Document:

<PAGE>   1

                                                                     Exhibit 4.1

                             HERITAGE COMMERCE CORP
                                    as Issuer

                                    INDENTURE

                           Dated as of March 23, 2000

                              THE BANK OF NEW YORK
                                   as Trustee

                       JUNIOR SUBORDINATED DEBT SECURITIES
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                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                     Page
                                                                                     ----
<S>                                                                                  <C>
Parties ..........................................................................      1
Recitals .........................................................................      1
Authorization of Indenture .......................................................      1
Compliance with Legal Requirements ...............................................      1
Purpose of and Consideration for Indenture .......................................      1

                                    ARTICLE I
                                   DEFINITIONS

SECTION 1.01. Definitions ........................................................      1
    Additional Interest ..........................................................      1
    Affiliate ....................................................................      1
    Authenticating Agent .........................................................      2
    Bankruptcy Law ...............................................................      2
    Board of Directors ...........................................................      2
    Board Resolution .............................................................      2
    Business Day .................................................................      2
    Capital Securities ...........................................................      2
    Capital Securities Guarantee .................................................      2
    Capital Treatment Event ......................................................      2
    Certificate ..................................................................      2
    Common Securities ............................................................      2
    Company ......................................................................      3
    Comparable Treasury Issue ....................................................      3
    Comparable Treasury Price ....................................................      3
    Custodian ....................................................................      3
    Debt Security or Debt Securities .............................................      3
    Debt Security Register .......................................................      3
    Declaration ..................................................................      3
    Default ......................................................................      3
    Defaulted Interest ...........................................................      3
    Deferred Interest ............................................................      3
    Event of Default .............................................................      3
    Extension Period .............................................................      3
    Federal Reserve ..............................................................      3
    Finance Subsidiary ...........................................................      3
    Indenture ....................................................................      4
    Institutional Trustee ........................................................      4
    Interest Payment Date ........................................................      4
    Interest Rate ................................................................      4
    Investment Company Event .....................................................      4
    Liquidation Amount ...........................................................      4
    Maturity Date ................................................................      4
</TABLE>

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<TABLE>
<S>                                                                                  <C>
    Officers' Certificate ........................................................      4
    Opinion of Counsel ...........................................................      4
    outstanding ..................................................................      4
    Person .......................................................................      5
    Predecessor Security .........................................................      5
    Primary Treasury Dealer ......................................................      5
    Principal Office of the Trustee ..............................................      5
    Quotation Agent ..............................................................      5
    Redemption Date ..............................................................      5
    Reference Treasury Dealer ....................................................      6
    Reference Treasury Dealer Quotations .........................................      6
    Remaining Life ...............................................................      6
    Responsible Officer ..........................................................      6
    Securityholder, holder of Debt Securities ....................................      6
    Senior Indebtedness ..........................................................      6
    Special Event ................................................................      7
    Special Redemption Date ......................................................      7
    Special Redemption Price .....................................................      7
    Subsidiary ...................................................................      7
    Tax Event ....................................................................      7
    Treasure Rate ................................................................      8
    The Trust ....................................................................      8
    Trust Indenture Act: .........................................................      8
    Trust Securities .............................................................      8
    Trustee ......................................................................      8

                                   ARTICLE II
                                 DEBT SECURITIES

SECTION 2.01. Authentication and Dating ..........................................      9
SECTION 2.02. Form of Trustee's Certificate of Authentication ....................      9
SECTION 2.03. Form and Denomination of Debt Securities ...........................     10
SECTION 2.04. Execution of Debt Securities .......................................     10
SECTION 2.05. Exchange and Registration of Transfer of Debt Securities ...........     11
SECTION 2.06. Mutilated, Destroyed, Lost or Stolen Debt Securities ...............     12
SECTION 2.07. Temporary Debt Securities ..........................................     13
SECTION 2.08. Payment of Interest ................................................     13
SECTION 2.09. Cancellation of Debt Securities Paid, etc ..........................     15
SECTION 2.10. Computation of Interest ............................................     15
SECTION 2.11. Extension of Interest Payment Period ...............................     15
SECTION 2.12. CUSIP Numbers ......................................................     16
</TABLE>

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<TABLE>
<CAPTION>
                                   ARTICLE III
                       PARTICULAR COVENANTS OF THE COMPANY
<S>                                                                                <C>
SECTION 3.01. Payment of Principal, Premium and Interest; Agreed Treatment of the
    Debt Securities and the Capital Securities ...................................     16
SECTION 3.02. Offices for Notices and Payments, etc...............................     17
SECTION 3.03. Appointments to Fill Vacancies in Trustee's Office .................     18
SECTION 3.04. Provision as to Paying Agent........................................     18
SECTION 3.05. Certificate to Trustee .............................................     19
SECTION 3.06. Additional Sums ....................................................     19
SECTION 3.07. Compliance with Consolidation Provisions............................     19
SECTION 3.08. Limitation on Dividends ............................................     19
SECTION 3.09. Covenants as to the Trust ..........................................     20

                                   ARTICLE IV
       SECURITYHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE

SECTION 4.01. Securityholders Lists...............................................     20
SECTION 4.02. Preservation and Disclosure of Lists ...............................     21

                                    ARTICLE V
                   REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
                            UPON AN EVENT OF DEFAULT

SECTION 5.01. Events of Default ..................................................     22
SECTION 5.02. Payment of Debt Securities on Default; Suit Therefor ...............     24
SECTION 5.03. Application of Moneys Collected by Trustee .........................     25
SECTION 5.04. Proceedings by Securityholders .....................................     26
SECTION 5.05. Proceedings by Trustee .............................................     26
SECTION 5.06. Remedies Cumulative and Continuing .................................     26
SECTION 5.07. Direction of Proceedings and Waiver of Defaults by
    Majority of Securityholders ..................................................     27
SECTION 5.08. Notice of Defaults .................................................     27
SECTION 5.09. Undertaking to Pay Costs ...........................................     28

                                   ARTICLE VI
                             CONCERNING THE TRUSTEE

SECTION 6.01. Duties and Responsibilities of Trustee .............................     28
SECTION 6.02. Reliance on Documents, Opinions, etc................................     29
SECTION 6.03. No Responsibility for Recitals, etc.................................     30
SECTION 6.04. Trustee, Authenticating Agent, Paying Agents, Transfer Agents or
    Registrar May Own Debt Securities ............................................     30
SECTION 6.05. Moneys to be Held in Trust .........................................     31
SECTION 6.06. Compensation and Expenses of Trustee ...............................     31
SECTION 6.07. Officers' Certificate as Evidence ..................................     32
</TABLE>

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<TABLE>
<S>                                                                                  <C>
SECTION 6.08. Eligibility of Trustee .............................................     32
SECTION 6.09. Resignation or Removal of Trustee ..................................     32
SECTION 6.10. Acceptance by Successor Trustee ....................................     34
SECTION 6.11. Succession by Merger, etc...........................................     35
SECTION 6.12. Authenticating Agents ..............................................     35

                                   ARTICLE VII
                         CONCERNING THE SECURITYHOLDERS

SECTION 7.01. Action by Securityholders ..........................................     36
SECTION 7.02. Proof of Execution by Securityholders ..............................     37
SECTION 7.03. Who Are Deemed Absolute Owners .....................................     37
SECTION 7.04. Debt Securities Owned by Company Deemed Not Outstanding ............     37
SECTION 7.05. Revocation of Consents; Future Holders Bound .......................     38

                                  ARTICLE VIII
                            SECURITYHOLDERS' MEETINGS

SECTION 8.01. Purposes of Meetings ...............................................     38
SECTION 8.02. Call of Meetings by Trustee ........................................     39
SECTION 8.03. Call of Meetings by Company or Securityholders .....................     39
SECTION 8.04. Qualifications for Voting ..........................................     39
SECTION 8.05. Regulations ........................................................     39
SECTION 8.06. Voting .............................................................     40
SECTION 8.07. Quorum; Actions ....................................................     40

                                   ARTICLE IX
                             SUPPLEMENTAL INDENTURES

SECTION 9.01. Supplemental Indentures without Consent of Securityholders .........     41
SECTION 9.02. Supplemental Indentures with Consent of Securityholders ............     42
SECTION 9.03. Effect of Supplemental Indentures ..................................     43
SECTION 9.04. Notation on Debt Securities ........................................     44
SECTION 9.05. Evidence of Compliance of Supplemental Indenture to be Furnished to
    Trustee ......................................................................     44

                                    ARTICLE X
                            REDEMPTION OF SECURITIES

SECTION 10.01. Optional Redemption ...............................................     44
SECTION 10.02. Special Event Redemption ..........................................     44
SECTION 10.03. Notice of Redemption; Selection of Debt Securities ................     45
SECTION 10.04. Payment of Debt Securities Called for Redemption ..................     45
</TABLE>

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<TABLE>
<CAPTION>

                                   ARTICLE XI
                CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
<S>                                                                                  <C>
SECTION 11.01. Company May Consolidate, etc., on Certain Terms ...................     46
SECTION 11.02. Successor Entity to be Substituted ................................     46
SECTION 11.03. Opinion of Counsel to be Given to Trustee .........................     47

                                   ARTICLE XII
                     SATISFACTION AND DISCHARGE OF INDENTURE

SECTION 12.01. Discharge of Indenture ............................................     47
SECTION 12.02. Deposited Moneys to be Held in Trust by Trustee ...................     48
SECTION 12.03. Paying Agent to Repay Moneys Held .................................     48
SECTION 12.04. Return of Unclaimed Moneys ........................................     48

                                  ARTICLE XIII
         IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS

SECTION 13.01. Indenture and Debt Securities Solely Corporate Obligations ........     48

                                   ARTICLE XIV
                            MISCELLANEOUS PROVISIONS
SECTION 14.01. Successors.........................................................     49
SECTION 14.02. Official Acts by Successor Entity .................................     49
SECTION 14.03. Surrender of Company Powers .......................................     49
SECTION 14.04. Addresses for Notices, etc.........................................     49
SECTION 14.05. Governing Law .....................................................     49
SECTION 14.06. Evidence of Compliance with Conditions Precedent ..................     50
SECTION 14.07. Non-Business Days .................................................     50
SECTION 14.08. Table Of Contents, Headings, etc...................................     50
SECTION 14.09. Execution in Counterparts .........................................     50
SECTION 14.10. Separability ......................................................     50
SECTION 14.11. Assignment ........................................................     51
SECTION 14.12. Acknowledgment of Rights ..........................................     51

                                   ARTICLE XV
                        SUBORDINATION OF DEBT SECURITIES

SECTION 15.01. Agreement to Subordinate ..........................................     51
SECTION 15.02. Default on Senior Indebtedness ....................................     52
SECTION 15.03. Liquidation; Dissolution; Bankruptcy ..............................     52
SECTION 15.04. Subrogation .......................................................     53
SECTION 15.05. Trustee to Effectuate Subordination ...............................     54
SECTION 15.06. Notice by the Company .............................................     54
SECTION 15.07. Rights of the Trustee; Holders of Senior Indebtedness .............     55
SECTION 15.08. Subordination May Not Be Impaired .................................     56
</TABLE>

                                       v
<PAGE>   7
                  THIS INDENTURE, dated as of March 23, 2000, between Heritage
Commerce Corp, a bank holding company incorporated in California (hereinafter
sometimes called the "Company"), and The Bank of New York, as trustee
(hereinafter sometimes called the "Trustee"),

                                  WITNESSETH:

                  WHEREAS, for its lawful corporate purposes, the Company has
duly authorized the issuance of its 10 7/8% Junior Subordinated Deferrable
Interest Debentures due 2030 (the "Debt Securities") under this Indenture to
provide, among other things, for the execution and authentication, delivery and
administration thereof, the Company has duly authorized the execution of this
Indenture; and

                  WHEREAS, all acts and things necessary to make this Indenture
a valid agreement according to its terms, have been done and performed;

                  NOW, THEREFORE, This Indenture Witnesseth:

                  In consideration of the premises, and the purchase of the Debt
Securities by the holders thereof, the Company covenants and agrees with the
Trustee for the equal and proportionate benefit of the respective holders from
time to time of the Debt Securities as follows:

                                    ARTICLE I
                                   DEFINITIONS

                  SECTION 1.01. Definitions

                  The terms defined in this Section 1.01 (except as herein
otherwise expressly provided or unless the context otherwise requires) for all
purposes of this Indenture and of any indenture supplemental hereto shall have
the respective meanings specified in this Section 1.01. All accounting terms
used herein and not expressly defined shall have the meanings assigned to such
terms in accordance with generally accepted accounting principles and the term
"generally accepted accounting principles" means such accounting principles as
are generally accepted at the time of any computation. The words "herein,"
"hereof" and "hereunder" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision.

                  "Additional Interest" shall have the meaning set forth in
Section 3.06.

                  "Affiliate" means, with respect to a specified Person, any
Person directly or indirectly controlling or controlled by, or under direct or
indirect common control with the specified Person. For purposes of this
definition, "control" when used with respect to any Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise.

                                       1
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                  "Authenticating Agent" means any agent or agents of the
Trustee which at the time shall be appointed and acting pursuant to Section
6.12.

                  "Bankruptcy Law" means Title 11, U.S. Code, or any similar
federal or state law for the relief of debtors.

                  "Board of Directors" means the board of directors or the
executive committee or any other duly authorized designated officers of the
Company.

                  "Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of such
certification and delivered to the Trustee.

                  "Business Day" means any day other than a Saturday, Sunday or
any other day on which banking institutions in New York City are permitted or
required by any applicable law to close.

                  "Capital Securities" means undivided beneficial interests in
the assets of Heritage Capital Trust I which rank pari passu with Common
Securities issued by Heritage Capital Trust I; provided, however, that upon the
occurrence of an Event of Default (as defined in the Declaration), the rights of
holders of such Common Securities to payment in respect of distributions and
payments upon liquidation, redemption and otherwise are subordinated to the
rights of holders of such Capital Securities.

                  "Capital Securities Guarantee" means, in respect of the
guarantee that the Company may enter into with The Bank of New York or other
Persons that operates directly or indirectly for the benefit of holders of
Capital Securities of Heritage Capital Trust I.

                  "Capital Treatment Event" means the reasonable determination
by the Company that, as a result of the occurrence of any amendment to, or
change (including any announced prospective change) in, the laws of the United
States or any political subdivision thereof or therein, or as the result of any
official or administrative pronouncement or action or decision interpreting or
applying such laws, rules or regulations, which amendment or change is effective
or which pronouncement, action or decision is announced on or after the date of
issuance of the Debt Securities, there is more than an insubstantial risk that
the Company will not be entitled to treat an amount equal to the aggregate
Liquidation Amount of the Debt Securities as "Tier I Capital" (or the then
equivalent thereof) for purposes of the capital adequacy guidelines of the
Federal Reserve, as then in effect and applicable to the Company.

                  "Certificate" means a certificate signed by any one of the
principal executive officer, the principal financial officer or the principal
accounting officer of the Company.

                  "Common Securities" means undivided beneficial interests in
the assets of Heritage Capital Trust I which rank pari passu with Capital
Securities issued by Heritage Capital Trust I; provided, however, that upon the
occurrence of an Event of Default (as defined in the Declaration), the rights of
holders of such Common Securities to payment in respect of distributions and
payments upon liquidation, redemption and otherwise are subordinated to the
rights of holders of such Capital Securities.

                                        2
<PAGE>   9
                  "Company" means Heritage Commerce Corp, a bank holding company
incorporated in California, and, subject to the provisions of Article XI, shall
include its successors and assigns.

                  "Comparable Treasury Issue" means with respect to any Special
Redemption Date, the United States Treasury security selected by the Quotation
Agent as having a maturity comparable to the Remaining Life that would be
utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the Remaining Life. If no United States Treasury security has a
maturity which is within a period from three months before to three months after
March 8, 2010, the two most closely corresponding United States Treasury
securities shall be used as the Comparable Treasury Issue, and the Treasury Rate
shall be interpolated or extrapolated on a straight-line basis, rounding to the
nearest month using such securities.

                  "Comparable Treasury Price" means (a) the average of five
Reference Treasury Dealer Quotations for such Special Redemption Date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations, or
(b) if the Trustee obtains fewer than five such Reference Treasury Dealer
Quotations, the average of all such Quotations.

                  "Custodian" means any receiver, trustee, assignee, liquidator
or similar official under any Bankruptcy Law.

                  "Debt Security" or "Debt Securities" has the meaning stated in
the first recital of this Indenture.

                  "Debt Security Register" has the meaning specified in Section
2.05.

                  "Declaration" means the Amended and Restated Declaration of
Trust of Heritage Capital Trust I, as amended or supplemented from time to time.

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

                  "Defaulted Interest" has the meaning set forth in Section
2.08.

                  "Deferred Interest" has the meaning set forth in Section 2.11.

                  "Event of Default" means any event specified in Section 5.01,
continued for the period of time, if any, and after the giving of the notice, if
any, therein designated.

                  "Extension Period" has the meaning set forth in Section 2.11.

                  "Federal Reserve" means the Board of Governors of the Federal
         Reserve System.

                  "Finance Subsidiary" means a special purpose vehicle created
expressly for the purpose of financing the activities of the Company and its
subsidiaries.

                                        3
<PAGE>   10
                  "Indenture" means this instrument as originally executed or,
if amended or supplemented as herein provided, as so amended or supplemented, or
both.

                  "Institutional Trustee" has the meaning set forth in the
Declaration.

                  "Interest Payment Date" means each March 8 and September 8
during the term of this Indenture.

                  "Interest Rate" means 10 7/8%.

                  "Investment Company Event" means the receipt by Heritage
Capital Trust I of an opinion of counsel experienced in such matters to the
effect that, as a result of the occurrence of a change in law or regulation or
written change (including any announced prospective change) in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority, there is more than an insubstantial risk that
Heritage Capital Trust I is or will be considered an "investment company" that
is required to be registered under the Investment Company Act of 1940, as
amended, which change or prospective change becomes effective or would become
effective, as the case may be, on or after the date of the issuance of the Debt
Securities.

                  "Liquidation Amount" means the stated amount of $1,000 per
Trust Security.

                  "Maturity Date" means March 8, 2030.

                  "Officers' Certificate" means a certificate signed by the
Chairman of the Board, the Vice Chairman, the President, any Managing Director
or any Vice President, and by the Chief Financial Officer, the Treasurer, an
Assistant Treasurer, the Comptroller, an Assistant Comptroller, the Secretary or
an Assistant Secretary of the Company, and delivered to the Trustee. Each such
certificate shall include the statements provided for in Section 14.06 if and to
the extent required by the provisions of such Section.

                  "Opinion of Counsel" means an opinion in writing signed by
legal counsel, who may be an employee of or counsel to the Company, or may be
other counsel satisfactory to the Trustee. Each such opinion shall include the
statements provided for in Section 14.06 if and to the extent required by the
provisions of such Section.

                  The term "outstanding," when used with reference to Debt
Securities, subject to the provisions of Section 7.04, means, as of any
particular time, all Debt Securities authenticated and delivered by the Trustee
or the Authenticating Agent under this Indenture, except

                  (a) Debt Securities theretofore canceled by the Trustee or the
         Authenticating Agent or delivered to the Trustee for cancellation;

                  (b) Debt Securities, or portions thereof, for the payment or
         redemption of which moneys in the necessary amount shall have been
         deposited in trust with the Trustee or with any paying agent (other
         than the Company) or shall have been set aside and segregated in trust
         by the Company (if the Company shall act as its own paying agent);
         provided that, if such Debt Securities, or portions thereof, are to be
         redeemed prior to

                                        4
<PAGE>   11
         maturity thereof, notice of such redemption shall have been given as
         provided in Article Fourteen or provision satisfactory to the Trustee
         shall have been made for giving such notice; and

                  (c) Debt Securities paid pursuant to Section 2.06 or in lieu
         of or in substitution for which other Debt Securities shall have been
         authenticated and delivered pursuant to the terms of Section 2.06
         unless proof satisfactory to the Company and the Trustee is presented
         that any such Debt Securities are held by bona fide holders in due
         course.

                  "Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.

                  "Predecessor Security" of any particular Debt Security means
every previous Debt Security evidencing all or a portion of the same debt as
that evidenced by such particular Debt Security; and, for the purposes of this
definition, any Debt Security authenticated and delivered under Section 2.06 in
lieu of a lost, destroyed or stolen Debt Security shall be deemed to evidence
the same debt as the lost, destroyed or stolen Debt Security.

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

                  "Principal Office of the Trustee," or other similar term,
means the office of the Trustee, at which at any particular time its corporate
trust business shall be principally administered, which at the time of the
execution of this Indenture shall be 101 Barclay Street, Floor 21 west, New
York, NY 10286.

                  "Quotation Agent" means Salomon Smith Barney, Inc. and its
successors; provided, however, that if the foregoing shall cease to be a Primary
Treasury Dealer, the Company shall substitute therefor another Primary Treasury
Dealer.

                  "Redemption Date" has the meaning set forth in Section 10.01.

                  "Redemption Price" means the price set forth in the following
table for any Redemption Date or Special Redemption Date that occurs within the
twelve-month period beginning in the relevant year indicated below, expressed in
percentage of the principal amount of the Debt Securities being redeemed:

<TABLE>
<CAPTION>
Year Beginning                          Percentage
<S>                                     <C>
 March 8, 2010                           105.438
 March 8, 2011                           104.894
 March 8, 2012                           104.350
 March 8, 2013                           103.806
 March 8, 2014                           103.263
</TABLE>

                                       5
<PAGE>   12
<TABLE>
<S>   <C>                                <C>
March 8, 2015                            102.719
March 8, 2016                            102.175
March 8, 2017                            101.631
March 8, 2018                            101.088
March 8, 2019                            100.544
March 8, 2020 and after                  100.000
</TABLE>

                  plus accrued and unpaid interest on such Debentures to the
Redemption Date or, in the case of a redemption due to the occurrence of a
Special Event, to the Special Redemption Date.

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

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

                  "Remaining Life" means, with respect to any Debt Security, the
period from the Special Redemption Date for such Debt Security to March 8, 2010.

                  "Responsible Officer" means, with respect to the Trustee, any
officer within the Principal Office of the Trustee, including any
vice-president, any assistant vice-president, any secretary, any assistant
secretary, the treasurer, any assistant treasurer, any trust officer or other
officer of the Principal Trust Office of the 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.

                  "Securityholder," "holder of Debt Securities" or other similar
terms, means any Person in whose name at the time a particular Debt Security is
registered on the register kept by the Company or the Trustee for that purpose
in accordance with the terms hereof.

                  "Senior Indebtedness" means, with respect to the Company, (i)
the principal, premium, if any, and interest in respect of (A) indebtedness of
the Company for money borrowed and (B) indebtedness evidenced by securities,
debentures, notes, bonds or other similar instruments issued by the Company;
(ii) all capital lease obligations of the Company; (iii) all obligations of the
Company issued or assumed as the deferred purchase price of property, all
conditional sale obligations of the Company and all obligations of the Company
under any title retention agreement (but excluding trade accounts payable
arising in the ordinary course of business); (iv) all obligations of the Company
for the reimbursement of any letter of credit, any banker's acceptance, any
security purchase facility, any repurchase agreement or similar

                                       6
<PAGE>   13
arrangement, any interest rate swap, any other hedging arrangement, any
obligation under options or any similar credit or other transaction; (v) all
obligations of the type referred to in clauses (i) through (iv) above of other
Persons for the payment of which the Company is responsible or liable as
obligor, guarantor or otherwise; and (vi) all obligations of the type referred
to in clauses (i) through (v) above of other Persons secured by any lien on any
property or asset of the Company (whether or not such obligation is assumed by
the Company), whether incurred on or prior to the date of this Indenture or
thereafter incurred, unless, in the instrument creating or evidencing the same
or pursuant to which the same is outstanding, it is provided that such
obligations are not superior or pari passu in right of payment to the Debt
Securities, except for (1) any indebtedness between or among the Company and any
Finance Subsidiary of the Company, and (2) Debt Securities issued pursuant to
this Indenture and guarantees in respect of such Debt Securities. Senior
Indebtedness shall continue to be Senior Indebtedness and be entitled to the
subordination provisions irrespective of any amendment, modification or waiver
of any term of such Senior Indebtedness.

                  "Special Event" means any of a Tax Event, an Investment
Company Event or a Capital Treatment Event.

                  "Special Redemption Date" has the meaning set forth in 10.02.

                  "Special Redemption Price" means (1) if the Special Redemption
Date is before March 8, 2010, the greater of (a) 100% of the principal amount of
the Debt Securities being redeemed pursuant to Section 10.02 and (b) as
determined by a Quotation Agent, the sum of the present values of scheduled
payments of principal and interest over the Remaining Life of such Debt
Securities, discounted to the Special Redemption Date on a semi-annual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Treasury
Rate plus 0.45%, plus, in the case of either (a) or (b), accrued and unpaid
interest on such Debt Securities to the Special Redemption Date and (2) if the
Special Redemption Date is on or after March 8, 2010, the Redemption Price for
such Special Redemption Date.

                  "Subsidiary" means, with respect to any Person, (i) any
corporation at least a majority of the outstanding voting stock of which is
owned, directly or indirectly, by such Person or by one or more of its
Subsidiaries, or by such Person and one or more of its Subsidiaries, (ii) any
general partnership, joint venture or similar entity, at least a majority of the
outstanding partnership or similar interests of which shall at the time be owned
by such Person, or by one or more of its Subsidiaries, or by such Person and one
or more of its Subsidiaries, and (iii) any limited partnership of which such
Person or any of its Subsidiaries is a general partner. For the purposes of this
definition, "voting stock" means shares, interests, participations or other
equivalents in the equity interest (however designated) in such Person having
ordinary voting power for the election of a majority of the directors (or the
equivalent) of such Person, other than shares, interests, participations or
other equivalents having such power only by reason of the occurrence of a
contingency.

                  "Tax Event" means the receipt by the Company and Heritage
Capital Trust I of an opinion of counsel experienced in such matters to the
effect that, as a result of any amendment to or change (including any announced
prospective change) in the laws or any regulations thereunder of the United
States or any political subdivision or taxing authority thereof or therein,

                                        7
<PAGE>   14
or as a result of any official administrative pronouncement (including any
private letter ruling, technical advice memorandum, field service advice,
regulatory procedure, notice or announcement, including any notice or
announcement of intent to adopt such procedures or regulations (an
"Administrative Action")) or judicial decision interpreting or applying such
laws or regulations, regardless of whether such Administrative Action or
judicial decision is issued to or in connection with a proceeding involving the
Company or Heritage Capital Trust I and whether or not subject to review or
appeal, which amendment, clarification, change, Administrative Action or
decision is enacted, promulgated or announced, in each case on or after the date
of issuance of the Debt Securities, there is more than an insubstantial risk
that: (i) Heritage Capital Trust I is, or will be within 90 days of the date of
such opinion, subject to United States federal income tax with respect to income
received or accrued on the Debt Securities; (ii) interest payable by the Company
on the Debt Securities is not, or within 90 days of the date of such opinion,
will not be, deductible by the Company, in whole or in part, for United States
federal income tax purposes; or (iii) Heritage Capital Trust I is, or will be
within 90 days of the date of such opinion, subject to more than a de minimis
amount of other taxes, duties or other governmental charges.

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

                  "Trust" Means Heritage Capital Trust I, the Delaware business
trust, or any other similar trust created for the purpose of issuing Capital
Securities in connection with the issuance of Debt Securities under this
Indenture, of which the Company is the sponsor.

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

                  "Trust Securities" means Common Securities and Capital
Securities of Heritage Capital Trust I.

                  "Trustee" means the Person identified as "Trustee" in the
first paragraph hereof, and, subject to the provisions of Article VI hereof,
shall also include its successors and assigns as Trustee hereunder.

                                        8
<PAGE>   15
                                   ARTICLE II
                                 DEBT SECURITIES

                  SECTION 2.01. Authentication and Dating.

                  Upon the execution and delivery of this Indenture, or from
time to time thereafter, Debt Securities in an aggregate principal amount not in
excess of $7,217,000 may be executed and delivered by the Company to the Trustee
for authentication, and the Trustee shall thereupon authenticate and make
available for delivery said Debt Securities to or upon the written order of the
Company, signed by its Chairman of the Board of Directors, Vice Chairman,
President or Chief Financial Officer, one of its Managing Directors or one of
its Vice Presidents and by its Secretary, any Assistant Secretary, Treasurer or
any Assistant Treasurer, without any further action by the Company hereunder. In
authenticating such Debt Securities, and accepting the additional
responsibilities under this Indenture in relation to such Debt Securities, the
Trustee shall be entitled to receive, and (subject to Section 6.01) shall be
fully protected in relying upon:

                           (a) a copy of any Board Resolution or Board
         Resolutions relating thereto and, if applicable, an appropriate record
         of any action taken pursuant to such resolution, in each case certified
         by the Secretary or an Assistant Secretary of the Company as the case
         may be; and

                           (b) an Opinion of Counsel prepared in accordance with
         Section 14.06 which shall also state:

                                    (1) that such Debt Securities, when
                           authenticated and delivered by the Trustee and issued
                           by the Company in each case in the manner and subject
                           to any conditions specified in such Opinion of
                           Counsel, will constitute valid and legally binding
                           obligations of the Company; and

                                    (2) that all laws and requirements in
                           respect of the execution and delivery by the Company
                           of the Debt Securities, have been complied with and
                           that authentication and delivery of the Debt
                           Securities by the Trustee will not violate the terms
                           of this Indenture.

                  The Trustee shall have the right to decline to authenticate
and deliver any Debt Securities under this Section if the Trustee, being advised
by counsel, determines that such action may not lawfully be taken or if a
Responsible Officer of the Trustee in good faith shall determine that such
action would expose the Trustee to personal liability to existing holders.

                  The definitive Debt Securities shall be typed, printed,
lithographed or engraved on steel engraved borders or may be produced in any
other manner, all as determined by the officers executing such Debt Securities,
as evidenced by their execution of such Debt Securities.

                  SECTION 2.02. Form of Trustee's Certificate of Authentication.

                  The Trustee's certificate of authentication on all Debt
Securities shall be in substantially the following form:

                                        9
<PAGE>   16
                  This is one of the Debt Securities referred to in the
                  within-mentioned Indenture.

                  THE BANK OF NEW YORK, AS TRUSTEE

                  By:

                  Authorized Officer

                  Dated:

                  SECTION 2.03. Form and Denomination of Debt Securities.

                  The Debt Securities shall be in registered, certificated form
without coupons and in minimum denominations of $1,000 and any multiple of
$1,000 in excess thereof. The Debt Securities shall be numbered, lettered, or
otherwise distinguished in such manner or in accordance with such plans as the
officers executing the same may determine with the approval of the Trustee as
evidenced by the execution and authentication thereof.

                  SECTION 2.04. Execution of Debt Securities.

                  The Debt Securities shall be signed in the name and on behalf
of the Company by the manual or facsimile signature of its Chairman of the Board
of Directors, Vice Chairman, President or Chief Financial Officer, one of its
Managing Directors or one of its Executive Vice Presidents, Senior Vice
Presidents or Vice Presidents and by the manual or facsimile signature of its
Secretary, one of its Assistant Secretaries, its Treasurer or one of its
Assistant Treasurers, under its corporate seal which may be affixed thereto or
printed, engraved or otherwise reproduced thereon, by facsimile or otherwise,
and which need not be attested. Only such Debt Securities as shall bear thereon
a certificate of authentication substantially in the form herein before recited,
executed by the Trustee or the Authenticating Agent by the manual signature of
an authorized officer, shall be entitled to the benefits of this Indenture or be
valid or obligatory for any purpose. Such certificate by the Trustee or the
Authenticating Agent upon any Debt Security executed by the Company shall be
conclusive evidence that the Debt Security so authenticated has been duly
authenticated and delivered hereunder and that the holder is entitled to the
benefits of this Indenture.

                  In case any officer of the Company who shall have signed any
of the Debt Securities shall cease to be such officer before the Debt Securities
so signed shall have been authenticated and delivered by the Trustee or the
Authenticating Agent, or disposed of by the Company, such Debt Securities
nevertheless may be authenticated and delivered or disposed of as though the
Person who signed such Debt Securities had not ceased to be such officer of the
Company; and any Debt Security may be signed on behalf of the Company by such
Persons as, at the actual date of the execution of such Debt Security, shall be
the proper officers of the Company, although at the date of the execution of
this Indenture any such person was not such an officer.

                  Every Debt Security shall be dated the date of its
         authentication.

                                       10
<PAGE>   17
                  SECTION 2.05. Exchange and Registration of Transfer of Debt
Securities.

                  The Company shall cause to be kept, at the office or agency
maintained for the purpose of registration of transfer and for exchange as
provided in Section 3.02, a register (the "Debt Security Register") for the Debt
Securities issued hereunder in which, subject to such reasonable regulations as
it may prescribe, the Company shall provide for the registration and transfer of
all Debt Securities as in this Article Two provided. Such register shall be in
written form or in any other form capable of being converted into written form
within a reasonable time.

                  Debt Securities to be exchanged may be surrendered at the
principal corporate trust office of the Trustee or at any office or agency to be
maintained by the Company for such purpose as provided in Section 3.02, and the
Company shall execute, the Company or the Trustee shall register and the Trustee
or the Authenticating Agent shall authenticate and make available for delivery
in exchange therefor the Debt Security or Debt Securities which the
Securityholder making the exchange shall be entitled to receive. Upon due
presentment for registration of transfer of any Debt Security at the principal
corporate trust office of the Trustee or at any office or agency of the Company
maintained for such purpose as provided in Section 3.02, the Company shall
execute, the Company or the Trustee shall register and the Trustee or the
Authenticating Agent shall authenticate and make available for delivery in the
name of the transferee or transferees a new Debt Security for a like aggregate
principal amount. Registration or registration of transfer of any Debt Security
by the Trustee or by any agent of the Company appointed pursuant to Section
3.02, and delivery of such Debt Security, shall be deemed to complete the
registration or registration of transfer of such Debt Security.

                  All Debt Securities presented for registration of transfer or
for exchange or payment shall (if so required by the Company or the Trustee or
the Authenticating Agent) be duly endorsed by, or be accompanied by a written
instrument or instruments of transfer in form satisfactory to the Company and
the Trustee or the Authenticating Agent duly executed by, the holder or his
attorney duly authorized in writing.

                  No service charge shall be made for any exchange or
registration of transfer of Debt Securities, but the Company or the Trustee may
require payment of a sum sufficient to cover any tax, fee or other governmental
charge that may be imposed in connection therewith.

                  The Company or the Trustee shall not be required to exchange
or register a transfer of any Debt Security for a period of 15 days next
preceding the date of selection of Debt Securities for redemption.

                  Notwithstanding the foregoing, Debt Securities may not be
transferred except in compliance with the restricted securities legend set forth
below (the "Restrictive Securities Legend"), unless otherwise determined by the
Company in accordance with applicable law:

                  THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED

                                       11
<PAGE>   18
OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES
TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY ONLY (A) TO THE COMPANY, (B)
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (C) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (a) (1), (2),(3) OR (7) OF . RULE 501 UNDER THE SECURITIES ACT THAT
IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF AN
"ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (D) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S RIGHT
PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (C) OR (D) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO IT IN ACCORDANCE WITH THE INDENTURE, A COPY OF WHICH
MAY BE OBTAINED FROM THE COMPANY. THE HOLDER OF THIS SECURITY AGREES THAT IT
WILL COMPLY WITH THE FOREGOING RESTRICTIONS.

                  SECTION 2.06. Mutilated, Destroyed, Lost or Stolen Debt
Securities

                  In case any Debt Security shall become mutilated or be
destroyed, lost or stolen, the Company shall execute, and upon its written
request the Trustee shall authenticate and deliver, a new Debt Security bearing
a number not contemporaneously outstanding, in exchange and substitution for the
mutilated Debt Security, or in lieu of and in substitution for the Debt Security
so destroyed, lost or stolen. In every case the applicant for a substituted Debt
Security shall furnish to the Company and the Trustee such security or indemnity
as may be required by them to save each of them harmless, and, in every case of
destruction, loss or theft, the applicant shall also furnish to the Company and
the Trustee evidence to their satisfaction of the destruction, loss or theft of
such Debt Security and of the ownership thereof.

                  The Trustee may authenticate any such substituted Debt
Security and deliver the same upon the written request or authorization of any
officer of the Company. Upon the issuance of any substituted Debt Security, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses connected therewith. In case any Debt Security which has matured or is
about to mature or has been called for redemption in full shall become mutilated
or be destroyed, lost or stolen, the Company may, instead of issuing a
substitute Debt Security, pay or authorize the payment of the same (without
surrender thereof except in the case of a mutilated Debt Security) if the
applicant for such payment shall furnish to the Company and the Trustee such
security or indemnity as may be required by them to save each of them harmless
and, in case of

                                       12
<PAGE>   19
destruction, loss or theft, evidence satisfactory to the Company and to the
Trustee of the destruction, loss or theft of such Security and of the ownership
thereof.

                  Every substituted Debt Security issued pursuant to the
provisions of this Section 2.06 by virtue of the fact that any such Debt
Security is destroyed, lost or stolen shall constitute an additional contractual
obligation of the Company, whether or not the destroyed, lost or stolen Debt
Security shall be found at any time, and shall be entitled to all the benefits
of this Indenture equally and proportionately with any and all other Debt
Securities duly issued hereunder. All Debt Securities shall be held and owned
upon the express condition that, to the extent permitted by applicable law, the
foregoing provisions are exclusive with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Debt Securities and shall preclude any and
all other rights or remedies notwithstanding any law or statute existing or
hereafter enacted to the contrary with respect to the replacement or payment of
negotiable instruments or other securities without their surrender.

                  SECTION 2.07. Temporary Debt Securities.

                  Pending the preparation of definitive Debt Securities, the
Company may execute and the Trustee shall authenticate and make available for
delivery temporary Debt Securities that are typed, printed or lithographed.
Temporary Debt Securities shall be issuable in any authorized denomination, and
substantially in the form of the definitive Debt Securities but with such
omissions, insertions and variations as may be appropriate for temporary Debt
Securities, all as may be determined by the Company. Every such temporary Debt
Security shall be executed by the Company and be authenticated by the Trustee
upon the same conditions and in substantially the same manner, and with the same
effect, as the definitive Debt Securities. Without unreasonable delay the
Company will execute and deliver to the Trustee or the Authenticating Agent
definitive Debt Securities and thereupon any or all temporary Debt Securities
may be surrendered in exchange therefor, at the principal corporate trust office
of the Trustee or at any office or agency maintained by the Company for such
purpose as provided in Section 3.02, and the Trustee or the Authenticating Agent
shall authenticate and make available for delivery in exchange for such
temporary Debt Securities a like aggregate principal amount of such definitive
Debt Securities. Such exchange shall be made by the Company at its own expense
and without any charge therefor except that in case of any such exchange
involving a registration of transfer the Company may require payment of a sum
sufficient to cover any tax, fee or other governmental charge that may be
imposed in relation thereto. Until so exchanged, the temporary Debt Securities
shall in all respects be entitled to the same benefits under this Indenture as
definitive Debt Securities authenticated and delivered hereunder.

                  SECTION 2.08. Payment of Interest.

                  Each Debt Security will bear interest at the Interest Rate
from and including the original date of issuance of such Debt Security until the
Maturity Date, and on any overdue principal and (to the extent that payment of
such interest is enforceable under applicable law) Deferred Interest on any
overdue installment of interest (including Defaulted Interest), payable (subject
to the provisions of Article XII) on each Interest Payment Date commencing on
September 8, 2000. Interest and any Deferred Interest on any Debt Security that
is payable, and is punctually paid or duly provided for, on any Interest Payment
Date for Debt Securities shall be

                                       13
<PAGE>   20
paid to the Person in whose name said Debt Security (or one or more Predecessor
Securities) is registered at the close of business on the regular record date
for such interest installment except that interest and any Deferred Interest
payable on the Maturity Date shall be paid to the Person to whom principal is
paid. In the event that any Debt Security or portion thereof is called for
redemption and the redemption date is subsequent to a regular record date with
respect to any Interest Payment Date and prior to such Interest Payment Date,
interest on such Debt Security will be paid upon presentation and surrender of
such Debt Security.

         Any interest on any Debt Security, other than Deferred Interest, that
is payable, but is not punctually paid or duly provided for, on any Interest
Payment Date (herein called "Defaulted Interest") shall forthwith cease to be
payable to the registered holder on the relevant regular record date by virtue
of having been such holder; and such Defaulted Interest shall be paid by the
Company to the Persons in whose names such Debt Securities (or their respective
Predecessor Securities) are registered at the close of business on a special
record date for the payment of such Defaulted Interest, which shall be fixed in
the following manner: the Company shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each such Debt Security and
the date of the proposed payment, and at the same time the Company shall deposit
with the Trustee an amount of money equal to the aggregate amount proposed to be
paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the proposed
payment, such money when deposited to be held in trust for the benefit of the
Persons entitled to such Defaulted Interest as in this clause provided.
Thereupon the Trustee shall fix a special record date for the payment of such
Defaulted interest which shall not be more than fifteen nor less than ten days
prior to the date of the proposed payment and not less than ten days after the
receipt by the Trustee of the notice of the proposed payment. The Trustee shall
promptly notify the Company of such special record date and, in the name and at
the expense of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the special record date therefor to be mailed, first
class postage prepaid, to each Securityholder at his or her address as it
appears in the Debt Security Register, not less than ten days prior to such
special record date. Notice of the proposed payment of such Defaulted Interest
and the special record date therefor having been mailed as aforesaid, such
Defaulted Interest shall be paid to the Persons in whose names such Debt
Securities (or their respective Predecessor Securities) are registered on such
special record date and shall be no longer payable.

         Any interest scheduled to become payable on an Interest Payment Date
occurring during an Extension Period shall not be Defaulted Interest and shall
be payable on such other date as may be specified in the terms of such Debt
Securities.

         The term "regular record date" as used in this Section shall mean
either the fifteenth day of the month immediately preceding the month in which
an Interest Payment Date shall occur, if such Interest Payment Date is the first
day of a month, or the last day of the month immediately preceding the month in
which an Interest Payment shall occur, if such Interest Payment Date is the
fifteenth day of a month, whether or not such date is a Business Day.

         Subject to the foregoing provisions of this Section, each Debt Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other

                                       14
<PAGE>   21
Debt Security shall carry the rights to interest accrued and unpaid, and to
accrue, that were carried by such other Debt Security.

         SECTION 2.09. Cancellation of Debt Securities Paid, etc.

         All Debt Securities surrendered for the purpose of payment, redemption,
exchange or registration of transfer, shall, if surrendered to the Company or
any paying agent, be surrendered to the Trustee and promptly canceled by it, or,
if surrendered to the Trustee or any Authenticating Agent, shall be promptly
canceled by it, and no Debt Securities shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Indenture. All Debt
Securities canceled by any Authenticating Agent shall be delivered 'to the
Trustee. The Trustee shall destroy all canceled Debt Securities unless the
Company otherwise directs the Trustee in writing. If the Company shall acquire
any of the Debt Securities, however, such acquisition shall not operate as a
redemption or satisfaction of the indebtedness represented by such Debt
Securities unless and until the same are surrendered to the Trustee for
cancellation.

         SECTION 2.10. Computation of Interest.

         The amount of interest payable for any period will be computed on the
basis of a 3 60-day year of twelve 3 0-day months.

         SECTION 2.11. Extension of Interest Payment Period.

         So long as no Event of Default has occurred and is continuing, the
Company shall have the right, from time to time and without causing an Event of
Default, to defer payments of interest on the Debt Securities by extending the
interest payment period on the Debt Securities at any time and from time to time
during the term of the Debt Securities, for up to ten consecutive semi-annual
periods (each such extended interest payment period, an "Extension Period"),
during which Extension Period no interest shall be due and payable. No Extension
Period may end on a date other than an Interest Payment Date. During any
Extension Period, interest will continue to accrue on the Debt Securities and
interest on such accrued interest (such accrued interest and interest thereon
referred to herein as "Deferred Interest") will accrue at the Interest Rate,
compounded semi-annually from the date such Deferred Interest would have been
payable were it not for the Extension Period, both to the extent permitted by
law. No interest or Deferred Interest shall be due and payable during an
Extension Period, except at the end thereof, but each installment of interest
that would otherwise have been due and payable during such Extension Period
shall bear Deferred Interest. At the end of any such Extension Period the
Company shall pay all Deferred Interest then accrued and unpaid on the Debt
Securities; provided, however, that no Extension Period may extend beyond the
Maturity Date; and provided further, however, that during any such Extension
Period, the Company may not (i) declare or pay any dividends or distributions
on, or redeem, purchase, acquire or make a liquidation payment with respect to,
any of the Company's capital stock or (ii) make any payment of principal of or
interest or premium; if any, on or repay, repurchase or redeem any debt
securities of the Company that rank pari passu in all respects with or junior in
interest to the Debt Securities (other than (a) repurchases, redemptions or
other acquisitions of shares of capital stock of the Company in connection with
any employment contract, benefit plan or other similar arrangement with or for
the benefit of one or more employees, officers, directors or consultants, in
connection with a dividend reinvestment

                                       15
<PAGE>   22
or stockholder stock purchase plan or in connection with the issuance of capital
stock of the Company (or securities convertible into or exercisable for such
capital stock) as consideration in an acquisition transaction entered into prior
to the applicable Extension Period, (b) as a result of any exchange or
conversion of any class or series of the Company's capital stock (or any capital
stock of a subsidiary of the Company) for any class or series of the Company's
capital stock or of any class or series of the Company's indebtedness for any
class or series of the Company's capital stock, (c) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged, (d) any declaration of a dividend in connection with any
stockholder's rights plan, or the issuance of rights, stock or other property
under any stockholder's rights plan, or the redemption or repurchase of rights
pursuant thereto, or (e) any dividend in the form of stock, warrants, options or
other rights where the dividend stock or the stock issuable upon exercise of
such warrants, options or other rights is the same stock as that on which the
dividend is being paid or ranks pari passu with or junior to such stock). Prior
to the termination of any Extension Period, the Company may further extend such
period, provided that such period together with all such previous and further
consecutive extensions thereof shall not exceed ten consecutive semi-annual
periods, or extend beyond the Maturity Date. Upon the termination of any
Extension Period and upon the payment of all Deferred Interest, the Company may
commence a new Extension Period, subject to the foregoing requirements. The
Company must give the Trustee notice of its election to begin such Extension
Period at least one Business Day prior to the earlier of (i) the date interest
on the Debt Securities would have been payable except for the election to begin
such Extension Period or (ii) the date such interest is payable, but in any
event not less than one Business Day prior to such record date. The Trustee
shall give notice of the Company's election to begin at new Extension Period to
the Securityholders.

SECTION 2.12. CUSIP Numbers.

         The Company in issuing the Debt Securities may use "CUSIP" numbers (if
then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption as a convenience to Securityholders; provided that any
such notice may state that no representation is made as to the correctness of
such numbers either as printed on the Debt Securities or as contained in any
notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Debt Securities, and any such redemption
shall not be affected by any defect in or omission of such numbers. The Company
will promptly notify the Trustee in writing of any change in the CUSIP numbers.

                                   ARTICLE III

                      PARTICULAR COVENANTS OF THE COMPANY

         SECTION 3.01. Payment of Principal, Premium and Interest; Agreed
Treatment of the Debt Securities.

         (a) The Company covenants and agrees that it will duly and punctually
pay or cause to be paid the principal of and premium, if any, and interest on
the Debt Securities at the place, at the respective times and in the manner
provided in this Indenture and the Debt Securities. At the option of the
Company, each installment of interest on the Debt Securities

                                       16
<PAGE>   23
may be paid (i) by mailing checks for such interest payable to the order of the
holders of Debt Securities entitled thereto as they appear on the registry books
of the Company or (ii) by wire transfer to any account with a banking
institution located in the United States designated by such Person to the paying
agent no later than the related record date.

         (b) The Company will treat the Debt Securities as indebtedness, and the
amounts payable in respect of the principal amount of such Debt Securities as
interest, for all U.S. federal income tax purposes. All payments in respect of
such Debt Securities will be made free and clear of U.S. withholding tax to any
beneficial owner thereof that has provided an Internal Revenue Service Form W8
BEN (or any substitute or successor form) establishing its non-U.S. status for
U.S. federal income tax purposes.

         (c) The Company has no present intention to exercise its right under
Section 2.11 to defer payments of interest on the Debt Securities by commencing
an Extension Period.

         (d) The Company believes that the likelihood that it would exercise its
right under Section 2.11 to defer payments of interest on the Debt Securities by
commencing an Extension Period at any time during which the Debt Securities are
outstanding is remote because of the restrictions that would be imposed on the
Company's ability to declare or pay dividends or distributions on, or to redeem,
purchase or make a liquidation payment with respect to, any of its outstanding
equity and on the Company's ability to make any payments of principal of or
interest on, or repurchase or redeem, any of its debt securities that rank pari
passu in all respects with (or junior in interest to) the Debt Securities.

         SECTION 3.02. Offices for Notices and Payments, etc.

         So long as any of the Debt Securities remain outstanding, the Company
will maintain in California, an office or agency where the Debt Securities may
be presented for payment, an office or agency where the Debt Securities may be
presented for registration of transfer and for exchange as in this Indenture
provided and an office or agency where notices and demands to or upon the
Company in respect of the Debt Securities or of this Indenture may be served.
The Company will give to the Trustee written notice of the location of any such
office or agency and of any change of location thereof. Until otherwise
designated from time to time by the Company in a notice to the Trustee, or
specified as contemplated by Section 2.05, such office or agency for all of the
above purposes shall be the office or agency of the Trustee. In case the Company
shall fail to maintain any such office or agency in California, or shall fail to
give such notice of the location or of any change in the location thereof,
presentations and demands may be made and notices may be served at the principal
corporate trust office of the Trustee.

         In addition to any such office or agency, the Company may from time to
time designate one or more offices or agencies outside California, where the
Debt Securities may be presented for registration of transfer and for exchange
in the manner provided in this Indenture, and the Company may from time to time
rescind such designation, as the Company may deem desirable or expedient;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain any such office or agency in
California, for the purposes above mentioned. The Company will give to the
Trustee prompt written notice of any such designation or rescission thereof.

                                       17
<PAGE>   24
         SECTION 3.03. Appointments to Fill Vacancies in Trustee's Office.

         The Company, whenever necessary to avoid or fill a vacancy in the
office of Trustee, will appoint, in the manner provided in Section 6.09, a
Trustee, so that there shall at all times be a Trustee hereunder.

         SECTION 3.04. Provision as to Paying Agent.

         (a) If the Company shall appoint a paying agent other than the Trustee,
it will cause such paying agent to execute and deliver to the Trustee an
instrument in which such agent shall agree with the Trustee, subject to the
provision of this Section 3.04,

                  (1) that it will hold all sums held by it as such agent for
         the payment of the principal of and premium, if any, or interest, if
         any, on the Debt Securities (whether such sums have been paid to it by
         the Company or by any other obligor on the Debt Securities) in trust
         for the benefit of the holders of the Debt Securities;

                  (2) that it will give the Trustee prompt written notice of any
         failure by the Company (or by any other obligor on the Debt Securities)
         to make any payment of the principal of and premium, if any, or
         interest, if any, on the Debt Securities when the same shall be due and
         payable; and

                  (3) that it will, at any time during the continuance of any
         Event of Default, upon the written request of the Trustee, forthwith
         pay to the Trustee all sums so held in trust by such paying agent.

         (b) If the Company shall act as its own paying agent, it will, on or
before each due date of the principal of and premium, if any, or interest, if
any, on the Debt Securities, set aside, segregate and hold in trust for the
benefit of the holders of the Debt Securities a sum sufficient to pay such
principal, premium or interest so becoming due and will notify the Trustee in
writing of any failure to take such action and of any failure by the Company (or
by any other obligor under the Debt Securities) to make any payment of the
principal of and premium, if any, or interest, if any, on the Debt Securities
when the same shall become due and payable.

         Whenever the Company shall have one or more paying agents for the Debt
Securities, it will, on or prior to each due date of the principal of and
premium, if any, or interest, if any, on the Debt Securities, deposit with a
paying agent a sum sufficient to pay the principal, premium or interest so
becoming due, such sum to be held in trust for the benefit of the, Persons
entitled thereto and (unless such paying agent is the Trustee) the Company shall
promptly notify the Trustee in writing of its action or failure to act.

         (c) Anything in this Section 3.04 to the contrary notwithstanding, the
Company may, at any time, for the purpose of obtaining a satisfaction and
discharge with respect to the Debt Securities, or for any other reason, pay, or
direct any paying agent to pay to the Trustee all sums held in trust by the
Company or any such paying agent, such sums to be held by the Trustee upon the
trusts herein contained.

                                       18
<PAGE>   25
         (d) Anything in this Section 3.04 to the contrary notwithstanding, the
agreement to hold sums in trust as provided in this Section 3.04 is subject to
Sections 12.03 and 12.04.

         SECTION 3.05. Certificate to Trustee.

         The Company will deliver to the Trustee on or before 120 days after the
end of each fiscal year in each year, so long as Debt Securities are outstanding
hereunder, a Certificate stating that in the course of the performance by the
signers of their duties as officers of the Company they would normally have
knowledge of any default by the Company in the performance of any covenants
contained herein, stating whether or not they have knowledge of any such
default and, if so, specifying each such default of which the signers have
knowledge and the nature thereof.

         SECTION 3.06. Additional Interest.

         If and for so long as the Trust is the holder of all Debt Securities
and the Trust is required to pay any additional taxes, duties, assessments or
other governmental charges as a result of a Tax Event, the Company will pay such
additional amounts (the "Additional Interest") on the Debt Securities as shall
be required so that the net amounts received and retained by the Trust after
paying taxes, duties, assessments or other governmental charges will be equal to
the amounts the Trust would have received if no such taxes, duties, assessments
or other governmental charges had been imposed. Whenever in this Indenture or
the Debt Securities there is a reference in any context to the payment of
principal of or interest on the Debt Securities, such mention shall be deemed to
include mention of payments of the Additional Interest provided for in this
paragraph to the extent that, in such context, Additional Interest is, was or
would be payable in respect thereof pursuant to the provisions of this paragraph
and express mention of the payment of Additional Interest (if applicable) in any
provisions hereof shall not be construed as excluding Additional Interest in
those provisions hereof where such express mention is not made, provided,
however, that the deferral of the payment of interest during an Extension Period
pursuant to Section 2.11 shall not defer the payment of any Additional Interest
that may be due and payable.

         SECTION 3.07. Compliance with Consolidation Provisions.

         The Company will not, while any of the Debt Securities remain
outstanding, consolidate with, or merge into, or merge into itself, or sell or
convey all or substantially all of its property to any other Person unless the
provisions of Article XI hereof are complied with.

         SECTION 3.08. Limitation on Dividends.

         If Debt Securities are initially issued to the Trust or a trustee of
such trust in connection with the issuance of Trust Securities by the Trust
(regardless of whether Debt Securities continue to be held by such trust) and
(i) there shall have occurred and be continuing any event that would constitute
an Event of Default, (ii) the Company shall be in default with respect to its
payment of any obligations under the Capital Securities Guarantee, or (iii) the
Company shall have given notice of its election to defer payments of interest on
the Debt Securities by extending the interest payment period as provided herein
and such period, or any

                                       19
<PAGE>   26
extension thereof, shall be continuing, then the Company may not (i) declare or
pay any dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Company's capital stock or (ii)
make any payment of principal of or interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Company that rank pari passu in
all respects with or junior in interest to the Debt Securities (other than (a)
repurchases, redemptions or other acquisitions of shares of capital stock of the
Company in connection with any employment contract, benefit plan or other
similar arrangement with or for the benefit of one or more employees, officers,
directors or consultants, in connection with a dividend reinvestment or
stockholder stock purchase plan or in connection with the issuance of capital
stock of the Company (or securities convertible into or exercisable for such
capital stock) as consideration in an acquisition transaction entered into prior
to the occurrence of the Event of Default, (b) as a result of any exchange or
conversion of any class or series of the Company's capital stock (or any capital
stock of a subsidiary of the Company) for any class or series of the Company's
capital stock or of any class or series of the Company's indebtedness for any
class or series of the Company's capital stock, (c) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged, (d) any declaration of a dividend in connection with any
stockholder's rights plan, or the issuance of rights, stock or other property
under any stockholder's rights plan, or the redemption or repurchase of rights
pursuant thereto, or (e) any dividend in the form of stock, warrants, options or
other rights where the dividend stock or the stock issuable upon exercise of
such warrants, options or other rights is the same stock as that on which the
dividend is being paid or ranks pari passu with or junior to such stock).

         SECTION 3.09. Covenants as to the Trust.

         For so long as such Trust Securities remain outstanding, the Company
shall maintain 100% ownership of the Common Securities; provided, however, that
any permitted successor of the Company under this Indenture may succeed to the
Company's ownership of such Common Securities. The Company, as owner of a
majority of the Common Securities shall cause the Trust (a) to remain a
statutory business trust, except in connection with a distribution of Debt
Securities to the holders of Trust Securities in liquidation of the Trust, the
redemption of all of the Trust Securities or certain mergers, consolidations or
amalgamations, each as permitted by the Declaration, (b) to otherwise continue
to be classified as a grantor trust for United States federal income tax
purposes and (c) to use its reasonable efforts to cause each holder of Trust
Securities to be treated as owning an undivided beneficial interest in the Debt
Securities.

                                   ARTICLE IV

                       SECURITYHOLDERS' LISTS AND REPORTS
                         BY THE COMPANY AND THE TRUSTEE

         SECTION 4.01. Securityholders' Lists.

         The Company covenants and agrees that it will furnish or caused to be
furnished to the Trustee:

                                       20
<PAGE>   27
         (a) on each regular record date for the Debt Securities, a list, in
such form as the Trustee may reasonably require, of the names and addresses of
the Securityholders of the Debt Securities as of such record date; and

         (b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of similar
form and content as of a date not more than 15 days prior to the time such list
is furnished;

except that no such lists need be furnished under this Section 4.01 so long as
the Trustee is in possession thereof by reason of its acting as Debt Security
registrar.

         SECTION 4.02. Preservation and Disclosure of Lists.

         (a) The Trustee shall preserve, in as current a form as is reasonably
practicable, all information as to the names and addresses of the holders of
Debt Securities (1) contained in the most recent list furnished to it as
provided in Section 4.01 or (2) received by it in the capacity of Debt
Securities registrar (if so acting) hereunder. The Trustee may destroy any list
furnished to it as provided in Section 4.01 upon receipt of a new list so
furnished.

         (b) In case three or more holders of Debt Securities (hereinafter
referred to as "applicants") apply in writing to the Trustee and furnish to the
Trustee reasonable proof that each such applicant has owned a Debt Security for
a period of at least six months preceding the date of such application, and such
application states that the applicants desire to communicate with other holders
of Debt Securities with respect to their rights under this Indenture or under
such Debt Securities and is accompanied by a copy of the form of proxy or other
communication which such applicants propose to transmit, then the Trustee shall
within five Business Days after the receipt of such application, at its
election, either:

                  (1) afford such applicants access to the information preserved
         at the time by the Trustee in accordance with the provisions of
         subsection (a) of this Section 4.02, or

                  (2) inform such applicants as to the approximate number of
         holders of Debt Securities whose names and addresses appear in the
         information preserved at the time by the Trustee in accordance with the
         provisions of subsection (a) of this Section 4.02, and as to the
         approximate cost of mailing to such Securityholders the form of proxy
         or other communication, if any, specified in such application.

         If the Trustee shall elect not to afford such applicants access to such
information, the Trustee shall, upon the written request of such applicants,
mail to each Securityholder of Debt Securities whose name and address appear in
the information preserved at the time by the Trustee in accordance with the
provisions of subsection (a) of this Section 4.02 a copy of the form of proxy or
other communication which is specified in such request with reasonable
promptness after a tender to the Trustee of the material to be mailed and of
payment, or provision for the payment, of the reasonable expenses of mailing,
unless within five days after such tender, the Trustee shall mail to such
applicants and file with the Securities and Exchange Commission, if permitted or
required by applicable law, together with a copy of the material to be mailed, a
written statement to the effect that, in the opinion of the Trustee, such
mailing would be contrary

                                       21
<PAGE>   28
to the best interests of the holders of all Debt Securities, as the case may
be, or would be in violation of applicable law. Such written statement shall
specify the basis of such opinion. If said Commission, as permitted or required
by applicable law, after opportunity for a hearing upon the objections
specified in the written statement so filed, shall enter an order refusing to
sustain any of such objections or if, after the entry of an order sustaining
one or more of such objections, said Commission shall find, after notice and
opportunity for hearing, that all the objections so sustained have been met and
shall enter an order so declaring, the Trustee shall mail copies of such
material to all such Securityholders with reasonable promptness after the entry
of such order and the renewal of such tender; otherwise the Trustee shall be
relieved of any obligation or duty to such applicants respecting their
application.

     (c)  Each and every holder of Debt Securities, by receiving and holding
the same, agrees with Company and the Trustee that neither the Company nor the
Trustee nor any paying agent shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the holders
of Debt Securities in accordance with the provisions of subsection (b) of this
Section 4.02, regardless of the source from which such information was derived,
and that the Trustee shall not be held accountable by reason of mailing any
material pursuant to a request made under said subsection (b).

                                   ARTICLE V
                  REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
                            UPON AN EVENT OF DEFAULT

     SECTION 5.01.  Events of Default.

     The following Events of Default shall be "Events of Default" with respect
to Debt Securities:

     (a)  the Company defaults in the payment of any interest upon any Debt
Security when it becomes due and payable, and continuance of such default for a
period of 30 days; or

     (b)  the Company defaults in the payment of all or any part of the
principal of (or premium, if any, on) any Debt Securities as and when the same
shall become due and payable either at maturity, upon redemption (including
redemption for any sinking fund), by declaration of acceleration or otherwise;
or

     (c)  the Company defaults in the performance of, or breaches, any of its
covenants or agreements in Sections 3.06, 3.07, 3.08 and 3.09 of this Indenture
(other than a covenant or agreement a default in whose performance or whose
breach is elsewhere in this Section specifically dealt with), and continuance
of such default or breach for a period of 90 days after there has been given,
by registered or certified mail, to the Company by the trustee or to the
Company and the Trustee by the holders of at least 25% in aggregate principal
amount of the outstanding Debt Securities, a written notice specifying such
default or breach and requiring it to be remedied and stating that such notice
is a "Notice of Default" hereunder; or

     (d)  a court having jurisdiction in the premises shall enter a decree or
order for relief in respect of the Company in an involuntary case under any
applicable bankruptcy,

                                       22
<PAGE>   29
insolvency or other similar law now or hereafter in effect, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of the Company or for any substantial part of its property, or
ordering the winding-up or liquidation of its affairs and such decree or order
shall remain unstayed and in effect for a period of 90 consecutive days; or

          (e)  the Company shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, shall
consent to the entry of an order for relief in an involuntary case under any
such law, or shall consent to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of the Company or of any substantial part of its property, or
shall make any general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due; or

          (f)  the Trust shall have voluntarily or involuntarily liquidated,
dissolved, wound-up its business or otherwise terminated its existence except in
connection with (1) the distribution of the Debt Securities to holders of such
Trust Securities in liquidation of their interests in the Trust, (2) the
redemption of all of the outstanding Trust Securities or (3) certain mergers,
consolidations or amalgamations, each as permitted by the Declaration.

     If an Event of Default occurs and is continuing with respect to the Debt
Securities, then, and in each and every such case, unless the principal of the
Debt Securities shall have already become due and payable, either the Trustee or
the holders of not less than 25% in aggregate principal amount of the Debt
Securities then outstanding hereunder, by notice in writing to the Company (and
to the Trustee if given by Securityholders), may declare the entire principal
of the Debt Securities and the interest accrued thereon, if any, to be due and
payable immediately, and upon any such declaration the same shall become
immediately due and payable.

     The foregoing provisions, however, are subject to the condition that if,
at any time after the principal of the Debt Securities shall have been so
declared due and payable, and before any judgment or decree for the payment of
the moneys due shall have been obtained or entered as hereinafter provided, the
Company shall pay or shall deposit with the Trustee a sum sufficient to pay all
matured installments of interest upon all the Debt Securities and the principal
of and premium, if any, on the Debt Securities which shall have become due
otherwise than by acceleration (with interest upon such principal and premium,
if any, and Deferred Interest, to the extent permitted by law) and such amount
as shall be sufficient to cover reasonable compensation to the Trustee and each
predecessor Trustee, their respective agents, attorneys and counsel, and all
other amounts due to the Trustee pursuant to Section 6.06, and if any and all
Events of Default under this Indenture, other than the non-payment of the
principal of or premium, if any, on Debt Securities which shall have become due
by acceleration, shall have been cured, waived or otherwise remedied as provided
herein -- then and in every such case the holders of a majority in aggregate
principal amount of the Debt Securities then outstanding, by written notice to
the Company and to the Trustee, may waive all defaults and rescind and annul
such declaration and its consequences, but no such waiver or rescission and
annulment shall extend to or shall affect any subsequent default or shall
impair any right consequent thereon.

                                       23

<PAGE>   30
     In case the Trustee shall have proceeded to enforce any right under this
Indenture and such proceedings shall have been discontinued or abandoned
because of such rescission or annulment or for any other reason or shall have
been determined adversely to the Trustee, then and in every such case the
Company, the Trustee and the holders of the Debt Securities shall be restored
respectively to their several positions and rights hereunder, and all rights,
remedies and powers of the Company, the Trustee and the holders of the Debt
Securities shall continue as though no such proceeding had been taken.

     SECTION 5.02.  Payment of Debt Securities on Default; Suit Therefor.

     The Company covenants that (a) in case default shall be made in the
payment of any installment of interest upon any of the Debt Securities as and
when the same shall become due and payable, and such default shall have
continued for a period of 30 days, or (b) in case default shall be made in the
payment of the principal of or premium, if any, on any of the Debt Securities
as and when the same shall have become due and payable, whether at maturity of
the Debt Securities or upon redemption or by declaration of acceleration or
otherwise -- then, upon demand of the Trustee, the Company will pay to the
Trustee, for the benefit of the holders of the Debt Securities the whole amount
that then shall have become due and payable on all Debt Securities for
principal and premium, if any, or interest, or both, as the case may be,
including Deferred Interest accrued on the Debt Securities; and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including a reasonable compensation to the Trustee, its
agents, attorneys and counsel, and any other amounts due to the Trustee under
Section 6.06. In case the Company shall fail forthwith to pay such amounts upon
such demand, the Trustee, in its own name and as trustee of an express trust,
shall be entitled and empowered to institute any actions or proceedings at law
or in equity for the collection of the sums so due and unpaid, and may
prosecute any such action or proceeding to judgment or final decree, and may
enforce any such judgment or final decree against the Company or any other
obligor on such Debt Securities and collect in the manner provided by law out
of the property of the Company or any other obligor on such Debt Securities
wherever situated the moneys adjudged or decreed to be payable.

     In case there shall be pending proceedings for the bankruptcy or for the
reorganization of the Company or any other obligor on the Debt Securities under
Bankruptcy Law, or in case a receiver or trustee shall have been appointed for
the property of the Company or such other obligor, or in the case of any other
similar judicial proceedings relative to the Company or other obligor upon the
Debt Securities, or to the creditors or property of the Company or such other
obligor, the Trustee, irrespective of whether the principal of the Debt
Securities shall then be due and payable as therein expressed or by declaration
of acceleration or otherwise and irrespective of whether the Trustee shall have
made any demand pursuant to the provisions of this Section 5.02, shall be
entitled and empowered, by intervention in such proceedings or otherwise, to
file and prove a claim or claims for the whole amount of principal and interest
owing and unpaid in respect of the Debt Securities and, in case of any judicial
proceedings, to file such proofs of claim and other papers or documents as may
be necessary or advisable in order to have the claims of the Trustee (including
any claim for reasonable compensation to the Trustee and each predecessor
Trustee, and their respective agents, attorneys and counsel, and for
reimbursement of all other amounts due to the Trustee under Section 6.06) and
of the Securityholders allowed in such judicial proceedings relative to the
Company or any

                                       24
<PAGE>   31
other obligor on the Debt Securities, or to the creditors or property of the
Company or such other obligor, unless prohibited by applicable law and
regulations, to vote on behalf of the holders of the Debt Securities in any
election of a trustee or a standby trustee in arrangement, reorganization,
liquidation or other bankruptcy or insolvency proceedings or Person performing
similar functions in comparable proceedings, and to collect and receive any
moneys or other property payable or deliverable on any such claims, and to
distribute the same after the deduction of its charges and expenses; and any
receiver, assignee or trustee in bankruptcy or reorganization is hereby
authorized by each of the Securityholders to make such payments to the Trustee,
and, in the event that the Trustee shall consent to the making of such payments
directly to the Securityholders, to pay to the Trustee such amounts as shall be
sufficient to cover reasonable compensation to the Trustee, each predecessor
Trustee and their respective agents, attorneys and counsel, and all other
amounts due to the Trustee under Section 6.06.

         Nothing herein contained shall be construed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Securityholder any
plan of reorganization, arrangement, adjustment or composition affecting the
Debt Securities or the rights of any holder thereof or to authorize the Trustee
to vote in respect of the claim of any Securityholder in any such proceeding.

         All rights of action and of asserting claims under this Indenture, or
under any of the Debt Securities, may be enforced by the Trustee without the
possession of any of the Debt Securities, or the production thereof at any trial
or other proceeding relative thereto, and any such suit or proceeding instituted
by the Trustee shall be brought in its own name as trustee of an express trust,
and any recovery of judgment shall be for the ratable benefit of the holders of
the Debt Securities.

         In any proceedings brought by the Trustee (and also any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party) the Trustee shall be held to represent all the holders
of the Debt Securities, and it shall not be necessary to make any holders of the
Debt Securities parties to any such proceedings.

SECTION 5.03. Application of Moneys Collected by Trustee.

         Any moneys collected by the Trustee shall be applied in the following
order, at the date or dates fixed by the Trustee for the distribution of such
moneys, upon presentation of the several Debt Securities in respect of which
moneys have been collected, and stamping thereon the payment, if only partially
paid, and upon surrender thereof if fully paid:

         First: To the payment of costs and expenses incurred by, and reasonable
fees of, the Trustee, its agents, attorneys and counsel, and of all other
amounts due to the Trustee under Section 6.06;

         Second: To the payment of all Senior Indebtedness of the Company if and
to the extent required by Article XV;

         Third: To the payment of the amounts then due and unpaid upon Debt
Securities for principal (and premium, if any), and interest on the Debt
Securities, in respect of which or for the benefit of which money has been
collected, ratably, without preference or priority of any

                                       25
<PAGE>   32
kind, according to the amounts due on such Debt Securities for principal (and
premium, if any) and interest, respectively; and

         Fourth: The balance, if any, to the Company.

         SECTION 5.04. Proceedings by Securityholders.

         No holder of any Debt Security shall have any right to institute any
suit, action or proceeding for any remedy hereunder, unless such holder
previously shall have given to the Trustee written notice of an Event of Default
with respect to the Debt Securities and unless the holders of not less than 25%
in aggregate principal amount of the Debt Securities then outstanding shall have
given the Trustee a written request to institute such action, suit or proceeding
and shall have offered to the Trustee such reasonable indemnity as it may
require against the costs, expenses and liabilities to be incurred thereby, and
the Trustee for 60 days after its receipt of such notice, request and offer of
indemnity shall have failed to institute any such action, suit or proceeding;
provided, that no holder of Debt Securities shall have any right to prejudice
the rights of any other holder of Debt Securities, obtain priority or preference
over any other such holder or enforce any right under this Indenture except in
the manner herein provided and for the equal, ratable and common benefit of all
holders of Debt Securities.

         Notwithstanding any other provisions in this Indenture, however, the
right of any holder of any Debt Security to receive payment of the principal of,
premium, if any, and interest, on such Debt Security when due, or to institute
suit for the enforcement of any such payment, shall not be impaired or affected
without the consent of such holder. For the protection and enforcement of the
provisions of this Section, each and every Securityholder and the Trustee shall
be entitled to such relief as can be given either at law or in equity.

         SECTION 5.05. Proceedings by Trustee.

         In case of an Event of Default hereunder the Trustee may in its
discretion proceed to protect and enforce the rights vested in it by this
Indenture by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any of such rights, either by suit in
equity or by action at law or by proceeding in bankruptcy or otherwise, whether
for the specific enforcement of any covenant or agreement contained in this
Indenture or in aid of the exercise of any power granted in this Indenture, or
to enforce any other legal or equitable right vested in the Trustee by this
Indenture or by law.

         SECTION 5.06. Remedies Cumulative and Continuing.

         Except as otherwise provided in Section 2.06, all powers and remedies
given by this Article V to the Trustee or to the Securityholders shall, to the
extent permitted by law, be deemed cumulative and not exclusive of any other
powers and remedies available to the Trustee or the holders of the Debt
Securities, by judicial proceedings or otherwise, to enforce the performance or
observance of the covenants and agreements contained in this Indenture or
otherwise established with respect to the Debt Securities, and no delay or
omission of the Trustee or of any holder of any of the Debt Securities to
exercise any right or power accruing upon any Event of Default occurring and
continuing as Aforesaid shall impair any such right or power, or shall be
construed to be a waiver of any such default or an acquiescence therein; and,
subject to

                                       26
<PAGE>   33
the provisions of Section 5.04, every power and remedy given by this Article V
or by law to the Trustee or to the Securityholders may be exercised from time to
time, and as often as shall be deemed expedient, by the Trustee or by the
Securityholders.

         SECTION 5.07. Direction of Proceedings and Waiver of Defaults by
Majority of Securityholders.

         The holders of a majority in aggregate principal amount of the Debt
Securities affected (voting as one class) at the time outstanding shall have the
right to direct the time, method, and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred on
the Trustee with respect to such Debt Securities; provided, however, that
(subject to the provisions of Section 6.01) the Trustee shall have the right to
decline to follow any such direction if the Trustee shall determine that the
action so directed would be unjustly prejudicial to the holders not taking part
in such direction or if the Trustee being advised by counsel determines that the
action or proceeding so directed may not lawfully be taken or if a Responsible
Officer of the Trustee shall determine that the action or proceedings so
directed would involve the Trustee in personal liability. Prior to any
declaration accelerating the maturity of the Debt Securities, the holders of a
majority in aggregate principal amount of the Debt Securities at the time
outstanding may on behalf of the holders of all of the Debt Securities waive (or
modify any previously granted waiver of) any past default or Event of Default
and its consequences, except a default (a) in the payment of principal of,
premium, if any, or interest on any of the Debt Securities, (b) in respect of
covenants or provisions hereof which cannot be modified or amended without the
consent of the holder of each Debt Security affected, or (c) in respect of
the covenants contained in Section 3.09; provided, however, that if the Debt
Securities are held by the Trust or a trustee of such trust, such waiver or
modification to such waiver shall not be effective until the holders of a
majority in liquidation preference of Trust Securities of the Trust shall have
consented to such waiver or modification to such waiver; provided, further, that
if the consent of the holder of each outstanding Debt Security is required, such
waiver shall not be effective until each holder of the Trust Securities of the
Trust shall have consented to such waiver. Upon any such waiver, the default
covered thereby shall be deemed to be cured for all purposes of this Indenture
and the Company, the Trustee and the holders of the Debt Securities shall be
restored to their former positions and rights hereunder, respectively; but no
such waiver shall extend to any subsequent or other default or Event of Default
or impair any right consequent thereon. Whenever any default or Event of Default
hereunder shall have been waived as permitted by this Section 5.07, said default
or Event of Default shall for all purposes of the Debt Securities and this
Indenture be deemed to have been cured and to be not continuing.

         SECTION 5.08. Notice of Defaults.

         The Trustee shall, within 90 days after a Responsible Officer of the
Trustee shall have received notice or obtained actual knowledge of the
occurrence of a default with respect to the Debt Securities, mail to all
Securityholders, as the names and addresses of such holders appear upon the Debt
Security Register, notice of all defaults with respect to the Debt Securities
known to the Trustee, unless such defaults shall have been cured before the
giving of such notice (the term "defaults" for the purpose of this Section 5.08
being hereby defined to be the events specified in subsections (a), (b), (c),
(d) and (e) of Section 5.01, not including periods of grace, if any, provided
for therein); provided, that, except in the case of default in the payment of
the

                                       27
<PAGE>   34
principal of, premium, if any, or interest on any of the Debt Securities, the
Trustee shall be protected in withholding such notice if and so long as a
Responsible Officer of the Trustee in good faith determines that the withholding
of such notice is in the interests of the Securityholders.

         SECTION 5.09. Undertaking to Pay Costs.

         All parties to this Indenture agree, and each holder of any Debt
Security by his acceptance thereof shall be deemed to have agreed, that any
court may in its discretion require, in any suit for the enforcement of any
right or remedy under this Indenture, or in any suit against the Trustee for any
action taken or omitted by it as Trustee, the filing by any party litigant in
such suit of an undertaking to pay the costs of such suit, and that such court
may in its discretion assess reasonable costs, including reasonable attorneys'
fees and expenses, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party litigant;
but the provisions of this Section 5.09 shall not apply to any suit instituted
by the Trustee, to any suit instituted by any Securityholder, or group of
Securityholders, holding in the aggregate more than 10% in principal amount of
the Debt Securities outstanding, or to any suit instituted by any Securityholder
for the enforcement of the payment of the principal of (or premium, if any) or
interest on any Debt Security against the Company on or after the same shall
have become due and payable.

                                   ARTICLE VI
                             CONCERNING THE TRUSTEE

         SECTION 6.01. Duties and Responsibilities of Trustee.

         With respect to the holders of Debt Securities issued hereunder, the
Trustee, prior to the occurrence of an Event of Default with respect to the Debt
Securities and after the curing or waiving of all Events of Default which may
have occurred, with respect to the Debt Securities, undertakes to perform such
duties and only such duties as are specifically set forth in this Indenture. In
case an Event of Default with respect to the Debt Securities has occurred (which
has not been cured or waived) the Trustee shall exercise such of the rights and
powers vested in it by this Indenture, and use the same degree of care and skill
in their exercise, as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs.

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

         (a) prior to the occurrence of an Event of Default with respect to Debt
Securities and after the curing or waiving of all Events of Default which may
have occurred

                  (1) the duties and obligations of the Trustee with respect to
         Debt Securities shall be determined solely by the express provisions of
         this Indenture, and the Trustee shall not be liable except for the
         performance of such duties and obligations with respect to the Debt
         Securities as are specifically set forth in this Indenture, and no
         implied covenants or obligations shall be read into this Indenture
         against the Trustee, and

                                       28
<PAGE>   35
                  (2) in the absence of bad faith on the part of the Trustee,
         the 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 Trustee and conforming to the
         requirements of this Indenture; but, in the case of any such
         certificates or opinions which by any provision hereof are specifically
         required to be furnished to the Trustee, the Trustee shall be under a
         duty to examine the same to determine whether or not they conform to
         the requirements of this Indenture;

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

         (c) the 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
Securityholders pursuant to Section 5.07, relating to the time, method and place
of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this Indenture.

         None of the provisions contained in this Indenture shall require the
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.

         SECTION 6.02. Reliance on Documents, Opinions, etc.

         Except as otherwise provided in Section 6.01:

         (a) the 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, consent, order, bond, note,
debenture or other paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties;

         (b) any request, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by an Officers' Certificate (unless other
evidence in respect thereof be herein specifically prescribed); and any Board
Resolution may be evidenced to the Trustee by a copy thereof certified by the
Secretary or an Assistant Secretary of the Company;

         (c) the Trustee may consult with counsel of its selection and any
advice or Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with such advice or Opinion of Counsel;

         (d) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Securityholders, pursuant to the provisions of this
Indenture, unless such Securityholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred therein or thereby;

                                       29
<PAGE>   36
         (e) the Trustee shall not be liable for any action taken or omitted by
it in good faith and believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Indenture; nothing contained herein
shall, however, relieve the Trustee of the obligation, upon the occurrence of an
Event of Default with respect to the Debt Securities (that has not been cured or
waived) to exercise with respect to Debt Securities such of the rights and
powers vested in it by this Indenture, and to use the same degree of care and
skill in their exercise, as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs;

         (f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice; request, consent, order, approval, bond, debenture,
coupon or other paper or document, unless requested in writing to do so by the
holders of not less than a majority in principal amount of the outstanding Debt
Securities affected thereby; provided, however, that if the payment within a
reasonable time to the Trustee of the costs, expenses or liabilities likely to
be incurred by it in the making of such investigation is, in the opinion of the
Trustee, not reasonably assured to the Trustee by the security afforded to it by
the terms of this Indenture, the Trustee may require reasonable indemnity
against such expense or liability as a condition to so proceeding;

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

         (h) the Trustee shall not be charged with knowledge of any Default or
Event of Default with respect to the Debt Securities unless either (1) a
Responsible Officer shall have actual knowledge of such Default or Event of
Default or (2) written notice of such Default or Event of Default shall have
been given to the Trustee by the Company or any other obligor on the Debt
Securities or by any holder of the Debt Securities.

         SECTION 6.03. No Responsibility for Recitals, etc.

         The recitals contained herein and in the Debt Securities (except in the
certificate of authentication of the Trustee or the Authenticating Agent) shall
be taken as the statements of the Company and the Trustee and the Authenticating
Agent assume no responsibility for the correctness of the same. The Trustee and
the Authenticating Agent make no representations as to the validity or
sufficiency of this Indenture or of the Debt Securities. The Trustee and the
Authenticating Agent shall not be accountable for the use or application by the
Company of any Debt Securities or the proceeds of any Debt Securities
authenticated and delivered by the Trustee or the Authenticating Agent in
conformity with the provisions of this Indenture.

         SECTION 6.04. Trustee, Authenticating Agent, Paying Agents Transfer
Agents or Registrar May Own Debt Securities.

         The Trustee or any Authenticating Agent or any paying agent or any
transfer agent or any Debt Security registrar, in its individual or any other
capacity, may become the

                                       30
<PAGE>   37
owner or pledgee of Debt Securities with the same rights it would have if it
were not Trustee, Authenticating Agent, paying agent, transfer agent or Debt
Security registrar.

         SECTION 6.05. Moneys to be Held in Trust.

         Subject to the provisions of Section 12.04, all moneys received by the
Trustee or any paying agent shall, until used or applied as herein provided, be
held in trust for the purpose for which they were received, but need not be
segregated from other funds except to the extent required by law. The Trustee
and any paying agent shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed in writing with the Company.
So long as no Event of Default shall have occurred and be continuing, all
interest allowed on any such moneys shall be paid from time to time upon the
written order of the Company, signed by the Chairman of the Board of Directors,
the President, the Chief Operating Officer, a Managing Director, a Vice
President, the Treasurer or an Assistant Treasurer of the Company.

         SECTION 6.06. Compensation and Expenses of Trustee.

         The Company covenants and agrees to pay to the Trustee from time to
time, and the Trustee shall be entitled to, such compensation as shall be agreed
to in writing between the Company and the Trustee (which shall not be limited by
any provision of law in regard to the compensation of a trustee of an express
trust), and the Company will pay or reimburse the Trustee upon its request for
all reasonable expenses, disbursements and advances incurred or made by the
Trustee in accordance with any of the provisions of this Indenture (including
the reasonable compensation and the expenses and disbursements of its counsel
and of all Persons not regularly in its employ) except any such expense,
disbursement or advance as may arise from its negligence or bad faith. The
Company also covenants to indemnify each of the Trustee or any predecessor
Trustee (and its officers, agents, directors and employees) for, and to hold it
harmless against, any and all loss, damage, claim, liability or expense
including taxes (other than taxes based on the income of the Trustee) incurred
without negligence or bad faith on the part of the Trustee and arising out of or
in connection with the acceptance or administration of this trust, including the
costs and expenses of defending itself against any claim of liability in the
premises. The obligations of the Company under this Section 6.06 to compensate
and indemnify the Trustee and to pay or reimburse the Trustee for expenses,
disbursements and advances shall constitute additional indebtedness hereunder.
Such additional indebtedness shall be secured by a lien prior to that of the
Debt Securities upon all property and funds held or collected by the Trustee as
such, except funds held in trust for the benefit of the holders of particular
Debt Securities.

         Without prejudice to any other rights available to the Trustee under
applicable law, when the Trustee incurs expenses or renders services in
connection with an Event of Default specified in subsections (c), (d) or (e) of
Section 5.01, the expenses (including the reasonable charges and expenses of its
counsel) and the compensation for the services are intended to constitute
expenses of administration under any applicable federal or state bankruptcy,
insolvency or other similar law.

         The provisions of this Section shall survive the resignation or removal
of the Trustee and the defeasance or other termination of this Indenture.

                                       31
<PAGE>   38
         SECTION 6.07. Officers' Certificate as Evidence.

         Except as otherwise provided in Sections 6.01 and 6.02, whenever in the
administration of the provisions of this Indenture the Trustee shall deem it
necessary or desirable that a matter be proved or established prior to taking or
omitting any action hereunder, such matter (unless other evidence in respect
thereof be herein specifically prescribed) may, in the absence of negligence or
bad faith on the part of the Trustee, be deemed to be conclusively proved and
established by an Officers' Certificate delivered to the Trustee, and such
certificate, in the absence of negligence or bad faith on the part of the
Trustee, shall be full warrant to the Trustee for any action taken or omitted by
it under the provisions of this Indenture upon the faith thereof.

         SECTION 6.08. Eligibility of Trustee.

         The Trustee hereunder shall at all times 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 other
Person authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least 50 million U.S. dollars ($50,000,000)
and subject to supervision or examination by federal, state, territorial, or
District of Columbia authority. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of this
Section 6.08 the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
records of condition so published.

         The Company may not, nor may any Person directly or indirectly
controlling, controlled by, or under common control with the Company, serve as
Trustee; provided, that such corporation shall be otherwise eligible and
qualified under this Article.

         In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 6.08, the Trustee shall resign
immediately in the manner and with the effect specified in Section 6.09.

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

         SECTION 6.09. Resignation or Removal of Trustee.

         (a) The Trustee, or any trustee or trustees hereafter appointed, may at
any time resign by giving written notice of such resignation to the Company and
by mailing notice thereof, at the Company's expense, to the holders of the Debt
Securities at their addresses as they shall appear on the Debt Security
Register. Upon receiving such notice of resignation, the Company shall promptly
appoint a successor trustee or trustees by written instrument, in duplicate,
executed by order of its Board of Directors, one copy of which instrument shall
be delivered to the resigning Trustee and one copy to the successor Trustee. If
no successor Trustee shall have been so appointed and have accepted appointment
within 30 days after the mailing of such notice of resignation to the affected
Securityholders, the resigning Trustee may petition any

                                       32
<PAGE>   39
court of competent jurisdiction for the appointment of a successor Trustee, or
any Securityholder who has been a bona fide holder of a Debt Security or Debt
Securities for at least six months may, subject to the provisions of Section
5.09, on behalf of himself and all others similarly situated, petition any such
court for the appointment of a successor Trustee. Such court may thereupon,
after such notice, if any, as it may deem proper and prescribe, appoint a
successor Trustee.

         (b) In case at any time any of the following shall occur:

                  (1) the Trustee shall fail to comply with the provisions of
         Section 6.08 after written request therefor by the Company or by any
         Securityholder who has been a bona fide holder of a Debt Security or
         Debt Securities for at least six months,

                  (2) the Trustee shall cease to be eligible in accordance with
         the provisions of Section 6.08 and shall fail to resign after written
         request therefor by the Company or by any such Securityholder, or

                  (3) the Trustee shall become incapable of acting, or shall be
         adjudged a bankrupt or insolvent, or a receiver of the Trustee or of
         its property shall be appointed, or any public officer shall take
         charge or control of the Trustee or of its property or affairs for the
         purpose of rehabilitation, conservation or liquidation,

then, in any such case, the Company may remove the Trustee and appoint a
successor Trustee by written instrument, in duplicate, executed by order of the
Board of Directors, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor Trustee, or, subject to the
provisions of Section 5.09, any Securityholder who has been a bona fide holder
of a Debt Security or Debt Securities for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee. Such court may thereupon, after such notice, if any, as it may deem
proper and prescribe, remove the Trustee and appoint successor Trustee.

         (c) Upon prior written notice to the Company and the Trustee, the
holders of a majority in aggregate principal amount of the Debt Securities at
the time outstanding may at any time remove the Trustee and nominate a successor
Trustee, which shall be deemed appointed as successor Trustee unless within ten
Business Days after such nomination the Company objects thereto, in which case
or in the case of a failure by such holders to nominate a successor Trustee, the
Trustee so removed or any Securityholder, upon the terms and conditions and
otherwise as in subsection (a) of this Section 6.09 provided, may petition any
court of competent jurisdiction for an appointment of a successor.

         (d) Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section 6.09 shall
become effective upon acceptance of appointment by the successor Trustee as
provided in Section 6.10.

                                       33
<PAGE>   40
         SECTION 6.10. Acceptance by Successor Trustee.

         Any successor Trustee appointed as provided in Section 6.09 shall
execute, acknowledge and deliver to the Company and to its predecessor Trustee
an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the retiring Trustee shall become effective and such
successor Trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, duties and obligations with respect to the
Debt Securities of its predecessor hereunder, with like effect as if originally
named as Trustee herein; but, nevertheless, on the written request of the
Company or of the successor Trustee, the Trustee ceasing to act shall, upon
payment of any amounts then due it pursuant to the provisions of Section 6.06,
execute and deliver an instrument transferring to such successor Trustee all the
rights and powers of the Trustee so ceasing to act and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee thereunder. Upon request of any such successor Trustee,
the Company shall execute any and all instruments in writing for more fully and
certainly vesting in and confirming to such successor Trustee all such rights
and powers. Any Trustee ceasing to act shall, nevertheless, retain a lien upon
all property or funds held or collected by such Trustee to secure any amounts
then due it pursuant to the provisions of Section 6.06.

         If a successor Trustee is appointed, the Company, the retiring Trustee
and the successor Trustee shall execute and deliver an indenture supplemental
hereto which shall contain such provisions as shall be deemed necessary or
desirable to confirm that all the rights, powers, trusts and duties of the
retiring Trustee with respect to the Debt Securities as to which the predecessor
Trustee is not retiring shall continue to be vested in the predecessor Trustee,
and shall add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the Trust hereunder
by more than one Trustee, it being understood that nothing herein or in such
supplemental indenture shall constitute such Trustees co-trustees of the same
trust and that each such Trustee shall be Trustee of a trust or trusts hereunder
separate and apart from any trust or trusts hereunder administered by any other
such Trustee.

         No successor Trustee shall accept appointment as provided in this
Section 6.10 unless at the time of such acceptance such successor Trustee shall
be eligible under the provisions of Section 6.08.

         In no event shall a retiring Trustee be liable for the acts or
omissions of any successor Trustee hereunder.

         Upon acceptance of appointment by a successor Trustee as provided in
this Section 6.10, the Company shall mail notice of the succession of such
Trustee hereunder to the holders of Debt Securities at their addresses as they
shall appear on the Debt Security Register. If the Company fails to mail such
notice within ten Business Days after the acceptance of appointment by the
successor Trustee, the successor Trustee shall cause such notice to be mailed at
the expense of the Company.

                                       34
<PAGE>   41
         SECTION 6.11. Succession by Merger, etc.

         Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder without
the execution or filing of any paper or any further act on the part of any of
the parties hereto; provided, that such corporation shall be otherwise eligible
and qualified under this Article.

         In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any of the Debt Securities shall have been
authenticated but not delivered, any such successor to the Trustee may adopt the
certificate of authentication of any predecessor Trustee, and deliver such Debt
Securities so authenticated; and in case at that time any of the Debt Securities
shall not have been authenticated, any successor to the Trustee may authenticate
such Debt Securities either in the name of any predecessor hereunder or in the
name of the successor Trustee; and in all such cases such certificates shall
have the full force which it is anywhere in the Debt Securities or in this
Indenture provided that the certificate of the Trustee shall have; provided,
however, that the right to adopt the certificate of authentication of any
predecessor Trustee or authenticate Debt Securities in the name of any
predecessor Trustee shall apply only to its successor or successors by merger,
conversion or consolidation.

         SECTION 6.12. Authenticating Agents.

         There may be one or more Authenticating Agents appointed by the Trustee
upon the request of the Company with power to act on its behalf and subject to
its direction in the authentication and delivery of Debt Securities issued upon
exchange or registration of transfer thereof as fully to all intents and
purposes as though any such Authenticating Agent had been expressly authorized
to authenticate and deliver Debt Securities; provided, that the Trustee shall
have no liability to the Company for any acts or omissions of the Authenticating
Agent with respect to the authentication and delivery of Debt Securities. Any
such Authenticating Agent shall at all times be a corporation organized and
doing business under the laws of the United States or of any state or territory
thereof or of the District of Columbia authorized under such laws to act as
Authenticating Agent, having a combined capital and surplus of at least
$5,000,000 and being subject to supervision or examination by federal, state,
territorial or District of Columbia authority. If such corporation publishes
reports of condition at least annually pursuant to law or the requirements of
such authority, then for the purposes of this Section 6.12 the combined capital
and surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time an Authenticating Agent shall cease to be eligible in accordance with
the provisions of this Section, it shall resign immediately in the manner and
with the effect herein specified in this Section.

         Any corporation into which any Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any Authenticating Agent
shall be a party, or any corporation succeeding to all or substantially all of
the corporate trust business of any Authenticating Agent, shall be the successor
of such Authenticating Agent hereunder, if such

                                       35
<PAGE>   42
successor corporation is otherwise eligible under this Section 6.12 without the
execution or filing of any paper or any further act on the part of the parties
hereto or such Authenticating Agent.

         Any Authenticating Agent may at any time resign by giving written
notice of resignation to the Trustee and to the Company. The Trustee may at any
time terminate the agency of any Authenticating Agent with respect to the Debt
Securities by giving written notice of termination to such Authenticating Agent
and to the Company. Upon receiving such a notice of resignation or upon such a
termination, or in case at any time any Authenticating Agent shall cease to be
eligible under this Section 6.12, the Trustee may, and upon the request of the
Company shall, promptly appoint a successor Authenticating Agent eligible under
this Section 6.12, shall give written notice of such appointment to the Company
and shall mail notice of such appointment to all holders of Debt Securities as
the names and addresses of such holders appear on the Debt Security Register.
Any successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all rights, powers, duties and responsibilities with
respect to the Debt Securities of its predecessor hereunder, with like effect as
if originally named as Authenticating Agent herein.

         The Company agrees to pay to any Authenticating Agent from time to time
reasonable compensation for its services. Any Authenticating Agent shall have no
responsibility or liability for any action taken by it as such in accordance
with the directions of the Trustee.

                                   ARTICLE VII

                        CONCERNING THE SECURITYHOLDERS

         SECTION 7.01. Action by Securityholders.

         Whenever in this Indenture it is provided that the holders of a
specified percentage in aggregate principal amount of the Debt Securities may
take any action (including the making of any demand or request, the giving of
any notice, consent or waiver or the taking of any other action) the fact that
at the time of taking any such action the holders of such specified percentage
have joined therein may be evidenced (a) by any instrument or any number of
instruments of similar tenor executed by such Securityholders in person or by
agent or proxy appointed in writing, (b) by the record of such holders of Debt
Securities voting in favor thereof at any meeting of such Securityholders duly
called and held in accordance with the provisions of Article VIII, (c) by a
combination of such instrument or instruments and any such record of such a
meeting of such Securityholders or (d) by any other method the Trustee deems
satisfactory.

         If the Company shall solicit from the Securityholders any request,
demand, authorization, direction, notice, consent, waiver or other action or
revocation of the same, the Company may, at its option, as evidenced by an
Officers' Certificate, fix in advance a record date for such Debt Securities for
the determination of Securityholders entitled to give such request, demand,
authorization, direction, notice, consent, waiver or other action or revocation
of the same, but the Company shall have no obligation to do so. If such a record
date is fixed, such request, demand, authorization, direction, notice, consent,
waiver or other action or revocation of the same may be given before or after
the record date, but only the Securityholders of record at the close of business
on the record date shall be deemed to be Securityholders for the purposes of

                                       36
<PAGE>   43
determining whether Securityholders of the requisite proportion of outstanding
Debt Securities have authorized or agreed or consented to such request, demand,
authorization, direction, notice, consent, waiver or other action or revocation
of the same, and for that purpose the outstanding Debt Securities shall be
computed as of the record date; provided, however, that no such authorization,
agreement or consent by such Securityholders on the record date shall be deemed
effective unless it shall become effective pursuant to the provisions of this
Indenture not later than six months after the record date.

         SECTION 7.02. Proof of Execution by Securityholders.

         Subject to the provisions of Sections 6.01, 6.02 and 8.05, proof of the
execution of any instrument by a Securityholder or his agent or proxy shall be
sufficient if made in accordance with such reasonable rules and regulations as
may be prescribed by the Trustee or in such manner as shall be satisfactory to
the Trustee. The ownership of Debt Securities shall be proved by the Debt
Security Register or by a certificate of the Debt Security registrar. The
Trustee may require such additional proof of any matter referred to in this
Section as it shall deem necessary.

         The record of any Securityholders' meeting shall be proved in the
manner provided in Section 8.06.

         SECTION 7.03. Who Are Deemed Absolute Owners.

         Prior to due presentment for registration of transfer of any Debt
Security, the Company, the Trustee, any Authenticating Agent, any paying agent,
any transfer agent and any Debt Security registrar may deem the Person in whose
name such Debt Security shall be registered upon the Debt Security Register to
be, and may treat him as, the absolute owner of such Debt Security (whether or
not such Debt Security shall be overdue) for the purpose of receiving payment of
or on account of the principal of, premium, if any, and interest on such Debt
Security and for all other purposes; and neither the Company nor the Trustee nor
any Authenticating Agent nor any paying agent nor any transfer agent nor any
Debt Security registrar shall be affected by any notice to the contrary. All
such payments so made to any holder for the time being or upon his order shall
be valid, and, to the extent of the sum or sums so paid, effectual to satisfy
and discharge the liability for moneys payable upon any such Debt Security.

         SECTION 7.04. Debt Securities Owned by Company Deemed Not Outstanding.

         In determining whether the holders of the requisite aggregate principal
amount of Debt Securities have concurred in any direction, consent or waiver
under this Indenture, Debt Securities which are owned by the Company or any
other obligor on the Debt Securities or by any Person directly or indirectly
controlling or controlled by OR UNDER DIRECT or indirect common control with the
Company or any other obligor on the Debt Securities shall be disregarded and,
deemed not to be outstanding for the purpose of any such determination;
provided, that for the purposes of determining whether the Trustee shall be
protected in relying on any such direction, consent or waiver, only Debt
Securities which a Responsible Officer of the Trustee actually knows are so
owned shall be so disregarded. Debt Securities so owned which have been pledged
in good faith may be regarded as outstanding for the purposes of this Section
7.04 if the pledgee

                                       37
<PAGE>   44
shall establish to the satisfaction of the Trustee the pledgee's right to vote
such Debt Securities and that the pledgee is not the Company or any such other
obligor or Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company or any such other obligor. In
the case of a dispute as to such right, any decision by the Trustee taken upon
the advice of counsel shall be full protection to the Trustee.

         SECTION 7.05. Revocation of Consents; Future Holders Bound.

         At any time prior to (but not after) the evidencing to the Trustee, as
provided in Section 7.01, of the taking of any action by the holders of the
percentage in aggregate principal amount of the Debt Securities specified in
this Indenture in connection with such action, any holder (in cases where no
record date has been set pursuant to Section 7.01) or any holder as of an
applicable record date (in cases where a record date has been set pursuant to
Section 7.01) of a Debt Security (or any Debt Security issued in whole or in
part in exchange or substitution therefor) the serial number of which is shown
by the evidence to be included in the Debt Securities the holders of which have
consented to such action may, by fling written notice with the Trustee at the
Principal Office of the Trustee and upon proof of holding as provided in Section
7.02, revoke such action so far as concerns such Debt Security (or so far as
concerns the principal amount represented by any exchanged or substituted Debt
Security). Except as aforesaid any such action taken by the holder of any Debt
Security shall be conclusive and binding upon such holder and upon all future
holders and owners of such Debt Security, and of any Debt Security issued in
exchange or substitution therefor or on registration of transfer thereof,
irrespective of whether or not any notation in regard thereto is made upon such
Debt Security or any Debt Security issued in exchange or substitution therefor.

                                  ARTICLE VIII
                           SECURITYHOLDERS' MEETINGS

         SECTION 8.01. Purposes of Meetings.

         A meeting of Securityholders may be called at any time and from time to
time pursuant to the provisions of this Article VIII for any of the following
purposes:

         (a) to give any notice to the Company or to the Trustee, or to give any
directions to the Trustee, or to consent to the waiving of any default hereunder
and its consequences, or to take any other action authorized to be taken by
Securityholders pursuant to any of the provisions of Article V;

         (b) to remove the Trustee and nominate a successor trustee pursuant to
the provisions of Article VI;

         (c) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 9.02; or

         (d) to take any other action authorized to be taken by or on behalf of
the holders of any specified aggregate principal amount of such Debt Securities
under any other provision of this Indenture or under applicable law.

                                       38
<PAGE>   45
         SECTION 8.02. Call of Meetings by Trustee.

         The Trustee may at any time call a meeting of Securityholders to take
any action specified in Section 8.01, to be held at such time and at such place
in California, as the Trustee shall determine. Notice of every meeting of the
Securityholders, setting forth the time and the place of such meeting and in
general terms the action proposed to be taken at such meeting, shall be mailed
to holders of Debt Securities affected at their addresses as they shall appear
on the Debt Securities Register. Such notice shall be mailed not less than 20
nor more than 180 days prior to the date fixed for the meeting.

         SECTION 8.03. Call of Meetings by Company or Securityholders.

         In case at any time the Company pursuant to a Board Resolution, or the
holders of at least 10% in aggregate principal amount of the Debt Securities, as
the case may be, then outstanding, shall have requested the Trustee to call a
meeting of Securityholders, by written request setting forth in reasonable
detail the action proposed to be taken at the meeting, and the Trustee shall not
have mailed the notice of such meeting within 20 days after receipt of such
request, then the Company or such Securityholders may determine the time and the
place in said Borough of Manhattan for such meeting and may call such meeting to
take any action authorized in Section 8.01, by mailing notice thereof as
provided in Section 8.02.

         SECTION 8.04. Qualifications for Voting.

         To be entitled to vote at any meeting of Securityholders a Person shall
(a) be a holder of one or more Debt Securities with respect to which the meeting
is being held or (b) a Person appointed by an instrument in writing as proxy by
a holder of one or more such Debt Securities. The only Persons who shall be
entitled to be present or to speak at any meeting of Securityholders shall be
the Persons entitled to vote at such meeting and their counsel and any
representatives of the Trustee and its counsel and any representatives of the
Company and its counsel.

         SECTION 8.05. Regulations.

         Notwithstanding any other provisions of this Indenture, the Trustee may
make such reasonable regulations as it may deem advisable for any meeting of
Securityholders, in regard to proof of the holding of Debt Securities and of the
appointment of proxies, and in regard to the appointment and duties of
inspectors of votes, the submission and examination of proxies, certificates and
other evidence of the right to vote, and such other matters concerning the
conduct of the meeting as it shall think fit.

         The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Securityholders as provided in Section 8.03, in which case the
Company or the Securityholders calling the meeting, as the case may be, shall in
like manner appoint a temporary chairman. A permanent chairman and a permanent
secretary of the meeting shall be elected by majority vote of the meeting.

         Subject to the provisions of Section 7.04, at any meeting each holder
of Debt Securities with respect to which such meeting is being held or proxy
therefor shall be entitled to

                                       39
<PAGE>   46
one vote for each $1,000 principal amount of Debt Securities held or represented
by him; provided, however, that no vote shall be cast or counted at any meeting
in respect of any Debt Security challenged as not outstanding and ruled by the
chairman of the meeting to be not outstanding. The chairman of the meeting shall
have no right to vote other than by virtue of Debt Securities held by him or
instruments in writing as aforesaid duly designating him as the Person to vote
on behalf of other Securityholders. Any meeting of Securityholders duly called
pursuant to the provisions of Section 8.02 or 8.03 may be adjourned from time to
time by a majority of those present, whether or not constituting a quorum, and
the meeting may be held as so adjourned without further notice.

         SECTION 8.06. Voting.

         The vote upon any resolution submitted to any meeting of holders of
Debt Securities with respect to which such meeting is being held shall be by
written ballots on which shall be subscribed the signatures of such holders or
of their representatives by proxy and the serial number or numbers of the Debt
Securities held or represented by them. The permanent chairman of the meeting
shall appoint two inspectors of votes who shall count all votes cast at the
meeting for or against any resolution and who shall make and file with the
secretary of the meeting their verified written reports in triplicate of all
votes cast at the meeting. A record in duplicate of the proceedings of each
meeting of Securityholders shall be prepared by the secretary of the meeting and
there shall be attached to said record the original reports of the inspectors of
votes on any vote by ballot taken thereat and affidavits by one or more Persons
having knowledge of the facts setting forth a copy of the notice of the meeting
and showing that said notice was mailed as provided in Section 8.02. The record
shall show the serial numbers of the Debt Securities voting in favor of or
against any resolution. The record shall be signed and verified by the
affidavits of the permanent chairman and secretary of the meeting and one of the
duplicates shall be delivered to the Company and the other to the Trustee to be
preserved by the Trustee, the latter to have attached thereto the ballots voted
at the meeting.

         Any record so signed and verified shall be conclusive evidence of the
matters therein stated.

         SECTION 8.07. Quorum; Actions.

         The Persons entitled to vote a majority in principal amount of the Debt
Securities shall constitute a quorum for a meeting of Securityholders; provided,
however, that if any action is to be taken at such meeting with respect to a
consent, waiver, request, demand, notice, authorization, direction or other
action which may be given by the holders of not less than a specified percentage
in principal amount of the Debt Securities, the Persons holding or representing
such specified percentage in principal amount of the Debt Securities will
constitute a quorum. In the absence of a quorum within 30 minutes of the time
appointed for any such meeting, the meeting shall, if convened at the request of
Securityholders, be dissolved. In any other case the meeting may be adjourned
for a period of not less than 10 days as determined by the permanent chairman of
the meeting prior to the adjournment of such meeting. In the absence of a quorum
at any such adjourned meeting, such adjourned meeting may be further adjourned
for a period of not less than 10 days as determined by the permanent chairman of
the meeting prior to the adjournment of such adjourned meeting. Notice of the
reconvening of any adjourned

                                       40
<PAGE>   47
meeting shall be given as provided in Section 8.02, except that such notice need
be given only once not less than five days prior to the date on which the
meeting is scheduled to be reconvened. Notice of the reconvening of an adjourned
meeting shall state expressly the percentage, as provided above, of the
principal amount of the Debt Securities which shall constitute a quorum.

         Except as limited by the proviso in the first paragraph of Section
9.02, any resolution presented to a meeting or adjourned meeting duly reconvened
at which a quorum is present as aforesaid may be adopted by the affirmative vote
of the holders of a majority in principal amount of the Debt Securities;
provided, however, that, except as limited by the proviso in the first paragraph
of Section 9.02, any resolution with respect to any consent, waiver, request,
demand, notice, authorization, direction or other action that this Indenture
expressly provides may be given by the holders of not less than a specified
percentage in principal amount of the Debt Securities may be adopted at a
meeting or an adjourned meeting duly reconvened and at which a quorum is present
as aforesaid only by the affirmative vote of the holders of a not less than such
specified percentage in principal amount of the Debt Securities.

         Any resolution passed or decision taken at any meeting of holders of
Debt Securities duly held in accordance with this Section shall be binding on
all the Securityholders, whether or not present or represented at the meeting.

                                   ARTICLE IX
                             SUPPLEMENTAL INDENTURES

         SECTION 9.01. Supplemental Indentures without Consent of
Securityholders.

         The Company, when authorized by a Board Resolution, and the Trustee may
from time to time and at any time enter into an indenture or indentures
supplemental hereto, without the consent of the Securityholders, for one or more
of the following purposes:

         (a) to evidence the succession of another corporation to the Company,
or successive successions, and the assumption by the successor corporation of
the covenants, agreements and obligations of the Company, pursuant to Article XI
hereof;

         (b) to add to the covenants of the Company such further covenants,
restrictions or conditions for the protection of the holders of Debt Securities
as the Board of Directors shall consider to be for the protection of the holders
of such Debt Securities, and to make the occurrence, or the occurrence and
continuance, of a default in any of such additional covenants, restrictions or
conditions a default or an Event of Default permitting the enforcement of all or
any of the several remedies provided in this Indenture as herein set forth;
provided, however, that in respect of any such additional covenant, restriction
or condition such supplemental indenture may provide for a particular period of
grace after default (which period may be shorter or longer than that allowed in
the case of other defaults) or may provide for an immediate enforcement upon
such default or may limit the remedies available to the Trustee upon such
default;

                                       41
<PAGE>   48
         (c) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be defective or
inconsistent with any other provision contained herein or in any supplemental
indenture, or to make such other provisions in regard to matters or questions
arising under this Indenture; provided, that any such action shall not adversely
affect the interests of the holders of the Debt Securities;

         (d) to add to, delete from, or revise the terms of Debt Securities,
including, without limitation, any terms relating to the issuance, exchange,
registration or transfer of Debt Securities, including to provide for transfer
procedures and restrictions substantially similar to those applicable to the
Capital Securities as required by Section 2.05 (for purposes of assuring that no
registration of Debt Securities is required under the Securities Act of 1933, as
amended); provided that any such action shall not adversely affect the interests
of the holders of the Debt Securities then outstanding (it being understood, for
purposes of this proviso, that transfer restrictions on Debt Securities
substantially' similar to those that were applicable to Capital Securities shall
not be deemed to adversely affect the holders of the Debt Securities);

         (e) to evidence and provide for the acceptance of appointment hereunder
by a successor Trustee with respect to the Debt Securities and to add to or
change any of the provisions of this Indenture as shall be necessary to provide
for or facilitate the administration of the trusts hereunder by more than one
Trustee, pursuant to the requirements of Section 6.10;

         (f) to make any change (other than as elsewhere provided in this
paragraph) that does not adversely affect the rights of any Securityholder in
any material respect; or

         (g) to provide for the issuance of and establish the form and terms and
conditions of the Debt Securities, to establish the form of any certifications
required to be furnished pursuant to the terms of this Indenture or the Debt
Securities, or to add to the rights of the holders of Debt Securities.

         The Trustee is hereby authorized to join with the Company in the
execution of any such supplemental indenture, to make any further appropriate
agreements and stipulations which may be therein contained and to accept the
conveyance, transfer and assignment of any property thereunder, but the Trustee
shall not be obligated to, but may in its discretion, enter into any such
supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.

         Any supplemental indenture authorized by the provisions of this Section
9.01 may be executed by the Company and the Trustee without the consent of the
holders of any of the Debt Securities at the time outstanding, notwithstanding
any of the provisions of Section 9.02.

         SECTION 9.02. Supplemental Indentures with Consent of Securityholders.

         With the consent (evidenced as provided in Section 7.01) of the holders
of not less than a majority in aggregate principal amount of the Debt Securities
at the time outstanding affected by such supplemental indenture (voting as a
class), the Company, when authorized by a Board Resolution, and the Trustee may
from time to time and at any time enter into an indenture or indentures
supplemental hereto (which shall conform to the provisions of the Trust
Indenture

                                       42
<PAGE>   49
Act, then in effect, applicable to indentures qualified thereunder) for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Indenture or of any supplemental indenture or of
modifying in any manner the rights of the holders of the Debt Securities;
provided, however, that no such supplemental indenture shall without the consent
of the holders of each Debt Security then outstanding and affected thereby (i)
extend the fixed maturity of any Debt Security, or reduce the principal amount
thereof or any premium thereon, or reduce the rate or extend the time of payment
of interest thereon, or reduce any amount payable on redemption thereof or make
the principal thereof or any interest or premium thereon payable in any coin or
currency other than that provided in the Debt Securities, or impair or affect
the right of any Securityholder to institute suit for payment thereof or impair
the right of repayment, if any, at the option of the holder, or (ii) reduce the
aforesaid percentage of Debt Securities the holders of which are required to
consent to any such supplemental indenture; and provided, further, that if the
Debt Securities are held by the Trust or a trustee of such trust, such
supplemental indenture shall not be effective until the holders of a majority in
liquidation preference of Trust Securities shall have consented to such
supplemental indenture; provided further, that if the consent of the
Securityholder of each outstanding Debt Security is required, such supplemental
indenture shall not be effective until each holder of the Trust Securities shall
have consented to such supplemental indenture.

         Upon the request of the Company accompanied by a Board Resolution
authorizing the execution of any such supplemental indenture, and upon the
filing with the Trustee of evidence of the consent of Securityholders as
aforesaid, the Trustee shall join with the Company in the execution of such
supplemental indenture unless such supplemental indenture affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise, in
which case the Trustee may in its discretion, but shall not be obligated to,
enter into such supplemental indenture.

         Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of this Section, the Trustee
shall transmit by mail, first class postage prepaid, a notice, prepared by the
Company, setting forth in general terms the substance of such supplemental
indenture, to the Securityholders thereby as their names and addresses appear
upon the Debt Security Register. Any failure of the Trustee to mail such notice,
or any defect therein, shall not, however, in any way impair or affect the
validity of any such supplemental indenture.

         It shall not be necessary for the consent of the Securityholders under
this Section 9.02 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.

         SECTION, 9.03. Effect of Supplemental Indentures.

         Upon the execution of any supplemental indenture pursuant to the
provisions of this Article IX, this Indenture shall be and be deemed to be
modified and amended in accordance therewith and the respective rights,
limitations of rights, obligations, duties and immunities under this Indenture
of the Trustee, the Company and the holders of Debt Securities shall thereafter
be determined, exercised and enforced hereunder subject in all respects to such
modifications and

                                       43
<PAGE>   50
amendments and all the terms and conditions of any such supplemental indenture
shall be and be deemed to be part of the terms and conditions of this Indenture
for any and all purposes.

         SECTION 9.04. Notation on Debt Securities.

         Debt Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to the provisions of this Article IX may bear a
notation as to any matter provided for in such supplemental indenture. If the
Company or the Trustee shall so determine, new Debt Securities so modified as to
conform, in the opinion of the Board of Directors of the Company, to any
modification of this Indenture contained in any such supplemental indenture may
be prepared and executed by the Company, authenticated by the Trustee or the
Authenticating Agent and delivered in exchange for the Debt Securities then
outstanding.

         SECTION 9.05. Evidence of Compliance of Supplemental Indenture to be
Furnished to Trustee.

         The Trustee, subject to the provisions of Sections 6.01 and 6.02,
shall, in addition to the documents required by Section 14.06, receive an
Officers' Certificate and an Opinion of Counsel as conclusive evidence that any
supplemental indenture executed pursuant hereto complies with the requirements
of this Article IX. The Trustee shall receive an Opinion of Counsel as
conclusive evidence that any supplemental indenture executed pursuant to this
Article IX is authorized or permitted by, and conforms to, the terms of this
Article IX and that it is proper for the Trustee under the provisions of this
Article IX to join in the execution thereof.

                                    ARTICLE X
                            REDEMPTION OF SECURITIES

         SECTION 10.01. Optional Redemption.

         At any time the Company shall have the right, subject to the receipt by
the Company of prior approval from the Federal Reserve, if then required under
applicable capital guidelines or policies of the Federal Reserve, to redeem the
Debt Securities, in whole or in part, on any March 8 or September 8 on or after
March 8, 2010 (the "Redemption Date"), at the Redemption Price.

         SECTION 10.02 Special Event Redemption.

         If a Special Event shall occur and be continuing, the Company shall
have the right, subject to the receipt by the Company of prior approval from the
Federal Reserve if then required under applicable capital guidelines or policies
of the Federal Reserve, to redeem the Debt Securities, in whole but not in part,
at any time within 90 days following the occurrence of such Special Event (the
"Special Redemption Date"), at the Special Redemption Price.

                                       44
<PAGE>   51
         SECTION 10.03. Notice of Redemption; Selection of Debt Securities.

         In case the Company shall desire to exercise the right to redeem all,
or, as the case may be, any part of the Debt Securities, it shall fix a date for
redemption and shall mail a notice of such redemption at least 30 and not more
than 60 days prior to the date fixed for redemption to the holders of Debt
Securities so to be redeemed as a whole or in part at their last addresses as
the same appear on the Debt Security Register. Such mailing shall be by first
class mail. The notice if mailed in the manner herein provided shall be
conclusively presumed to have been duly given, whether or not the holder
receives such notice. In any case, failure to give such notice by mail or any
defect in the notice to the holder of any Debt Security designated for
redemption as a whole or in part shall not affect the validity of the
proceedings for the redemption of any other Debt Security.

         Each such notice of redemption shall specify the CUSIP number of the
Debt Securities to be redeemed, the date fixed for redemption, the redemption
price at which Debt Securities are to be redeemed, the place or places of
payment, that payment will be made upon presentation and surrender of such Debt
Securities, that interest accrued to the date fixed for redemption will be paid
as specified in said notice, and that on and after said date interest thereon or
on the portions thereof to be redeemed will cease to accrue. If less than all
the Debt Securities are to be redeemed the notice of redemption shall specify
the numbers of the Debt Securities to be redeemed. In case the Debt Securities
are to be redeemed in part only, the notice of redemption shall state the
portion of the principal amount thereof to be redeemed and shall state that on
and after the date fixed for redemption, upon surrender of such Debt Security, a
new Debt Security or Debt Securities in principal amount equal to the unredeemed
portion thereof will be issued.

         Prior to 10:00 a.m. on the Redemption Date specified in the notice of
redemption given as provided in this Section, the Company will deposit with the
Trustee or with one or more paying agents an amount of money sufficient to
redeem on the redemption date all the Debt Securities so called for redemption
at the appropriate redemption price, together with accrued interest to the date
fixed for redemption.

         The Company will give the Trustee notice not less than 45 nor more than
60 days prior to the redemption date as to the aggregate principal amount of
Debt Securities to be redeemed and the Trustee shall select, in such manner as
in its sole discretion it shall deem appropriate and fair, the Debt Securities
or portions thereof (in integral multiples of $1,000) to be redeemed.

         SECTION 10.04. Payment of Debt Securities Called for Redemption.

         If notice of redemption has been given as provided in Section 10.03,
the Debt Securities or portions of Debt Securities with respect to which such
notice has been given shall become due and payable on the Redemption Date and at
the place or places stated in such notice at the applicable redemption price,
together with interest accrued to the date fixed for redemption, and on and
after said Redemption Date (unless the Company shall default in the payment of
such Debt Securities at the redemption price, together with interest accrued to
said date) interest on the Debt Securities or portions of Debt Securities so
called for redemption shall

                                       45
<PAGE>   52
cease to accrue. On presentation and surrender of such Debt Securities at a
place of payment specified in said notice, such Debt Securities or the specified
portions thereof shall be paid and redeemed by the Company at the applicable
redemption price, together with interest accrued thereon to the Redemption Date.

         Upon presentation of any Debt Security redeemed in part only, the
Company shall execute and the Trustee shall authenticate and make available for
delivery to the holder thereof, at the expense of the Company, a new Debt
Security or Debt Securities of authorized denominations in principal amount
equal to the unredeemed portion of the Debt Security so presented.

                                   ARTICLE XI
               CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE

         SECTION 11.01. Company May Consolidate, etc., on Certain Terms.

         Nothing contained in this Indenture or in the Debt Securities shall
prevent any consolidation or merger of the Company with or into any other
corporation or corporations (whether or not affiliated with the Company) or
successive consolidations or mergers in which the Company or its successor or
successors shall be a party or parties, or shall prevent any sale, conveyance,
transfer or other disposition of the property of the Company or its successor or
successors as an entirety, or substantially as an entirety, to any other
corporation (whether or not affiliated with the Company, or its successor or
successors) authorized to acquire and operate the same; provided, however, that
the Company hereby covenants and agrees that, upon any such consolidation,
merger (where the Company is not the surviving corporation), sale, conveyance,
transfer or other disposition, the due and punctual payment of the principal of
(and premium, if any) and interest on all of the Debt Securities in accordance
with their terms, according to their tenor, and the due and punctual performance
and observance of all the covenants and conditions of this Indenture to be kept
or performed by the Company, shall be expressly assumed by supplemental
indenture satisfactory in form to the Trustee executed and delivered to the
Trustee by the entity formed by such consolidation, or into which the Company
shall have been merged, or by the entity which shall have acquired such
property.

         SECTION 11.02. Successor Entity to be Substituted.

         In case of any such consolidation, merger, sale, conveyance, transfer
or other disposition and upon the assumption by the successor entity, by
supplemental indenture, executed and delivered to the Trustee and satisfactory
in form to the Trustee, of the due and punctual payment of the principal of and
premium, if any, and interest on all of the Debt Securities and the due and
punctual performance and observance of all of the covenants and conditions of
this Indenture to be performed or observed by the Company, such successor entity
shall succeed to and be substituted for the Company, with the same effect as if
it had been named herein as the Company, and thereupon the predecessor entity
shall be relieved of any further liability or obligation hereunder or upon the
Debt Securities. Such successor entity thereupon may cause to be signed, and may
issue either in its own name or in the name of the Company, any or all of the
Debt Securities issuable hereunder which theretofore shall not have been signed

                                       46
<PAGE>   53
by the Company and delivered to the Trustee or the Authenticating Agent; and,
upon the order of such successor entity instead of the Company and subject to
all the terms, conditions and limitations in this Indenture prescribed, the
Trustee or the Authenticating Agent shall authenticate and deliver any Debt
Securities which previously shall have been signed and delivered by the officers
of the Company, to the Trustee or the Authenticating Agent for authentication,
and any Debt Securities which such successor entity thereafter shall cause to be
signed and delivered to the Trustee or the Authenticating Agent for that
purpose. All the Debt Securities so issued shall in all respects have the same
legal rank and benefit under this Indenture as the Debt Securities theretofore
or thereafter issued in accordance with the terms of this Indenture as though
all of such Debt Securities had been issued at the date of the execution hereof.

         SECTION 11.03. Opinion of Counsel to be Given to Trustee.

         The Trustee, subject to the provisions of Sections 6.01 and 6.02, shall
receive, in addition to the Opinion of Counsel required by Section 9.05, an
Opinion of Counsel as conclusive evidence that any consolidation, merger, sale,
conveyance, transfer or other disposition, and any assumption, permitted or
required by the terms of this Article XI complies with the provisions of this
Article XI.

                                   ARTICLE XII
                    SATISFACTION AND DISCHARGE OF INDENTURE

         SECTION 12.01. Discharge of Indenture.

         When (a) the Company shall deliver to the Trustee for cancellation all
Debt Securities theretofore authenticated (other than any Debt Securities which
shall have been destroyed, lost or stolen and which shall have been replaced or
paid as provided in Section 2.06) and not theretofore canceled, or (b) all the
Debt Securities not theretofore canceled or delivered to the Trustee for
cancellation shall have become due and payable, or are by their terms to become
due and payable within one year or are to be called for redemption within one
year under arrangements satisfactory to the Trustee for the giving of notice of
redemption, and the Company shall deposit with the Trustee, in trust, funds,
which shall be immediately due and payable, sufficient to pay at maturity or
upon redemption all of the Debt Securities (other than any Debt Securities which
shall have been destroyed, lost or stolen and which shall have been replaced or
paid as provided in Section 2.06) not theretofore canceled or delivered to the
Trustee for cancellation, including principal and premium, if any, and interest
due or to become due to such date of maturity or redemption date, as the case
may be, but excluding, however, the amount of any moneys for the payment of
principal of, and premium, if any, or interest on the Debt Securities (1)
theretofore repaid to the Company in accordance with the provisions of Section
12.04, or (2) paid to any state or to the District of Columbia pursuant to its
unclaimed property or similar laws, and if in the case of either clause (a) or
clause (b) the Company shall also pay or cause to be paid all other sums payable
hereunder by the Company, then this Indenture shall cease to be of further
effect except for the provisions of Sections 2.05, 2.06, 2.08, 3.01, 3.02, 3.04,
6.06, 6.09 and 12.04 hereof shall survive until such Debt Securities shall
mature and be paid. Thereafter, Sections 6.09 and 12.04 shall survive, and the
Trustee, on demand of the

                                       47
<PAGE>   54
Company accompanied by an Officers' Certificate and an Opinion of Counsel, each
stating that all conditions precedent herein provided for relating to the
satisfaction and discharge of this Indenture have been complied with, and at the
cost and expense of the Company, shall execute proper instruments acknowledging
satisfaction of and discharging this Indenture, the Company, however, hereby
agreeing to reimburse the Trustee for any costs or expenses thereafter
reasonably and properly incurred by the Trustee in connection with this
Indenture or the Debt Securities.

         SECTION 12.02. Deposited Moneys to be Held in Trust by Trustee.

         Subject to the provisions of Section 12.04, all moneys deposited with
the Trustee pursuant to Section 12.01 shall be held in trust and applied by it
to the payment, either directly or through any paying agent (including the
Company if acting as its own paying agent), to the holders of the particular
Debt Securities for the payment of which such moneys have been deposited with
the Trustee, of all sums due and to become due thereon for principal, and
premium, if any, and interest.

         SECTION 12.03. Paying Agent to Repay Moneys Held.

         Upon the satisfaction and discharge of this Indenture all moneys then
held by any paying agent of the Debt Securities (other than the Trustee) shall,
upon demand of the Company, be repaid to it or paid to the Trustee, and
thereupon such paying agent shall be released from all further liability with
respect to such moneys.

         SECTION 12.04. Return of Unclaimed Moneys.

         Any moneys deposited with or paid to the Trustee or any paying agent
for payment of the principal of, and premium, if any, or interest on Debt
Securities and not applied but remaining unclaimed by the holders of Debt
Securities for two years after the date upon which the principal of, and
premium, if any, or interest on such Debt Securities, as the case may be, shall
have become due and payable, shall be repaid to the Company by the Trustee or
such paying agent on written demand; and the holder of any of the Debt
Securities shall thereafter look only to the Company for any payment which such
holder may be entitled to collect and all liability of the Trustee or such
paying agent with respect to such moneys shall thereupon cease.

                                  ARTICLE XIII
                    IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
                             OFFICERS AND DIRECTORS

         SECTION 13.01. Indenture and Debt Securities Solely Corporate
Obligations.

         No recourse for the payment of the principal of or premium, if any, or
interest on any Debt Security, or for any claim based thereon or otherwise in
respect thereof, and no recourse under or upon any obligation, covenant or
agreement of the Company in this Indenture or in any supplemental indenture, or
in any such Debt Security, or because of the creation of any indebtedness
represented thereby, shall be had against any incorporator, stockholder, officer
or

                                       48
<PAGE>   55
director, as such, past, present or future, of the Company or of any successor
corporation of the Company, either directly or through the Company or any
successor corporation of the Company, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise; it being expressly understood that all such liability is hereby
expressly waived and released as a condition of, and as a consideration for, the
execution of this Indenture and the issue of the Debt Securities.

                                   ARTICLE XIV
                            MISCELLANEOUS PROVISIONS

         SECTION 14.01. Successors.

         All the covenants, stipulations, promises and agreements in this
Indenture contained by the Company shall bind its successors and assigns whether
so expressed or not.

         SECTION 14.02. Official Acts by Successor Entity.

         Any act or proceeding by any provision of this Indenture authorized or
required to be done or performed by any board, committee or officer of the
Company shall and may be done and performed with like force and effect by the
like board, committee, officer or other authorized Person of any entity that
shall at the time be the lawful successor of the Company.

         SECTION 14.03. Surrender of Company Powers.

         The Company by instrument in writing executed by authority of 2/3
(two-thirds) of its Board of Directors and delivered to the Trustee may
surrender any of the powers reserved to the Company and thereupon such power so
surrendered shall terminate both as to the Company, and as to any permitted
successor.

         SECTION 14.04. Addresses for Notices, etc.

         Any notice or demand which by any provision of this Indenture is
required or permitted to be given or served by the Trustee or by the
Securityholders on the Company may be given or served in writing by being
deposited postage prepaid by registered or certified mail in a post office
letter box addressed (until another address is filed by the Company, with the
Trustee for the purpose) to the Company at 150 Almaden Boulevard, San Jose,
California 95113, Attention: Lawrence D. McGovern, Executive Vice President and
Chief Financial Officer. Any notice, direction, request or demand by any
Securityholder or the Company to or upon the Trustee shall be deemed to have
been sufficiently given or made, for all purposes, if given or made in writing
at the office of the Trustee, addressed to the Trustee, 101 Barclay Street,
Floor 21 W, New York, NY 10286 Attention: Corporate Trust Administration.

         SECTION 14.05. Governing Law.

         This Indenture and each Debt Security shall be deemed to be a contract
made under the law of the State of New York, and for all purposes shall be
governed by and construed in accordance with the law of said State, without
regard to conflict of laws principles thereof.

                                       49
<PAGE>   56
         SECTION 14.06. Evidence of Compliance with Conditions Precedent.

         Upon any application or demand by the Company to the Trustee to take
any action under any of the provisions of this Indenture, the Company shall
furnish to the Trustee an Officers' Certificate stating that in the opinion of
the signers all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with and an Opinion of
Counsel stating that, in the opinion of such counsel, all such conditions
precedent have been complied with.

         Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
provided for in this Indenture shall include (a) a statement that the person
making such certificate or opinion has read such covenant or condition; (b) a
brief statement as to the nature and scope of the examination or investigation
upon which the statements or opinions contained in such certificate or opinion
are based; (c) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and (d) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.

         SECTION 14.07. Non-Business Days.

         In any case where the date of payment of interest on or principal of
the Debt Securities will be a Saturday, Sunday or a day on which banking
institutions in New York City (in the State of New York) are permitted or
required by any applicable law to close, the payment of such interest on or
principal of the Debt Securities need not be made on such date but may be made
on the next succeeding day not a Saturday, Sunday or a day on which banking
institutions in such cities are permitted or required by any applicable law to
close, with the same force and effect as if made on the date of payment and no
interest shall accrue for the period from and after such date.

         SECTION 14.08. Table of Contents, Headings, etc.

         The table of contents and the titles and headings of the articles and
sections of this Indenture have been inserted for convenience of reference only,
are not to be considered a part hereof, and shall in no way modify or restrict
any of the terms or provisions hereof.

         SECTION 14.09. Execution in Counterparts.

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

         SECTION 14.10. Separability.

         In case any one or more of the provisions contained in this Indenture
or in the Debt Securities shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Indenture or of such Debt
Securities, but this Indenture and such Debt Securities shall be

                                       50
<PAGE>   57
construed as if such invalid or illegal or unenforceable provision had never
been contained herein or therein.

         SECTION 14.11. Assignment.

         The Company will have the right at all times to assign any of its
rights or obligations under this Indenture to a direct or indirect wholly owned
Subsidiary of the Company, provided that, in the event of any such assignment,
the Company will remain liable for all such obligations. Subject to the
foregoing, this Indenture is binding upon and inures to the benefit of the
parties hereto and their respective successors and assigns. This Indenture may
not otherwise be assigned by the parties thereto.

         SECTION 14.12. Acknowledgment of Rights.

         The Company acknowledges that, with respect to any Debt Securities held
by the Trust or the Institutional Trustee of the Trust, if the Institutional
Trustee of the Trust fails to enforce its rights under this Indenture as the
holder of Debt Securities held as the assets of the Trust after the holders of a
majority in liquidation amount of the Capital Securities of the Trust have so
directed such Institutional Trustee, a holder of record of such Capital
Securities may to the fullest extent permitted by law institute legal
proceedings directly against the Company to enforce such Institutional Trustee's
rights under this Indenture without first instituting any legal proceedings
against such Institutional Trustee or any other Person. Notwithstanding the
foregoing, if an Event of Default has occurred and is continuing and such event
is attributable to the failure of the Company to pay interest (or premium, if
any) or principal on the Debt Securities on the date such interest (or premium,
if any) or principal is otherwise payable (or in the case of redemption, on the
redemption date), the Company acknowledges that a holder of record of Capital
Securities of the Trust may directly institute a proceeding against the Company
for enforcement of payment to such holder directly of the principal of (or
premium, if any) or interest on the of Debt Securities having an aggregate
principal amount equal to the aggregate liquidation amount of the Capital
Securities of such holder on or after the respective due date specified in the
Debt Securities.

                                   ARTICLE XV
                        SUBORDINATION OF DEBT SECURITIES

         SECTION 15.01. Agreement to Subordinate.

         The Company covenants and agrees, and each holder of Debt Securities
issued hereunder and under any supplemental indenture or by any Board Resolution
(the "Additional Provisions") by such Securityholder's acceptance thereof
likewise covenants and agrees, that all Debt Securities shall be issued subject
to the provisions of this Article XV; and each holder of a Debt Security,
whether upon original issue or upon transfer or assignment thereof, accepts and
agrees to be bound by such provisions.

         The payment by the Company of the principal of, and premium, if any,
and interest on all Debt Securities issued hereunder and under any Additional
Provisions shall, to the extent and in the manner hereinafter set forth, be
subordinated and junior in right of payment to

                                       51
<PAGE>   58
the prior payment in full of all Senior Indebtedness of the Company, whether
outstanding at the date of this Indenture or thereafter incurred.

         No provision of this Article XV shall prevent the occurrence of any
default or Event of Default hereunder.

         SECTION 15.02. Default on Senior Indebtedness.

         In the event and during the continuation of any default by the Company
in the payment of principal, premium, interest or any other payment due on any
Senior Indebtedness of the Company following any grace period, or in the event
that the maturity of any Senior Indebtedness of the Company has been accelerated
because of a default, then, in either case, no payment shall be made by the
Company with respect to the principal (including redemption and sinking fund
payments) of, or premium, if any, or interest on the Debt Securities.

         In the event that, notwithstanding the foregoing, any payment shall be
received by the Trustee when such payment is prohibited by the preceding
paragraph of this Section 15.02, such payment shall, subject to Section 15.06,
be held in trust for the benefit of, and shall be paid over or delivered to, the
holders of Senior Indebtedness or their respective representatives, or to the
trustee or trustees under any indenture pursuant to which any of such Senior
Indebtedness may have been issued, as their respective interests may appear, but
only to the extent that the holders of the Senior Indebtedness (or their
representative or representatives or a trustee) notify the Trustee in writing
within 90 days of such payment of the amounts then due and owing on the Senior
Indebtedness and only the amounts specified in such notice to the Trustee shall
be paid to the holders of Senior Indebtedness.

         SECTION 15.03. Liquidation; Dissolution; Bankruptcy.

         Upon any payment by the Company or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any dissolution or winding-up or liquidation or reorganization of
the Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due upon all Senior Indebtedness
of the Company shall first be paid in full, or payment thereof provided for in
money in accordance with its terms, before any payment is made by the Company,
on account of the principal (and premium, if any) or interest on the Debt
Securities; and upon any such dissolution or winding-up or liquidation or
reorganization, any payment by the Company, or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
which the Securityholders or the Trustee would be entitled to receive from the
Company, except for the provisions of this Article XV, shall be paid by the
Company, or by any receiver, trustee in bankruptcy, liquidating trustee, agent
or other Person making such payment or distribution, or by the Securityholders
or by the Trustee under this Indenture if received by them or it, directly to
the holders of Senior Indebtedness of the Company (pro rata to such holders on
the basis of the respective amounts of Senior Indebtedness held by such holders,
as calculated by the Company) or their representative or representatives, or to
the trustee or trustees under any indenture pursuant to which any instruments
evidencing such Senior Indebtedness may have been issued, as their respective
interests may appear, to the extent necessary to pay such Senior Indebtedness in
full, in money or money's worth, after giving effect to any

                                       52
<PAGE>   59
concurrent payment or distribution to or for the holders of such Senior
Indebtedness, before any payment or distribution is made to the Securityholders
or to the Trustee.

         In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, prohibited by the foregoing, shall be received by the
Trustee before all Senior Indebtedness of the Company is paid in full, or
provision is made for such payment in money in accordance with its terms, such
payment or distribution shall be held in trust for the benefit of and shall be
paid over or delivered to the holders of such Senior Indebtedness or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Senior Indebtedness
may have been issued, as their respective interests may appear, as calculated by
the Company, for application to the payment of all Senior Indebtedness of the
Company, remaining unpaid to the extent necessary to pay such Senior
Indebtedness in full in money in accordance with its terms, after giving effect
to any concurrent payment or distribution to or for the benefit of the holders
of such Senior Indebtedness.

         For purposes of this Article XV, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, the payment of which
is subordinated at least to the extent provided in this Article XV with respect
to the Debt Securities to the payment of all Senior Indebtedness of the Company,
that may at the time be outstanding, provided that (a) such Senior Indebtedness
is assumed by the new corporation, if any, resulting from any such
reorganization or readjustment, and (b) the rights of the holders of such Senior
Indebtedness are not, without the consent of such holders, altered by such
reorganization or readjustment. The consolidation of the Company with, or the
merger of the Company into, another corporation or the liquidation or
dissolution of the Company following the conveyance or transfer of its property
as an entirety, or substantially as an entirety, to another corporation upon the
terms and conditions provided for in Article IX of this Indenture shall not be
deemed a dissolution, winding-up, liquidation or reorganization for the purposes
of this Section 15.03 if such other corporation shall, as a part of such
consolidation, merger, conveyance or transfer, comply with the conditions stated
in Article IX of this Indenture. Nothing in Section 15.02 or in this Section
15.03 shall apply to claims of, or payments to, the Trustee under or pursuant to
Section 6.06 of this Indenture.

         SECTION 15.04. Subrogation.

         Subject to the payment in full of all Senior Indebtedness of the
Company, the Securityholders shall be subrogated to the rights of the holders of
such Senior Indebtedness to receive payments or distributions of cash, property
or securities of the Company, applicable to such Senior Indebtedness until the
principal of (and premium, if any) and interest on the Debt Securities shall be
paid in full; and, for the purposes of such subrogation, no payments or
distributions to the holders of such Senior Indebtedness of any cash, property
or securities to which the Securityholders or the Trustee would be entitled
except for the provisions of this Article XV, and no payment over pursuant to
the provisions of this Article XV to or for the benefit of the holders of such
Senior Indebtedness by Securityholders or the Trustee, shall, as between the
Company, its creditors other than holders of Senior Indebtedness of the Company,
and the holders of the Debt Securities be deemed to be a payment or distribution
by the

                                       53
<PAGE>   60
Company to or on account of such Senior Indebtedness. It is understood that the
provisions of this Article XV are and are intended solely for the purposes of
defining the relative rights of the holders of the Securities, on the one hand,
and the holders of such Senior Indebtedness, on the other hand.

         Nothing contained in this Article XV or elsewhere in this Indenture,
any Additional Provisions or in the Debt Securities is intended to or shall
impair, as between the Company, its creditors other than the holders of Senior
Indebtedness of the Company, and the holders of the Debt Securities, the
obligation of the Company, which is absolute and unconditional, to pay to the
holders of the Debt Securities the principal of (and premium, if any) and
interest on the Debt Securities as and when the same shall become due and
payable in accordance with their terms, or is intended to or shall affect the
relative rights of the holders of the Debt Securities and creditors of the
Company, other than the holders of Senior Indebtedness of the Company, nor shall
anything herein or therein prevent the Trustee or the holder of any Debt
Security from exercising all remedies otherwise permitted by applicable law upon
default under this Indenture, subject to the rights, if any, under this Article
XV of the holders of such Senior Indebtedness in respect of cash, property or
securities of the Company, received upon the exercise of any such remedy.

         Upon any payment or distribution of assets of the Company referred to
in this Article XV, the Trustee, subject to the provisions of Article VI of this
Indenture, and the Securityholders shall be entitled to conclusively rely upon
any order or decree made by any court of competent jurisdiction in which such
dissolution, winding-up, liquidation or reorganization proceedings are pending,
or a certificate of the receiver, trustee in bankruptcy, liquidation trustee,
agent or other Person making such payment or distribution, delivered to the
Trustee or to the Securityholders, for the purposes of ascertaining the Persons
entitled to participate in such distribution, the holders of Senior Indebtedness
and other indebtedness of the Company, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article XV.

         SECTION 15.05. Trustee to Effectuate Subordination.

         Each Securityholder by such Securityholder's acceptance thereof
authorizes and directs the Trustee on such Securityholder's behalf to take such
action as may be necessary or appropriate to effectuate the subordination
provided in this Article XV and appoints the Trustee such Securityholder's
attorney-in-fact for any and all such purposes.

         SECTION 15.06. Notice by the Company.

         The Company shall give prompt written notice to a Responsible Officer
of the Trustee at the Principal Office of the Trustee of any fact known to the
Company that would prohibit the making of any payment of monies to or by the
Trustee in respect of the Debt Securities pursuant to the provisions of this
Article XV. Notwithstanding the provisions of this Article XV or any other
provision of this Indenture or any Additional Provisions, the Trustee shall not
be charged with knowledge of the existence of any facts that would prohibit the
making of any payment of monies to or by the Trustee in respect of the Debt
Securities pursuant to the provisions of this Article XV, unless and until a
Responsible Officer of the Trustee at the

                                       54
<PAGE>   61
Principal Office of the Trustee shall have received written notice thereof from
the Company or a holder or holders of Senior Indebtedness or from any trustee
therefor; and before the receipt of any such written notice, the Trustee,
subject to the provisions of Article VI of this Indenture, shall be entitled in
all respects to assume that no such facts exist; provided, however, that if the
Trustee shall not have received the notice provided for in this Section 15.06 at
least two Business Days prior to the date upon which by the terms hereof any
money may become payable for any purpose (including, without limitation, the
payment of the principal of (or premium, if any) or interest on any Debt
Security), then, anything herein contained to the contrary notwithstanding, the
Trustee shall have full power and authority to receive such money and to apply
the same to the purposes for which they were received, and shall not be affected
by any notice to the contrary that may be received by it within two Business
Days prior to such date.

         The Trustee, subject to the provisions of Article VI of this Indenture,
shall be entitled to conclusively rely on the delivery to it of a written notice
by a Person representing himself to be a holder of Senior Indebtedness of the
Company (or a trustee or representative on behalf of such holder), to establish
that such notice has been given by a holder of such Senior Indebtedness or a
trustee or representative on behalf of any such holder or holders. In the event
that the Trustee determines in good faith that further evidence is required with
respect to the right of any Person as a holder of such Senior Indebtedness to
participate in any payment or distribution pursuant to this Article XV, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of such Senior Indebtedness held by
such Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article XV, and, if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.

         SECTION 15.07. Rights of the Trustee; Holders of Senior Indebtedness.

         The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article XV in respect of any Senior Indebtedness at any
time held by it, to the same extent as any other holder of Senior Indebtedness,
and nothing in this Indenture or any Additional Provisions shall deprive the
Trustee of any of its rights as such holder.

         With respect to the holders of Senior Indebtedness of the Company, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article XV, and no implied
covenants or obligations with respect to the holders of such Senior Indebtedness
shall be read into this Indenture or any Additional Provisions against the
Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of such Senior Indebtedness and, subject to the provisions of Article VI
of this Indenture, the Trustee shall not be liable to any holder of such Senior
Indebtedness if it shall pay over or deliver to Securityholders, the Company or
any other Person money or assets to which any holder of such Senior Indebtedness
shall be entitled by virtue of this Article XV or otherwise.

         Nothing in this Article XV shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 6.06.

                                       55
<PAGE>   62
         SECTION 15 08. Subordination May Not Be Impaired.

         No right of any present or future holder of any Senior Indebtedness of
the Company to enforce subordination as herein provided shall at any time in any
way be prejudiced or impaired by any act or failure to act on the part of the
Company, or by any act or failure to act, in good faith, by any such holder, or
by any noncompliance by the Company, with the terms, provisions and covenants of
this Indenture, regardless of any knowledge thereof that any such holder may
have or otherwise be charged with.

         Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness of the Company may, at any time and from time
to time, without the consent of or notice to the Trustee or the Securityholders,
without incurring responsibility to the Securityholders and without impairing or
releasing the subordination provided in this Article XV or the obligations
hereunder of the holders of the Debt Securities to the holders of such Senior
Indebtedness, do any one or more of the following: (a) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, such
Senior Indebtedness, or otherwise amend or supplement in any manner such Senior
Indebtedness or any instrument evidencing the same or any agreement under which
such Senior Indebtedness is outstanding; (b) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing such
Senior Indebtedness; (c) release any Person liable in any manner for the
collection of such Senior Indebtedness; and (d) exercise or refrain from
exercising any rights against the Company, and any other Person.

         The Bank of New York hereby accepts the trusts in this Indenture
declared and provided, upon the terms and conditions herein above set forth.

                                       56
<PAGE>   63
         IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed by their respective officers thereunto duly authorized, as of the
day and year first above written.

                                            HERITAGE COMMERCE CORP.

                                            By /s/ John Rossell
                                              ---------------------------------
                                              Name: John Rossell
                                              Title: CEO

                                            THE BANK OF NEW YORK, as Trustee

                                            By /s/ Annette L. Kos
                                               --------------------------------
                                                Name: Annette L. Kos
                                                Title: Assistant Vice President

                                       64<PAGE>   1
                                                                     Exhibit 4.2

                        AMENDED AND RESTATED DECLARATION

                                    OF TRUST

                            HERITAGE CAPITAL TRUST I

                           Dated as of March 23, 2000
<PAGE>   2
                                TABLE OF CONTENTS

                                    ARTICLE I
                         INTERPRETATION AND DEFINITIONS
<TABLE>
<CAPTION>
                                                                                                    Page

<S>              <C>                                                                               <C>
SECTION 1.1      Definitions ...............................................................          1

                                   ARTICLE II
                                  ORGANIZATION

SECTION 2.1      Name ......................................................................          9
SECTION 2.2      Office ....................................................................          9
SECTION 2.3      Purpose ...................................................................          9
SECTION 2.4      Authority .................................................................          9
SECTION 2.5      Title to Property of the Trust ............................................          9
SECTION 2.6      Powers and Duties of the Trustees and the Administrators ..................         10
SECTION 2.7      Prohibition of Actions by the Trust and the Trustees ......................         13
SECTION 2.8      Powers and Duties of the Institutional Trustee ............................         14
SECTION 2.9      Certain Duties and Responsibilities of the Trustees and Administrators ....         16
SECTION 2.10     Certain Rights of Institutional Trustee ...................................         17
SECTION 2.11     Delaware Trustee ..........................................................         20
SECTION 2.12     Execution of Documents ....................................................         20
SECTION 2.13     Not Responsible for Recitals or Issuance of Securities ....................         20
SECTION 2.14     Duration of Trust .........................................................         20
SECTION 2.15     Mergers ...................................................................         20

                                 ARTICLE III
                                   SPONSOR

SECTION 3.1      Sponsor's Purchase of Common Securities ...................................         22
SECTION 3.2      Responsibilities of the Sponsor ...........................................         22

                                   ARTICLE IV
                           TRUSTEES AND ADMINISTRATORS

SECTION 4.1      Number of Trustees ........................................................         23
SECTION 4.2      Delaware Trustee ..........................................................         23
SECTION 4.3      Institutional Trustee; Eligibility ........................................         23
SECTION 4.4      Certain Qualifications of the Delaware Trustee Generally ..................         24
SECTION 4.5      Administrators ............................................................         24
SECTION 4.6      Delaware Trustee ..........................................................         24
SECTION 4.7      Appointment, Removal and Resignation of Trustees and Administrators........         24
SECTION 4.8      Vacancies Among Trustees ..................................................         26
SECTION 4.9      Effect of Vacancies .......................................................         26
SECTION 4.10     Meetings of the Trustees and the Administrators ...........................         26
</TABLE>
                                       i
<PAGE>   3
<TABLE>
<S>              <C>                                                                               <C>
SECTION 4.11     Delegation of Power .......................................................         27
SECTION 4.12     Conversion, Consolidation or Succession to Business .......................         27

                                    ARTICLE V
                                  DISTRIBUTIONS

SECTION 5.1      Distributions .............................................................         27

                                   ARTICLE VI
                             ISSUANCE OF SECURITIES

SECTION 6.1      General Provisions Regarding Securities....................................         28
SECTION 6.2      Paying Agent, Transfer Agent and Registrar ................................         29
SECTION 6.3      Form and Dating ...........................................................         29
SECTION 6.4      Mutilated, Destroyed, Lost or Stolen Certificates .........................         30
SECTION 6.5      Temporary Securities ......................................................         30
SECTION 6.6      Cancellation ..............................................................         30
SECTION 6.7      Rights of Holders; Waivers of Past Defaults ...............................         30

                                   ARTICLE VII
                      DISSOLUTION AND TERMINATION OF TRUST

SECTION 7.1      Dissolution and Termination of Trust ......................................         32

                                  ARTICLE VIII
                              TRANSFER OF INTERESTS

SECTION 8.1      General....................................................................         33
SECTION 8.2      Transfer Procedures and Restrictions ......................................         34
SECTION 8.3      Deemed Security Holders ...................................................         36

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

SECTION 9.1      Liability .................................................................         36
SECTION 9.2      Exculpation ...............................................................         37
SECTION 9.3      Fiduciary Duty ............................................................         37
SECTION 9.4      Indemnification ...........................................................         38
SECTION 9.5      Outside Businesses ........................................................         40
SECTION 9.6      Compensation; Fee .........................................................         41
</TABLE>

                                       ii
<PAGE>   4
<TABLE>
<S>              <C>                                                                               <C>
                                    ARTICLE X
                                   ACCOUNTING

SECTION 10.1     Fiscal Year................................................................         41
SECTION 10.2     Certain Accounting Matters ................................................         41
SECTION 10.3     Banking ...................................................................         42
SECTION 10.4     Withholding ...............................................................         42

                                 ARTICLE XI
                          AMENDMENTS AND MEETINGS

SECTION 11.1     Amendments ................................................................         43
SECTION 11.2     Meetings of the Holders of Securities; Action by Written Consent ..........         45

                                 ARTICLE XII
                      REPRESENTATIONS OF INSTITUTIONAL
                        TRUSTEE AND DELAWARE TRUSTEE

SECTION 12.1     Representations and Warranties of Institutional Trustee ...................         46
SECTION 12.2     Representations and Warranties of Delaware Trustee ........................         47

                                ARTICLE XIII
                                MISCELLANEOUS

SECTION 13.1     Notices ...................................................................         48
SECTION 13.2     Governing Law..............................................................         49
SECTION 13.3     Intention of the Parties...................................................         49
SECTION 13.4     Headings ..................................................................         50
SECTION 13.5     Successors and Assigns ....................................................         50
SECTION 13.6     Partial Enforceability ....................................................         50
SECTION 13.7     Counterparts ..............................................................         50
</TABLE>

                                      iii
<PAGE>   5
                    AMENDED AND RESTATED DECLARATION OF TRUST

                                       OF

                            HERITAGE CAPITAL TRUST I

                                 March 23, 2000

         AMENDED AND RESTATED DECLARATION OF TRUST (this "Declaration") dated
and effective as of March 23, 2000, by the Trustees (as defined herein), the
Administrators (as defined herein), the Sponsor (as defined herein) and the
holders, from time to time, of undivided beneficial interests in the Trust (as
defined herein) to be issued pursuant to this Declaration;

         WHEREAS, certain of the Trustees, the Administrators and the Sponsor
established Heritage Capital Trust I (the "Trust"), a statutory business trust
under the Delaware Business Trust Act pursuant to a Declaration of Trust dated
as of March 7, 2000 (the "Original Declaration"), and a Certificate of Trust
filed with the Secretary of State of the State of Delaware on March 10, 2000,
for the sole purpose of issuing and selling certain securities representing
undivided beneficial interests in the assets of the Trust and investing the
proceeds thereof in certain debentures of the Debenture Issuer (as defined
herein);

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

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

         NOW, THEREFORE, it being the intention of the parties hereto to
continue the Trust as a statutory business trust under the Business Trust Act
(as defined herein) and that this Declaration constitutes the governing
instrument of such statutory 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.

                                    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;
<PAGE>   6
         (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 (as defined herein) has
the same meaning when used in this Declaration unless otherwise defined in this
Declaration or unless the context otherwise requires; and.

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

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

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

         "Administrators" means each of John E. Rossell III and Lawrence D.
McGovern, solely in such Person's capacity as Administrator of the Trust created
and continued hereunder and not in such Person's individual capacity, or such
Administrator's successor in interest in such capacity, or any successor
appointed as herein provided.

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

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

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

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

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

         "Business Day" means any day other than Saturday, Sunday or any other
day on which banking institutions in New York are permitted or required by any
applicable any applicable law to close.

                                       2
<PAGE>   7
         "Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code,
12 Del. Code Section 3801 et seq., as it may be amended from time to time, or
any successor legislation.

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

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

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

         "Certificate" means any certificate evidencing Securities.

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

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

         "Commission" means the Securities and Exchange Commission.

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

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

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

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

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

         "Corporate Trust Office" means the office of the Institutional Trustee
at which the corporate trust business of the Institutional Trustee shall, at any
particular time, be principally administered, which office at the date of
execution of this Declaration is located at 101 Barclay Street, Floor 21 West,
New York, NY 10286.

         "Covered Person" means: (a) any Administrator, 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.

         "Debenture Issuer" means Heritage Commerce Corp, a bank holding company
incorporated in California, in its capacity as issuer of the Debentures under
the Indenture.

                                       3
<PAGE>   8
         "Debenture Trustee" means The Bank of New York, as trustee under the
Indenture until a successor is appointed thereunder, and thereafter means such
successor trustee.

         "Debentures" means the 10 7/8% Junior Subordinated Deferrable Interest
Debentures due 2030 to be issued by the Debenture Issuer under the Indenture.

         "Deferred Interest" means any interest on the Debentures that would
have been overdue and unpaid for more than one Distribution Payment Date but for
the imposition of an Extension Period, and the interest that shall accrue (to
the extent that the payment of such interest is legally enforceable) on such
interest at the rate per annum equal to 10 7/8%, compounded semi-annually from
the date on which such Deferred Interest would otherwise have been due and
payable until paid or made available for payment.

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

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

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

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

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

         "Event of Default" means any one of the following events (whatever the
reason for such event and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body):

         (a) the occurrence of an Indenture Event of Default;

         (b) default by the Trust in the payment of any Redemption Price of any
Security when it becomes due and payable;

         (c) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Trustees in this Declaration (other than those
specified in clause (b) above) and continuation of such default or breach for a
period of 30 days after there has been given, by registered or certified mail to
the Trustees and to the Sponsor by the Holders of at least 25% in aggregate
liquidation amount of the outstanding Capital Securities a written notice
specifying such default or breach and requiring it to be remedied and stating
that such notice is a "Notice of Default" hereunder; or

         (d) the occurrence of a Bankruptcy Event with respect to the
Institutional Trustee if a successor Institutional Trustee has not been
appointed within 90 days thereof.

                                       4
<PAGE>   9
         "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor legislation.

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

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

         "Fiduciary Indemnified Person" shall mean the Institutional Trustee,
the Delaware Trustee, any Affiliate of the Institutional Trustee or the Delaware
Trustee, and any officers, directors, shareholders, members, partners,
employees, representatives, custodians, nominees or agents of the Institutional
Trustee and the Delaware Trustee.

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

         "Guarantee" means the guarantee agreement to be dated as of March 23,
2000, of the Sponsor in respect of the Capital Securities.

         "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 Company Indemnified Person or a Fiduciary
Indemnified Person.

         "Indenture" means the Indenture dated as of March 23, 2000, among the
Debenture Issuer and the Debenture Trustee, and any indenture supplemental
thereto pursuant to which the Debentures are to be issued.

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

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

         "interest" means any interest due on the Debentures, including any
Deferred Interest and Defaulted Interest (as each such term is defined in the
Indenture).

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

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

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

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

                                       5
<PAGE>   10
         "Liquidation" has the meaning set forth in paragraph 3 of Annex I.

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

         "Majority in liquidation amount of the Securities" means Holder(s)
of outstanding Securities voting together as a single class or, as the context
may require, Holders of outstanding Capital Securities or Holders of outstanding
Common Securities voting separately as a class, who are the record owners of
more than 50% of the aggregate liquidation amount (including the 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.

         "Officers' Certificates" 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 it 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 informed opinion as to whether or not such covenant or condition
has been complied with; and

         (d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.

         "Paying Agent" has the meaning specified in Section 6.2.

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

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

         "Placement Agreement" means the Placement Agreement relating to the
offering and sale of Capital Securities in the form of Exhibit E.

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

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

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

                                        6
<PAGE>   11
         "Pro Rata" has the meaning set forth in paragraph 8 of Annex I.

         "QIB" means a "qualified institutional buyer" as defined under Rule
144A of the Securities Act.

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

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

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

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

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

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

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

         "Relevant Trustee" has the meaning set forth in Section 4.7(a).

         "Remaining Life" has the meaning set forth in paragraph 4(a) of Annex
1.

         "Responsible Officer" means, with respect to the Institutional Trustee,
any officer within the Corporate Trust Office of the Institutional Trustee,
including any vice-president, any assistant vice-president, any assistant
secretary, the treasurer, any assistant treasurer, any trust officer or other
officer of the Corporate Trust Office of the Institutional Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of that officer's
knowledge of and familiarity with the particular subject.

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

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

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

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

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

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

                                        7
<PAGE>   12
         "Sponsor" means Heritage Commerce Corp, a bank holding company
incorporated in California, or any successor entity in a merger, consolidation
or amalgamation, in its capacity as sponsor of the Trust.

         "Successor Delaware Trustee" has the meaning set forth in Section
4.7(a).

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

         "Successor Institutional Trustee" has the meaning set forth in Section
4.7(a).

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

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

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

         "10% in liquidation amount of the Securities" means Holder(s) of
outstanding Securities voting together as a single class or, as the context may
require, Holders of outstanding Capital Securities or Holders of outstanding
Common Securities voting separately as a class, who are the record owners of 10%
or more of the aggregate liquidation amount (including the stated amount that
would be paid 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.

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

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

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

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

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

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

                                        8
<PAGE>   13
         "U.S. Person" means a United States Person as defined a Section
7701(a)(30) of the Code.

                                   ARTICLE II

                                  ORGANIZATION

         SECTION 2.1 Name. The Trust is named "Heritage Capital Trust I," as
such name may be modified from time to time by the Administrators 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
Administrators.

         SECTION 2.2 Office. The address of the principal office of the Trust is
150 Almaden Boulevard, San Jose, CA 95113. On ten Business Days written notice
to the Holders of the Securities, the Administrators may designate another
principal office which, shall be in a State of the United States or the District
of Columbia.

         SECTION 2.3 Purpose. The exclusive purposes and functions of the Trust
are (a) to issue and sell the Securities representing undivided beneficial
interests in the assets of the Trust, (b) to invest the gross proceeds from such
sale to acquire the Debentures and (c) 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 2.4 Authority. Except as specifically provided in this
Declaration, the Institutional Trustee shall have exclusive and complete
authority to carry out the purposes of the Trust. An action taken by a Trustee
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. The
Administrators shall have only those ministerial duties set forth herein with
respect to accomplishing the purposes of the Trust and are not intended to be
trustees or fiduciaries with respect to the Trust or the Holders.

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

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

         The Trustees and the Administrators shall conduct the affairs of the
Trust (a) in accordance with the terms of this Declaration. Subject to the
limitations set forth in paragraph (b) of this Section, and in accordance with
the following provisions (i) and (ii), the

                                        9
<PAGE>   14
Trustees and the Administrators shall have the authority to enter into all
transactions and agreements determined by the Trustees to be appropriate in
exercising the authority, express or implied, otherwise granted to the Trustees
or the Administrators, as the case may be, under this Declaration, and to
perform all acts in furtherance thereof, including without limitation, the
following:

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

                           (A) the issuance and sale of the Securities;

                           (B) to cause the Trust to enter into, and to execute
                  and deliver on behalf of the Trust, such agreements as may be
                  necessary or desirable in connection with the purposes and
                  function of the Trust, including agreements with the Paying
                  Agent;

                           (C) ensuring compliance with the Securities Act,
                  applicable state securities or blue sky laws;

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

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

                           (F) the consent to the appointment of a Paying Agent,
                  Transfer Agent and Registrar in accordance with this
                  Declaration, which consent shall not be unreasonably withheld;

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

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

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

                           (J) the taking of any action incidental to the
                  foregoing as the Institutional Trustee may from time to time
                  determine is necessary to give effect

                                       10
<PAGE>   15
                  to the terms of this Declaration for the benefit of the
                  Holders (without consideration of the effect of any such
                  action on any particular Holder);

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

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

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

                           (A) the establishment of the Property Account;

                           (B) the receipt of the Debentures;

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

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

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

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

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

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

                           (I) after any Event of Default (provided that such
                  Event of Default is not by or with respect to the
                  Institutional Trustee) the taking of any action incidental to
                  the foregoing as the Institutional Trustee may from time to
                  time determine is necessary or advisable to give effect to the
                  terms of this Declaration and protect and conserve the Trust
                  Property for the benefit of the Holders

                                       11
<PAGE>   16
                  (without consideration of the effect of any such action on any
                  particular Holder); and

                           (J) to take all action that may be necessary 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 Capital
                  Securities or to enable the Trust to effect the purposes for
                  which the Trust was created.

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

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

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

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

                  (iii) the negotiation of the terms of, and the execution and
         delivery of, the Placement Agreement providing for the sale of the
         Capital Securities; and

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

                                       12
<PAGE>   17
         (d) Notwithstanding anything herein to the contrary, the Administrators
and the Holders of a Majority in liquidation amount of the Common Securities are
authorized and directed to conduct the affairs of the Trust and to operate the
Trust so that (i) the Trust will not be deemed to be an "investment company"
required to be registered under the Investment Company Act and (ii) the Trust
will not fail to be classified as a grantor trust for United States federal
income tax purposes. The Administrator and the Holders of a Majority in
liquidation amount of the Common Securities shall not take any action
inconsistent with the treatment of the Debentures as indebtedness of the
Debenture Issuer for United States federal income tax purposes. In this
connection, the Holders of a Majority in liquidation amount of the Common
Securities are authorized to take any action, not inconsistent with applicable
laws, the Original Declaration or this Declaration, as amended from time to
time, that such Holders determine in their discretion to be necessary or
desirable for such purposes, even if such action adversely affects the interests
of the Holders of the Capital Securities.

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

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

         (g) Legal title to all Trust Property shall be vested at all times in
the Institutional Trustee (in its capacity as such) and shall be held and
administered by the Institutional Trustee for the benefit of the Trust and
neither the Administrators nor the Holders in accordance with this Declaration.

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

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

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

                  (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 Debentures;

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

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

                                       13
<PAGE>   18
                  (vii) other than as provided in this Declaration (including
         Annex I), (A) direct the time, method and place of exercising any trust
         or power conferred upon the Debenture Trustee with respect to the
         Debentures, (B) waive any past default that is waivable under the
         Indenture, (C) exercise any right to rescind or annul any declaration
         that the principal of all the Debentures shall be due and payable, or
         (D) consent to any amendment, modification or termination of the
         Indenture or the Debentures where such consent shall be required unless
         the Trust shall have received an opinion of counsel to the effect that
         such modification will not cause the Trust to cease to be classified as
         a grantor trust for United States federal income tax purposes.

         SECTION 2.8 Powers and Duties of the Institutional Trustee.

         (a) The legal title to the Debentures shall be owned by and held of
record in the name of the Institutional Trustee in trust for the benefit of the
Trust. The right, title and interest of the Institutional Trustee to the
Debentures shall vest automatically in each Person who may hereafter be
appointed as Institutional Trustee in accordance with Section 4.7. Such vesting
and cessation of title shall be effective whether or not conveyancing documents
with regard to the Debentures have been executed and delivered.

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

         (c) The Institutional Trustee shall:

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

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

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

                                       14
<PAGE>   19
         (d) The Institutional Trustee shall take all actions and perform such
duties as may be specifically required of the Institutional Trustee pursuant to
the terms of the Securities.

         (e) The Institutional Trustee may bring or defend, pay, collect,
compromise, arbitrate, resort to legal action with respect to, or otherwise
adjust claims or demands of or against, the Trust (a "Legal Action") which
arises out of or in connection with an Event of Default of which a Responsible
Officer of the Institutional Trustee has actual knowledge or the Institutional
Trustee's duties and obligations under this Declaration or the Trust Indenture
Act; provided, however, that if an Event of Default has occurred and is
continuing and such event is attributable to the failure of the Debenture Issuer
to pay interest or principal on the Debentures on the date such interest or
principal is otherwise payable (or in the case of redemption, on the redemption
date), then a Holder of the Capital Securities may directly institute a
proceeding for enforcement of payment to such Holder of the principal of or
interest on the Debentures having a principal amount equal to the aggregate
liquidation amount of the Capital Securities of such Holder (a "Direct Action")
on or after the respective due date specified in the Debentures. In connection
with such Direct Action, the rights of the Holders of the Common Securities will
be subrogated to the rights of such Holder of the Capital Securities to the
extent of any payment made by the Debenture Issuer to such Holder of the Capital
Securities in such Direct Action; provided, however, that a Holder of the Common
Securities may exercise such right of subrogation only so long as an Event of
Default with respect to the Capital Securities has occurred and is continuing.

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

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

                  (ii) a Successor Institutional Trustee has been appointed and
         has accepted that appointment in accordance with Section 4.7.

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

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

                                       15
<PAGE>   20
         SECTION 2.9 Certain Duties and Responsibilities of the Trustees and
Administrators.

         (a) The Institutional 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 Institutional Trustee. In case an Event of Default has occurred
(that has not been cured or waived pursuant to Section 6.7), the Institutional
Trustee shall exercise such of the rights and powers vested in it by this
Declaration, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs.

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

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

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

                                       16
<PAGE>   21
                  (i) the Institutional Trustee shall not be liable for any
         error or judgment made in good faith by an Authorized Officer of the
         Institutional Trustee, unless it shall be proved that the Institutional
         Trustee was negligent in ascertaining the pertinent facts:

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

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

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

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

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

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

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

                                       17
<PAGE>   22
the course of action to be taken and the Institutional Trustee shall take such
action, or refrain from taking such action, as the Institutional Trustee shall
be directed, in which event the Institutional Trustee shall have no liability
except for its own negligence or willful misconduct;

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

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

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

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

         (g) the Institutional Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Declaration at the request or
direction of any of the Holders pursuant to this Declaration, unless such
Holders shall have offered to the Institutional Trustee security or indemnity
reasonably satisfactory to it against the costs, expenses and liabilities which
might be incurred by it in compliance with such request or direction; provided,
that nothing contained in this Section 2.10(g) shall be taken to relieve the
Institutional Trustee, upon the occurrence of an Event of Default, of its
obligation to exercise the rights and powers vested in it by this Declaration;

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

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

                                       18
<PAGE>   23
         (j) whenever in the administration of this Declaration the
Institutional Trustee shall deem it desirable to receive instructions with
respect to enforcing any remedy or right or taking any other action hereunder,
the Institutional Trustee (i) may request instructions from the Holders of the
Capital Securities, which instructions may be given only by the Holders of the
same proportion in liquidation amount of the Capital Securities as would be
entitled to direct the Institutional Trustee under the terms of the Capital
Securities in respect of such remedy, right or action, (ii) may refrain from
enforcing such remedy or right or taking such other action until such
instructions are received, and (iii) shall be fully protected in acting in
accordance with such instructions;

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

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

         (m) the Institutional Trustee shall not be charged with knowledge of an
Event of Default unless a Responsible Officer of the Institutional Trustee
obtains actual knowledge of such event or the Institutional Trustee receives
written notice of such event from any Holder;

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

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

         SECTION 2.11 Delaware Trustee. Notwithstanding any other provision of
this Declaration other than Section 4.2, the Delaware Trustee shall not be
entitled to exercise any powers, nor shall the Delaware Trustee have any of the
duties and responsibilities of any of the Trustees or the Administrators
described in this Declaration. Except as set forth in Section 4.2, the Delaware
Trustee shall be a Trustee for the sole and limited purpose of fulfilling the
requirements of Section 3807 of the Business Trust Act.

                                       19
<PAGE>   24
         SECTION 2.12 Execution of Documents. Subject to the provisions of
Section 2.11, unless otherwise determined in writing by the Institutional
Trustee, and except as otherwise required by the Business Trust Act, the
Institutional Trustee, or any one or more of the Administrators, as the case may
be, is authorized to execute on behalf of the Trust any documents that the
Trustees or the Administrators, as the case may be, have the power and authority
to execute pursuant to Section 2.6.

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

         SECTION 2.14 Duration of Trust. The Trust, unless dissolved pursuant to
the provisions of Article VII hereof, shall have existence for fifty-five (55)
years from the Closing Date.

         SECTION 2.15 Mergers. (a) The Trust may not consolidate, amalgamate,
merge with or into, or be replaced by, or convey, transfer or lease its
properties and assets substantially as an entirety to any corporation or other
body, except as described in this Section 2.15(b) and (c).

         (b) The Trust may, with the consent of the Institutional Trustee and
without the consent of the Delaware Trustee or the Holders of the Capital
Securities, consolidate, amalgamate, merge with or into, or be replaced by a
trust organized as such under the laws of any State; provided, that:

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

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

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

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

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

                                       20
<PAGE>   25
                  (iv) such merger, consolidation, amalgamation or replacement
         does not cause the Capital 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, 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 such
         Holders' interests in the Successor Entity as a result of such merger,
         consolidation, amalgamation or replacement);

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

                  (vii) prior to such merger, consolidation, amalgamation or
         replacement, the Trust 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);

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

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

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

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

         (c) Notwithstanding Section 2.15(b), the Trust shall not, except with
the consent of Holders of 100% in liquidation amount of the Securities,
consolidate, amalgamate, merge with or into, or to 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.

                                       21
<PAGE>   26
                                   ARTICLE III

                                     SPONSOR

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

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

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

         (b) to prepare for filing and request the Administrators to cause the
filing by the Trust, as may be appropriate, of an application to the PORTAL
system, for listing or quotation upon notice of issuance of any Capital
Securities, if required; and

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

                                   ARTICLE IV

                           TRUSTEES AND ADMINISTRATORS

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

         (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 Capital Securities voting as a class at a meeting of the Holders
of the Capital Securities; provided, however, that there shall be a Delaware
Trustee if required by Section 4.2; and there shall always be one Trustee who
shall be the Institutional Trustee, and such Trustee may also serve as Delaware
Trustee if it meets the applicable requirements, in which case Section 2.11
shall have no application to such entity in its capacity as Institutional
Trustee.

                                       22
<PAGE>   27
         SECTION 4.2 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 is organized under the
laws of the United States or any State thereof or the District of Columbia, has
its principal place of business in the State of Delaware, and otherwise meets
the requirements of applicable law, including Section 3807 of the Business Trust
Act.

         SECTION 4.3 Institutional Trustee; Eligibility. (a) There shall at all
times be one Trustee which shall act as Institutional Trustee which shall:

                  (i) not be an Affiliate of the Sponsor;

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

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

         (b) If at any time the Institutional Trustee shall cease to be eligible
to so act under Section 4.3(a), the Institutional Trustee shall immediately
resign in the manner and with the effect set forth in Section 4.7(a).

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

         (d) The initial Institutional Trustee shall be The Bank of New York.

         SECTION 4.4 Certain Qualifications of the Delaware Trustee Generally.
The Delaware Trustee shall be a U.S. Person and 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 4.5 Administrators. Each Administrator shall be a U.S. Person.
The initial Administrators shall be John E. Rossell III and Lawrence D.
McGovern. There shall at all times be at least one Administrator.

                                       23
<PAGE>   28
         Except where a requirement for action by a specific number of
Administrators is expressly set forth in this Declaration and except with
respect to any action the taking of which is the subject of a meeting of the
Administrators any action required or permitted to be taken by the
Administrators may be taken by, and any power of the Administrators may be
exercised by, or with the consent of, any one such Administrator.

         SECTION 4.6 Initial Delaware Trustee. The initial Delaware Trustee
shall be The Bank of New York (Delaware).

         SECTION 4.7 Appointment, Removal and Resignation of Trustees and
Administrators.

         (a) No resignation or removal of any Trustee (the "Relevant Trustee")
and no appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of this Section 4.7.

         Subject to the immediately preceding paragraph, a Relevant Trustee may
resign at any time by giving written notice thereof to the Holders of the
Securities and by appointing a successor Relevant Trustee. Upon the resignation
of the Institutional Trustee, the Institutional Trustee shall appoint a
successor by requesting from each of Bank One Trust Company, NA, Bankers Trust
Company and State Street Bank & Trust Company, its expenses and charges to serve
as the successor Institutional Trustee on a form provided by the Administrators,
and selecting the Person who agrees to the lowest expense and charges (the
"Successor Institutional Trustee"). If the instrument of acceptance by the
successor Relevant Trustee required by Section 4.7 shall not have been delivered
to the Relevant Trustee within 60 days after the giving of such notice of
resignation or delivery of the instrument of removal, the Relevant Trustee may
petition, at the expense of the Trust, any Federal, State or District of
Columbia court of competent jurisdiction for the appointment of a successor
Relevant Trustee. Such court may thereupon, after prescribing such notice, if
any, as it may deem proper, appoint a Relevant Trustee. The Institutional
Trustee shall have no liability for the selection of such successor pursuant to
this Section 4.7.

         The Institutional Trustee or the Delaware Trustee, or both of them, may
be removed by the act of the Holders of a Majority in liquidation amount of the
Capital Securities, delivered to the Relevant Trustee (in its individual
capacity and on behalf of the Trust) if an Event of Default shall have occurred
and be continuing. If any Trustee shall be so removed, the Holders of Capital
Securities, by act of the Holders of a Majority in liquidation amount of the
Capital Securities then outstanding delivered to the Relevant Trustee, shall
promptly appoint a successor Relevant Trustee or Trustees, and such successor
Trustee shall comply with the applicable requirements of this Section 4.7. If no
successor Relevant Trustee shall have been so appointed by the Holders of a
Majority in liquidation amount of the Capital Securities and accepted
appointment in the manner required by this Section 4.7, within 30 days after
delivery of an instrument of removal, the Relevant Trustee or any Holder who has
been a Holder of the Securities for at least six months may, on behalf of
himself and all others similarly situated, petition any Federal, State or
District of Columbia court of competent jurisdiction for the

                                       24
<PAGE>   29
appointment of a successor Relevant Trustee. Such court may thereupon, after
prescribing such notice, if any, as it may deem proper, appoint a successor
Relevant Trust or Trustees.

         The Institutional Trustee shall give notice of each resignation and
each removal of a Trustee and each appointment of a successor Trustee to all
Holders in the manner provided in Section 4.7(b) and shall give notice to the
Sponsor. Each notice shall include the name of the successor Relevant Trustee
and the address of its Corporate Trust Office if it is the Institutional
Trustee.

         Notwithstanding the foregoing or any other provision of this
Declaration, in the event a Delaware Trustee who is a natural person dies or
becomes incompetent or incapacitated, the vacancy created by such death,
incompetence or incapacity may be filled by the Institutional Trustee following
the procedures in this Section 4.7 (with the successor being a Person who
satisfies the eligibility requirement for a Delaware Trustee set forth in this
Declaration) (the "Successor Delaware Trustee").

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

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

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

         SECTION 4.8 Vacancies Among Trustees. If a Trustee ceases to hold
office for any reason and the number of Trustees is not reduced pursuant to
Section 4.1, or if the number of Trustees is increased pursuant to Section 4.1,
a vacancy shall occur. A resolution certifying the existence of such vacancy by
the Trustees or, if there are more than two, a majority of the

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<PAGE>   30
Trustees shall be conclusive evidence of the existence of such vacancy. The
vacancy shall be filled with an a Trustee appointed in accordance with Section
4.7.

         SECTION 4.9 Effect of Vacancies. The death, resignation, retirement,
removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to
perform the duties of a Trustee shall not operate to dissolve, terminate or
annul the Trust. Whenever a vacancy in the number of Trustees shall occur, until
such vacancy is filled by the appointment of a Trustee in accordance with
Section 4.7, the Institutional Trustee shall have all the powers granted to the
Trustees and shall discharge all the duties imposed upon the Trustees by this
Declaration.

         SECTION 4.10 Meetings of the Trustees and the Administrators. Meetings
of the Trustees or the Administrators shall be held from time to time upon the
call of any Trustee or Administrator, as applicable. Regular meetings of the
Trustees and the Administrators, respectively, may be in person in the United
States or by telephone, at a place (if applicable) and time fixed by resolution
of the Trustees or the Administrators, as applicable. Notice of any in-person
meetings of the Trustees or the Administrators shall be hand delivered or
otherwise delivered in writing (including by facsimile, with a hard copy by
overnight courier) not less than 48 hours before such meeting. Notice of any
telephonic meetings of the Trustees or the Administrators or any committee
thereof shall be hand delivered or otherwise delivered in writing (including by
facsimile, with a hard copy by overnight courier) not less than 24 hours before
a meeting. Notices shall contain a brief statement of the time, place and
anticipated purposes of the meeting. The presence (whether in person or by
telephone) of a Trustee or an Administrator, as the case may be, at a meeting
shall constitute a waiver of notice of such meeting except where a Trustee or an
Administrator, as the case may be, attends a meeting for the express purpose of
objecting to the transaction of any activity on the ground that the meeting has
not been lawfully called or convened. Unless provided otherwise in this
Declaration, any action of the Trustees or the Administrators, as the case may
be, may be taken at a meeting by vote of a majority of the Trustees or the
Administrators present (whether in person or by telephone) and eligible to vote
with respect to such matter; provided, that a Quorum is present, or without a
meeting by the unanimous written consent of the Trustees or the Administrators.
Meetings of the Trustees and the Administrators together shall be held from the
time to time upon the call of any Trustee or Administrator.

         SECTION 4.11 Delegation of Power. (a) Any Trustee or any Administrator,
as the case may be, may, by power of attorney consistent with applicable law,
delegate to any other natural person over the age of 21 that is a U.S. Person
his or her power for the purpose of executing any documents contemplated in
Section 2.6; and

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

                                       26
<PAGE>   31
         SECTION 4.12 Conversion, Consolidation or Succession to Business. Any
Person into which the Institutional Trustee or the Delaware Trustee, as the case
may be, may be merged or converted or with which either may be consolidated, or
any Person resulting from any merger, conversion or consolidation to which the
Institutional Trustee or the Delaware Trustee, as the case may be, shall be a
party, or any Person succeeding to all or substantially all the corporate trust
business of the Institutional Trustee or the Delaware Trustee, as the case may
be, shall be the successor of the Institutional Trustee or the Delaware Trustee,
as the case may be, hereunder, provided such Person shall be otherwise qualified
and eligible under this Article, without the execution or filing of any paper or
any further act on the part of any of the parties hereto.

                                    ARTICLE V

                                  DISTRIBUTIONS

         SECTION 5.1 Distributions. Holders shall receive Distributions in
accordance with the applicable terms of the relevant Holder's Securities.
Distributions shall be made on the Capital Securities and the Common Securities
in accordance with the preferences set forth in their respective terms. If and
to the extent that the Debenture Issuer makes a payment of interest (including
any Additional Interest or Deferred Interest) and/or principal on the Debentures
held by the Institutional Trustee (the amount of any such payment being a
"Payment Amount"), the Institutional Trustee shall and is directed, to the
extent funds are available for that purpose, to make a distribution (a
"Distribution") of the Payment Amount to Holders.

                                   ARTICLE VI

                             ISSUANCE OF SECURITIES

         SECTION 6.1 General Provisions Regarding Securities.

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

         (b) The Certificates shall be signed on behalf of the Trust by one or
more Administrators. Such signature shall be the facsimile or manual signature
of any Administrator. In case any Administrator of the Trust who shall have
signed any of the Securities shall cease to be such Administrator before the
Certificates so signed shall be delivered by the Trust, such

                                       27
<PAGE>   32
Certificates nevertheless may be delivered as though the person who signed such
Certificates had not ceased to be such Administrator; and any Certificate may be
signed on behalf of the Trust by such person who, at the actual date of
execution of such Security, shall be an Administrator of the Trust, although at
the date of the execution and delivery of the Declaration any such person was
not such an Administrator. A Capital Security shall not be valid until
authenticated by the manual signature of an Authorized Officer of the
Institutional Trustee. Such signature shall be conclusive evidence that the
Capital Security has been authenticated under this Declaration. Upon written
order of the Trust signed by one Administrator, the Institutional Trustee shall
authenticate the Capital Securities for original issue. The Institutional
Trustee may appoint an authenticating agent that is a U.S. Person acceptable to
the Trust to authenticate the Capital Securities. A Common Security need not be
so authenticated.

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

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

         (e) Every Person, by virtue of having become a Holder or a Capital
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 and the Guarantee.

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

         SECTION 6.3 Form and Dating. The Capital Securities and the
Institutional Trustee's certificate of authentication thereon shall be
substantially in the form of Exhibit A-1, and the Common Securities shall be
substantially in the form of Exhibit A-2, each of which is hereby incorporated
in and expressly made a part of this Declaration. Certificates may be typed,

                                       28
<PAGE>   33
printed, lithographed or engraved or may be produced in any other manner as is
reasonably acceptable to the Administrators, as conclusively evidenced by their
execution thereof. The Securities may have letters, numbers, notations or other
marks of identification or designation and such legends or endorsements required
by law, stock exchange rule, agreements to which the Trust is subject, if any,
or usage (provided, that any such notation, legend or endorsement is in a form
acceptable to the Sponsor). The Trust at the direction of the Sponsor shall
furnish any such legend not contained in Exhibit A-1 to the Institutional
Trustee in writing. Each Capital Security shall be dated the date of its
authentication. The terms and provisions of the Securities set forth in Annex I
and the forms of Securities set forth in Exhibits A-1 and A-2 are part of the
terms of this Declaration and to the extent applicable, the Institutional
Trustee, the Delaware Trustee, the Administrators and the Sponsor, by their
execution and delivery of this Declaration, expressly agree to such terms and
provisions and to be bound thereby. Capital Securities will be issued only in
blocks having a stated liquidation amount of not less than $1,000.

         The Capital Securities are being offered and sold by the Trust pursuant
to the Placement Agreement in definitive, registered form without coupons with
the Restricted Securities Legend.

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

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

         (b) there shall be delivered to the Registrar, the Administrators and
the Institutional Trustee such security or indemnity as may be required by them
to keep each of them harmless; then, in the absence of notice that such
Certificate shall have been acquired by a bona fide purchaser, an Administrator
on behalf of the Trust shall execute (and in the case of a Capital Security
Certificate, the Institutional Trustee shall authenticate) and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate of like denomination. In connection with the
issuance of any new Certificate under this Section 6.4, the Registrar or the
Administrators may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection therewith. Any
duplicate Certificate issued pursuant to this Section shall constitute
conclusive evidence of an ownership interest in the relevant Securities, as if
originally issued, whether or not the lost, stolen or destroyed Certificate
shall be found at any time.

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

                                       29
<PAGE>   34
         SECTION 6.6 Cancellation. The Administrators at any time may deliver
Securities to the Institutional Trustee for cancellation. The Registrar shall
forward to the Institutional Trustee any Securities surrendered to it for
registration of transfer, redemption or payment. The Institutional Trustee shall
promptly cancel all Securities surrendered for registration of transfer,
payment, replacement or cancellation and shall dispose of such canceled
Securities as the Administrators direct. The Administrators may not issue new
Securities to replace Securities that have been paid or that have been delivered
to the Institutional Trustee for cancellation.

         SECTION 6.7 Rights of Holders; waivers of Past Defaults.

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

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

         At any time after a declaration of acceleration with respect to the
Debentures has been made and before a judgment or decree for payment of the
money due has been obtained by the Debenture Trustee as provided in the
Indenture, if the Institutional Trustee fails to annul any such declaration and
waive such default, the Holders of at least a majority in liquidation amount of
the Capital Securities, by written notice to the Institutional Trustee, the
Sponsor and the Debenture Trustee, may rescind and annul such declaration and
its consequences if:

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

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

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

                           (C) the principal of (and premium, if any, on) any
                  Debentures that have become due otherwise than by such
                  declaration of acceleration and interest and Deferred Interest
                  thereon at the rate borne by the Debentures, and

                                       30
<PAGE>   35
                           (D) all sums paid or advanced by the Debenture
                  Trustee under the Indenture and the reasonable compensation,
                  expenses, disbursements and advances of the Debenture Trustee
                  and the Institutional Trustee, their agents and counsel; and

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

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

         Upon receipt by the Institutional Trustee of written notice declaring
such an acceleration, or rescission and annulment thereof, by Holders of any
part of the Capital Securities a record date shall be established for
determining Holders of outstanding Capital Securities entitled to join in such
notice, which record date shall be at the close of business on the day the
Institutional Trustee receives such notice. The Holders on such record date, or
their duly designated proxies, and only such Persons, shall be entitled to join
in such notice, whether or not such Holders remain Holders after such record
date; provided, that, unless such declaration of acceleration, or rescission and
annulment, as the case may be, shall have become effective by virtue of the
requisite percentage having joined in such notice prior to the day that is 90
days after such record date, such notice of declaration of acceleration, or
rescission and annulment, as the case may be, shall automatically and without
further action by any Holder be canceled and of no further effect. Nothing in
this paragraph shall prevent a Holder, or a proxy of a Holder, from giving,
after expiration of such 90-day period, a new written notice of declaration of
acceleration, or rescission and annulment thereof, as the case may be, that is
identical to a written notice that has been canceled pursuant to the proviso to
the preceding sentence, in which event a new record date shall be established
pursuant to the provisions of this Section 6.7.

         (d) Except as otherwise provided in paragraphs (a) and (b) of this
Section 6.7, the Holders of at least a majority in liquidation amount of the
Capital Securities may, on behalf of the Holders of all the Capital Securities,
waive any past default or Event of Default and its consequences. Upon such
waiver, any such default or Event of Default shall cease to exist, and any
default or Event of Default arising therefrom shall be deemed to have been
cured, for every purpose of this Trust Agreement, but no such waiver shall
extend to any subsequent or other default or Event of Default or impair any
right consequent thereon.

                                       31
<PAGE>   36
                                  ARTICLE VII

                      DISSOLUTION AND TERMINATION OF TRUST

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

                  (i) unless earlier dissolved, on March 8, 2055, the expiration
         of the term of the Trust;

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

                  (iii) (other than in connection with a merger, consolidation
         or similar transaction not prohibited by the Indenture, this
         Declaration or the Guarantee, as the case may be) upon the filing of a
         certificate of dissolution or its equivalent with respect to the
         Sponsor; upon the revocation of the charter of the Sponsor and the
         expiration of 90 days after the date of revocation without a
         reinstatement thereof;

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

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

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

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

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

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

                                       32
<PAGE>   37
                                  ARTICLE VIII

                              TRANSFER OF INTERESTS

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

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

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

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

         (e) The Trust shall not be required (i) to issue, register the transfer
of, or exchange any Securities during a period beginning at the opening of
business 15 days before the day of any selection of Securities for redemption
and ending at the close of business on the earliest date on which the relevant
notice of redemption is deemed to have been given to all Holders of the
Securities to be redeemed, or (ii) to register the transfer or exchange of any

                                       33
<PAGE>   38
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.

         SECTION 8.2 Transfer Procedures and Restrictions.

         (a) General. (i) The Capital Securities shall bear the Restricted
Securities Legend, which shall not be removed unless there is delivered to the
Trust such satisfactory evidence, which may include an opinion of counsel
licensed to practice law in the State of New York, as may be reasonably required
by the Trust, that neither the legend nor the restrictions on transfer set forth
therein are required to ensure that transfers thereof comply with the provisions
of the Securities Act or that such Securities are not "restricted" within the
meaning of Rule 144 under the Securities Act. Upon provision of such
satisfactory evidence, the Institutional Trustee, at the written direction of
the Trust, shall authenticate and deliver Capital Securities that do not bear
the legend.

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

         (c) Legend. Except as permitted by Section 8.2(a), each Capital
Security shall bear a legend (the "Restricted Securities Legend") in
substantially the following form:

         THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF
THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE
TRANSFER SUCH SECURITY ONLY (A) TO THE DEBENTURE ISSUER OR THE TRUST, (B)
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (C) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (a) (1),

                                       34
<PAGE>   39
(2),(3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE
SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF AN "ACCREDITED INVESTOR,"
FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN
CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (D)
PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT, SUBJECT TO THE DEBENTURE ISSUER'S AND THE TRUST'S RIGHT
PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (C) OR (D) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM IN ACCORDANCE WITH THE DECLARATION OF
TRUST, A COPY OF WHICH MAY BE OBTAINED FROM THE DEBENTURE ISSUER OR THE TRUST.
THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING
RESTRICTIONS.

         (d) Obligations with Respect to Transfers and Exchanges of Capital
Securities.

                  (i) To permit registrations of transfers and exchanges, the
         Trust shall execute and the Institutional Trustee shall authenticate
         Capital Securities at the Registrar's request.

                  (ii) Registrations of transfers or exchanges will be effected
         without charge, but only upon payment (with such indemnity as the
         Registrar or the Sponsor may require) in respect of any tax or other
         governmental charge that may be imposed in relation to it.

                  (iii) The Registrar shall not be required to register the
         transfer of or exchange of any Capital Security during a period
         beginning at the opening of business 15 days before the day of any
         selection of any Capital Security for redemption set forth in the terms
         and ending at the close of business on the earliest date on which the
         relevant notice of redemption is deemed to have been given to all
         Holders of Capital Securities to be redeemed.

                  (iv) All Capital Securities issued upon any registration of
         transfer or exchange pursuant to the terms of this Declaration shall
         evidence the same security and shall be entitled to the same benefits
         under this Declaration as the Capital Securities surrendered upon such
         registration of transfer or exchange.

         SECTION 8.3 Deemed Security Holders. The Trust, the Administrators, the
Trustees, the Paying Agent, the Transfer Agent or the Registrar may treat the
Person in whose name any Certificate shall be registered on the books and
records of the Trust as the sole holder 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, the Administrators, the Trustees, the
Paying Agent, the Transfer Agent or the Registrar shall have actual or other
notice thereof.

                                       35
<PAGE>   40
                                   ARTICLE IX

                           LIMITATION OF LIABILITY OF
                    HOLDERS OF SECURITIES, TRUSTEES OR OTHERS

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

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

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

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

         (c) Pursuant to Section 3803(a) of the Business Trust Act, the Holders
of the Capital 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 9.2 Exculpation. (a) No Indemnified Person shall be liable,
responsible or accountable in damages or otherwise to the Trust or any Covered
Person for any loss, damage or claim incurred by reason of any act or omission
performed or omitted by such Indemnified Person in good faith on behalf of the
Trust and in a manner such Indemnified Person reasonably believed to be within
the scope of the authority conferred on such Indemnified Person by this
Declaration or by law, except that an Indemnified Person shall be liable for any
such loss, damage or claim incurred by reason of such Indemnified Person's
negligence or willful misconduct with respect to such acts or omissions.

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

         SECTION 9.3 Fiduciary Duty. (a) To the extent that, at law or in
equity, an Indemnified Person has duties (including fiduciary duties) and
liabilities relating thereto to the Trust or to any other Covered Person, an
Indemnified Person acting under this Declaration shall not be liable to the
Trust or to any other Covered Person for its good faith reliance on the
provisions of this Declaration. The provisions of this Declaration, to the
extent that they restrict

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<PAGE>   41
the duties and liabilities of an Indemnified Person otherwise existing at law or
in equity (other than the duties imposed on the Institutional Trustee under the
Trust Indenture Act), are agreed by the parties hereto to replace such other
duties and liabilities of the Indemnified Person.

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

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

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

         SECTION 9.4 Indemnification. (a) (i) The Sponsor shall indemnify, to
the full extent permitted by law, any Indemnified Person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Trust) by reason
of the fact that he is or was an Indemnified Person against expenses (including
attorneys' fees and expenses), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Trust, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the Indemnified
Person did not act in good faith and in a manner which he reasonably believed to
be in or not opposed to the best interests of the Trust, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.

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

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<PAGE>   42
                  (iii) To the extent that an Indemnified Person shall be
         successful on the merits or otherwise (including dismissal of an action
         without prejudice or the settlement of an action without admission of
         liability) in defense of any action, suit or proceeding referred to in
         paragraphs (i) and (ii) of this Section 9.4(a), or in defense of any
         claim, issue or matter therein, he shall be indemnified, to the full
         extent permitted by law, against expenses (including attorneys' fees
         and expenses) actually and reasonably incurred by him in connection
         therewith.

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

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

                  (vi) Each Trustee, at the sole cost and expense of the
         Sponsor, retains the right to representation by counsel of its own
         choosing in any action, suit or any other proceeding hereunder or
         against it by relation to the foregoing, without affecting its right
         to indemnification hereunder or waiving any rights afforded to it under
         this Declaration or applicable law.

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<PAGE>   43
         (b) The Sponsor shall indemnify, to the fullest extent permitted by
applicable law, each Indemnified Person from and against any and all loss,
damage, liability, tax, penalty, expense or claim of any kind or nature
whatsoever incurred by such Indemnified Person arising out of or in connection
with or by reason of the creation, 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 willful misconduct with respect to such
acts or omissions.

         (c) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other paragraphs of this Section 9.4 shall not be
deemed exclusive of any other rights to which those seeking indemnification and
advancement of expenses may be entitled under any agreement, vote of
stockholders or disinterested directors of the Sponsor or Capital Security
Holders of the Trust or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office. All rights to
indemnification under this Section 9.4 shall be deemed to be provided by a
contract between the Sponsor and each Indemnified Person who serves in such
capacity at any time while this Section 9.4 is in effect. Any repeal or
modification of this Section 9.4 shall not affect any rights or obligations then
existing.

         (d) The Sponsor or the Trust may purchase and maintain insurance on
behalf of any Person who is or was an Indemnified Person against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Sponsor would have the power to indemnify
him against such liability under the provisions of this Section 9.4.

         (e) For purposes of this Section 9.4, references to "the Trust" shall
include, in addition to the resulting or surviving entity, any constituent
entity (including any constituent of a constituent) absorbed in a consolidation
or merger, so that any Person who is or was a director, trustee, officer or
employee of such constituent entity, or is or was serving at the request of such
constituent entity as a director, trustee, officer, employee or agent of another
entity, shall stand in the same position under the provisions of this Section
9.4 with respect to the resulting or surviving entity as he would have with
respect to such constituent entity if its separate existence had continued.

         (f) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section 9.4 shall, unless otherwise provided when
authorized or ratified, continue as to a Person who has ceased to be an
Indemnified Person and shall inure to the benefit of the heirs, executors and
administrators of such a Person.

         The provisions of this Section shall survive the termination of this
agreement or the earlier resignation or removal of the Institutional Trustee.
The obligations of the Sponsor under this Section 9.4 to compensate and
indemnify the Trustees and to pay or reimburse the Trustees for expenses,
disbursements and advances shall constitute additional indebtedness

                                       39
<PAGE>   44
hereunder. Such additional indebtedness shall be secured by a lien prior to that
of the Securities upon all property and funds held or collected by the Trustees
as such, except funds held in trust for the benefit of the holders of particular
Securities.

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

         SECTION 9.6 Compensation; Fee. The Sponsor agrees:

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

         (b) except as otherwise expressly provided herein, to 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 their respective agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or willful
misconduct.

         The provisions of this Section 9.6 shall survive the dissolution of the
Trust and the termination of this Declaration and the removal or resignation of
any Trustee.

         No Trustee may claim any lien or charge on any property of the Trust as
a result of any amount due pursuant to this Section 9.6.

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<PAGE>   45
                                    ARTICLE X

                                   ACCOUNTING

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

         SECTION 10.2 Certain Accounting Matters.

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

         (b) The Administrators shall cause to be prepared at the principal
office of the Trust in the United States, as defined for purposes of Treasury
regulations section 301.7701-7, and delivered to each of the Holders of
Securities, 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
which shall be examined by and reported upon by a firm of independent certified
public accountants selected by the Administrators.

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

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

         (e) So long as the only Holder of the Capital Securities is Regional
Diversified Funding Limited, the Administrators will cause the Sponsor's reports
on Form FR Y-9C, FR Y-9LP and FR Y-6 to be delivered to the Holder promptly
following their filing with the Federal Reserve.

         SECTION 10.3 Banking. The Trust shall maintain one or more bank
accounts in the United States, as defined for purposes of Treasury regulations
section 301.7701-7, in the

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<PAGE>   46
name and for the sole benefit of the Trust; provided, however, that all payments
of funds in respect of the Debentures held by the Institutional Trustee shall be
made directly to the Property Account and no other funds of the Trust shall be
deposited in the Property Account. The sole signatories for such accounts
(including the Property Account) shall be designated by the Institutional
Trustee.

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

                                   ARTICLE XI

                             AMENDMENTS AND MEETINGS

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

                  (i) the Institutional Trustee, and

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

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

                  (i) unless the Institutional Trustee shall have first received

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

                                       42

<PAGE>   47
                           (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

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

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

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

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

                           (D) cause the Debenture Issuer to be unable to treat
                  an amount equal to the Liquidation Amount of the Debentures as
                  "Tier 1 Capital" for purposes of the capital adequacy
                  guidelines of the Federal Reserve.

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

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

                  (e) Section 8.1(b) and 8.1(c) and this Section 11.1 shall
not be amended without the consent of all of the Holders of the Securities.

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

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

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

                  (i) cure any ambiguity;

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<PAGE>   48
                  (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; and

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

         provided, however, that no such modification, elimination or addition
referred to in clauses (i), (ii) or (iii) shall adversely affect the powers,
preferences or special rights of Holders of Capital Securities.

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

                  (a) Meetings of the Holders of any class of Securities may be
called at any time by the Administrators (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 Capital
Securities are listed or admitted for trading, if any. The Administrators 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 Administrators one or more calls
in a writing stating that the signing Holders of the Securities wish to call a
meeting and indicating the general or specific purpose for which the meeting is
to be called. Any Holders of the Securities calling a meeting shall specify in
writing the Certificates held by the Holders of the Securities exercising the
right to call a meeting and only those Securities represented by such
Certificates shall be counted for purposes of determining whether the required
percentage set forth in the second sentence of this paragraph has been met.

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

                  (i) notice of any such meeting shall be given to all the
         Holders of the Securities having a right to vote thereat at least 7
         days and not more than 60 days before the date of such meeting.
         Whenever a vote, consent or approval of the Holders of the Securities
         is permitted or required under this Declaration or the rules of any
         stock exchange on which the Capital Securities are listed or admitted
         for trading, if any, such vote, consent or approval may be given at a
         meeting of the Holders of the Securities. Any action that may be taken
         at a meeting of the Holders of the Securities may be taken

                                       44
<PAGE>   49
         without a meeting if a consent in writing setting forth the action so
         taken is signed by the Holders of the Securities owning not less than
         the minimum amount of Securities in liquidation amount that would be
         necessary to authorize or take such action at a meeting at which all
         Holders of the Securities having a right to vote thereon were present
         and voting. Prompt notice of the taking of action without a meeting
         shall be given to the Holders of the Securities entitled to vote who
         have not consented in writing. The Administrators may specify that any
         written ballot submitted to the Holders of the Securities for the
         purpose of taking any action without a meeting shall be returned to the
         Trust within the time specified by the Administrators;

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

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

                                  ARTICLE XII

                    REPRESENTATIONS OF INSTITUTIONAL TRUSTEE
                              AND DELAWARE TRUSTEE

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

                                       45
<PAGE>   50
                  (a) the Institutional Trustee is a banking corporation with
trust powers, duly organized, validly existing and in good standing under the
laws 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, this
Declaration;

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

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

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

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

                  (a) The Delaware Trustee is 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, this Declaration.

                  (b) The Delaware Trustee has been authorized to perform its
obligations under the Certificate of Trust and this Declaration. This
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 (regardless of whether considered in a proceeding in equity
or at law).

                  (c) No consent, approval or authorization of, or registration
with or notice to, any state or federal banking authority is required for the
execution, delivery or performance by the Delaware Trustee of this Declaration.

                  (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

                                       46
<PAGE>   51
State of Delaware and, in either case, a Person that satisfies for the Trust the
requirements of Section 3807 of the Business Trust Act.

                                  ARTICLE XIII

                                 MISCELLANEOUS

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

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

                           Heritage Capital Trust I
                           c/o Heritage Commerce Corp.
                           150 Almaden Boulevard
                           San Jose, California 95113

                           Attention: Administrators of Heritage Capital Trust I

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

                           The Bank of New York (Delaware)
                           White Clay Center, Route 273
                           Newark, Delaware
                           Attention: Corporate Trust Administration
                           Telecopy:

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

                           The Bank of New York
                           101 Barclay Street, Floor 21W
                           New York, NY 10286
                           Attention: Corporate Trust Administration
                           Telecopy: 212-819-5915

                                       47
<PAGE>   52
                  (d) if given to the Holder of the Common Securities, at the
mailing address of the Sponsor set forth below (or such other address as the
Holder of the Common Securities may give notice of to the Trust):

                           Heritage Commerce Corp.
                           150 Almaden Boulevard
                           San Jose, California 95113
                           Attention: Lawrence D. McGovern

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

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

                  SECTION 13.2 Governing Law. This Declaration and the rights of
the parties hereunder shall be governed by and interpreted in accordance with
the law of the State of Delaware and all rights and remedies shall be governed
by such laws without regard to the principles of conflict of laws of the State
of Delaware or any other jurisdiction that would call for the application of the
law of any jurisdiction other than the State of Delaware; provided, however,
that there shall not be applicable to the Trust, the Trustees or this
Declaration any provision of the laws (statutory or common) of the State of
Delaware pertaining to trusts that relate to or regulate, in a manner
inconsistent with the terms hereof (a) the filing with any court or governmental
body or agency of trustee accounts or schedules of trustee fees and charges, (b)
affirmative requirements to post bonds for trustees, officers, agents or
employees of a trust, (c) the necessity for obtaining court or other
governmental approval concerning the acquisition, holding or disposition of real
or personal property, (d) fees or other sums payable to trustees, officers,
agents or employees of a trust, (e) the allocation of receipts and expenditures
to income or principal, (f) restrictions or limitations on the permissible
nature, amount or concentration of trust investments or requirements relating to
the titling, storage or other manner of holding or investing trust assets or (g)
the establishment of fiduciary or other standards of responsibility or
limitations on the acts or powers of trustees that are inconsistent with the
limitations or liabilities or authorities and powers of the Trustees as set
forth or referenced in this Declaration. Section 3540 of Title 12 of the
Delaware Code shall not apply to the Trust.

                  SECTION 13.3 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 13.4 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.

                                       48
<PAGE>   53
                  SECTION 13.5 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 or not
so expressed.

                  SECTION 13.6 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 13.7 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 and Administrators to
any of such counterpart signature pages. All of such counterpart signature pages
shall be read as though one, and they shall have the same force and effect as
though all of the signers had signed a single signature page.

                                       49
<PAGE>   54
                  IN WITNESS WHEREOF, the undersigned have caused these presents
to be executed as of the day and year first above written.

                                        THE BANK OF NEW YORK (DELAWARE)
                                           as Delaware Trustee

                                        By:  /s/  WILLIAM T. LEWIS
                                           -------------------------------
                                           Name:  WILLIAM T. LEWIS, SVP
                                           Title

                                        THE BANK OF NEW YORK
                                           as Institutional Trustee

                                        By:  /s/  ANNETTE L. KOS
                                           -------------------------------
                                           Name:  ANNETTE L. KOS
                                           Title: Assistant Vice President

                                        HERITAGE COMMERCE CORP.,
                                           as Sponsor

                                        By:  /s/  JOHN ROSSELL
                                           -------------------------------
                                           Name:  JOHN ROSSELL
                                           Title: CEO

                                        HERITAGE CAPITAL TRUST I

                                        By:  /s/  LAWRENCE D. McGOVERN
                                           -------------------------------
                                           Administrator

                                        By:
                                           -------------------------------
                                           Administrator

                                       54
<PAGE>   55
                                    ANNEX I

                                    TERMS OF
         FIXED RATE CAPITAL TRUST PASS-THROUGH SECURITIES(R) (TRUPS(R))

                  Pursuant to Section 6.1 of the Amended and Restated
Declaration of Trust, dated as of March 23, 2000 (as amended from time to time,
the "Declaration"), the designation, rights, privileges, restrictions,
preferences and other terms and provisions of the Capital Securities and the
Common Securities are set out below (each capitalized term used but not defined
herein has the meaning set forth in the Declaration):

                  1. Designation and Number. (a) Capital Securities. 7,000
Capital Securities of Heritage Capital Trust I (the "Trust"), with an aggregate
stated liquidation amount with respect to the assets of the Trust of Seven
Million ($7,000,000) and a stated liquidation amount with respect to the assets
of the Trust of $1,000 per Capital Security, are hereby designated for the
purposes of identification only as the "Fixed Rate Capital Trust Pass-through
Securities"(R) (the "Capital Securities"). The Capital Security Certificates
evidencing the Capital Securities shall be substantially in the form of Exhibit
A-1 to the Declaration, with such changes and additions thereto or deletions
therefrom as may be required by ordinary usage, custom or practice or to conform
to the rules of any stock exchange on which the Capital Securities are listed,
if any.

                  (b) Common Securities. 217 Common Securities of the Trust (the
"Common Securities") will be evidenced by Common Security Certificates
substantially in the form of Exhibit A-2 to the Declaration, with such changes
and additions thereto or deletions therefrom as may be required by ordinary
usage, custom or practice.

                  2. Distributions. (a) Distributions payable on each Security
will be payable at an annual rate equal to 10-7/8% (the "Coupon Rate") of the
stated liquidation amount of $1,000 per Security, such rate being the rate of
interest payable on the Debentures to be held by the Institutional Trustee.
Except as set forth below in respect of an Extension Period, Distributions in
arrears for more than one semi-annual period will bear interest thereon
compounded semi-annually at the Coupon Rate (to the extent permitted by
applicable law). The term "Distributions" as used herein includes cash
distributions and any such compounded distributions payable unless otherwise
stated. A Distribution is payable only to the extent that payments are made in
respect of the Debentures held by the Institutional Trustee and to the extent
the Institutional Trustee has funds available therefor. The amount of
Distributions payable for any period will be computed for any full semi-annual
period on the basis of a 360-day year of twelve 30-day months.

                  (b) Distributions on the Securities will be cumulative, will
accrue from the date of original issuance, and will be payable, subject to
extension of distribution payment periods as described herein, semi-annually in
arrears on March 8 and September 8 of each year, commencing on September 8, 2000
(each, a "Distribution Payment Date") when, as and if available for payment. The
Debenture Issuer has the right under the Indenture to defer payments of interest
on the Debentures by extending the interest payment period for up to 10
consecutive semi-annual periods (each, an "Extension Period") at any time and
from time to time on the

                                       I-1
<PAGE>   56
Debentures, subject to the conditions described below, although such interest
would continue to accrue on the Debentures, and interest will accrue on such
Deferred Interest at an annual rate equal to 10-7/8%, compounded semi-annually
to the extent permitted by law during any Extension Period. No Extension Period
may end on a date other than a Distribution Payment Date. At the end of any such
Extension Period the Debenture Issuer shall pay all Deferred Interest; provided,
however, that no Extension Period may extend beyond the Maturity Date and
provided further, that, during any such Extension Period, the Debenture Issuer
may not (i) declare or pay any dividends or distributions on, or redeem,
purchase, acquire, or make a liquidation payment with respect to, any of the
Debenture Issuer's capital stock or (ii) make any payment of principal of or
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Debenture Issuer that rank pari passu in all respects with or
junior in interest to the Debentures (other than (a) repurchases, redemptions or
other acquisitions of shares of capital stock of the Debenture Issuer in
connection with any employment contract, benefit plan or other similar
arrangement with or for the benefit of one or more employees, officers,
directors or consultants, in connection with a dividend reinvestment or
stockholder stock purchase plan or in connection with the issuance of capital
stock of the Debenture Issuer (or securities convertible into or exercisable for
such capital stock) as consideration in an acquisition transaction entered into
prior to the applicable Extension Period, (b) as a result of any exchange or
conversion of any class or series of the Debenture Issuer's capital stock (or
any capital stock of a subsidiary of the Debenture Issuer) for any class or
series of the Debenture Issuer's capital stock or of any class or series of the
Debenture Issuer's indebtedness for any class or series of the Debenture
Issuer's capital stock, (c) the purchase of fractional interests in shares of
the Debenture Issuer's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged,
(d) any declaration of a dividend in connection with any stockholder's rights
plan, or the issuance of rights, stock or other property under any stockholder's
rights plan, or the redemption or repurchase of rights pursuant thereto, or (e)
any dividend in the form of stock, warrants, options or other rights where the
dividend stock or the stock issuable upon exercise of such warrants, options or
other rights is the same stock as that on which the dividend is being paid or
ranks pari passu with or junior to such stock). Prior to the termination of any
Extension Period, the Debenture Issuer may further extend such period, provided
that such period together with all such previous and further consecutive
extensions thereof shall not exceed 10 consecutive semi-annual periods, or
extend beyond the Maturity Date. Upon the termination of any Extension Period
and upon the payment of all Deferred Interest, the Debenture Issuer may commence
a new Extension Period, subject to the foregoing requirements. No interest or
Deferred Interest shall be due and payable during an Extension Period, except at
the end thereof, but each installment of interest that would otherwise have been
due and payable during such Extension Period shall bear Deferred Interest. If
Distributions are deferred, the Distributions due shall be paid on the date that
the related Extension Period terminates, or, if such date is not a Distribution
Payment Date, on the immediately following Distribution Payment Date, to Holders
of the Securities as they appear on the books and records of the Trust on the
record date immediately preceding such date. Distributions on the Securities
must be paid on the dates payable (after giving effect to any Extension Period)
to the extent that the Trust has funds available for the payment of such
distributions in the Property Account of the Trust. The Trust's funds available
for Distribution to the Holders of the Securities will be limited to payments
received from the Debenture Issuer. The payment of Distributions out of moneys
held by the Trust is guaranteed by the Guarantor pursuant to the Guarantee.

                                      I-2
<PAGE>   57
                  (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. The relevant record dates shall be selected by the
Administrators, which dates shall be 15 days before the relevant payment dates.
Distributions payable on any Securities that are not punctually paid on any
Distribution Payment Date, as a result of the Debenture Issuer having failed to
make a payment under the Debentures, as the case may be, when due (taking into
account any Extension Period), will cease to be payable to the Person in whose
name such Securities are registered on the relevant 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. 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 succeeding 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 payment 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
the voluntary or involuntary liquidation, dissolution, winding-up or termination
of the Trust (each, a "Liquidation") other than in connection with a redemption
of the Debentures, the Holders of the Securities will be entitled to receive out
of the assets of the Trust available for distribution to Holders of the
Securities, after satisfaction of liabilities to creditors of the Trust (to the
extent not satisfied by the Debenture Issuer), distributions equal to the
aggregate of the stated liquidation amount of $1,000 per Security plus accrued
and unpaid Distributions thereon to the date of payment (such amount being the
"Liquidation Distribution"), unless in connection with such Liquidation, the
Debentures in an aggregate stated principal amount equal to the aggregate stated
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, and having the same record date as, such
Securities, after paying or making reasonable provision to pay all claims and
obligations of the Trust in accordance with Section 3808(e) of the Business
Trust Act, shall be distributed on a Pro Rata basis to the Holders of the
Securities in exchange for such Securities.

                  The Sponsor, as the Holder of all of the Common Securities,
has the right at any time to dissolve the Trust (including without limitation
upon the occurrence of a Tax Event, an Investment Company Event or a Capital
Treatment Event), subject to the receipt by the Debenture Issuer of prior
approval from the Board of Governors of the Federal Reserve System (the "Federal
Reserve"), if then required under applicable capital guidelines or policies of
the Federal Reserve and, after satisfaction of liabilities to creditors of the
Trust, cause the Debentures to be distributed to the Holders of the Securities
on a Pro Rata basis in accordance with the aggregate stated liquidation amount
thereof.

                  The Trust shall dissolve on the first to occur of (i) March 8,
2055, the expiration of the term of the Trust, (ii) a Bankruptcy Event with
respect to the Sponsor, Trust or the

                                      I-3
<PAGE>   58
Debenture Issuer, (iii) (other than in connection with a merger, consolidation
or similar transaction not prohibited by the Indenture, this Declaration or the
Guarantee, as the case may be) upon the filing of a certificate of dissolution
of the Sponsor or upon revocation of the charter of the Sponsor and the
expiration of 90 days after the date of revocation without a reinstatement
thereof, (iv) the distribution to the Holders of the Securities of the
Debentures, upon exercise of the right of the Holder of all of the outstanding
Common Securities to dissolve the Trust as described above, (v) the entry of a
decree of a judicial dissolution of the Sponsor or the Trust, or (vi) when all
of the Securities shall have been called for redemption and the amounts
necessary for redemption thereof shall have been paid to the Holders in
accordance with the terms of the Securities. As soon as practicable after the
dissolution of the Trust and upon completion of the winding up of the Trust, the
Trust shall terminate upon the filing of a certificate of cancellation with the
Secretary of State of the State of Delaware.

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

                  If, upon any such Liquidation 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 such Capital Securities shall be paid to the Holders of
the Trust Securities on a pro rata basis, except that if an Event of Default has
occurred and is continuing, the Capital Securities shall have a preference over
the Common Securities with regard to such distributions.

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

                  After the date for any distribution of the Debentures upon
dissolution of the Trust, (i) the Securities of the Trust will be deemed to be
no longer outstanding, and (ii) any certificates representing the Capital
Securities will be deemed to represent undivided beneficial interests in such of
the Debentures as have an aggregate principal amount equal to the aggregate
stated liquidation amount of, with an interest rate identical to the
distribution rate of, and bearing accrued and unpaid interest equal to accrued
and unpaid distributions on, the Securities until such certificates are
presented to the Debenture Issuer or its agent for transfer or reissuance.

                                      I-4
<PAGE>   59
                  4. Redemption and Distribution.

                  (a) The Debentures will mature on March 8, 2030. The
Debentures may be redeemed by the Debenture Issuer, in whole or in part, on any
March 8 or September 8 on or after March 8, 2010, at the Redemption Price, upon
not less than 30 days nor more than 60 day's notice to Holders of such
Debentures. In addition, upon the occurrence and continuation of a Tax Event, an
Investment Company Event or a Capital Treatment Event, the Debentures may be
redeemed by the Debenture Issuer in whole but not in part, at any time within 90
days following the occurrence of such Tax Event, Investment Company Event or
Capital Treatment Event, as the case may be (the "Special Redemption Date"), at
the Special Redemption Price, upon not less than 30 nor more than 60 days'
notice to Holders of the Debentures so long as such Tax Event, Investment
Company Event or Capital Treatment Event, as the case may be, is continuing. In
each case, the right of the Debenture Issuer to redeem the Debentures is subject
to the Debenture Issuer having received prior approval from the Federal Reserve,
if then required under applicable capital guidelines or policies of the Federal
Reserve.

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

                  "Investment Company Event" means the receipt by the Trust of
an opinion of counsel experienced in such matters to the effect that, as a
result of the occurrence of a change in law or regulation or written change
(including any announced prospective change) in interpretation or application of
law or regulation by any legislative body, court, governmental agency or
regulatory authority, there is more than an insubstantial risk that the Trust is
or will be considered an "investment company" that is required to be registered
under the Investment Company Act of 1940, as amended which change or prospective
change becomes effective or would become effective, as the case may be, on or
after the date of the issuance of the Debentures.

                                      I-5
<PAGE>   60
                  "Capital Treatment Event" means the reasonable determination
by the Debenture Issuer that, as a result of the occurrence of any amendment to,
or change (including any announced prospective change) in, the laws of the
United States or any political subdivision thereof or therein, or as the result
of any official or administrative pronouncement or action or decision
interpreting or applying such laws, rules or regulations, which amendment or
change is effective or which pronouncement, action or decision is announced on
or after the date of issuance of the Debentures, there is more than an
insubstantial risk that the Debenture Issuer will not be entitled to treat an
amount equal to the aggregate Liquidation Amount of the Debentures as "Tier I
Capital" (or the then equivalent thereof) for purposes of the capital adequacy
guidelines of the Federal Reserve, as then in effect and applicable to the
Debenture Issuer; provided, however, that the distribution of the Debentures in
connection with the Liquidation of the Trust by the Debenture Issuer shall not
in and of itself constitute a Capital Treatment Event unless such Liquidation
shall have occurred in connection with a Tax Event or an Investment Company
Event.

                  "Special Event" means any of a Capital Treatment Event, a Tax
Event or an Investment Company Event.

                  "Redemption Price" means the price set forth in the following
table for any Redemption Date or Special Redemption Date that occurs within the
twelve-month period beginning in the relevant year indicated below, expressed in
percentage of the principal amount of the Debt Securities being redeemed:

<TABLE>
<CAPTION>
                    Year                                    Percentage
                    ----                                    ----------
<S>                                                         <C>
               March 8, 2010                                  105.438
               March 8, 2011                                  104.894
               March 8, 2012                                  104.350
               March 8, 2013                                  103.806
               March 8, 2014                                  103.263
               March 8, 2015                                  102.719
               March 8, 2016                                  102.175
               March 8, 2017                                  101.631
               March 8, 2018                                  101.088
               March 8, 2019                                  100.544
          March 8, 2020 and after                             100.000
</TABLE>

                  plus accrued and unpaid interest on such Debentures to the
Redemption Date or, in the case of a redemption due to the occurrence of a
Special Event, to the Special Redemption Date.

                                      1-6
<PAGE>   61
                  "Special Redemption Price" means (1) if the Special Redemption
Date is before March 8, 2010, the greater of (a) 100% of the principal amount of
the Debentures being redeemed and (b) as determined by a Quotation Agent, the
sum of the present values of scheduled payments of principal and interest from
the Special Redemption Date to March 8, 2010 (the "Remaining Life") discounted
to the Special Redemption Date on a semi-annual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Treasury Rate plus 0.45%, plus, in
the case of either (a) or (b), accrued and unpaid interest on such Debentures to
the Special Redemption Date and (2) if the Special Redemption Date is on or
after March 8, 2010, the Redemption Price for such Special Redemption Date.

                  "Comparable Treasury Issue" means with respect to any Special
Redemption Date the United States Treasury security selected by the Quotation
Agent as having a maturity comparable to the Remaining Life that would be
utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the Remaining Life. If no United States Treasury security has a
maturity which is within a period from three months before to three months after
March 8, 2010, the two most closely corresponding United States Treasury
securities shall be used as the Comparable Treasury Issue, and the Treasury Rate
shall be interpolated or extrapolated on a straight-line basis, rounding to the
nearest month using such securities.

                  "Comparable Treasury Price" means (a) the average of five
Reference Treasury Dealer Quotations for such Special Redemption Date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations, or
(b) if the Quotation Agent obtains fewer than five such Reference Treasury
Dealer Quotations, the average of all such Quotations.

                  "Primary Treasury Dealer" shall mean a primary United States
Government securities dealer in New York City.

                  "Quotation Agent" means Salomon Smith Barney, Inc. and its
successors; provided, however, that if the foregoing shall cease to be a primary
United States Government securities dealer in New York City (a "Primary Treasury
Dealer"), the Debenture Issuer shall substitute therefor another Primary
Treasury Dealer.

                  "Redemption Date" shall mean the date fixed for the redemption
of Capital Securities, which shall be any March 8 or September 8 commencing on
March 8, 2010.

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

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

                                      I-7
<PAGE>   62
                  "Treasury Rate" means (i) the yield, under the heading which
represents the average for the week immediately prior to the date of
calculation, appearing in the most recently published statistical release
designated H.15 (519) or any successor publication which is published weekly by
the Federal Reserve and which establishes yields on actively traded United
States Treasury securities adjusted to constant maturity under the caption
"Treasury Constant Maturities", for the maturity corresponding to the Remaining
Life (if no maturity is within three months before or after the Remaining Life,
yields for the two published maturities most closely corresponding to the
Remaining Life shall be determined and the Treasury Rate shall be interpolated
or extrapolated from such yields on a straight-line basis, rounding to the
nearest month) or (ii) if such release (or any successor release) is not
published during the week preceding the calculation date or does not contain
such yields, the rate per annum equal to the semi-annual equivalent yield to
maturity of the Comparable Treasury Issue, calculated using a price for the
Comparable Treasury Issue (expressed as a percentage of its principal amount)
equal to the Comparable Treasury Price for such Special Redemption Date. The
Treasury Rate shall be calculated on the third Business Day preceding the
Special Redemption Date.

                  (b) Upon the repayment in full at maturity or redemption in
whole or in part of the Debenture (other than following the distribution of the
Debenture to the Holders of the Securities), the proceeds from such repayment or
payment shall concurrently be applied to redeem Pro Rata at the applicable
Redemption Price, Securities having an aggregate liquidation amount equal to the
aggregate principal amount of the Debenture so repaid or redeemed; provided.
however, that holders of such Securities shall be given not less than 30 nor
more than 60 days' notice of such redemption (other than at the scheduled
maturity of the Debenture).

                  (c) If fewer than all the outstanding Securities are to be so
redeemed, the Common Securities and the Capital Securities will be redeemed Pro
Rata and the Capital Securities to be redeemed will be as described in Section
4(e)(ii) below.

                  (d) The Trust may not redeem fewer than all the outstanding
Capital Securities unless all accrued and unpaid Distributions have been paid on
all Capital Securities for all semi-annual Distribution periods terminating on
or before the date of redemption.

                  (e) Redemption or Distribution Procedures.

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

                                      I-8
<PAGE>   63
         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 Capital Securities.

                           (iii) If the Securities are to be redeemed and the
         Trust gives a Redemption/Distribution Notice, which notice may only be
         issued if the Debentures are redeemed as set out in this Section 4
         (which notice will be irrevocable), then, provided that the
         Institutional Trustee has a sufficient amount of cash in connection
         with the related redemption or maturity of the Debentures, the
         Institutional Trustee will pay the relevant Redemption Price to the
         Holders of such Securities by check mailed to the address of each such
         Holder appearing on the books and records of the Trust on the
         redemption date. If a Redemption/Distribution Notice shall have been
         given and funds deposited as required then immediately prior to the
         close of business on the date of such deposit Distributions will cease
         to accrue on the Securities so 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 applicable
         Redemption Price specified in Section 4(a), but without interest on
         such Redemption Price. If any date fixed for redemption of Securities
         is not a Business Day, then payment of any such 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 either by the Trust or by the Debenture Issuer as guarantor
         pursuant to the Guarantee, Distributions on such Securities will
         continue to accrue at the then applicable rate 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. In the event of any
         redemption of the Capital Securities issued by the Trust in part, the
         Trust shall not be required to (i) issue, register the transfer of or
         exchange any Security during a period beginning at the opening of
         business 15 days before any selection for redemption of the Capital
         Securities and ending at the close of business on the earliest date on
         which the relevant notice of redemption is deemed to have been given to
         all Holders of the Capital Securities to be so redeemed or (ii)
         register the transfer of or exchange any Capital Securities so selected
         for redemption, in whole or in part, except for the unredeemed portion
         of any Capital Securities being redeemed in part.

                           (iv) Redemption/Distribution Notices shall be sent by
         the Administrators on behalf of the Trust (A) in respect of the Capital
         Securities, to the Holders thereof, and (B) in respect of the Common
         Securities, to the Holder thereof.

                           (v) Subject to the foregoing and applicable law
         (including, without limitation, United States federal securities laws),
         and provided that the acquiror is not the Holder of the Common
         Securities or the obligor under the Indenture, the Sponsor or any

                                      I-9
<PAGE>   64
         of its subsidiaries may at any time and from time to time purchase
         outstanding Capital Securities by tender, in the open market or by
         private agreement.

                  5. Voting Rights - Capital Securities. (a) Except as provided
under Sections 5(b) and 7 and as otherwise required by law and the Declaration,
the Holders of the Capital Securities will have no voting rights. The
Administrators are required to call a meeting of the Holders of the Capital
Securities if directed to do so by Holders of at least 10% in liquidation amount
of the Capital Securities.

                  (b) Subject to the requirements of obtaining a tax opinion by
the Institutional Trustee in certain circumstances set forth in the last
sentence of this paragraph, the Holders of a Majority in liquidation amount of
the Capital Securities, voting separately as a class, have the right to direct
the time, method, and place of conducting any proceeding for any remedy
available to the Institutional Trustee, or exercising any trust or power
conferred upon the Institutional Trustee under the Declaration, including the
right to direct the Institutional Trustee, as holder of the Debentures, to (i)
exercise the remedies available under the Indenture as the holder of the
Debentures, (ii) waive any past default that is waivable under the Indenture, or
(iii) exercise any right to rescind or annul a declaration that the principal of
all the Debentures shall be due and payable or (iv) consent on behalf of all the
Holders of the Capital Securities to any amendment, modification or termination
of the Indenture or the Debentures where such consent shall be required;
provided, however, that, where a consent or action under the Indenture would
require the consent or act of the holders of greater than a simple majority in
principal amount of Debentures (a "Super Majority") affected thereby, the
Institutional Trustee may only give such consent or take such action at the
written direction of the Holders of at least the proportion in liquidation
amount of the Capital Securities outstanding which the relevant Super Majority
represents of the aggregate principal amount of the Debentures outstanding. If
the Institutional Trustee fails to enforce its rights under the Debentures after
the Holders of a Majority in liquidation amount of such Capital Securities have
so directed the Institutional Trustee, to the fullest extent permitted by law, a
Holder of the Capital Securities may institute a legal proceeding directly
against the Debenture Issuer to enforce the Institutional Trustee's rights under
the Debentures without first instituting any legal proceeding against the
Institutional Trustee or any other person or entity. Notwithstanding the
foregoing, if an Event of Default has occurred and is continuing and such event
is attributable to the failure of the Debenture Issuer to pay interest or
principal on the Debentures on the date the interest or principal is payable (or
in the case of redemption, the redemption date), then a Holder of record of the
Capital Securities may directly institute a proceeding for enforcement of
payment, on or after the respective due dates specified in the Debentures, to
such Holder directly of the principal of or interest on the Debentures having an
aggregate principal amount equal to the aggregate liquidation amount of the
Capital Securities of such Holder. The Institutional Trustee shall notify all
Holders of the Capital Securities of any default actually known to the
Institutional Trustee with respect to the Debentures unless (x) such default has
been cured prior to the giving of such notice or (y) the Institutional Trustee
determines in good faith that the withholding of such notice is in the interest
of the Holders of such Capital Securities, except where the default relates to
the payment of principal of or interest on any of the Debentures. Such notice
shall state that such Indenture Event of Default also constitutes an Event of
Default hereunder. Except with respect to directing the time, method and place
of conducting a proceeding for a remedy, the Institutional Trustee shall not
take any of the actions described in clauses (i), (ii) or (iii) above unless the
Institutional

                                      I-10
<PAGE>   65
Trustee has obtained an opinion of tax counsel to the effect that, as a result
of such action, the Trust will not be classified as other than a grantor trust
for United States federal income tax purposes.

                  In the event the consent of the Institutional Trustee, as the
holder of the Debentures is required under the Indenture with respect to any
amendment, modification or termination of the Indenture, the Institutional
Trustee shall request the direction of the Holders of the Securities with
respect to such amendment, modification or termination and shall vote with
respect to such amendment, modification or termination as directed by a Majority
in liquidation amount of the Securities voting together as a single class;
provided, however, that where a consent under the Indenture would require the
consent of a Super Majority, the Institutional Trustee may only give such
consent at the direction of the Holders of at least the proportion in
liquidation amount of such Trust Securities outstanding which the relevant Super
Majority represents of the aggregate principal amount of the Debentures
outstanding. The Institutional Trustee shall not take any such action in
accordance with the directions of the Holders of the Securities unless the
Institutional Trustee has obtained an opinion of tax counsel to the effect that,
as a result of such action, the Trust will not be classified as other than a
grantor trust for United States federal income tax purposes.

                  A waiver of an Indenture Event of Default will constitute a
waiver of the corresponding Event of Default hereunder. Any required approval or
direction of Holders of the Capital Securities may be given at a separate
meeting of Holders of the Capital Securities convened for such purpose, at a
meeting of all of the Holders of the Securities in the Trust or pursuant to
written consent. The Institutional Trustee will cause a notice of any meeting at
which Holders of the Capital Securities are entitled to vote, or of any matter
upon which action by written consent of such Holders is to be taken, to be
mailed to each Holder of record of the Capital Securities. Each such notice will
include a statement setting forth the following information (i) the date of such
meeting or the date by which such action is to be taken, (ii) a description of
any resolution proposed for adoption at such meeting on which such Holders are
entitled to vote or of such matter upon which written consent is sought and
(iii) instructions for the delivery of proxies or consents. No vote or consent
of the Holders of the Capital Securities will be required for the Trust to
redeem and cancel Capital Securities or to distribute the Debentures in
accordance with the Declaration and the terms of the Securities.

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

                  In no event will Holders of the Capital Securities have the
right to vote to appoint, remove or replace the Administrators, which voting
rights are vested exclusively in the Sponsor as the Holder of all of the Common
Securities of the Trust. Under certain circumstances as more fully described in
the Declaration, Holders of Capital Securities have the right to vote to
appoint, remove or replace the Institutional Trustee and the Delaware Trustee.

                                      I-11
<PAGE>   66
                  6. Voting Rights - Common Securities. (a) Except as provided
under Sections 6(b), 6(c) and 7 and as otherwise required by law and the
Declaration, the Common Securities will have no voting rights.

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

                  (c) Subject to Section 6.7 of the Declaration and only after
each Event of Default (if any) with respect to the Capital Securities has been
cured, waived or otherwise eliminated and subject to the requirements of the
second to last sentence of this paragraph, the Holders of a Majority in
liquidation amount of the Common Securities, voting separately as a class, may
direct the time, method, and place of conducting any proceeding for any remedy
available to the Institutional Trustee, or exercising any trust or power
conferred upon the Institutional Trustee under the Declaration, including (i)
directing the time, method, place of conducting any proceeding for any remedy
available to the Debenture Trustee, or exercising any trust or power conferred
on the Debenture Trustee with respect to the Debentures, (ii) waive any past
default and its consequences that is waivable under the Indenture, or (iii)
exercise any right to rescind or annul a declaration that the principal of all
the Debentures shall be due and payable, provided, however, that, where a
consent or action under the Indenture would require a Super Majority, the
Institutional Trustee may only give such consent or take such action at the
written direction of the Holders of at least the proportion in liquidation
amount of the Common Securities which the relevant Super Majority represents of
the aggregate principal amount of the Debentures outstanding. Notwithstanding
this Section 6(c), the Institutional Trustee shall not revoke any action
previously authorized or approved by a vote or consent of the Holders of the
Capital Securities. Other than with respect to directing the time, method and
place of conducting any proceeding for any remedy available to the Institutional
Trustee or the Debenture Trustee as set forth above, the Institutional Trustee
shall not take any action described in (i), (ii) or (iii) above, unless the
Institutional Trustee has obtained an opinion of tax counsel to the effect that
for the purposes of United States federal income tax the Trust will not be
classified as other than a grantor trust on account of such action. If the
Institutional Trustee fails to enforce its rights under the Declaration to the
fullest extent permitted by law, any Holder of the Common Securities may
institute a legal proceeding directly against any Person to enforce the
Institutional Trustee's rights under the Declaration, without first instituting
a legal proceeding against the Institutional Trustee or any other Person.

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

                                      I-12
<PAGE>   67
                  No vote or consent of the Holders of the Common Securities
will be required for the Trust to redeem and cancel Common Securities or to
distribute the Debentures in accordance with the Declaration and the terms of
the Securities.

                  7. Amendments to Declaration and Indenture. (a) In addition to
any requirements under Section 11.1 of the Declaration, if any proposed
amendment to the Declaration provides for, or the Trustees otherwise propose to
effect, (i) any action that would adversely affect the powers, preferences or
special rights of the Securities, whether by way of amendment to the Declaration
or otherwise, or (ii) the Liquidation of the Trust, other than as described in
Section 7.1 of the Declaration, then the Holders of outstanding Securities,
voting together as a single class, will be entitled to vote on such amendment or
proposal and such amendment or proposal shall not be effective except with the
approval of the Holders of at least a Majority in liquidation amount of the
Securities; affected thereby; provided, however, if any amendment or proposal
referred to in clause (i) above would adversely affect only the Capital
Securities or only the Common Securities, then only 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 Institutional Trustee as
the holder of the Debentures is required under the Indenture with respect to any
amendment, modification or termination of the Indenture or the Debentures, the
Institutional Trustee shall request the written direction of the Holders of the
Securities with respect to such amendment, modification or termination and shall
vote with respect to such amendment, modification, or termination as directed by
a Majority in liquidation amount of the Securities voting together as a single
class; provided, however, that where a consent under the Indenture would require
a Super Majority, the Institutional Trustee may only give such consent at the
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 Debentures outstanding.

                  (c) Notwithstanding the foregoing, no amendment or
modification may be made to a Declaration if such amendment or modification
would (i) cause the Trust to be classified for purposes of United States federal
income taxation as other than a grantor trust, (ii) reduce or otherwise
adversely affect the powers of the Institutional Trustee or (iii) cause the
Trust to be deemed an "investment company" which is required to be registered
under the Investment Company Act.

                  (d) Notwithstanding any provision of the Declaration, the
right of any Holder of the Capital Securities to receive payment of
distributions and other payments upon redemption or otherwise, on or after their
respective due dates, or to institute a suit for the enforcement of any such
payment on or after such respective dates, shall not be impaired or affected
without the consent of such Holder. For the protection and enforcement of the
foregoing provision, each and every Holder of the Capital Securities shall be
entitled to such relief as can be given either at law or equity.

                  8. Pro Rata. A reference in these terms of the Securities to
any payment, distribution or treatment as being "Pro Rata" shall mean pro rata
to each Holder of the Securities according to the aggregate liquidation amount
of the Securities held by the relevant Holder in

                                      I-13
<PAGE>   68
relation to the aggregate liquidation amount of all Securities outstanding
unless, in relation to a payment, an Event of Default has occurred and is
continuing, in which case any funds available to make such payment shall be paid
first to each Holder of the Capital Securities Pro Rata according to the
aggregate liquidation amount of the Capital Securities held by the relevant
Holder relative to the aggregate liquidation amount of all Capital Securities
outstanding, and only after satisfaction of all amounts owed to the Holders of
the Capital Securities, to each Holder of the Common Securities Pro Rata
according to the aggregate liquidation amount of the Common Securities held by
the relevant Holder relative to the aggregate liquidation amount of all Common
Securities outstanding.

                  9. Ranking. The Capital Securities rank pari passu with and
payment thereon shall be made Pro Rata with the Common Securities except that,
where an Event of Default has occurred and is continuing, the rights of Holders
of the Common Securities to receive payment of Distributions and payments upon
liquidation, redemption and otherwise are subordinated to the rights of the
Holders of the Capital Securities with the result that no payment of any
Distribution on, or Redemption Price of, any Common Security, and no other
payment on account of redemption, liquidation or other acquisition of Common
Securities, shall be made unless payment in full in cash of all accumulated and
unpaid Distributions on all outstanding Capital Securities for all distribution
periods terminating on or prior thereto, or in the case of payment of the
Redemption Price the full amount of such Redemption Price on all outstanding
Capital Securities then called for redemption, shall have been made or provided
for, and all funds immediately available to the Institutional Trustee shall
first be applied to the payment in full in cash of all Distributions on, or the
Redemption Price of, the Capital Securities then due and payable.

                  10. Acceptance of Guarantee and Indenture. Each Holder of the
Capital Securities and the Common Securities, by the acceptance of such
Securities, agrees to the provisions of the Guarantee, including the
subordination provisions therein and to the provisions of the Indenture.

                  11. No Preemptive Rights. The Holders of the Securities shall
have no preemptive or similar rights to subscribe for any additional securities.

                  12. Miscellaneous. These terms constitute a part of the
Declaration. The Sponsor will provide a copy of the Declaration, the Guarantee,
and the Indenture to a Holder without charge on written request to the Sponsor
at its principal place of business.

                                      I-14
<PAGE>   69
                                  EXHIBIT A-1

                      FORM OF CAPITAL SECURITY CERTIFICATE

                           [FORM OF FACE OF SECURITY]

                  THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF
THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE
TRANSFER SUCH SECURITY ONLY (A) TO THE DEBENTURE ISSUER OR THE TRUST, (B)
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (C) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (a) (1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT
IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF AN
"ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (D) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE DEBENTURE
ISSUER'S AND THE TRUST'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSES (C) OR (D) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM IN
ACCORDANCE WITH THE DECLARATION OF TRUST, A COPY OF WHICH MAY BE OBTAINED FROM
THE DEBENTURE ISSUER OR THE TRUST. THE HOLDER OF THIS SECURITY AGREES THAT IT
WILL COMPLY WITH THE FOREGOING RESTRICTIONS.

                  IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO
THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATE AND OTHER INFORMATION MAY BE
REQUIRED BY THE DECLARATION TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE
FOREGOING RESTRICTIONS.

                                     A-1-1
<PAGE>   70
Certificate Number                           Number of Capital Securities: 7,000

                                    CUSIP NO

                    Certificate Evidencing Capital Securities

                                       of

                            Heritage Capital Trust I

            Fixed Rate Capital Pass-through Securities(C) (TRUPS(R))

                (liquidation amount $1,000 per Capital Security)

                  Heritage Capital Trust I, a statutory business trust created
under the laws of the State of Delaware (the "Trust"), hereby certifies that
______________ (the "Holder") is the registered owner of securities of the Trust
representing undivided beneficial interests in the assets of the Trust,
designated the Fixed Rate Capital Trust Pass-through Securities(R) (liquidation
amount $1,000 per Capital Security) (the "Capital Securities"). Subject to the
Declaration (as defined below), the Capital Securities are transferable on the
books and records of the Trust, in person or by a duly authorized attorney, upon
surrender of this Certificate duly endorsed and in proper form for transfer. The
designation, rights, privileges, restrictions, preferences and other terms and
provisions of the Capital Securities represented hereby are issued pursuant to,
and shall in all respects be subject to, the provisions of the Amended and
Restated Declaration of Trust of the Trust dated as of March 23, 2000, among
John E. Rossell III and Lawrence D. McGovern, as Administrators, The Bank of New
York (Delaware), as Delaware Trustee, The Bank of New York, as Institutional
Trustee, Heritage Commerce Corp, as Sponsor, and the holders from time to time
of undivided beneficial interests in the assets of the Trust, including the
designation of the terms of the Capital Securities as set forth in Annex I to
the Declaration, as the same may be amended from time to time (the
"Declaration"). Capitalized terms used herein but not defined shall have the
meaning given them in the Declaration. The Holder is entitled to the benefits of
the Guarantee to the extent provided therein. The Sponsor will provide a copy of
the Declaration, the Guarantee, and the Indenture to the Holder without charge
upon written request to the Trust at its principal place of business.

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

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

                  This Capital Security is governed by, and construed in
accordance with, the laws of the State of Delaware, without regard to principles
of conflict of laws.

                                      A-1-2
<PAGE>   71
IN WITNESS WHEREOF, the Trust has duly executed this certificate.

                                             HERITAGE CAPITAL TRUST I

                                             By:
                                                 Name:
                                                 Title: Administrator

                                             Dated:

                          CERTIFICATE OF AUTHENTICATION

                  This is one of the Capital Securities referred to in the
within-mentioned Declaration.

                                             THE BANK OF NEW YORK, as the
                                               Institutional Trustee

                                             By:
                                                     Authorized Officer

                                             Dated:

                                     A-1-3
<PAGE>   72
                          [FORM OF REVERSE OF SECURITY]

                  Distributions payable on each Capital Security will be payable
at an annual rate of 10-7/8% (the "Coupon Rate") of the stated liquidation
amount of $1,000 per Capital Security, such rate being the rate of interest
payable on the Debentures to be held by the Institutional Trustee. Except as set
forth below in respect of an Extension Period, Distributions in arrears for more
than a semi-annual period will bear interest thereon compounded semi-annual at
the Coupon Rate (to the extent permitted by applicable law). The term
"Distributions" as used herein includes cash distributions, any such compounded
interest and any Additional Interest payable on the Debentures unless otherwise
stated. A Distribution is payable only to the extent that payments are made in
respect of the Debentures held by the Institutional Trustee and to the extent
the Institutional Trustee has funds available therefor. The amount of
Distributions payable for any period will be computed for any full semi-annual
Distribution period on the basis of a 360-day year of twelve 30-day months.

                  Except as otherwise described below, Distributions on the
Capital Securities will be cumulative, will accrue from the date of original
issuance and will be payable semi-annually in arrears on March 8 and September 8
of each year, commencing on September 8, 2000. The Debenture Issuer has the
right under the Indenture to defer payments of interest on the Debentures by
extending the interest payment period for up to 10 consecutive semi-annual
periods (each, an "Extension Period") at any time and from time to time on the
Debentures, subject to the conditions described below, although such interest
would continue to accrue on the Debentures, and Interest will accrue on such
Deferred Interest, at an annual rate equal to 10 7/8%, compounded semi-annually
to the extent permitted by law during any Extension Period. No Extension Period
may end on a date other than a Distribution Payment Date. At the end of any such
Extension Period the Debenture Issuer shall pay all Deferred Interest then
accrued and unpaid on the Debentures; provided however, that no Extension Period
may extend beyond the Maturity Date. Prior to the termination of any Extension
Period, the Debenture Issuer may further extend such period, provided that such
period together with all such previous and further consecutive extensions
thereof shall not exceed 10 consecutive semi-annual periods, or extend beyond
the Maturity Date. Upon the termination of any Extension Period and upon the
payment of all Deferred Interest, the Debenture Issuer may commence a new
Extension Period, subject to the foregoing requirements. No interest or Deferred
Interest shall be due and payable during an Extension Period, except at the end
thereof, but each installment of interest that would otherwise have been due and
payable during such Extension Period shall bear Deferred Interest. If
Distributions are deferred, the Distributions due shall be paid on the date that
the related Extension Period terminates, or, if such date is not a Distribution
Payment Date, on the immediately following Distribution Payment Date, to Holders
of the Securities as they appear on the books and records of the Trust on the
record date immediately preceding such date. Distributions on the Securities
must be paid on the dates payable (after giving effect to any Extension Period)
to the extent that the Trust has funds available for the payment of such
distributions in the Property Account of the Trust. The Trust's funds available
for Distribution to the Holders of the Securities will be limited to payments
received from the Debenture Issuer. The payment of Distributions out of moneys
held by the Trust is guaranteed by the Guarantor pursuant to the Guarantee.

                  The Capital Securities shall be redeemable as provided in the
Declaration.

                                      A-1-4
<PAGE>   73
                                   ASSIGNMENT

                  FOR VALUE RECEIVED, the undersigned assigns and transfers this

Capital Security Certificate to:

______________________________

______________________________

______________________________

(Insert assignee's social security or tax identification number)

______________________________

______________________________

______________________________

(Insert address and zip code of assignee), and irrevocably appoints ____________
as agent to transfer this Capital Security Certificate on the books of the
Trust. The agent may substitute another to act for him or her.

                  Date: __________________________

                  Signature: _____________________

                  (Sign exactly as your name appears on the other side of this
Capital Security Certificate)

                  Signature Guarantee(1): ____________________________

_________________
(1) Signature must be guaranteed by an "eligible guarantor institution" that is
a bank, stockbroker, savings and loan association or credit union meeting the
requirements of the Security registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Security
registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.

                                      A-1-5
<PAGE>   74
                                   EXHIBIT A-2

                       FORM OF COMMON SECURITY CERTIFICATE

THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION.

                  THIS SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED.

Certificate Number                              Number of Common Securities: 217

                    Certificate Evidencing Common Securities

                                       of

                            Heritage Capital Trust I

                  Heritage Capital Trust I, a statutory business trust created
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 (the "Common Securities"). The designation, rights, privileges,
restrictions, preferences and other terms and provisions of the Common
Securities represented hereby are issued pursuant to, and shall in all respects
be subject to, the provisions of the Amended and Restated Declaration of Trust
of the Trust dated as of March 23, 2000, among John E. Rossell III and Lawrence
D. McGovern, as Administrators, The Bank of New York (Delaware), as Delaware
Trustee, The Bank of New York, as Institutional Trustee, Heritage Commerce Corp,
as Sponsor and the holders from time to time of undivided beneficial interest in
the assets of the Trust including the designation of the terms of the Common
Securities as set forth in Annex I to the Declaration, as the same may be
amended from time to time (the "Declaration"). Capitalized terms used herein but
not defined shall have the meaning given them in the Declaration. The Holder is
entitled to the benefits of the Guarantee to the extent provided therein. The
Sponsor will provide a copy of the Declaration, the Guarantee and the Indenture
to the Holder without charge upon written request to the Sponsor at its
principal place of business.

                  As set forth in the Declaration, where an Event of Default has
occurred and continuing, the rights of Holders of Common securities to payment
in respect of Distributions and payments upon Liquidation, redemption or
otherwise are subordinated to the rights of payment of Holders of the Capital
Securities.

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

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

                                      A-2-1
<PAGE>   75
                  This Common Security is governed by, and construed in
accordance with, the laws of the State of Delaware, without regard to principles
of conflict of laws.

                                      A-2-2
<PAGE>   76
                  IN WITNESS WHEREOF, the Trust has executed this certificate
this 23rd day of March, 2000.

                                             HERITAGE CAPITAL TRUST I

                                             By:
                                                 Name:
                                                 Title: Administrator

                                      A-2-3
<PAGE>   77
                          [FORM OF REVERSE OF SECURITY]

                  Distributions payable on each Common Security will be
identical in amount to the Distributions payable on each Capital Security, which
is at an annual rate of 10 7/8% (the "Coupon Rate") of the stated liquidation
amount of $1,000 per Capital Security, such rate being the rate of interest
payable on the Debentures to be held by the Institutional Trustee. Except as set
forth below in respect of an Extension Period, Distributions in arrears for more
than one period will bear interest thereon compounded at the Coupon Rate (to the
extent permitted by applicable law). The term "Distributions" as used herein
includes cash distributions, any such compounded distribution and any Additional
Interest payable on the Debentures unless otherwise stated. A Distribution is
payable only to the extent that payments are made in respect of the Debentures
held by the Institutional Trustee and to the extent the Institutional Trustee
has funds available therefor. The amount of Distributions payable for any
period will be computed for any full semi-annual Distribution period on 360-day
year of twelve 30-day months.

                  Except as otherwise described below, Distributions on the
Common Securities will be cumulative, will accrue from the date of original
issuance and will be payable semiannually in arrears on March 8 and September 8
of each year, commencing on September 8, 2000. The Debenture Issuer has the
right under the Indenture to defer payments of interest on the Debentures by
extending the interest payment period for up to 10 consecutive semi-annual
periods (each, an "Extension Period") at any time and from time to time on the
Debentures, subject to the conditions described below, during which Extension
Period no interest shall be due and payable. No Extension Period may end on a
date other than a Distribution Payment Date. During an Extension Period,
interest would continue to accrue on the Debentures, and interest on such
accrued interest (such accrued interest and interest thereon referred to herein
as "Deferred Interest") will accrue at an annual rate equal to 10 7/8%,
compounded semi-annually from the date such Deferred Interest would have been
payable were it not for the Extension Period to the extent permitted by law
during any Extension Period. At the end of any such Extension Period the
Debenture Issuer shall pay all Deferred Interest then accrued and unpaid on the
Debentures; provided, however, that no Extension Period may extend beyond the
Maturity Date. Prior to the termination of any Extension Period, the Debenture
Issuer may further extend such period, provided that such period together with
all such previous and further consecutive extensions thereof shall not exceed 10
consecutive semi-annual periods, or extend beyond the Maturity Date. Upon the
termination of any Extension Period and upon the payment of all Deferred
Interest, the Debenture Issuer may commence a new Extension Period, subject to
the foregoing requirements. No interest or Deferred Interest shall be due and
payable during an Extension Period, except at the end thereof, but each
installment of interest that would otherwise have been due and payable during
such Extension Period shall bear Deferred Interest. If Distributions are
deferred, the Distributions due shall be paid on the date that the related
Extension Period terminates, or, if such date is not a Distribution Payment
Date, on the immediately following Distribution Payment Date, to Holders of the
Securities as they appear on the books and records of the Trust on the record
date immediately preceding such date. Distributions on the Securities must be
paid on the dates payable (after giving effect to any Extension Period) to the
extent that the Trust has funds available for the payment of such distributions
in the Property Account of the Trust. The Trust's funds available for
Distribution to the Holders of the Securities will be

                                      A-2-4
<PAGE>   78
limited to payments received from the Debenture Issuer. The payment of
Distributions out of moneys held by the Trust is guaranteed by the Guarantor
pursuant to the Guarantee.

                  The Common Securities shall be redeemable as provided in the
Declaration.

                                     A-2-5
<PAGE>   79
                                   ASSIGNMENT

                  FOR VALUE RECEIVED, the undersigned assigns and transfers this
Common Security Certificate to:

______________________________

______________________________

______________________________

                  (Insert assignee's social security or tax identification
number)

______________________________

______________________________

______________________________

                  (Insert address and zip code of assignee), and irrevocably
appoints _____________________ as agent to transfer this Common Security
Certificate on the books of the Trust. The agent may substitute another to act
for him or her.

                  Date: __________________________

                  Signature: _____________________

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

                  Signature Guarantee: (2):___________________________

__________________
(2)      Signature must be guaranteed by an "eligible guarantor institution"
that is a bank, stockbroker, savings and loan association or credit union,
meeting the requirements of the Security registrar, which requirements include
membership or participation in the Securities Transfer Agents Medallion Program
("STAMP") or such other "signature guarantee program" as may be determined by
the Security registrar in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.

                                      A-2-6
<PAGE>   80
                                                                       EXHIBIT B

                         FORM OF TRANSFEREE CERTIFICATE
                 TO BE EXECUTED BY TRANSFEREES OTHER THAN QIBS

                                                            _______________, [ ]

Heritage Commerce Corp.
Heritage Capital Trust I
150 Almaden Boulevard
San Jose, CA 95113

Re:      Purchase of $1,000 stated liquidation amount of Fixed Rate Capital
         Trust Pass-through Securities(R) TruPS (R) the "Capital Securities"
         of Heritage Capital Trust I

Ladies and Gentlemen:

                  In connection with our purchase of the Capital Securities we
confirm that:

                  1. We understand that the Capital Securities (including the
guarantee (the "Guarantee") of Heritage Commerce Corp (the "Company") executed
in connection therewith) of Heritage Capital Trust I (the "Trust") and the Fixed
Rate Junior Subordinated Deferrable Interest Debentures due 2030 (the
"Subordinated Debt Securities") of the Company (the Capital Securities, the
Guarantee and the Subordinated Debt Securities together being referred to herein
as "Offered Securities"), have not been registered under the Securities Act of
1933, as amended (the "Securities Act"), and may not be offered or sold except
as permitted in the following sentence. We agree on our own behalf and on behalf
of any investor account for which we are purchasing the Offered Securities that,
if, we decide to offer, sell or otherwise transfer any such Offered Securities,
such offer, sale or transfer will be made only (a) to the Trust or the Company,
(b) pursuant to Rule 144A under the Securities Act, to a person we reasonably
believe is a qualified institutional buyer under Rule 144A (a "QIB") that
purchases for its own account or for the account of a QIB and to whom notice is
given that the transfer is being made in reliance on Rule 144A, (c) to an
"accredited investor" with the meaning of subparagraph (a) (1), (2), (3) or (7)
of Rule 501 under the Securities Act that is acquiring Offered Securities for
its own account or for the account of such an accredited investor for investment
purposes and not with a view to, or for offer or sale in connection with, any
distribution thereof in violation of the Securities Act, or (d) pursuant to
another available exemption from the registration requirements of the Securities
Act, subject in each of the foregoing cases to any requirements of law that the
disposition of our property or compliance with any applicable state securities
laws. The foregoing restrictions on resale will not apply subsequent to the
Resale Restriction Termination Date. If any resale or other transfer of the
Offered Securities is proposed to be made pursuant to clause (c) or (d) above
the transferor shall deliver a letter from the transferee substantially in the
form of this letter to The Bank of New York as Transfer Agent, which shall
provide as applicable, among other things, that the transferee is an "accredited
investor" within the meaning of subparagraph (a) (1), (2), (3) or (7) of Rule
501 under the Securities Act that is acquiring such Securities for investment
purposes and not for distribution in violation of the Securities Act. We
acknowledge on our behalf and on behalf of any investor account for which we are
purchasing

                                       B-1
<PAGE>   81
Securities that the Trust and the Company reserve the right prior to any offer,
sale or other transfer pursuant to clauses (d) or (e) to require the delivery of
any opinion of counsel, certifications and/or other information satisfactory to
the Trust and the Company. We understand that the certificates for any Offered
Security that we receive will bear a legend substantially to the effect of the
foregoing.

                  2. We are an "accredited investor" with the meaning of
subparagraph (a) (1), (2), (3) or (7) of Rule 501 under the Securities Act
purchasing for our own account or for the account of such an "accredited
investor," and we are acquiring the Offered Securities for the investment
purposes and not with view to, or for offer or sale in connection with, any
distribution in violation of the Securities Act and we have such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of our investment in the Offered Securities, and we and any
account for which we are acting are each able to bear the economic risks of our
or its investment.

                  3. We are acquiring the Offered Securities purchased by us for
our own account (or for one or more accounts as to each of which we exercise
sole investment discretion and have authority to make, and do make, the
statements contained in this letter) and not with a view to any distribution of
the Offered Securities, subject, nevertheless, to the understanding that the
disposition of our property will at all times be and remain within our control.

                  4. In the event that we purchase any Capital Securities or any
Subordinated Debt Securities, we will acquire such Capital Securities having an
aggregate stated liquidation amount of not less than $1,000 or such
Subordinated Debt Securities having an aggregate principal amount not less than
$1,000, for our own account and for each separate account for which we are
acting.

                  5. We acknowledge that we either (A) are not a fiduciary of a
pension, profitsharing or other employee benefit plan subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") (a "Plan"), or an
entity whose assets include "plan assets" by reason of any Plan's investment in
the entity and are not purchasing the Offered Securities on behalf of or with
"plan assets" by reason of any Plan's investment in the entity and is not
purchasing the Offered Securities on behalf of or with "plan assets" of any Plan
or (B) are eligible for the exemptive relief available under one or more of the
following prohibited transaction class exemptions ("PTCEs") issued by the U.S.
Department of Labor: PTCE 96-23, 95-60, 91-38, 90-1 or 84-14.

                  6. We acknowledge that the Trust and the Company and others
will rely upon the truth and accuracy of the foregoing acknowledges,
representations, warranties and agreements and agree that if any of the
acknowledgments, representations, warranties and agreements deemed to have been
made by our purchase of the Offered Securities are no longer accurate, we shall
promptly notify the Initial Purchasers. If we are acquiring any Offered
Securities as a fiduciary or agent for one or more investor accounts, we
represent that we have sole discretion with respect to each such investor
account and that we have full power to make the foregoing acknowledgments,
representations and agreement on behalf of each such investor account.

                                       B-2
<PAGE>   82
                                                Very truly yours,
                                                ________________________________
                                                (Name of Purchaser)

                                                By: ____________________________

                                                Date: __________________________

                  Upon transfer of the Offered Securities would be registered in
the name of the new beneficial owner as follows.

Name:_________________________

Address:______________________

Taxpayer ID Number:___________

                                       B-3
<PAGE>   83
                                                                       EXHIBIT C

                         FORM OF TRANSFEREE CERTIFICATE
                             TO BE EXECUTED FOR QIBs

                                                            _______________, [ ]

Heritage Commerce Corp.
Heritage Capital Trust I
150 Almaden Boulevard
San Jose, CA 95113

Re:      Purchase of $1,000 stated liquidation amount of Fixed Rate Capital
         Trust Pass-through Securities(R) (TRUPS)(R) (the "Capital Securities")
         of Heritage Capital Trust I

                  Reference is hereby made to the Amended and Restated
Declaration dated as of March 23, 2000 (the "Declaration") among John E. Rossell
III and Lawrence D. McGovern, as Administrators, The Bank of New York
(Delaware), as Delaware Trustee, The Bank of New York, as Institutional Trustee,
Heritage Commerce Corp., as Sponsor, and the holders from time to time of
undivided beneficial interest in the assets of Heritage Capital Trust I.
Capitalized terms used but not defined herein shall have the meanings given them
in the Declaration.

                  This letter relates to $[         ] aggregate liquidation
amount of Capital Securities which are held in the name of [name of transferor]
(the "Transferor").

                  In connection with such request, and in respect to such
Capital Securities, the transferor does hereby certify that such Capital
Securities are being transferred in accordance with (i) the transfer
restrictions set forth in the Capital Securities and (ii) Rule 144A under the
United States Securities Act of 1933, as amended ("Rule 144A"), to a transferee
that the Transferor reasonably believes is purchasing the Capital Securities for
its own account or an account with respect to which the transferee exercises
sole investment discretion and the transferee and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A, in a
transaction meeting the requirements of Rule 144A and in accordance with
applicable securities laws of any state of the United States or any other
jurisdiction.

                  You are entitled to rely upon this letter and are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceeding or official inquiry with respect to the
matters covered hereby.

                                             ___________________________________
                                                (Name of Transferor)

                                             By:________________________________
                                                Name:___________________________
                                                Title:__________________________

                                             Date:______________________________

                                      C-1
<PAGE>   84
                                    EXHIBIT D
                          SPECIMEN OF INITIAL DEBENTURE

                                       D-1

<PAGE>   85
                        JUNIOR SUBORDINATED DEBT SECURITY

                           [FORM OF FACE OF SECURITY]

                   THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF
THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE
TRANSFER SUCH SECURITY ONLY (A) TO THE COMPANY, (B) PURSUANT TO RULE 144A UNDER
THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE
IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) TO AN
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1),(2),(3) OR (7)
OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN
ACCOUNT, OR FOR THE ACCOUNT OF AN "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (D) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO THE COMPANY'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSES (C) OR (D) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO ITS IN ACCORDANCE WITH
THE INDENTURE, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY. THE HOLDER OF
THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS.

                  IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO
THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATE AND OTHER INFORMATION MAY BE
REQUIRED BY THE INDENTURE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE
FOREGOING RESTRICTIONS.
<PAGE>   86
                   10 7/8% Junior Subordinated Debt Security

                                       of

                             Heritage Commerce Corp.

                  Heritage Commerce Corp., a bank holding company incorporated
in California (the "Company"), for value received promises to pay to The Bank of
New York, not in its individual capacity but solely as Institutional Trustee for
Heritage Capital Trust I (the "Holder") or registered assigns, the principal sum
of Seven Million Two Hundred Seventeen Thousand Dollars ($7,217,000) on March 8,
2030, and to pay interest on said principal sum from March 23, 2000, 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, semi-annually (subject to
deferral as set forth herein) in arrears on March 8 and September 8 of each year
commencing September 8, 2000, at an annual rate equal to 10 7/8% (the "Interest
Rate") until the principal hereof shall have become due and payable, and on any
overdue principal and (without duplication and to the extent that payment of
such interest is enforceable under applicable law) on any overdue installment of
interest at an annual rate equal to 10 7/8% compounded semi-annually. 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. In the event that any date on which
interest is payable on this Debt Security is not a Business Day, then payment of
interest 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 succeeding 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 Debt Security (or one or more Predecessor Securities, as
defined in said Indenture) is registered at the close of business on the Record
Date for such interest installment, which shall be the close of business on the
15th 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 Record Date and may be paid to the
Person in whose name this Debt Security (or one or more Predecessor Debt
Securities) is registered at the close of business on a special record date to
be fixed by the Trustee for the payment of such defaulted interest, notice
whereof shall be given to the registered holders of the Debt Securities not less
than 10 days prior to such special record date, all as more fully provided in
the Indenture. The principal of and interest on this Debt Security shall be
payable at the office or agency of the Trustee (or other paying agent appointed
by the Company) maintained for that purpose in any coin or currency of the
United States of America that 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 Debt Security Register or by wire transfer
to an account appropriately designated by the holder hereof. Notwithstanding the
foregoing, so long as the holder of this Debt Security is the Institutional
Trustee, the payment of the principal of and interest on this Debt Security will
be made in immediately available funds at such place and to such account as may
be designated by the Trustee.
<PAGE>   87
                  So long as no Event of Default has occurred and is continuing,
the Company shall have the right, from time to time, to defer payments of
interest on the Debt Securities by extending the interest payment period on the
Debt Securities at any time and from time to time during the term of the Debt
Securities, for up to 10 consecutive semi-annual periods (each such extended
interest payment period, an "Extension Period"), during which Extension Period
no interest shall be due and payable. During any Extension Period, interest will
continue to accrue on the Debt Securities and interest on such accrued interest
(such accrued interest and interest thereon referred to herein as "Deferred
Interest") will accrue at the Interest Rate, compounded semi-annually from the
date such Deferred Interest would have been payable were it not for the
Extension Period, both to the extent permitted by law. No Extension Period may
end on a date other than an Interest Payment Date. At the end of any such
Extension Period the Company shall pay all Deferred Interest then accrued and
unpaid on the Debt Securities; provided however, that no Extension Period may
extend beyond the Maturity Date and provided further however, during any such
Extension Period, the Company may not (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of the Company's capital stock or (ii) make any payment of
principal of or interest or premium, if any, on or repay, repurchase or redeem
any debt securities of the Company that rank pari passu in all respects with or
junior in interest to the Debt Securities (other than (a) repurchases,
redemptions or other acquisitions of shares of capital stock of the Company in
connection with any employment contract, benefit plan or other similar
arrangement with or for the benefit of one or more employees, officers,
directors or consultants, in connection with a dividend reinvestment or
stockholder stock purchase plan or in connection with the issuance of capital
stock of the Company (or securities convertible into or exercisable for such
capital stock) as consideration in an acquisition transaction entered into prior
to the applicable Extension Period, (b) as a result of any exchange or
conversion of any class or series of the Company's capital stock (or any capital
stock of a subsidiary of the Company) for any class or series of the Company's
capital stock or of any class or series of the Company's indebtedness for any
class or series of the Company's capital stock, (c) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged, (d) any declaration of a dividend in connection with any
stockholder's rights plan, or the issuance of rights, stock or other property
under any stockholder's rights plan, or the redemption or repurchase of rights
pursuant thereto, or (e) any dividend in the form of stock, warrants, options or
other rights where the dividend stock or the stock issuable upon exercise of
such warrants, options or other rights is the same stock as that on which the
dividend is being paid or ranks pari passu with or junior to such stock). Prior
to the termination of any Extension Period, the Company may further extend such
period, provided that such period together with all such previous and further
consecutive extensions thereof shall not exceed 10 consecutive semi-annual
periods, or extend beyond the Maturity Date. Upon the termination of any
Extension Period and upon the payment of all Deferred Interest, the Company may
commence a new Extension Period, subject to the foregoing requirements. No
interest or Deferred Interest shall be due and payable during an Extension
Period, except at the end thereof, but each installment of interest that would
otherwise have been due and payable during such Extension Period shall bear
Deferred Interest. The Company must give the Trustee notice of its election to
begin such Extension Period at least one Business Day prior to the earlier of
(i) the date interest on the Debt Securities would have been payable except for
the election to begin
<PAGE>   88
such Extension Period or (ii) the date such interest is payable, but in any
event not less than one Business Day prior to such record date.

                  The indebtedness evidenced by this Debt Security 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 Debt Security is
issued subject to the provisions of the Indenture with respect thereto. Each
holder of this Debt Security, by accepting the same, (a) agrees to and shall be
bound by such provisions, (b) authorizes and directs the Trustee on his or her
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 or her
attorney-in-fact for any and all such purposes. Each holder hereof, by his or
her acceptance hereof, hereby waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder of
Senior Indebtedness, whether now outstanding or hereafter incurred and waives
reliance by each such holder upon said provisions.

                  This Debt Security 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 Debt Security 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.
<PAGE>   89
IN WITNESS WHEREOF, the Company has duly executed this certificate.

                                             HERITAGE COMMERCE CORP.

                                             By: /s/ Lawrence D. McGovern
                                                -------------------------
                                                Name: Lawrence D. McGovern
                                                Title: CFO

Dated: March 23, 2000

                          CERTIFICATE OF AUTHENTICATION

                  This is one of the Debt Securities referred to in the
within-mentioned Indenture.

                                             THE BANK OF NEW YORK, as the
                                               Institutional Trustee

                                             By: /s/ Annette L. Kos
                                                ------------------------
                                                Authorized Officer
<PAGE>   90
                          [FORM OF REVERSE OF SECURITY]

                  This Debt Security is one of a duly authorized series of Debt
Securities of the Company, all issued or to be issued pursuant to an Indenture
(the "Indenture") dated as of March 23, 2000, duly executed and delivered
between the Company and The Bank of New York, as Trustee (the "Trustee"), 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 Debt
Securities (referred to herein as the "Debt Securities") of which this Debt
Security is a part. The summary of the terms of this Debt Security contained
herein does not purport to be complete and is qualified by reference to the
Indenture.

                  Upon the occurrence and continuation of a Tax Event, an
Investment Company Event or a Capital Treatment Event (a "Special Event"), this
Debt Security may become due and payable, in whole or in part, at any time,
within 90 days following the occurrence of such Tax Event, Investment Company
Event or Capital Treatment Event (the "Special Redemption Date"), as the case
may be, at the Special Redemption Price. The Company shall also have the right
to redeem this Debt Security at the option of the Company in whole or in part,
on any March 8 or September 8 on or after March 8, 2010 (a "Redemption Date"),
at the Redemption Price.

                  Any redemption pursuant to the preceding paragraph will be
made, subject to the receipt by the Company of prior approval from the Board of
Governors of the Federal Reserve System (the "Federal Reserve") if then
required under applicable capital guidelines or policies of the Federal Reserve,
upon not less than 30 days' nor more than 60 days' notice. If the Debt
Securities are only partially redeemed by the, Company, the Debt Securities will
be redeemed pro rata or by lot or by any other method utilized by the Trustee.

                  "Redemption Price" means the price set forth in the following
table for any Redemption Date or Special Redemption Date that occurs within the
twelve-month period beginning in the relevant year indicated below, expressed in
percentage of the principal amount of the Debt Securities being redeemed:

<TABLE>
<CAPTION>
                  Year Beginning               Percentage
                  --------------               ----------
<S>                                            <C>
                  March 8, 2010                 105.438
                  March 8, 2011                 104.894
                  March 8, 2012                 104.350
                  March 8, 2013                 103.806
                  March 8, 2014                 103.263
                  March 8, 2015                 102.719
                  March 8, 2016                 102.175
                  March 8, 2017                 101.631
                  March 8, 2018                 101.088
</TABLE>
<PAGE>   91
                       March 8, 2019                      100.544
                  March 8, 2020 and after                 100.000

                  plus accrued and unpaid interest on such Debentures to the
Redemption Date or in the case of a redemption due to the occurrence of a
Special Event, to the Special Redemption Date.

                  "Special Redemption Price means (1) if the Special Redemption
Date is before March 8, 2010, the greater of (a) 100% of the principal amount of
the Debt Securities being redeemed pursuant to Section 10.02 of the Indenture
and (b) as determined by a Quotation Agent, the sum of the present values of
scheduled payments of principal and interest over the Remaining Life of such
Debt Securities, discounted to the Special Redemption Date on a semi-annual
basis (assuming a 360-day year consisting of twelve 30-day months) at the
Treasury Rate plus 0.45%, plus, in the case of either (a) or (b), accrued and
unpaid interest on such Debt Securities to the Special Redemption Date and (2)
if the Special Redemption Date is on or after March 8, 2010, the Redemption
Price for such Special Redemption Date.

                  "Comparable Treasury Issue" means with respect to any Special
Redemption Date the United States Treasury security selected by the Quotation
Agent as having a maturity comparable to the Remaining Life that would be
realized at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the Remaining Life. If no United States Treasury security has a
maturity which is within a period from three months before to three months after
March 8, 2010, the two most closely corresponding United States Treasury
securities shall be used as the Comparable Treasury Issue, and the Treasury Rate
shall be interpolated or extrapolated on a straight-line basis, rounding to the
nearest month using such securities.

                  "Comparable Treasury Price" means (a) the average of five
Reference Treasury Dealer Quotations for such Redemption Date, after excluding
the highest and lowest such Reference Treasury Dealer Quotations, or (b) if the
Trustee obtains fewer than five such Reference Treasury Dealer Quotations, the
average of all such Quotations.

                  "Primary Treasury Dealer" shall mean a primary United States
Government securities dealer in New York City.

                  "Quotation Agent" means Salomon Smith Barney, Inc. and its
successors; provided, however, that if the foregoing shall cease to be a primary
United States Government securities dealer in New York City (a "Primary Treasury
Dealer"), the Company shall substitute therefor another Primary Treasury Dealer.

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

                  "Reference Treasury Dealer Quotations" means, with respect to
each Reference Treasury Dealer and any Special Redemption Date, the average, as
determined by the Trustee, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a
<PAGE>   92
percentage of its principal amount) quoted in writing to the Trustee by such
Reference Treasury Dealer at 5:00 p.m., New York City time, on the third
Business Day preceding such Special Redemption Date.

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

                  In the event of redemption of this Debt Security in part only,
a new Debt Security or Debt Securities 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 Debt
Securities may be declared due and payable, and upon such declaration of
acceleration 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 not less than a majority in
aggregate principal amount of the Debt Securities at the time outstanding
affected thereby, as specified in the Indenture, to execute supplemental
indentures for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of the Indenture or of any supplemental
indenture or of modifying in any manner the rights of the holders of the Debt
Securities; provided, however, that no such supplemental indenture shall, among
other things, without the consent of the holders of each Debt Security then
outstanding and affected thereby (i) extend the fixed maturity of the Debt
Securities, or reduce the principal amount thereof or any redemption premium
thereon, or reduce the rate or extend the time of payment of interest thereon,
or make the principal of, or interest or premium on, the Debt Securities payable
in any coin or currency other than that provided in the Debt Securities, or
impair or affect the right of any holder of Debt Securities to institute suit
for the payment thereof, or (ii) reduce the aforesaid percentage of Debt
Securities, the holders of which are required to consent to any such
supplemental indenture. The Indenture also contains provisions permitting the
holders of a majority in aggregate principal amount of the Debt Securities at
the time outstanding affected thereby as provided in the Indenture, on behalf of
all of the holders of the Debt Securities, to waive any past default in the
performance of any of the covenants contained in the Indenture, or established
pursuant to the Indenture, and its
<PAGE>   93
consequences, except a default in the payment of the principal of or premium, if
any, or interest on any of the Debt Securities. Any such consent or waiver by
the registered holder of this Debt Security (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such holder and upon all future
holders and owners of this Debt Security and of any Debt Security 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 Debt Security.

                  No reference herein to the Indenture and no provision of this
Debt Security 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 Debt Security at the time and place and at
the rate and in the money herein prescribed.

                  As provided in the Indenture and subject to certain
limitations herein and therein set forth, this Debt Security is transferable by
the registered holder hereof on the Debt Security Register of the Company, upon
surrender of this Debt Security for registration of transfer at the office or
agency of the Trustee in the City and State of 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 Debt Securities 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 registration of 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
Debt Security, the Company, the Trustee, any Authenticating Agent any paying
agent, any transfer agent and the Debt Security registrar may deem and treat
the registered holder hereof as the absolute owner hereof (whether or not this
Debt Security shall be overdue and notwithstanding any notice of ownership or
writing hereon) for the purpose of receiving payment of or on account of the
principal hereof and interest due hereon and for all other purposes, and neither
the Company nor the Trustee nor any Authenticating Agent nor any paying agent
nor any transfer agent nor any Debt Security registrar shall be affected by any
notice to the contrary.

                  No recourse shall be had for the payment of the principal of
or the interest on this Debt Security, or for any claim based hereon, or
otherwise in respect hereof, or based on or in respect of the Indenture, against
any incorporator, stockholder, officer or director, past, present or future, as
such, of the Company or of any predecessor or successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issuance hereof, expressly
waived and released.

                  The Debt Securities are issuable only in registered
certificated form without coupons. As provided in the Indenture and subject to
certain limitations herein and therein set forth, Debt Securities are
exchangeable for a like aggregate principal amount of Debt Securities of a
different authorized denomination, as requested by the holder surrendering the
same.
<PAGE>   94
                  All terms used in the Debt Security that are defined in the
Indenture shall have the meanings assigned to them in the Indenture.

                  THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE
AND THE DEBT SECURITIES, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF.
<PAGE>   95
                                    EXHIBIT E

                              PLACEMENT AGREEMENT

                                      E-1
<PAGE>   96
                            HERITAGE CAPITAL TRUST I

                                   $7,000,000
     10 7/8% Fixed Rate Capital Trust Pass-Through Securities(R) (TruPS)(R)

            Fully and Unconditionally Guaranteed as to Distributions
                              and Other Payments by
                             HERITAGE COMMERCE CORP

                               PLACEMENT AGREEMENT

                                                              New York, New York
                                                                   March 9, 2000

Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013

Ladies and Gentlemen:

                  Heritage Commerce Corp, a bank holding company incorporated in
California (the "Company") and Heritage Capital Trust I, a Delaware statutory
business trust (the "Trust"), propose, subject to the terms and conditions
stated herein, to issue and sell $7,000,000 of 10 7/8% Fixed Rate Capital Trust
Pass-through Securities (R) of the Trust, having a stated liquidation amount of
$1,000 per capital security (the "Capital Securities"). Salomon Smith Barney
Inc. is acting as the exclusive agent of the Company and the Trust in connection
with the offering of the Capital Securities.

                  The Capital Securities will be fully and unconditionally
guaranteed on a subordinated basis by the Company with respect to distributions
and amounts payable upon liquidation, redemption or repayment (the "Guarantee")
pursuant to the Guarantee Agreement (the "Guarantee Agreement"), to be dated as
of the Closing Date specified in Section 3 hereof and executed and delivered by
the Company and The Bank of New York, as trustee (the "Guarantee Trustee"), for
the benefit of the holders from time to time of the Capital Securities. The
entire proceeds from the sale of the Capital Securities will be combined with
the entire proceeds from the sale by the Trust to the Company of its common
securities (the "Common Securities"), and will be used by the Trust to purchase
$7,217,000 in principal amount of the Fixed Rate Junior Subordinated Deferrable
Interest Debentures due 2030 of the Company (the "Subordinated Debt
Securities"). The Capital Securities and the Common Securities for the Trust
will be issued pursuant to the Amended and Restated Declaration of Trust (the
"Declaration"), to be dated as of the Closing Date among the Company, as
sponsor, the Administrator(s) named therein (the "Administrators"), The Bank of
New York (Delaware), a Delaware corporation (the "Delaware Trustee"), The Bank
of New York (the "Institutional Trustee"), and the holders from time to time of
undivided beneficial interests in the assets of the
<PAGE>   97
Trust. The Subordinated Debt Securities will be issued pursuant to an Indenture,
to be dated as of the Closing Date (the "Indenture"), between the Company and
The Bank of New York, as trustee (the "Indenture Trustee").

The Capital Securities, the Common Securities and the Subordinated Debt
Securities are collectively referred to herein as the "Securities." This
Agreement, the Indenture, the Declaration, the Guarantee Agreement and the
Securities are referred to collectively as the "Operative Documents."
Capitalized terms used herein without definition have the respective meanings
specified in the Declaration.

The Securities have not been and will not be registered under the Securities Act
of 1933, as amended (the "Securities Act").

         1. Representations and Warranties. The Company and the Trust jointly
and severally represent and warrant to, and agree with you as set forth below in
this Section 1.

         (a) Neither the Company nor the Trust, nor any of their Affiliates (as
defined in Rule 501 (b) of Regulation D under the Securities Act ("Regulation
D")), nor any person acting on its or their behalf has, directly or indirectly,
made offers or sales of any security, or solicited offers to buy any security,
under circumstances that would require the registration of any of the Securities
under the Securities Act.

         (b) Neither the Company nor the Trust, nor any of their Affiliates, nor
any person acting on its or their behalf has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D) in
connection with any offer or sale of any of the Securities.

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

         (d) Neither the Company nor the Trust, nor any of their Affiliates, nor
any person acting on its or their behalf, has engaged or will engage in any
directed selling efforts with respect to the Securities within the meaning of
Regulation S.

         (e) Neither the Company nor the Trust is an "investment company" or an
entity "controlled" by an "investment company," in each case within the meaning
of Section 3(a) of the Investment Company Act of 1940, as amended (the
"Investment Company Act") without regard to Section 3(c) of the Investment
Company Act.

         (f) Neither the Company nor the Trust has paid or agreed to pay to any
person any compensation for soliciting another to purchase any of the
Securities.

         (g) The Trust has been duly created and is validly existing in good
standing as a business trust under the Delaware Business Trust Act, 12 Del. C.
3801, et seq. (the "Business Trust Act") with the power and authority to own
property and to conduct the business it transacts and proposes to transact and
to enter into and perform its obligations under the Operative Documents. The
Trust is duly qualified to transact business as a foreign entity and is in good
standing in each jurisdiction in which such qualification is necessary, except
where the failure to

                                        2
<PAGE>   98
so qualify or be in good standing would not have a material adverse effect on
such Trust. The Trust is not a party to or otherwise bound by any agreement
other than the Operative Documents. The Trust is and will, under current law, be
classified for federal income tax purposes as a grantor trust and not as an
association taxable as a corporation.

         (h) The Declaration has been duly authorized by the Company and, on the
Closing Date, will have been duly executed and delivered by the Company and the
Administrators of the relevant Trust, and, assuming due authorization, execution
and delivery by the Delaware Trustee and the Institutional Trustee, be a valid
and binding obligation of the Company and such Administrators, enforceable
against them in accordance with its terms, subject to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally and to general
principles of equity ("Bankruptcy and Equity"). Each of the Administrators of
the Trust is an employee of the Company and has been duly authorized by the
Company to execute and deliver the Declaration.

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

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

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

         (1) This Agreement has been duly authorized, executed and delivered by
the Company and the Trust.

         (m) The Trust is not in violation of the Declaration or any provision
of the Business Trust Act. The execution, delivery and performance of the
Operative Documents to which it is a party by the Company or Trust, and the
consummation of the transactions contemplated herein or therein, will not
conflict with or constitute a breach of, or a default under, or result in the
creation or imposition of any lien, charge or other encumbrance upon any

                                        3
<PAGE>   99
property or assets of the Trust, the Company or any of the Company's
subsidiaries pursuant to any contract, indenture, mortgage, loan agreement,
note, lease or other instrument to which the Trust, the Company or any of its
subsidiaries is a party or by which it or any of them may be bound, or to which
any of the property or assets of any of them is subject, except for a conflict,
breach, default, lien, charge or encumbrance which could not reasonably be
expected to have an adverse effect on the consummation of the transactions
contemplated herein or therein, nor will such action result in any violation of
the Declaration or the Business Trust Act or require the consent, approval,
authorization or order of any court or governmental agency or body.

         (n) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of California, with all requisite
corporate power and authority to own its properties and conduct the business it
transacts and proposes to transact, and is duly qualified to transact business
and is in good standing as a foreign corporation in each jurisdiction where the
nature of its activities requires such qualification except where the failure of
the Company to be so qualified would not, singly or in the aggregate, have a
materially adverse effect on the condition (financial or otherwise), earnings or
business of the Company and its subsidiaries taken as a whole, whether or not
occurring in the ordinary course of business (a "Material Adverse Effect").

         (o) Each of the Company's significant subsidiaries listed in Exhibit 1
(the "Subsidiaries") has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction in which it is
chartered or organized, with all requisite corporate power and authority to own
its properties and conduct the business it transacts and proposes to transact,
and is duly qualified to transact business and is in good standing as a foreign
corporation in each jurisdiction where the nature of its activities requires
such qualification except where the failure of such Subsidiary to be so
qualified would not, singly or in the aggregate, have a Material Adverse Effect.

         (p) The Company and each of its Subsidiaries have all requisite power
and authority, and all necessary material authorizations, approvals, orders,
licenses, certificates and permits of and from regulatory or governmental
officials, bodies and tribunals, to own or lease their respective properties and
to conduct their respective businesses as now being conducted, and neither the
Company nor any of the Subsidiaries has received any notice of proceedings
relating to the revocation or modification of any such authorizations,
approvals, orders, licenses, certificates or permits which, singly or in the
aggregate, if the failure to be so licensed or approved or if the subject of an
unfavorable decision, ruling or finding, would have a Material Adverse Effect;
and the Company and its Subsidiaries are in compliance with all applicable laws,
rules, regulations and orders and consents, the violation of which would have a
Material Adverse Effect.

         (q) The audited consolidated financial statements (including the notes
thereto) and schedules of the Company and its consolidated subsidiaries for
December 31, 1999 (the "Financial Statements") provided to you are the most
recent available audited consolidated financial statements of the Company and
its consolidated subsidiaries and fairly presents in all material respects, in
accordance with generally accepted accounting principles, the financial position
of the Company and its consolidated subsidiaries, and the results of operations
and changes in financial condition as of the dates and for the periods therein
specified. Such

                                        4
<PAGE>   100
consolidated financial statements and schedules have been prepared in accordance
with generally accepted accounting principles consistently applied throughout
the periods involved (except as otherwise noted therein).

                  (r) The Company's report on FRY-9C dated December 31, 1999
provided to you is the most recent available such report and the information
therein fairly presents in all material respects the financial position of the
Company and its subsidiaries.

                  (s) Since December 31, 1999, there has been no material
adverse change or development with respect to the financial condition or
earnings of the Company and its subsidiaries, taken as a whole.

                  (t) Neither the Company nor any of the Subsidiaries is in
violation of its respective charter or by-laws or similar organizational
documents or in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract, indenture, mortgage,
loan agreement, note, lease or other agreement or instrument to which the
Company or any of the Subsidiaries is a party or by which it or any of them may
be bound or to which any of the property or assets of the Company or any of the
Subsidiaries is subject, the effect of which violation or default in performance
or observance would have a Material Adverse Effect.

                  (u) The Company is duly registered as a bank holding company
under the Bank Holding Company Act of 1956, as amended (the "Bank Holding
Company Act"), and the regulations of the Board of Governors of the Federal
Reserve System (the "Federal Reserve"), and the deposit accounts of the
Company's subsidiary banks are insured by the Federal Deposit Insurance
Corporation ("FDIC") to the fullest extent permitted by law and the rules and
regulations of the FDIC, and no proceeding for the termination of such insurance
are pending or threatened.

                  2. Sale of the Capital Securities. Subject to the terms and
conditions and in reliance upon the representations and warranties herein set
forth, the Company and the Trust jointly and severally hereby appoint you as
placement agent (the "Placement Agent"), and you hereby accept such appointment,
to act as the exclusive agent of the Company and the Trust, in connection with
the offering of the Capital Securities contemplated hereby, for the purpose of
soliciting offers and sales of the Capital Securities.

                  The Placement Agent shall solicit offers to purchase Capital
Securities in connection with the offering contemplated hereby. The Placement
Agent shall use its best efforts, subject to the terms and conditions of this
Agreement, to procure subscribers for the Capital Securities with an aggregate
stated liquidation amount of $7,000,000 at a purchase price equal to 100% of the
stated liquidation amount thereof. The Placement Agent shall not, in fulfilling
its obligations hereunder, act as an underwriter for the Capital Securities and
is in no way obligated, directly or indirectly, to advance its own funds to
purchase any Capital Securities.

                  If the sale and delivery of the Capital Securities as provided
herein is consummated, the Company will pay to the Placement Agent on the
Closing Date a commission per Capital Security equal to 3% of the stated
liquidation amount thereof. Any payment pursuant

                                       5
<PAGE>   101
to this Section 2 shall be made by wire transfer in immediately available funds
to the U.S. account designated in writing by the party entitled to receive such
payment.

                  The dividend rate of the Capital Securities, as of the date
hereof, is 10-7/8%. Under certain circumstances, the dividend rate of the
Capital Securities may be reduced pursuant to a written agreement between you
and the Company made prior to the Closing Date.

                  3. Delivery and Payment. Delivery of and payment for the
Capital Securities shall be made at 10:00 AM, New York City time, on March 23,
2000, or such later date as you shall designate, which date and time may be
postponed by agreement between you, on the one hand, and the Company and the
Trust, on the other hand (such date and time of delivery and payment for the
Capital Securities being herein called the "Closing Date").

                  Delivery of the Capital Securities shall be made at such
location, and in such names and denominations, as you shall designate at least
one business day in advance of the Closing Date. The Company and the Trust agree
to have the Capital Securities available for inspection and checking by you in
New York, New York, not later than 1:00 PM on the business day prior to the
Closing Date. The closing for the purchase and sale of the Capital Securities
shall occur at the offices of Cleary, Gottlieb, Steen & Hamilton, One Liberty
Plaza, New York, NY 10006, or such other place as the parties hereto shall
agree.

                  4. Representations. You represent to the Company and the Trust
that:

                  (a) You are aware that the Securities have not been and will
not be registered under the Securities Act and may not be offered or sold within
the United States or to U.S persons except in accordance with Rule 903 of
Regulation S under the Securities Act or pursuant to an exemption from the
registration requirements of the Securities Act. You will not offer, sell or
arrange for the offer or sale of any Securities to purchasers ("Purchasers")
except in privately negotiated transactions that will not require registration
of the Securities under the Securities Act. Terms used in the first sentence of
this subsection (a) have the meanings given to them by Regulation S under the
Securities Act.

                  (b) You have not offered or sold or and will not arrange for
the offer or sale of the Capital Securities except (i) in an offshore
transaction complying with Rule 903 of Regulation S under the Securities Act,
(ii) to those you reasonably believe are qualified institutional buyers (as
defined in Rule 144A under the Securities Act) and that in connection with each
such sale, you have taken or will take reasonable steps to ensure that the
purchaser of any Capital Securities is aware that such sale is being made in
reliance on Rule 144A or (iii) to "accredited investors" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D) who provide to you and to the
Company a letter in the form set out in the Declaration.

                  (c) You represent and agree that you and each of your
Affiliates has not entered, and will not enter into any contractual arrangement
with respect to the distribution of the Securities except with the prior written
consent of the Company.

                  (d) Neither you, nor any of your Affiliates, nor any person
acting on your or their behalf has engaged, or will engage, in any form of
general solicitation or general

                                        6
<PAGE>   102
advertising (within the meaning of Regulation D) in connection with any offer or
sale of the Securities.

                  (e) Neither you nor any or your Affiliates, nor any person
acting on your or their behalf, has engaged or will engage in any directed
selling efforts within the meaning of Regulation S under the Securities Act with
respect to the Securities.

                  5. Agreements. The Company and the Trust agree with the
Placement Agent that:

                  (a) The Company and the Trust will arrange for the
qualification of the Capital Securities for sale under the laws of such
jurisdictions as you may designate and will maintain such qualifications in
effect so long as required for the sale of the Capital Securities. The Company
or the Trust, as the case may be, will promptly advise you of the receipt by the
Company or the Trust, as the case may be, of any notification with respect to
the suspension of the qualification of the Capital Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose.

                  (b) Neither the Company nor the Trust will, nor will either of
them permit any of its Affiliates to, resell any Capital Securities that have
been acquired by any of them.

                  (c) Neither the Company nor the Trust will, nor will either of
them permit any of its Affiliates, nor any person acting on its or their behalf,
to, directly or indirectly, make offers or sales of any security, or
solicit offers to buy any security, under circumstances that would require the
registration of any of the Securities under the Securities Act.

                  (d) Neither the Company nor the Trust will, nor will either of
them permit any of its Affiliates, nor any person acting on its or their behalf,
to, engage in any form of general solicitation or general advertising (within
the meaning of Regulation D) in connection with any offer or sale of the any of
the Securities.

                  (e) Neither the Company nor the Trust will, nor will either of
them permit any of its Affiliates, nor any person acting on its or their behalf
to engage in any directed selling efforts within the meaning of Regulation S
under the Securities Act with respect to the Securities.

                  (f) So long as any of the Securities are outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act, each of the Company and the Trust will, during any period in
which it is not subject to and in compliance with Section 13 or 15(d) of the
Exchange Act or it is not exempt from such reporting requirements pursuant to
and in compliance with Rule 12g3-2(b) under the Exchange Act, provide to each
holder of such restricted securities and to each prospective purchaser (as
designated by such holder) of such restricted securities, upon the request of
such holder or prospective purchaser, any information required to be provided by
Rule 144A(d)(4) under the Securities Act. This covenant is intended to be for
the benefit of the holders, and the prospective purchasers designated by such
holders, from time to time of such restricted securities. The information
provided by the Company and the Trust pursuant to this Section 5(f) hereof will
not, at the date thereof, contain any untrue

                                       7
<PAGE>   103
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.

                  (g) Neither the Company nor the Trust will, until 180 days
following the Closing Date, without your prior written consent, offer, sell,
contract to sell, grant any option to purchase or otherwise dispose of, directly
or indirectly, (i) any Capital Securities or other securities of the Trust other
than as contemplated by this Agreement, (ii) any securities that are
substantially similar to the Securities or (iii) any other securities
convertible into, or exercisable or exchangeable for, any of (i) or (ii), or
enter into an agreement, or announce an intention, to do any of the foregoing.

                  (h) The Company agrees to pay (i) the costs incident to the
authorization, issuance, sale and delivery of the Capital Securities and any
taxes payable in that connection; (ii) the fees and expenses of qualifying the
Capital Securities under the securities laws of the several jurisdictions as
provided in Section 5(a); and (iii) the fees and expenses of the Institutional
Trustee (as defined in the Declaration), the Guarantee Trustee and the Indenture
Trustee.

                  6. Conditions to Your Obligations. ions. Your obligations to
use your best efforts to procure subscription and payment for the Capital
Securities shall be subject to the accuracy of the representations and
warranties on the part of the Company and the Trust contained herein as of the
date and time that this Agreement is executed (the "Execution Time") and the
Closing Date, to the accuracy of the statements of the Company and the Trust
made in any Capital Securities pursuant to the provisions hereof, to the
performance by the Company and the Trust of their obligations hereunder and to
the following additional conditions:

                  (a) The Company shall have furnished to you the opinion of
McCutchen, Doyle, Brown & Enersen, LLP, special counsel to the Company, dated
the Closing Date, addressed to you to, in substantially the form set out in
Annex A hereto.

                  (b) The Company shall have furnished to you the opinion of
McCutchen, Doyle, Brown & Enersen, LLP, special tax counsel to the Company,
dated the Closing Date, containing such assumptions, qualifications and
limitations as shall be reasonably acceptable to you and your counsel to the
effect that for U.S. federal income tax purposes, the Subordinated Debt
Securities will constitute indebtedness of the Company.

                  (c) You shall have received the opinion of Richards, Layton &
Finger, special Delaware counsel for the Company and the Trust, dated the
Closing Date, addressed to you, in substantially the form set out in Annex B
hereto.

                  (d) You shall have received the opinion of white & Case, LLP,
counsel for the Guarantee Trustee, the Institutional Trustee and the Indenture
Trustee, dated the Closing Date addressed to you, in substantially the form set
out in Annex C hereto.

                  (e) You shall have received the opinion of Richards, Layton &
Finger, counsel for the Delaware Trustee, dated the Closing Date, addressed to
you, in substantially the form set out in Annex D hereto.

                                       8
<PAGE>   104
                  (f) The Company shall have furnished to you a certificate of
the Company, signed by a Vice President and by a Treasurer or Chief Financial
Officer of the Company, dated the Closing Date, to the effect that:

                           (i) the representations and warranties of the Company
         and the Trust in this Agreement are true and correct in all material
         respects on and as of the Closing Date with the same effect as if made
         on the Closing Date, and the Company and the Trust have complied with
         all the agreements and satisfied all the conditions on either of their
         part to be performed or satisfied at or prior to the Closing Date; and

                           (ii) since the date of the most recent financial
         statements provided to you, there has been no material adverse change
         in the condition (financial or other), earnings, business or properties
         of the Company and its subsidiaries, whether or not arising from
         transactions in the ordinary course of business.

                  (g) Subsequent to the Execution Time there shall not have been
any change, or any development involving a prospective change, in or affecting
the business or properties of the Company and its subsidiaries the effect of
which, is, in your judgment, so material and adverse as to make it impractical
or inadvisable to proceed with the offering or delivery of the Capital
Securities.

                  (h) Prior to the Closing Date, the Company and the Trust
shall have furnished to you such further information, certificates and documents
as you may reasonably request.

                  (i) At the Closing Date, each of the Operative Documents shall
have been duly authorized, executed and delivered by each party thereto, and
copies thereof shall have been delivered to you.

                  If any of the conditions specified in this Section 6 shall not
have been fulfilled in all material respects when and as provided in this
Agreement, or if any of the opinions, certificates and documents mentioned above
or elsewhere in this Agreement shall not be in all material respects reasonably
satisfactory in form and substance to you, this Agreement and all your
obligations hereunder may be canceled at, or at any time prior to, the Closing
Date by you. Notice of such cancellation shall be given to the Company and the
Trust in writing or by telephone or telegraph confirmed in writing.

                  7. Reimbursement of Your Expenses. If the sale of the Capital
Securities provided for herein is not consummated because any condition to set
forth in Section 6 hereof is not satisfied, because of any termination pursuant
to Section 9 hereof or because of any refusal, inability or failure on the part
of the Company or the Trust to perform any agreement herein or comply with any
provision hereof, the Company will reimburse you upon demand for all
out-of-pocket expenses (including reasonable fees and disbursements of counsel)
that shall have been incurred by you in connection with the proposed offering of
the Capital Securities.

                  8. Indemnification. (a) The Company and the Trust agree
jointly and severally to indemnify and hold harmless you and your directors,
officers, employees and agents and each person who controls you within the
meaning of either the Securities Act or the Exchange Act against any and all
losses, claims, damages or liabilities, joint or several, to which

                                       9
<PAGE>   105
they or any of them may become subject under the Securities Act, the Exchange
Act or other Federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in any information (whether oral
or written) or documents furnished or made available to you in connection with
the transactions contemplated herein, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
agrees to reimburse each such indemnified party, as incurred, for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action. This indemnity
agreement will be in addition to any liability which the Company or the Trust
may otherwise have.

                  (b) The Company agrees to indemnify the Trust against all
loss, liability, claim, damage and expense whatsoever, as due from the Trust
under Section 8(a) hereunder.

                  (c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve the indemnifying party from liability under paragraph (a),
above unless and to the extent that the indemnifying party did not otherwise
learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii) will not, in
any event, relieve the indemnifying party from any obligations to any
indemnified party other than the indemnification obligation provided in
paragraph (a) above. The indemnifying party shall be entitled to appoint counsel
of the indemnifying party's choice at the indemnifying party's expense to
represent the indemnified party in any action for which indemnification is
sought (in which case the indemnifying party shall not thereafter be responsible
for the fees and expenses of any separate counsel retained by the indemnified
party or parties except as set forth below); provided, however, that such
counsel shall be satisfactory to the indemnified party. Notwithstanding the
indemnifying party's election to appoint counsel to represent the indemnified
party in an action, the indemnified party shall have the right to employ
separate counsel (including local counsel), and the indemnifying party shall
bear the reasonable fees, costs and expenses of such separate counsel if (i) the
use of counsel chosen by the indemnifying party to represent the indemnified
party would present such counsel with a conflict of interest, (ii) the actual or
potential defendants in, or targets of, any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to those
available to the indemnifying party, (iii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of the institution of
such action or (iv) the indemnifying party shall authorize the indemnified party
to employ separate counsel at the expense of the indemnifying party. An
indemnifying party will not, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement,

                                       10
<PAGE>   106
compromise or consent includes an unconditional release of each indemnified
party from all liability arising out of such claim, action, suit or proceeding.

                  9. Termination. This Agreement shall be subject to termination
in the absolute discretion of you, by notice given to the Company and the Trust
prior to delivery of and payment for the Capital Securities, if prior to such
time (i) trading in any of the Company's securities shall have been suspended by
the Commission or the National Association of Securities Dealers or trading in
securities generally on the New York Stock Exchange shall have been suspended or
limited or minimum prices shall have been established on such Exchange, (ii) a
banking moratorium shall have been declared either by Federal or California
authorities or (iii) there shall have occurred any outbreak or escalation of
hostilities, declaration by the United States of a national emergency or war or
other calamity or crisis the effect of which on financial markets is such as to
make it, in your judgment, impracticable or inadvisable to proceed with the
offering or delivery of the Capital.

                  10. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Company and the Trust or their respective officers or trustees and of you set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of you, the Company
or the Trust or any of the officers, directors or trustees, administrators,
controlling persons, and will survive delivery of and payment for the Capital
Securities. The provisions of Sections 7 and 8 hereof shall survive the
termination or cancellation of this Agreement.

                  11. Notices. All communications hereunder will be in writing
and effective only on receipt, and, if sent to you, will be mailed, delivered or
telegraphed and confirmed to at 388 Greenwich Street, New York, New York 10013,
attention of the Legal Department; if sent to the Company or the Trust, will be
mailed, delivered or telegraphed and confirmed to it at 150 Almaden Boulevard,
San Jose, California 95113, Attention: Lawrence D. McGovern, Executive Vice
President and Chief Financial Officer.

                  12. Successors. This Agreement will inure to the benefit of
and be binding upon the parties hereto and their respective successors and the
officers and directors and controlling persons, and no other person will have
any right or obligation hereunder.

                  13. Applicable Law. THIS AGREEMENT WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REFERENCE
TO PRINCIPLES OF CONFLICTS OF LAW.

                                       11
<PAGE>   107
                  If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this letter and your acceptance shall represent a binding agreement
among the Company, the Trust and you.

                                        Very truly yours,

                                        Heritage Commerce Corp.

                                        By:  /s/  John Rossell
                                           ----------------------------
                                           Name:  John Rossell
                                           Title: CEO

                                        Heritage Capital Trust I

                                        By:

                                        By:  /s/  Lawrence D. McGovern
                                           ----------------------------
                                           Name:  Lawrence D. McGovern
                                           Title: CFO

The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.

Salomon Smith Barney Inc.

By:  /s/  PAUL R. BITLER
   ------------------------------
   Name:  PAUL R. BITLER
   Title: VICE PRESIDENT

                                       12
<PAGE>   108
                                                                      SCHEDULE 1

                        LIST OF SIGNIFICANT SUBSIDIARIES

Heritage Bank of Commerce

Heritage Bank East Bay

Heritage Bank South Valley

                                       13
<PAGE>   109
                                                                         ANNEX A

                  Pursuant to Section 6(a) of the Placement Agreement, counsel
of the Company shall deliver an opinion to the effect that:

                           (i) each of the Company and the Subsidiaries (A) has
         been duly incorporated and is validly existing as a corporation in good
         standing under the laws of the jurisdiction in which it is chartered or
         organized, with full corporate power and authority to own its
         properties and conduct the business it transacts and proposes to
         transact, (B) is duly qualified to do business as a foreign corporation
         and is in good standing under the laws of each jurisdiction which
         requires such qualification wherein it owns or leases material
         properties or conducts material business, except where the failure to
         be so qualified would not, singularly or in the aggregate, have a
         Material Adverse Effect, and (C) holds all material approvals,
         authorizations, orders, licenses, certificates and permits from
         governmental authorities necessary for the conduct of its business,
         except where the failure to hold such approvals, authorizations,
         orders, licenses, certificates and/or permits would not, singularly or
         in the aggregate, have a Material Adverse Effect;

                           (ii) no consent, approval, authorization or order of
         any court or governmental agency or body is required for the
         consummation of the transactions contemplated herein or in the
         Operative Documents, in connection with the solicitation of the
         purchase and sale of the Capital Securities by you or the purchase of
         the Subordinated Debt Securities by the Trust except such approvals
         (specified in such opinion) as have been obtained;

                           (iii) neither the issue and sale of the Capital
         Securities or the Subordinated Debt Securities, the execution and
         delivery of the Operative Documents by the Company or the Trust and the
         consummation of any other of the transactions therein contemplated in
         any Operative Document nor the fulfillment of the terms thereof will
         conflict with, result in a breach or violation of, or constitute a
         default under any law or the charter or by-laws of the Company or any
         of its Subsidiaries, the terms of any indenture or other agreement or
         instrument known to such counsel and to which the Company or any of its
         Subsidiaries is a party or bound or any judgment, order, decree, of any
         court, regulatory body, administrative agency, governmental body or
         arbitrator having jurisdiction over the Company or any of its
         Subsidiaries, or any provision of applicable law, known to such counsel
         to be applicable to the Company or any of its Subsidiaries, except for
         such conflicts, breaches, violations or defaults which are not, in the
         aggregate, material to the Company and its subsidiaries taken as a
         whole and which do not adversely affect the consummation of the
         transactions contemplated in this Agreement and the Operative
         Documents;

                           (iv) the Company is duly registered as a bank holding
         company under the Bank Holding Company Act and the regulations
         thereunder of the Federal Reserve, and the deposit accounts of the
         Company's banking subsidiaries are insured by the FDIC
<PAGE>   110
         to the fullest extent permitted by law and the rules and regulations of
         the FDIC, and no proceeding for the termination of such insurance are
         pending or threatened;

                           (v) each of the Indenture and the Guarantee Agreement
         has been duly authorized, executed and delivered by the Company, and
         (in the case of the Indenture and the Guarantee, respectively, assuming
         it is duly authorized, executed and delivered by the Indenture Trustee
         and the Guarantee Trustee, respectively) constitutes a legal, valid and
         binding instrument of the Company enforceable against the Company in
         accordance with its terms, subject to Bankruptcy and Equity; the
         Subordinated Debt Securities have been duly and validly authorized and
         delivered to the Indenture Trustee for authentication in accordance
         with the Indenture, when authenticated in accordance with the
         provisions of the Indenture and delivered to and paid for by the
         relevant Trust, will constitute legal, valid and binding obligations of
         the Company entitled to the benefits of the Indenture and enforceable
         against the Company in accordance with its terms, subject to Bankruptcy
         and Equity;

                           (vi) this Agreement has been duly authorized,
         executed and delivered by the Company;

                           (vii) the Declaration has been duly authorized,
         executed and delivered by the Company and the Trust;

                           (viii) this Agreement has been duly executed and
         delivered by the Trust;

                           (ix) neither the Company nor the Trust is an
         "investment company" or an entity "controlled" by an "investment
         company," in each case within the meaning of Section 3(a) of the
         Investment Company Act; and

                           (x) assuming the accuracy of the representations and
         warranties and compliance with the agreements contained herein, no
         registration of any of the Securities under the Securities Act is
         required for the offer and sale to you of the Capital Securities in the
         manner contemplated by this Agreement, and the Indenture, the
         Declaration and the Guarantee are not required to be qualified under
         the Trust Indenture Act of 1939.

                  In rendering such opinions, such counsel may (A) state that
         its opinion is limited to the laws of the California and New York, the
         corporate laws of the State of Delaware and the Federal laws of the
         United States and (B) rely as to matters involving the application of
         laws of any jurisdiction other than California, New York and Delaware
         or the United States, to the extent deemed proper and specified in such
         opinion, upon the opinion of other counsel of good standing believed to
         be reliable and who are satisfactory to you and as to matters of fact,
         to the extent deemed proper, on certificates of responsible officers of
         the Company and public officials.

                                        2
<PAGE>   111
                                                                         ANNEX B

                  Pursuant to Section 6(c) of the Placement Agreement, Richards,
Layton & Finger shall deliver an opinion in the following form.

                  (i) The Trust is a duly formed and validly existing statutory
business trust in good standing under the Business Trust Act of the State of
Delaware with the business trust power and authority to enter into and perform
its obligations under this Agreement, the Securities and the Declaration and to
own property and conduct its business as described in the Declaration.

                  (ii) Under the Delaware Business Trust Act and the
Declaration, the execution and delivery by the Trust of this Agreement, and the
performance by the Trust of its obligations hereunder, have been duly authorized
by all necessary business trust action on the part of the Trust.

                  (iii) The Declaration constitutes a valid and binding
obligation of the Company and the Trustees, enforceable against the Company and
the Trustees, in accordance with its terms, subject, as to enforcement, to the
effect upon the Declaration of (a) bankruptcy, insolvency, moratorium,
receivership, liquidation, fraudulent conveyance and transfer, reorganization
and other similar laws relating to or affecting the remedies and rights of
creditors, (b) general principles of equity (regardless of whether considered or
applied in a proceeding in equity or at law), (c) considerations of public
policy or the effect of applicable law relating to fiduciary duties, and (d)
principles of course of dealing or course of performance and standards of good
faith, fair dealing, materiality or reasonableness that may be applied by a
court to the exercise of rights or remedies.

                  (iv) The Common Securities have been duly authorized for
issuance by the Trust and upon issuance and delivery by the Trust to the Company
against payment therefor as described in the Declaration, will be duly and
validly issued and will represent duly issued beneficial interests in the Trust.
The issuance of the Common Securities is not subject to preemptive or other
similar rights under the Declaration or the Business Trust Act; provided, that
such counsel may note that the holders of Common Securities may be required to
make payment or provide indemnity or security as set forth in the Declaration.

                  (v) The Capital Securities have been duly authorized for
issuance by the Trust, and, when issued and delivered against payment therefor
as provided herein, will be duly and validly issued and, subject to the
qualifications set forth herein, fully paid and non-assessable beneficial
interests in the Trust; the issuance of the Capital Securities is not subject to
preemptive or other similar rights under the Declaration or the Business Trust
Act; and the holders of the Capital Securities will 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; provided that such counsel need express no opinion as to any holder
of a Capital Security that is, was or becomes a named Trustee of the Trust. Such
counsel may note
<PAGE>   112
that the holders of the Capital Securities may be required to make payment or
provide indemnity or security as set forth in the Declaration.

                  (vi) The issuance and sale by the Trust of the Securities, the
execution, delivery and performance by the Trust of the Agreement, the
consummation by the Trust of the transactions contemplated therein and the
compliance by the Trust with its obligations thereunder do not violate (a) any
of the provisions of the Certificate of Trust of the Trust or the Declaration or
(b) any Delaware law or Delaware administrative regulation applicable to the
Trust.

                  (vii) Assuming that the Trust derives no income from or
connected with sources within the State of Delaware and has no assets,
activities (other than having a Delaware trustee as required by the Delaware
Business Trust Act and the filing of documents with the Secretary of State of
the State of Delaware) or employees in the State of Delaware, no authorization,
approval, consent or order of any Delaware court or Delaware governmental
authority or Delaware agency is required to be obtained by the Trust solely as a
result of the issuance and sale of the Capital Securities, the consummation by
the Trust of the transactions contemplated herein or the compliance by the Trust
with its obligations hereunder, except such as have been obtained and such as
may be required by the securities laws of the State of Delaware (as to which
such counsel need express no opinion).

                  (viii) Assuming that the Trust derives no income from or
connected with sources within the State of Delaware and has no assets,
activities (other than having a Delaware trustee as required by the Delaware
Business Trust Act and the filing of documents with the Secretary of State of
the State of Delaware) or employees in the State of Delaware, and assuming that
the Trust is treated as a grantor trust for federal income tax purposes and that
the holders of the Capital Securities are viewed for federal income tax purposes
as owners of either all of, or their liquidation and accrued but unpaid share
of, the Subordinated Debt Securities held by the Trust, the holders of Capital
Securities (other than those holders of Capital Securities, or persons who are
partners or S corporation shareholders for federal income tax purposes in such
holders of Capital Securities, who reside or are domiciled in the State of
Delaware or who are otherwise subject to income taxation in the State of
Delaware) will have no liability for income taxes imposed by the State of
Delaware solely as a result of their participation in the Trust, and the Trust
will not be liable for any income tax imposed by the State of Delaware (in
rendering the opinion expressed in this paragraph (viii), such counsel need
express no opinion concerning the securities laws of the State of Delaware).

                                       2
<PAGE>   113
                                                                         ANNEX C

                  Pursuant to Section 6(d) of the Placement Agreement, White &
Case LLP shall deliver an opinion to the effect that:

                           (i) The Bank of New York, is a national banking
         association with trust powers duly organized and validly existing in
         good standing under the laws of the United States of America with all
         necessary corporate power and authority to execute, deliver and carry
         out and perform its obligations under the terms of the Guarantee
         Agreement, the Declaration and the Indenture;

                           (ii) the execution, delivery and performance by The
         Bank of New York of the Guarantee Agreement, the Declaration and the
         Indenture have been duly authorized by all necessary corporate action
         on the part of The Bank of New York and each of the Guarantee
         Agreement, the Declaration and the Indenture has been duly executed and
         delivered by The Bank of New York, and constitutes the legal, valid and
         binding obligation of The Bank of New York, enforceable against it in
         accordance with its terms (subject to Bankruptcy and Equity);

                           (iii) the execution, delivery and performance of the
         Guarantee Agreement, the Declaration and the Indenture by The Bank of
         New York do not conflict with or constitute a breach of the charter or
         by-laws of The Bank of New York; and

                           (iv) no consent, approval or authorization of, or
         registration with or notice to, any governmental authority or agency of
         the United States of America governing the banking or trust powers of
         The Bank of New York is required for the execution, delivery or
         performance by it of the Guarantee Agreement, the Declaration and the
         Indenture.
<PAGE>   114
                                                                         ANNEX D

                  Pursuant to Section 6(e) of the Placement Agreement, Richards,
Layton & Finger shall deliver an opinion to the following form.

                  1. The Delaware Trustee has been duly incorporated and is
validly existing in good standing as a banking corporation under the laws of the
State of Delaware.

                  2. The Delaware Trustee has the requisite corporate power and
authority to execute and deliver each Declaration of Trust, and has taken all
necessary corporate action to authorize the execution and delivery of each
Declaration of Trust.

                  3. Neither the execution, delivery and performance by the
Delaware Trustee of each Declaration of Trust, nor the consummation of any of
the transactions by the Delaware Trustee contemplated thereby, are in violation
of the charter or by-laws of the Delaware Trustee or of any law, governmental
rule or regulation of the State of Delaware or the United States governing the
banking or trust powers of the Delaware Trustee or, to our knowledge, without
independent investigation, of any indenture, mortgage, bank credit agreement,
note or bond purchase agreement, long-term lease, license or other agreement or
instrument to which the Delaware Trustee is a party or by which it is bound or,
to our knowledge, without independent investigation, of any judgment or order
applicable to the Delaware Trustee.

                  4. Neither the execution, delivery and performance by the
Delaware Trustee of each Declaration of Trust, nor the consummation of any of
the transactions by the Delaware Trustee contemplated thereby, requires the
consent or approval of, the withholding of objection on the part of, the giving
of notice to, the filing, registration or qualification with, or the taking of
any other action in respect of, any governmental authority or agency of the
State of Delaware or the United States of America governing the banking or trust
powers of the Delaware Trustee, except for the filing of the certificate of
trust for each Trust with the Office of the Secretary of State of the State of
Delaware pursuant to the Delaware Business Trust Act, 12 Del C. Section 3801, et
seq.

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