Document:

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                                                                    EXHIBIT 10.2

                    AMENDED AND RESTATED DECLARATION OF TRUST

                                       OF

                               APCAPITAL TRUST II

                            Dated as of May 22, 2003

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                                TABLE OF CONTENTS
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                                                   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 ................................................................................ 10
SECTION 2.4.      Authority .............................................................................. 10
SECTION 2.5.      Title to Property of the Trust ......................................................... 10
SECTION 2.6.      Powers and Duties of the Trustees and the Administrators ............................... 10
SECTION 2.7.      Prohibition of Actions by the Trust and the Trustees ................................... 15
SECTION 2.8.      Powers and Duties of the Institutional Trustee ......................................... 16
SECTION 2.9.      Certain Duties and Responsibilities of the Trustees and the Administrators ............. 17
SECTION 2.10.     Certain Rights of Institutional Trustee ................................................ 19
SECTION 2.11.     Delaware Trustee ....................................................................... 21
SECTION 2.12.     Execution of Documents ................................................................. 22
SECTION 2.13.     Not Responsible for Recitals or Issuance of Securities ................................. 22
SECTION 2.14.     Duration of Trust ...................................................................... 22
SECTION 2.15.     Mergers ................................................................................ 22

                                                  ARTICLE III
                                                    SPONSOR

SECTION 3.1.      Sponsor's Purchase of Common Securities ................................................ 24
SECTION 3.2.      Responsibilities of the Sponsor ........................................................ 24

                                                   ARTICLE IV
                                          TRUSTEES AND ADMINISTRATORS

SECTION 4.1.      Number of Trustees ..................................................................... 24
SECTION 4.2.      Delaware Trustee ....................................................................... 25
SECTION 4.3.      Institutional Trustee; Eligibility ..................................................... 25
SECTION 4.4.      Administrators ......................................................................... 26
SECTION 4.5.      Appointment, Removal and Resignation of the Trustees and the Administrators ............ 26
SECTION 4.6.      Vacancies Among Trustees ............................................................... 28
SECTION 4.7.      Effect of Vacancies .................................................................... 28
SECTION 4.8.      Meetings of the Trustees and the Administrators ........................................ 28
SECTION 4.9.      Delegation of Power .................................................................... 29
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SECTION 4.10.     Merger, Conversion, Consolidation or Succession to Business ...........................  29

                                                   ARTICLE V
                                                 DISTRIBUTIONS

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

                                                   ARTICLE VI
                                             ISSUANCE OF SECURITIES

SECTION 6.1.      General Provisions Regarding Securities ................................................ 30
SECTION 6.2.      Paying Agent, Transfer Agent, Calculation Agent and Registrar .......................... 31
SECTION 6.3.      Form and Dating ........................................................................ 31
SECTION 6.4.      Mutilated, Destroyed, Lost or Stolen Certificates ...................................... 32
SECTION 6.5.      Temporary Securities ................................................................... 32
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 ............................................................................ 40
SECTION 9.3.      Fiduciary Duty ......................................................................... 40
SECTION 9.4.      Indemnification ........................................................................ 41
SECTION 9.5.      Outside Businesses ..................................................................... 44
SECTION 9.6.      Compensation; Fee ...................................................................... 44

                                                   ARTICLE X
                                                   ACCOUNTING

SECTION 10.1.     Fiscal Year ............................................................................ 45
SECTION 10.2.     Certain Accounting Matters ............................................................. 45
SECTION 10.3.     Banking ................................................................................ 46
SECTION 10.4.     Withholding ............................................................................ 46
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                                                   ARTICLE XI
                                            AMENDMENTS AND MEETINGS

SECTION 11.1.     Amendments ............................................................................. 47
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 ................................ 50
SECTION 12.2.     Representations and Warranties of Delaware Trustee ..................................... 51

                                                  ARTICLE XIII
                                                 MISCELLANEOUS

SECTION 13.1.     Notices ................................................................................ 51
SECTION 13.2.     Governing Law .......................................................................... 53
SECTION 13.3.     Submission to Jurisdiction ............................................................. 53
SECTION 13.4.     Intention of the Parties ............................................................... 53
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
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                    AMENDED AND RESTATED DECLARATION OF TRUST

                                       OF

                               APCAPITAL TRUST II

                                  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 APCapital
Trust II (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;

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     (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 William B. Cheeseman, Frank H. Freund and
James A. Pratt, 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
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     "Business Day" means any day other than Saturday, Sunday or any other day
on which banking institutions in Wilmington, Delaware, The City of New York or
East Lansing, Michigan are permitted or required by law or executive order to
close.

     "Calculation Agent" has the meaning set forth in Section 1.01 of the
Indenture.

     "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.

     "Comparable Treasury Issue" has the meaning set forth in paragraph 4(a) of
Annex I.

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

     "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.

                                       3
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     "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 American Physicians Capital, Inc., an insurance
holding company incorporated in Michigan, in its capacity as issuer of the
Debentures under the Indenture, and any permitted successor under the Indenture.

     "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 Floating Rate Junior Subordinated Debt Securities
due 2033 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 applicable during such Extension Period, 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(e) of
Annex I.

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

                                       4
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     "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

     "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).

     "LIBOR" means the London Interbank Offered Rate for three-month U.S. Dollar
deposits in Europe as determined by the Calculation Agent according to paragraph
2(b) of Annex I.

     "LIBOR Banking Day" has the meaning set forth in paragraph 2(b)(1) of
Annex I.

     "LIBOR Business Day" has the meaning set forth in paragraph 2(b)(1) of
Annex I.

                                       5
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     "LIBOR Determination Date" has the meaning set forth in paragraph 2(b)(1)
of Annex I. "Liquidation" has the meaning set forth in paragraph 3 of Annex I.

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

     "Majority in liquidation amount of the Securities" means 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.

     "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.

                                       6
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     "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).

     "Primary Treasury Dealer" has the meaning set forth in paragraph 4(a) of
Annex 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.

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

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

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

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

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

     "Reference Treasury Dealer" has the meaning set forth in paragraph 4(a) of
Annex I.

     "Reference Treasury Dealer Quotations" has the meaning set forth in
paragraph 4(a) of Annex I.

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

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

     "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.

                                       7
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     "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.

     "Sponsor" means American Physicians Capital, Inc., an insurance holding
company that is incorporated in the State of Michigan, or any permitted
successor of the Debenture Issuer under the Indenture, 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.

                                       8
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     "Telerate Page 3750" has the meaning set forth in paragraph 2(b)(1) 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 Rate" has the meaning set forth in paragraph 4(a) of Annex I.

     "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.

     "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 "APCapital Trust II," 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
1301 N. Hagadorn Road, East Lansing, Michigan 48823. On ten Business Days'
written notice to the Institutional

                                       9
<PAGE>
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.

     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;

                                       10
<PAGE>

               (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;

               (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

                                       11
<PAGE>
          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.

          (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;

                                       12
<PAGE>

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

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

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

     (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

                                       13
<PAGE>
(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.

     (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.

                                       14
<PAGE>

     (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;

     (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

                                       15
<PAGE>
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.

     (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

                                       16
<PAGE>
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.

     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.

                                       17
<PAGE>

     (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.

     (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 or
     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

                                       18
<PAGE>

     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 believed by it to be genuine and to have been signed, sent or
presented by the proper party or parties;

     (b) if (i) in performing its duties under this Declaration, the
Institutional Trustee is required to decide between alternative courses of
action, (ii) in construing any of the provisions of this Declaration, the
Institutional Trustee finds the same ambiguous or inconsistent with any other
provisions contained herein, or (iii) the Institutional Trustee is unsure of the
application of any provision of this Declaration, then, except as to any matter
as to which the Holders of Capital Securities are entitled to vote under the
terms of this Declaration, the Institutional Trustee may deliver a notice to the
Sponsor requesting the Sponsor's 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;

                                       19
<PAGE>

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

     (d) whenever in the administration of this Declaration, the Institutional
Trustee shall deem it desirable that a matter be proved or established before
undertaking, suffering or omitting any action hereunder, the Institutional
Trustee (unless other evidence is herein specifically prescribed) may, 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;

     (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

                                       20
<PAGE>
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 or resulting from the
default in the payment of any premium payable upon a redemption of Debentures
following a Special Event, in each case 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.

     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

                                       21
<PAGE>
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;

                                       22
<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;

               (viii) the Sponsor guarantees the obligations of the Successor
          Entity under the Successor Securities to the same extent provided by
          the Indenture, the Guarantee, the Debentures and this Declaration; and

                                       23
<PAGE>

          (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.

                                   ARTICLE IV

                           TRUSTEES AND ADMINISTRATORS

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

                                       24
<PAGE>

     (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.

     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.

                                       25
<PAGE>

     (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.

     (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

                                       26
<PAGE>
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 Capital
Securities 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.

     (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.

                                       27
<PAGE>

     (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.

     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.

                                       28
<PAGE>

     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.

     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.

                                       29
<PAGE>

                                   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.

     (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.

                                       30
<PAGE>

     SECTION 6.2. Paying Agent, Transfer Agent, Calculation Agent and Registrar.

     (a) 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.

     (b) The Trust shall also appoint a Calculation Agent, which shall determine
the Coupon Rate in accordance with the terms of the Securities. The Trust
initially appoints the Institutional Trustee as Calculation Agent.

     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.

                                       31
<PAGE>

     (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.

     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

                                       32
<PAGE>

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;

               (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

                                       33
<PAGE>

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.

                                  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

                                       34
<PAGE>

     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.

                                  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
Debenture Issuer 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

                                       35
<PAGE>

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.

     (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

                                       36
<PAGE>

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:

     THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS OR ANY OTHER
APPLICABLE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY OR ANY INTEREST
OR PARTICIPATION HEREIN, BY ITS ACCEPTANCE HEREOF OR THEREOF, AS THE CASE MAY
BE, 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

                                       37
<PAGE>

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.

     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.

                                       38
<PAGE>

     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.

     (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:

                                       39
<PAGE>

          (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.

     (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.

                                       40
<PAGE>

     (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) 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.

          (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 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

                                       41
<PAGE>

     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.

          (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

                                       42
<PAGE>

     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.

     (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

                                       43
<PAGE>

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.

     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

                                       44
<PAGE>

     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, 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 the 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.

     (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, 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

                                       45
<PAGE>

Administrators shall endeavor to deliver all such statements within 30 days
after the end of each Fiscal Year of the Trust.

     (d) 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 state 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.

     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.

                                       46
<PAGE>

                                   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

               (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

                                       47
<PAGE>

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

          (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

                                       48
<PAGE>

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.

          (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.

                                       49
<PAGE>
          (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;

     (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

                                       50
<PAGE>

     (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;

     (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:

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<PAGE>

     (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):

                          APCapital Trust II
                          c/o American Physicians Capital, Inc.
                          1301 N. Hagadorn Road
                          East Lansing, MI 48823
                          Attention: Frank H. Freund
                          Telecopy: 517-351-7866
                          Telephone: 517-324-6737

     (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

     (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):

                          American Physicians Capital, Inc.
                          1301 N. Hagadorn Road
                          East Lansing, MI 48823
                          Attention: Frank H. Freund
                          Telecopy: 517-351-7866
                          Telephone: 517-324-6737

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

                                       52
<PAGE>

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.

     (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.

     (b) Each of the Sponsor, the Trustees, the Administrators and the Holder of
the Common Securities 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) 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.

     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.

                                       53
<PAGE>

     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.

     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.

                                       54

<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: /s/ Donald F. MacKelcan
                                               ---------------------------------
                                               Name: Donald F. MacKelcan
                                               Title:  Vice President

                                           WILMINGTON TRUST COMPANY,
                                               as Institutional Trustee

                                           By: /s/ Donald F. MacKelcan
                                               ---------------------------------
                                               Name: Donald F. MacKelcan
                                               Title:  Vice President

                                           AMERICAN PHYSICIANS CAPITAL, INC.
                                               as Sponsor

                                           By: /s/ Frank H. Freund
                                               ---------------------------------
                                               Name:  Frank H. Freund
                                               Title:  Chief Financial Officer

                                           /s/ William B. Cheeseman
                                           -------------------------------------
                                           William B. Cheeseman
                                               as Administrator

                                           /s/ Frank H. Freund
                                           -------------------------------------
                                           Frank H. Freund
                                              as Administrator

                                           /s/ James A. Pratt
                                           -------------------------------------
                                           James A. Pratt
                                              as Administrator

                                       55

<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 APCapital Trust II
(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 floating rate of interest per annum, which, with respect to any
Distribution Period (as defined herein), will be equal to LIBOR, as determined
on the LIBOR Determination Date for such Distribution Period, plus 4.20% (the
"Coupon Rate"); provided, that the Coupon Rate for any Distribution Period prior
to the Distribution Period commencing on the Distribution Payment Date (as
defined herein) in May 2008 may not exceed 12.5% per annum; provided, further,
that the Coupon Rate for any Distribution Period may not exceed the Interest
Rate (as defined in the Indenture) for the related Interest Period (as defined
in the Indenture). Distributions in arrears for more than one Distribution
Period will bear interest thereon, compounded quarterly, at the applicable
Coupon Rate for each Distribution Period thereafter (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 and the actual

                                     A-I-1
<PAGE>

number of days elapsed in such Distribution Period; provided, however, that if
the Special Redemption Date is before May 23, 2008, the amounts payable upon
redemption of the Securities pursuant to this Declaration shall be calculated as
set forth in the definition of Special Redemption Price.

     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.

     (b) LIBOR shall be determined by the Calculation Agent for each
Distribution Period in accordance with the following provisions:

          (1) On the second LIBOR Business Day (provided, that on such day
     commercial banks are open for business (including dealings in foreign
     currency deposits) in London (a "LIBOR Banking Day"), and otherwise the
     next preceding LIBOR Business Day that is also a LIBOR Banking Day) prior
     to March 1, June 1, September 1, or December 1, as the case may be,
     immediately succeeding the commencement of such Distribution Period (or, in
     the case of the first Distribution Period, on May 20, 2003) (each such day,
     a "LIBOR Determination Date"), LIBOR shall equal the rate, as obtained by
     the Calculation Agent, for three-month U.S. Dollar deposits in Europe,
     which appears on Telerate (as defined in the International Swap and
     Derivatives Association, Inc. 2000 Interest Rate and Currency Exchange
     Definitions) page 3750 or such other page as may replace such page 3750, as
     of 11:00 a.m. (London time) on such LIBOR Determination Date, as reported
     by Bloomberg Financial Markets Commodities News or any successor service
     ("Telerate Page 3750"). "LIBOR Business Day" means any day that is not a
     Saturday, Sunday or other day on which commercial banking institutions in
     The City of New York or Wilmington, Delaware are authorized or obligated by
     law or executive order to be closed. If such rate is superseded on Telerate
     Page 3750 by a corrected rate before 12:00 noon (London time) on such LIBOR
     Determination Date, the corrected rate as so substituted will be LIBOR for
     such LIBOR Determination Date.

          (2) If, on such LIBOR Determination Date, such rate does not appear on
     Telerate Page 3750, the Calculation Agent shall determine the arithmetic
     mean of the offered quotations of the Reference Banks (as defined below) to
     leading banks in the London interbank market for three-month U.S. Dollar
     deposits in Europe (in an amount determined by the Calculation Agent) by
     reference to requests for quotations as of approximately 11:00 a.m. (London
     time) on such LIBOR Determination Date made by the Calculation Agent to the
     Reference Banks. If, on such LIBOR Determination Date, at least two of the
     Reference Banks provide such quotations, LIBOR shall equal the arithmetic
     mean of such quotations. If, on such LIBOR Determination Date, only one or
     none of the Reference Banks provide such a quotation, LIBOR shall be deemed
     to be the

                                     A-I-2
<PAGE>

     arithmetic mean of the offered quotations that at least two leading banks
     in The City of New York (as selected by the Calculation Agent) are quoting
     on such LIBOR Determination Date for three-month U.S. Dollar deposits in
     Europe at approximately 11:00 a.m. (London time) (in an amount determined
     by the Calculation Agent). As used herein, "Reference Banks" means four
     major banks in the London interbank market selected by the Calculation
     Agent.

          (3) If the Calculation Agent is required but is unable to determine a
     rate in accordance with at least one of the procedures provided above,
     LIBOR for such Distribution Period shall be LIBOR in effect for the
     immediately preceding Distribution Period.

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

     (d) On each LIBOR Determination Date, the Calculation Agent shall notify,
in writing, the Sponsor and the Paying Agent of the applicable Coupon Rate that
applies to the related Distribution Period. The Calculation Agent shall, upon
the request of a Holder of any Securities, inform such Holder of the Coupon Rate
that applies to the related Distribution Period. All calculations made by the
Calculation Agent in the absence of manifest error shall be conclusive for all
purposes and binding on the Sponsor and the Holders of the Securities. The
Paying Agent shall be entitled to rely on information received from the
Calculation Agent or the Sponsor as to the applicable Coupon Rate. The Sponsor
shall, from time to time, provide any necessary information to the Paying Agent
relating to any original issue discount and interest on the Securities that is
included in any payment and reportable for taxable income calculation purposes.

     (e) 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 applicable
during such Extension Period, 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

                                     A-I-3
<PAGE>

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 capital stock, (ii) make any payment of principal 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 capital stock 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 stockholder stock purchase plan or
(C) in connection with the issuance of capital stock of the Debenture Issuer (or
securities convertible into or exercisable for such capital stock), as
consideration in an acquisition transaction entered into prior to the applicable
Extension Period, (b) as a result of any exchange or conversion of any class or
series of the Debenture Issuer's capital stock (or any capital stock of a
subsidiary of the Debenture Issuer) for any class or series of the Debenture
Issuer's capital stock or of any class or series of the Debenture Issuer's
indebtedness for any class or series of the Debenture Issuer's capital stock,
(c) the purchase of fractional interests in shares of the Debenture Issuer's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged, (d) any declaration of a
dividend in connection with any stockholder's rights plan, or the issuance of
rights, stock or other property under any stockholder's rights plan, or the
redemption or repurchase of rights pursuant thereto, (e) any dividend in the
form of stock, warrants, options or other rights where the dividend stock or the
stock issuable upon exercise of such warrants, options or other rights is the
same stock as that on which the dividend is being paid or ranks pari passu with
or junior in interest to such stock or (f) any payments under the Capital
Securities 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.

     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 applicable during such Extension Period, 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.

                                     A-I-4
<PAGE>

     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.

     (f) 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.

     (g) 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.

     (h) If any Distribution Payment Date, other than any date of redemption,
falls on a day that is not a Business Day, then Distributions payable will be
paid on, and such Distribution Payment Date will be moved to, the next
succeeding Business Day, and additional Distributions will accrue for each day
that such payment is delayed as a result thereof.

     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,

                                     A-I-5
<PAGE>

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 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
described above, (v) the entry of a decree of a 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. 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.

     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-

                                     A-I-6
<PAGE>

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. Additional interest may also be payable by the
Debenture Issuer in connection with such Tax Event or Investment Company Event
as specified in Section 10.02 of the Indenture. Any such interest received by
the Trust will be distributed promptly to Holders of the Securities on a Pro
Rata basis.

     "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,

                                     A-I-7
<PAGE>

subject to United States federal income tax with respect to income received or
accrued on the Debentures; (ii) interest payable by the Debenture Issuer on the
Debentures is not, or within 90 days of the date of such opinion, will not be,
deductible by the Debenture Issuer, in whole or in part, for United States
federal income tax purposes; or (iii) the Trust is, or will be within 90 days of
the date of such opinion, subject to 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 100% of the
principal amount of the Debentures being redeemed plus unpaid interest accrued
on such Debentures to the related 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.

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

     "Special Redemption Price" means, with respect to the redemption of the
Debentures following a Special Event, an amount in cash equal to (1) if the
Special Redemption Date is before May 23, 2008, the greater of (a) 100% of the
outstanding principal amount thereof or (b) as determined by the Quotation
Agent, the sum of the present value of the principal amount payable as part of
the Optional Redemption Price with respect to a redemption as of May 23, 2008,
together with the present value of interest payments calculated at a fixed rate
of interest per annum equal to 7.60% over the Remaining Life of such Debentures,
discounted to the Special Redemption Date on a quarterly basis (assuming a
360-day year consisting of twelve 30-day months) at the Treasury Rate plus 2.0%,
plus, in the case of either (a) or (b), 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.

     "Comparable Treasury Issue" means, with respect to the Special Redemption
Date, the United States Treasury security selected by the Quotation Agent as
having a maturity comparable to the Remaining Life that would be utilized, at
the time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
Remaining Life. If no United States Treasury security has a maturity which is
within a period from three months before to three months after May 23, 2008, the
two most closely corresponding United States Treasury securities shall be used
as the

                                     A-I-8
<PAGE>

Comparable Treasury Issue, and the Treasury Rate shall be interpolated or
extrapolated on a straight-line basis, rounding to the nearest month using such
securities.

     "Comparable Treasury Price" means, with respect to the Special Redemption
Date, (a) the average of three Reference Treasury Dealer Quotations (as defined
herein) for the Special Redemption Date received by the Quotation Agent, after
excluding the highest and lowest of five such Reference Treasury Dealer
Quotations so received, or (b) if the Quotation Agent receives fewer than five
such Reference Treasury Dealer Quotations, the average of all such Reference
Treasury Dealer Quotations.

     "Primary Treasury Dealer" means a primary United States Government
securities dealer in The City of New York.

     "Quotation Agent" means Citigroup Global Markets Inc. and its successors;
provided, however, that if the foregoing shall cease to be a Primary Treasury
Dealer, the Debenture Issuer shall substitute therefor another Primary Treasury
Dealer.

     "Reference Treasury Dealer" means (i) the Quotation Agent and (ii) any
other Primary Treasury Dealer selected by the Debenture Trustee after
consultation with the Debenture Issuer.

     "Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and the Special Redemption Date, the average, as
determined by the Quotation Agent, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Debenture Trustee by such Reference
Treasury Dealer at 5:00 p.m., New York City time, on the third Business Day
preceding the Special Redemption Date.

     "Remaining Life" means the period from the Special Redemption Date through
May 23, 2008.

     "Treasury Rate" means, with respect to the Special Redemption Price, (i)
the yield, under the heading which represents the average for the week
immediately prior to the third Business Day immediately preceding the Special
Redemption Date, appearing in the most recently published statistical release
designated H.15 (519) or any successor publication which is published weekly by
the Board of Governors of the Federal Reserve System and which establishes
yields on actively traded United States Treasury securities adjusted to constant
maturity under the caption "Treasury Constant Maturities," for the maturity
corresponding to the Remaining Life (provided that if no maturity is within
three months before or after the Remaining Life, then the yields for the two
published maturities most closely corresponding to the Remaining Life shall be
determined and the Treasury Rate shall be interpolated or extrapolated from such
yields on a straight-line basis, rounding to the nearest month) or (ii) if such
release (or any successor release) is not published during the week immediately
prior to the third Business Day immediately preceding the Special Redemption
Date or does not contain such yields, the rate per annum equal to the quarterly
equivalent yield to maturity of the Comparable Treasury Issue, calculated using
a price for the Comparable Treasury Issue (expressed as a

                                     A-I-9
<PAGE>

percentage of its principal amount) equal to the Comparable Treasury 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.

          (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

                                     A-I-10
<PAGE>

     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.

     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

                                     A-I-11
<PAGE>

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 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

                                     A-I-12
<PAGE>

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

                                     A-I-13
<PAGE>

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.

     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) 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

                                     A-I-14
<PAGE>

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.

     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.

                                     A-I-15
<PAGE>

     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-16
<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. 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

                                     A-1-1

<PAGE>

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.

     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

                                     A-1-2

<PAGE>

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

                               APCAPITAL TRUST II

                               Capital Securities

                (liquidation amount $1,000 per Capital Security)

     APCapital Trust II, 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 William B.
Cheeseman, Frank H. Freund and James A. Pratt, as Administrators, Wilmington
Trust Company, as Delaware Trustee, Wilmington Trust Company, as Institutional
Trustee, American Physicians Capital, Inc., as Sponsor, and the holders from
time to time of undivided beneficial interests in the assets of the Trust,
including the designation of the terms of the Capital Securities as set forth in
Annex I to 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.

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

     This Capital Security is governed by, and 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.

                                       APCAPITAL TRUST II

                                       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
floating rate of interest per annum, which, with respect to any Distribution
Period, will be equal to LIBOR, as determined on the LIBOR Determination Date
for such Distribution Period, plus 4.20% (the "Coupon Rate"); provided, that the
Coupon Rate for any Distribution Period prior to the Distribution Period
commencing on the Distribution Payment Date (as defined below) in May 2008 may
not exceed 12.5% per annum; provided, further, that the Coupon Rate for any
Distribution Period may not exceed the Interest Rate (as defined in the
Indenture) for the related Interest Period (as defined in the Indenture).
Distributions in arrears for more than one Distribution Period will bear
interest thereon, compounded quarterly, at the applicable Coupon Rate for each
Distribution Period thereafter (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 and the
actual number of days elapsed in the applicable Distribution Period; provided,
however, if the Special Redemption Date is before May 23, 2008, the amounts
payable upon redemption of this Capital Security shall be calculated as set
forth in the definition of Special Redemption Price in the Declaration.

     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 applicable during such Extension Period, 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

                                     A-1-6

<PAGE>

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.

     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

                               APCAPITAL TRUST II

     APCapital Trust II, a statutory trust created under the laws of the State
of Delaware (the "Trust"), hereby certifies that American Physicians Capital,
Inc. 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 William B. Cheeseman, Frank H. Freund and James A.
Pratt, 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.

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

     This Common Security is governed by, and 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.

                                       APCAPITAL TRUST II

                                       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 floating
rate of interest per annum, which, with respect to any Distribution Period, will
be equal to LIBOR, as determined on the LIBOR Determination Date for such
Distribution Period, plus 4.20% (the "Coupon Rate"); provided, that the Coupon
Rate for any Distribution Period prior to the Distribution Period commencing on
the Distribution Payment Date (as defined below) in May 2008 may not exceed
12.5% per annum; provided, further, that the Coupon Rate for any Distribution
Period may not exceed the Interest Rate (as defined in the Indenture) for the
related Interest Period (as defined in the Indenture). Distributions in arrears
for more than one Distribution Period will bear interest thereon, compounded
quarterly, at the applicable Coupon Rate for each Distribution Period thereafter
(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 and the actual number of days elapsed
in the applicable Distribution Period; provided, however, that if the Special
Redemption Date is before May 23, 2008, the amounts payable upon redemption of
this Common Security shall be calculated as set forth in the definition of
Special Redemption Price in the Declaration.

     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 applicable during such Extension Period, 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

                                     A-2-4
<PAGE>

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.

     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

                                                              __________, [    ]

American Physicians Capital, Inc.
APCapital Trust II
1301 N. Hagadorn Road
East Lansing, Michigan 48823

Re:    Purchase of $1,000 liquidation amount of InCapS(SM)
       (the "Capital Securities") of APCapital Trust II

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
APCapital Trust II (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

                                      B-1
<PAGE>

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 American
Physicians Capital, Inc. (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.

     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

                                      B-2

<PAGE>

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.

     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 Offered 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

                                                            ___________, [    ]

American Physicians Capital, Inc.
APCapital Trust II
1301 N. Hagadorn Road
East Lansing, Michigan 48823

Re:    Purchase of $1,000 liquidation amount of InCapS(SM)
       (the "Capital Securities") of APCapital Trust II

     Reference is hereby made to the Amended and Restated Declaration of Trust
of APCapital Trust II, dated as of May 22, 2003 (the "Declaration"), among
William B. Cheeseman, Frank H. Freund and James A. Pratt, as Administrators,
Wilmington Trust Company, as Delaware Trustee, Wilmington Trust Company, as
Institutional Trustee, American Physicians Capital, Inc., as Sponsor, and the
holders from time to time of undivided beneficial interests in the assets of
APCapital Trust II. 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.

     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-1

<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                                         __________%

<PAGE>

For Property & Casualty Companies:

Expense Ratio                                                        __________%

Loss and LAE Ratio                                                   __________%

Combined Ratio                                                       __________%

Net Premiums Written (trailing twelve month period)
 to Policyholders' Surplus                                           __________%

<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: ______________________________

<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 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) + Asset Valuation Reserve
                                                             - 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 Admitted Assets                                        Total admitted assets as determined in accordance with
                                                             statutory accounting principles

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

Expense Ratio                                                Other Underwriting Expenses Incurred/Net premiums Earned

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

Combined Ratio                                               Expense Ratio + Loss and LAE Ratio

Net Premiums Written (trailing twelve month period) to       Net Premiums Written of the trailing twelve month
 Policyholders' Surplus                                      period/Policyholders' Surplus
</TABLE><PAGE>
                                                                   EXHIBIT 10.03

                        AMERICAN PHYSICIANS CAPITAL, INC.

                            15,000 CAPITAL SECURITIES

                        FLOATING RATE CAPITAL SECURITIES

               (LIQUIDATION AMOUNT $1,000.00 PER CAPITAL SECURITY)

                               PLACEMENT AGREEMENT

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

                                                                  April 25, 2003

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

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

Ladies and Gentlemen:

         American Physicians Capital, Inc., incorporated and existing under the
laws of the State of Michigan (the "Company"), and its financing subsidiary,
American Physicians Capital Statutory Trust I, a Connecticut statutory trust
(the "Trust," and hereinafter together with the Company, the "Offerors"), hereby
confirm their agreement (this "Agreement") with you as placement agents (the
"Placement Agents"), as follows:

SECTION 1. ISSUANCE AND SALE OF SECURITIES.

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

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

<PAGE>

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

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

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

SECTION 2. PURCHASE OF CAPITAL SECURITIES.

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

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

         2.3 CLOSING AND DELIVERY OF PAYMENT.

                  2.3.1 CLOSING; CLOSING DATE. The sale and purchase of the
Capital Securities by the Offerors to the Purchaser shall take place at a
closing (the "Closing") at the offices of LeBoeuf, Lamb, Greene & MacRae,
L.L.P., at 10:00 a.m. (New York City time) on May 15,

                                       2
<PAGE>

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.

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

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

         2.4 PLACEMENT AGENTS' FEES AND EXPENSES.

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

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

         2.5 FAILURE TO CLOSE. If any of the conditions to the Closing specified
in this Agreement shall not have been fulfilled to the satisfaction of the
Placement Agents or if the Closing shall not have occurred on or before 10:00
a.m. (New York City time) on May 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.

                                       3
<PAGE>

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

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

                                       4
<PAGE>

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

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

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

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

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

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

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

                                       5
<PAGE>

and warranties of the Placement Agents contained in this Agreement and to the
following further conditions:

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

         4.2 FULFILLMENT OF OTHER OBLIGATIONS. The Placement Agents shall have
fulfilled all of their other obligations and duties required to be fulfilled
under this Agreement prior to or at the Closing.

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

         5.1 SECURITIES LAW MATTERS; AUTHORIZATIONS.

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

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

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

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

                  (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

                                       6
<PAGE>

regulatory agency or body) is required in connection with the offering and sale
of the Securities or the Guarantee hereunder, or the consummation by the Company
or the Trust of any other transaction contemplated hereby, except such as have
been obtained and made under the federal securities laws or state insurance laws
and such as may be required under state or foreign securities or Blue Sky laws.

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

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

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

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

                                       7
<PAGE>

         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 and except as any indemnification or contribution provisions thereof may
be limited under applicable securities laws.

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

         5.9 ORGANIZATION, STANDING AND QUALIFICATION OF THE COMPANY. The
Company has been duly incorporated and is validly existing as a corporation in
good standing under the laws of the State of Michigan, 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.

         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

                                       8
<PAGE>

under the laws of the jurisdiction in which it is chartered or organized, with
all requisite power and authority to own its properties and conduct the business
it transacts and proposes to transact, and is duly qualified to transact
business and is in good standing as a foreign entity in each jurisdiction where
the nature of its activities requires such qualification, except where the
failure of any such Significant Subsidiaries to be so qualified would not,
singly or in the aggregate, have a Material Adverse Effect. All of the issued
and outstanding shares of capital stock of the Significant Subsidiaries (a) have
been duly authorized and are validly issued, (b) are fully paid and
nonassessable, and (c) are wholly owned, directly or indirectly, by the Company
free and clear of any security interest, mortgage, pledge, lien, encumbrance,
restriction upon voting or transfer, preemptive rights, claim, equity or other
defect.

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

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

         5.13 FINANCIAL STATEMENTS.

                  (a) The consolidated balance sheets of the Company and its
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

                                       9
<PAGE>

all material respects the financial position and the results of operations and
changes in shareholders' equity of the Company and all of its Significant
Subsidiaries as of the dates and for the periods indicated (subject, in the case
of interim financial statements, to normal recurring year-end adjustments, none
of which shall be material). The books and records of the Company and all of its
Significant Subsidiaries have been, and are being, maintained in all material
respects in accordance with generally accepted accounting principles and any
other applicable legal and accounting requirements and reflect only actual
transactions.

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

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

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

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

         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.

                                       10
<PAGE>

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

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

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

SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE PLACEMENT AGENTS. Each
Placement Agent represents and warrants to the Offerors as to itself (but not as
to the other Placement Agent) as follows:

         6.1 ORGANIZATION, STANDING AND QUALIFICATION.

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

                                       11
<PAGE>

material adverse effect on the condition (financial or otherwise), earnings,
business, prospects or results of operations of FTN Financial Capital Markets.

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

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

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

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

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

         6.6. OFFERING CIRCULARS. Neither the Placement Agent nor its
representatives will include any non-public information about the Company, the
Trust or any of their affiliates in any

                                       12
<PAGE>

registration statement, prospectus, offering circular or private placement
memorandum used in connection with any purchase of Capital Securities without
the prior written consent of the Trust and the Company.

SECTION 7. COVENANTS OF THE OFFERORS. The Offerors covenant and agree with the
Placement Agents and the Purchaser as follows:

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

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

         7.3 USE OF PROCEEDS. The Trust shall use the proceeds from the sale of
the Capital Securities to purchase the Debentures from the Company.

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

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

         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).

                                       13
<PAGE>

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

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

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

SECTION 9. INDEMNIFICATION.

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

                                       14
<PAGE>

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

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

                                       15
<PAGE>

with the assumption of legal defenses in accordance with the proviso in the
preceding sentence (it being understood, however, that the Offerors shall not be
liable for the expenses of more than one separate counsel representing the
Indemnified Parties who are parties to such action), or (b) the Offerors shall
not have employed counsel reasonably satisfactory to the Indemnified Party to
represent the Indemnified Party within a reasonable time after notice of
commencement of the action, in each of which cases the fees and expenses of
counsel of such Indemnified Party shall be at the expense of the Offerors.

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

                                       16
<PAGE>

No person found guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
person who was not found guilty of such fraudulent misrepresentation.

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

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

SECTION 10. RIGHTS AND RESPONSIBILITIES OF PLACEMENT AGENTS.

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

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

SECTION 11. MISCELLANEOUS.

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

                                       17
<PAGE>

and shall not be deemed to be an exception to one or more representations or
warranties contained in Section 5 hereof unless such information is specifically
included on the Disclosure Schedule in accordance with the provisions of this
Section 11.1.

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

         if to the Placement Agents, to:

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

                                and

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

         with a copy to:

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

                               and

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

                                       18
<PAGE>

         if to the Offerors, to:

                            American Physicians Capital, Inc.
                            1301 N. Hagadorn Road
                            East Lansing, Michigan 48823
                            Telecopier:  517-351-7866
                            Telephone:  517-324-6737
                            Attention:  Frank H. Freund

         with a copy to:

                            Dykema Gossett PLLC
                            400 Renaissance Center
                            Detroit, Michigan 48243
                            Telecopier:  313-568-6832
                            Telephone:  313-568-5434
                            Attention:  Mark Metz, Esq.

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

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

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

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

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

         11.7 ENTIRE AGREEMENT. This Agreement, together with the other
Operative Documents and the other documents delivered in connection with the
transactions contemplated

                                       19
<PAGE>

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

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

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

                     Signatures appear on the following page

                                       20
<PAGE>

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

VERY TRULY YOURS,

AMERICAN PHYSICIANS CAPITAL, INC.

By: /s/ Frank H. Freund
    --------------------------
Name:  Frank H. Freund
Title: Chief Financial Officer

AMERICAN PHYSICIANS CAPITAL
STATUTORY TRUST I

By: /s/ Frank H. Freund
    --------------------------
Name:  Frank H. Freund
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: /s/ James D. Wingett
    --------------------------
Name:  James D. Wingett
Title  Managing Director

KEEFE, BRUYETTE & WOODS, INC.
A NEW YORK CORPORATION, AS A PLACEMENT AGENT

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

                                       21
<PAGE>

                                    EXHIBIT A

                         FORM OF SUBSCRIPTION AGREEMENT

                  AMERICAN PHYSICIANS CAPITAL STATUTORY TRUST I

                        AMERICAN PHYSICIANS CAPITAL, INC.

                             SUBSCRIPTION AGREEMENT

                                  MAY 15, 2003

         THIS SUBSCRIPTION AGREEMENT (this "Agreement") made among American
Physicians Capital Statutory Trust I (the "Trust"), a statutory trust created
under the Connecticut Statutory Trust Act (Chapter 615 of Title 34 of the
Connecticut General Statutes, Section 500, et seq.), American Physicians
Capital, Inc., a Michigan corporation, with its principal offices located at
1301 N. Hagadorn Road, East Lansing, Michigan 48823 (the "Company" and,
collectively with the Trust, the "Offerors"), and I-Preferred Term Securities
II, Ltd. (the "Purchaser").

                                    RECITALS:

         A. The Trust desires to issue 15,000 of its Floating Rate Capital
Securities (the "Capital Securities"), liquidation amount $1,000.00 per Capital
Security, representing an undivided beneficial interest in the assets of the
Trust (the "Offering"), to be issued pursuant to an Amended and Restated
Declaration of Trust (the "Declaration") by and among the Company, U.S. Bank
National Association ("U.S. Bank"), the administrators named therein, and the
holders (as defined therein), which Capital Securities are to be guaranteed by
the Company with respect to distributions and payments upon liquidation,
redemption and otherwise pursuant to the terms of a Guarantee Agreement between
the Company and U.S. Bank, as trustee (the "Guarantee"); and

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

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

                                    ARTICLE I
                     PURCHASE AND SALE OF CAPITAL SECURITIES

         1.1. Upon the execution of this Agreement, the Purchaser hereby agrees
to purchase from the Trust 15,000 Capital Securities at a price equal to
$1,000.00 per Capital Security (the

<PAGE>

"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 May 15, 2003, or such other business day as may
be designated by the Purchaser, but in no event later than May 22, 2003 (the
"Closing Date"). The Offerors shall provide the Purchaser wire transfer
instructions no later than 1 day following the date hereof.

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

         1.3. The Placement Agreement, dated April 25, 2003 (the "Placement
Agreement"), among the Offerors and the Placement Agents identified therein
includes certain representations and warranties, covenants and conditions to
closing and certain other matters governing the Offering. The Placement
Agreement is hereby incorporated by reference into this Agreement and the
Purchaser shall be entitled to each of the benefits of the Placement Agents and
the Purchaser under the Placement Agreement and shall be entitled to enforce the
obligations of the Offerors under such Placement Agreement as fully as if the
Purchaser were a party to such Placement Agreement.

                                   ARTICLE II
                   REPRESENTATIONS AND WARRANTIES OF PURCHASER

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

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

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

                                      A-2
<PAGE>

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

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

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

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

         2.8. The Purchaser represents and warrants that (i) the Purchaser is
not in violation or default of any term of its Memorandum of Association or
Articles of Association, of any provision of any mortgage, indenture, 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:           American Physicians Capital, Inc.
                                    1301 N. Hagadorn Road
                                    East Lansing, Michigan 48823
                                    Attention:  Frank H. Freund
                                    Fax:  517-351-7866

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

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

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

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

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

                                      A-4
<PAGE>

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

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

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

                     Signatures appear on the following page

                                      A-5
<PAGE>

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

I-PREFERRED TERM SECURITIES II, LTD.

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

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

                                      AMERICAN PHYSICIANS CAPITAL, INC.

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

                                      AMERICAN PHYSICIANS CAPITAL
                                      STATUTORY TRUST I

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

                                      A-6
<PAGE>

                                   EXHIBIT B-1

                         FORM OF COMPANY COUNSEL OPINION

                                 [CLOSING], 2003

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

Ladies and Gentlemen:

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

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

         The law covered by the opinions expressed herein is limited to the law
of the United States of America and of the State of Michigan.

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

         As used herein, the phrase "to our knowledge" or "to the best of our
knowledge" or other similar phrase means the actual knowledge of the attorneys
who have had active involvement in

                                     B-1-1
<PAGE>

the transactions described above or who have prepared or signed this opinion
letter, or who otherwise have devoted substantial attention to legal matters for
the Company.

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

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

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

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

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

         5. The Debentures have been duly authorized, executed and delivered by
the Company, are entitled to the benefits of the Indenture and are legal, valid
and binding obligations of the Company enforceable against the Company in
accordance with their terms, subject to the

                                     B-1-2
<PAGE>

effect of bankruptcy, insolvency, reorganization, receivership, moratorium and
other laws affecting the rights and remedies of creditors generally and of
general principles of equity.

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

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

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

                                     B-1-3
<PAGE>

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

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

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

         [With respect to the foregoing opinions, since no member of this firm
is actively engaged in the practice of law in the States of Connecticut or New
York, we do not express any opinions as to the laws of such states and have (i)
relied, with your approval, upon the opinion of Bingham McCutchen LLP with
respect to matters of Connecticut law, and (ii) assumed, with your approval and
without rendering any opinion to such effect, that the laws of the State of New
York, in all respects material to this opinion, are substantively identical to
the laws of the State of Michigan, without regard to conflict of law
provisions.](1)

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

                                           Very truly yours,

--------
         (1) To be used if author of opinion is not qualified to practice in the
State of New York.

                                     B-1-4
<PAGE>
                                   EXHIBIT B-2

                       FORM OF CONNECTICUT COUNSEL OPINION

TO THE PARTIES LISTED
ON SCHEDULE I HERETO

Ladies and Gentlemen:

         We have acted as special counsel in the State of Connecticut (the
"State") for American Physicians Capital Statutory Trust I (the "Trust"), a
Connecticut statutory trust formed pursuant to the Amended and Restated
Declaration of Trust (the "Trust Agreement") dated as of the date hereof, among
American Physicians Capital, Inc., a Michigan 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 William B.
Cheeseman and Frank H. Freund, 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 the State of the State of
                                    Connecticut dated April 15, 2003; and

                           (viii)   a Certificate of Legal Existence for the
                                    Trust obtained from the Secretary of State
                                    of the State of Connecticut dated April 16,
                                    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.

         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,

                                     B-2-2
<PAGE>

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

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

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

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

                                     B-2-3
<PAGE>

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

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

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

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

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

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

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

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

                                     B-2-4
<PAGE>

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

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

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

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

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

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

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

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

                                     B-2-5
<PAGE>
Trust, or, to the best of our knowledge, any judgment or order of any court or
other tribunal, in each case known to us, applicable to or binding on it.

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

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

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

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

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

                                               Very truly yours,

                                     B-2-6
<PAGE>

                                   SCHEDULE I

         U.S. Bank National Association

         FTN Financial Capital Markets

         Keefe, Bruyette & Woods, Inc.

         I-Preferred Term Securities II, Ltd.

         I-Preferred Term Securities II, Inc.

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

         American Physicians Capital, Inc.

         Dykema Gossett PLLC

<PAGE>

                            EXHIBIT A TO EXHIBIT B-2

                         CERTIFICATE OF LEGAL EXISTENCE

                                  See attached

<PAGE>

                                   EXHIBIT B-3

                           FORM OF TAX COUNSEL OPINION

                                                                 [CLOSING], 2003

American Physicians Capital, Inc.
1301 N. Hagadorn Road
East Lansing, Michigan 48823

American Physicians Capital Statutory Trust I
c/o American Physicians Capital, Inc.
1301 N. Hagadorn Road
East Lansing, Michigan 48823

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 American Physicians
Capital, Inc., a corporation organized and existing under the laws of Michigan
(the "Company"), and to American Physicians Capital Statutory Trust I, a
statutory trust created under the laws of Connecticut (the "Trust"), in
connection with the proposed issuance of (i) Floating Rate Capital Securities,
liquidation amount $1,000.00 per Capital Security (the "Capital Securities") of
the Trust, pursuant to the terms of the Amended and Restated Declaration of
Trust dated as of the date hereof by and among the Company, U.S. Bank National
Association, as institutional trustee, and William B. Cheeseman and Frank H.
Freund, as Administrators (the "Trust Agreement"), (ii) Floating Rate Common
Securities, liquidation amount $1,000 per common security (the "Common
Securities") of the Trust, pursuant to the terms of the Trust Agreement, (iii)
Floating Rate Junior Subordinated Deferrable Interest Debentures (the
"Corresponding Debentures") of the Company issued pursuant to the terms of an
Indenture dated as of the date hereof from the Company to U.S. Bank National
Association, as trustee (the "Indenture"), which Corresponding Debentures are to
be sold by the Company to the Trust, and (iv) the Guarantee Agreement of the
Company with respect to the Capital Securities dated as of the date hereof (the
"Guarantee") between the Company and U.S. Bank National Association, as
guarantee trustee. The Capital Securities, the Common Securities and the
Corresponding Debentures are to be issued as

<PAGE>

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.

         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.

<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,

<PAGE>

                        AMERICAN PHYSICIANS CAPITAL, INC.

                                                                 [CLOSING], 2003

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

         Re:      Representations Concerning the Issuance of Floating Rate
                  Junior Subordinated Deferrable Interest Debentures (the
                  "Corresponding Debentures") to American Physicians Capital
                  Statutory Trust I (the "Trust") and Sale of Trust Securities
                  (the "Trust Securities") of the Trust

Dear Sirs:

         In accordance with your request, American Physicians Capital, Inc. (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

<PAGE>

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

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

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

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

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

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

<PAGE>

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

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

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

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

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

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

<PAGE>

                                              Very truly yours,

                                              AMERICAN PHYSICIANS CAPITAL, INC.

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

<PAGE>

                                    EXHIBIT C

                            SIGNIFICANT SUBSIDIARIES

American Physicians Assurance Corporation (Michigan)

APSpecialty Insurance Corporation (Michigan)

Insurance Corporation of America (Michigan)

<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__

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            _______%

<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 FIXED INCOME         (Total Class 1 + Total Class 2 Rated Investments)/Total Fixed
INVESTMENTS                                                       Income Investments

TOTAL CLASS 1 & 2 RATED INVESTMENTS TO TOTAL INVESTMENTS          (Total Class 1 + Total Class 2 Rated Investments)/Total
                                                                  Investments

TOTAL ASSETS                                                      Total Assets

RETURN ON POLICYHOLDERS' SURPLUS                                  Net Income/Policyholders' Surplus

EXPENSE RATIO                                                     Other Underwriting Expenses Incurred/Net premiums Earned

LOSS AND LAE RATIO                                                (Losses Incurred + Loss Expenses Incurred)/Net Premiums Earned

COMBINED RATIO                                                    Expense Ratio + Loss and LAE Ratio

NET PREMIUMS WRITTEN (ANNUALIZED) TO POLICYHOLDERS' SURPLUS       Net Premiums Written/Policyholders' Surplus
</TABLE>

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00055-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00055-of-00352.parquet"}]]