<PAGE>

                                                                     EXHIBIT 4.7



                                                                  EXECUTION COPY








================================================================================










                              GUARANTEE AGREEMENT

                                    Between

                         COMMONWEALTH BANKSHARES, INC.
                                (as Guarantor)

                           WILMINGTON TRUST COMPANY
                                 (as Trustee)

                                  Dated as of

                           __________________, 2001









================================================================================
<PAGE>

<TABLE>
<CAPTION>

                            CROSS-REFERENCE TABLE*

Section of Trust Indenture                                                      Section of
Act of 1939, as amended                                                   Guarantee Agreement
-----------------------                                                   -------------------
<S>                                                                       <C>
310(a)                                                                          4.01(a)
                   ...................................................
310(b)                                                                       4.01(c), 208
                   ...................................................
310(c)                                                                       Inapplicable
                   ...................................................
311(a)                                                                          2.02(b)
                   ...................................................
311(b)                                                                          2.02(b)
                   ...................................................
311(c)                                                                       Inapplicable
                   ...................................................
312(a)                                                                          2.02(a)
                   ...................................................
312(b)                                                                          2.02(b)
                   ...................................................
313(a)                                                                           2.03
                   ...................................................
313(b)                                                                           2.03
                   ...................................................
313(c)                                                                           2.03
                   ...................................................
313(d)                                                                           2.03
                   ...................................................
314(a)                                                                           2.04
                   ...................................................
314(b)                                                                       Inapplicable
                   ...................................................
314(c)                                                                           2.05
                   ...................................................
314(d)                                                                       Inapplicable
                   ...................................................
314(e)                                                                     1.01, 2.05, 3.02
                   ...................................................
314(f)                                                                        2.01, 3.02
                   ...................................................
315(a)                                                                         3.01 (d)
                   ...................................................
315(b)                                                                           2.07
                   ...................................................
315(c)                                                                         3.01 (c)
                   ...................................................
315(d)                                                                          3.01(d)
                   ...................................................
316(a)                                                                      1.01, 2.06,5.04
                   ...................................................
316(b)                                                                        5.03, 5.04
                   ...................................................
315(c)                                                                           8.02
                   ...................................................
317(a)                                                                       Inapplicable
                   ...................................................
317(b)                                                                       Inapplicable
                   ...................................................
318(a)                                                                          2.01(b)
                   ...................................................

</TABLE>

_______________________
* This Cross-Reference Table does not constitute part of the Guarantee Agreement
and shall not affect the interpretation of any of its terms or provisions.
<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                        Page
                                                                                        ----
<S>                                                                                     <C>
ARTICLE I  Definitions................................................................    1

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

ARTICLE II  Trust Indenture Act.......................................................    4

   SECTION 2.01.  Trust Indenture Act; Application....................................    4
   SECTION 2.02.  List of Holders.....................................................    4
   SECTION 2.03.  Reports by the Guarantee Trustee....................................    5
   SECTION 2.04.  Periodic Reports to the Guarantee Trustee...........................    5
   SECTION 2.05.  Evidence of Compliance with Conditions Precedent....................    5
   SECTION 2.06.  Events of Default; Waiver...........................................    5
   SECTION 2.07.  Event of Default; Notice............................................    5
   SECTION 2.08.  Conflicting Interests...............................................    5

ARTICLE III  Powers, Duties and Rights of the Guarantee Trustee.......................    6

   SECTION 3.01.  Powers and Duties of the Guarantee Trustee..........................    6
   SECTION 3.02.  Certain Rights of Guarantee Trustee.................................    7
   SECTION 3.03.  Indemnity...........................................................    9
   SECTION 3.04.  Expenses............................................................    9

ARTICLE IV  Guarantee Trustee.........................................................    9

   SECTION 4.01.  Guarantee Trustee: Eligibility......................................    9
   SECTION 4.02.  Appointment, Removal and Resignation of the Guarantee Trustee.......   10

ARTICLE V  Guarantee..................................................................   10

   SECTION 5.01.  Guarantee...........................................................   10
   SECTION 5.02.  Waiver of Notice and Demand.........................................   10
   SECTION 5.03.  Obligations Not Affected............................................   10
   SECTION 5.04.  Rights of Holders...................................................   11
   SECTION 5.05.  Guarantee of Payment................................................   12
   SECTION 5.06.  Subrogation.........................................................   12
   SECTION 5.07.  Independent Obligations.............................................   12

ARTICLE VI  Covenants and Subordination...............................................   12

   SECTION 6.01.  Subordination.......................................................   12
   SECTION 6.02.  Pari Passu Guaranty.................................................   12

ARTICLE VII  Termination..............................................................   13

   SECTION 7.01.  Termination.........................................................   13

ARTICLE VIII  Miscellaneous...........................................................   13

   SECTION 8.01.  Successors and Assigns..............................................   13
</TABLE>

                                       i
<PAGE>

<TABLE>
<S>                                                                                    <C>
   SECTION 8.02.  Amendments..........................................................   13
   SECTION 8.03.  Notices.............................................................   13
   SECTION 8.04.  Benefit.............................................................   14
   SECTION 8.05.  Interpretation......................................................   14
   SECTION 8.06.  Governing Law.......................................................   15
</TABLE>

                                      ii
<PAGE>

         GUARANTEE AGREEMENT (this "Guarantee Agreement"), dated as of
_____________, 2001, executed and delivered by COMMONWEALTH BANKSHARES, INC.,
bank holding company (the "Guarantor") having its principal office at 403 Boush
Street, Norfolk, Virginia 23510, and WILMINGTON TRUST COMPANY, a Delaware
corporation (the "Guarantee Trustee"), for the benefit of the Holders (as
defined herein) from time to time of the Trust Securities (as defined herein) of
COMMONWEALTH BANKSHARES CAPITAL TRUST I, a Delaware statutory business trust
(the "Issuer").

         WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the
"Declaration of Trust"), dated as of ____________, 2001, among the Trustees
named therein, the Guarantor, as Depositor, and the Holders from time to time of
undivided beneficial ownership interests in the assets of the Issuer, the Issuer
is issuing $__________ aggregate Liquidation Amount of its Capital Trust
Securities, Liquidation Amount $25.00 per security (the "Capital Securities"),
and $_____________ aggregate Liquidation Amount of its Common Securities,
Liquidation Amount $25.00 per security (the "Common Securities" and collectively
with the Capital Securities, the "Trust Securities"), representing undivided
beneficial ownership interests in the assets of the Issuer and having the terms
set forth in the Declaration of Trust;

         WHEREAS, the Trust Securities will be issued by the Issuer and the
proceeds thereof will be used by the Issuer to purchase the Junior Subordinated
Debt Securities due ______________ (as defined in the Declaration of Trust) (the
"Junior Subordinated Debt Securities") of the Guarantor, which will be held by
Wilmington Trust Company, as Property Trustee under the Declaration of Trust, as
trust assets; and

         WHEREAS, as incentive for the Holders to purchase Trust Securities, the
Guarantor desires irrevocably and unconditionally to agree, to the extent set
forth herein, to pay to the Holders the Guarantee Payments (as defined herein)
and to make certain other payments on the terms and conditions set forth herein.

         NOW, THEREFORE, in consideration of the purchase of Trust Securities by
each Holder, which purchase the Guarantor hereby agrees shall benefit the
Guarantor, the Guarantor executes and delivers this Guarantee Agreement for the
benefit of the Holders from time to time of the Trust Securities.

                                   ARTICLE I

                                  Definitions
                                  -----------

         SECTION 1.01. Definitions. As used in this Guarantee Agreement, the
                       -----------
terms set forth below shall, unless the context otherwise requires, have the
following meanings. Capitalized or otherwise defined terms used but not
otherwise defined herein shall have the meanings assigned to such terms in the
Declaration of Trust as in effect on the date hereof.

         "Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person; provided, however, that an Affiliate of the
Guarantor shall not be deemed to include the

                                       1
<PAGE>

Issuer. For the purposes of this definition, "control" when used with respect to
any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.

          "Capital Securities" shall have the meaning specified in the first
recital of this Guarantee Agreement.

          "Common Securities" shall have the meaning specified in the first
recital of this Guarantee Agreement.

          "Declaration of Trust" shall have the meaning specified in he first
recital of this Guarantee Agreement.

          "Event of Default" means a default by the Guarantor on any of its
payment or other obligations under this Guarantee Agreement; provided, however,
                                                             --------  -------
that, except with respect to a default in payment of any Guarantee Payments, the
Guarantor shall have received notice of default and shall not have cured such
default within 60 days after receipt of such notice; provided, further, that no
                                                     --------  -------
Event of Default shall occur unless an Event of Default (as defined in the
Indenture or the Declaration of Trust) shall have occurred and be continuing.

          "Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Trust Securities, to the extent not
paid or made by or on behalf of the Issuer: (i) any accrued and unpaid
Distributions required to he paid on the Trust Securities, to the extent that
the Issuer shall have funds on hand available therefor at such time, (ii) the
redemption price, including all accrued and unpaid Distributions to the date of
redemption (the "Redemption Price"), with respect to the Trust Securities called
for redemption by the Issuer to the extent that the Issuer shall have funds on
hand available therefor at such time, and (iii) upon a voluntary or involuntary
termination, winding-up or liquidation of the Issuer, unless Junior Subordinated
Debt Securities are distributed to the Holders or all of the Capital Securities
are redeemed, the lesser of (a) the aggregate of the Liquidation Amount of $25
per Trust Security plus accrued and unpaid Distributions on the Trust Securities
to the date of payment to the extent that the Issuer shall have funds on hand
available to make such payment at such time and (b) the amount of assets of the
Issuer remaining available for distribution to Holders in liquidation of the
Issuer after satisfaction of liabilities to creditors of the Issuer as required
by applicable law (in either case, the "Liquidation Distribution"). If an Event
of Default under the Declaration of Trust has occurred and is continuing, no
Guarantee Payments with respect to the Common Securities or any guarantee
payment under any Other Guarantees (as defined in the Indenture) with respect to
Common Securities of any other Commonwealth Bankshares Capital Trust (as defined
in the Indenture), if any, shall be made until the Holders of Capital Securities
shall be paid in full the Guarantee Payments to which they are entitled under
this Guarantee Agreement. Subordination of Guarantee Payments on the Common
Securities following such an Event of Default under the Declaration of Trust
shall be analogous to the subordination of the Common Securities provided for in
Section 4.03 of the Declaration of Trust.

                                       2
<PAGE>

          "Guarantee Trustee" means Wilmington Trust Company, until a Successor
Guarantee Trustee has been appointed and has accepted such appointment pursuant
to the terms of this Guarantee Agreement and thereafter means each such
Successor Guarantee.

          "Guarantor" shall have the meaning specified in the first recital of
this Guarantee Agreement.

          "Holder" means a person in whose name a Trust Security or Trust
Securities is registered on the books and records of the Issuer; provided,
                                                                 --------
however, that in determining whether the holders of the requisite percentage of
-------
Trust Securities have given any request, notice, consent or waiver hereunder,
"Holder" shall not include the Guarantor, the Guarantee Trustee, or any
Affiliate of the Guarantor or the Guarantee Trustee.

          "Indenture" means the Junior Subordinated Indenture dated as of
____________, 2001, as supplemented and amended between the Guarantor and
Wilmington Trust Company, as trustee, relating to the issuance of the Junior
Subordinated Debt Securities.

          "Issuer" shall have the meaning specified in the first recital of this
Guarantee Agreement.

          "List of Holders" has the meaning specified in Section 2.02(a).

          "Majority in Liquidation Amount of the Securities" means, except as
 provided by the Trust Indenture Act, a vote by the Holder(s), voting separately
 as a class, of more than 50% of the aggregate Liquidation Amount of all then
 Outstanding Capital Securities.

          "Officers' Certificate" means, with respect to any Person, a
 certificate signed by the Chairman and Chief Executive Officer, President or a
 Vice President, and by the Treasurer, an Associate Treasurer, an Assistant
 Treasurer, the Controller, the Secretary or an Assistant Secretary of such
 Person, and delivered to the Guarantee Trustee. Any Officers' Certificate
 delivered with respect to compliance with a condition or covenant provided for
 in this Guarantee Agreement shall include:

               (a) a statement that each officer 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 officer in rendering the Officers'
          Certificate;

               (c) a statement that each officer has made such examination or
          investigation as, in such officer's opinion, is necessary to enable
          such officer 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 officer,
          such condition or covenant has been complied with.

                                       3
<PAGE>

          "Responsible Officer" when used with respect to the Guarantee Trustee
means any officer assigned to the Corporate Office, including any managing
director, vice president, assistant vice president, assistant treasurer,
assistant treasurer, assistant secretary or any other officer of the Guarantee
Trustee customarily performing functions similar to those performed by any of
the above designated officers and having direct responsibility for the
administration of this Guarantee Agreement, and also, with respect to a
particular matter, any other officer to whom such matter is referred because of
such officer's knowledge of and familiarity with the particular subject.

          "Senior Debt" shall have the meaning specified in the Indenture.

          "Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 4.01.

          "Trust Indenture Act" has the meaning specified in Section 1.01 of the
Indenture.

          "Trust Securities" shall have the meaning specified in the first
recital of this Guarantee Agreement.

                                  ARTICLE II

                              Trust Indenture Act
                              -------------------

          SECTION 2.01. Trust Indenture Act; Application. (a) This Guarantee
                        --------------------------------
Agreement will not be qualified under the Trust Indenture Act except upon the
effectiveness of a registration statement with respect to this Guarantee
Agreement.

               (b)  Upon qualification under the Trust Indenture Act as
contemplated in clause (a) above, if and to the extent that any provision of
this Guarantee Agreement limits, qualifies or conflicts with the duties imposed
by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed
duties shall control .

          SECTION 2.02. List of Holders. (a) The Guarantor shall furnish or
                        ---------------
cause to be furnished to the Guarantee Trustee semiannually, not more than 15
days after January 15 and July 15 of each year, a list, in such form as the
Guarantee Trustee may reasonably require, of the names and addresses of the
holders ("List of Holders") as of a date not more than 15 days prior to the
delivery thereof, and (ii) at such other times as Guarantee Trustee may request
in writing, within 30 days after the receipt by the Guarantor of any such
request, a List of Holders as of a date not more than 15 days prior to the time
such list is furnished, in each case to the extent such information is in the
possession or control of the Guarantor and is not identical to a previously
supplied list of Holders or has not otherwise been received by the Guarantee
Trustee in its capacity as such. The Guarantee Trustee may destroy any List of
Holders previously given to it on receipt of a new List of Holders.

               (b)  The Guarantee Trustee shall comply with its obligations
under Section 311(a), Section 311 (b) and Section 312 (b) of the Trust Indenture
Act.

                                       4
<PAGE>

          SECTION 2.03. Reports by the Guarantee Trustee. Not later than the
                        --------------------------------
last calendar day in August of each calendar year, commencing with the last
calendar day in August, 2001, the Guarantee Trustee shall provide to the Holders
such reports, if any, as are required by Section 313 of the Trust Indenture Act
in the form and in the manner provided by Section 313 of the Trust Indenture
Act. The Guarantee Trustee shall also comply with the requirements of Section
313(d) of the Trust Indenture Act.

          SECTION 2.04. Periodic Reports to the Guarantee Trustee. The Guarantor
                        -----------------------------------------
shall provide to the Guarantee Trustee, the Securities and Exchange Commission
and the Holders such documents, reports and information, if any, as required by
Section 314 of the Trust Indenture Act and the compliance certificate required
by Section 314 of the Trust Indenture Act, in the form, in the manner and at the
times required by Section 314 of the Trust Indenture Act.

          SECTION 2.05. Evidence of Compliance with Conditions Precedent. The
                        ------------------------------------------------
Guarantor shall provide to the Guarantee Trustee such evidence of compliance
with such conditions precedent, if any, provided for in this Guarantee Agreement
that relate to any of the matters set forth in Section 314 (c) of the Trust
Indenture Act. Any certificate or opinion required to be given by any officer
pursuant to Section 314(c)(1) may be given in the form of an Officers'
Certificate.

          SECTION 2.06. Events of Default; Waiver. The Holders of a Majority in
                        -------------------------
Liquidation Amount of the Securities may, by vote, on behalf of the Holders,
waive any past Event of Default and its consequences. Upon such waiver, any such
Event of Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured, for every purpose of this
Guarantee Agreement, but no such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent therefrom.

          SECTION 2.07. Event of Default; Notice. (a) The Guarantee Trustee
                        ------------------------
shall, within 90 days after the occurrence of an Event of Default, transmit by
mail, first class postage prepaid, to the Holders, notices of all Events of
Default known to the Guarantee Trustee, unless such Events of Default have been
cured before the giving of such notice; provided that, except in the case of a
                                        --------
default in the payment of a Guarantee Payment, the Guarantee Trustee shall be
protected in withholding such notice if and so long as the Board of Directors,
the executive committee or a trust committee of directors and/or a Responsible
Officer in good faith determines that the withholding of such notice is in the
interests of the Holders

               (b)  The Guarantee Trustee shall not be deemed to have knowledge
of any Event of Default unless a Responsible Officer charged with the
administration of the Declaration of Trust shall have received written notice of
such Event of Default.

          SECTION 2.08. Conflicting Interests. The Declaration of Trust shall be
                        ---------------------
deemed to be specifically described in this Guarantee Agreement for the purposes
of clause (i) of the first proviso contained in Section 310(b) of the Trust
Indenture Act.

                                       5
<PAGE>

                                  ARTICLE III

              Powers, Duties and Rights of the Guarantee Trustee
              --------------------------------------------------

          SECTION 3.01. Powers and Duties of the Guarantee Trustee. (a) This
                        ------------------------------------------
Guarantee Agreement shall be held by the Guarantee Trustee for the benefit of
the Holders, and the Guarantee Trustee shall not transfer this Guarantee
Agreement to any Person except a Holder exercising his or her rights pursuant to
Section 5.04(iv) or to a Successor Guarantee Trustee on acceptance by such
Successor Guarantee Trustee of its appointment to act as Successor Guarantee
Trustee. The right, title and interest of the Guarantee Trustee shall
automatically vest in any Successor Guarantee Trustee, upon acceptance by such
Successor Guarantee Trustee of its appointment hereunder, and such vesting and
cessation of title shall be effective whether or not conveyancing documents have
been executed and delivered pursuant to the appointment of such Successor
Guarantee Trustee.

               (b)  If an Event of Default has occurred and is continuing, the
Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of the
Holders.

               (c)  The Guarantee Trustee, before the occurrence of any Event of
Default 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 Guarantee Agreement, and no implied covenants shall be read into this
Guarantee Agreement against the Guarantee Trustee. In case an Event of Default
has occurred (that has not been cured or waived pursuant to Section 2.06), the
Guarantee Trustee shall exercise such of the rights and powers vested in it by
this Guarantee Agreement, and use the same degree of care and skill in its
exercise thereof, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.

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

               (i)  prior to the occurrence of any Event of Default and after
         the curing or waiving of all such Events of Default that may have
         occurred:

                    (A) the duties and obligations of the Guarantee Trustee
               shall be determined solely by the express provisions of this
               Guarantee Agreement, and the Guarantee Trustee shall not be
               liable except for the performance of such duties and obligations
               as are specifically set forth in this Guarantee Agreement; and

                    (B) in the absence of bad faith on the part of the Guarantee
               Trustee, the Guarantee Trustee may conclusively rely, as to the
               truth of the statements and the correctness of the opinions
               expressed therein, upon any certificates or opinions furnished to
               the Guarantee Trustee and conforming to the requirements of this
               Guarantee Agreement; but in the case of any such certificates or
               opinions that by any provision hereof or of the Trust Indenture
               Act are specifically required to be furnished to the Guarantee
               Trustee, the Guarantee Trustee shall be under a duty to

                                       6
<PAGE>

               examine the same to determine whether or not they conform to the
               requirements of this Guarantee Agreement;

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

               (iii) the Guarantee Trustee shall not be liable with respect to
          any action taken or omitted to be taken by it in good faith in
          accordance with the direction of the Holders of not less than a
          Majority in Liquidation Amount of the Securities relating to the time,
          method and place of conducting any proceeding for any remedy available
          to the Guarantee Trustee, or exercising any trust or power conferred
          upon the Guarantee Trustee under this Guarantee Agreement; and

               (iv)  no provision of this Guarantee Agreement shall require the
          Guarantee Trustee to expend or risk its own funds or otherwise incur
          personal financial liability in the performance of any of its duties
          or in the exercise of any of its rights or powers if the Guarantee
          Trustee shall have reasonable grounds for believing that the repayment
          of such funds or liability is not assured to it under the terms of
          this Guarantee Agreement or indemnity satisfactory to it against such
          risk or liability is not reasonably assured it.

          SECTION 3.02.  Certain Rights of Guarantee Trustee. (a) Subject to the
                         -----------------------------------
provisions of Section 3.01:

                  (i)    The Guarantee Trustee may conclusively rely and shall
          be fully protected in acting or refraining from acting upon any
          resolution, certificate, statement, instrument, opinion, report,
          notice, request, direction, consent, order, bond, debenture, note,
          other evidence of indebtedness or other paper or document reasonably
          believed by it to be genuine and to have been signed, sent or
          presented by the proper party or parties.

                  (ii)   Any direction or act of the Guarantor contemplated by
          this Guarantee Agreement shall be sufficiently evidenced by an
          Officers' Certificate unless otherwise prescribed herein.

                  (iii)  Whenever, in the administration of this Guarantee
          Agreement, the Guarantee Trustee shall deem it desirable that a matter
          be proved or established before taking, suffering or omitting to take
          any action hereunder, the Guarantee 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 from the Guarantee Trustee, shall
          be promptly delivered by the Guarantor.

                  (iv)   The Guarantee Trustee may consult with legal counsel,
          and the advice or written opinion of such legal counsel with respect
          to legal matters shall be full and complete authorization and
          protection in respect of any action taken, suffered or omitted to be
          taken by it hereunder in good faith and in accordance with such advice
          or opinion.

                                       7
<PAGE>

          Such legal counsel may be legal counsel to the Guarantor or any of its
          Affiliates and may be one of its employees. The Guarantee Trustee
          shall have the right at any time to seek instructions concerning the
          administration of this Guarantee Agreement from any court of competent
          jurisdiction.

                  (v)    The Guarantee Trustee shall be under no obligation to
          exercise any of the rights or powers vested in it by this Guarantee
          Agreement at the request or direction of any Holder, unless such
          Holder shall have provided to the Guarantee Trustee such security and
                            --------
          indemnity reasonably satisfactory to it, against the costs, expenses
          (including attorneys' fees and expenses) and liabilities that might be
          incurred by it in complying with such request or direction, including
          such reasonable advances as may be requested by the Guarantee Trustee;
          provided, that nothing contained in this Section 3.02(a)(v) shall be
          taken to relieve the Guarantee Trustee, upon the occurrence of an
          Event of Default, of its obligation to exercise the rights and powers
          vested in it by this Guarantee Agreement.

                  (vi)   The Guarantee 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,
          direction, consent, order, bond, debenture, note, other evidence of
          indebtedness or other paper or document, but the Guarantee Trustee, in
          its discretion, may make such further inquiry or investigation into
          such facts or matters as it may see fit.

                  (vii)  The Guarantee 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 Guarantee Trustee shall
          not be responsible for any misconduct or negligence on the part of any
          such agent or attorney appointed with due care by it hereunder.

                  (viii) Whenever in the administration of this Guarantee
          Agreement the Guarantee Trustee shall deem it desirable to receive
          instructions with respect to enforcing any remedy or right or taking
          any other action hereunder, the Guarantee Trustee (A) may request
          instructions from the Holders, (B) may refrain from enforcing such
          remedy or right or taking such other action until such instructions
          are received and (C) shall be fully protected in acting m accordance
          with such instructions.

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

                  (b)    No provision of this Guarantee Agreement shall be
deemed to impose any duty or obligation on the Guarantee 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
Guarantee Trustee shall be unqualified or incompetent in accordance with
applicable law, to perform any such act or acts or to exercise any such right,
power, duty or obligation. No permissive power or authority available to the
Guarantee Trustee shall be construed to be a duty to act in accordance with such
power and authority.

                                       8
<PAGE>

          SECTION 3.03. Indemnity. The Guarantor agrees to indemnify the
                        ---------
Guarantee Trustee, and to hold it harmless against, any loss, liability or
expense including taxes (other than taxes based upon, measured by or determined
by the income of the Guarantee Trustee) incurred without negligence or bad faith
on the part of the Guarantee Trustee, arising out of or in connection with the
acceptance or administration of this Guarantee Agreement, including the costs
and expenses of defending itself against any claim or liability in connection
with the exercise or performance of any of its powers or duties hereunder. The
Guarantee Trustee will not claim or exact any lien or charge on any Guarantee
Payments as a result of any amount due to it under this Guarantee Agreement.
This indemnity shall survive the termination of this Guarantee Agreement or the
resignation or removal of the Guarantee Trustee.

          SECTION 3.04. Expenses. The Guarantor, as obligor on the Junior
                        --------
Subordinated Debt Securities, shall from time to time reimburse the Guarantee
Trustee for such expenses and costs incurred in connection with the performance
of its duties hereunder as shall be agreed to in writing from time to time by
the Guarantor and the Guarantee Trustee:

                                  ARTICLE IV

                               Guarantee Trustee
                               -----------------

          SECTION  4.01. Guarantee Trustee: Eligibility. (a) There shall at all
                         ------------------------------
times be a Guarantee Trustee that shall:

                  (i)    not be an Affiliate of the Guarantor; and

                  (ii)   be a Person that is eligible pursuant to the Trust
         Indenture Act to act as such and has a combined capital and surplus of
         at least $50,000,000, and shall be a corporation meeting the
         requirements of Section 310(c) of the Trust Indenture Act. If such
         corporation publishes reports of condition at least annually, pursuant
         to law or to the requirements of the supervising or examining
         authority, then, for the purposes of this Section and to the extent
         permitted by the Trust Indenture Act, the combined capital and surplus
         of such corporation shall be deemed to be its combined capital and
         surplus as set forth in its most recent report of condition so
         published.

                  (b)    If at any time the Guarantee Trustee shall cease to be
eligible to so act under Section 4.10(a), the Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section 4.02(c).

                  (c)    If the Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Guarantee Trustee and Guarantor shall in all respects comply
with the provisions of Section 310(b) of the Trust Indenture Act.

                                       9
<PAGE>

          SECTION 4.02. Appointment, Removal and Resignation of the Guarantee
                        -----------------------------------------------------
Trustee. (a) Subject to Section 4.02(b), in the absence of the existence of an
-------
Event of Default, the Guarantee Trustee may be appointed or removed without
cause at any time by the Guarantor.

               (b)  The Guarantee Trustee shall not be removed until a Successor
Guarantee Trustee has been appointed and has accepted such appointment by
written instrument executed by such Successor Guarantee Trustee and delivered to
the Guarantor.

               (c)  The Guarantee Trustee appointed hereunder shall hold office
until a Successor Guarantee Trustee shall have been appointed or until its
removal or resignation. The Guarantee Trustee may resign from office (without
need for prior or subsequent accounting) by an instrument in writing executed by
the Guarantee Trustee and delivered to the Guarantor, which resignation shall
not take effect until a Successor Guarantee Trustee has been appointed and has
accepted such appointment by instrument in writing executed by such Successor
Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee
Trustee.

               (d)  If no Successor Guarantee Trustee shall have been appointed
and accepted appointment as provided in this Section 4.02 within 30 days after
delivery to the Guarantor of an instrument of resignation, the resigning
Guarantee Trustee may petition, at the expense of the Guarantor, any court of
competent jurisdiction for appointment of a Successor Guarantee Trustee. Such
court may thereupon, after prescribing such notice, if any, as it may deem
proper, appoint a Successor Guarantee Trustee.

                                   ARTICLE V

                                   Guarantee
                                   ---------

          SECTION 5.01. Guarantee. The Guarantor irrevocably and unconditionally
                        ---------
agrees to pay in full to the Holders the Guarantee Payments (without duplication
of amounts theretofore paid by or on behalf of the Issuer), as and when due,
regardless of any defense, right of set-off or counterclaim that the issuer may
have or assert. The Guarantor's obligation to make a Guarantee Payment may be
satisfied by direct payment of the required amounts by the Guarantor to the
Holders or by causing the Issuer to pay such amounts to the Holders. The
Guarantor shall give written notice to the Guarantee Trustee as promptly as
practicable in the event it makes any direct payment hereunder.

          SECTION 5.02. Waiver of Notice and Demand. The Guarantor hereby waives
                        ---------------------------
notice of acceptance of the Guarantee Agreement and of any liability to which it
applies or may apply, presentment, demand for payment, any right to require a
proceeding first against the Guarantee Trustee, Issuer or any other Person
before proceeding against the Guarantor, protest, notice of nonpayment, notice
of dishonor, notice of redemption and all other notices and demands.

          SECTION 5.03. Obligations Not Affected. The obligations, covenants,
                        ------------------------
agreements and duties of the Guarantor under this Guarantee Agreement shall in
no way be affected or impaired by reason of the happening from time to time of
any of the following:

                                      10
<PAGE>

               (a)  the release or waiver, by operation of law or otherwise, of
         the performance or observance by the Issuer of any express or implied
         agreement, covenant, term or condition relating to the Trust Securities
         to be performed or observed by the Issuer;

               (b)  the extension of time for the payment by the Issuer of all
         or any portion of the Distributions (other than any extension of time
         for payment of Distributions that results from the extension of any
         interest payment period on the Junior Subordinated Debt Securities as
         so provided in the Indenture), Redemption Price, Liquidation
         Distribution or any other sums payable under the terms of the Trust
         Securities or the extension of time for the performance of any other
         obligation arising under, out of or in connection with the Trust
         Securities;

               (c)  any failure, omission, delay or lack of diligence on the
         part of the Holders to enforce, assert or exercise any right,
         privilege, power or remedy conferred on the Holders pursuant to the
         terms of the Trust Securities, or any action on the part of the Issuer
         granting indulgence or extension of any kind;

               (d)  the voluntary or involuntary liquidation, dissolution, sale
         of any collateral, receivership, insolvency, bankruptcy, assignment for
         the benefit of creditors, reorganization, arrangement, composition or
         readjustment of debt of, or other similar proceedings affecting, the
         Issuer or any of the assets of the Issuer;

               (e)  any invalidity of, or defect or deficiency in, the Trust
         Securities;

               (f)  the settlement or compromise of any obligation guaranteed
         hereby or hereby incurred; or

               (g)  any other circumstance whatsoever that might otherwise
         constitute a legal or equitable discharge or defense of a guarantor, it
         being the intent of this Section 5.03 that the obligations of the
         Guarantor hereunder shall be absolute and unconditional under any and
         all circumstances.

               There shall be no obligation of the Holders to give notice to, or
obtain the consent of, the Guarantor with respect to the happening of any of the
foregoing.

          SECTION 5.04. Rights of Holders. The Guarantor expressly acknowledges
                        -----------------
that: (i) this Guarantee Agreement will be deposited with the Guarantee Trustee
to be held for the benefit of the Holders; (ii) the Guarantee Trustee has the
right to enforce this Guarantee Agreement on behalf of the Holders; (iii) the
Holders of a Majority in Liquidation Amount of the Trust Securities have right
to direct the time, method and place of conducting any proceeding for any remedy
available to the Guarantee Trustee in respect of this Guarantee Agreement or
exercising any trust or Power conferred upon the Guarantee Trustee under this
Guarantee Agreement; and (iv) any Holder may institute a legal proceeding
directly, against the Guarantor to enforce its rights under this Guarantee
Agreement, without first instituting a legal proceeding against the Issuer or
any other Person.

                                      11
<PAGE>

          SECTION 5.05. Guarantee of Payment. This Guarantee Agreement creates a
                        --------------------
guarantee of payment and not of collection. This Guarantee Agreement will not be
discharged except by payment of the Guarantee Payments in full (without
duplication of amounts theretofore paid by the Issuer) or upon distribution of
Junior Subordinated Debt Securities to Holders as provided in the Declaration of
Trust.

          SECTION 5.06. Subrogation. The Guarantor shall be subrogated to all
                        -----------
(if any) rights of the Holders against the Issuer in respect of any amounts paid
to the Holders by the Guarantor under this Guarantee Agreement and shall have
the right to waive payment by the Issuer pursuant to Section 5.01; provided,
                                                                   --------
however, that the Guarantor shall not (except to the extent required by
-------
mandatory provisions of law) be entitled to enforce or exercise any rights that
it may acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Guarantee Agreement,
if at the time of any such payment, any amounts are due and unpaid under this
Guarantee Agreement. If any amount shall be paid to the Guarantor in violation
of the preceding sentence, the Guarantor agrees to hold such amount in trust for
the Holders and to pay over such amount to the Holders.

          SECTION 5.07. Independent Obligations. The Guarantor acknowledges that
                        -----------------------
its obligations hereunder are independent of the obligations of the Issuer with
respect to the Trust Securities and that the Guarantor shall be liable as
principal and as debtor hereunder to make Guarantee Payments pursuant to the
terms of this Guarantee Agreement notwithstanding the occurrence of any event
referred to in subsections (a) through (g), inclusive, of Section 5.03.

                                  ARTICLE VI

                          Covenants and Subordination
                          ---------------------------

          SECTION 6.01. Subordination. This Guarantee Agreement will constitute
                        -------------
an unsecured obligation of the Guarantor and will rank subordinate and junior in
right of payment to all Senior Debt of the Guarantor, to the same extent and in
the same manner that the Junior Subordinated Debt Securities are subordinated to
Senior Debt pursuant to the Indenture, it being understood that the terms of
Article XIII of the Indenture shall apply to the obligations of the Guarantor
under this Guarantee Agreement as if (x) such Article XIII were set forth herein
in full and (y) such obligations were substituted for the term "Securities"
appearing in such Article XIII.

          SECTION 6.02. Pari Passu Guaranty. This Guarantee Agreement shall rank
                        -------------------
pari passu with any similar guarantee agreements issued by the Guarantor on
---- -----
behalf of the holders of trust securities issued by a trust created by the
Guaranty similar to Commonwealth Bankshares Capital Trust I.

                                      12
<PAGE>

                                  ARTICLE VII

                                  Termination
                                  -----------

          SECTION 7.01. Termination. This Guarantee Agreement shall terminate
                        -----------
and be of no further force and effect upon (i) full payment of the Redemption
Price of all Trust Securities, (ii) the distribution of Junior Subordinated Debt
Securities to the Holders in exchange for all of the Trust Securities or (iii)
full payment of the amounts payable in accordance with the Declaration or Trust
upon liquidation of the Issuer. Notwithstanding the foregoing, this Guarantee
Agreement will continue to be effective or will be reinstated, as the case may
be, if at any time any Holder must repay any sums paid with respect to Trust
Securities or this Guarantee Agreement.

                                 ARTICLE VIII

                                 Miscellaneous
                                 -------------

          SECTION 8.01. Successors and Assigns. All guarantees and agreements
                        ----------------------
contained in this Guarantee Agreement shall bind the successors, assigns,
receivers, trustees and representatives of Guarantor and shall inure to the
benefit of the Holders then outstanding. Except in connection with a
consolidation, merger sale involving the Guarantor that is permitted under
Article VIII of the Indenture and pursuant to which the assignee agrees in
writing to perform the Guarantor's obligations hereunder, the Guarantor shall
not assign its obligations hereunder.

          SECTION 8.02. Amendments. Except with respect to any changes that do
                        ----------
not adversely affect the rights of the Holders in any material respect (in which
case no consent of the Holders will be required), this Guarantee Agreement may
only be amended with the prior approval of the Holders of not less than a
Majority in Liquidation Amount of the Securities. The provisions of Article VI
of the Declaration of Trust concerning meetings of the Holders shall apply to
the giving of such approval.

          SECTION 8.03. Notices. Any notice, request or other communication
                        -------
required or permitted to be given hereunder shall be in writing, duly signed by
the party giving such notice, and delivered, telecopied (confirmed by delivery
of the original) or mailed by first class mail as follows:

               (a)  if given to the Guarantor, to the address set forth below or
such other address, facsimile number or to the attention of such other Person as
the Guarantor may give notice to the Holders:

                         COMMONWEALTH BANKSHARES, INC.
                         403 Boush Street
                         Norfolk, VA 23510
                         Facsimile No.: (757) 446-6929

                                      13
<PAGE>

               (b)  if given to the Issuer, in care of the Guarantee Trustee, at
the Issuer's (and the Guarantee Trustee's) address set forth below or such other
address as the Guarantee Trustee on behalf of the Issuer may give notice to the
Holders:

                    COMMONWEALTH BANKSHARES CAPITAL TRUST I
                    c/o Commonwealth Bankshares, Inc.
                    403 Boush Street
                    Norfolk, VA 23510
                    Facsimile No.: (757) 446-6929

                 with a copy to:

                    WILMINGTON TRUST COMPANY
                    1100 N. Market Street
                    Attention: Corporate Trust Administration
                    Wilmington, Delaware 19890
                    Facsimile No.: (302) 651-8882

               (c)  if given to the Guarantee Trustee:

                    WILMINGTON TRUST COMPANY 1
                    100 N. Market Street
                    Attention: Corporate Trust Administration
                    Wilmington, Delaware 19890
                    Facsimile No.: (302) 651-8882

               (d)  if given to any Holder, at the address set forth in the
books and records of the Issuer.

          All notices hereunder 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 8.04. Benefit. This Guarantee Agreement is solely for the
                        -------
benefit of the Holders and is not separately transferable from the Trust
Securities.

          SECTION 8.05. Interpretation. In this Guarantee Agreement, unless the
                        --------------
context otherwise requires:

               (a)  a term defined anywhere in this Guarantee Agreement has the
same meaning throughout;

                                      14
<PAGE>

               (b)  all references to "the Guarantee Agreement" or "this
Guarantee Agreement" are to this Guarantee Agreement as modified, supplemented
or amended from time to time;

               (c)  all references in this Guarantee Agreement to Articles and
Sections are to Articles and Sections of this Guarantee Agreement unless
otherwise specified;

               (d)  a term defined in the Trust Indenture Act has the same
meaning when used in this Guarantee Agreement unless otherwise defined in this
Guarantee Agreement or unless the context otherwise requires;

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

               (f)  the masculine, feminine or neuter genders used herein shall
include the masculine, feminine and neuter genders.

          SECTION 8.06. Governing Law. THIS GUARANTEE AGREEMENT SHALL BE
                        -------------
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
COMMONWEALTH OF VIRGINIA WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES
THEREOF.

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

          THIS GUARANTEE AGREEMENT is executed as of the day and year first
above written.

                               WILMINGTON TRUST COMPANY, as
                               Guarantee Trustee


                               By: ____________________________________________
                               Name:    Donald G. MacKelcan
                               Title:   Assistant Vice President



                               COMMONWEALTH BANKSHARES, INC., as Guarantor


                               By: ____________________________________________
                               Name:    Edward J. Woodard, Jr.
                               Title:   President and Chief Executive Officer

                                      15