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                    AMENDED AND RESTATED DECLARATION OF TRUST



                              XL CAPITAL TRUST [ ]




                                  Dated as of ,






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                                TABLE OF CONTENTS


                                                                            Page


ARTICLE I       INTERPRETATION AND DEFINITIONS................................2

SECTION 1.1.   Definitions....................................................2

ARTICLE II      TRUST INDENTURE ACT...........................................9

SECTION 2.1.   Trust Indenture Act; Application...............................9
SECTION 2.2.   Lists of Holders of Securities.................................9
SECTION 2.3.   Reports by the Property Trustee...............................10
SECTION 2.4.   Periodic Reports to Property Trustee..........................10
SECTION 2.5.   Evidence of Compliance with Conditions Precedent..............10
SECTION 2.6.   Events of Default; Waiver.....................................10
SECTION 2.7.   Event of Default; Notice......................................13

ARTICLE III     ORGANIZATION.................................................13

SECTION 3.1.   Name..........................................................13
SECTION 3.2.   Office........................................................14
SECTION 3.3.   Purpose.......................................................14
SECTION 3.4.   Authority.....................................................14
SECTION 3.5.   Title to Property of the Trust................................14
SECTION 3.6.   Powers and Duties of the Regular Trustees.....................15
SECTION 3.7.   Prohibition of Actions by the Trust and the Trustees..........18
SECTION 3.8.   Powers and Duties of the Property Trustee.....................19
SECTION 3.9.   Certain Duties and Responsibilities of the Property Trustee...21
SECTION 3.10.  Certain Rights of the Property Trustee........................23
SECTION 3.11.  Delaware Trustee..............................................26
SECTION 3.12.  Execution of Documents........................................26
SECTION 3.13.  Not Responsible for Recitals or Issuance of Securities........26
SECTION 3.14.  Duration of Trust.............................................26
SECTION 3.15.  Mergers.......................................................27

ARTICLE IV      SPONSOR......................................................29

SECTION 4.1.   Sponsor's Purchase of Common Securities.......................29
SECTION 4.2.   Responsibilities of the Sponsor...............................29
SECTION 4.3.   Expenses......................................................30

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ARTICLE V       TRUSTEES.....................................................30

SECTION 5.1.   Number of Trustees............................................30
SECTION 5.2.   Delaware Trustee..............................................31
SECTION 5.3.   Property Trustee; Eligibility.................................31
SECTION 5.4.   Qualifications of Regular Trustees and Delaware Trustee
                 Generally...................................................32
SECTION 5.5.   Initial Trustees..............................................32
SECTION 5.6.   Appointment, Removal and Resignation of Trustees..............33
SECTION 5.7.   Vacancies Among Trustees......................................35
SECTION 5.8.   Effect of Vacancies...........................................35
SECTION 5.9.   Meetings......................................................35
SECTION 5.10.  Delegation of Power...........................................36

ARTICLE VI      DISTRIBUTIONS................................................36

SECTION 6.1.   Distributions.................................................36

ARTICLE VII     ISSUANCE OF SECURITIES.......................................37

SECTION 7.1.   General Provisions Regarding Securities.......................37

ARTICLE VIII    DISSOLUTION OF TRUST.........................................38

SECTION 8.1.   Dissolution of Trust..........................................38

ARTICLE IX      TRANSFER OF INTERESTS........................................39

SECTION 9.1.   Transfer of Securities........................................39
SECTION 9.2.   Transfer of Certificates......................................40
SECTION 9.3.   Deemed Security Holders.......................................40
SECTION 9.4.   Book Entry Interests..........................................40
SECTION 9.5.   Notices to Clearing Agency....................................41
SECTION 9.6.   Appointment of Successor Clearing Agency......................42
SECTION 9.7.   Definitive Preferred Security Certificates....................42
SECTION 9.8.   Mutilated, Destroyed, Lost or Stolen Certificates.............43

ARTICLE X     LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES
                OR OTHERS....................................................43

SECTION 10.1.  Liability.....................................................43
SECTION 10.2.  Exculpation...................................................44
SECTION 10.3.  Fiduciary Duty................................................45
SECTION 10.4.  Indemnification and Reimbursement.............................46
SECTION 10.5.  Outside Businesses............................................47

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ARTICLE XI      ACCOUNTING...................................................47

SECTION 11.1.  Fiscal Year...................................................47
SECTION 11.2.  Certain Accounting Matters....................................48
SECTION 11.3.  Banking.......................................................48
SECTION 11.4.  Withholding...................................................49

ARTICLE XII     AMENDMENTS AND MEETINGS......................................49

SECTION 12.1.  Amendments....................................................49
SECTION 12.2.  Meetings of the Holders; Action by Written Consent............52

ARTICLE XIII    REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE.....54

SECTION 13.1.  Representations and Warranties of Property Trustee............54
SECTION 13.2.  Representations and Warranties of Delaware Trustee............55

ARTICLE XIV     MISCELLANEOUS................................................56

SECTION 14.1.  Notices.......................................................56
SECTION 14.2.  Governing Law.................................................57
SECTION 14.3.  Intention of the Parties......................................57
SECTION 14.4.  Headings......................................................57
SECTION 14.5.  Successors and Assigns........................................57
SECTION 14.6.  Partial Enforceability........................................58
SECTION 14.7.  Counterparts..................................................58

ANNEX I        TERMS OF SECURITIES.......................................   I-1
EXHIBIT A-1    FORM OF PREFERRED SECURITY CERTIFICATE....................  A1-1
EXHIBIT A-2    FORM OF COMMON SECURITY CERTIFICATE.......................  A2-1
EXHIBIT B      SPECIMEN OF SUBORDINATED NOTE.............................   B-1


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                             CROSS-REFERENCE TABLE*


    Section of
Trust Indenture Act                                       Section of
of 1939, as amended                                      Declaration

      310(a)                   .......................   5.3(a)
      310(b)                   .......................   5.3(c), 5.3(d)
      310(c)                   .......................   Inapplicable
      311(a)                   .......................   2.2(b)
      311(b)                   .......................   2.2(b)
      311(c)                   .......................   Inapplicable
      312(a)                   .......................   2.2(a)
      312(b)                   .......................   2.2(b)
      313                      .......................   2.3
      314(a)                   .......................   2.4
      314(b)                   .......................   Inapplicable
      314(c)                   .......................   2.5
      314(d)                   .......................   Inapplicable
      314(e)                   .......................   1.1, 2.5
      314(f)                   .......................   Inapplicable
      315(a)                   .......................   3.9(b)
      315(c)                   .......................   3.9(a)
      315(d)                   .......................   3.9(b)
      316(a)                   .......................   Annex I
      316(c)                   .......................   3.6(e)
      317(a)                   .......................   3.8(d)
      317(b)                   .......................   3.8(h)

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*        This Cross-Reference Table does not constitute part of the Declaration
         and shall not affect the interpretation of any of its terms or
         provisions.


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                    AMENDED AND RESTATED DECLARATION OF TRUST

                                       OF

                              XL CAPITAL TRUST [ ]

                                        ,


     AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration"), dated and
effective as of , , by the Trustees (as defined herein), the Sponsor (as defined
herein) and by the holders, from time to time, of undivided beneficial interests
in the assets of the Trust to be issued pursuant to this Declaration.


                              W I T N E S S E T H:
                               -------------------

     WHEREAS, certain of the Trustees and the Sponsor created XL Capital Trust [
] (the "Trust") as a business trust under the Business Trust Act pursuant to a
Declaration of Trust dated as of October , 2001 (the "Original Declaration") and
a Certificate of Trust filed with the Secretary of State of the State of
Delaware on October , 2001, for the exclusive purposes of issuing and selling
certain securities representing undivided beneficial interests in the assets of
the Trust, investing the proceeds thereof in certain Subordinated Notes of the
Subordinated Note Issuer (as defined herein) and engaging in activities
necessary or incidental thereto;

     WHEREAS, prior to the date hereof, no interests in the Trust have been
issued; and

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

     NOW, THEREFORE, it being the intention of the parties hereto to continue
the Trust as a business trust under the Business Trust Act and that this
Declaration constitute the governing instrument of such business trust, the
Trustees declare that all assets contributed to the Trust will be held in trust
for the benefit of the Holders, from time to time, of the securities
representing undivided beneficial interests in the assets of the Trust issued
hereunder, subject to the provisions of this Declaration.



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                                      -2-


                                    ARTICLE I

                         INTERPRETATION AND DEFINITIONS


SECTION 1.1. Definitions.

     Unless the context otherwise requires:

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

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

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

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

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

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

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

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

     "Book Entry Interest" means a beneficial interest in a Global Certificate,
ownership and transfers of which shall be maintained and made through book
entries by a Clearing Agency as described in Section 9.4.

     "Business Day" means any day other than a Saturday, a Sunday or any other
day on which banking institutions in New


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     York, New York or the New York Stock Exchange are authorized or required by
     law to close.

     "Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12
Del. Codess.3801 et seq., as it may be amended from time to time.

     "Certificate" means a Common Security Certificate or a Preferred Security
Certificate.

     "Clearing Agency" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act that is acting as depositary for the
Preferred Securities and in whose name or in the name of a nominee of that
organization shall be registered a Global Certificate and which shall undertake
to effect book entry transfers and pledges of the Preferred Securities.

     "Clearing Agency Participant" means a broker, dealer, bank or other
financial institution or other Person for whom from time to time the Clearing
Agency effects book entry transfers and pledges of securities deposited with the
Clearing Agency.

     "Closing Date" means , .

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

     "Commission" means the Securities and Exchange Commission.

     "Common Securities Guarantee" means the guarantee agreement, dated as of ,
, of the Sponsor in respect of the Common Securities.

     "Common Security" has the meaning specified in Section 7.1.

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

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


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                                      -4-


     "Delaware Trustee" has the meaning set forth in Section 5.2.

     "Definitive Preferred Security Certificates" has the meaning set forth in
Section 9.4.

     "Direction" by a Person means a written direction signed:

          (a) if the Person is a natural Person, by that Person; or

          (b) in any other case, in the name of such Person by one or more
     Authorized Officers of that Person.

     "Distribution" means a distribution payable to Holders of Securities in
accordance with Section 6.1.

     "DTC" means The Depository Trust Company, the initial Clearing Agency.

     "Event of Default" in respect of the Securities means an Event of Default
(as defined in the Indenture) has occurred and is continuing in respect of the
Subordinated Notes.

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

     "Global Certificate" has the meaning set forth in Section 9.4.

     "Holder" means a Person in whose name a Certificate representing a Security
is registered, such Person being a beneficial owner within the meaning of the
Business Trust Act.

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

     "Indenture" means the Indenture dated as of , , as amended and supplemented
by a First Supplemental Indenture, dated as of , (the "Supplemental Indenture"),
among the Subordinated Note Issuer and the Subordinated Note Trustee, and any
further indentures supplemental thereto relating to the Subordinated Notes.


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                                      -5-


     "Investment Company" means an investment company (as defined in the
Investment Company Act) that is required to register as such under the
Investment Company Act.

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

     "Investment Company Event" has the meaning set forth in Annex I.

     "Legal Action" has the meaning set forth in Section 3.6(g).

     "Majority in liquidation amount of the Securities" means, except as
provided in the terms of the Preferred Securities and by the Trust Indenture
Act, Holder(s) of outstanding Securities voting together as a single class or,
as the context may require, Holders of outstanding Preferred Securities or
Holders of outstanding Common Securities voting separately as a class, who are
the record owners of more than 50% of the aggregate liquidation amount
(including the stated amount that would be paid on redemption, liquidation or
otherwise, plus accrued and unpaid Distributions to the date upon which the
voting percentages are determined) of all outstanding Securities of the relevant
class.

     "Ministerial Action" has the meaning set forth in Annex I.

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

          (a) a statement that each officer signing the 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 in-


<PAGE>
                                      -6-


     formed 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.

     "Paying Agent" has the meaning specified in Section 3.8(h).

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

     "Preferred Securities Guarantee" means the guarantee agreement, dated as of
, , of the Sponsor in respect of the Preferred Securities.

     "Preferred Security" has the meaning specified in Section 7.1.

     "Preferred Security Beneficial Owner" means, with respect to a Book Entry
Interest, a Person who is the beneficial owner of such Book Entry Interest, as
reflected on the books of the Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency (directly as a Clearing Agency
Participant or as an indirect participant, in each case in accordance with the
rules of such Clearing Agency).

     "Preferred Security Certificate" means a certificate representing a
Preferred Security substantially in the form of Exhibit A-1.

     "Property Trustee" means the Trustee meeting the eligibility requirements
set forth in Section 5.3.

     "Property Trustee Account" has the meaning set forth in Section 3.8(c).

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

     "Regular Trustee" means any Trustee other than the Property Trustee and the
Delaware Trustee.


<PAGE>
                                      -7-


     "Related Party" means, with respect to the Sponsor, any direct or indirect
wholly owned subsidiary of the Sponsor or any other Person that owns, directly
or indirectly, 100% of the outstanding voting securities of the Sponsor.

     "Responsible Officer" means, with respect to the Property Trustee, (a) any
vice president, any assistant vice president, any assistant secretary, the
treasurer, any assistant treasurer, any trust officer or assistant trust officer
or any other officer in the corporate trust department of the Property Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of that
officer's knowledge of and familiarity with the particular subject and (b) who
shall have direct responsibility for the administration of this Declaration.

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

     "Securities" means the Common Securities and the Preferred Securities.

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

     "Securities Guarantees" means the Preferred Securities Guarantee and the
Common Securities Guarantee.

     "Special Event" has the meaning set forth in Annex I.

     "Sponsor" means XL Capital Ltd, a Cayman Islands exempted limited company,
or any successor entity in a merger, consolidation or amalgamation, in its
capacity as sponsor of the Trust.

     "Subordinated Note Issuer" means the Sponsor in its capacity as issuer of
the Subordinated Notes.

     "Subordinated Note Trustee" means State Street Bank and Trust Company, as
trustee under the Indenture until a successor is appointed thereunder, and
thereafter means such successor trustee.

     "Subordinated Notes" means the [ ]% Subordinated Deferrable Interest Notes
Due [ ], 20[ ] to be issued by the Subordinated Note Issuer under the Indenture
and held by


<PAGE>
                                      -8-


the Property Trustee. A specimen certificate representing a Subordinated Note is
attached hereto as Exhibit B. The Subordinated Notes will be subordinate and
junior in right of payment to certain other indebtedness of the Subordinated
Note Issuer as set forth in the Indenture.

     "Super Majority" has the meaning set forth in Section 2.6(a)(ii).

     "Supplemental Indenture" has the meaning ascribed thereto in the definition
of "Indenture".

     "Tax Event" has the meaning set forth in Annex I hereto.

     "10% in liquidation amount of the Securities" means, except as provided in
the terms of the Preferred Securities or by the Trust Indenture Act, Holders of
outstanding Securities voting together as a single class or, as the context may
require, Holders of outstanding Preferred Securities or Holders of outstanding
Common Securities, voting separately as a class, representing 10% of the
aggregate liquidation amount (including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accrued and unpaid Distributions to
the date upon which the voting percentages are determined) of all outstanding
Securities of the relevant class.

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

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

     "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended to
the date hereof.

     "Underwriting Agreement" means the underwriting agreement among the Trust,
the Subordinated Note Issuer and the


<PAGE>
                                      -9-


underwriters designated by the Regular Trustees with respect to the offer and
sale of the Preferred Securities.




                                   ARTICLE II

                               TRUST INDENTURE ACT


SECTION 2.1. Trust Indenture Act; Application.

     (a) This Declaration is subject to the provisions of the Trust Indenture
Act that are required to be part of this Declaration and shall, to the extent
applicable, be governed by such provisions.

     (b) The Property Trustee shall be the only Trustee that is a Trustee for
the purposes of the Trust Indenture Act.

     (c) If and to the extent that any provision of this Declaration limits,
qualifies or conflicts with the duties imposed by ss.ss. 310 to 317, inclusive,
of the Trust Indenture Act, such imposed duties shall control.

     (d) The application of the Trust Indenture Act to this Declaration shall
not affect the nature of the Securities as equity securities representing
undivided beneficial interests in the assets of the Trust.

SECTION 2.2. Lists of Holders of Securities.

     (a) Each of the Sponsor and the Regular Trustees on behalf of the Trust
shall provide the Property Trustee (i) within 14 days after each record date for
payment of Distributions, a list, in such form as the Property Trustee may
reasonably require, of the names and addresses of the Holders of the Securities
("List of Holders") as of such record date, provided that neither the Sponsor
nor the Regular Trustees on behalf of the Trust shall 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 Property Trustee by the Sponsor and the
Regular Trustees on behalf of the Trust, and (ii) at any other time, within 30
days of receipt by the Trust of a written request therefor, a List of Holders as
of a date no more than 14 days before such List of Holders is given to the
Property Trustee. The Property Trustee shall preserve,


<PAGE>
                                      -10-


in as current a form as is reasonably practicable, all information contained in
Lists of Holders given to it or which it receives in the capacity of Paying
Agent (if acting in such capacity); provided that the Property Trustee may
destroy any List of Holders previously given to it on receipt of a new List of
Holders.

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

SECTION 2.3. Reports by the Property Trustee.

     Within 90 days after May 15 of each year or at such other time as required
under ss. 313(b) of the Trust Indenture Act, the Property Trustee shall provide
to the Holders of the Securities such reports as are required by ss. 313 of the
Trust Indenture Act, if any, in the form and in the manner provided by ss. 313
of the Trust Indenture Act. The Property Trustee shall also comply with the
requirements of ss. 313(d) of the Trust Indenture Act.

SECTION 2.4. Periodic Reports to Property Trustee.

     Each of the Sponsor and the Regular Trustees on behalf of the Trust shall
provide to the Property Trustee such documents, reports and information as are
required by ss. 314 of the Trust Indenture Act (if any) and the compliance
certificate required by ss. 314 of the Trust Indenture Act in the form, in the
manner and at the times required by ss. 314 of the Trust Indenture Act.

SECTION 2.5. Evidence of Compliance with Conditions Precedent.

     Each of the Sponsor and the Regular Trustees on behalf of the Trust shall
provide to the Property Trustee such evidence of compliance with any conditions
precedent, if any, provided for in this Declaration that relate to any of the
matters set forth in ss. 314(c) of the Trust Indenture Act. Any certificate or
opinion required to be given by an officer pursuant to ss. 314(c)(1) of the
Trust Indenture Act may be given in the form of an Officers' Certificate.

SECTION 2.6. Events of Default; Waiver.

     (a) The Holders of a Majority in liquidation amount of Preferred Securities
may, by vote, on behalf of the Holders


<PAGE>
                                      -11-


of all of the Preferred Securities, waive any past Event of Default in respect
of the Preferred Securities and its consequences, provided that, if the
underlying Event of Default under the Indenture:

          (i) is not waivable under the Indenture, the Event of Default under
     the Declaration shall also not be waivable; or

          (ii) requires the consent or vote of greater than a majority in
     principal amount of the holders of the Subordinated Notes (a "Super
     Majority") to be waived under the Indenture, the Event of Default under the
     Declaration may only be waived by the vote of the Holders of at least the
     proportion in liquidation amount of the Preferred Securities outstanding
     that the relevant Super Majority represents of the aggregate principal
     amount of the Subordinated Notes outstanding.

     The foregoing provisions of this Section 2.6(a) shall be in lieu of ss.
316(a)(1)(B) of the Trust Indenture Act and such ss. 316(a)(1)(B) of the Trust
Indenture Act is hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act. Upon such waiver, any such
default shall cease to exist, and any Event of Default with respect to the
Preferred Securities arising therefrom shall be deemed to have been cured, for
every purpose of this Declaration, but no such waiver shall extend to any
subsequent or other default or Event of Default with respect to the Preferred
Securities or impair any right consequent thereon. Any waiver by the Holders of
the Preferred Securities of an Event of Default with respect to the Preferred
Securities shall also be deemed to constitute a waiver by the Holders of the
Common Securities of any such Event of Default with respect to the Common
Securities for all purposes of this Declaration without any further act, vote,
or consent of the Holders of the Common Securities.

     (b) The Holders of a Majority in liquidation amount of the Common
Securities may, by vote, on behalf of the Holders of all of the Common
Securities, waive any past Event of Default with respect to the Common
Securities and its consequences, provided that, if the underlying Event of
Default under the Indenture:

          (i) is not waivable under the Indenture, except where the Holders of
     the Common Securities are deemed to have waived such Event of Default under
     the Declaration as


<PAGE>
                                      -12-


     provided below in this Section 2.6(b), the Event of Default under the
     Declaration shall also not be waivable; or

          (ii) requires the consent or vote of a Super Majority to be waived,
     except where the Holders of the Common Securities are deemed to have waived
     such Event of Default under the Declaration as provided below in this
     Section 2.6(b), the Event of Default under the Declaration may only be
     waived by the vote of the Holders of at least the proportion in liquidation
     amount of the Common Securities outstanding that the relevant Super
     Majority represents of the aggregate principal amount of the Subordinated
     Notes outstanding;

provided, further, that each Holder of Common Securities will be deemed to have
waived any such Event of Default and all Events of Default with respect to the
Common Securities and their consequences until all Events of Default with
respect to the Preferred Securities have been cured, waived or otherwise
eliminated, and until such Events of Default have been so cured, waived or
otherwise eliminated, the Property Trustee will be deemed to be acting solely on
behalf of the Holders of the Preferred Securities and only the Holders of the
Preferred Securities will have the right to direct the Property Trustee in
accordance with the terms of the Securities. The foregoing provisions of this
Section 2.6(b) shall be in lieu of ss.ss. 316(a)(1)(A) and 316(a)(1)(B) of the
Trust Indenture Act and such ss.ss. 316(a)(1)(A) and 316(a)(1)(B) of the Trust
Indenture Act are hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act. Subject to the foregoing
provisions of this Section 2.6(b), upon such waiver, any such default shall
cease to exist and any Event of Default with respect to the Common Securities
arising therefrom shall be deemed to have been cured for every purpose of this
Declaration, but no such waiver shall extend to any subsequent or other default
or Event of Default with respect to the Common Securities or impair any right
consequent thereon.

     (c) A waiver of an Event of Default under the Indenture by the Property
Trustee at the direction of the Holders of the Preferred Securities constitutes
a waiver of the corresponding Event of Default under this Declaration. The
foregoing provisions of this Section 2.6(c) shall be in lieu of ss. 316(a)(1)(B)
of the Trust Indenture Act and such ss. 316(a)(1)(B) of the Trust Indenture Act
is hereby expressly excluded from this Declaration and the Securities, as
permitted by the Trust Indenture Act.


<PAGE>
                                      -13-


SECTION 2.7. Event of Default; Notice.

     (a) The Property Trustee shall, within 90 days after the occurrence of an
Event of Default, transmit by mail, first class postage prepaid, to the Holders
of the Securities, notices of all defaults with respect to the Securities
actually known to a Responsible Officer of the Property Trustee, unless such
defaults have been cured before the giving of such notice (the term "defaults"
for the purposes of this Section 2.7(a) being hereby defined to be an Event of
Default as defined in the Indenture, not including any periods of grace provided
for therein and irrespective of the giving of any notice provided therein);
provided that, except for a default in the payment of principal of (or premium,
if any) or interest on any of the Subordinated Notes, the Property 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 Property Trustee in good faith determines that the
withholding of such notice is in the interests of the Holders of the Securities.

     (b) The Property Trustee shall not be deemed to have knowledge of any
default except:

          (i) a default under Sections 6.01(a) and 6.01(b) of the Indenture; or

          (ii) any default as to which a Responsible Officer shall have actual
     knowledge or a Responsible Officer charged with the administration of the
     Declaration shall have obtained written notice.


                                   ARTICLE III

                                  ORGANIZATION


SECTION 3.1. Name.

     The Trust is named "XL Capital Trust [ ]", as such name may be modified
from time to time by the Regular Trustees following written notice to the
Holders of the Securities. The Trust's activities may be conducted under the
name of the Trust or any other name deemed advisable by the Regular Trustees.


<PAGE>
                                      -14-


SECTION 3.2. Office.

     The address of the principal office of the Trust is c/o XL Capital Ltd, XL
House, One Bermudiana Road, Hamilton HM11, Bermuda. On ten Business Days written
notice to the Holders of the Securities, the Regular Trustees may designate
another principal office.

SECTION 3.3. Purpose.

     The exclusive purposes and functions of the Trust are (a) to issue and sell
the Securities and use the proceeds from such sale to purchase and hold the
Subordinated Notes, and (b) except as otherwise limited herein, to engage in
only those other activities necessary, or incidental thereto. The Trust shall
not borrow money, issue debt or reinvest proceeds derived from investments,
pledge any of its assets, or otherwise undertake (or permit to be undertaken)
any activity that would cause the Trust not to be classified for United States
federal income tax purposes as a grantor trust.

SECTION 3.4. Authority.

     Subject to the limitations provided in this Declaration and to the specific
duties of the Property Trustee, the Regular Trustees shall have exclusive and
complete authority to carry out the purposes of the Trust. An action taken by
the Regular Trustees in accordance with their powers shall constitute the act of
and serve to bind the Trust and an action taken by the Property Trustee in
accordance with its powers shall constitute the act of and serve to bind the
Trust. In dealing with the Trustees acting on behalf of the Trust, no person
shall be required to inquire into the authority of the Trustees to bind the
Trust. Persons dealing with the Trust are entitled to rely conclusively on the
power and authority of the Trustees as set forth in this Declaration.

SECTION 3.5. Title to Property of the Trust.

     Except as provided in Section 3.8 with respect to the Subordinated Notes or
as otherwise provided in this Declaration, legal title to all assets of the
Trust shall be vested in the Trust. The Holders shall not have legal title to
any part of the assets of the Trust, but shall have an undivided beneficial
interest in the assets of the Trust.


<PAGE>
                                      -15-


SECTION 3.6. Powers and Duties of the Regular Trustees.

     The Regular Trustees shall have the exclusive power, duty and authority to
cause the Trust to engage in the following activities:

     (a) to issue and sell the Preferred Securities and the Common Securities in
accordance with this Declaration; provided that the Trust may issue no more than
one series of Preferred Securities and no more than one series of Common
Securities, and provided, further, that there shall be no interests in the Trust
other than the Securities, and the issuance of Securities shall be limited to a
one-time, simultaneous issuance of both Preferred Securities and Common
Securities on the Closing Date;

     (b) in connection with the issue and sale of the Preferred Securities, at
the direction of the Sponsor, to:

          (i) execute and file with the Commission the registration statement on
     Form S-3 prepared by the Sponsor, including any amendments thereto,
     pertaining to the Preferred Securities;

          (ii) execute and file any documents prepared by the Sponsor, or take
     any acts as determined by the Sponsor to be necessary in order to qualify
     or register all or part of the Preferred Securities in any State in which
     the Sponsor has determined to qualify or register such Preferred Securities
     for sale;

          (iii) execute and file an application, prepared by the Sponsor, to the
     New York Stock Exchange, Inc. or any other national securities exchange or
     with The Nasdaq Stock Market for listing upon notice of issuance of any
     Preferred Securities;

          (iv) execute and file with the Commission a registration statement on
     Form 8-A, including any amendments thereto, prepared by the Sponsor,
     relating to the registration of the Preferred Securities under Section
     12(b) of the Exchange Act; and

          (v) designate underwriters to be party to the Underwriting Agreement
     and execute and enter into the Underwriting Agreement providing for the
     sale of the Preferred Securities;


<PAGE>
                                      -16-


     (c) to acquire the Subordinated Notes with the proceeds of the sale of the
Preferred Securities and the Common Securities; provided that the Regular
Trustees shall cause legal title to the Subordinated Notes to be held of record
in the name of the Property Trustee for the benefit of the Holders of the
Preferred Securities, the Holders of the Common Securities and the Trust;

     (d) to give the Sponsor and the Property Trustee prompt written notice of
the occurrence of a Special Event; provided that the Regular Trustees shall
consult with the Sponsor and the Property Trustee before taking or refraining
from taking any Ministerial Action in relation to a Special Event;

     (e) to establish a record date with respect to all actions to be taken
hereunder that require a record date be established, including and with respect
to, for the purposes of ss. 316(c) of the Trust Indenture Act, Distributions,
voting rights, redemptions and exchanges, and to issue relevant notices to the
Holders of Preferred Securities and Holders of Common Securities as to such
actions and applicable record dates;

     (f) to take all actions and perform such duties as may be required of the
Regular Trustees pursuant to the terms of the Securities or this Declaration;

     (g) to bring or defend, pay, collect, compromise, arbitrate, resort to
legal action, or otherwise adjust claims or demands of or against the Trust
("Legal Action"), unless pursuant to Section 3.8(e), the Property Trustee has
the exclusive power to bring such Legal Action;

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

     (i) to cause the Trust to comply with the Trust's obligations under the
Trust Indenture Act;

     (j) to give the certificate required by ss. 314(a)(4) of the Trust
Indenture Act to the Property Trustee, which certificate may be executed by any
Regular Trustee;

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


<PAGE>
                                      -17-


     (l) to act as, or appoint another Person to act as, registrar and transfer
agent for the Securities;

     (m) to give prompt written notice to the Holders of the Securities of any
notice received from the Subordinated Note Issuer of its election to defer
payments of interest on the Subordinated Notes by extending the interest payment
period under the Indenture;

     (n) to execute all documents or instruments, perform all duties and powers,
and do all things for and on behalf of the Trust in all matters necessary or
incidental to the foregoing;

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

     (p) to take any action, not inconsistent with this Declaration or with
applicable law, that the Regular Trustees determine in their discretion to be
necessary or desirable in carrying out the activities of the Trust as set out in
this Section 3.6, including, but not limited to:

          (i) causing the Trust not to be deemed to be an Investment Company;

          (ii) causing the Trust to be classified for United States federal
     income tax purposes as a grantor trust; and

          (iii) cooperating with the Subordinated Note Issuer to ensure that the
     Subordinated Notes will be treated as indebtedness of the Subordinated Note
     Issuer for United States federal income tax purposes,

provided that such action does not adversely affect the interests of Holders;
and

     (q) to take all action necessary to cause all applicable tax returns and
tax information reports that are required to be filed with respect to the Trust
to be duly prepared and filed by the Regular Trustees, on behalf of the Trust.


<PAGE>
                                      -18-


     The Regular Trustees must exercise the powers set forth in this Section 3.6
in a manner that is consistent with the purposes and functions of the Trust set
out in Section 3.3, and the Regular Trustees shall not take any action that is
inconsistent with the purposes and functions of the Trust set forth in Section
3.3.

     Subject to this Section 3.6, the Regular Trustees shall have none of the
powers or the authority of the Property Trustee set forth in Section 3.8.

SECTION 3.7. Prohibition of Actions by the Trust and the Trustees.

     (a) The Trust shall not, and the Trustees (including the Property Trustee)
shall not, engage in any activity other than as required or authorized by this
Declaration. In particular, the Trust shall not and the Trustees (including the
Property Trustee) shall cause the Trust not to:

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

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

          (iii) possess Trust property for other than a Trust purpose;

          (iv) make any loans or incur any indebtedness other than loans
     represented by the Subordinated Notes;

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

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

          (vii) other than as provided in this Declaration, (A) direct the time,
     method and place of exercising any trust or power conferred upon the
     Subordinated Note Trustee with respect to the Subordinated Notes, (B) waive
     any past default that is waivable under Section 6.04 of the Indenture, (C)
     exercise any right to rescind or annul any dec-


<PAGE>
                                      -19-


     laration that the principal of all the Subordinated Notes shall be due and
     payable, or (D) consent to any amendment or modification of the Indenture
     or the Subordinated Notes where such consent shall be required unless the
     Trust shall have received an opinion of counsel to the effect that such
     amendment or modification will not cause more than an insubstantial risk
     that for United States federal income tax purposes the Trust will not be
     classified as a grantor trust.

SECTION 3.8. Powers and Duties of the Property Trustee.

     (a) The legal title to the Subordinated Notes shall be owned by and held of
record in the name of the Property Trustee in trust for the benefit of the
Holders of the Securities. The right, title and interest of the Property Trustee
to the Subordinated Notes shall vest automatically in each Person who may
hereafter be appointed as Property Trustee in accordance with Section 5.6. Such
vesting (and cessation as to the resigning Property Trustee) of title shall be
effective whether or not conveyancing documents with regard to the Subordinated
Notes have been executed and delivered.

     (b) The Property Trustee shall not transfer its right, title and interest
in the Subordinated Notes to the Regular Trustees or to the Delaware Trustee (if
the Property Trustee does not also act as Delaware Trustee).

     (c) The Property Trustee shall:

          (i) establish and maintain a segregated non-interest bearing trust
     account (the "Property Trustee Account") in the name of and under the
     exclusive control of the Property Trustee on behalf of the Holders of the
     Securities and, upon the receipt of payments of funds made in respect of
     the Subordinated Notes held by the Property Trustee, deposit such funds
     into the Property Trustee Account and make payments to the Holders of the
     Preferred Securities and Holders of the Common Securities from the Property
     Trustee Account in accordance with Section 6.1. Funds in the Property
     Trustee Account shall be held uninvested until disbursed in accordance with
     this Declaration. The Property Trustee Account shall be an account that is
     maintained with a banking institution the rating on whose long-term
     unsecured indebtedness is at least equal to the rating, as such rating is
     specified in a notice given to the Property Trustee by the Sponsor or
     publicly available, assigned to the Preferred Securities by a "nationally
     recognized statistical rating organization",


<PAGE>
                                      -20-


     as that term is defined for purposes of Rule 436(g)(2) under the Securities
     Act;

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

          (iii) upon notice of distribution issued by the Regular Trustees in
     accordance with the terms of the Securities, engage in such ministerial
     activities as shall be necessary or appropriate to effect the distribution
     of the Subordinated Notes to Holders of Securities upon the occurrence of a
     Special Event.

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

     (e) The Property Trustee shall take any Legal Action which arises out of or
in connection with an Event of Default or the Property Trustee's duties and
obligations under this Declaration or the Trust Indenture Act.

     (f) The Property Trustee shall not resign as a Trustee unless either:

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

          (ii) a successor Property Trustee has been appointed and has accepted
     that appointment in accordance with Section 5.6.

     (g) The Property Trustee shall have the legal power to exercise all of the
rights, powers and privileges of a holder of Subordinated Notes under the
Indenture and, if an Event of Default occurs and is continuing, the Property
Trustee shall, for the benefit of Holders of the Securities, enforce its rights
as holder of the Subordinated Notes subject to the rights of the Holders
pursuant to the terms of such Securities.

     (h) The Property Trustee may authorize one or more Persons (each, a "Paying
Agent") to pay Distributions, redemption payments or liquidation payments on
behalf of the Trust with respect to all Securities and any such Paying Agent
shall


<PAGE>
                                      -21-


comply with ss. 317(b) of the Trust Indenture Act. Any Paying Agent may be
removed by the Property Trustee at any time and a successor Paying Agent or
additional Paying Agents may be appointed at any time by the Property Trustee.

     (i) Subject to this Section 3.8, the Property Trustee shall have none of
the duties, liabilities, powers or the authority of the Regular Trustees set
forth in Section 3.6.

     The Property Trustee must exercise the powers set forth in this Section 3.8
in a manner that is consistent with the purposes and functions of the Trust set
out in Section 3.3, and the Property Trustee shall not take any action that is
inconsistent with the purposes and functions of the Trust set out in Section
3.3.

SECTION 3.9. Certain Duties and Responsibilities of the Property Trustee.

     (a) The Property 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
Declaration and no implied covenants shall be read into this Declaration against
the Property Trustee. In case an Event of Default has occurred (that has not
been cured or waived pursuant to Section 2.6), the Property Trustee shall
exercise such of the rights and powers vested in it by this Declaration, and use
the same degree of care and skill in their exercise, as a prudent person would
exercise or use under the circumstances in the conduct of his or her own
affairs.

     (b) No provision of this Declaration shall be construed to relieve the
Property 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 an 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 Property Trustee shall be
          determined solely by the express provisions of this Declaration and
          the Property Trustee shall not be liable except for the performance of
          such duties and obligations as are specifically set forth in this
          Declaration, and no implied covenants


<PAGE>
                                      -22-


          or obligations shall be read into this Declaration against the
          Property Trustee; and

               (B) in the absence of bad faith on the part of the Property
          Trustee, the Property 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 Property
          Trustee and conforming to the requirements of this Declaration; but in
          the case of any such certificates or opinions that by any provision
          hereof are specifically required to be furnished to the Property
          Trustee, the Property Trustee shall be under a duty to examine the
          same to determine whether or not they conform to the requirements of
          this Declaration (but need not confirm or investigate the accuracy of
          mathematical calculations or the facts stated therein);

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

          (iii) the Property 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 Property Trustee,
     or exercising any trust or power conferred upon the Property Trustee under
     this Declaration;

          (iv) no provision of this Declaration shall require the Property
     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 it 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 Declaration or adequate
     indemnity against such risk or liability is not reasonably assured to it;

          (v) the Property Trustee's sole duty with respect to the custody, safe
     keeping and physical preservation of the Subordinated Notes and the
     Property Trustee Account shall


<PAGE>
                                      -23-


     be to deal with such property in a manner that is customary in the
     industry, subject to the protections and limitations on liability afforded
     to the Property Trustee under this Declaration, the Trust Indenture Act and
     Rule 3a-7;

          (vi) the Property Trustee shall have no duty or liability for or with
     respect to the value, genuineness, existence or sufficiency of the
     Subordinated Notes or the payment of any taxes or assessments levied
     thereon or in connection therewith;

          (vii) the Property Trustee shall not be liable for any interest on any
     money received by it except as it may otherwise agree in writing with the
     Sponsor. Money held by the Property Trustee need not be segregated from
     other funds held by it except in relation to the Property Trustee Account
     maintained by the Property Trustee pursuant to Section 3.8(c)(i) and except
     to the extent otherwise required by law; and

          (viii) the Property Trustee shall not be responsible for monitoring
     the compliance by the Regular Trustees or the Sponsor with their respective
     duties under this Declaration, nor shall the Property Trustee be liable for
     the default or misconduct of the Regular Trustees or the Sponsor.

SECTION 3.10. Certain Rights of the Property Trustee.

     (a) Subject to the provisions of Section 3.9:

          (i) the Property 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 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 Sponsor or the Regular Trustees
     contemplated by this Declaration shall be sufficiently evidenced by a
     Direction or an Officers' Certificate;

          (iii) whenever in the administration of this Declaration, the Property
     Trustee shall deem it desirable that a


<PAGE>
                                      -24-


     matter be proved or established before taking, suffering or omitting any
     action hereunder, the Property Trustee (unless other evidence is herein
     specifically prescribed) may, in the absence of bad faith on its part,
     request and conclusively rely upon an Officers' Certificate which, upon
     receipt of such request, shall be promptly delivered by the Sponsor or the
     Regular Trustees;

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

          (v) the Property Trustee may consult with counsel or other experts of
     its selection and the advice or opinion of such counsel and experts with
     respect to legal matters or advice within the scope of such experts' area
     of expertise 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 Sponsor or any of its Affiliates, and may include any of the
     Sponsor's or its Affiliates' employees. The Property Trustee shall have the
     right at any time to seek instructions concerning the administration of
     this Declaration from any court of competent jurisdiction;

          (vi) the Property Trustee shall be under no obligation to exercise any
     of the rights or powers vested in it by this Declaration at the request or
     direction of any Holder, unless such Holder shall have provided to the
     Property Trustee adequate security and indemnity, which would satisfy a
     reasonable person in the position of the Property Trustee, 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 Property
     Trustee; provided that nothing contained in this Section 3.10(a)(vi) shall
     be taken to relieve the Property Trustee, upon the occurrence of an Event
     of Default, of its obligation to exercise the rights and powers vested in
     it by this Declaration;

          (vii) the Property 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,


<PAGE>
                                      -25-


     debenture, note, other evidence of indebtedness or other paper or document,
     but the Property Trustee, in its discretion, may make such further inquiry
     or investigation into such facts or matters as it may see fit;

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

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

          (xi) except as otherwise expressly provided by this Declaration, the
     Property Trustee shall not be under any obligation to take any action that
     is discretionary under the provisions of this Declaration.

     (b) No provision of this Declaration shall be deemed to impose any duty or
obligation on the Property 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 Property Trustee


<PAGE>
                                      -26-


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 Property Trustee
shall be construed to be a duty.

SECTION 3.11. Delaware Trustee.

     Notwithstanding any other provision of this Declaration other than Section
5.2, the Delaware Trustee shall not be entitled to exercise any powers, nor
shall the Delaware Trustee have any of the duties and responsibilities, of the
Regular Trustees or the Property Trustee described in this Declaration. Except
as set forth in Section 5.2, the Delaware Trustee shall be a Trustee for the
sole and limited purpose of fulfilling the requirements of ss. 3807 of the
Business Trust Act.

SECTION 3.12. Execution of Documents.

     Unless otherwise determined by the Regular Trustees, and except as
otherwise required by the Business Trust Act, a majority of or, if there are
only two, any Regular Trustee or, if there is only one, such Regular Trustee is
authorized to execute on behalf of the Trust any documents that the Regular
Trustees have the power and authority to execute pursuant to Section 3.6;
provided that the registration statement referred to in Section 3.6(b)(i),
including any amendments thereto, shall be signed by all of the Regular
Trustees.

SECTION 3.13. Not Responsible for Recitals or Issuance of Securities.

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

SECTION 3.14. Duration of Trust.

     The Trust, unless dissolved pursuant to the provisions of Article VIII
hereof, shall have existence for fifty-five (55) years from the Closing Date.


<PAGE>
                                      -27-


SECTION 3.15. Mergers.

     (a) The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other body, except as
described in Section 3.15(b) and (c).

     (b) The Trust may, with the consent of the Regular Trustees or, if there
are more than two, a majority of the Regular Trustees and without the consent of
the Holders, the Delaware Trustee or the Property Trustee, consolidate,
amalgamate, merge with or into, or be replaced by a trust organized as such
under the laws of any State; provided that:

          (i) such successor entity (the "Successor Entity") either:

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

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

          (ii) the Subordinated Note Issuer expressly acknowledges a trustee of
     the Successor Entity that possesses the same powers and duties as the
     Property Trustee as the Holder of the Subordinated Notes;

          (iii) the Preferred Securities or any Successor Securities are listed,
     or any Successor Securities will be listed upon notification of issuance,
     on the New York Stock Exchange, Inc. or such other national securities
     exchange or with The Nasdaq Stock Market or such other organization on
     which the Preferred Securities are then listed or quoted;

          (iv) such merger, consolidation, amalgamation or replacement does not
     cause the Preferred Securities (including any Successor Securities) to be
     downgraded by any nationally recognized statistical rating organization;

          (v) such merger, consolidation, amalgamation or replacement does not
     adversely affect the rights, prefer-


<PAGE>
                                      -28-


     ences and privileges of the Holders of the Securities (including any
     Successor Securities) in any material respect (other than with respect to
     any dilution of such Holders' interests in the Successor Entity as a result
     of such merger, consolidation, amalgamation or replacement);

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

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

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

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

          (viii) the Sponsor guarantees the obligations of such Successor Entity
     under the Successor Securities at least to the extent provided by the
     Preferred Securities Guarantee.

     (c) Notwithstanding Section 3.15(b), the Trust shall not, except with the
consent of Holders of 100% in liquidation amount of the Securities, consolidate,
amalgamate, merge with or into, or be replaced by any other entity or permit any
other entity to consolidate, amalgamate, merge with or into, or replace it if
such consolidation, amalgamation, merger or replacement would cause the Trust or
Successor Entity to be classified as other than a grantor trust for United
States federal income tax purposes and any Holder of Securities not to be
treated as owning an undivided beneficial interest in the Subordinated Notes.



<PAGE>
                                      -29-


                                   ARTICLE IV

                                     SPONSOR


SECTION 4.1. Sponsor's Purchase of Common Securities.

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

SECTION 4.2. Responsibilities of the Sponsor.

     In connection with the issue and sale of the Preferred Securities, the
Sponsor shall have the exclusive right and responsibility to engage in the
following activities:

          (a) to prepare for filing by the Trust with the Commission a
     registration statement on Form S-3 in relation to the Preferred Securities,
     including any amendments thereto;

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

          (c) to prepare for filing by the Trust an application to the New York
     Stock Exchange, Inc. or any other national securities exchange or with The
     Nasdaq Stock Market for listing upon notice of issuance of any Preferred
     Securities;

          (d) to prepare for filing by the Trust with the Commission a
     registration statement on Form 8-A relating to the registration of the
     Preferred Securities under Section 12(b) of the Exchange Act, including any
     amendments thereto; and

          (e) to negotiate the terms of the Underwriting Agreement providing for
     the sale of the Preferred Securities.


<PAGE>
                                      -30-


SECTION 4.3. Expenses.

     (a) The Sponsor shall be responsible for and shall pay for all debts and
obligations (other than with respect to the Securities) and all costs and
expenses of the Trust (including, but not limited to, costs and expenses
relating to the organization of the Trust, the issuance and sale of the
Preferred Securities, the fees and expenses (including reasonable counsel fees
and expenses) of the Trustees, the costs and expenses of accountants, attorneys,
statistical or bookkeeping services, expenses for printing and engraving and
computing or accounting equipment, Paying Agent(s), registrar(s), transfer
agent(s), duplication, travel and telephone and other telecommunications
expenses and costs and expenses incurred in connection with the disposition of
Trust assets).

     (b) The Sponsor will pay any and all taxes (other than United States
withholding taxes attributable to the Trust or its assets) and all liabilities,
costs and expenses with respect to such taxes of the Trust.

     (c) The Sponsor's obligations under this Section 4.3 shall be for the
benefit of, and shall be enforceable by, the Property Trustee and any Person to
whom any such debts, obligations, costs, expenses and taxes are owed (a
"Creditor") whether or not such Creditor has received notice hereof. The
Property Trustee and any such Creditor may enforce the Sponsor's obligations
under this Section 4.3 directly against the Sponsor and the Sponsor irrevocably
waives any right or remedy to require that the Property Trustee or any such
Creditor take any action against the Trust or any other Person before proceeding
against the Sponsor. The Sponsor agrees to execute such additional agreements as
may be necessary or desirable in order to give full effect to the provisions of
this Section 4.3.


                                    ARTICLE V

                                    TRUSTEES


SECTION 5.1. Number of Trustees.

     The number of Trustees initially shall be five (5), and:


<PAGE>
                                      -31-


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

          (b) after the issuance of any Securities, the number of Trustees may
     be increased or decreased by vote of the Holders of a majority in
     liquidation amount of the Common Securities voting as a class at a meeting
     of the Holders of the Common Securities,

provided that, if the Property Trustee does not also act as Delaware Trustee,
the number of Trustees shall be at least three (3).

SECTION 5.2. Delaware Trustee.

     If required by the Business Trust Act, one Trustee (the "Delaware Trustee")
shall be:

          (a) a natural person who is a resident of the State of Delaware; or

          (b) if not a natural person, an entity which has its principal place
     of business in the State of Delaware, and otherwise meets the requirements
     of applicable law,

provided that, if the Property Trustee has its principal place of business in
the State of Delaware and otherwise meets the requirements of applicable law,
then the Property Trustee shall also be the Delaware Trustee and Section 3.11
shall have no application. The Delaware Trustee may be an Affiliate of the
Property Trustee.

SECTION 5.3. Property Trustee; Eligibility.

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

          (i) not be an Affiliate of the Sponsor;

          (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
     Commission to act as an institutional trustee under the Trust Indenture
     Act, authorized under such laws to exercise corporate trust powers, having
     (or, in the case of a subsidiary of a bank holding company that shall
     guarantee the obligations of the Property Trustee under this Declaration,
     such holding Company parent shall have) a combined capital and surplus of
     at least 50 million U.S. dollars ($50,000,000), and subject


<PAGE>
                                      -32-


     to supervision or examination by federal, State, Territorial or District of
     Columbia authority. If such corporation or holding company parent 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 5.3(a)(ii), the combined capital and
     surplus of such corporation or holding company parent shall be deemed to be
     its combined capital and surplus as set forth in its most recent report of
     condition so published; and

          (iii) if the Trust is excluded from the definition of an Investment
     Company solely by means of Rule 3a-7 and to the extent Rule 3a-7 requires a
     trustee having certain qualifications to hold title to the "eligible
     assets" of the Trust, the Property Trustee shall possess those
     qualifications.

     (b) If at any time the Property Trustee shall cease to be eligible to so
act under Section 5.3(a), the Property Trustee shall immediately resign in the
manner and with the effect set forth in Section 5.6(c).

     (c) If the Property Trustee has or shall acquire any "conflicting interest"
within the meaning of ss. 310(b) of the Trust Indenture Act, the Property
Trustee and the Holder of the Common Securities (as if it were the obligor
referred to in ss. 310(b) of the Trust Indenture Act) shall in all respects
comply with the provisions of ss. 310(b) of the Trust Indenture Act.

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

SECTION 5.4. Qualifications of Regular Trustees and Delaware Trustee Generally.

     Each Regular Trustee and the Delaware Trustee (unless the Property Trustee
also acts as Delaware Trustee) shall be either a natural person who is at least
21 years of age or a legal entity that shall act through one or more Authorized
Officers.

SECTION 5.5. Initial Trustees.

     The initial Regular Trustees shall be:


<PAGE>
                                      -33-


                           Brian M. O'Hara

                           Jerry de St. Paer

                           Paul S. Giordano

     The initial Delaware Trustee shall be:

                           First Union Trust Company, National Association

     The initial Property Trustee shall be:

                           State Street Bank and Trust Company

SECTION 5.6. Appointment, Removal and Resignation of Trustees.

     (a) Subject to Section 5.6(b), Trustees may be appointed or removed without
cause at any time:

          (i) until the issuance of any Securities, by written instrument
     executed by the Sponsor; and

          (ii) after the issuance of any Securities, by vote of the Holders of a
     Majority in liquidation amount of the Common Securities voting as a class
     at a meeting of the Holders of the Common Securities or by unanimous
     written consent.

     (b)(i) The Trustee that acts as Property Trustee shall not be removed in
accordance with Section 5.6(a) until a successor Property Trustee has been
appointed and has accepted such appointment by written instrument executed by
such successor Property Trustee and delivered to the Regular Trustees and the
Sponsor; and

     (ii) the Trustee that acts as Delaware Trustee shall not be removed in
accordance with this Section 5.6(a) until a successor Trustee possessing the
qualifications to act as Delaware Trustee under Sections 5.2 and 5.4 (a
"Successor Delaware Trustee") has been appointed and has accepted such
appointment by written instrument executed by such Successor Delaware Trustee
and delivered to the Regular Trustees and the Sponsor.

     (c) A Trustee appointed to office shall hold office until his successor
shall have been appointed or until his death, removal or resignation. Any
Trustee may resign from office (without need for prior or subsequent accounting)
by an


<PAGE>
                                      -34-


instrument in writing signed by the Trustee and delivered to the Sponsor and the
Trust, which resignation shall take effect upon such delivery or upon such later
date as is specified therein; provided that:

          (i) no such resignation of the Trustee that acts as the Property
     Trustee shall be effective:

               (A) until a Successor Property Trustee has been appointed and has
          accepted such appointment by instrument executed by such Successor
          Property Trustee and delivered to the Trust, the Sponsor and the
          resigning Property Trustee; or

               (B) if the Trust is deemed not to be an Investment Company solely
          by reason of Rule 3a-7, until the assets of the Trust have been
          completely liquidated and the proceeds thereof distributed to the
          Holders of the Securities; and

          (ii) no such resignation of the Trustee that acts as the Delaware
     Trustee shall be effective until a Successor Delaware Trustee has been
     appointed and has accepted such appointment by instrument executed by such
     Successor Delaware Trustee and delivered to the Trust, the Sponsor and the
     resigning Delaware Trustee.

     (d) The Holders of the Common Securities shall use their best efforts to
promptly appoint a Successor Property Trustee or Successor Delaware Trustee, as
the case may be, if the Property Trustee or the Delaware Trustee delivers an
instrument of resignation in accordance with this Section 5.6.

     (e) If no Successor Property Trustee or Successor Delaware Trustee shall
have been appointed and accepted appointment as provided in this Section 5.6
within 30 days after delivery of an instrument of resignation or removal, the
Property Trustee or Delaware Trustee resigning or being removed, as applicable,
may (at the expense of the Sponsor) petition any court of competent jurisdiction
for appointment of a Successor Property Trustee or Successor Delaware Trustee.
Such court may thereupon, after prescribing such notice, if any, as it may deem
proper and prescribe, appoint a Successor Property Trustee or Successor Delaware
Trustee, as the case may be.


<PAGE>
                                      -35-


SECTION 5.7. Vacancies Among Trustees.

     If a Trustee ceases to hold office for any reason and the number of
Trustees is not reduced pursuant to Section 5.1, or if the number of Trustees is
increased pursuant to Section 5.1, a vacancy shall occur. A resolution
certifying the existence of such vacancy by the Regular Trustees or, if there
are more than two, a majority of the Regular Trustees shall be conclusive
evidence of the existence of such vacancy. The vacancy shall be filled with a
Trustee appointed in accordance with Section 5.6.

SECTION 5.8. Effect of Vacancies.

     The death, resignation, retirement, removal, bankruptcy, dissolution,
liquidation, incompetence or incapacity to perform the duties of a Trustee shall
not operate to annul the Trust. Whenever a vacancy in the number of Regular
Trustees shall occur, until such vacancy is filled by the appointment of a
Regular Trustee in accordance with Section 5.6, the Regular Trustees in office,
regardless of their number, shall have all the powers granted to the Regular
Trustees and shall discharge all the duties imposed upon the Regular Trustees by
this Declaration.

SECTION 5.9. Meetings.

     If there is more than one Regular Trustee, meetings of the Regular Trustees
shall be held from time to time upon the call of any Regular Trustee. Regular
meetings of the Regular Trustees may be held at a time and place fixed by
resolution of the Regular Trustees. Notice of any in-person meetings of the
Regular Trustees shall be hand delivered or otherwise delivered in writing
(including by facsimile, with a hard copy by overnight courier) not less than 48
hours before such meeting. Notice of any telephonic meetings of the Regular
Trustees or any committee thereof shall be hand delivered or otherwise delivered
in writing (including by facsimile, with a hard copy by overnight courier) not
less than 24 hours before such meeting. Notices shall contain a brief statement
of the time, place and anticipated purposes of the meeting. The presence
(whether in person or by telephone) of a Regular Trustee at a meeting shall
constitute a waiver of notice of such meeting except where a Regular Trustee
attends a meeting for the express purpose of objecting to the transaction of any
activity on the ground that the meeting has not been lawfully called or
convened. Unless provided otherwise in this Declaration, any action of the
Regular Trustees may be taken at a meeting by vote


<PAGE>
                                      -36-


of a majority of the Regular Trustees present (whether in person or by
telephone) and eligible to vote with respect to such matter, provided that a
Quorum is present, or without a meeting by the unanimous written consent of the
Regular Trustees. In the event there is only one Regular Trustee, any and all
action of such Regular Trustee shall be evidenced by a written consent of such
Regular Trustee.

SECTION 5.10. Delegation of Power.

     (a) Any Regular Trustee may, by power of attorney consistent with
applicable law, delegate to any other natural person over the age of 21 his or
her power for the purpose of executing any documents contemplated in Section
3.6, including any registration statement or amendment thereto filed with the
Commission, or making any other governmental filing; and

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

                                   ARTICLE VI

                                  DISTRIBUTIONS


SECTION 6.1. Distributions.

     Holders shall receive Distributions (as defined herein) in accordance with
the applicable terms of the relevant Holder's Securities. Distributions shall be
made on the Preferred Securities and the Common Securities in accordance with
the preferences set forth in their respective terms. If and to the extent that
the Subordinated Note Issuer makes a payment of interest (including Additional
Interest (as defined in the Indenture)), premium and/or principal on the
Subordinated Notes held by the Property Trustee (the amount of any such payment
being a "Payment Amount"), the Property Trustee shall and is directed, to the
extent funds are available for that purpose, to make a distribution (a
"Distribution") of the Payment Amount to the Holders.



<PAGE>
                                      -37-


                                   ARTICLE VII

                             ISSUANCE OF SECURITIES


SECTION 7.1. General Provisions Regarding Securities.

     (a) The Regular Trustees shall on behalf of the Trust issue one class of
preferred securities representing undivided beneficial interests in the assets
of the Trust having such terms as are set forth in Annex I (the "Preferred
Securities") and one class of common securities representing undivided
beneficial interests in the assets of the Trust having such terms as are set
forth in Annex I (the "Common Securities.") The Trust shall not issue any
securities or other interests in respect of the assets of the Trust other than
the Preferred Securities and the Common Securities.

     (b) The Certificates shall be signed on behalf of the Trust by two Regular
Trustees. Each such signature shall be the manual or facsimile signature of any
present or any future Regular Trustee. In case any Regular Trustee of the Trust
who shall have signed any of the Certificates shall cease to be such Regular
Trustee before the Certificates so signed shall be delivered by the Trust, such
Certificates nevertheless may be delivered as though the person who signed such
Certificates had not ceased to be such Regular Trustee; and any Certificate may
be signed on behalf of the Trust by such persons who, at the actual date of
execution of such Certificate, shall be the Regular Trustees of the Trust,
although at the date of the execution and delivery of the Declaration any such
person was not such a Regular Trustee. Certificates shall be printed,
lithographed or engraved or may be produced in any other manner as is reasonably
acceptable to the Regular Trustees, as evidenced by their execution thereof, and
may have such letters, numbers or other marks of identification or designation
and such legends or endorsements as the Regular Trustees may deem appropriate,
or as may be required to comply with any law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange on which
Securities may be listed, or to conform to usage. Upon a written order of the
Trust signed by one Regular Trustee, the Property Trustee shall countersign the
Preferred Security Certificate for original issue.

     (c) The consideration received by the Trust for the issuance of the
Securities shall constitute a contribution to


<PAGE>
                                      -38-


the capital of the Trust and shall not constitute a loan to the Trust.

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

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

     (f) Every Person who becomes a Holder or a Preferred Security Beneficial
Owner shall be deemed to have agreed to treat the Subordinated Notes as
indebtedness for United States federal income tax purposes and the Preferred
Securities as evidence of an indirect beneficial ownership in the Subordinated
Notes.


                                  ARTICLE VIII

                              DISSOLUTION OF TRUST


SECTION 8.1. Dissolution of Trust.

     (a) The Trust shall dissolve and its affairs shall be wound up:

          (i) upon the bankruptcy of the Holder of the Common Securities or the
     Sponsor;

          (ii) upon the filing of a certificate of dissolution or its equivalent
     with respect to the Holder of the Common Securities or the Sponsor or the
     revocation of the Holder of the Common Securities or the Sponsor's charter
     and the expiration of 90 days after the date of revocation without a
     reinstatement thereof;

          (iii) upon the entry of a decree of judicial dissolution of the Holder
     of the Common Securities, the Sponsor or the Trust;

          (iv) when all of the Securities shall have been called for redemption
     and the amounts necessary for re-


<PAGE>
                                      -39-


     demption thereof shall have been paid to the Holders in accordance with the
     terms of the Securities;

          (v) upon the occurrence and continuation of a Special Event pursuant
     to which the Trust shall have been dissolved in accordance with the terms
     of the Securities and all of the Subordinated Notes in accordance with the
     terms thereof shall have been distributed to the Holders of Securities in
     exchange for all of the Securities; or

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

     (b) As soon as is practicable after the occurrence of an event referred to
in Section 8.1(a), the Trustees shall file a certificate of cancellation with
the Secretary of State of the State of Delaware.

     (c) The provisions of Section 3.9 and Article X shall survive the
termination of the Trust.


                                   ARTICLE IX

                              TRANSFER OF INTERESTS


SECTION 9.1. Transfer of Securities.

     (a) Securities may only be transferred, in whole or in part, in accordance
with the terms and conditions set forth in this Declaration and in the
Securities. Any transfer or purported transfer of any Security not made in
accordance with this Declaration and these Securities shall be null and void.

     (b) Subject to this Article IX, Preferred Securities shall be freely
transferable.

     (c) Subject to this Article IX, (x) the Sponsor may only transfer Common
Securities to a Related Party and (y) a Related Party may only transfer Common
Securities to the Sponsor or another Related Party; provided that any such
transfer is subject to the condition precedent that the transferor obtain the
written opinion of nationally recognized independent counsel experienced in such
matters that such transfer would not cause more than an insubstantial risk that:


<PAGE>
                                      -40-


          (i) the Trust would no longer be classified for United States federal
     income tax purposes as a grantor trust; or

          (ii) the Trust would become an Investment Company or the transferee
     would become an Investment Company.

SECTION 9.2. Transfer of Certificates.

     The Regular Trustees shall provide for the registration of Certificates and
of transfers of Certificates, which will be effected without charge but only
upon payment (with such indemnity as the Regular Trustees may require) in
respect of any tax or other government charges that may be imposed in relation
to it. Upon surrender for registration of transfer of any Certificate, the
Regular Trustees shall cause one or more new Certificates to be issued in the
name of the designated transferee or transferees. Every Certificate surrendered
for registration of transfer shall be accompanied by a written instrument of
transfer in form satisfactory to the Regular Trustees duly executed by the
Holder or such Holder's attorney duly authorized in writing. Each Certificate
surrendered for registration of transfer shall be canceled by the Regular
Trustees. A transferee of a Certificate shall be entitled to the rights and
subject to the obligations of a Holder hereunder upon the receipt by such
transferee of a Certificate. By acceptance of a Certificate, each transferee
shall be deemed to have agreed to be bound by this Declaration and the terms of
the Securities represented by such Certificate.

SECTION 9.3. Deemed Security Holders.

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

SECTION 9.4. Book Entry Interests.

     Unless otherwise specified in the terms of the Preferred Securities, the
Preferred Securities Certificates, on original issuance, will be issued in the
form of one or more,


<PAGE>
                                      -41-


fully registered, global Preferred Security Certificates (each a "Global
Certificate"), to be delivered to DTC, the initial Clearing Agency, by, or on
behalf of, the Trust. Such Global Certificates shall initially be registered on
the books and records of the Trust in the name of Cede & Co., the nominee of
DTC, and no Preferred Security Beneficial Owner will receive a definitive
Preferred Security Certificate representing such Preferred Security Beneficial
Owner's interests in such Global Certificates, except as provided in Section
9.7. Unless and until definitive, fully registered Preferred Security
Certificates (the "Definitive Preferred Security Certificates") have been issued
to the Preferred Security Beneficial Owners pursuant to Section 9.7:

          (a) the provisions of this Section 9.4 shall be in full force and
     effect;

          (b) the Trust and the Trustees shall be entitled to deal with the
     Clearing Agency for all purposes of this Declaration (including the payment
     of Distributions on the Global Certificates and receiving approvals, votes
     or consents hereunder) as the Holder of the Preferred Securities and the
     sole holder of the Global Certificates and shall have no obligation to the
     Preferred Security Beneficial Owners;

          (c) to the extent that the provisions of this Section 9.4 conflict
     with any other provisions of this Declaration, the provisions of this
     Section 9.4 shall control; and

          (d) the rights of the Preferred Security Beneficial Owners shall be
     exercised only through the Clearing Agency and shall be limited to those
     established by law and agreements between such Preferred Security
     Beneficial Owners and the Clearing Agency and/or the Clearing Agency
     Participants. The Clearing Agency will make book entry transfers among the
     Clearing Agency Participants and receive and transmit payments of
     Distributions on the Global Certificates to such Clearing Agency
     Participants.

SECTION 9.5. Notices to Clearing Agency.

     Whenever a notice or other communication to the Preferred Security Holders
is required under this Declaration, unless and until Definitive Preferred
Security Certificates shall have been issued to the Preferred Security
Beneficial Owners pursuant to Section 9.7, the Regular Trustees shall give all

<PAGE>
                                      -42-


such notices and communications specified herein to be given to the Preferred
Security Holders to the Clearing Agency, and shall have no notice obligations to
the Preferred Security Beneficial Owners.

SECTION 9.6. Appointment of Successor Clearing Agency.

     If any Clearing Agency elects to discontinue its services as securities
depositary with respect to the Preferred Securities, the Regular Trustees may,
in their sole discretion, appoint a successor Clearing Agency with respect to
the Preferred Securities.

SECTION 9.7. Definitive Preferred Security Certificates.

     If:

          (a) a Clearing Agency elects to discontinue its services as securities
     depositary with respect to the Preferred Securities and a successor
     Clearing Agency is not appointed within 90 days after such election
     pursuant to Section 9.6; or

          (b) the Regular Trustees elect after consultation with the Sponsor to
     terminate the book entry system through the Clearing Agency with respect to
     the Preferred Securities,

     then:

          (c) Definitive Preferred Security Certificates shall be prepared by
     the Regular Trustees on behalf of the Trust with respect to the Preferred
     Securities; and

          (d) upon surrender of the Global Certificates by the Clearing Agency,
     accompanied by registration instructions, the Regular Trustees shall cause
     Definitive Preferred Security Certificates to be delivered to Preferred
     Security Beneficial Owners in accordance with the instructions of the
     Clearing Agency. Neither the Trustees nor the Trust shall be liable for any
     delay in delivery of such instructions and each of them may conclusively
     rely on and shall be protected in relying on, said instructions of the
     Clearing Agency. The Definitive Preferred Security Certificates shall be
     printed, lithographed or engraved or may be produced in any other manner as
     is reasonably acceptable to the Regular Trustees, as evidenced by their
     execution thereof, and may have such letters, numbers or


<PAGE>
                                      -43-


     other marks of identification or designation and such legends or
     endorsements as the Regular Trustees may deem appropriate, or as may be
     required to comply with any law or with any rule or regulation made
     pursuant thereto or with any rule or regulation of any stock exchange on
     which the Preferred Securities may be listed, or to conform to usage.

SECTION 9.8. Mutilated, Destroyed, Lost or Stolen Certificates.

     If:

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

          (b) there shall be delivered to the Regular Trustees such security or
     indemnity as may be required by them to keep each of them harmless,

then, in the absence of notice that such Certificate shall have been acquired by
a bona fide purchaser, any two Regular Trustees on behalf of the Trust shall
execute and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Certificate, a new Certificate of like denomination.
In connection with the issuance of any new Certificate under this Section 9.8,
the Regular Trustees may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection therewith.
Any duplicate Certificate issued pursuant to this Section shall constitute
conclusive evidence of an ownership interest in the relevant Securities, as if
originally issued, whether or not the lost, stolen or destroyed Certificate
shall be found at any time.


                                    ARTICLE X

                           LIMITATION OF LIABILITY OF
                    HOLDERS OF SECURITIES, TRUSTEES OR OTHERS


SECTION 10.1. Liability.

     (a) Except as expressly set forth in this Declaration, the Securities
Guarantees and the terms of the Securities, the Sponsor shall not be:


<PAGE>
                                      -44-


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

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

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

     (c) Pursuant to ss. 3803(a) of the Business Trust Act, the Holders of the
Preferred Securities shall be entitled to the same limitation of personal
liability extended to stockholders of private corporations for profit organized
under the General Corporation Law of the State of Delaware.

SECTION 10.2. Exculpation.

     (a) No Indemnified Person shall be liable, responsible or accountable in
damages or otherwise to the Trust or any Covered Person for any loss, damage or
claim incurred by reason of any act or omission performed or omitted by such
Indemnified Person in good faith on behalf of the Trust and in a manner such
Indemnified Person reasonably believed to be within the scope of the authority
conferred on such Indemnified Person by this Declaration or by law, except that
an Indemnified Person shall be liable for any such loss, damage or claim
incurred by reason of such Indemnified Person's gross negligence (or, in the
case of the Property Trustee, 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 Trust and upon such information, opinions, reports or
statements presented to the Trust by any Person as to matters the Indemnified
Person reasonably believes are within such other Person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Trust, including information, opinions, reports or statements as to the value
and amount of the assets, liabilities, profits, losses, or any other facts
pertinent to the existence and amount of assets from which Distributions to
Holders of Securities might properly be paid.


<PAGE>
                                      -45-


SECTION 10.3. Fiduciary Duty.

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

     (b) Unless otherwise expressly provided herein:

          (i) whenever a conflict of interest exists or arises between any
     Covered Persons; or

          (ii) whenever this Declaration or any other agreement contemplated
     herein or therein provides that an Indemnified Person shall act in a manner
     that is, or provide terms that are, fair and reasonable to the Trust or any
     Holder,

the Indemnified Person shall resolve such conflict of interest, take such action
or provide such terms, considering in each case the relative interest of each
party (including its own interest) to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interests, any customary
or accepted industry practices, and any applicable generally accepted accounting
practices or principles. In the absence of bad faith by the Indemnified Person,
the resolution, action or term so made, taken or provided by the Indemnified
Person shall not constitute a breach of this Declaration or any other agreement
contemplated herein or of any duty or obligation of the Indemnified Person at
law or in equity or otherwise.

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

          (i) in its "discretion" or under a grant of similar authority, the
     Indemnified Person shall be entitled to consider such interests and factors
     as it desires, including its own interests, and shall have no duty or
     obliga-


<PAGE>
                                      -46-


     tion to give any consideration to any interest of or factors affecting the
     Trust or any other Person; or

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

SECTION 10.4. Indemnification and Reimbursement.

     (a) The Sponsor shall indemnify and hold harmless each Indemnified Person
from and against any loss, damage, liability, tax, penalty, expense or claim of
any kind or nature whatsoever incurred by such Indemnified Person by reason of
the creation, operation or termination of the Trust or any act or omission
performed or omitted by such Indemnified Person in good faith on behalf of the
Trust and in a manner such Indemnified Person reasonably believed to be within
the scope of authority conferred on such Indemnified Person by this Declaration,
except that no Indemnified Person shall be entitled to be indemnified in respect
of any loss, damage or claim incurred by such Indemnified Person by reason of
gross negligence (or, in the case of the Property Trustee, negligence) or
willful misconduct with respect to such acts or omissions.

     (b) Expenses (including legal fees and expenses) incurred by an Indemnified
Person in defending any claim, demand, action, suit or proceeding (whether such
claim, demand, action, suit or proceeding arises between the parties hereto or
results from suits involving third parties) shall, from time to time, be
advanced by the Sponsor prior to the final disposition of such claim, demand,
action, suit or proceeding upon receipt by the Sponsor of an undertaking by or
on behalf of the Indemnified Person to repay such amount if it shall be
determined that the Indemnified Person is not entitled to be indemnified as
authorized in Section 10.4(a). The indemnification set forth in this Section
10.4 shall survive the termination of this Declaration.

     (c) The Sponsor shall reimburse the Trustees upon request for all
reasonable expenses, disbursements and advances incurred or made by the Trustees
in accordance with any provision of this Declaration (including the reasonable
compensation and the expenses and disbursements of its agents and counsel).

     The Property Trustee shall have a lien prior to the Securities as to all
property and funds held by its hereunder


<PAGE>
                                      -47-


for any amount owing it or any predecessor Property Trustee pursuant to this
Section 10.4, except with respect to funds held in trust for the benefit of the
Holders of particular Securities.

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

SECTION 10.5. Outside Businesses.

     Any Covered Person, the Sponsor, the Delaware Trustee and the Property
Trustee may engage in or possess an interest in other business ventures of any
nature or description, independently or with others, similar or dissimilar to
the business of the Trust, and the Trust and the Holders shall have no rights by
virtue of this Declaration in and to such independent ventures or the income or
profits derived therefrom, and the pursuit of any such venture, even if
competitive with the business of the Trust, shall not be deemed wrongful or
improper. No Covered Person, the Sponsor, the Delaware Trustee, or the Property
Trustee shall be obligated to present any particular investment or other
opportunity to the Trust even if such opportunity is of a character that, if
presented to the Trust, could be taken by the Trust, and any Covered Person, the
Sponsor, the Delaware Trustee and the Property Trustee shall have the right to
take for its own account (individually or as a partner or fiduciary) or to
recommend to others any such particular investment or other opportunity. Any
Covered Person, the Delaware Trustee and the Property Trustee may engage or be
interested in any financial or other transaction with the Sponsor or any
Affiliate of the Sponsor, or may act as depositary for, trustee or agent for, or
act on any committee or body of holders of, securities or other obligations of
the Sponsor or its Affiliates.


                                   ARTICLE XI

                                   ACCOUNTING


SECTION 11.1. Fiscal Year.

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


<PAGE>
                                      -48-


SECTION 11.2. Certain Accounting Matters.

     (a) At all times during the existence of the Trust, the Regular Trustees
shall keep, or cause to be kept, full books of account, records and supporting
documents which shall reflect, in reasonable detail, each transaction of the
Trust. The books of account shall be maintained on the accrual method of
accounting, in accordance with generally accepted accounting principles,
consistently applied. The Trust shall use the accrual method of accounting for
United States federal income tax purposes. The books of account and the records
of the Trust shall be examined by and reported upon as of the end of each Fiscal
Year of the Trust by a firm of independent certified public accountants selected
by the Regular Trustees.

     (b) The Regular Trustees shall cause to be prepared and delivered to each
of the Holders, within 90 days after the end of each Fiscal Year of the Trust,
annual financial statements of the Trust, including a balance sheet of the Trust
as of the end of such Fiscal Year, and the related statements of income or loss.

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

     (d) The Regular Trustees shall cause to be duly prepared and filed with the
appropriate taxing authority an annual United States federal income tax return,
on a Form 1041 or such other form required by United States federal income tax
law, and any other annual income tax returns required to be filed by the Regular
Trustees on behalf of the Trust with any state or local taxing authority.

SECTION 11.3. Banking.

     The Trust shall maintain one or more bank accounts in the name and for the
sole benefit of the Trust; provided that all payments of funds in respect of the
Subordinated Notes held by the Property Trustee shall be made directly to the
Property Trustee Account and no other funds of the Trust shall be deposited in
the Property Trustee Account. The sole signatories for


<PAGE>
                                      -49-


such accounts shall be designated by the Regular Trustees; provided that the
Property Trustee shall designate the signatories for the Property Trustee
Account.

SECTION 11.4. Withholding.

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


                                   ARTICLE XII

                             AMENDMENTS AND MEETINGS


SECTION 12.1. Amendments.

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

          (i) the Regular Trustees (or, if there are more than two Regular
     Trustees, a majority of the Regular Trustees);

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


<PAGE>
                                      -50-


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

          (iv) if the amendment affects the rights, powers, duties, obligations
     or immunities of the Sponsor, the Sponsor.

     (b) No amendment shall be made, and any purported amendment shall be void
and ineffective:

          (i) unless, in the case of any proposed amendment, the Property
     Trustee shall have first received:

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

               (B) an opinion of counsel (who may be counsel to the Sponsor or
          the Trust) that such amendment is permitted by, and conforms to, the
          terms of this Declaration (including the terms of the Securities);

          (ii) unless, in the case of any proposed amendment which affects the
     rights, powers, duties, obligations or immunities of the Property Trustee,
     the Property Trustee shall have first received:

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


<PAGE>
                                      -51-


               (B) an opinion of counsel (who may be counsel to the Sponsor or
          the Trust) that such amendment is permitted by, and conforms to, the
          terms of this Declaration (including the terms of the Securities); and

          (iii) to the extent the result of such amendment would be to:

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

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

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

     (c) If the Trust has any Securities outstanding, any amendment that would
adversely affect the rights, privileges or preferences of any Holder of such
Securities may be effected only with such additional requirements as may be set
forth in the terms of such Securities.

     (d) Section 9.1(c) and this Section 12.1 shall not be amended without the
consent of all of the Holders of the Securities.

     (e) Article IV shall not be amended without the consent of the Holders of a
Majority in liquidation amount of the Common Securities.

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

     (g) Notwithstanding Section 12.1(c), this Declaration may be amended
without the consent of the Holders of the Securities to:

               (i) cure any ambiguity;

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

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

               (iv) in the event the Trust is deemed not to be an Investment
          Company solely by reason of Rule 3a-7, conform to any change in Rule
          3a-7 or written change in interpretation or application of Rule 3a-7
          by any legislative body, court, government agency or regulatory
          authority which amendment does not have a material adverse effect on
          the rights, preferences or privileges of the Holders; and


<PAGE>
                                      -52-


               (v) cause the Trust to continue to be classified for purposes of
          United States federal income taxation as a grantor trust; provided
          that such amendment does not have a material adverse effect on the
          rights, preferences or privileges of the Holders.

SECTION 12.2. Meetings of the Holders; Action by Written Consent.

     (a) Meetings of the Holders of any class of Securities may be called at any
time by the Regular Trustees (or as provided in the terms of the Securities) to
consider and act on any matter on which Holders of such class of Securities are
entitled to act under the terms of this Declaration, the terms of the Securities
or the rules of any stock exchange on which the Preferred Securities are listed
or admitted for trading. The Regular Trustees shall call a meeting of the
Holders of such class if directed to do so by the Holders of at least 10% in
liquidation amount of such class of Securities. Such direction shall be given by
delivering to the Regular Trustees one or more calls in a writing stating that
the signing Holders wish to call a meeting and indicating the general or
specific purpose for which the meeting is to be called. Any Holders calling a
meeting shall specify in writing the Security Certificates held by the Holders
exercising the right to call a meeting and only those Securities specified shall
be counted for purposes of determining whether the required percentage set forth
in the second sentence of this paragraph has been met.

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

          (i) notice of any such meeting shall be given to all the Holders of
     Securities having a right to vote thereat at least 7 days and not more than
     60 days before the date of such meeting. Whenever a vote, consent or
     approval of Holders is permitted or required under this Declaration or the
     rules of any stock exchange on which the Preferred Securities are listed or
     admitted for trading, such vote, consent or approval may be given at a
     meeting of such Holders. Any action that may be taken at a meeting of
     Holders may be taken without a meeting if a consent in writing setting
     forth the action so taken is signed by Holders owning not less than the
     minimum amount of Securities in liquidation amount that would be necessary
     to authorize or take such action at a meeting at which all Holders of
     Securities having a right to vote thereon were


<PAGE>
                                      -53-


     present and voting. Prompt notice of the taking of action without a meeting
     shall be given to the Holders of Securities entitled to vote who have not
     consented in writing. The Regular Trustees may specify that any written
     consent submitted to Holders for the purpose of taking any action without a
     meeting shall be returned to the Trust within the time specified by the
     Regular Trustees;

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

          (iii) each meeting of Holders shall be conducted by the Regular
     Trustees or by such other Person that the Regular Trustees may designate;
     and

          (iv) unless the Business Trust Act, this Declaration, the terms of the
     Securities, the Trust Indenture Act or the listing rules of any stock
     exchange on which the Preferred Securities are then listed or trading
     otherwise provides, the Regular Trustees, in their sole discretion, shall
     establish all other provisions relating to meetings of Holders, including
     notice of the time, place or purpose of any meeting at which any matter is
     to be voted on by any Holders, waiver of any such notice, action by consent
     without a meeting, the establishment of a record date, quorum requirements,
     voting in person or by proxy or any other matter with respect to the
     exercise of any such right to vote.



<PAGE>
                                      -54-


                                  ARTICLE XIII

            REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE


SECTION 13.1. Representations and Warranties of Property Trustee.

     The Trustee that acts as initial Property Trustee represents and warrants
to the Trust and to the Sponsor at the date of this Declaration, and each
successor Property Trustee represents and warrants to the Trust and the Sponsor
at the time of the successor Property Trustee's acceptance of its appointment as
Property Trustee, that:

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

          (b) the execution, delivery and performance by the Property Trustee of
     the Declaration has been duly authorized by all necessary corporate action
     on the part of the Property Trustee. The Declaration has been duly executed
     and delivered by the Property Trustee, and it constitutes a legal, valid
     and binding obligation of the Property Trustee, enforceable against it in
     accordance with its terms, subject to applicable bankruptcy,
     reorganization, moratorium, insolvency, and other similar laws affecting
     creditors' rights generally and to general principles of equity and the
     discretion of the court (regardless of whether the enforcement of such
     remedies is considered in a proceeding in equity or at law);

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

          (d) no consent, approval or authorization of, or registration with or
     notice to, any Massachusetts or Connecticut State or Federal banking
     authority is required for the execution, delivery or performance by the
     Property Trustee of the Declaration; and

          (e) the Property Trustee has made a filing under Section 131.3 of the
     New York Banking Law.


<PAGE>
                                      -55-


SECTION 13.2. Representations and Warranties of Delaware Trustee.

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

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

          (b) the Delaware Trustee has been authorized to perform its
     obligations under the Certificate of Trust and the Declaration. The
     Declaration under Delaware law constitutes a legal, valid and binding
     obligation of the Delaware Trustee, enforceable against it in accordance
     with its terms, subject to applicable bankruptcy, reorganization,
     moratorium, insolvency, and other similar laws affecting creditors' rights
     generally and to general principles of equity and the discretion of the
     court (regardless of whether the enforcement of such remedies is considered
     in a proceeding in equity or at law);

          (c) no consent, approval or authorization of, or registration with or
     notice to, any Delaware State or Federal banking authority is required for
     the execution, delivery or performance by the Delaware Trustee of the
     Declaration; and

          (d) the Delaware Trustee is a natural person who is a resident of the
     State of Delaware or, if not a natural person, an entity which has its
     principal place of business in the State of Delaware.



<PAGE>
                                      -56-


                                   ARTICLE XIV

                                  MISCELLANEOUS


SECTION 14.1. Notices.

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

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

                 XL Capital Trust [  ]
                 c/o XL Capital Ltd
                 XL House
                 One Bermudiana Road
                 Hamilton HM11
                 Bermuda
                 Attention:  Paul S. Giordano

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

                 First Union Trust Company
                 One Rodney Square
                 920 King Street, Suite 102
                 Wilmington, Delaware 19801
                 Attention: Corporate Trust Administration

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

                 State Street Bank and Trust Company
                 225 Asylum Street - 23rd Floor
                 Hartford, Connecticut 06103
                 Attention: Corporate Trust Administration  (XL Capital Ltd)

          (d) if given to the Holder of the Common Securities, at the mailing
     address of the Sponsor set forth below (or


<PAGE>
                                      -57-


     such other address as the Holder of the Common Securities may give notice
     of to the Trust):

                 XL Capital Ltd
                 XL House
                 One Bermudiana Road
                 Hamilton HM11
                 Bermuda
                 Attention:  Paul S. Giordano

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

     All such notices shall be deemed to have been given when received.

SECTION 14.2. Governing Law.

     This Declaration and the rights of the parties hereunder shall be governed
by and interpreted in accordance with the laws of the State of Delaware and all
rights and remedies shall be governed by such laws without regard to principles
of conflict of laws.

SECTION 14.3. Intention of the Parties.

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

SECTION 14.4. Headings.

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

SECTION 14.5. Successors and Assigns.

     Whenever in this Declaration any of the parties hereto is named or referred
to, the successors and assigns of such party shall be deemed to be included, and
all covenants and agreements in this Declaration by the Sponsor and the Trustees
shall bind and inure to the benefit of their respective successors and assigns,
whether so expressed.


<PAGE>
                                      -58-


SECTION 14.6. Partial Enforceability.

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

SECTION 14.7. Counterparts.

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



                                      -59-

<PAGE>


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


                               ---------------------------------
                               Brian M. O'Hara, as Trustee


                               ---------------------------------
                               Jerry de St. Paer, as Trustee


                               --------------------------------
                               Paul S. Giordano, as Trustee



                               FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION,
                                        as Delaware Trustee



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



                               STATE STREET BANK AND TRUST COMPANY,
                                        as Property Trustee



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

<PAGE>
                                      -60-


     IN WITNESS WHEREOF, XL CAPITAL LTD, as Sponsor, has caused this Amended and
restated Declaration of Trust to be duly executed as a deed the day and year
first before written.

The common seal of )
XL CAPITAL LTD     )
was hereunto       )
affixed in the     )
presence of        )




______________________________
Name:
Title:


Witness:


______________________________
Name:
Title:



<PAGE>



                                     ANNEX I


                                    TERMS OF
                         [ ]% TRUST PREFERRED SECURITIES
                                COMMON SECURITIES


     Further to Section 7.1 of the Amended and Restated Declaration of Trust,
dated as of , (as amended from time to time, the "Declaration"), the
designation, rights, privileges, restrictions, preferences and other terms and
provisions of the Preferred Securities and the Common Securities are set out
below (each capitalized term used but not defined herein has the meaning set
forth in the Declaration or, if not defined in such Declaration, as defined in
the Prospectus referred to below):

     (1) Designation and Amount.

     (a) Preferred Securities. Preferred Securities of the Trust with an
aggregate liquidation amount with respect to the assets of the Trust of [ ]
dollars ($[ ]) and a liquidation amount with respect to the assets of the Trust
of $[ ] per preferred security, are hereby designated for the purposes of
identification only as "[ ]% Trust Preferred Securities" (the "Preferred
Securities"). The Preferred Security Certificates evidencing the Preferred
Securities shall be substantially in the form of Exhibit A-1 to the Declaration,
with such changes and additions thereto or deletions therefrom as may be
required by ordinary usage, custom or practice or to conform to the rules of any
stock exchange on which the Preferred Securities are listed.

     (b) Common Securities. Common Securities of the Trust with an aggregate
liquidation amount with respect to the assets of the Trust of [ ] dollars ($[ ])
and a liquidation amount with respect to the assets of the Trust of $[ ] per
common security, are hereby designated for the purposes of identification only
as "Common Securities" (the "Common Securities"). The Common Security
Certificates evidencing the Common Securities shall be substantially in the form
of Exhibit A-2 to the Declaration, with such changes and additions thereto or
deletions therefrom as may be required by ordinary usage, custom or practice.


                                      I-1

<PAGE>


     (2) Distributions.

     (a) Distributions payable on each Security will be fixed at a rate per
annum of [ ]% (the "Coupon Rate") of the stated liquidation amount of $[ ] per
Security, such rate being the rate of interest payable on the Subordinated Notes
to be held by the Property Trustee. Distributions in arrears for more than one
quarter will bear interest thereon compounded quarterly at the Coupon Rate (to
the extent permitted by applicable law). The term "Distributions" as used herein
includes such cash distributions and any such interest payable unless otherwise
stated. A Distribution is payable only to the extent that payments are made in
respect of the Subordinated Notes held by the Property Trustee and to the extent
the Property Trustee has funds available therefor in the Payment Account. The
amount of Distributions payable for any period will be computed for any full
quarterly Distribution period on the basis of a 360-day year of twelve 30-day
months, and for any period shorter than a full quarterly Distribution period for
which Distributions are computed, Distributions will be computed on the basis of
the actual number of days elapsed per 90-day quarter.

     (b) Distributions on the Securities will be cumulative, will accrue from
the date of original issuance, and will be payable quarterly in arrears, on , ,
and of each year, commencing on [ , ]], except as otherwise described below. The
Distribution payable on [ , ], which will be based on a period shorter than a
full quarter, will be in an amount of $[. ] per Preferred Security. The
Subordinated Note Issuer has the right under the Indenture to defer payments of
interest by extending the interest payment period from time to time on the
Subordinated Notes for a period not exceeding 20 consecutive quarters (each an
"Extension Period"), provided that no Extension Period shall last beyond the
date of maturity of the Subordinated Notes. As a consequence of such deferral,
Distributions will also be deferred. Despite such deferral, quarterly
Distributions will continue to accrue with interest thereon at the Coupon Rate
compounded quarterly during any such Extension Period (to the extent permitted
by applicable law). Prior to the termination of any such Extension Period, the
Subordinated Note Issuer may further extend such Extension Period; provided that
such Extension Period together with all previous and such further extensions
thereof may not exceed 20 consecutive quarters or last beyond the date of
maturity of the Subordinated Notes. Payments of accrued Distributions will be
payable to Holders as they appear on the books and records of the Trust on the
first


                                      I-2
<PAGE>


record date for the payment of Distributions after the end of the Extension
Period. Upon the termination of any Extension Period and the payment of all
amounts then due, the Subordinated Note Issuer may commence a new Extension
Period, subject to the above requirements.

     (c) Distributions on the Securities will be payable to the Holders thereof
as they appear on the books and records of the Trust on the relevant record
dates. While the Preferred Securities remain in book-entry only form, the
relevant record dates shall be one Business Day prior to the relevant payment
dates which payment dates correspond to the interest payment dates on the
Subordinated Notes. Subject to any applicable laws and regulations and the
provisions of the Declaration, each such payment in respect of the Preferred
Securities will be made as described under the heading "Description of the Trust
Preferred Securities -- Book-Entry Only Issuance -- The Depository Trust
Company" in the Prospectus, dated , (the "Base Prospectus") (collectively with
the Prospectus Supplement, dated , (the "Prospectus Supplement"), the
"Prospectus") that forms part of the Registration Statement on Form S-3 of the
Sponsor (in its capacity as the Subordinated Note Issuer and the issuer of the
Preferred Securities Guarantee) and the Trust (Reg. No. 333- ). The relevant
record dates for the Common Securities shall be the same record dates as for the
Preferred Securities. If the Preferred Securities shall not continue to remain
in book-entry only form, the relevant record dates for the Preferred Securities
shall conform to the rules of any securities exchange on which such securities
are listed and, if none, shall be selected by the Regular Trustees, which dates
shall be at least one Business Day but less than 60 Business Days before the
relevant payment dates, which payment dates correspond to the interest payment
dates on the Subordinated Notes. Distributions payable on any Securities that
are not punctually paid on any Distribution payment date, as a result of the
Subordinated Note Issuer having failed to make a payment under the Subordinated
Notes, will cease to be payable to the Person in whose name such Securities are
registered on the relevant regular record date, and such defaulted Distribution
will instead be payable to the Person in whose name such Securities are
registered on the special record date or other specified date determined in
accordance with the Indenture for the making of such payment. If any date on
which Distributions are payable on the Securities is not a Business Day, then
payment of the Distribution payable on such date will be made on the next
succeeding day that is a Business Day (and without any interest or other payment
in respect of any such delay) except that, if such Business Day is in the next
suc-


                                      I-3
<PAGE>


ceeding calendar year, such payment shall be made on the immediately preceding
Business Day, in each case with the same force and effect as if made on such
date.

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

     (3) Liquidation Distribution Upon Dissolution.

     In the event of any voluntary or involuntary dissolution, winding-up or
termination of the Trust, the Holders on the date of the dissolution, winding-up
or termination, as the case may be, will be entitled to receive out of the
assets of the Trust available for distribution to Holders after satisfaction of
liabilities of creditors an amount equal to the aggregate of the liquidation
amount of $[ ] per Security plus accrued and unpaid Distributions thereon to the
date of payment (such amount being the "Liquidation Distribution"), unless, in
connection with such dissolution, winding-up or termination, Subordinated Notes
in an aggregate principal amount equal to the aggregate liquidation amount of
such Securities, with an interest rate equal to the Coupon Rate of, and bearing
accrued and unpaid interest in an amount equal to the accrued and unpaid
Distributions on, such Securities, shall be distributed on a Pro Rata basis to
the Holders of the Securities in exchange for such Securities.

     If, upon any such dissolution, the Liquidation Distribution can be paid
only in part because the Trust has insufficient assets available to pay in full
the aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Securities shall be paid on a Pro Rata basis.

     (4) Redemption and Distribution.

     (a) Upon the repayment of the Subordinated Notes in whole or in part,
whether at maturity or upon redemption, the proceeds from such repayment shall
be simultaneously applied to redeem Securities having an aggregate liquidation
amount equal to the aggregate principal amount of the Subordinated Notes so
repaid or redeemed at a redemption price of $[ ] per Security plus an amount
equal to accrued and unpaid Distributions thereon at the date of the redemption,
payable in cash (the "Redemption Price"). Holders will be given not less than 30
nor more than 60 days notice of such redemption.


                                      I-4
<PAGE>


     (b) If fewer than all the outstanding Securities are to be so redeemed, the
Common Securities and the Preferred Securities will be redeemed Pro Rata and the
procedure for redeeming Preferred Securities will be as described in Section
4(f)(ii) below.

     (c) If a Tax Event or an Investment Company Event (each as defined below,
and each a "Special Event") shall occur and be continuing, the Regular Trustees
shall, except in certain limited circumstances in relation to a Tax Event
described in this Section 4(c), dissolve the Trust and, after satisfaction of
liabilities to creditors, cause Subordinated Notes held by the Property Trustee,
having an aggregate principal amount equal to the aggregate stated liquidation
amount of, with an interest rate identical to the Coupon Rate of, and accrued
and unpaid interest equal to accrued and unpaid Distributions on, and having the
same record date for payment, as the Securities, to be distributed to the
Holders in liquidation of such Holders' interests in the Trust on a Pro Rata
basis, within 90 days following the occurrence of such Special Event (the "90
Day Period"); provided that, as a condition of such dissolution and
distribution, the Regular Trustees shall have received an opinion of a
nationally recognized independent tax counsel experienced in such matters (a "No
Recognition Opinion"), which opinion may rely on published revenue rulings of
the Internal Revenue Service, to the effect that the Holders will not recognize
any gain or loss for United States federal income tax purposes as a result of
the dissolution of the Trust and the distribution of Subordinated Notes, and
provided, further, that, if at the time there is available to the Trust the
opportunity to eliminate, within the 90 Day Period, the Special Event by taking
some ministerial action, such as filing a form or making an election, or
pursuing some other similar reasonable measure that has no adverse effect on the
Trust, the Subordinated Note Issuer, the Sponsor or the Holders ("Ministerial
Action"), the Trust will pursue such Ministerial Action in lieu of dissolution.

     If, in the case of the occurrence and continuation of a Tax Event, the
Regular Trustees shall have been informed by such tax counsel that a No
Recognition Opinion cannot be delivered to the Trust, the Subordinated Note
Issuer shall have the right at any time, upon not less than 30 nor more than 60
days notice, to redeem the Subordinated Notes in whole or in part for cash
within 90 days following the occurrence of such Tax Event, and, following such
redemption, Securities with an aggregate liquidation amount equal to the
aggregate principal amount of the Subordinated Notes so redeemed shall be
redeemed



                                      I-5
<PAGE>

by the Trust at the Redemption Price on a Pro Rata basis; provided that, if at
the time there is available to the Trust the opportunity to eliminate, within
such 90 day period, the Tax Event by taking some Ministerial Action, the Trust
or the Subordinated Note Issuer will pursue such Ministerial Action in lieu of
redemption.

     "Tax Event" means that the Regular Trustees shall have received an opinion
from a nationally recognized independent tax counsel experienced in such matters
(a "Tax Event Opinion") to the effect that, on or after the date of the
Prospectus Supplement, as a result of (a) any amendment to, or change (including
any announced prospective change) in, the laws (or any regulations thereunder)
of the United States or any political subdivision or taxing authority thereof or
therein or (b) any amendment to, or change in, an interpretation or application
of any such laws or regulations by any legislative body, court, governmental
agency or regulatory authority, in each case which amendment or change is
enacted, promulgated, issued or announced or which interpretation or
pronouncement is issued or announced or which action is taken, on or after the
date of the Prospectus Supplement, there is more than an insubstantial risk that
(i) the Trust is, or will be within 90 days of the date thereof, subject to
United States federal income tax with respect to interest accrued or received on
the Subordinated Notes, or (ii) the Trust is, or will be within 90 days of the
date thereof, subject to more than a de minimis amount of taxes, duties or other
governmental charges.

     "Investment Company Event" means that the Regular Trustees shall have
received an opinion from a nationally recognized independent counsel experienced
in practice under the Investment Company Act that, as a result of the occurrence
of a change in law or regulation or a written change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority (a "Change in 1940 Act Law"), there is a more
than an insubstantial risk that the Trust is or will be considered an Investment
Company which is required to be registered under the Investment Company Act,
which Change in 1940 Act Law becomes effective on or after the date of the
Prospectus Supplement.

     On and from the date fixed by the Regular Trustees for any distribution of
Subordinated Notes and dissolution of the Trust: (i) the Securities will no
longer be deemed to be outstanding and (ii) DTC (the "Depository") or its
nominee (or any successor Clearing Agency or its nominee), as the record Holder
of the Preferred Securities, will receive a registered



                                      I-6
<PAGE>

global certificate or certificates representing the Subordinated Notes to be
delivered upon such distribution and any certificates representing Securities,
except for certificates representing Preferred Securities held by the Depository
or its nominee (or any successor Clearing Agency or its nominee), will be deemed
to represent beneficial interests in the Subordinated Notes having an aggregate
principal amount equal to the aggregate stated liquidation amount of, with an
interest rate identical to the Coupon Rate of, and accrued and unpaid interest
equal to accrued and unpaid Distributions on such Securities until such
certificates are surrendered or presented to the Subordinated Note Issuer or its
agent for transfer or reissue.

     (d) The Trust may not redeem fewer than all the outstanding Securities
unless all accrued and unpaid Distributions have been paid on all Securities for
all quarterly Distribution periods terminating on or before the date of
redemption. (e) If the Subordinated Notes are distributed to holders of the
Securities, pursuant to the terms of the Indenture the Subordinated Note Issuer
will use its best efforts to have the Subordinated Notes listed on the New York
Stock Exchange, Inc. or on such other national securities exchange or with The
Nasdaq Stock Market or such other organization as the Preferred Securities were
listed immediately prior to the distribution of the Subordinated Notes.

     (f) The following provisions shall apply to any call for redemption of
Securities or any distribution of Subordinated Notes to Holders:

          (i) Notice of any redemption of, or notice of distribution of
     Subordinated Notes in exchange for, Securities (a "Redemption/Distribution
     Notice") will be given by the Trust by mail to each Holder of Securities to
     be redeemed or exchanged not fewer than 30 nor more than 60 days before the
     date fixed for redemption or exchange thereof which, in the case of a
     redemption, will be the date fixed for redemption of the Subordinated
     Notes. For purposes of the calculation of the date of redemption or
     exchange and the dates on which notices are given pursuant to this Section
     4(f)(i), a Redemption/Distribution Notice shall be deemed to be given on
     the day such notice is first mailed by first-class mail, postage prepaid,
     to Holders. Each Redemption/Distribution Notice shall be addressed to each
     Holder at the address of such Holder appearing in the books and records of
     the Trust. No defect in the Redemption/Distribution Notice or in the
     mailing of



                                      I-7
<PAGE>

     either thereof with respect to any Holder shall affect the validity of the
     redemption or exchange proceedings with respect to any other Holder.

          (ii) In the event that fewer than all the outstanding Securities are
     to be redeemed, the Securities to be redeemed shall be redeemed Pro Rata
     from each Holder of Securities, it being understood that in respect of
     Preferred Securities registered in the name of and held of record by the
     Depository or its nominee (or any successor Clearing Agency or its
     nominee), the distribution of the proceeds of such redemption will be made
     to each Clearing Agency Participant (or Person on whose behalf such
     Clearing Agency or nominee holds such securities) by lot in accordance with
     the procedures applied by such agency or nominee.

          (iii) If Securities are to be redeemed and the Trust gives a
     Redemption/Distribution Notice, which notice may only be issued if the
     Subordinated Notes are redeemed as set out in this Section 4 (which notice
     will be irrevocable), then (A) while the Preferred Securities are in
     book-entry only form, with respect to the Preferred Securities, by 12:00
     noon, New York City time, on the redemption date, the Property Trustee will
     deposit irrevocably with the Depository or its nominee (or successor
     Clearing Agency or its nominee) immediately available funds sufficient to
     pay the applicable Redemption Price with respect to the Preferred
     Securities and will give the Depository irrevocable instructions and
     authority to pay the Redemption Price to the Holders of the Preferred
     Securities; provided that the Subordinated Note Issuer has deposited with
     the Property Trustee a sufficient amount of cash in connection with the
     related redemption or maturity of the Subordinated Notes by 10:00 a.m., New
     York City time, on the redemption date, and (B) with respect to Preferred
     Securities issued in definitive form and Common Securities, the Property
     Trustee will pay the relevant Redemption Price to the Holders of such
     Securities by check mailed to the address of the relevant Holder appearing
     on the books and records of the Trust on the redemption date; provided that
     the Subordinated Note Issuer has deposited with the Property Trustee a
     sufficient amount of cash in connection with the related redemption or
     maturity of the Subordinated Notes, prior to such mailing. If a
     Redemption/Distribution Notice shall have been given and funds deposited
     with the Property Trustee on or before the redemption date as required,
     then immediately prior to the close of business on the redemp-



                                      I-8
<PAGE>

     tion date Distributions will cease to accrue on the Securities so called
     for redemption and all rights of Holders of such Securities so called for
     redemption will cease, except the right of the Holders of such Securities
     to receive the Redemption Price, but without interest on such Redemption
     Price. Neither the Regular Trustees nor the Trust shall be required to
     register or cause to be registered the transfer of any Securities that have
     been so called for redemption. If any date fixed for redemption of
     Securities is not a Business Day, then payment of the Redemption Price
     payable on such date will be made on the next succeeding day that is a
     Business Day (and without any interest or other payment in respect of any
     such delay) except that, if such Business Day falls in the next calendar
     year, such payment will be made on the immediately preceding Business Day,
     in each case with the same force and effect as if made on such date fixed
     for redemption. If payment of the Redemption Price in respect of any
     Securities is improperly withheld or refused and not paid on the redemption
     date either by the Property Trustee or by the Sponsor as guarantor pursuant
     to the relevant Securities Guarantee, Distributions on such Securities will
     continue to accrue from the original redemption date to the actual date of
     payment, in which case the actual payment date will be considered the date
     fixed for redemption for purposes of calculating the Redemption Price.

          (iv) Redemption/Distribution Notices shall be sent by the Regular
     Trustees on behalf of the Trust to (A) in respect of the Preferred
     Securities, the Depository or its nominee (or any successor Clearing Agency
     or its nominee) if the Global Certificates have been issued or, if
     Definitive Preferred Security Certificates have been issued, to the Holders
     thereof at their addresses appearing on the books and records of the Trust,
     and (B) in respect of the Common Securities to the Holder thereof.

          (v) Subject to the foregoing and applicable law (including, without
     limitation, United States federal securities laws), the Sponsor or any of
     its subsidiaries may at any time and from time to time purchase outstanding
     Preferred Securities by tender, in the open market or by private agreement.



                                      I-9
<PAGE>

     (5) Voting Rights - Preferred Securities.

     (a) Except as provided under Sections 5(b) and 7 and as otherwise required
by law and the Declaration, the Holders of the Preferred Securities will have no
voting rights.

     (b) Subject to the requirements set forth in this paragraph, the Holders of
a Majority in liquidation amount of the Preferred Securities, voting separately
as a class, may direct the time, method, and place of conducting any proceeding
for any remedy available to the Property Trustee, or exercising any trust or
power conferred upon the Property Trustee under the Declaration, including (i)
directing the time, method, place of conducting any proceeding for any remedy
available to the Subordinated Note Trustee, or exercising any trust or power
conferred on the Subordinated Note Trustee with respect to the Subordinated
Notes, (ii) waive any past default and its consequences that is waivable under
Section 6.04 of the Indenture, or (iii) exercise any right to rescind or annul a
declaration that the principal of all the Subordinated Notes shall be due and
payable; provided that where a consent under the Indenture would require the
consent or act of the Holders of greater than a majority in principal amount of
Subordinated Notes affected thereby (a "Super Majority"), the Property Trustee
may only give such consent or take such action at the direction of the Holders
of at least the proportion in liquidation amount of the Preferred Securities
outstanding which the relevant Super Majority represents of the aggregate
principal amount of the Subordinated Notes outstanding. The Property Trustee
shall not revoke any action previously authorized or approved by a vote of the
Holders of the Preferred Securities. Other than with respect to directing the
time, method and place of conducting any remedy available to the Property
Trustee or the Subordinated Note Trustee as set forth above, the Property
Trustee shall not take any action in accordance with the directions of the
Holders of the Preferred Securities under this paragraph unless the Property
Trustee has received an opinion of tax counsel to the effect that for the
purposes of United States federal income tax the Trust will not be classified as
other than a grantor trust on account of such action. If the Property Trustee
fails to enforce its rights under the Declaration, any Holder of Preferred
Securities may, to the extent permitted by applicable law, institute a legal
proceeding directly against any Person to enforce the Property Trustee's rights
under the Declaration without first instituting a legal proceeding against the
Property Trustee or any other Person. If an Event of Default occurs that results
from the failure of the Subordinated Note Issuer to pay principal of or interest
on the



                                      I-10
<PAGE>

Subordinated Notes when due, then during the continuance of such Event of
Default each Holder of Preferred Securities may directly institute proceedings
against the Subordinated Note Issuer to obtain payment to such Holder of an
amount equal to the principal or interest so defaulted on with respect to
Subordinated Notes in a principal amount equal to the aggregate liquidation
amount of the Preferred Securities owned by such Holder. No Holder of Preferred
Securities will be entitled to exercise directly against the Subordinated Note
Issuer any other remedy available to the Property Trustee, as the record holder
of the Subordinated Notes, unless the Property Trustee first fails to exercise
such remedy.

     Any approval or direction of Holders of Preferred Securities may be given
at a separate meeting of Holders of Preferred Securities convened for such
purpose, at a meeting of all of the Holders of Securities in the Trust or
pursuant to written consent. The Regular Trustees will cause a notice of any
meeting at which Holders of Preferred Securities are entitled to vote, or of any
matter upon which action by written consent of such Holders is to be taken, to
be mailed to each Holder of record of Preferred Securities. Each such notice
will include a statement setting forth (i) the date of such meeting or the date
by which such action is to be taken, (ii) a description of any resolution
proposed for adoption at such meeting on which such Holders are entitled to vote
or of such matter upon which written consent is sought and (iii) instructions
for the delivery of proxies or consents.

     No vote or consent of the Holders of the Preferred Securities will be
required for the Trust to redeem and cancel Preferred Securities or to
distribute the Subordinated Notes in accordance with the Declaration and the
terms of the Securities.

     Notwithstanding that Holders of Preferred Securities are entitled to vote
or consent under any of the circumstances described above, any of the Preferred
Securities that are owned by the Sponsor or any Affiliate of the Sponsor shall
not be entitled to vote or consent and shall, for purposes of such vote or
consent, be treated as if they were not outstanding.

     (6) Voting Rights - Common Securities.

     (a) Except as provided under Sections 6(b), (c) and 7 or as otherwise
required by law and the Declaration, the Holders of the Common Securities will
have no voting rights.



                                      I-11
<PAGE>

     (b) The Holders of the Common Securities are entitled, in accordance with
Article V of the Declaration, to vote to appoint, remove or replace any Trustee
or to increase or decrease the number of Trustees.

     (c) Subject to Section 2.6 of the Declaration and only after all Events of
Default with respect to the Preferred Securities have been cured, waived, or
otherwise eliminated and subject to the requirements of the penultimate sentence
of this paragraph, the Holders of a Majority in liquidation amount of the Common
Securities, voting separately as a class, may direct the time, method, and place
of conducting any proceeding for any remedy available to the Property Trustee,
or exercising any trust or power conferred upon the Property Trustee under the
Declaration, including (i) directing the time, method, place of conducting any
proceeding for any remedy available to the Subordinated Note Trustee, or
exercising any trust or power conferred on the Subordinated Note Trustee with
respect to the Subordinated Notes, (ii) waive any past default and its
consequences that is waivable under Section 6.04 of the Indenture, or (iii)
exercise any right to rescind or annul a declaration that the principal of all
the Subordinated Notes shall be due and payable; provided that where a consent
or action under the Indenture would require the consent or act of the Holders of
a Super Majority, the Property Trustee may only give such consent or take such
action at the direction of the Holders of at least the proportion in liquidation
amount of the Common Securities outstanding which the relevant Super Majority
represents of the aggregate principal amount of the Subordinated Notes
outstanding. Notwithstanding any vote pursuant to this Section 6(c), the
Property Trustee shall not revoke any action previously authorized or approved
by a vote of the Holders of the Preferred Securities. Other than with respect to
directing the time, method and place of conducting any remedy available to the
Property Trustee or the Subordinated Note Trustee as set forth above, the
Property Trustee shall not take any action in accordance with the directions of
the Holders of the Common Securities under this paragraph unless the Property
Trustee has received an opinion of tax counsel to the effect that for the
purposes of United States federal income tax the Trust will not be classified as
other than a grantor trust on account of such action. If the Property Trustee
fails to enforce its rights under the Declaration, any Holder of Common
Securities, to the extent permitted by applicable law, may institute a legal
proceeding directly against any Person to enforce the Property Trustee's rights
under the Declaration, without first instituting a legal proceeding against the
Property Trustee or any other Person.



                                      I-12
<PAGE>

     Any approval or direction of Holders of Common Securities may be given at a
separate meeting of Holders of Common Securities convened for such purpose, at a
meeting of all of the Holders of Securities in the Trust or pursuant to written
consent. The Regular Trustees will cause a notice of any meeting at which
Holders of Common Securities are entitled to vote, or of any matter upon which
action by written consent of such Holders is to be taken, to be mailed to each
Holder of record of Common Securities. Each such notice will include a statement
setting forth (i) the date of such meeting or the date by which such action is
to be taken, (ii) a description of any resolution proposed for adoption at such
meeting on which such Holders are entitled to vote or of such matter upon which
written consent is sought and (iii) instructions for the delivery of proxies or
consents.

     No vote or consent of the Holders of the Common Securities will be required
for the Trust to redeem and cancel Common Securities or to distribute the
Subordinated Notes in accordance with the Declaration and the terms of the
Securities.

     (7) Amendments to Declaration and Indenture.

     (a) In addition to any requirements under Section 12.1 of the Declaration,
if any proposed amendment to the Declaration provides for, or the Regular
Trustees otherwise propose to effect, (i) any action that would adversely affect
the powers, preferences or special rights of the Securities, whether by way of
amendment to the Declaration or otherwise, or (ii) the dissolution, winding-up
or termination of the Trust, other than under the circumstances described in
Section 8.1 of the Declaration, then the Holders of outstanding Securities will
be entitled to vote on such amendment or proposal (but not on any other
amendment or proposal) and such amendment or proposal shall not be effective
except with the approval of the Holders of at least a Majority in liquidation
amount of the Securities, voting together as a single class; provided that, if
any amendment or proposal referred to in clause (i) above would adversely affect
only the Preferred Securities or only the Common Securities, then only the
affected class will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of a
Majority in liquidation amount of such class of Securities.

     (b) In the event the consent of the Property Trustee as the holder of the
Subordinated Notes is required under the Indenture with respect to any amendment
or modification of the Indenture or the Subordinated Notes, the Property Trustee
shall



                                      I-13
<PAGE>

request the direction of the Holders of the Securities with respect to such
amendment or modification and shall vote with respect to such amendment or
modification as directed by a Majority in liquidation amount of the Securities
voting together as a single class; provided that where a consent under the
Indenture would require the consent of the holders of a Super Majority, the
Property Trustee may only give such consent at the direction of the Holders of
at least the proportion in liquidation amount of the Securities which the
relevant Super Majority represents of the aggregate principal amount of the
Subordinated Notes outstanding; provided, further, that the Property Trustee
shall not take any action in accordance with the directions of the Holders of
the Securities under this Section 7(b) unless the Property Trustee has received
an opinion of tax counsel to the effect that for the purposes of United States
federal income tax the Trust will not be classified as other than a grantor
trust on account of such action.

     (8) Pro Rata.

     A reference in these terms of the Securities to any payment, distribution
or treatment as being "Pro Rata" shall mean pro rata to each Holder of
Securities according to the aggregate liquidation amount of the Securities held
by the relevant Holder in relation to the aggregate liquidation amount of all
Securities outstanding unless, in relation to a payment, an Event of Default
under the Declaration in respect of the Preferred Securities has occurred and is
continuing, in which case any funds available to make such payment shall be paid
first to each Holder of the Preferred Securities pro rata according to the
aggregate liquidation amount of Preferred Securities held by the relevant Holder
relative to the aggregate liquidation amount of all Preferred Securities
outstanding, and only after satisfaction of all amounts owed to the Holders of
the Preferred Securities, then to each Holder of Common Securities pro rata
according to the aggregate liquidation amount of Common Securities held by the
relevant Holder relative to the aggregate liquidation amount of all Common
Securities outstanding.

     (9) Ranking.

     The Preferred Securities rank pari passu, and payment thereon shall be made
Pro Rata, with the Common Securities except that, where an Event of Default
occurs and is continuing under the Indenture in respect of the Subordinated
Notes held by the Property Trustee, the rights of Holders of the Common
Securities to payment in respect of Distributions and payments upon liquidation,
redemption and otherwise are subordinated to



                                      I-14
<PAGE>

the rights to payment of the Holders of the Preferred Securities.

     (10) Listing.

     The Regular Trustees shall use their best efforts to cause the Preferred
Securities to be listed for quotation on the New York Stock Exchange, Inc.

     (11) Acceptance of Securities Guarantee and Indenture.

     Each Holder of Preferred Securities and Common Securities, by the
acceptance thereof, agrees to the provisions of the Preferred Securities
Guarantee and the Common Securities Guarantee, respectively, and to the
provisions of the Indenture, including the subordination provisions of each
document.

     (12) No Preemptive Rights.

     The Holders of the Securities shall have no preemptive rights to subscribe
for any additional securities.

     (13) Miscellaneous.

     These terms constitute a part of the Declaration.

     The Sponsor will provide a copy of the Declaration, the Preferred
Securities Guarantee or the Common Securities Guarantee (as may be appropriate)
and the Indenture to a Holder without charge on written request to the Sponsor
at its principal place of business.

     (14) Agreement of Holders and Preferred Security Beneficial Owners.

     Every Person who becomes a Holder or a Preferred Security Beneficial Owner
shall be deemed to have agreed to treat the Subordinated Notes as indebtedness
for United States federal income tax purposes and the Preferred Securities as
evidence of an indirect beneficial ownership in the Subordinated Notes.




                                      I-15
<PAGE>


                                                                     EXHIBIT A-1


                     FORM OF PREFERRED SECURITY CERTIFICATE


     [IF THE PREFERRED SECURITY IS TO BE A GLOBAL CERTIFICATE INSERT - This
Preferred Security is a Global Certificate within the meaning of the Declaration
hereinafter referred to and is registered in the name of The Depository Trust
Company (the "Depositary") or a nominee of the Depositary. This Preferred
Security is exchangeable for Preferred Securities registered in the name of a
person other than the Depositary or its nominee only in the limited
circumstances described in the Declaration and no transfer of this Preferred
Security (other than a transfer of this Preferred Security as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary) may be registered except in
limited circumstances.

     Unless this Preferred Security is presented by an authorized representative
of The Depository Trust Company (55 Water Street, New York, New York) to the
Trust or its agent for registration of transfer, exchange or payment, and any
Preferred Security issued is registered in the name of Cede & Co. or such other
name as requested by an authorized representative of The Depository Trust
Company and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the
registered owner hereof, Cede & Co., has an interest herein.]

Certificate Number:                         Number of Preferred Securities

                                                               CUSIP NO.

                   Certificate Evidencing Preferred Securities

                                       of

                              XL CAPITAL TRUST [ ]


                         [ ]% Trust Preferred Securities
                (liquidation amount $[ ] per Preferred Security)


     XL Capital Trust [ ], a statutory business trust formed under the laws of
the State of Delaware (the "Trust"),



                                      A1-1
<PAGE>

hereby certifies that ______________ (the "Holder") is the registered owner of
_______ preferred securities of the Trust representing an undivided beneficial
interest in the assets of the Trust designated the [ ]% Trust Preferred
Securities (liquidation amount $[ ] per Preferred Security) (the "Preferred
Securities"). The Preferred Securities are transferable on the books and records
of the Trust, in person or by a duly authorized attorney, upon surrender of this
certificate duly endorsed and in proper form for transfer. The designations,
rights, privileges, restrictions, preferences and other terms and provisions of
the Preferred Securities are set forth in, and this certificate and the
Preferred Securities represented hereby are issued and shall in all respects be
subject to the terms and provisions of, the Amended and Restated Declaration of
Trust of the Trust dated as of , , as the same may be amended from time to time
(the "Declaration") including the designation of the terms of Preferred
Securities as set forth in Annex I to the Declaration. The Preferred Securities
and the Common Securities (as defined in the Declaration) issued by the Trust
pursuant to the Declaration represent undivided beneficial interests in the
assets of the Trust, including the Subordinated Notes (as defined in the
Declaration) issued by XL Capital Ltd, a Cayman Islands exempted limited company
("XL"), to the Trust pursuant to the Indenture referred to in the Declaration.
The Holder is entitled to the benefits of the Preferred Securities Guarantee
Agreement of XL dated as of , (the "Guarantee") to the extent provided therein.
The Trust will furnish a copy of the Declaration, the Guarantee and the
Indenture to the Holder without charge upon written request to the Trust at its
principal place of business or registered office.

     The Holder of this certificate, by accepting this certificate, is deemed to
have: (i) agreed to the terms of the Indenture and the Subordinated Notes,
including that the Subordinated Notes are subordinate and junior in right to
payment to all Senior Indebtedness (as defined in the Indenture) as and to the
extent provided in the Indenture; (ii) agreed to the terms of the Guarantee,
including that the Guarantee is (x) subordinate and junior in right to payment
to all other liabilities of XL, including the Subordinated Notes, except those
made pari passu or subordinated by their terms, (y) pari passu with the most
senior preferred or preference stock now or hereafter issued by XL and with any
guarantee now or hereafter entered into by XL in respect of any preferred or
preference stock of any affiliate of XL and (z) prior to XL's common stock; and
(iii) agreed to treat the Subordinated Notes as indebtedness for United States
federal income tax purposes and the Preferred Se-



                                      A1-2
<PAGE>

curities as evidence of an indirect beneficial ownership of the Subordinated
Notes.

     This certificate and the rights of the parties hereunder shall be governed
by and interpreted in accordance with the laws of the State of Delaware and all
rights and remedies shall be governed by such laws without regard to principles
of conflict of laws.

     Upon receipt of this certificate, the Holder is bound by the Declaration
and is entitled to the benefits thereunder.




                                      A1-3
<PAGE>


     IN WITNESS WHEREOF, the undersigned Regular Trustees of the Trust have
executed this certificate for and on behalf of the Trust.

Dated:            ,


                          XL CAPITAL TRUST [  ]



                          By:
                             ---------------------------------------------------
                                Regular Trustee


                          By:
                             ---------------------------------------------------
                                Regular Trustee


                          COUNTERSIGNED AND REGISTERED:

                          STATE STREET BANK AND TRUST   COMPANY
                          Transfer Agent and Registrar



                          By:
                             ---------------------------------------------------
                                 Authorized Signature



                                      A1-4
<PAGE>


The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM --as tenants in common               UNIF GIFT ACT ___ Custodian ___
TEN ENT --as tenants by the entireties                   (Cust)        (Minor)
JT TEN --as joint tenants with               Under Uniform Gifts to Minors
         right of survivorship and                            Act _________
         not as tenants in common                                  State)

     Additional abbreviations may also be used though not in the above list.

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


                                   ASSIGNMENT


     FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto:

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

          PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFICATION NUMBER
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
                Please print or typewrite name(s) and address(es)
                  including postal zip code(s), of assignee(s)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
       _______ of the Preferred Securities represented by this
       Certificate and does hereby irrevocably appoint
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
       attorney to transfer such Preferred Securities on the books of the Trust.
       The attorney may substitute another to act for him or her.

       Date:      _______________________


                                      A1-5
<PAGE>

       Signature: __________________
(Sign exactly as your name appears on the other side of this Preferred Security
Certificate)


       Signature: __________________
(Sign exactly as your name appears on the other side of this Preferred Security
Certificate)

*IMPORTANT READ CAREFULLY!


The signature(s) to this assignment must correspond with the name(s) as written
upon the face of the certificate in every particular without alteration,
enlargement or change whatsoever. The signature(s) of the person(s) executing
this power must be guaranteed by an eligible guarantor institution which, at the
time of issuing the guarantee, is a member of, or a participant in the medallion
signature guarantee program recognized by the Securities Transfer Association.





                                      A1-6
<PAGE>



                                   EXHIBIT A-2


                       FORM OF COMMON SECURITY CERTIFICATE


     THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR QUALIFIED UNDER ANY STATE
SECURITIES LAWS. THE SHARES MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF (EACH SUCH ACTION, A "TRANSFER") UNLESS
(A) EITHER (1) THE TRANSFER IS PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT, (2) THE TRANSFER IS TO AN AFFILIATE OF SUCH HOLDER OR (3) THE
TRUST SHALL HAVE BEEN FURNISHED WITH AN OPINION OF COUNSEL, WHICH OPINION OF
COUNSEL SHALL BE REASONABLY SATISFACTORY TO THE TRUST, TO THE EFFECT THAT NO
REGISTRATION IS REQUIRED BECAUSE OF THE AVAILABILITY OF AN EXEMPTION FROM
REGISTRATION UNDER THE ACT AND THE RULES AND REGULATIONS IN EFFECT THEREUNDER,
AND (B) SUCH TRANSFER SHALL BE IN COMPLIANCE WITH ANY APPLICABLE STATE OR
FOREIGN SECURITIES OR "BLUE SKY" LAWS.

Certificate Number:                    Number of Common Securities:

                    Certificate Evidencing Common Securities

                                       of

                              XL CAPITAL TRUST [ ]

                               Common Securities
                 (liquidation amount $[ ] per Common Security)

     XL Capital Trust [ ], a statutory business trust formed under the laws of
the State of Delaware (the "Trust"), hereby certifies that _________________
(the "Holder") is the registered owner of common securities of the Trust
representing undivided beneficial interests in the assets of the Trust
designated the Common Securities (liquidation amount $[ ] per Common Security)
(the "Common Securities"). The Common Securities are transferable on the books
and records of the Trust, in person or by a duly authorized attorney, upon
surrender of this certificate duly endorsed and in proper form for transfer. The
designation, rights, privileges, restrictions, preferences and other terms and
provisions of the Common Securities represented hereby are issued and shall in
all respects be subject to the provisions of the Amended and Restated
Declaration of Trust of the Trust dated as of , , as the same may be amended
from time to time (the "Declaration"), including the designation of the terms of
the Common Securities as set forth



                                      A2-1
<PAGE>

in Annex I to the Declaration. Capitalized terms used herein but not defined
shall have the meaning given them in the Declaration. The Holder is entitled to
the benefits of the Common Securities Guarantee to the extent provided therein.
The Sponsor will provide a copy of the Declaration, the Common Securities
Guarantee and the Indenture to the Holder without charge upon written request to
the Sponsor at its principal place of business.

     Upon receipt of this certificate, the Sponsor is bound by the Declaration
and is entitled to the benefits thereunder.

     By acceptance, the Holder agrees to treat, for United States federal income
tax purposes, the Subordinated Notes as indebtedness and the Common Securities
as evidence of indirect beneficial ownership in the Subordinated Notes.

     This certificate and the rights of the parties hereunder shall be governed
by and interpreted in accordance with the laws of the State of Delaware and all
rights and remedies shall be governed by such laws without regard to principles
of conflict of laws.

     IN WITNESS WHEREOF, the undersigned Regular Trustees of the Trust have
executed this certificate this [ ]th day of [ ], .



                           XL CAPITAL TRUST [  ]



                           By:
                              --------------------------------------------------
                                 Regular Trustee


                           By:
                              --------------------------------------------------
                                 Regular Trustee




                                      A2-3
<PAGE>


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


                                   ASSIGNMENT


     FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
this Common Security Certificate unto:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(Insert assignee's name and social security or tax identifica-tion number)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
                    (Insert Address and zip code of assignee)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
       _______ of the Common Securities represented by this
       Certificate and does hereby irrevocably appoint
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
       attorney to transfer these Common Securities on the books of the Trust.
       The attorney may substitute another to act for him or her.

       Date:      _______________________


       Signature: __________________
(Sign exactly as your name appears on the other side of this Common Security
Certificate)



                                      A2-4
<PAGE>



                                    EXHIBIT B


                          SPECIMEN OF SUBORDINATED NOTE



No. 01                                                       $[          ]

CUSIP No. [          ]

                                 XL CAPITAL LTD

                   [ ]% SUBORDINATED DEFERRABLE INTEREST NOTE
                                  DUE [ , 20 ]


     XL CAPITAL LTD, a Cayman Islands exempted limited company (the "Company",
which term includes any successor corporation under the Indenture hereinafter
referred to), for value received, hereby promises to pay to State Street Bank
and Trust Company or registered assigns, the principal sum of [ ] Dollars ($[ ])
on [ , 20 ] and to pay interest on said principal sum from [ , ] or from the
most recent interest payment date (each such date, an "Interest Payment Date")
to which interest has been paid or duly provided for, quarterly (subject to
deferral as set forth herein) in arrears on , , and of each year, commencing [ ,
], at the rate of [ ]% per annum until the principal hereof shall have become
due and payable, and on any overdue principal and premium, if any, and (without
duplication and to the extent that payment of such interest is enforceable under
applicable law) on any overdue installment of interest, compounded quarterly, at
the same rate per annum. The amount of interest payable on any Interest Payment
Date shall be computed on the basis of a 360-day year of twelve 30-day months.
The amount of interest payable for any period shorter than a full quarterly
period for which interest is computed will be computed on the basis of the
actual number of days elapsed in such 90-day quarter. In the event that any date
on which interest is payable on this Note is not a Business Day, then payment of
interest payable on such date will be made on the next succeeding day which is a
Business Day (and without any interest or other payment in respect of any such
delay), except that, if such Business Day is in the next suc-



                                      B-1
<PAGE>

ceeding calendar year, such payment shall be made on the immediately preceding
Business Day, in each case with the same force and effect as if made on such
date. The interest installment so payable, and punctually paid or duly provided
for, on any Interest Payment Date will, as provided in the Indenture, be paid to
the Person in whose name this Note (or one or more Predecessor Securities, as
defined in said Indenture) is registered at the close of business on the Regular
Record Date for such interest installment which shall be the close of business
on the Business Day next preceding such Interest Payment Date. Any such interest
installment not punctually paid or duly provided for shall forthwith cease to be
payable to the registered Holders on such Regular Record Date, and may be paid
to the Person in whose name this Note (or one or more Predecessor Securities) is
registered at the close of business on a special record date to be fixed by the
Company for the payment of such defaulted interest, notice whereof shall be
given to the registered Holders of the Notes not less than fifteen (15) days
prior to such special record date, or may be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Notes may be listed, and upon such notice as may be required by
such exchange, all as more fully provided in the Indenture. The principal of
(and premium, if any) and the interest on this Note shall be payable at the
office or agency of the Trustee maintained for that purpose in New York, New
York, in any coin or currency of the United States of America which at the time
of payment is legal tender for payment of public and private debts; provided,
however, that payment of interest may be made at the option of the Company by
check mailed to the registered Holder at such address as shall appear in the
security register maintained by the Registrar. Notwithstanding the foregoing, so
long as the Holder of this Note is the Property Trustee of XL Capital Trust [ ],
the payment of the principal of (and premium, if any) and interest on this Note
will be made in immediately available funds at such place and to such account as
may by designated by the Property Trustee of XL Capital Trust [ ].

     The indebtedness evidenced by this Note is, to the extent provided in the
Indenture, subordinate and junior in right of payment to the prior payment in
full of all Senior Indebtedness, and this Note is issued subject to the
provisions of the Indenture with respect thereto. Each Holder of this Note, by
accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee on his behalf to take such action as may be
necessary or appropriate to acknowledge or effectuate the subordination so
provided and (c) appoints the Trustee his attorney-in-fact for any and all such
purposes. Each Holder hereof, by his acceptance hereof, hereby waives all notice
of the acceptance of the subordination provisions contained herein and in the
Indenture by



                                      B-2
<PAGE>

each holder of Senior Indebtedness, whether now outstanding or hereafter
incurred, and waives reliance by each such holder upon said provisions.

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

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

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

Dated:            ,

                        XL CAPITAL LTD


                        By: ___________________________________________________
                            Name:
                            Title:


Attest:


By:__________________________
      Name:
      Title:



                                      B-3
<PAGE>


                          CERTIFICATE OF AUTHENTICATION


     This is one of the [ ]% Subordinated Debt Securities of XL Capital Ltd of
the series designated herein referred to in the within-mentioned Indenture.

                             STATE STREET BANK AND TRUST COMPANY,
                                  as Trustee


                             By:________________________________________________
                                    Authorized Signatory





                                      B-4
<PAGE>


                            (FORM OF REVERSE OF NOTE)



     This Note is one of a duly authorized series of Securities of the Company
designated its "[ ]% Subordinated Deferrable Interest Notes due [ , 20 ]"
(herein sometimes referred to as the "Notes"), issued under and pursuant to an
Indenture dated as of [ , ], duly executed and delivered between the Company and
State Street Bank and Trust Company, not in its individual capacity but solely
as trustee (the "Trustee"), as supplemented by a First Supplemental Indenture
dated as of , , between the Company and the Trustee (such Indenture as so
supplemented, the "Indenture"), to which Indenture and all indentures
supplemental thereto reference is hereby made for a description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Trustee, the Company and the Holders of the Notes. The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939, as in effect on the date of the
Indenture (the "TIA"). This Note is subject to all such terms and the Holder of
this Note is referred to the Indenture and the TIA for a statement of those
terms.

     The Notes are general unsecured obligations of the Company and are limited
(except as otherwise provided in the Indenture) to $[ ] in aggregate principal
amount.

     Upon the occurrence and continuation of a Tax Event, in certain
circumstances this Note may be redeemed by the Company at a redemption price
equal to 100% of the principal amount hereof, plus any accrued but unpaid
interest thereon to the date of such redemption (the "Special Redemption
Price"). The Special Redemption Price shall be paid prior to 12:00 noon, New
York City time, on the date of such redemption or at such earlier time as the
Company determines. The Company shall also have the right to redeem this Note at
the option of the Company, without premium or penalty, in whole or in part at
any time on or after , 20 (an "Optional Redemption"), at a redemption price
equal to 100% of the principal amount hereof, plus any accrued but unpaid
interest thereon to the date of such redemption (the "Optional Redemption
Price"). Any optional redemption pursuant to this paragraph will be made upon
not less than 30 nor more than 60 days notice, at the Optional Redemption Price.
If the Notes are only partially redeemed by the Company pursuant to an Optional
Redemption, the Notes will be redeemed by lot or by any other method utilized by
the Trustee; provided, however, that if at the time of redemption the Notes are
registered as a global Note, the deposi-



                                      B-5
<PAGE>

tary shall determine by lot the interest of each of its participants in such
global Note to be redeemed.

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

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

     The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the Holders of a majority in aggregate principal amount of
the Securities of each series affected at the time outstanding, as defined in
the Indenture, to amend or supplement the Indenture or the Securities of any
series (including the Notes) for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the Indenture or
of modifying in any manner the rights of the Holders of the Securities
(including the Notes); provided, however, that no such amendment or supplement
shall (i) extend the fixed maturity of any Securities of any series, or reduce
the principal amount thereof, or reduce the rate or extend the time for payment
of interest thereon, without the consent of the Holder of each Security of such
series so affected or (ii) reduce the aforesaid percentage in aggregate
principal amount of Securities, the Holders of which are required to consent to
any such amendment or supplement, without the consent of the Holders of each
Security then outstanding and affected thereby. The Indenture also contains
provisions permitting the Holders of a majority in aggregate principal amount of
the Securities of any series at the time outstanding affected thereby, on behalf
of all of the Holders of the Securities of such series, to waive any past
default in the performance of any of the covenants contained in the Indenture,
or established pursuant to the Indenture with respect to such series, and its
consequences, except a default in the payment of the principal of or interest,
if any, on any of the Securities of such series. Any such consent or waiver by
the registered Holder of this Note (unless revoked as provided in the Indenture)
shall be conclusive and binding upon such Holder and upon all future Holders and
owners of this Note and of any Note issued in exchange herefor or in place
hereof (whether by registration of transfer or otherwise), irrespective of
whether or not any notation of such consent or waiver is made upon this Note.



                                      B-6
<PAGE>

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

     The Company shall have the right at any time during the term of the Notes,
and from time to time, to extend the interest payment period of the Notes for up
to twenty (20) consecutive quarters (an "Extended Interest Payment Period"), at
the end of which period the Company shall pay all interest then accrued and
unpaid (together with interest thereon at the rate specified for the Notes to
the extent that payment of such interest is enforceable under applicable law).
Before the termination of any such Extended Interest Payment Period, the Company
may further extend such Extended Interest Payment Period, provided, however,
that such Extended Interest Payment Period together with all previous and such
further extensions thereof shall not exceed twenty (20) consecutive quarters or
extend beyond the maturity of the Notes. At the termination of any such Extended
Interest Payment Period and upon the payment of all accrued and unpaid interest
and any additional amounts then due, the Company may select a new Extended
Interest Payment Period, subject to the foregoing requirements.

     As provided in the Indenture and subject to certain limitations therein set
forth, this Note is transferable by the registered Holder hereof on the security
register of the Company maintained by the Registrar, upon surrender of this Note
for registration of transfer at the office or agency of the Trustee in New York,
New York accompanied by a written instrument or instruments of transfer in form
satisfactory to the Company or the Trustee duly executed by the registered
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Notes of authorized denominations and for the same aggregate principal
amount will be issued to the designated transferee or transferees. No service
charge will be made for any such transfer, but the Company may require payment
of a sum sufficient to cover any tax or other governmental charge payable in
relation thereto.

     Prior to due presentment for registration of transfer of this Note, the
Company, the Trustee, any Paying Agent and the Registrar may deem and treat the
registered Holder hereof as the absolute owner hereof (whether or not this Note
shall be overdue and notwithstanding any notice of ownership or writing hereon
made by anyone other than the Registrar) for the purpose of receiving payment of
principal of and interest due hereon and for all other purposes, and neither the
Company nor the



                                      B-7
<PAGE>

Trustee nor any Paying Agent nor the Registrar shall be affected by any notice
to the contrary.

     No past, present or future director, officer, employee or stockholder, as
such, of the Company or the Trustee or any successor of either thereof shall
have any liability for any obligations of the Company or the Trustee under the
Notes or this Indenture or for any claim based on, in respect of, or by reason
of, such obligations or their creation, all such liability being, by the
acceptance hereof and as part of the consideration for the issuance hereof,
expressly waived and released.

     This global Note is exchangeable for Notes in definitive certificated form
only under certain limited circumstances set forth in the Indenture. Notes so
issued are issuable only in registered form without coupons in denominations of
$1000 and any integral multiple thereof. As provided in the Indenture and
subject to certain limitations therein set forth, Notes so issued are
exchangeable for a like aggregate principal amount of Notes of a different
authorized denomination, as requested by the Holder surrendering the same.

     This Note shall be governed by the internal laws of the State of New York,
and for all purposes shall be construed in accordance with the laws of said
State.

     All terms used in this Note which are defined in the Indenture shall have
the meanings assigned to them in the Indenture.






                                      B-8