Sponsor............................................................23
SECTION 3.3.   Sponsor May Consolidate, etc., on Certain Terms............................................24

                                                  ARTICLE IV
                                         TRUSTEES AND ADMINISTRATORS

SECTION 4.1.   Number of Trustees.........................................................................24
SECTION 4.2.   Delaware Trustee...........................................................................24
SECTION 4.3.   Institutional Trustee; Eligibility.........................................................25
SECTION 4.4.   Administrators.............................................................................25
SECTION 4.5.   Appointment, Removal and Resignation of the Trustees and the Administrators................25
SECTION 4.6.   Vacancies Among Trustees...................................................................27
SECTION 4.7.   Effect of Vacancies........................................................................27
SECTION 4.8.   Meetings of the Trustees and the Administrators............................................28
</TABLE>

<PAGE>

<TABLE>
<S>            <C>                                                                                        <C>
SECTION 4.9.   Delegation of Power........................................................................28
SECTION 4.10.  Merger, Conversion, Consolidation or Succession to Business................................28

                                                  ARTICLE V
                                                DISTRIBUTIONS

SECTION 5.1.   Distributions..............................................................................29

                                                  ARTICLE VI
                                            ISSUANCE OF SECURITIES

SECTION 6.1.   General Provisions Regarding Securities....................................................29
SECTION 6.2.   Paying Agent, Transfer Agent and Registrar.................................................30
SECTION 6.3.   Form and Dating............................................................................31
SECTION 6.4.   Mutilated, Destroyed, Lost or Stolen Certificates..........................................31
SECTION 6.5.   Temporary Securities.......................................................................31
SECTION 6.6.   Cancellation...............................................................................32
SECTION 6.7.   Rights of Holders; Waivers of Past Defaults................................................32

                                                 ARTICLE VII
                                     DISSOLUTION AND TERMINATION OF TRUST

SECTION 7.1.   Dissolution and Termination of Trust.......................................................34

                                                 ARTICLE VIII
                                            TRANSFER OF INTERESTS

SECTION 8.1.   General....................................................................................35
SECTION 8.2.   Transfer Procedures and Restrictions.......................................................36
SECTION 8.3.   Deemed Security Holders....................................................................39

                                                  ARTICLE IX
                     LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS

SECTION 9.1.   Liability..................................................................................39
SECTION 9.2.   Exculpation................................................................................39
SECTION 9.3.   Fiduciary Duty.............................................................................40
SECTION 9.4.   Indemnification............................................................................40
SECTION 9.5.   Outside Businesses.........................................................................43
SECTION 9.6.   Compensation; Fee..........................................................................44

                                                  ARTICLE X
                                                  ACCOUNTING

SECTION 10.1.  Fiscal Year................................................................................44
SECTION 10.2.  Certain Accounting Matters.................................................................44
SECTION 10.3.  Banking....................................................................................45
SECTION 10.4.  Withholding................................................................................46
</TABLE>

                                       ii
<PAGE>

<TABLE>
<S>            <C>                                                                                        <C>
                                                  ARTICLE XI
                                           AMENDMENTS AND MEETINGS

SECTION 11.1.  Amendments.................................................................................46
SECTION 11.2.  Meetings of the Holders of the Securities; Action by Written Consent.......................48

                                                 ARTICLE XII
                        REPRESENTATIONS OF INSTITUTIONAL TRUSTEE AND DELAWARE TRUSTEE

SECTION 12.1.  Representations and Warranties of Institutional Trustee....................................49
SECTION 12.2.  Representations and Warranties of Delaware Trustee.........................................50

                                                 ARTICLE XIII
                                                MISCELLANEOUS

SECTION 13.1.  Notices....................................................................................51
SECTION 13.2.  Governing Law..............................................................................52
SECTION 13.3.  Submission to Jurisdiction; Agent for Service of Process; Waiver of Immunity...............52
SECTION 13.4.  Intention of the Parties...................................................................54
SECTION 13.5.  Headings...................................................................................54
SECTION 13.6.  Successors and Assigns.....................................................................54
SECTION 13.7.  Partial Enforceability.....................................................................54
SECTION 13.8.  Counterparts...............................................................................54

                              ANNEXES AND EXHIBITS

ANNEX I        Terms of Capital Securities and Common Securities

EXHIBIT A-1    Form of Capital Security Certificate
EXHIBIT A-2    Form of Common Security Certificate
EXHIBIT B      Form of Transferee Certificate to be Executed by Transferees Other than QIBS
EXHIBIT C      Form of Transferor Certificate to be Executed for QIBS
EXHIBIT D      Form of Officers' Certificate
</TABLE>

                                       iii
<PAGE>

                    AMENDED AND RESTATED DECLARATION OF TRUST

                                       OF

                             PXRE CAPITAL TRUST III

                                  May 22, 2003

            AMENDED AND RESTATED DECLARATION OF TRUST (as amended or
supplemented from time to time in accordance with the terms hereof, this
"Declaration"), dated and effective as of May 22, 2003, by the Trustees (as
defined herein), the Administrators (as defined herein), the Sponsor (as defined
herein) and the holders from time to time of undivided beneficial interests in
the assets of the Trust (as defined herein) to be issued pursuant to this
Declaration.

            WHEREAS, certain of the Trustees and the Sponsor established PXRE
Capital Trust III (the "Trust"), a statutory trust under the Statutory Trust Act
(as defined herein), pursuant to a Declaration of Trust, dated as of May 12,
2003 (the "Original Declaration"), and a Certificate of Trust filed with the
Secretary of State of the State of Delaware on May 12, 2003, for the sole
purpose of issuing and selling the Securities (as defined herein) representing
undivided beneficial interests in the assets of the Trust, investing the
proceeds thereof in the Debentures (as defined herein) of the Debenture Issuer
(as defined herein) and engaging in those activities necessary, advisable or
incidental thereto;

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

            WHEREAS, all of the Trustees, the Administrators and the Sponsor, by
this Declaration, amend and restate each and every term and provision of the
Original Declaration.

            NOW, THEREFORE, it being the intention of the parties hereto to
continue the Trust as a statutory trust under the Statutory Trust Act and that
this Declaration constitutes the governing instrument of such statutory trust,
and that all assets contributed to the Trust will be held in trust for the
benefit of the holders, from time to time, of the Securities, subject to the
provisions of this Declaration, and, in consideration of the mutual covenants
contained herein and other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties, intending to be legally bound hereby, amend
and restate in its entirety the Original Declaration and agree as follows:

                                   ARTICLE I
                         INTERPRETATION AND DEFINITIONS

            SECTION 1.1. Definitions. Unless the context otherwise requires:

            (a) capitalized terms used in this Declaration but not defined in
the preamble above or elsewhere herein have the respective meanings assigned to
them in this Section 1.1 or, if not defined in this Section 1.1 or elsewhere
herein, in the Indenture;

<PAGE>

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

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

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

            (e) a term defined in the Trust Indenture Act (as defined herein)
has the same meaning when used in this Declaration unless otherwise defined in
this Declaration or unless the context otherwise requires; and

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

            "Additional Interest" has the meaning set forth in Section 3.06 of
the Indenture.

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

            "Administrators" means each of John Modin, Bruce Byrnes and Jeff
Jeffreys, solely in such Person's capacity as Administrator of the Trust
continued hereunder and not in such Person's individual capacity, or such
Administrator's successor in interest in such capacity, or any successor
appointed as herein provided.

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

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

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

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

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

                                       2
<PAGE>

            "Business Day" means any day other than Saturday, Sunday or any
other day on which banking institutions in Wilmington, Delaware or The City of
New York are permitted or required by law or executive order to close.

            "Capital Securities" has the meaning set forth in Section 6.1(a).

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

            "Certificate" means any certificate evidencing Securities.

            "Certificate of Trust" means the certificate of trust filed with the
Secretary of State of the State of Delaware with respect to the Trust, as
amended and restated from time to time.

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

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

            "Commission" means the United States Securities and Exchange
Commission.

            "Common Securities" has the meaning set forth in Section 6.1(a).

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

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

            "Corporate Trust Office" means the office of the Institutional
Trustee at which at any particular time its corporate trust business shall be
principally administered, which at all times shall be located within the United
States and at the time of execution of this Declaration shall be Rodney Square
North, 1100 North Market Street, Wilmington, DE 19890-0001, Attention: Corporate
Trust Administration.

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

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

            "Debenture Issuer" means PXRE Group Ltd., a holding company
organized under the laws of Bermuda, in its capacity as issuer of the Debentures
under the Indenture, and any permitted successor under the Indenture.

                                       3
<PAGE>

            "Debenture Trustee" means Wilmington Trust Company, a Delaware
banking corporation, not in its individual capacity but solely as trustee under
the Indenture until a successor is appointed thereunder, and thereafter means
such successor trustee.

            "Debentures" means the Fixed Rate Junior Subordinated Debt
Securities due 2033, Series C to be issued by the Debenture Issuer under the
Indenture.

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

            "Deferred Interest" means any interest on the Debentures that would
have been overdue and unpaid for more than one Distribution Payment Date but for
the imposition of an Extension Period, and the interest that shall accrue (to
the extent that the payment of such interest is legally enforceable) on such
interest at the Coupon Rate, compounded quarterly from the date on which such
Deferred Interest would otherwise have been due and payable until paid or made
available for payment.

            "Definitive Capital Securities" means any Capital Securities in
definitive form issued by the Trust.

            "Delaware Trustee" has the meaning set forth in Section 4.2.

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

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

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

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

            "Event of Default" means the occurrence of an Indenture Event of
Default.

            "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor legislation.

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

            "Fiduciary Indemnified Person" shall mean each of the Institutional
Trustee (including in its individual capacity), the Delaware Trustee (including
in its individual capacity), any Affiliate of the Institutional Trustee or the
Delaware Trustee, and any officers, directors, shareholders, members, partners,
employees, representatives, custodians, nominees or agents of the Institutional
Trustee or the Delaware Trustee.

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

                                       4
<PAGE>

            "Guarantee" means the Guarantee Agreement, dated as of the Closing
Date, of the Sponsor (the "Guarantor") in respect of the Capital Securities.

            "Holder" means a Person in whose name a Certificate representing a
Security is registered on the register maintained by or on behalf of the
Registrar, such Person being a beneficial owner within the meaning of the
Statutory Trust Act.

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

            "Indenture" means the Indenture, dated as of the Closing Date, among
the Debenture Issuer and the Debenture Trustee, and any indenture supplemental
thereto pursuant to which the Debentures are to be issued.

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

            "Institutional Trustee" means the Trustee meeting the eligibility
requirements set forth in Section 4.3.

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

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

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

            "Legal Action" has the meaning set forth in Section 2.8(e).

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

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

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

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

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

                                       5
<PAGE>

            "Officers' Certificate" means, with respect to any Person, a
certificate signed by two Authorized Officers of such Person or, in the case of
a natural Person, such Person. Any Officers' Certificate delivered with respect
to compliance with a condition or covenant provided for in this Declaration
shall include:

            (a) a statement that each Authorized Officer or Person, as the case
may be, signing the Officers' Certificate has read the covenant or condition and
the definitions relating thereto;

            (b) a brief statement of the nature and scope of the examination or
investigation undertaken by each Authorized Officer or Person, as the case may
be, in rendering the Officers' Certificate;

            (c) a statement that each Authorized Officer or Person, as the case
may be, has made such examination or investigation as, in his or her opinion, is
necessary to enable such Authorized Officer or Person, as the case may be, to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and

            (d) a statement as to whether, in the opinion of each Authorized
Officer or Person, as the case may be, such condition or covenant has been
complied with.

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

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

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

            "Payment Amount" has the meaning set forth in Section 5.1.

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

            "Placement Agreement" means the Placement Agreement relating to the
offering and sale of Capital Securities.

            "PORTAL" has the meaning set forth in Section 2.6(a)(i).

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

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

            "QIB" means a "qualified institutional buyer" as defined under Rule
144A.

                                       6
<PAGE>

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

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

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

            "Relevant Trustee" has the meaning set forth in Section 4.5(a).

            "Resale Restriction Termination Date" means, with respect to any
Capital Security, 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 Capital Security and (z) the
last date on which the Trust or any Affiliate of the Trust was the Holder of
such Capital Security (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 Institutional
Trustee, any officer within the Corporate Trust Office of the Institutional
Trustee with direct responsibility for the administration of this Declaration,
including any vice-president, any assistant vice-president, any secretary, any
assistant secretary, the treasurer, any assistant treasurer, any trust officer
or other officer of the Corporate Trust Office of the Institutional Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of that
officer's knowledge of and familiarity with the particular subject.

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

            "Rule 144A" means Rule 144A under the Securities Act.

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

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

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

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

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

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

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

                                       7
<PAGE>

            "Sponsor" means PXRE Group Ltd., a holding company that is organized
under the laws of Bermuda, or any successor corporation permitted under
Section 3.3, in its capacity as sponsor of the Trust.

            "Statutory Trust Act" means Chapter 38 of Title 12 of the Delaware
Code, 12 Del. Code ss. 3801 et seq., as it may be amended from time to time, or
any successor legislation.

            "Successor Delaware Trustee" has the meaning set forth in
Section 4.5(e).

            "Successor Entity" has the meaning set forth in Section 2.15(b).

            "Successor Institutional Trustee" has the meaning set forth in
Section 4.5(b).

            "Successor Securities" has the meaning set forth in Section 2.15(b).

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

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

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

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

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

            "Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended from time-to-time, or any successor legislation.

            "Trustee" or "Trustees" means each Person who has signed this
Declaration as a trustee, so long as such Person shall continue in office in
accordance with the terms hereof, and all other Persons who may from time to
time be duly appointed, qualified and serving as Trustees in accordance with the
provisions hereof, and references herein to a Trustee or the Trustees shall
refer to such Person or Persons solely in their capacity as trustees hereunder.

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

                                       8
<PAGE>

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

                                   ARTICLE II
                                  ORGANIZATION

            SECTION 2.1. Name. The Trust is named "PXRE Capital Trust III," as
such name may be modified from time to time by the Administrators following
written notice to the Institutional Trustee and the Holders of the Securities.
The Trust's activities may be conducted under the name of the Trust or any other
name deemed advisable by the Administrators.

            SECTION 2.2. Office. The address of the principal office of the
Trust, which shall be in a state of the United States or the District of
Columbia, is Rodney Square North, 1100 North Market Street, Wilmington, Delaware
19890-0001, Attention: Corporate Trust Administration. On ten Business Days'
written notice to the Institutional Trustee and the Holders of the Securities,
the Administrators may designate another principal office, which shall be in a
state of the United States or the District of Columbia.

            SECTION 2.3. Purpose. The exclusive purposes and functions of the
Trust are (a) to issue and sell the Securities representing undivided beneficial
interests in the assets of the Trust, (b) to invest the gross proceeds from such
sale in the Debentures and (c) except as otherwise limited herein, to engage in
only those other activities deemed necessary, advisable or incidental thereto by
the Institutional Trustee, including, without limitation, those activities
specified in this Declaration. The Trust shall not borrow money, issue debt or
reinvest proceeds derived from investments, pledge any of its assets, or
otherwise undertake (or permit to be undertaken) any activity that would cause
the Trust not to be classified for United States federal income tax purposes as
a grantor trust.

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

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

                                       9
<PAGE>

            SECTION 2.6. Powers and Duties of the Trustees and the
Administrators.

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

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

                    (A) the issuance and sale of the Securities;

                    (B) to cause the Trust to enter into, and to execute,
                deliver and perform on behalf of the Trust, such agreements as
                may be necessary or desirable in connection with the purposes
                and function of the Trust, including agreements with the Paying
                Agent, a subscription agreement for Debentures between the Trust
                and the Sponsor, a subscription agreement for Capital Securities
                between the Trust and the purchaser of the Capital Securities
                and a subscription agreement for Common Securities between the
                Trust and the Sponsor;

                    (C) ensuring compliance with the Securities Act and
                applicable securities or blue sky laws of states and other
                jurisdictions;

                    (D) if and at such time determined solely by the Sponsor at
                the request of the Holders, assisting in the designation of the
                Capital Securities for trading in the Private Offering, Resales
                and Trading through the Automatic Linkages ("PORTAL") system if
                available;

                    (E) the sending of notices (other than notices of default)
                and other information regarding the Securities and the
                Debentures to the Holders in accordance with this Declaration,
                including notice of any notice received from the Debenture
                Issuer of its election to defer payments of interest on the
                Debentures by extending the interest payment period under the
                Indenture;

                    (F) the appointment of a Paying Agent, Transfer Agent and
                Registrar in accordance with this Declaration;

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

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

                                       10
<PAGE>

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

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

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

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

                    (M) to negotiate the terms of, and the execution and
                delivery of, the Placement Agreement providing for the sale of
                the Capital Securities;

                    (N) to employ or otherwise engage employees, agents (who may
                be designated as officers with titles), managers, contractors,
                advisors, attorneys and consultants and pay reasonable
                compensation for such services;

                    (O) to incur expenses that are necessary, advisable or
                incidental to carry out any of the purposes of the Trust;

                    (P) to give the certificate required by ss. 314(a)(4) of the
                Trust Indenture Act to the Institutional Trustee, which
                certificate may be executed by an Administrator; and

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

                                       11
<PAGE>

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

                    (A) the establishment of the Property Account;

                    (B) the receipt of the Debentures;

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

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

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

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

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

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

                    (I) after any Event of Default (of which the Institutional
                Trustee has knowledge (as provided in Section 2.10(m) hereof))
                (provided, that such Event of Default is not by or with respect
                to the Institutional Trustee), the taking of any action that the
                Institutional Trustee may from time to time determine is
                necessary, advisable or incidental for the foregoing to give
                effect to the terms of this Declaration and protect and conserve
                the Trust Property for the benefit of the Holders (without
                consideration of the effect of any such action on any particular
                Holder);

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

                    (K) to undertake any actions set forth in ss. 317(a) of the
                Trust Indenture Act.

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

                                       12
<PAGE>

            (b) So long as this Declaration remains in effect, the Trust (or the
Trustees or Administrators acting on behalf of the Trust) shall not undertake
any business, activities or transaction except as expressly provided herein or
contemplated hereby. In particular, neither the Trustees nor the Administrators
may cause the Trust to (i) acquire any investments or engage in any activities
not authorized by this Declaration, (ii) sell, assign, transfer, exchange,
mortgage, pledge, set-off or otherwise dispose of any of the Trust Property or
interests therein, including to Holders, except as expressly provided herein,
(iii) take any action that would cause (or in the case of the Institutional
Trustee, to the actual knowledge of a Responsible Officer would cause) the Trust
to fail or cease to qualify as a grantor trust for United States federal income
tax purposes, (iv) incur any indebtedness for borrowed money or issue any other
debt or (v) take or consent to any action that would result in the placement of
a lien on any of the Trust Property. The Institutional Trustee shall, at the
sole cost and expense of the Trust subject to reimbursement under Section
9.6(a), defend all claims and demands of all Persons at any time claiming any
lien on any of the Trust Property adverse to the interest of the Trust or the
Holders in their capacity as Holders.

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

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

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

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

                                       13
<PAGE>

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

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

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

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

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

            SECTION 2.7. Prohibition of Actions by the Trust and the Trustees.

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

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

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

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

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

                                       14
<PAGE>

            (e) possess any power or otherwise act in such a way as to vary the
Trust Property or the terms of the Securities;

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

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

            SECTION 2.8. Powers and Duties of the Institutional Trustee.

            (a) The legal title to the Debentures shall be owned by and held of
record in the name of the Institutional Trustee in trust for the benefit of the
Trust. The right, title and interest of the Institutional Trustee to the
Debentures shall vest automatically in each Person who may hereafter be
appointed as Institutional Trustee in accordance with Section 4.5. Such vesting
and cessation of title shall be effective whether or not conveyancing documents
with regard to the Debentures have been executed and delivered.

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

            (c) The Institutional Trustee shall:

                (i) establish and maintain a segregated non-interest bearing
            trust account (the "Property Account") in the United States (as
            defined in Treasury Regulations ss.301.7701-7), in the name of and
            under the exclusive control of the Institutional Trustee, and
            maintained in the Institutional Trustee's trust department, on
            behalf of the Holders of the Securities and, upon the receipt of
            payments of funds made in respect of the Debentures held by the
            Institutional Trustee, deposit such funds into the Property Account
            and make payments to the Holders of the Capital Securities and
            Holders of the Common Securities from the Property Account in
            accordance with Section 5.1. Funds in the Property Account shall be
            held uninvested until disbursed in accordance with this Declaration;

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

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

                                       15
<PAGE>

            (d) The Institutional Trustee shall take all actions and perform
such duties as may be specifically required of the Institutional Trustee
pursuant to the terms of the Securities.

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

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

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

               (ii) a Successor Institutional Trustee has been appointed and has
            accepted that appointment in accordance with Section 4.5.

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

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

                                       16
<PAGE>

            SECTION 2.9. Certain Duties and Responsibilities of the Trustees and
the Administrators.

            (a) The Institutional Trustee, before the occurrence of any Event of
Default (of which the Institutional Trustee has knowledge (as provided in
Section 2.10(m) hereof)) and after the curing of all Events of Default that may
have occurred, shall undertake to perform only such duties as are specifically
set forth in this Declaration and no implied covenants shall be read into this
Declaration against the Institutional Trustee. In case an Event of Default (of
which the Institutional Trustee has knowledge (as provided in Section 2.10(m)
hereof)), has occurred (that has not been cured or waived pursuant to Section
6.7), the Institutional Trustee shall exercise such of the rights and powers
vested in it by this Declaration, and use the same degree of care and skill in
their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.

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

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

                                       17
<PAGE>

            (d) No provision of this Declaration shall be construed to relieve
the Institutional Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct or bad faith with
respect to matters that are within the authority of the Institutional Trustee
under this Declaration, except that:

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

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

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

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

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

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

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

                                       18
<PAGE>

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

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

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

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

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

            (g) the Institutional Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Declaration at the
request or direction of any of the Holders pursuant to this Declaration, unless
such Holders shall have offered to the Institutional Trustee security or
indemnity reasonably satisfactory to it against the costs, expenses and
liabilities which might be incurred by it in compliance with such request or
direction; provided, that nothing contained in this Section 2.10(g) shall be
taken to relieve the Institutional Trustee, upon the occurrence of an Event of
Default (of which the Institutional Trustee has knowledge (as provided in
Section 2.10(m) hereof)) that has not been cured or waived, of its obligation to
exercise the rights and powers vested in it by this Declaration;

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

                                       19
<PAGE>

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

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

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

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

            (m) the Institutional Trustee shall not be charged with knowledge of
an Event of Default unless a Responsible Officer of the Institutional Trustee
has actual knowledge of such event or the Institutional Trustee receives written
notice of such event from any Holder, except that the Institutional Trustee
shall be deemed to have knowledge of any Event of Default pursuant to Sections
5.01(a) or 5.01(b) of the Indenture (other than an Event of Default resulting
from the default in the payment of Additional Interest if the Institutional
Trustee does not have actual knowledge or written notice that such payment is
due and payable);

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

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

                                       20
<PAGE>

            SECTION 2.11. Delaware Trustee. Notwithstanding any other provision
of this Declaration other than Section 4.2, the Delaware Trustee shall not be
entitled to exercise any powers, and the Delaware Trustee shall not have any of
the duties and responsibilities of any of the Trustees or the Administrators
specified in this Declaration (except as may be required under the Statutory
Trust Act). Except as set forth in Section 4.2, the Delaware Trustee shall be a
Trustee for the sole and limited purpose of fulfilling the requirements of ss.
3807 of the Statutory Trust Act.

            SECTION 2.12. Execution of Documents. Unless otherwise determined in
writing by the Institutional Trustee, and except as otherwise required by the
Statutory Trust Act, the Institutional Trustee, or any one or more of the
Administrators, as the case may be, is authorized to execute and deliver on
behalf of the Trust any documents, agreements, instruments or certificates that
the Trustees or the Administrators, as the case may be, have the power and
authority to execute pursuant to Section 2.6.

            SECTION 2.13. Not Responsible for Recitals or Issuance of
Securities. The recitals contained in this Declaration and the Securities shall
be taken as the statements of the Sponsor, and the Trustees do not assume any
responsibility for their correctness. The Trustees make no representations as to
the value or condition of the Trust Property or any part thereof. The Trustees
make no representations as to the validity or sufficiency of this Declaration,
the Debentures or the Securities.

            SECTION 2.14. Duration of Trust. The Trust, unless dissolved
pursuant to the provisions of Article VII hereof, shall have existence for
thirty-five (35) years from the Closing Date.

            SECTION 2.15. Mergers. (a) The Trust may not consolidate,
amalgamate, merge with or into, or be replaced by, or convey, transfer or lease
its properties and assets substantially as an entirety to any corporation or
other Person, except as described in this Section 2.15 and except with respect
to the distribution of Debentures to Holders of Securities pursuant to
Section 7.1(a)(iv) of this Declaration or Section 4 of Annex I.

            (b) The Trust may, with the consent of the Administrators (which
consent will not be unreasonably withheld) and without the consent of the
Institutional Trustee, the Delaware Trustee or the Holders of the Capital
Securities, consolidate, amalgamate, merge with or into, or be replaced by, or
convey, transfer or lease its properties and assets as an entirety or
substantially as an entirety to a trust organized as such under the laws of any
state; provided, that:

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

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

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

                                       21
<PAGE>

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

                (iii) the Capital Securities or any Successor Securities are
            listed or quoted, or any Successor Securities will be listed or
            quoted upon notification of issuance, on any national securities
            exchange or with another organization on which the Capital
            Securities are then listed or quoted, if any;

                (iv) such merger, consolidation, amalgamation, replacement,
            conveyance, transfer or lease does not cause the rating on the
            Capital Securities or any Successor Securities to be downgraded or
            withdrawn by any nationally recognized statistical rating
            organization, if the Capital Securities are then rated;

                (v) such merger, consolidation, amalgamation, replacement,
            conveyance, transfer or lease does not adversely affect the rights,
            preferences and privileges of the Holders of the Securities or any
            Successor Securities in any material respect (other than with
            respect to any dilution of such Holders' interests in the Successor
            Entity);

                (vi) such Successor Entity, if any, has a purpose substantially
            identical to that of the Trust;

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

                    (A) such merger, consolidation, amalgamation, replacement,
                conveyance, transfer or lease does not adversely affect the
                rights, preferences and privileges of the Holders of the
                Securities or any Successor Securities in any material respect
                (other than with respect to any dilution of such Holders'
                interests in the Successor Entity);

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

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

                                       22
<PAGE>

                (viii) the Sponsor or any successor corporation permitted under
            Section 3.3 guarantees the obligations of the Successor Entity under
            the Successor Securities at least to the same extent provided by the
            Indenture, the Guarantee, the Debentures and this Declaration; and

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

            (c) Notwithstanding Section 2.15(b), the Trust shall not, except
with the consent of Holders of 100% in liquidation amount of the Securities,
consolidate, amalgamate, merge with or into, or be replaced by, or convey,
transfer or lease its properties and assets as an entirety or substantially as
an entirety to, any other Person or permit any other Person to consolidate,
amalgamate, merge with or into, or replace it if such consolidation,
amalgamation, merger, replacement, conveyance, transfer or lease would cause the
Trust or Successor Entity to be classified as other than a grantor trust for
United States federal income tax purposes.

                                  ARTICLE III

                                     SPONSOR

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

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

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

            (b) to prepare for filing and request the Administrators to cause
the filing by the Trust, as may be appropriate, of an application to the PORTAL
system, for listing or quotation upon notice of issuance of any Capital
Securities, as requested by the Holders of not less than a Majority in
liquidation amount of the Capital Securities; and

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

                                       23
<PAGE>

            SECTION 3.3. Sponsor May Consolidate, etc., on Certain Terms. The
Sponsor will not consolidate with, or merge into, any other Person, or merge
into itself, or sell, convey, transfer or otherwise dispose of all or
substantially all of its property and assets to any other Person unless, upon
any such consolidation, merger (where the Sponsor is not the surviving
corporation), sale, conveyance, transfer or other disposition, the successor
entity shall be a corporation organized and existing under the laws of the same
jurisdiction as the Sponsor (unless such corporation has agreed to make all
payments due under this Declaration without withholding or deduction for, or on
account of, any taxes, duties, assessments or other governmental charges under
the laws or regulations thereunder of the jurisdiction of organization or
residence (for tax purposes) of such corporation or any political subdivision or
taxing authority thereof or therein unless required by applicable law, in which
case such corporation shall have agreed to pay such additional amounts as shall
be required so that the net amounts received and retained by the parties
entitled to receive such payments, after payment of all taxes (including
withholding taxes), duties, assessments or other governmental charge, will be
equal to the amounts that such parties would have received and retained had no
such taxes (including withholding taxes), duties, assessments or other
governmental charges been imposed) and such corporation expressly assumes all of
the obligations of the Sponsor under this Declaration.

                                   ARTICLE IV

                           TRUSTEES AND ADMINISTRATORS

            SECTION 4.1. Number of Trustees. The number of Trustees initially
shall be two, and:

            (a) at any time before the issuance of any Securities, the Sponsor
may, by written instrument, increase or decrease the number of Trustees; and

            (b) after the issuance of any Securities, the number of Trustees may
be increased or decreased by vote of the Holder of a Majority in liquidation
amount of the Common Securities voting as a class at a meeting of the Holder of
the Common Securities; provided, however, that there shall be a Delaware Trustee
if required by Section 4.2; and there shall always be one Trustee who shall be
the Institutional Trustee, and such Trustee may also serve as Delaware Trustee
if it meets the applicable requirements, in which case Section 2.11 shall have
no application to such entity in its capacity as Institutional Trustee.

            SECTION 4.2. Delaware Trustee. If required by the Statutory Trust
Act, one Trustee (the "Delaware Trustee") shall be:

            (a) a natural person who is a resident of the State of Delaware and
a U.S. Person at least 21 years of age; or

            (b) if not a natural person, an entity which is organized under the
laws of the United States or any state thereof or the District of Columbia, has
its principal place of business in the State of Delaware, and otherwise meets
the requirements of applicable law, including ss.3807 of the Statutory Trust
Act.

                                       24
<PAGE>

            The initial Delaware Trustee shall be Wilmington Trust Company.

            SECTION 4.3. Institutional Trustee; Eligibility.

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

                (i) not be an Affiliate of the Sponsor;

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

                (iii) be a banking corporation or national association organized
            and doing business under the laws of the United States of America or
            any state thereof or of the District of Columbia and authorized
            under such laws to exercise corporate trust powers, having a
            combined capital and surplus of at least fifty million U.S. dollars
            ($50,000,000), and subject to supervision or examination by federal,
            state or District of Columbia authority. If such corporation or
            national association publishes reports of condition at least
            annually, pursuant to law or to the requirements of the supervising
            or examining authority referred to above, then for the purposes of
            this Section 4.3(a)(iii), the combined capital and surplus of such
            corporation or national association shall be deemed to be its
            combined capital and surplus as set forth in its most recent report
            of condition so published.

            (b) If at any time the Institutional Trustee shall cease to be
eligible to so act under Section 4.3(a), the Institutional Trustee shall
immediately resign in the manner and with the effect set forth in Section 4.5.

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

            (d) The initial Institutional Trustee shall be Wilmington Trust
Company.

            SECTION 4.4. Administrators. Each Administrator shall be a U.S.
Person. There shall at all times be at least one Administrator. Except where a
requirement for action by a specific number of Administrators is expressly set
forth in this Declaration and except with respect to any action the taking of
which is the subject of a meeting of the Administrators, any action required or
permitted to be taken by the Administrators may be taken by, and any power of
the Administrators may be exercised by, or with the consent of, any one such
Administrator acting alone.

            SECTION 4.5. Appointment, Removal and Resignation of the Trustees
and the Administrators.

            (a) No resignation or removal of any Trustee (the "Relevant
Trustee") and no appointment of a successor Trustee pursuant to this Article
shall become effective until the acceptance of appointment by the successor
Trustee in accordance with the applicable requirements of this Section.

                                       25
<PAGE>

            (b) Subject to Section 4.5(a), a Relevant Trustee may resign at any
time by giving written notice thereof to the Holders of the Securities and by
appointing a successor Relevant Trustee. Upon the resignation of the
Institutional Trustee, the Institutional Trustee shall appoint a successor by
requesting from at least three Persons meeting the eligibility requirements
their expenses and charges to serve as the successor Institutional Trustee on a
form provided by the Administrators, and selecting the Person who agrees to the
lowest expense and charges (the "Successor Institutional Trustee"). If the
instrument of acceptance by the successor Relevant Trustee required by this
Section shall not have been delivered to the Relevant Trustee within 60 days
after the giving of such notice of resignation or delivery of the instrument of
removal, the Relevant Trustee may petition, at the expense of the Trust, any
federal, state or District of Columbia court of competent jurisdiction for the
appointment of a successor Relevant Trustee. Such court may thereupon, after
prescribing such notice, if any, as it may deem proper, appoint a Relevant
Trustee. The Institutional Trustee shall have no liability for the selection of
such successor pursuant to this Section.

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

            (d) The Institutional Trustee shall give notice of each resignation
and each removal of a Trustee and each appointment of a successor Trustee to all
Holders and to the Sponsor. Each notice shall include the name of the successor
Relevant Trustee and the address of its Corporate Trust Office if it is the
Institutional Trustee.

                                       26
<PAGE>

            (e) Notwithstanding the foregoing or any other provision of this
Declaration, in the event a Delaware Trustee who is a natural person dies or is
adjudged by a court to have become incompetent or incapacitated, the vacancy
created by such death, incompetence or incapacity may be filled by the
Institutional Trustee following the procedures in this Section (with the
successor being a Person who satisfies the eligibility requirement for a
Delaware Trustee set forth in this Declaration) (the "Successor Delaware
Trustee").

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

            (g) No Institutional Trustee or Delaware Trustee shall be liable for
the acts or omissions to act of any Successor Institutional Trustee or Successor
Delaware Trustee, as the case may be.

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

            (i) Any Successor Delaware Trustee shall file an amendment to the
Certificate of Trust with the Secretary of State of the State of Delaware
identifying the name and principal place of business of such Delaware Trustee in
the State of Delaware.

            SECTION 4.6. Vacancies Among Trustees. If a Trustee ceases to hold
office for any reason and the number of Trustees is not reduced pursuant to
Section 4.1, or if the number of Trustees is increased pursuant to Section 4.1,
a vacancy shall occur. A resolution certifying the existence of such vacancy by
the Trustees or, if there are more than two, a majority of the Trustees shall be
conclusive evidence of the existence of such vacancy. The vacancy shall be
filled with a Trustee appointed in accordance with Section 4.5.

                                       27
<PAGE>

            SECTION 4.7. Effect of Vacancies. The death, resignation,
retirement, removal, bankruptcy, dissolution, liquidation, incompetence or
incapacity to perform the duties of a Trustee shall not operate to dissolve,
terminate or annul the Trust or terminate this Declaration. Whenever a vacancy
in the number of Trustees shall occur, until such vacancy is filled by the
appointment of a Trustee in accordance with Section 4.5, the Institutional
Trustee shall have all the powers granted to the Trustees and shall discharge
all the duties imposed upon the Trustees by this Declaration.

            SECTION 4.8. Meetings of the Trustees and the Administrators.
Meetings of the Trustees or the Administrators shall be held from time to time
upon the call of any Trustee or Administrator, as applicable. Regular meetings
of the Trustees and the Administrators, respectively, may be in person in the
United States or by telephone, at a place (if applicable) and time fixed by
resolution of the Trustees or the Administrators, as applicable. Notice of any
in-person meetings of the Trustees or the Administrators shall be hand delivered
or otherwise delivered in writing (including by facsimile, with a hard copy by
overnight courier) not less than 48 hours before such meeting. Notice of any
telephonic meetings of the Trustees or the Administrators or any committee
thereof shall be hand delivered or otherwise delivered in writing (including by
facsimile, with a hard copy by overnight courier) not less than 24 hours before
a meeting. Notices shall contain a brief statement of the time, place and
anticipated purposes of the meeting. The presence (whether in person or by
telephone) of a Trustee or an Administrator, as the case may be, at a meeting
shall constitute a waiver of notice of such meeting except where a Trustee or an
Administrator, as the case may be, attends a meeting for the express purpose of
objecting to the transaction of any activity on the ground that the meeting has
not been lawfully called or convened. Unless provided otherwise in this
Declaration, any action of the Trustees or the Administrators, as the case may
be, may be taken at a meeting by vote of a majority of the Trustees or the
Administrators present (whether in person or by telephone) and eligible to vote
with respect to such matter; provided, that, in the case of the Administrators,
a Quorum is present, or without a meeting by the unanimous written consent of
the Trustees or the Administrators, as the case may be. Meetings of the Trustees
and the Administrators together shall be held from time to time upon the call of
any Trustee or Administrator.

            SECTION 4.9. Delegation of Power. (a) Any Trustee or any
Administrator, as the case may be, may, by power of attorney consistent with
applicable law, delegate to any other natural person over the age of 21 that is
a U.S. Person his or her power for the purpose of executing any documents,
instruments or other writings contemplated in Section 2.6.

            (b) The Trustees shall have power to delegate from time to time to
such of their number or to any officer of the Trust that is a U.S. Person, the
doing of such things and the execution of such instruments or other writings
either in the name of the Trust or the names of the Trustees or otherwise as the
Trustees may deem expedient, to the extent such delegation is not prohibited by
applicable law or contrary to the provisions of the Trust, as set forth herein.

                                       28
<PAGE>

            SECTION 4.10. Merger, Conversion, Consolidation or Succession to
Business. Any Person into which the Institutional Trustee or the Delaware
Trustee, as the case may be, may be merged or converted or with which either may
be consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Institutional Trustee or the Delaware Trustee, as the
case may be, shall be a party, or any Person succeeding to all or substantially
all the corporate trust business of the Institutional Trustee or the Delaware
Trustee, as the case may be, shall be the successor of the Institutional Trustee
or the Delaware Trustee, as the case may be, hereunder, without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
provided such Person shall be otherwise qualified and eligible under this
Article and, provided, further, that such Person shall file an amendment to the
Certificate of Trust with the Secretary of State of the State of Delaware as
contemplated in Section 4.5(i).

                                    ARTICLE V

                                  DISTRIBUTIONS

            SECTION 5.1. Distributions. Holders shall receive Distributions in
accordance with the applicable terms of the relevant Holder's Securities.
Distributions shall be made on the Capital Securities and the Common Securities
in accordance with the preferences set forth in their respective terms. If and
to the extent that the Debenture Issuer makes a payment of interest (including
any Additional Interest or Deferred Interest) or premium, if any, on and/or
principal of the Debentures held by the Institutional Trustee (the amount of any
such payment being a "Payment Amount"), the Institutional Trustee shall and is
directed, to the extent funds are available in the Property Account for that
purpose, to make a distribution (a "Distribution") of the Payment Amount to
Holders. For the avoidance of doubt, funds in the Property Account shall not be
distributed to Holders to the extent of any taxes payable by the Trust, in the
case of withholding taxes, as determined by the Institutional Trustee or any
Paying Agent and, in the case of taxes other than withholding tax taxes, as
determined by the Administrators in a written notice to the Institutional
Trustee.

                                   ARTICLE VI

                             ISSUANCE OF SECURITIES

            SECTION 6.1. General Provisions Regarding Securities.

            (a) The Administrators shall on behalf of the Trust issue one series
of capital securities, evidenced by a certificate substantially in the form of
Exhibit A-1, representing undivided beneficial interests in the assets of the
Trust and having such terms as are set forth in Annex I (the "Capital
Securities"), and one series of common securities, evidenced by a certificate
substantially in the form of Exhibit A-2, representing undivided beneficial
interests in the assets of the Trust and having such terms as are set forth in
Annex I (the "Common Securities"). The Trust shall issue no securities or other
interests in the assets of the Trust other than the Capital Securities and the
Common Securities. The Capital Securities rank pari passu and payment thereon
shall be made Pro Rata with the Common Securities except that, where an Event of
Default has occurred and is continuing, the rights of Holders of the Common
Securities to payment in respect of Distributions and payments upon liquidation,
redemption and otherwise are subordinated to the rights to payment of the
Holders of the Capital Securities.

                                       29
<PAGE>

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

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

            (d) Upon issuance of the Securities as provided in this Declaration,
the Securities so issued shall be deemed to be validly issued, fully paid and
non-assessable, and each Holder thereof shall be entitled to the benefits
provided by this Declaration.

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

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

                                       30
<PAGE>

            SECTION 6.3. Form and Dating.

            (a) The Capital Securities and the Institutional Trustee's
certificate of authentication thereon shall be substantially in the form of
Exhibit A-1, and the Common Securities shall be substantially in the form of
Exhibit A-2, each of which is hereby incorporated in and expressly made a part
of this Declaration. Certificates may be typed, printed, lithographed or
engraved or may be produced in any other manner as is reasonably acceptable to
the Administrators, as conclusively evidenced by their execution thereof. The
Securities may have letters, numbers, notations or other marks of identification
or designation and such legends or endorsements required by law, stock exchange
rule, agreements to which the Trust is subject, if any, or usage (provided, that
any such notation, legend or endorsement is in a form acceptable to the
Sponsor). The Trust at the direction of the Sponsor shall furnish any such
legend not contained in Exhibit A-1 to the Institutional Trustee in writing.
Each Capital Security shall be dated the date of its authentication. The terms
and provisions of the Securities set forth in Annex I and the forms of
Securities set forth in Exhibits A-1 and A-2 are part of the terms of this
Declaration and to the extent applicable, the Institutional Trustee, the
Delaware Trustee, the Administrators and the Sponsor, by their execution and
delivery of this Declaration, expressly agree to such terms and provisions and
to be bound thereby. Capital Securities will be issued only in blocks having an
aggregate liquidation amount of not less than $100,000.

            (b) The Capital Securities are being offered and sold by the Trust
initially pursuant to the Placement Agreement in definitive form, registered in
the name of the Holder thereof, without coupons and with the Restricted
Securities Legend.

            SECTION 6.4. Mutilated, Destroyed, Lost or Stolen Certificates. If:

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

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

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

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<PAGE>

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

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

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

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

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

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

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

                    (B) any accrued Deferred Interest on all of the Debentures;

                                       32
<PAGE>

                    (C) all payments on any Debentures that have become due
                otherwise than by such acceleration and interest and Deferred
                Interest thereon at the rate borne by the Debentures; and

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

                (ii) all Events of Default with respect to the Debentures, other
            than the non-payment of the principal of or premium, if any, on the
            Debentures that has become due solely by such acceleration, have
            been cured or waived as provided in Section 5.07 of the Indenture.

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

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

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

                                       33
<PAGE>

                                  ARTICLE VII

                      DISSOLUTION AND TERMINATION OF TRUST

            SECTION 7.1. Dissolution and Termination of Trust. (a) The Trust
shall dissolve on the first to occur of :

                (i) unless earlier dissolved, on May 22, 2038, the expiration of
            the term of the Trust;

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

                (iii) (other than in connection with a merger, consolidation or
            similar transaction permitted by the Indenture, this Declaration or
            the Guarantee, as the case may be) the filing of a certificate of
            dissolution or its equivalent with respect to the Sponsor or upon
            the revocation of the charter of the Sponsor and the expiration of
            90 days after the date of revocation without a reinstatement
            thereof;

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

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

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

                (vii) before the issuance of any Securities, with the consent of
            all of the Trustees and the Sponsor.

            (b) As soon as is practicable after the occurrence of an event
referred to in Section 7.1(a), and after satisfaction of liabilities to
creditors of the Trust as required by applicable law, including ss.3808 of the
Statutory Trust Act, and subject to the terms set forth in Annex I, the
Institutional Trustee shall terminate the Trust by filing a certificate of
cancellation with the Secretary of State of the State of Delaware.

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

                                       34
<PAGE>

                                  ARTICLE VIII

                              TRANSFER OF INTERESTS

            SECTION 8.1. General. (a) Where Capital Securities are presented to
the Registrar with a request to register a transfer or to exchange them for an
equal aggregate liquidation amount of Capital Securities represented by
different Certificates, the Registrar shall register the transfer or make the
exchange if its requirements for such transactions are met. To permit
registrations of transfers and exchanges, the Trust shall issue and the
Institutional Trustee shall authenticate Capital Securities at the Registrar's
request.

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

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

            (d) The Registrar shall provide for the registration of Securities
and of transfers of Securities, which will be effected without charge but only
upon payment (with such indemnity as the Registrar may require) in respect of
any tax or other governmental charges that may be imposed in relation to it.
Upon surrender for registration of transfer of any Securities, the Registrar
shall cause one or more new Securities to be issued in the name of the
designated transferee or transferees. Any Security issued upon any registration
of transfer or exchange pursuant to the terms of this Declaration shall evidence
the same Security and shall be entitled to the same benefits under this
Declaration as the Security surrendered upon such registration of transfer or
exchange. Every Security surrendered for registration of transfer shall be (i)
duly endorsed or accompanied by a written instrument of transfer in form
reasonably satisfactory to the Registrar duly executed by the Holder or such
Holder's attorney duly authorized in writing and (ii) accompanied, if such
Security is being transferred prior to the Resale Restriction Termination Date,
by a certificate substantially in the form set forth as Exhibit B or C, as
applicable, hereto. Each Security surrendered for registration of transfer shall
be canceled by the Institutional Trustee pursuant to Section 6.6. A transferee
of a Security shall be entitled to the rights and subject to the obligations of
a Holder hereunder upon the receipt by such transferee of a Security. By
acceptance of a Security, each transferee shall be deemed to have agreed to be
bound by this Declaration.

                                       35
<PAGE>

            (e) Neither the Trust nor the Registrar shall be required (i) to
issue, register the transfer of, or exchange any Securities during a period
beginning at the opening of business 15 days before the day of any selection of
Securities for redemption and ending at the close of business on the earliest
date on which the relevant notice of redemption is deemed to have been given to
all Holders of the Securities to be redeemed, or (ii) to register the transfer
or exchange of any Security so selected for redemption in whole or in part,
except the unredeemed portion of any Security being redeemed in part.

            SECTION 8.2. Transfer Procedures and Restrictions.

            (a) Prior to the Resale Restriction Termination Date, the Capital
Securities shall bear the Restricted Securities Legend. The Restricted
Securities Legend on any outstanding Capital Security shall not be removed
unless there is delivered to the Trust such satisfactory evidence, which may
include an opinion of counsel, as may be reasonably required by the Trust, that
neither the Restricted Securities Legend nor the restrictions on transfer set
forth therein are required to ensure that transfers thereof comply with the
provisions of the Securities Act or that such Securities are not "restricted"
within the meaning of Rule 144 under the Securities Act. Upon provision of such
satisfactory evidence, the Institutional Trustee, at the written direction of
the Trust, shall authenticate and deliver Capital Securities that do not bear
the Restricted Securities Legend in exchange for the Capital Securities bearing
the Restricted Securities Legend.

            (b) When Capital Securities are presented to the Registrar (x) to
register the transfer of such Capital Securities, or (y) to exchange such
Capital Securities for an equal aggregate liquidation amount of Capital
Securities represented by different Certificates, the Registrar shall register
the transfer or make the exchange as requested if its reasonable requirements
for such transaction are met; provided, however, that the Capital Securities
surrendered for registration of transfer or exchange shall be duly endorsed or
accompanied by a written instrument of transfer in form reasonably satisfactory
to the Trust and the Registrar duly executed by the Holder thereof or his
attorney duly authorized in writing and (i) if such Capital Securities are being
transferred prior to the Resale Restriction Termination Date to a QIB,
accompanied by a certificate of the transferor substantially in the form set
forth as Exhibit C hereto or (ii) if such Capital Securities are being
transferred prior to the Resale Restriction Termination Date otherwise than to a
QIB, accompanied by a certificate of the transferee substantially in the form
set forth as Exhibit B hereto.

            (c) The Capital Securities may not be transferred prior to the
Resale Restriction Termination Date except in compliance with restrictions on
transfer set forth in the legend set forth below (the "Restricted Securities
Legend"), and except as otherwise contemplated in Section 8.2(a), prior to the
Resale Restriction Termination Date, each Capital Security shall bear the
Restricted Securities Legend:

                                       36
<PAGE>

            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 AND ANY APPLICABLE STATE SECURITIES LAW. THE
HOLDER OF THIS SECURITY OR ANY INTEREST OR PARTICIPATION HEREIN, BY ITS
ACCEPTANCE HEREOF OR THEREOF, AS THE CASE MAY BE, HEREIN 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) OF THE SECURITIES ACT) AFTER THE LATER OF (Y)
THE DATE OF ORIGINAL ISSUANCE HEREOF AND (Z) THE LAST DATE ON WHICH THE TRUST OR
ANY AFFILIATE (AS DEFINED IN RULE 405 UNDER THE SECURITIES ACT) OF THE TRUST 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 DEBENTURE ISSUER OR THE
TRUST, (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 RIGHT OF THE DEBENTURE ISSUER AND THE TRUST PRIOR TO ANY
SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (C), (D) OR (E) ABOVE TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM IN ACCORDANCE WITH THE AMENDED AND
RESTATED DECLARATION OF TRUST, A COPY OF WHICH MAY BE OBTAINED FROM THE
DEBENTURE ISSUER OR THE TRUST. 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.

                                       37
<PAGE>

            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, 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 REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER
INFORMATION AS MAY BE REQUIRED BY THE AMENDED AND RESTATED DECLARATION OF TRUST
TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.

            THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS
HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000 AND MULTIPLES OF $1,000 IN
EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING A
LIQUIDATION AMOUNT 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 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.

                                       38
<PAGE>

            (d) Capital Securities may only be transferred in minimum blocks of
$100,000 aggregate liquidation amount (100 Capital Securities) and multiples of
$1,000 in excess thereof. Any attempted transfer of Capital Securities in a
block having an aggregate liquidation amount 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 a Holder of such Capital Securities for any
purpose, including, but not limited to, the receipt of Distributions on such
Capital Securities, and such purported transferee shall be deemed to have no
interest whatsoever in such Capital Securities.

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

                                   ARTICLE IX

                           LIMITATION OF LIABILITY OF
                    HOLDERS OF SECURITIES, TRUSTEES OR OTHERS

            SECTION 9.1. Liability. (a) Except as expressly set forth in this
Declaration, the Guarantee and the terms of the Securities, the Sponsor shall
not be:

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

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

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

            (c) Pursuant to ss. 3803(a) of the Statutory Trust Act, the Holders
of the Securities shall be entitled to the same limitation of personal liability
extended to stockholders of private corporations for profit organized under the
General Corporation Law of the State of Delaware, except as otherwise
specifically set forth herein.

            SECTION 9.2. Exculpation. (a) No Indemnified Person shall be liable,
responsible or accountable in damages or otherwise to the Trust or any Covered
Person for any loss, damage or claim incurred by reason of any act or omission
performed or omitted by such Indemnified Person in good faith on behalf of the
Trust and in a manner such Indemnified Person reasonably believed to be within
the scope of the authority conferred on such Indemnified Person by this
Declaration or by law, except that an Indemnified Person (other than an
Administrator) shall be liable for any such loss, damage or claim incurred by
reason of such Indemnified Person's negligence, willful misconduct or bad faith
with respect to such acts or omissions and except that an Administrator shall be
liable for any such loss, damage or claim incurred by reason of such
Administrator's gross negligence, willful misconduct or bad faith with respect
to such acts or omissions.

                                       39
<PAGE>

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

            SECTION 9.3. Fiduciary Duty. (a) To the extent that, at law or in
equity, an Indemnified Person has duties (including fiduciary duties) and
liabilities relating thereto to the Trust or to any other Covered Person, an
Indemnified Person acting under this Declaration shall not be liable to the
Trust or to any other Covered Person for its good faith reliance on the
provisions of this Declaration. The provisions of this Declaration, to the
extent that they restrict the duties and liabilities of an Indemnified Person
otherwise existing at law or in equity (other than the duties imposed on the
Institutional Trustee under the Trust Indenture Act), are agreed by the parties
hereto to replace such other duties and liabilities of the Indemnified Person.

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

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

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

            SECTION 9.4. Indemnification. (a)

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

                                       40
<PAGE>

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

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

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

                                       41
<PAGE>

                (v) To the fullest extent permitted by law, expenses (including
            attorneys' fees and expenses) incurred by an Indemnified Person in
            defending a civil, criminal, administrative or investigative action,
            suit or proceeding referred to in paragraphs (i) and (ii) of this
            Section 9.4(a) shall be paid by the Sponsor in advance of the final
            disposition of such action, suit or proceeding upon receipt of an
            undertaking by or on behalf of such Indemnified Person to repay such
            amount if it shall ultimately be determined that such Person is not
            entitled to be indemnified by the Sponsor as authorized in this
            Section 9.4(a). Notwithstanding the foregoing, no advance shall be
            made by the Sponsor if a determination is reasonably and promptly
            made (1) in the case of a Company Indemnified Person (A) by the
            Administrators by a majority vote of a Quorum of disinterested
            Administrators, (B) if such a Quorum is not obtainable, or, even if
            obtainable, if a Quorum of disinterested Administrators so directs,
            by independent legal counsel in a written opinion or (C) by the
            Common Security Holder of the Trust, that, based upon the facts
            known to the Administrators, counsel or the Common Security Holder
            at the time such determination is made, such Indemnified Person
            acted in bad faith or in a manner that such Person either believed
            to be opposed to or did not believe to be in the best interests of
            the Trust, or, with respect to any criminal proceeding, that such
            Indemnified Person believed or had reasonable cause to believe such
            conduct was unlawful, or (2) in the case of a Fiduciary Indemnified
            Person, by independent legal counsel in a written opinion that,
            based upon the facts known to the counsel at the time such
            determination is made, such Indemnified Person acted in bad faith or
            in a manner that such Indemnified Person either believed to be
            opposed to or did not believe to be in the best interests of the
            Trust, or, with respect to any criminal proceeding, that such
            Indemnified Person believed or had reasonable cause to believe such
            conduct was unlawful. In no event shall any advance be made (i) to a
            Company Indemnified Person in instances where the Administrators,
            independent legal counsel or the Common Security Holder reasonably
            determine that such Person deliberately breached such Person's duty
            to the Trust or its Common or Capital Security Holders or (ii) to a
            Fiduciary Indemnified Person in instances where independent legal
            counsel promptly and reasonably determines in a written opinion that
            such Person deliberately breached such Person's duty to the Trust or
            its Common or Capital Security Holders.

            (b) The Sponsor shall indemnify, to the fullest extent permitted by
applicable law, each Indemnified Person from and against any and all loss,
damage, liability, tax (other than taxes based on the income of such Indemnified
Person), penalty, expense or claim of any kind or nature whatsoever incurred by
such Indemnified Person arising out of or in connection with or by reason of the
creation, administration or termination of the Trust, or any act or omission of
such Indemnified Person in good faith on behalf of the Trust and in a manner
such Indemnified Person reasonably believed to be within the scope of authority
conferred on such Indemnified Person by this Declaration, except that no
Indemnified Person shall be entitled to be indemnified in respect of any loss,
damage, liability, tax, penalty, expense or claim incurred by such Indemnified
Person by reason of negligence, willful misconduct or bad faith with respect to
such acts or omissions.

                                       42
<PAGE>

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

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

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

            (f) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section shall, unless otherwise provided when
authorized or ratified, continue as to a Person who has ceased to be an
Indemnified Person and shall inure to the benefit of the heirs, executors and
administrators of such a Person.

            (g) The provisions of this Section shall survive the termination of
this Declaration or the earlier resignation or removal of the Institutional
Trustee. The obligations of the Sponsor under this Section to compensate and
indemnify the Trustees and to pay or reimburse the Trustees for expenses,
disbursements and advances shall constitute additional indebtedness hereunder.
Such additional indebtedness shall be secured by a lien prior to that of the
Securities upon all property and funds held or collected by the Trustees as
such, except funds held in trust for the benefit of the Holders of particular
Capital Securities, provided, that the Sponsor is the Holder of the Common
Securities.

            SECTION 9.5. Outside Businesses. Any Covered Person, the Sponsor,
the Delaware Trustee and the Institutional Trustee (subject to Section 4.3(c))
may engage in or possess an interest in other business ventures of any nature or
description, independently or with others, similar or dissimilar to the business
of the Trust, and the Trust and the Holders of Securities shall have no rights
by virtue of this Declaration in and to such independent ventures or the income
or profits derived therefrom, and the pursuit of any such venture, even if
competitive with the business of the Trust, shall not be deemed wrongful or
improper. None of any Covered Person, the Sponsor, the Delaware Trustee or the
Institutional Trustee shall be obligated to present any particular investment or
other opportunity to the Trust even if such opportunity is of a character that,
if presented to the Trust, could be taken by the Trust, and any Covered Person,
the Sponsor, the Delaware Trustee and the Institutional Trustee shall have the
right to take for its own account (individually or as a partner or fiduciary) or
to recommend to others any such particular investment or other opportunity. Any
Covered Person, the Delaware Trustee and the Institutional Trustee may engage or
be interested in any financial or other transaction with the Sponsor or any
Affiliate of the Sponsor, or may act as depositary for, trustee or agent for, or
act on any committee or body of holders of, securities or other obligations of
the Sponsor or its Affiliates.

                                       43
<PAGE>

            SECTION 9.6. Compensation; Fee. (a) The Sponsor agrees:

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

                (ii) except as otherwise expressly provided herein, to reimburse
            each of the Trustees upon request for all reasonable, documented
            expenses, disbursements and advances incurred or made by such Person
            in accordance with any provision of this Declaration (including the
            reasonable compensation and the expenses and disbursements of such
            Person's agents and counsel), except any such expense, disbursement
            or advance attributable to such Person's negligence, willful
            misconduct or bad faith.

            (b) The provisions of this Section shall survive the dissolution of
the Trust and the termination of this Declaration and the removal or resignation
of any Trustee.

                                   ARTICLE X

                                   ACCOUNTING

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

            SECTION 10.2. Certain Accounting Matters.

            (a) At all times during the existence of the Trust, to the extent
required by the Code, the Administrators shall keep, or cause to be kept, at the
principal office of the Trust in the United States, as defined for purposes of
Treasury Regulations ss. 301.7701-7, full books of account, records and
supporting documents, which shall reflect in reasonable detail each transaction
of the Trust. The books of account shall be maintained on the accrual method of
accounting, in accordance with generally accepted accounting principles,
consistently applied.

            (b) The Sponsor shall cause the Administrators to deliver to each
Holder of Securities: (i) within 45 days after the end of each quarterly fiscal
period other than year end, (1) unaudited consolidated financial statements of
the Sponsor (including balance sheet and income statement) covering such period
and (2) an Officer's Certificate of the Sponsor to the effect specified in
Exhibit D hereto; (ii) within 60 days after the end of each year end, (1)
unaudited consolidated financial statements of the Sponsor (including balance
sheet and income statement) covering the related annual period and (2) an
Officer's Certificate of the Sponsor to the effect specified in Exhibit D
hereto; (iii) within the earlier of (x) 90 days after the end of each year end
and (y) such earlier number of days prescribed by the Commission for the filing
with it of a Form 10-K by companies subject to the informational reporting
requirements of the Exchange Act, (1) audited consolidated financial statements
of the Sponsor (including balance sheet and income statement) covering such
related annual period, (2) the report of the independent accountants with
respect to such financial statements and (3) an Officer's Certificate of the
Sponsor detailing any material differences between the unaudited financial
statements for such annual period delivered pursuant to clause (ii)(1) above and
those delivered pursuant to this clause; and (iv) within 7 days after the filing
thereof, each Form 10-K and Form 10-Q that is prepared by the Sponsor in respect
of the Sponsor or the Trust and filed with the Commission in accordance with the
Exchange Act, if any. In addition, at any time when the Trust is not subject to
Section 13 or Section 15(d) of the Exchange Act (or is not current in its
reporting obligations thereunder nor exempt from reporting pursuant to Rule
12g3-2(b) thereunder), the Trust will make available, upon request, to any
Holder and any prospective purchaser of Securities the information required
pursuant to Rule 144A(d)(4) under the Securities Act.

                                       44
<PAGE>

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

            (d) To the extent required by the Code, the Administrators shall
cause to be duly prepared in the United States, as defined for purposes of
Treasury Regulations ss. 301.7701-7, and filed an annual United States federal
income tax return on a Form 1041 or such other form required by United States
federal income tax law, and any other annual income tax returns required to be
filed by the Administrators on behalf of the Trust with any state or local
taxing authority.

            (e) So long as the only Holder of the Capital Securities is InCapS
Funding I, Ltd. or a trustee thereof, the Administrators will cause copies of
the annual financial statements of the Sponsor and/or Affiliates that are filed
with the insurance regulator in the jurisdiction in which the Sponsor or any
such Affiliate is incorporated to be delivered to the Holder promptly following
their filing.

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

                                       45
<PAGE>

            SECTION 10.4. Withholding. The Institutional Trustee or any Paying
Agent and the Administrators shall comply with all withholding requirements
under United States federal, state and local law. The Institutional Trustee or
any Paying Agent shall request, and each Holder shall provide to the
Institutional Trustee or any Paying Agent, such forms or certificates as are
necessary to establish an exemption from withholding with respect to the Holder,
and any representations and forms as shall reasonably be requested by the
Institutional Trustee or any Paying Agent to assist it in determining the extent
of, and in fulfilling, its withholding obligations. The Administrators shall
file required forms with applicable jurisdictions and, unless an exemption from
withholding is properly established by a Holder, shall remit amounts withheld
with respect to the Holder to applicable jurisdictions. To the extent that the
Institutional Trustee or any Paying Agent is required to withhold and pay over
any amounts to any authority with respect to distributions or allocations to any
Holder, the amount withheld shall be deemed to be a Distribution to the Holder
in the amount of the withholding. In the event of any claimed overwithholding,
Holders shall be limited to an action against the applicable jurisdiction. If
the amount required to be withheld was not withheld from actual Distributions
made, the Institutional Trustee or any Paying Agent may reduce subsequent
Distributions by the amount of such withholding.

                                   ARTICLE XI

                             AMENDMENTS AND MEETINGS

            SECTION 11.1. Amendments. (a) Except as otherwise provided in this
Declaration or by any applicable terms of the Securities, this Declaration may
only be amended by a written instrument approved and executed by

                (i) the Institutional Trustee,

                (ii) if the amendment affects the rights, powers, duties,
            obligations or immunities of the Delaware Trustee, the Delaware
            Trustee,

                (iii) if the amendment affects the rights, powers, duties,
            obligations or immunities of the Administrators, the Administrators,
            and

                (iv) the Holders of a Majority in liquidation amount of the
            Common Securities.

            (b) Notwithstanding any other provision of this Article XI, no
amendment shall be made, and any such purported amendment shall be void and
ineffective:

                (i) unless the Institutional Trustee shall have first received

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

                                       46
<PAGE>

                    (B) an opinion of counsel (who may be counsel to the Sponsor
                or the Trust) that such amendment is permitted by, and conforms
                to, the terms of this Declaration (including the terms of the
                Securities) and that all conditions precedent to the execution
                and delivery of such amendment have been satisfied; or

                (ii) if the result of such amendment would be to

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

                    (B) reduce or otherwise adversely affect the powers of the
                Institutional Trustee in contravention of the Trust Indenture
                Act; or

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

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

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

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

            (f) The rights of the Holders of the Capital Securities and Common
Securities, as applicable, under Article IV to increase or decrease the number
of, and appoint and remove, Trustees shall not be amended without the consent of
the Holders of a Majority in liquidation amount of the Capital Securities or
Common Securities, as applicable.

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

                (i) cure any ambiguity;

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

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

                                       47
<PAGE>

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

provided, however, that no such amendment contemplated in clause (i), (ii),
(iii) or (iv) shall adversely affect the powers, preferences, rights or
interests of Holders of Capital Securities.

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

            (a) Meetings of the Holders of the Capital Securities or the Common
Securities may be called at any time by the Administrators (or as provided in
the terms of such Securities) to consider and act on any matter on which Holders
of such Securities are entitled to act under the terms of this Declaration, the
terms of such Securities or the rules of any stock exchange on which the Capital
Securities are listed or admitted for trading, if any. The Administrators shall
call a meeting of the Holders of such Securities if directed to do so by the
Holders of not less than 10% in liquidation amount of such Securities. Such
direction shall be given by delivering to the Administrators one or more notices
in a writing stating that the signing Holders of such Securities wish to call a
meeting and indicating the general or specific purpose for which the meeting is
to be called. Any Holders of Securities calling a meeting shall specify in
writing the Certificates held by the Holders of the Securities exercising the
right to call a meeting and only those Securities represented by such
Certificates shall be counted for purposes of determining whether the required
percentage set forth in the second sentence of this paragraph has been met.

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

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

                                       48
<PAGE>

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

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

                                   ARTICLE XII

                    REPRESENTATIONS OF INSTITUTIONAL TRUSTEE
                              AND DELAWARE TRUSTEE

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

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

                                       49
<PAGE>

            (b) the Institutional Trustee has a combined capital and surplus of
at least fifty million U.S. dollars ($50,000,000);

            (c) the Institutional Trustee is not an Affiliate of the Sponsor,
nor does the Institutional Trustee offer or provide credit or credit enhancement
to the Trust;

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

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

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

            SECTION 12.2. Representations and Warranties of Delaware Trustee.
The Trustee that acts as initial Delaware Trustee represents and warrants to the
Trust and to the Sponsor at the date of this Declaration, and each Successor
Delaware Trustee represents and warrants to the Trust and the Sponsor at the
time of the Successor Delaware Trustee's acceptance of its appointment as
Delaware Trustee that:

            (a) if it is not a natural person, the Delaware Trustee is duly
organized, validly existing and in good standing under the laws of the State of
Delaware;

            (b) if it is not a natural person, the execution, delivery and
performance by the Delaware Trustee of this Declaration has been duly authorized
by all necessary corporate action on the part of the Delaware Trustee, and this
Declaration has been duly executed and delivered by the Delaware Trustee, and
under Delaware law (excluding any securities laws) constitutes a legal, valid
and binding obligation of the Delaware Trustee, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, reorganization,
moratorium, insolvency and other similar laws affecting creditors' rights
generally and to general principles of equity and the discretion of the court
(regardless of whether considered in a proceeding in equity or at law);

            (c) if it is not a natural person, the execution, delivery and
performance of this Declaration by the Delaware Trustee does not conflict with
or constitute a breach of the charter or by-laws of the Delaware Trustee;

            (d) it has trust power and authority to execute and deliver, and to
carry out and perform its obligations under the terms of, this Declaration;

                                       50
<PAGE>

            (e) no consent, approval or authorization of, or registration with
or notice to, any state or federal banking authority governing the trust powers
of the Delaware Trustee is required for the execution, delivery or performance
by the Delaware Trustee of this Declaration; and

            (f) the Delaware Trustee is a natural person who is a resident of
the State of Delaware or, if not a natural person, it is an entity which has its
principal place of business in the State of Delaware and, in either case, a
Person that satisfies for the Trust the requirements of ss.3807 of the Statutory
Trust Act.

                                  ARTICLE XIII
                                  MISCELLANEOUS

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

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

                       PXRE Capital Trust III
                       c/o PXRE Group Ltd.
                       Swan Building, 26 Victoria Street
                       Hamilton, Bermuda HM12
                       Attention: Chief Financial Officer
                       Telecopy: 441-296-6162
                       Telephone: 441-278-3710

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

                       Wilmington Trust Company
                       Rodney Square North
                       1100 North Market Street
                       Wilmington, DE 19890-0001
                       Attention: Corporate Trust Administration
                       Telecopy: 302-651-8882
                       Telephone: 302-651-1000

                                       51
<PAGE>

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

                       Wilmington Trust Company
                       Rodney Square North
                       1100 North Market Street
                       Wilmington, DE 19890-0001
                       Attention: Corporate Trust Administration
                       Telecopy: 302-651-8882
                       Telephone: 302-651-1000

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

                       PXRE Group Ltd.
                       Swan Building, 26 Victoria Street
                       Hamilton, Bermuda HM12
                       Attention: Chief Financial Officer
                       Telecopy: 441-296-6162
                       Telephone: 441-278-3710

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

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

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

            SECTION 13.3. Submission to Jurisdiction; Agent for Service of
Process; Waiver of Immunity.

            (a) Each of the parties hereto agrees that any suit, action or
proceeding arising out of or based upon this Declaration, or the transactions
contemplated hereby, may be instituted in any of the courts of the State of New
York and the United States District Courts, in each case located in the Borough
of Manhattan, City and State of New York, and further agrees to submit to the
jurisdiction of any competent court in the place of its corporate domicile in
respect of actions brought against it as a defendant. In addition, each such
party irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of such suit,
action or proceeding brought in any such court and irrevocably waives any claim
that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum and irrevocably waives any right to which it
may be entitled on account of its place of corporate domicile. Each such party
hereby irrevocably waives any and all right to trial by jury in any legal
proceeding arising out of or relating to this Declaration or the transactions
contemplated hereby. Each such party agrees that final judgment in any
proceedings brought in such a court shall be conclusive and binding upon it and
may be enforced in any court to the jurisdiction of which it is subject by a
suit upon such judgment.

                                       52
<PAGE>

            (b) Each of the Trustees and the Administrators irrevocably consents
to the service of process on it in any such suit, action or proceeding by the
mailing thereof by registered or certified mail, postage prepaid, to it at its
address given in or pursuant to Section 13.1 hereof.

            (c) Each of the Sponsor and the Holder of the Common Securities
hereby irrevocably designates, appoints and empowers CT Corporation System, 111
Eighth Avenue, 13th Floor, New York, New York 10011, as its designee, appointee
and agent to receive, accept and acknowledge for and on its behalf, and its
properties, assets and revenues, service of any and all legal process, summons,
notices and documents which may be served in any action, suit or proceeding in
respect of this Declaration that is brought in any United States federal court
or New York state court, in each case located in the Borough of Manhattan, The
City of New York, which may be made on such designee, appointee and agent in
accordance with legal procedures prescribed for such courts. If for any reason
such designee, appointee and agent shall cease to be available to act as such,
each of the Sponsor and the Holder of the Common Securities agrees to designate
a new designee, appointee and agent in The City of New York on the terms and for
the purposes of this clause. Each of the Sponsor and the Holder of the Common
Securities, to the fullest extent permitted by law, hereby further irrevocably
agrees to the service of any and all legal process, summons, notices and
documents in any such action, suit or proceeding by serving a copy thereof upon
the relevant agent for service of process referred to in this clause (whether or
not the appointment of such agent shall for any reason prove to be ineffective
or such agent shall accept or acknowledge such service) or by mailing copies
thereof by registered or certified air mail, first class, postage prepaid, to
the Sponsor at Swan Building, 26 Victoria Street, Hamilton, Bermuda HM12,
Attention: John Modin. Each of the Sponsor and the Holder of the Common
Securities, to the fullest extent permitted by law, further agrees that service
of process as aforementioned shall be deemed in every respect effective service
of process upon it in any such action, suit or proceeding and that the failure
of any such designee, appointee and agent to give any notice of such service to
it shall not impair or affect in any way the validity of such service or any
judgment rendered in any action, suit or proceeding based thereon. Nothing
herein shall in any way be deemed to limit the ability of any Person to serve
any such legal process, summons, notices and documents in any other manner
permitted by applicable law or to obtain jurisdiction over the Sponsor or the
Holder of the Common Securities or bring actions, suits or proceedings against
the Sponsor or the Holder of the Common Securities in any jurisdiction, and in
such manner, as may be permitted by applicable law.

                                       53
<PAGE>

            (d) To the extent permitted by law, nothing herein contained shall
preclude any party from effecting service of process in any lawful manner or
from bringing any suit, action or proceeding in respect of this Declaration in
any other state, country or place.

            (e) To the extent that the Sponsor or the Holder of the Common
Securities or any of their respective properties, assets or revenues may have or
may hereafter become entitled to, or have attributed to it, any right of
immunity, on the grounds of sovereignty or otherwise, from any action, suit or
proceeding, from the giving of any relief in any action, suit or proceeding,
from setoff or counterclaim, from the jurisdiction of any court, from service of
process, from attachment upon or prior to judgment, from attachment in aid of
execution of judgment, or from execution of judgment, or other legal process or
proceeding for the giving of any relief or for the enforcement of any judgment,
in any jurisdiction in which proceedings may at any time be commenced, in
respect of this Declaration, each of the Sponsor and the Holder of the Common
Securities, to the fullest extent permitted by law, hereby irrevocably and
unconditionally waives, and agrees not to plead or claim, any such immunity and
consents to such relief and enforcement.

            (f) All payments required to be made by the Sponsor in respect of
this Declaration shall be made free and clear of, and without deduction or
withholding for or on account of, any and all present and future taxes, duties,
assessments or other governmental charges of whatever nature (collectively,
"Foreign Taxes") now or hereinafter imposed or levied by or on behalf of Bermuda
or any political subdivision or taxing authority thereof or therein unless
required under applicable law. If such a withholding or deduction is required
under applicable law, the Sponsor shall pay such additional amounts to the party
entitled to receive the related payment under this Declaration as shall be
required so that the net amounts received and retained by such party, after
paying all Foreign Taxes, will be equal to the amounts that such party would
have received and retained had no Foreign Taxes been imposed.

            SECTION 13.4. Intention of the Parties. It is the intention of the
parties hereto that the Trust be classified for United States federal income tax
purposes as a grantor trust. The provisions of this Declaration shall be
interpreted to further this intention of the parties.

            SECTION 13.5. Headings. Headings contained in this Declaration are
inserted for convenience of reference only and do not affect the interpretation
of this Declaration or any provision hereof.

            SECTION 13.6. Successors and Assigns. Whenever in this Declaration
any of the parties hereto is named or referred to, the successors and assigns of
such party shall be deemed to be included, and all covenants and agreements in
this Declaration by the Sponsor and the Trustees shall bind and inure to the
benefit of their respective successors and assigns, whether or not so expressed.

            SECTION 13.7. Partial Enforceability. If any provision of this
Declaration, or the application of such provision to any Person or circumstance,
shall be held invalid, the remainder of this Declaration, or the application of
such provision to persons or circumstances other than those to which it is held
invalid, shall not be affected thereby.

                                       54
<PAGE>

            SECTION 13.8. Counterparts. This Declaration may contain more than
one counterpart of the signature page and this Declaration may be executed by
the affixing of the signature of each of the Trustees and Administrators to any
of such counterpart signature pages. All of such counterpart signature pages
shall be read as though one, and they shall have the same force and effect as
though all of the signers had signed a single signature page.

                                       55
<PAGE>

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

                                          WILMINGTON TRUST COMPANY,
                                              as Delaware Trustee

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

                                          WILMINGTON TRUST COMPANY,
                                              as Institutional Trustee

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

                                          PXRE GROUP LTD.
                                              as Sponsor

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

                                          ---------------------------------
                                              John Modin
                                                       as Administrator

                                          ---------------------------------
                                              Bruce Byrnes
                                                       as Administrator

                                          ---------------------------------
                                              Jeff Jeffreys
                                                       as Administrator

                                       56
<PAGE>

                                     ANNEX I

                                    TERMS OF
                    CAPITAL SECURITIES AND COMMON SECURITIES

            Pursuant to Section 6.1 of the Amended and Restated Declaration of
Trust, dated as of May 22, 2003 (as amended from time to time, the
"Declaration"), the designation, rights, privileges, restrictions, preferences
and other terms and provisions of the Capital Securities and the Common
Securities (collectively, the "Securities") are set out below (each capitalized
term used but not defined herein has the meaning set forth in the Declaration):

            1. Designation and Number.

            (a) Capital Securities. 15,000 Capital Securities of PXRE Capital
Trust III (the "Trust"), with an aggregate liquidation amount with respect to
the assets of the Trust of FIFTEEN MILLION Dollars ($15,000,000) and a
liquidation amount with respect to the assets of the Trust of $1,000 per Capital
Security, are hereby designated for the purposes of identification only as the
"InCapS(SM)" (the "Capital Securities"). The Capital Security Certificates
evidencing the Capital Securities shall be substantially in the form of Exhibit
A-1 to the Declaration, with such changes and additions thereto or deletions
therefrom as may be required by ordinary usage, custom or practice or to conform
to the rules of any stock exchange on which the Capital Securities are listed,
if any.

            (b) Common Securities. 464 Common Securities of the Trust (the
"Common Securities") will be evidenced by Common Security Certificates
substantially in the form of Exhibit A-2 to the Declaration, with such changes
and additions thereto or deletions therefrom as may be required by ordinary
usage, custom or practice. In the absence of an Event of Default, the Common
Securities will have an aggregate liquidation amount with respect to the assets
of the Trust of FOUR HUNDRED AND SIXTY-FOUR THOUSAND Dollars ($464,000) and a
liquidation amount with respect to the assets of the Trust of $1,000 per Common
Security.

            2. Distributions. (a) Distributions payable on each Security will be
payable at a fixed rate of interest equal to 9.75% per annum (the "Coupon
Rate"). Distributions in arrears for more than one Distribution Period will bear
interest thereon, compounded quarterly, at the Coupon Rate (to the extent
permitted by applicable law). The term "Distributions", as used herein, includes
cash Distributions, any such compounded Distributions and any Additional
Interest payable on the Debentures unless otherwise stated. A Distribution is
payable only to the extent that payments are made in respect of the Debentures
held by the Institutional Trustee and to the extent the Institutional Trustee
has funds legally available in the Property Account therefor. The amount of
Distributions payable for any Distribution Period will be computed on the basis
of a 360-day year consisting of twelve 30-day months.

            The term "Distribution Period", as used herein, means (i) in the
case of the first Distribution Period, the period from, and including, the date
of original issuance of the Securities to, but excluding, the initial
Distribution Payment Date and (ii) thereafter, from and including the first day
following the end of the preceding Distribution Period to, but excluding, the
related Distribution Payment Date or, in the case of the last Distribution
Period, the related date of redemption.

                                     A-I-1
<PAGE>

            (b) Distributions on the Securities will be cumulative, will accrue
from the date of original issuance, and will be payable, subject to extension of
Distribution Periods as described herein, quarterly in arrears on February 23,
May 23, August 23 and November 23 of each year, commencing on August 23, 2003
(each, a "Distribution Payment Date"). The Debenture Issuer has the right under
the Indenture to defer payments of interest on the Debentures by extending the
interest payment period for up to 20 consecutive quarterly periods (each such
extended interest payment period, together with all previous and future
consecutive extensions thereof, is referred to herein as an "Extension Period")
at any time and from time to time on the Debentures, subject to the conditions
described below and in the Indenture. No Extension Period may end on a date
other than a Distribution Payment Date or extend beyond the Maturity Date, any
Optional Redemption Date or the Special Redemption Date, as the case may be
(each such term as defined herein). During any Extension Period, interest will
continue to accrue on the Debentures, and interest on such accrued interest
(such accrued interest and interest thereon referred to herein as "Deferred
Interest") will accrue, at an annual rate equal to the Coupon Rate, compounded
quarterly from the date such Deferred Interest would have been payable were it
not for the Extension Period, to the extent permitted by applicable law. At the
end of any Extension Period, the Debenture Issuer shall pay all Deferred
Interest then accrued and unpaid on the Debentures; provided, however, that
during any Extension Period, the Debenture Issuer may not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Debenture Issuer's share
capital, (ii) make any payment of principal of or premium or interest on or
repay, repurchase or redeem, any debt securities of the Debenture Issuer that
rank in all respects pari passu with or junior in interest to the Debentures or
(iii) make any payment under any guarantees of the Debenture Issuer that rank in
all respects pari passu with or junior in interest to the Guarantee (other than
(a) repurchases, redemptions or other acquisitions of shares of the Debenture
Issuer (A) in connection with any employment contract, benefit plan or other
similar arrangement with or for the benefit of one or more employees, officers,
directors or consultants, (B) in connection with a dividend reinvestment or
shareholder share purchase plan or (C) in connection with the issuance of share
capital of the Debenture Issuer (or securities convertible into or exercisable
for such share capital), as consideration in an acquisition transaction entered
into prior to the applicable Extension Period, (b) as a result of any exchange
or conversion of any class or series of the Debenture Issuer's share capital (or
any share capital of a subsidiary of the Debenture Issuer) for any class or
series of the Debenture Issuer's share capital or of any class or series of the
Debenture Issuer's indebtedness for any class or series of the Debenture
Issuer's share capital, (c) the purchase of fractional interests in shares of
the Debenture Issuer's share capital pursuant to the conversion or exchange
provisions of such share capital or the security being converted or exchanged,
(d) any declaration of a dividend in connection with any shareholder's rights
plan, or the issuance of rights, shares or other property under any
shareholder's rights plan, or the redemption or repurchase of rights pursuant
thereto, (e) any dividend in the form of shares, warrants, options or other
rights where the bonus shares or the shares issuable upon exercise of such
warrants, options or other rights are the same shares as that on which the
dividend is being paid or ranks pari passu with or junior in interest to such
shares or (f) any payments under the Guarantee). Prior to the termination of any
Extension Period, the Debenture Issuer may further extend such Extension Period,
provided, that no Extension Period (including all previous and further
consecutive extensions that are part of such Extension Period) shall exceed 20
consecutive quarterly periods. Upon the termination of any Extension Period and
upon the payment of all Deferred Interest, the Debenture Issuer may commence a
new Extension Period, subject to the requirements herein and in the Indenture.
No interest or Deferred Interest (except any Additional Interest that may be due
and payable) shall be due and payable during an Extension Period, except at the
end thereof, but Deferred Interest shall accrue upon each installment of
interest that would otherwise have been due and payable during such Extension
Period until such installment is paid.

                                     A-I-2
<PAGE>

            As a consequence of any Extension Period, Distributions will be
deferred. Notwithstanding any such deferral, Distributions will continue to
accrue on the Securities, and Distributions on such accrued Distributions will
accrue, at the Coupon Rate, compounded quarterly, to the extent permitted by
applicable law. If Distributions are deferred, the Distributions due shall be
paid on the date that such Extension Period terminates to Holders of the
Securities as they appear on the books and records of the Trust on the regular
record date immediately preceding the Distribution Payment Date on which such
Extension Period terminates to the extent that the Trust has funds legally
available for the payment of such Distributions in the Property Account of the
Trust.

            The Trust's funds available for Distributions to the Holders of the
Securities will be limited to payments received from the Debenture Issuer. The
payment of Distributions out of moneys held by the Trust is guaranteed by the
Guarantor pursuant to the Guarantee.

            (c) Distributions on the Securities will be payable to the Holders
thereof as they appear on the books and records of the Registrar on the relevant
regular record dates. The relevant "regular record dates" shall be 15 days
before the relevant Distribution Payment Dates. Distributions payable on any
Securities that are not punctually paid on any Distribution Payment Date, as a
result of the Debenture Issuer having failed to make a payment under the
Debentures, as the case may be, when due (taking into account any Extension
Period), will cease to be payable to the Person in whose name such Securities
are registered on the original relevant regular record date, and such defaulted
Distributions will instead be payable to the Person in whose name such
Securities are registered on the regular record date preceding the Distribution
Payment Date on which the related Extension Period terminates or, in the absence
of an Extension Period, a special record date therefor selected by the
Administrators.

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

            (e) If any Distribution Payment Date falls on a day that is not a
Business Day, then Distributions payable on such Distribution Payment Date will
be paid on the next succeeding Business Day, and no additional Distributions
will accrue in respect of such payment on such next succeeding Business Day.

                                     A-I-3
<PAGE>

            3. Liquidation Distribution Upon Dissolution. In the event of the
voluntary or involuntary liquidation, dissolution, winding-up or termination of
the Trust (each, a "Liquidation"), the Holders of the Securities will be
entitled to receive out of the assets of the Trust legally available for
distribution to Holders of the Securities, after satisfaction of liabilities to
creditors of the Trust (to the extent not satisfied by the Debenture Issuer), an
amount in cash equal to the aggregate of the liquidation amount of $1,000 per
Security plus unpaid Distributions accrued thereon to the date of payment
(collectively, the "Liquidation Distribution"), unless: (i) the Debentures have
been redeemed in full in accordance with the terms thereof and of the Indenture;
or (ii) the Debentures in an aggregate principal amount equal to the aggregate
liquidation amount of such Securities and bearing accrued and unpaid interest in
an amount equal to the accrued and unpaid Distributions on such Securities,
after paying or making reasonable provision to pay all claims and obligations of
the Trust in accordance with Section 3808(e) of the Statutory Trust Act, shall
be distributed on a Pro Rata basis to the Holders of the Securities in exchange
for such Securities.

            The Sponsor, as the Holder of all of the Common Securities, has the
right at any time, upon receipt by the Debenture Issuer and the Institutional
Trustee for the benefit of the Trust of an opinion of nationally recognized tax
counsel, which opinion may rely on private rulings of the Internal Revenue
Service or public rulings of the Internal Revenue Service, that Holders will not
recognize any gain or loss for United States Federal income tax purposes as a
result of the distribution of Debentures, to dissolve the Trust (including,
without limitation, upon the occurrence of a Tax Event or an Investment Company
Event, each as defined herein) and, after satisfaction of liabilities to
creditors of the Trust, cause the Debentures to be distributed to the Holders of
the Securities on a Pro Rata basis in accordance with the aggregate liquidation
amount thereof.

            The Trust shall dissolve on the first to occur of (i) May 22, 2038,
the expiration of the term of the Trust, (ii) a Bankruptcy Event with respect to
the Sponsor, the Trust or the Debenture Issuer, (iii) (other than in connection
with a merger, consolidation or similar transaction permitted by the Indenture,
this Declaration or the Guarantee, as the case may be) the filing of a
certificate of dissolution of the Sponsor or upon the revocation of the charter
of the Sponsor and the expiration of 90 days after the date of revocation
without a reinstatement thereof, (iv) the distribution to the Holders of the
Securities of all of the Debentures, upon exercise of the right of the Holder of
all of the outstanding Common Securities to dissolve the Trust as described
above, (v) the entry of a decree of a judicial dissolution of the Sponsor or the
Trust, (vi) when all of the Securities are then subject to redemption and the
amounts necessary for redemption thereof shall have been paid to the Holders in
accordance with the terms of the Securities, or (vii) before the issuance of any
Securities, with the consent of all of the Trustees and the Sponsor. As soon as
practicable after the dissolution of the Trust and upon completion of the
winding up of the Trust, the Trust shall terminate upon the filing of a
certificate of cancellation with the Secretary of State of the State of
Delaware.

                                     A-I-4
<PAGE>

            Notwithstanding the foregoing, if a Liquidation of the Trust occurs
as described in clause (i), (ii), (iii) or (v) in the immediately preceding
paragraph, the Trust shall be liquidated by the Institutional Trustee of the
Trust as expeditiously as such Trustee determines to be practical by
distributing, after satisfaction of liabilities to creditors of the Trust (to
the extent not satisfied by the Debenture Issuer) as provided by applicable law,
to the Holders of the Securities, the Debentures on a Pro Rata basis, unless
such distribution is determined by the Institutional Trustee not to be
practical, in which event such Holders will be entitled to receive on a Pro Rata
basis, out of the assets of the Trust legally available for distribution to the
Holders of the Securities, after satisfaction of liabilities to creditors of the
Trust (to the extent not satisfied by the Debenture Issuer), an amount in cash
equal to the Liquidation Distribution. A Liquidation of the Trust pursuant to
clause (iv) of the immediately preceding paragraph shall occur if the
Institutional Trustee determines that such Liquidation is practical by
distributing, after satisfaction of liabilities to creditors of the Trust (to
the extent not satisfied by the Debenture Issuer), to the Holders of the
Securities on a Pro Rata basis, the Debentures, and such distribution occurs.

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

            Upon any Liquidation of the Trust involving a distribution of the
Debentures, if at the time of such Liquidation, the Capital Securities were
rated by at least one nationally-recognized statistical rating organization, the
Debenture Issuer will use its reasonable best efforts to obtain from at least
one such or other rating organization a rating for the Debentures.

            After the date for any distribution of the Debentures upon any
Liquidation of the Trust, (i) the Securities of the Trust will be deemed to be
no longer outstanding, (ii) any certificates representing the Capital Securities
will be deemed to represent undivided beneficial interests in such of the
Debentures as have an aggregate principal amount equal to the aggregate
liquidation amount of such Capital Securities and bearing accrued and unpaid
interest equal to accrued and unpaid distributions on such Capital Securities
until such certificates are presented to the Debenture Issuer or its agent for
transfer or reissuance (and until such certificates are so surrendered, no
payments shall be made to Holders of Securities in respect of any payments due
and payable under the Debentures) and (iii) all rights of Holders of Securities
shall cease, except the right of such Holders to receive Debentures upon
surrender of certificates representing such Securities.

            4. Redemption and Distribution.

            (a) The Debentures will mature on May 23, 2033 (the "Maturity Date")
at an amount in cash equal to 100% of the principal amount thereof plus unpaid
interest accrued thereon to such date (the "Maturity Redemption Price"). The
Debentures may be redeemed by the Debenture Issuer, at its option, in whole or
in part, on any Distribution Payment Date on or after May 23, 2008 (each, an
"Optional Redemption Date"), at the Optional Redemption Price, upon not less
than 30 nor more than 60 days' prior written notice to holders of such
Debentures. In addition, upon the occurrence and continuation of a Tax Event or
an Investment Company Event, the Debentures may be redeemed by the Debenture
Issuer, at its option, in whole but not in part, at any time within 90 days
following the occurrence of such Tax Event or Investment Company Event, as the
case may be (the "Special Redemption Date"), at the Special Redemption Price,
upon not less than 30 nor more than 60 days' prior written notice to holders of
the Debentures so long as such Tax Event or Investment Company Event, as the
case may be, is continuing.

                                     A-I-5
<PAGE>

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

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

            "Optional Redemption Price" means an amount in cash equal to the
percentage for the principal amount of the Debentures to be redeemed that is
specified below for such Optional Redemption Date plus unpaid interest accrued
thereon to such Optional Redemption Date or, in the case of a redemption due to
the occurrence of a Special Event, to the Special Redemption Date if the Special
Redemption Date is on or after May 23, 2008.

Optional Redemption During the 12-Month           Percentage of Principal Amount
---------------------------------------           ------------------------------
       Period Beginning May 23,
       ------------------------
2008                                                         104.875%
2009                                                         103.900%
2010                                                         102.925%
2011                                                         101.950%
2012                                                         100.975%
2013 and thereafter                                          100.000%

                                     A-I-6
<PAGE>

            "Special Event" means either a Tax Event or an Investment Company
Event, or both.

            "Special Redemption Price" means, with respect to the redemption of
any Debentures following a Special Event, an amount in cash equal to (1) if the
Special Redemption Date is before May 23, 2008, 106.875% of the outstanding
principal amount thereof plus unpaid interest accrued on such Debentures to the
Special Redemption Date and (2) if the Special Redemption Date is on or after
May 23, 2008, the Optional Redemption Price for the Special Redemption Date.

            (b) Upon any repayment of the Debentures at maturity or in whole or
in part upon redemption (other than following the distribution of the Debentures
to the Holders of the Securities), the proceeds from such repayment shall
concurrently be applied to redeem Pro Rata, at a redemption price corresponding
to the applicable Maturity Redemption Price, Optional Redemption Price or
Special Redemption Price for the Debentures, as the case may be, Securities
having an aggregate liquidation amount equal to the aggregate principal amount
of the Debentures so repaid; provided, however, that Holders of such Securities
shall be given not less than 30 nor more than 60 days' prior written notice of
such redemption (other than a redemption resulting from the maturity of the
Debentures on the Maturity Date).

            (c) If fewer than all the outstanding Securities are to be so
redeemed, the Common Securities and the Capital Securities will be redeemed Pro
Rata and the Capital Securities to be redeemed will be as described in Section
4(e)(ii) below.

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

            (e) Redemption or Distribution Procedures.

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

                                     A-I-7
<PAGE>

                (ii) In the event that fewer than all the outstanding Capital
      Securities are to be redeemed, the Capital Securities to be redeemed shall
      be redeemed Pro Rata from each Holder.

                (iii) If the Securities are to be redeemed and the Trust gives a
      Redemption/Distribution Notice, which notice may only be issued if the
      Debentures are redeemed or repaid as set out in this Section (which notice
      will be irrevocable), then, provided, that the Institutional Trustee has a
      sufficient amount of cash in connection with the related redemption or
      maturity of the Debentures, the Institutional Trustee will pay the price
      payable upon redemption of the Securities to the Holders of such
      Securities by check mailed to the address of each such Holder appearing on
      the books and records of the Trust on the related date of redemption. If a
      Redemption/Distribution Notice shall have been given and funds deposited
      as required, then immediately prior to the close of business on the date
      of such deposit, Distributions will cease to accrue on the Securities so
      subject to redemption and all rights of Holders of such Securities so
      subject to redemption will cease, except the right of the Holders of such
      Securities to receive the applicable price specified in Section 4(a), but
      without interest on such price. If any date of redemption of the
      Securities falls on a day that is not a Business Day, then payment of all
      amounts payable on such date will be made on the next succeeding Business
      Day, and no additional Distributions will accrue in respect of such
      payment on such next succeeding Business Day. If any amount payable upon
      redemption of the Securities is improperly withheld or refused and not
      paid either by the Trust, the Debenture Issuer or the Sponsor as guarantor
      pursuant to the Guarantee, Distributions on such Securities will continue
      to accrue at the Coupon Rate applicable from the date of redemption to the
      actual date of payment, in which case the actual payment date will be
      considered the date of redemption for purposes of calculating the price
      payable upon redemption of the Securities.

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

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

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

                                     A-I-8
<PAGE>

            5. Voting Rights - Capital Securities. (a) Except as provided under
Sections 5(b) and 7 and as otherwise required by law and the Declaration, the
Holders of the Capital Securities will have no voting rights. The Administrators
are required to call a meeting of the Holders of the Capital Securities if
directed to do so by Holders of not less than 10% in liquidation amount of the
Capital Securities.

            (b) Subject to the requirements of obtaining a tax opinion by the
Institutional Trustee in certain circumstances set forth in the last sentence of
this paragraph, the Holders of a Majority in liquidation amount of the Capital
Securities, voting separately as a class, have the right to direct the time,
method, and place of conducting any proceeding for any remedy available to the
Institutional Trustee, or exercising any trust or power conferred upon the
Institutional Trustee under the Declaration, including (i) directing the time,
method, place of conducting any proceeding for any remedy available to the
Debenture Trustee, or exercising any trust or power conferred on the Debenture
Trustee with respect to the Debentures, (ii) waiving any past default and its
consequences that are waivable under the Indenture, (iii) exercising any right
to rescind or annul an acceleration of the principal of all the Debentures or
(iv) consenting on behalf of all the Holders of the Capital Securities to any
amendment, modification or termination of the Indenture or the Debentures where
such consent shall be required; provided, however, that, where a consent or
action under the Indenture would require the consent or act of the holders of
greater than a simple majority in principal amount of Debentures (a "Super
Majority") affected thereby, the Institutional Trustee may only give such
consent or take such action at the written direction of the Holders of not less
than the proportion in liquidation amount of the Capital Securities outstanding
which the relevant Super Majority represents of the aggregate principal amount
of the Debentures outstanding. If the Institutional Trustee fails to enforce its
rights under the Debentures after the Holders of a Majority or Super Majority,
as the case may be, in liquidation amount of such Capital Securities have so
directed the Institutional Trustee, to the fullest extent permitted by law, a
Holder of the Capital Securities may institute a legal proceeding directly
against the Debenture Issuer to enforce the Institutional Trustee's rights under
the Debentures without first instituting any legal proceeding against the
Institutional Trustee or any other person or entity. Notwithstanding the
foregoing, if an Event of Default has occurred and is continuing and such event
is attributable to the failure of the Debenture Issuer to pay interest or
premium, if any, on or principal of the Debentures on the date such interest,
premium, if any, or principal is payable (or in the case of redemption, the date
of redemption), then a Holder of the Capital Securities may directly institute a
proceeding for enforcement of payment, on or after the respective due dates
specified in the Debentures, to such Holder directly of the principal of or
premium, if any, or interest on the Debentures having an aggregate principal
amount equal to the aggregate liquidation amount of the Capital Securities of
such Holder. Except with respect to directing the time, method and place of
conducting a proceeding for a remedy, the Institutional Trustee shall not take
any of the actions described in clause (i), (ii), (iii) or (iv) above unless the
Institutional Trustee has obtained an opinion of tax counsel to the effect that,
as a result of such action, the Trust will not be classified as other than a
grantor trust for United States federal income tax purposes.

            The Institutional Trustee shall notify all Holders of the Capital
Securities of any Default actually known to the Institutional Trustee with
respect to the Debentures unless (x) such Default has been cured prior to the
giving of such notice or (y) the Institutional Trustee determines in good faith
that the withholding of such notice is in the interest of the Holders of such
Capital Securities, except, in the case of clause (y), where the Default relates
to the payment of principal of or premium, if any, or interest on any of the
Debentures. Such notice shall state that such Indenture Event of Default also
constitutes an Event of Default hereunder.

                                     A-I-9
<PAGE>

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

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

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

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

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

            (c) Subject to Section 6.7 of the Declaration and only after each
Event of Default (if any) with respect to the Capital Securities has been cured,
waived or otherwise eliminated and subject to the requirements of the second to
last sentence of this paragraph, the Holders of a Majority in liquidation amount
of the Common Securities, voting separately as a class, may direct the time,
method, and place of conducting any proceeding for any remedy available to the
Institutional Trustee, or exercising any trust or power conferred upon the
Institutional Trustee under the Declaration, including (i) directing the time,
method, place of conducting any proceeding for any remedy available to the
Debenture Trustee, or exercising any trust or power conferred on the Debenture
Trustee with respect to the Debentures, (ii) waiving any past default and its
consequences that are waivable under the Indenture, or (iii) exercising any
right to rescind or annul an acceleration of the principal of all the
Debentures, provided, however, that, where a consent or action under the
Indenture would require a Super Majority, the Institutional Trustee may only
give such consent or take such action at the written direction of the Holders of
not less than the proportion in liquidation amount of the Common Securities
which the relevant Super Majority represents of the aggregate principal amount
of the Debentures outstanding. Notwithstanding this Section 6(c), the
Institutional Trustee shall not revoke any action previously authorized or
approved by a vote or consent of the Holders of the Capital Securities. Other
than with respect to directing the time, method and place of conducting any
proceeding for any remedy available to the Institutional Trustee or the
Debenture Trustee as set forth above, the Institutional Trustee shall not take
any action described in clause (i), (ii) or (iii) above, unless the
Institutional Trustee has obtained an opinion of tax counsel to the effect that
for the purposes of United States federal income tax the Trust will not be
classified as other than a grantor trust on account of such action. If the
Institutional Trustee fails to enforce its rights under the Declaration, to the
fullest extent permitted by law, any Holder of the Common Securities may
institute a legal proceeding directly against any Person to enforce the
Institutional Trustee's rights under the Declaration, without first instituting
a legal proceeding against the Institutional Trustee or any other Person.

                                     A-I-10
<PAGE>

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

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

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

                                     A-I-11
<PAGE>

            (a) In the event the consent of the Institutional Trustee, as the
holder of the Debentures, is required under the Indenture with respect to any
amendment, modification or termination of the Indenture or the Debentures, the
Institutional Trustee shall request the written direction of the Holders of the
Securities with respect to such amendment, modification or termination and shall
vote with respect to such amendment, modification, or termination as directed by
a Majority in liquidation amount of the Securities voting together as a single
class; provided, however, that where a consent under the Indenture would require
a Super Majority, the Institutional Trustee may only give such consent at the
written direction of the Holders of not less than the proportion in liquidation
amount of the Securities which the relevant Super Majority represents of the
aggregate principal amount of the Debentures outstanding.

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

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

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

                                     A-I-12
<PAGE>

            9. Ranking. The Capital Securities rank pari passu with, and payment
thereon shall be made Pro Rata with, the Common Securities except that, where an
Event of Default has occurred and is continuing, the rights of Holders of the
Common Securities to receive payment of Distributions and payments upon
liquidation, redemption and otherwise are subordinated to the rights of the
Holders of the Capital Securities with the result that no payment of any
Distribution on, or any amount payable upon the redemption of, any Common
Security, and no payment to the Holder of any Common Security on account of the
Liquidation of the Trust, shall be made unless payment in full in cash of (i)
all accrued and unpaid Distributions on all outstanding Capital Securities for
all Distribution Periods terminating on or prior thereto, (ii) all amounts
payable upon Capital Securities then subject to redemption and (iii) all amounts
payable upon Capital Securities in the event of the Liquidation of the Trust, in
each case, shall have been made or provided for, and all funds immediately
available to the Institutional Trustee shall first be applied to the payment in
full in cash of the amounts specified in clause (i), (ii) and (iii) above that
are then due and payable.

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

            11. No Preemptive Rights. The Holders of the Securities shall have
no, and the issuance of the Securities is not subject to, preemptive or similar
rights to subscribe for any additional securities.

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

                                     A-I-13
<PAGE>

                                   EXHIBIT A-1

                      FORM OF CAPITAL SECURITY CERTIFICATE

                           [FORM OF FACE OF SECURITY]

            THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), 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 AND ANY APPLICABLE STATE SECURITIES LAW. THE
HOLDER OF THIS SECURITY OR ANY INTEREST OR PARTICIPATION HEREIN, BY ITS
ACCEPTANCE HEREOF OR THEREOF, AS THE CASE MAY BE, HEREIN 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) OF THE SECURITIES ACT) AFTER THE LATER OF (Y)
THE DATE OF ORIGINAL ISSUANCE HEREOF AND (Z) THE LAST DATE ON WHICH THE TRUST OR
ANY AFFILIATE (AS DEFINED IN RULE 405 UNDER THE SECURITIES ACT) OF THE TRUST 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 DEBENTURE ISSUER OR THE
TRUST, (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 RIGHT OF THE DEBENTURE ISSUER AND THE TRUST PRIOR TO ANY
SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (C), (D) OR (E) ABOVE TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM IN ACCORDANCE WITH THE AMENDED AND
RESTATED DECLARATION OF TRUST, A COPY OF WHICH MAY BE OBTAINED FROM THE
DEBENTURE ISSUER OR THE TRUST. 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.

                                     A-1-1
<PAGE>

            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, 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 REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER
INFORMATION AS MAY BE REQUIRED BY THE AMENDED AND RESTATED DECLARATION OF TRUST
TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.

                                     A-1-2
<PAGE>

            THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS
HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000 AND MULTIPLES OF $1,000 IN
EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING A
LIQUIDATION AMOUNT 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 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.

                                     A-1-3
<PAGE>

Certificate Number P-1                      Number of Capital Securities 15,000

                    Certificate Evidencing Capital Securities

                                       of

                             PXRE CAPITAL TRUST III

                               Capital Securities

                (liquidation amount $1,000 per Capital Security)

            PXRE Capital Trust III, a statutory trust created under the laws of
the State of Delaware (the "Trust"), hereby certifies that JPMorgan Chase Bank,
as Trustee for the benefit of Noteholders of InCapS Funding I, Ltd., is the
registered owner (the "Holder") of 15,000 capital securities of the Trust
representing undivided beneficial interests in the assets of the Trust,
designated as InCapS(SM) (liquidation amount $1,000 per Capital Security) (the
"Capital Securities"). Subject to the Declaration (as defined below), the
Capital Securities are transferable on the books and records of the Trust, in
person or by a duly authorized attorney, upon surrender of this Certificate duly
endorsed and in proper form for transfer. The Capital Securities represented
hereby are issued pursuant to, and the designation, rights, privileges,
restrictions, preferences and other terms and provisions of the Capital
Securities shall in all respects be subject to, the provisions of the Amended
and Restated Declaration of Trust of the Trust, dated as of May 22, 2003, among
John Modin, Bruce Byrnes and Jeff Jeffreys, as Administrators, Wilmington Trust
Company, as Delaware Trustee, Wilmington Trust Company, as Institutional
Trustee, PXRE Group Ltd., as Sponsor, and the holders from time to time of
undivided beneficial interests in the assets of the Trust, including the
designation of the terms of the Capital Securities as set forth in Annex I to
the Declaration, as the same may be amended from time to time (the
"Declaration"). Capitalized terms used herein but not defined shall have the
meaning given them in the Declaration. The Holder is entitled to the benefits of
the Guarantee and the Indenture to the extent provided therein. The Sponsor will
provide a copy of the Declaration, the Guarantee, and the Indenture to the
Holder without charge upon written request to the Sponsor at its principal place
of business.

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

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

                                     A-1-4
<PAGE>

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

                                PXRE CAPITAL TRUST III

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

                                Dated:
                                      ----------------------------

                          CERTIFICATE OF AUTHENTICATION

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

                                WILMINGTON TRUST COMPANY,
                                not in its individual capacity but solely as the
                                Institutional Trustee

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

                                Dated:
                                      ----------------------------

                                     A-1-5
<PAGE>

                          [FORM OF REVERSE OF SECURITY]

            Distributions payable on each Capital Security will be payable at a
fixed rate of interest equal to 9.75% per annum (the "Coupon Rate").
Distributions in arrears for more than one Distribution Period will bear
interest thereon, compounded quarterly, at the Coupon Rate (to the extent
permitted by applicable law). The term "Distributions", as used herein, includes
cash Distributions, any such compounded Distributions and any Additional
Interest payable on the Debentures unless otherwise stated. A Distribution is
payable only to the extent that payments are made in respect of the Debentures
held by the Institutional Trustee and to the extent the Institutional Trustee
has funds legally available in the Property Account therefor. The amount of
Distributions payable for any Distribution Period will be computed on the basis
of a 360-day year consisting of twelve 30-day months.

            Except as otherwise described below, Distributions on the Capital
Securities will be cumulative, will accrue from the date of original issuance
and will be payable quarterly in arrears on February 23, May 23, August 23 and
November 23 of each year, commencing on August 23, 2003 (each, a "Distribution
Payment Date"), subject to the Business Day convention specified in the
Declaration. The Debenture Issuer has the right under the Indenture to defer
payments of interest on the Debentures by extending the interest payment period
for up to 20 consecutive quarterly periods (each such extended interest payment
period, together with all previous and future consecutive extensions thereof, is
referred to herein as an "Extension Period") at any time and from time to time
on the Debentures, subject to the conditions described below and in the
Declaration and the Indenture. No Extension Period may end on a date other than
a Distribution Payment Date or extend beyond the Maturity Date, any Optional
Redemption Date or the Special Redemption Date, as the case may be. During any
Extension Period, interest will continue to accrue on the Debentures, and
interest on such accrued interest (such accrued interest and interest thereon
referred to herein as "Deferred Interest") will accrue, at an annual rate equal
to the Coupon Rate, compounded quarterly from the date such Deferred Interest
would have been payable were it not for the Extension Period, to the extent
permitted by applicable law. At the end of any Extension Period, the Debenture
Issuer shall pay all Deferred Interest then accrued and unpaid on the
Debentures; provided, however, that prior to the termination of any Extension
Period, the Debenture Issuer may further extend such Extension Period, provided,
that no Extension Period (including all previous and further consecutive
extensions that are part of such Extension Period) shall exceed 20 consecutive
quarterly periods. Upon the termination of any Extension Period and upon the
payment of all Deferred Interest, the Debenture Issuer may commence a new
Extension Period, subject to the requirements set forth herein and in the
Declaration and the Indenture. No interest or Deferred Interest (except any
Additional Interest that may be due and payable) shall be due and payable during
an Extension Period, except at the end thereof, but Deferred Interest shall
accrue upon each installment of interest that would otherwise have been due and
payable during such Extension Period until such installment is paid.

            As a consequence of any Extension Period, Distributions will be
deferred. If Distributions are deferred, the Distributions due shall be paid on
the date that the related Extension Period terminates to Holders of the
Securities as they appear on the books and records of the Trust on the regular
record date immediately preceding the Distribution Payment Date on which such
Extension Period terminates to the extent that the Trust has funds legally
available for the payment of such Distributions in the Property Account of the
Trust.

                                     A-1-6
<PAGE>

                  The Capital Securities shall be redeemable, and shall be
entitled to the Liquidation Distribution, as provided in the Declaration.

                                     A-1-7
<PAGE>

                                   ASSIGNMENT

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

____________________________

____________________________

____________________________

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

____________________________

____________________________

____________________________

(Insert address and zip code of assignee),

and irrevocably appoints ______________________________________________________
as agent to transfer this Capital Security Certificate on the books of the
Trust. The agent may substitute another to act for it, him or her.

            Date:__________________

            Signature:__________________

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

            Signature Guarantee:(1) ____________________________

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

                                     A-1-8
<PAGE>

                                   EXHIBIT A-2

                       FORM OF COMMON SECURITY CERTIFICATE

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

            EXCEPT AS SET FORTH IN SECTION 8.1(b) OF THE DECLARATION (AS DEFINED
BELOW), THIS SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED.

                                     A-2-1
<PAGE>

Certificate Number C-1                           Number of Common Securities 464

                    Certificate Evidencing Common Securities

                                       of

                             PXRE CAPITAL TRUST III

            PXRE Capital Trust III, a statutory trust created under the laws of
the State of Delaware (the "Trust"), hereby certifies that PXRE Group Ltd. is
the registered owner (the "Holder") of 464 common securities of the Trust
representing undivided beneficial interests in the assets of the Trust
(liquidation amount $1,000 per Common Security)(the "Common Securities"). The
Common Securities represented hereby are issued pursuant to, and the
designation, rights, privileges, restrictions, preferences and other terms and
provisions of the Common Securities shall in all respects be subject to, the
provisions of the Amended and Restated Declaration of Trust of the Trust, dated
as of May 22, 2003 among John Modin, Bruce Byrnes and Jeff Jeffreys, as
Administrators, Wilmington Trust Company, as Delaware Trustee, Wilmington Trust
Company, as Institutional Trustee, the Holder, as Sponsor, and the holders from
time to time of undivided beneficial interests in the assets of the Trust,
including the designation of the terms of the Common Securities as set forth in
Annex I to the Declaration, as the same may be amended from time to time (the
"Declaration"). Capitalized terms used herein but not defined shall have the
meaning given them in the Declaration. The Sponsor will provide a copy of the
Declaration and the Indenture to the Holder without charge upon written request
to the Sponsor at its principal place of business.

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

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

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

                                     A-2-2
<PAGE>

            IN WITNESS WHEREOF, the Trust has executed this certificate this
22nd day of May, 2003.

                                         PXRE CAPITAL TRUST III

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

                                     A-2-3
<PAGE>

                          [FORM OF REVERSE OF SECURITY]

            Distributions payable on each Common Security will be identical in
amount to the Distributions payable on each Capital Security, which is at a
fixed rate of interest equal to 9.75% per annum, (the "Coupon Rate").
Distributions in arrears for more than one Distribution Period will bear
interest thereon, compounded quarterly, at the Coupon Rate (to the extent
permitted by applicable law). The term "Distributions", as used herein, includes
cash Distributions, any such compounded Distributions and any Additional
Interest payable on the Debentures, unless otherwise stated. A Distribution is
payable only to the extent that payments are made in respect of the Debentures
held by the Institutional Trustee and to the extent the Institutional Trustee
has funds legally available in the Property Account therefor. The amount of
Distributions payable for any Distribution Period will be computed on the basis
of a 360-day year consisting of twelve 30-day months.

            Except as otherwise described below, Distributions on the Common
Securities will be cumulative, will accrue from the date of original issuance
and will be payable quarterly in arrears on February 23, May 23, August 23 and
November 23 of each year, commencing on August 23, 2003 (each, a "Distribution
Payment Date"), subject to the Business Day convention specified in the
Declaration. The Debenture Issuer has the right under the Indenture to defer
payments of interest on the Debentures by extending the interest payment period
for up to 20 consecutive quarterly periods (each such extended interest payment
period, together with all previous and future consecutive extensions thereof, is
referred to herein as an "Extension Period") at any time and from time to time
on the Debentures, subject to the conditions described below and in the
Declaration and the Indenture. No Extension Period may end on a date other than
a Distribution Payment Date or extend beyond the Maturity Date, any Optional
Redemption Date or the Special Redemption Date, as the case may be. During any
Extension Period, interest will continue to accrue on the Debentures, and
interest on such accrued interest (such accrued interest and interest thereon
referred to herein as "Deferred Interest") will accrue, at an annual rate equal
to the Coupon Rate, compounded quarterly from the date such Deferred Interest
would have been payable were it not for the Extension Period, to the extent
permitted by applicable law. At the end of any Extension Period, the Debenture
Issuer shall pay all Deferred Interest then accrued and unpaid on the
Debentures; provided, however, that prior to the termination of any Extension
Period, the Debenture Issuer may further extend such Extension Period, provided,
that no Extension Period (including all previous and further consecutive
extensions that are part of such Extension Period) shall exceed 20 consecutive
quarterly periods. Upon the termination of any Extension Period and upon the
payment of all Deferred Interest, the Debenture Issuer may commence a new
Extension Period, subject to the requirements set forth herein and in the
Declaration and the Indenture. No interest or Deferred Interest (except any
Additional Interest that may be due and payable) shall be due and payable during
an Extension Period, except at the end thereof, but Deferred Interest shall
accrue upon each installment of interest that would otherwise have been due and
payable during such Extension Period until such installment is paid.

                                     A-2-4
<PAGE>

            As a consequence of any Extension Period, Distributions will be
deferred. If Distributions are deferred, the Distributions due shall be paid on
the date that the related Extension Period terminates to Holders of the
Securities as they appear on the books and records of the Trust on the regular
record date immediately preceding the Distribution Payment Date on which such
Extension Period terminates to the extent that the Trust has funds legally
available for the payment of such Distributions in the Property Account of the
Trust.

            The Common Securities shall be redeemable, and shall be entitled to
the Liquidation Distribution, as provided in the Declaration.

                                     A-2-5
<PAGE>

                                   ASSIGNMENT

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

____________________________

____________________________

____________________________

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

____________________________

____________________________

____________________________

(Insert address and zip code of assignee),

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

            Date:____________________

            Signature:________________________

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

            Signature Guarantee:(1) ________________________

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

                                     A-2-6
<PAGE>

                                                                       EXHIBIT B

                         FORM OF TRANSFEREE CERTIFICATE
                  TO BE EXECUTED BY TRANSFEREES OTHER THAN QIBS

                                                                 __________, [ ]

PXRE Group Ltd.
PXRE Capital Trust III
Swan Building, 26 Victoria Street
Hamilton, Bermuda HM12

Re:    Purchase of $1,000 liquidation amount of InCapS(SM)
       (the "Capital Securities") of PXRE Capital Trust III
       ----------------------------------------------------

Ladies and Gentlemen:

            In connection with our purchase of the Capital Securities, we
confirm that:

            1. We understand that the InCapS(SM) (the "Capital Securities") of
PXRE Capital Trust III (the "Trust") have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and may not be
offered or sold except as permitted in the following sentence. We agree on our
own behalf and on behalf of any investor account for which we are purchasing the
Capital Securities that, if we decide to offer, sell or otherwise transfer any
such Capital Securities prior to the date which is the later of (i) two years
(or such shorter period of time as permitted by Rule 144(k) of the Securities
Act) after the later of (Y) the date of original issuance of the Capital
Securities and (Z) the last date on which the Trust or any Affiliate (as defined
in Rule 405 under the Securities Act) of the Trust was the holder of any such
Capital Securities (or any predecessor thereto) and (ii) such later date, if
any, as may be required by any subsequent change in applicable law (the "Resale
Restriction Termination Date"), then such offer, sale or other transfer will be
made only (a) to the Company or the Trust, (b) pursuant to Rule 144A under the
Securities Act, to a person we reasonably believe is a qualified institutional
buyer under Rule 144A (a "QIB"), that purchases for its own account or for the
account of a QIB and to whom notice is given that the transfer is being made in
reliance on Rule 144A, (c) pursuant to an exemption from registration, 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 any such Capital
Securities 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 thereof in violation of the Securities Act, or
(d) pursuant to another available exemption from the registration requirements
of the Securities Act, and in each of the foregoing cases in accordance with any
applicable state securities laws and any requirements of law that govern the
disposition of our property. If any resale or other transfer of the Capital
Securities is proposed to be made pursuant to clause (c) or (d) above, the
transferor shall deliver a letter from the transferee substantially in the form
of this letter to the Institutional Trustee as Transfer Agent, which shall
provide as applicable, among other things, that the transferee is 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 such Capital Securities for
investment purposes and not for any distribution in violation of the Securities
Act. We acknowledge on our behalf and on behalf of any investor account for
which we are purchasing Capital Securities that the Company and the Trust
reserve the right prior to any offer, sale or other transfer pursuant to clause
(c) or (d) to require the delivery of any opinion of counsel, certifications
and/or other information satisfactory to PXRE Group Ltd. (the "Company") and the
Trust. We understand that the certificates for any Capital Securities that we
receive prior to the Resale Restriction Termination Date will bear a legend
substantially to the effect of the foregoing.

                                      B-1
<PAGE>

            2. We are an accredited investor within the meaning of subparagraph
(a) (1), (2), (3), (7) or (8) of Rule 501 under the Securities Act purchasing
for our own account or for the account of such an accredited investor, and we
are acquiring the Capital Securities for investment purposes and not with view
to, or for offer or sale in connection with, any distribution in violation of
the Securities Act, and we have such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of our
investment in the Capital Securities, and we and any account for which we are
acting are each able to bear the economic risks of our or its investment.

            3. We are acquiring the Capital Securities purchased by us for our
own account (or for one or more accounts as to each of which we exercise sole
investment discretion and have authority to make, and do make, the statements
contained in this letter) and not with a view to any distribution of the Capital
Securities in violation of the Securities Act, subject, nevertheless, to the
understanding that the disposition of our property will at all times be and
remain within our control.

            4. In the event that we purchase any Capital Securities, we will
acquire such Capital Securities having an aggregate liquidation amount of not
less than $100,000 for our own account and for each separate account for which
we are acting.

            5. We acknowledge that we either (A) are not a fiduciary of a
pension, profit-sharing or other employee benefit plan or arrangement subject to
the Employee Retirement Income Security Act of 1974, as amended or to Section
4975 of the Internal Revenue Code of 1986, as amended (a "Plan"), or an entity
whose assets include "plan assets" by reason of any Plan's investment in the
entity and are not purchasing the Capital Securities on behalf of or with "plan
assets" by reason of any Plan's investment in the entity and are not purchasing
the Capital Securities on behalf of or with "plan assets" of any Plan or (B) are
eligible for the exemptive relief available under one or more of the following
prohibited transaction class exemptions ("PTCEs") issued by the U.S. Department
of Labor: PTCE 96-23, 95-60, 91-38, 90-1 or 84-14.

            6. We acknowledge that each Plan, by its purchase of the Capital
Securities, will be deemed to have directed the Trust to invest in the
Debentures, and to have consented to the appointment of the Institutional
Trustee.

            7. We acknowledge that the Company, the Trust and others will rely
upon the truth and accuracy of the foregoing acknowledgments, representations,
warranties and agreements and agree that if any of our acknowledgments,
representations, warranties and agreements are no longer accurate, we shall
promptly notify the Placement Agent. If we are acquiring any Capital Securities
as a fiduciary or agent for one or more investor accounts, we represent that we
have sole discretion with respect to each such investor account and that we have
full power to make the foregoing acknowledgments, representations and agreements
on behalf of each such investor account.

                                      B-2
<PAGE>

            You are entitled to rely upon this letter and are irrevocably
authorized to produce this letter or a copy thereof to any interested party in
any administrative or legal proceeding or other inquiry with respect to matters
covered hereby.

                                              __________________________________
                                              (Name of Purchaser)

                                              By:_______________________________

                                              Date:_____________________________

            Upon transfer, the Capital Securities would be registered in the
name of the new beneficial owner as follows.

Name:_______________________

Address:______________________

Taxpayer ID Number:_____________________

                                      B-3
<PAGE>

                                                                       EXHIBIT C

                         FORM OF TRANSFEROR CERTIFICATE
                             TO BE EXECUTED FOR QIBs

                                                                 __________, [ ]

PXRE Group Ltd.
PXRE Capital Trust III
Swan Building, 26 Victoria Street
Hamilton, Bermuda HM12

Re:    Purchase of $1,000 liquidation amount of InCapS(SM)
       (the "Capital Securities") of PXRE Capital Trust III
       ----------------------------------------------------

            Reference is hereby made to the Amended and Restated Declaration of
Trust of PXRE Capital Trust III, dated as of [CLOSING DATE] (the "Declaration"),
among John Modin, Bruce Byrnes and Jeff Jeffreys, as Administrators, Wilmington
Trust Company, as Delaware Trustee, Wilmington Trust Company, as Institutional
Trustee, PXRE Group Ltd., as Sponsor, and the holders from time to time of
undivided beneficial interests in the assets of PXRE Capital Trust III.
Capitalized terms used but not defined herein shall have the meanings given them
in the Declaration.

            This letter relates to $[_______________] aggregate liquidation
amount of Capital Securities which are held in the name of [name of transferor]
(the "Transferor").

            In accordance with Section 8.2(b) of the Declaration, the Transferor
does hereby certify that such Capital Securities are being transferred in
accordance with (i) the transfer restrictions set forth in the Capital
Securities and (ii) Rule 144A under the Securities Act ("Rule 144A"), to a
transferee that the Transferor reasonably believes is purchasing the Capital
Securities for its own account or an account with respect to which the
transferee exercises sole investment discretion and the transferee and any such
account is a "qualified institutional buyer" within the meaning of Rule 144A, in
a transaction meeting the requirements of Rule 144A and in accordance with
applicable securities laws of any state of the United States or any other
jurisdiction.

                                      C-1
<PAGE>

            You are entitled to rely upon this letter and are irrevocably
authorized to produce this letter or a copy thereof to any interested party in
any administrative or legal proceeding or other inquiry with respect to matters
covered hereby.

                                               ________________________________
                                                   (Name of Transferor)

                                            By:________________________________

                                               Name: __________________________

                                               Title:__________________________

                                               Date:___________________________

                                      C-2
<PAGE>

                                                                       EXHIBIT D

                          FORM OF OFFICERS' CERTIFICATE

                           QUARTERLY FINANCIAL REPORT

TO: Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration

                  PLEASE COMPLETE FOR EACH INSURANCE SUBSIDIARY

Name of Insurance Company: _________________________________

Date of Report:                                                     ___________

Current A.M. Best Insurer's Financial Strength Rating:              ___________

Please provide the following information for the most recent quarterly
period ended Quarter: /_/ March 31 /_/ June 30 /_/ September 30
/_/ December 31 Year: 20____

Most Recently Reported NAIC Risk Based Capital Ratio               ___________ %

Total Policyholders' Surplus                                       $__________

Ratio of Consolidated Debt and Preferred Stock
to Total Policyholders' Surplus                                    ___________%

Total Admitted Assets                                              $__________

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

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

Return on Policyholders' Surplus for the Trailing Twelve Month
Period                                                             ___________%

                                      D-1
<PAGE>

For Property & Casualty Companies:

Expense Ratio                                                      ___________%

Loss and LAE Ratio                                                 ___________%

Combined Ratio                                                     ___________%

Net Premiums Written (trailing twelve month period)
to Policyholders' Surplus                                          ___________%

                                      D-2
<PAGE>

                                  CERTIFICATION

            The undersigned hereby certifies that he/she has duly executed the
attached Quarterly Financial Report, dated ______, __, for and on behalf of
____________, that he/she is the _______________ of such Company, and that
he/she has authority to execute and file such instrument. The undersigned
further certifies that he/she is familiar with such instrument and that the
facts therein set forth are true to the best of his/her knowledge, information
and belief.

                                            Name: ______________________________

                                      D-3
<PAGE>

                                     LEGEND

<TABLE>
<S>                                                          <C>
------------------------------------------------------------ ---------------------------------------------------------
NAIC Risk Based Capital Ratio-P&C                            (Total Adjusted Capital (as defined in the NAIC RBC
                                                             Instructions for P&C Insurers) /Authorized Control
                                                             Level Risk-Based Capital)
------------------------------------------------------------ ---------------------------------------------------------
NAIC Risk Based Capital Ratio-Life                           (Total Adjusted Capital (as defined in the NAIC RBC
                                                             Instructions for Life Insurers) /Authorized Control
                                                             Level Risk-Based Capital)
------------------------------------------------------------ ---------------------------------------------------------
Total Capital and Surplus-Life                               Common Share Capital + Preferred Share Capital +
                                                             Aggregate Write-Ins for other than special surplus
                                                             funds + Surplus Notes + Gross Paid-In and Contributed
                                                             Surplus + Aggregate Write-Ins for Special Surplus Funds
                                                             + Unassigned Funds (Surplus) + Asset Valuation Reserve
                                                             - Treasury Stock
------------------------------------------------------------ ---------------------------------------------------------
Total Capital and Surplus-P&C                                Aggregate Write-Ins for Special Surplus Funds + Common
                                                             Share Capital + Preferred Share Capital + Aggregate
                                                             Write-Ins for other than special surplus funds + Surplus
                                                             Notes +Gross Paid-In and Contributed Surplus + Unassigned
                                                             Funds (Surplus) - Treasury Stock
------------------------------------------------------------ ---------------------------------------------------------
Total Admitted Assets                                        Total admitted assets as determined in accordance with
                                                             statutory accounting principles
------------------------------------------------------------ ---------------------------------------------------------
Return on Policyholders' Surplus for the Trailing Twelve     Net Income/Policyholders' Surplus for the Trailing
Month Period                                                 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 (trailing twelve month period) to       Net Premiums Written of the trailing twelve month
Policyholders' Surplus                                       period/Policyholders' Surplus
------------------------------------------------------------ ---------------------------------------------------------
</TABLE>

                                      D-4

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