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                     CAPITAL SECURITIES GUARANTEE AGREEMENT

                            ORION CAPITAL CORPORATION

                          DATED AS OF FEBRUARY 5, 1998

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                                TABLE OF CONTENTS

                                                                            Page
ARTICLE I.   DEFINITIONS AND INTERPRETATION

        SECTION 1.1.         Definitions and Interpretation....................1

ARTICLE II.  TRUST INDENTURE ACT

        SECTION 2.1.         Trust Indenture Act; Application................. 5
        SECTION 2.2.         List of Holders of Securities.................... 5
        SECTION 2.3.         Reports by the Capital Securities
                               Guarantee Trustee...............................6
        SECTION 2.4.         Periodic Reports to Capital
                               Securities Guarantee Trustee................... 6
        SECTION 2.5.         Evidence of Compliance with
                               Conditions Precedent............................6
        SECTION 2.6.         Events of Default; Waiver........................ 6
        SECTION 2.7.         Event of Default; Notice......................... 7
        SECTION 2.8.         Conflicting Interests............................ 8

ARTICLE III.  POWERS, DUTIES AND RIGHTS OF THE CAPITAL
                SECURITIES GUARANTEE TRUSTEE

        SECTION 3.1.         Powers and Duties of the Capital
                               Securities Guarantee Trustee................... 7
        SECTION 3.2.         Certain Rights of Capital
                               Securities Guarantee Trustee....................9
        SECTION 3.3.         Not Responsible for Recitals or Issuance
                               of Capital Securities Guarantee................11

ARTICLE IV.   CAPITAL SECURITIES GUARANTEE TRUSTEE

        SECTION 4.1.         Capital Securities Guarantee Trustee;
                               Eligibility....................................11
        SECTION 4.2.         Appointment, Removal and Resignation
                               of Capital Securities Guarantee Trustee........12

ARTICLE V.   GUARANTEE

        SECTION 5.1.         Guarantee........................................13
        SECTION 5.2.         Waiver of Notice and Demand......................13
        SECTION 5.3.         Obligations Not Affected.........................13
        SECTION 5.4.         Rights of Holders................................14
        SECTION 5.5.         Guarantee of Payment.............................15
        SECTION 5.6.         Subrogation......................................15
        SECTION 5.7.         Independent Obligations..........................15

ARTICLE VI.  LIMITATION OF TRANSACTION; SUBORDINATION

        SECTION 6.1.         Limitation of Transactions.......................15
        SECTION 6.2.         Ranking..........................................16

ARTICLE VII. TERMINATION

        SECTION 7.1.         Termination......................................16

ARTICLE VIII. INDEMNIFICATION

        SECTION 8.1.         Exculpation......................................17
        SECTION 8.2.         Indemnification..................................17

ARTICLE IX.  MISCELLANEOUS

        SECTION 9.1.         Successors and Assigns...........................18
        SECTION 9.2.         Amendments.......................................18
        SECTION 9.3.         Notices..........................................18
        SECTION 9.4.         Exchange Offer...................................20
        SECTION 9.5.         Benefit..........................................20
        SECTION 9.6.         Governing Law....................................20


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                     CAPITAL SECURITIES GUARANTEE AGREEMENT

               This  CAPITAL  SECURITIES   GUARANTEE   AGREEMENT  (the  "Capital
Securities Guarantee"), dated as of February 5, 1998, delivered by Orion Capital
Corporation, a Delaware corporation (the "Guarantor"), and The Bank of New York,
a New York banking  corporation,  as trustee (the "Capital Securities  Guarantee
Trustee"),  for the benefit of the Holders (as defined herein) from time to time
of the Capital  Securities  (as  defined  herein) of Orion  Capital  Trust II, a
Delaware statutory business trust (the "Issuer").

               WHEREAS, pursuant to an Amended and Restated Declaration of Trust
(the "Declaration"), dated as of February 5, 1998, the Guarantor as Sponsor, and
the holders from time to time of undivided beneficial interests in the assets of
the Issuer, the Issuer is issuing on the date hereof 125,000 capital securities,
having an aggregate liquidation amount of $125,000,000,  such capital securities
being  designated as the 7.701% Capital  Securities  (collectively  the "Capital
Securities");

               WHEREAS,  as  incentive  for the Holders to purchase  the Capital
Securities,  the Guarantor desires  irrevocably and unconditionally to agree, to
the extent set forth in this Capital Securities Guarantee, to pay to the Holders
of the  Capital  Securities  the  Guarantee  Payments  (as defined  below).  The
Guarantor  agrees to make certain other payments on the terms and conditions set
forth herein; and

               WHEREAS,  the Guarantor is executing  and  delivering a guarantee
agreement (the "Common  Securities  Guarantee"),  with  substantially  identical
terms to this Capital  Securities  Guarantee,  for the benefit of the holders of
the Common  Securities (as defined  herein),  except that if an Event of Default
(as defined in the  Declaration)  has occurred and is continuing,  the rights of
holders of the Common Securities to receive Guarantee  Payments under the Common
Securities  Guarantee  are  subordinate  to the  rights of  holders  of  Capital
Securities to receive Guaranty Payments under this Capital Securities Guarantee.

               NOW, THEREFORE,  in consideration of the purchase by each Holder,
which purchase the Guarantor  hereby  acknowledges  shall benefit the Guarantor,
the Guarantor  executes and delivers this Capital  Securities  Guarantee for the
benefit of the Holders.

                                    ARTICLE I

                         DEFINITIONS AND INTERPRETATION

SECTION 1.1  DEFINITIONS AND INTERPRETATION

               In  this  Capital  Securities   Guarantee,   unless  the  context
otherwise requires:

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

               (b) Terms defined in the  Declaration as at the date of execution
        of this Capital Securities  Guarantee have the same meaning when used in
        this  Capital  Securities  Guarantee  unless  otherwise  defined in this
        Capital Securities Guarantee;

               (c) a term defined anywhere in this Capital Securities  Guarantee
        has the same meaning throughout;

               (d) all references to "the Capital Securities Guarantee" or "this
        Capital Securities  Guarantee" are to this Capital Securities  Guarantee
        as modified, supplemented or amended from time to time;

               (e)  all  references  in this  Capital  Securities  Guarantee  to
        Articles  and  Sections  are to Articles  and  Sections of this  Capital
        Securities Guarantee, unless otherwise specified;

               (f) a term  defined  in the  Trust  Indenture  Act has  the  same
        meaning when used in this Capital Securities Guarantee, unless otherwise
        defined in this  Capital  Securities  Guarantee  or unless  the  context
        otherwise requires; and

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

               "AFFILIATE" shall mean, with respect to a specified  Person,  (a)
any Person  directly or indirectly  owning,  controlling or holding the power to
vote  20% or  more of the  outstanding  voting  securities  or  other  ownership
interests  of the  specified  Person,  (b)  any  Person  20% or  more  of  whose
outstanding  voting  securities  or other  ownership  interests  are directly or
indirectly owned, controlled or held with power to vote by the specified Person,
(c) any Person  directly  or  indirectly  controlling,  controlled  by, or under
common  control with the specified  Person,  and (d) a partnership  in which the
specified  Person is a  general  partner;  provided,  however,  that  Intercargo
Corporation  shall not be  deemed to be an  Affiliate  of the  Company  or Orion
Capital Trust II.

               "BUSINESS  DAY" means any day other than a Saturday  or a Sunday,
or a day on which banking institutions in The City of New York are authorized or
required by law or executive order to close.

               "CAPITAL  SECURITIES  GUARANTEE  TRUSTEE"  means  The Bank of New
York,  a New York  banking  corporation,  until a Successor  Capital  Securities
Guarantee Trustee has been appointed and has accepted such appointment  pursuant
to the terms of this Capital Securities Guarantee and thereafter means each such
Successor Capital Securities Guarantee Trustee.

               "COMMON  SECURITIES"  means the  securities  representing  common
undivided beneficial interests in the assets of the Issuer.

               "CORPORATE   TRUST  OFFICE"  means  the  office  of  the  Capital
Securities  Guarantee  Trustee  at which the  corporate  trust  business  of the
Capital  Securities   Guarantee  Trustee  shall,  at  any  particular  time,  be
principally  administered,  which  office  at the  date  of  execution  of  this
Agreement is located at The Bank of New York, 101 Barclay Street, Floor 21W, New
York, New York 10286.

               "COVERED  PERSON" means any Holder or beneficial owner of Capital
Securities.

               "DEBENTURES"  means the series of subordinated debt securities of
the Guarantor  designated  the 7.701% Junior  Subordinated  Deferrable  Interest
Debentures  due April 15, 2028 held by the  Property  Trustee (as defined in the
Declaration) of the Issuer.

               "EVENT OF DEFAULT" means a default by the Guarantor on any of its
payments or other obligations under this Capital Securities Guarantee.

               "GUARANTEE    PAYMENTS"   means   the   following   payments   or
distributions,  without duplication,  with respect to the Capital Securities, to
the  extent  not paid or made by the  Issuer:  (i) any  accumulated  and  unpaid
Distributions  (as defined in the  Declaration)  that are required to be paid on
such  Capital  Securities  to the extent  the  Issuer has funds on hand  legally
available  therefor  at such time,  (ii) the  redemption  price,  including  all
accumulated and unpaid  Distributions to the date of redemption (the "Redemption
Price") to the extent the Issuer has funds on hand legally available therefor at
such time, with respect to any Capital  Securities  called for redemption by the
Issuer, and (iii) upon a voluntary or involuntary  dissolution or liquidation of
the Issuer (other than in connection with the  distribution of Debentures to the
Holders in exchange for Capital Securities as provided in the Declaration),  the
lesser of (a) the aggregate of the  liquidation  amount and all  accumulated and
unpaid  Distributions on the Capital  Securities to the date of payment,  to the
extent the  Issuer has funds on hand  legally  available  therefor,  and (b) the
amount of assets of the Issuer  remaining  available for distribution to Holders
in  liquidation  of the  Issuer.  If an  Event of  Default  (as  defined  in the
Indenture)  has occurred and is  continuing,  no  Guarantee  Payments  under the
Common Securities  Guarantee with respect to the Common Securities shall be made
until the  Holders of  Capital  Securities  shall be paid in full the  Guarantee
Payments to which they are entitled under this Capital Securities Guarantee.

               "HOLDER" means any holder, as registered on the books and records
of  the  Issuer,  of  any  Capital  Securities;   provided,  however,  that,  in
determining  whether  the  holders  of  the  requisite   percentage  of  Capital
Securities have given any request, notice, consent or waiver hereunder, "Holder"
shall not include the Guarantor or any Affiliate of the Guarantor.

               "INDEMNIFIED  PERSON"  means  the  Capital  Securities  Guarantee
Trustee,  any  Affiliate of the Capital  Securities  Guarantee  Trustee,  or any
officers,    directors,    shareholders,     members,    partners,    employees,
representatives,  nominees,  custodians  or  agents  of the  Capital  Securities
Guarantee Trustee.

               "INDENTURE"  means the  Indenture,  dated as of February 5, 1998,
between the  Guarantor  (the  "Debenture  Issuer") and The Bank of New York,  as
trustee,  pursuant  to which the  Debentures  are to be  issued to the  Property
Trustee.

               "MAJORITY IN LIQUIDATION AMOUNT OF THE CAPITAL SECURITIES" means,
except as provided by the Trust  Indenture  Act, a vote by  Holder(s) of Capital
Securities,  voting  separately  as a class,  of more than 50% of the  aggregate
liquidation   amount  (including  the  stated  amount  that  would  be  paid  on
redemption,  liquidation or otherwise, plus accumulated and unpaid Distributions
to the date upon which the voting  percentages  are  determined)  of all Capital
Securities.

               "OFFICERS'  CERTIFICATE"  means,  with  respect to any person,  a
certificate  signed  by the  Chairman,  a Vice  Chairman,  the  Chief  Executive
Officer, the President, a Vice President (however designated),  the Secretary or
an Assistant  Secretary of the Guarantor.  Any Officers'  Certificate  delivered
with respect to  compliance  with a condition  or covenant  provided for in this
Capital Securities Guarantee 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
        Certificate;

               (c) a statement that each such 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  such
        officer, such condition or covenant has been complied with.

               "OTHER   DEBENTURES"   means  only  those   junior   subordinated
debentures  issued by the  Guarantor  from time to time and sold to trusts to be
established  by the  Guarantor  (if any),  which are in each case similar to the
Issuer.

               "OTHER  GUARANTEES"  means any  guarantee  now or hereafter to be
entered  into by the  Guarantor in respect to any capital  securities  or common
securities of any other trust  similar to the Issuer,  or of any trustee of such
trust, or of a partnership or other entity affiliated with the Guarantor that is
a financing vehicle of the Guarantor.

               "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.

               "REGISTRATION  RIGHTS  AGREEMENT" means the  Registration  Rights
Agreement,  dated as of February 5, 1998, by and among the Guarantor, the Issuer
and the  Initial  Purchasers  named  therein as such  agreement  may be amended,
modified or supplemented from time to time.

               "RESPONSIBLE  OFFICER"  when used  with  respect  to the  Capital
Securities  Guarantee  Trustee,  means the chairman or any vice  chairman of the
board of directors, the chairman or any vice chairman of the executive committee
of the board of directors,  the chairman of the trust committee,  the president,
any vice  president,  any assistant vice president,  the cashier,  any assistant
cashier, the secretary,  any assistant secretary,  the treasurer,  any assistant
treasurer,  any trust officer or assistant trust officer,  the controller or any
assistant  controller or any other  officer or assistant  officer of the Capital
Securities  Guarantee 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 his  knowledge  of and  familiarity  with  the  particular
subject.

               "SUCCESSOR   CAPITAL   SECURITIES   GUARANTEE  TRUSTEE"  means  a
successor Capital Securities  Guarantee Trustee possessing the qualifications to
act as Capital Securities Guarantee Trustee under Section 4.1.

            "TRUST INDENTURE ACT"  means the  Trust Indenture Act of 1939, as 
amended.


                                   ARTICLE II

                               TRUST INDENTURE ACT

SECTION 2.1  TRUST INDENTURE ACT; APPLICATION

               This Capital Securities Guarantee is subject to the provisions of
the Trust Indenture Act that are required to be part of this Capital  Securities
Guarantee and shall, to the extent  applicable,  be governed by such provisions;
and if and to the extent that any provision of this Capital Securities Guarantee
limits,  qualifies or conflicts  with the duties  imposed by Section 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control.

SECTION 2.2  LIST OF HOLDERS OF SECURITIES

               (a) The Guarantor shall provide the Capital Securities  Guarantee
Trustee  (unless the  Capital  Securities  Guarantee  Trustee is  otherwise  the
registrar of the Capital  Securities)  with a list,  in such form as the Capital
Securities Guarantee Trustee may reasonably require, of the names and addressees
of the Holders of the Capital  Securities  ("List of  Holders") as of such date,
(i) within one Business  Day after each record date,  and (ii) at any other time
within 30 days of receipt by the  Guarantor  of a written  request for a List of
Holders as of a date no more than 14 days  before  such List of Holders is given
to the Capital Securities Guarantee Trustee;  provided, that the Guarantor shall
not be obligated to provide such List of Holders at any time the List of Holders
does not  differ  from the most  recent  List of  Holders  given to the  Capital
Securities Guarantee Trustee by the Guarantor.  The Capital Securities Guarantee
Trustee may destroy any List of Holders  previously  given to it on receipt of a
new List of Holders.

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

SECTION 2.3  REPORTS BY THE CAPITAL SECURITIES GUARANTEE TRUSTEE

                On or before  February 4 of each year,  commencing  February  4,
1999, the Capital  Securities  Guarantee Trustee shall provide to the Holders of
the Capital  Securities such reports as are required by Section 313 of the Trust
Indenture Act, if any, in the form and in the manner  provided by Section 313 of
the Trust  Indenture Act. The Capital  Securities  Guarantee  Trustee shall also
comply with the requirements of Section 313(d) of the Trust Indenture Act.

SECTION 2.4  PERIODIC REPORTS TO CAPITAL SECURITIES GUARANTEE TRUSTEE

               The Guarantor shall provide to the Capital  Securities  Guarantee
Trustee such  documents,  reports and information as required by Section 314 (if
any)  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.  Delivery  of such  reports,  information  and
documents  to the  Capital  Securities  Guarantee  Trustee is for  informational
purposes only and the Capital  Securities  Guarantee  Trustee's  receipt of such
shall not constitute constructive notice of any information contained therein or
determinable  from  information  contained  therein,  including the  Guarantor's
compliance  with  any of  its  covenants  hereunder  (as to  which  the  Capital
Securities  Guarantee  Trustee is  entitled  to rely  exclusively  on  Officers'
Certificates).

SECTION 2.5  EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT

               The Guarantor shall provide to the Capital  Securities  Guarantee
Trustee such  evidence of  compliance  with any  conditions  precedent,  if any,
provided  for in this  Capital  Securities  Guarantee  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 an officer pursuant to Section  314(c)(1) may
be given in the form of an Officers' Certificate.

SECTION 2.6  EVENTS OF DEFAULT; WAIVER

               The  Holders  of a  Majority  in  Liquidation  Amount of  Capital
Securities  may,  by  vote,  on  behalf  of the  Holders  of all of the  Capital
Securities,  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
Capital Securities Guarantee,  but no such waiver shall extend to any subsequent
or other default or Event of Default or impair any right consequent thereon.

SECTION 2.7  EVENT OF DEFAULT; NOTICE

               (a) The Capital  Securities  Guarantee  Trustee shall,  within 90
days after the  occurrence of a default with respect to this Capital  Securities
Guarantee,  mail by first class postage  prepaid,  to all Holders of the Capital
Securities,  notices of all defaults actually known to a Responsible  Officer of
the Capital Securities  Guarantee Trustee,  unless such defaults have been cured
before the giving of such notice,  provided, that, except in the case of default
in the  payment of any  Guarantee  Payment,  the  Capital  Securities  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 Responsible  Officers of the Capital Securities Guarantee Trustee in good
faith  determines that the withholding of such notice is in the interests of the
holders of the Capital Securities.

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

SECTION 2.8  CONFLICTING INTERESTS

               The Declaration  shall be deemed to be specifically  described in
this Capital  Securities  Guarantee  for the purposes of clause (i) of the first
proviso contained in Section 310(b) of the Trust Indenture Act.


                                   ARTICLE III

                        POWERS, DUTIES AND RIGHTS OF THE
                      CAPITAL SECURITIES GUARANTEE TRUSTEE

SECTION 3.1  POWERS AND DUTIES OF THE CAPITAL SECURITIES GUARANTEE TRUSTEE

               (a)  This  Capital  Securities  Guarantee  shall  be  held by the
Capital  Securities  Guarantee  Trustee for the benefit of the Holders,  and the
Capital Securities  Guarantee Trustee shall not transfer this Capital Securities
Guarantee to any Person except a Holder exercising his or her rights pursuant to
Section  5.4(b) or to a Successor  Capital  Securities  Guarantee  Trustee  upon
acceptance  by  such  Successor  Capital  Securities  Guarantee  Trustee  of its
appointment to act as Successor Capital Securities Guarantee Trustee. The right,
title  and  interest  of  the  Capital   Securities   Guarantee   Trustee  shall
automatically  vest in any Successor Capital Securities  Guarantee Trustee,  and
such vesting and succession of title shall be effective whether or not documents
have been executed and delivered  pursuant to the  appointment of such Successor
Capital Securities Guarantee Trustee.

               (b) If an  Event  of  Default  actually  known  to a  Responsible
Officer  of  the  Capital  Securities  Guarantee  Trustee  has  occurred  and is
continuing,  the Capital Securities Guarantee Trustee shall enforce this Capital
Securities Guarantee for the benefit of the Holders.

               (c)  The  Capital  Securities   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  Capital  Securities  Guarantee,  and no implied
covenants  shall be read into this  Capital  Securities  Guarantee  against  the
Capital Securities  Guarantee Trustee.  In case an Event of Default has occurred
(that has not been  cured or waived  pursuant  to Section  2.6) and is  actually
known to a Responsible Officer of the Capital Securities  Guarantee Trustee, the
Capital  Securities  Guarantee  Trustee  shall  exercise  such of the rights and
powers  vested  in it by this  Capital  Securities  Guarantee,  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 Capital  Securities  Guarantee  shall be
construed to relieve the Capital Securities Guarantee Trustee from liability for
its own negligent  action,  its own negligent failure to act, or its own 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  Capital
               Securities  Guarantee  Trustee shall be determined  solely by the
               express provisions of this Capital Securities Guarantee,  and the
               Capital  Securities  Guarantee Trustee shall not be liable except
               for  the  performance  of  such  duties  and  obligations  as are
               specifically set forth in this Capital Securities Guarantee,  and
               no  implied  covenants  or  obligations  shall be read  into this
               Capital  Securities  Guarantee  against  the  Capital  Securities
               Guarantee Trustee; and

                             (B) in the  absence of bad faith on the part of the
               Capital  Securities  Guarantee  Trustee,  the Capital  Securities
               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  Capital
               Securities  Guarantee  Trustee and conforming to the requirements
               of this Capital Securities Guarantee; but in the case of any such
               certificates  or  opinions  that  by  any  provision  hereof  are
               specifically  required to be furnished to the Capital  Securities
               Guarantee Trustee, the Capital Securities Guarantee Trustee shall
               be under a duty to examine the same to  determine  whether or not
               they  conform  to the  requirements  of this  Capital  Securities
               Guarantee;

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

                    (iii) the Capital Securities  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 Capital  Securities  relating to the time,
method and place of conducting any  proceeding  for any remedy  available to the
Capital Securities Guarantee Trustee, or exercising any trust or power conferred
upon the Capital  Securities  Guarantee  Trustee  under this Capital  Securities
Guarantee; and

                    (iv) no provision of this Capital Securities Guarantee shall
require the Capital Securities 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  Capital
Securities  Guarantee  Trustee shall have reasonable  grounds for believing that
the repayment of such funds or liability is not  reasonably  assured to it under
the  terms  of  this  Capital  Securities  Guarantee  or  indemnity,  reasonably
satisfactory to the Capital Securities  Guarantee Trustee,  against such risk or
liability is not reasonably assured to it.

SECTION 3.2  CERTAIN RIGHTS OF CAPITAL SECURITIES GUARANTEE TRUSTEE

               (a)    Subject to the provisions of Section 3.1:

                       (i)  The  Capital   Securities   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 Capital Securities Guarantee may be sufficiently evidenced by an
        Officers' Certificate.

                      (iii)  Whenever,  in the  administration  of this  Capital
        Securities  Guarantee,  the Capital  Securities  Guarantee Trustee shall
        deem it desirable that a matter be proved or established  before taking,
        suffering  or omitting  any action  hereunder,  the  Capital  Securities
        Guarantee   Trustee  (unless  other  evidence  is  herein   specifically
        prescribed)  may,  in the  absence  of bad  faith on its  part,  request
        evidence as to such matter from the  Guarantor,  which evidence shall be
        promptly delivered by the Guarantor.

                      (iv) The Capital  Securities  Guarantee Trustee shall have
        no  duty  to  see  to  any  recording,  filing  or  registration  of any
        instrument (or any rerecording, refiling or registration thereof).

                      (v) The Capital  Securities  Guarantee Trustee may consult
        with counsel of its selection, and the advice or opinion of such counsel
        with respect to legal matters  shall be full and complete  authorization
        and protection in respect of any action taken, suffered or omitted by it
        hereunder in good faith and in  accordance  with such advice or opinion.
        Such counsel may be counsel to the  Guarantor  or any of its  Affiliates
        and may include any of its employees.  The Capital Securities  Guarantee
        Trustee shall have the right at any time to seek instructions concerning
        the administration of this Capital  Securities  Guarantee from any court
        of competent jurisdiction.

                      (vi) The Capital  Securities  Guarantee  Trustee  shall be
        under no obligation to exercise any of the rights or powers vested in it
        by this Capital Securities  Guarantee at the request or direction of any
        Holder, unless such Holder shall have provided to the Capital Securities
        Guarantee Trustee such security and indemnity,  reasonably  satisfactory
        to the Capital Securities Guarantee Trustee, against the costs, expenses
        (including  attorneys' fees and expenses and the expenses of the Capital
        Securities  Guarantee  Trustee's  agents,  nominees or  custodians)  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  Capital  Securities  Guarantee  Trustee;   provided  that,  nothing
        contained  in this  Section  3.2(a)(vi)  shall be taken to  relieve  the
        Capital Securities Guarantee Trustee, upon the occurrence of an Event of
        Default,  of its  obligation to exercise the rights and powers vested in
        it by this  Capital  Securities  Guarantee  in the  case of an  Event of
        Default.

                      (vii) The Capital  Securities  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 Capital
        Securities  Guarantee Trustee, in its discretion,  may make such further
        inquiry or investigation into such facts or matters as it may see fit.

                      (viii)  The  Capital  Securities   Guarantee  Trustee  may
        execute  any of the trusts or powers  hereunder  or  perform  any duties
        hereunder either directly or by or through agents, nominees,  custodians
        or attorneys,  and the Capital Securities 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.

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

                      (x)  Whenever  in  the   administration  of  this  Capital
        Securities Guarantee the Capital Securities Guarantee Trustee shall deem
        it desirable  to receive  instructions  with  respect to  enforcing  any
        remedy  or right or taking  any  other  action  hereunder,  the  Capital
        Securities  Guarantee  Trustee  (i) may  request  instructions  from the
        Holders of a Majority in Liquidation  Amount of the Capital  Securities,
        (ii) may  refrain  from  enforcing  such  remedy or right or taking such
        other action until such  instructions  are received,  and (iii) shall be
        protected in  conclusively  relying on or acting in accordance with such
        instructions.

                      (xi) The Capital Securities Guarantee Trustee shall not be
        liable for any action taken,  suffered,  or omitted to be taken by it in
        good faith and reasonably  believed by it to be authorized or within the
        discretion  or  rights  or  powers  conferred  upon it by  this  Capital
        Securities Guarantee.

               (b) No provision of this Capital  Securities  Guarantee  shall be
deemed to impose any duty or  obligation  on the  Capital  Securities  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  Capital  Securities  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 Capital  Securities  Guarantee
Trustee shall be construed to be a duty.

SECTION 3.3  NOT  RESPONSIBLE FOR  RECITALS OR  ISSUANCE  OF  CAPITAL SECURITIES
             GUARANTEE

               The recitals contained in this Capital Securities Guarantee shall
be  taken  as the  statements  of the  Guarantor,  and  the  Capital  Securities
Guarantee Trustee does not assume any responsibility for their correctness.  The
Capital Securities  Guarantee Trustee makes no representation as to the validity
or sufficiency of this Capital Securities Guarantee.


                                   ARTICLE IV

                      CAPITAL SECURITIES GUARANTEE TRUSTEE

SECTION 4.1  CAPITAL SECURITIES GUARANTEE TRUSTEE; ELIGIBILITY

               (a) There  shall at all times be a Capital  Securities  Guarantee
Trustee which shall:

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

                      (ii) be a corporation  organized and doing  business under
        the laws of the  United  States of  America  or any  State or  Territory
        thereof or of the  District  of  Columbia,  or a  corporation  or Person
        permitted  by  the  Securities  and  Exchange  Commission  to  act as an
        institutional  trustee under the Trust Indenture Act,  authorized  under
        such laws to exercise corporate trust powers,  having a combined capital
        and  surplus  of at least 50 million  U.S.  dollars  ($50,000,000),  and
        subject to supervision or examination by Federal, State,  Territorial or
        District of Columbia authority. If such corporation publishes reports of
        condition at least annually,  pursuant to law or to the  requirements of
        the supervising or examining  authority referred to above, then, for the
        purposes of this Section 4.1(a)(ii), 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 Capital Securities Guarantee Trustee shall
cease to be  eligible to so act under  Section  4.1(a),  the Capital  Securities
Guarantee Trust shall  immediately  resign in the manner and with the effect set
out in Section 4.2(c).

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

SECTION 4.2  APPOINTMENT,  REMOVAL  AND  RESIGNATION  OF  CAPITAL   SECURITIES 
             GUARANTEE TRUSTEE

               (a) Subject to Section 4.2(b), the Capital  Securities  Guarantee
Trustee may be appointed or removed  without  cause at any time by the Guarantor
except during an Event or Default.

               (b) The Capital Securities Guarantee Trustee shall not be removed
in accordance with Section 4.2(a) until a Successor Capital Securities Guarantee
Trustee  has  been  appointed  and has  accepted  such  appointment  by  written
instrument executed by such Successor Capital Guarantee Trustee and delivered to
the Guarantor.

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

               (d) If no Successor  Capital  Securities  Guarantee Trustee shall
have been  appointed  and accepted  appointment  as provided in this Section 4.2
within 60 days after  delivery of an instrument of removal or  resignation,  the
Capital Securities Guarantee Trustee resigning or being removed may petition any
court  of  competent   jurisdiction  for  appointment  of  a  Successor  Capital
Securities Guarantee Trustee.  Such court may thereupon,  after prescribing such
notice, if any, as it may deem proper,  appoint a Successor  Capital  Securities
Guarantee Trustee.

               (e) No Capital  Securities  Guarantee Trustee shall be liable for
the acts or  omissions  to act of any  Successor  Capital  Securities  Guarantee
Trustee.

               (f) Upon  termination  of this  Capital  Securities  Guarantee or
removal or resignation of the Capital  Securities  Guarantee Trustee pursuant to
this Section 4.2, the Guarantor  shall pay to the Capital  Securities  Guarantee
Trustee all amounts due to the Capital  Securities  Guarantee Trustee accrued to
the date of such termination, removal or resignation.

                                    ARTICLE V

                                    GUARANTEE

SECTION 5.1  GUARANTEE

               The Guarantor  irrevocably and  unconditionally  agrees to pay in
full to the Holders  the  Guarantee  Payments  (without  duplication  of amounts
theretofore  paid by 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.

SECTION 5.2  WAIVER OF NOTICE AND DEMAND

               The Guarantor  hereby waives notice of acceptance of this Capital
Securities  Guarantee  and of any  liability  to which it  applies or may apply,
presentment, demand for payment, any right to require a proceeding first against
the 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 5.3  OBLIGATIONS NOT AFFECTED

               (a) The  obligations,  covenants,  agreements  and  duties of the
Guarantor under this Capital Securities Guarantee shall in no way be affected or
impaired by reason of the happening from time to time of any of the following:

                      (i)  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
        Capital Securities to be performed or observed by the Issuer;

                      (ii) the  extension  of time for the payment by the Issuer
        of  all  or  any  portion  of  the   Distributions,   Redemption  Price,
        Liquidation  Distribution  or any other sums payable  under the terms of
        the Capital  Securities or the extension of time for the  performance of
        any other obligation  under,  arising out of, or in connection with, the
        Capital  Securities  (other  than an  extension  of time for  payment of
        Distributions,  Redemption Price,  Liquidation Distribution or other sum
        payable that results from the extension of any interest  payment  period
        on the Debentures permitted by the Indenture);

                      (iii) 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 Capital Securities, or any action on the part of the Issuer
        granting indulgence or extension of any kind;

                      (vi)  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;

                      (v)   any  invalidity  of, or defect or deficiency in,
        the Capital Securities;

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

                      (vii)  the consummation of the Exchange Offer; or

                      (viii)  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 5.3 that the obligations
        ofthe Guarantor hereunder shall be absolute and unconditional under any
        and all circumstances.

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

SECTION 5.4  RIGHTS OF HOLDERS

               (a) The  Holders  of a  Majority  in  Liquidation  Amount of the
Capital  Securities  have the right to  direct  the  time, method  and place of
conducting  any proceeding  for any remedy  available to the Capital Securities
Guarantee Trustee in respect of this Capital Securities Guarantee or exercising
any trust or power conferred upon the Capital Securities Guarantee Trustee under
this Capital Securities Guarantee.

               (b) If the Capital Securities  Guarantee Trustee fails to enforce
such  Capital  Securities  Guarantee,  any  Holder  of  Capital  Securities  may
institute  a legal  proceeding  directly  against the  Guarantor  to enforce the
Capital  Securities  Guarantee  Trustee's  rights under this Capital  Securities
Guarantee,  without first instituting a legal proceeding against the Issuer, the
Capital  Securities  Guarantee  Trustee  or any  other  person  or  entity.  The
Guarantor waives any right or remedy to require that any action be brought first
against  the Issuer or any other  person or entity  before  proceeding  directly
against the Guarantor.

SECTION 5.5  GUARANTEE OF PAYMENT

               This Capital Securities  Guarantee creates a guarantee of payment
and not of collection.

SECTION 5.6  SUBROGATION

               The  Guarantor  shall be subrogated to all (if any) rights of the
Holders against the Issuer in respect of any amounts paid to such Holders by the
Guarantor under this Capital Securities Guarantee;  provided,  however, that the
Guarantor  shall not (except to the extent  required by mandatory  provisions of
law) be entitled to enforce or exercise  any right 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 Capital Securities Guarantee,  if, at the time of
any such payment,  any amounts are due and unpaid under this Capital  Securities
Guarantee.  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 5.7  INDEPENDENT OBLIGATIONS

               The Guarantor  acknowledges  that its  obligations  hereunder are
independent  of the  obligations  of the  Issuer  with  respect  to the  Capital
Securities,  and that the  Guarantor  shall be liable as principal and as debtor
hereunder  to make  Guarantee  Payments  pursuant  to the terms of this  Capital
Securities Guarantee  notwithstanding the occurrence of any event referred to in
subsections (a)(i) through (viii), inclusive, of Section 5.3 hereof.


                                   ARTICLE VI

                    LIMITATION OF TRANSACTION; SUBORDINATION

SECTION 6.1  LIMITATION OF TRANSACTIONS

               So long as any Capital Securities remain  outstanding,  if at any
time (i) there shall have  occurred any event of which the  Guarantor has actual
knowledge  that (x) with the  giving of  notice  or the lapse of time,  or both,
would  constitute  an Event of Default and (y) in respect of which the Guarantor
shall not have taken  reasonable  steps to cure,  (ii) the Guarantor shall be in
default  with  respect to its  payment  of any  obligations  under this  Capital
Securities  Guarantee and the Debentures held by the Property Trustee,  or (iii)
the  Guarantor  shall have given  notice of its  election of the exercise of its
right to defer  payment of interest  pursuant to Section  16.01 of the Indenture
and any such extension shall be continuing, then the Guarantor shall not

               (1) declare or pay any dividends or distributions  on, or redeem,
        purchase,  acquire, or make a liquidation payment with respect to any of
        the  Guarantor's  capital  stock (which  includes  common and  preferred
        stock);

               (2) make any payment of principal,  premium,  if any, or interest
on or  repay or  repurchase  or  redeem  any debt  securities  of the  Guarantor
(including any Other Debentures) that rank pari passu with or junior in right of
payment to the Debentures; or

               (3) make any guarantee  payments with respect to any guarantee by
        the Guarantor of the debt  securities of any subsidiary of the Guarantor
        (including  Other  Guarantees)  if such  guarantee  ranks  pari passu or
        junior in right of payment to the Debentures

other than (a) dividends or  distributions  in shares of, or options,  warrants,
rights to subscribe for or purchase shares of common stock of the Guarantor, (b)
any  declaration  of a  dividend  in  connection  with the  implementation  of a
stockholder's  rights plan,  or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, (c)
payments under the Capital Securities Guarantee,  (d) as a direct result of, and
only to the extent  necessary to avoid the issuance of fractional  shares of the
Guarantor's  capital stock  following,  a  reclassification  of the  Guarantor's
capital  stock or the exchange or the  conversion  of one class or series of the
Guarantor's capital stock for another class or series of the Guarantor's capital
stock,  (e) the purchase of  fractional  interests in shares of the  Guarantor's
capital stock pursuant to the conversion or exchange  provisions of such capital
stock or the security being converted or exchanged,  and (f) purchases of common
stock  related  to the  issuance  of  common  stock or  rights  under any of the
Guarantor's benefit plans for its directors, officers or employees or any of the
Guarantor's dividend reinvestment plans.

SECTION 6.2  RANKING

               This Capital  Securities  Guarantee will  constitute an unsecured
obligation of the Guarantor and will rank (i) subordinate and junior in right of
payment to all other  liabilities  of the Guarantor  (other than  obligations in
respect of Other Guarantees), (ii) pari passu with (A) the most senior preferred
or preference stock now or hereafter  issued by the Guarantor,  and (B) with any
Other  Guarantee and the Common  Securities  Guarantee,  and (iii) senior to the
Guarantor's common stock.


                                   ARTICLE VII

                                   TERMINATION

SECTION 7.1  TERMINATION

               This Capital  Securities  Guarantee shall terminate (i) upon full
payment of the Redemption  Price (as defined in the  Declaration) of all Capital
Securities,  or (ii) upon  liquidation  of the Issuer,  the full  payment of the
amounts payable in accordance  with the  Declaration or the  distribution of the
Debentures to the Holders of all of the Capital Securities.  Notwithstanding the
foregoing,  this Capital  Securities  Guarantee will continue to be effective or
will be  reinstated,  as the case may be, if at any time any  Holder of  Capital
Securities must restore payment of any sums paid under the Capital Securities or
under this Capital Securities Guarantee.


                                  ARTICLE VIII

                                 INDEMNIFICATION

SECTION 8.1  EXCULPATION

               (a)  No  Indemnified  Person  shall  be  liable,  responsible  or
accountable  in damages or otherwise to the Guarantor or any Covered  Person for
any loss,  damage or claim inured by reason of any act or omission  performed or
omitted by such Indemnified Person in good faith in accordance with this Capital
Securities  Guarantee and in a manner that such  Indemnified  Person  reasonably
believed to be within the scope of the authority  conferred on such  Indemnified
Person  by  this  Capital  Securities  Guarantee  or  by  law,  except  that  an
Indemnified  Person shall be liable for any such loss,  damage or claim incurred
by reason of such  Indemnified  Person's  negligence or willful  misconduct with
respect to such acts or omissions.

               (b) An Indemnified  Person shall be fully protected in relying in
good  faith  upon  the  records  of the  Guarantor  and upon  such  information,
opinions,  reports or statements  presented to the Guarantor by any Person as to
matters  the  Indemnified  Person  reasonably  believes  are  within  such other
Person's  professional  or  expert  competence  and who has been  selected  with
reasonable  care  by or on  behalf  of  the  Guarantor,  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 Capital Securities might
properly be paid.

SECTION 8.2  INDEMNIFICATION

               (a) The Guarantor  agrees to indemnify  each  Indemnified  Person
for, and to hold each  Indemnified  Person harmless  against,  any and all loss,
liability,  damage, claim or expense incurred without negligence or bad faith on
its part,  arising out of or in connection with the acceptance or administration
of the trust or trusts  hereunder,  including the costs and expenses  (including
reasonable   legal  fees  and  expenses)  of  defending   itself   against,   or
investigating,  any  claim or  liability  in  connection  with the  exercise  or
performance  of any  of its  powers  or  duties  hereunder.  The  obligation  to
indemnify as set forth in this Section 8.2 shall survive the termination of this
Capital Securities Guarantee.

               (b) Each  Indemnified  Person  shall  give  prompt  notice to the
Guarantor of any action  threatened or commenced  against it in respect of which
any indemnity is sought hereunder, enclosing a copy of all papers served on, and
notices and demands  delivered to, such Indemnified  Person, if any, but failure
to so notify the Guarantor  shall not relieve the  Guarantor  from any liability
which it may have  under  this  Section  8.2,  except to the  extent  that it is
materially prejudiced by such failure. The Guarantor shall be entitled to assume
the  defense  of  any  such  action  or  proceeding   with  counsel   reasonably
satisfactory to the Indemnified Person who shall not, except with the consent of
the  Indemnified  Person,  be counsel to the Guarantor.  Upon  assumption by the
Guarantor  of the  defense of any such  action or  proceeding,  the  Indemnified
Person shall have the right to  participate  in such action or proceeding and to
retain its own counsel, but the Guarantor shall not be liable for any legal fees
or expenses  subsequently incurred by such Indemnified Person in connection with
the defense  thereof  unless (i) the  Guarantor  has agreed to pay such fees and
expenses,  (ii) the  Guarantor  shall have failed to employ  counsel  reasonably
satisfactory  to the  Indemnified  Person  in a  timely  manner,  or  (iii)  the
Indemnified Person shall have been advised by counsel (who shall not be employed
by such  Indemnified  Person  and who shall be  reasonably  satisfactory  to the
Guarantor)  that such  representation  would  constitute  an actual or potential
conflict of interests for counsel selected by the Guarantor. The Guarantor shall
not consent to the terms of any compromise or settlement of any action  defended
by the Guarantor in accordance  with the foregoing  without the prior consent of
the  Indemnified  Person,  and the  Indemnified  Person shall not consent to the
terms of any  compromise  or  settlement  of any action  being  defended  by the
Guarantor in  accordance  with the  foregoing  without the prior  consent of the
Guarantor. Notwithstanding the immediately preceding sentence, if at any time an
Indemnified   Person  shall  have  requested  the  Guarantor  to  reimburse  the
Indemnified  Person for fees and expenses of counsel as contemplated  above, the
Guarantor  agrees that it shall be liable for any  settlement of any  proceeding
effected without its written consent if (i) such settlement is entered into more
than 30 business days after  receipt by the  Guarantor of the aforesaid  request
and (ii) the  Guarantor  shall not have  reimbursed  the  Indemnified  Person in
accordance with such request prior to the date of such settlement.


                                   ARTICLE IX

                                  MISCELLANEOUS

SECTION 9.1  SUCCESSORS AND ASSIGNS

               All  guarantees   and   agreements   contained  in  this  Capital
Securities Guarantee shall bind the successors, assigns, receivers, trustees and
representatives  of the  Guarantor and shall inure to the benefit of the Holders
of the Capital Securities then outstanding.

SECTION 9.2  AMENDMENTS

               Except with respect to any changes that do not  adversely  affect
the rights of Holders  (in which case no consent of Holders  will be  required),
this Capital Securities Guarantee may only be amended with the prior approval of
the  Holders  of at  least a  Majority  in  Liquidation  Amount  of the  Capital
Securities.  The provisions of Section 12.2 of the  Declaration  with respect to
meetings  of  Holders  of the  Capital  Securities  apply to the  giving of such
approval.

SECTION 9.3  NOTICES

               All notices  provided  for in this Capital  Securities  Guarantee
shall be in writing,  duly signed by the party giving such notice,  and shall be
delivered, telecopied or mailed by first class mail, as follows:

               (a) If  given  to  the  Issuer,  in  care  of the  Administrative
        Trustees at the Issuer's  mailing address set forth below (or such other
        address  as the  Issuer may give  notice to the  Holders of the  Capital
        Securities):

                      Orion Capital Trust II
                      9 Farm Springs Road
                      Farmington, CT  06032
                      Attention:  Michael P. Maloney, Esq.
                                  Administrative Trustee
                      Telecopy: (860) 674-6890

        with a copy to

                      Donovan Leisure Newton & Irvine LLP
                      30 Rockefeller Plaza
                      New York, New York  10112
                      Attn:  John J. McCann, Esq.
                      Fax:   (212) 632-3315

               (b) If given to the Capital Securities  Guarantee Trustee, at the
        Capital Securities  Guarantee  Trustee's mailing address set forth below
        (or such other addresses the Capital  Securities  Guarantee  Trustee may
        give notice of to the Holders of the Capital Securities);

                      The Bank of New York
                      101 Barclay Street, Floor 21 West
                      New York, New York  10286
                      Attention:  Corporate Trust Administration
                      Telecopy:   (212) 815-5915

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

                      Orion Capital Corporation
                      9 Farm Springs Road
                      Farmington, CT 06032
                      Attention:  Michael P. Maloney, Esq.
                                  Senior Vice President, General
                                   Counsel and Secretary
                      Telecopy: (860) 674-6890

               (d) If given to any Holder of Capital Securities,  at the address
        set forth on the books and records of the Issuer.

               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,
such notice or other document shall be deemed to have been delivered on the date
of such refusal.

SECTION 9.4  EXCHANGE OFFER

               In the event an Exchange Offer Registration Statement (as defined
in the Registration  Rights  Agreement)  becomes effective and the Issuer issues
any capital  securities in the Exchange  Offer,  the Guarantor will enter into a
new capital securities  guarantee  agreement,  in substantially the same form as
this Capital Securities Guarantee, with respect to such capital securities.

SECTION 9.5  BENEFIT

               This  Capital  Securities  Guarantee is solely for the benefit of
the Holders of the Capital  Securities and,  subject to Section  3.1(a),  is not
separately transferable from the Capital Securities.

SECTION 9.6  GOVERNING LAW

               THIS CAPITAL SECURITIES  GUARANTEE SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.

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


                             ORION CAPITAL CORPORATION,
                               as Guarantor

                             By:  /s/ Michael P. Maloney
                                  Michael P. Maloney, Esq.
                                  Senior Vice President, General
                                   Counsel and Secretary


                             THE BANK OF NEW YORK, as
                               Capital Securities Guarantee Trustee

                             By:/s/ Walter N. Gitlin
   
                                Walter N. Gitlin
                                Vice President